Volume VII - Annexes 141-160

INTERNATIONAL COURT OF JUSTICE
CERTAIN IRANIAN ASSETS
(ISLAMIC REPUBLIC OF IRAN v. UNITED STATES OF AMERICA)
COUNTER-MEMORIAL
SUBMITTED BY
THE UNITED STATES OF AMERICA
October 14, 2019
ANNEXES
VOLUME VII
Annexes 141 through 160

ANNEX 141

First Nat. City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983)
103 S.Ct. 2591, 77 L.Ed.2d 46
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103 S.Ct. 2591
Supreme Court of the United States
FIRST NATIONAL CITY BANK, Petitioner
v.
BANCO PARA EL COMERCIO EXTERIOR de CUBA.
No. 81–984.
|
Argued March 28, 1983.
|
Decided June 17, 1983.
Synopsis
State-owned Cuban bank brought suit against American bank to recover an unpaid letter of credit. The United States District
Court for the Southern District of New York, Charles L. Brieant, J., 505 F.Supp. 412, dismissed complaint on the merits on
basis that the amount claimed was exceeded by the amount of defendant’s validly asserted counterclaim for losses to the
Cuban expropriation of assets, and plaintiff appealed. The Court of Appeals, 658 F.2d 913,reversed and remanded, and
certiorari was granted. The Supreme Court, Justice O’Connor held that the American bank could apply claimed setoff of
value of its seized Cuban assets when Cuban bank with full juridical capacity filed suit seeking to collect on letter of credit
issued by American bank.
Ordered accordingly.
Justice Stevens filed an opinion concurring in part and dissenting in part in which Justices Brennan and Blackmun joined.
*611 **2592 Syllabus*
In 1960, the Cuban Government established respondent to serve as an official autonomous credit institution for foreign trade
with full juridical capacity of its own. Respondent sought to collect on a letter of credit issued by petitioner bank in
respondent’s favor in support of a contract for delivery of Cuban sugar to a buyer in the United States. Shortly thereafter, all
of petitioner’s assets in Cuba were seized and nationalized by the Cuban Government. When respondent brought suit on the
letter of credit in Federal District Court, petitioner counterclaimed, asserting a right to set off the value of its seized Cuban
assets. After the suit was brought but before petitioner filed its counterclaim, respondent was dissolved and its capital was
split between Banco Nacional, Cuba’s central bank, and certain foreign trade enterprises or houses of the Cuban Ministry of
Foreign Trade. Rejecting respondent’s contention that its separate juridical status shielded it from liability for the acts of the
Cuban Government, the District Court held that since the value of petitioner’s Cuban assets exceeded respondent’s claim, the
setoff could be granted in petitioner’s favor, and therefore dismissed the complaint. The Court of Appeals reversed, holding
that respondent was not an alter ego of the Cuban Government for the purpose of petitioner’s counterclaim.
Held: Under principles of equity common to international law and federal common law, petitioner may apply the claimed
setoff, notwithstanding the fact that respondent was established as a separate juridical entity. Pp. 2596–2603.
(a) The Foreign Sovereign Immunities Act of 1976 does not control the determination of whether petitioner may apply the
setoff. That Act was not intended to affect the substantive law determining the liability of a foreign state or instrumentality,
or the attribution of liability among such instrumentalities. Pp. 2596–2597.
(b) Duly created instrumentalities of a foreign state are to be accorded a presumption of independent status. This presumption
may be overcome, however, where giving effect to the corporate form would permit a foreign state to be the sole beneficiary
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of a claim pursued in United States courts while escaping liability to the opposing party imposed by international law. Pp.
2598–2602.
*612 (c) Thus, here, giving effect to respondent’s juridical status, even though it has **2593 long been dissolved, would
permit the real beneficiary of such an action, the Cuban Government, to obtain relief in our courts that it could not obtain in
its own right without waiving its sovereign immunity and answering for the seizure of petitioner’s assets in violation of
international law. The corporate form will not be blindly adhered to where doing so would cause such an injustice. Having
dissolved respondent and transferred its assets to entities that may be held liable on petitioner’s counterclaim, Cuba cannot
escape liability for acts in violation of international law simply by retransferring assets to separate juridical entities. To hold
otherwise would permit governments to avoid the requirements of international law simply by creating juridical entities
whenever the need arises. Pp. 2602–2603.
658 F.2d 913 (2nd Cir.1981), reversed and remanded.
Attorneys and Law Firms
Henry Harfield argued the cause for petitioner. With him on the briefs were John E. Hoffman, Jr., and Charles B. Manuel, Jr.
Richard G. Wilkins argued the cause pro hac vice for the United States as amicus curiae urging reversal. With him on the
brief were Solicitor General Lee, Assistant Attorney General McGrath, Deputy Solicitor General Geller, Geoffrey S. Stewart,
Davis R. Robinson, Fred L. Morrison, and Ronald W. Kleinman.
Michael Krinsky argued the cause for respondent. With him on the brief were Victor Rabinowitz, Judith Levin, and Jules
Lobel.*
* John J. McGrath, Jr., filed a brief for Kalamazoo Spice Extraction Co. as amicus curiae urging reversal.
Richard F. Bellman filed a brief for the International Center for Law in Development as amicus curiae urging affirmance.
Opinion
*613 Justice O’CONNOR delivered the opinion of the Court.
In 1960 the Government of the Republic of Cuba established respondent Banco Para El Comercio Exterior de Cuba (Bancec)
to serve as “[a]n official autonomous credit institution for foreign trade ... with full juridical capacity ... of its own....” Law
No. 793, Art. 1 (1960), App. to Pet. for Cert. 2d. In September 1960 Bancec sought to collect on a letter of credit issued by
petitioner First National City Bank (now Citibank) in its favor in support of a contract for delivery of Cuban sugar to a buyer
in the United States. Within days after Citibank received the request for collection, all of its assets in Cuba were seized and
nationalized by the Cuban Government. When Bancec brought suit on the letter of credit in United States District Court,
Citibank counterclaimed, asserting a right to set off the value of its seized Cuban assets. The question before us is whether
Citibank may obtain such a setoff, notwithstanding the fact that Bancec was established as a separate juridical entity.
Applying principles of equity common to international law and federal common law, we conclude that Citibank may apply a
setoff.
I
Resolution of the question presented by this case requires us to describe in some detail the events giving rise to the current
controversy.
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Bancec was established by Law No. 793, of April 25, 1960, as the legal successor to the Banco Cubano del Comercio
Exterior (Cuban Foreign Trade Bank), a trading bank established by the Cuban Government in 1954 and jointly owned by the
Government and private banks. Law No. 793 contains detailed “By-laws” specifying Bancec’s purpose, structure, and
administration. Bancec’s stated purpose was “to contribute to, and collaborate with, the international trade policy of the
Government and the application of the measures concerning foreign trade adopted by the ‘Banco Nacional de Cuba,’ ”
Cuba’s central bank (Banco Nacional). Art. 1, *614 No. VIII, App. to Pet. for Cert. 4d. Bancec was empowered to act as the
Cuban Government’s exclusive agent in foreign trade. The Government supplied all of its capital and owned all of its stock.
The General Treasury of the Republic received all of Bancec’s profits, after deduction of amounts for capital reserves. A
Governing Board consisting of delegates from Cuban governmental ministries governed and managed Bancec. Its president
was Ernesto Che Guevara, who also was Minister of State and president of Banco Nacional. A General Manager appointed
by the Governing Board was charged with directing Bancec’s day-to-day operations in a manner consistent with its enabling
statute.
**2594 In contracts signed on August 12, 1960, Bancec agreed to purchase a quantity of sugar from El Institutio Nacional de
Reforma Agraria (INRA), an instrumentality of the Cuban Government which owned and operated Cuba’s nationalized sugar
industry, and to sell it to the Cuban Canadian Sugar Company. The latter sale agreement was supported by an irrevocable
letter of credit in favor of Bancec issued by Citibank on August 18, 1960, which Bancec assigned to Banco Nacional for
collection.
Meanwhile, in July 1960 the Cuban Government enacted Law No. 851, which provided for the nationalization of the Cuban
properties of United States citizens. By Resolution No. 2 of September 17, 1960, the Government ordered that all of the
Cuban property of three United States banks, including Citibank, be nationalized through forced expropriation. The “Bank
Nationalization Law,” Law No. 891, of October 13, 1960, declared that the banking function could be carried on only by
instrumentalities created by the State, and ordered Banco Nacional to effect the nationalization.
On or about September 15, 1960, before the banks were nationalized, Bancec’s draft was presented to Citibank for payment
by Banco Nacional. The amount sought was $193,280.30 for sugar delivered at Pascagoula, Mississippi. On September 20,
1960, after its branches were nationalized, *615 Citibank credited the requested amount to Banco Nacional’s account and
applied the balance in Banco Nacional’s account as a setoff against the value of its Cuban branches.
On February 1, 1961, Bancec brought this diversity action to recover on the letter of credit in the United States District Court
for the Southern District of New York.
On February 23, 1961, by Law No. 930, Bancec was dissolved and its capital was split between Banco Nacional and “the
foreign trade enterprises or houses of the Ministry of Foreign Trade,” which was established by Law No. 934 the same day.1
App. to Pet. for Cert. 16d. All of Bancec’s rights, claims, and assets “peculiar to the banking business” were vested in Banco
Nacional, which also succeeded to its banking obligations. Ibid. All of Bancec’s “trading functions” were to be assumed by
“the foreign trade enterprises or houses of the Ministry of Foreign Trade.” By Resolution No. 1, dated March 1, 1961, the
Ministry of Foreign Trade created Empresa Cubana de Exportaciones (Cuban Enterprise for Exports) (Empresa), which was
empowered to conduct all commercial export transactions formerly conducted by Bancec “remaining subrogated in the rights
and obligations of said bank [Bancec] as regards the commercial export activities.” App. to Pet. for Cert. 26d. Three hundred
thousand of the two million pesos distributed to the Ministry of Foreign Trade when Bancec was dissolved were assigned to
Empresa. Id., at 27d. By Resolution No. 102, dated December 31, 1961, and Resolution No. 1, dated January 1, 1962,
Empresa was dissolved and Bancec’s rights relating to foreign commerce in sugar were assigned to Empresa Cubana *616
Exportadora de Azucar y sus Derivados (Cuba Zucar), a state trading company, which is apparently still in existence.
On March 8, 1961, after Bancec had been dissolved, Citibank filed its answer, which sought a setoff for the value of its
seized branches, not an affirmative recovery of damages.2 On July 7, 1961, Bancec filed a stipulation signed by the parties
stating that Bancec had been dissolved and that its **2595 claim had been transferred to the Ministry of Foreign Trade, and
agreeing that the Republic of Cuba may be substituted as plaintiff. The District Court approved the stipulation, but no
amended complaint was filed.
Apparently the case lay dormant until May 1975, when respondent filed a motion seeking an order substituting Cuba Zucar as
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plaintiff. The motion was supported by an affidavit by counsel stating that Bancec’s claim had passed through the Ministry of
Foreign Trade and Empresa to Cuba Zucar, all by operation of the laws and resolutions cited above. Counsel for petitioner
opposed the motion, and the District Court denied it in August 1975, stating that “to permit such a substitution ... would only
multiply complications in this already complicated litigation.” App. 160.
A bench trial was held in 19773, after which the District *617 Court4 granted judgment in favor of Citibank. 505 F.Supp. 412
(1980). The court rejected Bancec’s contention that its separate juridical status shielded it from liability for the acts of the
Cuban Government.
“Under all of the relevant circumstances shown in this record, ... it is clear that Bancec lacked an independent existence,
and was a mere arm of the Cuban Government, performing a purely governmental function. The control of Bancec was
exclusively in the hands of the Government, and Bancec was established solely to further Governmental purposes.
Moreover, Bancec was totally dependent on the Government for financing and required to remit all of its profits to the
Government.
Bancec is not a mere private corporation, the stock of which is owned by the Cuban Government, but an agency of the
Cuban Government in the conduct of the sort of matters which even in a country characterized by private capitalism, tend
to be supervised and managed by Government. Where the equities are so strong in *618 favor of the counter-claiming
defendants, as they are in this case, the Court should recognize the practicalities of the transactions.... The Court concludes
that Bancec is an alter ego of the Cuban Government.” Id., at 427–428.
Without determining the exact value of Citibank’s assets seized by Cuba, the court held that “the value of the confiscated
branches ... substantially exceeds the sums already recovered, and therefore the set-off pleaded here may be granted in full in
favor of Citibank.” Id., at 467. It therefore **2596 entered judgment dismissing the complaint.5
The United States Court of Appeals for the Second Circuit reversed. 658 F.2d 913 (2nd Cir.1981). While expressing
agreement with the District Court’s “descriptions of Bancec’s functions and its status as a wholly-owned instrumentality of
the Cuban government,” the court concluded that “Bancec was *619 not an alter ego of the Cuban government for the
purpose of [Citibank’s] counterclaims.” Id., at 917. It stated that, as a general matter, courts would respect the independent
identity of a governmental instrumentality created as “a separate and distinct juridical entity under the laws of the state that
owns it”—except “when the subject matter of the counterclaim assertible against the state is state conduct in which the
instrumentality had a key role.” Id., at 918. As an example of such a situation the Court of Appeals cited Banco Nacional de
Cuba v. First National City Bank, 478 F.2d 191 (CA2 1973), in which it had ruled that Banco Nacional could be held liable
by way of setoff for the value of Citibank’s seized Cuban assets because of the role it played in the expropriations. But the
court declined to hold that “a trading corporation wholly owned by a foreign government, but created and operating as a
separate juridical entity, is an alter ego of that government for the purpose of recovery for wrongs of the government totally
unrelated to the operations, conduct or authority of the instrumentality.” 658 F.2d, at 920.6
Citibank moved for rehearing, arguing, inter alia, that the panel had ignored the fact that Bancec had been dissolved in
February 1961. The motion, and a suggestion of rehearing en banc, were denied. This Court granted certiorari. 459 U.S. 942,
103 S.Ct. 253, 74 L.Ed.2d 198 (1982). We reverse, and remand the case for further proceedings.
II
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A
As an initial matter, Bancec contends that the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1602–1611 (1976
ed.) (FSIA), immunizes an instrumentality owned by a foreign government from suit on a counterclaim based on actions
*620 taken by that government. Bancec correctly concedes that, under 28 U.S.C. § 1607(c)7, an **2597 instrumentality of a
foreign state bringing suit in a United States court is not entitled to immunity “with respect to any counterclaim—... to the
extent that the counterclaim does not seek relief exceeding in amount or differing in kind from that sought by the
[instrumentality.]” It contends, however, that as a substantive matter the FSIA prohibits holding a foreign instrumentality
owned and controlled by a foreign government responsible for actions taken by that government.
We disagree. The language and history of the FSIA clearly establish that the Act was not intended to affect the substantive
law determining the liability of a foreign state or instrumentality, or the attribution of liability among instrumentalities of a
foreign state. Section 1606 of the FSIA provides in relevant part that “[a]s to any claim for relief with respect to which a
foreign state is not entitled to immunity ..., the foreign state shall be liable in the same manner and to the same extent as a
private individual under like circumstances....” The House Report on the FSIA states:
“The bill is not intended to affect the substantive law of liability. Nor is it intended to affect ... the attribution of
responsibility between or among entities of a foreign state; for example, whether the proper entity of a foreign state has
been sued, or whether an entity sued is *621 liable in whole or in part for the claimed wrong.” H.R.Rep. No. 94–1487, p.
12 (1976), U.S.Code Cong. & Admin.News 1976, pp. 6604, 6610.8
Thus, we conclude that the Foreign Sovereign Immunities Act does not control the determination of whether Citibank may
set off the value of its seized Cuban assets against Bancec’s claim. Nevertheless, our resolution of that question is guided by
the policies articulated by Congress in enacting the FSIA. See infra, at 2600–2601.
B
We must next decide which body of law determines the effect to be given to Bancec’s separate juridical status. Bancec
contends that internationally recognized conflict-of-law principles require the application of the law of the state that
establishes a government instrumentality—here Cuba—to determine whether the instrumentality may be held liable for
actions taken by the sovereign.
We cannot agree. As a general matter, the law of the state of incorporation normally determines issues relating to the
internal affairs of a corporation. Application of that body of law achieves the need for certainty and predictability of result
while generally protecting the justified expectations of parties with interests in the corporation. See Restatement (Second) of
Conflict of Laws § 302, Comments a & e, (1971). Cf. Cort v. Ash, 422 U.S. 66, 84, 95 S.Ct. 2080, 2090, 45 L.Ed.2d 26
(1975). Different conflicts principles apply, however, where the rights of third parties external to the corporation are at issue.
See Restatement (Second) of Conflict of Laws, supra, § 301.9 To *622 give conclusive effect to the law of the chartering
state in determining whether the separate juridical status of its instrumentality should be respected would permit the state to
violate with impunity the rights of third parties under international law while effectively insulating itself from liability in
foreign **2598 courts.10 We decline to permit such a result.11
Bancec contends in the alternative that international law must determine the resolution of the question presented. Citibank, on
the other hand, suggests that federal common law governs. The expropriation claim against which Bancec *623 seeks to
interpose its separate juridical status arises under international law, which, as we have frequently reiterated, “is part of our
law ....” The Paquete Habana, 175 U.S. 677, 700, 20 S.Ct. 290, 299, 44 L.Ed. 320 (1900). As we set forth below, see infra, at
2600–2601 and nn. 19–20, the principles governing this case are common to both international law and federal common law,
which in these circumstances is necessarily informed both by international law principles and by articulated congressional
policies.
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III
A
Before examining the controlling principles, a preliminary observation is appropriate. The parties and amici have repeatedly
referred to the phrases that have tended to dominate discussion about the independent status of separately constituted juridical
entities, debating whether “to pierce the corporate veil,” and whether Bancec is an “alter ego” or a “mere instrumentality” of
the Cuban Government. In Berkey v. Third Avenue Railway Co., 244 N.Y. 84, 155 N.E. 58 (1926), Justice (then Judge)
Cardozo warned in circumstances similar to those presented here against permitting worn epithets to substitute for rigorous
analysis.
“The whole problem of the relation between parent and subsidiary corporations is one that is still enveloped in the mists of
metaphor. Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by
enslaving it.” Id., at 94, 155 N.E., at 58.
With this in mind, we examine briefly the nature of government instrumentalities.12
*624 Increasingly during this century, governments throughout the world have established separately constituted legal
entities to perform a variety of tasks.13 The organization **2599 and control of these entities vary considerably, but many
possess a number of common features. A typical government instrumentality, if one can be said to exist, is created by an
enabling statute that prescribes the powers and duties of the instrumentality, and specifies that it is to be managed by a board
selected by the government in a manner consistent with the enabling law. The instrumentality is typically established as a
separate juridical entity, with the powers to hold and sell property and to sue and be sued. Except for appropriations to
provide capital or to cover losses, the instrumentality is primarily responsible for its own finances. The instrumentality is run
as a distinct economic enterprise; often it is not subject to the same budgetary and personnel requirements with which
government agencies must comply.14
These distinctive features permit government instrumentalities to manage their operations on an enterprise basis while
granting them a greater degree of flexibility and independence from close political control than is generally enjoyed *625 by
government agencies.15 These same features frequently prompt governments in developing countries to establish separate
juridical entities as the vehicles through which to obtain the financial resources needed to make large-scale national
investments.
“[P]ublic enterprise, largely in the form of development corporations, has become an essential instrument of economic
development in the economically backward countries which have insufficient private venture capital to develop the utilities
and industries which are given priority in the national development plan. Not infrequently, these public development
corporations ... directly or through subsidiaries, enter into partnerships with national or private foreign enterprises, or they
offer shares to the public.” Friedmann, “Government Enterprise: A Comparative Analysis” in Government Enterprise: A
Comparative Study 333–334 (W. Friedmann & J.F. Garner eds. 1970).
Separate legal personality has been described as “an almost indispensable aspect of the public corporation.” Friedmann,
supra, at 314. Provisions in the corporate charter stating that the instrumentality may sue and be sued have been construed to
waive the sovereign immunity accorded to many governmental activities, thereby enabling third parties to deal with the
instrumentality knowing that they may seek relief in the courts.16 Similarly, the instrumentality’s assets and liabilities must be
treated as distinct from those of its sovereign in *626 order to facilitate credit transactions with third parties. Id., at 315. Thus
what the Court stated with respect to private corporations in Anderson v. Abbott, 321 U.S. 349, 64 S.Ct. 531, 88 L.Ed. 793
(1944), is true also for governmental corporations:
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**2600 “Limited liability is the rule, not the exception; and on that assumption large undertakings are rested, vast
enterprises are launched, and huge sums of capital attracted.” Id., at 362, 64 S.Ct., at 537.
Freely ignoring the separate status of government instrumentalities would result in substantial uncertainty over whether an
instrumentality’s assets would be diverted to satisfy a claim against the sovereign, and might thereby cause third parties to
hesitate before extending credit to a government instrumentality without the government’s guarantee.17 As a result, the efforts
of sovereign nations to structure their governmental activities in a manner deemed necessary to promote economic
development and efficient administration would surely be frustrated. Due respect for the actions taken by foreign sovereigns
and for principles of comity between nations, see Hilton v. Guyot, 159 U.S. 113, 163–164, 16 S.Ct. 139, 143, 40 L.Ed. 95
(1895), leads us to conclude—as the courts of Great Britain have concluded in other circumstances18—that government *627
instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as
such.
We find support for this conclusion in the legislative history of the Foreign Sovereign Immunities Act. During its
deliberations, Congress clearly expressed its intention that duly created instrumentalities of a foreign state are to be accorded
a presumption of independent status. In its discussion of FSIA § 1610(b), the provision dealing with the circumstances under
which a judgment creditor may execute upon the assets of an instrumentality of a foreign government, the House Report
states:
“Section 1610(b) will not permit execution against the property of one agency or instrumentality to satisfy a *628
judgment against another, unrelated agency or instrumentality. There are compelling reasons for this. If U.S. law did not
respect the separate juridical identities of different agencies or instrumentalities, it might encourage foreign jurisdictions to
**2601 disregard the juridical divisions between different U.S. corporations or between a U.S. corporation and its
independent subsidiary. However, a court might find that property held by one agency is really the property of another.”
H.R.Rep. No. 94–1487, pp. 29–30, U.S.Code Cong. & Admin.News 1976, pp. 6628–6629 (citation omitted).
Thus, the presumption that a foreign government’s determination that its instrumentality is to be accorded separate legal
status is buttressed by this congressional determination. We next examine whether this presumption may be overcome in
certain circumstances.
B
In discussing the legal status of private corporations, courts in the United States19 and abroad20, have recognized *629 that an
incorporated entity—described by Chief Justice Marshall as “an artificial being, invisible, intangible, and existing only in
contemplation of law”21 —is not to be regarded as legally separate from its owners in all circumstances. Thus, where a
corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created, we have held
that one may be held liable for the actions of the other. See NLRB v. Deena Artware, Inc., 361 U.S. 398, 402–404, 80 S.Ct.
441, 443, 44 L.Ed.2d 400 (1960). In addition, our cases have long recognized “the broader equitable principle that the
doctrine of corporate entity, recognized generally and for most purposes, will not be regarded when to do so would work
fraud or injustice.” Taylor v. Standard Gas Co., 306 U.S. 307, 322, 59 S.Ct. 543, 550, 83 L.Ed. 669 (1939). See Pepper v.
Litton, 308 U.S. 295, 310, 60 S.Ct. 238, 246, 84 L.Ed. 281 (1940). In *630 particular, the Court has consistently refused to
give effect to the corporate form where it is interposed to defeat legislative policies. E.g., Anderson v. Abbott, supra, 321
U.S., at 362–363, 64 S.Ct., at 537–38. And, in Bangor Punta Operations, Inc. v. Bangor & **2602 Aroostook Railroad Co.,
417 U.S. 703, 94 S.Ct. 2578, 41 L.Ed.2d 418 (1974), we concluded:
“Although a corporation and its shareholders are deemed separate entities for most purposes, the corporate form may be
disregarded in the interests of justice where it is used to defeat an overriding public policy.... [W]here equity would
preclude the shareholders from maintaining the action in their own right, the corporation would also be precluded.... [T]he
principal beneficiary of any recovery and itself estopped from complaining of petitioners’ alleged wrongs, cannot avoid the
command of equity through the guise of proceeding in the name of ... corporations which it owns and controls.” Id., at 713,
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94 S.Ct., at 2584 (citations omitted).
C
We conclude today that similar equitable principles must be applied here. In National City Bank v. Republic of China, 348
U.S. 356, 75 S.Ct. 423, 99 L.Ed. 389 (1955), the Court ruled that when a foreign sovereign asserts a claim in a United States
court, “the consideration of fair dealing” bars the state from asserting a defense of sovereign immunity to defeat a setoff or
counterclaim. Id., at 365, 75 S.Ct., at 429. See 28 U.S.C. § 1607(c). As a general matter, therefore, the Cuban Government
could not bring suit in a United States court without also subjecting itself to its adversary’s counterclaim. Here there is
apparently no dispute that, as the District Court found, and the Court of Appeals apparently agreed, see 658 F.2d, at 916, n. 4,
“the devolution of [Bancec’s] claim, however viewed, brings it into the hands of the Ministry [of Foreign Trade], or Banco
Nacional,” each a party that may be held liable for the expropriation *631 of Citibank’s assets. 505 F.Supp., at 425.22 See
Banco Nacional de Cuba v. First National City Bank, supra, 478 F.2d, at 194. Bancec was dissolved even before Citibank
filed its answer in this case, apparently in order to effect “the consolidation and operation of the economic and social
conquests of the Revolution,” particularly the nationalization of the banks ordered by Law No. 891.23 Thus, the Cuban
Government and Banco Nacional, not any third parties that may *632 have relied on Bancec’s separate juridical identity,
would be the only beneficiaries of any recovery.24
**2603 In our view, this situation is similar to that in the Republic of china case.
“We have a foreign government invoking our law but resisting a claim against it which fairly would curtail its recovery. It
wants our law, like any other litigant, but it wants our law free from the claims of justice.” Id., at 361–362, 75 S.Ct., at 427
(footnote omitted).25
Giving effect to Bancec’s separate juridical status in these circumstances, even though it has long been dissolved, would
permit the real beneficiary of such an action, the Government of the Republic of Cuba, to obtain relief in our courts that it
could not obtain in its own right without waiving its sovereign immunity and answering for the seizure of Citibank’s
assets—a seizure previously held by the Court of Appeals to have violated international law.26 We decline to adhere blindly to
the corporate form where doing so would cause such an injustice. See Bangor Punta Operations, Inc. v. Bangor & Aroostook
Railroad Co., supra, 417 U.S., at 713, 94 S.Ct., at 2584.
Respondent contends, however, that the transfer of Bancec’s assets from the Ministry of Foreign Trade or Banco Nacional to
Empresa and Cuba Zucar effectively insulates it *633 from Citibank’s counterclaim. We disagree. Having dissolved Bancec
and transferred its assets to entities that may be held liable on Citibank’s counterclaim, Cuba cannot escape liability for acts
in violation of international law simply by retransferring the assets to separate juridical entities. To hold otherwise would
permit governments to avoid the requirements of international law simply by creating juridical entities whenever the need
arises. Cf. Federal Republic of Germany v. Elicofon, 358 F.Supp. 747, 757 (EDNY 1972), aff’d, 478 F.2d 231 (CA2 1973),
cert. denied, 415 U.S. 931, 94 S.Ct. 1443, 39 L.Ed.2d 489 (1974). See n. 25, supra. We therefore hold that Citibank may set
off the value of its assets seized by the Cuban Government against the amount sought by Bancec.
IV
Our decision today announces no mechanical formula for determining the circumstances under which the normally separate
juridical status of a government instrumentality is to be disregarded.27 Instead, it is the product of the application of
internationally recognized equitable principles to avoid the injustice that would result from permitting a *634 foreign state to
reap the benefits of our courts while avoiding the obligations of international law.28
**2604 The District Court determined that the value of Citibank’s Cuban assets exceeded Bancec’s claim. Bancec challenged
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this determination on appeal, but the Court of Appeals did not reach the question. It therefore remains open on remand. The
judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
Justice STEVENS, with whom Justice BRENNAN and Justice BLACKMUN join, concurring in part and dissenting in part.
Today the Court correctly rejects the contention that American courts should readily “pierce the corporate veils” of separate
juridical entities established by foreign governments to perform governmental functions. Accordingly, I join Parts I, II, III–A,
and III–B of the Court’s opinion. But I respectfully dissent from Part III–C, in which the Court endeavors to apply the
general principles it has enunciated. Instead I would vacate the judgment and remand the case to the Court of Appeals for
further proceedings.
As the Court acknowledges, the evidence presented to the District Court did not focus on the factual issue that the Court now
determines to be dispositive. Only a single witness testified on matters relating to Bancec’s legal status and operational
autonomy. The record before the District Court also included English translations of various Cuban statutes and resolutions,
but there was no expert testimony on the *635 significance of those foreign legal documents. Finally, as the Court notes, the
record includes a July 1961 stipulation of the parties and a May 1975 affidavit by counsel for respondent. Ante, at 2595, n. 3.
It is clear to me that the materials of record that have been made available to this Court are not sufficient to enable us to
determine the rights of the parties.
The Court relies heavily on the District Court’s statement that “the devolution of [Bancec’s] claim, however viewed, brings it
into the hands of the Ministry [of Foreign Trade], or Banco Nacional.” But that statement should not be given dispositive
significance, for the District Court made no inquiry into the capacity in which either entity might have taken Bancec’s claim.
If the Ministry of Foreign Trade held the claim on its own account, arguably the Cuban government could be subject to
Citibank’s setoff. But it is clear that the Ministry held the claim for six days at most, during the interval between the
promulgation of Laws No. 930 and No. 934 on February 23, 1961, and the issuance of Resolution No. 1 on March 1. It is thus
possible that these legal documents reflected a single, integrated plan of corporate reorganization carried out over a six-day
period, which resulted in the vesting of specified assets of Bancec in a new, juridically autonomous corporation, Empresa.1
Respondents argue *636 that the Ministry **2605 played the role of a trustee, “entrusted and legally bound to transfer
Bancec’s assets to the new empresa [foreign trade enterprise].... The Republic having acted as a trustee, there could be no
counterclaim based upon its acts in an individual capacity.” Brief for Respondent 57.
Of course, the Court may have reached a correct assessment of the transactions at issue. But I continue to believe that the
Court should not decide factual issues that can be resolved more accurately and effectively by other federal judges,
particularly when the record presented to this Court is so sparse and uninformative.2
All Citations
462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46
Footnotes
* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience
of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.
1 Law No. 934 provides that “[a]ll the functions of a mercantile character heretofore assigned to [Bancec] are hereby transferred and
vested in the foreign trade enterprises or houses set up hereunder, which are subrogated to the rights and obligations of said former
Bank in pursuance of the assignment of those functions ordered by the Minister.” App. to Pet. for Cert. 24d.
2 Citibank’s answer alleged that the suit was “brought by and for the benefit of the Republic of Cuba by and through its agent and
wholly-owned instrumentality, ... which is in fact and in law and in form and function an integral part of and indistinguishable
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from the Republic of Cuba.” App. 113.
3 The bulk of the evidence at trial was directed to the question whether the value of Citibank’s confiscated branches exceeded the
amount Citibank had already recovered from Cuba, including a setoff it had successfully asserted in Banco Nacional de Cuba v.
First National City Bank, 478 F.2d 191 (CA2 1973) (Banco I ), the decision on remand from this Court’s decision in First National
City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 92 S.Ct. 1808, 32 L.Ed.2d 466 (1972). Only one witness, Raul Lopez,
testified on matters touching upon the question presented. (A second witness, Juan Sanchez, described the operations of Bancec’s
predecessor. App. 185–186.) Lopez, who was called by Bancec, served as a lawyer for Banco Nacional from 1953 to 1965, when
he went to work for the Foreign Trade Ministry. He testified that “Bancec was an autonomous organization that was supervised by
the Cuban government but not controlled by it.” App. 197. According to Lopez, under Cuban law Bancec had independent legal
status, and could sue and be sued. Lopez stated that Bancec’s capital was supplied by the Cuban government and that its net
profits, after reserves, were paid to Cuba’s Treasury, but that Bancec did not pay taxes to the Government. Id., at 196.
The District Court also took into evidence translations of the Cuban statutes and resolutions, as well as the July 1961 stipulation for
leave to file a motion to file an amended complaint substituting the Republic of Cuba as plaintiff. The court stated that the
stipulation would be taken “for what it is worth,” and acknowledged respondent’s representation that it was based on an
“erroneous” interpretation of Cuba’s law. Id., at 207–209.
4 Judge vanPelt Bryan, before whom the case was tried, died before issuing a decision. With the parties’ consent, Judge Brieant
decided the case based on the record of the earlier proceedings. 505 F.Supp. 412, 418 (1980).
5 The District Court stated that the events surrounding Bancec’s dissolution “naturally inject a question of ‘real party in interest’ into
the discussion of Bancec’s claim,” but it attached “no significance or validity to arguments based on that concept.” 505 F.Supp., at
425. It indicated that when Bancec dissolved, the claim on the letter of credit was “the sort of asset, right and claim peculiar to the
banking business, and accordingly, probably should be regarded as vested in Banco Nacional....” Id., at 424. Noting that the Court
of Appeals, in Banco I, had affirmed a ruling that Banco Nacional could be held liable by way of setoff for the value of Citibank’s
seized Cuban assets, the court concluded:
“[T]he devolution of [Bancec’s] claim, however viewed, brings it into the hands of the Ministry, or Banco Nacional, each an alter
ego of the Cuban Government.... [W]e accept the present contention of plaintiff’s counsel that the order of this Court of July 6th
[1961] permitting, but apparently not requiring, the service of an amended complaint in which the Republic of Cuba itself would
appear as a party plaintiff in lieu of Bancec was based on counsel’s erroneous assumption, or an erroneous interpretation of the
laws and resolutions providing for the devolution of the assets of Bancec. Assuming this to be true, it is of no moment. The
Ministry of Foreign Trade is no different than the Government of which its minister is a member.” Id., at 425 (emphasis in
original).
6 In a footnote, the Court of Appeals referred to Bancec’s dissolution and listed its successors, but its opinion attached no
significance to that event. 658 F.2d, at 916, n. 4.
7 In relevant part, 28 U.S.C. § 1607 provides:
“In any action brought by a foreign state ... in a court of the United States or of a State, the foreign state shall not be accorded
immunity with respect to any counterclaim—
(c) to the extent that the counterclaim does not seek relief exceeding in amount or differing in kind from that sought by the foreign
state.”
As used in 28 U.S.C. § 1607, a “foreign state” includes an “agency or instrumentality of a foreign state....” 28 U.S.C. § 1603(a).
Section 1607(c) codifies our decision in National City Bank v. Republic of China, 348 U.S. 356, 75 S.Ct. 423, 99 L.Ed. 389 (1955).
See H.R.Rep. No. 94–1487, p. 23 (1976).
8 See also H.R.Rep. No. 94–1487, p. 28, U.S.Code Cong. & Admin.News 1976, p. 6627 (in deciding whether property in the United
States of a foreign state is immune from attachment and execution under 28 U.S.C. § 1610(a)(2), “[t]he courts will have to
determine whether property ‘in the custody of’ an agency or instrumentality is property ‘of’ the agency or instrumentality, whether
property held by one agency should be deemed to be property of another, [and] whether property held by an agency is property of
the foreign state.”)
9 See also Hadari, The Choice of National Law Applicable to the Multinational Enterprise and the Nationality of Such Enterprises,
1974 Duke L.J. 1, 15–19.
10 Cf. Anderson v. Abbott, 321 U.S. 349, 365, 64 S.Ct. 531, 539, 88 L.Ed. 793 (1944) (declining to apply the law of the state of
incorporation to determine whether a banking corporation complied with the requirements of federal banking laws because “no
State may endow its corporate creatures with the power to place themselves above the Congress of the United States and defeat the
federal policy concerning national banks which Congress has announced”).
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11 Pointing out that 28 U.S.C. § 1606, see ante, at 2596–2597, contains language identical to the Federal Tort Claims Act (FTCA), 28
U.S.C. § 2674 (1976 ed.), Bancec also contends alternatively that the FSIA, like the FTCA, requires application of the law of the
forum state—here New York—including its conflicts principles. We disagree. Section 1606 provides that “[a]s to any claim for
relief with respect to which a foreign state is not entitled to immunity ..., the foreign state shall be liable in the same manner and to
the same extent as a private individual in like circumstances.” Thus, where state law provides a rule of liability governing private
individuals, the FSIA requires the application of that rule to foreign states in like circumstances. The statute is silent, however,
concerning the rule governing the attribution of liability among entities of a foreign state. In Banco Nacional de Cuba v. Sabbatino,
376 U.S. 398, 425, 84 S.Ct. 923, 938, 11 L.Ed.2d 804 (1964), this Court declined to apply the State of New York’s act of state
doctrine in a diversity action between a United States national and an instrumentality of a foreign state, concluding that matters
bearing on the nation’s foreign relations “should not be left to divergent and perhaps parochial state interpretations.” When it
enacted the FSIA, Congress expressly acknowledged “the importance of developing a uniform body of law” concerning the
amenability of a foreign sovereign to suit in United States courts. H.R.Rep. No. 94–1487, p. 32. See Verlinden B.V. v. Central
Bank of Nigeria, ––– U.S. ––––, ––––, 103 S.Ct. 1962, 1969, 75 L.Ed.2d 81 (1983). In our view, these same considerations
preclude the application of New York law here.
12 Although this Court has never been required to consider the separate status of a foreign instrumentality, it has considered the legal
status under federal law of United States government instrumentalities in a number of contexts, none of which are relevant here.
See, e.g., Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 59 S.Ct. 516, 83 L.Ed. 784 (1939) (determining that
Congress did not intend to endow corporations chartered by the Reconstruction Finance Corporation with immunity from suit).
13 Friedmann, “Government Enterprise: A Comparative Analysis” in Government Enterprise: A Comparative Study 306–307 (W.
Friedmann & J.F. Garner eds. 1970). See D. Coombes, State Enterprise: Business or Politics? (1971) (United Kingdom); Dallmayr,
Public and Semi-Public Corporations in France, 26 Law & Contemp. Prob. 755 (1961); J. Quigley, The Soviet Foreign Trade
Monopoly 48–49, 119–120 (1974); Seidman, “Government-sponsored Enterprise in the United States,” in The New Political
Economy 85 (B. Smith ed. 1975); Supranowitz, The Law of State-Owned Enterprises in a Socialist State, 26 Law &
Contemp.Prob. 794 (1961); United Nations Department of Economic and Social Affairs, Organization, Management and
Supervision of Public Enterprises in Developing Countries 63–69 (1974) (hereinafter United Nations Study); A.H. Walsh, The
Public’s Business: The Politics and Practices of Government Corporations 313–321 (1978) (Europe).
14 Friedmann, supra, at 334; United Nations Study, supra, at 63–65.
15 President Franklin D. Roosevelt described the Tennessee Valley Authority, perhaps the best known of the American public
corporations, as “a corporation clothed with the power of government but possessed of the flexibility and initiative of a private
enterprise.” 77 Cong.Rec. 1423 (1933). See also J. Thurston, Government Proprietary Corporations in the English-Speaking
Countries 7 (1937).
16 J. Thurston, supra, at 43–44. This principle has long been recognized in courts in common law nations. See Bank of the United
States v. Planters’ Bank of Georgia, (22 U.S.) 9 Wheat. 904, 6 L.Ed. 244 (1824); Tamlin v. Hannaford, [1950] 1 K.B. 18, 24
(C.A.).
17 See Posner, The Rights of Creditors of Affiliated Corporations, 43 U.Chi.L.Rev. 499, 516–517 (1976) (discussing private
corporations).
18 The British courts, applying principles we have not embraced as universally acceptable, have shown marked reluctance to attribute
the acts of a foreign government to an instrumentality owned by that government. In I Congreso del Partido, [1983] A.C. 244, a
decision discussing the so-called “restrictive” doctrine of sovereign immunity and its application to three Cuban state-owned
enterprises, including Cubazucar, Lord Wilberforce described the legal status of government instrumentalities:
“State-controlled enterprises, with legal personality, ability to trade and to enter into contracts of private law, though wholly
subject to the control of their state, are a well-known feature of the modern commercial scene. The distinction between them, and
their governing state, may appear artificial: but it is an accepted distinction in the law of English and other states. Quite different
considerations apply to a state-controlled enterprise acting on government directions on the one hand, and a state, exercising
sovereign functions, on the other.” Id., at 258 (citation omitted).
Later in his opinion, Lord Wilberforce rejected the contention that commercial transactions entered into by state-owned
organizations could be attributed to the Cuban government. “The status of these organizations is familiar in our courts, and it has
never been held that the relevant state is in law answerable for their actions.” Id., at 271. See also Trendtex Trading Corp. v.
Central Bank of Nigeria, [1977] Q.B. 529 in which the Court of Appeal ruled that the Central Bank of Nigeria was not an “alter
ego or organ” of the Nigerian government for the purpose of determining whether it could assert sovereign immunity. Id., at 559.
In C. Czarnikow, Ltd. v. Rolimpex, [1979] A.C. 351, the House of Lords affirmed a decision holding that Rolimpex, a Polish state
trading enterprise that sold Polish sugar overseas, could successfully assert a defense of force majeure in an action for breach of a
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contract to sell sugar. Rolimpex had defended on the ground that the Polish government had instituted a ban on the foreign sale of
Polish sugar. Lord Wilberforce agreed with the conclusion of the court below that, in the absence of “clear evidence and definite
findings” that the foreign government took the action “purely in order to extricate a state enterprise from contractual liability,” the
enterprise cannot be regarded as an organ of the state. Rolimpex, he concluded, “is not so closely connected with the government
of Poland that it is precluded from relying on the ban [on foreign sales] as government intervention....” Id., at 364.
19 See 1 W.M. Fletcher, Cyclopedia of the Law of Private Corporations § 41 (rev. perm. ed. 1974):
“[A] corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but,
when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will
regard the corporation as an association of persons.” Id., at 166 (footnotes omitted).
See generally, H. Henn, Handbook of the Law of Corporations § 146 (2d ed. 1970); I.M. Wormser, Disregard of the Corporate
Fiction and Allied Corporate Problems 42–85 (1927).
20 In Case Concerning The Barcelona Traction, Light & Power Co., 1970 I.C.J. 3, the International Court of Justice acknowledged
that, as a matter of international law, the separate status of an incorporated entity may be disregarded in certain exceptional
circumstances:
“Forms of incorporation and their legal personality have sometimes not been employed for the sole purposes they were intended to
serve; sometimes the corporate entity has been unable to protect the rights of those who have entrusted their financial resources to
it; thus inevitably there have arisen dangers of abuse, as in the case of many other institutions of law. Here, then, as elsewhere, the
law, confronted with economic realities, has had to provide protective measures and remedies in the interests of those within the
corporate entity as well as those outside who have dealings with it: the law has recognized that the independent existence of the
legal entity cannot be treated as an absolute. It is in this context that the process of ‘lifting the corporate veil’ or ‘disregarding the
legal entity’ has been found justified and equitable in certain circumstances or for certain purposes. The wealth of practice already
accumulated on the subject in municipal law indicates that the veil is lifted, for instance, to prevent misuse of the privileges of legal
personality, as in certain cases of fraud or malfeasance, to protect third persons such as a creditor or purchaser, or to prevent the
evasion of legal requirements or of obligations.
In accordance with the principle expounded above, the process of lifting the veil, being an exceptional one admitted by municipal
law in respect of an institution of its own making, is equally admissible to play a similar role in international law....” Id., at 38–39.
On the application of these principles by European courts, see Cohn and Simitis, “Lifting the Veil” in the Company Laws of the
European Continent, 12 Int. & Comp.L.Q. 189 (1963); Hadari, The Structure of the Private Multinational Enterprise, 71
Mich.L.Rev. 729, 771, n. 260 (1973).
21 Trustees of Dartmouth College v. Woodward, (17 U.S.) 4 Wheat. 514, 636, 4 L.Ed. 629 (1819).
22 Pointing to the parties’ failure to seek findings of fact in the District Court concerning Bancec’s dissolution and its aftermath,
Bancec contends that the District Court’s order denying its motion to substitute Cuba Zucar as plaintiff precludes further
consideration of the effect of the dissolution. While it is true that the District Court did not hear evidence concerning which agency
or instrumentality of the Cuban Government, under Cuban law, succeeded to Bancec’s claim against Citibank on the letter of
credit, resolution of that question has no bearing on our inquiry. We rely only on the fact that Bancec was dissolved by the Cuban
Government and its assets transferred to entities that may be held liable on Citibank’s counterclaim—undisputed facts readily
ascertainable from the statutes and orders offered in the District Court by Bancec in support of its motion to substitute Cuba Zucar.
23 Law No. 930, the law dissolving Bancec, contains the following recitations:
“WHEREAS, the measures adopted by the Revolutionary Government in pursuance of the Program of the Revolution have
resulted, within a short time, in profound social changes and considerable institutional transformations of the national economy.
“WHEREAS, among these institutional transformations there is one which is specially significant due to its transcendence in the
economic and financial fields, which is the nationalization of the banks ordered by Law No. 891, of October 13, 1960, by virtue of
which the banking functions will hereafter be the exclusive province of the Cuban Government.
“WHEREAS, the consolidation and the operation of the economic and social conquests of the Revolution require the
restructuration into a sole and centralized banking system, operated by the State, constituted by the [Banco Nacional], which will
foster the development and stimulation of all productive activities of the Nation through the accumulation of the financial resources
thereof, and their most economic and reasonable utilization....” App. to Pet. for Cert. 14d–15d.
24 The parties agree that, under the Cuban Assets Control Regulations, 31 CFR Part 515 (1982), any judgment entered in favor of an
instrumentality of the Cuban Government would be frozen pending settlement of claims between the United States and Cuba.
25 See also Banco Nacional de Cuba v. First National City Bank, supra, 406 U.S., at 770–773, 92 S.Ct., at 1814–1816 (Douglas, J.,
concurring in the result); Federal Republic of Germany v. Elicofon, 358 F.Supp. 747 (EDNY 1972), aff’d,
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1973), cert. denied, 415 U.S. 931, 94 S.Ct. 1443, 39 L.Ed.2d 489 (1974). In Elicofon, the District Court held that a separate
juridical entity of a foreign state not recognized by the United States may not appear in a United States court. A contrary holding,
the court reasoned, “would permit non-recognized governments to use our courts at will by creating ‘juridical entities’ whenever
the need arises.” 358 F.Supp., at 757.
26 See Banco I, supra, 478 F.2d, at 194.
27 The District Court adopted, and both Citibank and the Solicitor General urge upon the Court, a standard in which the determination
whether or not to give effect to the separate juridical status of a government instrumentality turns in part on whether the
instrumentality in question performed a “governmental function.” We decline to adopt such a standard in this case, as our decision
is based on other grounds. We do observe that the concept of a “usual” or a “proper” governmental function changes over time and
varies from nation to nation. Cf. New York v. United States, 326 U.S. 572, 580, 66 S.Ct. 310, 313, 90 L.Ed. 326 (1945) (opinion of
Frankfurter, J.) (“To rest the federal taxing power on what is ‘normally’ conducted by private enterprise in contradiction to the
‘usual’ governmental functions is too shifting a basis for determining constitutional power and too entangled in expediency to
serve as a dependable legal criterion”); id., at 586, 66 S.Ct., at 316 (Stone, C.J., concurring); id., at 591, 66 S.Ct., at 318 (Douglas,
J., dissenting). See also Friedmann, The Legal Status and Organization of the Public Corporation, 16 Law & Contemp.Prob. 576,
589–591 (1951).
28 Bancec does not suggest, and we do not believe, that the act of state doctrine, see e.g., Banco Nacional de Cuba v. Sabbatino, 376
U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964), precludes this Court from determining whether Citibank may set off the value of its
seized Cuban assets against Bancec’s claim. Bancec does contend that the doctrine prohibits this Court from inquiring into the
motives of the Cuban Government for incorporating Bancec. Brief for Respondent 16–18. We need not reach this contention,
however, because our conclusion does not rest on any such assessment.
1 Law No. 930 provided, in part, that Bancec’s “trade functions will be assumed by the foreign trade enterprises or houses of the
Ministry of Foreign Trade,” App. to Pet. for Cert. 16d, App. 104. Law No. 934, correspondingly, stated, “All the functions of a
mercantile character heretofore assigned to said Foreign Trade Bank of Cuba are hereby transferred and vested in the foreign trade
enterprises or houses set up hereunder, which are subrogated to the rights and obligations of said former Bank in pursuance of the
assignment of those functions ordered by the Minister.” App. to Pet. for Cert. 24d. The preamble of Resolution No. 1 of 1961,
issued on March 1, 1961, explained that Law No. 934 had provided “that all functions of a commercial nature that were assigned to
the former Cuban Bank for Foreign Trade are attributed to the enterprises or foreign trade houses which are subrogated in the
rights and obligations of said Bank.” Nothing in the affidavit filed by respondent in May 1975 elucidates the precise nature of these
transactions, or explains how Bancec’s former trading functions were exercised during the six-day interval. App. 132–137.
2 Nor do I agree that a contrary result “would cause such an injustice.” Ante, at 2603. Petitioner is only one of many American
citizens whose property was nationalized by the Cuban Government. It seeks to minimize its losses by retaining $193,280.30 that a
purchaser of Cuban sugar had deposited with it for the purpose of paying for the merchandise, which was delivered in due course.
Having won this lawsuit, petitioner will simply retain that money. If petitioner’s contentions in this case had been rejected, the
money would be placed in a fund comprised of frozen Cuban assets, to be distributed equitably among all the American victims of
Cuban nationalizations. Ante, at 2602, n. 24. Even though petitioner has suffered a serious injustice at the hands of the Cuban
Government, no special equities militate in favor of giving this petitioner a preference over all other victims simply because of its
participation in a discrete, completed, commercial transaction involving the sale of a load of Cuban sugar.
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Annex 141

ANNEX 142

Sumitomo Shoji America, Inc. v. Avagliano, 457 U.S. 176 (1982)
102 S.Ct. 2374, 28 Fair Empl.Prac.Cas. (BNA) 1753, 29 Empl. Prac. Dec. P 32,782...
© 2019 Thomson Reuters. No claim to original U.S. Government Works. 1
102 S.Ct. 2374
Supreme Court of the United States
SUMITOMO SHOJI AMERICA, INC., Petitioner
v.
Lisa M. AVAGLIANO et al.
Lisa M. AVAGLIANO, et al., Petitioners
v.
SUMITOMO SHOJI AMERICA, INC.
Nos. 80–2070, 81–24.
|
Argued April 26, 1982.
|
Decided June 15, 1982.
Synopsis
Past and present female secretarial employees of a New York corporation, which was a wholly owned subsidiary of a
Japanese general trading company, brought a class action against their employer, claiming that its alleged practice of hiring
only male Japanese citizens to fill executive, managerial, and sales positions violated Title VII of the Civil Rights Act.
Defendant moved to dismiss the complaint on ground that its practices were protected under Article VIII(1) of the
Friendship, Commerce and Navigation Treaty between the United States and Japan. The United States District Court for the
Southern District of New York, 473 F.Supp. 506, held that because defendant was incorporated in the United States, it was
not covered by Article VIII(1), but the Court then certified for interlocutory appeal the question whether the terms of the
treaty exempted defendant from Title VII’s provisions. The Court of Appeals, Second Circuit, 638 F.2d 552,reversed in part,
and certiorari was granted. The Supreme Court, Chief Justice Burger, held that Article VIII(1), which provides that the
“companies of either Party shall be permitted to engage, within the territories of the other Party, accountants and other
technical experts, executive personnel, attorneys, agents and other specialists of their choice,” provided no defense to a Title
VII employment discrimination suit against an American subsidiary of a Japanese company, since such an American
subsidiary is not a company of Japan and thus is not covered by Article VIII(1) of the treaty.
Vacated and remanded.
**2375 Syllabus*
*176 Petitioner Sumitomo Shoji America, Inc., is a New York corporation and a wholly owned subsidiary of a Japanese
general trading company. Past and present female secretarial employees of Sumitomo, who, with one exception, are United
States citizens, brought a class action in Federal District Court against Sumitomo, claiming that its alleged practice of hiring
only male Japanese citizens to fill executive, managerial, and sales positions violated Title VII of the Civil Rights Act of
1964. Sumitomo moved to dismiss the complaint on the ground that its practices were protected under Art. VIII(1) of the
Friendship, Commerce and Navigation Treaty between the United States and Japan. Article VIII(1) provides that the
“companies of either Party shall be permitted to engage, within the territories of the other Party, accountants and other
technical experts, executive personnel, attorneys, agents and other specialists of their choice.” Article XXII(3) of the Treaty
defines “companies” as “[c]ompanies constituted under the applicable laws and regulations within the territories of either
Party.” The District Court refused to dismiss, holding that because Sumitomo was incorporated in the United States, it was
not covered by Art. VIII(1), but the court then certified for interlocutory appeal to the Court of Appeals the question whether
the terms of the Treaty exempted Sumitomo from Title VII’s provisions. The Court of Appeals reversed in part, holding that
Art. VIII(1) was intended to cover locally incorporated subsidiaries of foreign companies but that the Treaty language did not
insulate Sumitomo’s employment practices from Title VII scrutiny.
Held: Sumitomo is not a company of Japan and thus is not covered by Art. VIII(1) of the Treaty. Pp. 2377–2382.
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(a) Under Art. XXII(3)’s literal language, Sumitomo is a company of the United States, since it was “constituted under the
applicable laws and regulations” of New York. As a company of the United States, it cannot invoke the rights provided in
Art. VIII(1), which are available only to companies of Japan operating in the United States and to companies *177 of the
United States operating in Japan. Where both parties to the Treaty agree with this meaning and such interpretation follows
from the clear Treaty language, deference will be given to it, absent extraordinarily strong contrary evidence. Pp. 2377–2380.
(b) Adherence to the Treaty language does not overlook the Treaty’s purpose, since the primary purpose of the corporation
provisions was to give corporations of each signatory legal status in the territory **2376 of the other party and to allow them
to conduct business in the other country on a comparable basis with domestic firms. Pp. 2380–2382.
2d Cir., 638 F.2d 552, vacated and remanded.
Attorneys and Law Firms
Abram Chayes, Washington, D. C., for Sumitomo Shoji America, Inc.
Lewis M. Steel, New York City, for Avagliano, et al.
Lawrence G. Wallace, Washington, D. C., for the United States as amicus curiae by special leave of Court.
Opinion
Chief Justice BURGER delivered the opinion of the Court.
We granted certiorari to decide whether Article VIII(1) of the Friendship, Commerce and Navigation Treaty between *178
the United States and Japan provides a defense to a Title VII employment discrimination suit against an American subsidiary
of a Japanese company.
I
Petitioner, Sumitomo Shoji America, Inc., is a New York corporation and a wholly owned subsidiary of Sumitomo Shoji
Kabushiki Kaisha, a Japanese general trading company or sogo shosha.1 Respondents are past and present female secretarial
employees of Sumitomo.2 All but one of the respondents are United States citizens; that one exception is a Japanese citizen
living in the United States. Respondents brought this suit as a class action claiming that Sumitomo’s alleged practice of hiring
only male Japanese citizens to fill executive, managerial, and sales positions violated both 42 U.S.C. § 1981 and Title VII of
the Civil Rights Act of 1964, 78 Stat. 253, as amended, 42 U.S.C. § 2000e et seq. (1976 ed. and Supp.IV).3 Respondents
sought both injunctive relief and damages.
*179 Without admitting the alleged discriminatory practice, Sumitomo moved under Rule 12(b)(6) of the Federal Rules of
Civil Procedure to dismiss the complaint. Sumitomo’s motion was based on two grounds: (1) discrimination on the basis of
Japanese citizenship does not violate Title VII or § 1981; and (2) Sumitomo’s practices are protected under Article VIII(1) of
the Friendship, Commerce and Navigation Treaty between the United States and Japan, Apr. 2, 1953, [1953] 4 U.S.T. 2063,
T.I.A.S. No. 2863. The District Court dismissed the § 1981 claim, holding that neither sex discrimination nor national origin
discrimination are cognizable under that section. 473 F.Supp. 506 (S.D.N.Y.1979). The court refused to dismiss the Title VII
claims, however; it held that because Sumitomo is incorporated in the United States it is not covered by Article VIII(1) of the
Treaty. The District Court then certified for interlocutory appeal to the Court of Appeals under 28 U.S.C. § 1292(b) the
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question of whether the terms of the Treaty **2377 exempted Sumitomo from the provisions of Title VII.
The Court of Appeals reversed in part. 638 F.2d 552 (C.A.2 1981). The court first examined the Treaty’s language and its
history and concluded that the Treaty parties intended Article VIII(1) to cover locally incorporated subsidiaries of foreign
companies such as Sumitomo. The court then held that the Treaty language does not insulate Sumitomo’s executive
employment practices from Title VII scrutiny. The court concluded that under certain conditions, Japanese citizenship could
be a bona fide occupational qualification for high-level employment with a Japanese-owned domestic corporation and that
Sumitomo’s practices might *180 thus fit within a statutory exception to Title VII.4 The court remanded for further
proceedings.5
We granted certiorari, 454 U.S. 962, 102 S.Ct. 501, 70 L.Ed.2d 377 (1981), and we vacate and remand.
II
Interpretation of the Friendship, Commerce and Navigation Treaty between Japan and the United States must, of course,
begin with the language of the Treaty itself. The clear import of treaty language controls unless “application of the words of
the treaty according to their obvious meaning effects a result inconsistent with the intent or expectations of its signatories.”
Maximov v. United States, 373 U.S. 49, 54, 83 S.Ct. 1054, 1057, 10 L.Ed.2d 184 (1963). See also The Amiable Isabella, 6
Wheat. (10 U.S.) 1, 72, 5 L.Ed. 191 (1821).
*181 Article VIII(1) of the Treaty provides in pertinent part:
“[C]ompanies of either Party shall be permitted to engage, within the territories of the other Party,
accountants and other technical experts, executive personnel, attorneys, agents and other specialists of
their choice.” (Emphasis added.)6
*182 **2378 Clearly Article VIII(1) only applies to companies of one of the Treaty countries operating in the other country.
Sumitomo contends that it is a company of Japan, and that Article VIII(1) of the Treaty grants it very broad discretion to fill
its executive, managerial, and sales positions exclusively with male Japanese citizens.7
Article VIII(1) does not define any of its terms; the definitional section of the Treaty is contained in Article XXII. Article
XXII(3) provides:
“As used in the present Treaty, the term ‘companies’ means corporations, partnerships, companies and other associations,
whether or not with limited liability and whether or not for pecuniary profit. Companies constituted under the applicable
laws and regulations within the territories of either Party shall be deemed companies thereof and shall have their juridical
status recognized within the territories of the other Party.” (Emphasis added.)
Sumitomo is “constituted under the applicable laws and regulations” of New York; based on Article XXII(3), it is a
company of the United States, not a company of Japan.8 As *183 a company of the United States operating in the United
States, under the literal language of Article XXII(3) of the Treaty, Sumitomo cannot invoke the rights provided in Article
VIII(1), which are available only to companies of Japan operating in the United States and to companies of the United States
operating in Japan.
The Governments of Japan and the United States support this interpretation of the Treaty. Both the Ministry of Foreign
Affairs of Japan and the United States Department of State agree that a United States corporation, even when wholly owned
by a Japanese company, is not a company of Japan under the Treaty and is therefore not covered by Article VIII(1). **2379
The Ministry of Foreign Affairs stated its position to the American Embassy in Tokyo with reference to this case:
“The Ministry of Foreign Affairs, as the Office of [the Government of Japan] responsible for the interpretation of the
[Friendship, Commerce and Navigation] Treaty, reiterates its view concerning the application of Article 8, Paragraph 1 of
the Treaty: For the purpose of the Treaty, companies constituted under the applicable laws ... of either Party shall be
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deemed companies thereof and, therefore, a subsidiary of a Japanese company which is incorporated under the laws of
New York is not *184 covered by Article 8 Paragraph 1 when it operates in the United States.”9
The United States Department of State also maintains that Article VIII(1) rights do not apply to locally incorporated
subsidiaries.10 Although not conclusive, the meaning attributed to treaty provisions by the Government agencies *185 charged
with their negotiation and enforcement is entitled to great weight. Kolovrat v. Oregon, 366 U.S. 187, 194, 81 S.Ct. 922, 926,
6 L.Ed.2d 218 (1961).11
Our role is limited to giving effect to the intent of the Treaty parties. When the parties to a treaty both agree as to the
meaning of a treaty provision, and that interpretation follows from the clear treaty language, we must, absent extraordinarily
strong contrary evidence, defer to that interpretation.12
III
Sumitomo maintains that although the literal language of the Treaty supports the contrary interpretation, the intent of Japan
and the United States was to cover subsidiaries regardless of their place of incorporation. We disagree.
**2380 Contrary to the view of the Court of Appeals and the claims of Sumitomo, adherence to the language of the Treaty
would not “overlook the purpose of the Treaty.” 638 F.2d, at 556. The Friendship, Commerce and Navigation Treaty between
Japan and the United States is but one of a series of similar commercial agreements negotiated after World War II.13 The
primary purpose of the corporation provisions of *186 the Treaties was to give corporations of each signatory legal status in
the territory of the other party, and to allow them to conduct business in the other country on a comparable basis with
domestic firms. Although the United States negotiated commercial treaties as early as 1778, and thereafter throughout the
19th century and early 20th century,14 these early commercial treaties were primarily concerned with the trade and shipping
rights of individuals. Until the 20th century, international commerce was much more an individual than a corporate affair.15
As corporate involvement in international trade expanded in this century, old commercial treaties became outmoded. Because
“corporation[s] can have no legal existence out of the boundaries of the sovereignty by which [they are] created,” Bank of
Augusta v. Earle, 13 Pet. (38 U.S.) 519, 588, 10 L.Ed. 274 (1839), it became necessary to negotiate new treaties granting
corporations legal status and the right to function abroad. A series of Treaties negotiated before World War II gave
corporations legal status and access to foreign courts,16 but it was not until the *187 postwar Friendship, Commerce and
Navigation Treaties that United States corporations gained the **2381 right to conduct business in other countries.17 The
purpose of the Treaties was *188 not to give foreign corporations greater rights than domestic companies, but instead to
assure them the right to conduct business on an equal basis without suffering discrimination based on their alienage.
The Treaties accomplished their purpose by granting foreign corporations “national treatment”18 in most respects and by
allowing foreign individuals and companies to form locally incorporated subsidiaries. These local subsidiaries are considered
for purposes of the Treaty to be companies of the country in which they are incorporated; they are entitled to the rights, and
subject to the responsibilities of other domestic corporations. By treating these subsidiaries as domestic companies, the
purpose of the Treaty provisions—to assure that corporations of one Treaty party have the right to conduct business within
the territory of the other party without suffering discrimination as an alien entity—is fully met.
*189 Nor can we agree with the Court of Appeals view that literal interpretation of the Treaty would create a “crazy-quilt
pattern” in which the rights of branches of Japanese companies operating directly in the United States would be greatly
superior to the right of locally incorporated subsidiaries of Japanese companies. 638 F.2d, at 556. The Court of Appeals
maintained that if such subsidiaries were not considered companies of Japan under the Treaty, they, unlike branch offices of
Japanese corporations, would be denied access to the legal system, would be left unprotected against unlawful entry and
molestation, and would be unable to dispose of property, obtain patents, engage in importation and exportation, or make
payments, remittances, and transfers of funds. Ibid. That this is not the case is obvious; the subsidiaries, as companies of the
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United States, would enjoy all of those rights and more. The only significant advantage branches may have over subsidiaries
is that conferred by Article VIII(1).
IV
We are persuaded, as both signatories agree, that under the literal language of **2382 Article XXII(3) of the Treaty,
Sumitomo is a company of the United States; we discern no reason to depart from the plain meaning of the Treaty language.
Accordingly, we hold that Sumitomo is not a company of Japan and is thus not covered by Article VIII(1) of the Treaty.19 The
judgment of the Court of Appeals is vacated, *190 and the case is remanded for further proceedings consistent with this
opinion.
Vacated and remanded.
All Citations
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Footnotes
* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience
of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.
1 General trading companies have been a unique fixture of the Japanese economy since the Meiji era. These companies each market
large numbers of Japanese products, typically those of smaller concerns, and also have a large role in the importation of raw
materials and manufactured products to Japan. In addition, the trading companies play a large part in financing Japan’s
international trade. The largest trading companies—including Sumitomo’s parent company—in a typical year account for over
50% of Japanese exports and over 60% of imports to Japan. See Krause & Sekiguchi, Japan and the World Economy, in Asia’s
New Giant: How the Japanese Economy Works 383, 389–397 (H. Patrick & H. Rosovsky eds. 1976).
2 Respondents have also filed a cross-petition in this case. Thus, the past and present secretaries, generally referred to as
respondents, are the respondents in No. 80–2070 and the cross-petitioners in No. 81–24. Sumitomo is the petitioner in No. 80–2070
and the cross-respondent in No. 81–24.
3 Prior to bringing this suit, respondents each filed timely complaints with the Equal Employment Opportunity Commission. The
EEOC issued “right to sue” letters to the respondents on October 27, 1977. This suit was filed on November 21, 1977, well within
the statutory 90-day period allowed for filing suits after receipt of an EEOC notice of right to sue. 42 U.S.C. § 2000e–5(f)(1).
4 Sumitomo argued in the District Court that discrimination on the basis of national citizenship, as opposed to national origin, was
not prohibited by Title VII. The District Court disagreed, however. It relied on Espinoza v. Farah Manufacturing Co., 414 U.S. 86,
92, 94 S.Ct. 334, 338, 38 L.Ed.2d 287 (1973), in which we noted that “Title VII prohibits discrimination on the basis of citizenship
whenever it has the purpose or effect of discriminating on the basis of national origin.” Although discussed at length in the briefs,
this issue is not properly before the Court and we do not reach it. It was not included in the question certified for interlocutory
review by the Court of Appeals under 28 U.S.C. § 1292(b), was not decided by the Court of Appeals, and was not set forth or fairly
included in the questions presented for review by this Court as required by Rule 21.1(a).
5 In a nearly identical case, a divided panel of the Court of Appeals for the Fifth Circuit came to somewhat contrary results. Spiess v.
C. Itoh & Co., 643 F.2d 353 (1981), cert. pending, No. 81–1496. The Fifth Circuit majority agreed with the Second Circuit
decision that a locally incorporated subsidiary of a Japanese corporation is covered by Article VIII(1) of the Treaty, but disagreed
with the latter court’s decision on the effect of the Treaty on Title VII. The court held that the Treaty provision did protect the
subsidiary’s practices from Title VII liability.
In dissent, Judge Reavley disagreed with the majority’s initial conclusion. He would have held that under the plain language of the
Treaty, locally incorporated subsidiaries are to be considered domestic corporations and are thus not covered by Article VIII(1).
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6 Similar provisions are contained in the Friendship, Commerce and Navigation Treaties between the United States and other
countries. See, e.g., Article XII(4) of the Treaty with Greece, [1954] 5 U.S.T. 1829, 1857, T.I.A.S. No. 3057 (1951); Article
VIII(1) of the Treaty with Israel, [1954] 5 U.S.T. 550, 557, T.I.A.S. No. 551 (1951); Article VIII(1) of the Treaty with the Federal
Republic of Germany, [1956] 7 U.S.T. 1839, 1848, T.I.A.S. No. 3593 (1954).
These provisions were apparently included at the insistence of the United States; in fact, other countries, including Japan,
unsuccessfully fought for their deletion. See, e.g., State Department Airgram No. A–453, dated Jan. 7, 1952, pp. 1, 3, reprinted in
App. 130a, 131a, 133a (discussing Japanese objections to Article VIII(1)); Foreign Service Despatch No. 2529, dated Mar. 18,
1954, reprinted in App. 181a, 182a (discussing German objections to Article VIII(1)).
According to Herman Walker, Jr., who at the time of the drafting of the Treaty served as Adviser on Commercial Treaties at the
State Department, Article VIII(1) and the comparable provisions of other treaties were intended to avoid the effect of strict
percentile limitations on the employment of Americans abroad and “to prevent the imposition of ultranationalistic policies with
respect to essential executive and technical personnel.” Walker, Provisions on Companies in United States Commercial Treaties,
50 Am.J.Int’l L. 373, 386 (1956); Walker, Treaties for the Encouragement and Protection of Foreign Investment: Present United
States Practice, 5 Am.J.Comp.L. 229, 234 (1956). According to the State Department, Mr. Walker was responsible for formulation
of the postwar form of the Friendship, Commerce and Navigation Treaty and negotiated several of the treaties for the United
States. Department of State Airgram A–105, dated Jan. 9, 1976, reprinted in App. 157a.
See also Foreign Service Despatch No. 2529, supra, App. 182a (Purpose of Article VIII(1) of Treaty with Germany “is to preclude
the imposition of ‘percentile’ legislation. It gives freedom of choice as among persons lawfully present in the country and
occupationally qualified under the local law”).
7 The issues raised by this contention are clearly of widespread importance. As we noted in n. 6, supra, treaty provisions similar to
that invoked by Sumitomo are in effect with many other countries. In fact, some treaties contain even more broad language. See,
e.g., Article XII(4), Treaty of Friendship, Commerce and Navigation with Greece, [1954] 5 U.S.T., at 1857–1859 (“Nationals and
companies of either party shall be permitted to engage, within the territories of the other Party, accountants and other technical
experts, executive personnel, attorneys, agents and other employees of their choice...”) (emphasis added). As of 1979, United
States affiliates of foreign corporations employed over 1.6 million workers in this country. Howenstine, Selected Data on the
Operations of U. S. Affiliates of Foreign Companies, 1978 and 1979, in Survey of Current Business 35, 36 (U.S. Dept. of
Commerce, May 1981).
8 The clear language of Article VII(1) and Article XXII(3) is consistent with other Treaty provisions. For example, Article XVI(2)
accords national treatment to “[a]rticles produced by nationals and companies of either Party within the territories of the other
Party, or by companies of the latter Party controlled by such nationals and companies....” (Emphasis added.) This provision
obviously envisions that companies of one party may be controlled by companies of the other party. If the nationality of a company
were determined by the nationality of its controlling entity as Sumitomo proposes, rather than by the place of its incorporation, this
provision would make no sense.
Several other Treaty provisions would make little sense if American subsidiaries were considered companies of Japan. Articles
VII(1), VII(4), and XVI(2) contain clauses dealing with companies or enterprises controlled by companies of either party. If those
companies or enterprises were themselves companies of the country of their parents, this separate treatment would be unwarranted.
9 State Department Cable, Tokyo 03300, dated Feb. 26, 1982 (cable from the United States Embassy in Tokyo to the Secretary of
State relaying the position of the Ministry of Foreign Affairs of Japan). See also Diplomatic Communication from the Embassy of
Japan in Washington to the United States Department of State, dated Apr. 21, 1982 (“The Government of Japan reconfirms its
view that a subsidiary of a Japanese company which is incorporated under the laws of New York is not itself covered by article 8.,
paragraph 1 of the Treaty of Friendship, Commerce and Navigation between Japan and the United States (the FCN Treaty) when it
operates in the United States”).
10 Brief for United States as Amicus Curiae 8–22; Letter of James R. Atwood, Deputy Legal Adviser, U.S. Department of State, to
Lutz Alexander Prager, Assistant General Counsel, Equal Employment Opportunity Commission, dated Sept. 11, 1979, reprinted
in App. 307a. (“On further reflection on the scope of application of the first sentence of Paragraph 1 of Article VIII of the U.
S.–Japan FCN, we have established to our satisfaction that it was not the intent of the negotiators to cover locally-incorporated
subsidiaries, and that therefore U. S. subsidiaries of Japanese corporations cannot avail themselves of this provision of the treaty”).
The Court of Appeals and Sumitomo dismiss the Atwood letter as incorrect, and point to a letter written by a previous State
Department Deputy Legal Adviser as taking the contrary view. Letter of Lee R. Marks, Deputy Legal Adviser, U.S. Department of
State, to Abner W. Sibal, General Counsel, Equal Employment Opportunity Commission, dated Oct. 17, 1978, reprinted in App.
94a. However neither of these letters is indicative of the state of mind of the Treaty negotiators; they are merely evidence of the
later interpretation of the State Department as the agency of the United States charged with interpreting and enforcing the Treaty.
However ambiguous the State Department position may have been previously, it is certainly beyond dispute that the Department
now interprets the Treaty in conformity with its plain language, and is of the opinion that Sumitomo is not a company of Japan and
is not covered by Article VIII(1). That interpretation, and the identical position of the Government of Japan, is entitled to great
weight. Kolovrat v. Oregon, 366 U.S. 187, 81 S.Ct. 922, 6 L.Ed.2d 218 (1961).
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11 Determining the nationality of a company by its place of incorporation is consistent with prior treaty practice. See Walker, 50
Am.J.Int’l L., supra, n. 6, at 382–383. The place-of-incorporation rule also has the advantage of making determination of
nationality a simple matter. On the other hand, application of a control test could certainly make nationality a subject of dispute.
12 We express no view, of course, as to the interpretation of other Friendship, Commerce and Navigation Treaties which, although
similarly worded, may have different negotiating histories.
13 See, e.g., Treaties of Friendship, Commerce and Navigation with China, 63 Stat. 1299, T.I.A.S. No. 1871 (1946); Italy, 63 Stat.
2255, T.I.A.S. No. 1965 (1948); Israel, [1954] 5 U.S.T. 550, T.I.A.S. No. 551 (1951); Greece, [1954] 5 U.S.T. 1829, T.I.A.S. No.
3057 (1951); Japan, [1953] 4 U.S.T. 2063, T.I.A.S. No. 2863 (1953); Federal Republic of Germany, [1956] 7 U.S.T. 1839, T.I.A.S.
No. 3593 (1954); The Netherlands, [1957] 8 U.S.T. 2043, T.I.A.S. No. 3942 (1956); and Pakistan, [1961] 12 U.S.T. 110, T.I.A.S.
No. 4683 (1959). The provisions of several of the treaties are compared in tabular form in Commercial Treaties: Hearing on
Treaties of Friendship, Commerce and Navigation with Israel, Ethiopia, Italy, Denmark, Greece, Finland, Germany, and Japan,
before the Subcommittee of the Senate Committee on Foreign Relations, 83d Cong., 1st Sess., 7–17 (1953).
14 See, e.g., Treaty of Amity and Commerce with France, 8 Stat. 12, T.S. No. 83 (1778); Treaty of Amity, Commerce and Navigation
with Great Britain, 8 Stat. 116, T.S. No. 105 (1794); Treaty of Commerce and Friendship with Sweden and Norway, 8 Stat. 232,
T.S. No. 347 (1816); Treaty of Commerce and Navigation with the Netherlands, 8 Stat. 524, T.S. No. 251 (1839); Treaty of
Commerce and Navigation with Belgium, 8 Stat. 606, T.S. No. 19 (1845); Treaty of Commerce and Navigation with Italy, 17 Stat.
845, T.S. No. 177 (1871); Treaty of Commerce with Spain, 23 Stat. 750, T.S. No. 337 (1884); Treaty of Commerce with Germany,
31 Stat. 1935, T.S. No. 101 (1900); Treaty of Commerce with China, 33 Stat. 2208, T.S. No. 430 (1903).
15 See Walker, 50 Am.J.Int’l L., supra n. 6, at 374–378.
16 Treaty of Commerce and Consular Rights with Japan, 37 Stat. 1504, T.S. No. 558 (1911); Treaties of Friendship, Commerce and
Navigation with Germany, 44 Stat. 2132, T.S. No. 725 (1923); Estonia, 44 Stat. 2379, T.S. No. 736 (1925); Hungary, 44 Stat.
2441, T.S. No. 748 (1925); El Salvador, 46 Stat. 2817, T.S. No. 827 (1926); Honduras, 45 Stat. 2618, T.S. No. 764 (1927); Latvia,
45 Stat. 2641, T.S. No. 765 (1928); Austria, 47 Stat. 1876, T.S. No. 838 (1928); Norway, 47 Stat. 2135, T.S. No. 852 (1928);
Poland, 48 Stat. 1507, T.S. No. 862 (1931); Finland, 49 Stat. 2659, T.S. No. 868 (1934); Treaties of Friendship, Commerce and
Navigation with Siam, 53 Stat. 1731, T.S. No. 940 (1937); Liberia, 54 Stat. 1739, T.S. No. 956 (1938).
These rights given to corporations by these Treaties were quite limited. For example, Article VII of the 1911 Treaty with Japan
provided:
“Limited liability and other companies and associations ... already or hereafter to be organized in accordance with the laws of
either High Contracting Party and domiciled in the territories of such Party, are authorized, in the territories of the other, to
exercise their rights and appear in the courts either as plaintiffs or defendants, subject to the laws of such other Party.
“The foregoing stipulation has no bearing upon the question whether a company or association organized in one of the two
countries will or will not be permitted to transact its business or industry in the other, this permission remaining always subject to
the laws and regulations enacted or established in the respective countries or in any part thereof.” 37 Stat. 1506.
A similarly limited provision was contained in the other Treaties.
17 The significance of this advance was emphasized in the Senate hearings on an early set of postwar Friendship, Commerce and
Navigation Treaties:
“Perhaps the most striking advance of the postwar treaties is the cognizance taken of the widespread use of the corporate form of
business organization in present-day economic affairs. In the treaties antedating World War II American corporations were
specifically assured only small protection against possible discriminatory treatment in foreign countries. In the postwar treaties,
however, corporations are accorded essentially the same treaty rights as individuals in such vital matters as the right to do business,
taxation on a nondiscriminatory basis, the acquisition and enjoyment of real and personal property, and the application of exchange
controls. Furthermore, the citizens and corporations of one country are given substantial rights in connection with forming local
subsidiaries under the corporation laws of the other country and controlling and managing the affairs of such local companies.”
Commercial Treaties: Hearing on Treaties of Friendship, Commerce and Navigation Between the United States and Colombia,
Israel, Ethiopia, Italy, Denmark and Greece before a Subcommittee of the Senate Committee on Foreign Relations, 82d Cong., 2d
Sess., 4–5 (1952) (opening statement of Harold Linder, Deputy Assistant Secretary of State for Economic Affairs).
18 “National treatment” is defined in Article XXII(1) of the Treaty:
“The term ‘national treatment’ means treatment accorded within the territories of a Party upon terms no less
favorable than the treatment accorded therein, in like situations, to nationals, companies, products, vessels or
other objects, as the case may be, of such Party.”
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In short, national treatment of corporations means equal treatment with domestic corporations. It is ordinarily the highest level of
protection afforded by commercial treaties. In certain areas treaty parties are unwilling to grant full national treatment; in those
areas the parties frequently grant “most-favored-nation treatment,” which means treatment no less favorable than that accorded to
nationals or companies of any third country. See Article XXII(2) of the Treaty. “The most-favored-nation rule can now, therefore,
imply or allow the status of alien disability rather than of favor. In applicable situations nowadays, the first-class treatment tends to
be national treatment; that which the citizens of the country enjoy.” Walker, Modern Treaties of Friendship, Commerce and
Navigation, 42 Minn.L.Rev. 805, 811 (1958).
19 We express no view as to whether Japanese citizenship may be a bona fide occupational qualification for certain positions at
Sumitomo or as to whether a business necessity defense may be available. There can be little doubt that some positions in a
Japanese controlled company doing business in the United States call for great familiarity with not only the language of Japan, but
also the culture, customs, and business practices of that country. However, the Court of Appeals found the evidentiary record
insufficient to determine whether Japanese citizenship was a bona fide occupational qualification for any of Sumitomo’s positions
within the reach of Article VIII(1). Nor did it discuss the bona fide occupational qualification exception in relation to respondents’
sex discrimination claim or the possibility of a business necessity defense. Whether Sumitomo can support its assertion of a bona
fide occupational qualification or a business necessity defense is not before us. See n. 4, supra.
We also express no view as to whether Sumitomo may assert any Article VIII(1) rights of its parent.
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ANNEX 144

IN THE ARBITRATION UNDER CHAPTER ELEVEN
OF THE NORTH AMERICAN FREE TRADE AGREEMENT
AND THE ICSID ARBITRATION (ADDITIONAL FACILITY) RULES
BETWEEN
ADF GROUP INC.,
Claimant/Investor,
-and-
UNITED STATES OF AMERICA,
Respondent/Party.
Case No. ARB(AF)/00/1
POST-HEARING SUBMISSION
OF RESPONDENT UNITED STATES OF AMERICA ON
ARTICLE 1105(1) AND POPE & TALBOT
Mark A. Clodfelter
Assistant Legal Adviser for International
Claims and Investment Disputes
Barton Legum
Chief, NAFTA Arbitration Division, Office
of International Claims and Investment
Disputes
Andrea J. Menaker
David A. Pawlak
Laura A. Svat
Jennifer I. Toole
Attorney-Advisers, Office of International
Claims and Investment Disputes
UNITED STATES DEPARTMENT OF STATE
Washington, D.C. 20520
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June 27, 2002
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CONTENTS
I. FURTHER OBSERVATIONS WITH RESPECT TO ARTICLE 1105(1) ..........................................2
II. OBSERVATIONS ON THE POPE DAMAGES AWARD.............................................................7
A. The NAFTA Does Not Authorize Chapter Eleven Tribunals
To Disregard The Actions Of The Free Trade Commission...........................................8
B. The Pope Tribunal Erred In Its Dicta Interpreting Article 1105(1)...............................12
1. The Pope Tribunal Ignored Well-Settled Principles of Treaty
Interpretation..........................................................................................................12
2. The Pope Tribunal Erred In Its Approach To The Development
of Customary International Law Through Treaty-Making..........................................19
3. The Pope Tribunal Erred In Its Analysis Of Authority Purportedly
Supporting Its Award..............................................................................................21
CONCLUSION .......................................................................................................................22
Annex 144
IN THE ARBITRATION UNDER CHAPTER ELEVEN
OF THE NORTH AMERICAN FREE TRADE AGREEMENT
AND THE ICSID ARBITRATION (ADDITIONAL FACILITY) RULES
BETWEEN
ADF GROUP INC.,
Claimant/Investor,
-and-
UNITED STATES OF AMERICA,
Respondent/Party.
Case No. ARB(AF)/00/1
POST-HEARINGSUBMISSION
OFRESPONDENTUNITEDSTATES OF AMERICA ON
ARTICLE 1105(1) AND POPE & TALBOT
In accordance with the Tribunal’s order of June 17, 2002, the United States respectfully
presents these further observations on Article 1105(1) and the May 31, 2002 Award in Respect of
Damages rendered in the case of Pope & Talbot Inc. v. Canada (the “Pope Damages Award”).1
In Part I below, the United States responds to the question posed by the Tribunal with
respect to Article 1105(1): “what factors or kinds of factors a Chapter Eleven tribunal applying in a
concrete case the ‘fair and equitable treatment and full protection and security standard’ referred to
in Article 1105(1), NAFTA, may take into account”? In Part II of this submission, the United
States presents its observations on the Pope Damages Award.
1 The United States adopts in this submission the same abbreviations that it used in its Counter-Memorial and
Rejoinder.
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I. FURTHEROBSERVATIONS WITH RESPECT TO ARTICLE 1105(1)
For the reasons stated below, the United States respectfully submits that the “factors or
kinds of factors a Chapter Eleven tribunal applying . . . the ‘fair and equitable treatment and full
protection and security’ standard . . . may take into account”2 depend upon the rule of the
customary international law minimum standard of treatment implicated by the claims asserted. Here,
however, no rule of customary international law incorporated into Article 1105(1) addresses the
conduct that ADF has claimed to violate that article. Nor has ADF attempted to identify any such
rule. Because the relevant factors depend upon the particular rule that is applicable in any given set
of circumstances, the absence of such a rule here renders identification of such factors unnecessary.
The United States therefore submits that, although Article 1105(1) is “applicable” here because
ADF has asserted a claim under that article, no actionable claim of violation of Article 1105(1) has
been stated.
The “international minimum standard” embraced by Article 1105(1) is an umbrella concept
incorporating a set of rules that over the centuries have crystallized into customary international law
in specific contexts.3 The treaty term “fair and equitable treatment” refers to the customary
2 June 17, 2002 Letter-Order.
3 See Transcript of Hearing, Apr. 17, 2002, at 758-60 (statement by Mr. Legum); see also IAN BROWNLIE,
PRINCIPLES OF PUBLIC INTERNATIONAL LAW 531 (5th ed. 1998) (“there is no single standard but different
standards relating to different situations.”); see also id. at 529 (“The basic point would seem to be that there is
no single standard.”); 5 CHARLES ROUSSEAU, DROIT INTERNATIONAL PUBLIC 46 (1970) (“The great majority of
commentators hold that there exists in this respect an international minimum standard according to which States
must accord to foreigners certain rights . . . , even where they refuse such treatment to their own nationals.”)
(“La grande majorité de la doctrine estime qu’il existe à cet égard un standard international minimum suivant
lequel les Etats sonts tenus d’accorder aux étrangers certains droits, . . . même dans le cas où ils refuseraient ce
traitement à leurs nationaux.”) (emphasis supplied; translation by counsel).
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international law minimum standard of treatment.4 The rules grouped under the heading of the
international minimum standard include those for denial of justice, expropriation and other acts
subject to an absolute, minimum standard of treatment under customary international law.5 The
treaty term “full protection and security” refers to the minimum level of police protection against
criminal conduct that is required as a matter of customary international law.6
The rules encompassed within the customary international law minimum standard of
treatment are specific ones that address particular contexts. There is no single standard applicable
to all contexts. The customary international law minimum standard is in this sense analogous to the
4 See U.S. Rejoinder at 42 n.62 & accompanying text; accord Transcript, Apr. 17, 2002, at 761 (statement by Mr.
Legum).
5 See, e.g., Swiss Dep’t of External Affairs, Mémoire, 36 ANN. SUISSE DE DROIT INT’L 174, 179 (1980) (“So far as
the content of this standard is concerned, we can limit ourselves to describing it as it relates to the property
rights of foreigners since article 2 of the BIT addresses ‘fair and equitable treatment’ of only ‘investments.’ On
this point, it is appropriate to note the following: foreign property can be nationalized or expropriated only upon
prompt payment of an effective and adequate indemnity. The foreigner must also have access to the judiciary to
defend himself against wrongful acts against his property by individuals. Moreover, the alien may require that
his person and his goods be protected by the authorities in the event of riots, in a state of emergency, etc. . . . .
The expression ‘fair and equitable treatment’ encompasses the ensemble of these elements.”) (“Pour ce qui est
de ce standard, nous pouvons nous borner à en décrire le contenu en ce qui concerne les droits patrimoniaux
des étrangers puisque l’article 2 de l’API touche au ‘traitement juste et équitable’ des seuls ‘investissements’.
Sur ce point, il convient de faire les constatations suivantes : . . . la propriété étrangère ne peut être nationalisée
ou expropriée que moyennant le versement sans retard d’une indemnité effective et adéquate. L’étranger doit
également pouvoir accéder aux voies judiciaires pour se défendre contres les atteintes portées à son patrimoine
par des particuliers. De plus, il peut exiger que sa personne et ses biens soient protégés par la force publique en
cas d’émeutes, lorsqu’il existe un état d’urgence, etc. . . . . L’expression ‘traitement juste et équitable’ se rapporte
à l’ensemble de ces éléments.”) (footnotes omitted; translation by counsel).
6 Tribunals have found the obligation of full protection and security to have been breached only in cases where
the criminal conduct involved a physical invasion of the person or property of an alien. See, e.g., American
Manufacturing & Trading, Inc. (U.S.) v. Zaire, 36 I.L.M. 1531 (1997) (finding violation of protection and security
obligation in case involving destruction and looting of property); Asian Agricultural Products Ltd. (U.K.) v. Sri
Lanka, 30 I.L.M. 577 (1991) (similar finding in case involving destruction of claimant’s property); Case
Concerning United States Diplomatic and Consular Staff in Tehran (U.S. v. Iran), 1980 I.C.J. 3 (May 24) (similar
finding in case involving hostage-taking of foreign nationals); Chapman v. United Mexican States (U.S. v.
Mex.), 4 R.I.A.A. 632 (Mex.-U.S. Gen. Cl. Comm’n 1930) (similar finding in case where claimant was shot and
seriously wounded); H.G. Venable (U.S. v. Mex.), 4 R.I.A.A. 219 (Mex.-U.S. Gen. Cl. Comm’n 1927) (bankruptcy
court indirectly responsible for physical damage to attached property); Biens Britanniques au Maroc Espagnol
(Réclamation 53 de Melilla - Ziat, Ben Kiran) (Spain v. Gr. Brit.), 2 R.I.A.A. 729 (1925) (no violation where
police protection under the circumstances would not have prevented mob from destroying claimant’s store).
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common-law approach of distinguishing among a number of distinct torts potentially applicable to
particular conduct, as contrasted with the civil-law approach of prescribing a single delict applicable
to all conduct. As with common-law torts, the burden under Article 1105(1) is on the claimant to
identify the applicable rule and to articulate and prove that the respondent engaged in conduct that
violated that rule.
Thus, for example, in a case in which a claimant asserts that it has suffered injury as a result
of an allegedly unjust court judgment, the factors a tribunal applying Article 1105(1) must take into
account are those for an alleged substantive denial of justice: whether the judgment in question
effects a “manifest injustice” or “gross unfairness,”7 “flagrant and inexcusable violation,”8 or
“palpable deviation” in which “[b]ad faith – not judicial error seems to be the heart of the matter.”9
Where a claimant asserts that it suffered injury as a result of the destruction of its property by
private citizens, the factors a tribunal applying Article 1105(1) must take into account are those for
an alleged denial of full protection and security: whether, under all the circumstances, the police
7 J.W. Garner, International Responsibility of States for Judgments of Courts and Verdicts of Juries Amounting
to Denial of Justice, 1929 BRIT.Y.B. INT’L L. 181, 183; see also id. at 188 (“manifestly or notoriously unjust”
decisions).
8 Eduardo Jim• nez de Ar• chaga, International Law in the Past Third of a Century, 159 R.C.A.D.I. 267, 281 (1978).
9 2 DANIEL P. O’CONNELL, INTERNATIONAL LAW 948 (2d ed. 1970); see also, e.g., Garrison’s Case (U.S. v.
Mex.) (1871), 3 MOORE’S INT’L ARBITRATION 3129 (1868) (an “extreme” case where court “act[ing] with great
irregularity” refused Garrison’s appeal “by intrigues or unlawful transactions”); Rihani, Am.-Mex. Cl. Comm’n
(1942), 1948 Am. Mex. Cl. Rep. 254, 257-58 (finding decision of the Supreme Court of Justice of Mexico “such a
gross and wrongful error as to constitute a denial of justice”); The Texas Company, Am.-Mex. Cl. Comm’n (1942),
1948 Am. Mex. Cl. Rep. 142, 144 (rejecting claim for failure to show error by Supreme Court of Justice of Mexico
“resulting in a manifest injustice”); Chattin (U.S.) v. Mexico (1927), 4 R.I.A.A. 282, 286-87 (requiring that
injustice committed by judiciary rise to the level of “an outrage, bad faith, wilful neglect of duty, or insufficiency
of action apparent to any unbiased man”)•
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exerted the minimum level of protection against criminal conduct required as a matter of customary
international law.10
Here, however, ADF asserts that it has suffered injury under Article 1105(1) because the
FHWA, admittedly acting in accordance with the regulation’s terms and the agency’s longstanding
administrative policy, applied to its investment a regulation of general application.11 ADF does not
contend that the substance of the regulation was contrary to customary international law.12 It does
not contend that the application of the regulation effected a denial of justice.13
Instead, ADF’s complaint is that, pursuant to statutory authority, the FHWA promulgated a
regulation that was more specific than the terms of the statute that the regulations implemented (i.e.,
the 1982 Act).14 It contends that, even though the regulation long preceded its contract bid, it was
confused by the existence of a more general standard in the statute and a more specific standard in
the implementing regulation.15 It further asserts that the United States Congress should have acted
to resolve the supposed inconsistency between the general standard in the statute and the more
10 See authorities cited supra n.6
11 See Transcript, Apr. 18, 2002, at 905-08 (statement of Mr. Kirby); see also id. at 904 (“The way the law was
applied--once again, not challenging that that was the way it was done. That's what the regulations say.”).
12 See id. at 904 (statement of Mr. Kirby) (“Or because you can well say--they could still have passed it as a rule
of origin--as a 100 percent content rule. Theoretically, Congress could have said all manufactured products as
well, 100 percent content.”).
13 See id. at 911 (statement of Mr. Kirby) (“this isn't a denial of justice case”).
14 See id. at 900-04 (statement of Mr. Kirby).
15 See id.; see also id. at 901 (“And when he looks at that entire chain, what he sees is a very, very difficult beast
to conceptualize, and he is left with either believe what the lowest official tells me and that's it, or believe that
that lower official must surely recognize that what he's doing is so different to what the statute requires that we
challenge him or we do something else.”).
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specific one in the regulation.16 It does not identify any rule of the customary international law
minimum standard of treatment of aliens that is implicated by its assertions.
Under these circumstances, the United States submits that the Tribunal’s analysis under
Article 1105(1) must begin and end with an assessment of whether ADF has articulated a violation
of any applicable rule of customary international law. The United States submits that ADF has
articulated no such violation. As the United States noted in its Rejoinder (at 32-33), the system of
administrative rule-making in the United States grants certain agencies, including the FHWA, the
rule-making authority to promulgate specific regulations that implement more general statutory
provisions. The United States, of course, has the sovereign right under international law to structure
its rule-making organs in this manner. As the International Court of Justice has observed: “No rule
of international law, in the view of the Court, requires the structure of a State to follow any particular
pattern, as is evident from the diversity of the forms of State found in the world today.”17 No
breach of customary international law may be stated based on the allegation that the FHWA’s
regulation was more specific than the congressional statute it implemented.18
16 See Transcript, Apr. 18, 2002, at 889 (statement of Mr. Kirby) (“there is an ongoing duty on the part of
Congress to rectify and not to leave that arbitrary application of the laws in the hands of the administrative
officials at Federal Highway.”); id. at 898 (referring to the supposed “duty of Congress to ensure that its laws are
properly administered and applied.”).
17 Western Sahara, 1975 I.C.J. 12, 43-44 ¶ 94 (Oct. 16).
18 On various occasions in these proceedings, ADF has argued that the FHWA’s promulgation of implementing
regulations in 1983 was ultra vires. ADF recognized at the hearing, however, that any claim with respect to the
promulgation of the regulations could not be entertained under the NAFTA, which did not enter into force until
1994. See Transcript, Apr. 18, 2002, at 905-10. In any event, as the United States demonstrated in its pleadings
and at the hearing, the regulations were amply within the FHWA’s authority and ADF’s assertion of ultra vires
action under municipal law in any case could not, by itself, establish a violation of customary international law.
See Counter-Mem. at 15-16; Rejoinder at 32-33.
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Because ADF’s assertions implicate no applicable rule of customary international law, the
predicate necessary for determining what factors would be relevant to an analysis under Article
1105(1) is absent. In other words, because the relevant factors depend upon the applicable rule,
the absence of such a rule here renders identification of such factors unnecessary. The absence of
an applicable rule should end the Tribunal’s analysis under Article 1105(1).
Finally, the United States notes that the foregoing response to the Tribunal’s question is
based on ADF’s position as stated in its pleadings and at the hearing. It is, of course, far too late
for ADF to attempt to change its position at this stage of the proceeding. Should ADF nonetheless
attempt to do so in its responsive submission, the United States reserves its right to object and to
request the opportunity to address any new articulation of ADF’s Article 1105(1) claim.
II. OBSERVATIONS ON THE POPE DAMAGESAWARD
An award of a Chapter Eleven tribunal has “no binding force except between the disputing
parties and in respect of the particular case.” NAFTA art. 1136(1). The significance of such an
award for another tribunal, therefore, depends among other things upon the persuasiveness of the
reasoning expressed in the award.
Although the recent Pope award is an “Award in Respect of Damages,” it addresses
primarily the Free Trade Commission’s July 31, 2001 interpretation of Article 1105(1), which was
issued after the Pope tribunal’s award on the merits but before the damages award. The United
States, therefore, directs its observations on the Pope Damages Award to the tribunal’s treatment
of the FTC interpretation.
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The United States submits that there is no persuasive force to the Pope tribunal’s suggestion
that it need not abide by a Free Trade Commission (“FTC”) interpretation of a provision of the
NAFTA. In addition to lacking support in the NAFTA or elsewhere, the bulk of the Pope
Damages Award consists of opinions extraneous to the narrow grounds on which the decision was
ultimately based – opinions of the type known in common-law jurisdictions as obiter dicta and
which are given lesser weight than those on which the decision rests.19 As the United States
demonstrates below, the Pope Damages Award merits little consideration for several reasons.
A. The NAFTA Does Not Authorize Chapter Eleven Tribunals To Disregard
The Actions Of The Free Trade Commission
The Pope tribunal was wrong to suggest in dicta that the NAFTA grants it the authority to
sit in judgment of the NAFTA Parties’ acts undertaken pursuant to NAFTA Chapter Twenty. 20
Although the NAFTA contemplates that both the Free Trade Commission and Chapter Eleven
tribunals may have reason to interpret the meaning of a provision of the Agreement, the text of the
NAFTA confirms the subsidiary role of Chapter Eleven tribunals vis-à-vis the FTC in that regard.
19 Indeed, it is noteworthy that the 41-page “Award in Respect of Damages” addresses the subject of damages
only in the last nine pages, and begins that brief discussion under a heading styled “Other Issues.”
20 See Pope Damages Award ¶¶ 23-24.
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In Chapter Twenty, the three NAFTA Parties gave the FTC plenary authority over the
implementation and interpretation of the NAFTA generally. Among other things, Chapter Twenty
provides that “[t]he Commission shall . . . supervise the implementation of this Agreement,” and it
shall resolve, without qualification, “disputes that may arise regarding its interpretation or
application[.]” NAFTA art. 2001(2)(a), (c) (emphasis added). The three Parties thus manifested
their shared intent “to arrive at a mutually satisfactory resolution” – through the Free Trade
Commission – “of any matter that might affect [the NAFTA’s] operation.” Id. art. 2003 (emphasis
added).
Chapter Eleven, in contrast, authorizes ad hoc Chapter Eleven tribunals to settle only a
limited range of investment disputes and, likewise, grants each tribunal limited authority over a
particular investment dispute and the individual claimant and NAFTA Party involved. See NAFTA
arts. 1116-1117; art. 1136(1) (“An award made by a Tribunal shall have no binding force except
between disputing parties and in respect of the particular case.”).21 Thus, although a tribunal may be
called upon to apply a provision of the NAFTA in settling an investment dispute (see id. art.
1131(1)), its own interpretation of such a provision does not bind other Chapter Eleven tribunals.
The same is not true, however, of an interpretation by the FTC, which binds all Chapter
Eleven tribunals. Indeed, the NAFTA directly addresses the possibility that a Chapter Eleven
tribunal may have to apply a provision of the NAFTA as to which the FTC has issued an
interpretation. In such a case, the FTC’s plenary power overrules a tribunal’s authority to interpret
particular NAFTA provisions in deciding issues in investment disputes: “An interpretation by the
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Commission of a provision of this Agreement shall be binding on a Tribunal established under
[Section B of Chapter Eleven].”22 It follows that a Chapter Eleven tribunal may not disregard an
interpretation of a provision of the NAFTA by the NAFTA Parties, acting through the FTC
pursuant to Chapter Twenty, or interpret that provision in a manner inconsistent with an FTC
interpretation.23 The NAFTA Parties thus expressly limited the powers of Chapter Eleven tribunals
with respect to the interpretation of the NAFTA, and made those powers subject to decisions taken
by the Free Trade Commission.
Any other result would thwart the intent of the NAFTA Parties and render provisions of the
NAFTA ineffective. If, as suggested by the Pope tribunal in dicta, a Chapter Eleven tribunal could
disregard an FTC interpretation that differs from the tribunal’s own reading of a NAFTA provision,
the aims of Article 1131(2) and Chapter Twenty would be defeated. The FTC’s authority under
Article 2001 to issue interpretations binding, by virtue of Article 1131(2), on all Chapter Eleven
tribunals ensures the consistent and uniform interpretation of the NAFTA. That purpose would not
be served if individual Chapter Eleven tribunals could disregard an FTC interpretation based on an
ad hoc judgment as to whether the FTC was correct in viewing its action as an interpretation.
21 See also NAFTA art. 1134 (Chapter Eleven tribunals may not even issue recommendations with respect to the
measure alleged to constitute a breach).
22 NAFTA art. 1131(2) (emphasis added). Even the Pope tribunal recognized that such an interpretation binds all
constituted tribunals, regardless of the phase of the pending arbitration. See Pope Damages Award ¶ 51.
23 Indeed, the NAFTA considers the views of the Parties regarding questions of interpretation to be of
significant importance even when not expressed in the form of a binding interpretation under Article 1131(2).
See, e.g., NAFTA art. 1128 (allowing non-disputing Parties to make submissions to a tribunal regarding
questions of interpretation); id. art. 2020 (calling on the NAFTA Parties to seek agreement on an interpretation of
the NAFTA when the issue of interpretation arises in a domestic proceeding); see also id. art. 1132 (providing
that, where a defense is asserted based on a reservation or exception set out in an Annex, an interpretation by
the Commission “shall be binding” on a tribunal, and only if no interpretation is submitted shall the tribunal
decide the issue).
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Indeed, principles of international law do not endorse such a result, because it would effectively
“deprive the [FTC] of an important power which has been entrusted to it by the [NAFTA],”24 and
thereby render provisions of the NAFTA ineffective.25 In other words, if a Chapter Eleven tribunal
were to disregard an FTC interpretation by characterizing it as an amendment, the result would be
to override the FTC’s interpretation. This would be precisely the reverse of the approach
envisioned under the NAFTA, in which the FTC’s interpretive authority ranks above that of
tribunals, not the other way around.
Indeed, nothing in the text of the NAFTA supports the view that FTC interpretations would
be subject to such review by an ad hoc tribunal constituted under Chapter Eleven. Where the
Parties envisaged a review mechanism – for example, in Article 1136(3), which contemplates
ICSID or municipal court proceedings to annul or review final Chapter Eleven awards – the Parties
expressly stated their intent. By contrast, no provision of Chapter Twenty nor any provision
elsewhere in the NAFTA calls for review of FTC action. Had the parties intended Chapter Eleven
tribunals to review and selectively disregard FTC actions, as the Pope Damages Award suggests in
24 Competence of the General Assembly for the Admission of a State to the United Nations, 1950 I.C.J. 4, 9 (Mar.
3) (“To hold that the General Assembly has power to admit a State to membership in the absence of a
recommendation of the Security Council would be to deprive the Security Council of an important power which
has been entrusted to it by the Charter. It would almost nullify the role of the Security Council in the exercise of
one of the essential functions of the Organization.”).
25 See Territorial Dispute (Libya v. Chad), 1994 I.C.J. 6 • 51 (Feb. 3) (collecting authorities supporting “one of
the fundamental principles of interpretation of treaties, consistently upheld by international jurisprudence,
namely that of effectiveness”); accord Corfu Channel (U.K. v. Alb.), 1949 I.C.J. 4, 24 (Apr. 9) (“It would indeed
be incompatible with the generally accepted rules of interpretation to admit that a provision of this sort occurring
in a special agreement should be devoid of purport or effect.”).
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dicta, provisions enabling – or at least referencing – such review would have been included in the
NAFTA.26 The absence of such provisions refutes the Pope tribunal’s dicta.
In sum, the NAFTA does not permit a Chapter Eleven tribunal to review an interpretation
of the NAFTA Parties sitting as the members of the FTC and to disregard it on the ground that the
tribunal considers it to be an “amendment.” For a Chapter Eleven tribunal to disregard a Free
Trade Commission interpretation is thus to exceed the scope of its authority under the NAFTA.
B. The Pope Tribunal Erred In Its Dicta Interpreting Article 1105(1)
As demonstrated below, the Pope tribunal’s reasoning in dicta with respect to Article
1105(1) is not only contrary to an FTC interpretation binding on this Tribunal, but contrary to
established principles of treaty interpretation. It also is based upon a lack of appreciation for how
rules of customary international law are established and finds no support in the principal authority
relied upon by the Pope tribunal.
1. The Pope Tribunal Ignored Well-Settled Principles of Treaty
Interpretation
As the United States previously demonstrated and the FTC confirmed, the Pope tribunal
erred in its interpretation of Article 1105(1) in its April 10, 2001 Award on the Merits (“Pope
Merits Award”).27 This incorrect interpretation, which the Pope tribunal reiterated in its May 31,
26 Cf., e.g., Treaty Establishing the European Community, Mar. 25, 1957, art. 230 (ex art. 173), available at
<http://www.europa.eu.int/eur-lex/en/treaties/dat/ec_cons_treaty_en.pdf&…; (“The Court of Justice shall review
the legality of acts adopted jointly by the European Parliament and the Council, of acts of the Council, of the
Commission . . . and of acts of the European Parliament intended to produce legal effects vis-à-vis third
parties.”).
27 See Counter-Mem. at 49-50; Rejoinder at 33.
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2002 Damages Award (but ultimately did not apply), defies established principles of treaty
interpretation in several respects.28
First, the Pope tribunal admitted that its interpretation of Article 1105(1) is inconsistent
with the plain meaning of that Article’s text.29 Such an approach flatly disregards the cardinal rule,
set forth in the Vienna Convention on the Law of Treaties (“Vienna Convention”), that “[a] treaty
shall be interpreted . . . in accordance with the ordinary meaning to be given to the terms of the
treaty[.]”30
Second, there is no basis in international law for the Pope tribunal’s analysis of the phrase
“international law” in Article 1105(1) based solely on the reference to that term in the Statute of the
International Court of Justice, a treaty not related to the NAFTA.31 To the contrary, customary
international law requires that treaty terms be construed “in their context and in the light of [the
treaty’s] object and purpose.”32 That context includes the text of the treaty and certain related
instruments, but does not include unrelated treaties.33
28 See Pope Damages Award ¶¶ 9, 44.
29 See id. ¶ 9 (“[T]he Tribunal determined that, notwithstanding the language of Article 1105, which admittedly
suggests otherwise, the requirement to accord NAFTA investors fair and equitable treatment was independent
of, not subsumed by the requirement to accord them treatment required by international law.”) (emphasis added).
30 Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331 (“Vienna Convention”), art. 31(1).
31 See Pope Damages Award ¶ 46 & n.35 (relying exclusively on Article 38 of the Statute of the International
Court of Justice). Contrary to the Pope tribunal’s approach, Article 38 does not purport to define the term
“international law” in any event.
32 Vienna Convention art. 31(1) (emphasis added).
33 See id. art. 31(2) (“The context for the purpose of the interpretation of a treaty shall comprise, in addition to the
text . . . : (a) any agreement relating to the treaty which was made between all the parties in connection with the
conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the
conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.”).
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The context of Article 1105(1), which the Pope Damages Award does not consider,
unequivocally demonstrates that the NAFTA Parties did not intend to incorporate the entirety of
international law in that provision. Notably, the NAFTA’s provisions show that, although the
Parties were well aware of the international legal obligations contained in the NAFTA and in other
agreements in force between them,34 they intended to subject to investor-State arbitration only a
narrow range of obligations: Articles 1116(1) and 1117(1) provide for investor-State arbitration
only of “a claim that another Party has breached an obligation under . . . Section A or Article
1503(2) . . . or . . . Article 1502(3)(a)[.]” (Emphasis added). Reading Article 1105(1) to
encompass all international legal obligations would render meaningless the clearly stated limitation in
Articles 1116 and 1117. If the NAFTA Parties intended to offer Chapter Eleven arbitration for
breaches of any international legal obligation, including those contained in the NAFTA, they would
not have drafted Articles 1116 and 1117 as they did.
For example, the NAFTA states various obligations of the NAFTA Parties with respect to
sanitary and phytosanitary measures. See, e.g., NAFTA Chapter Seven, Section B, arts. 709-723.
The NAFTA, of course, is an international convention within the meaning of Article 38(1)(a) of the
Statute of the International Court of Justice, and the obligations with respect to sanitary and
phytosanitary measures are obligations in international law as among the NAFTA Parties. Articles
1116(1) and 1117(1) make perfectly clear, however, that the NAFTA Parties did not intend to
subject claims of violations of those international law obligations to investor-State arbitration under
34 See NAFTA art. 103 (“In the event of any inconsistency between this Agreement and such other agreements,
this Agreement shall prevail to the extent of the inconsistency . . . .”).
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Chapter Eleven of the NAFTA. Reading Article 1105(1) to encompass all international legal
obligations, including these, cannot be reconciled with the context of the provision.
Similarly, under the Pope tribunal’s interpretation of Article 1105(1), it would be
unnecessary for a claimant under Chapter Eleven to specify that it was bringing a claim under any
article of Section A of Chapter Eleven other than Article 1105(1). Rather, under the Pope
tribunal’s reading, a claim of a violation of, for example, Chapter Eleven’s national treatment
provision would be subsumed in an Article 1105(1) claim. Those incongruous results are not what
the NAFTA Parties intended. Indeed, the binding FTC Interpretation has made it clear that “[a]
determination that there has been a breach of another provision of the NAFTA, or of a separate
international agreement, does not establish that there has been a breach of Article 1105(1).” FTC
Interpretation (July 31, 2001) ¶ B(3).
The context of Article 1105(1) further shows that the international legal obligations the
NAFTA Parties had in mind in Article 1105(1) were those setting forth minimum standards of
treatment of foreign persons and their property in the territory of the host State. NAFTA Article
1105(1) itself reflects the NAFTA Parties’ commitment to provide “investments of investors of
another Party” with the international minimum standard of treatment. The title of the article is
“Minimum Standard of Treatment.”35 There is a body of international law that sets forth minimum
standards of treatment for property of nationals of a State in the territory of another State. As the
FTC observed in its clarification, that body of law is one established under customary international
35 See also NAFTA art. 1101(1)(a)-(b) (limiting the scope of application of Chapter Eleven, in pertinent part, to
“measures maintained or adopted by a Party relating to . . . investments of investors of another Party in the
territory of the Party”).
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law, and it is known as the customary international law minimum standard of treatment of aliens.36
Thus, the context of Article 1105(1) conclusively confirms the correctness of the FTC interpretation
and rejects the ill-considered views of the Pope tribunal.
Third, the Pope tribunal similarly erred in its reliance on provisions of bilateral investment
treaties (“BITs”) to interpret NAFTA Article 1105(1).37 Those treaties are not part of the context
for interpreting Article 1105(1) as defined by Article 31(2) of the Vienna Convention. The Vienna
Convention clearly defines the “context” of a treaty to include only those “agreement[s] . . . which
[were] made between all the parties” of the treaty and “instrument[s] . . . made by one or more
parties . . . and accepted by the other parties as an instrument related to the treaty.”38 Neither
Mexico nor Canada has entered into a BIT with the United States. Nor has any NAFTA Party
accepted, as contemplated by Article 31(2) of the Vienna Convention, the BITs as instruments
related to the NAFTA. Therefore, the Pope tribunal erred in relying on the BITs as “context” to
interpret the NAFTA.
Moreover, there is no foundation in any event for the Pope Award’s suggestion of “stark
inconsistencies” between the BITs’ provisions on “fair and equitable treatment” and the text of
36 See FTC Interpretation ¶ B(1)-(2). Contrary to the Pope tribunal's erroneous suggestion, the NAFTA Parties
did not seek, by issuing the interpretation of Article 1105(1), to modify the phrase “international law.” See Pope
Damages Award at n.9 (“the clarification consisted of adding the word ‘customary’ as a modifier.”); id. at n.37
(characterizing the United States’ position as arguing “that the term ‘international law’ in Article 1105 means
customary international law”). Rather, in paragraph B(1) of the July 31, 2001 Interpretation, the three NAFTA
Parties interpreted the meaning of the obligation agreed to in Article 1105(1): “Article 1105(1) prescribes the
customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be
afforded to investments of investors of another Party.”
37 See Pope Merits Award ¶¶ 110- 117; Pope Damages Award ¶¶ 9, 27, 44, 61-62.
38 Vienna Convention art. 31(2) (emphasis added).
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Article 1105(1).39 The Pope tribunal’s reading of those BIT provisions, based in particular on the
views of academics regarding United States BITs, is flatly inconsistent with what the United States
Department of State repeatedly has advised the United States Senate that provision means in
submitting the treaties for constitutionally-required advice and consent: that the provision was
intended to require a minimum standard of treatment based on customary international law.40
The United States’ understanding of the BITs it negotiated is the same as the understanding of
NAFTA Article 1105(1) expressed in the Canadian Statement of Implementation, issued on
January 1, 1994, the day the NAFTA entered into force: “Article 1105 . . . provides for a minimum
absolute standard of treatment, based on long-standing principles of customary international
law.”41 The Pope tribunal therefore erred in suggesting that there were inconsistencies between the
“fair and equitable treatment” provisions of the BITs and Article 1105(1).42
Indeed, for all of the reasons stated above, the United States joined Canada and Mexico in
late 2000 in a submission to the Pope tribunal, stating that the treatment to be accorded to
“investments of investors of another Party” under Article 1105(1) is the minimum standard of
39 See Pope Damages Award ¶ 25.
• • See U.S. Rejoinder at nn.59-61 & accompanying text (listing Department of State letters submitting U.S. BITs to
Congress that clarify that “‘fair and equitable’ treatment in accordance with international law. . . . sets out a
minimum standard of treatment based on customary international law”).
41 Canadian Statement of Implementation at 149 (Jan. 1, 1994) (emphasis added).
42 The Pope tribunal mischaracterized the United States as having “asserted that the difference [between the text
of the BITs and Article 1105(1) of the NAFTA] was the product of a conscious decision by the NAFTA Parties
to change the approach in the BITs.” Pope Damages Award ¶ 27. Rather, the United States explained to the
Pope tribunal that the NAFTA Parties, in Article 1105(1), merely “chose a formulation that expressly tied fair and
equitable treatment to the customary international minimum standard” to exclude any other conclusion in light of
the academic debate concerning the meaning of the phrase “fair and equitable treatment” as it appears in the
BITs without express reference to customary international law. Fourth Submission of the United States in Pope
& Talbot, Inc. v. Canada (Nov. 1, 2000) ¶¶ 7-8. Notwithstanding the academic debate, however, neither the U.S.
BITs nor NAFTA Article 1105(1) requires treatment beyond the minimum standard of treatment based on
customary international law.
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treatment of aliens under customary international law.43 The Pope tribunal, however, rejected that
interpretation and provided its own interpretation, stating, among other things, that “[n]either Mexico
nor Canada has subscribed to the version of the intent of the drafters put forward by the United
States.”44 Mexico then responded, noting that the Pope tribunal was incorrect, and that all three
NAFTA Parties had subscribed to that same interpretation.45 The Pope tribunal never addressed
the point raised in Mexico’s submission and did not acknowledge it in its Damages Award. Instead,
even after the three NAFTA Parties issued their binding interpretation in July 2001, largely to
address the Pope tribunal’s failure to heed to the NAFTA Parties prior statements regarding the
interpretation of Article 1105(1), the Pope tribunal in its Damages Award concluded in dicta that
the Parties had attempted to amend the NAFTA.46
Finally, the Pope tribunal’s analysis of the NAFTA’s negotiating history is erroneous for
two reasons. As an initial matter, the Pope tribunal erred in resorting to the negotiating history at
all.47 The premise for the tribunal’s reference to travaux préparatoires was its suggestion that the
text of Article 1105(1) “contained ambiguities that had to be resolved by those charged with
interpreting the texts.”48 The Pope tribunal’s suggestion, however, cannot be reconciled with its
dicta suggesting that the meaning of Article 1105(1) was so clear that the FTC’s interpretation of
43 See Fourth Submission of the United States in Pope & Talbot (Nov. 1, 2000) ¶¶ 7-8.
44 Pope Merits Award ¶ 114 n.109.
45 See Submission of Mexico in Pope & Talbot (Apr. 25, 2001) at 1-2 (stating “all three NAFTA Parties pleaded
that Article 1105 incorporates only the international minimum standard” and requesting that the Pope tribunal
issue a corrigendum to reflect accurately Mexico’s views with regard to the parameters of Article 1105).
46 See Pope Damages Award ¶ 47.
47 The Vienna Convention permits resort to supplementary means of treaty interpretation only for specified
purposes. See Vienna Convention art. 32.
48 See Pope Damages Award ¶ 26 & n.10.
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the provision was an “amendment.” If, as the Pope tribunal suggested, the article was ambiguous,
the FTC acted well within its authority in interpreting it. If it was not – and it certainly is not as
interpreted by the FTC – then the Pope tribunal had no occasion to resort to secondary means of
treaty interpretation such as the negotiating history.49
The Pope tribunal’s conclusions based on that history are without support in any event.
After reviewing more than forty drafts of NAFTA Chapter Eleven, the Pope tribunal found that the
text of Article 1105(1) underwent relatively few changes and none showed, as the investor had
contended, that the Parties had considered but rejected a version of the article expressly referencing
“customary international law.”50 Nonetheless, the Pope tribunal inexplicably suggested that the
negotiating history supported its view, expressed in dicta, that the FTC interpretation was an
“amendment.”51 Basing such a result on such a history as this cannot be reconciled with accepted
approaches to treaty interpretation.52
2. The Pope Tribunal Erred In Its Approach To The Development of
Customary International Law Through Treaty-Making
The Pope tribunal observed in its award on damages that treaties such as bilateral
investment treaties reflect State practice, but it erred by implying that such State practice – without
49 Vienna Convention art. 32(a)-(b).
50 See Pope Damages Award ¶¶ 38, 43, 46.
51 Id. ¶ 47.
52 See Vienna Convention art. 32; see also Maritime Delimitation and Territorial Questions (Qatar v. Bahrain)
1995 I.C.J. 5, 21-2 ¶ 41 (Feb. 15) (stating that travaux similar to those that do exist for the NAFTA “must be used
with caution . . . on account of their fragmentary nature;” where the final text did not exclude Qatar’s
interpretation, the Court was “unable to see why the abandonment of a form of words corresponding to the
interpretation given by Qatar to the[] [treaty] should imply that the [treaty] must be interpreted in accordance
with Bahrain’s thesis.”). The Pope tribunal also questioned Canada’s statement to the claimant that there were
“no mutually agreed negotiating texts.” Pope Damages Award ¶¶ 31, 40. In the United States’ view, however,
short of the final text of the signed NAFTA itself, there are no such “mutually agreed” texts.
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more – is sufficient to establish a rule of customary international law. See Pope Damages Award •
59 (“International agreements constitute practice of states and contribute to the grounds of
customary international law.”); id. • 62 (“the practice of states is now represented by [in excess of
1800 bilateral investment] treaties”).
As the United States has previously advised this Tribunal, customary international law,
including the minimum standard of treatment of aliens, may evolve over time. Cf. Pope Damages
Award • 58 (rejecting “static conception of customary international law”). In addition, treaties,
including BITs, may constitute a form of State practice as between or among the parties to a given
treaty. However, the United States disagrees with the Pope Damages Award in that it appears to
ascribe legal significance to this form of State practice without further analysis.
It is elemental that a rule may be considered to form part of customary international law only
where the rule is established by a general and consistent practice of States followed by them from
a sense of legal obligation.53 In other words, a customary international law rule is established by
two elements: “a concordant practice of a number of States acquiesced in by others; and a
conception that the practice is required by or consistent with the prevailing law (the opinio juris).”54
In addition, the International Court of Justice has observed that several factors must be
considered in assessing whether a treaty-based rule reflects opinio juris supporting the existence of
a customary, rather than simply a treaty-based, obligation. In North Sea Continental Shelf
(F.R.G. v. Den.; F.R.G. v. Neth.), the Court held that, in order for a provision to become part of
53 See RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW OF THE UNITED STATES • 102(2) (1987).
54 CLIVE PARRY, JOHN P. GRANT, ANTHONY PARRY & ARTHUR D. WATTS, ENCYCLOPAEDIC DICTIONARY OF
INTERNATIONAL LAW 82 (1986).
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customary international law, among other things, it must be “a norm-creating provision,” one which
“is now accepted as [a norm of the general corpus of international law] by the opinio juris, so as to
have become binding even for countries which have never, and do not, become parties to the
Convention.”55
While a bilateral investment treaty may reflect State practice between the two parties to that
BIT, the Pope tribunal erred in its analysis of the BITs. It made no attempt to analyze either the
consistency of State practice in investment treaties or whether any such State practice evidenced the
opinio juris necessary to establish customary international law.56 The tribunal does not even
mention opinio juris, let alone cite any evidence of it. Indeed, as mentioned above, the Pope
tribunal found “stark inconsistencies between the provisions of BITs and corresponding
commitments of Article 1105.”57 Thus, because it failed even to attempt the requisite analysis, the
Pope tribunal’s statement that BITs are State practice cannot support a view that any particular BIT
obligation has crystallized into a rule of customary international law.
3. The Pope Tribunal Erred In Its Analysis Of Authority Purportedly
Supporting Its Award
Finally, the United States notes that the decision of the Chamber of the International Court
of Justice in Elettronica Sicula S.P.A. (ELSI) (U.S. v. Italy), 1989 I.C.J. 15 (July 20), does not
55 1969 I.C.J. 3, 41 • 71 (Feb. 20).
56 See Pope Damages Award ¶¶ 59-62.
57 Id. • 25.
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support the Pope tribunal’s conclusions with respect to the evolution and content of customary
international law.58
In ELSI, the ICJ interpreted a treaty provision, not replicated in the text of the NAFTA,
which prohibited certain “arbitrary” measures.59 The ICJ was not applying customary international
law to the claims of arbitrariness presented in ELSI. Thus, contrary to the Pope tribunal’s
suggestion, the decision in ELSI cannot reflect an evolution in customary international law. Of
course, citation to a single authority applying a conventional standard does not demonstrate the
requisite State practice or opinio juris necessary to establish the existence of a principle of
customary international law.60 In fact, ELSI did not even purport to address customary international
law standards requiring treatment of an alien amounting to an “outrage” for a finding of a violation.
In any event, ELSI clearly does not establish that any relevant standard under customary
international requires mere “surprise.”61 The Pope tribunal’s approach should be rejected.
CONCLUSION
For the foregoing reasons, the United States respectfully submits that there is no occasion
for the Tribunal to identify factors or types of factors relevant to an analysis under Article 1105(1)
because ADF’s has failed to identify any rule of customary international implicated by its claims.
58 See Pope Damages Award ¶¶ 63-64.
59 See ELSI, 1989 I.C.J. at 72 (quoting Article I of the Supplementary Agreement to the 1948 FCN Treaty between
Italy and the United States as follows: “The nationals, corporations and associations of either High Contracting
Party shall not be subjected to arbitrary or discriminatory measures . . . .”). Even assuming the Pope tribunal’s
broad view of the meaning of Article 1105(1) is correct (and it is not), because the FCN Treaty in ELSI is not in
force as between Canada, Mexico and the United States, the ELSI cannot provide any rule of decision applicable
here. See Statute of the International Court of Justice art. 38(1)(a) (stating that the ICJ shall apply “international
conventions . . . establishing rules expressly recognized by the contesting states”).
60 See supra nn.53-54 and accompanying text.
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The United States further submits that the Tribunal should not rely on the Pope Damages Award as
it is poorly-reasoned and unpersuasive.
Respectfully submitted,
_________/S/_______________________
Mark A. Clodfelter
Assistant Legal Adviser for International
Claims and Investment Disputes
Barton Legum
Chief, NAFTA Arbitration Division, Office
of International Claims and Investment
Disputes
Andrea J. Menaker
David A. Pawlak
Laura A. Svat
Jennifer I. Toole
Attorney-Advisers, Office of International
Claims and Investment Disputes
UNITED STATES DEPARTMENT OF STATE
Washington, D.C. 20520
June 27, 2002
61 See Pope Damages Award ¶ 64.
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ANNEX 145

Annex 145
TABLE OF CONTENTS
PRELIMINARY STATEMENT .........................................................................................................1
FACTS .........................................................................................................................................7
I. Mining On Federal Lands Is Heavily Regulated By Both Federal And State Law.......7
A. Congress Amended The Mining Law In 1976 To Strengthen Protections Of
Environmental, Cultural And Archaeological Values ................................................8
B. The California Desert Conservation Area Was Created In Part To Protect
Sensitive Cultural Resources In the California Desert .............................................11
1. The CDCA Plan Was Based On The Principle Of “Multiple Use” Of Public
Lands...................................................................................................................12
2. The Full Extent Of The Cultural Resources Within The CDCA Is Not
Known.................................................................................................................14
C. BLM’s 3809 Regulations Implemented FLPMA’s Unnecessary Or Undue
Degradation Standard................................................................................................17
D. Glamis Must Comply With State Reclamation Laws Applicable To Mining On
Federal Lands Within California ..............................................................................19
1. The California Environmental Quality Act Imposes Stringent Requirements
On Mining Operators ..........................................................................................20
2. The California Surface Mining and Reclamation Act Mandated That Mined
Lands Be Restored To A Usable Condition........................................................22
II. An Extensive Array of Domestic Legislation And International Instruments
Protect Native American Cultural Resources ..............................................................24
A. Congress Has Increasingly Legislated In The Interest Of Historic And Cultural
Preservation...............................................................................................................24
B. Both Congress And The California Legislature Have Enacted Legislation
Specifically Designed To Ensure The Preservation Of Native American Culture...30
C. Various International Instruments Recognize The Importance Of Adequately
Preserving Historic And Cultural Properties ............................................................33
III. Glamis’s Proposed Open-Pit Cyanide Heap leach Gold Mine: The Imperial
Project ..........................................................................................................................35
A. Unbackfilled Open-Pit Metallic Mines, Such As Glamis’s Proposed Imperial
Project, Leave Enormous Open Pits And Mounds Of Waste Materials On Mined
Lands That Threaten The Environment And Public Health And Safety ..................37
B. Glamis Proposed To Locate The Imperial Project On A Major Prehistoric
Travel Corridor That Is Central To The Spirituality And Cultural Continuity Of
The Quechan .............................................................................................................41
IV. Federal Processing Of Glamis’s Plan Of Operations...................................................48
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2
A. Several Archaeological Surveys Of The Proposed Imperial Project Site
Identified Numerous, Significant Native American Cultural Resources..................50
1. The Cultural And Archaeological Significance Of The Proposed Mine Site
Was Documented Before Glamis Acquired Its Interest In The Imperial
Project Mining Claims ........................................................................................51
2. The First Block Survey Of The Proposed Imperial Project Revealed That
The Area Was Associated With Quechan Religious and Cultural Traditions ....58
3. The Archaeological Surveys Conducted In Association With The 1996
EIS/EIR Confirmed That A Major Prehistoric Trail Network Intersected The
Proposed Imperial Project Mine And Process Area ...........................................59
4. Concerns About The Adequacy Of The 1996 Archaeological Survey And
Cultural Resource Inventory Led BLM To Require A Resurvey Of The
Proposed Project Mine And Process Area ..........................................................62
5. The Archaeological Surveys Conducted In Association With The 1997
DEIS/EIR Confirmed That The Proposed Imperial Mine Would Adversely
Impact An Area That Was Spiritually And Culturally Significant To The
Quechan ..............................................................................................................63
6. No Other CDCA Mine Had As Significant An Impact On Native American
Cultural And Spiritual Resources As Did The Proposed Imperial Project.........71
B. EIS Process ...............................................................................................................74
C. ACHP Comments......................................................................................................78
D. The DOI Solicitor’s 1999 M-Opinion.......................................................................81
E. Final Environmental Impact Statement ....................................................................84
F. The Issuance And Rescission Of The Record Of Decision For The Imperial
Project .......................................................................................................................85
G. Validity Examination ................................................................................................87
H. Glamis’s Request To Cease Processing Its Plan Operations And Submission Of
Its Claim To Arbitration............................................................................................90
V. The California Measures..............................................................................................92
A. Senate Bill 22............................................................................................................92
B. State Mining & Geology Board Regulations ............................................................96
ARGUMENT.............................................................................................................................104
I. Glamis’s Claims With Respect To Many Of The Federal Measures Are Time-
Barred Under NAFTA Article 1117(2)......................................................................104
II. Glamis’s Expropriation Claim Is Without Merit .......................................................107
A. Glamis’s Expropriation Claim Challenging The California Measures Is Not
Ripe.........................................................................................................................108
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4
A. An Article 1105(1) Claim Can Only Be Sustained When A Violation Of The
Customary International Law Minimum Standard Of Treatment Has Been
Demonstrated ..........................................................................................................218
B. Glamis Has Failed To Establish That The California And Federal Measures At
Issue Implicate The Minimum Standard Of Treatment ..........................................223
C. Glamis Fails To Show That The Standards It Alleges Were Violated Are Part Of
The Customary International Law Minimum Standard Of Treatment ...................226
D. None Of The California Or Federal Government Actions Violated The
Standards Proposed By Glamis...............................................................................235
1. The California Measures Do Not Run Afoul Of The Standards Alleged By
Glamis ...............................................................................................................235
2. The Federal Measures Are Consistent With The Standards Invoked By
Glamis ...............................................................................................................247
a. The Record of Decision .................................................................................247
b. DOI’s and BLM’s Processing Of Glamis’s Plan Of Operations After The
ROD Was Rescinded .....................................................................................258
CONCLUSION...........................................................................................................................263
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119
fide legislation and regulations enacted in the public interest) or they are not (as Glamis
asserts when arguing that the California measures are preempted by federal law and thus
barred from application to its plan of operations). In any event, Glamis’s own arguments
to the BLM undermine any claim of futility.
Glamis has not been refused permission to develop the Imperial Project site, its
reclamation plan has not been denied, and the California measures have not been applied
to it. Accordingly, Glamis’s expropriation claim is not ripe and should be denied.
B. The California Measures Did Not Interfere With Any Property Right
Held By Glamis And, Thus, Are Not Expropriatory
If the Tribunal nevertheless considers Glamis’s expropriation claim ripe for
review, a threshold inquiry in the analysis of whether a regulation constitutes an
expropriation is whether the claimant has established that it holds a compensable property
interest.563 Glamis’s claim that the California measures expropriated its investment fails
because Glamis has no property right to engage in mining activities free from the
reclamation requirements imposed by those measures.
563 See, e.g., United States v. Chandler-Dunbar Water Power Co., 229 U.S. 53 (1913) (denying regulatory
takings claim after finding that claimant had no property interest in navigable waters); United States v.
Willow River Power Co., 324 U.S. 499 (1945) (dismissing regulatory takings claim on the ground that
claimant had no property interest in river runoff for tailwaters); Karuk Tribe v. United States, 209 F.3d
1366, 1374 (Fed. Cir. 2000) (insisting that a court must first determine whether plaintiff possessed a “stick
in the bundle of property rights” before it can find a taking), cert. denied, 532 U.S. 941 (2001); M & J Coal
Co. v. United States, 47 F.3d 1148, 1153-54 (Fed. Cir. 1995) (describing the need to “determine whether
the use interest proscribed by the governmental action was part of the owner’s title to begin with” as a
threshold inquiry in any takings analysis), cert. denied, 516 U.S. 808. International law recognizes the
expropriation only of property rights or property interests. See, e.g., Rosalyn Higgins, The Taking of
Property by the State: Recent Developments in International Law, 176 R.C.A.D.I. 259, 272 (1982) (“Only
property deprivation will give rise to compensation.”) (emphasis in original); Rodolf Dolzer, Indirect
Expropriation of Alien Property, 1 ICSID Review, For. Investment L.J. 41, 41 (1986) (“[O]nce it is
established in an expropriation case that the object in question amounts to ‘property,’ the second logical
step concerns the identification of expropriation.”); Tradex Hellas S.A. v. Republic of Albania, Case No.
ARB/94/2, Award ¶ 177 (Apr. 29, 1999) (“expropriation by definition is a ‘compulsory’ transfer of
property rights”) (internal quotations omitted). Although international law governs this arbitration,
domestic law may nevertheless be relevant for determining the existence of such property rights or property
interests. See, e.g., Tradex Award ¶ 130 (property right limited by privatization provisions under Albanian
land law); Marvin Roy Feldman Karpa v. United Mexican States, Case No. ARB(AF)/99/1, Award ¶¶ 118-
19 (Dec. 16, 2002) (property right limited by invoice requirement under Mexican excise tax law).
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The property rights held by Glamis – unpatented mining claims located on federal
lands – are possessory interests subject to wide-ranging federal, state, and local
regulations. The unpatented mining claims include no right to have a particular plan of
operations or reclamation plan approved by governmental authorities. Furthermore, the
unpatented mining claims are subject to pre-existing principles of religious
accommodation enshrined in the U.S. and California Constitutions, as well as preexisting
cultural, environmental, and health and safety limitations under California
property law. Accordingly, any burden imposed on Glamis by the challenged California
measures – which merely specify the implementation of those pre-existing principles in
the particular context of surface mining – cannot be deemed expropriatory.
1. The Property Interest At Issue: Glamis’s Unpatented Mining
Claims
The Mining Law gives U.S. citizens the right “to explore, discover, and extract
valuable minerals from the public domain and to obtain title to lands containing such
discoveries.”564 Any U.S. citizen has the right to explore for minerals on federal public
lands that have not already been claimed.565 This right of exploration is a gratuity from
the government that can be withdrawn at any time.566 The rights in a mining claim on
federal public lands are hierarchical: the locator of an “unpatented” mining claim merely
564 Freese v. United States, 221 Cl. Ct. 963 (1979). The Mining Law restricts exploration for minerals on
the federal public lands to U.S. citizens. 30 U.S.C. § 22 (2000). To meet the Mining Law’s citizenship
requirements, Glamis Gold, Inc., a subsidiary of Glamis Gold, Ltd., a Canadian company, is incorporated
under the laws of the State of Nevada, and is also headquartered in Nevada. See NOA at 4. In the case of a
corporation, such citizenship is established by showing proof of incorporation under the laws of the United
States. 30 U.S.C. § 24 (2000).
565 See 30 U.S.C. § 22 (2000).
566 Mineral Policy Center v. Norton, 292 F. Supp. 2d 30, 47 (D.D.C. 2003).
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121
holds a possessory interest in, while the owner of a “patented” mining claim holds title to,
the land.
All of the mining claims that comprise the Imperial Project site are unpatented
mining claims, located after 1980,567 on approximately 1,600 acres of land owned by the
U.S. federal government.568 In 1987, Glamis began acquiring the rights to these
claims,569 over which it ultimately obtained sole ownership through a variety of business
partnerships, joint ventures, and acquisitions.570
The locator of an unpatented mining claim holds only a right of “possession and
enjoyment” of the surface of the land and any minerals located within the land.571 The
possessory interest and mineral rights arise when a mining claimant makes a valuable
mineral discovery, posts notice at the site of the claim, records these facts with the
appropriate land office, and pays the required annual fees.572 With respect to every
unpatented mining claim, the United States maintains the underlying fee title to the
land.573
567 BLM, Mineral Report, Att. I-3 (Sept. 27, 2002) (10 FA tab 98). The Imperial Project is composed of
187 lode mining claims and 277 mill site locations. Id.
568 BLM, Mineral Report, at 13 (Sept. 27, 2002) (6 FA tab 255).
569 Mem. ¶ 29.
570 Mem. ¶ 29, McArthur Statement ¶¶ 4-5; Letter from A.D. Rovig, Glamis Gold, Inc., to J.R. Billingsley,
Vice President, Admin., Glamis Gold, Ltd. (Feb. 18, 1994) (GLA093196 to 235).
571 30 U.S.C. § 26 (2000); Best v. Humboldt Placer Mining Co., 371 U.S. 334, 335 (1963).
572 See 30 U.S.C. §§ 26, 29, 30 (2000).
573 30 U.S.C. § 26 (2000). It is not until a mining claim is patented that fee simple title to the land is
conveyed by the Government to the claimant. After a patent is issued, the Government no longer retains
title to the land in question, and the patentee is freed from the limitations of the mining laws and may put
the land to uses other than mining. 30 U.S.C. § 29 (2000). The patentee, however, must still comply with
the same federal and state environmental, health, and safety regulations that apply to other private land
owners. Since 1994, Congress has imposed a moratorium on spending appropriated funds for the
acceptance or processing of mineral patent applications. See Interior and Related Agencies Appropriations
Act for Fiscal Year 2005, Pub. L. No. 108-447, Div. E, tit. I, 118 Stat. 2809, at § 120 (2004).
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122
Congress’s authority over the public lands is plenary 574 and one acquires only
what has been granted pursuant to that authority.575 Such grants “are construed favorably
to the Government, that nothing passes except what is conveyed in clear language, and
that if there are doubts they are resolved for the Government, not against it.”576
Unpatented mining claims on federal lands are subject to compliance with federal,
state and local environmental and other regulations.577 Absent an actual conflict between
state and federal law, unpatented mining claims are subject to reasonable state
environmental regulations applicable to federal lands within a state’s borders,578 and there
is no conflict between state and federal law where state mining laws or regulations
require “a higher standard of protection for public lands” than federal law.579 Federal law
574 Kleppe v. New Mexico, 426 U.S. 529, 539 (1976).
575 Andrus v. Charlestone Stone Prods., 436 U.S. 604, 617 (1978); United States v. Union Pac. R. Co., 353
U.S. 112, 116 (1957).
576 Id.; Andrus v. Charlestone Stone Prods., 436 U.S. at 617.
577 30 U.S.C. § 22 (2000) (“[A]ll valuable mineral deposits in lands belonging to the United States, both
surveyed and unsurveyed, shall be free and open to exploration and purchase . . . under regulations
prescribed by law, and according to the local customs or rules of miners in the several mining districts, so
far as the same are applicable and not inconsistent with the laws of the United States.”); 30 U.S.C. § 26
(2000) (according exclusive right of possession to locaters of mining claims on public lands “so long as
they comply with the laws of the United States, and with State, territorial, and local regulations not in
conflict with the laws of the United States governing their possessory title”); see also Best v. Humboldt
Placer Mining Co., 371 U.S. 334, 336 (1963) (mining claims are “valid against the United States if there
has been a discovery of [a valuable] mineral within the limits of the claim, if the lands are still mineral, and
if other statutory requirements have been met”).
578 California Coastal Comm’n v. Granite Rock Co., 480 U.S. 572, 581 (1987) (rejecting pre-emption
challenge to state environmental regulation of unpatented mining claims in national forests where the
applicable federal regulations “expressly contemplate[d] coincident compliance with state law as well as
with federal law”).
579 43 C.F.R. § 3809.3 (2002) (“Nothing in this subpart shall be construed to effect a preemption of State
laws and regulations relating to the conduct of operations or reclamation on federal lands under the mining
laws”); see also 43 C.F.R. 3809.3-1(a) (1980); California Coastal Comm’n v. Granite Rock Co., 480 U.S.
572, 587, 581 (1987) (distinguishing, for pre-emption purposes, land use regulations (which “in essence
choose[] particular uses for the land”) from environmental regulations (which “require[] only that,
however the land is used, damage to the environment is kept within prescribed limits”), and observing that
state law is pre-empted “to the extent it actually conflicts with federal law, that is, when it is impossible to
comply with both state and federal law, or where the state law stands as an obstacle to the accomplishment
of the full purposes and objectives of Congress”) (internal quotations and citations omitted)).
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does not exempt mining claimants from following reasonable federal or state
environmental laws or regulations, even where the law or regulation would render certain
mining activities on the public lands uneconomic.580
Furthermore, Glamis’s unpatented mining claims include no right to have a
specific project approved by governmental authorities.581 For example, the Interior
Board of Land Appeals (“IBLA”), the administrative body that hears appeals by mining
companies against the BLM, ruled in Great Basin Mine Watch that “the mere filing of a
plan of operations by a holder of a mining claim invests no rights in the claimant to have
any plan of operations approved.”582 The IBLA rejected the BLM’s characterization of
its own authority, finding that the BLM had in fact “understated” its authority to reject a
plan of operations.583 Specifically, the IBLA ruled that “under no circumstances” could
regulatory compliance be waived merely because such compliance would render a given
project unprofitable.584
The recent Montana Supreme Court decision in Seven-Up Pete Venture v.
Montana further illustrates that a mining company’s property interest does not include a
right of approval for a particular project, especially where mining in the manner proposed
580 See, e.g., Atlas Corp. v. United States, 895 F.2d 745, 757-58 (Fed. Cir. 1990) (affirming dismissal of
takings claim where reclamation requirements were imposed on mining project “[p]ursuant to Congress’
power to protect the general health, safety, and welfare,” even if the costs of such reclamation requirements
rendered the mining project uneconomic). In addition, the NAFTA Parties were careful to recognize the
need to maintain their ability to regulate for the protection of the environment. See NAFTA art. 1114
(“Nothing in . . . Chapter [Eleven] shall be construed to prevent a Party from adopting, maintaining, or
enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that
investment activity in its territory is undertaken in a manner sensitive to environmental concerns.”).
581 43 C.F.R. § 3809.1-6(a)(2) (1980) (BLM will notify the operator “[o]f any changes in or additions to the
plan necessary to meet the requirements of these regulations”); 43 C.F.R. § 3809.411(d) (2002) (describing
circumstances under which BLM could either approve or disapprove a proposed plan of operations).
582 Great Basin Mine Watch, 146 I.B.L.A. 248, 256, (Interior Bd. of Land Appeals Nov. 9, 1998).
583 Id. at 256.
584 Id.
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would cause environmental damage.585 In 1998, the State of Montana, through voter
initiative 137 (“I-137”), banned all open-pit cyanide leaching at new gold and silver
mines and mine expansions.586 Certain mining companies in Montana that held mineral
leases on state lands, as well as private mineral leases and fee interests on federal lands
that pre-dated I-137 sued, claiming the initiative amounted to an unconstitutional taking
of their property.587
The plaintiffs in Seven-Up Pete had invested more than $70 million in their
mining projects.588 They argued that I-137 destroyed the value of their mineral leases
and fee interests, which were terminated as a result of I-137. They also argued that I-137
frustrated their expectations with respect to the manner in which they could mine,
because the state knew that plaintiffs intended to use cyanide heap leaching to recover the
minerals and there was no other economically viable way to mine the land at issue.589
Further, the plaintiffs complained that I-137 “changed a century of Montana mining
history.”590
The State of Montana, on the other hand, noted that the leases in question
provided that “[t]he lessee shall fully comply with all applicable state and federal laws,
rules and regulations, including but not limited to those concerning safety, environmental
585 Seven Up Pete Venture v. Montana, 114 P.3d 1009 (2005).
586 Mont. Code Ann. § 82-4-390 (“Cyanide heap and vat leach open-pit gold and silver mining prohibited.
(1) Open-pit mining for gold or silver using heap leaching or vat leaching with cyanide ore-processing
reagents is prohibited except as described in subsection (2). (2) A mine described in this section operating
on November 3, 1998, may continue operating under its existing operating permit or any amended permit
that is necessary for the continued operation of the mine.”).
587 See Seven Up Pete Venture, 114 P.3d at 1015.
588 Id. at 1021.
589 Id. at 1016.
590 Seven Up Pete Venture v. Montana, Appellants’ Initial Brief (No. 03-154) (June 6, 2003), at 6.
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protection, and reclamation.”591 It also argued that the plaintiffs had never been given a
guarantee that their mining permits would be approved and, likewise, they did not have a
right to mine using the cyanide heap leach process.592 The state further argued that the
heavily regulated nature of the mining industry should have put plaintiffs on notice of the
likelihood of future regulations.593 Finally, Montana noted that I-137 did not prohibit
plaintiffs from developing their mineral estate in a manner other than through a cyanide
heap leach process and did not deprive them of any right granted by the mineral leases.594
The Supreme Court of Montana found that plaintiffs did not have a property
interest in the approval of their mining permit.595 Citing federal law, the court set out the
applicable standard for determining whether there is a cognizable property interest in
obtaining a permit, which exists “only when the discretion of the issuing agency is so
narrowly circumscribed that approval of a proper application is virtually assured.”596 The
court reasoned that the Montana Department of Environmental Quality possessed the
statutory discretion to deny a mining permit, and the plaintiffs were required by their
mineral leases to obtain a mining permit subject to environmental regulations before
commencing mining.597 Thus, the court concluded that the plaintiffs’ opportunity to seek
a mining permit did not constitute a property right.598 Furthermore, the court continued,
591 Seven Up Pete Venture v. Montana, Brief of Respondent (No. 03-154) (July 7, 2003), at 4.
592 Seven Up Pete Venture, 114 P.3d at 1016.
593 See id. at 1016-17.
594 See id. at 1017.
595 See id. at 1019.
596 See id. at 1018 (quoting Kiely Const. LLC v. City of Red Lodge, 57 P.3d 836, ¶ 28 (Mont. 2002) (quoting
Gardner v. Baltimore Mayor & City Council, 969 F.2d 63, 68 (4th Cir. 1992)) (emphasis in Seven Up Pete
Venture omitted).
597 Id. at 1017-20.
598 Id. at 1019.
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“the [plaintiffs] had not secured an operating permit as required by [statute and the terms
of the leases]. Thus, the passage of I-137 did not take away any existing permits or halt
any on-going mine operations related to the Venture’s projects.”599 Because the plaintiffs
lacked a property right in obtaining the permits, the court found that the enactment of I-
137 did not constitute an unconstitutional taking.600
Similarly, in Kinross Copper Corp. v. Oregon, the holder of unpatented mining
claims argued that the state’s denial of a water discharge permit that was necessary to
commence mining constituted a taking of its mining claims under the U.S. and Oregon
Constitutions.601 The court rejected this argument, explaining, “the determinative inquiry
is whether what the government has prohibited is itself a property right.”602 The court
noted that the permit denial did not prohibit the plaintiff from mining.603 It concluded
that the only property that plaintiff held was its unpatented mining claims, and this
property did not include water rights. Because the permit denial did not deprive plaintiff
of its property interest in its unpatented mining claims, no taking had occurred.604
As discussed above, Glamis’s unpatented mining claims confer a possessory
interest that is subject to wide-ranging federal, state, and local regulations, including state
regulations that may require a higher standard of protection for public lands than federal
law, and include no right of approval for a specific proposed mining project or
599 Id. at 1019.
600 When amending the 3809 Regulations, the DOI acknowledged Montana’s ban on cyanide leach mining
and noted that “no conflict exists if the State regulation requires a higher level of environmental
protection.” Mining Claims Under the General Mining Laws; Surface Management, 65 Fed. Reg. 69,998,
70,008 (Nov. 21, 2000) (codified at 43 C.F.R. § 3809.3 (2001)).
601 Kinross Copper Corp. v. Oregon, 160 Or. App. 513, 516 (1999).
602 Id. at 519 (emphasis in original).
603 Id. at 520.
604 Id. at 524-526.
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reclamation plan. Moreover, as discussed below, background principles of the U.S. and
California Constitutions and California property law serve to further restrict the bundle of
property rights Glamis holds in its unpatented mining claims. Given the broad, preexisting
limitations on Glamis’s property rights, the specific, later-in-time
implementation of those limitations by the challenged California measures cannot be
deemed expropriatory.
2. Laws And Regulations That Merely Specify Pre-Existing
Limitations On Property Rights Are Not Expropriatory
In reviewing regulatory action in takings claims, the U.S. Supreme Court has
traditionally resorted to “existing rules or understandings that stem from an independent
source such as state law,” when determining if a claimant holds an interest that qualifies
for protection under the Fifth and Fourteenth Amendments as “property.”605 As such,
“[i]f the logically antecedent inquiry into the nature of the owner’s estate shows that the
proscribed use interests were not part of his title to begin with,” the government need not
compensate a property owner, no matter what the economic impact of the challenged
regulations.606 In such a case, the challenged law or decree “inheres in the title itself, in
the restrictions that the background principles of the State’s law of property and nuisance
already place upon land ownership.”607
605 Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972).
606 Lucas v. S. Carolina Coastal Council, 505 U.S. 1003, 1027 (1992) (noting the Court’s traditional resort
to pre-existing rules or understandings of state property law when defining the range of interests protected
by the Constitution); see also id. at 1030 (characterizing as “unexceptional” its “recognition that the
Takings Clause does not require compensation when an owner is barred from putting land to a use that is
proscribed by those ‘existing rules or understandings.’”); Lingle v. Chevron U.S.A., 544 U.S. 528, 538
(2005) (citing Lucas for proposition that the government must pay compensation for “‘total regulatory
takings,’ except to the extent that ‘background principles of nuisance and property law’ independently
restrict the owner’s intended use of the property”).
607 Lucas, 505 U.S. at 1029; see also Tahoe-Sierra Pres. Council v. Tahoe Reg’l Planning Agency, 535 U.S.
302 (2002) (Rehnquist, J., dissenting on other grounds) (recognizing that “short-term delays attendant to
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Decisions of both domestic courts and international tribunals illustrate that the
specific application of broad, pre-existing limitations on property rights is not
expropriatory. In the recent case of American Pelagic Fishing Co. v. United States, for
instance, the Court of Appeals for the Federal Circuit denied the claimant’s takings claim
on grounds that a pre-existing federal statute circumscribed the nature of the property
right in question.608 There, the claimant had invested nearly $40 million in a commercial
fishing vessel and obtained special permits to fish for mackerel in the U.S. Exclusive
Economic Zone (“EEZ”) after a federally commissioned study concluded that larger
vessels were needed to “improve the competitive position of the U.S. Atlantic mackerel
industry with respect to European competitors.”609 After the claimant had made its
investment, and in response to concerns regarding the size of the claimant’s vessel and its
potential environmental effect on the Atlantic mackerel and herring populations,
Congress “effectively cancelled American Pelagic’s existing permits and authorization
letter, and at the same time prevented any further permits from being issued” to the
vessel.610 Congress, through a later appropriations bill, eventually made this permit
revocation permanent.611 It was undisputed that these measures prohibited “all profitable
zoning and permit regimes are a long-standing feature of state property law and part of a landowner’s
reasonable investment-backed expectations”).
608 American Pelagic Fishing Co. v. United States, 379 F.3d 1363 (Fed. Cir. 2004), cert. denied, 125 S.Ct.
2963 (2005).
609 Id. at 1367-68.
610 Id. at 1368-69.
611 Id.
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uses of the vessel.”612 Furthermore, the court below conclusively found that “[n]o other
vessels were affected by the legislative revocation.”613
The court dismissed American Pelagic’s takings claim. In so doing, it relied on
the fact that American Pelagic had made its investment against the backdrop of the 1976
Magnuson-Stevens Fishery Conservation and Management Act.614 That Act abrogated
any common law right to fish in the EEZ.615 As such, the court found that the Act was a
“background principle” of federal law that established the federal government’s right to
permit or restrict fishing in that zone and enabled the federal government subsequently to
alter the bundle of rights American Pelagic could claim to hold pursuant to that statute,
without causing an expropriation.616 Consequently, despite the fact that (i) American
Pelagic had made its investment in reliance on a federally funded study which
recommended additional fishing in the EEZ and had obtained the requisite fishing
permits; (ii) the Congressional measures challenged in the case were enacted after
American Pelagic acquired title to its vessel; and (iii) the Congressional measures were
directed exclusively at American Pelagic, the court held that the property right that
American Pelagic had in its vessel did not include the right to fish in the EEZ and,
therefore, denied the takings claim.
Similarly, in Hunziker v. Iowa, the Supreme Court of Iowa rejected an action by a
group of land developers challenging a denial of a building permit on the basis of a
612 American Pelagic Fishing Co. v. United States, 49 Fed. Cl. 36, 50 (2001).
613 Id. at 42.
614 American Pelagic, 379 F.3d at 1367, n.1 (citing the Magnuson-Stevens Fishery Conservation and
Management Act, Pub. L. No. 94-265, 90 Stat. 331 (codified as amended at 16 U.S.C. §§ 1801-1883
(2000)).
615 Id. at 1380.
616 Id. at 1382-83.
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previously enacted statute.617 In that case, the developers sold a plot of land for
residential development, which, one year later, the Iowa state archaeologist discovered to
contain a Native American burial mound. Pursuant to an Iowa state statute enacted more
than a decade prior to the time the developers acquired title to the land, the Iowa state
archaeologist prohibited the mound’s disinterment and the city refused to issue a building
permit to allow residential construction on the lot, which ultimately forced the developers
to refund the proceeds from the sale of land and retake possession of the property.618 The
Supreme Court of Iowa found an Iowa statute prohibiting the disinterment of Native
American graves to be a “background principle” of Iowa state property law that rendered
the municipality’s action non-compensable.619
Relying on U.S. Supreme Court precedent, the Iowa Supreme Court held that the
actions of the Iowa state archaeologist and the subsequent municipal building permit
denial did not exact a taking, because the “bundle of rights” the developers acquired with
their fee simple title to the land never included the right to “disinter the human remains
and build in the area where the remains were located.”620 Accordingly, because Iowa’s
statutory scheme to protect Native American burial remains was “in existence at least a
decade before plaintiff acquired title,” from the moment the developers acquired the plot
in question the State of Iowa could have prevented the disinterment of these remains.
617 Hunziker v. Iowa, 519 N.W.2d 367 (Iowa 1994), cert. denied, 514 U.S. 1003 (1995).
618 See id. at 368-69.
619 See id. at 371.
620 Id. The Iowa Supreme Court described Section 305A.9 as part of a complete statutory scheme by the
Iowa legislature to prevent the disinterment of ancient Native American remains. The two other provisions
of this scheme which it set forth in some detail were Section 305A.7, which provides in relevant part that
the Iowa state archaeologist has primary responsibility for “investigating, preserving and reinterring”
ancient human remains, and Section 716.5(2) which imposes criminal penalties on persons that
intentionally disinter human remains of “state and national significance from an historical or scientific
standpoint” without the permission of the state archaeologist. See Hunziker, 519 N.W.2d at 370 (quoting
Iowa Acts ch. 1158 § 7 (1976) and ch. 1029 § 50 (1978)).
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The Court thus found that the plaintiff never had a right to engage in activity that
disturbed Native American burial remains, and dismissed the takings claim.621
These principles apply equally to mining rights. For example, in M & J Coal Co.
v. United States,622 the U.S. Court of Appeals for the Federal Circuit found that the
claimant’s property rights were limited by pre-existing environmental and health and
safety standards, specifically under the Surface Mining Control and Reclamation Act of
1977 (“SMCRA”), as enforced by the Department of the Interior’s Office of Surface
Mining (“OSM”). Just as the California SMARA requires the California SMGB to adopt
regulations addressing environmental and health and safety concerns arising from mining
activity, the federal SMCRA authorizes the OSM “to prohibit mining operations that
endanger public health and safety or harm the environment.”623
In M & J Coal, the OSM issued a cessation order requiring M & J to alter the
subsidence mining technique it was using, so as to restore the strength of the subsided
land above the mine and protect the public from surface cracks on adjacent properties.624
M & J argued that the order constituted a taking requiring the payment of just
compensation under the Fifth Amendment. The Federal Circuit rejected the claim,
notwithstanding the fact that the original mining rights were acquired through various
mineral severance deeds which included the express right to mine without liability for
damage done to the overlying surface of the mine, reasoning:
[A]t the time M & J acquired its mining rights, whatever they
were, it knew or should have known that it could not mine in such
621 Id. at 371.
622 M & J Coal Co. v. United States, 47 F.3d 1148 (Fed. Cir. 1995), cert. denied, 516 U.S. 808.
623 Id. at 1150.
624 Id. at 1151-52.
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a way as to endanger public health and safety and that any state
authorization it may have received was subordinate to the national
standards that were established by SMCRA and enforced by
OSM.625
Because the “bundle of property rights” M & J acquired with its mining rights never
included a cognizable property right to mine in the manner it proposed, the Federal
Circuit held that the OSM’s requirement that it modify its plan of operations to protect
surface structures did not effect a taking.626
Similarly, as noted above, the Court of Appeals of Oregon in Kinross Copper
determined that the Oregon Department of Environmental Quality’s failure to grant
Kinross Copper’s National Pollutant Discharge Elimination System (NPDES) permit did
not effect a taking, because Kinross Copper’s unpatented mining claims did not confer
upon it “the ‘right’ to discharge mining wastes into the waters of the state.”627 The court
found that the pre-existing principles of federal mining law did not confer upon Kinross
Copper any right to have its permit approved, because its property rights “came into
existence in 1976, nearly 100 years after the enactment of the Desert Lands Act of 1877,
which severed water rights from the grant of an unpatented mining claim.”628 Similarly,
because the Oregon legislature had long regulated the nature of water rights within the
state, establishing a comprehensive permitting system for appropriating water and
expressly providing that no person could discharge waste without obtaining a NPDES
permit, the Court of Appeals reasoned that Oregon law did not confer upon Kinross
625 Id. at 1154.
626 Id. (quoting Lucas, 505 U.S. at 1027).
627 Kinross Copper v. Oregon, 160 Or. App. 513, 525 (1999).
628 Id. at 524.
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Copper any such right to a water discharge permit.629 Thus, the Court of Appeals
concluded that Kinross Copper’s takings claim was “predicated on the loss of a right that
it never possessed” under pre-existing federal and state law and dismissed its takings
claim.630
International tribunals also recognize that the scope of property rights is informed
by the legislative and regulatory framework existing at the time such rights are acquired.
For example, in the Tradex case, described above, the tribunal found that a pre-existing
Albanian land law limited the property rights at issue in that case.631 The tribunal found
that certain references to an Albanian land law in the joint-venture agreement established
that “the parties to the Agreement, including Tradex, accepted future application of the
Land Law and that the investment was subject to future applications of the Land Law, in
other words: subject to future privatizations.”632 Such a limitation on Tradex’s
investment “from the very beginning” would allow Albania to argue that “the actual
application of the Land Law at a later stage did not infringe the investment and thus did
not constitute an expropriation.”633
The same principle was applied by the tribunal in Marvin Roy Feldman Karpa v.
United Mexican States when denying claimant’s expropriation claim.634 The Feldman
tribunal observed that the claimant had been “stymied by a longstanding requirement”
629 Id. at 523-24.
630 Id. at 525-26.
631 See Tradex Hellas S.A. v. Republic of Albania, Case No. ARB/94/2, Award ¶ 54 (Apr. 29, 1999).
632 Id. ¶ 130.
633 Id. Because the tribunal ultimately found that Tradex had not demonstrated that any rights had been
expropriated, it did not need to reach the issue of whether such rights, in light of the references to the Land
Law in the joint venture agreement, were subject to possible privatization measures “from the very
beginning of the investment.” Id. ¶ 131.
634 Marvin Roy Feldman Karpa v. United Mexican States, Case No. ARB(AF)/99/1, Award (Dec. 16,
2002).
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under the applicable excise tax law, which required, for tax rebate purposes, the
presentation of certain invoices.635 Because claimant had not been in a position to obtain
such invoices “at any relevant time,” the tribunal found that the claimant never possessed
a “‘right’” to obtain tax rebates upon export of cigarettes.636 Accordingly, the tribunal
found, “this is not a situation in which the Claimant can reasonably argue that post
investment changes in the law destroyed the Claimant’s investment, since the [excise tax]
law at all relevant times contained the invoice requirements.”637 Any later-in-time denial
of tax rebates based on claimant’s failure to meet the pre-existing invoice requirements
therefore was not expropriatory.
Likewise, the tribunal in International Thunderbird Gaming Corporation v.
United Mexican States specifically denied an expropriation claim under NAFTA Article
1110 on the ground that “compensation is not owed for regulatory takings where it can be
established that the investor or investment never enjoyed a vested right in the business
activity that was subsequently prohibited.”638 The tribunal in that case found the claimant
never had a right to operate gaming machines in Mexico because the operation of such
machines was prohibited by Mexican law.639 Given this pre-existing legal limitation, the
Thunderbird tribunal held that Mexico could not have expropriated a property interest the
claimant never held.
635 Id. ¶ 118.
636 Id.
637 Feldman Award ¶ 119.
638 International Thunderbird Gaming Corp. v. United Mexican States, NAFTA/UNCITRAL, Award ¶ 208
(January 26, 2006).
639 Id. ¶ 124.
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Thus, the Tradex, Feldman and Thunderbird tribunals recognized the same
proposition as was applied in the domestic U.S. cases discussed above: where property
rights are, from their inception, subject to a broad restriction, the claimant’s property
right does not include the right to engage in the activity proscribed by (or the right to be
relieved from the requirements imposed by) the subsequent application of that restriction.
The subsequent application of that pre-existing limitation on property rights, therefore, is
not expropriatory. Glamis’s unpatented mining claims are subject to such pre-existing
limitations, which were merely implemented by the challenged California measures.
Accordingly, those measures interfered with no property right held by Glamis.
As discussed above, the unpatented mining claims that comprise the Imperial
Project were located after 1980.640 Long pre-dating those claims were principles of
religious accommodation enshrined in the First Amendment of the United States
Constitution641 and Article I of the California Constitution,642 as well as the California
Legislature’s enactment of the Sacred Sites Act in 1976 (prohibiting irreparable damage
to Native American sites on public land absent a showing of necessity)643 and SMARA in
640 See supra note 140.
641 The First Amendment of the United States Constitution provides that the United States Congress “shall
make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” U.S. CONST.
amend. I. The Fourteenth Amendment prohibits the state legislatures from making or enforcing any law
“which shall abridge the privileges and immunities of the citizens of the United States.” U.S. CONST.
amend. XIV.
642 Article I of the California Constitution guarantees the free exercise and enjoyment of religion without
discrimination or preference to all California citizens and directs that the California legislature make no law
respecting an establishment of religion. See CAL. CONST. of 1849, art. I, § 4. While the California courts
are generally charged with interpreting the provisions of the California Constitution, because there are
relatively few cases interpreting its prohibition against the establishment of religion, the California
Supreme Court generally looks to federal cases to interpret this provision. See, e.g., Bennett v. Livermore
Unified Sch. Dis., 238 Cal. Rptr. 819, 821 (Cal. Ct. App. 1987).
643 CAL. PUB. RES. CODE § 5097.9 (1976).
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1975 (requiring mined lands to be reclaimed to a “usable condition which is readily
adaptable for alternate land uses and create no danger to public health and safety”).644
Glamis’s unpatented mining claims, therefore, never included the right to limit
California’s authority to accommodate Native American religious practices, or to mine in
a manner that that irreparably damage[d] Native American cultural and religious sites (in
violation of the Sacred Sites Act) or to fail to reclaim mined lands to a usable condition
(in violation of SMARA). Senate Bill 22 merely implements, in the specific context of
surface mining operations, pre-existing principles of religious accommodation under the
U.S. and California Constitutions and pre-existing protections for Native American
cultural and religious sites under the Sacred Sites Act, and thus did not expropriate any
property right that Glamis ever held. Similarly, the amendments to the SMGB
regulations, which merely implement, in the specific context of open-pit metallic mining
operations, the pre-existing reclamation standard under SMARA, interfered with no
property right held by Glamis.
Accordingly, and as confirmed in the attached expert report of Professor Joseph
L. Sax, a renowned expert in U.S. Constitutional takings law, Glamis’s unpatented
mining claims include no right to limit the authority of the state, pursuant to background
principles of constitutional law, to accommodate Native American religious practices.645
Nor do those claims include any right to mine in a manner that is inconsistent with preexisting
standards under the Sacred Sites Act or SMARA.646 Accordingly, neither the
644 CAL PUB. RES. CODE § 2733 (2001).
645 Sax Rpt. ¶¶ 13-19.
646 Id. ¶¶ 9(b), 23-24.
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reclamation requirements imposed by Senate Bill 22 nor those imposed by the
amendments to the SMGB’s regulations can be deemed expropriatory.
a. SB 22 Is A Generally-Applicable Legislative Measure To
Implement Pre-Existing Principles of Religious
Accommodation Enshrined In The United States And
California Constitutions, And Is Therefore Not Expropriatory
The U.S. Supreme Court has long interpreted the First Amendment as permitting
government accommodation of the free exercise of religion.647 In fact, the U.S. Supreme
Court has explained that the “government may (and sometimes must) accommodate
religious practices and that it may do so without violating the Establishment Clause.”648
The California Senate introduced Senate Bill 22 on December 2, 2002, as an “urgency
statute” necessary “[t]o prevent the imminent destruction of important Native American
sacred sites” by requiring that surface mines be “backfilled and graded to achieve the
approximate original contours of mined lands prior to mining.”649 By amending SMARA
to prevent irreparable damage to such sites, the California Legislature implemented the
pre-existing principle of religious accommodation enshrined in the First Amendment of
the United States Constitution and Article I of the California Constitution.
647 See Cutter v. Wilkinson, 544 U.S. 709, 713 (2005) (quoting Hobbie v. Unemployment Appeals Comm’n
of Fla., 480 U.S. 136, 144-45 (1987) (“This Court has long recognized that the government may . . .
accommodate religious practices . . . without violating the Establishment Clause.”)).
648 Corp. of the Presiding Bishop of the Church of Jesus Christ of Latter-Day Saints v. Amos, 483 U.S. 327,
334 (1987) (quoting Hobbie v. Unemployment Appeals Comm’n of Fla., 480 U.S. 136, 144-45 (1987)).
The line between mandatory and merely permissible government accommodation of religion lies
somewhere between the Free Exercise and Establishment Clauses. See Locke v. Davey, 540 U.S. 712, 718
(2004) (reaffirming that “there is room for play in the joints between [the Free Exercise and Establishment
Clauses],” allowing room for legislative action that is neither compelled by the Free Exercise Clause nor
prohibited by the Establishment Clause); see also generally Sandra B. Zellmer, Sustaining Geographies of
Hope: Cultural Resouces on Public Lands, 73 U. COLO. L. REV. 413, 475 (2002).
649 California Senate, Senate Bill 22 (introduced Dec. 2, 2002) (ARC 01084-86) (Cal. 2003) (explaining
that SB 22 was “an urgency statute necessary for the immediate preservation of the public peace, health, or
safety within the meaning of Article IV of the Constitution” and as such, it went into immediate effect).
Annex 145
216
Here, Glamis chose not to wait for a decision from the DOI on its plan of
operations. Neither did it challenge DOI’s or BLM’s actions – or alleged inaction – in
court. In this respect, Glamis resembles the hypothetical claimant described in
Generation Ukraine, who “abandon[s] his investment without any effort at overturning
the administrative fault; and thus claims an international delict on the theory that there
had been an uncompensated virtual expropriation.”954
Under well-established principles of international law, Glamis’s claim that the
federal government’s actions expropriated its investment should be rejected.
IV. Glamis Has Failed To Demonstrate A Violation Of Article 1105(1)
Glamis’s claim that the United States breached Article 1105(1) of the NAFTA
should be dismissed. Glamis’s claim is based on the mistaken premise that the measures
at issue, taken separately or together, violate what Glamis contends are customary
international law obligations on all States to manage their regulatory and legislative
affairs in a transparent and predictable manner, to refrain from upsetting foreign
investors’ legitimate, investment-backed expectations, and to refrain from acting in an
arbitrary or unjust manner.955 Glamis, however, fails to demonstrate general and
consistent State practice followed from a sense of legal obligation, as is necessary to
prove a rule of customary international law. Even if Glamis had shown the existence of
such rules – which it has not – none of the measures at issue, alone or in combination,
lacked transparency, undermined Glamis’s legitimate expectations, was arbitrary, or
order prohibiting further rental payments by the National Iranian Oil Company (NOIC) to claimant for
petroleum exploration and drilling equipment held by the NIOC).
954 Generation Ukraine Inc. v. Ukraine, 44 I.L.M. 404, Award ¶ 20.30 (Sept. 16, 2003).
955 Mem. ¶¶ 523-39.
Annex 145
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constituted anything other than the normal exercise of regulatory and legislative decisionmaking
in the face of complex and conflicting public interests.
Not only was the relevant government decision-making conducted in a regular
and transparent manner, but also Glamis itself was one of the most active public
participants in that process at every level of state and federal government. That Glamis’s
lobbying efforts evidently did not succeed, or that it may dislike the decisions ultimately
reached by the State of California and the federal government, does not establish a breach
of the NAFTA. As the S.D. Myers Chapter Eleven tribunal explained:
When interpreting and applying the ‘minimum standard’ a Chapter Eleven
tribunal does not have an open-ended mandate to second-guess
government decision-making. Governments have to make many potential
controversial choices. In doing so, they may appear to have made
mistakes, to have misjudged the facts, proceeded on the basis of a
misguided economic or sociological theory, placed too much emphasis on
some social values over others and adopted solutions that are ultimately
ineffective or counterproductive. The ordinary remedy, if there were one,
for errors in modern governments is through internal political and legal
processes, including elections.956
Glamis effectively requests that this Tribunal second-guess California’s
democratically established means of addressing the public interest in protecting
the environment and irreplaceable, sacred Native American resources from the
threat posed by open-pit cyanide heap leach mining, and the federal government’s
interpretation of its own regulations – a request this Tribunal lacks authority to
grant. Glamis’s Article 1105(1) claim should therefore be dismissed.
Below, we first demonstrate that NAFTA Article 1105(1) prescribes the minimum
standard of treatment under customary international law. Second, we describe the
content of that standard, and demonstrate that the measures at issue do not violate this
956 S.D. Myers, Inc. v. Canada, 232 I.L.M. 408, First Partial Award ¶ 261 (Nov. 13, 2000).
Annex 145
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standard. Finally, we demonstrate that the California and federal measures at issue fully
comply even with the standards Glamis advances, but which it fails to show are part of
customary international law.
A. An Article 1105(1) Claim Can Only Be Sustained When A Violation
Of The Customary International Law Minimum Standard Of
Treatment Has Been Demonstrated
The disputing parties agree that Article 1105(1) requires treatment in accordance
with customary international law.957 Article 1105 is captioned “Minimum Standard of
Treatment.” Paragraph One of that Article provides that “Each Party shall accord to
investments of investors of another Party treatment in accordance with international law,
including fair and equitable treatment and full protection and security.”958 In July 2001,
the NAFTA Free Trade Commission, which is composed of the trade ministers of the
three NAFTA Parties, issued the following Note of Interpretation:
Minimum Standard of Treatment in Accordance with International Law
1. Article 1105(1) prescribes the customary international law
minimum standard of treatment of aliens as the minimum standard of
treatment to be afforded to investments of investors of another Party.
2. The concepts of ‘fair and equitable treatment’ and ‘full protection
and security’ do not require treatment in addition to or beyond that which
is required by the customary international law minimum standard of
treatment of aliens.
3. A determination that there has been a breach of another provision
of the NAFTA, or of a separate international agreement, does not establish
that there has been a breach of Article 1105(1).
957 Mem. ¶¶ 517-18 (“[T]he international minimum standard of treatment,” including the “’fair and
equitable treatment’ standard,” “is comprised of customary international law.”). Given the parties’
agreement that Article 1105(1) prescribes the customary international law minimum standard of treatment,
Glamis’s argument that Article 1105(1) must be interpreted in good faith is irrelevant. See id. ¶ 517.
Rather, the pertinent issue is the content of the customary international law minimum standard of treatment.
958 NAFTA art. 1105(1) (emphasis added).
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This interpretation is binding on all Chapter Eleven tribunals.959
Thus, the minimum standard of treatment required by Article 1105 is that set by
rules of customary international law. As Glamis itself recognizes,960 a rule only
crystallizes into customary international law over time through a general and consistent
practice of States that is adhered to from a sense of legal obligation.961 Establishment of
such a rule thus requires two elements: “a concordant practice of a number of States
acquiesced in by others; and a conception that the practice is required by or consistent
with the prevailing law (opinio juris).”962
959 See id. art. 1131(2) (“An interpretation by the Commission of a provision of this Agreement shall be
binding on a Tribunal established under this section.”). Glamis’s suggestion that the Parties’ interpretation
amounts to a “re-interpretation” is unfounded. Mem. ¶ 517. Numerous NAFTA Chapter Eleven tribunals,
the Supreme Court of British Columbia, and secondary authorities relied on by Glamis all recognize the
interpretation’s validity. See, e.g., International Thunderbird Gaming Corp. v. United Mexican States,
UNCITRAL, Award ¶¶ 192-93 (Jan 26, 2006); Methanex Corp. v. United States of America, UNCITRAL,
Award, Pt. IV, Ch. C ¶¶ 20-24 (Aug. 3, 2005) (noting that even if the interpretation had altered the meaning
of Article 1105(1) – which it did not – it would nonetheless be “entirely legal and binding on a tribunal
seized with a Chapter Eleven case” under the terms of the Vienna Convention on the Law of Treaties);
Waste Mgmt., Inc. v United Mexican States, ICSID Case No. ARB(AF)/00/3, 43 I.L.M. 967, Award ¶¶ 90-
91 (Apr. 30, 2004); Loewen Group, Inc. v. United States of America, 7 ICSID REP. 442, Award ¶¶ 124-28
(June 26, 2003); ADF Group, Inc. v. United States of America, 6 ICSID REP. 470, Award ¶¶ 175-78 (Jan. 9,
2003); United Parcel Serv. of Am., Inc. v. Canada, 7 ICSID REP. 288, Award ¶ 97 (Nov. 22, 2002);
Mondev Int’l Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, 42 I.L.M. 85, Award ¶¶
100-125 (Oct. 11, 2002); United Mexican States v. Metalclad Corp., 5 ICSID REP. 236 ¶¶ 61-65 (Sup. Ct.
B.C.) (May 2, 2001); Christoph Schreuer, Fair and Equitable Treatment in Arbitral Practice, J. WORLD
INVEST. & TRADE 357, 362-63 (noting, inter alia, that Article 1105(1)’s text “suggest[s] that . . . fair and
equitable treatment is part of international law, specifically of its rules on the minimum standard of
treatment”).
960 Mem. ¶ 518.
961 RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW OF THE UNITED STATES § 102(2) (1987); see also
United States-Chile Free Trade Agreement, ann. 10-A, June 6, 2003, State Dept. No. 04-35 (“The Parties
confirm their shared understanding that ‘customary international law’ generally and as specifically
referenced in Articles 10.4 and 10.9 results from a general and consistent practice of States that they follow
from a sense of legal obligation.”); United States – Singapore Free Trade Agreement, Exchange of letters
of May 6, 2003, State Dept. No. 04-36 (same); Dominican Republic – Central America – United States
Free Trade Agreement, ann. 10-B, Aug. 5, 2004, State Dept. No. 06-63 (same).
962 CLIVE PARRY, JOHN P. GRANT, ANTHONY PARRY & ARTHUR D. WATTS, ENCYCLOPAEDIC DICTIONARY
OF INTERNATIONAL LAW 82 (1986); Statute of the International Court of Justice art. 38(1) (customary
international law is “international custom, as evidence of a general practice accepted as law”); Case of
Nicaragua v. United States (Merits), I.C.J. REP. 14 (1986) (“[F]or a new customary rule to be formed, not
only must the acts concerned ‘amount to settled practice,’ but they must be accompanied by the opinion
juris sive necessitates. Either the States taking such action or the other States in a position to react to it,
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220
The customary international law minimum standard of treatment does not impose
a duty on States to compensate any party who complains that a particular regulation or
legislation is “unfair.”963 The exercise of regulatory or legislative powers in the context
of shifting governmental policies and public interests will inevitably result in outcomes
that may appear unfair to some. Rather, the minimum standard sets an absolute minimum
floor of treatment, ensuring that States’ treatment of aliens does not “fall[] below a
civilized standard.”964
Such a minimum standard of treatment is necessary where protections under
treaty-based national treatment obligations do not adequately protect aliens because the
host State treats it own nationals unjustly or egregiously, and accords aliens like
treatment. As the S.D. Myers tribunal observed:
The minimum standard of treatment provision of the NAFTA is similar to
clauses contained in [bilateral investment treaties]. The inclusion of a
‘minimum standard’ provision is necessary to avoid what might otherwise
be a gap. A government might treat an investor in a harsh, injurious and
unjust manner, but do so in a way that is no different than the treatment
inflicted on its own nationals. The ‘minimum standard’ is a floor below
which treatment of foreign investors must not fall.965
must have behaved so that their conduct is ‘evidence of a belief that this practice is rendered obligatory by
the existence of a rule of law requiring it.’”).
963 NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions, ¶ B(1) (July
31, 2001).
964 Edwin Borchard, The “Minimum Standard” of the Treatment of Aliens, 33 AM. SOC’Y OF INT’L L.
PROC. 51, 58 (1939). Likewise, Glamis’s contention that the minimum standard of treatment is a relative
standard that varies according to the “levels of development of the host state” must be rejected. See Mem.
¶ 519. The OECD Working Paper, on which Glamis itself relies, explicitly provides that the international
minimum standard under customary international law “is an ‘absolute,’ ‘noncontingent’ standard of
treatment, . . . as opposed to the ‘relative’ standards embodied in ‘national treatment’ ….” OECD Working
Paper on Fair and Equitable Treatment (2004) 2 & 8 n.32. It “provid[es] for a minimum set of principles
which States, regardless of their domestic legislation and practices, must respect when dealing with
foreign nationals and their property.” Id. at n.32 (emphasis added).
965 S.D. Myers, Inc. v. Canada, 232 I.L.M. 408, First Partial Award ¶ 259 (Nov. 13, 2000) (emphasis
added); see also J.C. Thomas, Reflections on Article 1105 of NAFTA: History, State Practice and the
Influence of Commentators, 17 ICSID REVIEW – FOR. INVEST. L.J. 21, 22-23 (2002) (citing E. Root, The
Basis for Protection to Citizens Residing Abroad, 4 AM. J. INT’L L. 517 (1910)).
Annex 145
221
Sufficiently broad State practice and opinio juris have thus far coincided to establish
minimum standards of State conduct in only a few areas. Article 1105(1) embodies, for
example, the requirement to provide a minimum level of internal security and law and
order, referred to as the customary international law obligation of full protection and
security.966 Similarly, Article 1105 recognizes that a State may incur international
responsibility for a “denial of justice” where its judiciary administers justice to aliens in a
“notoriously unjust”967 or “egregious”968 manner “which offends a sense of judicial
propriety.”969 In addition, the most widely-recognized substantive standard applicable to
legislative and rule-making acts in the investment context is the rule barring
expropriation without compensation, but that obligation is particularized in the NAFTA
under Article 1110.970 In the absence of a customary international law rule governing
966 See, e.g., Asian Agric. Prods. Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Award ¶¶ 67-77
(June 27, 1990); Am. Mfg. & Trading, Inc. v. Republic of Zaire, ICSID Case No. ARB/93/1, Award ¶ 6.06
(Feb. 21, 1997).
967 JAN PAULSSON, DENIAL OF JUSTICE IN INTERNATIONAL LAW 44 (2005) (citing IRIZARRY Y PUENTE,
DENIAL OF JUSTICE at 406); id. at 4 (“[A] state incurs responsibility if it administers justice to aliens in a
fundamentally unfair manner.”); Chattin case (U.S. v. Mex.), 4 R.I.A.A. 282, 286-87 (1927) (“Acts of the
judiciary . . . are not considered insufficient unless the wrong committed amounts to an outrage, bad faith,
wilful neglect of duty, or insufficiency of action apparent to any unbiased man.”) (emphasis omitted); D.P.
O’CONNELL, INTERNATIONAL LAW 948 (2d ed. 1970) (“Bad faith and not judicial error seems to be the
heart of” a denial of justice claim.).
968 JAN PAULSSON, DENIAL OF JUSTICE IN INTERNATIONAL LAW 60 (2005) (“The modern consensus is clear
to the effect that the factual circumstances must be egregious if state responsibility is to arise on the
grounds of denial of justice.”).
969 Loewen Group, Inc. v. United States of America, 7 ICSID REP. 442, Award ¶ 132 (June 26, 2003) (a
denial of justice may arise where there has occurred a “[m]anifest injustice in the sense of a lack of due
process leading to an outcome which offends a sense of judicial propriety”). Claims for denial of justice
may also arise with respect to administrative proceedings that are quasi-judicial in nature, although
international law restraints on administrative action are even less strict. See International Thunderbird
Gaming Corp. v. United Mexican States, UNCITRAL, Award ¶ 200 (Jan 26, 2006) (“As acknowledged by
Thunderbird, the SEGOB proceedings should be tested against the standards of due process and procedural
fairness applicable to administrative officials. The administrative due process requirement is lower than
that of a judicial process.”) (emphasis added); see also id. (noting that in the administrative context, mere
procedural errors that may lead to a seemingly arbitrary or unfair result “do[] not attain the minimum level
of gravity required under Article 1105 of the NAFTA”).
970 See ANDREAS H. ROTH, THE MINIMUM STANDARD OF INTERNATIONAL LAW APPLIED TO ALIENS 168
(1949) (“With regard to the legislative power, no general customary rule limiting the legislative power of
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222
State conduct in a particular area, however, a State remains free to conduct its affairs as it
deems appropriate.971
The burden is on the claimant to establish the existence of a rule of customary
international law.972 “The party which relies on a custom . . . must prove that this custom
is established in such a manner that it has become binding on the other party.”973 The
claimant also bears the burden of demonstrating that the State has engaged in conduct
that has violated that rule.974
[a] State to legislation not interfering with vested rights, or making internationally illegal, legislation
infringing vested rights and therefore rendering a State internationally liable for it, has ever been shown to
exist . . . . ”; noting only substantive obligation to pay compensation for expropriation); 5 CHARLES
ROUSSEAU, DROIT INTERNATIONAL PUBLIC 44-66 (1970) (extensive analysis of State responsibility for
legislative acts that identifies three categories of legislative acts that implicate State responsibility:
expropriation, promulgation of a law contrary to international agreements, and failure to promulgate a law
required by international agreement or to abrogate a law inconsistent with an international agreement);
RESTATEMENT (SECOND) OF FOREIGN RELATIONS LAW OF THE UNITED STATES §§ 178-196, ch. 2 intro. n.
(1965) (extensive review of substantive principles of State responsibility for injury to aliens, in which
sections 178-183 “relate to applications of this [international minimum] standard to the procedure followed
by a state in the administration of justice, as distinct from the provisions of its substantive law;” remaining
sections address expropriation, repudiation of contract and prohibition on gainful activity by aliens).
971 S.S. Lotus (Fr. v. Turkey), 1927 P.C.I.J. (ser. A) No. 10, at 18 (rejecting any implied ‘[r]restrictions upon
the independence of States,” and noting that States “enjoy a wide measure of discretion which is only
limited in certain cases by prohibitive rules.”); Legality of the Threat or Use of Nuclear Weapons, Advisory
Opinion, 1996 I.C.J. 226, ¶ 52 (July 8) (“State practice shows that the illegality of the use of certain
weapons as such does not result from an absence of authorization but, on the contrary, is formulated in
terms of prohibition.”).
972 Rights of Nationals of the United States of America in Morocco (Fr. v. U.S.), 1952 I.C.J. 176, 200 (Aug.
27) (Judgment) (quoting Asylum (Colom. v. Peru), 1950 I.C.J. 266, 276 (Nov. 20) (Judgment)) (“The Party
which relies on a custom of this kind must prove that this custom is established in such a manner that it has
become binding on the other Party.”); NGUYEN QUOC DINH, PATRICK DAILLIER & ALAIN PELLET, DROIT
INTERNATIONAL PUBLIC 330 § 214 (6th ed. 1999) (burden is placed on the party “who relies on a custom to
establish its existence and exact content”) (translation from French by counsel); IAN BROWNLIE,
PRINCIPLES OF PUBLIC INTERNATIONAL LAW 12 (5th ed. 1998) (“In practice the proponent of a custom has
a burden of proof of the nature of which will vary according to the subject-matter and the form of the
pleadings.”).
973 Asylum (Colom. v. Peru), 1950 I.C.J., at 276.
974 See, e.g., Tradex Hellas S.A. v. Albania, 14 ICSID REV. – FOREIGN INV. L.J. 197, 219 (Final Award
Apr. 29, 1999) (“[I]t is the claimant who has the burden of proof for the conditions required in the
applicable substantive rules of law to establish the claim . . . . A Party having the burden of proof must not
only bring evidence in support of his allegations, but must also convince the Tribunal of their truth, lest
they be disregarded for want, or insufficiency, of proof.”) (internal quotation omitted); BIN CHENG,
GENERAL PRINCIPLES OF LAW AS APPLIED BY INTERNATIONAL COURTS AND TRIBUNALS 334 (1987)
(“[T]he general principle [is] that the burden of proof falls upon the claimant . . . .”); Feldman v. Mexico,
ICSID Case No. ARB(AF)/99/1, 42 I.L.M. 625, Award ¶ 177 (Dec. 16, 2002) (“[I]t is a generally accepted
Annex 145

ANNEX 146

CONFIDENTIAL INFORMATION REDACTED
IN THE ARBITRATION UNDER CHAPTER ELEVEN
OF THE NORTH AMERICAN FREE TRADE AGREEMENT
AND THE UNCITRAL ARBITRATION RULES
BETWEEN
GRAND RIVER ENTERPRISES SIX NATIONS, LTD.,
JERRY MONTOUR, KENNETH HILL AND ARTHUR
MONTOUR, JR.,
Claimants/Investors,
-and-
UNITED STATES OF AMERICA,
Respondent/Party.
COUNTER-MEMORIAL OF
RESPONDENT UNITED STATES OF AMERICA
Jeffrey D. Kovar
Assistant Legal Adviser
Lisa J. Grosh
Deputy Assistant Legal Adviser
Mark E. Feldman
Chief, NAFTA Arbitration
Alicia L. Cate
John D. Daley
Karin L. Kizer
Jennifer Thornton
Attorney-Advisers
Office of International Claims
and Investment Disputes
UNITED STATES DEPARTMENT OF STATE
Washington, D.C. 20520
December 22, 2008
Annex 146
TABLE OF CONTENTS
PRELIMINARY STATEMENT……………..………………………………………………….1
FACTS………….………………………...………………………………………………...6
I. The Master Settlement Agreement Addresses Serious Tobacco-Related Public
Health and Fiscal Concerns………….………………………………...………….6
II. The Escrow Statutes Ensure That States Have Access To Funds To Satisfy Any
Potential Future Judgments Against Non-Participating Manufacturers For Harms
Caused By Their Tobacco Products……..………………………………..….…..14
III. Settling States Enacted Complementary Legislation To Ensure That NPMs Do
Not Evade Deposit Obligations Under The Escrow Statutes………….............…19
IV. The Allocable Share Amendments Correct An Unintended Flaw In The
Escrow Statutes That Defeated The Purposes Of Those Statutes In Many
Jurisdictions...........................................................................................................23
V. Shortly After The Signing Of The MSA, Grand River Began To Manufacture
Seneca Brand Cigarettes for the U.S. Market……………………………………30
VI. In 1999 And 2000, Grand River Entered Into “Cigarette Manufacturing
Agreements” With Its On-Reservation Distributors, Native Tobacco Direct and
Native Wholesale Supply……………………………………….………………..31
VII. In 2002, Grand River Entered Into A “Cigarette Production Agreement” With
Its Off-Reservation Distributor, Tobaccoville USA, Inc………………………...34
VIII. Grand River’s Sales To NTD/NWS And Tobaccoville Increased By Over
1,500,000,000 Cigarettes From 2003 To 2006…………………………………..37
IX. Grand River’s Financial Performance Has Improved Consistently From 1999-
2005 And Has Remained Strong Thereafter…………………...………………...38
X. Native Wholesale Supply Distributes Millions Of Seneca Brand Cigarettes In
States In Which Grand River Is Not Listed On The State Tobacco
Directory, In Violation Of State Complementary Legislation…………………...40
ARGUMENT…………………………………………………………………………….…48
I. Jurisdiction………………………………………………………………….....…48
A. Claimants Fail To Meet Jurisdictional Requirements Under Article 1101(1)....50
Annex 146
1. Claimants Fail To Include Tobaccoville, And Thus Their Off-Reservation
Sales, Within Their Alleged Investment In The United States……………....53
2. Claimants’ Bare Allegations Of A U.S. Parent Enterprise Aimed At The
Development Of The Seneca Brand Should Be Rejected…………………...55
3. The Escrow Statutes (In Their Original Form Or As Amended) Do Not
“Relate To” Arthur Montour, Jr., As Required By Article 1101(1),
Because NTD/NWS Are Not Subject To Deposit Obligations Under
Those Measures……………………………………………………………...66
B. Claimants Fail To Address Jurisdictional Requirements Under Article 2103
For Tax Measures…………………………………………………………...…69
II. Merits – Liability………………………………………………………………...71
A. Claimants Fail To Meet Any Of The Required Elements For A National
Treatment Claim Under Article 1102 Or A Most-Favored-Nation Treatment
Claim Under Article 1103……………………………………………………...71
1. Claimants Fail To Meet Any Of The Required Elements For A National
Treatment Claim Under NAFTA Article 1102……………………………....73
a. Treatment: The “Treatment” Challenged By Claimants Has Not Been
Accorded To Grand River With Respect To Any U.S. Investment………..74
b. Like Circumstances: Claimants Have Failed To Identify An Appropriate
Comparator………………………………………………………….……..75
c. Less Favorable: Claimants Fail To Establish That They Have Been
Accorded Less Favorable Treatment Than That Accorded To Other
NPMs………………………………………………………………………78
2. Claimants Fail To Meet Any Of The Required Elements For An Article
1103 Claim…………………………………………………….……………..81
3. Claimants’ National Treatment And Most-Favored-Nation Claims Cannot
Be Salvaged By General NAFTA Objectives Under Article 102(1)………...82
B. Claimants Fail To Establish That Their Alleged Investments Were Not
Accorded The Minimum Standard Of Treatment Under Article 1105……...…84
1. A Claim Under Article 1105(1) Must Arise From The Failure To Accord The
Minimum Standard Of Treatment To An Alien’s Investment……………….88
a. The Scope Of Article 1105(1) Includes Only Protections Recognized
Annex 146
Under The Minimum Standard Of Treatment………...……………….…..89
b. The Obligations Alleged By Claimants, Which They Have Not Shown
To Be Included Within The Minimum Standard Of Treatment, Were In
Any Case Not Violated Here…………………………………………...….93
2. The Minimum Standard Of Treatment Does Not Obligate States To Protect
An Investor’s Expectations…………………………………………………..96
a. Claimants Fail To Demonstrate Any Obligation To Provide Investors With
A “Transparent And Predictable Business And Regulatory Climate” Under
The Minimum Standard Of Treatment…………………………………...100
b. Even Assuming That The Minimum Standard Of Treatment Obligates
States To Provide Foreign Investors With A “Transparent And Predictable”
Regulatory Environment, Claimants Fail To Demonstrate A Violation Of
That Standard……………………………………………………………..102
i. The Settling States Made No “Offer” Allowing NPMs To Avoid Escrow
Deposit Obligations By Adopting A “Regional” Sales Strategy……….102
ii. Claimants’ Bare Assertion That State Officials Promised A “Level
Playing Field” Between Regional NPMs and Grandfathered SPMs
Operating On A National Basis Should Be Rejected……………..…….103
iii. The Amendments Closing the Loophole In the Allocable Share Release
Provision Were Enacted In A Transparent Manner………….…………104
iv. The Amendments Closing The Loophole In The Allocable Share Release
Provision Were Predictable…………………………...………………...105
c. Claimants Could Not Have Had Any Legitimate Expectation That Their
Distribution And Sale Of Seneca Cigarettes In The United States Would
Be Free From Regulation Based On Article 3 Of The Jay Treaty………..109
d. Claimants Could Not Have Had Any Legitimate Expectation, Under U.S.
Federal Indian Law, That Their Tobacco-Related Operations Would Be
Exempt From State Regulation…………………….…………………..…116
i. Claimants Grand River, Jerry Montour, And Kenneth Hill Are Not
Members Of Any Federally Recognized Indian Tribe And Their
Activities Do Not Occur Within “Indian Country” Under Federal
Indian Law………………………….…………………………………..116
Annex 146
ii. The Distribution Activities Of NTD/NWS Occur Partially Off-
Reservation, With Substantial Off-Reservation Effects……………...121
3. There Is No Basis To Find That The United States Has Impermissibly
Discriminated Against Claimants, And The Minimum Standard of Treatment
Of Aliens In Article 1105 Does Not Include An Obligation To Proactively
Consult With Indigenous Tribes……………………………………………125
a. Customary International Law Prohibits Discrimination Against Aliens
Only In Specific Contexts, Not Applicable Here…………………………129
b. The International Instruments And Documents On Which Claimants
Rely Do Not Reflect Customary International Law…………………...…134
4. Claimants’ Denial Of Justice Claim Fails Because The Allocable Share
Amendments And Complementary Legislation Do Not Deny Them Access
To U.S. Courts……………..……………………………………………….140
C. Claimants’ Article 1110 Claim Fails Because Claimants Have Not
Demonstrated That Any “Investment” Has Been Expropriated……...………146
1. Claimants’ Alleged Business And Other Property Interests Have Not Been
Expropriated Because The Impact Of The Challenged Measures Upon
Them Is Insufficient to Qualify As An Expropriation………………….…..149
a. Claimants Fail To Establish A Sufficient Impact On Their Putative
Integrated Business Enterprise To Prove An Expropriation………….…..150
b. Claimants Fail To Establish A Sufficient Impact On Their Alleged
Investment Of Intellectual Property And Goodwill To Constitute An
Expropriation……………………………………………………….…….153
2. Claimants Have Failed To Establish Any Reasonable Expectation That The
Favorable Regulatory Conditions They Exploited Would Continue In
Perpetuity……………………………………………………………….......157
3. The Regulatory Nature Of The Allocable Share Amendments And The
Escrow Statutes They Amended Do Not Support A Finding Of
Expropriation……………………………………………………………….159
III. Merits – Damages………………………………………………………………161
A. Claimants Wrongly Rely Upon Expert Valuation Analyses That Do Not
Meet The Legal Standard Or Match The Theories Of Liability On Which
They Base Their Case………………………………………………...………163
1. Claimants’ Damages Arguments Under Article 1110 Should Be Rejected
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Because They Fail To Present The Fair Market Value Of Their Alleged
“Investment”………………………………………………………………..165
2. Claimants’ Valuation Analysis For Off-Reservation Damages Is
Fundamentally Flawed And Does Not Fit The Theory Of Liability
Underlying Their Non-Expropriation Claims……………………..….….…168
a. The “Cash Benefit From Exemption” Approach Is Fundamentally
Flawed…………………………………………………………………..169
b. The “Lost Sales” Approach Does Not Fit With Claimants’ Liability
Theory…………………………………………………………………..171
3. Claimants’ On-Reservation Valuation Analysis Should Be Rejected
Because It Is Based Upon Demonstrably False Assumptions And
Erroneous Calculations….………………………...………………………..172
B. Claimants Assume, Rather Than Demonstrate, That Grand River’s Drop In
Market Share Was Caused By The Challenged Measures...…………...……..174
C. Claimants’ Valuation Analysis Is Riddled With Errors That Drastically
Inflate Their Claim For Compensation...……………………………………..176
D. Claimants Have Failed To Demonstrate That They Are Entitled To Recover
Their Alleged Compliance Costs, Professional Fees Or Equipment Purchase
Costs……………………………………………………………………….….179
RELIEF SOUGHT…………………………………………………………………………182
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Thus, the key to interpreting the provisions of the NAFTA must be the text itself,
as informed by the treaty’s context, object, and purpose, only to the extent those
additional sources are relevant to, and consonant with, the substantive provision at issue.
This approach is grounded in the well-accepted principle that general objectives can shed
light on treaty provisions, but cannot impose independent obligations on treaty
signatories.308
Claimants cannot rely on general NAFTA objectives under Article 102 to
transform the nature of national treatment and most-favored-nation obligations under
Article 1102 and Article 1103. Given Claimants’ failure to meet required elements under
Article 1102 and Article 1103, both claims should be dismissed.
B. Claimants Fail To Establish That Their Alleged Investments Were Not
Accorded The Minimum Standard of Treatment Under Article 1105
Article 1105, the minimum standard of treatment provision of NAFTA Chapter
Eleven, obligates Parties to “accord to investments of investors of another Party treatment
in accordance with international law, including fair and equitable treatment and full
protection and security.” Claimants put forward several obligations which, they contend,
are included within the minimum standard of treatment obligation under Article 1105.
308 See Oil Platforms Case (Iran v. U.S.), 1996 I.C.J. 803, ¶¶ 24-31 (Dec. 12, 1996) (rejecting Iran’s
suggestion that Article I of the Treaty of Amity, Economic Relations and Consular Rights of August 15,
1955, which provided for a “firm and enduring peace and sincere friendship” between the parties, conferred
any independent obligations on the Parties; finding, rather, that such general language only “throw[s] light
on the interpretation of the other Treaty provisions”); Sale v. Haitian Ctrs. Council, Inc., 509 U.S. 155,
178-79 (1993) (holding that the “broad remedial goals” of the United Nations Protocol Relating to the
Status of Refugees could not be interpreted to impose extraterritorial obligations on its signatories); WORLD
TRADE ORGANIZATION, REPORT OF THE APPELLATE BODY NO. AB-1997-4, ECMEASURES CONCERNING
MEAT AND MEAT PRODUCTS (HORMONES) ¶¶ 211-13, WTO DOC. NO. WT/DS26/AB/R (Jan. 16, 1998)
(finding that the general objective in Article 5.5 of the Agreement on the Application of Sanitary and
Phytosanitary measures of achieving “consistency in the application of the concept of appropriate level of
sanitary or phytosanitary protection” was a prospective goal that did not establish a legal obligation of
consistency on Parties to the agreement).
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Claimants then assert that such obligations have been violated in this case. As discussed
below, Claimants fail on both counts.
NWS and Tobaccoville distribute and sell billions of Grand River-manufactured
cigarettes throughout the United States. As an NPM, Grand River is not subject to the
payment obligations or advertising restrictions that apply to participating manufacturers
under the MSA. The escrow statutes adopted by all Settling States were intended to level
the playing field between PMs and NPMs by imposing deposit obligations on NPMs that
were roughly comparable to the payment obligations imposed on PMs under the MSA.
Escrow payments under the original escrow statutes were subject to the allocable share
release provision, which was premised on the assumption that NPMs sold cigarettes
nationally.309
Grand River, like many NPMs, was able to exploit that assumption by
concentrating its sales in a few Settling States and thereby obtain refunds of large
portions of its escrow payments. As stated by Professor Gruber, the allocable share
release “unintentionally skewed the competitive playing field dramatically in favor” of
NPMs that concentrated their sales in a few Settling States.310 The allocable share
amendments restored the level playing field between PMs and NPMs by amending the
release provision to foreclose the ability of NPMs to obtain refunds by concentrating their
sales in only a few states.
Claimants assert that the allocable share amendments violated the customary
international law minimum standard of treatment of aliens. But the allocable share
amendments apply to all NPMs equally, and were adopted through open, democratic
309 See Facts Sec. IV.
310 Gruber Report ¶ 31.
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processes in which both PMs and NPMs participated. Claimants operate in the highlyregulated
tobacco industry. Given the plainly unanticipated loophole in the allocable
share release provision, the amendment of that provision was both reasonable and
predictable.
Faced with these facts, Claimants rest their Article 1105 claim on unsupported,
and unsupportable, assertions. First, Claimants allege that the Settling States made the
following “unilateral offer” to tobacco manufacturers: if opting not to sign the MSA, a
manufacturer, as an NPM, would be “entitled” to obtain refunds on escrow payments
“reflecting their proportionate share of the national market.”311 But the “entitlement”
alleged by Claimants was in fact an unanticipated loophole that undermined the very
purpose of the escrow statutes: to ensure an adequate source of funds for Settling States
to satisfy any potential future tobacco-related judgments against NPMs.
Second, Claimants assert that they took “state officials . . . at their word” that the
escrow statutes would provide a level playing field between “regional” NPMs and
grandfathered SPMs operating on a national basis. This assertion is not only
unsupported, but directly contrary to the basic assumption underlying the escrow statutes,
that NPMs would sell their products nationally.312
In addition, as discussed above in connection with Claimants’ Article 1102 and
Article 1103 claims, the “discrimination” alleged by Claimants ultimately concerns the
failure to accord Grand River special treatment, different from that accorded to all other
NPMs. Specifically, Grand River seeks an exemption from deposit obligations that is not
311 Mem. ¶ 203.
312 See Facts Sec. IV.
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available to any other NPM. But such an exemption is not justified by their status as
members of Canadian First Nations.
Furthermore, the deposit obligations under the amended escrow statutes apply to
Grand River, a Canadian exporter of cigarettes, which has no investment in the United
States. Article 1105 obligates each Party to accord investments of investors of another
Party treatment in accordance with the law minimum standard of treatment. The deposit
obligations do not apply to any U.S. investment of Claimants, and thus cannot support a
claim under Article 1105. Nevertheless, even if the escrow deposit obligations did apply
to an investment of the Claimants in the United States, the minimum standard of
treatment has not been violated with respect to such an investment.
This section responds to Claimants’ arguments under Article 1105 as follows.
First, the section provides an overview of the content of the minimum standard of
treatment, as well as the requirements for demonstrating a rule of customary international
law. Second, the section addresses how Claimants have failed to take such requirements
into account when putting forward an alleged obligation not to frustrate an investor’s
“basic” expectations. Third, assuming arguendo the existence of Claimants’ alleged
“expectations” obligation, the section addresses Claimants’ failure to support their
particular expectations arguments with respect to the Jay Treaty, federal Indian law, and
the regulatory environment for the tobacco industry. Fourth, with respect to Claimants’
allegations of discrimination under Article 1105, the section refers back to the earlier
analysis of Claimants’ Article 1102 and Article 1103 claims, which observed that the
“discrimination” alleged by Claimants ultimately concerns the failure to accord Grand
River special treatment, different from the treatment accorded to all other NPMs. Fifth,
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and finally, the section addresses Claimants’ denial of justice claim, which fails because
the challenged measures do not limit Claimants’ access to U.S. courts. For the reasons
set forth below, Claimants’ Article 1105 claim should be dismissed in its entirety.
1. A Claim Under Article 1105(1) Must Arise From The Failure To Accord
The Minimum Standard Of Treatment To An Alien’s Investment
Article 1105(1) requires that “[e]ach Party shall accord to investments of investors of
another Party treatment in accordance with international law, including fair and equitable
treatment and full protection and security.”313 As the NAFTA Free Trade Commission
(“FTC”) confirmed in its 2001 interpretation, the scope of Article 1105(1) extends only to
those investment protections that are recognized under customary international law:
1. Article 1105(1) prescribes the customary international law minimum
standard of treatment of aliens as the minimum standard of treatment to be
afforded to investments of investors of another Party.
2. The concepts of “fair and equitable treatment” and “full protection and
security” do not require treatment in addition to or beyond that which is
required by the customary international law minimum standard of
treatment of aliens.
3. A determination that there has been a breach of another provision of the
NAFTA, or of a separate international agreement, does not establish that
there has been a breach of Article 1105(1).314
Under Article 1131, the FTC’s interpretation “of a provision of this Agreement
shall be binding on a Tribunal established under this Section.”315 In addition, NAFTA
Chapter Eleven tribunals, as well as the Supreme Court of British Columbia, have
313 NAFTA art. 1105(1) (emphasis added).
314 NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions, ¶ B (July 31,
2001) (emphasis added).
315 NAFTA art. 1131(2).
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recognized the authority of the interpretation.316 Furthermore, “‘an agreement as to the
interpretation of a provision reached after the conclusion of the treaty represents an
authentic interpretation by the parties which must be read into the treaty for purposes of
its interpretation.’”317 Claimants do not dispute the valid and binding nature of the FTC
interpretation.318
a. The Scope of Article 1105(1) Includes Only Protections
Recognized Under The Minimum Standard of Treatment
As confirmed by the FTC interpretation, Article 1105(1) protects only the
property rights and interests of aliens, i.e., the “investments of investors,” that are
recognized under the minimum standard of treatment, which “provid[es] for a minimum
316 See, e.g., Int’l Thunderbird Gaming Corp. v. United Mexican States, NAFTA/UNCITRAL, Award ¶¶
192-93 (Jan. 26, 2006) (“Int’l Thunderbird Gaming v. Mexico, Award”); Methanex v. United States of
America, Final Award, pt. IV, ch. C, ¶¶ 20-24 (noting that even if the interpretation had altered the meaning
of Article 1105(1)—which it did not—it would nonetheless be “entirely legal and binding on a tribunal
seized with a Chapter 11 case” under the terms of the Vienna Convention on the Law of Treaties); Waste
Mgmt., Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award ¶¶ 90-91 (Apr. 30, 2004)
(“Waste Mgmt. v. Mexico, Award”); Loewen Group v. United States, Award ¶¶ 124-28; ADF Group v.
United States, Award ¶¶ 175-78; United Parcel Serv. of Am.,Inc. v. Gov’t of Canada, 7 ICSID Rep. 288,
Award on Jurisdiction ¶ 97 (Nov. 22, 2002) (“UPS v. Canada, Award on Jurisdiction”); Mondev Int’l Ltd.
v. United States, ICSID Case No. ARB(AF)/99/2, 42 I.L.M. 85, Award ¶¶ 100-25 (Oct. 11, 2002)
(“Mondev v. United States, Award”); United Mexican States v. Metalclad Corp., 5 ICSID Rep. 236 ¶¶ 61-
65 (Sup. Ct. B.C.) (May 2, 2001); Christoph Schreuer, Fair and Equitable Treatment in Arbitral Practice, 6
J.WORLD INVEST. & TRADE 357, 362-63 (noting, inter alia, that Article 1105(1)’s text “suggest[s] that . . .
fair and equitable treatment is part of international law, specifically of its rules on the minimum standard of
treatment”).
317 Methanex Corp. v. United States, Final Award, pt. II, ch. B, ¶ 19 (quoting International Law
Commission Report, vol. 2, at 221, and noting the ICJ’s approval of this passage in the Kasikili/Sedudu
Island Case (Bots. v. Namib.), 1999 I.C.J. Rep. 1045 ¶ 49). See also ROBERT JENNINGS &ARTHUR
WATTS, 1 OPPENHEIM’S INTERNATIONAL LAW § 630 (9th ed. 1992) (“The parties to a treaty often foresee
many of the difficulties of interpretation likely to arise in its application, and in the treaty itself define
certain of the terms used. Or they may in some other way and before, during, or after the conclusion of the
treaty, agree upon the interpretation of a term, either informally (and executing the treaty accordingly) or
by a more formal procedure, as by an interpretive declaration or protocol or a supplementary treaty. Such
authentic interpretations given by the parties override general rules of interpretation.”) (footnotes omitted)
(quoted with approval in the Methanex v. United States Final Award at pt. II, ch. H, ¶ 23); ARTHURWATTS,
2 THE INTERNATIONAL LAW COMMISSION 1949-1998, PART TWO 688-89 (1999) (Commentary to final draft
article 27) (same); see also Campbell McLachlan, The Principle of Systemic Integration & Art. 31(3)(C) of
the Vienna Convention, 54 INT’L&COMP. L.Q. 279, 287 (2005) (“For much of the time, interpretation of
contracts and treaties alike will be a matter of ascertaining and giving effect to the intention of the parties
by reference to the words they have used.”).
318 See Mem. ¶ 154 (citing the FTC interpretation with approval).
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set of principles which States, regardless of their domestic legislation and practices, must
respect when dealing with foreign nationals and their property.”319 As such, this standard
establishes an absolute minimum “floor below which treatment of foreign investors must
not fall.”320
Currently, this “floor” defines certain categories of treatment that thereby
constitute the protection accorded to investments under Article 1105(1). One such
category is a State’s obligation to prevent a “denial of justice,” which arises, for example,
when its judiciary administers justice to aliens in a “notoriously unjust”321 or
“egregious”322 manner “which offends a sense of judicial propriety.”323 Another such
standard is a State’s responsibility to provide a minimum level of internal security and
law and order, which is found in the customary international legal obligation to accord
319 OECD DIRECTORATE FOR FIN. AND ENTER. AFFAIRS, WORKING PAPERS ON INTERNATIONAL
INVESTMENT NO. 2004/3, FAIR AND EQUITABLE TREATMENT STANDARD IN INTERNATIONAL INVESTMENT
LAW 8 n. 32 (2004) (“OECDWORKING PAPER ON FAIR AND EQUITABLE TREATMENT”).
320 S.D. Myers v. Canada, First Partial Award ¶ 259; see also Edwin Borchard, The ‘Minimum Standard’ of
the Treatment of Aliens, 33 AM. SOC’Y OF INT’L PROC. 51, 58 (1939). Likewise, the OECD Working
Group on Fair and Equitable Treatment expressly recognized that the minimum standard of treatment of
foreign direct investment under customary international law “is an ‘absolute,’ ‘non-contingent’ standard of
treatment, . . . as opposed to the ‘relative standards’ embodied in ‘national treatment’ . . . .” OECD
WORKING PAPER ON FAIR AND EQUITABLE TREATMENT 2, 8 n.32.
321 Jan Paulsson, DENIAL OF JUSTICE IN INTERNATIONAL LAW 44 (2005) (citing J. Irizarry y Puente, The
Concept of “Denial of Justice” in Latin America, 43MICH. L.REV. 383, 406 (1944)); id. at 4 (“[A] state
incurs responsibility if it administers justice to aliens in a fundamentally unfair manner.”) (emphasis
omitted); Chattin Case (U.S. v. Mex.), 4 R. INT’L ARB. AWARDS 282, 286-87 (1927), reprinted in 22 AM. J.
INT’L L. 667, 672 (1928) (“Acts of the judiciary … are not considered insufficient unless the wrong
committed amounts to an outrage, bad faith, wilful neglect of duty, or insufficiency of action apparent to
any unbiased man.”) (emphasis omitted); D.P. O’Connell, 2 INTERNATIONAL LAW 948 (2d ed. 1970) (“Bad
faith and not judicial error seems to be the heart of” a denial of justice claim) (footnotes omitted).
322 Jan Paulsson, DENIAL OF JUSTICE IN INTERNATIONAL LAW 60 (2005) (“The modern consensus is clear to
the effect that the factual circumstances must be egregious if state responsibility is to arise on the grounds
of denial of justice.”).
323 Loewen Group v. United States, Award ¶ 132 (a denial of justice may arise where there has occurred a
“[m]anifest injustice in the sense of a lack of due process leading to an outcome which offends a sense of
judicial propriety”).
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“full protection and security” to investments of investors.324 The minimum standard of
treatment also bars direct and indirect expropriation without prompt, adequate, and
effective compensation.325 NAFTA Chapter Eleven, however, sets out the expropriation
obligation in its own provision, Article 1110.
The NAFTA Parties agreed that the minimum standard of treatment obligation
under Article 1105(1) would extend only to the “investments of investors of another
Party,” i.e., the foreign investor’s economic stake in the host State. Thus the treatment
accorded to matters other than a foreign investor’s investment in the host State cannot
support a claim under Article 1105(1). This limitation is consistent with the commentary
to the OECD Draft Convention on the Protection of Foreign Property, which states that
the minimum standard of treatment reflects the “well-established general principle of
international law that a State is bound to respect and protect the property of nationals of
other States.”326
324 See, e.g., Asian Agric. Prods., Ltd. v. Rep. of Sri Lanka, ICSID Case No. ARB/87/3, Final Award ¶¶ 85-
86 (June 27, 1990) (finding that Sri Lanka violated the full protection and security obligation under the
minimum standard when it failed to take measures which would have prevented harm to farm in the course
of counter-insurgency); Am. Mfg. & Trading, Inc. v. Zaire, ICSID Case No. ARB/93/1, Award ¶ 6 (Feb. 21,
1997) (explaining that the obligation to provide full protection and security under international law makes it
incumbent upon the State receiving an investment to “take all measures necessary” to ensure the physical
security of an investment and finding that Zaire violated that obligation when it failed to prevent looting of
American Manufacturing’s property).
325 See, e.g., OECD DIRECTORATE FOR FIN. AND ENTER. AFFAIRS,WORKING PAPERS ON INTERNATIONAL
INVESTMENT NO. 2004/4, “INDIRECT EXPROPRIATION” AND THE “RIGHT TO REGULATE” IN INTERNATIONAL
INVESTMENT LAW at 2 (2004) (“It is a well recognized rule of international law that the property of aliens
cannot be taken, whether for public purposes or not, without adequate compensation .”); G.C. Christie,
What constitutes a Taking of Property Under International Law, 38 BRIT. Y.B. INT’L L. 307, 307 (1962)
(examining “the question of what constitutes a taking of the kind that brings into operation the widely
recognized rule of international law that the property of aliens cannot normally be taken, whether for public
purpose or not, without adequate compensation”); IAN BROWNLIE, PRINCIPLES OF PUBLIC INTERNATIONAL
LAW 535-36 (5TH ED. 1998) (“The rule supported by all leading ‘Western’ governments and many jurists in
Europe and North America is as follows: the expropriation of alien property is lawful if prompt, adequate,
and effective compesation is provided for.”).
326 OECD Draft Convention on the Protection of Foreign Property, Oct. 12, 1967, reprinted in 7 I.L.M. 117
(1968) (emphasis added). Likewise, the 2004 U.S. Model BIT recognizes that the customary international
law minimum standard of treatment “refers to all customary international law principles that protect the
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Furthermore, because the minimum standard of treatment sets an absolute
minimum “floor below which treatment of foreign investors must not fall,”327 that floor
cannot provide special treatment for particular classes of investors or investments.
Finally, as provided in the FTC interpretation, a “determination that there has
been a breach … of a separate international agreement, does not establish that there has
been a breach of Article 1105(1).”328 The investor-State dispute resolution provisions of
Chapter Eleven do not provide a forum for enforcing rights that a claimant may have
under other international agreements.329 Nor can Claimants import obligations indirectly
from separate international legal instruments by characterizing those obligations as
“relevant rules of international law” for purposes of interpreting Article 1105(1).330
“[R]elevant rules of international law” under Article 31(3)(c) of the Vienna Convention
cannot override a treaty provision, much less a treaty provision that has been expressly
interpreted by the Parties.331 Claimants’ attempt to the contrary should be rejected.
economic rights and interests of aliens.” 2004 Model BIT, Annex A (emphasis added). Recent Bilateral
Investment Treaties (“BITs”) and Free Trade Agreements (“FTAs”) signed by the United States have
included the same language. See, e.g., U.S.-Uru. Bilateral Investment Treaty, Nov. 4, 2008, Annex A;
U.S.-Rwanda Bilateral Investment Treaty, Feb. 19, 2008, Annex A; U.S.-S. Korea Free Trade Agreement,
June 30, 2007, Annex 11-A. See also Alireza Falstafi, The International Minimum Standard of Treatment
of Foreign Investors’ Property: A Contingent Standard, 30 SUFFOLK TRANSNAT’L L. REV. 317, 356-57
(2007) (“The minimum standard of treatment must operate within the framework of international rules
regarding the treatment of foreign investment or property” or risk creating a standard that could
“accommodate any claim of responsibility for injury.” Such an approach “is vulnerable to the substitution
of the subjective perception of the observer for the international law on the treatment of foreign investors’
property.”).
327 See S.D. Myers, supra n. 320, ¶259.
328 FTC Interpretation ¶ B(3).
329 See Mondev v. United States, Award ¶ 121 (“If there had been an intention to incorporate by reference
extraneous treaty standards in Article 1105 and to make Chapter 11 arbitration applicable to them, some
clear indication of this would have been expected.”).
330 See Vienna Convention art. 31(3)(c) (“any relevant rules of international law applicable in the relations
between the parties” shall be taken into account when interpreting a treaty provision, together with the
treaty’s context).
331 See, e.g., Alexander Orakhelashvili, Restrictive Interpretation of Human Rights Treaties in the Recent
Jurisprudence of the European Court of Human Rights, 14 EUR. J. INT’L L. 529, 537 (2003) (“Relevant
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In sum, Article 1105(1) affords the investments of investors only the customary
international law minimum standard of treatment of aliens—no more and no less.
b. The Obligations Alleged By Claimants, Which They Have Not
Shown To Be Included Within The Minimum Standard Of
Treatment, Were In Any Case Not Violated Here
Claimants attempt to derive two broad minimum standard of treatment obligations
from the international legal principle of “good faith,” which they hope to insert within the
minimum standard of treatment: (i) a prohibition against frustrating an investor’s “basic”
expectations about the regulatory environment and other specific legal obligations that
were in place when the investor chose to invest and (ii) a general prohibition on
discrimination against foreign investors.332 Claimants fail to demonstrate that such
alleged obligations are part of the minimum standard of treatment. Specifically,
Claimants fail to establish that their alleged obligations are supported by (i) consistent
state practice; and (ii) opinio juris, or an understanding that such practice is required by
law.333 Even if Claimants were able to establish such obligations, however, such
obligations have not been violated in this case.
rules” under Article 31(3)(c) may not, generally speaking, override or limit the scope or effect of a
provision for whose clarification they are referred.”); RosInvestCo UK Ltd. v. Russian Fed. SCC Case No.
V079/2005, Award on Jurisdiction ¶ 39 (Oct. 1, 2007) (observing that Article 31(3)(c) should not “amount
to a general licence to override” terms of a treaty).
332 See Mem. ¶¶ 161-68, 178.
333 See Continental Shelf Case (Libya v. Malta), 1985 I.C.J. Rep. 13, 29 (June 3, 1985) (“It is of course
axiomatic that the material of customary international law is to be looked for primarily in the actual
practice and opinio juris of States . . . .”); Military and Paramilitary Activities in and Against Nicaragua
Case (Nicar. v. U.S.), 1986 I.C.J. 14 , 108-09 (Nov. 26, 1986) (“[F]or a new customary rule to be formed,
not only must the acts concerned ‘amount to a settled practice,’ but they must be accompanied by the
opinio juris sive necessitates. Either the States taking such action or other States in a position to react to it,
must have behaved so that their conduct is ‘evidence of a belief that this practice is rendered obligatory by
the existence of a rule of law requiring it.’”); see also CLIVE PARRY ET AL., ENCYCLOPAEDIC DICTIONARY
OF INTERNATIONAL LAW 81-82 (1986) (customary international legal rule emerges from “a concordant
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When arguing that the “principle of good faith” is part of the minimum standard
of treatment, Claimants mischaracterize the role of “good faith” under customary
international law.334 “The principle of good faith is … ‘one of the basic principles
governing the creation and performance of legal obligations’; … [but] it is not in itself a
source of obligation where none would otherwise exist.”335 As such, customary
international law does not impose a free-standing, substantive obligation of “good faith”
that, if breached, can result in State liability. Absent a specific treaty obligation, a
Claimant “may not justifiably rely upon the principle of good faith” to support a claim.336
Claimants submit no evidence of State practice or opinio juris to contradict this wellpractice
of a number of States acquiesced in by others; and a conception that the practice is required by or
consistent with the prevailing law (the opinio juris)”).
The party relying on custom “must prove that this custom is established in such a manner that it has
become binding on the other Party,” Asylum Case (Colom. v. Peru), Judgment, 1950 I.C.J. Rep. 266, 276
(Nov. 20, 1950). The relevant state practice “should have been both extensive and virtually uniform in the
sense of the provision invoked; -- and should moreover have occurred in such a way as to show a general
recognition that a rule of law or legal obligation is involved.” North Sea Continental Shelf Cases (F.R.G. v.
Den.; F.R.G. v. Neth.), 1969 I.C.J. 3, 43, ¶ 74 (Feb. 20, 1969). Once the claimant has demonstrated a
particular custom, the claimant must then show that the State has engaged in conduct that violated the
applicable rule. See, e.g., Tradex Hellas S.A. v. Albania, ICSID Case No. ARB/94/2, Final Award ¶ 74
(Apr. 29, 1999) (“[I]t is the claimant who has the burden of proof for the conditions required in the
applicable substantive rules of law to establish the claim. … A Party having the burden of proof must not
only bring evidence in support of his allegations, but must also convince the Tribunal of their truth, lest
they be disregarded for want, or insufficiency, of proof.”) (internal quotation omitted); BIN CHENG,
GENERAL PRINCIPLES OF LAW AS APPLIED BY INTERNATIONAL COURTS AND TRIBUNALS 334 (1987) (“[T]he
general principle [is] that the burden of proof falls upon the claimant ….”); Feldman v. Mexico, Award
¶ 177 (“[I]t is a generally accepted canon of evidence in civil law, common law and, in fact, most
jurisdictions, that the burden of proof rests upon the party, whether complaining or defending, who asserts
the affirmative of a claim or defence.”). See also NGUYEN QUOC DINH, PATRICK DALLIER &ALAIN
PELLET, DROIT INTERNATIONAL PUBLIC 334-35 § 214 (7th ed. 2002) (burden is placed on the party “who
relies on a custom to establish its existence and exact content”) (“qui s’appuie sur une coutume d’en établir
l’existence et la portée exacte”) (translation from French by counsel); IAN BROWNLIE, PRINCIPLES OF
PUBLIC INTERNATIONAL LAW 12 (6th ed. 2003) (“In practice the proponent of a custom has a burden of
proof the nature of which will vary according to the subject-matter and the form of the pleadings.”).
334 See Mem. ¶¶ 161-63, 171-74.
335 Border and Transborder Armed Actions Case (Nicar. v. Hond.), 1988 I.C.J. Rep. 69, 105, ¶ 94 (Dec. 20,
1988) (emphasis added).
336 Land and Maritime Boundary Case (Cameroon v. Nig.), 1998 I.C.J. 275, 297, ¶ 39 (June 11, 1998).
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settled rule.337 Claimants’ attempt to characterize the international law principle of good
faith as a free-standing obligation should be rejected.338
Furthermore, Claimants’ attempts to derive “expectations” and discrimination
obligations from the principle of “good faith” are equally unsound. A general principle
of international law that does not impose any substantive obligations on a State toward
foreign investors cannot itself create additional State obligations toward such investors.
Even if such additional obligations could be read into the minimum standard of treatment,
however, Claimants have failed to show that the minimum standard of treatment protects
a foreign investor’s “basic” expectations, whether it be to a “transparent and predictable
business and regulatory environment,”339 certain treatment under the Jay Treaty;340 or
U.S. federal Indian law.341 Likewise, Claimants have failed to demonstrate that the
minimum standard of treatment provides a blanket prohibition against discrimination
337 The arbitral decisions on which Claimants rely do not find good faith to be a free-standing obligation
under customary international law. See, e.g., Sempra Energy Int’l v. Argentine Rep., ICSID Case No.
ARB/02/16, Award ¶ 298 (Sept. 28, 2007) (referring to the “good faith requirement” in the context of an
existing treaty obligation of fair and equitable treatment); Siemens A.G. v. Argentina, ICSID Case No.
ARB/02/8, Award ¶ 308 (Feb. 6, 2007) (finding that the “fair and equitable treatment” obligation includes a
“principle of good faith”); Tecmed v. Mexico, Award ¶ 154 (analyzing existing treaty obligation of fair and
equitable treatment “in light of the good faith principle established by international law”).
338 Claimants similarly fail to establish a free-standing obligation under the rule of pacta sunt servanda –
that “[e]very treaty in force is binding upon the parties to it and must be performed by them in good faith.”
Vienna Convention art. 26; see also Report of the International Law Commission Covering Its 16th
Session, 727th Meeting, 20 May 1964, [1964] 1 Y.B. INT’L L. COMM’N 27-32, ¶ 70, U.N. Doc.
A/CN.4/SER.A/1964 (“[A] treaty must be applied and observed not merely according to its letter, but in
good faith” including “abstain[ing] from acts which would inevitably affect [the Parties’] ability to perform
the treaty.”). A rule of treaty interpretation, pacta sunt servanda cannot be transformed into an open-ended
source for claimants to import other international obligations. In support of their argument, Claimants rely
on the Separate Opinion of Judge Cancado Trindade in Hilaire, Constantine, and Benjamin v. Trindidad
and Tobago, Series C No. 94 [2002] IACHR 4 (June 21, 2002). But that Separate Opinion addressed the
rule of pacta sunt servanda in the context of Trinidad and Tobago’s fulfillment of “the international
obligations that it has assumed.” See id. ¶ 43.
339 See Mem. ¶¶ 164-68, 202-12.
340 See Mem. ¶¶ 220-29.
341 See Mem. ¶¶ 220-29.
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against foreign investors.342 Finally, even if such obligations were protected by the
minimum standard of treatment, Claimants fail to demonstrate that their claims would
prevail.
2. The Minimum Standard Of Treatment Does Not Obligate States To
Protect An Investor’s Expectations
Contrary to Claimants’ assertions,343 States are not obligated to protect a foreign
investor’s expectations—legitimate or otherwise—under the minimum standard of
treatment.344
Notably, as a factual matter and contrary to their assertions, Claimants could not
possibly have had any “legitimate expectation” that the allocable share release
mechanism under the original escrow statutes would not be amended. Under the original
escrow statutes, for NPM sales in 2003, NPMs obtained releases of approximately $137
million dollars (out of approximately $236 million in escrowed funds).345 Such a
shortfall of available funds for Settling States to satisfy potential future tobacco-related
judgments against NPMs plainly was unsustainable. As discussed below, the allocable
share amendments were both reasonable and predictable.
As a matter of international law, although an investor may develop its own
expectations about the legal regime that governs its investment, those expectations do not
impose a legal obligation on the State.346 Even if, unlike in this case, Claimants had
342 See Mem. ¶¶ 179-92.
343 See Mem. ¶¶ 161-63.
344 Claimants’ arguments with respect to their alleged open-ended discrimination obligation under Article
1105 are addressed in Merits-Liability Sec. II.B.3 below.
345 Hering Declaration ¶ 3.
346 CMS Gas Transmission v. Argentine Rep., ICISD No. ARB/01/8, Annulment Proceeding, ¶ 89 (Sept. 25,
2007) (“Although legitimate expectations might arise by reason of a course of dealing between the investor
and the host State, these are not, as such, legal obligations.”).
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entered into a contractual relationship with the Settling States, a mere breach of contract
cannot, by itself, amount to a breach of the minimum standard of treatment.347 To breach
the minimum standard of treatment, something more is required, such as a complete
repudiation of the contract or a denial of justice in the execution of the contract.348
NAFTA Chapter Eleven tribunals recognize this point.349
Similarly, Claimants’ assertion that a foreign investor’s “detrimental reliance” on
the investment climate of a host State can violate the minimum standard of treatment
347 See SGS Société Générale de Surveillance S.A. v. Pakistan, ICSID Case No. ARB/01/13, Decision on
Jurisdiction ¶ 167 (Aug. 6, 2003) (noting “the widely accepted principle . . . that under general international
law, a violation of a contract entered into by a State with an investor of another State, is not, by itself, a
violation of international law”); SGS Société Générale de Surveillance S.A. v. Philippines, ICSID Case No.
ARB/02/6, Decision on Jurisdiction ¶ 122 (Jan. 29, 2004) (citing SGS v. Pakistan with approval); Draft
Articles on Responsibility of States for Internationally Wrongful Acts Adopted by the Drafting Committee
on Second Reading, art. 4, cmt. ¶ 6, 53rd Sess. [2001] 2:2 Y.B. INT’L L. COMM’N 40, U.N. Doc. A/56/10
(“Of course the breach by a State of a contract does not as such entail a breach of international law.”); F.V.
García-Amador, Special Rapporteur, International Responsibility: Fourth Report, [1959] 2 Y.B. INT’L L.
COMM’N 30, ¶ 123, U.N. Doc. A/CN.4/119 (Feb. 26, 1959) (“Diplomatic practice and international caselaw
have traditionally accepted almost as dogma the idea that the mere non-performance by a State of its
obligations under a contract with an alien individual does not in itself necessarily give rise to international
responsibility.”); F. A. Mann, State Contracts and State Responsibility, 54 AM. J. INT’L L. 572, 578
(1960) (pointing out that no States other than Switzerland and France have adopted the view that mere
contractual breaches give rise to a breach of international law and that the United States “has, for more than
a century and a half, been clearly opposed to it”).
348 See Draft Articles on Responsibility of States for Internationally Wrongful Acts, art. 4, cmt. ¶ 6, 53rd
Sess. [2001] 2:2 Y.B. INT’L L. COMM’N 40, U.N. Doc. A/56/10 (“Something further is required before
international law becomes relevant, such as a denial of justice by the courts of the State in proceedings
brought by the other contracting party.”); Compañía de Aguas del Aconquija S.A. v. Argentine Rep., ICSID
Case No. ARB/97/3, Decision on Annulment ¶ 110 n.78 (July 3, 2002) (“Vivendi II”) (explaining that the
determination of whether particular conduct violates a treaty cannot be satisfied by an examination of that
conduct in context of contractual rights and duties alone; also citing ROBERT JENNINGS & ARTHURWATTS,
OPPENHEIM’S INTERNATIONAL LAW 927 (9th ed. 1992): “It is doubtful whether a breach by a state of its
contractual obligations with aliens constitutes per se a breach of an international obligation, unless there is
some additional element as denial of justice, or expropriation, or breach of treaty, in which case it is that
additional element which will constitute the basis for the state’s international responsibility.”).
349 See Azinian v. United Mexican States, ICSID Case No. ARB(AF)/97/2, Award ¶ 87 (Nov. 1, 1999)
(“NAFTA does not, however, allow investors to seek international arbitration for mere contractual
breaches. Indeed, NAFTA cannot possibly be read to create such a regime, which would have elevated a
multitude of ordinary transactions with public authorities into potential international disputes.”); Waste
Mgmt. V. Mexico, Award ¶ 115 (explaining that “even the persistent non-payment of debts by a
municipality is not equated with a violation of Article 1105, provided that it does not amount to an outright
and unjustified repudiation of the transaction and … some remedy is open to the creditor to address the
problem”).
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cannot withstand scrutiny.350 Claimants provide no evidence of State practice
establishing such an obligation. In fact, tribunals discussing state practice confirm the
opposite; namely, that a State acting in its sovereign capacity does not incur liability for
an investor’s purported detrimental reliance on the state of the business or regulatory
climate in which it invests. The Methanex panel, for example, rejected claimant’s
argument that it was entitled to the preservation of the preferences it had received for
access in the MTBE market because “the very market for MTBE in the United States was
the result of precisely this [the MTBE] regulatory process.”351
The weakness of Claimants’ “expectations” theory is further illustrated by the
principal authority on which they rely for support. Claimants place particular weight on
the Tecmed v. Mexico award,352 but that decision has been criticized for exceeding the
scope of international obligations that bind States. As the ad hoc tribunal in the MTD
Equity v. Chile annulment observed, “the TECMED Tribunal’s apparent reliance on the
foreign investor’s expectations as the host State’s obligations … is questionable” because
“[t]he obligations of the host State towards foreign investors derive from the terms of the
350 See Mem. ¶¶ 161-63.
351 Methanex Corp. v. United States, Final Award, pt. IV, ch. D ¶ 9. Similarly, the Permanent Court of
International Justice concluded in the Oscar Chinn case that a State’s business and regulatory regime does
not create “vested rights,” i.e., actionable rights, that would prevent a State from changing its regulatory
environment to meet new needs or address economic problems. See Oscar Chinn Case, 1934 P.C.I.J. (Ser.
A/B) No. 63, at 88-89 (Dec. 12, 1934) (rejecting British claim of violation of “general principles of
international law” of “vested rights” on behalf of national) (“Favourable business conditions and goodwill
are transient circumstances, subject to inevitable changes . . . [when industries are] exposed to the danger of
ruin or extinction if circumstances change . . . no vested rights are violated by the State.”); see also G.
Kaeckenbeeck, The Protection of Vested Rights in International Law, 17 BRIT. Y.B. INT’L L. 1, 2-3 (1936)
(noting that the “liberty to embark upon industry or commercial activity” was not a “vested right”); see also
id. at 3 (“By vested right, however, is not as a rule here meant every legal relation of a determinate person.
Abstract faculties or qualities of all men or of whole classes of men, as well as expectations founded on the
law, are not vested rights, and are normally destroyed by a new law.”).
352 Tecmed v. Mexico, Award, supra note 246.
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applicable investment treaty and not from any set of expectations investors may have or
claim to have.”353
Claimants submit no evidence of State practice establishing a legal obligation not
to frustrate an investor’s expectations formed at the time the investor made its
investment. State practice, in fact, tends to support the opposite view. As Claimants
acknowledge,354 under customary international law, States may regulate to achieve
legitimate objectives to benefit the public welfare and will not incur liability solely
because the change interferes with an investor’s “expectations” about the state of the
business environment.355 The protection of public health falls squarely within that
regulatory authority under international law.356
As the S.D. Meyers tribunal recognized, the determination of a breach of the
obligation of ‘fair and equitable treatment’ by the host State “must be made in the light of
the high measure of deference that international law generally extends to the right of
353 MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/7, Decision on
Annulment ¶ 67 (Mar. 21, 2007).
354 See Mem. ¶ 154 (recognizing that the minimum standard of treatment obligation under Article 1105
“requires due respect for the right of a sovereign State to regulate in the best interests of its citizens”).
355 Feldman v. Mexico, Award ¶ 112 (“Governments, in their exercise of regulatory power, frequently
change their laws and regulations in response to changing economic circumstances or changing political,
economic or social consideration. Those changes may well make certain activities less profitable or even
uneconomic to continue.”).
356 See, e.g.,LOUIS B. SOHN AND R.R. BAXTER, CONVENTION ON THE INTERNATIONAL RESPONSIBILITY OF
STATES FOR INJURIES TO ALIENS, FINAL DRAFT WITH EXPLANATORY NOTES, ART. 10(5) (1961), REPRINTED
IN F.V. GARCÍA-AMADOR ET AL., RECENT CODIFICATION OF THE LAW OF STATE RESPONSIBILITY FOR
INJURIES TO ALIENS 204-05 (1974) (“An uncompensated taking of an alien property or a deprivation of the
use or enjoyment of property of an alien which results from the execution of tax laws; from a general
change in the value of currency; from the action of the competent authorities of the State in the
maintenance of public order, health, and morality; or from the valid exercise of belligerent rights or
otherwise incidental to the normal operation of the laws of the State shall not be considered wrongful.”);
see also OECD Draft Convention on the Protection of Foreign Property, Oct. 12, 1967, reprinted in 7
I.L.M. 117, accompanying note to Article 3 (“Article 3 acknowledges, by implication, the sovereign right
of a State, under international law, to deprive owners, including aliens, of property which is within its
territory in the pursuit of its political, social,or economic ends. To deny such a right would be [to] attempt
to interfere with its powers to regulate – by virtue of its independence and autonomy, equally recognized by
international law – its political and social existence.”).
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domestic authorities to regulate matters within their own borders.”357 As such, a host
State is accorded “wide discretion with respect to how it carries out [its public welfare]
policies by regulation” and is free to change such policies to address legitimate public
needs.358 Tribunals are consequently reluctant to second-guess decisions made by State
officials because “[g]overnments have to make many potentially controversial choices.
In doing so, they may appear to have made mistakes, to have misjudged the facts,
proceeded on the basis of a misguided economic or sociological theory, placed too much
emphasis on some social values over others and adopted solutions that are ultimately
ineffective or counterproductive.”359 None of Claimants’ authorities contradicts these
principles.
a. Claimants Fail To Demonstrate Any Obligation To Provide
Investors With A “Transparent And Predictable Business And
Regulatory Climate” Under The Minimum Standard Of
Treatment
Claimants fail to demonstrate that the minimum standard of treatment obligates
States to provide a “transparent” and “stable” or “predictable” regulatory environment.360
The authorities cited by Claimants do not demonstrate that “transparency” is protected by
the minimum standard of treatment.361 Claimants’ main support for a “transparent”
regulatory environment, Metalclad v. Mexico,362 has been set aside on this precise point
by the Supreme Court of British Columbia. The Court found that Metalclad had failed to
357 S.D. Myers v. Canada, First Partial Award ¶ 263.
358 Int’l Thunderbird Gaming v. Mexico, Award ¶ 127.
359 S.D. Myers v. Canada, First Partial Award ¶ 261
360 Mem. ¶¶ 200(a), 202-12.
361 Similarly, Claimants point to no case interpreting the minimum standard of treatment or identifying
State practice that establishes an obligation to provide an investor with a “predictable” regulatory
environment.
362 United Mexican States v. Metalclad Corp., 5 ICSID REP. 236 ¶ 70 (Sup. Ct. B.C.) (May 2, 2001).
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introduce any evidence of any kind “to establish that transparency has become a part of
customary international law” and held that the Metalclad tribunal had exceeded its
authority because it had “misstated the applicable law to include transparency obligations
and then made its decision on the basis of the concept of transparency.”363 By
comparison, NAFTA tribunals that have rejected the notion of transparency as an element
of customary international law have based their conclusion on State practice and are, as
such, more persuasive authorities for interpreting the scope of Article 1105(1).364
Indeed, the NAFTA itself, in Chapter Eighteen, imposes specific transparency
obligations that are limited to publication, notification and provision of information,
administrative proceedings, and review and appeal.365 Claims that a Party has violated
one of these Chapter Eighteen obligations may not be brought by individuals but must be
resolved on a State-by-State basis under Chapter Twenty.366 Moreover, as confirmed by
the binding FTC interpretation, a “breach of another provision of the NAFTA does not
establish that there has been a breach of Article 1105(1).”367
363 Id. See also OECD DIRECTORATE FOR FIN. AND ENTER. AFFAIRS, WORKING PAPERS ON
INTERNATIONAL INVESTMENT NO. 2004/3, FAIR AND EQUITABLE TREATMENT STANDARD IN
INTERNATIONAL INVESTMENT LAW at 37 (2004) (concluding that “[i]n a few cases, Arbitral Tribunals have
defined “fair and equitable treatment” drawing upon a relatively new concept not generally considered a
customary international law standard: transparency”) (emphasis added).
364 See, e.g., S.D. Myers, Inc. v. Canada, First Partial Award (Sep. Op. by B. Schwartz (concurring in part))
¶ 241 (Nov. 13, 2000) (noting the “absence of evidence” of acceptance “by states throughout the world”
supporting the proposition that “transparency in the making of regulations is part of general international
law”); Feldman v.Mexico, Award ¶ 133 (“[I]t is doubtful that lack of transparency alone rises to the level of
violation of NAFTA and international law.”).
365 See NAFTA arts. 1802-1805.
366 See NAFTA arts. 2004-2019.
367 FTC interpretation, ¶B(3).
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ANNEX 147

IN A NAFTA ARBITRATION UNDER THE UNCITRAL ARBITRATION RULES
S.D. Myers, Inc.
(Claimant)
-and-
Government of Canada
(Respondent)
___________________________
PARTIAL AWARD
___________________________
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CONTENTS
Chapter
Page
I. Preface
1
II. History of the Proceedings
5
III. The Factual Background
15
IV. Summary of the Positions of the Parties
28
V. The Export Ban
35
VI. Interpretation of the NAFTA
45
VII. Was SDMI an Investor? Was there an Investment?
52
VIII. Did the Measure relate to an Investment?
58
IX. Did CANADA comply with its NAFTA Chapter 11 Obligations?
59
X. Is SDMI’s claim barred by other Chapters of the NAFTA?
72
XI. The Principles on which Compensation should be Awarded
75
XII. Conclusions and Dispositive Provisions of the Award
80
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CHAPTER VIII
DID THE MEASURE RELATE TO AN INVESTMENT?
233. Article 1101 of the NAFTA states:
Scope and Coverage
This Chapter applies to measures adopted or maintained by a Party relating to:
(a) investors of another Party;
(b) investments of investors of another Party in the territory of the
Party; and
(c) with respect to Articles 1106 and 1114, all investments in the
territory of the Party.
234. In this case, the requirement that the import ban be “in relation” to SDMI and its investment
in Canada is easily satisfied. It was the prospect that SDMI would carry through with its
plans to expand its Canadian operations that was the specific inspiration for the export ban.
It was raised to address specifically the operations of SDMI and its investment.
235. That is sufficient to dispose of the “relating to” requirement for the immediate purpose of
determining liability in this case.
236. CANADA also took the position that the requirement was not met because the measure
concerned trade in goods. This contention is dealt with separately in the context of the
relationship between Chapter 11 and other chapters of the NAFTA.
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CHAPTER IX
DID CANADA COMPLY WITH ITS NAFTA CHAPTER 11 OBLIGATIONS?
237. In this Chapter the Tribunal reviews the merits of SDMI’s claims under four separate
provisions of Chapter 11 of the NAFTA.
Article 1102 (National Treatment)
238. SDMI claims that CANADA denied it “national treatment”, contrary to Article 1102.
Article 1102(1) states:
Each Party shall accord to investors of another Party treatment no less
favorable than it accords, in like circumstances, to its own investors, with
respect to the establishment, acquisition, expansion, management,
conduct, operation, and sale or other disposition of investments.
239. Article 1102(2) is identical, except that it refers to “investments”, rather than “investors”:
Each Party shall accord to investments of investors of another Party
treatment no less favorable than it accords, in like circumstances, to
investments of its own investors with respect to the establishment,
acquisition, expansion, management, conduct, operation, and sale or
other disposition of investments.
240. Article 1102(3) addresses the obligations of “sub-national” authorities - local states or
provinces - and states that in that context the relevant comparison is between the treatment
accorded to an investment or an investor and the best treatment accorded to investments or
investors within the jurisdiction of the sub-national authority:
The treatment accorded by a Party under paragraphs 1 and 2 means, with
respect to a state or a province, treatment no less favorable than the most
favorable treatment accorded, in like circumstances, by that state or
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province to investors, and to the investments of investors, or the Party of
which it forms a part.43
241. CANADA argues that the Interim Order merely established a uniform regulatory regime
under which all were treated equally. No one was permitted to export PCBs, so there was
no discrimination. SDMI contends that Article 1102 was breached by a ban on the export
of PCBs that was not justified by bona fide health or environmental concerns, but which had
the aim and effect of protecting and promoting the market share of producers who were
Canadians and who would perform the work in Canada.
242. CANADA’s submission is one dimensional and does not take into account the basis on
which the different interests in the industry were organized to undertake their business.
“Like Circumstances”
243. Articles 1102(1) and 1102(2) refer to treatment that is accorded to a Party’s own nationals
“in like circumstances”. The phrase “like circumstances” is open to a wide variety of
interpretations in the abstract and in the context of a particular dispute.
244. WTO dispute resolution panels, and its appellate body, frequently have been required to
apply the concept of “like products”. The case law has emphasized that the interpretation of
“like” must depend on all the circumstances of each case. The case law also suggests that
close attention must be paid to the legal context in which the word “like” appears; the same
word “like” may have different meanings in different provisions of the GATT. In Japan -
Alcoholic Beverages, WT/DS38/AB/R, the Appellate Body stated at paragraphs 8.5 and
8.6:
[the interpretation and application of “like”] is a discretionary decision
that must be made in considering the various characteristics of products
43 Article 1102(4) appears to be of little relevance to the current discussion. It confirms that a state cannot require
that a minimum level of equity in an enterprise in its territory be held by its own nationals, and that an investor of
another Party cannot be required to sell or otherwise dispose of its investment in the territory of the Party.
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in individual cases. No one approach to exercising judgment will be
appropriate for all cases. The criteria in [an earlier case], Border Tax
Adjustments should be examined, but there can be no one precise and
absolute definition of what is “like”. The concept of “likeness” is a
relative one that evokes the image of an accordion. The accordion of
“likeness” stretches and squeezes in different places as different
provisions of the WTO Agreement are applied. The width of the
accordion in any one of those places must be determined by the particular
provision in which the term “like” is encountered as well as by the context
and the circumstances that prevail in any given case to which the
provisions may apply.
245. In considering the meaning of “like circumstances” under Article 1102 of the NAFTA, it is
similarly necessary to keep in mind the overall legal context in which the phrase appears.
246. In the GATT context, a prima facie finding of discrimination in “like” cases often takes
place within the overall GATT framework, which includes Article XX (General Exceptions).
A finding of “likeness” does not dispose of the case. It may set the stage for an inquiry into
whether the different treatment of situations found to be “like” is justified by legitimate
public policy measures that are pursued in a reasonable manner.
247. The Tribunal considers that the legal context of Article 1102 includes the various provisions
of the NAFTA, its companion agreement the NAAEC and principles that are affirmed by the
NAAEC (including those of the Rio declaration). The principles that emerge from that
context, to repeat, are as follows:
 states have the right to establish high levels of environmental protection. They are not
obliged to compromise their standards merely to satisfy the political or economic
interests of other states;
 states should avoid creating distortions to trade;
 environmental protection and economic development can and should be mutually
supportive.
248. As SDMI noted in its Memorial, all three NAFTA partners belong to the OECD. OECD
practice suggests that an evaluation of “like situations” in the investment context should
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take into account policy objectives in determining whether enterprises are in like
circumstances. The OECD Declaration on International and Multinational Enterprises,
issued on June 21, 1976, states that investors and investments should receive treatment that
is …no less favorable than that accorded in like situations to domestic enterprises. In 1993
the OECD reviewed the “like situation” test in the following terms:
As regards the expression ‘in like situations’, the comparison between
foreign-controlled enterprises is only valid if it is made between firms
operating in the same sector. More general considerations, such as the
policy objectives of Member countries could be taken into account to
define the circumstances in which comparison between foreign-controlled
and domestic enterprises is permissible inasmuch as those objectives are
not contrary to the principle of national treatment.
249. The Supreme Court of Canada has explored the complexity of making comparisons as it has
developed its line of decisions on discrimination against individuals. In the Andrews case,
the Court stated that the question of whether or not discrimination exists cannot be
determined by applying a purely mechanical test whether similarly situated individuals are
treated in the same manner. Whether individuals are “similarly situated”, and have been
treated in a substantively equal manner, depends on an examination of the context in which a
measure is established and applied and the specific circumstances of each case.44
250. The Tribunal considers that the interpretation of the phrase “like circumstances” in Article
1102 must take into account the general principles that emerge from the legal context of the
NAFTA, including both its concern with the environment and the need to avoid trade
distortions that are not justified by environmental concerns. The assessment of “like
circumstances” must also take into account circumstances that would justify governmental
regulations that treat them differently in order to protect the public interest. The concept of
“like circumstances” invites an examination of whether a non-national investor complaining
of less favourable treatment is in the same “sector” as the national investor. The Tribunal
44 [1989] 1 S.C.R. 143, at paragraphs 27 to 31. Decisions of U.S. courts are to a similar effect. Although domestic
law is not controlling in Chapter 11 disputes, it is not inappropriate to consider how the domestic laws of the
parties to the dispute address an issue.
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takes the view that the word “sector” has a wide connotation that includes the concepts of
“economic sector” and “business sector”.
251. From the business perspective, it is clear that SDMI and Myers Canada were in “like
circumstances” with Canadian operators such as Chem-Security and Cintec. They all were
engaged in providing PCB waste remediation services. SDMI was in a position to attract
customers that might otherwise have gone to the Canadian operators because it could offer
more favourable prices and because it had extensive experience and credibility. It was
precisely because SDMI was in a position to take business away from its Canadian
competitors that Chem-Security and Cintec lobbied the Minister of the Environment to ban
exports when the U.S. authorities opened the border.
National treatment and protectionist motive or intent.
252. The Tribunal takes the view that, in assessing whether a measure is contrary to a national
treatment norm, the following factors should be taken into account:
 whether the practical effect of the measure is to create a disproportionate benefit for
nationals over non nationals;
 whether the measure, on its face, appears to favour its nationals over non-nationals who
are protected by the relevant treaty.
253. Each of these factors must be explored in the context of all the facts to determine whether
there actually has been a denial of national treatment.
254. Intent is important, but protectionist intent is not necessarily decisive on its own. The
existence of an intent to favour nationals over non-nationals would not give rise to a breach
of Chapter 1102 of the NAFTA if the measure in question were to produced no adverse
effect on the non-national complainant. The word “treatment” suggests that practical
impact is required to produce a breach of Article 1102, not merely a motive or intent that is
in violation of Chapter 11.
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255. CANADA was concerned to ensure the economic strength of the Canadian industry, in part,
because it wanted to maintain the ability to process PCBs within Canada in the future. This
was a legitimate goal, consistent with the policy objectives of the Basel Convention. There
were a number of legitimate ways by which CANADA could have achieved it, but
preventing SDMI from exporting PCBs for processing in the USA by the use of the Interim
Order and the Final Order was not one of them. The indirect motive was understandable,
but the method contravened CANADA’s international commitments under the NAFTA.
CANADA’s right to source all government requirements and to grant subsidies to the
Canadian industry are but two examples of legitimate alternative measures. The fact that
the matter was addressed subsequently and the border re-opened also shows that CANADA
was not constrained in its ability to deal effectively with the situation.
256. The Tribunal concludes that the issuance of the Interim Order and the Final Order was a
breach of Article 1102 of the NAFTA.
257. The consequences of the Tribunal’s determination in relation to Article 1102 of the NAFTA
are considered later.
Article 1105
258. SDMI submits that CANADA treated it in a manner that was inconsistent with Article
1105(1) of the NAFTA. Entitled “Minimum Standard of Treatment”, it reads as follows:
Each Party shall accord to investments of investors of another Party
treatment in accordance with international law, including fair and
equitable treatment and full protection and security.
259. The minimum standard of treatment provision of the NAFTA is similar to clauses contained
in BITs. The inclusion of a “minimum standard” provision is necessary to avoid what might
otherwise be a gap. A government might treat an investor in a harsh, injurious and unjust
manner, but do so in a way that is no different than the treatment inflicted on its own
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nationals. The “minimum standard” is a floor below which treatment of foreign investors
must not fall, even if a government were not acting in a discriminatory manner.
260. The US-Mexican Claims Commission noted in the Hopkins case that:
It not infrequently happens that under the rules of international law
applied to controversies of an international aspect a nation is required to
accord to aliens broader and more liberal treatment than it accords to its
own citizens under its municipal laws...The citizens of a nation may enjoy
many rights which are withheld from aliens, and conversely, under
international law, aliens may enjoy rights and remedies which the nation
does not accord to its own citizens.45
261. When interpreting and applying the “minimum standard”, a Chapter 11 tribunal does not
have an open-ended mandate to second-guess government decision-making. Governments
have to make many potentially controversial choices. In doing so, they may appear to have
made mistakes, to have misjudged the facts, proceeded on the basis of a misguided
economic or sociological theory, placed too much emphasis on some social values over
others and adopted solutions that are ultimately ineffective or counterproductive. The
ordinary remedy, if there were one, for errors in modern governments is through internal
political and legal processes, including elections.
262. Article 1105(1) expresses an overall concept. The words of the article must be read as a
whole. The phrases …fair and equitable treatment… and …full protection and security…
cannot be read in isolation. They must be read in conjunction with the introductory phrase
…treatment in accordance with international law.
263. The Tribunal considers that a breach of Article 1105 occurs only when it is shown that an
investor has been treated in such an unjust or arbitrary manner that the treatment rises to the
level that is unacceptable from the international perspective. That determination must be
made in the light of the high measure of deference that international law generally extends to
45 The USA on behalf of George W. Hopkins v. The United Mexican States (Docket No. 39), 21 American Journal
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the right of domestic authorities to regulate matters within their own borders. The
determination must also take into account any specific rules of international law that are
applicable to the case.
264. In some cases, the breach of a rule of international law by a host Party may not be decisive
in determining that a foreign investor has been denied “fair and equitable treatment”, but
the fact that a host Party has breached a rule of international law that is specifically designed
to protect investors will tend to weigh heavily in favour of finding a breach of Article 1105.
265. The breadth of the “minimum standard”, including its ability to encompass more particular
guarantees, was recognized by Dr. Mann in the following passage:
...it is submitted that the right to fair and equitable treatment goes much
further than the right to most-favored-nation and to national
treatment....so general a provision is likely to be almost sufficient to cover
all conceivable cases, and it may well be that provisions of the
Agreements affording substantive protection are not more than examples
of specific instances of this overriding duty.46
266. Although modern commentators might consider Dr Mann’s statement to be an overgeneralisation,
and the Tribunal does not rule out the possibility that there could be
circumstances in which a denial of the national treatment provisions of the NAFTA would
not necessarily offend the minimum standard provisions, a majority of the Tribunal
determines that on the facts of this particular case the breach of Article 1102 essentially
establishes a breach of Article 1105 as well.
267. Mr. Chiasson considers that a finding of a violation of Article 1105 must be based on a
demonstrated failure to meet the fair and equitable requirements of international law.
Breach of another provision of the NAFTA is not a foundation for such a conclusion. The
language of the NAFTA does not support the notion espoused by Dr. Mann insofar as it is
of International Law 160, at 166-167 (1926).
46 F.A. Mann, “British Treaties for the Promotion and Protection of Investments”, (1981) 52 Brit. Y.B. Int’l L.
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considered to support a breach of Article 1105 that is based on a violation of another
provision of Chapter 11. On the facts of this case, CANADA’s actions come close to the
line, but on the evidence no breach of Article 1105 is established.
268. By a majority, the Tribunal determines that the issuance of the Interim and Final Orders was
a breach of Article 1105 of the NAFTA. The Tribunal’s decision in this respect makes it
unnecessary to review SDMI’s other submissions in relation to Article 1105.
269. The consequences of the Tribunal’s determination in relation to Article 1105 of the NAFTA
are considered in the next chapter.
Article 1106 – Performance Requirements
270. SDMI contends that CANADA’s export ban breached Article 1106 of NAFTA because, in
effect, SDMI was required, as a condition of operating in Canada, to carry out a major part
of its proposed business, the physical disposal of PCB waste in Canada. In doing so, SDMI
effectively would have been required to consume goods and services in Canada.
271. Article 1106 states:
No party may imposed or enforce any of the following requirements, or
enforce any commitment or undertaking, in connection with the
establishment, acquisition, expansion, management, conduct or operation
of an investment of an investor of a Party or a non Party in its territory:
(b) to achieve a given level or percentage of domestic content
(c) to purchase, use or accord a preference to goods produced or
services provided in its territory or to purchase goods or services from
persons in its territory;
272. Article 1106(5) states:
241 at p. 243.
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Paragraphs 1 and 3 do not apply to any requirement other then the
requirements set out in those paragraphs
273. The export ban imposed by CANADA was not cast in the form of express conditions
attached to a regulatory approval but, in applying Article 1106 the Tribunal must look at
substance, not only form.
274. The 1947 GATT agreement contained no specific provisions on performance requirements.
One dispute was brought before a GATT panel. The USA challenged CANADA’s FIRA.
Under that statute, non-Canadian investors in some circumstances had to obtain regulatory
approval before operating or expanding in CANADA. The regulator could attach
conditions to its approval. For example, a factory operator might be required to purchase
50% of its supplies from local suppliers, rather than from abroad. The GATT panel
accepted some aspects of the U.S. complaint and rejected others, but the GATT panel
looked at the substance of the measure notwithstanding the fact that the GATT did not
contain any express provision equivalent to Article 1106 of the NAFTA.
275. Although the Tribunal must review the substance of the measure, it cannot take into
consideration any limitations or restrictions that do not fall squarely within the
“requirements” listed in Articles 1106(1) and (3).
276. The only part of the definition that might apply to the current situation is …conduct or
operation of an investment…. but in the opinion of the majority of the Tribunal,
subparagraph (b) clearly does not apply and, neither does subparagraph (c).
277. Looking at the substance and effect of the Interim Order, as well as the literal wording of
Article 1106, the majority of the Tribunal considers that no “requirements” as defined were
imposed on SDMI that fell within Article 1106. Professor Schwartz considers that the
effect of the Interim Order was to require SDMI to undertake all of its operations in Canada
and that this amounted to a breach of subparagraph (b).
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278. By a majority, the Tribunal concludes that this is not a “performance requirements” case.
Article 1110 – Expropriation
279. SDMI claims that the Interim Order and the Final Order were “tantamount” to an
expropriation and violated Article 1110 of the NAFTA.
280. The term “expropriation” in Article 1110 must be interpreted in light of the whole body of
state practice, treaties and judicial interpretations of that term in international law cases. In
general, the term “expropriation” carries with it the connotation of a “taking” by a
governmental-type authority of a person’s “property” with a view to transferring ownership
of that property to another person, usually the authority that exercised its de jure or de facto
power to do the “taking”.
281. The Tribunal accepts that, in legal theory, rights other than property rights may be
“expropriated” and that international law makes it appropriate for tribunals to examine the
purpose and effect of governmental measures. The Interim Order and the Final Order were
regulatory acts that imposed restrictions on SDMI. The general body of precedent usually
does not treat regulatory action as amounting to expropriation. Regulatory conduct by
public authorities is unlikely to be the subject of legitimate complaint under Article 1110 of
the NAFTA, although the Tribunal does not rule out that possibility.
282. Expropriations tend to involve the deprivation of ownership rights; regulations a lesser
interference. The distinction between expropriation and regulation screens out most
potential cases of complaints concerning economic intervention by a state and reduces the
risk that governments will be subject to claims as they go about their business of managing
public affairs.
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283. An expropriation usually amounts to a lasting removal of the ability of an owner to make
use of its economic rights although it may be that, in some contexts and circumstances, it
would be appropriate to view a deprivation as amounting to an expropriation, even if it were
partial or temporary.
284. In this case the closure of the border was temporary.47 SDMI’s venture into the Canadian
market was postponed for approximately eighteen months. Mr. Dana Myers testified that
this delay had the effect of eliminating SDMI’s competitive advantage. This may have
significance in assessing the compensation to be awarded in relation to CANADA’s
violations of Articles 1102 and 110548, but it does not support the proposition on the facts
of this case that the measure should be characterized as an expropriation within the terms of
Article 1110.
285. SDMI relied on the use of the word “tantamount” in Article 1110(1) to extend the meaning
of the expression “tantamount to expropriation” beyond the customary scope of the term
“expropriation” under international law. The primary meaning of the word “tantamount”
given by the Oxford English Dictionary is “equivalent”. Both words require a tribunal to
look at the substance of what has occurred and not only at form. A tribunal should not be
deterred by technical or facial considerations from reaching a conclusion that an
expropriation or conduct tantamount to an expropriation has occurred. It must look at the
real interests involved and the purpose and effect of the government measure.
286. The Tribunal agrees with the conclusion in the Interim Award of the Pope & Talbot Arbitral
Tribunal49 that something that is “equivalent” to something else cannot logically encompass
more. In common with the Pope & Talbot Tribunal, this Tribunal considers that the drafters
of the NAFTA intended the word “tantamount” to embrace the concept of so-called
47 The fact that the border was closed again on the U.S. side in July 1997 cannot be laid at CANADA’s door.
48 This is a matter for argument at a later stage of the proceedings.
49 Award of June 26, 2000, para. 104.
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“creeping expropriation”, rather than to expand the internationally accepted scope of the
term expropriation.
287. In this case, the Interim Order and the Final Order were designed to, and did, curb SDMI’s
initiative, but only for a time. CANADA realized no benefit from the measure. The
evidence does not support a transfer of property or benefit directly to others. An
opportunity was delayed.
288. The Tribunal concludes that this is not an “expropriation” case.
Annex 147
ANNEX 148

INTERNATIONAL CENTRE FOR SETTLEMENT OF
INVESTMENT DISPUTES
Washington, D.C.
In accordance with the
United Nations Commission on International Trade Law (UNCITRAL)
Arbitration Rules
Glamis Gold, Ltd.
(Claimant)
- AND -
United States of America
(Respondent)
AWARD
Before the Arbitral Tribunal constituted under Chapter 11
of the North American Free Trade Agreement, and comprised of:
Michael K. Young
Professor David D. Caron
Kenneth D. Hubbard
Secretary of the Tribunal
Ms. Eloïse Obadia
Legal Assistant to the Tribunal
Ms. Leah D. Harhay
Date of dispatch to the parties: June 8, 2009
Annex 148
CONFIDENTIAL INFORMATION REDACTED
i
TABLE OF CONTENTS
TABLE OF CONTENTS .......................................................................................................... i
FREQUENTLY USED ABBREVIATIONS AND ACRONYMS ................................................... iv
REPRESENTATION OF THE PARTIES ................................................................................ vi
I. INTRODUCTION AND SUMMARY ............................................................................ 1
The Tribunal’s Understanding of Its Task: Undertaking a Case-Specific
Arbitration with Awareness of the NAFTA Chapter 11 System ..................... 1
A Summary Statement of the Tribunal’s Award .............................................. 6
II. FACTUAL SUMMARY ............................................................................................ 14
Disputing Parties ............................................................................................ 14
The Domestic Regulatory Landscape ............................................................ 19
Establishment and Review of the Imperial Project ........................................ 40
Initial Exploration and Development of Mining Claims and Mill Sites .. 40
Initial Cultural and Archeological Surveys and Inventories of the
Region ...................................................................................................... 41
Submission and Review of the Plan of Operations .................................. 45
Continuing Site Exploration ..................................................................... 45
Initial Environmental Impact Study ......................................................... 46
Cultural Studies Following the 1996 DEIS/DEIR ................................... 49
1997 Draft Environment Impact Study/Environmental Impact Report ... 54
Government to Government Consultations with the Quechan ................. 55
Preliminary Feasibility Study ................................................................... 57
Comments from the Advisory Committee on Historic Properties ........... 59
BLM Withdrawal of the ATCC from Future Mining Claims .................. 63
Mineral Validity Determination ............................................................... 64
DOI Solicitor’s 1999 M-Opinion ............................................................. 67
Final Environmental Impact Study .......................................................... 73
Completion of Withdrawal from Mineral Entry ...................................... 75
Issuance and Rescission of the Record of Decision for the
Imperial Project ........................................................................................ 76
Resumption of Validity Determination .................................................... 78
Re-Examination of Imperial Project Plan of Operations ......................... 80
California Measures ....................................................................................... 81
California Legislation ............................................................................... 81
State Mining and Geology Board Regulations ......................................... 87
Notice of Arbitration ...................................................................................... 90
III. PROCEDURAL HISTORY ....................................................................................... 91
The Request for Arbitration ........................................................................... 91
The Appointment of Arbitrators ..................................................................... 91
First Procedural Meeting ................................................................................ 92
Respondent’s Statement of Defense ............................................................... 93
Request for Bifurcation .................................................................................. 94
Document Production ..................................................................................... 96
Decision on Objections to Document Production .................................... 97
Decision on Parties’ Requests for Production of Documents
Withheld on Grounds of Privilege ......................................................... 102
Decision on Requests for Production of Documents and
Challenges to Assertions of Privilege .................................................... 111
Decision with respect to Documents Withheld by Claimant on
Annex 148
ii
Grounds of the Attorney-Client and Work Product Privileges .............. 119
Party Submissions ........................................................................................ 123
Article 1128 and Non-Disputing Party Submissions ................................... 126
Pre-Hearing Procedural Hearing .................................................................. 131
Hearing on the Merits ................................................................................... 135
Tribunal’s Request for Further Information ................................................. 136
IV. PRELIMINARY OBJECTIONS .............................................................................. 137
Issue Presented ............................................................................................. 137
Ripeness ....................................................................................................... 138
Respondent’s Contentions ...................................................................... 138
Claimant’s Contentions .......................................................................... 143
Conclusion of the Tribunal with respect to Ripeness ............................. 147
Time Bar ....................................................................................................... 152
Final Disposition of the Tribunal with respect to Preliminary
Objections…………………………………………………… ...................... 154
V. CLAIMANT’S CLAIM FOR EXPROPRIATION UNDER ARTICLE 1110 .................. 154
The First Disputed Element of Claimant’s Valuation: The Cost of
Backfilling .................................................................................................... 161
Issue Presented ....................................................................................... 161
Claimant’s Contentions .......................................................................... 162
Respondent’s Contentions ...................................................................... 173
Decision of the Tribunal with respect to the Cost of Backfilling ........... 183
The Second Disputed Element of Claimant’s Valuation: The Singer Pit –
Reserves versus Resources ........................................................................... 191
Issue Presented ....................................................................................... 191
Claimant’s Contentions .......................................................................... 193
Respondent’s Contentions ...................................................................... 195
Decision of the Tribunal with respect to the Singer Pit Valuation ......... 198
The Third Disputed Element of Claimant’s Valuation: Gold Price ............. 201
Issue Presented ....................................................................................... 201
Claimant’s Contentions .......................................................................... 201
Respondent’s Contentions ...................................................................... 203
Decision of the Tribunal with respect to Gold Price .............................. 205
The Fourth Disputed Element of Claimant’s Valuation: Financial
Assurances .................................................................................................... 207
Issue Presented ....................................................................................... 207
Appropriate and Available Financial Instruments to Meet
Financial Assurance Requirements ........................................................ 209
Required Timing of Financial Assurance Posting .................................. 214
Decision of the Tribunal with respect to Financial Assurances ............. 220
The Fifth Disputed Element of Claimant’s Valuation: The Appropriate
Discount Rate ............................................................................................... 223
Issue Presented ....................................................................................... 223
Claimant’s Contentions .......................................................................... 224
Respondent’s Contentions ...................................................................... 226
Decision of the Tribunal with respect to the Proper Discount Rate ....... 227
Final Determination of the Tribunal with respect to Claimant’s
Claim for Expropriation under Article 1110 ................................................ 230
VI. CLAIMANT’S CLAIM UNDER ARTICLE 1105 ...................................................... 231
Article 1105(1) Legal Standard: What is Required of a State
Party by the Obligation to Provide “Fair and Equitable Treatment” ........... 231
Issue Presented ....................................................................................... 231
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iii
Contentions of the Parties ...................................................................... 233
Sources Relevant to Determine the Article 1105 Standard .............. 233
Scope of the Standard ....................................................................... 239
Introductory Note ....................................................................... 239
The Asserted Evolution of the Customary International
Law Minimum Standard of Treatment ........................................ 241
The Asserted Obligation to Protect Legitimate Expectations
through Establishment of a Transparent and Predictable
Legal and Business Framework .................................................. 243
The Asserted Obligation to Provide Protection from
Arbitrary Actions ......................................................................... 251
Decision of the Tribunal with respect to the Article 1105(1)
Legal Standard ........................................................................................ 258
Asserted Obligation to Protect Legitimate Expectations
Through Establishment of a Transparent and Predictable
Legal and Business Framework ........................................................ 265
Asserted Obligation to Provide Protection from
Arbitrary Measures ............................................................................ 266
Final Disposition of the Tribunal with respect to the Scope of the
Fair and Equitable Legal Standard ......................................................... 268
Determination of Whether the Facts Alleged Violate the Articulated
Legal Standard of Article 1105(1) ............................................................... 268
Factual Contentions with respect to the Alleged Violation of
Article 1105 by the Actions of the United States Federal
Government ............................................................................................ 269
Issue Presented ................................................................................. 269
Claimant’s Contentions .................................................................... 270
Respondent’s Contentions ................................................................ 280
Factual Contentions with respect to the Alleged Violation of
Article 1105 by the Actions of the Government of the State of
California ................................................................................................ 294
Issue Presented ................................................................................. 294
Claimant’s Contentions .................................................................... 294
Respondent’s Contentions ................................................................ 310
The Tribunal’s Holding with respect to Claimant’s Claim under
Article 1105 of the NAFTA ......................................................................... 328
The Complained-Of Acts of the United States Federal
Government ............................................................................................ 329
The M-Opinion and Record of Decision .......................................... 329
The Delay of Review of the Imperial Project .................................. 333
The Cultural Review of the Imperial Project .................................... 335
The Complained-Of Acts of the California State Government .............. 339
Senate Bill 22 ................................................................................... 339
The SMGB Regulations ................................................................... 346
The Asserted Intertwining of the California Measures .................... 350
The Record as a Whole and the Determination of Whether it
Falls Short of Respondent’s Obligations under Article 1105(1) ............ 352
Final Disposition of the Tribunal with respect to Claimant’s
Claim under Article 1105(1) of the NAFTA .......................................... 353
VII. COSTS .................................................................................................................. 353
VIII. AWARD AND ORDER .......................................................................................... 355
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Glamis Gold, Ltd. v. United States of America – Page 154
349. The basis of the claim is to be determined with reference to the submissions of
Claimant. Claimant argues that the events listed by Respondent are not the basis of its
claim but rather form “the factual predicate of the unlawful and now rescinded January
17, 2001 Secretarial Record of Decision denying the Imperial Project, and are thus the
context for the substantial damage flowing from that decision and the failure of the
federal and state government authorities to comply with the law and approve Glamis’s
Plan of Operation on a timely basis.”698
350. The Tribunal has reviewed the submissions of Claimant and finds that Claimant
does not in its Notice of Arbitration, nor its subsequent filings, bring a claim on the basis
of the earlier events listed by Respondent. The Tribunal denies Respondent’s objection.
D. FINAL DISPOSITION OF THE TRIBUNAL WITH RESPECT TO PRELIMINARY
OBJECTIONS
351. The Tribunal holds that Claimant’s claims are not time barred. Claimant does not
in its Notice of Arbitration, nor its subsequent filings, bring a claim on the basis of the
earlier events listed by Respondent.
352. The Tribunal additionally holds that Claimant’s claim as articulated, that the
California measures caused such significant harm to its investment as to effect an
expropriation on the date of their passage, is ripe for adjudication.
V. CLAIMANT’S CLAIM FOR EXPROPRIATION UNDER ARTICLE 1110
353. NAFTA Article 1110(1), titled “Expropriation and Compensation,” provides:
No Party may directly or indirectly nationalize or expropriate an
investment of an investor of another Party in its territory or take a
measure tantamount to nationalization or expropriation of such an
investment (“expropriation”), except:
(a) for a public purpose;
(b) on a non-discriminatory basis;
(c) in accordance with due process of law and Article 1105(1); and
(d) on payment of compensation in accordance with paragraphs 2
through 6.
698 Claimant’s Reply Memorial, ¶ 287.
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Glamis Gold, Ltd. v. United States of America – Page 155
354. The inclusion in Article 1110 of the term “expropriation” incorporates by
reference the customary international law regarding that subject. Under custom, a State
is responsible, and therefore must provide compensation, for an expropriation of property
when it subjects the property of another State Party’s investor to an action that is
confiscatory or that “unreasonably interferes with, or unduly delays, effective enjoyment”
of the property.699 A State is not responsible, however, “for loss of property or for other
economic disadvantage resulting from bona fide … regulation … if it is not
discriminatory.”700
355. A direct expropriation is readily apparent: there is an “open, deliberate and
acknowledged taking[] of property, such as outright seizure or formal or obligatory
transfer of title in favour of the host State….”
701 In an indirect expropriation, the
property is still “taken” by the host government in that the economic value of the
property interest is radically diminished, but such an expropriation does not occur
through a formal action such as nationalization. Instead, in an indirect expropriation,
some entitlements inherent in the property right are taken by the government or the public
so as to render almost without value the rights remaining with the investor. An action
“tantamount to expropriation”, like an indirect taking, does not involve the direct transfer
of title from the investor to the host State. “Tantamount” means equivalent and thus the
concept should not encompass more than direct expropriation; it merely differs from
direct expropriation which effects a physical taking of property in that no actual transfer
of ownership rights occurs.702
356. This proceeding involves the particularly thorny issue of what is commonly
known as a regulatory taking. More specifically, the question presented in this
699 RUDOLF DOLZER, EXPROPRIATION AND NATIONALIZATION, 4 ENCYCLOPEDIA OF PUBLIC
INTERNATIONAL LAW 319 (Rudolf Bernhardt, ed. 1995).
700 RESTATEMENT (THIRD) OF FOREIGN RELATIONS § 712, Comment (g) (1986).
701 Metalclad, Award, ¶ 103 (Aug. 30, 2000).
702 See S.D. Myers, Partial Award, ¶ 285 (Nov. 13, 2000). Actions that result in an indirect taking
or are “tantamount to expropriation” include those acts that sometimes constitute what is known as
“creeping expropriation”. See S.D. Myers, supra, ¶ 286. Creeping expropriation occurs when the
expropriating measures are implemented over a period of time. See Feldman, Award, ¶ 101 (Dec. 16,
2002). Most often, creeping expropriation is said to occur when a State seeks “to achieve the same result
[as an outright taking] by taxation and regulatory measures designed to make continued operation of a
project uneconomical so that it is abandoned.” RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW § 712,
Reporter’s Note 7 (1986) [Ex. 44].
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Glamis Gold, Ltd. v. United States of America – Page 156
proceeding is whether the administrative and legislative actions taken individually, or in
concert, by the federal government and the State of California constitute an expropriation
under Article 1110. The Parties, citing to the 2004 Model Bilateral Investment Treaty,703
indicate that tribunals in such instances often assess whether measures of a State
constitute a non-compensable regulation or a compensable expropriation by examining,
inter alia, (1) the extent to which the measures interfered with reasonable and
investment-backed expectations of a stable regulatory framework,704 and (2) the purpose
and character of the governmental actions taken.705
357. Several NAFTA tribunals agree on the extent of interference that must occur for
the finding of an expropriation, phrasing the test in one instance as, “the affected property
must be impaired to such an extent that it must be seen as ‘taken’”;
There is for all expropriations,
however, the foundational threshold inquiry of whether the property or property right was
in fact taken. This threshold question is relatively straightforward in the case of a direct
taking, for example, by nationalization. In the case of an indirect taking or an act
tantamount to expropriation such as by a regulatory taking, however, the threshold
examination is an inquiry as to the degree of the interference with the property right.
This often dispositive inquiry involves two questions: the severity of the economic
impact and the duration of that impact.
706
703 Claimant’s Memorial, ¶ 423; Respondent’s Counter-Memorial, at 160. The Tribunal notes that
both Parties, to support this assertion, refer to the 2004 U.S. Model Bilateral Investment Treaty, ann. B ¶ 4,
and Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978). The Parties both cite to and rely
on U.S. law of takings, not because it is applicable, but because it is argued by both as a well-developed
body of law.
and in another
instance as, “the test is whether that interference is sufficiently restrictive to support a
704 Cane Tenn., Inc. v. United States, 63 Fed. Cl. 715 (2005), quoting Cienega Gardens v. United
States, 331 F.3d 1319, 1345-46 (2003) (internal citations omitted) (“The purpose of consideration of
plaintiffs’ investment-backed expectations is to limit recoveries to property owners who can demonstrate
that ‘they bought their property in reliance on a state of affairs that did not include the challenged
regulatory regime.’”).
705 OECD, “INDIRECT EXPROPRIATION” AND THE “RIGHT TO REGULATE” IN INTERNATIONAL
INVESTMENT LAW, (OECD WORKING PAPERS ON INTERNATIONAL INVESTMENT) 10 (2004/4) [Ex. 53]. See
also Saluka, Award, ¶ 264 (Mar. 17, 2006) (emphasis in original) (“It thus inevitably falls to the
adjudicator to determine whether particular conduct by a state ‘crosses the line’ that separates valid
regulatory activity from expropriation. Faced with the question of when, how and at what point otherwise
valid regulation becomes, in fact and effect, an unlawful expropriation, international tribunals must
consider the circumstances in which the question arises. The context within which an impugned measure is
adopted and applied is critical to the determination of its validity.”).
706 GAMI Investments, Final Award, ¶ 126 (Nov. 15, 2004).
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Glamis Gold, Ltd. v. United States of America – Page 157
conclusion that the property has been ‘taken’ from the owner.”707 Therefore, a panel’s
analysis should begin with determining whether the economic impact of the complained
of measures is sufficient to potentially constitute a taking at all: “[I]t must first be
determined if the Claimant was radically deprived of the economical use and enjoyment
of its investments, as if the rights related thereto ... had ceased to exist.”708 The Tribunal
agrees with these statements and thus begins its analysis of whether a violation of Article
1110 of the NAFTA has occurred by determining whether the federal and California
measures “substantially impair[ed] the investor’s economic rights, i.e. ownership, use,
enjoyment or management of the business, by rendering them useless. Mere restrictions
on the property rights do not constitute takings.”709
358. To determine whether Claimant’s investment in the Imperial Project has been so
radically deprived of its economic value to Claimant as to potentially constitute an
expropriation and violation of Article 1110 of the NAFTA, the Tribunal must assess the
impact of the complained of measures on the value of the Project. Claimant has alleged
that the federal and California measures acted both individually and together to effect a
taking.
710 As to their collective effect, Claimant argues that Respondent, at the federal
and state levels, committed a “continuum of acts” with the delay and denial of decisions
and approvals by the federal government’s having allowed the State of California the
time to impose legislative and regulatory measures on the Imperial Project.711 Although
the federal measures were “partially lift[ed],” there was not, according to Claimant, ever
a “correction” of that act; thus Claimant’s investment was left exposed to the subsequent
California measures.712
707
Pope & Talbot, Interim Award, ¶ 102 (June 26, 2000).
708 Tecmed, Award, ¶ 115 (May 29, 2003).
709 OECD, “INDIRECT EXPROPRIATION” AND THE “RIGHT TO REGULATE” IN INTERNATIONAL
INVESTMENT LAW, (OECD WORKING PAPERS ON INTERNATIONAL INVESTMENT) 11 (2004/4) [Ex. 53].
710 Counsel for Claimant, Tr. 1591:10-1592:4.
711 Counsel for Claimant, Tr. 1591:14-1592:1.
712 Counsel for Claimant, Tr. 1591:14-1592:1. See also Claimant’s Memorial, ¶¶ 512-514.
Claimant argues that the denial of its Plan of Operations by Secretary Babbitt also severely affected the
value of the Imperial Project, occasioning “unreasonable and improper delays” that are “the very reason
that Glamis became subject to the California measures in December 2002.” Claimant argues, however that,
should the denial not appear sufficiently severe on its own, it breaches international obligations when
viewed in totality with the California measures.
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Glamis Gold, Ltd. v. United States of America – Page 158
359. As this is an indirect expropriation claim and Claimant argues that there are
several acts working together to effect the expropriation, several dates of expropriation
are discussed. Claimant argues that the date of the California regulations—December 12,
2002—would be the last date upon which expropriation occurred (though it may have
occurred previously), and it argues for this date as it is “so much more clear of [a] precise
date of expropriation.”713 With respect to the federal measures, Claimant places the date
of expropriation as January 17, 2001, the date of the ROD denying the Plan of
Operations.714 The Parties in fact discuss many possible dates because, as Claimant
explains, “in cases such as these involving measures tantamount to expropriation, the
Tribunal could look to other dates as well ….”715 Respondent argues, however, that this,
or presumably any date, is an “artificial” date for valuation, as the California reclamation
requirements have not yet been applied to Claimant.716
360. To the extent that Claimant argues that the delay and temporary denial occasioned
by the federal government themselves effected an expropriation, the Tribunal finds
Claimant’s argument without merit. The Tribunal finds that the federal Record of
Decision denying approval of the Imperial Project, even if it presented difficulties to
Claimant, was quickly reversed and therefore of short duration. This does not constitute
an expropriation under NAFTA Article 1110. The Tribunal therefore denies Claimant’s
claim that the delay and temporary denial occasioned by the federal government either
individually or in combination with subsequent complained of measures of the State of
California were violations of Article 1110.
361. To the extent that Claimant is arguing that the federal measures facilitated the
expropriation by the California measures, the issue becomes the effect of the California
measures. The Tribunal thus focuses upon the effect of the California measures, which
713 Counsel for Claimant, Tr. 1593:3-4; see also 1592:5-11. See also supra ¶¶ 181-84. These
regulations took effect on December 18, 2002, and were set to expire as of April 17, 2003, but were re-filed
on April 15, 2003, and were finally made final and permanent on April 18, 2003 and, on May 30, 2003,
were approved by the Office of Administrative Law.
714 Counsel for Claimant, Tr. 2001:21-2002:3.
715 Claimant’s Reply Memorial, ¶ 302; See Counsel for Claimant, Tr. 2002:4-13 (arguing that
Respondent, is “responsible for all of the measures,” and therefore, in a claim for an act tantamount to
expropriation, there is no need to divide up each of the individual actions. There is a choice as to when, in
the pattern of practice that begins with the federal measures on July 17, 2002, expropriation actually
occurs.).
716 Counsel for Respondent, Tr. 1903:2-6.
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Claimant itself has done.717
362. The Tribunal begins with Claimant’s assertion that the value of the Imperial
Project before the adoption of the backfilling measures was $49.1 million and its further
assertion that after the adoption of the backfilling measures the value of the Project was
negative $8.9 million.
The Tribunal necessarily turns its attention to the impact of
the California measures—Senate Bill 22 (“SB 22”) and the State Mining and Geology
Board Regulations (“SMGB Regulations”) (collectively referred to as “the backfilling
measures” or the “California measures”). Therefore, the Tribunal turns to the
determination of whether there has been a radical diminution in value of the Imperial
Project, which is ascertained by the analysis of the entitlements and value that remain
with Claimant after the enactment of these measures.
718
363. The first of the five contested elements concerns the cost of backfilling and
involves weighing the two Parties’ contentions as to the appropriate cost of backfilling,
which in turn is based on four sub-factors: (a) the calculated cost per ton of backfilling,
which includes an analysis of the regulatory requirements for and estimated expenses of
pit engineering, (b) the cost of equipment refurbishment, (c) the appropriate swell factors
for the two identified mineral groups—ore-containing materials and waste rock—a
critical issue for determining how many tons of material would need to be backfilled and
thus the ultimate cost of backfilling; and (d) the estimated total tonnage that would need
to be backfilled to satisfy the California requirements, which includes evaluating the
Parties’ disparate views regarding the timing of such movement and the associated costs
of performing the various stages of backfilling at different times. The second element
examined is the appropriate weight to be given the third pit, the Singer Pit, and
The Parties focus on five different elements which, Claimant
argues, together lead to this asserted negative value. In making its own evaluation of
whether the Imperial Project retained value following the backfilling measures, the
Tribunal starts with the values and methodologies offered by Claimant for the several
elements of its valuation, reviews them one-by-one with Respondent’s objections to each,
and makes adjustments that the Tribunal considers appropriate in light of the facts
presented.
717 Counsel for Claimant, Tr. 1593:1-6.
718 Behre Dolbear Response Report (Dec. 2006), at 4.
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Claimant’s assertion that its value is too speculative to include in the post-backfilling
valuation and Respondent’s argument that this assumption is incorrect. The third element
that the Tribunal analyzes is the appropriate price of gold: although the Parties agree on
the correct price of gold at the alleged date of expropriation, they dispute the relevance of
the current price to the value of the Imperial Project. The fourth element the Tribunal
analyzes is the Parties’ dispute regarding the amount and type of financial assurances that
the federal, state and county governments would require to be posted to ensure proper
reclamation of the Imperial Project. The Tribunal assesses both the types of financial
assurances available to Claimant, as well as the timing for posting these assurances as
required by the various responsible governmental entities. In the fifth and final element,
the Tribunal determines the appropriate discount rate to be employed in valuing the
Imperial Project as of the asserted date of expropriation—December 12, 2002—which
includes an assessment of the disparate discount rates offered by the Parties to use in
calculating the present value of the Imperial Project. This rate is based on the risk-free
rate plus a component that accounts for the specific risks of the particular project and is a
critical component of valuing an asset with an uncertain or risky income stream.
364. The Tribunal in the following sections examines each of these elements and the
contentions of the Parties regarding each. With respect to each element, the Tribunal
decides upon the appropriate reduction in value, if any, for each of these five elements
and modifies the Claimant’s asserted post-backfilling measures valuation. This
approach—namely, the Tribunal’s acceptance of Claimant’s assumptions as a starting
point—is a best case scenario for Claimant. In essence, this approach asks: “Even if the
Tribunal accepts Claimant’s pre-backfilling measures valuation as correct and further
accepts Claimant’s characterization of the factors resulting in a reduced value, does a
review of the claimed reduction and the resulting adjustments by the Tribunal result in a
radical diminution in the value of the Imperial Project?”719
365. Thus, to be specific, the Tribunal’s goal in this inquiry into Claimant’s valuation
model is not to determine if there was an expropriation, but to determine if there was not
719 The Tribunal notes that this methodology would not apply at a damages phase, where the
Tribunal would be required to reach a final definitive number; whereas in this situation, the Tribunal need
only reach the conclusion that substantial value remained.
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significant economic impact. These are very different inquiries: the first requires
definitive cost calculations and a full revision of the discounted cash flow methodologies
to determine exactly the value of the Imperial Project post-backfilling; while the second
requires only sufficient calculation to determine if the Project’s value is positive. In this
latter endeavor, issues presenting specific complexity, in which the Tribunal is satisfied
with neither of the calculations offered by either Party, can be resolved in Claimant’s
favor, as the question above is not what is the exact value of the Imperial Project
following the complained of measures, but is the value of the post-backfilling Imperial
Project positive even if such an issue is decided in Claimant’s favor.
366. The Tribunal, after completing its analysis, concludes that the California
backfilling measures did not result in a radical diminution in the value of the Imperial
Project. Therefore, it denies Claimant’s claim that the actions of the state and federal
government resulted in an expropriation under Article 1110. The Tribunal observes that,
although Arbitrator Hubbard dissents to the Tribunal’s conclusion with respect to the
fourth element, financial assurances, he agrees that the remaining value of the Imperial
Project would be sufficiently positive to warrant dismissal of Claimant’s claim for
expropriation.720
A. THE FIRST DISPUTED ELEMENT OF CLAIMANT’S VALUATION: THE COST OF
BACKFILLING
1. ISSUE PRESENTED
367. The California measures require complete backfilling of all pits to the extent
possible, and spreading and recontouring of any remaining piles to a maximum height of
25 feet. The cost of this required backfilling is central to the determination of whether
the value of the Glamis Imperial Project has been so dramatically decreased as to warrant
a finding of expropriation under Article 1110. Claimant estimates total reclamation costs
at the end of the Project being as much as $98.5 million; Respondent places the total cost
of backfilling, spreading and recontouring at approximately $55.4 million, a difference of
$43 million.
720 See infra footnote 1044.
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Claimant’s investment. The Tribunal thus holds that Claimant’s claim under Article
1110 fails.
VI. CLAIMANT’S CLAIM UNDER ARTICLE 1105
537. Claimant argues that the complained of measures of the United States federal and
California state governments, viewed both individually and collectively, violated its
rights to receive fair and equitable treatment as promised by Article 1105 of the NAFTA.
In order to evaluate these claims, the Tribunal must first determine the scope and bounds
of the customary international law minimum standard of treatment of aliens which, as
discussed below, comprises the fair and equitable treatment standard of Article 1105.
The Tribunal begins this task by identifying the sources which bear on determining this
standard; it then assesses the record to determine what state obligations are required by
the customary international law minimum standard of treatment. Finally, the Tribunal
will hold the federal and California measures, both individually and as a collective whole,
up against this standard and assess whether Claimant has proven a breach of Article
1105.
A. ARTICLE 1105(1) LEGAL STANDARD: WHAT IS REQUIRED OF A STATE PARTY
BY THE OBLIGATION TO PROVIDE “FAIR AND EQUITABLE TREATMENT”
1. ISSUE PRESENTED
538. Article 1105(1) of the NAFTA provides that “[e]ach Party shall accord to
investments of investors of another Party treatment in accordance with international law,
including fair and equitable treatment and full protection and security.” The scope and
reach of what is required of a Party by this standard has been addressed in numerous
arbitrations and debated by scholars; this case is no different.
539. The Parties to this Arbitration agree that fair and equitable treatment is a
“recognized standard under customary international law,”1085
1085 Counsel for Claimant, Tr. 2078:22-2079:6.
and that it is “firmly within
the minimum standard of treatment to be accorded under customary international
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law.”1086
540. In its analysis of the fair and equitable treatment standard of Article 1105, the
Tribunal therefore addresses first the proper scope of authoritative sources to which it
may look for guidance in defining this elusive standard; and second, assesses Claimant’s
contentions to determine what obligations it has proven the customary international law
minimum standard of treatment now requires of a State Party.
They disagree, however, on what that standard requires of a State Party and
what authorities are permissibly referenced by the Tribunal to define the standard.
541. The Tribunal thus turns to its first task: determining the universe of sources
available to instruct it on the bounds of “fair and equitable treatment.” Although, by the
close of proceedings, both Parties agreed that the NAFTA standard is the customary
international law minimum standard of treatment of aliens, they, as well as numerous
other scholars, jurists, States and corporations, disagree as to how to define this
customary international law standard. A major difference between the Parties’ positions
turns on Claimant’s assertion that the Tribunal may rely on decisions of tribunals that
apply an autonomous analysis—driven by the language of the treaty, which may or may
not reflect customary international law standards—in addition to those decisions that rest
explicitly on customary international law.
542. Specifically, Claimant contends that the fair and equitable treatment standard
includes interrelated and dynamic obligations providing for, among other duties,
protection against arbitrariness and discrimination, protection of legitimate investmentbacked
expectations, and a requirement of a transparent and predictable legal and
business framework.1087
1086 Counsel for Claimant, Tr. 36:15-18; Counsel for Respondent, Tr. 1390:11-14.
Claimant arrives at this interpretation from the guidance of
1087 See, e.g., Counsel for Claimant, Tr. 40:9-16. The Tribunal notes that, as exhibited under the
NAFTA, there are two types of discrimination: nationality-based discrimination and discrimination that is
founded on the targeting of a particular investor or investment. The former falls under the purview of
Article 1102 and Claimant does not argue this. Inasmuch as Claimant argues that it was discriminated
against, this argument appears primarily in the discussion of Article 1110, in which Claimant asserts that
the discriminatory nature of the California measures provides additional proof that the measures were not a
bona fide exercise of State police power and thus a non-compensable regulation. See, e.g., Claimant’s
Memorial, ¶¶ 497-510; Claimant’s Reply Memorial, ¶¶ 170-75. Claimant does not argue the
discriminatory nature of the California measures in its Article 1105 claim, explaining that Waste
Management was criticized in obiter dictum by the Methanex tribunal to the extent that Waste Management
implies a duty of non-discrimination in Article 1105(1). Claimant’s Memorial, at 291, footnote 1015,
citing Methanex, Final Award, Part IV, Ch. C, ¶ 26 (Aug. 3, 2005). Claimant asserts that Waste
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arbitral decisions based on bilateral investment treaties (“BITs”), as well as NAFTA
arbitrations, scholarship, and state practice.
543. Respondent argues that Article 1105’s duty to provide fair and equitable
treatment is solely a reference to the minimum standard of treatment demanded by
customary international law.1088 As customary international law, this interpretation is
derived from “general and consistent practice of states followed by them out of a sense of
legal obligation or opinio juris.”1089 Respondent reiterates that “international tribunals do
not create customary international law. Only nations create customary international
law.”1090
544. The Tribunal therefore begins its analysis by identifying those sources that
illuminate the customary international law standard and then, based on the record before
it, determines the content of that standard. Following this analysis, the Tribunal will hold
up the disputed facts to this standard and determine whether Claimant has proved that
Respondent has failed to fulfill the obligations required.
2. CONTENTIONS OF THE PARTIES
a. Sources Relevant to Determine the Article 1105 Standard
i. Claimant’s Contentions
545. Claimant explains the task for this Tribunal, and all tribunals addressing Article
1105, as “determin[ing] whether the facts of a particular case violated those established
and commonly accepted legal principles that comprise the fair and equitable treatment
standard of treatment under customary international law.”1091
Management does so, however, only in circumstances where the claimant’s allegations of discrimination
were offered in regard to Article 1102 and only incidentally as regards a claim under Article 1105(1).
Claimant continues to explain, however, that Loewen Group v. United States does state that discrimination
can be unfair and inequitable in the context of Article 1105(1). Claimant’s Memorial, at 291, footnote
1015, citing Loewen, Award, ¶ 135 (June 26, 2003). The Tribunal therefore interprets Claimant’s
arguments made in its Memorial, at paragraph 568, regarding “Respondent’s arbitrary and discriminatory
treatment” as an assertion that, as part of the duty prescribed by Article 1105 to not act arbitrarily, there is a
duty to not unfairly target a particular investor, whether based upon nationality or some other characteristic.
1088 Respondent’s Counter-Memorial, at 218-19.
1089 Counsel for Respondent, Tr. 105:10-13.
1090 Counsel for Respondent, Tr. 105:17-19.
1091 Counsel for Claimant, Tr. 36:7-13.
Claimant thus agrees that
the fair and equitable treatment standard articulated in Article 1105 is the customary
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international law minimum standard of treatment, but argues that there is a universe of
principles that are so “fundamental” that they are common throughout the world,
“regardless of whether the standard is viewed through the lens of customary international
law or the so-called autonomous Treaty standard.”1092 These principles, it asserts,
include “the duty to act in good faith, due process, transparency and candor, and fairness
and protection from arbitrariness.”1093
546. Claimant argues that, to accept Respondent’s framework, the Tribunal would
have to accept three principles fundamentally at odds with international law:
[F]irst, that the content of Article 1105 is sui generis and thus, divorced from the
substantive protections recognized by arbitral tribunals as comprising the
international standard of treatment for foreign investors under customary
international law; second, that Article 1105 need not be interpreted in an
evolutionary fashion; and third, that reference to the ‘minimum standard’
somehow means that the most arbitrary and capricious of state actors sets the bar
for how any state may treat foreign investors.1094
Such a framework, contends Claimant, is both unsupported by international law, and
contradictory “even to positions Respondent has advanced in the past.”
1095
547. Claimant argues that Respondent is attempting to freeze a historical
interpretation of the requirements of Article 1105 from the 1920s rather than interpreting
it, as it should, in an evolutionary fashion.
1096 Claimant asserts that freezing the
protection provided by the fair and equitable treatment standard is criticized by modern
tribunals, which have explicitly rejected any threshold limitation that conduct be
“egregious,” “outrageous,” “shocking,” or otherwise extraordinary (as was required by
the seminal case of Neer v. Mexico).1097
1092 Counsel for Claimant, Tr. 39:22-40:6.
1093 Counsel for Claimant, Tr. 40:6-8.
1094 Claimant’s Reply Memorial, ¶ 206.
1095 Id.
1096 Id. ¶ 214.
1097 Id. ¶ 215, citing Neer v. Mexico (“Neer”), 4 R. Int’l Arb. Awards, 60-62 (Oct. 15, 1926). Mr.
Neer, a citizen of the United States employed as the superintendent of a mine near Guanaceví, Mexico, was
riding home on horseback with his wife when they were stopped by a number of armed men who engaged
Mr. Neer in conversation, and subsequently shot him dead. Mrs. Neer claimed that the Mexican authorities
“showed an unwarrantable lack of diligence or an unwarrantable lack of intelligent investigation in
prosecuting the culprits ....” Id. ¶ 1. “Without attempting to announce a precise formula” for determining
an international delinquency, the commission held:
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548. Claimant argues instead that the duty to accord fair and equitable treatment and
the minimum standard of treatment are dynamic standards, elucidated by review of
current legal and treaty activity. Citing the OECD Working Papers on Fair and Equitable
Treatment, Claimant argues that all three NAFTA Parties have accepted this
characterization.1098 This is also reflected, Claimant contends, in the fact that “FTC
interpretations incorporate current international law, whose content is shaped by the
conclusion of more than 2,000 bilateral investment treaties and many treaties of
friendship and commerce.”1099 Claimant also points to the decision of the Mondev
tribunal and its finding that BITs, “through their incorporation of the ‘fair and equitable
treatment’ standard, reflected both the State practice, as well as the sense of obligation,
legal obligation, opinio juris required under customary international law.”1100
549. Claimant does not dispute that NAFTA Free Trade Commission’s (“FTC”)
interpretation “prescribes the customary international law minimum standard of treatment
of aliens as the minimum standard of treatment to be afforded to investments of investors
of another Party.”
1101
(first) that the propriety of governmental acts should be put to the test of international standards and
(second) that the treatment of an alien, in order to constitute an international delinquency, should
amount to an outrage, bad faith, to willful neglect of duty, or to an insufficiency of governmental
action so far short of international standards that every reasonable and impartial man would readily
recognize its insufficiency.
Still, Claimant contends, the standard must be interpreted in “good
faith in accordance with the ordinary meaning to be given to the terms of the treaty in
their context and in light of its object and purpose,” as required by Article 31(1) of the
Id. ¶ 4. But see Mondev, Award, ¶ 116 (Oct. 11, 2002) (“[B]oth the substantive and procedural rights of the
individual in international law have undergone considerable development. In the light of these
developments it is unconvincing to confine the meaning of ‘fair and equitable treatment’ and ‘full
protection and security’ of foreign investments to what those terms – had they been current at the time –
might have meant in the 1920s when applied to the physical security of an alien. To the modern eye, what
is unfair or inequitable need not equate with the outrageous or the egregious. In particular, a State may
treat foreign investment unfairly and inequitably without necessarily acting in bad faith.”).
1098 Claimant’s Memorial, ¶ 518, citing OECD, Fair and Equitable Treatment Standard in
International Investment Law (OECD Working Papers on International Investment, 2004/3) (“OECD
Working Papers”), at 11-12 (“United States expressed the view that the customary international law
referred to in NAFTA Article 1105(1) is not ‘frozen in time’ and that the minimum standard of treatment
does evolve.” “Canada agreed with the US on the view that the minimum standard of treatment does
evolve.” “Mexico also agrees that ‘the standard is relative and that the conduct which may not have
violated international law [in] the 1920s might very well be seen to offend internationally accepted
principles today.’” (citations and emphasis omitted)) [Ex. 174].
1099 Counsel for Claimant, Tr. 37:1-7, quoting Mondev, Award, ¶ 125 (Oct. 11, 2002) (emphasis
added).
1100 Counsel for Claimant, Tr. 37:8-13, citing Mondev, Award (Oct. 11, 2002).
1101 Claimant’s Memorial, ¶ 517.
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Vienna Convention, which requires looking at the standard as it has evolved under
customary international law.1102
550. Claimant does dispute Respondent’s allegations that “there is any restriction that
fair and equitable treatment be defined only by customary international law rather than
international law in general, given that the plain language of Article 1105 requires
treatment in accordance with international law.”
1103 Claimant cites to the NAFTA
awards in Mondev, Pope & Talbot, Loewen and ADF for the proposition that there is no
rule that fair and equitable treatment be defined solely by customary international law,
rather than the “normal sources of international law.”1104
551. Claimant agrees that there is a difference between the autonomous and customary
international law standards and that the standard articulated in NAFTA Article 1105 is
the customary international law minimum standard of treatment of aliens, but it argues
that the two sources of law, at this point, require the same conduct of states. Claimant
thus asserts that this dispute between “customary international law” and “international
law” is unnecessary, as “BIT jurisprudence has converged with customary international
law in this area ....”
1105 That the standards are generally the same, Claimant argues, is
demonstrated in the OECD Draft Convention and recognition by the United States, which
incorporated the same standard as that in the Draft Convention in its various BITs.1106 In
addition, according to Claimant, some tribunals—including Occidental and CMS—have
affirmatively stated that the treaty standard at issue does not differ from the customary
international law standard.1107
552. Finally, Claimant reiterates that the customary standard referenced in the
NAFTA has been influenced by the many BITs that require fair and equitable
treatment.
1108
1102 Id.
1103 Counsel for Claimant, Tr. 1709:20-1710:3.
1104 Counsel for Claimant, Tr. 1710:3-19; see also Claimant’s Reply Memorial, ¶¶ 210-11.
1105 Counsel for Claimant, Tr. 1710:20-22.
1106 Counsel for Claimant, Tr. 1711:3-14.
1107 Counsel for Claimant, Tr. 1713:5-9, citing Occidental v. Ecuador, Final Award (July 1, 2004)
and CMS v. Argentina, Award (May 12, 2005).
1108 Claimant’s Reply Memorial, ¶ 207.
BIT jurisprudence demonstrates both elements of customary international
law—State practice and opinio juris—and thus informs the international standard of
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treatment owed to foreign investors under customary international law.1109 Claimant
quotes the Mondev award for its finding that “the vast number of bilateral and regional
investment treaties (more than 2,000) almost uniformly provide for fair and equitable
treatment of foreign investments, and largely provide for full security and protection of
investments …. On a remarkably widespread basis, States have repeatedly obliged
themselves to accord foreign investment such treatment.”1110
ii. Respondent’s Contentions
553. While Claimant states that it agrees with Respondent that Article 1105 is the
“obligation to accord investments the customary international law minimum standard of
treatment,” Respondent argues that this is merely “lip service” as Claimant nowhere
proves the existence of any rule of customary international law violated by
Respondent.1111 According to Respondent, establishment of a rule of customary
international law requires: (1) “a concordant practice of a number of States acquiesced in
by others” and (2) “a conception that the practice is required by or consistent with the
prevailing law (opinio juris).”1112 Respondent asserts that the burden is on Claimant to
prove the existence of a rule of customary international law and Respondent’s violation
of that rule, and that Claimant has done neither.1113
554. Customary international law cannot be proven, alleges Respondent, by decisions
of international tribunals, as they do not constitute State practice.
1114
1109 Id. ¶ 208, citing Mondev, Award, ¶¶ 110-125 (Oct. 11, 2002).
1110 Id., quoting Mondev, Award, ¶ 117 (Oct. 11, 2002) (internal citation omitted).
1111 Counsel for Respondent, Tr. 1390:10-20.
1112 Respondent’s Counter-Memorial, at 219 (citation omitted).
1113 Id. at 222.
1114 Respondent’s Rejoinder, at 151, citing MOHAMED SHAHABUDDEEN, PRECEDENT IN THE
WORLD COURT 71 (1997).
In support,
Respondent cites to the U.S. Court of Appeals for the Second Circuit which distinguishes
between primary and secondary sources of customary international law: “[A] primary
source of authority” is one upon which, standing alone, courts may rely for propositions
of customary international law; while secondary sources (such as “the writings of
jurists”) “at most provide evidence of the practice of States, and then only insofar as they
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Glamis Gold, Ltd. v. United States of America – Page 238
rest on factual and accurate descriptions of the past practices of [S]tates, not on
projections of future trends or the advocacy of the ‘better rule.’”1115
555. Respondent argues that the NAFTA Free Trade Commission could not have been
clearer in its note of interpretation of July 31, 2001 (“FTC Note”): the requirement under
Article 1105(1) requires the customary international law minimum standard of treatment,
nothing more and nothing less.
1116 According to Respondent’s view of this
interpretation, an investor is barred from claiming that the language regarding the fair and
equitable treatment standard under Article 1105(1) differs from or is greater than that
required by customary international law.1117 This is supported, Respondent asserts, by
arbitral awards subsequent to the issuance of the FTC Note. Respondent cites to the ADF
award in which the tribunal held that the FTC Note “clarifies that so far as the three
NAFTA Parties are concerned, the long-standing debate as to whether there exists such a
thing as a minimum standard of treatment of non-nationals and their property prescribed
in customary international law, is closed.”1118 In addition, the Mondev award states that
the FTC Note “makes it clear that Article 1105(1) refers to a standard existing under
customary international law, and not to standards established by other treaties of the three
NAFTA Parties.”1119
556. Therefore, Respondent asserts, any tribunal interpreting a BIT that finds the fair
and equitable treatment provision in that BIT as being “something other than a shorthand
reference to customary international law” (i.e., an autonomous standard) is not
interpreting it “in accordance with the intent of the NAFTA parties, nor in a manner that
the NAFTA parties have all through the Free Trade Commission instructed and bound
NAFTA Tribunals to interpret that phrase.”
1120
1115 Id. at 151-52, quoting U.S. v. Yousef, 327 F.3d 56, 93, 99 (2d Cir. 2003) (emphasis omitted).
1116 Counsel for Respondent, Tr. 1931:19-1932:8.
1117 Counsel for Respondent, Tr. 1932:8-15.
1118 Respondent’s Counter-Memorial, at 218-19, citing ADF Group, Award, ¶ 178 (Jan. 9, 2003)
(citation omitted).
1119 Id., citing Mondev, Award, ¶ 121 (Oct. 11, 2002).
1120 Counsel for Respondent, Tr. 1934:9-20. Specifically, in response to Tribunal questions,
Respondent stated that it does not believe that the standard articulated in the cases based on the U.S.-
Argentine BIT is “reflective or has been shown to be reflective of the minimum standard of treatment under
customary international law.” Counsel for Respondent, Tr. 2134:2-11.
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557. The additional danger of looking to BIT jurisprudence, Respondent warns, is that
“the majority of fair and equitable treatment clauses in international investment
agreements do not include any reference to international law.”1121 There are, Respondent
admits, some agreements in force with provisions similar to Article 1105, but that does
not mean that all fair and equitable treatment provisions are the same.1122 Respondent
points to UNCTAD’s study of fair and equitable treatment in which it concluded that “the
presence of a provision assuring fair and equitable treatment in an investment instrument
does not automatically incorporate the international minimum standard for foreign
investors.”1123 UNCTAD reports, in fact, that there are at least four different approaches
to fair and equitable treatment that it found in various BITs.1124
558. According to Respondent, the fact that treaty practice establishes the repeated
inclusion of fair and equitable treatment provisions in BITs proves nothing in and of
itself.
1125 There are, Respondent argues, significant textual differences among the
various fair and equitable treatment provisions, which indicate that their meanings are not
uniform across agreements.1126 Quoting Mondev, Respondent contends that the central
question in Chapter 11 cases still remains: “what is the content of customary international
law providing for fair and equitable treatment …?”1127
b. Scope of the Standard
i. Introductory Note
559. The Tribunal notes that numerous NAFTA tribunals have wrestled with the
question of the scope and bounds of “fair and equitable treatment” and the duties and
obligations that this treatment requires of a State Party. Probably the most
comprehensive review was done by the tribunal in Waste Management¸ in which it
attempted a survey of the holdings to date in NAFTA jurisprudence:
1121 Respondent’s Rejoinder, at 147 (citation omitted).
1122 Id.
1123 Id. at 148, quoting UNCTAD, Fair and Equitable Treatment, Series on Issues in International
Investment Agreements, UNCTAD/ITE/IIT/11 (Vol. III) (1999), at 40.
1124 Respondent’s Rejoinder, at 148, citing id. at 13.
1125 Id. at 142.
1126 Id.
1127 Id., quoting Mondev, Award, ¶ 113 (Oct. 11, 2002) (emphasis added).
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Taken together, the S.D. Myers, Mondev, ADF and Loewen cases suggest that the
minimum standard of treatment… of fair and equitable treatment is infringed by
conduct attributable to the State and harmful to the claimant if the conduct is
arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes
the claimant to sectional or racial prejudice, or involves a lack of due process
leading to an outcome which offends judicial propriety–as might be the case with
a manifest failure of natural justice in judicial proceedings or a complete lack of
transparency and candour in an administrative process. In applying this standard
it is relevant that the treatment is in breach of representations made by the host
State which were reasonably relied on by the claimant.1128
The tribunal in GAMI primarily followed this line of reasoning, extracting four
“implications” that it found particularly salient: (1) “The failure to fulfill the objectives of
administrative regulations without more does not necessarily rise to a breach of
international law;” (2) “A failure to satisfy requirements of national law does not
necessarily violate international law;” (3) “Proof of a good faith effort by the
Government to achieve the objectives of its laws and regulations may counter-balance
instances of disregard of legal or regulatory requirements;” and (4) “The record as a
whole—not isolated events—determines whether there has been a breach of international
law.”
1129
560. The tribunal in International Thunderbird Gaming had a slightly different
holding: “the Tribunal views acts that would give rise to a breach of the minimum
standard of treatment prescribed by the NAFTA and customary international law as those
that, weighed against the given factual context, amount to a gross denial of justice or
manifest arbitrariness falling below acceptable international standards.”
1130 Although
bad faith would meet the standards described, most tribunals agree that a breach of
Article 1105 does not require bad faith.1131
561. In this case, Claimant argues that the international minimum standard of
treatment is a dynamic, evolving standard and points to two particular duties that it
argues are current requirements of a host State under its obligations to provide fair and
1128 Waste Management, Award, ¶ 98 (Apr. 30, 2004). As noted above at footnote 1087, Claimant
is not arguing a duty of non-discrimination as a duty separate from those included in the requirement of fair
and equitable treatment under Article 1105.
1129 GAMI Investments, Final Award, ¶ 97 (Nov. 15, 2004).
1130 International Thunderbird, Award, ¶ 194 (Jan. 26, 2006).
1131 See Loewen, Award, ¶ 132 (June 26, 2003); Mondev, Award, ¶ 115 (Oct. 11, 2002); Waste
Management, Award, ¶ 93 (Apr. 30, 2004).
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equitable treatment: (1) an obligation to protect legitimate expectations through
establishment of a transparent and predictable business and legal framework;1132 and (2)
an obligation to provide protection from arbitrary measures.1133
562. The Tribunal notes that Claimant asserts that these two duties are both aspects of
the same obligation, “interrelated” “strands” that are typically evaluated together;
It is against these alleged
duties that Claimant weighs the disputed facts and argues that Respondent has breached
Article 1105. It is therefore incumbent upon the Tribunal to address the contention of the
evolution of the standard and these two asserted aspects of the obligation to provide fair
and equitable treatment.
1134
while Respondent asserts that there is “no greater showing of State practice and opinio
juris with respect to the combined,” as opposed to individual, duties.1135
ii. The Asserted Evolution of the Customary International Law
Minimum Standard of Treatment
a. Claimant’s Contentions
In order to best
assess the scope of the standard as the Parties argue it, the Tribunal first examines the two
individual duties asserted and then weaves them back into a comprehensive standard
against which to weigh the facts.
563. Claimant argues that, “[g]iven the international minimum standard of treatment is
comprised of customary international law, the standard is an evolving one based on the
general and consistent practice of states and opinio juris ….”1136 Claimant asserts that
“[a]ll three parties to the NAFTA accept that the Article 1105(1) standard is a dynamic
one.”1137 Claimant cites to statements by the United States in Mondev that “Article
1105(1) is intended to provide a real measure of protection of investments, and ... having
regard to its general language and to the evolutionary character of international law, it has
evolutionary potential.”1138
1132 Claimant’s Reply Memorial, ¶¶ 224-34.
1133 Id. ¶¶ 235-41.
1134 Counsel for Claimant, Tr. 40:9-16.
1135 Counsel for Respondent, Tr. 1402:8-12.
1136 Claimant’s Memorial, ¶ 518, citing OECD Working Papers, at 40 [Ex. 174].
1137 Id., citing OECD Working Papers, at 11-12.
1138 Id., quoting Mondev, Award, ¶ 119.
Claimant therefore argues that Respondent’s treatment of it
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must be judged against the international law minimum standard of treatment, “which
incorporates current standards of fair and equitable treatment.”1139
564. Claimant contends that the resources and levels of development particular to a
host State play an integral role in the application of the minimum standard of treatment to
it.
1140 Claimant argues that this is especially important in determining an investor’s
legitimate expectations.1141 Therefore, “[f]or a highly developed legal system with
relatively extensive resources and institutional stability, such as the United States, the
international minimum standard thus requires better conduct than what may be required
for a less-developed country.”1142
565. This is not because the fair and equitable treatment standard is a contingent
standard, Claimant explains, that varies based on a host State’s treatment of foreigners or
its own nationals, but because the exact meaning of the standard is to be determined “by
reference to specific circumstances of application.”
1143 The specific circumstances of
application, Claimant continues, “necessarily involve[] a consideration of the host state’s
level of development.”1144
It is an ‘absolute’, ‘non-contingent’ standard of treatment, i.e., a standard that
states the treatment to be accorded in terms whose exact meaning has to be
determined, by reference to specific circumstances of application, as opposed to
the ‘relative’ standards embodied in ‘national treatment’ and ‘most favoured
nation’ principles which define the required treatment by reference to the
treatment accorded to other investment.
Claimant quotes OECD Working Papers to explain this
concept:
1145
566. Respondent argues that the minimum standard of treatment is neither dynamic
nor flexible based on the particular development of a country. Citing also to the OECD
Working Papers, Respondent asserts that “the international minimum standard of
treatment under customary international law ‘is an “absolute,” “noncontingent” standard
b. Respondent’s Contentions
1139 Id.
1140 Id. ¶ 519.
1141 Id., citing Generation Ukraine, Award, ¶ 20.37 (Sept. 16, 2003).
1142 Id.
1143 Claimant’s Reply Memorial, ¶¶ 219-20, quoting OECD Working Papers, at 2.
1144 Id. ¶ 220.
1145 Id. ¶ 218, quoting OECD Working Papers, at 2 (emphasis added) [Ex. 174].
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of treatment, … as opposed to the “relative” standards embodied in “national
treatment”’….’”1146 Claimant’s standard, according to Respondent, would tie the
minimum standard of treatment to the domestic legal system of the respondent in each
case.1147
The international minimum standard is a norm of customary international law
which governs the treatment of aliens, by providing for a minimum set of
principles which States, regardless of their domestic legislation and practices,
must respect when dealing with foreign nationals and their property.
Respondent asserts that this is incorrect as the standard, by definition, sets a
minimum:
1148
567. Respondent argues that, as Claimant “itself recognizes, a rule only crystallizes
into customary international law over time through a general and consistent practice of
States that is adhered to from a sense of legal obligation.”
1149 Respondent therefore
asserts that the establishment of such a rule requires two elements: “a concordant practice
of a number of States acquiesced in by others; and a conception that the practice is
required by or consistent with the prevailing law (opinio juris).”1150
iii. The Asserted Obligation to Protect Legitimate Expectations
through Establishment of a Transparent and Predictable Legal
and Business Framework
a. Claimant’s Contentions
568. Claimant asserts that the “NAFTA Treaty itself in its preamble, resolved, ‘that it
was to ensure a predictable commercial framework for business planning and
investment.’”1151
1146 Respondent’s Counter-Memorial, at 220, footnote 964, quoting OECD Working Papers, at 2
and 8, footnote 32.
1147 Respondent’s Rejoinder, at 143.
1148 Id. at 144, quoting OECD Working Papers, at 8, footnote 32 (emphasis added) (additional
citations omitted).
1149 Respondent’s Counter-Memorial, at 219, citing Claimant’s Memorial, ¶ 518 and
RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW OF THE UNITED STATES § 102(2) (1987).
1150 Id., quoting CLIVE PARRY, JOHN P. GRANT, ANTHONY PARRY & ARTHUR D. WATTS,
ENCYCLOPAEDIC DICTIONARY OF INTERNATIONAL LAW 82 (1986).
1151 Counsel for Claimant, Tr. 44:2-5, 44:12-15.
Inherent in business planning and investment based upon prediction of
the commercial framework is the concept of an investor’s “legitimate expectations.”
Claimant argues that, “[t]he principle of ‘legitimate expectation,’ though not explicitly
mentioned in Article 1105 or in other similar investment treaties, is considered to be part
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Glamis Gold, Ltd. v. United States of America – Page 244
of the fair and equitable treatment standard as an expression and part of the ‘good faith’
principle recognized in international law ….”1152 Claimant draws on the Tecmed award
for support of this contention. In that award, the tribunal held that the fair and equitable
treatment standard under the Spain-Mexico BIT in question required the “Contracting
Parties to provide to international investments treatment that does not affect the basic
expectations that were taken into account by the foreign investor to make the
investment.”1153
569. Similarly, Claimant cites to the CMS tribunal which, in analyzing the underlying
United States-Argentina bilateral investment treaty, held that “[t]here can be no doubt,
therefore, that a stable legal and business environment is an essential element of fair and
equitable treatment.”
1154
In addition to the specific terms of the Treaty, the significant number of treaties,
both bilateral and multilateral, that have dealt with this standard also
unequivocally shows that fair and equitable treatment is inseparable from
stability and predictability. Many arbitral decisions and scholarly writing point
in the same direction.
Claimant quotes the CMS tribunal as explaining:
1155
570. Claimant also cites to International Thunderbird, in which, Claimant argues, a
NAFTA tribunal accepts the notion that the protection of legitimate expectations is part
of the fair and equitable treatment obligations under customary international law.
1156
Having considered recent investment case law and the good faith principle of
international customary law, the concept of ‘legitimate expectations’ relates,
within the context of the NAFTA framework, to a situation where a Contracting
Party’s conduct creates reasonable and justifiable expectations on the part of an
investor (or investment) to act in reliance on said conduct, such that a failure by
the NAFTA party to honour those expectations could cause the investor (or
investment) to suffer damages.
The
award states:
1157
Claimant additionally references numerous other arbitral decisions based on various BITs
that, Claimant claims, “have found that stability of the legal and business framework is an
1152 Claimant’s Memorial, ¶ 532, quoting Tecmed, Award, ¶ 153 (May 29, 2003).
1153 Id. ¶ 533, quoting Tecmed, Award, ¶ 154 (May 29, 2003).
1154 Id. ¶ 534, quoting CMS v. Argentina, Award, ¶ 274 (May 12, 2005).
1155 Claimant’s Reply Memorial, ¶ 226, quoting CMS v. Argentina, Award, ¶ 276 (May 12, 2005).
1156 Counsel for Claimant, Tr. 45:8-20, citing International Thunderbird, Award, ¶ 147 (Jan. 26,
2006).
1157 International Thunderbird, Award, ¶ 147 (Jan. 26, 2006) (internal citation omitted).
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Glamis Gold, Ltd. v. United States of America – Page 245
essential or dominant element of fair and equitable treatment ….”1158
571. Claimant stresses that a tribunal should not “second-guess” a State’s action, but
that it still must evaluate whether the State complied with its international obligations.
Claimant quotes Saluka v. Czech Republic: “The Czech Republic, once it had decided to
bind itself by the Treaty to accord ‘fair and equitable treatment’ to investors of the other
Contracting Party, was bound to implement its policies, including its privatization
strategies, in a way that did not lead to unjustified differential treatment unlawful under
the Treaty.”
1159 A determination of a breach of the fair and equitable treatment standard
therefore, according to Claimant, requires weighing the legitimate and reasonable
expectations of the investor against the legitimate regulatory interests of the State.1160
572. Claimant argues that “numerous tribunals—interpreting BITs and other
instruments around the world—have concluded that measures which lack transparency,
fail to provide predictability or are otherwise arbitrary violate the customary international
law obligation to provide fair and equitable treatment.”
1161 It relies on Waste
Management, among other awards,1162 to support this contention.1163 Waste Management
held that the minimum standard of fair and equitable treatment can be “infringed by
conduct attributable to the State and harmful to the claimant” if it “involves a lack of due
process leading to an outcome which offends judicial propriety—as might be the case
with a manifest failure of natural justice in judicial proceedings or a complete lack of
transparency and candour in an administrative process.”1164
573. Claimant also cites to the Tecmed award for the proposition that a foreign
investor expects its host State to act consistently, free from ambiguity and “totally
1158 Counsel for Claimant, Tr. 47:16-22, citing Saluka v. Czech Republic; Azurix v. Argentina;
Occidental v. Ecuador; PSEG v. Turkey; CMS v. Argentina; and Enron v. Argentina.
1159 Counsel for Claimant, Tr. 1728:13-19, quoting Saluka v. Czech Republic, Partial Award, ¶ 337
(Mar. 17, 2006).
1160 Counsel for Claimant, Tr. 1729:1-6.
1161 Claimant’s Reply Memorial, ¶ 222 (emphasis added).
1162 See Claimant’s Memorial, ¶ 534, citing CMS v. Argentina, Award, ¶ 274 (May 12, 2005);
Claimant’s Memorial, ¶ 535, citing Metalclad, Award, ¶ 76 (Sept. 2, 2000); Claimant’s Memorial, ¶ 537,
citing Mazzeffini v. Kingdom of Spain (“Mazzeffini”), ICSID Case No. ARB/97/7, Award, ¶ 83 (Jan. 25,
2000).
1163 Claimant’s Memorial, ¶ 538.
1164 Id., quoting Waste Management, Award, ¶ 98 (Apr. 30, 2004) (emphasis added).
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transparently” in its relations with the investor.1165 This enables the investor to “know
beforehand any and all rules and regulations that will govern its investments, as well as
the goals of the relevant policies and administrative practices to be able to plan its
investment and comply with such regulations.”1166 Claimant quotes ADC v. Hungary
which provides: “It is one thing to say that an investor shall conduct its business in
compliance with the host State’s domestic laws and regulations. It is quite another to
imply that the investor must also be ready to accept whatever the host State decides to do
to it.”1167
574. Finally, Claimant finds additional support for its contention that fair and
equitable treatment includes a duty of transparency in the 1999 UNCTAD Report on fair
and equitable treatment:
The concept of transparency overlaps with fair and equitable treatment in at least
two significant ways. First, transparency may be required, as a matter of course,
by the concept of fair and equitable treatment. If laws, administrative decisions
and other binding decisions are to be imposed upon a foreign investor by a host
State, then fairness requires that the investor is informed about such decisions
before they are imposed. This interpretation suggests that where an investment
treaty does not expressly provide for transparency, but does for fair and equitable
treatment, then transparency is implicitly included in the treaty. Secondly, where
a foreign investor wishes to establish whether or not a particular State action is
fair and equitable, as a practical matter, the investor will need to ascertain the
pertinent rules concerning the State action; the degree of transparency in the
regulatory environment will therefore affect the ability of the investor to assess
whether or not fair and equitable treatment has been made available in any given
case.1168
575. Respondent asserts that Claimant has failed to demonstrate the existence of any
customary international law rule requiring “States to regulate in such a manner—or
refrain from regulating—so as to avoid upsetting foreign investors’ settled expectations
b. Respondent’s Contentions
1165 Counsel for Claimant, Tr. 1724:8-16, citing Tecmed, Award, ¶ 154 (May 29, 2003).
1166 Id. Claimant argues that this decision is instructive, despite the fact that it is based on an
autonomous fair and equitable treatment standard in the Spain-Mexico BIT, because the tribunal expressly
interpreted the provision by giving effect to “the good faith principle and international law.” Counsel for
Claimant, Tr. 1724:5-8; Tecmed, Award, ¶ 155 (May 29, 2003).
1167 Claimant’s Reply Memorial, ¶ 231, quoting ADC v. Hungary, Award, ¶ 424 (Oct. 2, 2006).
1168 Id. ¶ 229, quoting UNCTAD, FAIR AND EQUITABLE TREATMENT 51 (UNCTAD Series on
International Investment Agreements, 1999) (internal citations omitted).
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with respect to their investments.”1169 For support of this contention, Respondent points
to the cases relied upon by Claimant for the proposition that the “duty to accord fair and
equitable treatment” includes protection “against disappointment of an investor’s
expectations.” None of these cases, Respondent contends, explains how such a principle
became a part of the minimum standard of treatment under customary international
law.1170 Generation Ukraine is not relevant to Claimant’s argument, Respondent
contends, because the claimant in that case alleged only a breach of the prohibition
against expropriation, not a breach of the minimum standard of treatment.1171 Claimant’s
reliance on Tecmed was similarly misplaced, according to Respondent, as that tribunal
interpreted the Spain-Mexico BIT and, in doing so, expressly interpreted the fair and
equitable treatment standard in that BIT as an “autonomous” standard.1172 Similarly,
Respondent contends that the Saluka tribunal also was applying an autonomous
standard.1173
1169 Respondent’s Counter-Memorial, at 230. As noted above, Claimant divided the asserted
duties inherent in the fair and equitable treatment of Article 1105(1) into two obligations: (1) the duty to
protect investor expectations through the maintenance of a predictable and transparent framework, and (2)
the duty to protect investors from arbitrary acts. Claimant’s Reply Memorial, ¶¶ 224-41. Respondent, in
countering these asserted duties, divided them instead into three obligations: (1) to act transparently, (2) to
act in a manner that does not frustrate investors’ legitimate expectations, and (3) to refrain from arbitrary
conduct. Counsel for Respondent, Tr. 1390:21-1391:8. As it is the burden of the Claimant to prove the
content of the customary international law minimum standard of treatment that it asserts has been breached
in this situation, it is its right to determine the methodology by which to argue its positions. The Tribunal
therefore adopts Claimant’s methodology of analysis and combines the first two obligations. In addition, as
explained below in its holding, the Tribunal takes this approach because it finds that Claimant has not in
fact alleged a separate stand-alone claim for breach of transparency in the usual sense of insufficient notice
and comment, and instead argues for a “transparent and predictable framework” which the Tribunal
interprets to mean a knowable and consistent regime in which significant changes should be forewarned
and not surprising. To the extent that Respondent argued its positions based upon three inherent State
obligations, the Tribunal has combined its first two asserted duties into one and consolidated Respondent’s
arguments with respect to these duties.
1170 Respondent’s Rejoinder, at 179.
1171 Respondent’s Counter-Memorial, at 230-31.
1172 Id. at 231, quoting Tecmed, Award, ¶¶ 155-56 (May 29, 2003). For further explanation of the
“autonomous” standard, as opposed to that of customary international law or international law, see supra ¶¶
541-43.
1173 Counsel for Respondent, Tr. 1980:12-19, citing Saluka v. Czech Republic, Award, ¶ 305 (Mar.
17, 2006). Respondent also notes that the Saluka tribunal nevertheless recognized that no investor may
reasonably “expect that the circumstances prevailing at the time the investment is made remain totally
unchanged.” Id.
Finally, the CMS tribunal, according to Respondent, “summarily equated
the international law minimum standard of treatment with ‘the required stability and
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Glamis Gold, Ltd. v. United States of America – Page 248
predictability of the business environment, founded on solemn legal and contractual
commitments,’ without purporting to rely on any evidence” of opinio juris.1174
576. Respondent argues that frustration of an investor’s expectations cannot form the
basis of a stand-alone claim under NAFTA Chapter 11.
1175 Respondent asserts that if
States were prohibited from regulating in any manner that frustrated expectations—or
had to compensate for any diminution in profit—they would lose the power to
regulate.1176 In contrast to such a stand-alone provision, Respondent points to tribunals
interpreting BITs which have found breaches of the obligation to provide fair and
equitable treatment when express assurances or contractual commitments made to induce
foreign investment had been breached.1177 For instance, Respondent argues that both the
CMS and Enron tribunals found a breach of the fair and equitable treatment obligations
when Argentina abandoned the energy privatization incentives it had agreed to in the Gas
Law of 1992, in the form of inflation-adjusted tariffs that could be calculated in U.S.
dollars and converted to pesos.1178 Similarly, in Azurix and Siemens, the tribunals found
that Argentina breached its fair and equitable treatment obligations when it forced
renegotiation of rate adjustment provisions contained in their respective Concession
Contracts.1179 Finally, the Tecmed tribunal found such a breach based on a conclusion
that Mexico had breached a quasi-contract between the investor and various
governmental entities.1180
577. Respondent cites to the fact that a breach of contract does not rise to the level of
a Chapter 11 claim without something beyond mere breach as the best example of why
the duty to protect legitimate investor expectations is not a component of the customary
1174 Respondent’s Counter-Memorial, at 232, citing CMS v. Argentina, Award, ¶ 284 (May 12,
2005).
1175 Counsel for Respondent, Tr. 1396:12-15; Respondent’s Counter-Memorial, at 233-34;
Respondent’s Rejoinder, at 178-79.
1176 Respondent’s Counter-Memorial, at 233, citing Feldman, Award, ¶ 103 (Dec. 16, 2002)
(noting, in the context of an indirect expropriation claim, that “[r]easonable governmental regulation of this
type cannot be achieved if any business that is adversely affected may seek compensation, and it is safe to
say the customary international law recognized this.”).
1177 Counsel for Respondent, Tr. 1981:18-1982:11.
1178 Counsel for Respondent, Tr. 1982:12-16; see also CMS, Form 8-K at Ex. 99.1 (May 17, 2005).
1179 Counsel for Respondent, Tr. 1983:1-6.
1180 Counsel for Respondent, Tr. 1983:7-17.
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international law minimum standard of treatment.1181 Respondent asserts that a claimant
must demonstrate something more than a contract breach, such as denial of justice or
repudiation in a discriminatory way, or in a manner motivated by non-commercial
considerations.1182 According to Respondent, if “the expectations [that] manifest in a
contract cannot provide a basis for a breach of the minimum standard of treatment, no
lesser basis for such expectation can do so.”1183
578. Respondent asserts that Claimant also has failed to show “any relevant State
practice to support its contention that States are obligated under international law to
provide a transparent and predictable framework for foreign investment.”
1184 Respondent
contends that “neither [Claimant] nor the sources it cites demonstrate that any such rule is
part of customary international law … or how—if at all—such a binding customary
international practice has evolved.”1185
[O]bviously in established sets of rules recognized as being part of the minimum
standard of treatment, there are some transparency aspects. For example, in a
judicial denial of justice, the accessibility of the foreign national to the courts and
the availability of records, for example, is obviously a part of the protection.
You might call that transparency, but no stand-alone rule of transparency [exists]
for all State conduct.
Respondent explains that, although there may be
transparency aspects within the customary international law minimum standard of
treatment, there is not a stand-alone rule:
1186
Respondent argues that Claimant is instead suggesting a standard that amounts to an
imposition of the same kind of procedural rigidity that has been administratively imposed
by the Administrative Procedure Act in the United States,
1187
579. In addition, Respondent argues that Claimant has failed to identify “what exactly
it believes States are required to do in order to conform to the so-called rule of customary
which, inter alia, provides
detailed instructions on how the rulemaking of U.S. federal agencies is to be conducted
and reviewed.
1181 Counsel for Respondent, Tr. 1396:18-1398:1; Respondent’s Rejoinder, at 179-80.
1182 Respondent’s Rejoinder, at 179-80, citing Draft Articles on Responsibility of States for
Internationally Wrongful Acts, art. 4, cmt. ¶ 6 (additional citations omitted).
1183 Counsel for Respondent, Tr. 1397:15-18; see also Respondent’s Rejoinder, at 180.
1184 Respondent’s Counter-Memorial, at 226-27.
1185 Respondent’s Rejoinder, at 154.
1186 Counsel for Respondent, Tr. 1444:10-18.
1187 Respondent’s Rejoinder, at 154; see also Counsel for Respondent, Tr. 1393:14-16.
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Glamis Gold, Ltd. v. United States of America – Page 250
international law.”1188 For instance, while Claimant cites to Tecmed and Azurix, both of
these tribunals, Respondent asserts, spoke of transparency in terms of a State making
public its laws and regulations that govern foreign investment.1189 Claimant does not,
however, allege that Respondent failed to properly publish its laws and regulations.1190
Respondent contends that if, however, Claimant is alleging that the international
minimum standard of treatment requires States to provide “ample opportunity” in
advance of all laws and regulations for foreign investor comment, this is legally
incorrect.1191
580. According to Respondent, all three State Parties to the NAFTA have agreed that
there is no general transparency requirement in Article 1105 and have expressly rejected
the notion that transparency forms part of customary international law.
1192 In addition,
the United States and Canada consider that, “unless explicitly provided for elsewhere in
the NAFTA, Chapter Eighteen comprise[s] the extent of the Parties’ agreement on their
transparency obligations. That is, expressio unius est exclusio alterius.”1193 Chapter 18,
Respondent points out, “sets out a number of requirements designed to foster openness,
transparency and fairness in the adoption and application of the administrative measures
covered by the Agreement.”1194 Respondent adds that the NAFTA Parties have not
consented to arbitrate any alleged breaches of obligations arising under Chapter 18
through Chapter 11’s investor State arbitration mechanism.1195
581. Respondent then challenges Claimant’s cited arbitral awards for its contention
that the customary international law minimum standard of treatment includes a
requirement of transparency. Respondent points out that the portion of the Metalclad
1188 Counsel for Respondent, Tr. 1392:19-22.
1189 Counsel for Respondent, Tr. 1392:22-1393:5.
1190 Counsel for Respondent, Tr. 1393:5-9.
1191 Counsel for Respondent, Tr. 1393:10-19.
1192 Respondent’s Rejoinder, at 158, citing Methanex, Rejoinder Memorial of the United States on
Jurisdiction, Admissibility and the Proposed Amendment, p. 33 (June 27, 2001); Metalclad, Amended
Petition of Mexico to the Supreme Court of British Columbia (Sup. Ct. B.C.), ¶ 72 (Oct. 27, 2000);
Metalclad¸ Outline of Argument of Intervenor Attorney General of Canada (Sup. Ct. B.C.), ¶¶ 31-33 (Feb.
16, 2001).
1193 Respondent’s Rejoinder, at 159, citing U.S. Statement of Administrative Action (hereinafter
“U.S. SAA”) at 193, and Canadian Statement of Implementation (hereinafter “Canadian SOI”) at 196
(internal citation omitted).
1194 Id., quoting NAFTA, IMPLEMENTATION ACT, STATEMENT OF ADMINISTRATIVE ACTION, H.R.
DOC. NO. 103-159, 103d Cong., at 193 (1993).
1195 Id. at 131, citing NAFTA, arts. 1116 & 1117.
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award that addresses transparency was overturned by the Supreme Court of British
Columbia, and this ruling was then quoted approvingly in the Feldman v. United Mexican
States NAFTA Chapter 11 award.1196 The Feldman award continued to state that “a
denial of transparency alone thus does not constitute a violation of Chapter Eleven.”1197
Respondent also dismisses Claimant’s reliance on ADC v. Hungary as it considered an
autonomous BIT standard.1198 Finally, the 2004 OECD Working Papers on fair and
equitable treatment, Respondent asserts, specifically note that “[i]n a few recent cases,
Arbitral Tribunals have defined ‘fair and equitable treatment’ drawing upon a relatively
new concept not generally considered a customary international law standard:
transparency.”1199
582. Finally, Respondent argues that to the extent any of the arbitral decisions cited by
Claimant applied an obligation of transparency, it was merely a general obligation to
publish relevant laws and regulations.
1200 Respondent alleges that Tecmed, for instance,
spoke of transparency in terms of an obligation to make known “beforehand any and all
rules and regulations that will govern ….”1201
iv. The Asserted Obligation to Provide Protection from Arbitrary
Actions
a. Claimant’s Contentions
583. Claimant contends that the duty to accord fair and equitable treatment includes
protection from arbitrariness and finds support for this assertion in two NAFTA awards.
First, Claimant cites to S.D. Myers, in which the tribunal held that “a breach of Article
1105 occurs only when it is shown that an investor has been treated in such an unjust or
arbitrary manner that the treatment rises to the level that is unacceptable from the
1196 Counsel for Respondent, Tr. 1394:18-1395:22.
1197 Counsel for Respondent, Tr. 1395:12-1396:1, quoting Feldman, Award, ¶ 133 (Dec. 16,
2002).
1198 Respondent’s Rejoinder, at 168, citing ADC v. Hungary, Award, ¶ 445 (Oct. 2, 2006).
1199 Id. at 156; see also Counsel for Respondent, Tr. 1394:10-17, quoting OECD Working Papers,
at 37.
1200 Id. at 169.
1201 Id. at 170, quoting Tecmed, Award, ¶ 154 (Award) (May 29, 2003).
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international perspective.”1202 Similarly, International Thunderbird held that “manifest
arbitrariness falling below international standards” is prohibited under Article 1105.1203
584. Citing BIT jurisprudence, Claimant points to the Tecmed tribunal, which found
that the Spain-Mexico BIT at the heart of that dispute protected the investor from
arbitrary actions and required the host State “to act in a consistent manner, free from
ambiguity and totally transparently in its relations with the foreign investor.”
1204
Claimant also cites to LG&E v. Argentina, in which the tribunal held that a State must
engage in a rational decision-making process to avoid arbitrariness.1205
585. Arbitrariness, Claimant asserts, lacks “procedural fairness.”
1206 Claimant argues
that “government actions are arbitrary, in violation of the fair and equitable treatment
standard, when the conduct is ‘grossly unfair,’ ‘unjust,’ ‘clearly improper and
discreditable ….’”1207 “Thus, when there is an insufficient nexus between the
government measure and the apparent objective, the government has acted arbitrarily,
since its actions are not founded on fair and adequate reasons and lack legal
justification.”1208
586. Claimant cites to the definition of arbitrariness provided by the Restatement
(Third) of Foreign Relations Law: an arbitrary act is one that is “unfair and unreasonable,
and inflicts serious injury to established rights of foreign nationals, though falling short of
an act that would constitute an expropriation.”
1209 Claimant expands on this definition
with that provided in Lauder v. Czech Republic: an arbitrary act is “not founded on
reason or fact nor on the law.”1210
The foreign investor also expects the host State to act consistently, i.e. without
arbitrarily revoking any preexisting decisions or permits issued by the State that
were relied upon by the investor to assume its commitments as well as to plan
and launch its commercial and business activities. The investor also expects the
State to use the legal instruments that govern the actions of the investor or the
In addition, the Tecmed award states:
1202 Claimant’s Reply Memorial, ¶ 239, quoting S.D. Myers, Partial Award, ¶ 263 (Nov. 13, 2000).
1203 Id., quoting International Thunderbird, Award, ¶ 194 (Jan. 26, 2006).
1204 Counsel for Claimant, Tr. 45:21-46:14, quoting Tecmed, Award, ¶ 154 (May 29, 2003).
1205 Counsel for Claimant, Tr. 47:9-15, citing LG&E v. Argentina.
1206 Counsel for Claimant, Tr. 1717:22-1718:5.
1207 Claimant’s Reply Memorial, ¶ 235.
1208 Claimant’s Memorial, ¶ 530.
1209 Id. ¶ 523, quoting RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW, § 712, footnote 11.
1210 Id., citing Lauder v. Czech Republic, Final Award, ¶ 232 (Sept. 3, 2002).
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investment in conformity with the function usually assigned to such instruments,
and not to deprive the investor of its investment without the required
compensation.1211
Arbitrariness is not so much something opposed to a rule of law, as something
opposed to the rule of law. This idea was expressed by the Court in the Asylum
case, when it spoke of ‘arbitrary action’ being ‘substituted for the rule of law’ …
It is a willful disregard of due process of law, an act which shocks, or at least
surprises, a sense of judicial propriety.
The ELSI tribunal, in turn, provides that:
1212
Claimant also points to the outer limits of this standard as defined in Pope & Talbot:
“there is no threshold limitation that the conduct complained of be egregious, outrageous,
or shocking, or otherwise extraordinary.”
1213 Nor, according to Claimant, does a party
need to show that the host State acted in bad faith.1214
587. To prove that Respondent acted arbitrarily, Claimant argues that it need not show
that the particular measure at issue is a violation of customary international law, but that
the legal framework from which the measure sprang violated the “established and
accepted principles embodied in the fair and equitable treatment standard ….”
1215
Claimant cites to Occidental v. Ecuador, in which the tribunal held that the claimant did
not need to prove a violation of customary international law for the failure to refund
value-added taxes, “but rather whether the legal and business framework [met] the
requirements of stability and predictability under international law.”1216 Therefore,
Claimant argues, there is no duty for it to demonstrate customary international law rules
regarding mine reclamation; it need only prove that fair and equitable treatment
obligations have been breached in terms of a failure to maintain a legal and business
environment free from arbitrariness.1217
1211 Counsel for Claimant, Tr. 1719:6-17, quoting
Tecmed, Award, ¶ 154 (May 29, 2003).
1212 Claimant’s Memorial, ¶ 525, quoting ELSI, Judgment, ¶ 128 (July 28, 1989) (internal citation
omitted).
1213 Counsel for Claimant, Tr. 1719:1-5; see also Claimant’s Memorial, ¶ 526, quoting Pope &
Talbot, Award on the Merits of Phase 2, ¶ 118 (Apr. 10, 2001).
1214 Claimant’s Memorial, ¶ 522, quoting Loewen, Award, ¶ 132 (June 26, 2003); Mondev, Award,
¶ 116 (Oct. 11, 2002); CMS v. Argentina, Award, ¶ 280 (May 12, 2005).
1215 Counsel for Claimant, Tr. 1714:13-1715:16.
1216 Counsel for Claimant, Tr. 1714:13-1715:16, quoting Occidental v. Ecuador, Final Award, ¶
191 (July 1, 2004).
1217 Counsel for Claimant, Tr. 1715:10-16.
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588. Finally, Claimant agrees that the task of the Tribunal is not to second-guess the
activities of the United States government, but rather to take the national conduct as a fact
and measure it against the international law standards of Chapter 11 to determine whether
the conduct was in accordance with those standards.1218 Claimant argues, however, that
“[w]hile tribunals cannot substitute their policy judgments for the State[’]s, they can and
must probe the host State’s rationale to see whether its measures matched its
objectives.”1219
b. Respondent’s Contentions
589. Respondent asserts that Claimant has “failed to present any evidence of relevant
State practice to support its contention that Article 1105(1) imposes a general obligation
on States to refrain from ‘arbitrary’ conduct.”1220 According to Respondent, no Chapter
11 tribunal has found that decision-making that appears “arbitrary” to some parties is
sufficient to constitute an Article 1105 violation; instead these tribunals have consistently
accorded a high level of deference to administrative decision-making.1221
590. Respondent additionally argues that Claimant, in making this argument, is
requesting the Tribunal to find a violation of Article 1105 “based on what it perceives to
be unwise legislation and mistakes made in the … administrative processing of its plan of
operations.”
1222 According to Respondent, Claimant seeks to impose upon Respondent
the burden of justifying the appropriateness of the regulatory and legislative measures
and proving that they are without “relevant flaws”; that they conform with “international
and U.S. best practice”; and that they are the “least restrictive measures available” and
“necessary, suitable, and proportionate.”1223
591. Imperfect legislation or regulation, however, does not give rise to State
responsibility under customary international law, Respondent contends.
1224
1218 Counsel for Claimant, Tr. 70:21-71:21, quoting Saluka v. Czech Republic, Partial Award, ¶
308 (Mar. 17, 2006) and International Thunderbird, Award, ¶ 127 (Jan. 26, 2006).
1219 Counsel for Claimant, Tr. 1722:4-7.
1220 Respondent’s Counter-Memorial, at 227.
1221 Id.
1222 Counsel for Respondent, Tr. 1399:3-7.
1223 Counsel for Respondent, Tr. 1399:8-17.
1224 Respondent’s Rejoinder, at 188.
Under
international law, every State is free to “change its regulatory policy,” and every State
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Glamis Gold, Ltd. v. United States of America – Page 255
“has a wide discretion with respect to how it carries out such policies by regulation and
administrative conduct.”1225 The issue is not the legislature’s motivation, but only
whether the measure is rationally related to a legitimate governmental purpose.1226
592. Respondent asserts that Claimant would have the Tribunal “engage in de novo
review of factual determinations made by agencies and legal conclusions drawn by
agencies on issues of first impression.”
1227 Respondent quotes S.D. Myers for the
proposition that tribunals are allowed limited, if any, appellate review of domestic
decisions: “determination [that Article 1105 has been breached] must be made in … light
of the high measure of deference that international law generally extends to the right of
domestic authorities to regulate matters within their own borders.”1228
When interpreting and applying the ‘minimum standard’, a Chapter 11 tribunal
does not have an open-ended mandate to second-guess government decisionmaking.
Governments have to make many potentially controversial choices. In
doing so, they may appear to have made mistakes, to have misjudged the facts,
proceeded on the basis of a misguided economic or sociological theory, placed
too much emphasis on some social values over others and adopted solutions that
are ultimately ineffective or counterproductive. The ordinary remedy, if there
were one, for errors in modern governments is through internal political and legal
processes, including elections.
The tribunal
explained the rationale for this holding:
1229
593. Respondent asserts that this is reiterated by the tribunal in International
Thunderbird:
[I]t is not up to the Tribunal to determine how [the state regulatory authority]
should have interpreted or responded to the [proposed business operation], as by
doing so, the Tribunal would interfere with issues of purely domestic law and the
manner in which governments should resolve administrative matters (which may
vary from country to country).1230
This deference is further reinforced by the tribunals in ADF and Mondev, both of which
stress that international tribunals do not sit as courts of appellate jurisdiction with
1225 Id., quoting International Thunderbird, Award, ¶ 127 (Jan. 26, 2006).
1226 Id. at 189, citing Williamson v. Lee Optical of Oklahoma, Inc., 348 U.S. 583, 487 (1955).
1227 Counsel for Respondent, Tr. 104:15-18.
1228 Respondent’s Counter-Memorial, at 230, quoting S.D. Myers, Partial Award, ¶ 263 (Nov. 13,
2000).
1229 Counsel for Respondent, Tr. 1400:9-1401:3, quoting S.D. Myers, Partial Award, ¶ 261 (Nov.
13, 2000).
1230 Respondent’s Rejoinder, at 207, quoting International Thunderbird, Award, ¶ 160 (Jan. 26,
2006).
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authority to review the legal validity of domestic measures.1231 Finally, it is also
confirmed by the Saluka award, Respondent contends, which holds that “[i]n the absence
of clear and compelling evidence that the [Czech banking regulator] erred or acted
otherwise improperly in reaching its decision … the Tribunal must in the circumstances
accept the justification given by the Czech banking regulator for its decision.”1232
594. Respondent argues that the deference usually accorded to administrative agency
and legislative decisions is not limited to separation of power, but also “arises out of a
recognition that those courts are not best placed to make those determinations; that they
lack the expertise that the legislature and/or the administrative agency has on these
particular questions” and they do not possess the full administrative record.
1233
Respondent cites to Claimant’s own expert to support this contention: “a high measure of
deference to the facts and factual conclusions seems the only way to prevent investment
tribunals from becoming science courts, and from frustrating democratically adopted
preferences of risk in matters of fundamental importance such as public health.”1234
595. Respondent observes that such deference is acknowledged by both U.S. and
Canadian courts. U.S. courts, for instance, have adopted the “arbitrary and capricious”
standard in which they will uphold a challenged agency action unless the petitioner can
show the action to be “arbitrary and capricious;”
1235 the scope of review is narrow and a
court is not to substitute its judgment for that of the agency.1236 Canadian courts,
Respondent argues, also “give considerable respect” to administrators’ discretionary
decision-making, restricting their review to “limited grounds such as the bad faith of
decision-makers, the exercise of discretion for an improper purpose, and the use of
irrelevant considerations ….”1237
1231 Counsel for Respondent, Tr. 2106:5-15, citing ADF Group, Second Article 1128 Submission
of the United Mexican States, ¶ 190 (Jan. 9, 2003) (citing
Mondev, Award, ¶ 136 (Oct. 11, 2002)).
1232 Respondent’s Rejoinder, at 207, quoting Saluka v. Czech Republic, Partial Award, ¶ 273 (Mar.
17, 2006).
1233 Counsel for Respondent, Tr. 1457:11-20.
1234 Counsel for Respondent, Tr. 1457:21-1458:11, quoting Expert Report of Professor Wälde, at
IV-27, footnote 474; see also Respondent’s Rejoinder, at 210.
1235 Respondent’s Rejoinder, at 208, quoting 5 U.S.C. § 706(2)(A) (1966).
1236 Id. at 208-9, quoting Motor Vehicles Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto.
Ins. Co., 463 U.S. 29, 43 (1983) (additional citations omitted).
1237 Id. at 209, quoting Baker v. Minister of Citizenship and Immigration, [1999] S.C.R. 817, 853
(Can.).
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596. If there is an obligation for a State to not act arbitrarily, as the ELSI court
determined based on the BIT under consideration in that case, Respondent argues that a
breach of such an international duty must go far beyond the measure’s mere domestic
illegality:
A finding of the local courts that an act was unlawful may well be relevant to an
argument that it was also arbitrary; but by itself, and without more, unlawfulness
cannot be said to amount to arbitrariness. … Nor does it follow from a finding by
a municipal court that an act was unjustified, or unreasonable, or arbitrary, that
that act is necessarily to be classed as arbitrary in international law, though the
qualification given to the impugned act by a municipal authority may be a
valuable indication.1238
597. Respondent argues that NAFTA tribunals have held that there is a very high
threshold beyond which an act must rise to be so arbitrary as to violate Article 1105. The
International Thunderbird tribunal, for instance, held that mere “arbitrary” conduct by an
administrative agency is insufficient to amount to an Article 1105 breach; to constitute a
breach of international obligations, the regulatory action had to amount to a “gross denial
of justice or manifest arbitrariness falling below international standards.”
1239 The
tribunal in S.D. Myers held similarly: a breach of Article 1105 occurs only when “an
investor has been treated in such an unjust or arbitrary manner that the treatment rises to
the level that is unacceptable from the international perspective.”1240 The S.D. Myers
tribunal continued on to note that this “determination must be made in light of the high
measure of deference that international law generally extends to the right of domestic
authorities to regulate matters within their own borders.”1241 The S.D. Myers tribunal,
Respondent notes, found no Article 1105 breach under an arbitrariness standard despite
its conclusion that “there was no legitimate environmental reason for introducing the
ban” at issue.1242
1238 Id. at 206, quoting ELSI, Judgment, p. 74 (July 28, 1989).
1239 Respondent’s Counter-Memorial, at 227-28, quoting International Thunderbird, Award, ¶ 194
(Jan. 26, 2006).
1240 Id. at 230, quoting S.D. Myers, Partial Award, ¶ 263 (Nov. 13, 2000).
1241 Id., quoting S.D. Myers, Partial Award, ¶ 263 (Nov. 13, 2000).
1242 Id., quoting S.D. Myers, Partial Award, ¶ 195 (Nov. 13, 2000).
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3. DECISION OF THE TRIBUNAL WITH RESPECT TO THE ARTICLE 1105(1)
LEGAL STANDARD
598. As noted above, Article 1105(1) of the NAFTA provides that “[e]ach party shall
accord to investments of investors of another Party treatment in accordance with
international law, including fair and equitable treatment and full protection and security.”
599. There is no disagreement among the State Parties to the NAFTA, nor the Parties
to this arbitration, that the requirement of fair and equitable treatment in Article 1105 is
to be understood by reference to the customary international law minimum standard of
treatment of aliens.1243 Indeed, the Free Trade Commission (“FTC”) clearly states, in its
binding Notes of Interpretation on July 31, 2001, that “Article 1105(1) prescribes the
customary international law minimum standard of treatment of aliens as the minimum
standard of treatment to be afforded to investments of investors of another Party.”1244
600. The question thus becomes: what does this customary international law minimum
standard of treatment require of a State Party vis-à-vis investors of another State Party?
Is it the same as that established in 1926 in Neer v. Mexico?
1245
601. As a threshold issue, the Tribunal notes that it is Claimant’s burden to
sufficiently answer each of these questions. The State Parties to the NAFTA (at least
Canada and Mexico) agree that “the test in Neer does continue to apply,” though Mexico
“also agrees that the standard is relative and that conduct which may not have violated
international law [in] the 1920’s might very well be seen to offend internationally
accepted principles today.”
Or has Claimant proven
that the standard has “evolved”? If it has evolved, what evidence of custom has Claimant
provided to the Tribunal to determine its current scope?
1246
1243 Counsel for Claimant, Tr. 36:15-18; Counsel for Respondent, Tr. 1390:11-14; Free Trade
Commission, Notes of Interpretation of Certain Chapter 11 Provisions, § B(2) (July 31, 2001) (“FTC
Notes”).
If, as Claimant argues, the customary international law
1244 FTC Notes, § B(1). For further discussion of the binding nature of the FTC Notes, see
NAFTA Article 1131(2): “An interpretation by the Commission of a provision of this Agreement shall be
binding on a Tribunal established under this Section.”
1245 Neer v. Mexico, 4 R. Int’l Arb. Awards, 60 (Oct. 15, 1926).
1246 ADF Group, Second Article 1128 Submission of the United Mexican States, p. 15 (July 22,
2002), quoting Pope & Talbot, Post-Hearing Article 1128 Submission of the United Mexican States
(Damages Phase), ¶ 8 (Dec. 3, 2001), quoting Pope & Talbot, Respondent Canada’s Counter-Memorial
(Phase 2), ¶ 309 (Aug. 18, 2001) (Mexico’s Post-Hearing Article 1128 Submission in Pope & Talbot
quotes with approval Canada’s submission as respondent in Pope & Talbot, which states in paragraph 8:
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minimum standard of treatment has indeed moved to require something less than the
“egregious,” “outrageous,” or “shocking” standard as elucidated in Neer, then the burden
of establishing what the standard now requires is upon Claimant.
602. The Tribunal acknowledges that it is difficult to establish a change in customary
international law. As Respondent explains, establishment of a rule of customary
international law requires: (1) “a concordant practice of a number of States acquiesced in
by others,” and (2) “a conception that the practice is required by or consistent with the
prevailing law (opinio juris).”1247
603. The evidence of such “concordant practice” undertaken out of a sense of legal
obligation is exhibited in very few authoritative sources: treaty ratification language,
statements of governments, treaty practice (e.g., Model BITs), and sometimes
pleadings.
1248
604. The Tribunal notes that, although an examination of custom is indeed necessary
to determine the scope and bounds of current customary international law, this
requirement—repeatedly argued by various State Parties—because of the difficulty in
proving a change in custom, effectively freezes the protections provided for in this
provision at the 1926 conception of egregiousness.
Although one can readily identify the practice of States, it is usually very
difficult to determine the intent behind those actions. Looking to a claimant to ascertain
custom requires it to ascertain such intent, a complicated and particularly difficult task.
In the context of arbitration, however, it is necessarily Claimant’s place to establish a
change in custom.
605. Claimant did provide numerous arbitral decisions in support of its conclusion that
fair and equitable treatment encompasses a universe of “fundamental” principles common
throughout the world that include “the duty to act in good faith, due process, transparency
and candor, and fairness and protection from arbitrariness.”1249
“The conduct of government toward the investment must amount to gross misconduct, manifest injustice
or, in the classic words of the Neer claim, an outrage, bad faith or the willful neglect of duty.”).
1247 Respondent’s Counter-Memorial, at 219 (citations omitted).
1248 In the NAFTA context, there is the addition of Article 1128 submissions through which the
State Parties can express directly their views on and interpretations of the provisions of the NAFTA.
1249 Counsel for Claimant, Tr. 40:1-8.
Arbitral awards,
Respondent rightly notes, do not constitute State practice and thus cannot create or prove
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customary international law.1250
606. This brings the Tribunal to its first task: ascertaining which of the sources argued
by Claimant are properly available to instruct the Tribunal on the bounds of “fair and
equitable treatment.” As briefly mentioned above, the Tribunal notes that it finds two
categories of arbitral awards that examine a fair and equitable treatment standard: those
that look to define customary international law and those that examine the autonomous
language and nuances of the underlying treaty language. Fundamental to this divide is
the treaty underlying the dispute: those treaties and free trade agreements, like the
NAFTA, that are to be understood by reference to the customary international law
minimum standard of treatment necessarily lead their tribunals to analyze custom; while
those treaties with fair and equitable treatment clauses that expand upon, or move
beyond, customary international law, lead their reviewing tribunals into an analysis of the
treaty language and its meaning, as guided by Article 31(1) of the Vienna Convention.
They can, however, serve as illustrations of customary
international law if they involve an examination of customary international law, as
opposed to a treaty-based, or autonomous, interpretation.
607. Ascertaining custom is necessarily a factual inquiry, looking to the actions of
States and the motives for and consistency of these actions. By applying an autonomous
standard, on the other hand, a tribunal may focus solely on the language and nuances of
the treaty language itself and, applying the rules of treaty interpretation, require no party
proof of State action or opinio juris. This latter practice fails to assist in the
ascertainment of custom.
608. As Article 1105’s fair and equitable treatment standard is, as Respondent phrases
it, simply “a shorthand reference to customary international law,”1251
1250 Respondent’s Rejoinder, at 151, quoting Robert Cryer, Of Custom, Treaties, Scholars, and the
Gavel: The Influence of the International Criminal Tribunals on the ICRC Customary Law Study, 11 J.
CONFLICT & SECURITY L. 239, 252 (2006) (additional citation omitted).
1251 Counsel for Respondent, Tr. 1934:9-20.
the Tribunal finds
that arbitral decisions that apply an autonomous standard provide no guidance inasmuch
as the entire method of reasoning does not bear on an inquiry into custom. The various
BITs cited by Claimant may or may not illuminate customary international law; they will
prove helpful to this Tribunal’s analysis when they seek to provide the same base floor of
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Glamis Gold, Ltd. v. United States of America – Page 261
conduct as the minimum standard of treatment under customary international law; but
they will not be of assistance if they include different protections than those provided for
in customary international law.
609. Claimant has agreed with this distinction between customary international law
and autonomous treaty standards but argues that, with respect to this particular standard,
BIT jurisprudence has “converged with customary international law in this area.”1252
610. Looking, for instance, to Claimant’s reliance on Tecmed v. Mexico for various of
its arguments, the Tribunal finds that Claimant has not proven that this award, based on a
BIT between Spain and Mexico,
The
Tribunal finds this to be an over-statement. Certainly, it is possible that some BITs
converge with the requirements established by customary international law; there are,
however, numerous BITs that have been interpreted as going beyond customary
international law, and thereby requiring more than that to which the NAFTA State Parties
have agreed. It is thus necessary to look to the underlying fair and equitable treatment
clause of each treaty, and the reviewing tribunal’s analysis of that treaty, to determine
whether or not they are drafted with an intent to refer to customary international law.
1253 defines anything other than an autonomous standard
and thus an award from which this Tribunal will not find guidance. Article 4(1) of the
Spain-Mexico BIT involved in the Tecmed proceeding provides that each contracting
party guarantees just and equitable treatment conforming with “International Law” to the
investments of investors of the other contracting party in its territory.1254 Article 4(2)
proceeds to explain that this treatment will not be less favorable than that granted in
similar circumstances by each contracting party to the investments in its territory by an
investor of a third State.1255 Several interpretations of the requirement espoused in
Article 4(2) are indeed possible, but the Tecmed tribunal itself states that it “understands
that the scope of the undertaking of fair and equitable treatment under Article 4(1) of the
Agreement described ... is that resulting from an autonomous interpretation ....”1256
1252 Counsel for Claimant, Tr. 1710:20-22.
1253 See Tecmed, Award, ¶ 4 (May 29, 2003), citing Agreement on the Reciprocal Promotion and
Protection of Investments signed by the Kingdom of Spain and the United Mexican States, (Dec. 18, 1996).
1254 Claimant’s Memorial, ¶ 533, footnote 1033, quoting Tecmed, Award, ¶ 154 (May 29, 2003).
1255 Agreement on the Reciprocal Promotion and Protection of Investments signed by the Kingdom
of Spain and the United Mexican States, Article 4(2) (Dec. 18, 1996).
1256 Tecmed, Award, ¶ 155 (May 29, 2003) (emphasis added).
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Thus, this Tribunal finds that the language or analysis of the Tecmed award is not
relevant to the Tribunal’s consideration.
611. The Tribunal therefore holds that it may look solely to arbitral awards—
including BIT awards—that seek to be understood by reference to the customary
international law minimum standard of treatment, as opposed to any autonomous
standard. The Tribunal thus turns to its second task: determining the scope of the current
customary international law minimum standard of treatment, as proven by Claimant.
612. It appears to this Tribunal that the NAFTA State Parties agree that, at a
minimum, the fair and equitable treatment standard is that as articulated in Neer:1257 “the
treatment of an alien, in order to constitute an international delinquency, should amount
to an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of
governmental action so far short of international standards that every reasonable and
impartial man would readily recognize its insufficiency.”1258
613. The Tribunal finds apparent agreement that the fair and equitable treatment
standard is subject to the first type of evolution: a change in the international view of
what is shocking and outrageous. As the Mondev tribunal held:
Whether this standard has
evolved since 1926, however, has not been definitively agreed upon. The Tribunal
considers two possible types of evolution: (1) that what the international community
views as “outrageous” may change over time; and (2) that the minimum standard of
treatment has moved beyond what it was in 1926.
Neer and like arbitral awards were decided in the 1920s, when the status of the
individual in international law, and the international protection of foreign
investments, were far less developed than they have since come to be. In
particular, both the substantive and procedural rights of the individual in
international law have undergone considerable development. In light of these
developments it is unconvincing to confine the meaning of ‘fair and equitable
treatment’ and ‘full protection and security’ of foreign investments to what those
1257 ADF Group, Second Article 1128 Submission of the United Mexican States, p. 15 (July 22,
2002), quoting Pope & Talbot, Post-Hearing Article 1128 Submission of the United Mexican States
(Damages Phase), ¶ 8 (Dec. 3, 2001), quoting Pope & Talbot, Respondent Canada’s Counter-Memorial
(Phase 2), ¶ 309 (Aug. 18, 2001).
1258 Neer v. Mexico, 4 R. Int’l Arb. Awards, ¶ 4 (Oct. 15, 1926). The Neer tribunal continued to
explain that its inquiry was limited to “whether there [was] convincing evidence either (1) that the
authorities administering the Mexican law acted in an outrageous way, in bad faith, in wilful neglect of
their duties, or in a pronounced degree of improper action, or (2) that Mexican law rendered it impossible
for them properly to fulfil their task.” Id. ¶ 5.
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terms—had they been current at the time—might have meant in the 1920s when
applied to the physical security of an alien. To the modern eye, what is unfair or
inequitable need not equate with the outrageous or the egregious. In particular, a
State may treat foreign investment unfairly and inequitably without necessarily
acting in bad faith.1259
614. As regards the second form of evolution—the proposition that customary
international law has moved beyond the minimum standard of treatment of aliens as
defined in Neer—the Tribunal finds that the evidence provided by Claimant does not
establish such evolution. This is evident in the abundant and continued use of adjective
modifiers throughout arbitral awards, evidencing a strict standard. International
Thunderbird used the terms “gross denial of justice” and “manifest arbitrariness” to
describe the acts that it viewed would breach the minimum standard of treatment.
Similarly, this Tribunal holds that the Neer standard, when applied with current
sentiments and to modern situations, may find shocking and egregious events not
considered to reach this level in the past.
1260
S.D. Myers would find a breach of Article 1105 when an investor was treated “in such an
unjust or arbitrary manner.”1261 The Mondev tribunal held: “The test is not whether a
particular result is surprising, but whether the shock or surprise occasioned to an
impartial tribunal leads, on reflection, to justified concerns as to the judicial propriety of
the outcome ....”1262
615. The customary international law minimum standard of treatment is just that, a
minimum standard. It is meant to serve as a floor, an absolute bottom, below which
conduct is not accepted by the international community. Although the circumstances of
the case are of course relevant, the standard is not meant to vary from state to state or
investor to investor. The protection afforded by Article 1105 must be distinguished from
that provided for in Article 1102 on National Treatment. Article 1102(1) states: “Each
Party shall accord to investors of another Party treatment no less favorable than that it
accords, in like circumstances, to its own investors ....” The treatment of investors under
Article 1102 is compared to the treatment the State’s own investors receive and thus can
1259 Mondev, Award, ¶ 116 (Oct. 11, 2002).
1260 International Thunderbird, Award, ¶ 194 (Jan. 26, 2006) (emphasis added).
1261 S.D. Myers, Partial Award, ¶ 263 (Nov. 13, 2000) (emphasis added).
1262 Mondev, Award, ¶ 127 (Oct. 11, 2002) (emphasis added).
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vary greatly depending on each State and its practices. The fair and equitable treatment
promised by Article 1105 is not dynamic; it cannot vary between nations as thus the
protection afforded would have no minimum.
616. It therefore appears that, although situations may be more varied and complicated
today than in the 1920s, the level of scrutiny is the same. The fundamentals of the Neer
standard thus still apply today: to violate the customary international law minimum
standard of treatment codified in Article 1105 of the NAFTA, an act must be sufficiently
egregious and shocking—a gross denial of justice, manifest arbitrariness, blatant
unfairness, a complete lack of due process, evident discrimination, or a manifest lack of
reasons—so as to fall below accepted international standards and constitute a breach of
Article 1105(1). The Tribunal notes that one aspect of evolution from Neer that is
generally agreed upon is that bad faith is not required to find a violation of the fair and
equitable treatment standard, but its presence is conclusive evidence of such. Thus, an
act that is egregious or shocking may also evidence bad faith, but such bad faith is not
necessary for the finding of a violation. The standard for finding a breach of the
customary international law minimum standard of treatment therefore remains as
stringent as it was under Neer; it is entirely possible, however that, as an international
community, we may be shocked by State actions now that did not offend us previously.
617. Respondent argues below that, in reviewing State agency or departmental
decisions and actions, international tribunals as well as domestic judiciaries favor
deference to the agency so as not to second guess the primary decision-makers or become
“science courts.” The Tribunal disagrees that domestic deference in national court
systems is necessarily applicable to international tribunals. In the present case, the
Tribunal finds the standard of deference to already be present in the standard as stated,
rather than being additive to that standard. The idea of deference is found in the
modifiers “manifest” and “gross” that make this standard a stringent one; it is found in
the idea that a breach requires something greater than mere arbitrariness, something that
is surprising, shocking, or exhibits a manifest lack of reasoning.
618. With this thought in mind, the Tribunal turns to the duties that Claimant argues
are part of the requirements of a host State per Article 1105: (1) an obligation to protect
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legitimate expectations through establishment of a transparent and predictable business
and legal framework, and (2) an obligation to provide protection from arbitrary measures.
As the United States explained in its 1128 submission in Pope & Talbot, and as Mexico
adopted in its 1128 submission to the ADF tribunal: “‘fair and equitable treatment’ and
‘full protection and security’ are provided as examples of the customary international law
standards incorporated into Article 1105(1). … The international law minimum standard
[of treatment] is an umbrella concept incorporating a set of rules that has crystallized over
the centuries into customary international law in specific contexts.”1263
a. Asserted Obligation to Protect Legitimate Expectations Through
Establishment of a Transparent and Predictable Legal and Business
Framework
The Tribunal
therefore finds it appropriate to address, in turn, each of the State obligations Claimant
asserts are potential parts of the protection afforded by fair and equitable treatment.
619. As explained above, the minimum standard of treatment of aliens established by
customary international law, and by reference to which the fair and equitable treatment
standard of Article 1105(1) is to be understood, is an absolute minimum, a floor below
which the international community will not condone conduct. To maintain fair and
equitable treatment as an absolute floor, a breach must be based upon objective criteria
that apply equally among States and between investors.
620. The Tribunal notes Respondent’s argument that even those expectations that
manifest in a contract are insufficient to provide a basis for a breach of the minimum
standard of treatment.1264 The Tribunal agrees that mere contract breach, without
something further such as denial of justice or discrimination, normally will not suffice to
establish a breach of Article 1105.1265
1263 ADF Group, Second Article 1128 Submission of the United Mexican States, p. 8 (July 22,
2002), quoting Pope & Talbot, Fourth Article 1128 Submission of the United States, ¶¶ 3, 8 (Nov. 1, 2000).
1264 Counsel for Respondent, Tr. 1397:15-18; Respondent’s Rejoinder, at 180.
1265 See Azinian v. United Mexican States (“Azinian”), NAFTA/ICSID Case No. ARB/(AF)/97/2,
Award, ¶ 87 (Nov. 1, 1999) (holding, “NAFTA does not, however, allow investors to seek international
arbitration for mere contractual breaches. Indeed, NAFTA cannot possibly be read to create such a regime,
which would have elevated a multitude of ordinary transactions with public authorities into potential
international disputes.”).
Merely not living up to expectations cannot be
sufficient to find a breach of Article 1105 of the NAFTA. Instead, Article 1105(1)
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requires the evaluation of whether the State made any specific assurance or commitment
to the investor so as to induce its expectations.1266
621. The Tribunal therefore agrees with International Thunderbird that legitimate
expectations relate to an examination under Article 1105(1) in such situations “where a
Contracting Party’s conduct creates reasonable and justifiable expectations on the part of
an investor (or investment) to act in reliance on said conduct ….”
1267
622. As the Tribunal determines below that no specific assurances were made to
induce Claimant’s “reasonable and justifiable expectations,” the Tribunal need not
determine the level, or characteristics, of state action in contradiction of those
expectations that would be necessary to constitute a violation of Article 1105.
In this way, a State
may be tied to the objective expectations that it creates in order to induce investment.
b. Asserted Obligation to Provide Protection from Arbitrary Measures
623. With respect to the asserted duty to protect investors from arbitrariness, the
Tribunal notes Claimant’s citations to several NAFTA arbitrations that have found a
violation of Article 1105 in arbitrary state action. Claimant cites to S.D. Myers for its
holding that “a breach of Article 1105 occurs only when it is shown that an investor has
been treated in such an unjust and arbitrary manner that the treatment rises to the level
that is unacceptable from the international perspective.”1268 Similarly, it quotes
International Thunderbird’s holding that “manifest arbitrariness falling below acceptable
international standards” is prohibited under Article 1105.1269
624. The Tribunal also notes, however, Respondent’s argument that no Chapter 11
tribunal has found that decision-making that appears arbitrary to some parties is sufficient
to constitute an Article 1105 violation.
1270
1266
In Mondev, for instance, the tribunal held:
“The test is not whether a particular result is surprising, but whether the shock or surprise
occasioned to an impartial tribunal leads, on reflection, to justified concerns as to the
Methanex, Final Award, Part IV, Ch. D, ¶ 7 (Aug. 3, 2005).
1267 International Thunderbird, Award, ¶ 147 (Jan. 26, 2006) (internal citation omitted).
1268 Claimant’s Reply Memorial, ¶ 239, quoting S.D. Myers, Partial Award, ¶ 263 (Nov. 13, 2000).
1269 Id., citing International Thunderbird, Award, ¶ 194 (Jan. 26, 2006).
1270 Respondent’s Counter-Memorial, at 227.
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judicial propriety of the outcome ….”1271 Respondent understands this to be the case
because tribunals consistently afford administrative decision-making a high level of
deference.1272 Respondent quotes S.D. Myers to illustrate this deference: “determination
[that Article 1105 has been breached] must be made in light of the high measure of
deference that international law generally extends to the right of domestic authorities to
regulate matters within their own borders.”1273 This, Respondent argues, leads to the
result that merely imperfect legislation or regulation does not give rise to State
responsibility under customary international law.1274
625. The Tribunal finds that, in this situation, both Parties are correct. Previous
tribunals have indeed found a certain level of arbitrariness to violate the obligations of a
State under the fair and equitable treatment standard. Indeed, arbitrariness that
contravenes the rule of law, rather than a rule of law, would occasion surprise not only
from investors, but also from tribunals.
1275 This is not a mere appearance of arbitrariness,
however—a tribunal’s determination that an agency acted in a way with which the
tribunal disagrees or that a state passed legislation that the tribunal does not find curative
of all of the ills presented; rather, this is a level of arbitrariness that, as International
Thunderbird put it, amounts to a “gross denial of justice or manifest arbitrariness falling
below acceptable international standards.”1276
626. The Tribunal therefore holds that there is an obligation of each of the NAFTA
State Parties inherent in the fair and equitable treatment standard of Article 1105 that they
do not treat investors of another State in a manifestly arbitrary manner. The Tribunal thus
determines that Claimant has sufficiently substantiated its arguments that a duty to
protect investors from arbitrary measures exists in the customary international law
minimum standard of treatment of aliens; though Claimant has not sufficiently rebutted
Respondent’s assertions that a finding of arbitrariness requires a determination of some
act far beyond the measure’s mere illegality, an act so manifestly arbitrary, so unjust and
surprising as to be unacceptable from the international perspective.
1271 Mondev, Award, ¶ 127 (Oct. 11, 2002).
1272 Respondent’s Counter-Memorial, at 227.
1273 Id. at 230, quoting S.D. Myers, Partial Award, ¶ 263 (Nov. 13, 2000).
1274 Respondent’s Rejoinder, at 188.
1275 ELSI, Judgment, ¶ 128 (July 28, 1989).
1276 International Thunderbird, Award, ¶ 194 (Jan. 26, 2006).
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4. FINAL DISPOSITION OF THE TRIBUNAL WITH RESPECT TO THE SCOPE OF THE
FAIR AND EQUITABLE LEGAL STANDARD
627. The Tribunal holds that Claimant has not met its burden of proving that
something other than the fundamentals of the Neer standard apply today. The Tribunal
therefore holds that a violation of the customary international law minimum standard of
treatment, as codified in Article 1105 of the NAFTA, requires an act that is sufficiently
egregious and shocking—a gross denial of justice, manifest arbitrariness, blatant
unfairness, a complete lack of due process, evident discrimination, or a manifest lack of
reasons—so as to fall below accepted international standards and constitute a breach of
Article 1105. Such a breach may be exhibited by a “gross denial of justice or manifest
arbitrariness falling below acceptable international standards;”1277 or the creation by the
State of objective expectations in order to induce investment and the subsequent
repudiation of those expectations.1278
B. DETERMINATION OF WHETHER THE FACTS ALLEGED VIOLATE THE
ARTICULATED LEGAL STANDARD OF ARTICLE 1105(1)
The Tribunal emphasizes that, although bad faith
may often be present in such a determination and its presence certainly will be
determinative of a violation, a finding of bad faith is not a requirement for a breach of
Article 1105(1).
628. Claimant argues, as part of its claim under Article 1105 of the NAFTA, that in
“determining whether the Respondent’s conduct rises to the level of a breach of Article
1105, the Tribunal should consider the entirety of its conduct rather than focusing on
individual aspects of that conduct.”1279 Quoting GAMI, Claimant asserts that “[t]he
record as a whole—not isolated events—determines whether there has been a breach of
international law.”1280
1277 Id.
1278 The Tribunal takes no position on the type or nature of repudiation measures that would be
necessary to violate international obligations. As the Tribunal held above, Claimant has not proved
governmental actions that would have legitimately created such expectations; the Tribunal therefore need
not and does not reach the latter half of the inquiry.
1279 Claimant’s Memorial, ¶ 556.
1280 Id., quoting GAMI Investments, Final Award, ¶ 97 (Nov. 15, 2004).
To support its claim that the entirety of the United States federal
and California State actions worked together to violate Claimant’s rights under Article
1105, however, Claimant discusses the individual federal and State actions—and their
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ANNEX 152

United Nations A/CN.4/672
General Assembly Distr.: General
22 May 2014
Original: English
International Law Commission
Sixty-sixth session
Geneva, 5 May-6 June and 7 July-8 August 2014
Second report on identification of customary
international law
by Michael Wood, Special Rapporteur*
Contents
Page
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II. Scope and outcome of the topic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. Use of terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
IV. Basic approach: two constituent elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
V. A general practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
VI. Accepted as law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
VII. Future programme of work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Annex
Proposed draft conclusions on the identification of customary international law . . . . . . . . . . . . . 65
* The Special Rapporteur wishes to thank Omri Sender for his invaluable assistance with the preparation of
the present report.
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I. Introduction
1. In 2012 the Commission placed the topic “Formation and evidence of
customary international law” on its current programme of work, and held an initial
debate on the basis of a note by the Special Rapporteur.1 Also in 2012, the General
Assembly, following a debate in the Sixth Committee, noted with appreciation the
Commission’s decision to include the topic in its programme of work.2
2. At its sixty-fifth session, in 2013, the Commission held a general debate3 on
the basis of the Special Rapporteur’s first report,4 which was of an introductory
nature, and a memorandum by the Secretariat on ‘Elements in the previous work of
the International Law Commission that could be particularly relevant to the topic’.5
In light of the debate, and following informal consultations, the Commission
decided to change the title of the topic to read ‘Identification of customary
international law’. This was done partly to avoid difficulties with the translation of
the word ‘evidence’ into other United Nations official languages, and also to
emphasise that the principal objective of the topic was to offer guidance to those
called upon to identify the existence of a rule of customary international law. The
change in title was made on the understanding that matters relating both to what one
Commission member referred to as the ‘formative elements’, and to evidence or
proof of customary international law, remained within the scope of this topic.6
3. In addition, the Special Rapporteur drew the following conclusions7 from the
debate and informal consultations:
(a) There was general support among members of the Commission for the
‘two-element’ approach, that is to say, that the identification of a rule of customary
international law requires an assessment of both general practice and acceptance of
that practice as law. Virtually all those who spoke expressly endorsed this
approach, which was also supported by the wide array of materials covered in the
first report, and none questioned it. At the same time, it was recognized that the two
elements may sometimes be ‘closely entangled’, and that the relative weight to be
given to each may vary according to the circumstances.
__________________
1 See A/CN.4/653, Note on the formation and evidence of customary international law.
2 General Assembly resolution 67/92 of 14 December 2012, para. 4.
3 See summary records A/CN.4/SR.3181, 3182, 3183, 3184, 3185, 3186 (17, 18, 19, 23, 24, 25 July 2013);
A/68/10: Report of the International Law Commission on its Sixty-fifth session (6 May–7 June and 8 July–
9 August 2013), paras. 66-107.
4 A/CN.4/663.
5 A/CN.4/659 (hereinafter: ‘Secretariat memorandum’).
6 A/CN.4/SR.3186 (25 July 2013), at 5. It is worthwhile to recall in this context Jennings’ observation that
“in international law the questions of whether a rule of customary law exists, and how customary law is
made, tend in practice to coalesce”: R. Jennings, ‘What is International Law and How Do We Tell It When
We See It?’, Annuaire Suisse de Droit International, 37 (1981), 59, 60. See also K. Wolfke, Custom in
Present International Law, 2nd edition (Martinus Nijhoff Publishers, 1993), 116 (“The ascertainment and
formation of customary international law are of necessity closely interrelated, since, on the one hand, the
process of formation determines the means of identification of customary rules, and on the other, the action
of ascertaining custom or its elements influences its further development. This interdependence is already
evident from the content of Article 38.1(b) of the Statute of the [International] Court”).
7 A/CN.4/SR.3186, ibid., at 3-6.
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(b) There was widespread agreement that the primary materials for seeking
guidance on the topic would be likely to be the approach of States, as well as that of
international courts and tribunals, first among them the International Court of
Justice.
(c) There was general agreement with the view that the outcome of the work
on the topic should be of a practical nature, and should be a set of ‘conclusions’ with
commentaries. Moreover, there was general agreement that in drafting conclusions
the Commission should not be overly prescriptive.
(d) There was general agreement that the Commission would need to deal to
some degree with the relationship between customary international law and other
sources of international law, in particular treaties and general principles of law. In
addition, there was interest in looking into ‘special’ or ‘regional’ customary
international law.
(e) Most members of the Commission were of the view that jus cogens
should not be dealt with as part of the present topic.
4. During the Sixth Committee debate in 2013, delegations welcomed the ‘twoelement’
approach, while stressing the need to address the question of the relative
weight to be accorded to State practice and opinio juris. There were differing views
on whether to include a detailed study of jus cogens within the present topic. The
Commission’s intention to consider the relationship between customary
international law and other sources of international law was generally welcomed,
though it was noted that the question of the hierarchy of sources was for separate
consideration. The importance of looking at ‘special’ or ‘regional’ customary
international law, including ‘bilateral custom’, was stressed.8
5. Delegations reaffirmed the importance of having regard, when identifying
customary international law, as far as possible, to the practice of States from all
regions, while noting, however, that relatively few States systematically compile
and publish their practice. Caution was expressed concerning the analysis of State
practice, in particular with respect to decisions of domestic and regional courts. It
was further suggested that the practice of international organizations should be
considered.9
6. One or two delegations proposed that the form of the final outcome of the
Commission’s work on the topic should be considered at a later stage; nevertheless,
the Commission’s present intention that the outcome should take the form of
‘conclusions’ with commentaries was widely supported. The importance of not
being overly prescriptive was emphasised, as was the notion that the flexibility of
customary international law must be preserved.10
7. At its 2013 session, the Commission requested States “to provide information,
by 31 January 2014, on their practice relating to the formation of customary
international law and the types of evidence suitable for establishing such law in a
given situation, as set out in (a) official statements before legislatures, courts and
__________________
8 A/CN.4/666: Topical summary of the discussion held in the Sixth Committee of the General Assembly
during its sixty-eighth session, paras. 43-44.
9 Ibid., at paras. 45-46.
10 Ibid., at para. 47.
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international organizations; and (b) decisions of national, regional and subregional
courts.”11 As of the date of writing this report, written contributions had been
received from nine States,12 for which the Special Rapporteur is very grateful.
Further contributions would be welcome at any time.
8. The Special Rapporteur also welcomes the contribution that can be made by
academic bodies to thinking on the subject. Over the last year or two, various
institutions have organised meetings on aspects of the topic, which were both
encouraging and stimulating. Since the Commission’s sixty-fifth session there have
also been some new relevant writings, as well as judgments of international courts
and tribunals, which this report has taken into account.
9. The first report sought to describe the basic materials to be consulted for the
purposes of the present topic, and considered certain preliminary issues. This second
report covers central questions concerning the approach to the identification of rules
of ‘general’ customary international law, in particular the two constituent elements
and how to determine whether they are present. Section II of the report covers the
scope and outcome of the topic, explaining that the draft conclusions concern the
method for identifying rules of customary international law, and do not enter upon
the actual substance of such rules. Section III, concerning the use of terms, includes
a definition of customary international law which is inspired by the wording of
Article 38.1(b) of the Statute of the International Court of Justice, but does not refer
directly to that provision. Section IV describes the basic ‘two elements’ approach in
general terms, these elements being ‘a general practice’ and ‘accepted as law’
(commonly referred to as ‘State practice’ and ‘opinio juris’, respectively). Sections
V and VI then begin the more detailed inquiry into the two elements, which (as
explained in Section VII on the future programme of work) will be continued in the
third report.
10. It seems desirable to cover in the same report both practice and opinio juris,
given the close relationship between the two. At the same time, doing so necessarily
means that a large amount of ground had to be covered in this report without the
benefit of detailed discussions within the Commission and Sixth Committee.
Sections V and VI are thus necessarily of a rather preliminary nature; the Special
Rapporteur may need to review and further refine both the text and the proposed
conclusions in the next report.
11. The present report proposes 11 draft conclusions, which are reproduced
together in the annex. As indicated there, it is proposed that the draft conclusions
should be divided into four Parts (Introduction; Two constituent elements; A general
practice; Accepted as law). This indicates the general structure envisaged by the
Special Rapporteur. Further draft conclusions will be proposed in the next report,
but – subject always to the views of members of the Commission – these are
unlikely to affect the structure.
__________________
11 A/68/10, supra note 3, at para. 26.
12 The Kingdom of Belgium; the Republic of Botswana; Cuba; the Czech Republic; the Republic of El
Salvador; the Federal Republic of Germany; Ireland; the Russian Federation; and the United Kingdom of
Great Britain and Northern Ireland.
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II. Scope and outcome of the topic
12. The debates in the Commission and in the Sixth Committee in 2013 confirmed
the utility of the present topic, which aims particularly to offer practical guidance to
those, in whatever capacity, called upon to identify rules of customary international
law, in particular those who are not necessarily specialists in the general field of
public international law. It is important that there be a degree of clarity in the
practical application of this central aspect of international law, while recognizing of
course that the customary process is inherently flexible. As is widely recognized,
“[t]he question of sources is … of critical importance; and the jurisprudential and
philosophical debates that continue to rage have much more than an academic
significance. It is right and proper to find them absorbing, and to participate in the
intellectual exchanges. But we should not ignore that the need for them is a
damaging acknowledgment of inadequacies in a legal system”.13
13. It is not of course the object of the present topic to determine the substance of
the rules of customary international law, or to address the important question of who
is bound by particular rules (States, international organizations, other subjects of
international law). The topic deals solely with the methodological question of the
identification of customary international law.
14. The present topic is and its conclusions are intended to be without prejudice to
ongoing work on other topics. It will also be important, as work on the topic
proceeds, to avoid entering upon matters relating to other sources of international
law, including general principles of law (Article 38.1(c) of the Statute of the
International Court of Justice). The work will also be without prejudice to questions
relating to jus cogens, which could be the subject of a separate topic.
15. In light of the above the following draft conclusion is proposed:
Draft Conclusion 1
Scope
1. The present draft conclusions concern the methodology for
determining the existence and content of rules of customary international
law.
2. The present draft conclusions are without prejudice to the
methodology concerning other sources of international law and questions
relating to peremptory norms of international law (jus cogens).
III. Use of terms
16. In the first report, the Special Rapporteur proposed a definition of ‘customary
international law’ that consisted of a simple cross-reference to Article 38.1(b) of the
Statute of the International Court of Justice (ICJ).14 A number of members of the
__________________
13 R. Higgins, Problems and Process: International Law and How We Use It (Clarendon Press, 1994), 17.
14 A/CN.4/663, supra note 1, at para. 45.
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Commission felt that a cross-reference was not entirely satisfactory, both because it
was not self-contained and because it might be seen as relying too heavily on the
Statute, which was in terms only applicable to the ICJ.15
17. The Special Rapporteur therefore proposes that the Commission adopt a
definition of customary international law that draws upon the language of the ICJ
Statute, without referring directly to it. This would have the advantage of
maintaining the key concepts (‘a general practice’; ‘accepted as law’), which are the
basis of the approach not only of the ICJ itself but also of other courts and tribunals
and of States.16 The language of Article 38.1(b), now almost a century old, continues
to be widely relied upon and has lost none of its relevance. Indeed, compared with
what are perhaps the terms in more common use today (‘State practice’ and ‘opinio
juris’) the wording of the Statute seems less problematic and indeed more modern.
In any event, the division into two distinct elements mandated by the language of
the Statute “constitutes an extremely useful tool for ‘discovering’ customary
rules”.17
18. Another term that it may perhaps be useful to define is ‘international
organization’. It would seem appropriate to adopt the definition used in the Vienna
Convention on the Representation of States in their Relations with International
Organizations of a Universal Character,18 as well as in the Vienna Convention on the
Law of Treaties between States and International Organizations or between
International Organizations,19 that is, that “international organization” means an
“intergovernmental organization”. As is clear from the Commission’s commentary,
the more elaborate definition employed in the draft articles on the Responsibility of
international organizations was devised for the particular circumstances of that
topic.20 In the present context, the more general and broader definition would seem
preferable.
__________________
15 But see ibid., at para. 32 (“Article 38.1 has frequently been referred to or reproduced in later instruments.
Although in terms it only applies to the International Court, the sources defined in Article 38.1 are
generally regarded as valid for other international courts and tribunals as well, subject to any specific rules
in their respective statutes” [citations omitted]). The chapeau of Art. 38.1, as adopted in 1945 (“The Court,
whose function is to decide in accordance with international law, such disputes as are submitted to it, shall
apply:” (emphasis added)), strongly suggests that this provision of the Statute is intended to state the
sources of international law.
16 See paras. 24-25 below.
17 A. Pellet, ‘Article 38’, in A. Zimmermann et al., The Statute of the International Court of Justice: A
Commentary, 2nd edition (Oxford University Press, 2012), 731, 813. See also G.M. Danilenko, ‘The
Theory of International Customary Law’, German Yearbook of International Law, 31 (1988), 9, 10-11 (“…
the definition of custom provided by Art. 38 of the statute is extremely important for the theory and
practice of customary international law. In the first place, Art. 38 reaffirms the recognition by all States of
international custom as one of the main sources of international law … Secondly, Art. 38 reflects the
agreement of all members of the international community on basic constituent elements required for the
formation and operation of customary rules of international law, namely, practice, on the one hand, and
acceptance of this practice as law, on the other”); G. Arangio-Ruiz, ‘Customary Law: A Few More
Thoughts about the Theory of ‘Spontaneous’ International Custom’, in N. Angelet (ed.), Droit Du Pouvoir,
Pouvoir Du Droit: Mélanges offerts à Jean Salmon (Bruylant, 2007), 93, 105.
18 Art. 1.1(1).
19 Art. 2.1(i).
20 Articles on the Responsibility of international organizations (2011), Art. 2(a) and commentary (1) to (15):
Report of the ILC 2011, 73-78.
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19. It will be for consideration, as the topic proceeds, whether further terms need
to be defined. If there is eventually a ‘use of terms’ provision it may be desirable to
include a saving clause along the lines of those contained in earlier texts based on
the Commission’s drafts, such as article 2.3 of the 2004 United Nations Convention
on Jurisdictional Immunities of States and Their Property.21
20. In light of the above, the following draft conclusion is proposed:
Draft Conclusion 2
Use of terms
For the purposes of the present draft conclusions:
(a) “Customary international law” means those rules of international law that derive
from and reflect a general practice accepted as law;
(b) “International organization” means an intergovernmental organization;
(c) …
IV. Basic approach: two constituent elements
21. The present report proceeds on the basis that the identification of a rule of
customary international law requires an assessment of both practice and the
acceptance of that practice as law (‘two-element’ approach).22 There was widespread
support for this approach within the Commission in the course of its debate in 2013,
as also in the Sixth Committee.23 As explained below, the two-element approach is
indeed generally adopted in the practice of States and the decisions of international
courts and tribunals, including the International Court of Justice. It is widely
endorsed in the literature.
22. Under this approach, a rule of customary international law may be said to exist
where there is ‘a general practice’ that is ‘accepted as law’. These two requirements,
“the criteria which [the International Court of Justice] has repeatedly laid down for
identifying a rule of customary international law”,24 must both be identified in any
__________________
21 The Article reads: “The provisions of paragraphs 1 and 2 regarding the use of terms in the present
Convention are without prejudice to the use of those terms or to the meanings which may be given to them
in other international instruments or in the internal law of any State”.
22 See also para. 3.1 above.
23 See also para. 24 below.
24 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports
2012, p. 99, at p. 122, para. 55; the Court went on, in the same paragraph, to specify that “In particular ...
the existence of a rule of customary international law requires that there be ‘a settled practice’ together
with opinio juris”. See also North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para.
77 (“…two conditions must be fulfilled. Not only must the acts concerned amount to a settled practice, but
they must also be such, or be carried out in such a way, as to be evidence of a belief that this practice is
rendered obligatory by the existence of a rule of law requiring it”); Continental Shelf (Libyan Arab
Jamahiriya/Malta), Judgment, I.C.J. Reports 1985, p. 13, at p. 29 (“It is of course axiomatic that the
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given case to support a finding that a relevant rule of customary international has
emerged. Thus, for a persuasive analysis of whether a rule of customary
international law exists, “it would be necessary to be satisfied that such a rule meets
the conditions required for the birth of an international custom”.25
23. The two elements are indeed indispensable for any rule of customary
international law properly so called. As one author has explained, “Without practice
(consuetudo), customary international law would obviously be a misnomer, since
practice constitutes precisely the main differentia specifica of that kind of
international law. On the other hand, without the subjective element of acceptance
of the practice as law the difference between international custom and simple
regularity of conduct (usus) or other non-legal rules of conduct would disappear”.26
24. The two-element approach is widely supported in State practice. To mention
just a few recent examples, Rwanda, the United States and Uruguay have stated, in
bilateral investment treaties, “their shared understanding” that customary
international law “… results from a general and consistent practice of States that
they follow from a sense of legal obligation”.27 The Netherlands and The United
Kingdom have similarly stated that “… the two constituent elements of customary
international law [are] the widespread and consistent practice of States (State
practice) and the belief that compliance is obligatory under a rule of law (opinio
juris)”.28 Such a position was adopted by Member States of the European Union as a
whole in the European Union Guidelines on promoting compliance with
international humanitarian law, which define customary international law as a
source of international law that “is formed by the practice of States, which they
accept as binding upon them”.29 The Supreme Court of Singapore has ruled that
“extensive and virtually uniform practice by all States … together with opinio juris,
__________________
material of customary international law is to be looked for primarily in the actual practice and opinio juris
of States”); Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of
America), Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 97 (“...the Court has next to consider what are
the rules of customary international law applicable to the present dispute. For this purpose, it has to direct
its attention to the practice and opinio juris of States”); P. Tomka, ‘Custom and the International Court of
Justice’, The Law & Practice of International Courts and Tribunals, 12 (2013), 195, 197 (“In fact, the
Court has never abandoned its view, firmly rooted in the wording of the Statute, that customary
international law is ‘general practice accepted as law’”).
25 Fisheries Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at p. 47
(Joint Separate Opinion of Judges Forster, Bengzon, Jiménez de Aréchaga, Nagendra Singh and Ruda).
26 K. Wolfke, supra note 6, at 40-41.
27 Annex A to the Treaty between the Government of the United States of America and the Government of the
Republic of Rwanda Concerning the Encouragement and Reciprocal Protection of Investment (2008) and
Annex A to the Treaty between the United States of America and the Oriental Republic of Uruguay
Concerning the Encouragement and Reciprocal Protection of Investment (2005), in which the parties
“confirm their shared understanding that ‘customary international law’ generally and as specifically
referenced in Article 5 and Annex B results from a general and consistent practice of States that they
follow from a sense of legal obligation”.
28 Brief by the Governments of the United Kingdom of Great Britain and Northern Ireland and The Kingdom
of The Netherlands as Amici Curiae in support of the Respondents in the case of Esther Kiobel et al v
Royal Dutch Petroleum Co et al (3 February 2012) before the United States Supreme Court, 8, 11.
29 Updated European Union Guidelines on promoting compliance with international humanitarian law
(2009/C 303/06), section 7.
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is what is needed for the rule in question to become a rule of CIL”,30 and in Slovenia
the Constitutional Court has likewise held that that norms “can become compulsory
as customary international law when they are applied by a great number of States
with the intention of respecting a rule in international law”.31 The Constitutional
Court and Supreme Court of the Czech Republic have also recognized the two
elements as essential,32 as did the New Zealand Court of Appeals, which observed
that “customary international law, the (unwritten) rules of international law binding
on all States … arise when States follow certain practices generally and consistently
out of a sense of legal obligation”.33 That both general practice and acceptance as
law are required for the formation and identification of customary international law
has been acknowledged, moreover, by, among others, Austria, India, Israel, Iran,
Malaysia, the Nordic countries, Portugal, Russia, South Africa, and Vietnam, in
their interventions in the Sixth Committee debates on the 2012 and 2013 reports of
the International Law Commission.34 In recent pleadings before the International
Court of Justice, States continue to base their arguments upon the two-element
approach.35
25. Other international courts and tribunals likewise accept that the identification
of rules of customary international law requires an inquiry into the two elements. As
noted in the first report, notwithstanding the specific contexts in which these other
courts and tribunals work, overall there is substantial reliance on the approach and
case law of the Permanent Court of International Justice and the International Court
of Justice, including the constitutive role attributed to the two elements of State
practice and opinio juris.36
__________________
30 Yong Vui Kong v Public Prosecutor, [2010] 3 S.L.R. 489 [2010] SGCA 20 (Supreme Court of Singapore
— Court of Appeal, 14 May 2010), paras. 96-98.
31 Decision No. U-I-146/07, dated 13 November 2008, para. 19; see also Case No. Up-13/99, decision of 8
March 2001, para. 14.
32 File no. II. ÚS 214/98 (30 January 2001) and file no. 11 Tcu 167/2004 (16 December 2004), respectively.
33 Attorney General v. Zaouvi, CA20/04, Judgment (30 September 2004), para. 34.
34 The statements by the various States during these debates may be found on the United Nations’
PaperSmart Portal, available online at http://www.un.org/en/ga/sixth/.
35 For example, in Jurisdictional Immunities of the State (Germany v. Italy) Germany argued that “No general
practice, supported by opinio juris, exists as to any enlargement of the derogation from the principle of
state immunity in respect of violations of humanitarian law committed by military forces during an armed
conflict”, and Italy, who was not relying on customary international law, suggested in its Counter-
Memorial that “The question at issue in the present case is not whether there is a widespread and consistent
practice, supported by the opinio juris, pointing to the existence of an international customary rule
permitting in general terms the denial of immunity in cases involving gross violations of international
humanitarian law or human rights law” (Memorial of the Federal Republic of Germany (12 June 2009),
para. 55; Counter-Memorial of Italy (22 December 2009), para. 4.108). For another recent example, see the
Questions relating to the Obligation to Prosecute or Extradite (Belgium v. Senegal) case, in particular
Questions put to the Parties by Members of the Court at the close of the public hearing held on 16 March
2012: compilation of the oral and written replies and the written comments on those replies, pp. 20-48,
especially at pp. 24-25 (Belgium) - “Question put to Belgium - Senegal being invited to comment - by
Judge Greenwood at the end of the public sitting of 16 March 2012”. In other instances as well, just as
States have not argued for the existence of a rule of customary international law based on the presence of
either practice or opinio juris alone, they have not attempted to question the existence of an alleged rule of
customary international law arguing that the two-element approach is theoretically flawed.
36 A/CN.4/663, supra note 1, at paras. 66-82.
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26. Most authors also adopt the two-element approach. It is to be found in both
textbooks and treatises on public international law37 and in monographs on or
dealing with custom, whether specifically on sources38 or on some other topic of
international law.39 For example, Oppenheim states that “the terms of Article
38(1)(b) … make it clear that there are two essential elements of custom, namely
practice and opinio juris”.40 And the recent edition of Brierly states that “[c]ustom in
its legal sense means something more than mere habit or usage; it is a usage felt by
those who follow it as obligatory … in the words of Article 38(1)(b) of the Statute,
__________________
37 See, for example, R. Jennings, A. Watts (eds.) Oppenheim’s International Law, vol. I, 9th edition
(Longmans, 1991), 25-31; A. Cassese, International Law, 2nd edition (Oxford University Press, 2005),
153-169 (“the fundamental elements constituting custom: State practice (usus or diuturnitas) and the
corresponding views of States (opinio juris or opinio necessitatis))”; P.-M. Dupuy, Y. Kerbrat, Droit
international public, 10th edition (Dalloz, 2010), 364 (“La bivalence du phénomène coutumier trouve un
écho direct dans la représentation qu'en donnent les différents courants de la doctrine, aussi bien
objectiviste que volontariste. Pour les uns comme pour les autres, confortés par le texte précité de l'article
38. b du statut de la Cour de La Haye (CPJI puis CIJ), la réunion de deux éléments est nécessaire pour que
naisse la coutume en tant que règle de droit”); M. Bos, A Methodology of International Law (North-
Holland, 1984), 109 (“for a custom to exist one merely has to ascertain the existence of the alleged factual
aspects of it, i.e. its material and psychological components, and to put these to the test of the definition of
custom”); V. Lowe, International Law (Oxford University Press, 2007), 36-63; M.N. Shaw, International
Law, 6th edition (Cambridge University Press, 2008), 72-93 (“it is possible to detect two basic elements in
the make-up of a custom. These are the material facts, that is, the actual behaviour of states and the
psychological or subjective belief that such behaviour is law”); L. Damrosch, L. Henkin, S. Murphy and H.
Smit, International Law: Cases and Materials, 5th edition (West, 2009), 59 (“What is clear is that the
definition of custom comprises two distinct elements …”); P. Dailler, M. Forteau and A. Pellet, Droit
international public, 8th edition (L.G.D.J, 2009), 352-379 (“Il est certes admis par tous que le processus
coutumier n’est parfait que par la réunion de deux elements”); S. Murphy, Principles of International Law,
2nd edition (West, 2012), 92-101 (“States through their practice, and international lawyers through
writings and judicial decisions, have agreed that customary international law exists whenever two key
requirements are met: (1) a relatively uniform and consistent state practice regarding a particular matter;
and (2) a belief among states that such practice is legally required”); A. Clapham, Brierly’s Law of
Nations: An Introduction to the Role of Law in International Relations, 7th edition (Oxford University
Press, 2012), 57-63; J. Crawford, Brownlie’s Principles of Public International Law, 8th edition (Oxford
University Press, 2012), 23-30 (“the existence of custom is … the conclusion of someone (a legal adviser,
a court, a government, a commentator) as to two related questions: (a) is there a general practice; (b) is it
accepted as international law?”); M. Diez de Velasco (C. Escobar Hernández, ed.), Instituciones de
derecho internacional public, 18th edition (Tecnos, 2013), 136-141 (“una prática seguida por los sujetos
internacionales e generalmente aceptada por éstos como derecho”); J. Klabbers, International Law
(Cambridge University Press, 2013), 26-34 (“two main requirements: there must be a general practice, and
this general practice must be accepted as law ….”); C. Santulli, Introduction au droit international
(Pedone, 2013), 45 (“la doctrine classique des deux éléments de la coutume: la pratique, qui constitue
l’élément materiel, et l’acceptation ou opinio juris, qui constitue l’élément volontaire (ou
“psychologique”)”).
38 See, for example, L. Millán Moro, La “Opinio Iuris” en el Derecho Internacional Contemporaneo
(Editorial Centro de Estudios Ramon Areces, 1990); H. Thirlway, The Sources of International Law
(Oxford University Press, 2014), Chapter III (“The traditional criteria in international law for the
recognition of a binding custom are that there should have been sufficient State practice … and that this
should have been accompanied by, or be backed by, evidence of what is traditionally called opinio juris or
opinio juris sive necessitatis”).
39 For example, O. Corten, Le droit contre la guerre, 2nd edition (Bruylant, 2014), Chapter 1; for an earlier
edition in English, see O. Corten, The Law Against War: The Prohibition on the Use of Force in
Contemporary International Law (Hart, 2010), Chapter 1.
40 R. Jennings, A. Watts (eds.), supra note 37, at 27.
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we must examine whether the alleged custom shows a ‘general practice accepted as
law’”.41
27. As was noted in the first report, certain authors have sought to devise
alternative approaches, often emphasising one constituent element over the other, be
it practice or opinio juris, or even excluding one element altogether.42 This was also
the case, to a degree, with the work of the International Law Association that
culminated in its London Statement of 2000,43 which tended to downplay the role of
the subjective element.44 While such writings are always interesting and
provocative, and have been (and should be) duly taken into account, it remains the
case that they do not seem to have greatly influenced the approach of States or
courts. The two-element approach remains dominant.45
28. The first report raised the question whether there might be different
approaches to the identification of rules of customary international law in different
fields.46 For example, there have been suggestions in the literature,47 occasionally
echoed in practice,48 that in such fields as international human rights law,
__________________
41 A. Clapham, supra note 37, at 57.
42 See A/CN.4/663, supra note 1, at paras. 97-101.
43 London Statement of Principles Applicable to the Formation of General Customary International Law,
with commentary: Resolution 16/2000 (Formation of General Customary International Law), adopted at
the sixty-ninth Conference of the International Law Association, in London, on 29 July 2000 (hereinafter:
‘ILA London Statement of Principles’); see also A/CN.4/663, supra note 1, at paras. 89-91.
44 The final report referred to “the alleged necessity for the ‘subjective’ element” (ILA London Statement of
Principles, Introduction, para. 10, as well as Part III).
45 See also O. Sender, M. Wood, ‘The Emergence of Customary International Law: Between Theory and
Practice’, in Y. Radi, C. Brölmann (eds.), Research Handbook on the Theory and Practice of International
Law-Making (Edward Elgar, forthcoming) (“the two-element approach has … enabled the formation and
identification of rules of international law that have for the most part won wide acceptance, while allowing
customary international law to retain its characteristic flexibility. It has proven to be both useful and stable,
and it remains authoritative through the ICJ Statute, which is binding on 193 States. Other theories on how
a rule of customary international law emerges are, essentially, policy approaches; as such they may be
instructive, but they remain policy, not law.”).
46 A/CN.4/663, supra note 1, at para. 19.
47 A/CN.4/663, supra note 1, at footnotes 32-34; see also R. Kolb, ‘Selected Problems in the Theory of
Customary International Law’, Netherlands International Law Review, 50 (2003), 119,128 (“… the time
has come to put à plat the theory of custom and to articulate different types (and thus elements) of it in
relation to different subject matters and areas. There is not one international custom; there are many
international customs whose common family-bond is still to be shown. Consequently, a new map of
international customary law has to be drawn, reflecting the various contours of international life, instead of
artificially pressing the growing diversity of that experience into the Procrustean bed of traditional practice
and opinio juris”); A. Cassese, supra note 37, at 160-161 (“Usus and opinio, as elements of customary law,
play a different role in a particular branch of international law, the humanitarian law of armed conflict …
In consequence [of the wording of the Martens Clause] it is logically admissible to infer (and is borne out
by practice) that the requirement of State practice may not need to apply to the formation of a principle or
a rule based on the laws of humanity or the dictates of public conscience …”).
48 See, for example, Prosecutor v. Kupreškić, Case No. IT-95-16-T (ICTY Trial Chamber), 14 January 2000,
para. 527 (“principles of international humanitarian law may emerge through a customary process under
the pressure of the demands of humanity or the dictates of public conscience, even where State practice is
scant or inconsistent. The other element, in the form of opinio necessitatis, crystallizing as a result of the
imperatives of humanity or public conscience, may turn out to be the decisive element heralding the
emergence of a general rule or principle of humanitarian law.”); see also Appeal Judgment of the
Extraordinary Chambers in the Courts of Cambodia (Supreme Court Chamber), Case number 001/18-07-
2007-ECCC/SC (3 February 2012), para. 93 (“With respect to customary international law, the Supreme
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international humanitarian law and international criminal law, among others, one
element may suffice in constituting customary international law, namely opinio
juris.49 However, the better view is that this is not the case.50 There may, on the
other hand, be a difference in application of the two-element approach in different
fields (or, perhaps more precisely, with respect to different types of rules): for
example, it may be that “for purposes of... [a specific] case the most pertinent State
practice”51 would be found in one particular form of practice that would be given “a
major role”.52 But the underlying approach is the same: both elements are required.
__________________
Court Chamber considers that in evaluating the emergence of a principle or general rule concerning
conduct that offends the laws of humanity or the dictates of public conscience in particular, the traditional
requirement of ‘extensive and virtually uniform’ state practice may actually be less stringent than in other
areas of international law, and the requirement of opinio juris may take pre-eminence over the usus
element of custom”).
49 It has similarly been suggested that “a sliding scale” by which consistent State practice may establish a rule
of customary international law even without any evidence of acceptance of the practice as law, and a
clearly established acceptance as law may establish a rule of customary international law without any
evidence of a settled practice, could be utilized “depend[ing] on the activity in question and on the
reasonableness of the asserted customary rule”: See F.L. Kirgis, Jr., ‘Custom on a Sliding Scale’, American
Journal of International Law, 81 (1987), 146-151 (the model also refers to situations where not “much” of
either element, respectively, exists).
50 See also the Statements on behalf of China, Israel, Iran, Poland, the Russian Federation, Singapore and
South Africa in the 2013 Sixth Committee debate on the work of the International Law Commission
(available at http://www.un.org/en/ga/sixth), all calling for a unified approach to be applied; T. Treves,
‘Customary International Law’, in Max Planck Encyclopedia of Public International Law (2012), para. 3
(“The essential characteristic which customary international law rules have in common is the way they
have come into existence and the way their existence may be determined”); J. Kammerhofer, ‘Orthodox
Generalists and Political Activists in International Legal Scholarship’, in M. Happold (ed.), International
Law in a Multipolar World (Routledge, 2012), 138-157.
51 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports
2012, p. 99 at p. 132, para. 73.
52 Ibid., at p. 162 (Separate Opinion of Judge Keith), para. 4. See, for example, Ahmadou Sadio Diallo
(Republic of Guinea v. Democratic Republic of the Congo), Preliminary Objections, Judgment, I.C.J.
Reports 2007, p. 582, at p. 614, para. 88 (“in contemporary international law, the protection of the rights of
companies and the rights of their shareholders, and the settlement of the associated disputes, are essentially
governed by bilateral or multilateral agreements for the protection of foreign investments, such as the
treaties for the promotion and protection of foreign investments, and the Washington Convention of 18
March 1965 on the Settlement of Investment Disputes between States and Nationals of Other States, which
created an International Centre for Settlement of Investment Disputes (ICSID), and also by contracts
between States and foreign investors. In that context, the role of diplomatic protection somewhat faded, as
in practice recourse is only made to it in rare cases where treaty régimes do not exist or have proved
inoperative”); Prosecutor v. Tadić, Case No. IT-94-1, Decision on the Defence Motion for Interlocutory
Appeal on Jurisdiction (ICTY Appeals Chamber), 2 October 1995, para. 99 (“Before pointing to some
principles and rules of customary law that have emerged in the international community for the purpose of
regulating civil strife, a word of caution on the law-making process in the law of armed conflict is
necessary. When attempting To ascertain State practice with a view to establishing the existence of a
customary rule or a general principle, it is difficult, if not impossible, to pinpoint the actual behaviour of
the troops in the field for the purpose of establishing whether they in fact comply with, or disregard, certain
standards of behaviour. This examination is rendered extremely difficult by the fact that not only is access
to the theatre of military operations normally refused to independent observers (often even to the ICRC)
but information on the actual conduct of hostilities is withheld by the parties to the conflict; what is worse,
often recourse is had to misinformation with a view to misleading the enemy as well as public opinion and
foreign Governments. In appraising the formation of customary rules or general principles one should
therefore be aware that, on account of the inherent nature of this subject-matter, reliance must primarily be
placed on such elements as official pronouncements of States, military manuals and judicial decisions”);
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Any other approach risks artificially dividing international law into separate fields,
which would run counter to the systemic nature of international law.53 In any case,
as will be illustrated below, it is often difficult to consider the two elements
separately.54
29. All evidence must be considered in light of its context.55 In assessing the
existence or otherwise of the two constituent elements, be it by reviewing primary
evidence or by looking to subsidiary means, great care is required. While “evidence
can be taken [from a variety of sources]… the greatest caution is always
necessary.”56 Much depends on the particular circumstances in determining what the
relevant practice actually is, and to what extent it is indeed accepted as law,57 and
different weight may be given to different evidence. For example, “[p]articularly
significant are manifestations of practice that go against the interest of the State
from which they come, or that entail for them significant costs in political, military,
economic, or other terms, as it is less likely that they reflect reasons of political
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Prosecutor v. Tadić, Case No. IT-94-1-A, Judgment (ICTY Appeals Chamber), 15 July 1999, para. 194.
See also B. Conforti, B. Labella, An Introduction to International Law (Martinus Nijhoff Publishers, 2012),
32 (“The weight given to the acts depends on the content of the international customary rule. For example,
treaties have great importance in matters of extradition, while domestic court decisions have more weigh in
questions of the jurisdictional immunities of foreign States and foreign State organs, etc.”). Cf. North Sea
Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 175 ,176 ,178 (Dissenting Opinion of Judge
Tanaka) (“To decide whether these two factors in the formative process of a customary law exist or not, is
a delicate and difficult matter … The appraisal of factors must be relative to the circumstances and
therefore elastic; it requires the teleological approach ... In short, the process of generation of a customary
law is relative in its manner according to the different fields of law, as I have indicated above. The time
factor, namely the duration of custom, is relative; the same with factor of number, namely State practice.
Not only must each factor generating a customary law be appraised according to the occasion and
circumstances, but the formation as a whole must be considered as an organic and dynamic process. We
must not scrutinize formalistically the conditions required for customary law and forget the social
necessity, namely the importance of the aims and purposes to be realized by the customary law in
question”).
53 As was stressed at the outset of the 2006 Fragmentation Study, “International law is a legal system”: ILC
Report 2006, para. 251, Conclusion (1). In addition, “[w]hen courts ignore the traditional requirements for
customary international law or fail to subject them to any strict scrutiny they risk giving tacit weight to
what has been called ‘the rush to champion new rules of law’ … [In such cases] [s]cant regard is given to
the niceties of state consent or the likelihood of compliance with such easily pronounced norms” (citations
omitted): A. Boyle, C. Chinkin, The Making of International Law (Oxford University Press, 2007), 285.
54 See also H. Thirlway, supra note 38, at 62 (“Practice and opinio juris together supply the necessary
information for it to be ascertained whether there exists a customary rule, but the role of each – practice
and opinio – is not uniquely focused; they complement one another”); ILA London Statement of Principles,
at 7 (“It is in fact often difficult or even impossible to disentangle the two elements”).
55 See also Case concerning rights of nationals of the United States of America in Morocco, Judgment of
August 27th, 1952: I.C.J. Reports 1952, p. 176, at p. 200 (“There are isolated expressions to be found in the
diplomatic correspondence which, if considered without regard to their context, might be regarded as
acknowledgements of United States claims to exercise consular jurisdiction and other capitulatory rights.
On the other hand, the Court can not ignore the general tenor of the correspondence …”).
56 J.L. Kunz, ‘The Nature of Customary International Law’, American Journal of International Law, 47
(1953), 662, 667.
57 See also T. Treves, supra note 50, at para. 28 (“[manifestations of practice] help in ascertaining what
is customary international law in a given moment. In performing such a task, caution and balance are
indispensable, not only in determining the right mix of what States say and do, want and believe, but also
in being aware of the ambiguities with which many elements of practice are fraught”).
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opportunity, courtesy, etc.”58 In a similar manner, the care with which a statement is
made is a relevant factor; less significance may be given to off-the-cuff remarks
made in the heat of the moment.
30. Ascertaining whether a rule of customary international law exists is a search
for “a practice, which… has gained so much acceptance among States that it may
now be considered a requirement under general international law”.59 Such an
exercise may be an “arduous and complex process”,60 not least because “any alleged
rule of customary law must [of course] be proved to be a valid rule of international
law, and not merely an unsupported proposition”.61 As elaborated below, for this
task “caution and balance are indispensable, not only in determining the right mix of
what States say and do, want and believe, but also in being aware of the ambiguities
with which many elements of practice are fraught”.62
31. In light of the above, the following draft conclusions are proposed:
Draft Conclusion 3
Basic approach
To determine the existence of a rule of customary international law
and its content, it is necessary to ascertain whether there is a general
practice accepted as law.
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58 T. Treves, supra note 50, at para. 30.
59 Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment, I.C.J. Reports 2010, p. 14, at p. 83,
para. 204.
60 E. Petrič, ‘Customary International Law in the Case Law of the Constitutional Court of the Republic of
Slovenia’ (to be published by the Council of Europe). See also the Brief by the Governments of the United
Kingdom of Great Britain and Northern Ireland and The Kingdom of The Netherlands as Amici Curiae in
support of the Respondents in the case of Esther Kiobel et al v Royal Dutch Petroleum Co et al, supra note
28, at 13 (“The methodology of determining what constitutes a new rule of international law is there-fore…
no straight-forward matter and requires painstaking analysis to establish whether the necessary elements of
State practice and opinio juris are present.”); Fisheries Jurisdiction (United Kingdom v. Iceland), Merits,
Judgment, I.C.J. Reports 1974, p. 3, at p. 100 (Separate Opinion of Judge De Castro) (“It is not easy to
prove the existence of a general practice accepted as law”); J.L. Kunz, supra note 56, at 667 (“The
ascertainment whether the two conditions of the custom procedure have been fulfilled in a concrete case …
is a difficult task”).
61 M.N. Shaw, supra note 37, at 144.
62 T. Treves, supra note 50, at para. 28. See also A. Boyle, C. Chinkin, supra note 53, at 279 (“applying the
criteria for establishing custom is not a scientific process, the accuracy of which can be measured. Rather it
requires an evaluation of the facts and arguments”); P.W. Birnie, A.E. Boyle, International Law and the
Environment, 2nd edition (Oxford University Press, 2002), 16 (“the identification of customary law has
always been, and remains, particularly problematical, requiring the exercise of skill, judgment, and
considerable research”).
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Draft Conclusion 4
Assessment of evidence
In assessing evidence for a general practice accepted as law, regard
must be had to the context including the surrounding circumstances.
V. A general practice
32. Practice,63 often referred to as the ‘material’ or ‘objective’ element, plays an
“essential role” in the formation and identification of customary international law.64
It may be seen as the ‘raw material’ of customary international law, as the latter
emerges from practice, which “both defines and limits it”.65 Such practice consists
of “material and detectable”66 acts of subjects of international law, and it is these
“instances of conduct”67 that may form “a web of precedents”68 in which a pattern of
conduct may be observed.
33. From ‘a general practice’ to ‘State practice’. States continue to be the primary
subjects of international law.69 State practice plays a number of important roles in
international law, including subsequent practice as an element (or means) for the
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63 Practice has also been referred to as, inter alia and at times interchangeably, ‘usage’, ‘usus’, ‘consuetude’,
or ‘diuturnitas’.
64 As the International Court observed in Military and Paramilitary Activities in and against Nicaragua,
“Bound as it is by Article 38 of its Statute to apply, inter alia, international custom ‘as evidence of a
general practice accepted as law’, the Court may not disregard the essential role played by general
practice” (Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of
America), Merits, Judgment, I.C.J. Reports 1986, p. 14, at pp. 97-98, para. 184).
65 See Judge Sir Percy Spender’s Dissenting Opinion in Case concerning Right of Passage over Indian
Territory (Merits), Judgment of 12 April 1960: I.C.J. Reports 1960, p. 6, at p. 99 (“The proper way of
measuring the nature and extent of any such custom, if established, is to have regard to the practice which
itself both defines and limits it. The first element in a custom is a constant and uniform practice which must
be determined before a custom can be defined”).
66 Francois Gény, Méthode d’interprétation et sources en droit privé positif (1899), section 110) (referring to
‘usage’ as a constitutive element of customary international law, quoted in A.A. D’Amato, The Concept of
Custom in International Law (Cornell University Press, 1971), 49).
67 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 108. See also Weisburd’s definition: “various types of
activity … practice means just that” (A.M. Weisburd, ‘Customary international Law: The Problem of
Treaties’, Vanderbilt Journal of Transnational Law, 21 (1988), 1, 7).
68 Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 3, at p. 329
(Separate Opinion of Judge Ammoun). See also Corfu Channel case, Judgment of April 9th, 1949: I.C.J.
Reports 1949, p. 4, at pp. 83, 99 (Dissenting Opinion by Judge Azevedo) (“Custom is made up of
recognized precedents … [Customary international law requires] significant or constant facts which could
justify the assumption that States have agreed to recognize a customary [rule]”); North Sea Continental
Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 175 (Dissenting Opinion of Judge Tanaka) (referring to “a
usage or a continuous repetition of the same kind of acts … It represents a quantitative factor of customary
law”); B. Stern, ‘Custom at the Heart of International Law’, Duke Journal of Comparative and
International Law, 11 (2001), 89, 95 (“it is very generally admitted that the material element is constituted
by the repetition of a certain number of facts for a certain length of time, these different variables being
modulated according to different situations”).
69 See also C. Walter, ‘Subjects of International Law’, in Max Planck Encyclopedia of Public International
Law (2012), para. 5.
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interpretation of treaties under articles 31.3(b) and 32 of the Vienna Convention on
the Law of Treaties.70 It is the conduct of States which is of primary importance for
the formation and identification of customary international law, and the material
element of customary international law is thus commonly referred to as ‘State
practice’, that is, conduct which is attributable to States.71 “[T]he actual practice of
States… is expressive, or creative, of customary rules”.72 As the International Court
has consistently made clear, it is “State practice from which customary law is
derived”.73
34. Attribution of practice to a State. As in other cases, such as State
responsibility and subsequent practice in relation to the interpretation of treaties, for
practice to be relevant for the formation of customary international law it must be
attributable to the State.74 For this purpose, the actions of all branches of
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70 Currently under consideration by the Commission in the topic ‘Subsequent agreements and subsequent
practice in relation to interpretation of treaties’: see in particular draft conclusions 4(2) and 5: ILC Report
2013. See also A.M. Weisburd, ‘The International Court of Justice and the Concept of State Practice’,
University of Pennsylvania Journal of International Law, 31 (2009), 295, 299 (observing that “The
significance of State practice in international law is difficult to overstate”); W.J. Aceves, ‘The Economic
Analysis of International Law: Transaction Cost Economics and the Concept of State Practice’, University
of Pennsylvania Journal of International Economic Law, 17 (1996), 995-1068; C. Parry, ‘The Practice of
States’, Transactions of the Grotius Society, 44 (1958) 145, 165 (“One looks to the practice of States, that
is to say, for evidence of new rules on new topics of international law, or of changes in the earlier law”).
71 See also M. Wood, O. Sender, ‘State Practice’, in Max Planck Encyclopedia of Public International Law
(2014 update); Y. Dinstein, ‘The Interaction between Customary Law and Treaties’, 322 Recueil des Cours
(2006), 242, 266 (“The general practice constituting the font et origo of customary international law is, in
essence, that of States”); M.H. Mendelson, ‘The Formation of Customary International Law’, 272 Recueil
des Cours (1998), 155, 201 (“what is conveniently and traditionally called State practice … is, more
precisely, the practice of subjects of international law”). On the historical development of the doctrine of
State practice as the basis of customary international law, see A. Carty, ‘Doctrine versus State Practice’, in
B. Fassbender, A. Peters (eds.), The Oxford Handbook of the History of International Law (Oxford
University Press, 2012), 972-996.
72 Continental Shelf (Tunisia/Libyan Arab Jamahiriya), Judgment, I.C.J. Reports 1982, p. 18, at p. 46, para.
43.
73 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports
2012, p. 99, at p. 143, para. 101. When used, the term ‘international practice’ has thus referred to the
practice of States: See, for example, Interpretation of Peace Treaties (Second Phase), Advisory Opinion:
I.C.J. Reports 1950, p. 221, at p. 242 (Dissenting opinion of Judge Read); Barcelona Traction, Light and
Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 3, at p. 261 (Separate Opinion of Judge
Padilla Nervo), and p. 344 (Dissenting Opinion of Judge Riphagen); Fisheries Jurisdiction (United
Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at p. 83 (Separate Opinion of Judge De
Castro); Gabčikovo-Nagymaros Project (Hungary/Slovakia), Judgment, I.C.J. Reports 1997, p. 7, at p. 236
(Dissenting Opinion of Judge Skubiszewski); Fisheries Jurisdiction (Spain v. Canada), Jurisdiction of the
Court, Judgment, I.C.J. Reports 1998, p. 432, at p. 554 (Dissenting Opinion of Judge Ranjeva); Arrest
Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium), Judgment, I.C.J. Reports 2002,
p. 3, at pp. 75, 76 (Joint Separate Opinion of Judges Higgins, Kooijmans and Buergenthal); Jurisdictional
Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports 2012, p. 99, at p.
170 (Separate Opinion of Judge Keith); Questions relating to the Obligation to Prosecute or Extradite
(Belgium v. Senegal), Judgment, I.C.J. Reports 2012, p. 422, at p. 457.
74 See the Commission’s Articles on the Responsibility of States for Internationally Wrongful Acts (2001),
Part One, Chapter II; and the Draft conclusions on subsequent agreements and subsequent practice in
relation to the interpretation of treaties, draft conclusion 5. See also I. Brownlie, ‘Some Problems in the
Evaluation of the Practice of States as an Element of Custom’, in Studi di diritto internazionale in onore di
Gaetano Arangio Ruiz, vol. I (2004), 313, 318 (referring to the 2001 Articles (4, 5, and 8) when suggesting
that “[n]o doubt analogous principles should apply to the identification of organs and persons competent to
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government (whether exercising executive, legislative, judicial or other functions)
may be relevant.75 The conduct of de facto organs of a State, that is, “those
individuals or entities which are to be considered as organs of a State under
international law, although they are not so characterized under municipal law”,76
may also count as State practice.77 This may be so “whatever position it holds in the
organization of the State, and whatever its character as an organ of the central
Government or of a territorial unit of the State”.78
35. One significant difficulty is ascertaining the practice of States. The
dissemination and location of practice remain an important practical issue in the
circumstances of the modern world, notwithstanding the development of technology
and information resources.79 As indicated in section VII below, this issue – which
the Commission considered several decades ago under the title ‘Ways and means of
__________________
produce statements or materials which qualify as State practice”). It is not necessarily the case that the
rules on attribution will be identical in different contexts; see, for example, H. Thirlway, The Law and
Procedure of the International Court of Justice: Fifty Years of Jurisprudence, vol. II (Oxford University
Press, 2013), 1190 (“The practice supportive of the existence of a rule of customary law must be State
practice, that is to say the practice of organs of the State, though the test is not the same as that for
establishing the responsibility of a State”).
75 Article 4 of the Articles on the Responsibility of States for internationally wrongful acts states that “[t]he
conduct of any state organ shall be considered an act of that State under international law, whether the
organ exercises legislative, executive, judicial or any other function ...”: J. Crawford, State Responsibility.
The General Part (Cambridge University Press, 2013), Part II (Attribution to the state), especially pp. 113-
126. See also Difference Relating to Immunity from Legal Process of a Special Rapporteur of the
Commission of Human Rights, Advisory Opinion, I.C.J. Reports 1999, p. 62, at p. 87 (“According to a
well-established rule of international law, the conduct of any organ of a State must be regarded as an act of
that State”); Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v.
Uganda), Judgment, I.C.J. Reports 2005, p. 168, at p. 242; 2 BvR 1506/03, Order of the Second Senate of 5
November 2003 (German Federal Constitutional Court), para. 51 (“For this purpose [consulting the
relevant state practice], the Court focuses on the conduct of the organs of state authority that are competent
for legal relations under international law; as a general rule, this will be the government or the head of
state. Apart from this, state practice can also result from the acts of other organs of state authority such as
acts of the legislature or of the courts to the extent that their conduct is directly relevant under international
law”); M. Bos, supra note 37, at 229 (“practice can be anything within the scope of a State's jurisdiction.
All actions or, more generally, forms of behaviours so qualified are eligible to become the basis of a
customary rule”); ILA London Statement of Principles, at 17. The older position, according to which only
the actions of those designated to represent the State externally (‘international organs of a State’) may
count as State practice (voiced, for example, by K. Strupp, ‘Regles générales du droit de la paix’, 47
Recueil des Cours (1934), 313-315) is no longer generally accepted.
76 P. Palchetti, ‘De Facto Organs of a State’, in Max Planck Encyclopedia of Public International Law
(2012), para. 2.
77 See also K. Zemanek, ‘What is ‘State Practice’ and who Makes It?’, in U. Beyerlin et al (eds.), Festschrift
für Rudolf Bernhardt (Springer-Verlag, 1995), 289, 305 (“the constitutional authority of the organs
performing the acts is immaterial as long as the conduct appears to foreign States, assessing it with due
diligence and good faith, as attributable to the State in question and expressing or implementing its attitude
towards a rule of customary law”).
78 See Article 4 of the Articles on State Responsibility. The ILA Committee’s suggestion that in States
organized under a federal structure, “[t]he activities of territorial governmental entities within a State which
do not enjoy separate international legal personality do not as such normally constitute State practice,
unless carried out on behalf of the State or adopted (‘ratified’) by it” (ILA London Statement of Principles,
at 16) does not seem accurate.
79 S. Rosenne, Practice and Methods of International Law (Oceana Publications, 1984), 56 (“The evidence of
customary law [remains] … scattered, elusive and on the whole unsystematic”).
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making the evidence of customary international law more readily available’ – will
be revisited in the Special Rapporteur’s third report.
36. The following draft conclusions are proposed:
Draft Conclusion 5
Role of practice
The requirement, as an element of customary international law, of a
general practice means that it is primarily the practice of States that
contributes to the creation, or expression, of rules of customary
international law.
Draft Conclusion 6
Attribution of conduct
State practice consists of conduct that is attributable to a State,
whether in the exercise of executive, legislative, judicial or any other
function.
37. Manifestations of practice. It has occasionally been suggested that ‘State
practice’ should only qualify as such for the purposes of customary international law
when it relates to a type of situation falling within the domain of international
relations,80 or to some actual incident or episode of claim-making (as opposed to
assertions in abstracto).81 This approach is too narrow; it may indeed be said that
“[i]n the international system … every act of state is potentially a legislative act”.82
Such acts may comprise both physical and verbal (written and oral) conduct: views
to the contrary, according to which “claims themselves, although they may
articulate a legal norm, cannot constitute the material component of custom”,83 are
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80 J.L. Kunz, supra note 56, at 666; ILA London Statement of Principles, at 9 (suggesting correctly, however,
that “[w]hether a matter concerns a State’s international legal relations, or is solely a matter of domestic
jurisdiction, depends on the stage of development of international law and relations at the time”); S.
Rosenne, ibid., at 56.
81 See, for example, H.W.A. Thirlway (writing in 1972), International Customary Law and Codification
(Sijthoff, 1972), 58 (“State practice as the material element in the formation of custom is, it is worth
emphasizing, material: it is composed of acts by States with regard to a particular person, ship, defined
area of territory, each of which amounts to the assertion or repudiation of a claim relating to a particular
apple of discord”).
82 A.M. Weisburd, supra note 67, at 31. See also I. Brownlie, supra note 74, at 313-314 (suggesting, inter
alia, that “the materials not related to sudden crises are more likely to represent a mature and consistent
view of the law”); V.D. Degan, Sources of International Law (Martinus Nijhoff, 1997), 149 (noting that
while some older scholars had confined the evidence of custom to those able to bind the State
internationally, “[n]evertheless, … customary rules can emerge from concordant legislative or other
unilateral acts of a number of States, or that even some decisions of municipal courts can influence
practice”).
83 A.A. D’Amato, supra note 66, at 88 (explaining that “a state has not done anything when it makes a claim;
until it takes enforcement action, the claim has little value as a prediction of what the state will actually
do”). See also Fisheries case, Judgment of December 18th, 1951: I.C.J. Reports 1951, p. 116, at p. 191
(Dissenting Opinion of Judge Read) (“[Customary international law] cannot be established by citing cases
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too restrictive.84 Accepting such views could also be seen as encouraging
confrontation and, in some cases, even the use of force.85 In any event, it appears
undeniable that “the method of communication between States has widened. The
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where coastal States have made extensive claims, but have not maintained their claims by the actual
assertion of sovereignty over trespassing foreign ships … The only convincing evidence of State practice is
to be found in seizures, where the coastal State asserts its sovereignty over the waters in question by
arresting a foreign ship and by maintaining its position in the course of diplomatic negotiation and
international arbitration”); A. D’Amato, ‘Custom and Treaty: A Response to Professor Weisburd’,
Vanderbilt Journal of Transnational Law, 21 (1988), 459, 465 (“what governments say is at best a theory
about international law, and not international law itself”); K. Wolfke, supra note 6, at 42 (“customs arise
from acts of conduct and not from promises of such acts”); G.J.H. van Hoof, Rethinking the Sources of
International Law (Kluwer Law and Taxation Publishers, 1983), 108. For a dated and extreme position see
Conradie J in S v Petane, 1988 (3) SA 51 (C) at 59F-G, 61D-E (Cape Provincial Division, South Africa)
(“customary international law is founded on practice, not on preaching … One must … look for state
practice at what states have done on the ground in the harsh climate of a tempestuous world, and not at
what their representatives profess in the ideologically overheated environment of the United Nations where
indignation appears frequently to be a surrogate for action”).
84 See also M.E. Villiger, Customary International Law and Treaties, 2nd edition (Kluwer Law International,
1997), 19-20 (“there is much merit in qualifying verbal acts as State practice. First, and most
important…States themselves as well as courts regard comments at conferences as constitutive of State
practice”); C. Parry, supra note 70, at 168 (“very often there is very little difference between what a State
does and what it says because its actions may consist only in pronouncements”); M. Akehurst, ‘Custom as
a Source of International Law’, British Yearbook of International Law, 47 (1977), 1, 53 (“State practice
means any act or statement by a State from which views about customary law can be inferred”); R.
Müllerson, ‘On the Nature and Scope of Customary International Law’, Austrian Review of International
& European Law, 2 (1997), 341, 342 (“even if one would be eager to make a clear-cut distinction between
‘actual’ practice and other forms of practice (non-actual?) it is not easy and sometimes it is simply
impossible”); R. Bernhardt, ‘Custom and Treaty in the Law of the Sea’, 205 Recueil des Cours (1987),
247, 265, 267 (“It has also sometimes been said that only factual deeds and not words are relevant State
practice … Words, declarations, communications, even signals must be included in the great variety of
practices which can be constitutive for customary law … it is legally unacceptable to exclude
communications, written and spoken words, from the world of State practice. There is no numerus clausus
of State acts and State practice which are exclusively necessary or decisive for the creation and coming into
force of customary law. On the other hand, it must be admitted that verbal declarations cannot create
customary rules if the real practice is different”); K. Skubiszewski, ‘Elements of Custom and the Hague
Court’, ZaöRV, 31 (1971), 810, 812 (“the practice of States is built of their actions and reactions. It is ‘a
process of reciprocal interaction’. This does not mean that the picture of State practice is composed
exclusively of actions sensu stricto. Words and inaction are also evidence of the conduct of States”
(citations omitted)); R.R. Baxter, ‘Multilateral Treaties as Evidence of Customary International Law’,
British Yearbook of International Law, 41 (1965-66), 275, 300 (“The firm statement by the State of what it
considers to be the rule is far better evidence of its position than what can be pieced together from the
actions of that country at different times and in a variety of contexts”). It is also worthy to recall in this
context the words of the ILA London Statement of Principles, which accepts that “[v]erbal acts, and not
only physical acts, of States count as State practice”, at 13-14: “When defining State practice … it is
necessary to take account of the distinction between what conduct counts as State practice, and the weight
to be given to it … Discussion of the objective element in custom has been bedeviled by a failure to make
this distinction”).
85 See also R. Müllerson, ‘The Interplay of Objective and Subjective Elements in Customary Law’, in K.
Wellens (ed.), International Law: Theory and Practice – Essays in Honour of Eric Suy (Martinus Nijhoff
Publishers, 1998), 161, 162 (“… if only seizures, invasions, genocide and other similar acts were state
practice then in some areas of international law (for example international humanitarian law) only so-called
rogue states would contribute to the development of customary law … it would [also] increase even more
the role of powerful states in the process of international law-making. Finally … in many [] areas of
international law only a few states may have such [‘actual’] practice or states may become involved in
‘actual’ practice only occasionally.”).
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beloved ‘real’ acts become less frequent because international law, and the Charter
of the UN in particular, place more and more restraints on States in this respect”.86
Moreover, “the term ‘practice’ (as per Article 38 of the ICJ Statute) is general
enough – thereby corresponding with the flexibility of customary law itself – to
cover any act or behaviour of a State, and it is not made entirely clear in what
respect verbal acts originating from a State would be lacking, so that they cannot be
attributed to the behaviour of that State”.87 At the same time, as will be suggested
below, caution is needed in assessing what States (and international organizations)
say: words cannot always be taken at face value.
38. Once both physical and verbal acts are accepted as forms of practice for
purposes of identification of customary international law, it appears that
“distinctions between ‘constitutive acts’ and ‘evidence of constitutive acts’… are
artificial and arbitrary”.88 Such distinctions will be avoided in this report. As was
stated in the Commission’s debate in 2013, “The material [that needs to be consulted
to identify customary international law] can be evidence of the existence of the
customary rule and in other situations it can also be the source of practice …
itself”.89 Accordingly, “the evidence [for ascertaining whether a rule of customary
international law has emerged or otherwise] may take a variety of forms, including
conduct – What is significant is that the source must be reliable and unequivocal,
and should reflect the consistent position of the State concerned.”90
39. Practice (and evidence thereof) takes a great variety of forms, as “in their
interaction and communication ... States do not confine themselves to dogmatically
determined types of acts. They use all forms which serve their purpose”.91 The
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86 K. Zemanek, supra note 77, at 306.
87 M.E. Villiger, supra note 84, at 21.
88 K. Zemanek, supra note 77, at 292 (explaining that “one may disguise the other” and adding that
“Furthermore, one might never know of a 'constitutive' act if it were not recorded”). See also A.A.
D’Amato, supra note 66, at 268 (“… a rule of law is not something that exists in the abstract, nor is opinio
juris something that we can lay our hands upon. Rules of law and states of mind appear only as
manifestations of conduct; they are generalizations we make when we find recurring patterns of behavior
or structured legal arguments. If the term ‘evidence’ must be used, we may say that rules of law are
expressed only in ‘evidence’; if the evidence is truly evidence of the rule of law, then it is an outward
expression of the rule itself. Evidence is a necessary, and not a dispensable, component of the rule. But
because of the confusions resulting from its use, the term ‘evidence’, along with the term ‘sources’, is best
relegated to the domain of counterproductive terminology”).
89 The Commission’s 3183rd meeting, 19 July 2013 (Hmoud).
90 I. Brownlie, supra note 74, at 318 (emphasis added). See also A. Clapham, supra note 37, at 58 (“Such
evidence [for an alleged custom] will obviously be voluminous and also diverse. There are multifarious
occasions on which persons who act or speak in the name of a state, do acts, or make declarations, which
either express or imply some view on a matter of international law. Any such act or declaration may, so far
as it goes, be some evidence that a custom, and therefore that a rule of international law, does or does not
exist. But, of course, its value as evidence will altogether be determined by the occasion and the
circumstances”).
91 K. Zemanek, supra note 77, at 299. In addition, “no rule of international law describes what the facts are
whose occurrence leads to the formation of a custom … there are no specific factual elements whose only
occurrence prove the existence of a rule”: L. Fumagalli, ‘Evidence Before the International Court of
Justice: Issues of Fact and Questions of Law in the Determination of International Custom’, in N.
Boschiero et al (eds.), International Courts and the Development of International Law: Essays in Honour
of Tullio Treves (Asser Press, 2013), 137, 146.
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Commission itself has relied upon various materials in assessing practice for the
purpose of identifying rules of customary international law.92
40. Several authors have drawn up lists of the main forms that practice may take.
For example, Brownlie’s Principles of Public International Law contains the
following non-exhaustive list:
diplomatic correspondence, policy statements, press releases, the opinions of
government legal advisers, official manuals on legal questions (e.g. manuals of
military law), executive decisions and practices, orders to military forces (e.g.
rules of engagement), comments by governments on ILC drafts and
corresponding commentaries, legislation, international and national judicial
decisions, recitals in treaties and other international instruments (especially
when in ‘all states’ form), an extensive pattern of treaties in the same terms,
the practice of international organs, and resolutions relating to legal questions
in UN organs, notably the General Assembly.93
41. Given the inevitability and pace of change, political and technological, it is
neither possible nor desirable to seek to provide an exhaustive list of these ‘material
sources’ of customary international law: it remains impractical for the Commission,
as it was in 1950, “to list all the numerous types of materials which reveal State
practice on each of the many problems arising in international law”.94 At the same
time, it may be helpful to indicate some of the main types of practice that have been
relied upon by States, by courts and tribunals, and in writings. The following list is
therefore non-exhaustive; moreover, some of the categories below overlap, so that a
particular example or type of State practice may well fall under more than one.
(a) Physical actions of States, that is, the conduct of States ‘on the ground’.95
Examples of such practice may include passage of ships in international
waterways;
96
passage over territory;
97
impounding of fishing boats; granting of
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92 Secretariat memorandum, at 14 (“The Commission has relied upon a variety of materials in assessing State
practice for the purpose of identifying a rule of customary international law”).
93 J. Crawford, supra note 37, at 24 (footnotes omitted); the author adds that “the value of these sources
varies and will depend on the circumstances”. Other lists may be found, for example, in L. Ferrari Bravo,
‘Méthodes de recherche de la coutume international dans la pratique des États’, 192 Recueil des Cours
(1985), 233, 257-287; M.E. Villiger, supra note 84, at 17; A. Pellet, supra note 17, at 815-816. Ireland has
similar list on its Ministry of Foreign Affairs website: “in the absence of a treaty governing relations
between two or more states as to what the law should be, or, in other words, state practice combined with
recognition that a certain practice is obligatory, if sufficiently widespread and consistent, such practice and
consensus may constitute customary international law. Evidence of custom may be found among the
following sources: diplomatic correspondence; opinions of official legal advisers, statements by
governments; United Nations General Assembly resolutions; comments by governments on drafts
produced by the International Law Commission; the decisions of national and international courts”. See
also Federal Republic of Germany v. Margellos and Others (Special Supreme Court of Greece), Judgment
No. 6/2002, 17 September 2002, 129 ILR 525, 528, para. 9; K. Wolfke, ‘Some Persistent Controversies
Regarding customary International Law’, Netherlands Yearbook of International Law, 24 (1993), 1, 15
(“As regards these ways and means of proving whether a custom already exists no full list of guidelines
can be drawn up”).
94 Yearbook of the International Law Commission, 1950, vol. II, 368.
95 Judge Read referred to “actual assertion of sovereignty” in his Dissenting Opinion in the Fisheries case,
Judgment of December 18th, 1951: I.C.J. Reports 1951, p. 116, at p. 191.
96 Corfu Channel case, Judgment of April 9th, 1949: I.C.J. Reports 1949, p. 4, at p. 99 (Dissenting Opinion
of Judge Azevedo).
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diplomatic asylum;
98
battlefield or operational behaviour; or conducting atmospheric
nuclear tests or deploying nuclear weapons.99
(b) Acts of the executive branch. These may include executive orders and
decrees,100 and other “administrative measures”,101 as well as official statements by
government such as declarations,102 proclamations,103 government statements before
parliament,104 positions expressed by States before national or international courts
and tribunals (including in amicus curiae briefs of States),105 and statements on the
international plane.106
(c) Diplomatic acts and correspondence.107 This includes protests against the
practice of other States and other subjects of international law. Diplomatic
correspondence may take a variety of forms, including notes verbales, circular
notes, third-party notes, and even ‘non-papers’.
(d) Legislative acts. From constitutions to draft bills,108 “[l]egislation is an
important aspect of State practice”.109 As the Permanent Court of International
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97 Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J.
Reports 1960, p. 6, at pp. 40-41.
98 Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports 1950, p. 266, at p.
277.
99 Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports 1974, p. 253, at p. 305 (Separate Opinion of
Judge Petrén); Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996,
p. 226, at p. 312 (Dissenting Opinion of Judge Schwebel).
100 See, for example, North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 104, 107
(Separate Opinion of Judge Ammoun).
101 See, for example, Dispute regarding Navigational and Related Rights (Costa Rica v. Nicaragua),
Judgment, I.C.J. Reports 2009, p. 213, at p. 280 (Separate Opinion of Judge Sepúlveda-Amor).
102 See, for example, Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports
1996, p. 226, at p. 295 (Separate Opinion of Judge Ranjeva); North Sea Continental Shelf, Judgment, I.C.J.
Reports 1969, p. 3, at p. 104 (Separate Opinion of Judge Ammoun); Fisheries Jurisdiction (United
Kingdom v. Iceland), Jurisdiction of the Court, Judgment, I.C.J. Reports 1973, p. 3, at p. 43 (Dissenting
Opinion of Judge Padilla Nervo); Fisheries Jurisdiction (United Kingdom v. Iceland), Merits, Judgment,
I.C.J. Reports 1974, p. 3, at p. 84 (Separate Opinion of Judge De Castro).
103 See, for example, North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 104, 105, 107,
126 (Separate Opinion of Judge Ammoun); Fisheries Jurisdiction (United Kingdom v. Iceland), Merits,
Judgment, I.C.J. Reports 1974, p. 3, at p. 84 (Separate Opinion of Judge De Castro).
104 See, for example, Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970,
p. 3, at p. 197 (Separate Opinion of Judge Jessup).
105 See, for example, Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment,
I.C.J. Reports 2012, p. 99, at p. 123, para. 55. See also I. Brownlie, supra note 74, at 315 (“it seems
obvious that statements made by Agents and Counsel before international tribunals constitute State
practice”).
106 See, for example, Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports
1996, p. 226, at p. 312 (Dissenting Opinion of Judge Schwebel).
107 See, for example, Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970,
p. 3, at p. 197 (Separate Opinion of Judge Jessup), and pp. 298, 299 (Separate Opinion of Judge Ammoun).
108 See, for example, Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium),
Judgment, I.C.J. Reports 2002, p. 3, at p. 24; Jurisdictional Immunities of the State (Germany v. Italy:
Greece intervening), Judgment, I.C.J. Reports 2012, p. 99, at p. 123, para. 55; Case concerning rights of
nationals of the United States of America in Morocco, Judgment of August 27th, 1952: I.C.J. Reports 1952,
p. 176, at p. 220 (Dissenting Opinion of Judges Hackworth, Badawi, Levi Carneiro and Sir Benegal Rau);
North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 105, 107, 129 (Separate Opinion of
Judge Ammoun, where he says, inter alia, “The bill [that was submitted to the Belgian Chamber of
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Justice observed in 1926, “From the standpoint of International Law and of the
Court which is its organ, municipal laws are merely facts which express the will and
constitute the activities of States, in the same manner as do legal decisions or
administrative measures”.110 It is worthwhile to recall the view expressed by the
Commission in this context in 1950, according to which “[t]he term legislation is
here employed in a comprehensive sense; it embraces the constitutions of States, the
enactments of their legislative organs, and the regulations and declarations
promulgated by executive and administrative bodies. No form of regulatory
disposition effected by a public authority is excluded”.111
(e) Judgments of national courts. Judicial decisions and opinions of
municipal courts may serve as State practice,112 and “are of value as evidence of that
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Representatives] … expresses the official point of view of the Government. It constitutes one of those acts
within the municipal legal order which can be counted among the precedents to be taken into consideration,
where appropriate, for recognizing the existence of custom”), and p. 228 (Dissenting Opinion of Judge
Lachs); Fisheries Jurisdiction (United Kingdom v. Iceland), Jurisdiction of the Court, Judgment, I.C.J.
Reports 1973, p. 3, at p. 44 (Dissenting Opinion of Judge Padilla Nervo), and p. 51 (Joint Separate Opinion
of Judges Forster, Bengzon, Jiménez de Aréchaga, Nagendra Singh and Ruda), and p. 84 (Separate
Opinion of Judge De Castro); Special Tribunal for Lebanon, Case No. STL-11-01/I, Interlocutory Decision
on the Applicable Law: Terrorism, Conspiracy, Homicide, Perpetration, Cumulative Charging (Appeals
Chamber), 16 February 2011, paras. 87, 91-98; Prosecutor v. Norman, Case No. SCSL-2004-14-AR72(E),
Decision on Preliminary Motion based on Lack of Jurisdiction (Special Court of Sierra Leone Appeals
Chamber), 31 May 2004, p. 13, at para. 18; Genny de Oliviera v. Embaixada da República Democratica
Alema (Brazilian Federal Supreme Court), Apelação Civel No. 9.696-3/SP, 31 May 1989, pp. 4-5;
Democratic Republic of the Congo v. FG Hemispheric Associates LLC, in the Court of Final Appeal of the
Hong Kong Special Administrative Region, Final Appeal Nos. 5, 6 & 7 of 2010 (Civil), 8 June 2011, para.
68 (“However that may be, a rule of domestic law in any given jurisdiction may happen to result from a
rule of customary international law or it may happen to precede and contribute to the crystallisation of a
custom into a rule of customary international law”). On constitutional provisions in particular as State
practice (and as evidence of opinio juris) see R. Crootof, ‘Constitutional convergence and Customary
International Law’, Harvard International Law Journal Online, 54 (2013), 195-203.
109 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports
2012, p. 99, at p. 310, para. 3 (Dissenting Opinion of Judge ad hoc Gaja). Judge Gaja went on to say that
“It is significant also when the object of a rule of international law is the conduct of judicial authorities, as
with regard to the exercise of jurisdiction by courts”.
110 Certain German Interests in Polish Upper Silesia, PCIJ, Series A, No 7, at 19.
111 ‘Ways and Means for Making the Evidence of Customary International Law More Readily Available’, Report of the
International Law Commission on its Second Session (A/CN.4/34), Yearbook of the International Law Commission, 1950,
Vol. II, 370.
112 See, for example, The Case of the S.S. “Lotus” (France/Turkey), PCIJ, Series A, No. 10, pp. 28-29; Arrest
Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium), Judgment, I.C.J. Reports 2002,
p. 3, at p. 24; Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment,
I.C.J. Reports 2012, p. 99, at p. 123, para. 55; Legality of the Threat or Use of Nuclear Weapons, Advisory
Opinion, I.C.J. Reports 1996, p. 226, at p. 292 (Separate Opinion of Judge Guillaume); Barcelona
Traction, Light and Power Company, Limited, Preliminary Objections, Judgment, I.C.J. Reports 1964, p.
6, at p. 63 (Separate Opinion of Judge Wellington Koo); Arrest Warrant of 11 April 2000 (Democratic
Republic of the Congo v. Belgium), Judgment, I.C.J. Reports 2002, p. 3, at p. 88 (Joint Separate Opinion of
Judges Higgins, Kooijmans and Buergenthal); Prosecutor v. Tadić, Case No. IT-94-1-A, Judgment (ICTY
Appeals Chamber), 15 July 1999, paras. 255-270; Extraordinary Chambers in the Courts of Cambodia,
Case No. 001/18-07-2007-ECCC/SC (Supreme Court Chamber), 3 February 2012, paras. 223, 224;
Prosecutor v. Šainović and Others, Case No. IT-05-87-A, Judgment (ICTY Appeals Chamber), 23 January
2014, paras. 1627-1642; Prosecutor v. Furundžija, Case No. IT-95-17/1-A, Judgment (ICTY Appeals
Chamber), 21 July 2000, Declaration of Judge Robinson, para. 281; Case No. Up-13/99 (Slovenian
Constitutional Court), Decision of 8 March 2001, para. 14; Dralle v Republic of Czechoslovakia (Austrian
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State’s practice, even if they do not otherwise serve as evidence of customary
international law” itself.113 When assessing the decisions of domestic courts,
however, the position of customary international law within the law to be applied by
the various courts and tribunals, and special provisions and procedures that may
exist at the various domestic levels for identifying rules of customary international
law, must be borne in mind.114 Moreover, “the value of these decisions varies
considerably, and individual decisions may present a narrow, parochial outlook or
rest on an inadequate use of sources”.115 Judgments of the highest courts naturally
carry more weight. Cases that have been reversed on the particular point are no
longer likely to be considered as practice.
(f) Official publications in fields of international law, such as military
manuals or instructions to diplomats.116
(g) Internal memoranda by State officials. Such memoranda are, however,
often not made public. It should be borne in mind, however, that as was said in a
different but analogous context, these “do not necessarily represent the view or
policy of any government, and may be no more than the personal view that one civil
servant felt moved to express to another particular civil servant at that moment; it is
not always easy to disentangle the personality elements from what were, after all,
internal, private and confidential memoranda at the time they were made”.117
(h) Practice in connection with treaties. Negotiating, concluding and entering
into, ratifying and implementing bilateral or multilateral treaties (and putting
forward objections and reservations to them) are another form of practice.118 Such
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Supreme Court), Judgment of 10 May 1950, 17 ILR 155, 157-161. See also H. Lauterpacht, ‘Decisions of
Municipal Courts as a Source of International Law’, British Yearbook of International Law, 10 (1929), 65-
95; P.M. Moremen, ‘National Court Decisions as State Practice: A Transnational Judicial Dialogue?’,
North Carolina Journal of International Law and Commercial Regulation, 32 (2006), 259, 265-290; A.
Roberts, ‘Comparative International Law: The Role of National Courts in Creating and Enforcing
International Law’, International & Comparative Law Quarterly, 60 (2011), 57, 62; and the lecture by
Judge Greenwood before the British Institute of International and Comparative Law entitled “The
Contribution of National Courts to the Development of International Law” (4 February 2014), available
online at http://www.biicl.org/news/view/-/id/201/.
113 ‘Ways and Means for Making the Evidence of Customary International Law More Readily Available’,
supra note 111. Speaking of, Crawford’s Brownlie’s Principles of Public International Law, supra note 37,
states that some decisions of national courts “provide indirect evidence of the practice of the forum state on
the question involved” (at 41).
114 A/CN.4/663, supra note 1, at para. 84. See also P.M. Moremen, supra note 112, at 290-308.
115 J. Crawford, supra note 37, at 41.
116 See, for example, Prosecutor v. Galić, Case No. IT-98-29-A, Judgment (ICTY Appeals Chamber), 30
November 2006, para. 89; Prosecutor v. Delalić, Case No. IT-96-21-T, Judgment (ICTY Trial Chamber),
16 November 1998, para. 341.
117 Red Sea Islands (Eritrea/Yemen) arbitration award, 9 October 1998, para. 94; see also I. Brownlie, supra
note 74, at 316-317.
118 See, for example, Nottebohm Case (second phase), Judgment of April 6th, 1955: I.C.J. Reports 1955, p. 4,
at pp. 22-23; Reservations to the Convention on Genocide, Advisory Opinion: I.C.J. Reports 1951, p.15, at
pp. 24-25; North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 43; North Sea
Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 104-105, 126, 128 (Separate Opinion of
Judge Ammoun); Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970,
p. 3, at p. 347 (Dissenting Opinion of Judge Riphagen); Fisheries Jurisdiction (United Kingdom v.
Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at p. 26; Continental Shelf (Tunisia/Libyan Arab
Jamahiriya), Judgment, I.C.J. Reports 1982, p. 18, at p. 79; Continental Shelf (Libyan Arab
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practice does not concern the law of treaties alone; it may also relate to the
obligations assumed through the relevant international legal instrument.119
(i) Resolutions of organs of international organizations, such as the General
Assembly of the United Nations, and international conferences.120 This mainly
concerns the practice of States in connection with the adoption of resolutions of
organs of international organizations or at international conferences, namely, voting
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Jamahiriya/Malta), Judgment, I.C.J. Reports 1985, p. 13, at pp. 38, 48; Jurisdictional Immunities of the
State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports 2012, p. 99, at pp. 138, 143, paras.
89, 100; Interpretation of Peace Treaties (second phase), Advisory Opinion: I.C.J. Reports 1950, p. 221, at
pp. 241-242 (Dissenting opinion of Judge Read); Legality of the Threat or Use of Nuclear Weapons,
Advisory Opinion, I.C.J. Reports 1996, p. 226, at p. 292 (Separate Opinion of Judge Guillaume), and pp.
312, 314 (Dissenting Opinion of Judge Schwebel); Fisheries case, Judgment of December 18th, 1951:
I.C.J. Reports 1951, p. 116, at pp. 163-164 (Dissenting Opinion of Judge McNair); Case concerning rights
of nationals of the United States of America in Morocco, Judgment of August 27th, 1952: I.C.J. Reports
1952, p. 176, at p. 220 (Dissenting Opinion of Judges Hackworth, Badawi, Levi Carneiro and Sir Benegal
Rau); Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J.
Reports 1960, p. 6, at pp. 41-42, and also pp. 55-56 (Separate Opinion of Judge Wellington Koo), and p.
104 (Dissenting Opinion of Judge Sir Percy Spender); Case concerning the Arbitral Award made by the
King of Spain on 23 December 1906, Judgment of 18 November 1960: I.C.J. Reports 1960, p. 192, at p.
223 (Dissenting Opinion of Judge Urrutia Holguín); Prosecutor v. Norman, Case No. SCSL-2004-14-
AR72(E), Decision on Preliminary Motion based on Lack of Jurisdiction (Special Court of Sierra Leone
Appeals Chamber), 31 May 2004, p. 13, paras. 18-21; Special Tribunal for Lebanon, Case No. STL-11-
01/I, Interlocutory Decision on the Applicable Law: Terrorism, Conspiracy, Homicide, Perpetration,
Cumulative Charging (Appeals Chamber), 16 February 2011, paras. 87-89; The Paquete Habana, 175 U.S.
677 (United States Supreme Court, 1900), 686-700. See also A.M. Weisburd, supra note 67, at 1-46
(“treaties are simply one more form of state practice”); Human Rights Council Report of the Working
Group on Arbitrary Detention (24 December 2012), A/HRC/22/44, para. 43.
119 See also A. D’Amato, supra note 83, at 462 (“What makes the content of a treaty count as an element of
custom is the fact that the parties to the treaty have entered into a binding commitment to act in accordance
with its terms. Whether or not they subsequently act in conformity with the treaty, the fact remains that
they have so committed to act. The commitment itself, then, is the ‘state practice’ component of custom”);
J. Barboza, ‘The Customary Rule: From Chrysalis to Butterfly’, in C.A. Armas Barea et al. (eds.), Liber
Amicorum 'In Memoriam' of Judge José María Ruda (Kluwer Law International, 2000), 1, 2-3 (“Texts
express with more precision than actions the contents of a practice, particularly when those texts are
carefully written by groups of technical and legal experts”). But see K. Wolfke, ‘Treaties and Custom:
Aspects of Interrelation’, in J. Klabbers, R. Lefeber (eds.), Essays on the Law of Treaties: A Collection of
Essays In Honour of Bert Vierdag (Martinus Nijhoff Publishers, 1998), 31, 33 (“A treaty per se is,
therefore, not any element of practice [of course with the exception of the customary law of treaties]. It
can, however, contribute to the element of acceptance as law by the parties”).
120 See, for example, Fisheries Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports
1974, p. 3, at p. 26; Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports
1970, p. 3, at pp. 302-303 (Separate Opinion of Judge Ammoun) (“I would observe, in addition, that the
positions taken up by the delegates of States in international organizations and conferences, and in
particular in the United Nations, naturally form part of State practice … it cannot be denied, with regard to
the resolutions which emerge therefrom, or better, with regard to the votes expressed therein in the name of
States, that these amount to precedents contributing to the formation of custom”); Legality of the Threat or
Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at p. 312 (Dissenting Opinion of
Judge Schwebel, who lists “action of the United Nations Security Council under ‘State Practice’); East
Timor (Portugal v. Australia), Judgment, I.C.J. Reports 1995, p. 90, at p. 188 (Dissenting Opinion of
Judge Weeramantry) (“The various resolutions of the General Assembly relating to this right in general
terms, which have helped shape public international law … are an important material source of customary
international law in this regard”). Security Council resolution 2125 (2013) implicitly recognizes this
potential role of resolutions as well by underscoring “that this resolution shall not be considered as
establishing customary international law” (para. 13).
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in favour or against them (or abstaining), and the explanations (if any) attached to
such acts.121 At the same time, it must be borne in mind that “the final text of a
decision of an international organization will always be incapable of reflecting all
propositions and alternatives formulated by each and every party to the negotiations
.… One should, therefore, not overly rely on the shortcuts provided by the decisionmaking
processes of international organizations in order to identify state
practice”.122 (This matter will be addressed more fully in in the third report.)
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121 See also R. Higgins, The Development of International Law Through the Political Organs of the United
Nations (Oxford University Press, 1963), 2 (“The United Nations is a very appropriate body to look to for
indications of developments in international law, for international custom is to be deduced from the
practice of states, which includes their international dealings as manifested by their diplomatic actions and
public pronouncements. With the development of international organizations, the votes and views of states
have come to have legal significance as evidence of customary law. Moreover, the practice of states
comprises their collective acts as well as the total of their individual acts ... The existence of the United
Nations ... now provides a very clear, very concentrated, focal point for state practice”); B. Conforti, B.
Labella, supra note 52, at 35, 42-43 (“The resolutions of international organizations are also relevant to the
ascertainment of custom as acts of States, i.e., as aggregates of expressions of the volition of States which
have voted in favour of the resolutions… [i]nternational organizations are endowed with some elements of
international personality. However, with regard to customary law making the resolutions of organizations
must be considered as the collective action of all the States that voted for their adoption rather than the
action of the organizations themselves. This explains why such resolutions play a role on the development
of custom only where they are adopted unanimously, by consensus, or at least by a wide majority”); I.
Brownlie, The Rule of Law in International Affairs: International Law at the Fiftieth Anniversary of the
United Nations (Martinus Nijhoff Publishers, 1998), 19-20 (“The process of synthesizing State practice is
assisted by several mechanisms. First, the resolutions of the General Assembly of the United Nations,
when they touch upon legal matters, constitute evidence of State practice. So also do resolutions of
Conferences of Heads of State”); ILA London Statement of Principles, at 19 (“in the context of the
formation of customary international law… [a resolution by an organ of an international organization,
containing statements about customary international law] is probably best regarded as a series of verbal
acts by the individual member States participating in that organ”). But see I. MacGibbon, ‘General
Assembly Resolutions: Custom, Practice and Mistaken Identity’, in B. Cheng (ed.), International Law:
Teaching and Practice (Stevens & Sons, 1982), 10, 19 (“while a General Assembly resolution (although
difficult to envisage as being, in itself, State practice in any meaningful sense) embodies, or rather is the
result of, various forms of State conduct in the General Assembly, and so reflects State practice of a kind, it
is nevertheless a peripheral kind and – in the context of the development of international custom – of a
somewhat artificial kind”); H. Meijers, ‘On International Customary Law in The Netherlands’, in I.F.
Dekker, H.H.G. Post (eds.), On the Foundations and Sources of International Law (T.M.C. Asser Press,
2003), 77, 84 (“Does a state, when voting on the acceptance of a resolution, for instance in the General
Assembly of the United Nations, act as a state, or as part of an organ of the United Nations, a separate
subject of international law? The answer seems evident: as part of the UN organ… [only when] it states its
reasons for voting in the way it did, or gives its point of view vis-à-vis that resolution, we may identify an
act of state”).
122 J. Wouters, P. De Man, ‘International Organizations as Law-Makers’, in J. Klabbers, A. Wallendahl (eds.),
Research Handbook on the Law of International Organizations (Edward Elgar Publishing, 2011), 190, 208
(reference omitted). See also R. Higgins, supra note 13, at 23-24 (“Resolutions are but one manifestation
of state practice. But in recent years there has been an obsessive interest with resolutions as an isolated
phenomenon. Intellectually, this is hard to understand or justify. We can only suppose that it is easier – that
is, that it requires less effort, less rigour, less by way of meticulous analysis – to comment on the legal
effect of a resolution than to look at a collective practice on a certain issue in all its complex
manifestations. The political bodies of international organizations engage in debate; in the public exchange
of views and positions taken; in expressing reservations upon views being taken by others; in preparing
drafts intended for treaties, or declarations, or binding resolutions, or codes; and in decision-making that
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42. Inaction as practice. Abstention from acting, also referred to as a “negative
practice of States”,123 may also count as practice.124 Inaction by States may be
central to the development and ascertainment of rules of customary international
law, in particular when it qualifies (or is perceived) as acquiescence.125 It is intended
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may or may not imply a legal view upon a particular issue. But the current fashion is often to examine the
resolution to the exclusion of all else”).
123 See, for example, Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium),
Judgment, I.C.J. Reports 2002, p. 3, at pp. 144, 145 (Dissenting Opinion of Judge ad hoc Van den
Wyngaert); P. Tomka, supra note 24, at 210.
124 See, for example, The Case of the S.S. “Lotus” (France/Turkey), PCIJ, Series A, No. 10, p. 28; Nottebohm
Case (second phase), Judgment of April 6th, 1955: I.C.J. Reports 1955, p. 4, at p. 22; Military and
Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), Merits,
Judgment, I.C.J. Reports 1986, p. 14, at p. 99 (abstentions from the threat of use of force against the
territorial integrity or political independence of any State as practice); Legality of the Threat or Use of
Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at p. 253, para. 65 (the Court referring to
proponents of a prohibition attempting to rely on “a consistent practice of non-utilization of nuclear
weapons by States”); Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening),
Judgment, I.C.J. Reports 2012, p. 99, at p. 135, para. 77 (“The almost complete absence of contrary
jurisprudence is also significant, as is the absence of any statements by States”); Legal Consequences for
States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security
Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports 1971, p. 16, at p. 134 (Separate Opinion
of Judge Petrén, referring to the practice of non-recognition when saying that the term “implies not positive
action but abstention from acts signifying recognition”); Case concerning rights of nationals of the United
States of America in Morocco, Judgment of August 27th, 1952: I.C.J. Reports 1952, p. 176, at p. 221
(Dissenting Opinion of Judges Hackworth, Badawi, Levi Carneiro and Sir Benegal Rau); Barcelona
Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 3, at pp. 198, 199
(Separate Opinion of Judge Jessup, referring to the United States Department of State declining to make
representation on behalf of an American company, and to the United States not raising a certain argument
as a basis for resisting a claim in an inter-State dispute). For support in scholarly writing see, for example,
ILA London Statement of Principles, at 15; G.I. Tunkin, ‘Remarks on the Juridical Nature of Customary
Norms of International Law’, California Law Review, 49 (1961), 419, 421 (“The practice of states may
consist in their taking definitive action under certain circumstances or, on the contrary, abstaining from
action”); S. Séfériadès, ‘Aperçu sur la coutume juridique internationale et notamment sur son fondement’,
RGDIP, 43 (1936), 129, 143 (“… même des actes négatifs, - des omissions, - consécutivement répétés,
sont de nature à finir par devenir des coutumes, entrainant l’obligation légale de ne pas faire. …
Egalement, en droit des gens, on ne saurait, nous semble-t-il, ne pas reconnaître une origine coutumière à
l’obligation des Etats de s’abstenir de faire contre les représentants des pays étrangers tout acte de nature à
porter atteinte à leur liberté personnelle ou à la franchise de leur hôtel, ainsi qu’à l’obligation des armées
d’occupation de respecter, sur terre, la propriété privée ennemie”); H. Meijers, ‘How is International Law
Made? – The Stages of Growth of International Law and the Use of Its Customary Rules’, Netherlands
Yearbook of International Law, 9 (1978), 3, 4-5 (“the inactive are carried along by the active … lack of
protest – lack of open objection to the development of the new rule – is sufficient for the creation of a rule
of customary law (and for the obligation to abide by it)”); J.L. Kunz, supra note 56, at 666; M. Mendelson,
‘The Subjective Element in Customary International Law’, British Yearbook of International Law, 66
(1995), 177, 199 (“omissions are perfectly capable, if they are sufficiently unambiguous, of constituting
acts of State practice”).
125 See also R. Kolb, supra note 47, at 136 (“There is hardly any exaggeration in saying that custom is mainly
silence and inaction, not action”); A.M. Weisburd, supra note 67, at 7 (“if generality in the sense of
affirmative acts by most states is not necessary, it must at least be possible to infer acquiescence in a rule
by the very large majority of states”). Danilenko differentiates between “active and passive customary
practice”, suggesting that the latter “increases the precedent value of active practice and thus becomes a
major factor in the process of creating generally accepted customary norms”: G.M. Danilenko, supra note
17, at 28.
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to examine this matter further in the third report, in light of the debate in the
Commission in 2014.
43. The practice of international (inter-governmental) organizations. This is an
important field that will be covered in greater detail in the third report.126 Bearing in
mind that “[t]he subjects of law in any legal system are not necessarily identical in
their nature or in the extent of their rights, and their nature depends upon the needs
of the community”,127 the acts of international organizations on which States have
conferred authority may also contribute or attest to the formation of a general
practice in the fields in which those organizations operate.128 In assessing the
practice of such organizations one ought to distinguish between practice relating to
the internal affairs of the organization on the one hand, and the practice of the
organization in its relations with States, international organizations, etc., on the
other.129 It is the latter practice that is relevant for present purposes, and which
mostly consists of “operational activities”, defined by one author as “the
programmatic work of international organizations carried out as part of their overall
mission or in fulfilment of a specific mandate”.130 Another important distinction
should be drawn in this context between the practice of organs or other bodies
composed of the representatives of States and that of organs composed of
individuals serving in their personal capacity, as the latter cannot be said to
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126 A leading work in this field is G. Cahin, La coutume internationale et les organisations internationales
(Pedone, 2001).
127 Reparations for injuries suffered in the service of the United Nations, Advisory Opinion, I.C.J. Reports
1949, p. 174, at 178.
128 See, for example, Reservations to the Convention on Genocide, Advisory Opinion: I.C.J. Reports 1951,
p.15, at p. 25; Gabčikovo-Nagymaros Project (Hungary/Slovakia), Judgment, I.C.J. Reports 1997, p. 7, at
p. 95 (Separate Opinion of Judge Weeramantry, who refers to “the practice of international financial
institutions”). See also Secretariat memorandum, at 23 (“Under certain circumstances, the practice of
international organizations has been relied upon by the Commission to identify the existence of a rule of
customary international law. Such reliance has related to a variety of aspects of the practice of international
organizations, such as their external relations, the exercise of their functions, as well as positions adopted
by their organs with respect to specific situations or general matters of international relations”); R.
Jennings, A. Watts (eds.), supra note 37, at 31 (“the concentration of state practice now developed and
displayed in international organisations and the collective decisions and the activities of the organisations
themselves may be valuable evidence of general practices accepted as law in the fields in which those
organisations operate”); ILA London Statement of Principles, at 19 (“The practice of intergovernmental
organizations in their own right is a form of ‘State practice’”). But see M.E. Villiger, supra note 84, at 16-
17. On this topic more generally see J. Klabbers, ‘International Organizations in the Formation of
Customary International Law’, in E. Cannizzaro, P. Palchetti (eds.), Customary International Law on the
Use of Force (Martinus Nijhoff Publishers, 2005), 179-195 (also raising the question whether ultra vires
practice of such organizations may count as ‘practice’); L. Hannikainen, ‘The Collective Factor as a
Promoter of Customary International Law’, Baltic Yearbook of International Law, 6 (2006), 125-141. Of
course, international organizations vary greatly from one another, and this needs to be borne in mind when
assessing the significance of their practice (see also commentary (8) to Article 6 of the Commission’s Draft
Articles on the Responsibility of International Organizations (2011)).
129 For example, administration of territory or peacekeeping operations. Indeed, such practice is no longer
thought of as confined to “States’ relations to the organizations” (‘Ways and Means for Making the
Evidence of Customary International Law More Readily Available’, supra note 111, at 372).
130 I. Johnstone, ‘Law-Making Through the Operational Activities of International Organizations’, George
Washington International Law Review, 40 (2008), 87, 94 (discussing such activities, however, in a
somewhat different context; and adding that these activities “are distinguished from the more explicitly
normative functions of international organizations, such as treaty making or adopting resolutions,
declarations, and regulations by intergovernmental bodies”).
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represent States.131 A distinction should, moreover, be made between “products of
the secretariats of international organizations and products of the intergovernmental
organs of international organizations. While both can provide materials that can be
consulted ... the greater weight ... [is] to be given to the products of the latter, whose
authors are also the primary authors of state practice.”132 While it has been
suggested that “IOs provide shortcuts to finding custom”,133 considerable caution is
required in assessing their practice.134 Considerations that apply to the practice of
States may also be relevant to the practice of international organizations, and the
present report should be read in that light.
44. The practice of those international organizations (such as the European Union)
to which Member States sometimes have transferred exclusive competences, may be
equated with that of States, since in particular fields such organizations act in place
of the Member States.135 This applies to the actions of such organizations, whatever
forms they take, whether executive, legislative or judicial. If one were not to equate
the practice of such international organizations with that of States, it would in fact
mean that, not only would the organization’s practice not count for State practice,
__________________
131 Accordingly, the work of the Commission as well, often employed as subsidiary means for determining the
existence or otherwise of a rule of customary international law, “cannot be equated with State practice, or
evidence an opinio juris” (H. Thirlway, ‘Law and Procedure, Part Two’, British Yearbook of International
Law, 61 (1990), 1, 59-60).
132 As suggested by Mr. Tladi in his intervention during last year’s debate in the Commission (3182nd
meeting, 18 July 2013).
133 J.E. Alvarez, International Organizations as Law-makers (Oxford University Press, 2005), 592 (explaining
that “The modern resort to IO-generated forms of evidence for custom might be seen … as a relatively
more egalitarian approach to finding this source of law, even if it comes, as critics charge is the case with
respect to GA resolutions for example, at the expense of sometimes elevating the rhetoric of states over
their deeds”).
134 See also J. Wouters, P. De Man, supra note 122, at 208 (“One should thus be mindful not to equate the
practice of international organizations with state practice. Whether actions of international organizations
can be attributed to the state community as a whole is a complex question and the answer depends on …
divergent factors”).
135 See also Statement on behalf of the European Union, A/C.6/68/SR.23 (4 November 2013), para. 37 (“The
Union acted on the international plane on the basis of competences conferred upon it by its founding
treaties. It was a contracting party to a significant number of international agreements, alongside States.
Moreover, in several areas covered by international law it had exclusive competences. Those special
characteristics gave it a particular role in the formation of customary international law, to which it could
contribute directly through its actions and practices.”); see also F. Hoffmeister ‘The Contribution of EU
Practice to International Law’, in M. Cremona, Developments in EU External Relations Law (Oxford
University Press, 2008), 37–128; M. Wood, O. Sender, ‘State Practice’, supra note 71, at paras. 20-21; E.
Paasivirta, P.J. Kuijper, ‘Does One Size Fit All? The European Community and the Responsibility of
International Organizations’, Netherlands Yearbook of International Law, 36 (2005), 169, 204-212. Ms.
Jacobsson has likewise suggested that “[o]ne cannot disregard… [] the practice of an international
organization if that organization has the competence to enact legislation in respect of a particular question.
Such practice cannot be described solely as the view on customary international law by the organization. It
may also be equalled to State practice” (the Commission’s 3184th meeting, 23 July 2013). But see J.
Vanhamme, ‘Formation and Enforcement of Customary International Law: The European Union’s
Contribution’, Netherlands Yearbook of International Law, 39 (2008), 127, 131 (“EC [European
Community] acts constitute EU [European Union] practice. To depict them as State practice [that is, to
attribute them to the Member States] would deny one of the main features of the European Community, i.e.
its autonomous functioning on the basis of the legislative, executive and judicial powers delegated to it by
the Member States. Moreover, the EC's international legal practice does faithfully represent the opinio juris
of all 27 Member States [who gave a permanent commitment to accept its decisions as binding law]”).
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but its Member States would be deprived or reduced of their ability to contribute to
State practice in cases where the Member States have conferred some of their public
powers to the organization.
45. The role of other non-State actors. It has sometimes been suggested that the
conduct of other ‘non-State actors’ such as non-governmental organizations and
even individuals, ought to be acknowledged as contributing to the development of
customary international law.136 Some have recalled in this context that “according to
Article 38 of the ICJ statute, custom … [is] not required to be followed or
acknowledged ‘by states’ only, as it is actually required by the same norm when
referring to conventions. So that, in principle, practices may emanate from state and
non-state actors.”137 The better view, however, is that, while individuals and nongovernmental
organizations can indeed “play important roles in the promotion of
international law and in its observance”138 (for example, by encouraging State
__________________
136 For such a dynamic view of ‘participation’ in international law-making or the call to make such processes
‘inclusive’, see, for example Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v.
Belgium), Judgment, I.C.J. Reports 2002, p. 3, at p. 155 (Dissenting Opinion of Judge ad hoc Van den
Wyngaert) (“the opinion of civil society … cannot be completely discounted in the formation of customary
international law today”); Legal Consequences for States of the Continued Presence of South Africa in
Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion,
I.C.J. Reports 1971, p. 16, at pp. 69-70, 74 (Dissenting Opinion of Judge Ammoun) (“the primary factor in
the formation of the customary rule whereby the right of peoples to self-determination is recognized …
[may be] the struggle of peoples [for such cause], before they [now members of the international
community] were recognized as States ... If there is any ‘general practice’ which might be held, beyond
dispute, to constitute law within the meaning of Article 38, paragraph 1 (b), of the Statute of the Court, it
must surely be that which is made up of the conscious action of the peoples themselves, engaged in a
determined struggle”); Western Sahara, Advisory Opinion, I.C.J. Reports 1975, p. 12, at p. 100 (Separate
Opinion of Judge Ammoun); L.-C. Chen, An Introduction to Contemporary International Law: A Policy-
Oriented Perspective, 2nd edition (Yale University Press, 2000), 344 (“the focus on ‘states’ is unrealistic ...
the relevant patterns in behavior extend ... also to those of private individuals and representatives of nongovernmental
organizations”); D. Bodansky, ‘Customary (and Not So Customary) International
Environmental Law’, Indiana Journal of Global Legal Studies, 3 (1995), 105, 108 (referring to the
behaviour of States and of “international organizations, transnational corporations and other nongovernmental
groups”); I. Gunning, ‘Modernizing Customary International Law: The Challenge of Human
Rights’, Virginia Journal of International Law, 31 (1991), 211, 212-213 (“In particular, by questioning the
comprehensiveness of traditional formulations of national sovereignty, this Article will explore the
prospect of permitting transnational and non-governmental groups to have a legal voice in the creation of
custom”); C. Steer, ‘Non-State Actors in International Criminal Law’, in J. D’Aspermont (ed.),
Participants in the International Legal System: Multiple Perspectives on Non-State Actors in International
Law (Routledge, 2013), 295-310 (arguing that in international criminal law non-State actors such as NGOs,
judges and lawyers are those who determine the normative content); J.J. Paust, ‘Nonstate Actor
Participation in International Law and the Pretense of Exclusion’, Virginia Journal of International Law,
51 (2011), 977-1004; A. Roberts, S. Sivakumaran, ‘Lawmaking by Nonstate Actors: Engaging Armed
Groups in the Creation of International Humanitarian Law’, Yale Journal of International Law, 37 (2012),
107-152; and W.M. Reisman, ‘The Democratization of Contemporary International Law-Making Processes
and the Differentiation of Their Application’, in R. Wolfrum, V. Röben (eds.), Developments of
International Law in Treaty Making (Springer, 2005), 15-30.
137 J.P. Bohoslavsky, Y. Li and M. Sudreau, ‘Emerging Customary International Law in Sovereign Debt
Governance?’, Capital Markets Law Journal, 9 (2013), 55, 63. Baron Descamps’ original proposal with
regard to the rules to be applied by the Permanent Court of International Justice referred to custom as
“being practice between nations accepted by them as law”: see K. Wolfke, supra note 6, at 3.
138 T. Buergenthal, S.D. Murphy, Public International Law in a Nutshell, 5th edition (West Publishing, 2013),
75.
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practice through bringing international law claims in national courts or by being
relevant when assessing such practice), their actions are not ‘practice’ for purposes
of the formation or evidencing of customary international law.139
46. While the decisions of international courts and tribunals as to the existence of
rules of customary international law and their formulation are not ‘practice’,140 such
decisions serve an important role as “subsidiary means for the determination of rules
of law”.141 The pronouncements of the ICJ in particular may carry great weight.142
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139 Cf. conclusion 5, paragraph 2, of the Commission’s draft conclusions on subsequent agreements and
subsequent practice in relation to the interpretation of treaties (ILC Report 2013, para. 38): “Other conduct,
including by non-State actors, does not constitute subsequent practice under articles 31 and 32. Such
conduct may, however, be relevant when assessing the subsequent practice of parties to a treaty”. See also
the Statements on behalf of Israel and Iran in the 2013 Sixth Committee debate on the work of the
International Law Commission (available at http://www.un.org/en/ga/sixth); A.C. Arend, Legal Rules and
International Society (Oxford University Press, 1999), 176 (“Even though nonstate actors exist, and, in
some cases, these nonstate actors have entered into international agreements, these actors do not enter into
the process of creating general international law in an unmediated fashion. In other words, the interactions
of nonstate actors with each other and with states do not produce customary international law”); J.
D’Aspermont, ‘Inclusive law-making and law-enforcement processes for an exclusive international legal
system’, in J. D’Aspermont (ed.), Participants in the International Legal System: Multiple Perspectives on
Non-State Actors in International Law (Routledge, 2013), 425, 430; M.H. Mendelson, supra note 71, at
203 (suggesting that the contribution of non-State actors to the formation of CIL is “in a broader sense …
[it is an] indirect contribution”); Y. Dinstein, supra note 71, at 267-269; ILA London Statement of
Principles, at 16. With regard to the suggestion by some that the practice of individuals, such as fishermen,
has been recognized as giving rise to customary international law (see, for example, K. Wolfke, supra note
93, at 4), it is probably more accurate to say that while “[i]t cannot be denied, of course, that actions of
individuals may create certain facts which may subsequently become the subject matter of inter-state
dialogue … in such circumstances the actions of individuals do not constitute a law-creating practice: they
are just simple facts giving rise to international practice of states” (G.M. Danilenko, Law-Making in the
International Community (Martinus Nijhoff Publishers, 1993), 84). See also K. Wolfke, supra note 6, at
58: “whose behaviour contributes to the practice is not important; what is important is to whom the practice
may be attributed, and above all, who it is who has ‘accepted it as law’”; C. Santulli, supra note 37, at 45-
46 (“Pour être pertinent aux fins de l’élaboration des règles coutoumières, le précédent doit pouvoir être
imputé à un Etat ou à une organisation internationale. Seuls les Etats et les organisations internationales, en
effet, pariticipent au phénomène coutoumier. La conduit des sujets internes n’en est pas moins importante,
mais elle n’est juridiquement pertinente pour apprécier la formation de la coutume internationale qu’au
regard de la réaction qu’elle a sucitée, tolérance ou réprobation”).
140 See also M.H. Mendelson, supra note 71, at 202; but see Barcelona Traction, Light and Power Company,
Limited, Judgment, I.C.J. Reports 1970, p. 3, at p. 315 (Separate Opinion of Judge Ammoun):
“international case-law … [is] considered an element of [custom]”; G.M. Danilenko, ibid., at 83 (“The
decisions of tribunals, and especially the judgments of the I.C.J., are an important part of community
practice”). Cf. L. Kopelmanas, ‘Custom as a Means of the Creation of International Law’, British Yearbook
of International Law, 18 (1937), 127, 142 (“the creation of legal rules by custom by the action of the
international judge is an incontestable positive fact”); R. Bernhardt, supra note 84, at 270 (“This formula
[of Article 38 of the International Court’s Statute, awarding judicial decision the status of subsidiary means
for determining rules of law] underestimates the role of decisions of international courts in the normcreating
process. Convincingly elaborate judgments often have a most important influence on the normgenerating
process, even if in theory courts apply existing law and do not create new law”).
141 Article 38.1(d) of the ICJ Statute. See also Secretariat memorandum, at 25-26 (observing that “The
Commission has, on some occasions, relied upon decisions of international courts or tribunals as
authoritatively expressing the status of a rule of customary international law” (Observation 15); that
“Furthermore, the Commission has often relied upon judicial pronouncements as a consideration in support
of the existence or non-existence of a rule of customary international law” (Observation 16); and that “At
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47. Confidential practice. Much State practice, such as classified exchanges
among Governments, is not publicly available, at least not for some time.143 It is
difficult to see how practice can contribute to the formation or identification of
general customary international law unless and until it has been disclosed
publicly.144 At the same time, a practice known among only some or even two States
may contribute to the development of a regional, special or local (rather than
general) rule of customary international law, opposable to them alone.145
48. The following draft conclusion is proposed:
Draft Conclusion 7
Forms of practice
1. Practice may take a wide range of forms. It includes both physical
and verbal actions.
2. Manifestations of practice include, among others, the conduct of
States ‘on the ground’, diplomatic acts and correspondence, legislative
acts, judgments of national courts, official publications in the field of
international law, statements on behalf of States concerning codification
__________________
times, the Commission has also relied upon decisions of international courts or tribunals, including arbitral
awards, as secondary sources for the purpose of identifying relevant State practice” (Observation 17)).
142 I. Brownlie, supra note 121, at 19 (“the judgments of the International Court and other international
tribunals have a role in the recognition and authentication of rules of customary international law”). For a
recent example see the judgment of the European Court of Human Rights in Jones and Others v. The
United Kingdom (Applications nos. 34356/06 and 40528/06), 14 January 2014, para. 198. Cf. K. Wolfke,
supra note 6, at 145 (“… judgments and opinions of international courts, especially of the Hague Court, are
of decisive importance as evidence of customary rules. The Court has invoked them almost as being
positive law”).
143 Such confidential practice is to be distinguished from practice which is simply hard to access. Practice may
go largely unnoticed, for a variety of reasons. This is, for example, the case where the practice of particular
States is not published in some widely accessibly form. There is a special problem, to which members of
the Commission and States have drawn attention, with practice that is primarily available in languages that
are not widely read (which is in fact the case with most languages).
144 See also Y. Dinstein, supra note 71, at 275 (“Another condition for State conduct – if it is to count in
assessing the formation of custom – is that it must be transparent, so as to enable other States to respond to
it positively or negatively”); ILA London Statement of Principles, at 15 (“Acts do not count as practice if
they are not public”). On the “representational function of doctrine [coming] up against the sécret de l'état”
more generally see A. Carty, supra note 71, at 979-982. Meijers stresses that “States concur in the creation
of law by not protesting, that is to say, by not reacting. If that is so, the states concerned must get an
opportunity to react. From this there flow two further requirements for the formation of law: it must be
possible to indicate at least one express manifestation of the will to create a law, and this express
manifestation of will must be cognoscible for all states which will be considered as wishing to concur in
the creation of the new rule if they do not protest” (H. Meijers, supra note 124, at 19). But see M. Bos,
‘The Identification of Custom in International Law’, German Yearbook of International Law, 25 (1982), 9,
30 (“even if facilitated, the discovery of evidence [of State practice] at times may be a problem, for not
every bit of practice will find its way to digests and collections. It is asking too much, therefore, to say that
in additions to the qualifications … [of virtual uniformity, attribution to the State and generality] practice
should also be sufficiently perceptible to other States on which the customary rule-to-be may be binding in
future”).
145 The issue of regional/special/bilateral custom will be dealt with in the Special Rapporteur’s third report.
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efforts, practice in connection with treaties, and acts in connection with
resolutions of organs of international organizations and conferences.
3. Inaction may also serve as practice.
4. The acts (including inaction) of international organizations may also
serve as practice.
49. No predetermined hierarchy. No one manifestation of practice is a priori more
important than the other; its weight depends on the circumstances as well as on the
nature of the rule in question.146 For example, while in common parlance ‘actions
speak louder than words’, that will obviously not be the case when it is
acknowledged that the action is unlawful.147 At the same time, in many cases it is
ultimately the executive that speaks for the State in international affairs.148
50. A State’s practice should be “taken as a whole”.149 This implies, first, that
account has to be taken of all available practice of a particular State. Secondly, it
may be the case that the various organs of the State do not speak with one voice. For
example, a court, or the legislature, may adopt a position contrary to that of the
executive branch, and even within the same branch different positions may be taken.
This may be particularly likely with the practice of sub-State organs (for example, in
a federal State); it may be necessary to look cautiously at that practice, in the same
way one would approach lower court decisions. Where a State speaks in several
voices, its practice is ambivalent, and such conflict may well weaken the weight to
be given to the practice concerned.150
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146 See also B. Conforti, B. Labella, supra note 52, at 32 (“These diverse actions are not governed by a set
hierarchy: acts of domestic courts and executive organs, organs conducting foreign relations, and
representatives at international organizations, are all on an equal footing. The weight given to the acts
depends on the content of the international customary rule”); M. Akehurst, supra note 84, at 21 (“There is
no compelling reason for attaching greater importance to one kind of practice than to another”); K. Wolfke,
supra note 6, at 157 (“The absence of any appropriate indication in the Statute of the [international] Court,
and the freedom enjoyed by the Court in the choice and evaluation of evidence of customary law, do not
give any ground for admitting any formal hierarchy of the kinds of such evidence”).
147 See, for example, the International Court’s consideration of the principle of non-intervention in
its Nicaragua judgment: Military and Paramilitary Activities in and against Nicaragua (Nicaragua v.
United States of America), Merits, Judgment, I.C.J. Reports 1986, p. 14, at pp. 108-109, para. 207. See also
R. Müllerson, supra note 84, at 344 (“Of course, different categories of state practice may have different
weight in the process of custom formation. Usually it matters more what states do than what they say, but
on the other hand, at least in official inter-state relations, saying is also doing. ‘Actual’ practice may be
weightier in the process of custom formation but diplomatic practice usually conveys more clearly the
international legal position of states. Often only a few states may be engaged in ‘actual’ practice, while
other states’ practice may be only diplomatic or even completely absent”).
148 See also A. Roberts, supra note 112, at 62 (“Where inconsistencies emerge, the conflicting practice must
be weighed, considering factors such as which branch of government has authority over the matter”); but
see I. Wuerth, ‘International Law in Domestic Courts and the Jurisdictional Immunities of the State Case’,
Melbourne Journal of International Law, 13 (2012), 1, 9 (“Privileging the executive branch is
unsatisfactory because a national court decision invokes the responsibility of the state as a matter of
international law and it often provides clearer evidence of the opinio juris than executive branch practice”).
149 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports
2012, p. 99, at p. 136, para. 83.
150 See, for example, Yong Vui Kong v Public Prosecutor, [2010] 3 S.L.R. 489 [2010] SGCA 20 (Supreme
Court of Singapore — Court of Appeal, 14 May 2010), para. 96. For a different argument, according to
which only once differences between the practice followed by different organs of a State disappear can the
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51. The following draft conclusion is proposed:
Draft Conclusion 8
Weighing evidence of practice
1. There is no predetermined hierarchy among the various forms of
practice.
2. Account is to be taken of all available practice of a particular State.
Where the organs of the State do not speak with one voice, less weight is
to be given to their practice.
52. Generality of practice. “It is of course clear from the explicit terms of Article
38, paragraph 1 (b), of the Statute of the Court, that the practice from which it is
possible to deduce a general custom is that of the generality of States and not of all
of them”.151 Indeed, for a rule of general customary international law to emerge or
be identified the practice need not be unanimous (universal);
152 but, it must be
“extensive”153 or, in other words, sufficiently widespread.154 This is not a purely
__________________
practice of that State become “consistent and thus capable of contributing to the development of customary
law” see M. Akehurst, supra note 84, at 22.
151 Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 3, at p. 330
(Separate Opinion of Judge Ammoun).
152 See also North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 104 (Separate Opinion of
Judge Ammoun) (“[Proving the existence of customary international law] is therefore a question of
enquiring whether such a practice is observed, not indeed unanimously, but… by the generality of States
with actual consciousness of submitting themselves to a legal obligation”), and p. 229 (Dissenting Opinion
of Judge Lachs) (“to become binding, a rule or principle of international law need not pass the test of
universal acceptance. This is reflected in several statements of the Court … Not all States have, as I
indicated earlier in a different context, an opportunity or possibility of applying a given rule. The evidence
should be sought in the behaviour of a great number of States, possibly the majority of States, in any case
the great majority of the interested States”); Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports
1974, p. 253, at p. 435 (Dissenting Opinion of Judge Barwick) (“Customary law among the nations does
not, in my opinion, depend on universal acceptance”); Gabčikovo-Nagymaros Project (Hungary/Slovakia),
Judgment, I.C.J. Reports 1997, p. 7, at p. 95 (Separate Opinion of Judge Weeramantry) (“The general
support of the international community does not of course mean that each and every member of the
community of nations has given its express and specific support to the principle – nor is this a requirement
for the establishment of a principle of customary international law”). For scholarly support see, for
example, J. Dugard SC, International Law: A South African Perspective, 4th edition (Juta, 2012), 28 (“For
a rule to qualify as custom, it must receive ‘general’ or ‘widespread’ acceptance. Universal acceptance is
not necessary”); H. Thirlway, supra note 38, at 59 (“One thing that can be stated with certainty is that
unanimity among all States is not a requirement, either in the sense that all States must have been shown to
have participated in [the practice], or in the sense that there is evidence that the opinio, the view that it is a
binding custom, is held by all States”).
153 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 43, para. 74.
154 See, for example, Maritime Delimitation and Territorial Questions between Qatar and Bahrain, Merits,
Judgment, I.C.J. Reports 2001, p. 40, at p. 102, para. 205 (referring to “[a uniform and] widespread State
practice”); Delimitation of the Maritime Boundary in the Gulf of Maine Area, Judgment, I.C.J. Reports
1984, p. 246, at 299, para. 111 (referring to “a sufficiently extensive and convincing practice”); Fisheries
Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at pp. 45, 52 (Joint
Separate Opinion of Judges Forster, Bengzon, Jiménez de Aréchaga, Nagendra Singh and Ruda) (referring
to “sufficiently widespread” and “sufficiently general and uniform” State practice), and p. 161 (Separate
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quantitative test, as the participation in the practice must also be broadly
representative,155 and include those States whose interests are specially affected.
53. The exact number of States required for the “kind of ‘head count’ analysis of
State practice”156 leading to the recognition of a practice as ‘general’ cannot be
identified in the abstract.157 In essence, what is important is that “[t]he practice must
have been applied by the overwhelming majority of states which hitherto had an
opportunity of applying it”158 (including, in appropriate cases, through inaction), and
that “[t]he available practice … [will be] so widespread that any remaining
__________________
Opinion of Judge Petrén) (referring to the need for a “sufficiently large” number of States); Kaunda and
Others v. The President of the Republic of South Africa and Others, Judgment of the Constitutional Court
of South Africa (4 August 2004), para. 29 (“…presently this is not the general practice of states… It must
be accepted, therefore, that the applicants cannot base their claims on customary international law”); 2 BvR
1506/03, Order of the Second Senate of 5 November 2003 (German Federal Constitutional Court), para. 59
(“Such practice, however, is not sufficiently widespread as to be regarded as consolidated practice that
creates customary international law”). Generality has indeed been described as “the key concept to the
essence of a universal customary rule”: J. Barboza, supra note 119, at 7. See also the Secretariat
memorandum, at 10 (“The generality of State practice has also been regarded by the Commission as a key
consideration in the identification of a rule of customary international law”).
155 See North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 42, para. 73 (“a very
widespread and representative participation…”), and p. 227 (Dissenting Opinion of Judge Lachs) (“This
mathematical computation, important as it is in itself, should be supplemented by, so to speak, a spectral
analysis of the representativity of the States … For in the world today an essential factor in the formation
of a new rule of general international law is to be taken into account: namely that States with different
political, economic and legal systems, States of all continents, participate in the process”); Mondev
International Ltd v. United States of America (ICSID, Award, 11 October 2002), para. 117 (“Investment
treaties run between North and South, and East and West, and between States in these spheres inter se. On
a remarkably widespread basis, States have repeatedly obliged themselves to accord foreign investment
such treatment. In the Tribunal’s view, such a body of concordant practice will necessarily have influenced
the content of rules governing the treatment of foreign investment in current international law”); 2 BvR
1506/03, Order of the Second Senate of 5 November 2003 (German Federal Constitutional Court), para. 50
(referring to “conduct that is continuous in time and as uniform as possible, and which takes place with a
broad and representative participation of states and other subjects of international law with law-making
authority”); ILA London Statement of Principles, at 23 (“For a rule of general customary international law
to come into existence, it is necessary for the State practice to be both extensive and representative”); G.M.
Danilenko, supra note 139, at 94 (“The requirement of generality means that customary practice must
acquire a broad and representative character”).
156 To borrow the words of Judge Dillard in his Separate Opinion in Fisheries Jurisdiction (United Kingdom v.
Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at p. 56.
157 See also A. Clapham, supra note 37, at 59-60 (“This test of general recognition [among States of a certain
practice as obligatory] is necessarily a vague one; but it is of the nature of customary law, whether national
or international, not to be susceptible to exact or final formulation”); J. Barboza, supra note 119, at 8
(‘“Generality’ seems to be a rather flexible notion”).
158 J.L. Kunz, supra note 56, at 666; and see para. 54 below on ‘specially affected States’. See also R. Higgins,
supra note 13, at 22 (“we must not lose sight of the fact that it is the practice of the vast majority of states
that is critical, both in the formation of new norms and in their development and change and possible
death”). The German Federal Constitutional Court has held that it suffices if a rule is recognized as binding
by an overwhelming majority of States, which need not necessarily include Germany (see Order of the
Second Senate of 8 May 2007, 2 BvM 1-5/03, 1, 2/06, para. 33: “A rule of international law is ‘general’
within the meaning of Article 25 of the Basic Law if it is recognised by the vast majority of states (see
BVerfGE 15, 25 (34)). The general nature of the rule relates to its application, not to its content,
recognition by all states not being necessary. It is equally not necessary for the Federal Republic of
Germany in particular to have recognised the rule”).
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inconsistent practice will be marginal and without direct legal effect”.159 At times,
even a “respectable” number of States adhering to the practice may not necessarily
be sufficient;
160 yet it very well may be that only a relatively small number of States
engage in a practice, and the inaction of others suffices to create a rule of customary
international law.161
54. Specially affected States. Due regard should be given to the practice of “States
whose interests [are] specially affected”,162 where such States may be identified. In
other words, any assessment of international practice ought to take into account the
practice of those States that are “affected or interested to a higher degree than other
states”163 with regard to the rule in question, and such practice should weigh heavily
(to the extent that, in appropriate circumstances, it may prevent a rule from
emerging).164 Which States are “specially affected” will depend upon the rule under
consideration, and indeed “not all areas … allow a clear identification of ‘specially
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159 M.E. Villiger, supra note 84, at 30.
160 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 42, para. 73. See also Nguyen Tuong
Van v. Public Prosecutor (Singapore Court of Appeal), [2005] 1 SLR 103; [2004] SGCA 47, para. 92.
161 See, for example, M. Akehurst, supra note 84, at 18 (“A practice followed by a very small number of
States can create a rule of customary law if there is no practice which conflicts with the rule”).
162 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 42, para. 73 (“…With respect to the
other elements usually regarded as necessary before a conventional rule can be considered to have become
a general rule of international law, it might be that, even without the passage of any considerable period of
time, a very widespread and representative participation in the convention might suffice of itself, provided
it included that of States whose interests were specially affected”), p. 43, para. 74 (“State practice,
including that of States whose interest are specially affected”), and pp. 175-176 (Dissenting Opinion of
Judge Tanaka) (“It cannot be denied that the question of repetition is a matter of quantity … What I want to
emphasize is that what is important … [is] the meaning which [a number or figure] would imply in the
particular circumstances. We cannot evaluate the ratification of the Convention [on the Continental Shelf]
by a large maritime country or the State practice represented by its concluding an agreement on the basis of
the equidistance principle, as having exactly the same importance as similar acts by a land-locked country
which possesses no particular interest in the delimitation of the continental shelf”). See also Fisheries
Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at p. 90 (Separate
Opinion of Judge De Castro) (“For a new rule of international law to be formed, the practice of States,
including those whose interests are specially affected, must have been substantially or practically
uniform”), and p. 161 (Separate Opinion of Judge Petrén) (“Hence another element which is necessary for
the formation of a new rule of customary law is missing, namely its acceptance by those States whose
interests it affects”); J.B. Bellinger, W.J. Haynes, ‘A US government response to the International
Committee of the Red Cross study Customary International Humanitarian Law’, International Review of
the Red Cross, 89 (2007), 443, 445 (footnote 4); T. Treves, supra note 50, at para. 36 (“While, for instance,
it would be difficult to determine the existence of a rule on the law of the sea in the absence of
corresponding practice of the main maritime powers, or of the main costal States, or, as the case may be, of
the main fishing States, the silence of less involved States would not be an obstacle to such determination.
Similarly, rules on economic relations, such as those on foreign investment, require practice of the main
investor States as well as that of the main States in which investment is made”).
163 W.T. Worster, ‘The Transformation of Quantity into Quality: Critical Mass in the Formation of Customary
International Law’, Boston University International Law Journal, 31 (2013), 1, 63. Meijers refers to “The
states which have a predominant share in a given activity” (H. Meijers, supra note 124, at 7); Danilenko
refers to “a special interest in the relevant principles and rules” (G.M. Danilenko, supra note 139, at 95).
164 See, for example, Fisheries Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports
1974, p. 3, at p. 47 (Joint Separate Opinion of Judges Forster, Bengzon, Jiménez de Aréchaga, Nagendra
Singh and Ruda) (“…those claims have generally given rise to protests or objections by a number of
important maritime and distant-water fishing States, and in this respect they cannot be described as being
‘generally accepted’”).
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affected’ states”.165 In many cases, all States are affected equally. Admittedly, some
States will often be “specially affected”;
166 as mandated by the principle of
sovereign equality, however, it is only in such capacity that their practice may be
assessed and attributed particular weight.167
55. Consistency of the practice. For a rule of customary international law to
become established, the relevant practice must be consistent.168 While the specific
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165 G.M. Danilenko, supra note 139, at 95. See also M. Mendelson, supra note 124, at 186 (“the notion of
‘specially affected states’ is not very precise”); M.J. Aznar, ‘The Contiguous Zone as an Archeological
Maritime Zone’, International Journal of Marine and Coastal Law, 29 (2014), 1, 12. One example for such
a challenge may be found in the International Court’s Legality of the Threat or Use of Nuclear Weapons
case, where Judge Shahabuddeen, in his Dissenting Opinion, suggested that “Where what is in issue is the
lawfulness of the use of a weapon which could annihilate mankind and so destroy all States, the test of
which States are specially affected turns not on the ownership of the weapon, but on the consequences of
its use. From this point of view, all states are equally affected, for, like the people who inhabit them, they
all have an equal right to exist” (Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion,
I.C.J. Reports 1996, p. 226, at p. 414. For the same point see also pp. 535-536 (Dissenting Opinion of
Judge Weeramantry).
166 De Visscher compares the growth of customary international law to the “formation of a road across vacant
land”: “Among the users are some who mark the soil more deeply with their footprints than others, either
because of their weight, which is to say their power in the world, or because their interests bring them more
frequently this way”: C. De Visscher, Theory and Reality in Public International Law (Princeton
University Press, 1968), 149.
167 See also ILA London Statement of Principles, at 26: “There is no rule that major powers have to participate
in a practice in order for it to become a rule of general customary law. Given the scope of their interests,
both geographically and ratione materiae, they often will be ‘specially affected’ by a practice; and to that
extent and to that extent alone, their participation is necessary”. See also Legality of the Threat or Use of
Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at p. 278 (Declaration of Judge Shi)
(“any undue emphasis on the practice of this ‘appreciable section’ [of “important and powerful members of
the international community [that] play an important role on the stage of international politics”] would not
only be contrary to the very principle of sovereign equality of States, but would also make it more difficult
to give an accurate and proper view of the existence of a customary rule”), and p. 533 (Dissenting Opinion
of Judge Weeramantry) (“From the standpoint of the creation of international custom, the practice and
policies of five States out of 185 seem to be an insufficient basis on which to assert the creation of custom,
whatever be the global influence of those five”). But see Legality of the Threat or Use of Nuclear
Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at pp. 312, 319 (Dissenting Opinion of Judge
Schwebel) (“This nuclear practice is not a practice of a lone and secondary persistent objector. This is not a
practice of a Pariah government crying out in the wilderness of otherwise adverse international opinion.
This is the practice of five of the world’s major Powers, of the permanent members of the Security
Council, significantly supported for almost 50 years by their allies and other States sheltering under their
nuclear umbrellas. That is to say, it is the practice of States – and practice supported by a large and weighty
number of other States – that together represent the bulk of the world’s military and economic and financial
and technological power and a very large proportion of its population”); Nuclear Tests (Australia v.
France), Judgment, I.C.J. Reports 1974, p. 253, at p. 306 (Separate Opinion of Judge Petrén) (“It would be
unrealistic to close one’s eye to the attitude, in that respect, of the State with the largest population in the
world”); T. Buergenthal and S.D. Murphy, supra note 138, at 28 (“That it [practice] does not have to be
universal seems to be clear. Equally undisputed is the conclusion that, in general, the practice must be one
that is accepted by the world’s major powers and by states directly affected by it”).
168 See, for example, Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports
1950, p. 266, at pp. 276, 277 (“a constant and uniform usage”); Case concerning Right of Passage over
Indian Territory (Merits), Judgment of 12 April 1960: I.C.J. Reports 1960, p. 6, at p. 40 (“a constant and
uniform practice”); Nottebohm Case (second phase), Judgment of April 6th, 1955: I.C.J. Reports 1955, p.
4, at p. 30 (Dissenting Opinion of Judge Klaestad); North Sea Continental Shelf, Judgment, I.C.J. Reports
1969, p. 3, at p. 43, para. 74 (the practice must be “virtually uniform”); Fisheries Jurisdiction (United
Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at p. 90 (Separate Opinion of Judge De
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circumstances surrounding each act may naturally vary, “a core of meaning that
does not change” common to them is required: it is then that a regularity of conduct
may be observed.169 Where, by contrast, the practice demonstrates “that each
specific case is, in the final analysis, different from all the others ... [t]his precludes
the possibility of those conditions arising which are necessary for the formation of
principles and rules of customary law”.170 In other words, where the facts reveal that
“there is so much uncertainty and contradiction, so much fluctuation and
discrepancy … so much inconsistency … and the practice has been so much
influence by considerations of political expediency in the various cases, [] it is not
possible to discern in all this any constant and uniform usage, accepted as law, with
regard to the alleged rule …”.171
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Castro) (“For a new rule of international law to be formed, the practice of States, including those whose
interests are specially affected, must have been substantially or practically uniform”) and p. 50 (Joint
Separate Opinion of Judges Forster, Bengzon, Jiménez de Aréchaga, Nagendra Singh and Ruda) (“Another
essential requirement for the practice of States to acquire the status of customary law is that such State
practice must be common, consistent and concordant. Thus contradiction in the practice of States or
inconsistent conduct, particularly emanating from these very States which are said to be following or
establishing the custom, would prevent the emergence of a rule of customary law”). See also the
Secretariat memorandum, at 9 (“The uniformity of State practice has been regarded by the Commission as
a key consideration in the identification of a rule of customary international law”). One scholar has written
that in practice the two requirements of generality and uniformity “meld together in a unitary analytical
process. International lawyers cannot, for example, analyze whether State practice is general without
having identified a practice that is uniform” (D.P. Fidler, ‘Challenging the Classical Concept of Custom:
Perspectives on the Future of Customary International Law’, German Yearbook of International Law, 39
(1996), 198, 202).
169 J. Barboza, supra note 119, at 7 (“The repetition of conduct is of the essence of custom. Of course, the facts
are never the same: Heraclitus used to say that we never bathe twice in the same river. The facts may
change, the subjects may be different, the circumstances may vary, but there is a core of meaning that does
not change. Whenever there is a repetition, there are individual facts that belong to a common genus; to
speak of repetition implies a previous abstraction and elimination of a number of data belonging to the
individual facts, the facts that occurred in real life. At the same time, a core of generic meaning is kept, i.e.
a meaning that can be applied to the other situations ... That generic meaning repeats itself in every
precedent and establishes the content of the accepted by States concerned as law between them”). See also
G.M. Danilenko, supra note 139, at 96 (“any customary rule is a normative generalization from individual
precedents”).
170 Delimitation of the Maritime Boundary in the Gulf of Maine Area, Judgment, I.C.J. Reports 1984, p. 246,
at p. 290, para. 81.
171 Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports 1950, p. 266, at p.
277. See also Corfu Channel case, Judgment of April 9th, 1949: I.C.J. Reports 1949, p. 4, at p. 74
(Dissenting Opinion by Judge Krylov) (“The practice of States in this matter is far from uniform, and it is
impossible to say that an international custom exists in regard to it”) and p. 128 (Dissenting Opinion by
Judge ad hoc Ečer) (“The practice of States was so varied that no proof of the existence of such a rule [of
customary international law] was to be found”); Fisheries case, Judgment of December 18th, 1951: I.C.J.
Reports 1951, p. 116, at p. 131 (finding that where “certain States” adopted or applied one rule and “other
States” have adopted a different practice, “Consequently, the [] rule has not acquired the authority of a
general rule of international law”); Barcelona Traction, Light and Power Company, Limited, Judgment,
I.C.J. Reports 1970, p. 3, at pp. 56-57 (Separate Opinion of President Bustamante y Rivero) (asserting that
where [practice] is of a “sporadic nature [that] stands in the way of any systemization” the emergence of
customary international law is “hardly likely in the circumstances”); Fisheries Jurisdiction (Federal
Republic of Germany v. Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 175, at p. 212 (Declaration of
Judge Nagendra Singh) (“a widely divergent and, discordant State practice [would prevent a rule from
crystallizing]”); Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium),
Judgment, I.C.J. Reports 2002, p. 3, at pp. 117-118 (Separate Opinion of Judge Bula-Bula) (“many
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56. In establishing the consistency of practice it is, of course, important to
consider situations that are in fact comparable, where the same or similar issues
have arisen.172 And while frequent repetition of a consistent practice would naturally
lend it greater weight, “the degree of frequency has to be weighed against the
frequency with which the circumstances arise in which the action constituting
practice has to be taken, or is appropriate”.173
57. Some inconsistency is not fatal. Complete uniformity of practice is not
required: “[t]oo much account should not be taken of superficial contradictions and
inconsistencies”.174 In the words of the International Court, “It is not to be expected
that in the practice of States the application of the rules in question should have
been perfect ... The Court does not consider that, for a rule to be established as
customary, the corresponding practice must be in absolutely rigorous conformity
with the rule. In order to deduce the existence of customary rules, the Court deems it
sufficient that the conduct of States should, in general, be consistent with such rules,
and that instances of State conduct inconsistent with a given rule should generally
have been treated as breaches of that rule, not as indications of the recognition of a
new rule.”175
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inconsistencies and equivocations fundamentally characterizing a practice both unilateral and solitary …
[mean that] no customary norm has emerged”).
172 See, for example, North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 45, para. 79; 2
BvR 1506/03, Order of the Second Senate of 5 November 2003 (German Federal Constitutional Court),
para 42 (“it must be particularly taken into account that the relevant state practice and the doctrines that the
Higher Regional Court has taken into consideration, in their overriding majority refer to situations that
involve only two states. In the present case, however, legal relations exist between the Republic of Yemen,
as the complainant’s state of origin, the United States of America, as the requesting state of the forum, and
the Federal Republic of Germany as the requested state of residence. Accordingly, the legal consequences
of the alleged violation of international law do not directly refer to criminal proceedings in the state of the
forum… but to extradition proceedings in the requested state of residence”); Prosecutor v. Fofana and
Kondewa, Case No. SCSL-04-14-A, Judgment (Special Court for Sierra Leone Appeals Chamber), 28 May
2008, para. 406.
173 H. Thirlway, supra note 38, at 65.
174 G. Fitzmaurice, ‘The Law and Procedure of the International Court of Justice, 1951-54: General Principles
and Sources of Law’, British Yearbook of International Law, 30 (1953), 1, 45. See also M. Villiger, supra
note 84, at 44 (“… an overly strict test … would jeopardize the formation of customary international law.
For example, it would mean neglecting the necessarily general character of customary law when examining
the instances of practice in too much detail. Furthermore, what appears at first glance to be inconsistent
practice may well contain as a common denominator a general rule, or there may at least be uniformity on
partial or special rules. Once the rule has become established, it may well permit various options …
Divergence from the rule may, in reality, point to an admissible exception …”); J. Crawford, supra note
37, at 24 (“Complete uniformity of practice is not required, but substantial uniformity is”); D. Bodansky,
supra note 136, at 109 (“customary rules represent regularities, but not necessarily uniformities, of
behaviour … mistakes and violations of rules are possible”); R. Müllerson, supra note 85, at 167 (making
the general point that “Legal regulation is needed only where there are deviations from desired patterns of
practice”). In Briggs’ words, “Variations from the concordance, generality, or consistency of a practice are
grist for judicial interpretations”: H.W. Briggs, ‘The Colombian-Peruvian Asylum Case and Proof of
Customary International Law’, American Journal of international Law, 45 (1951), 728, 729. According to
the Secretariat memorandum, “Where there was a unifying thread or theme underlying international
practice, a certain variability in practice has often not precluded the Commission from identifying a rule of
customary international law” (at 12).
175 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 98, para. 186. The Court added that “If a State acts in a
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58. Duration of the practice. Although rules of customary international law have
traditionally emerged as a result of a practice extending over a lengthy period of
time, it is widely acknowledged that there is no specific requirement with regard to
how long a practice must exist before it can ripen into a rule of customary
international law.176 As the International Court held in the North Sea Continental
Shelf case, “the passage of only a short period of time is not necessarily, or of itself,
a bar to the formation of a new rule of customary international law … [yet] an
indispensable requirement would be that within the period in question, short though
it might be, State practice, including that of States whose interests are specially
affected, should have been both extensive and virtually uniform … and should
moreover have occurred in such a way as to show a general recognition that a rule
of law or legal obligation is involved”.177 While some rules may inevitably take
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way prima facie incompatible with a recognized rule, but defends its conduct by appealing to exceptions or
justifications contained within the rule itself, then whether or not the State’s conduct is in fact justifiable on
that basis, the significance of that attitude is to confirm rather than to weaken the rule”. See also
Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports 1950, p. 266, at p.
336 (Dissenting Opinion by Judge Azevedo); Case concerning Right of Passage over Indian Territory
(Merits), Judgment of 12 April 1960: I.C.J. Reports 1960, p. 6, at pp. 40, and also in pp. 104, 107
(Dissenting Opinion of Judge Sir Percy Spender); North Sea Continental Shelf, Judgment, I.C.J. Reports
1969, p. 3, at p. 229 (Dissenting Opinion of Judge Lachs). In the Fisheries case the Court said that it
“considers that too much importance need not be attached to the few uncertainties or contradictions, real or
apparent, which the United Kingdom Government claims to have discovered in Norwegian practice. They
may easily be understood in the light of the variety of the facts and conditions prevailing in the long period
which has elapsed since 1812, and are not such as to modify the conclusions reached by the Court”
(Fisheries case, Judgment of December 18th, 1951: I.C.J. Reports 1951, p. 116, at p. 138).
176 See, for example, J. Dugard SC, supra note 152, at 27 (“In most cases some passage of time is required for
a practice to crystallize into a customary rule. In some cases, however, where little practice is needed to
establish a rule, it may come into existence very rapidly”); O. Corten, Métholodologie du droit
international public (Editions de l’Université de Bruxelles, 2009), 150-151 (“Si, auparavant, la doctrine
semblait exiger une pratique très ancienne, les évolutions récentes de la jurisprudence ont rendu cette
condition caduque. Ratione temporis, une coutume peut très bien resultée d’une pratique limitée dans le
temps pouvu, ajoute-t-on généralement, qu’elle soit particulièrement intense et univoque”); J.L. Kunz,
supra note 56, at 666 (“… international law contains no rules as to how many times or for how long a time
this practice must be repeated”); K. Wolfke, supra note 93, at 3 (“this practice no longer needs to occur for
any great length of time”); ILA London Statement of Principles, at 20 (“… no precise amount of time is
required”). But see the Separate Opinion of Judge Sepúlveda-Amor in Dispute regarding Navigational and
Related Rights (Costa Rica v. Nicaragua), Judgment, I.C.J. Reports 2009, p. 213, at p. 279: “Time is
another important element in the process of creation of customary international law … To claim the
existence of a customary right, created in such a short span of time, clearly contradicts the Court's previous
jurisprudence on the matter” (citing to the Right of Passage case); R.Y. Jennings, ‘The Identification of
International Law’, in B. Cheng (ed.), International Law: Teaching and Practice (Stevens & Sons, 1982),
3, 5 (“Certainly practice over a more or less long period is an essential ingredient of customary law”).
177 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 43, para. 74; see also p. 124
(Separate Opinion of Judge Ammoun), p. 230 (Dissenting Opinion of Judge Lachs) (“With regard to the
time factor, the formation of law by State practice has in the past frequently been associated with the
passage of a long period of time. There is no doubt that in some cases this may be justified. However, the
great acceleration of social and economic change, combined with that of science and technology, have
confronted law with a serious challenge: one it must meet, lest it lag even farther behind events than it has
been wont to do … the short period within which the law on the continental shelf has developed and
matured does not constitute an obstacle to recognizing its principles and rules, including the equidistance
rule, as part of general law”), and p. 244 (Dissenting Opinion of Judge Sørensen) (“The possibility has thus
been reserved of recognizing the rapid emergence of a new rule of customary law based on the recent
practice of States. This is particularly important in view of the extremely dynamic process of evolution in
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longer to emerge,178 provided that the practice shows sufficient generality and
consistency, no particular duration is required.179 It ought to be borne in mind in this
context, however, that “all states which could become bound by their inaction must
have the time necessary to avoid implicit acceptance by resisting the rule”.180
59. The following draft conclusion is proposed:
Draft Conclusion 9
Practice must be general and consistent
1. To establish a rule of customary international law, the relevant
practice must be general, meaning that it must be sufficiently widespread
and representative. The practice need not be universal.
2. The practice must be generally consistent.
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which the international community is engaged at the present stage of history”). The Inter-American Court
of Human Right has held with regard to ‘customary practice’ that “the important point is that the practice is
observed without interruption and constantly, and that it is not essential that the conduct should be
practiced over a specific period of time” (Baena Ricardo et al., Judgment of November 28, 2003, Inter-
Am. Ct. H.R., (Ser. C) No. 104 (2003), para. 104).
178 See H. Thirlway, supra note 38, at 64 (“If the issue to be resolved arises frequently, and is regulated in
essentially the same way on each occasion, the time required may be short; if the issue arises only
sporadically, it may take a longer time for consistency of handling to be observable … It is in fact the
consistency and repetition rather than the duration of the practice that carries the most weight.”). See also
H. Lauterpacht, ‘Sovereignty over Submarine Areas’, British Yearbook of International Law, 27 (1950),
376, 393 (suggesting that “[t]he ‘evidence of a general practice as law’ – in the words of Article 38 of the
Statute – need not be spread over decades. Any tendency to exact a prolonged period for the crystallization
of custom must be proportionate to the degree and the intensity, of the change that it purports, or is
asserted, to effect”); H. Li, Guoji Fa De Gainian Yu Yuanyuan (Concepts and Sources of International
Law) (Guizhou People’s Press, 1994), 91 (cited in C. Cai, ‘Intenrational Investment Treaties and the
Formation, Application and Transformation of Customary International Law Rules’, Chinese Journal of
International Law, 7 (2008), 659, 661).
179 See also I. Brownlie, supra note 121, at 19; E. Jiménez de Aréchaga, ‘General Course in Public
International Law’, 159 Recueil des Cours (1978), 25 (“The Court's acceptance of a quickly maturing
practice shows that the traditional requirement of duration is not an end in itself but only a means of
demonstrating the generality and uniformity of a given State practice”); L.B. Sohn, ‘Unratified Treaties as
a Source of Customary International Law’, in A. Bos, H. Siblesz (eds.), Realism in Law-Making: Essays in
International Law in Honour of Willem Riphagen (Martinus Nijhoff Publishers, 1986), 231, 234 (“The
length of time over which a practice has endured is not crucial for formation of custom. More important is
the strength of other factors – frequency and repetition of the practice, number of States that have engaged
in the practice, and the relative strength of opposing practice”); S. Rosenne, supra note 79, at 55 (“It is not
necessary that this line of conduct should have been pursued over a long period of time, although assertions
of ‘quickie’ or spontaneous production of customary rules must be treated with reserve. It is more
important to establish that there is widespread acceptance of the view that such conduct is in conformity
with the law and is required by the law, together with experience of actual conduct consonant therewith”).
Cf. M.P. Scharf, Customary International Law in Times of Fundamental Change: Recognizing Grotian
Moments (Cambridge University Press, 2013).
180 H. Meijers, supra note 124, at 23-24 (asserting that “[a]ll states that fall within the potential reach of the
nascent rule must get an opportunity to protest against its emergence”). But see G. Arangio-Ruiz, supra
note 17, at 100 (“Particularly nowadays any action or omission of a State is known all over the world with
the immediateness of a ray of light”).
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3. Provided that the practice is sufficiently general and consistent, no
particular duration is required.
4. In assessing practice, due regard is to be given to the practice of
States whose interests are specially affected.
VI. Accepted as law
60. The second element necessary for the formation and identification of
customary international law – acceptance of the ‘general practice’ as law – is
commonly referred to as opinio juris (or “opinio juris sive necessitatis”). This
“subjective element” of customary international law requires, in essence, that the
practice in question be motivated by a “conception... that such action was enjoined
by law”.181 States are to “believe[] themselves to be applying a mandatory rule of
customary international law”,182 or, in other words, “[feel] legally compelled to …
[perform the relevant act] by reason of a rule of customary law obliging them to do
so”.183 It is this “internal point of view”184 through which regularities of conduct
may harden into a rule of law, and which enables a distinction to be made between
law and non-law.185 As Judge Chagla put it, “… custom under international law
requires much more than [a piling up of a large number of instances]. It is not
enough to have its external manifestation proved; it is equally important that its
mental or psychological element must be established. It is this all-important element
that distinguishes mere practice or usage from custom. In doing something or in
forbearing from doing something, the parties must feel that they are doing or
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181 M.O. Hudson, The Permanent Court of International Justice, 1920-1942 – a Treatise (Macmillan, 1943),
609.
182 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para. 76.
183 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 44-45, para. 78.
184 D. Bodansky, supra note 136, at 109.
185 A practice unaccompanied by such a sense of obligation does not contribute to customary international law.
See also North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para. 77 (“Not only
must the acts concerned amount to a settled practice, but they must also be such, or be carried out in such a
way, as to be evidence of a belief that this practice is rendered obligatory by the existence of a rule of law
requiring it. The need for such a belief, i.e., the existence of a subjective element, is implicit in the very
notion of the opinio juris sive necessitatis”); Jurisdictional Immunities of the State (Germany v. Italy:
Greece intervening), Judgment, I.C.J. Reports 2012, p. 99, at p. 123, para. 55 (“While it may be true that
States sometimes decide to accord an immunity more extensive than that required by international law, for
present purposes, the point is that the grant of immunity in such a case is not accompanied by the requisite
opinio juris and therefore sheds no light upon the issue currently under consideration by the Court”). See
also H.W.A. Thirlway, supra note 81, at 48 (“while the requirement of opinio juris does undoubtedly give
rise to many problems in practice … it is admittedly difficult to distinguish between usage which has
become binding as customary law and usage which has not … without allowing the psychological element
in the creation of custom to creep back into the discussion by a devious route and under another name”).
On the important function of opinio juris in preventing generally unwanted general practice from becoming
customary international law see C. Dahlman, ‘The Function of Opinio Juris in Customary International
Law’, Nordic Journal of International Law, 81 (2012), 327-339. Villiger has remarked that “In addition,
the opinio serves in particular to distinguish violations of the customary rule from subsequent
modifications to the rule – a test not without its significance in view of the dynamic nature of customary
international law. As long as the previous opinio has not been eroded, and the new opinio is not
established, the diverging practice remains a form either of persistent or subsequent objection” (M.E.
Villiger, supra note 84, at 48).
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forbearing out of a sense of obligation. They must look upon it as something which
has the same force as law ... there must be an overriding feeling of compulsion – not
physical but legal”.186
61. Other motives for action. ‘Acceptance as law’ is to be distinguished from
other, extra-legal considerations that a State may have with regard to the practice in
question. In ascertaining whether a rule of customary international law exists it
ought to be established, therefore, that the relevant practice was not motivated
(solely) by considerations such as “courtesy, good-neighbourliness and political
expediency”187 as well as “convenience or tradition”.188 States must have accorded
deference to a rule “as a matter of legal obligation and not merely as a matter of
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186 Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J.
Reports 1960, p. 6, at p. 120 (Dissenting Opinion of Judge Chagla, referring to local custom but relies in
this context on the general language of Article 38.1(b) of the Statute of the Court).
187 Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports 1950, p. 266, at pp.
285, 286 (adding that “considerations of convenience or simple political expediency seem to have led the
territorial State to recognize asylum without that decision being dictated by any feeling of legal
obligation”). See also Case concerning Right of Passage over Indian Territory (Preliminary Objections),
Judgment of November 26th, 1957: I.C.J. Reports 1957, p. 125, at p. 177 (Dissenting Opinion of Judge
Chagla) (“[the State] must go further and establish that … [the practice was] enjoyed … as a matter of right
and not as a matter of grace or concession”); Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports
1974, p. 253, at p. 305 (Separate Opinion of Judge Petrén) (“[refraining from a conduct must be] motivated
not by political or economic considerations but by a conviction that … [that certain conduct is] prohibited
by customary international law”); Military and Paramilitary Activities in and against Nicaragua
(Nicaragua v. United States of America), Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 109 (where the
Court contrasted “statements of international policy” from “an assertion of rules of existing international
law”); Case concerning rights of nationals of the United States of America in Morocco, Judgment of
August 27th, 1952: I.C.J. Reports 1952, p. 176, at p. 221 (Dissenting Opinion of Judges Hackworth,
Badawi, Levi Carneiro and Sir Benegal Rau) (referring to “asserting usage as at least one basis of its rights
… [and thus] It was not, therefore, a case of mere ‘gracious tolerance’”); Legality of the Threat or Use of
Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at pp. 423-424 (Dissenting Opinion of
Judge Shahabuddeen) (“It is also important to have in mind that bare proof of acts or omissions allegedly
constituting State practice does not remove the need to interpret such acts or omissions. The fact that States
may feel that realities leave them no choice but to do what they do does not suffice to exclude what they do
from being classified as part of State practice, provided, however, that what they do is done in the belief
that they were acting out of a sense of legal obligation…”); Arrest Warrant of 11 April 2000 (Democratic
Republic of the Congo v. Belgium), Judgment, I.C.J. Reports 2002, p. 3, at p. 145 (Dissenting Opinion of
Judge ad hoc Van den Wyngaert) (“A ‘negative practice of States’, consisting in their abstaining from
instituting criminal proceedings, cannot, in itself, be seen as evidence of an opinio juris. Abstinence may
be explained by many other reasons, including courtesy, political considerations, practical concerns and
lack of extraterritorial criminal jurisdiction. Only if this abstention was based on a conscious decision of
the States in question can this practice generate customary international law”); C. De Visscher, supra note
166, at 149 (“Governments attach importance to distinguishing between custom, by which they hold
themselves bound, and the mere practices often dictated by considerations of expediency and therefore
devoid of definite legal reasoning. The fact that this is often a political interest is no reason for denying its
significance”).
188 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para. 77 (“There are many
international acts, e.g. in the field of ceremonial and protocol, which are performed almost invariably, but
which are motivated only by considerations of courtesy, convenience or tradition, and not by any sense of
legal duty”). See also Continental Shelf (Libyan Arab Jamahiriya/Malta), Judgment, I.C.J. Reports 1985,
p. 13, at p. 69 (Separate Opinion of Vice-President Sette-Camara) (“In support of the distance principle
political and diplomatic convenience can be invoked – but this is hardly opinio juris sive necessitatis”).
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reciprocal tolerance or comity”.189 ‘Acceptance as law’ is not to be confused with
considerations of a social or economic nature either,190 although these may very well
be present especially at the outset of the development of a practice.
62. Nor may practice motivated (solely) by the need to comply with treaty (or
some other extra-customary) obligations be taken as indicating ‘acceptance as
law’:191 when the parties to a treaty act in fulfilment of their conventional
obligations, this does not generally demonstrate the existence of an opinio juris.192
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189 Fisheries Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports 1974, p. 3, at p. 58
(Separate Opinion of Judge Dillard).
190 See also North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 23 (where the Court said of
the equidistance method of maritime delimitation: “In short, it would probably be true to say that no other
method of delimitation has the same combination of practical convenience and certainty of application. Yet
these factors do not suffice of themselves to convert what is a method into a rule of law, making the
acceptance of the results of using that method obligatory in all cases in which the parties do not agree
otherwise … Juridically, if there is such a rule, it must draw its legal force from other factors than the
existence of these advantages, important though they may be”); South West Africa, Second Phase,
Judgment, I.C.J. Reports 1966, p. 6, at p. 34 (“Humanitarian considerations may constitute an inspirational
basis for rules of law … Such considerations do not, however, in themselves amount to rules of law. All
States are interested – have an interest – in such matters. But the existence of an "interest" does not of itself
entail that this interest is specifically juridical in nature”).
191 See also O. Schachter, ‘Entangled Treaty and Custom’, in Y. Dinstein, M. Tabory (eds.), International Law
at a Time of Perplexity: Essays in Honour of Shabtai Rosenne (Martinus Nijhoff Publishers, 1989), 717,
729; A. Orakhelashvili, The Interpretation of Acts and Rules in Public International Law (Oxford
University Press, 2008), 81 (“Practice in compliance with some other extra-customary rule will not be
independent evidence of customary opinio juris, as was established in the North Sea case”). Baxter pointed
to a paradox in this context, according to which “As the express acceptance of the treaty increases, the
number of States not parties whose practice is relevant diminishes” (R.R. Baxter, ‘Treaties and Custom’,
129 Recueil des Cours (1970), 27, 73; see also R. Cryer, ‘Of Custom, Treaties, Scholars and the Gavel:
The Influence of the International Criminal Tribunals on the ICRC Customary Law Study’, Journal of
Conflict and Security Law, 11 (2006), 239, 244 (“In some ways, it can be more difficult to appraise
practice in relation to a norm that has a pre-existing treaty basis, as the practice of parties to the treaties
inter se can be attributed to the existence of the treaty”).
192 See, for example, North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 43, para. 76
(“over half the States concerned, whether acting unilaterally or conjointly, were or shortly became parties
to the Geneva Convention, and were therefore presumably so far as they were concerned, acting actually or
potentially in the application of the Convention. From their action no inference could legitimately be drawn
as to the existence of a rule of customary international law …”); Case concerning rights of nationals of the
United States of America in Morocco, Judgment of August 27th, 1952: I.C.J. Reports 1952, p. 176, at pp.
199-200 (“throughout this whole period [of 150 years], the United States consular jurisdiction was in fact
based, not on custom or usage, but on treaty rights … [there is] not enough to establish that the States
exercising consular jurisdiction in pursuance of treaty rights enjoyed in addition an independent title
thereto based on custom or usage”); Military and Paramilitary Activities in and against Nicaragua
(Nicaragua v. United States of America), Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 531
(Dissenting Opinion of Judge Jennings) (“… there are obvious difficulties about extracting even a scintilla
of relevant ‘practice’ on these matters from the behaviour of those few States which are not parties to the
Charter; and the behaviour of all the rest, and the opinio juris which it might otherwise evidence, is surely
explained by their being bound by the Charter itself”); Questions relating to the Obligation to Prosecute or
Extradite (Belgium v. Senegal), Judgment, I.C.J. Reports 2012, p. 422, at p. 479 (Separate Opinion of
Judge Abraham) (“such an approach does not demonstrate the existence of an opinio juris, that is to say, a
belief that there exists an obligation … outside of any conventional obligation”); Prosecutor v. Delalić,
Case No. IT-96-21-T, Judgment (ICTY Trial Chamber), 16 November 1998, para. 302. The United States
Supreme Court has likewise referred in The Paquete Habana case (1900) to a rule of international law
existing “independently of any express treaty or other public act”: 175 U.S. 677, 708. See also P. Tomka,
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By contrast, where States act in conformity with a treaty by which they are not (yet)
bound or towards States not parties to the treaty, the existence of ‘acceptance as law’
may indeed be established.193 This may also be the case where non-parties to a treaty
act in accordance with rules embodied therein, as for example with certain nonparties
to the United Nations Convention on the Law of the Sea.194
63. Where States “freely have recourse [to a set of different methods] in order to
reconcile their national interests”, there is usually no indication of “any opinio juris
based on the awareness of States of the obligatory nature of the practice
employed”.195 In other words, “the practice of States does not justify the formulation
of any general rule of law” where such States are in a position to select a practice
appropriate to their individual circumstances (and have thus not recognized a
specific practice as obligatory).196
64. Acceptance as law is generally to be sought with respect to the interested
States, both those who carry out the practice in question and those in a position to
respond to it: “either the States taking such action or other States in a position to
react to it, must have behaved so that their conduct is ‘evidence of a belief that this
practice is rendered obligatory by the existence of a rule of law requiring it’”.197 In
the modern reality of multiple multilateral fora such inquiry into what some refer to
as “individual opinio juris” may be complemented or assisted by a search for
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supra note 24, at 204 (“This will not often be a problem in regard to determining whether the convention
codified a pre-existing rule of law, given the extensive preparatory work and opportunities for explicit
comments throughout the process of adopting a codification convention, as well as the circumstances of the
adoption, which will shed light on this issue”).
193 See, for example, the reference to Venezuelan practice in Colombian-Peruvian asylum case, Judgment of
November 20th, 1950: I.C.J. Reports 1950, p. 266, at p. 370 (Dissenting Opinion by Judge ad hoc Caicedo
Castilla).
194 In Peru v Chile before the International Court of Justice, the Agent of Peru stated that “Peru accepts and
applies the rules of the customary international law of the sea, as reflected in the [Law of the Sea]
Convention”: Maritime Dispute (Peru v. Chile), CR 2012/34, p. 43, para. 10 (Wagner).
195 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 127 (Separate Opinion of Judge
Ammoun). Unless, of course, the rule itself permits several courses of action.
196 Fisheries case, Judgment of December 18th, 1951: I.C.J. Reports 1951, p. 116, at p. 131.
197 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 109 (citation omitted); see also Case concerning Right
of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J. Reports 1960, p. 6, at p. 121
(Dissenting Opinion of Judge Chagla) (“There must be an equally clear realization on the other side of an
obligation…”); Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p.
3, at pp. 315 (Separate Opinion of Judge Ammoun) (“a practice only contributes to the formation of a
customary rule if … both the State which avails itself thereof or seeks to impose it and the State which
submits to or undergoes it regard such practice as expressing a legal obligation which neither may evade”);
H. Thirlway, supra note 38, at 70-71. By contrast, authors have sometimes suggested that it is mainly the
opinio juris of either group of States which is most important: for the view that the opinio juris of the
‘receiving’ states is most important see, for example, K. Wolfke, supra note 6, at 44,47 (“For a typical
custom it suffices that the acceptance of the practice as law should be presumed upon all circumstances of
the case in question, above all on the attitude, hence conduct, of the accepting states to be bound by the
customary rule … It should be added that the requirement of any ‘feeling of duty’ or ‘conviction’ on the
part of the acting state is even somewhat illogical, since what is legally important is only the reaction of
other states to the practice, in particular, whether they consider it as required by law or legally permitted”);
I.C. MacGibbon, ‘Customary International Law and Acquiescence’, British Yearbook of International Law,
33 (1957), 115, 126 (“The opinio juris is, of course, relevant to the formation of customary rights, but only
from the standpoint of the States affected by the exercise of the right in question …”).
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“coordinated or general opinio juris”,198 that is, acceptance of a certain practice as
law (or otherwise) by a general consensus of States.199 Much like the convenience
afforded by examining practice undertaken jointly by States, this may make it easier
to identify whether the members of the international community are indeed in
agreement or are divided as to the binding nature of a certain practice.
65. While the idea that acceptance as law is necessary for the transformation of
habitual practice into a legal rule dates back to the ancient world,200 the Latin phrase
opinio juris sive necessitatis is of far more recent origin. Literally meaning ‘belief
(or opinion) of law or of necessity’,201 this “technical name”202 for the subjective
element is usually shortened to “opinio juris”, a fact that may well have “its own
significance. What is generally regarded as required is the existence of an opinio as
to the law, that the law is, or is becoming, such as to require or authorize a given
action”.203
66. Scholars attempting to expound on the meaning and function of the concept of
opinio juris have wrestled not only with its linguistic indeterminacy and uncertain
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198 See, for example, G.M. Danilenko, supra note 139, at 102-107.
199 See also A. Pellet, supra note 17, at 819 (citing to several cases when suggesting that “in parallel with
practice, [the International Court of Justice] will usually rely on a general opinion, not that of States
individually”); E. Jiménez de Aréchaga, supra note 179, at 11 (“[The International Court] has searched for
the general consensus of States instead of adopting a positivist insistence on strict proof of the consent of
the defendant State”); P.B. Casella, ‘Contemporary Trends on Opinio Juris and the Material Evidence of
Customary International Law’, 2013 Amado Lecture before the Commission (speaking notes available with
the Special Rapporteur) (“Opinio juris is no longer to be viewed as individual opinion of one or of certain
states, but presently as collective statements, issued by the international community, as a whole, or a
substantial part of it); J. Charney, ‘Remarks on the Contemporary Role of customary International Law’,
ASIL/NVIR Proceedings (1995), 21 (“Some maintain that individual States must choose to accept the norm
as law. But clearly acceptance is required only by the international community and not by every individual
State and other international legal persons”). Judge Meron, in his Partly Dissenting Opinion in Nahimana
et al. v. Prosecutor (ICTR Appeals Chamber), suggests that where a “consensus among states has not
crystallized, there is clearly no norm under customary international law” (Case No. ICTR-99-52-A, 28
November 2007, paras. 5-8); see also Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion,
I.C.J. Reports 1996, p. 226, at p. 315 (Dissenting Opinion of Judge Schwebel) (“vehement protest and
reservation of right, as successive resolutions of the General Assembly show … abort the birth or survival
of opinio juris to the contrary”).
200 Crawford refers to Isidore of Seville’s (c540-636CE) Etymologiae, Liber V: De Legibus et Temporibus, ch
3, §§3-4, where it is said that “Custom as law is established by moral habits, which is accepted as law when
written law is lacking: it does not make a difference whether it exists in writing or reason, since reason too
commits to law … Custom is so called also because it is in common usage” (J. Crawford, supra note 37, at
26). For an “intellectual genealogy” of the “extra ingredient” of customary international law see E. Kadens,
E.A. Young, ‘How Customary Is Customary International Law?’, William & Mary Law Review, 54 (2013),
885-920.
201 Thirlway has proposed the following translation “in light of its application in law”: “the view (or
conviction) that what is involved is (or, perhaps, should be) a requirement of the law, or of necessity” (H.
Thirlway, supra note 38, at 57).
202 S. Rosenne, supra note 79, at 55.
203 H. Thirlway, supra note 38, at 78. See also L. Millán Moro, supra note 38; R. Huesa Vinaixa, El Nuevo
Alcance de la “Opinio Iuris” en el Derecho Internacional Contemporaneo (tirant lo blanch, 1991). Some
have suggested for opinio juris an additional role beyond the one commonly accorded to it with regard to
customary international law: see, for example, the Dissenting Opinion of Judge Cançado Trindade in
Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports
2012, p. 99, at p. 283, para. 290 (“one should not pursue a very restrictive view of opinio juris, reducing it
to the subjective component of custom and distancing it from the general principles of law”).
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provenance,204 but also with long-standing theoretical problems associated with
attempting to capture in exact terms the amorphous process by which a pattern of
State conduct acquires legal force.205 In particular, some have debated whether the
subjective element does indeed stand for the belief (or opinion) of States, or rather,
for their consent (or will).206 Others have deliberated the opinio juris ‘paradox’, that
“vicious cycle argument” which questions how a new rule of customary
international law can ever emerge if the relevant practice must be accompanied by a
conviction that such practice is already law.207 Still others have questioned whether
States may be capable at all of having a belief,208 and whether such inner motivation
can ever be proved.209 Several writers have argued that opinio juris ought to be
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204 See, for example, M. Mendelson, supra note 124, at 194, 207 (“it is submitted that the linguistic
incoherence of the phrase opinio juris sive necessitatis reflects a certain incoherence of the thought behind
it … for its part, [it] is a phrase of dubious provenance and uncertain meaning”).
205 See also E. Kadens, E.A. Young, supra note 200, at 907 (“The central problem of custom concerns the
‘extra ingredient’ necessary to transform a repetitive practice into a binding norm. And a central lesson of
our historical discussion is that this has always been the central problem”).
206 As has been noted by scholars, the PCIJ and the ICJ have referred to both notions of will and belief (see,
respectively, The Case of the S.S. “Lotus” (France/Turkey), PCIJ, Series A, No. 10, p. 18; North Sea
Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para. 77). For attempts to reconcile the two
approaches see, for example, the ILA London Statement of Principles, at 30 (“It is possible to achieve an
elision or apparent reconciliation of these two approaches by using such terms as “accepted” or
“recognized” as law”); O. Elias, ‘The Nature of the Subjective Element in Customary International Law’,
International and Comparative Law Quarterly, 44 (1995), 501-520.
207 See, for example, H. Kelsen, ‘Théorie du droit international coutumier’, Revue internationale de la théorie
du droit, X (1939), 253, 262-5, reproduced in C. Leben, Hans Kelsen, Ecrits français de droit international
(Presses Universitaires de France, 2001), 61; see also H. Taki, ‘Opinio Juris and the Formation of
Customary International Law: A Theoretical Analysis’, German Yearbook of International Law, 51 (2008),
447, 450. (On some of the proposed solutions to the ‘paradox’ see T. Maluwa, ‘Custom, Authority and
Law: Some Jurisprudential Perspectives on the Theory of Customary International Law’, African Journal
of International and Comparative Law, 6 (1994), 387-410; A. Verdross, ‘Entstehungsweisen und
Geltungsgrund des universellen völkerrechtlichen Gewohnheitsrechts’, ZaöRV, 29 (1969), 635-653; J.
Tasioulas, ‘Opinio Juris and the Genesis of Custom: A Solution to the ‘Paradox’’, Australian Yearbook of
International Law, 26 (2007), 199-205; D. Lefkowitz, ‘(Dis)solving the Chronological Paradox in
Customary International Law: A Hartian Approach’, Canadian Journal of Law and Jurisprudence, 21
(2008), 129-148; A.A. D’Amato, supra note 66, at 52-53; B.D. Lepard, Customary International Law: A
New Theory with Practical Implications (Cambridge University Press, 2010), 112; O.A. Elias, C.L. Lim,
The Paradox of Consensualism in International Law (Kluwer Law International, 1998), 3-21.
208 See, for example, A. D’Amato, supra note 83, at 471 (“it is an anthropomorphic fallacy to think that the
entities we call states can ‘believe’ anything; thus, there is no reason to call for any such subjective and
wholly indeterminate test of belief when one is attempting to describe how international law works and
how its content can be proved”); B. Cheng, ‘Custom: The Future of General State Practice In a Divided
World’, in R.St.J. Macdonald, D.M. Johnston (eds.), The Structure and Process of International Law:
Essays in Legal Philosophy Doctrine and Theory (Martinus Nijhoff Publishers, 1983), 513, 530 (“In the
first place, there is the question whether states, being legal entities, can ‘think’, but this is a simple matter
of imputability in international law. If states can ‘act’ and ‘commit illegal acts’ through their agents, why
can they not ‘think’? Are theirs all mindless acts? The next question is, can we really establish the thought
of man, let alone that of a legal person? This is an old chestnut. In law, one has no difficulty in ascertaining
the ‘intention of the parties’, the ‘intention of the legislator,’ mens rea, ‘willfulness,’ and a host of other
psychological elements everyday. In law, these psychological elements need not correspond to reality.
They are simply what, in lawyers’ logic, are deductible from what has been said or done”).
209 M. Akehurst, supra note 84, at 36 (“The traditional view seeks evidence of what States believe; the present
author prefers to look for statements of belief by States”); H. Taki, supra note 207, at 447 (“it is possible to
solve the ‘problem of proof’ by means of inferring the inner consciousness of the acting individual from
some external phenomena (for example observable conduct)”); J.L. Slama, ‘Opinio Juris in Customary
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understood as embodying ethical principles and morality,210 while others deny the
relevance of such considerations in this context.211 These academic debates and
others, referred to by one author as “formidable”,212 often reflect deeper
controversies on (international) law more broadly.213 The subjective element of
customary international law has, however, “created more difficulties in theory than
in practice”,214 and the theoretical torment which may accompany it in the books has
rarely impeded its application in practice.215
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International Law’, Oklahoma City University Law Review, 15 (1990), 603, 656 (“A state’s actions,
express statements, consent, acquiescence, protests, or lack of protests, are all objective factors capable of
manifesting opinio juris”).
210 See, for example, R. Wolfrum, ‘Sources of International Law’, in Max Planck Encyclopedia of Public
International Law (2012), para. 25 (“Opinio iuris, the belief that a certain conduct is required or permitted
under international law, is in fact a conviction that such conduct is just, fair, or reasonable and for that
reason is required under law”).
211 See, for example, K. Skubiszewski, supra note 84, at 838 (“The assertions of a right by one State or States,
the toleration or admission by others that the former are entitled to that right, the submission to the
obligation – these are phenomena that are evidence of the States’ opinion that they have moved from the
sphere of facts into the realm of law. For rights and duties here have a strictly and exclusively legal
connotation, and not moral, ethical, or one dictated by courtesy or convenience”); M. Akehurst, supra note
84, at 37 (“A statement that something is morally obligatory may help to create rules of international
morality; it cannot help to create rules of international law”).
212 I.C. MacGibbon, supra note 197, at 125.
213 See also M. Mendelson, supra note 124, at 177 (“One reason why the controversies have continued for so
long without resolution is that the holders of different theories are able to find in the phenomenon what
they want to see, thereby strengthening their pre-conceptions”); K. Wolfke, supra note 6, at 44 (“the
differences of opinion on this subjective element of custom are closely combined with endless disputes on
what is international law in general and on the so-called ‘basis of binding force’ of that law”); J. Klabbers,
supra note 128, ay 180 (“More importantly perhaps, the very idea of customary law provokes all sorts of
debates not just because of the practical relevance combined with the inherent indeterminacy of the notion,
but also because of its acute political relevance. It is through the sources of international law (and custom
still ranks as one of the two main sources of that particular legal order) that political values are being
distributed, which renders sources doctrine in general highly volatile … Small wonder then that sources
doctrine continues to provoke debate, and small wonder then that most of the debate tends to be
methodological in nature”); D.P. Fidler, supra note 168, at 199 (“the problems associated with CIL
ultimately stem from competing perspectives on international relations”). Many of the difficulties and
debates owe to a temporal analysis of the subjective element, that is, of its role in a rule’s early formative
stage as opposed to later emergence and identification: see also A. Orakhelashvili, supra note 191, at 80-
84. Cheng’s observation is most relevant here: “contrary to a rather prevalent view, opinio juris is not
necessarily the recognition of the binding character of a pre-existing rule in which case the question arises
as to the origin of the pre-existing rule itself. In a horizontal legal system like international law, where the
subjects are also the law-makers, opinio juris is simply what the subject/law-maker at any given moment
accepts as law, as general law…”: B. Cheng, ‘On the Nature and Sources of International Law’, in B.
Cheng (ed.), International Law: Teaching and Practice (Stevens & Sons, 1988), 203, 223.
214 H.W. Briggs, supra note 174, at 730 (adding that “Theoretical difficulties involved in the determination of
these elements [required for the establishment of a rule of customary international law] or of the methods
and procedures by which customary rules of international law are created or evolve from non-obligatory
practice often receive more attention than the fact that in a given case courts have relatively little difficulty
in determining whether or not an applicable rule of customary international law exists” (at 729)). See also
ILA London Statement of Principles, at 30 (“… in the real world of diplomacy the matter [of the subjective
element in customary international law] may be less problematic than in the groves of Academe”); S. Yee,
‘The News that Opinio Juris “Is Not a Necessary Element of Customary [International] Law” Is Greatly
Exaggerated’, German Yearbook of International Law, 43 (2000), 227, 230 (“The idea of opinio juris
remains the chief culprit in creating confusion among scholars and practitioners of international law in
general, but this is probably more so among legal theorists”); C. De Visscher, supra note 166, at 149
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67. The International Court has used a range of different expressions to refer to the
subjective element imported by the words “accepted as law” in its Statute. These
include a “feeling of legal obligation”;
216 “a belief that [the] practice is rendered
obligatory by the existence of a rule of law requiring it … [a] sense of legal
duty”;
217
a “recognition of necessity”;
218
a “conviction of necessity”;
219 “a belief in
the respect due to this long-established practice”;
220 “a deliberate intention … a
common awareness reflecting the conviction… as to [a] right”;
221 “the general
feeling… regarding the obligatory character of [the practice]”;
222 an “actual
consciousness of submitting [] to a legal obligation” or a “consciousness of the
binding nature of the rule”;
223 “a conviction that they [the parties] are applying the
law”;
224 and “a conviction, a conviction of law, in the minds of [States], to the effect
that they have… accepted the practice as a rule of law, the application whereof they
will not thereafter be able to evade”.225 Other courts and tribunals, as well as States,
have likewise drawn upon a rich fund of vocabulary in referring to this
‘psychological’/ ‘qualitative’/ ‘immaterial’/ ‘attitudinal’ requirement of customary
international law.226 In general, however, all such references appear to express a
__________________
(footnote 29) (“… proving the existence of the psychological element of custom does not present the
insurmountable difficulties sometimes alleged”); E. Jiménez de Aréchaga, supra note 179, at 24 (referring
to the argument that obtaining evidence of the existence of opinio juris in concrete cases is difficult when
saying that “This difficulty may be somewhat exaggerated”); H.W.A. Thirlway, supra note 81, at 47 (“The
precise definition of the opinio juris, the psychological element in the formation of custom, the
philosopher’s stone which transmutes the inert mass of accumulated usage into the gold of binding legal
rules, has probably caused more academic controversy than all the actual contested claims made by States
of the basis of alleged custom, put together”); I. Brownlie, supra note 121, at 21 (“in practice the question
of proof does not present as much difficulty as the writers have anticipated”); Restatement (Third) of the
Foreign Relations Law of the United States (1987), §102, reporter’s note 2 (“Most troublesome
conceptually has been the circularity in the suggestion that law is built by practice based on a sense of legal
obligation … Such conceptual difficulties, however, have not prevented acceptance of customary law
essentially as here defined”).
215 For the argument that pure theorizing, for example about what requirements customary international law
should or could have, does not change the law, see J. Kammerhofer, ‘Law-making by Scholars’, in Y.
Radi, C. Brölmann (eds.), Research Handbook on the Theory and Practice of International Law-Making
(Edward Elgar, forthcoming).
216 Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports 1950, p. 266, at p.
286.
217 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para. 77.
218 Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J.
Reports 1960, p. 6, at p. 60 (Separate Opinion of Judge Wellington Koo).
219 Ibid., at p. 121 (Dissenting Opinion of Judge Chagla).
220 Ibid., at p. 82 (Dissenting Opinion of Judge Armand-Ugon).
221 Ibid.
222 Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports 1950, p. 266, at p.
370 (Dissenting Opinion by Judge ad hoc Caicedo Castilla).
223 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 104, 130 (Separate Opinion of
Judge Ammoun).
224 Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J.
Reports 1960, p. 6, at p. 90 (Dissenting Opinion of Judge Moreno Quitana).
225 Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 3, at p. 306
(Separate Opinion of Judge Ammoun).
226 See, for example, United Parcel Service of America Inc v. Government of Canada (UNCITRAL, Award,
22 November 2002), para. 97 (“a sense of obligation”); Pre-Trial Chamber of the Extraordinary Chambers
in the Courts of Cambodia, Criminal Case No. 002/19-09-2007-EEEC/OICJ (PTC38), Decision on the
Appeals Against the Co-Investigative Judges Order on Joint Criminal Enterprise (JCE), 20 May 2010, para.
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common meaning: acceptance by States that their conduct or the conduct of others is
in accordance with customary international law. “Belief, acquiescence, tacit
recognition, consent have one thing in common – they all express subjective attitude
of states either to their own behaviour or to the behaviour of other states in the light
of international law”.227
68. The so-called “subjective element” constitutive of customary international law
thus refers to the requirement that the practice in question has “occurred in such a
way as to show a general recognition that a rule of [customary international] law or
legal obligation is involved”.228 While the term opinio juris has undoubtedly become
established in referring to this element,229 it is suggested that ‘accepted as law’ may
be the better term.230 The International Court, reflecting the language of its Statute,
has employed this language in the Right of Passage case, one of the first cases in
which the Court elaborated on the methodology for ascertaining customary
international law, when concluding that “in view of all the circumstances of the
case, [it was] satisfied that that practice was accepted as law”.231 Use of this term
__________________
53 (“…opinio juris, meaning that what States do and say represents the law”). See also Secretariat
memorandum, at 17, 18 (“The Commission has often characterized the subjective element as a sense
among States of the existence or non-existence of an obligatory rule … In certain instances, the
Commission has referred to the subjective element by employing different terminology…” (citations
omitted)).
227 R. Müllerson, supra note 85, at 163. See also H. Waldock, ‘General Course on Public International Law’,
106 Recueil des Cours (1962), 49 (“… the ultimate test [in ascertaining a rule of customary international
law] must always be: ‘is the practice accepted as law?’ This is especially true in the international
community, where those who participate in the formation of a custom are sovereign States who are the
decision-makers, the law-makers within the community. Their recognition of the practice as law is in a
very direct way the essential basis of customary law”).
228 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 43, para. 74. See also K. Wolfke,
supra note 6, at 44 (“such practice must give sufficient foundation for at least the presumption that the
states concerned have accepted it as legally binding”).
229 “[P]erhaps regrettably” so, writes Crawford: J. Crawford, supra note 37, at 25; Wolfke refers to the Latin
term as “still widely applied, but misleading”, explaining that “[m]isunderstandings arise because this term,
having a definite meaning in the history of legal theory, is applied by contemporary authors and, as has
been seen, even by the [International] Court, with different connotations or shades of meaning”: K.
Wolfke, supra note 6, at 45-46. But see R. Müllerson, supra note 85, at 164 (“Depending on a context we
may speak of will, consent, consensus, belief, acquiescence, protest, estoppel, or maybe even something
else. However, as the term opinio juris is so well entrenched in international legal practice and literature, it
would hardly be wise to try to get rid of it”).
230 See also I.C. MacGibbon, supra note 197, at 129 (“[As compared with the term ‘opinio juris’,] [t]he phrase
‘accepted as law’, however, may admit of interpretation in senses which more accurately reflect the actual
processes of evolution from practice or usage to custom, whether viewed from the standpoint of the
exercise of rights or that of the performance of obligations”); C. Santulli, supra note 37, at 50 (“Le statut
de la Cour internationale de Justice considère en son article 38 que la coutume est une pratique “acceptée”.
Ainsi le statut rompt-il avec une tradition qui aimait présenter l’opinio iuris sive necessitatis comme la
“conscience” d’obéir à une règle de droit”); A. Pellet, supra note 17, at 819 (referring to the travaux
préparatoires of Article 38.1(b) and to the practice of the Court when suggesting that “’acceptation’ is not
necessarily restricted to the will of the States but to an ‘acceptance’, which can be interpreted less
strictly”); K. Skubiszewski, supra note 84, at 839-840.
231 Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J.
Reports 1960, p. 6, at p. 40 (“This practice having continued over a period extending beyond a century and
a quarter unaffected by the change of regime in respect of the intervening territory which occurred when
India became independent, the Court is, in view of all the circumstances of the case, satisfied that that
practice was accepted as law by the Parties and has given rise to a right and a correlative obligation”).
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from the Statute goes a large way towards overcoming the opinio juris ‘paradox’
referred to above.
69. The following draft conclusion is proposed:
Draft Conclusion 10
Role of acceptance as law
1. The requirement, as an element of customary international law, that
the general practice be accepted as law means that the practice in
question must be accompanied by a sense of legal obligation.
2. Acceptance as law is what distinguishes a rule of customary
international law from mere habit or usage.
70. Evidencing ‘acceptance as law’. The motivation behind a certain practice must
be discernible in order to identify a rule of customary international law: “[o]nly by
objectifying the concept of opinio can it have a practical impact on the difficult task
of differentiating ‘legal’ custom from nonlegal ‘usage’”.232 In practice, acceptance
as law has indeed been indicated by or inferred from a variety of relevant conduct
undertaken by States. Some practice may thus in itself be evidence of opinio juris,
or, in other words, be relevant both in establishing the necessary practice and its
‘acceptance as law’.233 In that sense, “[w]hatever states do … is state practice which
has two facets or aspects to it: a visible, observable behaviour of states (or other
__________________
232 J.L. Slama, supra note 209, at 656. See also M.E. Villiger, supra note 84, at 48.
233 See also Delimitation of the Maritime Boundary in the Gulf of Maine Area, Judgment, I.C.J. Reports 1984,
p. 246, at 299 (“[the] presence [of customary rules] in the opinio juris of States can be tested by induction
based on the analysis of a sufficiently extensive and convincing practice, and not by deduction from
preconceived ideas”); Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports 1974, p. 253, at p. 305
(Separate Opinion of Judge Petrén) (“The conduct of these States [that have conducted nuclear atmospheric
tests] proves that their Governments have not been of the opinion that customary international law forbade
atmospheric nuclear tests”); Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v.
Belgium), Judgment, I.C.J. Reports 2002, p. 3, at p. 147 (Dissenting Opinion of Judge ad hoc Van den
Wyngaert); E. Jiménez de Aréchaga, supra note 179, at 24 (“A large amount of what is described as the
material element of State practice contains in itself an implicit subjective element, an indication of opinio
juris”); M. Bos, supra note 144, at 30 (“In general, it may be said that anything within the bracket of State
practice may serve as evidence of [] ‘general practice accepted as law’”); J. Kammerhofer, Uncertainty in
International Law: A Kelsenian Perspective (Routledge, 2010), 63 (“In one sense, all that states do or omit
to do can be classified as ‘state practice’, because their behaviour is what they do. State behaviour in a
wider sense, however, is also our only guide to what they want or believe to be the law”); M. Koskenniemi,
‘Theory: Implications for the Practitioner’, in Theory and International Law: An Introduction (The British
Institute of International and Comparative Law, 1991), 3, 15 (“In legal practice, there exists no way to
ascertain the presence or absence of the subjective element which would be separate from the
ascertainment of the existence of consistent conforming behaviour”); B. Conforti, B. Labella, supra note
52, at 32 (“The subjective element … ties together all the many different types of State conduct”); K.
Zemanek, supra note 77, at 292-293 (“separating material recording ‘State practice’ from material
recording opinio juris, though theoretically perhaps desirable, is practically impossible because the first
may, through its language, evidence the second”); H. Thirlway, supra note 38, at 58, 62, 70 (“Since the
opinio juris is a state of mind, there is an evident difficulty in attributing it to an entity such as a State; and
it is thus to be deduced from the State’s pronouncements and actions, particularly the actions alleged to
constitute the ‘practice’ element of the custom”).
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subjects of international law) and their subjective attitude to this behaviour which
may be implicitly present in the very act or behaviour or which may be conveyed to
other states through different acts of behaviour constituting, in turn, state practice of
a different kind”.234 In any case, it is important that the court or tribunal should
nevertheless in fact have separately identified the two elements.
71. How to determine the evidence of ‘acceptance as law’ may depend on the
nature of the rule and the circumstances in which the rule falls to be applied. There
may, for example be a distinction to be drawn between cases involving the assertion
of a legal right and those acknowledging a legal obligation, and between cases
where the practice concerned consists of conduct ‘on the ground’ as opposed to
verbal practice.
72. Mere adherence to an alleged rule does not generally suffice as evidence of
opinio juris: “such usage does not necessarily prove that actors see themselves as
subject to a legal obligation”.235 In the words of the International Court, “acting, or
agreeing to act in a certain way, does not itself demonstrate anything of a juridical
nature”.236
73. Similarly, although some have suggested that a large number of concordant
acts,237 or the fact that such cases have been occurring over a considerable period of
__________________
234 R. Müllerson, supra note 84, at 344. The International Court has also referred to, for example, “a practice
illustrative of belief” (Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United
States of America), Merits, Judgment, I.C.J. Reports 1986, p. 14 at p. 108, para. 206). But see M.
Koskenniemi, From Apology to Utopia: The Structure of International Legal Argument (Cambridge
University Press, 2005), 388 (“we cannot automatically infer anything about State wills or beliefs — the
presence or absence of custom — by looking at the State’s external behaviour. The normative sense of
behaviour can be determined only once we first know the ‘internal aspect’ — that is, how the State itself
understands its conduct … doctrine about customary law is indeterminate because circular. It assumes
behaviour to be evidence of the opinio juris and the latter to be evidence of which behaviour is relevant as
custom”).
235 A.M. Weisburd, supra note 67, at 9. See also Legality of the Threat or Use of Nuclear Weapons, Advisory
Opinion, I.C.J. Reports 1996, p. 226, at pp. 423-424 (Dissenting Opinion of Judge Shahabuddeen) (“It is
also important to have in mind that bare proof of acts or omissions allegedly constituting State practice
does not remove the need to interpret such acts or omissions. The fact that States may feel that realities
leave them no choice but to do what they do does not suffice to exclude what they do from being classified
as part of State practice, provided, however, that what they do is done in the belief that they were acting out
of a sense of legal obligation”).
236 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para. 76.
237 See, for example, Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports
1950, p. 266, at p. 336 (Dissenting Opinion by Judge Azevedo) (“concordant cases, by their number, would
clearly reveal an opinio juris”); Portugal’s contention in the Right of Passage that “it would be impossible
to contend that unanimity and uniformity [of practice of States] do not bear witness to a conviction of the
existence of a legal duty (opinio juris sive necessisatis)” (Case concerning Right of Passage over Indian
Territory (Merits), Judgment of 12 April 1960: I.C.J. Reports 1960, p. 6, at p. 11); H. Lauterpacht, The
Development of International Law by the International Court (Stevens, 1958), 380 (“Unless judicial
activity is to result in reducing the legal significance of the most potent source of rules of international law,
namely, the conduct of States, it would appear that the accurate principle on the subject consists in
regarding all uniform conduct of Governments (or, in appropriate cases, abstention therefrom) as
evidencing the opinio necessitatis juris except when it is shown that the conduct in question was not
accompanied by any such intention”), quoted with concurrence in North Sea Continental Shelf, Judgment,
I.C.J. Reports 1969, p. 3, at pp. 246-247 (Dissenting Opinion of Judge Sørensen).
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time,238 may suffice to establish the existence of opinio juris, this is not so. While
these facts may indeed give rise to the acceptance of the practice as law,239 they do
not embody such acceptance in and of themselves. As the International Court had
observed, “even if these instances of action … were much more numerous than they
in fact are, they would not, even in the aggregate, suffice in themselves to constitute
the opinio juris … The frequency, or even habitual character of the acts is not in
itself enough”.240
74. ‘Acceptance as law’ should thus generally not be evidenced by the very
practice alleged to be prescribed by customary international law. This provides,
moreover, that the same conduct should not serve in a particular case as evidence of
both practice and acceptance of that practice as law.241 Applying this rule to ‘nonactual’
practice may also serve to guarantee that abstract statements could not, by
themselves, create law.242
75. Manifestations of ‘acceptance as law’. “[T]he task of ascertaining the opinio,
although difficult, is feasible (and is considerably alleviated in the framework of the
modern drafting process)”.243 An express statement by a State that a given rule is
obligatory qua customary international law, for a start, provides “the clearest proof”
__________________
238 Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960: I.C.J.
Reports 1960, p. 6, at p. 83 (Dissenting Opinion of Judge Armand-Ugon) (“A fact observed over a long
period of years … acquires binding force and assumes the character of a rule of law”).
239 See, for example, Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April
1960: I.C.J. Reports 1960, p. 6, at p. 40 (“This practice having continued over a period extending beyond a
century and a quarter unaffected by the change of regime in respect of the intervening territory which
occurred when India became independent, the Court is, in view of all the circumstances of the case,
satisfied that that practice was accepted as law by the parties and has given rise to a right and a correlative
obligation”); and p. 82 (Dissenting Opinion of Judge Armand-Ugon) (“The continual repetition of an act
over a long period does not weaken this usage; on the contrary, it strengthens it; a relationship develops
between the act and the will of the States which have authorized it. The recurrence of these acts over so
long a period engenders, both in the State which performs them and in the State which suffers them, a
belief in the respect due to this long-established practice (Article 38(I)(b) of the Statute of the Court)”).
240 North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at p. 44, para. 77. See also The Case of
the S.S. “Lotus” (France/Turkey), PCIJ, Series A, No. 10, p. 28; Pre-Trial Chamber of the Extraordinary
Chambers in the Courts of Cambodia, Criminal, Case No. 002/19-09-2007-EEEC/OICJ (PTC38), Decision
on the Appeals Against the Co-Investigative Judges Order on Joint Criminal Enterprise (JCE), 20 May
2010, para. 53 (“A wealth of State practice does not usually carry with it a presumption that opinio juris
exists”).
241 See also M.H. Mendelson, supra note 71, at 206-207 (“What must, however, be avoided is counting the
same act as an instance of both the subjective and the objective element. If one adheres to the ‘mainstream’
view that it is necessary for both elements to be present, and in particular for the subjective element to be
accompanied by ‘real’ practice, this must necessarily preclude treating a statement as both an act and a
manifestation of belief (or will)”); M. Byers, Custom, Power and the Power of Rules: International
Relations and Customary International Law (Cambridge University Press, 1999) 136-141.
242 See also M.E. Villiger, supra note 84, at 19 (“Since such fears [that one body, or conference, could ‘make’
law through abstract statements of State representatives] are justified, we may first attempt a synthesis of
views, proceeding from Judge Read’s argument that ‘claims may be important as starting points’. Clearly,
the conditions for the formation of customary law are such that one instance of practice, or a few instances
in one occasion, cannot create law. Rather, a qualified series of instances is required, and statements at a
conference would lose any value if they were not followed by uniform and consistent practice. Equally
clearly however, these conditions serve as adequate safeguards, and the fear of instant customary law
hardly warrants attaching further conditions to the single instances of practice” (citations omitted)).
243 M.E. Villiger, supra note 84, at 50.
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that it “believes itself bound by, or that from now on it will adhere to, [that] certain
principle or rule”.244 Conversely, when a State says that something is not a rule of
customary international law, that is evidence of the absence of an opinio juris. Such
assertions by States of rights or obligations under (customary) international law (or
lack thereof) could, inter alia, take the form of an official statement by a
government or a minister of that government,245 claims and legal briefs before court
and tribunals, transmittal statements by which governments introduce draft
legislation in parliament,246 a joint declaration of States through an official
document, or statements made in multilateral conferences such as codification
conventions or debates in the United Nations.247 Diplomatic protests, in particular,
“may, and frequently do, indicate the view of the law on the matters in questions
entertained by the protesting States: to this extent they may afford evidence of the
acceptance of a practice as law”.248
76. Evidence of ‘acceptance as law’ (or lack thereof) may also be found in a wide
range of other practice,249 depending on the particular case and considering that
__________________
244 L.B. Sohn, supra note 179, at 235; see also, for example, Jurisdictional Immunities of the State (Germany
v. Italy: Greece intervening), Judgment, I.C.J. Reports 2012, p. 99, at pp. 122-123, para. 55; M.E. Villiger,
supra note 84, at 50 (“the express statement of a State that a given rule is obligatory (or customary, or
codificatory), furnishes the clearest evidence as to the State's legal conviction”).
245 See, for example, Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports
1950, p. 266, at p. 367 (Dissenting Opinion by Judge ad hoc Caicedo Castilla); Legal Consequences for
States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security
Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports 1971, p. 16, at pp. 74-75 (Separate
Opinion of Judge Ammoun); Prosecutor v. Tadić, Case No. IT-94-1, Decision on the Defence Motion for
Interlocutory Appeal on Jurisdiction (ICTY Appeals Chamber), 2 October 1995, paras. 100, 105, 113-114,
120-122.
246 See also Mondev International Ltd v. United States of America (ICSID, Award, 11 October 2002), para.
111 (“Whether or not explanations given by a signatory government to its own legislature in the course of
ratification or implementation of a treaty can constitute part of the travaux preparatoires of the treaty for
purposes of its interpretation, they can certainly shed light on the purposes and approaches taken to the
treaty, and thus can evidence opinio juris”).
247 See, for example, Reservations to the Convention on Genocide, Advisory Opinion: I.C.J. Reports 1951,
p.15, at p. 26; Fisheries Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, I.C.J. Reports 1974,
p. 3, at p. 48 (Joint Separate Opinion of Judges Forster, Bengzon, Jiménez de Aréchaga, Nagendra Singh
and Ruda) (“On a subject where practice is contradictory and lacks precision, is it possible and reasonable
to discard entirely as irrelevant the evidence of what States are prepared to claim and to acquiesce in, as
gathered from the positions taken by them in view of or in preparation for a conference for the codification
and progressive development of the law on the subject? ... The least that can be said ... is that such
declarations and statements and the written proposals submitted by representatives of States are of
significance to determine the views of those States as to the law or fisheries jurisdiction and their opinio
iuris on a subject regulated by customary international law”); Application of the Convention on the
Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and
Montenegro), Judgment, I.C.J. Reports 2007, p. 43, at p. 329 (Separate Opinion of Judge Tomka); E.
Jiménez de Aréchaga, supra note 179, at 14, 24 (“the deliberations in a plenipotentiary conference itself,
even before and independently of the adoption of a convention, may themselves result in the emergence of
a consensus of States which, followed by their actual practice, crystallizes in a customary rule … The
express or implicit indications of opinio juris are particularly significant and frequent when a State
participates in the process of a codification and progressive development of international law under United
Nations auspices”).
248 I.C. MacGibbon, supra note 197, at 124.
249 See also Secretariat memorandum, at 21-22 (“The Commission has relied upon a variety of materials in
assessing the subjective element for the purpose of identifying a rule of customary international law”);
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“[f]or a typical custom it suffices that the acceptance of the practice as law should
be presumed upon all circumstances of the case in question, above all on the
attitude, hence conduct, of the accepting states to be bound by the customary
rule”.250 As was the case with practice (see paragraph 41 above), the following list is
non-exhaustive: it is intended to suggest the kind of materials where the subjective
element may be found:
(a) Intergovernmental (diplomatic) correspondence,251 such as a
memorandum from a diplomatic mission to the Minister of Foreign Affairs of the
State to which it is accredited,252 or notes exchanged between governments. Here the
language used needs to be carefully analysed in context to determine whether the
State is expressing an opinion as to the existence of a legal rule.
(b) The jurisprudence of national courts253 clearly embodies a sense of legal
obligation. Care must be taken, however, as it “may be difficult to tell … whether
this sense of legal obligation derives from international law, from domestic law, or
from domestic auto-interpretation of international law”.254 Only when such
judgments apply the rule in question in a way which demonstrates, mostly by way of
its reasoning, that it is accepted as required under customary international law,
could they be relevant as evidence of ‘acceptance as law’.
(c) The opinions of government legal advisers when they say that something
is or is not in accordance with customary international law,255 and such opinion has
been adopted by the government as legally mandated.256
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Restatement (Third) of the Foreign Relations Law of the United States (1987), §102, comment (c)
(“Explicit evidence of a sense of legal obligation (e.g., by official statements) is not necessary; opinio juris
may be inferred from acts or omissions”).
250 K. Wolfke, supra note 6, at 44.
251 See, for example, Fisheries case, Judgment of December 18th, 1951: I.C.J. Reports 1951, p. 116, at pp.
135-136; Case concerning Right of Passage over Indian Territory (Merits), Judgment of 12 April 1960:
I.C.J. Reports 1960, p. 6, at p. 42.
252 See, for example, Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports
1950, p. 266, at p. 371 (Dissenting Opinion by Judge ad hoc Caicedo Castilla).
253 See, for example, Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment,
I.C.J. Reports 2012, p. 99, at p. 135, para. 77 (where the subjective element was “demonstrated by the
positions taken by States and the jurisprudence of a number of national courts which have made clear that
they considered that customary international law required immunity”); Arrest Warrant of 11 April 2000
(Democratic Republic of the Congo v. Belgium), Judgment, I.C.J. Reports 2002, p. 3, at p. 76 (Joint
Separate Opinion of Judges Higgins, Kooijmans and Buergenthal); Special Tribunal for Lebanon, Case No.
STL-11-01/I, Interlocutory Decision on the Applicable Law: Terrorism, Conspiracy, Homicide,
Perpetration, Cumulative Charging (Appeals Chamber), 16 February 2011, para. 100.
254 P.M. Moremen, supra note 112, at 274; see also Arrest Warrant of 11 April 2000 (Democratic Republic of
the Congo v. Belgium), Judgment, I.C.J. Reports 2002, p. 3, at pp. 171-172 (Dissenting Opinion of Judge
ad hoc Van den Wyngaert) (“And even where national law requires the presence of the offender, this is not
necessarily the expression of an opinio juris to the effect that this is a requirement under international law.
National decisions should be read with much caution”). Mr. Hmoud highlighted this point as well in his
intervention last year, saying that “[n]ational judicial decisions are an important source of material but they
have to be well scrutinized as national courts usually implement the internal legal processes of the state
involved and are not necessarily experienced or well-resourced to identify the rules of customary
international law” (3183rd meeting, 19 July 2013).
255 See, for example, Prosecutor v. Galić, Case No. IT-98-29-A, Judgment (ICTY Appeals Chamber), 30
November 2006, para. 89.
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(d) Official publications in fields of international law, such as military
manuals or instructions to diplomats.
(e) Internal memoranda by State officials, such as instructions of a Ministry
of Foreign Affairs to its diplomats.257
(f) Treaties (and their travaux préparatoires) may potentially demonstrate
the existence of ‘acceptance as law’ as well,258 given that “[c]onventions continue to
be a very important form for the expression of the juridical conscience of
peoples”.259 For present purposes, such juridical consciousness (with regard to the
convention as a whole or certain provisions therein) must exist outside the treaty,
not just within: for a treaty to serve as evidence of opinio juris, States (and
international organizations), whether parties or not, must be shown to regard the
rule(s) enumerated in the treaty as binding on them as rules of law regardless of the
treaty.260 This may well be the case when a treaty purports to be declaratory of
customary international law, explicitly or implicitly:261 then “the treaty is clear
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256 Indeed, it ought to be remembered that such opinions do not necessarily become those of the government,
and that at times, as the Commission has previously considered, “the efforts of legal advisers are
necessarily directed to the implementation of policy” (Yearbook of the International Law Commission,
1950, vol. II, p. 372, where it was added that “[n]or would a reproduction of such opinions be of much
value unless it were accompanied by an adequate analysis of the history leading up to the occasion with
reference to which they were given”).
257 See, for example, Colombian-Peruvian asylum case, Judgment of November 20th, 1950: I.C.J. Reports
1950, p. 266, at p. 372 (Dissenting Opinion by Judge ad hoc Caicedo Castilla)
258 See also Camuzzi International S.A. v. The Argentine Republic (ICSID, Decision on Objections to
Jurisdiction, 11 May 2005), para. 144 (“there is no obstacle in international law to the expression of the
will of States through treaties being at the same time an expression of practice and of the opinio juris
necessary for the birth of a customary rule if the conditions for it are met”); Colombian-Peruvian asylum
case, Judgment of November 20th, 1950: I.C.J. Reports 1950, p. 266, at pp. 369-370 (Dissenting Opinion
by Judge ad hoc Caicedo Castilla) (“… this article in the Bolivarian Agreement has a special meaning as
regards custom in matters of asylum, namely, that it demonstrates the existence in both Columbia and Peru
of one of the elements which are necessary for the existence of a custom – the psychological element, the
opinio juris sive necessitatis. The Bolivarian Agreement recognizes asylum, recognizes the value of the
principles applied in America; hence it includes these principles as binding. Consequently, their acceptance
by governments or by one individual government implies their acceptance by that government as ‘being the
law’, that is to say, that they are the applicable law. This is a matter of the utmost importance, since the
psychological element of custom, which is always so difficult to prove, is here entirely proved”);
Prosecutor v. Fofana and Kondewa, Case No. SCSL-04-14-A, Judgment (Special Court for Sierra Leone
Appeals Chamber), 28 May 2008, para. 403; Derecho, René Jesús s/incidente de prescripción de la acción
penal (Argentinian Supreme Court), causa N° 24.079C, 11 July 2007, para. III-A (of the State Attorney-
General’s brief); Appeal Judgment of the Extraordinary Chambers in the Courts of Cambodia (Supreme
Court Chamber), Case number 001/18-07-2007-ECCC/SC, 3 February 2012, para. 94.
259 Fisheries case, Judgment of December 18th, 1951: I.C.J. Reports 1951, p. 116, at p. 148 (Individual
Opinion of Judge Alvarez). See also A.T. Guzman, T.L. Meyer, ‘Customary International Law in the 21st
Century’, in R.A. Miller, R.M. Bratpies, Progress in International Law (Martinus Nijhoff Publishers,
2008), 207 (“looking to treaties as evidence of CIL can remain a valuable practice… because treaties can
send credible signals as to what rules states believe to be binding on non-parties”).
260 Bearing in mind that, as Weisburd asserts, “it does not follow that conclusion of a treaty necessarily
implies opinio juris, that is, that the parties believe that the treaty’s provisions would legally bind them
outside the treaty” (A.M. Weisburd, supra note 67, at 24). Of course, treaties may serve as evidence of
customary international law or contribute to the formation thereof not only with regard to rules enshrined
in them, but also with regard to the customary law of treaties.
261 As Baxter explains, “The declaratory treaty is most readily identified as such by an express statement to
that effect, normally in the preamble of the instrument, but its character may also be ascertained from
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evidence of the will of States [parties to the treaty], free of the ambiguities and
inconsistencies characteristic of the patchwork of evidence of State practice that is
normally employed in proving the state of international law”.262 In other words,
when States accept (within the treaty or in the negotiations leading up to it or upon
or after its adoption) that the treaty or certain provisions in it are declaratory of
existing customary international law, this may serve as clear evidence of
‘acceptance as law’.263 Still, “the evidence of the practice of the parties consolidated
in the treaty must be weighed in the balance with all other [consistent and
inconsistent] evidence of customary international law according to the normal
procedure employed in the proof of customary international law”, in particular “past
practice or declarations of the asserting State[s]”.264 Whether the States concerned
have indeed signed and/or ratified the treaty, and the ability of parties to make
reservations to articles of the treaty, may also be relevant in assessing the existence
of opinio juris,265 yet these considerations do not necessarily signal a lack of it given
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preparatory work for the treaty and its drafting history”: R.R. Baxter, supra note 191, at 56. See also K.
Wolfke, supra note 119, at 36 (“if a treaty contains an express, or even an indirect, recognition, of an
already existing customary rule, such recognition constitutes additional evidence of the customary rule in
question”). Weisburd correctly explains that “Even when this type of statement [that the treaty is
declarative of custom] is an inaccurate description of the state of the law as of the date of the treaty's
conclusion, it amounts to an explicit acknowledgment by the parties to the treaty that they would be legally
bound to the treaty’s rules even if the treaty did not exist”: A.M. Weisburd, supra note 67, at 23.
Importantly, however, “complex considerations … have to be taken into account in determining whether,
and if so to what extent, a new rule embodied in a codification convention may be regarded as expressive
of an existing or emerging norm of customary law. Any such rule has to be analyzed in its context and in
the light of the circumstances surrounding its adoption. It also has to be viewed against the background of
what may be a rapidly developing State practice in the sense of the new rule” (I. Sinclair, ‘The Impact of
the Unratified Codification Convention’, in A. Bos, H. Siblesz (eds.), Realism in Law-Making: Essays on
International Law In Honour of Willem Riphagen (Martinus Nijhoff Publishers, 1986), 211, 220).
262 R.R. Baxter, supra note 191, at 36.
263 See also A.M. Weisburd, supra note 67, at 25 (“a treaty is not evidence of opinio juris if the parties
expressly deny in the treaty text and opinio juris as to the legal status of the treaty's rules outside the
instrument [i.e. the treaties declare themselves as entered into by the parties purely as an act of grace]. The
issue is one of the parties’ beliefs. But if belief is the key issue, it would seem to follow that a treaty may
deny opinio juris even without an express statement to that effect if the treaty contains other evidence
demonstrating that the parties would not see the treaty’s rules as binding but for the treaty. This is not to
say that such treaties are not binding as treaties, or to say that such denials of opinio juris in the treaty
would preclude the emergence of a customary rule on the subject outside the treaty. It is only to say that
one cannot consider such a treaty itself to be evidence of the customary law status of the rules it
establishes”).
264 R.R. Baxter, supra note 191, at 43, 44. See also G.M. Danilenko, supra note 139, at 154 (“it should be
emphasized that codifying conventions, even those which expressly state that they embody existing
customary law, can never be considered as conclusive evidence of customary law”). As the Court opined in
a different context, “… in the field of customary international law, the shared view of the Parties as to the
content of what they regard as the rule is not enough. The Court must satisfy itself that the existence of the
rule in the opinio juris of States is confirmed by practice”: Military and Paramilitary Activities in and
against Nicaragua (Nicaragua v. United States of America), Merits, Judgment, I.C.J. Reports 1986, p. 14,
at p. 98, para 184.
265 See, for example, North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3, at pp. 38-39, para. 63,
and p. 42, para. 72; and see p. 130 (Separate Opinion of Judge Ammoun) (“the power to subject the
implementation of … [a treaty provision] implies the absence, in the minds of the signatories to the
Convention, of the opinio juris sive necessitatis. The latter requires consciousness of the binding nature of
the rule, and it is self-evident that a rule cannot be felt to be binding when the right not to apply it is
reserved”). See also Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports 1974, p. 253, at p. 305
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that custom and treaty may co-exist independently of one another.266 In any case,
“[w]hether a treaty rule is good evidence of opinio juris for purposes of customary
law is essentially a question of fact. One has to look at the statements, claims, and
State conduct …”267 in order to determine it. Another issue is whether the repetition
of a similar or identical provisions in a large number of bilateral treaties, may be of
evidence of ‘acceptance as law’. Here too, the provision (and the treaty in which it
is incorporated) would need to be analyzed in their context and in the light of the
circumstances surrounding their adoption. This is particularly so as “[t]he
multiplicity of … treaties … is as it were a double-edged weapon”:268 “the
concordance of even a considerable number of treaties per se constitutes neither
sufficient evidence not even a sufficient presumption that the international
community as a whole considers such treaties as evidence of general customary law.
On the contrary, there are quite a few cases where such treaties appear to be
evidence of exceptions from general regulations”.269
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(Separate Opinion of Judge Petrén) (observing that by a treaty which allows for denunciation the
signatories “show[] that they [are] still of the opinion that customary international law [does] not prohibit
[the obligation enumerated in the treaty]”); Nahimana et al. v. Prosecutor, Case No. ICTR-99-52-A,
Judgment (ICTR Appeals Chamber), 28 November 2007 (Partly Dissenting Opinion of Judge Meron),
para. 5 (“The number and extent of the reservations reveal that profound disagreement persists in the
international community as to whether mere hate speech is or should be prohibited, indicating that Article 4
of the CERD and Article 20 of the ICCPR do not reflect a settled principle. Since a consensus among states
has not crystallized, there is clearly no norm under customary international law criminalizing mere hate
speech”); Diplomatic Immunity of Domestic Servants Case (Austrian Supreme Court), OGH 6 Ob 94/71,
judgment of 28 April 1971, SZ 1971 No. 44/56, 204.
266 With regard to reservations (and, similarly, denunciation) see also R.R. Baxter, supra note 191, at 47-53;
ILA London Statement of Principles, at 44 (“[Conclusion] 22. The fact that a treaty permits reservations to
all or certain of its provisions does not of itself create a presumption that those provisions are not
declaratory of existing customary law”); North Sea Continental Shelf, Judgment, I.C.J. Reports 1969, p. 3,
at pp. 197-198 (Dissenting Opinion of Judge Morelli). On ratifying (on not) codification conventions as
evidence of acceptance as law see, for example, I. Sinclair, supra note 261, at 227 (“it is fair to say that
even sparsely ratified codification conventions may well be looked upon, in general, as providing some
evidence of opinio juris on the subject-matter involved. The quality of the evidence will depend on the
provenance of the particular provision which may be in issue. If the travaux préparatoires of a specific
codification convention demonstrate that a particular provision was adopted at the codification conference
on a sharply divided vote, and that the controversy thus engendered may have led a number of States to
refuse to participate in the convention, there is clearly a strong case for discounting the value of that
provision in the context of later codification efforts”).
267 O. Schachter, supra note 191, at 735.
268 Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 3, at p. 306
(Separate Opinion of Judge Ammoun).
269 K. Wolfke, supra note 119, at 35. See also Ahmadou Sadio Diallo, (Republic of Guinea v. Democratic
Republic of the Congo), Preliminary Objections, Judgment, I.C.J. Reports 2007, p. 582, at p. 615 (“The
fact invoked by Guinea that various international agreements, such as agreements for the promotion and
protection of foreign investments and the Washington Convention, have established special legal régimes
governing investment protection, or that provisions in this regard are commonly included in contracts
entered into directly between States and foreign investors, is not sufficient to show that there has been a
change in the customary rules of diplomatic protection; it could equally show the contrary.”); J.L. Kunz,
supra note 56, at 668 (“Treaties may, under different circumstances, be evidence for the fulfillment of both
conditions, and, under other circumstances, evidence against it”); K. Wolfke, supra note 93, at 9-10; H.
Thirlway, supra note 38, at 71; ILA London Statement of Principles, at 47-48 (“There is no presumption
that a succession of similar treaty provisions gives rise to a new customary rule with the same content”).
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(g) Resolutions of deliberative organs of international organizations, such as
the General Assembly and Security Council of the United Nations, and resolutions
of international conferences. Opinio juris may be deduced from the attitudes of
States vis-à-vis such non-binding texts that purport, explicitly or implicitly, to
declare the existing law, as may be expressed by both voting (in favour, against or
abstaining) on the resolution, by joining a consensus, or by statements made in
connection with the resolution.270 Such deduction is to be done, however, “with all
due caution”,271 as States may, in fact, have various motives when consenting to (or
disapproving of) the text of a resolution: indeed, “[s]upport for law-declaring
resolutions … would have to be appraised in the light of the conditions surrounding
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270 See, for example, Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United
States of America), Merits, Judgment, I.C.J. Reports 1986, p. 14, at pp. 99-100, 101 (“This opinio juris
may, though with all due caution, be deduced from, inter alia, the attitude of the Parties and the attitude of
States towards certain General Assembly resolutions … The effect of consent to the text of such
resolutions … may be understood as an acceptance of the validity of the rule or set of rules declared by the
resolution by themselves ... the adoption by States of … [a resolution] affords an indication of their opinio
juris as to customary international law on the question.”); Prosecutor v. Tadić, Case No. IT-94-1, Decision
on the Defence Motion for Interlocutory Appeal on Jurisdiction (ICTY Appeals Chamber), 2 October
1995, paras. 111, 112; Libyan American Oil Company (LIAMCO) v. Government of the Libyan Arab
Republic, Arbitral Award (1977), 62 ILR, 140, 189 (“… the said Resolutions, if not a unanimous source of
law, are evidence of the recent dominant trend of international opinion concerning the sovereign right of
States over their natural resources …”); Texaco Overseas Petroleum Company and California Asiatic Oil
Company v. The Government of the Libyan Arab Republic, Arbitral Award 1977), 53 ILR, 389, 491-495;
P. Tomka, supra note 24, at 210-211; H.W.A. Thirlway, supra note 81, at 65 (“It is suggested … that in
fact the discussions, and the statements made on behalf of member States in the discussions, will almost
always be of greater relevance than the resolution”); A. Pellet, supra note 17, at 817, 825 (“In the case of
ascertaining a customary rule of general international law … it is suggested that … [resolutions adopted by
the organs of international organizations] belong more to the manifestation of the opinio juris than to the
formation of a practice … in assessing their legal value, the important element is not what they say, but
what the States have had to say about them”); J.E. Alvarez, supra note 133, at 260 (“GA resolutions can be
an efficient mechanism for finding … opinio juris, especially as compared to the annoying tendency of
states to omit any discussion of the concept in their bilateral diplomatic discourse”); Human Rights Council
Report of the Working Group on Arbitrary Detention (24 December 2012), A/HRC/22/44, para. 43. See
also the conclusions of the commission of the Institut de Droit International on ‘The Elaboration of
General Multilateral Conventions and of Non-contractual Instruments Having a Normative Function or
Objective’ with regard to Resolutions of the United Nations General Assembly (1987, available at
http://www.idi-iil.org/idiE/resolutionsE/1987_caire_02_en.PDF): “A law-declaring Resolution purports to
state an existing rule of law. In particular, it may be a means for the determination or interpretation of
international law, it may constitute evidence of international custom, or it may set forth general principles
of law” (Conclusion 4); “A Resolution may constitute evidence of customary law or of one of its
ingredients (custom-creating practice, opinio juris), in particular when that has been the intention of States
in adopting the Resolution or when the procedures applied have led to the elaboration of a statement of
law” (Conclusion 20); “Evidence [of international custom] supplied by a Resolution is rebuttable”
(Conclusion 21). Rosenne has observed that “[t]o establish whether a given State has in fact consented to
that resolution, in whole or in part, close examination of all the proceedings in the body which adopted the
resolution is needed”: S. Rosenne, supra note 79, at 112.
271 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 99, para. 188; and see at p. 182 (Separate Opinion of
Judge Ago) (“There are, similarly, doubts which I feel bound to express regarding the idea … that the
acceptance of certain resolutions or declarations drawn up in the framework of the United Nations or the
Organization of American States, as well as in another context, can be seen as proof conclusive of the
existence among the States concerned of a concordant opinio juris possessing all the force of a rule of
customary international law”). See also Guidelines 3.1.5.3 and 4.4.2 of the Commission’s Guide to
Practice on Reservations to Treaties (2011).
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such action. It is far from clear that voting for a law-declaring resolution is in itself
conclusive evidence of a belief that the resolution expresses a legal rule”.272 As the
International Court had observed with regard to UN General Assembly resolutions,
“even if they are not binding, [such resolutions] may sometimes have normative
value. They can, in certain circumstances, provide evidence important for
establishing the existence of a rule or the emergence of an opinio juris. To establish
whether this is true of a given General Assembly resolution, it is necessary to look
at its content and the conditions of its adoption; it is also necessary to see whether
an opinio juris exists as to it normative character”.273 While an investigation into the
language and specific circumstances of adopting a given resolution is indeed
indispensable, it may be suggested that in general, where “substantial numbers of
negative votes and abstentions” by States are to be found, a generally held opinio
juris as to the normative character of the resolution is missing; in other words, such
resolution would “fall short of establishing the existence of an opinio juris”.274
Similarly, a resolution adopted unanimously (or by an overwhelming and
representative majority) may be evidence of a generally held legal conviction.275 In
addition, where a State not only refrains from voicing any objections to the adoption
of a law-declaring resolution but also takes an active part in bringing that about,
‘acceptance as law’ of its normative content may very well be attributed to it.276
Finally, “a series of resolutions [containing consistent statements] may show the
gradual evolution of the opinio juris required for the establishment of a new rule”;
277
this too, of course, depends on the particular circumstances.278
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272 O. Schachter, supra note 191, at 730. See also S. Rosenne, supra note 79, at 112 (“As often as not a vote is
an indication of a political desideratum and not a statement of belief that that the law actually requires such
a vote or contains any element of opinio juris sive necessitatis… or that the resolution is a statement of
law”); L. Hannikainen, supra note 128, at 138 (“The overwhelming majority of resolutions of international
organizations are formally recommendations only. This is well known to States – they may have very
different reasons to vote for a resolution. Those reasons may include political expediency and the desire not
to be singled out as a dissenter. Even if a resolution employs legal terminology and speaks of all States’
obligations, a State’s affirmative vote cannot be taken as a definitive proof of opinio juris”).
273 Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at pp.
254-255. See also the synthesized view of the Iran-United States Claims Tribunal in the Sedco case (1986):
“United Nations General Assembly resolutions are not directly binding upon States and generally are not
evidence of customary law. Nevertheless, it is generally accepted that such resolutions in certain specified
circumstances may be regarded as evidence of customary international law or can contribute—among other
factors—to the creation of such law” (25 ILM 629, 633-634).
274 Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at p. 255, para. 71.
275 See also Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West
Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports 1971, p.
16, at p. 79 (Separate Opinion of Judge Ammoun); Legal Consequences of the Construction of a Wall in
the Occupied Palestinian Territory, Advisory Opinion, I.C.J. Reports 2004, p. 136, at pp. 235, 236
(Separate Opinion of Judge Al-Khasawneh); J. Barboza, supra note 119, at 5 (“The probability of such
type of [General Assembly normative resolutions] to serve as a declaration of customary law, or as the
basis for the formation of a custom depends, precisely, on the majority behind it. If obtained by unanimity,
or by consensus, they represent the international opinion better than multilateral treaties, having a relatively
restricted membership”).
276 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 14, at p. 133, para 264.
277 Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at p.
255, para. 70; see also at p. 532 (Dissenting Opinion of Judge Weeramantry) (“The declarations of the
world community’s principal representative body, the General Assembly, may not themselves make law,
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77. Inaction as evidence of the subjective element. ‘Acceptance as law’ may also
be established by inaction or abstention, when these represent concurrence or
acquiescence in a practice.279 In Fitzmaurice’s words, “[c]learly, absence of
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but when repeated in a stream of resolutions … [they may] provide important reinforcement [to a view of
what a rule of customary international law is]”); Legal Consequences of the Construction of a Wall in the
Occupied Palestinian Territory, Advisory Opinion, I.C.J. Reports 2004, p. 136, at p. 236 (Separate Opinion
of Judge Al-Khasawneh) (“[a very large number of resolutions adopted by overwhelming majorities or by
consensus repeatedly making the same point] while not binding, nevertheless produce legal effects and
indicate a constant record of the international community's opinio juris”); South West Africa, Second
Phase, Judgment, I.C.J. Reports 1966, p. 6, at p. 292 (Dissenting Opinion of Judge Tanaka) (“Of course,
we cannot admit that individual resolutions, declarations, judgments, decisions, etc., have binding force
upon the members of the [international] organization. What is required for customary international law is
the repetition of the same practice; accordingly, in this case resolutions, declarations, etc., on the same
matter in the same, or diverse, organizations must take place repeatedly. Parallel with such repetition, each
resolution, declaration, etc., being considered as the manifestation of the collective will of individual
participant States, the will of the international community can certainly be formulated more quickly and
more accurately as compared with the traditional method of the normative process. This collective,
cumulative and organic process of custom-generation can be characterized as the middle way between
legislation by convention and the traditional process of custom making, and can be seen to have an
important role from the viewpoint of the development of international law. In short, the accumulation of
authoritative pronouncements such as resolutions, declarations, decisions, etc., concerning the
interpretation of the Charter by the competent organs of the international community can be characterized
as evidence of the international custom referred to in Article 38, paragraph 1 (b)”); E. Suy, ‘Innovation in
International Law-Making Processes’, in R. St. John Macdonald et al (eds.), The International Law and
Policy of Human Welfare (Sitjhoff & Noordhoff, 1978), 187, 190 (“[opinio juris] may also arise … through
the mere repetition of principles in subsequent resolutions to which states give their approval”). But see S.
Rosenne, supra note 79, at 112 (“There is a tendency today for the agendas of international organs to be
excessively repetitive, and the repeated voting is an inert reflex from a policy decision when the issue was
first brought up for discussion”). Cf. Western Sahara, Advisory Opinion, I.C.J. Reports 1975, p. 12, at p.
99 (Separate Opinion of Judge Ammoun) (“The General Assembly has affirmed the legitimacy of that
struggle [for liberation from foreign domination] in at least four resolutions … which taken together
already constitute a custom”), and p. 121 (Separate Opinion of Judge Dillard) (“even if a particular
resolution of the General Assembly is not binding, the cumulative impact of many resolutions when similar
in content, voted for by overwhelming majorities and frequently repeated over a period of time may give
rise to a general opinio juris and thus constitute a norm of customary international law”).
278 See Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I.C.J. Reports 1996, p. 226, at
pp. 254-255, and also at pp. 319-320 (Dissenting Opinion of Judge Schwebel) (“[General Assembly
resolutions] adopted by varying majorities, in the teeth of strong, sustained and qualitatively important
opposition … consisting as it does of States that bring together much of the world’s military and economic
power and a significant percentage of its population, more than suffices to deprive the [General Assembly]
resolutions in question of legal authority … the repetition of resolutions of the General Assembly in this
vein … rather demonstrates what the law is not. When faced with continuing and significant opposition,
the repetition of General Assembly resolutions is a mark of ineffectuality in law formation as it is in
practical effect”); Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports 1974, p. 253, at pp. 435-
436 (Dissenting Opinion of Judge Barwick) (“[it may be that] resolutions of the United Nations and other
expressions of international opinion, however frequent, numerous and emphatic, are insufficient to warrant
the view that customary international law now embraces [a certain rule]”). See also S. Rosenne, supra note
79, at 112 (“Consensus is a particularly misleading notion, as frequently the formal element of no vote will
conceal the many reservation buried away in the records, and it often only means agreement on the words
to be used and on their place in the sentence, and absence of agreement, or even disagreement, on their
meaning and on the intent of the document as a whole”); ILA London Statement of Principles, at 59.
279 See, for example, Interpretation of Peace Treaties (second phase), Advisory Opinion: I.C.J. Reports 1950,
p. 221, at p. 242 (Dissenting opinion of Judge Read) (“The fact that no State has adopted this position [that
a State party to a dispute may prevent its arbitration by the expedient of refraining from appointing a
representative on the Commission] is the strongest confirmation of the international usage or practice in
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opposition is relevant only in so far as it implies consent, acquiescence or toleration
on the part of the States concerned; but absence of opposition per se will not
necessarily or always imply this. It depends on whether the circumstances are such
that opposition is called for because the absence of it will cause consent or
acquiescence to be presumed. The circumstances are not invariably of this character,
particularly for instance where the practice or usage concerned has not been brought
to the knowledge of other States, or at all events lacks the notoriety from which
such knowledge might be presumed: or again, if the practice or usage concerned
takes a form such that it is not reasonably possible for other States to infer what its
true character is”.280
78. Contradictory practice (that is, practice inconsistent with the alleged rule of
customary international law) may evidence a lack of ‘acceptance as law’,281 just as it
may serve to prevent a certain practice from being regarded as settled. On the other
hand, the practice that is not in accordance with a rule may be an occasion that
reaffirms an opinio juris, if the action is justified in terms that support the
customary rule.282
79. Evidence of ‘acceptance as law’ by a particular State (or international
organization) may be inconsistent; for example, “Governments and national courts
in the same State may hold different opinions on the same question, which makes it
even more difficult to identify the opinio juris in that State”.283 As with practice,
such ambivalence might undermine the significance of the opinio juris of that State
(or intergovernmental organization) in attempting to identify the existence or not of
a rule of customary international law.
80. The following draft conclusion is proposed:
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matters of arbitration which is set forth above”); North Sea Continental Shelf, Judgment, I.C.J. Reports
1969, p. 3, at p. 232 (Dissenting Opinion of Judge Lachs); Priebke, Erich s/ solicitud de extradición
(Argentinian Supreme Court), causa No 16.063/94, 2 November 1995, para. 90. See also K. Wolfke, supra
note 6, at 48 (“toleration of a practice by other states, considering all relevant circumstances, justifies the
presumption of its acceptance as law”); J.I. Charney, ‘Universal International Law’, American Journal of
International Law, 87 (1993), 529, 536. Judge Hudson wrote of “the failure of other States to challenge
that conception [of the State that acted, that practice was required by law] at the time” as one of the
elements of customary international law: M.O. Hudson, supra note 181, at 609.
280 G. Fitzmaurice, supra note 174, at 33. See also The Case of the S.S. “Lotus” (France/Turkey), PCIJ, Series
A, No. 10, p. 28 (“only if such abstentions were based on their [States] being conscious of having a duty to
abstain would it be possible to speak of an international custom”); North Sea Continental Shelf, Judgment,
I.C.J. Reports 1969, p. 3, at p. 42, para. 73 (“That non-ratification may sometimes be due to factors other
than active disapproval of the convention concerned can hardly constitute a basis on which positive
acceptance of its principles can be implied: the reasons are speculative, but the facts remain”). Danilenko
highlights that “[u]nder existing international law, absence of protest implies acquiescence only if practice
affects interests [(direct or indirect)] and rights of an inactive state”: G.M. Danilenko, supra note 139, at
108.
281 See, for example, Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports 1974, p. 253, at p. 305
(Separate Opinion of Judge Petrén) (“The conduct of these States [that have conducted nuclear atmospheric
tests] proves that their Governments have not been of the opinion that customary international law forbade
atmospheric nuclear tests”).
282 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 14, at pp. 106, 108-109 (paras. 202, 207).
283 Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium), Judgment, I.C.J. Reports
2002, p. 3, at p. 171 (Dissenting Opinion of Judge ad hoc Van den Wyngaert).
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Draft Conclusion 11
Evidence of acceptance as law
1. Evidence of acceptance of a general practice as law may take a wide
range of forms. These may vary according to the nature of the rule and
the circumstances in which the rule falls to be applied.
2. The forms of evidence include, but are not limited to, statements by
States which indicate what are or are not rules of customary international
law, diplomatic correspondence, the jurisprudence of national courts, the
opinions of government legal advisers, official publications in fields of
international law, treaty practice, and action in connection with
resolutions of organs of international organizations and of international
conferences.
3. Inaction may also serve as evidence of acceptance as law.
4. The fact that an act (including inaction) by a State establishes
practice for the purpose of identifying a rule of customary international
law does not preclude the same act from being evidence that the practice
in question is accepted as law.
VII. Future programme of work
81. As already announced,284 the third report, in 2015, will continue the
discussion of the two elements of customary international law (‘a general practice’;
‘accepted as law’), and the relationship between them in the light of progress with
the topic in 2014. The next report will address in more detail certain particular
aspects touched on in the present report, in particular the role of treaties, resolutions
of international organizations and conferences, and international organizations
generally. The third report will also cover the “persistent objector” rule, and
“special” or “regional” customary international law, as well as “bilateral custom”.
82. As was recalled in the first report, at its first and second sessions in 1949 and
1950 the Commission, in accordance with the mandate in article 24 of its Statute,
had on its agenda a topic entitled ‘Ways and means of making the evidence of
customary international law more readily available’. This led to a series of
recommendations, which were adopted by the General Assembly and which are still
of importance today.285
83. As mentioned above, the dissemination and location of practice (and opinio
juris) remains an important practical issue in the circumstances of the modern
world.286 It is therefore proposed that the draft conclusions should be supplemented
by indications as to where and how to find practice and acceptance as law. This
would describe the various places where practice and opinio juris may be found, for
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284 A/CN.4/663, supra note 1, at para. 102.
285 See also Secretariat memorandum, at paras. 9-11; A/CN.4/663, supra note 1, at para. 9.
286 See, for example, S. Rosenne, supra note 79, at 58-61; O. Corten, supra note 176, at 149-178.
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example in digests and other publications of individual States, as well as
publications of practice in specific areas of international law.
84. The Special Rapporteur still aims to submit a final report in 2016, with revised
draft conclusions and commentaries in light of the debates and decisions of 2014
and 2015, but acknowledges, as some members of the Commission have said, that
this is an ambitious work programme.
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Annex
Proposed draft conclusions on the identification of
customary international law
Part one
Introduction
Draft conclusion 1
Scope
1. The present draft conclusions concern the methodology for determining
the existence and content of rules of customary international law.
2. The present draft conclusions are without prejudice to the methodology
concerning other sources of international law and questions relating to
peremptory norms of international law (jus cogens).
Draft conclusion 2
Use of terms
For the purposes of the present draft conclusions:
(a) “Customary international law” means those rules of international
law that derive from and reflect a general practice accepted as law;
(b) “International organization” means an intergovernmental
organization;
(c) …
Part two
Two constituent elements
Draft conclusion 3
Basic approach
To determine the existence of a rule of customary international law and its
content, it is necessary to ascertain whether there is a general practice accepted
as law.
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Draft Conclusion 4
Assessment of evidence
In assessing evidence for a general practice accepted as law, regard must
be had to the context including the surrounding circumstances.
Part three
A general practice
Draft conclusion 5
Role of practice
The requirement, as an element of customary international law, of a
general practice means that it is primarily the practice of States that
contributes to the creation, or expression, of rules of customary international
law.
Draft conclusion 6
Attribution of conduct
State practice consists of conduct that is attributable to a State, whether in
the exercise of executive, legislative, judicial or any other function.
Draft conclusion 7
Forms of practice
1. Practice may take a wide range of forms. It includes both physical and
verbal actions.
2. Manifestations of practice include, among others, the conduct of States
‘on the ground’, diplomatic acts and correspondence, legislative acts,
judgments of national courts, official publications in the field of international
law, statements on behalf of States concerning codification efforts, practice in
connection with treaties, and acts in connection with resolutions of organs of
international organizations and conferences.
3. Inaction may also serve as practice.
4. The acts (including inaction) of international organizations may also serve
as practice.
Draft conclusion 8
Weighing evidence of practice
1. There is no predetermined hierarchy among the various forms of practice.
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2. Account is to be taken of all available practice of a particular State.
Where the organs of the State do not speak with one voice, less weight is to be
given to their practice.
Draft conclusion 9
Practice must be general and consistent
1. To establish a rule of customary international law, the relevant practice
must be general, meaning that it must be sufficiently widespread and
representative. The practice need not be universal.
2. The practice must be generally consistent.
3. Provided that the practice is sufficiently general and consistent, no
particular duration is required.
4. In assessing practice, due regard is to be given to the practice of States
whose interests are specially affected.
Part Four
Accepted as Law
Draft conclusion 10
Role of acceptance as law
1. The requirement, as an element of customary international law, that the
general practice be accepted as law means that the practice in question must be
accompanied by a sense of legal obligation.
2. Acceptance as law is what distinguishes a rule of customary international
law from mere habit or usage.
Draft conclusion 11
Evidence of acceptance as law
1. Evidence of acceptance of a general practice as law may take a wide range
of forms. These may vary according to the nature of the rule and the
circumstances in which the rule falls to be applied.
2. The forms of evidence include, but are not limited to, statements by States
which indicate what are or are not rules of customary international law,
diplomatic correspondence, the jurisprudence of national courts, the opinions
of government legal advisers, official publications in fields of international law,
treaty practice, and action in connection with resolutions of organs of
international organizations and of international conferences.
3. Inaction may also serve as evidence of acceptance as law.
4. The fact that an act (including inaction) by a State establishes practice for
the purpose of identifying a rule of customary international law does not
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preclude the same act from being evidence that the practice in question is
accepted as law.
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