INTERNATIONAL COURT OF JUSTICE
CERTAIN IRANIAN ASSETS
(ISLAMIC REPUBLIC OF IRAN v. UNITED STATES OF AMERICA)
REJOINDER
SUBMITTED BY
THE UNITED STATES OF AMERICA
May 17, 2021
ANNEXES
VOLUME II
Annexes 279 through 304
ANNEX279
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
In the arbitration proceeding between
LANDESBANK BADEN-WURTTEMBERG ET AL.
Claimants
and
KINGDOM OF SPAIN
Respondent
ICSID Case No. ARB/15/45
DECISION ON THE SECOND PROPOSAL TO DISQUALIFY
ALL MEMBERS OF THE TRIBUNAL
CHAIR OF THE ICSID ADMINISTRATIVE COUNCIL
Mr. David Malpass
Date: 15 December 2020
Annex 279
argues, the circumstances underlying the Second Proposal are "beyond any reasonable
doubt."21
40. International Custom. In Spain's view, Articles 14 and 57 of the ICSID Convention cannot
be interpreted in isolation from other international conventions or international arbitration
practice;22 and the word "manifestly" in Article 57 does not justify a departure from
international custom.23 Such international custom demands the disqualification of an
arbitrator when there is "any reasonable doubt" about his/her lack of moral character,
impartiality or independence.24 Moreover, Spain adds, misrepresentations are absolutely
prohibited in the context of international arbitration, as shown by the doctrine of "clean
hands" which sanctions parties conduct in that regard.25 It follows, the Respondent argues,
that "conscious or reckless misrepresentations and misleading statements" must lead to
removal of a tribunal from office.26
41. General Principles of Law. Finally, Spain contends that under general principles of
international law "any slight doubt" about an adjudicator's lack of high moral character,
independence or impartiality is ground for disqualification;27 bias can be inferred, and there
is no need for strict evidence.28 This said, Spain argues, in this case the Tribunal's
"misrepresentations and misleading statements" are "blatantly evident."29
21 Resp. Second Proposal, 'I] 37.
22 Resp. Second Proposal, 'I] 47.
23 Resp. Second Proposal, 'I] 50.
24 Resp. Second Proposal, 'I] 49. See also, id., 'I] 53 (referring to ''justifiable and reasonable doubt"); Resp. Comments
III, '1]71.
25 Resp. Second Proposal, 'I] 54. See also, Resp. Comments II, 'I] 99.
26 Resp. Second Proposal, 'I] 56. See also, Resp. Comments II, '1] 104.
27 Resp. Second Proposal, '1] 58.
28 Resp. Second Proposal, '1] 60.
29 Resp. Second Proposal, '1] 60.
9
Annex 279
ANNEX280
89/2012 Sb.
ACT
of 3 February 2012
the Civil Code
the Parliament has adopted the following Act of the Czech Republic:
BOOK ONE
GENERAL PROVISIONS
TITLE I
SCOPE OF REGULATION AND ITS BASIC PRINCIPLES
Chapter 1
Private law
Section 1 [Recodification]
(1) The provisions of the legal order governing the mutual rights and duties of persons together constitute private law.
The application of private law is independent of the application of public law.
(2) Unless expressly prohibited by a statute, persons can stipulate rights and duties by way of exclusion from a
statute; stipulations contrary to good morals, public order or the law concerning the status of persons, including the right to
protection of personality rights, are prohibited.
Section 2 [Recodification]
(1) Each provision of private law may be interpreted only in accordance with the Charter of Fundamental Rights and
Freedoms and the constitutional order in general, the principles underlying this Act, and considering at all times the values that it
protects. Should the interpretation of a provision diverge from this imperative solely on the basis of its wording, the imperative
prevails.
(2) Statutory provisions may not be given a meaning other than that which follows from the actual sense of the words
in their mutual context and from the evident intention of the legislature; however, no one may invoke the wording of a legal
regulation contrary to its sense.
(3) The interpretation and application of a legal regulation must not be contrary to good morals and must not lead to
cruelty or inconsiderate behaviour offensive to ordinary human feelings.
Section 3 [Recodification]
(1) Private law protects the dignity and freedom of an individual and his natural right to pursue his own happiness and
the happiness of his family or people close to him in a way that does not unreasonably harm others.
(2) Private law primarily relies on the following principles:
a) everyone has the right to protect his life and health, as well as freedom, honour, dignity and privacy,
b) family, parenthood and marriage enjoy special statutory protection,
c) no one may sustain unjustified harm due to insufficient age, mental capacity or dependency; however, no one may
unreasonably benefit from his own inability to the detriment of others,
d) a promise is binding and contracts are to be executed,
e) right of ownership is protected by statutes, and only a statute can prescribe how the right of ownership is created and
extinguished, and
f) no one may be denied what he is rightfully entitled to.
(3) Private law also stems from other generally recognised principles of justice and law.
Section 4 [Recodification]
(1) Every person having legal capacity is presumed to have the intellect of an average individual and the ability to use
it with ordinary care and caution, and anybody can reasonably expect every such person to act in that way in legal transactions.
Annex 280
(2) Where the legal order makes a specific consequence dependent on one's knowledge, it means knowledge
reasonably acquired by a person knowledgeable of the case having considered the circumstances which must have been
obvious to him in his capacity. This applies by analogy if the legal order connects a certain consequence with the existence of a
doubt.
Section 5 [Recodification]
(1) A person who offers professional performance as a member of an occupation or profession, whether publicly or in
dealings with another person, demonstrates his ability to act with the knowledge and care associated with his occupation or
profession. If the person fails to act with such professional care, he bears the consequences.
(2) The nature or validity of a juridical act may not be challenged against the will of the person affected only because
the person who made the act was not duly authorised or was prohibited to do so.
Section 6 [Recodification]
(1) Everyone is obliged to act fairly in legal transactions.
(2) No one may benefit from acting unfairly or unlawfully. Furthermore, no one may benefit from an unlawful situation
which the person caused or over which he has control.
Section 7 [Recodification]
A person who acted in a certain way is presumed to have acted fairly and in good faith.
Section 8 [Recodification]
Evident abuse of a right does not enjoy legal protection.
Chapter 2
Application of the rules of civil law
Section 9 [Recodification]
(1) The Civil Code governs the personal status of persons.
(2) Private rights and duties of a personal and proprietary nature are governed by the Civil Code to the extent that
they are not governed by other legal regulations. Usages may be considered where invoked by a statute.
Section 10 [Recodification]
(1) Where a legal case cannot be decided on the basis of an express provision, it is assessed under the provisions
concerning the legal case which is, in terms of its content and purpose, the closest possible to the case under consideration.
(2) In the absence of such a provision, the legal case is to be assessed under the principles of fairness and the
principles underlying this Act in order to arrive at a good arrangement of rights and duties, having regard to the practice of
private life and taking into account the state of legal opinion and established decision-making practice.
Section 11 [Recodification]
General provisions concerning the creation, change and extinction of rights and duties arising from obligations under
Book Four of this Act apply, with the necessary modifications, to the creation, change and extinction of other private rights and
duties.
Chapter 3
Protection of private rights
Section 12 [Recodification)
Anyone who feels that his rights have been prejudiced may claim the protection of a body executing public authority
(hereinafter a "public body"). Unless otherwise provided by a statute, the public body is a court.
Section 13 [Recodification)
Anyone seeking legal protection may reasonably expect that his legal case will be decided similarly to another legal
case that has already been decided and that coincides in essential aspects with his legal case; where the legal case has been
decided differently, anyone seeking legal protection has the right to a persuasive explanation of the reasons for such a variance.
Section 14 [Recodification]
Self-help
Annex 280
(1) Anyone may, in a reasonable manner, help himself to his rights, if such rights are endangered and it is evident that
public authority action would come too late.
(2) Where an unlawful interference with one's right is imminent, anyone so threatened may use effort and resources
that a person in his position and under the given circumstances must consider appropriate to avert such encroachment.
However, if self-help is only aimed at securing a right that would otherwise be frustrated, the person exercising self-help must,
without undue delay, contact the competent public body.
TITLE II
PERSONS
Chapter 1
General provisions
Section 15 [Recodification]
(1) Legal personality is the capacity to have rights and duties within the legal order.
(2) Legal capacity is the capacity to acquire rights and assume duties for oneself by making juridical acts (to make
juridical acts).
Section 16 [Recodification]
No one may surrender his legal personality and legal capacity, neither in full, nor in part; doing so is disregarded.
Section 17
(1) Only persons may have and exercise their rights. Duties may only be imposed upon and their performance
enforced in relation to persons.
(2) If anyone creates a right or imposes a duty upon something other than a person, such a right or duty is attributed
to the person to whom it belongs according to the legal nature of the case.
Section 18
There are either natural, or legal persons.
Section 19 [Recodification]
(1) Every individual has innate natural rights knowable by the very reason and feelings, and therefore is considered to
be a person. A statute only provides for the limits of application and the manner of protection of the natural rights of an
individual.
(2) Natural rights associated with the personality of an individual may not be alienated and may not be waived; should
this occur, it is disregarded. The limitation of these rights to the extent contrary to a statute, good morals or public order is also
disregarded.
Section 20 [Recodification]
(1) A legal person is an organised body whose legal personality is provided or recognised by a statute. A legal person
may, without regard to its objects of activities, have rights and duties consistent with its legal nature.
(2) Legal persons governed by public law are subject to statutes under which they have been established; the
provisions of this Act only apply if they are consistent with the legal nature of these persons.
Section 21 [Recodification]
Within private law, the State is considered to be a legal person. Another legal regulation provides for the manner in
which the State makes juridical acts.
Section 22 [Recodification]
(1) A close person is a relative in the direct line, sibling and spouse or a partner under another statute governing
registered partnership (hereinafter a "partner''); other persons in a familial or similar relationship shall, with regard to each other,
be considered to be close persons if the harm suffered by one of them is perceived as his own harm by the other. Persons
related by affinity and persons permanently living together are also presumed to be close persons.
(2) If a statute provides specific conditions or limitations for the protection of third persons regarding the transfer or
encumbrance of property or the relinquishment of property to another for his use between close persons, these conditions and
limitations shall also apply to similar juridical acts between a legal person and a member of its governing body or a person
exercising substantial influence over the legal person as its member or based on an agreement or another fact.
Annex 280
Chapter 2
Natural persons
Division 1
General provisions
Section 23
An individual has legal personality from birth to death.
Section 24
Every individual is responsible for his own actions, if he is able to assess and control them. A person who induces
upon himself a self-inflicted condition which would otherwise preclude the responsibility for his actions is responsible for the
actions taken under this condition.
Section 25
A conceived child is considered to be already born if it suits the child's interests. A child is presumed to have been
born alive. However, if the child is not born alive, he is considered never to have existed.
Section 26
Proof of death
(1) The death of an individual is proved by a public instrument issued after examining the dead body in a manner
prescribed.
(2) Where a dead body cannot be examined in the manner prescribed, a court shall, even of its own motion, declare
the individual dead if the individual was involved in such an event that his death, given the circumstances, seems certain. In its
decision, the court shall specify the date established as the date of death.
Section 27
If a legal consequence is dependent on an individual surviving another individual, and it is not certain which of them
died first, they are all presumed to have died at the same time.
Section 28
(1) If it is not known where an individual died, he is presumed to have died where his body was found.
(2) The place where an individual declared dead last dwelled when he was alive is conclusively presumed to be the
place where he died.
Section 29 [Recodification]
Sex change
(1) Sex change of an individual takes place by surgery while simultaneously disabling the reproductive function and
transforming the genitalia. The date of the sex change is presumed to be the date indicated in the certificate issued by the
health care provider.
(2) Sex change does not affect the personal status of an individual or his personal and property situation; however,
marriage or registered partnership terminate. The rights and duties of a man and woman whose marriage terminated to their
common child and their property rights and duties at the period following the termination of marriage are governed, by analogy,
by the provisions on the rights and duties of divorced spouses to their common child and on their property rights and duties at
the period following the divorce; a court shall decide, even of its own motion, on the care each of the parents will take of their
common child thereafter.
Section 30 [Recodification]
Age of majority
(1) An individual acquires full legal capacity upon reaching the age of majority. The age of majority is reached upon
reaching eighteen years of age.
(2) Before reaching the age of majority, full legal capacity is acquired by being granted legal capacity or by entering
into marriage. Legal capacity acquired by entering into marriage is not terminated upon termination or invalidation of marriage.
Minors
Annex 280
Section 31 [Recodification]
Any minor who has not yet acquired full legal capacity is presumed to be capable of making juridical acts which are,
as to their nature, appropriate to the intellectual and volitional maturity of the minors of his age.
Section 32 [Recodification]
(1) Where, in accordance with the usages of private life, a legal representative has granted a minor who has not yet
acquired full legal capacity his consent to make a particular juridical act or achieve a specific purpose, the minor is capable of
making juridical acts within the consent so granted, unless specifically prohibited by a statute; the consent may be subsequently
limited or withdrawn.
(2) Where there are multiple legal representatives, it is sufficient if at least one of them expresses his will towards a
third person. However, if there are multiple representatives performing acts towards another person together and these acts are
contradictory, their expressions of will are disregarded.
Section 33 [Recodification]
(1) If the legal representative of a minor who has not yet acquired full legal capacity grants his consent to the
independent operation of a business enterprise or another similar gainful activity, the minor becomes capable of making acts
related to this activity. The validity of the consent is subject to the leave of a court.
(2) The leave of a court substitutes the condition of a certain age, if required to perform a gainful activity by another
legal regulation.
(3) The legal representative may withdraw his consent only with the leave of a court.
Section 34
Dependent work of minors under the age of fifteen years or minors who have not completed compulsory education is
prohibited. These minors may perform only artistic, cultural, advertising or sporting activities under the conditions laid down in
another legal regulation.
Section 35 [Recodification]
(1) A minor who has reached the age of fifteen years and completed compulsory education may undertake to perform
dependent work under another legal regulation.
(2) The legal representative of a minor who has not reached the age of sixteen years may terminate the minor's
employment or a job contract creating a similar obligation between an employee and the employer if it is necessary in the
interests of upbringing, development or health of the minor, in the manner provided by another legal regulation.
Section 36
Notwithstanding the content of other provisions, a minor who has not acquired full legal capacity shall in no case have
the capacity to act independently in the matters in which his legal representative would need the leave of a court.
Section 37 [Recodification]
Granting legal capacity
(1) If a minor without full legal capacity applies to a court to be awarded legal capacity, the court shall grant the
application if the minor has reached the age of sixteen years, if his ability to provide for his maintenance and take care of his
matters has been proved, and if the legal representative of the minor consents to such an application. In other cases the court
shall grant the application if it is in the interest of the minor for serious reasons.
(2) Under the conditions set out in Subsection (1 ), the court shall also grant legal capacity to a minor on the
application of his legal representative if the minor consents to the application.
Division 2
Subsidiary measures in the case of disrupted capacity of an adult to make juridical acts
Declaration in anticipation of incapacity
Section 38 [Recodification]
In anticipation of one's own lack of capacity to make juridical acts, an individual may express the will to have his
matters managed in a certain way or by a certain person, or to have a specific person become his guardian.
Section 39 [Recodification]
(1) Unless the declaration has the form of a public instrument, it must be made by a private instrument dated and
acknowledged by two witnesses; in the acknowledgement, the witness shall provide his personal information which allows the
witness to be identified.
Annex 280
(2) Only persons without any interest in the declaration and its contents who are not blind, deaf, mute or ignorant of
the language in which the declaration is made may become witnesses. Witnesses must sign the declaration and be able to
confirm the ability of the declarant to perform acts and the content of his declaration.
(3) Where the content of the declaration made by a public instrument determines who is to become the guardian, the
person who wrote the public instrument shall record information about the identity of the person who made the declaration, the
person who is selected to act as the guardian and the person who wrote the public instrument in a non-public list maintained
under another statute.
Section 40 [Recodification]
(1) Where the declaration is made by a blind person or a person who cannot or is not able to read or write, the
declaration must be read aloud to the person by a witness who did not write the declaration. A blind person or a person who
cannot or is not able to read or write shall confirm before witnesses that the instrument contains his true will.
(2) Where a declaration is made by a person with a sensory disability who cannot read or write, the contents of the
instrument must be interpreted to the person in the way of communication of his choosing and by a witness who did not write
the declaration; all witnesses must have command of the way of communication which is used to interpret the content of the
instrument. The declarant shall acknowledge before witnesses in the way of communication of his choosing that the instrument
contains his true will.
Section 41 [Recodification]
(1) Express withdrawal of the declaration requires the expression of will made in the form prescribed in Section 39(1 ).
(2) If the instrument containing the declaration is destroyed by the declarant, it has the effect of revocation.
Section 42 [Recodification]
Where the declaration concerns matters other than selecting a person to act as a guardian and its effectiveness is
conditional, the fulfilment of the condition is decided by a court.
Section 43 [Recodification]
If the circumstances evidently change in such a substantial way that, under such circumstances, the declarant would
not have made the declaration or would have made a declaration with different contents, a court shall amend or cancel the
declaration if the declarant were otherwise under a threat of serious harm. Before making any decision, the court shall make the
necessary effort to obtain the opinion of the individual whose declaration is subject to the court's decision, also using the way of
communication of the individual's choosing.
Section 44 [Recodification]
If the declaration or its revocation is invalid, the court shall take it into account, unless there is cause to doubt the wil I
of the declarant.
Assistance in decision-making
Section 45 [Recodification]
If an individual needs assistance in decision-making due to complications resulting from his mental disorder, even
where his legal capacity has not been limited, he and the assisting person may agree on the provision of assistance; there may
be multiple assisting persons.
Section 46 [Recodification]
(1) By concluding a contract for assistance, the assisting person undertakes, subject to the consent of the person
receiving assistance, to be present at his legal proceedings, provide him with the necessary information and communications
and assist him by giving advice.
(2) The contract becomes effective on the date on which it is approved by a court. Unless the contract has been
executed in writing, the parties are required to express their will to execute the contract before a court. If the interests of the
assisting person are contrary to the interests of the person receiving assistance, the court shall not approve the contract.
Section 47 [Recodification]
(1) The assisting person must not jeopardise the interests of the person receiving assistance by exerting improper
influence or unjustly enrich himself at the expense of the person receiving assistance.
(2) In carrying out his duties, the assisting person shall proceed in accordance with the decisions of the person
receiving assistance. If the person receiving assistance makes a juridical act in writing, the assisting person may affix his
signature, indicating his position and, where applicable, the support provided to the person receiving assistance; the assisting
person may also invoke the invalidity of the juridical act made by the person receiving assistance.
Section 48 [Recodification]
Annex 280
ANNEX281
Bertout c. Saffran
CANADA
PROVINCE DE QUEBEC
DISTRICT DE MONTREAL
COUR SUPERIEURE
No: 500-17 -088938-15 7
DATE: Le 22 octobre 2019
2019 QCCS 4367
SOUS LA PRESIDENCE DE L'HONORABLE LUKASZ GRANOSIK, j.c.s.
NOEL-ALEXANDRE BERTOUT
et
NOEL-ALEXANDRE BERTOUT PHARMACIEN INC.
Demandeurs
C.
IRVING SAFFRAN
Defendeur
JUGEMENT
(responsabilite contractuelle)
[1] Des pratiques commerciales douteuses, voire illegales, sont a la source de ce
litige qui oppose l'acheteur et le vendeur d'une pharmacie. Ce dernier vendait a une
partie importante de sa clientele, qui payait comptant, des medicaments a rabais et
!'abandon de cette pratique par l'acheteur a eu pour effet de plomber les ventes au
point de rendre !'exploitation de la pharmacie impraticable.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:2
[2] Taus reconnaissent que vendre des medicaments en de9a du prix fixe et
uniquement pour de l'argent comptant constitue de la fraude, une infraction a la
reglementation applicable ou les deux a la fois. Taus concedent egalement qu'en depit
de ce constat, cette pratique n'est pas exceptionnelle dans l'industrie et qu'elle a un
impact sur le chiffre d'affaires d'une pharmacie puisque la clientele, faut-il s'en etonner,
recherche toujours le meilleur prix. Or, en !'instance, l'acheteur qui a cesse cette fa9on
de faire connait une baisse considerable du chiffre d'affaires du commerce dont ii s'est
porte acquereur et en tient responsable le vendeur, qui lui aurait cache ses pratiques.
[3] Bref, alors que l'acheteur insiste sur !'obligation de renseignement a laquelle
serait tenu le vendeur, ce dernier replique que c'est plutot l'acheteur qui avait le devoir
de se renseigner adequatement quant a l'etendue de la pratique en cause, car ii en
connaissait !'existence.
CONTEXTE
[4] Noel-Alexandre Bertout est pharmacien. Apres avoir travaille quelques annees
au sein de l'industrie du medicament, ii souhaite se lancer en affaires et devenir
proprietaire d'une pharmacie. En 2013, ii en achete une situee sur le boulevard Decarie
a Montreal, sous la banniere Uniprix. II se presente immediatement a ses voisins
pharmaciens, dont Irving Saffran, qui exploite depuis 1964 la pharmacie fondee par son
pere dans les annees 40 sur la rue Sherbrooke.
[5] Apres avoir achete sa premiere entreprise, Bertout 1 cherche a en acquerir une
seconde. En faisant de la prospection commerciale, ii est aiguille vers Saffran, qu'il
connait deja a la faveur de la visite de courtoisie rendue quelques semaines
auparavant. Ce dernier ne veut pas necessairement vendre son entreprise mais ii est
age de 73 ans et son epouse, Esther, verrait d'un ban c:ail qu'il prenne sa retraite.
[6] Bien que n'occupant qu'un tout petit local, la pharmacie de Saffran a un chiffre
d'affaires enviable car elle prepare, a l'epoque, environ 80 000 prescriptions par an. Sa
clientele est constituee pour moitie de patients en residences pour personnes agees et
dans une proportion importante, par des patients issus de la communaute d'immigrants
russes et de la communaute autochtone de Kahnawake. Peu de clients habitent le
L'utilisation des seuls noms de famille dans le present jugement a pour but d'alleger le texte et ii ne
faut pas y voir un manque de courtoisie a l'egard des personnes concernees.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:3
quartier et, au plus fort de ses activites, Saffran emploie jusqu'a quatre livreurs a temps
partiel.
[7] Saffran doit son succes aupres des residences pour personnes agees a
!'utilisation des piluliers, alors qu'il aurait ete parmi les premiers pharmaciens a offrir ce
systeme de distribution des medicaments dans les annees 90. Lorsque ce procede est
devenu courant dans l'industrie, Saffran a su garder cette clientele en s'associant
etroitement avec des medecins qu'il a presentes a ces clients et qui ant commence a la
desservir, faisant done le pant avec la pharmacie de Saffran.
[8] Cependant, Saffran pratique la vente a rabais au comptant en faveur de certains
clients dont le nombre se situe entre 20 et 25 % des prescriptions preparees. II
encaisse ainsi des montants inferieurs a ceux qui sont factures officiellement. Ces
rabais sont octroyes a la caisse par !'employee de Saffran, selon les instructions de ce
dernier.
[9] Ce procede est illegal2. La preuve indique qu'au Quebec, le prix des
medicaments est fixe et que les pharmaciens ne peuvent le modifier a la baisse. Ces
derniers sont remuneres uniquement par les honoraires professionnels qui sont ajoutes
au prix du medicament. Lorsqu'il s'agit de medicaments couverts par !'assurance
maladie etatique, ces honoraires sont predetermines, mais etonnamment, quand ii
s'agit d'assurance privee, les pharmaciens auraient une marge de manc:euvre tant au
niveau du prix du medicament qu'au niveau des honoraires professionnels qu'ils
peuvent majorer. Meme si elle a pour effet de soustraire des patients beneficiant d'une
assurance privee des sommes considerables3, cette fagon de faire serait tout a fait
legale dans la mesure ou la majoration est la meme pour taus les clients d'une meme
pharmacie.
2
3
Les parties n'insistent pas pour faire la demonstration de cette illegalite car taus les temoins la
prennent pour acquise et certains referent a ce sujet a !'article 50 du Code de deontologie des
pharmaciens :
50. Le pharmacien ne doit accepter aucun avantage relatif a l'exercice de la pharmacie, en plus
de la remuneration a laquelle ii a droit. II peut toutefois accepter un remerciement d'usage ou un
cadeau de valeur modeste.
De meme, ii ne doit verser, offrir de verser ou s'engager a verser a quiconque tout avantage
relatif a l'exercice de sa profession.
Les assures paient des primes en fonction des coots lesquels sont manifestement plus eleves pour
les clients qui se prevalent du regime prive.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:4
[1 0] Durant l'ete 2013, Bertout et les Saffran4 entament les pourparlers en vue de la
transaction envisagee. Saffran fournit a Bertout les rapports de ventes pour les trois
dernieres annees et Bertout signe le 2 juillet 2013, une entente de confidentialite. Lars
d'une reunion, tenue apres les heures d'affaires a la pharmacie de Saffran, Bertout est
informe que Saffran favorise certains clients par des « escomptes »5. Bertout ne pose
pas de questions sur l'ampleur de ce phenomene et les Saffran ne le quantifient pas
non plus. Assez tot dans le processus de negociation, les parties fixent le prix de
l'achalandage a un multiple de 30 $ par prescription remplie.
[11] Par la suite, a la fin de 2013, Bertout sollicite Uniprix pour faire preparer des
previsions financieres en lien avec le contrat projete et retient les services de Me Martin.
Saffran engage alors Me Fernet, ces deux avocats etant experts en matiere
transactionnelle dans le domaine pharmaceutique.
[12] Saffran insiste pour vend re l'immobilier de la pharmacie pour 100 000 $ et
l'inventaire pour 230 000 $ (quitte a ce que ce dernier soit calcule de fagon exacte le
jour de la transaction). Bertout est d'accord et propose d'acheter l'achalandage pour
une somme de 2 400 000 $ en multipliant le nombre de 80 000 prescriptions par le prix
unitaire entendu de 30 $.
[13] Me Fernet prepare en fevrier 2014 une offre d'achat6 selon cette entente de
principe, laquelle offre est acceptee le 11 fevrier 2014 par Saffran7. Le 17 fevrier 2014,
Uniprix presente a Bertout un «proforma» avec les previsions financieres relatives a
!'exploitation de la pharmacie que celui-ci s'apprete a acheter8.
[14] Des le debut du processus, Me Fernet et Saffran realisent que les rabais
pratiques sur les prix de medicaments constituent un probleme potentiel et qu'il est a
prevoir que si Bertout ne les continue pas, la fidelite de la clientele qui s'en prevaut est
en peril. Puisque celle-ci represente entre 20 et 25 % de son chiffre d'affaires, Saffran
se dit pret, dans une telle eventualite, a assumer totalement les pertes jusqu'a 1 0 % et
4 Esther Saffran tient un role important dans les negociations, notamment a cause de la langue.
5 Ce terme ainsi que les expressions « rabais » ou « prix speciaux » ant ete utilises indistinctement
comme des synonymes tout le long de !'instruction de ce proces.
6 Piece P-6.
7 Cette offre d'achat a ete amendee de consentement le 19 mars 2014 pour modifier certains aspects
non pertinents au debat en !'instance.
8 Piece P-14.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:5
a partager avec l'acheteur les risques de perte d'achalandage jusqu'a hauteur de 25 %.
Ainsi, Me Fernet inclut dans l'offre une clause d'ajustement de prix qui se lit ainsi :
4.3d) De la somme prevue au paragraphe a), une somme de CINQ CENT
MILLE DOLLARS (500 000$), dent le solde sera payable selon les modalites de
remise sent prevues au paragraphe 8.3 des presentes, sera deposee en fiducie
aupres des procureurs du VENDEUR a titre de retenue pour la garantie relative a
l'achalandage;
8.3 Le VENDEUR s'engage a indemniser l'ACHETEUR de toute baisse de
l'achalandage survenant dans la premiere annee suivant la CLOTURE, de la
maniere prevue a la presente disposition. En cas d'une baisse de l'achalandage
allant jusqu'a 10% par rapport a l'achalandage ajuste conformement aux
dispositions 4.2 et 4.4 des presentes, le VENDEUR s'engage a indemniser
l'ACHETEUR pour la valeur de cette baisse.
En cas de baisse de l'achalandage superieure a 10%, le VEN DEUR, s'engage a
indemniser l'ACHETEUR:
- de la valeur de la premiere portion de 10% de baisse de l'achalandage; et
- de la moitie de la valeur pour la portion de la baisse de l'achalandage
entre 10% et 25%, au total.
L'ACHETEUR tient le VENDEUR libre de toute responsabilite quant a une baisse
de l'achalandage additionnelle, soit au-dela de 25%.
Pour plus de certitude, le VENDEUR reconnait et accepte que le montant
d'indemnisation total pour toute baisse de l'achalandage suivant la cloture ne
peut etre superieur a 17,5% de la valeur de l'achalandage.
( ... )
Une evaluation finale de l'achalandage aura lieu TROIS CENT SOIXANTE-CINQ
(365) jours suivant la CLOTURE. A ce moment, si une baisse reelle superieure a
la Baisse annualisee est constatee, les procureurs des VENDEURS remettront a
l'ACHETEUR la difference entre le montant d'indemnisation base sur cette
baisse reelle et celui base sur la Baisse annualisee a partir des Fonds en fiducie,
et le solde de ces fonds seront remis au VENDEUR. Si une baisse reelle
inferieure a la Baisse annualisee est constatee, l'ACHETEUR sera tenu de
remettre au VENDEUR la difference entre le montant d'indemnisation basee sur
la baisse reelle et celui base sur la Baisse annualisee, et les procureurs du
VENDEUR remettront au VENDEUR le solde des Fonds en fiducie.
[15] II taut souligner que contrairement a Saffran et a Me Fernet, Bertout affirmera,
tout comme son avocat, Me Martin, que la clause d'ajustement visait plutot a proteger
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:6
l'achalandage relie aux residences privees pour personnes agees, qu'ils qualifient de
tres volatile.
[16] Une fois l'offre acceptee, Bertout retient les services d'Uniprix pour proceder a la
verification diligente. Le 5 mars 2014, Pierre Blanchette d'Uniprix produit un rapport
compose d'un questionnaire-reponses, de tableaux et de sommaires de ventes9. Cette
verification diligente montre quelques elements inquietants : tout d'abord, le nombre de
prescriptions connait une baisse recente mais considerable. De 88 565 en 2012-2013, ii
passe a 71 799 en 2013-2014. De plus, 86 % des prescriptions relevent du regime
etatique, ce qui limite les revenus et la capacite de les augmenter. Ensuite, de ces
71 799 prescriptions remplies, en excluant les ordonnances ne portant aucun honoraire
ou recemment perdues 10, seulement 68 878 prescriptions sont « payantes », les autres
etant faites sans profit. Enfin, 47 % des affaires est attribuable a la clientele des
residences de personnes agees. Toujours dans le rapport de verification diligente,
Saffran affirme se conformer dans !'exploitation de sa pharmacie a toute la legislation et
la reglementation en vigueur et repond de la fac;on suivante aux questions cruciales :
Le vendeur declare et garantit a l'Acheteur qu'aucun rabais ou prix speciaux ne
sont consentis aux clients faisant en sorte que le montant reel des ventes de
prescriptions en dollars serait inferieur a celui apparaissant a l'etat des ventes du
systems informatique du Vendeur.
5) Prescriptions a rabais (clients particuliers, groupes, employes, etc).
R. employs au coutant et certain client (sic)
6) Prescriptions escomptees directement a la caisse. Facturation de la
coassurance pour les clients avec assurance privee.
R. aucun
[17] Blanchette affirme qu'il deconseille a Bertout de proceder a !'acquisition de la
pharmacie. Ce dernier ne suit pas cet avis mais choisit plutot d'amender l'offre d'achat
pour que le coot de l'achalandage soit dorenavant de 2 100 000 $ (base sur un nombre
approximatif de prescriptions de 70 000 a 30 $). Par le fait meme, la somme retenue en
fiducie, aux fins d'ajustement de prix prevu aux paragraphes 4 et 8 du contrat, est
diminuee a 400 000 $. Saffran accepte.
9 Piece P-19. Blanchette a demande a Saffran de repondre a un questionnaire et a recueilli toute
!'information financiere disponible.
10 La residence pour personnes agees Viva Life a cesse de faire affaires avec Saffran pendant cette
periode.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:?
[18] Le closing a lieu le 10 juin 2014; l'inventaire est d'environ 137 000 $ et le prix
paye pour l'achalandage est fonction du chiffre final reel de 61 650 ordonnances x 30 $,
soit de 1 849 500 $. De fac;on concomitante au contrat d'achat conclu entre Saffran et la
compagnie de Bertout, les parties signent une Convention de bail 11 par laquelle Saffran
loue le local ou se trouve la pharmacie a Bertout personnellement, pour un layer
mensuel de base de 3 700 $ et un layer additionnel. II ne reclamera jamais ce dernier.
[19] Des le 11 juin 2014, Bertout prend possession de la pharmacie. II est
immediatement interpelle par la caissiere qui veut savoir quoi faire avec les rabais
octroyes aux clients. Bertout se donne un temps de reflexion. II contacte M0 Martin qui
confirme l'illegalite de ce precede et Bertout decide de cesser cette pratique. Bertout
sait a ce moment que Saffran octroyait des escomptes, mais ii en ignore l'ampleur. Or,
du moment o0 ii commence a exploiter la pharmacie et ne vend plus les medicaments a
rabais moyennant paiement en argent comptant, le nombre d'ordonnances preparees
diminue de mois en mois, passant de 4 500 en juin 2014 a 3 800 en juillet, 3 200 en
ao0t, 3 000 en septembre, 2 800 en octobre, pour finalement se stabiliser a 2 600 en
novembre 2014 avec une legere remontee a partir du mois d'avril 2015. Le chiffre
d'affaires diminue en consequence.
[20] En novembre 2014, en application de la clause d'ajustement, Saffran concede
d'emblee, sans attendre le terme d'un an prevu pourtant au contrat, le maximum permis
par cette disposition contractuelle, soit une diminution de 17,5 % de la valeur de
l'achalandage, et precede au remboursement en consequence en faveur de Bertout.
[21] La diminution de l'achalandage et la baisse des revenus a cependant des
consequences desastreuses sur les affaires de la pharmacie et de la compagnie de
Bertout. En effet, les coats fixes etant toujours les memes, le chiffre d'affaires de la
pharmacie passe d'environ 300 000 $ de BAIIA12 a 6 000 $ par an. Etant donne que
Bertout s'est considerablement endette pour acquerir la pharmacie de Saffran, ii ne
peut continuer !'exploitation de celle-ci, les profits etant meme insuffisants pour assumer
le service de la dette. En juin 2015, Bertout prend la decision de fermer et de rapatrier
ce qui reste des affaires vers sa pharmacie de la rue Decarie. II s'agit tout au plus de
4 000 prescriptions par mois. Bertout remet alors les cles a Saffran et cesse de payer le
layer.
11 Piece P-5.
12 Acronyme de « benefices avant interets, impots et amortissement », soit essentiellement les profits
bruts.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:8
[22] En retrospective, ii s'avere qu'avec la cessation de la pratique de vente a rabais,
Bertout n'a pas achete une entreprise preparant 70 000 ni meme 60 000 prescriptions
par an mais environ 40 000, ce qui, considerant l'emprunt engage, etait insoutenable
sur le plan financier.
[23] II faut ajouter que pendant toute cette periode de pres d'un an suivant la
transaction, les Saffran continuent de frequenter la pharmacie de Bertout pour leurs
besoins personnels. Bertout ne les interpelle jamais au sujet de la baisse du nombre de
prescriptions. Au contraire, au mois d'octobre 2014, ii ecrit meme un courriel a Esther
Saffran visant a s'enquerir d'un immeuble que les Saffran ant mis en vente a proximite
de la pharmacie.
[24] C'est uniquement le 7 mai 2015 que Bertout adresse une mise en demeure 13 a
Saffran lui reprochant de fausses representations par rapport a la « strategie d'affaires
» de ce dernier. Le 12 mai 2015, M° Fernet repond au nom de Saffran soulevant que,
d'une part, Bertout etait parfaitement au courant de la situation et que, d'autre part, la
clause d'ajustement de prix visait justement a pallier la perte eventuelle de la clientele.
Le 28 mai 2015, Bertout envoie une nouvelle mise en demeure14 a Saffran invoquant le
dol au sujet des rabais octroyes par Saffran a ses clients, en contravention avec ses
obligations legales et contractuelles. Peu de temps apres, ii entreprend la presente
demande en justice.
PRETENTIONS DES PARTIES
[25] Bertout poursuit Saffran sur deux plans. Premierement, ii exige l'annulation du
contrat et la restitution des prestations car ii aurait ete victime d'une erreur causee par
le dol par reticence de Saffran. Deuxiemement, et de fac;on subsidiaire, ii invoque le
vice cache en ce que l'ampleur des pratiques commerciales illegales de Saffran lui etait
inconnue alors que s'il les avait connues, ii n'aurait pas achete la pharmacie ou paye un
prix aussi eleve. En effet, ii a acquis un achalandage de tout au plus 48 000
prescriptions pour un montant avoisinant 2 millions de dollars et ne produisant un profit
brut que d'environ 6 000 $ par an. Bertout ajoute qu'il a perdu toute la clientele de
l'exterieur du quartier car celle-ci lui indiquait que « si c'est le meme prix qu'ailleurs, on
ira plus pres de chez-nous ». Selan lui, les declarations de Saffran lors de la verification
13 Curieusement, les parties decident de ne pas produire cette mise en demeure.
14 Piece P-10.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE:9
diligente voulant que les rabais ne visaient qu'une poignee de clients se sont revelees
fausses car ii ya eu perte de centaines de patients et de milliers de prescriptions.
[26] Bertout affirme que la garantie de rajustement de prix avait pour objectif de
proteger l'achalandage au niveau des residences pour personnes agees. Aussi, ii se dit
satisfait de la verification diligente effectuee par Blanchette et affirme qu'Uniprix lui avait
donne le feu vert pour aller de l'avant avec !'acquisition.
[27] En defense, Saffran nie tout dol, avance que Bertout a commis une erreur
inexcusable en ne procedant pas a une verification diligente serieuse et formule une
demande reconventionnelle pour le layer impaye ainsi que pour les honoraires
extrajudiciaires invoquant que la poursuite de Bertout est abusive. II reclame egalement
50 000 $ en dommages moraux pour lui-meme et pour son epouse, au motif de troubles
et inconvenients causes par Bertout. II ajoute que la baisse du chiffre d'affaires
s'explique par la mauvaise gestion de Bertout et non pas par les consequences de la
decision de ce dernier de cesser les pratiques commerciales problematiques.
[28] En defense a la demande reconventionnelle, Bertout nie que Saffran ait subi
quelque dommage que ce soit et invoque que la convention de bail, qui etait accessoire
a l'achat de la pharmacie, doit suivre le meme sort que le contrat principal, et qu'elle est
done annulable egalement.
[29] II y a lieu de souligner qu'en cas d'annulation de la vente, la remise en etat des
parties est impossible dans la mesure ou Saffran n'est plus membre de l'Ordre des
pharmaciens. Aujourd'hui, Saffran et son epouse attendent avec impatience le
denouement du litige qui les empeche de profiter de leur retraite depuis deja plus de
cinq ans alors que Bertout continue d'exploiter sa pharmacie sur le boulevard Decarie
et recherche minimalement une diminution du prix paye pour la pharmacie de la rue
Sherbrooke.
ANALYSE
Le consentement de Bertout a-t-il ete vicie par le dol?
[30] Cet aspect du litige comprend une question preliminaire. II s'agit de verifier si la
situation dans laquelle Bertout s'est retrouve decoule du contrat d'achat et des
representations de Saffran ainsi que de la decision subsequente de Bertout de cesser
les pratiques de vente illegales ou si elle provient d'autres sources.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 10
[31] Saffran evoque certaines autres raisons que la fin de la vente a rabais pour de
l'argent comptant pour expliquer la diminution des affaires mais ces raisons ne
convainquent pas. Ainsi, Saffran avance que Bertout aurait applique une nouvelle
tarification preconisee par Uniprix, qu'il a provoque la demission de certains employes
cles et qu'il en a congedie d'autres, qu'il ne s'est pas suffisamment investi
personnellement dans l'entreprise devant necessairement partager son temps entre ses
deux pharmacies et, enfin, que la conjoncture economique defavorable a provoque la
baisse des affaires.
[32] Tous ces motifs sont peu probants et demeurent des hypotheses n'ayant fait
l'objet d'aucune demonstration serieuse.
[33] Ainsi, la gestion des ressources humaines par Bertout n'a pu influer sur la baisse
du nombre des prescriptions car les demissions et les congediements de certains
employes ont suivi plutot que precede la diminution des ventes. II n'y a absolument
aucune preuve que !'imposition d'une nouvelle grille de prix preconisee par Uniprix soit
differente de la grille « maison » appliquee par Saffran et que cela ait eu un impact
quelconque. La pretention que la conjoncture economique etait defavorable n'est
soutenue par aucun element de preuve et est meme contredite par l'expert Levasseur,
specialiste dans les finances du domaine pharmaceutique. Ce dernier affirme que la
conjoncture economique etait plutot favorable pour les pharmacies et que le marche
etait en croissance. L'hypothese de la mauvaise gestion ne se verifie pas non plus dans
la mesure ou meme si Bertout n'etait de service a la pharmacie sur la rue Sherbrooke
que deux jours et demi par semaine, les pharmaciens salaries deja en place ainsi que
tousles employes ont continue a reuvrer de la meme fac;on qu'avant la transaction.
[34] II faut necessairement en conclure que la seule explication plausible de la baisse
des affaires est !'erosion de la clientele qui beneficiait auparavant d'escomptes illegaux.
Ceci est d'autant plus vraisemblable que le pourcentage avance par les Saffran au
niveau des prescriptions, soit 20 a 25 %, correspond plus ou moins a la diminution des
affaires apres l'achat par Bertout. Ainsi, le lien de cause a effet est etabli de fac;on
satisfaisante; la baisse des revenus decoule de la fin de la vente de medicaments a
rabais.
[35] Cela etant etabli, s'agit-il d'un dol? Les articles pertinents a cet argument sont
1400 et 1401 du Code civil du Quebec:
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 11
1400. L'erreur vicie le consentement des parties ou de l'une d'elles lorsqu'elle
porte sur la nature du contrat, sur l'objet de la prestation ou, encore, sur tout
element essentiel qui a determine le consentement.
L'erreur inexcusable ne constitue pas un vice de consentement.
1401. L'erreur d'une partie, provoquee par le dol de l'autre partie ou a la
connaissance de celle-ci, vicie le consentement dans taus les cas ou, sans cela,
la partie n'aurait pas contracte ou aurait contracte a des conditions differentes.
Le dol peut resulter du silence ou d'une reticence.
[36] Le Tribunal adopte a ce sujet le resume du droit par le juge Michaud dans
Distributeur MDR inc. c. Blanchette 15 :
[21] Tout est affaire de circonstances lorsqu'il s'agit de determiner s'il y a eu
dol. Les tribunaux ant considere la qualite des parties, leur experience, le lien de
confiance qui peut exister entre elles, les demandes d'information et analyses
effectuees par l'acheteur, les renseignements fournis par le vendeur, l'objet du
contrat. Bref, ii faut examiner le contexte dans lequel les representations ant ete
faites.
[22] Comme le precise !'article 1401 C.c.Q., le dol peut resulter du silence ou
d'une reticence. II s'agit alors d'un manquement a !'obligation d'agir de bonne
foi et d'informer convenablement son contractant. Cela est encore plus vrai
lorsque l'un des contractants occupe une position privilegiee en raison de ses
connaissances comme l'ecrivent les auteurs Baudouin et Jodoin :
Lorsqu'il s'agit d'identifier le fondement de !'obligation precontractuelle
de renseignement, la disposition du second alinea de !'article 1401 C.c.,
touchant la reticence dolosive et le silence dolosif, peut s'appliquer
aujourd'hui. Cette regle n'est elle-meme qu'une application particuliere
du principe de la bonne foi dans la formation du contrat, enonce a
!'article 1375. Lorsgue l'un des futurs contractants occupe une position
privilegiee par rapport a l'autre, soit en raison de la connaissance gu'il a
de certaines informations, soit en raison de la possibilite d'y avoir acces,
ii doit parfois, pour ne pas tramper la confiance legitime de l'autre,
prendre !'initiative de fournir a ce dernier certains renseignements
cruciaux. L'obligation precontractuelle d'information se fonde done, soit
sur les articles 6 et 1375, soit, plus precisement, sur !'article 1401 C.c.
(le Tribunal souligne)
[23] Toutefois, l'erreur inexcusable ne constitue pas un vice de consentement.
Ainsi, le comportement negligent, na"if ou credule d'un acheteur est considere
comme une erreur inexcusable.
15 2014 QCCS 2204.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 12
[24] Un acheteur doit prendre les moyens raisonnables pour se
renseignerhttps://soquij.qc.ca/portail/recherchejuridique/Selection/3027422?selec
tionID=7226428 - _ftn11 et faire une verification diligente des informations. II doit
ainsi adopter la conduite d'une personne raisonnable placee dans les memes
circonstances et non agir de fac;on imprudente et insouciante.
(References omises)
[37] En application de ces principes, le Tribunal retient que Saffran a devoile la
situation de fagon correcte et que Bertout aurait pu ou aurait d0 se renseigner
davantage et done, que ce dernier n'a pas ete victime d'une erreur provoquee par le
dol.
[38] Premierement, Bertout reconnait que les discussions qu'il a eues avec Saffran et
son spouse ont porte sur les types de clientele, le nombre de prescriptions et les
questions financieres. Bertout n'avance pas ni n'allegue qu'il avait pose des questions
auxquelles les Saffran n'auraient pas repondu. II ne contredit pas non plus les
affirmations credibles et fiables des Saffran qui temoignent tous deux avoir informs
Bertout de la pratique de vente de medicaments a rabais. De plus, Bertout est contredit
par Blanchette, le conseiller senior chez Uniprix qui a precede a la verification diligente
de la pharmacie de Saffran. Autant Bertout avance qu'Uniprix a donne le feu vert a la
transaction, autant Blanchette est formel sur le fait que meme s'il n'a pas emis de
recommandation, ii a toutefois dit a Bertout de ne pas proceder avec !'acquisition 16.
Surtout, Blanchette confirme que Bertout est au courant de cette pratique illegale
d'octroyer des rabais.
[39] Deuxiemement, les deux avocats ayant prepare le contrat, Me Martin et Me
Fernet, affirment que la clause d'ajustement de prix etait inhabituelle, sinon
exceptionnelle. Les parties ne s'entendent pas toutefois sur ce que cette clause visait.
Le Tribunal note tout d'abord qu'elle a pour l'objet l'achalandage et que le contrat
prevoit la definition de ce qu'est l'achalandage 17. Cette definition ne distingue pas entre
16 Pour qualifier la transaction, ii utilise des termes tels «ga sent pas bon », ajoute que la pharmacie de
Saffran est « vendue trap cher » et qu' « ii n 'irait pas la » en parlant de !'acquisition envisagee.
17 2.1.1 « Achalandage » designe !'ensemble des biens plus amplement decrits aux paragraphes 2.1.2
(vi) des presentes;
( ... )
(vi) tout l'achalandage et le droit exclusif pour l'ACHETEUR de poursuivre les operations et de
continuer !'exploitation de l'OFFICINE. L'achalandage comprend egalement, sans limiter la
portee generale de ce qui precede :
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 13
les clients prives et les clients des residences ou autres. On ne peut done conclure
comme le pretend Bertout, que cet amenagement contractuel avait pour but
uniquement la protection des clients des residences pour personnes agees. Ensuite,
Bertout affirme qu'il avait aussi envisage une clause d'ajustement similaire lors de
l'achat de sa premiere pharmacie sur le boulevard Decarie mais puisque la
pharmacienne-vendeuse preferait reduire les prix tout en etant certaine du montant
obtenu, les parties ant diminue le coot unitaire de 30 $ par prescription a 22,50 $, avec
le prix de vente devenant ainsi final. Pourtant, ii n'etait pas question dans cette autre
transaction de quelconques residences pour personnes agees.
[40] Troisiemement, Bertout a un souvenir assez faible des evenements pertinents. II
ne se rappelle pas du tout, par exemple, d'avoir signe en juillet 2013 une clause de
confidentialite. II ne se souvient pas non plus d'avoir omis de payer une facture de
Saffran 18. Ses reponses manquent de precision et de conviction. Les Saffran en
revanche temoignent de fac;on claire et sabre. Ainsi, la version de Saffran est a
privilegier et le Tribunal ne peut retenir la pretention de Bertout a ce sujet. II n'est pas
conteste que c'est Saffran qui a propose la clause d'ajustement de prix. Bertout s'en
trouvait satisfait. Le Tribunal conclut que cette clause vise surtout la diminution
potentielle de la clientele au cas ou Bertout cessait la pratique problematique de vente a
rabais.
a) taus les droits a taus les numeros de telephone, numeros de telecopieur, adresses
electroniques, adresses de sites Web, sites Web et autres modes de communication;
b) taus les dossiers-patients, ordonnances, documents, livres, registres et dossiers (sur
document et/ou sous quelque autre support que ce soit, y compris tout support
electronique);
c) taus les permis et licences cessibles;
d) taus les noms utilises par le VENDEUR aux fins de !'operation de l'OFFICINE ainsi
que les formulas, permis, licences, dessins, ceuvres beneficiant de droits d'auteur,
listes de clients et de fournisseurs, dossiers-patients, ordonnances, manuals
d'instructions, pamphlets, litterature, livres, pieces, documents d'operation,
renseignements, informations confidentielles, listes, listes d'equipement, listes de
pieces, documents, registres, pieces justificatives, procedures, technologies et,
generalement, tout le savoir-faire que possede le VENDEUR concernant l'OFFICINE
ou son exploitation;
e) toutes les informations et taus les renseignements de quelque nature que ce soit,
relatifs a l'OFFICINE ainsi que tout support contenant de tels renseignements
(documents, manuals, listes, rubans, rubans d'ordinateur, disquettes, disquettes
d'ordinateur, disques durs, supports electroniques, etc.);
18 Les parties ant signe un contrat de travail apres l'achat de la pharmacie. Lars des vacances estivales
de Bertout, Saffran a visite une residence pour personnes agees au nom de Bertout et a facture ce
dernier la somme de 300 $.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 14
[41] Quatriemement et enfin, les actions et les declarations contemporaines et
immediatement posterieures de Bertout n'appuient pas ses pretentions qu'il aurait
commis une erreur et aurait ete victime du dol. Au contraire, elles demontrent plutot que
Bertout etait au courant de la fagon de faire des Saffran et que ce qu'il ne connaissait
pas, a la limite, etait l'ampleur du phenomene 19.
[42] C'est ainsi que Bertout n'en parle pas aux Saffran lorsque ceux-ci viennent
renouveler leurs prescriptions a la pharmacie, ii n'en discute pas avec son avocat de
fagon contemporaine sauf pour demander si la continuation possible de ce procede
pouvait etre envisagee, et bien au contraire, malgre la pretendue manreuvre dolosive
dont ii serait victime, ii compte bien faire affaires avec les Saffran de nouveau en
octobre 2014 alors qu'il entretient l'idee d'acheter l'immeuble voisin de la pharmacie.
Enfin, ii entreprend l'action en justice uniquement en mai 2015 et seulement lorsqu'il
s'apergoit que les ventes qui periclitent ont mis en peril la viabilite meme de son
entreprise. Aussi, pendant toute cette periode, Bertout ne contacte ni Uniprix ni l'Ordre
des pharmaciens soit pour se renseigner, soit pour denoncer le probleme. II attend tout
simplement de voir l'impact de sa decision de ne plus octroyer de rabais.
[43] En conclusion, le Tribunal est d'avis qu'il n'y a pas eu de dol, notamment par
reticence, viciant le consentement de Bertout dans la conclusion du contrat d'achat de
la pharmacie de Saffran. Bertout a sciemment choisi d'ignorer ou de banaliser le
probleme et s'est satisfait de la clause d'ajustement de prix, ne se souciant pas
d'examiner les choses plus en profondeur afin de determiner l'etendue du phenomene
et done, du risque. Or, sachant qu'il allait probablement mettre fin a cette pratique, ii
aurait d0 ou aurait pu se renseigner davantage sur les effets que pouvait avoir une telle
decision sur les revenus provenant de cette clientele qui gonflaient un peu
artificiellement les revenus du commerce.
Y a-t-il vice cache?
[44] Le droit de la vente est plaide subsidiairement par la demande. Cela se
comprend car les notions de «do/ par reticence» et d' «obligation de renseignement»
19 C'est non seulement le constat du Tribunal compte tenu de la preuve mais aussi, c'est la reponse de
Bertout a la question posee a ce sujet lors de la plaidoirie.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 15
sont implicites a !'analyse de la responsabilite du vendeur pour vice cache20. A la base
de cet argument se trouve !'article 1726 C.c.Q. lequel prevoit :
1726. Le vendeur est tenu de garantir a l'acheteur que le bien et ses accessoires
sont, lors de la vente, exempts de vices caches qui le rendent impropre a l'usage
auquel on le destine ou qui diminuent tellement son utilite que l'acheteur ne
l'aurait pas achete, ou n'aurait pas donne si haut prix, s'il les avait connus.
II n'est, cependant, pas tenu de garantir le vice cache connu de l'acheteur ni le
vice apparent; est apparent le vice qui peut etre constate par un acheteur
prudent et diligent sans avoir besoin de recourir a un expert.
[45] La norme applicable, qui est objective, est celle de l'acheteur raisonnable, qui se
comporte d'une maniere prudente et diligente21 :
[51] Le caractere cache du vice s'apprecie selon une norme objective, c'est-adire
en evaluant l'examen fait par l'acheteur en fonction de celui qu'aurait fait un
acheteur prudent et diligent de meme competence : P.-G. Jobin, « Precis sur la
vente », dans La reforme du Code civil (1993), vol. 2, 359, p. 466;
M. Pourcelet, La vente (5e ed. 1987), p. 149. Autrement dit, on ne s'interroge pas
simplement sur !'ignorance du vice; on cherchera aussi a determiner si un
acheteur raisonnable place dans les memes circonstances aurait constate
le vice.
[46] lei, pour les raisons expliquees ci-dessus, Bertout est manifestement au courant
de la pratique commerciale douteuse de Saffran. Get etat de fait ressort aussi du
rapport de verification diligente d'Uniprix. Certes, ii ne sait pas quelles seront les
consequences de cesser cette pratique mais connait le vice affectant l'entreprise. Un
acheteur prudent et diligent aurait pousse davantage son enquete et, le cas echeant,
aurait refuse de transiger ou exige que le vendeur corrige le probleme avant d'acquerir
l'entreprise. Bertout a, en toute connaissance de cause, accepte la clause d'ajustement
de prix comme seule consequence de cette situation. II ne peut par la suite plaider vice
cache.
[47] En somme, le vice etait ici apparent et ii n'y a pas de dol non plus. II n'existe
done aucun motif permettant d'annuler le contrat d'achat ou de modifier les prestations.
Demande reconventionnelle
20 ABB Inc. c. Domtar Inc., 2007 CSC 50; Perreault c. New Apostolic Church Canada, 2016 QCCA
1657.
21 ABB Inc. c. Domtar Inc., precite, note 20, par. 51; Desourdy c. Lagace, 2013 QCCA 1986; Boleyn c.
Germain, 2013 QCCA 326, notamment aux par. 5 a 7.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 16
La reclamation de foyer
[48] II n'est pas contredit que Bertout a deguerpi et a done resilie illegalement le bail.
[49] La convention de bail est conclue uniquement entre Bertout et Saffran. Ce
contrat prevoit le paiement de six mois de layer en cas de defaut du locataire. II est
exact que la disposition contractuelle inclut ace sujet aussi le layer additionnel, les frais
et les interets mais Saffran a !'instruction indique qu'il ne demande pas et qu'il n'a
jamais exige de layer additionnel de Bertout. Ainsi, la reclamation de Saffran a ce titre
avoisine vingt-deux mille dollars.
[50] Puisqu'il n'existe pas de motif permettant d'annuler le contrat d'achat de la
pharmacie, ii n'en existe pas en consequence afin d'annuler la convention de bail22, si
on voulait qualifier cette derniere de contrat accessoire. De plus, ni l'objet ni la cause de
ce contrat ne sont illegaux au illicites23 au cas au on considere celui-ci comme
autonome et distinct du contrat principal.
[51] Cela dit, ii s'agit neanmoins selon le Tribunal d'un cas ou ii ya lieu d'appliquer
une fin de non-recevoir selon les principes enonces par les maximes nemo auditur
propriam turpitudinem allegans24 et frustra legis auxilium quaerit qui in legem
committit25 . Celles-ci tirent leur origine du droit romain et ant ete reconnues tant dans
l'ancien droit fran9ais qu'en common law26 :
This and other kindred maxims of the Roman law have been adopted by all
civilized nations, whether governed by that system of laws or by the common law
of England.
[52] Le principe veut que le contractant qui contrevient a la morale ou a la loi ne
merite pas l'appui du systeme judiciaire, meme s'il en subit un appauvrissement injuste.
Bien entendu, ces devises romaines ne sont pas applicables sans nuances en droit
22 Piece P-5.
23 Articles 1411 et 1413 C.c.Q.
24 Nu/ ne peut se prevaloir de sa propre turpitude.
25 Celui qui viole la loi recherche en vain son secours.
26 Consumer Cordage Co. v. Connolly (1901), 31 SCR 244, p. 298. Vair aussi Lapointe c. Messier
(1914), 49 R.C.S. 271 ou Hall c. Hebert, [1993] 2 R.C.S. 159. On peut y ajouter que la seconde
maxime orne la fac;ade de l'immeuble montrealais de la Cour d'appel ce qui demontre de fac;on
convaincante son actualite.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 17
civil, codifie27. Toutefois, elles peuvent fonder une fin de non-recevoir a une action en
justice pour cause d'indignite ou d'immoralite.
[53] Or, en l'espece, le litige tire son origine d'une pratique commerciale de Saffran,
frauduleuse ou meme illegale. Lorsque Bertout abandonne cette pratique, les revenus
de la pharmacie declinent considerablement ce qui a pour effet de rendre celle-ci non
viable financierement. En consequence, Bertout doit arreter !'exploitation de cette
entreprise, quitter le local loue et cesser de payer le layer. II existe done un lien de
cause a effet entre les activites illicites de Saffran et sa reclamation. Accepter sa
demande de layer equivaut a mobiliser le systeme de justice au service d'une personne
qui manque de probite. Le Tribunal ne peut accepter une telle proposition.
[54] Bien au contraire et paradoxalement, dans l'eventualite ou Bertout avait perpetue
cette pratique illegale, ii aurait probablement maintenu le chiffre d'affaires et continue
!'exploitation de la pharmacie avec comme consequence qu'il n'aurait pas deguerpi et
aurait continue a acquitter le layer entendu. Dans un tel cas, la poursuite d'une situation
frauduleuse ou illegale aurait avantage son auteur original, Saffran, alors que cesser
cette illegalite l'a appauvri. Bref, meme si cette consequence parait injuste ici en
fonction du contrat de bail, resilie sans motif, ii n'y a pas lieu de condamner Bertout au
paiement du layer car ii s'agirait alors de donner effet a des considerants financiers
illicites ou immoraux.
Les dommages moraux
[55] Au niveau des dommages reclames par les Saffran, les memes commentaires
s'appliquent mais de surcroit d'autres motifs militent contre une condamnation de
Bertout ou de sa compagnie sur ce chef.
[56] Tout d'abord, la situation d'Esther Saffran ne peut etre compensee d'aucune
fagon car n'etant pas partie aux procedures, ses problemes de sante ne peuvent faire
l'objet de la presente decision. Ensuite, en ce qui concerne la reclamation d'lrving
Saffran, puisqu'il s'agit d'un litige en responsabilite contractuelle, et que seuls les
27 Vair la formidable analyse du juge Girouard dans Consumer Cordage Co. v. Connolly, precite, note
26 aux pp. 296 a 310. Les professeurs Baudouin et Jobin sont toutefois d'opinion, que, depuis
l'avenement des articles 1699 et suivants du C.c.Q., la regle nemo auditur propriam suam
turpitidinem allegans est implicitement abrogee, voir : Jean-Louis BAUDOUIN et Pierre-Gabriel
JOBIN, Les obligations, 7° ed., par P-G. JOBIN et N. VEZINA, Cowansville, Editions Yvon Blais,
2013, n° 922 et 923.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7 PAGE: 18
dommages directs et previsibles peuvent etre compenses28, le Tribunal ne peut retenir
!'argument voulant que celui-ci a droit a des dommages car ii a atteint un certain age,
qu'il est perturbe de fac;on considerable par l'action en justice et qu'il est empeche de
profiter de sa retraite. Taus ces aleas n'ont pas de lien avec le differend sous etude et
les inconvenients allegues ne depassent pas les consequences normales et attendues
d'une transaction commerciale qui tourne mal ou qui conduit a des poursuites.
Autrement dit, c'est le prix a payer pour faire des affaires, ce qui engage parfois un
contractant sur le terrain des conflits, incluant la possibilite d'etre l'objet d'une poursuite
judiciaire.
L 'abus de procedure
[57] Bien que la demande de Bertout echoue, elle n'etait pas pour autant
manifestement vouee a l'echec ni abusive et le Tribunal ne voit aucune temerite dans
l'exercice du recours par les demandeurs. La question posee justifiait un debat
judiciaire et l'illegalite des pratiques commerciales de Saffran a donne lieu a une
contestation raisonnable alors que tant Bertout que Me Martin affirmaient que la clause
d'ajustement des prix visait surtout la clientele des residences des personnes agees,
laquelle aurait ete, selon ces deux temoins, particulierement volatile. De surcroit, pour
les raisons avancees ci-dessus, les actions de Saffran sont a l'origine de ce litige et ce
dernier ne peut en consequence reclamer quoi que ce soit en sa faveur.
Les frais de justice
[58] Les deux parties ant presente des rapports d'expertise et des temoignages
d'experts CPA portant sur la valeur de l'entreprise achetee et sur les aspects financiers
de ce conflit. Taus ces elements n'ont aucune pertinence puisqu'il n'y a pas eu de dol ni
de vice cache. Compte tenu de l'issue de ce differend et de l'inutilite des expertises de
part et d'autre, dans la mesure o0 la responsabilite du vendeur n'a pas ete engagee,
chaque partie devra payer ses frais d'expert. De surcroit, le Tribunal ne peut cautionner
les actions illegales de Saffran qui, pendant des annees a procede a des rabais de prix
sur des medicaments. Chaque partie paiera done ses frais de justice.
PAR CES MOTIFS, LE TRIBUNAL :
[59] REJETTE la demande;
28 Article 1613 du Code civil du Quebec.
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"""
0
C\I
500-17 -088938-15 7
[60] REJETTE la demande reconventionnelle;
[61] LE TOUT SANS frais de justice.
Me Bruno Bourdelin
DEGRANDPRE JOLI-CCEUR S.E.N.C.R.L.
Procureur des demandeurs
Me Marc-Andre Blain
JURIMAB INC.
Procureur du defendeur
LUKASZ GRANOSIK, j.c.s.
Dates d'audience :
Argumentations
ecrites:
Les 21, 22, 23 et 24 mai 2019
Les 9, 16 et 26 septembre 2019
PAGE: 19
Annex 281
:::i
C: ca
2-
r-(
0
.(._".).
Cl)
()
() a
0)
T"'"
0
C\I
ANNEX282
A FUNCTIONAL APPROACH TO "GENERAL
PRINCIPLES OF INTERNATIONAL LAW"
M Cherif Bassiouni •
INTRODUCTION
"General Principles of International Law'.' are among the sources
of national and international law 1 which have long been recognized
and applied in disputes between States. 2 They were embodied in the
Statute of the Permanent Court of International Justice ["PCIJ"], article
38 (1)(3), and in the Statute of the International Court of Justice
["ICJ"], article 38 (l)(c), under the terms "general principles of law
recognized by civilized nations."3 As discussed below, both the PCIJ
and ICJ have relied on this source.
The terms used to describe this source of international law appear
to posit two separate requirements: one, ''General Principles,'' and
two, recognition by "civilized nations." With regard to the latter, it
would appear, at least in the post-United Nations Charter era, that a
pr~sumption exists that all Member-States of the United Nations are
"civilized. "4 The use of the term "General Principles" presents more
difficulty.
The writings of scholars and opinions of international and national
tribunals have invariably confirmed that "General Principles" are,
first, expressions of national legal systems, and, second, expressions of
other unperfected sources of international law enumerated in the statutes
of the PCIJ and ICJ; namely, conventions, customs, writings of
scholars, and decisions of the PCIJ and ICJ. It is obvious that if these
legal sources are perfected, they are ipso facto creative of international
legal obligations. When they are not perfected, however, such as when
a custom is not evidenced by sufficient or consistent practice, or when
States express opinio juris without any supportive practice, these man-
• Professor of Law, DePaul University Colllege of Law. The author would like to acknowledge
the research assistance of George M. Gullo (J.D. Candidate, DePaul, 1991).
I. See 1 L. OPPENHEIM, INTERNATIONAL L.Aw 29-30 (H. Lauterpacht 8th ed. 19S5).
2. See infra Section V.
3. STATUTE OF THE PERMANENT COURT OF INTERNATIONAL JUSTICE art. 38(1)(3); STATUTE
OF THE INTERNATIONAL COURT OF JUSTICE art. 38(1)(c).
4. This requirement has utility where a given nation, because of peculiar historical circumstances,
no longer follows its previously "civilized" system of law, or that of the other "civilized
nations."
768
Annex 282
Spring 1990] Functional Approach To "General Principles" 769
ifestations, singularly or cumulatively with others, may possibly be
considered to be expressions of a given principle.
In the post-United Nations Charter era, principles may also
emerge from manifestations of international consensus expressed in
General Assembly and Security Council Resolutions. 5
The decisions of international and national tribunals are, along
with the writings of the "most noted publicists," the most useful
sources for ascertaining the existence and application of a given legal
principle. 6 The effect of "General Principles," inter alia, is that,
"when a solution is approved by universal public opinion, the judge is
justified in applying it. "7
As the world's interdependence increases, there will doubtless be
greater reliance on international law as a means to resolve a variety of
issues which neither conventional nor customary international law is
ready to meet. The fast pace of human rights will also bring to the
forefront of international, regional, and national adjudication issues
which heretofore may have only been viewed as theoretical. The four
most pressing issues that will advance to the forefront in the 1990s are:
human rights, the environment, economic development, and international
and transnational criminality. Even the casual observer will
note that in these four areas, conventional and customary international
law have not developed the framework, norms, or rules necessary
to regulate these issues, nor is it likely that these two sources of
law will catch up with the needs of the time. Thus, it is quite likely
that "General Principles" will become the most important and influential
source of international law in this decade. Existing needs and conflicts
will necessarily require some legal basis for their satisfaction and
resolution. In this case, the definition, identification, and functional
use of "General Principles" will require more rigorous attention than
has thus far been given to these questions. For the same reasons,
greater rigor will be demanded of the rather loose manner in whichjus
cogens has been defined, identified, and applied by various writers.
5. See Bleicher, The Legal Significance of Re-citation of General Assembly Resolutions, 63
AM. J. INT'L l. 444 (1969).
6. For decisions of tribunals see Section V and for the writings of scholars see Part I. For
examples of "noted publicists," see, e.g. B. CHENG, GENERAL PRINCIPLES OF LA w AS APPLIED
BY INTERNATIONAL COURTS AND TRIBUNALS (1953); H. LAUTERPACHT, PRIVATE LAW
SOURCES AND ANALOGIES OF INTERNATIONAL LAW (1927); H. LAUTERPACHT, THE DEVELOPMENT
OF INTERNATIONAL LAW BY THE INTERNATIONAL COURT (rev. ed. 1958) [hereinafter
THE DEVELOPMENT OF INTERNATIONAL LAW]; 1 G. SCHWARZENBERGER, INTERNATIONAL
LAW (3d ed. 1957); Maki, General Principles of Human Rights Law Recognized by All Nations:
Freedom from Arbitrary Arrest and Detention, 10 CAL. W. INT'L L.J. 272 (1980).
7. M. Bos, A METHODOLOGY OF INTERNATIONAL LAW 70 (1984) (quoting PERMANENT
COURT OF INTERNATIONAL JUSTICE ADVISORY COMMITTEE OF JURISTS, Proces-Verbau;c of the
Proceedings of the Committee, June 16 - July 24, 1920, at 318 ( 1920)).
Annex 282
770 Michigan Journal of International Law [Vol 11:768
As "General Principles" become decisively more important as a
source of international law, more specific rules will be needed for the
identification, appraisal, and application of a given principle to a given
factual situation and a -clearer understanding of the functional uses of
such principles.
I. SCHOLARLY DEFINITIONS OF "GENERAL PRINCIPLES"
The scholarly debate does not center so much on dogmatic or doctrinal
conceptions, but more pragmatically on what evidences the
existence of "General Principles." This orientation reflects the pragmatic
empiricism of the Common Law tradition more than the doctrinal
or dogmatic approach of the Romanist-Civilist-Germanic legal
tradition. 8 Nevertheless, scholarly definitions of "General Principles"
abound, even though they are frequently so general and self-evident
that they add little to the plain meaning of the very words they intend
to define. A review of these definitional approaches is, thus, more rev~
aling than instructive.
Professor ~ersch Lauterpacht defines "General Principles" as:
[T]hose principles of law, private and public, which contemplation of the
legal experience of civilized nations leads one to regard as obvious maxims
of jurisprudence of a general and fundamental character ... a comparison,
generalization and synthesis of rules of law in its various
branches-private and public, constitutional, administrative, and procedural---
common to various systems of national law.9
To Bin Cheng, one of the most authoritative scholars on the sub•
ject, "General Principles" are "cardinal principles of the legal system,
in the light of which international ... law is to be interpreted and
applied." 10
Professor Schlesinger refers to "General Principles" as "a core of
legal ideas which are common to all civilized legal systems." 11 An•
8. The exception, however, is in the area ofjus cogens, discussed in Part VI, infra, which is at
the other end of the spectrum on this question of theoretical formulation .
9. I INTERNATIONAL LAW BEING THE COLLECTED PAPERS OF HERSCH LAUTERPACHT 69,
74 (E. Lauterpacht ed. 1970) [hereinafter COLLECTED PAPERS]. However, in Barcelona Traction
(Belg. v. Spain), 1970 I.CJ. 3 (Feb. 5), the International Court of Justice stated:
In this field international law is called upon to recognize institutions of municipal law that
have an important and extensive role in the international field. This does not necessarily
imply drawing any analogy between its own institutions and those of municipal law, nor
does it amount to making rules of international law dependent upon categories of municipal
law.
Id. at 33.
JO. Discussion of Bin Cheng, in The Meaning and Scope of Article 38(/)(c) of the Statute of
the International Court of Justice, 38 GROTIUS SOCIETY TRANSACTIONS FOR THE YEAR 1952
125, 132 (1953).
11. Schlesinger, Research on the General Principles of Law Recognized by Civilized Nations,
51 AM. J. lNT'L L. 734, 739 (I 957).
Annex 282
Spring 1990) Functional Approach To aGenera/ Principles" 771
other distinguished scholar, Verzijl, states that they are "principles
which are so fundamental to every well-ordered society that no reasonable
form of co-existence is possible without their being generally
recognized as valid." 12 Lammers, citing Favre, defines "General Principles"
in much the same way. He states that they are " ... norms
underlying national legal . orders . . . . [T]hey are the manifestation of
the universal legal conscience certified by the law of civilized States." 13
Professor Wolfgang Friedmann seems to be more relativistic when he
states that they are intended to embody the "maximum measure of
agreement on the principles relevant to the case at hand." 14 Conversely,
Gutteridge tends more toward absoluteness when he states
that "an international judge before taking over a principle from private
law must satisfy himself that it is recognized in substance by all
the main systems of law and that in applying it, he will not be doing
violence to the fundamental concepts of any of those systems." 15 Jalet
is more conceptual in her universalist formulation when she describes
"General Principles" as "principles that constitute that unformulated
reservoir of basic legal concepts universal in application, which exist
independently of· the institutions of any particular country and form
the irreducible essence of all legal systems." 16
Except for the literature onjus cogens discussed below, the consensus
of scholarly definitions stresses the objective character of the term
"principles" and recognizes the existence of a common core of objectively
identifiable legal principles. The consensus among the most
noted publicists is that "General Principles" are found in the underlying
or posited principles or postulates of national legal systems or of
international law. The definitions that leave room for further elaboration
and more specificity, including some of those noted above as well
as others not reported here, have the great merit of recognizing that
the very generality of the concept is needed to preserve the evolutionary
character of international law. The inevitable consequences of this
approach are divergent interpretations of the sources, scope, content,
functions, and evidence of "General Principles" with respect to their
12. 1 J.H.W. VERZIJL, INTERNATJONAL LAW IN HISTORICAL P ERSPECTIVE 59 (1968) (referring
to VON DER HEYDTE, Glossen zu einer Theorie der allgemeinen Rechtsgrundsiitze, in DIE
FRIEDENSWARTE 289 (1933)).
13. Lammers, General Principles of Law Recognized by Civilized Nations, in EsSAYS IN THE
DEVELOPMENT OF THE INTERNATIONAL LEGAL ORDER 53, 57 (F. Kalshoven, P.J. Kuyper &
J.G. Lammers eds. 1980) (citing A. FAVRE, PRINCIPES DU DR0IT DES GENS 273-90 (1974)).
14. Friedmann, The Uses of "General Principles" in the Development of International Law, 51
AM. J. INT'L L. 279, 284 (1963).
15. H.C. G UTTERIDGE, COMPARATIVE LAW 65 (2d ed. 1949).
16. See Jalet, The Quest/or the General Principles of Law Recognized by Civilized Nations, 10
U.C.L.A. L. REV. 1041, 1044 (1963).
Annex 282
772 Michigan Journal of International Law [Vol. 11:768
identification, appraisal, and application in international law, as is discussed
hereinafter.
II. SOURCES OF "GENERAL PRINCIPLES"
The majority of scholars believe that article 38 (1)(3) of the Statute
of the PCIJ and article 38 (l)(c) of the ICJ Statute envision or imply
that "General Principles" can be identified from two different legal
sources - national and international. 17 Of course, principles deemed
basic to international law can emerge in the international legal context
without having a specific counterpart in national legal systems because
of the differences that characterize these two legal systems. Indeed, it
would be incongruous to think that the framers of articles 3 8 of the
PCIJ and ICJ Statutes intended, for example, to exclude from "General
Principles of International Law" those principles which emerge
from the customary practice of States or from treaties. The writings of
scholars not only range from the more positivist objective view of
"General Principles" to that of the naturalist subjective one, but also
from the broadest possible generalization to that of the narrowest specific
norm. Thus, we can find principles with general content, such as
justice, fairness, equality, and good faith. Others of a more specific
nature are, for example, territorial criminal jurisdiction and treaty and
contract interpretation based first upon the plain meaning of the
words.
Some authors view "General Principles" as an international common
law growing out _of the composite concepts, norms, and rules of
State legal systems. 18 Other scholars conclude that the fundamental
principles of justice which have been accepted by "civilized nations"
are part and parcel of the corpus of international law. The appropriate
answer depends on the nature or subject of the principle in question.
However, whether a fundamental principle of justice rises to the level
of a "General Principle of International Law" can best, though not
exclusively, be determined by its existence in the national laws of "civilized
nations." 19 A common conception of both law and justice,
though not necessarily of its contents, exists among all States. The
international legal system is a reflection of this fact, as are the norms,
17. There are, however, some scholars who believe that "General Principles" consist only of
those principles explicitly recognized in national legal systems. See Lammers, supra note 13, at
56-57, citing several authorities.
18. See, e.g., Gutteridge, The Meaning and Scope of Article 38(1)(c) of the Statute of the
International Court of Justice, 38 GROTIUS TRANSACTIONS FOR THE YEAR 1952 125 (1953); C.
RHYNE, INTERNATIONAL LAW: THE SUBSTANCE, PROCESSES, PROCEDURES, AND INSTITU•
TIONS fOR WORLD PEACE WITH JUSTICE 54-69 (1971).
19. I D.P. O'CONNELL, INTERNATIONAL LAW 10 (1965); see also Maki, supra note 6.
Annex 282
Spring 1990] Functional Approach To "General Principles" 773
rules, and customs that regulate international relations. 20
Baron Descamps, President of the Advisory Committee which
drafted the Statute of the PCIJ, expressed such a view when he observed
that "the fundamental law of justice and injustice deeply engraved
on the heart of every human being and which is given its
highest and most authoritative expression in the legal conscience of
civilized nations [exists in every legal systern]."21 This view is representative
of the notion that a common denominator exists between all
legal systems. Professor Gordon Christenson refers to "General Principles"
as "foundational ordering norms in a global, interdependent
community."22 Thus, if a principle exists in most national laws, it is
likewise inherently part of the structure of international law, which
can best regulate the conduct of States by applying those principles
which are recognized by these States. Professor Gutteridge acknowledges
this linkage of principles between national and international law.
As he states:
[i]f any real meaning is to be given to the words "general" or "universal"
and the like, the correct test would seem to be that an international judge
before taking over a principle from private law must satisfy himself that
it is recognised in substance by all the main systems of law, and that in
applying it he will not be doing violence to the fundamental concepts of
any of those systems. 23
Comparative legal technique furnishes the judge seeking to identify
and apply "General Principles" with an objective test by which to
measure breadth and depth of the recognition and applicability of a
given principle in national legal systems. One such comparative legal
technique is the inductive process, which uses empirical data based on
the comparative legal method of analysis. This process is intended to
eliminate approximations of what a principle may be and avoids speculation
over its reliability or applicability. A methodology for such an
inductive process has not yet been agreed upon. This writer would
suggest that this is simply due to the fact that comparative legal research
has not defined a formula and that its techniques change with
time. lt _is valid to leave the method and the techniques to the evolving
science of comparative legal research.
The difference between those who argue that "General Principles"
are found only in national legal systems and those who advance the
proposition that they are also found in the international legal system is
20. Cheng, supra note 10, at 130.
21. M. Bos, supra note 7, at 70 (quoting Baron Descamps).
22. See Christenson, Jus Cogens: Guarding Interests Fundamental to International Society,
28 VA. J. INT'L L. 585, 587 (1988).
23. H.C. GUTTERIDGE, supra note 15, at 65.
Annex 282
774 Michigan Journal of International Law [Vol. 11 :768
the dual unarticulated desire for specificity and certainty. Principles
embedded in national law will usually have undergone the test of time
and experience and are more easily ascertainable. Consequently, they
are believed to be worthy of great deference. By contrast, principles in
the international legal system may prove to be more tentative and thus
less specific and more difficult to ascertain. Both of these positions
are, however, generalizations, and thus not always correct. There is
some interaction between principles found in national legal systems,
which are applicable in international law, and principles arising from
other sources of international law and practice, which may qualify as
"General Principles.'' As Professor Brierly points out,
"[i]nternational law ... does_ not borrow from this source [national
law] by importing private law institutions lock, stock, and barrel with
a ready-made set of particular rules; it rather looks to them for an
indication of a legal policy or principle. "24 Thus, Brierly affirms that
international tribunals should find and apply rules of international
law, which are generally recognized by the legal systems of civilized
states and which involve principles of law and equity.
Such "General Principles" may fill the gaps in conventional and
customary international law and provide a more objective basis than
the value-laden natural law philosophy espoused by some Continental
and American scholars. 25 Professor Lauterpacht argues that the ICJ
Statute "emphasizes their [i.e., "General Principles"] pragmatic and
inductive character inasmuch as they are derived from systems of law
actually in operation as distinguished from the speculative and philosophical
aspects of the classical law of nature."26 This view, though
more congruent to the Common Law's jurisprudential outlook, has
not, however, prevailed in its entirety. Indeed, there is reason to believe
that the framers of the PCIJ'·s article 38 (1)(3) and the ICJ's article
38 (l)(c) may have accepted the notion that natural law may be
separate from the naturalists' understanding of that term, and that it
may arise from concrete applications and common practices existing
in and among "civilized nations. "27 Such a composite conception may
be viewed as a compromise between positivism and naturalism, if that
is at all possible, and as a blending of Common Law pragmatism and
the more conceptual approach of the Romanist Civilist system. But
then, is not all international law a process of blending legal concepts in
a way that fits the exigencies of the international legal order? One
24. J.L. BRIERLY, THE LAW OF NATIONS 63 (6th ed. 1963).
25. See Lammers, supra note 13, at 60.
26. COLLECTED PA PERS, supra note 9, at 77.
27. See Lammers, supra note 13, at 61.
Annex 282
Spring t 990] Functional Approach To "General Principles" 775
author seemed to take such an approach when he observed: "General
Principles of International Law" are the "expression of the legal conviction
of states ... directly related to inter-State relations. "28
III. THE FUNCTIONS OF "GENERAL PRINCIPLES"
As objective or pragmatic as one might desire a rule-finding process
to be, it is nevertheless always predicated on certain values, just as
much as such a process seeks or aims to achieve a value-oriented
goal.29 Indeed, no principle is value-free, nor is it free of a value-oriented
goal or outcome. Yet, to define "General Principles," one
should first tum to their functions as they are perceived by theorists
and applied in practice, whether by international judicial adjudication
or as they emerge from customary practices in inter-state relations and
international interaction.
Some scholars regard "General Principles" merely as a means of
assistance in the interpretation and application of conventional and
customary law, while others consider them a primary source embodying
an equal or even a higher order of norms. 30 Precisely because that
doctrinal debate continues and its outcome is unlikely to be settled, it
may prove more useful to look at "General Principles" from the perspective
of their functional uses and applications. The most avid proponent
of this approach is probably Bin Cheng, who postulates three
general functions that "General Principles" may serve. First, they are
the source of various rules which are merely an expression of these
principles. Second, they constitute the guidelines or framework for
the judiciary with respect to the interpretative and applicative functions
of positive rules of law. Third, they may be applied as norms
whenever there are no formulated norms governing a given question. 31
To this writer, there are at least four functions that "General Principles"
fulfill as a source of international law that are also complementary
to the other sources of international law. "General Principles"
serve as:
(1) A source of interpretation for conventional and customary international
law;
(2) A means for developing new norms of conventional and customary
international law;
28. Id. at 67.
29. See LAW AND PUBLIC ORDER: THE LEGAL REGULATION OF INTERNATIONAL COERCION
(M. MacDougal & F. Feliciano eds. 1961).
30. See C. RHYNE, sup_ra note 18.
31. B. CHENG, supra note 6, at 390.
Annex 282
776 Michigan Journal of International Law [Vol. 11 :768
(3) A supplemental source to conventional and customary international
law; and, .
(4) A modifier of conventional and customary international rules.
This classification is neither exhaustive nor necessarily certain
enough to delineate with specificity the parameters of each one of the
four identified functions. The reason simply lies in the very nature of
"General Principles," which cannot be so extremely specific and precise
as to afford certainty of the law and at the same time be broad and
general enough to allow for the growth and evolution of international
law.
A. A source of interpretation for conventional and customary
. international law
"General Principles" have been primarily used to clarify and interpret
international law. For example, as Schlesinger notes, "General
Principles" must be considered in determining the meaning of treaty
terms. 32 Lauterpacht points out that recourse by the ICJ to "General
Principles" has constituted "no more than interpretation of existing
conventional and customary law by reference to common sense and
the canons of good faith."33 This interpretive function is the most
widely recognized and applied function of "General Principles" and
the one that is evidently the most needed and useful, in contrast to the
use of "General Principles" as a method to supplant or remedy deficiencies
in conventional and customary international law. 34
"General Principles" can be utilized to interpret ambiguous or uncertain
language in conventional or customary international law, but,
foremost, they can be relied upon to determine the rights and duties of
States in the contextual, conventional, or customary law. This is particularly
the case, for example, with respect to such principles as
"good faith" and "equitable performance."
The extent to which one can resort to "General Principles" for
interpretative purposes has never been established. Consequently,
"General Principles" can logically extend to fill gaps in conventional
and customary international law and serve as a supplementary source
thereto. From that basis, "General Principles" can be interpreted as a
source of law that overreaches other positive sources of international
law, and eventually supersedes it.
32. "(Treaty] terms acquire concrete meaning only by reading into them the general standards
of decency which civilized nations recognize in their municipal legal systems .. .. " Schlesinger,
supra note 11, at 736.
33. See THE DEVELOPMENT OF INTERNATIONAL LAW, supra note 6, at 166-67.
34. Sees. CARLSTON, LAW AND ORGANIZATION IN WORLD SOCIETY 216 (1962).
Annex 282
Spring 1990] Functional Approach To "General Principles'' 777
This interpretative approach can be applied in extenso. "General
Principles,, thus become not only a source of new norms, but also a
source of higher law, i.e, }us cogens [as discussed below].
B. A means for developing new norms of conventional and
customary international law
The second function of "General Principles" is known as the
growth function. Brierly states, "[i]t is an authoritative recognition of
a dynamic element in international law and of the creative function of
the courts which administer it. " 35 Many other writers, including
Verzijl, 36 Whiteman, 37 and Gross, 38 recognize this underlying role of
"General Principles" as necessary to the development of international
law. Thus, it is probably safe to assume that the framers of both the
PCIJ and ICJ Statutes anticipated the prospective need for evolution
and change in the development of international law-as evidenced by
article 38 (1)(3) and article 38 (l)(c).
Professor O'Connell articulated the need for growth in international
law:
If international law is seen as an organic growth reflecting more the life
of the international community than the conscious operation of the government
will, then the creative role of the judiciary is important, and its
pronouncements upon the emanations from basic principles significant. 39
Indeed, it would be stifling not to inject into the sources of any
legal system the capability of growth and development. Every national
legal system includes such a process, either through the jurisprudence
of its courts or through doctrine as developed by scholars .
.Thus, it can be said that legal principles evolve and that a legal mechanism
or process for the ·recognition and application of this evolutive
aspect of law must exist in international law.
Such an approach injects a dynamic element into international law.
This prevents the static application of archaic norms and procedures
to what is admittedly an evolving legal process designed to frame or
regulate the dynamic exigencies and needs of a community of nations
with changing interests and mutable goals and objectives. To state
that international law has faced and is likely to face increasing new
challenges, if for no other reason than to meet the fast-growing and
35. See J.L. BRIERLY, supra note 24, at 63.
36. See J.H.W. VERZIJL, supra note 12, at 57.
37. See 1 M. WHITEMAN, DIGEST OF INTERNATIONAL LAW 90 (1963).
38. See 1 L. GROSS, EsSAYS ON INTERNATIONAL LAW AND ORGANIZATION 145 (1984); M.
WHITEMAN, DIGEST OF INTERNATIONAL LAW AND ORGANIZATION 145 passim (1984).
39. See D.P. O'CONNELL, supra note 19, at 12.
Annex 282
778 Michigan Journal of International Law [Vol. 11 :768
changing technological advances, is a truism. Thus, the demands on
international law must be accommodated through an expanded usage
of "General Principles. "40 However, as will be discussed below, it has
not necessarily been the generalized experience of the jurisprudence of
the PCIJ and ICJ that "General Principles'' have, in fact, appreciably
influenced the growth of new rules.41 The development of new norms
of conventional and customary law required the existence of "General
Principles." As one author states: "From its legislative inception until
the final determination, law is a 'continuing. process.' "42
C. A supplemental source to conventional and customary
international law
"General Principles" may provide a norm or standard when a custom
or treaty is inapplicable or nonexistent. Some say this is precisely
one of the functions which the framers of article 38 had in mind when
they included "General Principles" among the sources of international
law. 43 Indeed, the members of the Advisory Committee drafting the
PCIJ statute were eager to avoid the danger of having to declare a non
liquet for lack of a positive rule. One committee member, Hangerup of
Norway, pointed out that "[a] rule must be established to meet this
eventuality to avoid the possibility of the court declaring itself incompetent
through lack of an applicable rule. n 44
Jalet recognizes that the rejection of the admissibility of non liquet
implies the necessity of creative activity on the part of the judges.45
Allowing the judge to search through the unbounded fields of legal
experience precludes the possibility that, in a given case, an applicable
rule of law may be absent.46 As one commentator observed:
Another favorite legalistic argument ... is the doctrine of Nu/la Poena
Sine Lege (No Penalty Without Law). 'But it doesn't follow from this
that in the absence of domestic legislation an international court cannot
justifiably punish acts well known by all concerned to be contrary to the
laws of nations. '47
40. See COLLECTED PAPERS, supra note 9, at 71.
41. See M . SoRENSEN, MANUAL OF PUBLIC INTERNATIONAL LAW 145 (1968).
42. See M. Bos, supra note 7, at 74.
43. See Lammers, supra note 13, at 64.
44. See C. RHYNE, supra note 18, at 60.
45. See Jalet, supra note 16, at 1060.
46. See COLLECTED PAPERS, supra note 9, at 243.
47. See Comment, International War Criminal Trials and the Common Law of War, 20 ST.
JOHN'S L. REV. 18, 23 (1945), (quoting· Glueck, By What Tribunal Shall War Offenders Be
Tried, 56 HARV. L. REV. 1059, 1081 (1943)); see also Allen, The Erosion of Legality in American
Criminal Justice: Some Latter-Day Adventures of the Nulla Poena Principle, 29 ARIZ. L. REV.
385 (1987).
Annex 282
Spring 1990] Functional Approach To "General Principles" 779
If this approach were not taken, we would be left with the notion that
"General Principles" are meant to prevent an international court from
redressing a denial of justice in a case where neither a treaty nor a
customary rule could be identified with specifically applicable provisions.
Similarly, how could one redress an abus de droit without resort
to "General Principles"? A pragmatic approach to this function
of "General Principles" is that the judge, in the absence of an applicable
rule of international law, in order to fill a legal gap, may rely on a
principle derived from the national legal systems which represent the
major systems of jurisprudence in the world, or from those systems
whose legal traditions more particularly apply to the specific case at
hand.48
Opposition to this function can be advanced on the premise that
filling gaps in conventional and customary international law by resorting
to "General Principles" creates new law and thus transforms the
judicial process into a legislative one. This concern explains the reluctance
of international judges to make use of this legal reservoir as a
source of principles that can be turned into operative norms. This is
particularly a concern where the parties to whom such principles are
applied may have never known of" these principles or contemplated
either their existence or their applicability to the parties' conduct. In
this respect, "General Principles" must conform to what is known in
criminal law doctrine as the "principles of legality," which prevent
judicial lawmaking. The dilemma with respect. to this function of
"General Principles" is no different from that of national legal systems
in which the judiciary is always seeking the proper balance between
strict and progressive legal interpretation. 49
D. A modifier of conventional and customary international law
The final function of "General Principles" is described as the corrective
function. "General Principles,'' in this context, would be used
to set aside or modify provisions of conventional or customary law in
favor of a greater good or higher cause. This is the most controversial
of the four functions. This function embodies that of jus cogens [discussed
below]. The argument that "General Principles" should, in
certain circumstances, be utilized to modify conventional or customary
law is at the heart of the jus cogens doctrine.
Professor Gordon Christenson explains the virtue of using "General
Principles" to fulfill this function:
48. See COLLECTED PAPERS, supra note 9, at 71.
49. See Jalet, supra note 16, at 1060-62.
Annex 282
780 Michigan Journal of International Law (Vol. 11 :768
[S]ome principles of general international law are or ought to be so compelling
that they might be recognized by the international community for
the purpose of invalidating or forcing revision in ordinary norms of
treaty or custom in conflict with them. 50
This statement brings to the surface another important concept: the
notion that jus cogens is premised on the existence of a hierarchy of
"General Principles." Scholars supporting this view argue that only
those principles which are "peremptory" may modify or overturn customary
or conventional law, holding a State to a higher obligation.
For example, as Professor Christenson states, "[the concept of jus
cogens] invalidates ordinary state-made rules of international law in
conflict with powerful norms expressing fundamental exceptions vitally
important to overriding community interests."51
Simply stated, in cases where protection of a fundamental interest
is needed, peremptory norms shall prevail over positive law. Peremptory
norms are those which are said to occupy the highest place in the
hierarchy of principles, and which must be accepted as overriding by
the international community. With this status, they have the power to
force revision "in certain conventional and customary prescriptions to
maintain the minimum coherence and content demanded of an international
public order system."52
Theoretically speaking, peremptory norms are said to be an indispensable
component of the law of nations because they are the framework
of the international legal order. 53 Yet it remains unclear
whether such peremptory norms are in a category of their own or if
they are merely a semantic variation of "General Principles." In other
words, if a "General Principle" has attained a higher level of consensus
or even unanimity, it becomes ajus cogens peremptory norm. N~
matter what the outcome of this distinction may be, there exists a separate
category or level of norms whose standing is on a higher plane
than other principles, norms and rules. The problems of ascertaining
the existence of such a peremptory norm and identifying its contents
for the purposes of applying it to a factual situation are, however, the
same as with respect to other principles, irrespective of whether the
source of the peremptory norm or principle arises under international
or national law.
Lauterpacht questions this function:
[I]n practice the situation is not that of simple absence or simple pres-
50. See Christenson, supra note 22, at 586 (footnote omitted).
51. Id. at 589 (footnote omitted).
52. Id. at 645.
53. See id. at 592.
Annex 282
Spring 1990] Functional Approach To "General Principles" 781
ence of rules of customary or conventional international law; that in
practice these rules are often obscure or controversial; that, as the result,
the question is not one of displacing them but of interpreting them
against the background or· in the light of general principles of law; and
that the difference between disregarding a rule of international law in
deference to a general principle of law and interpreting it (possibly out of
existence) in the light of a general principle of law may be but a play on
words.54
Corbett, however, sees it as a form of rhetoric:
No one has ever improved much on Aristotle's instructions, in The Art
of Rhetoric, to the advocate who, finding the precedents or code heavily
against him, tries to persuade the court to "interpret,, or ignore the enacted
or judge-made law in favor of a higher justice. 55
Jurisprudential theories abound in the international and national
legal literature as to whether higher principles of law can or should
override positive law, and the debate surely will continue as long as
there are legal systems evolving to meet societal needs and interests,
especially when legislative processes are unable, or unwilling, to respond
in a timely fashion to new societal needs and interests.
IV. "GENERAL PRINCIPLES": A SUBSIDIARY OR CO-EQUAL
SOURCE OF INTERNATIONAL LAW?
To determine whether "General Principles" are a subsidiary
source of international law presupposes a hierarchy of these sources
and their ranking of principles. Such suppositions raise, inter alia, the
following issues, which are particularly relevant to this functional approach
of "General Principles." They are:
1) The place of "General Principles" in the hierarchy of sources of international
law;
2) Hierarchial judicial reliance on "General Principles" as latent rules
of law;
3) Functional differences between legal norms and principles; and
4) The binding nature of "General Principles."
A doctrinal approach to these questions would have probably required
that the last of these four issues precede the others, but because
the approach followed herein is empirical, the issue as to the binding
nature of "General Principles" is deemed conclusory.
A. The place of "General Principles" in the hierarchy of
international law sources
Some consider "General Principles" to be a secondary source of
54. THE DEVELOPMENT OF INTERNATIONAL LAW, supra note 6, at 165-66.
55. Corbett, The Search for General Principles of Law, 47 VA. L. REV. 811 (1961).
Annex 282
782 Michigan Journal of International Law [Vol. 11:768
international law, following conventional and customary international
law, only because that is the order in which these sources are listed in
articles 38 of the PCIJ an~ ICJ Statutes. This notion of a hierarchy
based on the place of "General Principles" in the listing of intema•
tional law sources should be rejected. As Cheng states:
The order in which these components of international law are enumerated
is not, however, intended to represent a judicial hierarchy, but
merely to indicate the order in,which they would normally present themselves
in the mind of an international judge .... There is nothing to
prevent these three categories of rules or principles of international law
from being simultaneously present in the mind of the judge. His task
consists precisely in declaring which are the relevant rules applicable to
the case, in accordance with international law as a whole. 56
When one examines this issue in the context of legislative intent, it
becomes evident that the drafters of article 38 of the PCIJ Statute
never intended to create a hierarchy of sources. In fact, the Advisory
Committee notes reject the idea of a hierarchy. Descamps said that
"[t]he various sources of law should be examined successively."57 To
maintain that the sources should be examined successively requires a
judge not to draw upon a given source before first applying the preceding
one. This would contravene the drafting committee's intentions,
since, in the drafting process, the committee deleted the words "in the
order following" (en ordre successif), thus eliminating any requirement
in order of choice. 58
Judicial decisions and the teachings of publicists have emphasized
a more primary role for "General Principles." These two subsidiary
sources do not enunciate rules, but rather serve as a means of determining
how rules may properly be considered. They thus have "lawdetermining
agencies."59
The view that "General Principles" have the same standing as ~onventional
and customary laws also finds support in Western scholarly
writings, but it has been rejected by the socialist legal system60 and by
some Third-World countries. One source of concern for socialist
scholars is that the principles of Western capitalism are so different
from those of Marxism-Leninism, which inspire their systems. Similarly,
Muslim scholars would only accept those principles which are
56. B. CHENG, supra note 6, at 22-23 (footnote omitted).
57. C. RHYNE, supra note 18, at 61 (footnote omitted).
58. Id. at 62.
59. B. CHENG, supra note 6, at 23 (footnote omitted).
60. See, e.g., K. GRZYBOWSKI, SOVIET INTERNATIONAL LAW AND THE WORLD EcONOMIC
ORDER (1987); G.I. TUNKIN, THEORY OF INTERNATIONAL LAW (1974); see also Rubanov, The
Development of Generally Recognized Rules of International Law, in INTERNATIONAL LAW AND
INTERNATIONAL SYSTEMS (Butler ed. 1987).
Annex 282
Spring 1990] Functional Approach To "General Principles" 783
compatible with Islam.61 Other Third-World scholars reject the a priori
application of principles because they are a product of Western
systems that have long dominated many Third-World nations through
colonialism. 62 These rejectionist positions are gradually changing, first
because conflict between the East and the West - socialism and capitalism
- is abating, and second because the very concept of "General
Principles" is broad enough to encompass all world legal systems. Indeed,
so long as the emphasis is not on those principles emanating
solely from Western legal systems, the viability of "General Principles"
as one of the co-equal primary sources of international law will
prevail. In time, with increased reliance upon them in both national
systems and in the international system, and also in the interaction
between these systems, "General Principles" are bound to gain greater
acceptance and applicability in various functional aspects.
B. Hierarchical judicial reliance on "General Principles" as
utilization of latent rules of law
Past decisions of the international courts demonstrate that concerns
by scholars over eventual arbitrary or subjective application of
"General Principles" are unwarranted. 63
The composition of the ICJ serves as an initial safeguard against
arbitrariness and subjectivity. As Professor Sorensen points out:
[T]he formula [that identifies general principles] suggests a notion of
common consent comparable to that requisite for the creation of customary
law, but, in this context, to be found in a coincidence of municipal
rules of law. In practice, however, the International Court proceeds in a
more pragmatic fashion, and is satisfied with a coincidence of opinion
amongst its own judges. Such a method affords sufficient safeguards, the
judges having been elected so as to ensure 'the representation of the main
forms of civilisation and the principal legal systems of the world' (article
9 of the Statute).u64
Interestingly enough, the words "recognized by civilized nations,"
which at one time were regarded with suspicion because they were
thought to place Wes tern legal principles above those of socialist and
Third-World nations, are now a guarantee of the universality of
sources of principles. Indeed, all Member-States of the United Na-
61. See M. KHADDURJ, THE ISLAMIC LAW OF NATIONS (1966); Mahmassani, The Principles
of International Law in Light of Islamic Doctrine, 117 RECUEIL DES COURS 205 (1966); S. RAM·
ADAN, ISLAMIC LAW, ITS SCOPE ANO EQUITY (1961); H. HAMJDULLAH, MUSLIM CONDUCT OF
STATE (1961); Bassiouni, Islam: Law Concept and World Habeas Corpus, 1 RuT.-CAM. L.J. 163
(1969).
62. See C. RHYNE, supra note 18.
63. See Section V(B), infra, specifically footnotes 95-97 and accompanying text.
64. See M. SORENSEN, supra note 41, at 146.
Annex 282
784 Michigan Journal of International Law [Vol. 11:768
tions are presumed to be "civilized nations. "65 Thus, the basis for ascertaining
the existence of a given principle has so broadened that it
ensures against the limited basis that was once the reason for criticism
of that source.
The Advisory Committee for the ICJ's statute was in agreement
that a judge did not legislate by using "General Principles," because
although "applying them, [brought] latent rules of law to light, [it] did
not create new rules. "66 As previously mentioned, comparative legal
analysis provides a broad empirical basis for objectively ascertaining
the "General Principles" found in national legal systems, and that ensures
a broader measure of consensus as to what constitutes a given
"General Principle." Thus, judicial application of "General Principles"
is not a form of judicial legislation if a correct empirical approach
is followed in the ascertainment of a given principle and if its
judicial application is in accordance with similarly ascertained "principles"
of judicial practice.
In the final analysis, it is not the theoretical function of "General
Principles" that is outcome-determinative, but rather the manner in
which "General Principles" are judicially identified and applied. Assessing
judicial application can best be done experientially. As illustrated
below, the jurisprudence of both the PCIJ and the ICJ has
remained well within the boundaries of judicious identtfication and application
of "General Principles" in cases brought before the courts.
That jurisprudence, however, does not necessarily identify the methods
of inquiry or the rationale in applying "General Principles," even
though the outcome would withstand the tests of empirical methodology
in comparative legal research.
C. Functional differences between legal norms and principles
Some scholars believe that the word "principle" implies the need
for a philosophical content, and that "principles" thus should not be
considered on the same level as positive rules of law, which are said to
embody concrete and definite elements established by those making
the rules. Under this theory, using "General Principles" as a basis of
judicial decision-making and as a substitute for positive legal norms
would inject certain subjective elements, such as morality and justice,
into positive international Iaw.67
Certainly, the major difficulty encountered in accepting "General
65. See B. CHENG, supra note 6, at 25.
66. See id. at 19 (emphasis in the original).
67. See J.L. BRIERLY, supra note 24.
Annex 282
Spring 1990] Functional Approach To "General Principles" 78S
Principles" of morality and justice as a source of international law is
the fact that morality and justice are variable concepts in the different
legal systems of the world. 68 Lauterpacht finds that "paragraph 3 of
article 38 must be regarded as declaratory because 'general principles
of law' expresses that vast residuum of social necessity ... that social
and legal necessity without which law, international and other, is
inconceivable. "69
It is misleading, however, to reject "General Principles" of morality
and justice as purely subjective because every legal system, no matter
how different, has some principle of morality and justice.
Conceptual differences can be taken into account in the inductive process
of ascertaining the meaning and content of morality and justice.
These differences can then be objectivized in their application to specific
factual situations. Thus, for example, the principle of access to
justice can be objectively demonstrated and thereafter specific localization
of the principle can also be objectively applied. Such a technique
is used in conflict of laws. Consequently, the various approaches to
concepts of justice and fairness do not place their existence in legal
doubt, nor do they render their identification and application so impossible
· or uncertain as to nullify the functional validity of such a
principle, even when it is used to supersede positive law.70 Lastly, it
should be re~embered that "General Principles" "guide and give life
to the [positive] law"71 and are thus indispensable to its viable application.
72 With this understanding, semantic differences can be overcome
and "General Principles" · can remain a co-equal primary source,
standing with conventions and customs.
D. The binding nature of "General Principles"
With regard to the binding nature of "General Principles," a basic
question arises under a strict positivist approach, which would see
"General Principles" as an undefined and uncertain source of law
which would have the capacity of binding States to that to which they ·
have not specifically consented. For example, Hudson believes that
"General Principles" could be used in a way that would bind States
beyond that to which they have agreed to be bound. He states, "(Arti-
68. See G. VON GLAHN, LAW AMONG NATJONS: AN INTRODUCTION TO PUBLIC INTERNATIONAL
LAW 24-25 (4th ed. 1981).
69. See COLLECTED PAPERS, supra note 9, at 242.
70. M. HUDSON, THE PERMANENT COURT OF INTERNATIONAL JUSTICE 1920-1942 611
(1943), cited in M. WHITEMAN, supra note 37, at 91.
71. Jalet, supra . note 16, at 104 7.
72. M. HUDSON, supra note 70, at 611, cited in M. WHITEMAN, supra note 37, at 91.
Annex 282
786 Michigan Journal of International Law [Vol. 11:768
cle 38 of the PCIJ Statute] empowers the Court to go outside the field
in which States have expressed their will to accept certain principles of
law as governing their relations inter se, and to draw upon principles
common t o van.o us sys t ems of . . . 1a w . . . ." 73 .
The possibility that "General Principles" will be used as a basis to
modify conventional and customary law, and thus become a primary
source of international law, challenges the view that presumptive freedom
of any obligation exists where positive law is silent. Two ideas
are at the heart of this question: first, the distinction between express
and tacit agreement of States, and second, the fact that international
law is a permissive rather than a restrictive body of law.
It can be argued that "General Principles" create obligations
which have the implicit consent of States. 74 This argument can be
construed from the fact that "General Principles" are an accepted
source of international law and that they are derived from the States'
own principles, as ascertained through the inductive approach. Even
if express consent were required, it would be satisfied by empirical evidence
that principles existing in the national legal system are applicable
in international law. 75
On a pragmatic level, invalidating the ability of "General Principles"
to bind without the express consent of States can produce three
possible consequences:
( 1) denial of justice;
(2) a static body of international law; and
(3) a judicial system unable to resolve contentious issues on which
there is no positive law, or about which the positive law is insufficient,
unclear, or ambiguous.
With regard to the permissive character of international law, one
commentator stated that: "international law confines the jurisdiction
of sovereignties and those rights which are not specifically ruled out
accrue to the nations of the world as a residue of power."76 This presumption
of freedom of obligation cannot, however, be limitless. If
"General Principles" are considered to be rules from which States may
in no case depart, then they are a valid exception to the doctrine of
freedom of obligation beyond accepted normative positive law because
they too derive from positive law.
The best evidence that international law has not only accepted but
73. M. HuosoN, supra note 70, at 610-12, cited in M. WHITEMAN, supra note 37, at 91.
74. Id. .
75. See COLLECTED PAPERS, supra note 9, at 71.
76. See Comment, supra note 47, at 24 (citing S.S. "Lotus" (Fr. v. Turk.), 1927 P.C.I.J. (ser.
A) No. 9, at 23 (Sept. 7).
Annex 282
Spring 1990] Functional Approach To "General Principles" 787
relied on "General Principles'' is the Vienna Convention on the Law
of Treaties, which contains a number of such "principles" in its rules
of treaty interpretation. 77 Although that Convention codifies customary
rules of international law, it nonetheless incorporates such principles
as good faith and others as part of customary international law,
even though their origin is found in "General Principles."
The choice of which functions "General Principles" should assume
is clearly predicated on whether "General Principles" are deemed a
subsidiary or primary source of international law. If they are a primary
source, "General Principles" may have a binding legal effect superior
to· that of positive normative rules of international law. Those
who feel the subsidiary role of "General Principles" is more appropriate
justify their position by arguing that treaty provisions and customary
international law are, by nature, a more direct emanation of the
will of States and are also often more specifically related to the subject
matter envisaged by treaty provisions and customary rules than are
"General Principles." Thus, they contend that a priority of conventional
and customary international law should be maintained over
"General Principles." Under this view, "General Principles" are only
appropriately resorted to for the purposes of explaining inadequacies
in the positive normative law and can also occasionally fill gaps in
these two primary sources.
In contrast, viewing "General Principles" as a co-equal primary
source of law would mean that a court could apply them for the purpose
of modifying and superseding conventional and customary rules.
While critics have voiced some apprehension about applying "General
Principles" in this manner, the jurisprudence of international courts
and tribunals has not borne out these concerns. Thus, the question of
whether "General Principles" are a binding source of international
law is well established and its hierarchical ranking has simply been left
to the functional need for their application in specific cases. The exception,
as discussed below, remains in the area of jus cogens, where
confusion seems to thrive.
V. "GENERAL PRINCIPLES" AS APPLIED BY THE PERMANENT
COURT OF INTERNATIONAL JUSTICE AND THE
INTERNATIONAL COURT OF JUSTICE
The PCIJ and now the ICJ, under article 38 (1)(3) and article 38
(l)(c) respectively, have the authority to apply the "General Principles
77. Vienna Convention on the Law of Treaties, May 23, 1969, U.N. Doc. A/Conf. 239/27;
see T.O. ELIAS, THE MODERN LAW OF TREATIES 71-87 (1974); F. MALEKIAN, THE SYSTEM OF
INTERNATIONAL LAW: FORMATION, TREATIES, RESPONSIBILITY 110-16 (1987).
Annex 282
788 Michigan Journal of International Law (Vol. 11: 768
of Law Recognized by Civilized Nations.'' These "General Principles"
include "the norms common to the different legislation of the
world, united by the identity of the legal reason therefor, or the ratio
legis, transposed from the internal legal system to the international
legal system. "78 Despite this grant of authority, the two courts have,
for the most part, been cautious in applying "General Principles" and,
as a result, the exact scope of article 38(l)(c) has remained, at least
from a doctrinal perspective, somewhat undefined and uncertain. This
assertion becomes evident when one examines the decisions of the Permanent
Court of International Justice and those of the International
Court of Justice, even though both have relied upon and applied
"General Principles" in cases before them.
A. Identifying the Elements of "General Principles"
Even though the PCIJ and ICJ have usually taken a cautious approach
toward "General Principles," decisions of the two courts provide
some guidelines as to how to identify the elements of a "General
Principle.'' For a rule to be recognized as a "General Principle" under
article 38(1)(3) and 38(l)(c), it now appears that the rule must exist in
a number of States, but the rule does not have to meet the test of
"universal acceptance," and no quantitative or numerical test for
States having such a "principle" has ever been established.
In the Lotus case, the PCIJ suggested that article 38(1)(3) requires
a rule to be of universal acceptance when it stated that a "General
Principle" "is applied between all nations belonging to the community
of States. "79 An examination of the facts of this case, however, reveals
that the court's finding can be explained by reason of the very principle
which was found to be universal. That principle, territoriality of
criminal jurisdiction, is indeed universal in its recognition and application.
Had the facts of the case been different, the court likely would
not have suggested a requirement of universality. This writer's conclusion
is that the court did not intend to posit a test of universality for
"General Principles," but merely ascertained it in this instance.
The ICJ rejected the test of "universal acceptance" in the South
78. See North Sea Continental Shelf(W. Ger. v. Den.; W.Ger. v. Neth.), 1969 I.C.J. 101, 134
(Feb. 20) (Sep. Op. Ammoun); see also Right of Passage over Indian Territory (Port. v. India),
1960 I.C.J. 123, 149 (Apr. 21) (Fernandes, J., dissenting) (citing VERDR0SS, DERECH0 INTERNACIONAL
Pueuco 205-06 (1955)). Judge Fernandes suggested that "The general principles of
law are at the basis of custom and of conventional law. The latter are usually no more than the
crystallization of those principles." For the jurisprudence of the PCIJ, see M. HuosoN, THE
PERMANENT COURT OF INTERNATIONAL JUSTICE (1934); THE DEVELOPMENT OF INTERNATIONAL
LA w, supra note 6.
79. See S.S. "Lotus" (Fr. v. Turk.), 1927 P.C.I.J. (ser. A) No. 10, at 16 (Sept. 7).
Annex 282
Spring 1990] Functional Approach To "General Principles" 789
West Africa Cases (1966), where Judge Tanaka, in his dissenting opinion,
explained that, "[t]he recognition of a principle by civilized nations
... does not mean recognition by all civilized nations .... "80
That test was also rejected by the ICJ in the North Sea Continental
Shelf case, where Judge Lachs, in his dissenting opinion, explained
that "[t)he evidence should be sought in the behavior of a great
number of States, possibly the majority of States, in any case the great
majority of the interested States."81 Furthermore, none of the other
cases in which "General Principles" were relied upon required
"universality of acceptance.,,
Decisions of the ICJ further suggest that the term "civilized nations"
in article 38(l)(c) is not intended to be an added legal element
to evidence "General Principles." If that were the case, such a term
would be discriminatory and incompatible with the United Nations
Charter,82 which recognizes the equality of all Member-States. Judge
Ammoun of the ICJ suggested that article 9 of the ICJ Statute also
requires the court to recognize "as a whole the representation of the
main forms of civilization and of the principal legal systems of the
world."83 The import of that statement is consonant with comparative
legal research technique, which would look to representative
States among the world's major legal systems. Such an inquiry would
not seek to identify norms, but rather the sameness of precepts upon
which norms are predicated.
In evidencing a "General Principle," the PCIJ and ICJ have also
looked for · expressions of principles in the international context.
"General Principles" have been identified by examining State conduct,
policies, practices, and pronouncements at the international level,
which may be different from domestic legal principles. Thus, States'
foreign policies, bilateral and multilateral treaties, international pronouncements,
collective declarations, writings of scholars, international
case law, and international customs, even when unperfected, are
valid areas of inquiry from which to determine the existence of "principles"
within the international context.
In the Asylum Case, the ICJ was required to determine if a State
had the competence to unilaterally qualify an offense for the purpose
of granting asylum to a citizen of another State charged with organiz-
80. See South West Africa Cases (Ethiopia v. S. Afr.; Liberia v. S. Afr.), 1966 I.C.J. 4, 299
(July 18) (Tanaka, J., dissenting).
81. See North Sea Continental Shelf (W. Ger. v. Den.; W. Ger. v. Neth.), 1969 I.C.J. 101,
229 (Feb. 20) (Lachs, J ., dissenting).
82. North Sea Continental Shelf (W. Ger. v. Den.; W. Ger. v. Neth.), 1969 I.C.J. 101, 133
(Feb. 20) (Ammoun, J., separate opinion).
83. Id.
Annex 282
790 Michigan Journal of International Law [Vol. 11:768
ing a military rebellion in Peru. The court used "General Principles,,
in order to determine the policies underlying diplomatic asylum and
examined United States and Latin American international legal practice,
including certain international instruments of a regional and bilateral
nature. 84 Judge Castilla noted, "[a]t the Montevideo
Conference of 1933, the [asylum] principle was accepted by the United
States of America following the development of the policy of President
Franklin Roosevelt; and pursuant to the confirmation of juridical
equality of American States. " 85
Similarly, in the South West Africa Cases (1962), Judge Jessupfound
that the "principle of separation" is evidenced in the practice of
states as found in such publications as "Tobin, Termination of Multipartite
Treaties (1933); Stephens, Revisions of the Treaty of Versailles
(1939); [and] Hoyt, The Unanimity Rule in the Revision of Treaties: A
Reexamination ( 1959). " 86
The two courts have also looked at prior court decisions, and applied
them by close analogy to cases at bar. 87 However, the jurisprudence
of the PCIJ and the ICJ cannot be considered as having
precedential authority unless it is in harmony with the international
law or "General Principles" "common to all nations. " 88
The judges have been known to look for evidence of a principle at
the national level by examining all the branches of national law,
whether public, constitutional, administrative, private, commercial, or
procedural. For example, in the International Status of South West
Africa case, Judge McNair, in his separate opinion, examined the
American and English laws on trusts in order to define the policies
and principles underlying the League of Nations Mandate System,
which was a newly established institution in the international sphere. 89
As stated above, however, national legal principles do not automatically
become part of the international law:
The way' in which international law borrows from this source is not by
means of importing private law institutions "lock, stock and barrel,"
ready made and fully equipped with a set of rules . ... (T]he true view of
the duty of international tribunals in this matter is to regard any features
or terminology which are reminiscent of the rules and institutions of pri-
84. See Asylum Case (Colom. v. Peru), 1950 I.C.J. 359, 369 (Mar. 3) (CastiJla, J., dissenting).
85. Id. at 378-79 (emphasis added).
86. See South West Africa Cases (Ethiopia v. S. Afr., Liberia v. S. Afr.), 1962 I.C.J. 319,408
(Dec. 21) (Jessup, J., separate opinion).
87. See S.S. "Lotus" (Fr. v. Turk.), 1927 P.C.I.J. (ser. A) No. 10, at 16 (Sept. 7).
88. Id.
89. See International Status of South West Africa, 1950 I.C.J. 146, 148-49 (July 1 I) (McNair,
J., separate opinion).
Annex 282
Spring 1990) Functional Approach To "General Principles" 791
vate law as an indication of policy and principles rather than as directly
importing these rules and institutions. 90
The courts have sometimes looked to the origins of a given legal
system, such as Roman Law, for the Romanist-Civilist systems. In
some cases, resort to such origins leads to the examination of natural
law.91 In the words of Judge Tanaka, "[I]nternational protection of
human rights ... is not the application by analogy of a principle or
norm of private law to a matter of international character . . . only
one and the same law exists and this is valid through all kinds of
human societies in relationships of hierarchy and co-ordination. "92
It should be noted that in applying "General Principles," the
courts have not always been clear on where the -demarcation line
should be drawn between customary law and "General Principles." In
some instances, "General Principles" are barely distinguishable from
customary international law.93 In other cases, "General Principles"
and customary law are clearly set apart. However, it does appear that
some principles that are not encompassed in customary law may be
implicated by the term "General Principles." As Lammers suggested,
certain principles cannot be evidenced in customary law because they
are fairly broad in scope and have not yet been applied in State practice,
or ~ave been applied only in a limited form. 94
B. Reliance on "General Principles" by the International Courts
In the view of Judge Hudson, "principles'' in judicial practice have
loomed "less large" than in _the literature which they have inspired. 95
Judge Hudson's opinion holds true for the jurisprudence of both PCIJ
and the ICJ. An examination of the two courts' decisions reveals that
the judges have only sparingly employed "General Principles" in their
opinions. In the words of Lauterpacht, "[e]xperience has shown that
the main function of 'general principles of law' has been that of a
90. Id. at 148.
91. For a discussion of the relationship between natural law and positive law, see North Sea
Continental Shelf (W. Ger. v. Den.; W. Ger. v. Neth.), 1969 I.C.J. IOI, 193-95 (Feb. 20)
(Tanaka, J., dissenting).
92. See South West Africa Cases (Ethiopia v. S. Afr.; Liberia v. S. Afr.), 1966 I.CJ. 4, 296
(July 18) (Tanaka, J., dissenting).
93. In the Asylum Case (Colom. v. Peru), 1950 I.C.J. 266, 369 (Mar. 3) (Castilla, J., dissenting),
M. Castilla indicated, "These principles of international law cannot be other than those·
which have been stated in the various treaties on asylum . ... Acceptance of the application of
the principles of international law entails recognition of principles which may be derived from
international custom."
94. See Lammers, supra note 13, at 72. Such principles include the principle of freedom and
the principle of the high seas. For a discussion of these principles, see S.S. "Lotus" (Fr. v.
Turk.), 1927 P.C.l.J. (ser. A) No. 10 (Sept. 7).
95. See M. HUDSON, supra note 70, at 6I0-12, cited in M. WHITEMAN, supra note 37, at 91.
Annex 282
792 Michigan Journal of International Law [Vol. 11:768
safety-valve to be kept in reserve rather than a source of law of frequent
application."96 That may explain why on some occasions, when
"General Principles" are resorted to, the judges do not refer to them
eo nomine or by express reference to article 38. Thus, those who
feared that "General Principles" would lead to the demise of positivism
are proven w,t.ong. 97
Positivists espouse the view that no gaps or ambiguities exist in
international customs and conventions because the only international
law that exists is that which has been stated in positive terms. That
which has not been established in positive terms i~ outside the scope of
the law. Consequently, there is no need for "General Principles." To
take this position, however, is to deny reality and the needs of the
international legal system. That which is not covered by positive international
law exists and does give rise to conflicting and contentious
situations in need of judicial or legally based resolutions. Thus, there
is a need for "General Principles" to fill the gaps of positive law. That
is why this source of law was included in article 38 of both the PCIJ
and the ICJ Statutes.98
The real unarticulated fear of positivists is that "General Principles"
can be abused and can become a source of judge-made law. The
record of the PCIJ and the ICJ belies that fear.
1. "General Principles" as relied upon by the Permanent Court of
International Justice
.
As stated above, the Statute of the PCIJ authorized that court to
apply "General Principles of Law Recognized by Civilized Nations"
to cases before it. 99 In a number of cases, the court did resort to and
apply, "General Principles."100 As will be illustrated below, the extent
of the PCIJ's reliance on "General Principles" and the degree of specificity
with which the court utilized them varied from case to case.
One of the earliest references to "General Principles" by the PCIJ
is found in the Mavrommatis Palestine Concessions case. 101 In his dissenting
opinion, Judge John Bassett ~oore asserted that the require-
96. See THE DEVELOPMENT OF INTERNATIONAL LAW, supra note 6, at 166.
97. See generally M. Bos, supra note 7, for a discussion of general principles of law and legal
positivism.
98. See supra notes 43-44 and accompanying text.
99. STATUTE OF THE PERMANENT COURT OF INTERNATIONAL JUSTICE art. 38(1)(3).
100. See generally B. CHENG, supra note 6.
101. Mavrommatis Palestine Concessions (Greece v. Gr. Brit.),1924 P.C.I.J. (ser. A) No. 2
(Aug. 30).
Annex 282
Spring 1990) Functional Approach To "General Principles" 793
ment that a court have jurisdiction before it can act is one of the
principles common to all legal systems. As he stated:
There are certain elementary conceptions common to all systems of jurisprudence,
and one of these is the principle that a court of justice is
never justified in hearing and adjudging the merits of a cause of which it
has not jurisdiction .... The requirement of jurisdiction, which is universally
recognised in the national sphere, is not less fundamental and
peremptory in the international. 102
In several early cases, the PCIJ based its rulings on "General Principles,"
but did not articulate the basis of its specific reliance on the
principle in question. The PCIJ, in its Advisory Opinion on the Exchange
of Greek and Turkish Populations, declared that there is a
"self-evident" principle, "according to which a State which has contracted
valid international obligations is bound to make in its legislation
such modifications as may be necessary to ensure the fulfilment of
the obligations undertaken." 103 Similarly, in the case of Certain German
Interests in Polish Upper Silesia, 104 the court indicated that its
laws of procedure contain not only the "Statute or Rules which govern
-the Court's activities" but also "general principles of law." 105 Again
failing to specify the basis of its reliance on a given principle, the court,
in its Advisory Opinion in The Frontier Between Iraq and Turkey case,
simply acknowledged that the "well-known rule that no one can be
judge in his own suit holds good.''I06 Finally, ·in its advisory opinion
in Greco-Turkish Agreement of December 1, 1926, the court simply
asserted "the principle that, as a general rule, any body possessing jurisdictional
powers has the right in the first place itself to determine
the extent of its jurisdiction .... " 107
In the Chorzow Factory (Judgment) case, 108 the court continued to
rely on "General Principles," but unlike some of the previous cases, it
noted the basis of the principle - nullus commodum capere protest de
injuria sua propria - upon which it relied. The court held that:
It is, moreover, a principle generally accepted in the jurisprudence of international
arbitration, as well as by municipal courts, that one Party can-
102. Mavrommatis Palestine Concessions (Greece v. Gr. Brit.), 1924 P.C.I.J. (ser. A) No. 2,
at 57-59 (Aug. 30) (Moore, J., dissenting).
103. Exchange of Greek and Turkish Populations (Greece v. Turk.), 1925 P.C.l.J. (ser.B)
No. 10, at 20 (Feb. 21).
104. Certain German Interests in Polish Upper Silesia (Ger. v. Pol.), 1925 P.C.I.J. (ser. A)
No. 6 (Aug. 25).
105. Id. at 19.
106. Article 3, Paragraph 2 of the Treaty of Leusenne (Frontiers Between Turkey and Iraq),
1925 P.C.I.J. (ser. B) No. 12, at 32 (Nov. 21).
107. Interpretation of the Greco-Turkish Agreement of Dec. l, 1926, 1928 P.C.I.J. (ser. B)
No. 16, at 20 (Aug. 28).
108. Factory at Chorz6w (Ger. v. Pol.), 1927 P.C.I.J. (ser. A) No. 9 (July 26).
Annex 282
794 Michigan Journal of International Law [Vol. ll:768
not avail himself of the fact that the other has not fulfilled some
obligation or has not had recourse to some means of redress, if the former
Party has, by some illegal act, prevented the latter from fulfilling the
obligation in question, or from having recourse to the tribunal which
would have been open to him. 109
The S.S. "Lotus" case1 w is perhaps the most widely cited decision
of the PCIJ. Among other reasons, the case is important because it
instructs one on how to ascertain if a "General Principle" exists. The
court stated that the issue in the case was "whether or not under international
law there is a principle which would have prohibited Turkey,
in the circumstances of the case before the Court, from prosecuting
Lieutenant Demons.,, 111 The court went on to explain that:
[I]n the fulfilment of its task of itself ascertaining what the international
law is [the court] has included in its researches all precedents, teachings
and facts to which it had access and which might possibly have revealed
the existence of one of the principles of international law .... The result
of these researches has not been to establish the existence of any such
principle. 112
In its Chorzow Factory (Claim for Indemnity) decision, 113 which
involved the German government seeking damages for harm sustained
by two of its companies caused by the express acts of the Polish government,
the PCIJ again articulated the basis of the "General Principle"
upon which it relied. The court stated that:
The essential principle contained in the actual notion of an illegal act -
a principle which seems to be established by international practice and in
particular by decisions of arbitral tribunals - is that reparation must, as
far as possible, wipe out all the consequences of the illegal act and reestablish
the situation which would in all probability, have existed if that
act had not been committed. 114
The court thus affirmed that "it is a principle of international law, and
even a general conception of law, that any breach of an engagement
involves an obligation to make reparation." 115
The Lighthouses case116 serves as another example of the court
stating where the "General Principle" in question is found: "Contracting
Parties are always assumed to be acting honestly and in good
l09. Id. at 31 (emphasis added).
110. S.S. "Lotus" (Fr. v. Turk.), 1927 P.C.I.J. (ser. A) No. 10 (Sept. 7).
111. Id. at 21. More specifically, the issue was whether Turkey acted in conflict with principles
of international law when it assumed jurisdiction over an officer of a French ship which had
collided with a Turkish ship on the high seas.
112. Id. at 31 (emphasis added).
113. Chorzow Factory (Ger. v. Pol.) 1928 P.C.I.J. (ser. A) No. 17 (Sept. 13).
J 14. Id. at 47 (emphasis added).
115. Id. at 29.
116. Lighthouses (Fr. v. Greece), 1934 P.C.U. (ser. A/B) No. 62 (Mar. 17).
Annex 282
Spring 1990] Functional Approach To "General Principles" 795
faith. That is a legal principle, which is recognized in private law and
cannot be ignored in international law." 117
In the Serbian Loans case 118, the court referred to a couple of proposed
"General Principles of Law." The court found that the requirements
of one principle, however, were not met: "[ w ]hen the
requirements of the principle of estoppel to establish a loss of eight are
considered, it is quite clear that no sufficient basis has been shown for
applying the principle in this case. There has been no clear and unequivocal
representation by the bondholders upon which the debtor
State was entitled to rely and has relied .... " 119 The court went on to
reject the "principle" of impossibility of performance, stating: "It cannot
be maintained that war itself, despite its grave economic consequences,
affected the legal obligations of the contracts between the
Serbian Government and the French bondholders."120 In the companion
case to Serbian Loans, Brazilian Loans, the court did accept
and apply the principle of interpretation contra proferentum, asserting·
it as a "familiar rule for the construction of instruments." 121
In the Advisory Opinion concerning the Greco-Bulgarian "Communities,
" an issue arose as to which of two conflicting provisions - a
convention or a municipal law - should be preferred. 122 The PCIJ
held that "it is a generally accepted principle of international law that
in the relations between Powers who are contracting Parties to a
treaty, the provisions of municipal law cannot prevail over those of the
treaty." 123 In another of its Advisory Opinions, the case of Treatment
of Polish Nationals in Danzig, the court again referred to "General
Principles of Law," declaring:
It should . . . be observed that, while on the one hand, according to
generally accepted principles, a State cannot rely, as against another
State, on the provisions of the latter's Constitution, but only on international
law and international obligations duly accepted, on the other hand
and conversely, a State cannot adduce as against another State its own
Constitution with a view to evading obligations incumbent upon it under
international law or treaties in force. 124
The PCIJ continued its use of "General Principles" - though
117. Id. at 47 (Seferiades, J., separate opinion).
118. Serbian Loans (Fr. v. Serb.-Croat.-Slovans), 1929 P.C.l.J. (ser. A) Nos. 20, 21, at 5
(July 12).
119. Id. at 39.
120. Id. at 39-40.
121. Brazilian Loans (Fr. v. Braz.), 1929 P.C.I.J. (ser. A) Nos. 20. 21 (July 12).
122. Greco-Bulgarian Communities, 1930 P.C.I.J. (ser. B) No. 17, at 32 (July 31).
123. Id. at 32.
124. Treatment of Polish Nationals in Danzig, 1932 P.C.I.J. (ser. A/B) No. 44, at 24 (Feb.
4).
Annex 282
796 Michigan Journal of International Law [Vol. ll:768
without specific reference to them - in the Legal Status of Eastern
Greenland case, in which Norway was "estopped" from occupying
certain territories in eastern Greenland. 125 The court held:
In accepting these bilateral and multilateral agreements [the Treaty of
1826 and the Danish-Norwegian Agreements] as binding upon herself,
Norway reaffirmed that she recognized the whole of Greenland as Dan•
ish; and thereby she has debarred herself from contesting Danish sover•
eignty over the whole of Greenland, and, in consequence, from
proceeding to occupy any part of it. 126
Finally, in the case of Electricity Company of Sofia and Bulgaria
(Interim Protection), the PCIJ considered as a "principle universally
accepted by international tribunals" that "parties to a case must abstain
from any measure capable of exercising a prejudicial effect in
regard to the execution of the decision to be given and, in general, not
allow any step of any kind to be taken which might aggravate or extend
the dispute." 127
2. "General Principles" as relied upon by the International Court
of Justice.
The International Court of Justice continued the PCIJ's tradition
of utilizing "General Principles." Like its predecessor, the ICJ frequently
failed to articulate the method or process by which to identify
the existence of a "General Principle" under article 38( 1 )( c ). Moreover,
it has given no real guidance regarding how to employ a "General
Principle" in a legal dispute between States. The following is an
examination of some ICJ cases which resorted to "General Principles
of Law." 128
The Temple_ of Preah Vihear case is indicative of the ICJ's reluctance
to use "General Principles" and its failure to articulate what the
contents of "General Principles" are. The court failed to refer to the
"principle" of "preclusion" eo nomine and instead merely stated: "qui
tacet consentire yidetur si loqui debuisset ac potuisset" (he who is silent
appears to consent if he should, and could, have spoken). 129 Judge
Percy Spender's dissenting opinion, however, articulated the principle
of "preclusion" by referring to it eo nomine and explaining how the
125. Legal Status of Eastern Greenland (Den. v. Nor.), 1933 P.C.I.J.(ser. A/B) No. 53 (Apr.
5).
126. Id. at 68-69.
127. Electricity Company of Sofia and Bulgaria (Belg. v. Bulg.), 1939 P.C.I.J. (ser. A/B) No.
79, at 199 (Dec. 5).
128. See supra notes 78, 80-86, 89-93, and accompanying text.
129. Temple of Preah Vihear (Cambodia v. Thailand), 1962 I.C.J. 6, 23 (June 15). In the
Temple of Preah Vihear case, the court merely referred to the principle of plea of error as an
"established rule of law."
Annex 282
Spring 1990] Functional Approach To "General Principles" 797
principle operates to prevent a State from challenging a position previously
taken expressly or impliedly which one party has relied upon.
He then criticized the judgment for treating the principle as a "formless
... maxim," instead of an instrument of substantive international
law.130
One principle that the ICJ has specifically applied is that of good
faith.1 31 In the Nuclear Test case, which involved a dispute between
Australia and France concerning the atmospheric testing of nuclear
weapons in the Pacific Ocean, the court recognized that the principle
of good faith governs the creation and performance of an international
legal obligation: "Just as the very rule of pacta sunt servanda in the
law of treaties is based on good faith, so also is the binding character
of an international obligation assumed by unilateral declaration." 132
In its advisory opinion in the Western Sahara case, the ICJ examined
the question of self-determination and considered it a fundamental
principle. 133 Obviously, the court relied upon the existence of
such a principle as arising under international law. 134 In determining
the basis for such a principle, the court examined the United Nations
Charter, various General Assembly resolutions and its own prior
decisions. 135
It should be noted that, in the Right of Passage case, the court
applied a "regional custom," which had only been developed between
India and Portugal and which reflected the will of the two States, and
by-passed "General Principles." In that case, the court was asked to
determine if Portugal had a right of passage between the enclaves of
Dadra and Nagar-Avril, and the coastal district of Daman, and to determine
if India's refusal to allow passage of a proposed delegation of
Portuguese nationals in time of war violated Portugal's rights: The
court concluded:
130. Id. at 143. That approach was consonant with the common law of equity, which the
civilist and socialist systems do not recognize.
131. For a discussion of the good faith principle, see B. CHENG, GENERAL PRINCIPLES OF
LAW AS A SUBJECT FOR INTERNATIONAi... CODIFICATION 35; Schwarzenberger, Trends in the
Practice of the World Court, 4 CURRENT LEGAL PROBS. (M. Keeton & G. Schwarzenberger eds.
1951).
132. Nuclear Tests (Austl. v. Fr.), 1974 I.C.J. 253, 268 (Dec. 20).
133. Western Sahara, 1975 I.CJ. 1, 30-33 (Jan. 3). With specific regard to U.N. General
Assembly practices, the court stated: "The validity of the principle of self-determination, defined
as the need to pay regard to the freely expressed will of peoples, is not affected by the fact that in
certain cases the General Assembly has dispensed with the requirement of consulting inhabitants
of a given territory." Id. at 33.
134. As the court notes, "It [the court] is necessarily called upon to take into account existing
rules of international law which are directly connected with the terms of the request .... "
Id. at 30.
135. Id. at 31-35.
Annex 282
798 Michigan Journal of International Law [Vol. 11 :768
Portugal also invokes . . . the general principles of law recognized by
civilized nations, in support of its claim of a right of passage as formulated
by it. Having arrived at the conclusion that the course of dealings
between the British and Indian authorities on the one hand and the Portuguese
on the other established a practice, well understood between the
Parties ... the Court does not consider it necessary to examine . . . the
general principles of law recognized by civilized nations . . . . 136
"General Principles" have been used to provide a legal solution in
cases where the conventional and custQmary law does not address a
particular legal question; they have thus served a "gap filling function."
In the South West Africa Cases (1962), for example, Judge Jessup's
separate opinion employed "General Principles" to fill a gap in
an existing treaty. In that case, the Republic of South Africa had argued
that the court lacked compulsory jurisdiction because no dispute
existed as envisioned under article 7 of the League of Nations Mandate
(which triggered the court's compulsory jurisdiction). 137 By recognizing
the principle whereby a party may seek adjudication if that party
has a "legal interese' at stake, Jessup rejected South Africa's argument
on the grounds that the parties have a "legal interest" in that the outcome
of the case directly affected their financial and economic inter•
ests. He could also have argued that the meaning of "legal interests"
extends beyond economic interests and applies also to humanitarian
interests. 138
In the lnternariona/ Status of South West Africa case, Judge Arnold
McNair's separate opinion employed "General Principles" in order
to interpret the then-existing League of Nations Mandate system.
In so doing, he relied on Common Law principles applicable to the
law of trusts and he found that an analogy to the mandate system was
appropriate. 139
"General Principles" were also used for "interpretative purposes"
when the conventional or customary international law was obscure or
unclear, and on rare occasions, they have been used to influence the
development of conventional and customary law. In the Right of Pas•
sage case, Judge Wellington Koo used "General Principles" to deter-
136. Right of Passage Over Indian Territory (Port. v. India), 1960 I.C.J. 43 (Apr. 12).
137. South West Africa Cases (Ethiopia v. S. Afr.; Liberia v. S. Afr.), 1962 l.C.J. 319 (Dec.
21). Article 7 reads:
The Mandatory agrees that, if any dispute whatever should arise between the Mandatory
and another Member of the League of Nations relating to the interpretation or the application
of the provisions of the Mandate, such dispute, if it cannot be settled by negotiation,
shall be submitted to the Permanent Court of International Justice provided for by Article
14 of the Covenant of the League of Nations.
Id. at 401.
138. Id. at 425.
139. International Status of South West Africa, 1950 I.C.J. 127, 148-49 (July 11).
Annex 282
Spring 1990] Functional Approach To "General Principles" 799
mine if Portugal had a right of access to the Dadra enclaves. Here,
two conflicting rights existed because Portugal had a sovereign claim
over the enclaves while India claimed the right to passage. Based on
the elementary principle of justice founded on logic and reason which
is evidenced in international customary law, Judge Koo concluded
that a principle dictates that States, as a necessity, have a right of passage
in surrounding territories and suggested Portuguese sovereignty
over the enclaves is subject to the control and regulation by India. 140
Likewise, in the Asylum case, Judge Castilla's dissenting opinion ·resorted
to principles of international law in order to determine if the
doctrine of asylum as evidenced in various conventions enabled Colombia
to unilaterally qualify an offense for the purpose of granting
asylum to a Peruvian citizen charged with organizing a military rebellion
in Peru. 141
There are a number of "General Principles" arising out of the international
law of treaty interpretation and also out of the law of contracts
in national legal systems, and the court frequently resorts to
them when dealing with problems that arise when it is adjudicating
claims arising out of treaties and international contracts. For example,
in the South West Africa Cases (1962), Judge Jessup employed one
of these principles - that of "separateness'' of treaty provisions -
which may be resorted to when a treaty provision has become inoperative.
142 In that case, the question arose by reason of the fact that the
League of Nations was no longer in existence. 143 By using the principle
of "separateness," Jessup determined that the life of the League ..
was not necessary to the operation of a treaty provision (article 7). 144
Lastly, some cases hold that "General Principles" can also be derived
from the natural law. As stated above, in the South West Africa
Cases (1966), Judge Tanaka suggested that article 38(l)(c) incorporates
natural law into international law. Thus, in his dissenting opinion,
he indicated that the natural law recognizes the principle of
protection of human rights and that such rights are recognized and
deserving of protection everywhere because they pertain to
individuals. 145
140. Right of Passage Over Indian Territory (Port. v. India), 1960 I.C.J. 66-68 (Apr. 12).
141. See Asylum Case (Colom. v. Peru), 1950 I.C.J. 359 (Mar. 3).
142. See South West Africa Cases (Ethiopia v. S. Afr.; Liberia v. S. Afr.), 1962 I.C.J. 319,
408 (Dec. 21 ).
143. Id.
144. Id. at 414.
145. See South West Africa Cases (Ethiopia v. S. Afr.; Liberia v. S. Afr.), 1966 I.CJ. 4, 276
(July 18).
Annex 282
..
800 Michigan Journal of International Law [Vol. 11:768
C. The Function of uGeneral Principles" As Revealed by The
Jurisprudence of International Courts
As has been shown, both the PCIJ and the ICJ have made use of
"General Principles" in their decisions. However, when the two
courts have drawn upon "General Principles," their articulations
thereof have been vague. In practice, both the PCIJ and ICJ have
been cautious and have often restricted "General Principles" to a limited
role that some would see as a subsidiary function, though nothing
in the drafting history of the two courts' Statutes warrants that interpretation.
However, one cannot rely on the caution of the courts as
evidence that they intended to place "General Principles" in a subsidiary
position to other sources of international law.
As demonstrated above, scholars have attempted to articulate the
meaning and functions of "General Principles" in international law,
but there has been some disagreement in their positions. Some Soviet
writers suggest that "General Principles" can never play a normative
role in international law because of the divergence between Soviet law
and the national law of other States. 146 That position may not be valid
for long, given changing international and national perspectives. According
to Lammers, however, this early Soviet position is untenable.
The first sentence of article 38(l)(c) explicitly requires that "the
sources of law ... must be considered as sources of international law,
i.e., legal norms regulating the relations between States as subjects of
international law," 147 and the USSR is bound by the Statute.
"General Principles" have been used by the two courts in order to
fill gaps or lacunae in conventional and customary international
law. 148 These gaps or lacunae arise where conventions and customs
(whether general, particular, or regional) fail to address particular
legal issues in dispute.
"General Principles" have also been employed as a means of interpreting
conventions. They are useful for interpreting words not susceptible
to an ordinary or common meaning interpretation, or as a
means for ascertaining the intent of the parties (presumably objec-
146. See Lammers, supra note 13, at 54; see a~so G.I. TUNKIN, supra note 60.
147. Lammers, supra note 13, at 56.
148. Judge Fernandes advocated this position in the Right of Passage ca~e:
The priority given by Article 38 of the Statute of the Court to conventions and to custom in
relation to the general principles of law in no way excludes a simultaneous application of
those principles and of the first two sources of law. It frequently happens that a decision
given on the basis of a particular or general convention or of a custom requires recourse to
the general principles . . . . A court will have recourse to those principles to fill gaps in the
conventional rules. or to interpret them.
Right of Passage Over Indian Territory (Port. v. India), 1960 I.C.J. 123, 140 (Apr. 12) (Fernandes,
J., dissenting) (emphasis in original).
Annex 282
Spring 1990} Functional Approach To "General Principles" 801
tively). In that respect, "General Principles" may merge with the customary
law of treaty interpretation.
"General Principles'' are also embodied in customary law if for no
other reason than the fact that customary practice may emerge from
or be based on pre-existing "principles." Mutatis mutandi, customs,
when consistently practiced, becom·e "principles." Furthermore, unperfected
custom and opinio juris not followed by practice may evidence
a given "principle." Thus, there is an intertwining relationship
between customs and treaties where the latter evidence or are a source
of custom.
In general, the two courts have adhered to an apparently more
positivistic approach by according conventional and customary law a
presumptive priority in application, except where these conflict with a
jus cogens "principle." But whenever "General Principles" are embodied
in conventions and customs, it is difficult to conceive how they
can be of a lesser standing. Nevertheless, these two sources are presumably
given priority standing because they are a more objectively
ascertainable reflection of the will of the States.
The two courts have, however, occasionally strayed from this caution
and allowed "General Principles" to serve a "normative function"
in the regulation of State conduct whenever "[the State's] infraction
cannot be looked upon as a mere incident of the proceedings." 149 In
that sense, the two courts have overridden the presumption of freedom
of action of States.
VI. "GENERAL PRINCIPLES" AND Jus COGENS
The very words 'Yus cogens" mean "the compelling law" and, as
such, ajus cogens principle holds the highest position in the hierarchy
of all other norms, rules, and principles. It is because of that standing
that jus cogens principles have come to be known• as "peremptory
norms." However, scholars are in disagreement as to what constitutes
a peremptory norm and how a given rule, norm, or principle rises to
that level. The basic reason for this is that the underlying philosophical
premises of the scholarly protagonist view are different. These
philosophical differences are also aggravated by . methodological
disagreements.
Scholars differ as tojus cogens substance, sources, conten~ (the positive
or norm-creating elements), evidentiary elements (such as universality
or less), and value-oriented goals (for example, preservation of
world order and safeguarding of fundamental human rights). Further-
149. Temple of Preah Vihear (Cambodia v. Thailand), 1962 I.C.J. 6, 41~42 (June 15).
Annex 282
802 Michigan Journal of International Law [Vol. 11:768
more, there is no scholarly consensus on the methods by which to
ascertain the existence of such a norm, nor to assess its significance,
determine its contents, identify its elements, determine its priority over
other competing or conflicting rules, norms, or principles, assess the
significance and outcomes of prior application, and gauge its future
applicability in light of the value-oriented goals sought to be
achieved. 150 Perhaps we cannot expect much progress in this and
other multi-disciplinary approaches in an era where the legal generalist
has become a downgraded rarity and the highly narrow specialist
the upgraded generality. What is needed is a multi-disciplinary approach
that can bring together specialists in public and private international
law, jurisprudence, philosophy of law and legal methods, and
empiricists of various backgrounds. Without such an approach, we
will continue to be faced with confusion in this important area of law.
Some scholars see }us cogens and customary international law as
the same, 151 others properly distinguish between custom and peremptory
norms, 152 while still others question whether }us cogens is simply
not another semantical way of describing certain "General Principles,"
which for a variety of reasons rise above other "General Principles."
153 No matter how it is described, this appears to be a problem
of hierarchy of applicable law. Arguments regarding the justification
for this hierarchy continue to feed the flow of legal literature on the
subject, albeit too frequently shrouded in such metaphysics that the
ordinary legal practitioner has difficulty following, let alone applying,
these doctrines to actual cases and controversies. While doctrinal debate
is the grist of scholarship, it is in this case all too frequently ambiguous,
and, at times, confusing. To that extent, it is the bane of
practitioners, whether judges or advocates. Worse yet, it renders no
l 50. See generally Christenson, supra note 22; Parker & Neylon, Jus Cogens: Compelling the
Law of Human Rights, 12 HASTINGS INT'L & COMP. L. REV. 411 (1989); Tunkin, The Contemporary
Theory of Soviet International Law, 31 CURRENT LEGAL PRODS. 177 (1978); Rubanov,
supra note 60; I. BROWNLIE, PRINCIPLES OF PUBLIC INTERNATIONAL LAW 512-15 (3d ed.
1979); G. SCHWARZENBERGER, INTERNATIONAL LAW AND ORDER 5 (]971); 1 H. LAUTERPACHT,
INTERNATIONAL LAW 113 (E. Lauterpacht ed. 1970); see also Onuf & Birney, Peremptory
Norms of International Law: Their Source, Function and Future, 4 DENVER J. INT'L L. &
Po1:v 187 ( 1974), which states:
Peremptory norms of international law (jus cogens) have been the subject of much recent
interest. In light of their extensive and quite unprecedented treatment by the International
Law Commission and the Vienna Conference on the Law of Treaties, it may be surprising
that attention has not been greater. At the same time, inquiry into the relationship between
peremptory norms and the sources and functions of international law have been virtually
non-existent. This is indeed surprising, given the recent substantial interest in these areas as
part of a larger "theoretical explosion" in international legal studies.
Id. at 187.
151. A. D'AMATO, THE CONCEPT OF CUSTOM IN INTERNATIONAL LAW 132 (1971).
152. See Christenson, supra note 22.
153. Janis, Jus Cogens: An Artful Nor a Scientific Reality, 3 CONN. J. INT'L L. 370 (1988).
Annex 282
Spring 1990] Functional Approach To "General Principles" · 803
service to what this writer deems an exigent necessity of law: namely,
certainty .154
To be sure, certainty exists in some instances. For example, the
Vienna Convention on the Law of Treaties155 uses the term "peremptory
norm,"156 but its context is more justified by the reasons advanced
by Professor D' Amato as being · the common identity of
customary rules157 than it is by an unidentified higher law.158 The
Law of Treaties indeed embodies customary rules which have emerged
from international and national legal experience, as well as national
legal principles of the law of contracts. 159 However, adding certain
value-laden adjectives to what may be either a custom derived from a
principle, or a custom embodying a principle, or a principle reflecting
a custom, does not add much to the improved understanding of the
concept. Furthermore, the frequent references to jus cogens, or its
other appellation, "peremptory norm," or the undisciplined use of
such terms as "compelling," "inherent," "inalienable," "essential,"
"fundamental" and "overriding," does not contribute greater clarity
to the concept. Perhaps it is as Verdross stated: "no definition is necessary
because the idea of jus cogens is clear in itself." 160 This facile
way out of a difficult conundrum is reminiscent of Justice Stewart's
statement regarding the definition of obscenity: " ... perhaps I could
never succeed in intelligibly doing so. But I know it when I see it." 161
A naturalist would hardly have any difficulty identifying higher
principles of positive law based on the values and norms of that philosophy.
162 Conversely, positivists, both from the Common Law and Romanist-
Ci vilist-Germanic traditions, question the sources of such a
value-laden approach. Others simply reject subjective sources of law
because they contravene the certainty of the law. 163 Thus, by implica-
154. See, e.g., F. LoPEZ DE ONATE, LA CERTEZZA DEL DIRITIO (1968).
155. Vienna Convention on the Law of Treaties, May 23, 1969, U.N. Doc. A/CONF. 39/27.
156. Id. art. 53; see, e.g., C. ROZAKIS, THE CONCEPT OF Jus COGENS IN THE LAW OF
TREATIES (1976).
151. See A. D'AMATO, supra note 151.
158. See Janis, The Nature of Jus Cogens, 3 CONN. J. INT'L L. 359, 360 (1988).
159. This position is affirmed by the RESTATEMENT OF THE FOREIGN RELATIONS LAW OF
THE UNITED STATES (REVISED)§ 102 (Tent. Draft No. 6, 1985).
160. 1 Y.B. INT'L L. COMM. 63, 66-67 (1963); Verdross, Jus Dispositivium and Jus Cogens
in International Law, 60 AM. J. INT'L L. 55, 57 (1966).
161. Jacobe11is v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J., concurring).
162. For a survey, see R. POUND AN INTRODUCTlON TO THE PHILOSOPHY OF LAW (1922)
(discussing Beccaria, Grotius, and de Vattel), For a naturalist perspective, see J. MARITAIN, LES
DROITS DE L'HOMME ET LA Loi NATURELLE (1942).
163. See H.L.A. HART, THE CONCEPT OF LAW (1961); Hart, Positivism and the Separation
of Law and Morals, 71 HARV. L. REV. 593 (1958). Contra D'Amato, The Moral Dilemma of
Positivism. 20 VAL. U.L. REV. 43 (198S) (wherein he states initially: "Not only.do positivists
Annex 282
804 Michigan Journal of International Law [Vol. 11:768
tion, some positivists seek a value-neutral law, though of course there
can be no law which is value-neutral. 164 Most positivists acknowledge
that law embodies values, and seek no more than to have positive law
elaborated to avoid resorting to the subjectivity of a higher law whose
determination and application is left to the changing values of those
entrusted with its identification and application.
Admittedly, the generality of "General Principles" must be preserved
as a means to advance international law. Thus, it appears inevitable
that the flexibility needed for the growth of international law
must be supplied by a greater degree of flexibility in identifying "General
Principles," among them those that rise to the level ofjus cogens.
The International Court of Justice, in its opinion in Nicaragua v._
United States: Military and Paramilitary Activities in and Against Nicaragua,
165 relied on jus cogens as a fundamental principle of international
law. However, that case also demonstrates the tenuous
insist upon separating law from morality, but they also appear to be unable to deal with moral
questions raised by law once the two are separated. This inability stems, I believe, from their
simultaneous attempt to assert and to prove that law and morality are separate; the argument
reduces to a vicious circle."); D'Amato, The Relation of the Individual to the State in the Era of
Human Rights, 24 TEX. INT'L L.J. 1 (1989); P. DEVLIN, THE ENFORCEMENT OF MORALS
(1968); J. BENTHAM, A FRAGMENT ON GOVERNMENT AND AN INTRODUCTION TO THE PRINCIPLES
OF MORALS AND LEGISLATION (W. Harrison ed. 1948); Cohen, Moral Aspects of the
Criminal Law, 49 YALE L.J. 987 (1940); see also Onuf & Birney, supra note 150, who state:
The concept of peremptory norms originated in the thinking of Western publicists. Their
faith in Western culture and institutions shaken by the convulsions of recent decades, these
individuals were prompted by a desire to strengthen the international legal order as a vehicle
for justice and order. Yet the concept was embodied in the Vienna Convention at the insistence
of Asian, African, and Latin American states for altogether different purposes-purposes
which looked to the future rather than the past. Specifically, these states saw the
concept of peremptory norms as both an immediate symbol and eventual instrumentality_ for
restructuring the international legal order.
It would be instructive at this point to view peremptory norms as a subset of "general principles"
of international law, which is something they would seem to be almost as a matter of
definition. Non-Western states have demonstrated an active concern for establishing the
importance and defining the content of these general principles. The latter task has proven
exceedingly difficult and where successful has been undertaken at a level of considerable
generality. Inasmuch as general principles are inefficient for identifying individual instances
of deviant behavior, we might conclude that their function is not specifically constraintoriented.
The major alternative is that they perform a symbolic function. Concretely, this
could mean that such principles stand as generally understood and accepted characterizations
of the abiding concerns of the international community. Apparently, general principles
perform a service comparable to myth in any culture. _ A substantial change in the
thematic content of such symbols signals the emergence of new concerns in the community
including particularly the concern of its newer, more restless members.
Id. at 195-96.
164. See Bassiouni, Ideologically Motivated Offenses and the Political Offenses Exception in
Extradition-A Proposed Juridical Standard for an Unruly Problem, 19 DEPAUL L. REV. 217
(1969); see also Frank & Senecal, Porfiry's Proposition: Legitimacy and Terrorism, 20 VAND. J.
TRANSNAT' L. L. 195 (1987); Blakesley, Terrorism, Law and Our Constitutional Order, 60
C0LUM. L. REV. 471, 479-87 (1989).
165. Military and Paramilitary Activities in and Against Nicaragua (Nicar. v. U.S.), 1986
I.C.J. 14. See generally Appraisals of the ICJ's Decision: Nicaragua v. United States (Merits) , 81
AM. J. INT'L L. 77 (1987).
Annex 282
Spring 1990] Functional Approach To "General Principles" 805
relativity of the use of principles in the resolution of cases involving
ideological or political issues.
This wr_iter's understanding of jus cogens is that it is essentially a
label placed on a principle whose perceived importance, based oncertain
values and interests, rises to a level which is acknowledged to be
superior, and thus capable of overriding another norm, rule, or principle
in a given instance. However, this definition leaves open the differences
of values, philosophies, goals and strategies of those who claim
the existence of the norm in a given situation and its applicability to a
given case or controversy.
Admittedly, almost all the operative terms used in describing jus
cogens are value-laden and susceptible of multiple definitions based on
differing concepts. They are thus capable of producing several outcomes,
some contradictory. 166 Assuming, however, the validity of the
issues raised, one must ask the next logical question: in what way are
these issues different from those concerning "General Principles?"
Surely, it is obvious that these ar.e fundamental legal issues which
every legal system has been forced to confront, and for which no definitive
answer can, by the nature of the question, ever be found. One
must also wonder whether the debate is not really more of a methodological
rather than a substantive one. Positivists would probably find
a way to reason, for example, that positive law must be obeyed, but
that the absence of substantive or formal legitimacy for positive law
invalidates its legitimacy. In this case, most positivists would deem
such a law null and void~ and argue that it need not be followed. The
best example of such a situation arises with respect to the non-applicability
of the "defence of obedience to superior orders,, to a patently
illegal order. 167
The problem of technical positivism becomes more acute when one
seeks to fill a void in positive law in the face of an obvious and palpable
injustice, such as with respect to "Crimes Against Humanity,H as
articulated in the London Charter of August 8, 1945.168 After all, the
specific crimes, as enunciated in article 6(c) of the Charter, did not
exist in positive international criminal law until the Charter,s promul-
166. See, e.g., McDougal, Laswell & Reisman, The World Constitutive Process of Authoritative
Decision Making, in 1 THE FUTURE OF THE INTERNATIONAL LEGAL ORDER 73 (R. Falk &
C. Black eds. 1969).
167. See Y. DINSTEIN, THE DEFENCE OF "OBEDJENCE TO SUPERIOR ORDERS" IN INTERNATIONAL
LAW (1965); L. GREEN, SUPERIOR ORDERS IN NATIONAL AND INTERNATIONAL
LAW (1976).
168. The London Charter (accompanying the London Agreement), Aug. 8, 1945, 82
U.N.T.S. 279.
Annex 282 .
806 Michigan Journal of International Law [Vol. 11:768
gation thereof. 169 In that respect, a conflict exists between the theories
ajus cogens advocate would advance about the higher legal value to be
observed by prosecuting such offenders, and another principle whose
values and goals are, at least in principle, of that same dignity, namely
the "principle of legality"-nu//um crimen sine lege. 170 This articulation
of a value-neutral theory is indeed difficult, if not to say impossible,
when conflicting values are at stake. For example, can the
principle of punishing known offenders, for which there is no specific
law, override the principle of nullum crimen sine /ege?
Genocide171 is now deemed ajus cogens violation because its prohibition
imposes on states certain duties and obligations erga omnes.
Yet the very definition of genocide in article II excludes mass killings
when unaccompanied "with intent to destroy, in whole or in part, a
national, ethnical, racial or religious group .... " 172 On the basis of
the erga omnes rationale for genocide, "Crimes Against Humanity"
should also rise to that standard. Such a theory has not yet been fully
accepted, even though the notion certainly merits that equal status. 173
The moral out~age of the world community in the years 1945-46 has
subsided and has regrettably even dwindled over the ensuing years. 174
The erga omnes and }us cogens doctrines are often presented as two
sides of the same coin. The term erga omnes means "flowing to all,"
and thus obligations deriving from_ }us cogens are presumably erga
omnes. 175 Indeed, legal logic supports the proposition that what is
"compelling law'' must necessarily engender obligation "flowing to
all."
169. Bassiouni, International Law and the Holocaust, 9 CALIF. W. INT'L L.J. 201, 208-14
(1979).
170. See Allen, supra note 47; Ancel, La Regle Nulla Poena Sine Lege dans /es Legislations
Modernes, ANNALES DE L'INSTJTUT DE DROIT COMPARE 245 (1936); G. VASSALLI, Nullum
Crimen Sine Lege (1939); Nuvolone, Le Principe de la Legalite et /es Principes de la Defense
Sociale, 1956 REVUE DE SCIENCE CRtMINELLE ET DE DROIT PENAL COMPARE 231.
171. G.A. Res. 96, l U.N. GAOR (55th plen. mtg.) at 188, U.N. Doc. A/64 (1946); Convention
on Prevention of Genocide, Dec. 9, 1948, 78 U.N.T.S. 277; see Advisory Opinion of the
International Court of Justice on Reservations to the Genocide Convention, 1951 I.CJ. 1, 15
(May 28).
172. Convention on Prevention of Genocide, Dec. 9, 1948, 78 U.N.T.S. 277, 280; see Bassiouni,
Introduction to the Genocide Convention, in I M.C. BASSIOUNI, INTERNATIONAL CRIMINAL
LAW 281 (1986); Beres, Genocide and Genocide-like Crimes, in id. at 271.
173. Bassiouni, Crimes Against Humanity, in 3 M.C. BASSIOUNI, INTERNATIONAL CRIMINAL
LAW: ENFORCEMENT 51, 65-70 (1987). This position was prevalent in the Nuremberg and
Tokyo Charters, Indictments, and Judgments. It was also prevalent in the writings of scholars
who dealt with these prosecutions, see, e.g .• Schwelb, Crimes Against Humanity, 21 BRIT. Y.B.
INT'L L. l (1944), and others, see, e.g., Verdross, Forbidden Treaties in International Law, 31
AM. J. INT'L L. 571 (1937).
174. Bassiouni, Nuremberg: Forty Years After, PROC. AM. Soc'Y INT'L L. 59 (1986).
175. Randall, Universal Jurisdiction Under International Law, 66 TEX. L. REV. 785, 829-30
(1988),
Annex 282
Spring 1990] Functional Approach To uGeneral Principles', 807
The problem with such a simplistic formulation is that it is circular.
What "flows to all" is "compelling," and if what is "compelling"
"flows to all" it is difficult to distinguish between what constitutes a
"General Principle" creating an obligation so self-evident as to be
"compelling" and so "compelling" as to be "flowing to all," that is,
binding on all States. 176
In the Barcelona Traction case, the ICJ stated:
... [A]n essential distinction should be drawn between the obligations of
a State towards the international community as a whole, and those arising
vis-a-vis another State in the field of diplomatic protection. By their
very nature the former are the concern of all States. In view of the importance
of the rights involved, all States can be held to have a legal
interest in their protection; they are obligations erga omnes. 177
Thus, the first criterion of an obligation rising to the level of erga
omnes is, in the words of the ICJ, "the obligation(s) of a State towards
the international Community as a whole."178 The ICJ goes on in paragraph
34 to give examples, 179 but it does not define or list precisely
what it means by "obligations of a state towards the international
community as a whole." 180
Both the PCIJ and ICJ, particularly through the separate and dissenting
opinions of their judges, have tried to bring these norms to the
level of a higher law. 181 Despite this recognition, the relationship be-
176. In an important study bearing on the erga omnes and jus cogens relationship, Professor
Randall notes that, "traditionally international law functionaJJy has distinguished the erga omnes
and jus cogens doctrines .... " Randall, supra note 175, at 830. However, he, too, seems to
accept the sine qua non relatively.
"Jus cogens means compelling law." Thejus cogens concept refers to "peremptory principles
or norms from which no derogatory is permitted, and which may therefore operate to
invalidate a treaty or agreement between States to the extent of the inconsistency with any
such principles or norms."
While authoritative lists of obligations erga omnes and jus cogens norms do not exist, any
such list likely would include the norms against hijacking, hostage taking, crimes against
internationally protected persons, apartheid, and torture. Traditionally, international law
functionally has distinguished the erga omnes and jus cogens doctrines, which addresses
violations of individual responsibility. These doctrines nevertheless, may subsidiarily support
the right of all states to exercise universal jurisidiction over the individual offenders.
One might argue that "when committed by individuals," violations of erga omnes obligations
and peremptory norms "may be punishable by any State under the universality
principle."
177. Barcelona Traction (Belg. v. Spain), 1970 I.C.J. 3, 32 (Feb. 5).
178. Id.
179. Id. The court further stated in the ensuing paragraph:
Such obligations derive, for example, in contemporary international law, from the outlawing
of acts of aggression, and of genocide, as also from the principles and rules concerning the
basic rights of the human person, including protection from slavery and racial discrimination.
Some of the corresponding rights of protection have entered into the body of general
international law (Reservations to the Convention and Punishment of the Crime of Genocide,
Advisory Opinion, lCJ. Reports 1951, p. 23); others are conferred by international instruments
of a universal or quasi-universal character.
180. Id. at 32.
181. Judge Fernandes explained,
Annex 282
808 Michigan Journal of International Law [Vol. 11 :768
tween }us cogens and "General Principles" is not clearly articulated.
The jurisprudence of both courts also has failed to explicitly articulate
how a given norm becomesjus cogens and when and why it becomes
erga omnes. Arguably, ajus cogens norm rises to that level when the
principle it embodies has been universally accepted by the States.
Thus, the principle of territorial sovereignty has risen to the level of a
"peremptory norm" because all States have consented to the right of
States to exercise exclusive territorial jurisdiction. 182
Where to draw the line betweenjus cogens peremptory norms deriving
from a higher order, which Professor Schwelb refers to as the
equivalent of an international ordre public, 183 and jus dispositivium 184
is fertile ground for legal scholarship, 185 as is the relationship between
jus cogens and ergo omnes. The more significant issues regarding jus
cogens are:
(1) How do "principles" develop and rise to the level whereby they
override pre-existing positive international law?
(2) By what legal technique can a "principle" override that which
certain basic values would deem to be an unjust positive law?
(3) In what way can a "principle" fill the gap of positive international
law to avoid injustice, or denial of justice, or to do justice?
( 4) When is a jus cogens "principle" superseded by another one, or
when does it fall in desuetude?
None of these issues, among others, has yet been sufficiently addressed
by scholarly research. We are left with our imagination to
analogize }us cogens to a shooting star in the firmament of higher values,
without much knowledge of how it got there or why. We do not
know how to distinguish between the various trajectories taken by
these shooting stars, nor do we know how to compare their ·relative
brilliance. Finally, we have no understanding of how or why such
It is true that in principle special rules wil1 prevail over general rules, but to take it as
established that in the present case the particular rule is different from the general rule is to
beg the question. Moreover, there are exceptions to this principle. Several rules cogestes
prevail over any special rules. And the general principles to which I shall refer later constitute
true rule of ius cogens over which no special practice can prevail.
Right of Passage Over Indian Territory (Port. v. India), 1960 I.C.J. 123, 135 (Apr. 12) (Fernandes,
J., dissenting); see Legal Consequences for States of the Continued Presence of South Africa
in Namibia (South West Africa) notwithstanding Security Council Resolution 276, 1971 I.C.J. 66
(Ammoun,· J ., dissenting).
182. See S.S. "Lotus" (Fr. v. Turk.), 1927 P.C.I.J. (ser. A) No. 10 (Sept. 7).
l 83. Schwelb, Some Aspects of International Jus Cogens as Formulated by the International
Low Commission, 61 AM. J. INT'L L. 946, 949 (1967).
184. Verdross, supra note 160.
185. See Janis, supra note 153; Turpel & Sans, Peremptory International Law and Sovereignty:
Some Questions, 3 CONN. J. INT'L L. 369 (1988); see also Christenson, supra note 22;
D'Amato, The Moral Dilemma of Positivism, supra note 163.
Annex 282
Spring 1990] Functional Approach To "General Principles" 809
stars dip, lose their brilliance, or disappear from our. firmament of
higher values. The legal literature abounds with competing descriptions
whose many qualities, however, elude those of reliable methodology
and intellectual legal rigor which can provide us with predictable
and consistent outcomes.
VII. AN APPRAISAL OF THE PCIJ AND ICJ OPINIONS WITH
RESPECT TO DEFINING "GENERAL PRINCIPLES" AND
EsTABLISHING A METHODOLOGY FOR THEIR
IDENTIFICATION
As we have seen, the opinions of the I CJ, like its predecessor, the
PCIJ, make use of "General Principles." These cases have not, however,
explained the courts' technique or methodology for identifying
"General Principles.'' In those cases where the courts relied on international
law manifestations and expressions of States' policies and
practices, as evidenced by multilateral treaties, custom, and United
Nations resolutions, they did not indicate how they were doing so. In
short, the courts have not identified the process or the methodology
for identification and appraisal of the evidentiary sources of "General
Principles."
In the few cases where the courts relied upon the inductive method
of ascertaining "General Principles" as deriving from the national
legal systems, there was also no indication of the methodology employed.
This may be due to the fact that the courts implicitly relied
upon techniques of comparative legal research, and were unwilling to
take a position on a question of methods, which may be best left to
scholarly and doctrinal works.
To identify "General Principles" of international law which arise
from the various national legal systems, the inductive method of research
is employed. By that method, one identifies the existence of a
legal principle in the world's major legal systems. More specifically,
however, how one searches for an identity or commonality that exists
with respect to a given principle - under the domestic laws of different
countries which represent the world's major legal systems - needs
more particularity. Obviously, such an inductive method is both the
most logical and simplest approach to comparative research methodology,
but it will have to be particularized with respect to each subject,
or specific inquiry, for which the research is to be undertaken. Thus, if
the principle which is being researched is one of great generality, it
will more likely be easier to identify in the various major legal systems,
and in specific domestic legal systems representing the world's major
legal systems. If, however, the principle inquired of is narrow or spe-
Annex 282
810 Michigan Journal of International Law [Vol. 11:768
cific, then the focus of the research will have to be on the more relevant
or particularized sources of law within the various domestic legal
systems representing the major legal systems of the world. 186
Professor Akehurst confirms in his research on customs that this
methodology has been recognized and relied upon by international
and national courts, and by policy-makers in different countries. 187
Among the countries he specifically cites are Great Britain and the
United States. 188 As early as 1877, the British Foreign Office recognized
the validity of this approach, particularly with respect to criminal
matters, and so instructed the British Minister in Rio de Janiero as
follows: " 'Her Majesty's Government . . . would not be justified' in
protesting against a law extending the jurisdiction of Brazilian criminal
courts because the law was similar to the laws of several other
countries.,, 189
The United States of America has also followed this position since
the late l SOOs. 190 The Cutting case involving the United States and
Mexico is a landmark ruling on this point. 191 Both the United States
and Mexico relied on the laws of different countries to establish the
existence of a principle or custom or both, but of particular relevance
in this case was the emphasis on the representativeness of the countries
referred to and the sufficiency of their number. 192 The United States
has also relied on this approach in its national courts193 as has, for
example, Italy. 194
The ICJ, like its predecessor, the PCIJ, also examined national
legal systems to derive from them the existence of a custom or "General
Principle." Both courts used the same methodology of empirical
research, though obviously the relevance of the laws discovered and
their widespread similarity made for their inclusion in these two
sources of international law. The PCIJ used the methodology of em-
186. It should be noted that this empirical methodology is also relied upon in the identification
of customary rules of international law. See, e.g., A. D' AMATO, THE CONCEPT OF CUSTOM
IN INTERNATIONAL LAW (1971); Akehurst, Custom As a Source of International Law, 47 BRIT.
Y.B. INT'L L. 1, 16-18 (l977).
187. See Akehurst, supra note 186, at 8-11.
188. Id. at 8-9.
189. Id.
190. See 1887 FOREIGN RELATIONS OF THE UNITED STATES 859-67 (1888).
191. Id. at 751.
192. Id. at 754-S5, 781-817.
193. See The Scotia, 81 U.S. (14 Wall.) 170, 186-87 (1871); The Paquete Habana, 175 U.S.
677, 688-700 (1900).
194. Lagos v. Baggianini, 22 INT'L L. REP. 533 ( 19S3). To decide a question of diplomatic
immunity, the court looked to the custom and practice of states to determine "'the generally
accepted rule.'" Id. at 534.
Annex 282
Spring l 990] Functional Approach To "General Principles" 811
pirical research in the Lotus case. 195 In the Nottebohm case196 the ICJ
comparatively examined national legal provisions on nationality law,
and in the North Sea Continental Shelf's 191 case, the court looked for
relevant national laws on exploration of continental shelves. 198
Akehurst concludes: "Obviously a law which is frequently applied
carries greater weight than a law which is never or seldom applied;
any kind of State practice carries greater weight if it involves an element
of repetition." 199 Thus, the more a given national or international
principle is reiterated in national and international sources, the
more it deserves deference. 200
It should be noted that the empirical methodology used for demonstrating
the existence of "General Principles" is substantially similar
to the one used to demonstrate the existence of a customary rule of
international law. 201 While this same method can serve as a valid
technique for identifying a custom and a principle, the appraisal of the
research will be different with respect to establishing the existence of a
custom as compared to the identification of a given principle."202 The
connection between customs and principles does not, however, end
I
there, as customs draw on principles and principles may derive from
customs. Interestingly, however, neither PCIJ nor th~ ICJ identified
these methods nor indicated any views on their application, or for that
matter even commented on the difference between research methods
relevant to principles and customs.
Some initial, important methodological questions that may arise
concern the selection of legal systems, the relevant sources within each
system and within each State which is part of a system, and whether or
how to quantify the data deriving from the comparative research.
195. See S.S. "Lotus" (Fr. v. Turk.), l 927 P.C.I.J. (ser. A) No. 10, at 21 (Sept. 7).
196. Nottebohm (Liech. v. Guat.), 1955 I.C.J. 4, 22 (Apr. 16).
197. See North Sea Continental Shelf (W. Ger. v. Den.; W. Ger. v. Neth.), 1969 I.CJ. 101
(Feb. 20).
198. Id. at 129, 175, 228-29, containing the views of Ammoun, Tanaka, and Lachs.
199. Akehurst, supra note 186, at 9. .
200. Bleicher, The Legal Significance of Re-Citation of General Assembly Resolutions, 63 AM.
J. INT'L L. 444 (1969).
201. See supra notes 186-99.
202. The difference will depend on the nature of the custom and the principle, which in some
cases could be the same. This is indeed an overlap between sources of international law. Professor
D'Amato, supra note 186, looks at treaties as evidence of custom and practice. Akehurst,
supra note 186, and both the PCIJ and ICJ, supra notes 196 and 197, use national laws as evidence
of practice. Many of the PCIJ and ICJ cases, such as those cited in Pan V, use national
laws as evidence of "General Principles."
Annex 282
812 Michigan Journal of International Law (Vol. 11:768
A. The Major Legal Systems of the World
Scholars in comparative legal studies recognize the major legal systems
of the world as:203
(1) The Romanist-Civilist-Germanic Family of Legal Systems
(2) The Common Law Family of Legal Systems
(3) The Marxist-Socialist Family of Legal Systems
(4) The Islamic Family of Legal Systems
(5) The Asian Family of Legal Systems
There is no significant dispute as to this step in the methodology, but
there is no recognized yardstick to determine the representative quality
of choice of states within a given system.
For example, the Common Law family of legal systems includes,
inter alia: the United States, the United Kingdom, Canada, Australia,
Ghana, India, Nigeria, and Malaysia. However, various aspects of
United States law are entirely different from the laws of the other
countries in terms of purpose, scope, and substance. Thus, it would
not be appropriate to consider the United States as the only representative
country for the Common Law.
~ B. Identifying Legal Principles
The opinions of the courts do not draw a distinction between broad
and narrow legal principles. For example, a broad principle may be
whether a right to life exists in the world's major legal systems: A
narrow principle may be whether the taking of the life of one person
by another without legal justification constitutes a crime or, even more
specifically, what crime it constitutes. The type of inquiry will determine
the appropriateness of the choice of legal sources. Where broad
principles are involved, these sources can be as general as religious
laws or national constitutions.
In the instance of comparative research and analysis, a question
arises as to whether constitutions can be compared without regard to
whether their provisions are general or specific, and what weight
should be given to the terminology employed in the various texts.
Also, questions arise as to whether comparative evaluation should be
validated by research of other national laws and eventually research
inquiring into the application of the "principle," and whether there
should be, whenever relevant, a comparison between principles or
203. Rene David, who is recognized as the world's leading authority on comparative law,
states that the major world systems are: 1. The Romanist.Germanic; 2. The Socialist; 3. The
Common Law; 4. Islamic Law; 5. Asian Legal Systems. He refers to them as "famille" or
families of law. R. DAVID, LES GRANDS SYSTEMES DE DROIT CONTEMPORAIRES 22.32 (5th ed.
1973).
Annex 282
Spring 1990) Functional Approach To "General Principles" 813
rights enunciated in multilateral conventions and provisions in national
constitutions. In the cases that give rise to these concerns, the
inquiry is whether there is a numerical or quantitative standard for
correlating or comparing that data.204
'
C. Correlation Between the Sources of Law to be Consulted and the
Principle Sought to be Identified
Both courts have failed to address this questio_n except with broad
generalities. Presumably, the sources of law to be consulted with respect
to narrow or specific legal principles are the relevant statutes,
laws, and other normative sources. Thus, inquiring whether the killing
of one person by another without legal justification constitutes
murder would necessarily entail an examination of the criminal laws
of the countries representing the world's major legal systems with appropriate
geo-political representativeness.
However, the number of national legal systems that need to be consulted
within the world's major legal systems will depend upon the
type of inquiry and the degree of identity or similarity of findings that
may emerge from the research. Thus, the more obvious the similarity
in the different legal systems, the more likely it is that adding more
countries with the same general legal basis may not significantly add
to the outcome of the research. However, if there is only general similarity,
which is only vaguely equivalent but not of such sufficient comparative
equivalence to ensure a broad consensus, then it would appear
that a larger number of national legal systems would have to be
consulted.
It is obvious that no two legal systems are alike, and certainly the
legal provisions or normative formulations of different countries are
not likely to be identical. The question, therefore, is whether, by the
notion of sameness, one comprehends: (i) identical normative formulations;
(ii) identical legal elements; or (iii) substantial similarity, irre-
204. For a study of the basic rights in criminal processes protected under six international
instruments, which correlates them to more than one hundred national constitutions, see The
Protection of Human Rights in the Criminal Process Under International Instruments and National
Constitutions, in 4 NOUVELLES ETUDES PENALES 6-31 (1981 ); see also Maki, supra note 6;
C. STRONG, A HISTORY OF MODERN CONSTJTUTIONS: AN INTRODUCTION TO COMPARATIVE
STUDY OF THEJR HlSTORY AND EXJSTING FORMS (1964); K. AZIZ, COMPARATIVE CONSTITUTIONAL
AND ADMINISTRATIVE LAW (1979). For a research project on ACCESS TO JUSTICE
which compared various legal system's constitutional and normative approaches in several
volumes, see also A WORLD SURVEY (M. Cappelletti & B. Garth eds. 1978); PROMISING INSTITUTIONS
(M. Cappelletti & J. Weisner eds., vol. I, 1978, vol. 2, 1979); EMERGING ISSUES AND
PERSPECTIVES (M. Cappelletti & B'. Garth eds. 1979); and ANTHROPOLOGICAL PERSPECTIVE
(K.F. Koch ed. 1979). Unfortunately, this comprehensive study has no describeQ methodology.
For what is probably the best study on methodology, see J. HALL, COMPARATIVE LAW AND
SOCIAL THEORY (1963).
Annex 282
814 Michigan Journal of International Law [Vol. 11:768
spective of identical normative formulation or required elements. In
short, the question is whether or not one must seek sameness of normative
provisions or comparative equivalence of normative provisions.
The answer to that question will depend on whether the inquiry involves
a broad "General Principle" or not. By its very nature, a broad
"General Principle" does not require sameness in terms of its specific
normative formulation, but a narrower or specific principle will require
greater similarity.
Comparative criminal law research involving the determination of
what constitutes a crime in different national legal systems reveals a
substantial historical basis and national practice which provide a foundation
for such an inquiry. This foundation is embodied in the law of
international extradition, which has been in existence for a substantial
period of history and has been relied upon by almost all of the countries
in the world. In the comparative criminal law research process,
the search for comparative criminal legal provisions is referred to as
the "Principle of Double Criminality" or as the "Principle of Dual
Criminality. "205
Under this principle, the requested State in an extradition process
examines the crime charged by the requesting state and seeks to determine
whether that crime also constitutes a crime under the domestic
criminal laws of the requested State. Two methods may be applied in
the course of that inquiry: in concreto and in abstracto.206 Under the
in concreto approach, the use of which has been gradually abandoned
since the late 1800s, the focus is on whether or not the elements of the
205. See A. LAFOREST, INTERNATIONAL EXTRADITION TO AND FROM CANADA 52-56
(1961 ). The author notes that
. . . [A]n exact correspondence between offenses in two countries cannot be expected. It is,
therefore, not necessary that the crime concerned bears the same name in both countries. It
is sufficient if the acts constituting the offence in the demanding state also amount to a crime
in the country from which the fugitive is sought to be extradited even though it may be
called by a different name. As already mentioned it is the essence of the offence that is
important.
Id. at 54-55; see also LEGAL ASPECTS OF EXTRADITION AMONG EUROPEAN STATES (Council of
Europe, European Committee on Crime Prevention 1970); T. VOGLER, AUSLIEFERUNGSRECHT
UND GRUNDGESETZ (1970); I. SHEARER, EXTRADITION lN INTERNATIONAL LAW (1971);
Vieira, L 'Evolution Recent de /'Extradition dans le Continent Americain, 185 RECUEIL DES
CoURS 155 (1978); V.E.H. BOOTH, BRITISH EXTRADITION LAW AND PROCEDURE (1980); B.P.
BOROON6N, ASPECTOS PROCESALES DE LA EXTRADICION EN DERECHO EsPANOL (1984); ff.A.
BOUKHRISS, LA COOPERATION PENALE INTERNATIONALE PAR VOi D'EXTRADITlON AU
MOROC (1986); 0. LAGODNY, DIE RECHTSSTELLUNG DES AUSZULIEFERNDEN IN DER
BUNDESREPUBLIK DEUTSCHLAND (1987); M.C. BASSIOUNI, INTERNATIONAL EXTRADITION
IN UNITED STATES LAW AND PRACTICE 319-80 (2d rev. ed. 1987); M.T. LUPACCHINI,
L'EsTRADIZIONE DALL'EsTERO PER L'ITALIA (1989).
206. See 39 REVUE INTERNATIONALE DE DROIT PENALE (1968) dedicated to national reports
on extradition from: Austria, Belgium, Brazil, Chile, Czechoslovakia, Finland, France,
Federal Republic of Gennany, Greece, Hungary, Italy, Japan, Poland, Sweden, Switzerland,
United States and Yugoslavia.
Annex 282
Spring 1990] Functional Approach To "General Principles" 815
crime in the laws of the requested State are the same as the elements of
the crime in the laws of the requesting State - in other words, greater
specificity and sameness of incentive provisions. Under the in abstracto
approach, which is now used by almost all States, the focus is
on whether or not the crime in the requested State is generally comparable
to the crime in the requesting State. The modern trend is to
examine the underlying facts of the criminal charge to determine
whether or not the same facts that would give rise to a charge in the
requested State would give rise to the same or to a comparable charge
in the requesting State. 207
Therefore, a person who is charged with the killing of another person
without legal justification inay be charged in different legal countries
under different types of statutes involving criminal homicides.
These homicide laws may have different labels, require different levels
of intent, and have different elements. Still, all of these laws would
have the same general elements in common: the material element of
one person engaging in conduct which produced the death of another;
the mental element of intention (however described); and causation
(between conduct and resulting death). If, as a result of the above, the
fact that a person would be charged in one country with a crime called
murder whereas in another he would be charged with a crime called
intentional killing or voluntary manslaughter would not be legally relevant
to a finding that "dual criminality,, exists. The reason is that the
underlying fact, would give rise to a similar, though not necessarily
identical, charge in the requested State.
The inquiry, then, focuses on the general characteristics of the
crime charged in comparative analysis, and not on the sameness or
identity of the label of the crime, or the legal elements needed to prove
207. This position is required in all modalities of international cooperation in penal matters.
See E. MULLER-RAPPARD & M.C. BASSIOUNI, EUROPEAN INTER-STATE COOPERATION IN
CRIMINAL MATTERS, LA COOPERATION INTER-ETATIQUE EUROPENNE MATIERE PENALE (3
vols. 1987). For different modalities of international cooperation in penal matters, see MulJerRappard,
Schutte, Epp, Poncet, Zagaris, et al., in 2 M.C. BASSIOUNI, INTERNATIONAL CRIMINAL
LAW: PROCEDURE (1986); Grutzner, International Judicial Assistance and Cooperation in
Criminal Matters, in A TREATISE ON INTERNATIONAL LAW 189 (M.C. Bassiouni & V.P. Nanda
eds. 1973). For a survey of recent Mutual Legal Assistance Treaties between the United States
and other countries, see Nadelman, Negotiations in Criminal Law Assistance Treaties, 33 AM. J.
COMP. L. 467 (1985); Zagaris & Simonetti, Judical Assistance under U.S Bilateral Treaties, in
LEGAL RESPONSES TO INTERNATIONAL TERRORISM 219 (M.C. Bassiouni ed. 1989). For a Socialist
perspective, see Krapac, An Outline of the Recent Development of the Yugoslav Law of
International Judicial Assistance and Cooperation in Criminal Matters, 34 NETHERLANDS INT'L
L. REV. 324 (1987); Gardocki, The Socialist System of Judicial Assistance and Mutual Cooperation
in Penal Matters, in 2 M.C. Bassiouni, INTERNATIONAL CRIMINAL LAW: PROCEDURE 133
(1986); Shupilov, Legal Assistance in Criminal Cases and Some Important QuestionJ of Extradition
[in the USSR], 15 CASE W. RES. J. INT'L L. 127 (1983).
Annex 282
816 Michigan Journal of International Law [Vol. 11:768
it. 208 The same technique and approach is valid in other areas of comparative
legal research.
As stated above, with respect to other issues of comparative research,
the two courts have not provided much guidance. The same
can be said with respect to international law sources of "General Principles."
Should there be a quantified technique to assess principles
embodied in United Nations resolutions, treaties, or, customary practices
of States? If so, can common practices of States, because of their
recurrence, rise to the level of principles?
One of the reasons for the courts' lack of guidance on these issues
may be the fact that they may not have wished to establish precedents
that may impact on future cases. The courts, through the history of
their jurisprudence, seem to have avoided including the types of formulations
in their opinions that may lead to the notion that their opinions
could be deemed the basis for future jurisprudential development.
Unlike the jurisprudence of the Common Law courts, which relies on
precedents and adheres to stare decisis, the PCIJ and the ICJ have
carefully avoided having their opinions couched in formulations that
can lead to such a jurisprudential development. This is why one can
only find a more detailed explanation of what constitutes "General
Principles" and how they are applied in the separate and dissenting
opinions of the two courts; especially in those of the ICJ. However,
these difficulties are more prevalent in the area of jus cogens, as discussed
above.
CONCLUSION
"General Principles" are recognized as a source of international
law in the Statutes of the Permanent Court of International Justice
and International Court of Justice, but their identification, appraisal,
content, ranking, enforceability, and applicality are the subject of different
scholarly and judicial perceptions.
There is a well established consensus that "General Principles" are
to be derived from national legal systems. Thus, "General Principles"
are a common denominator of certain basic principles embodied in
208. It would be of no consequence to the requested State if the charge by the requesting
State is murder, intentionally killing, voluntary manslaughter, or, for that matter, involuntary
manslaughter, as long as the crime charged, irrespective of the specificity of its elements, generally
corresponds to an equivalent counterpart crime in the requested State. The issue will not
turn on what type of mental element is required, for example, for the offense of murder, first
degree murder, voluntary manslaughter, or involuntary manslaughter. Rather, the inquiry will
be whether the facts allegedly committed by the individual sought are such that they constitute
the material element of the killing of one person by another accompanied by some type of mental
state and thJt a resulting death ensued. If these basic facts would constitute a homicidal offense
in both the requested and requesting States, then extradition shall be granted.
Annex 282
Spring 1990] Functional Approach To "General Principles" 817
national legal systems which, because of their commonality, rise to an
internationally enforceable level. However, the process and methodology
of identification and appraisal of these national legal principles
remains open for further elaboration. There is no simple method that
can be applied, but surely an agreed methodology could be recognized.
In its absence, protagonists for different philosophical propositions
will rely on what they consider to be "General Principles" for selfserving
support. This practice does not aid in making the law more
certain.
In the meantime, there is little consensus about the processes and
methods of identifying, appraising, and applying "General Principles"
evidenced through various sources of international law. Scholarly
writings on this question are few, and what writings exist are unclear.
Opinions of international and national tribunals on this subject are
also vague and permit many inferences to be draw from reliance, for
example, on United Nations resolutions.
Recent jurisprudential scholarly debates onjus cogens have overshadowed
earlier, more legalistic, debates on "General Principles." In
the process, and before resolving the pending issues concerning "General
Principles,, discussed above, jus cogens became, at least for some
scholars, a higher source of peremptory norms, superceding all other
sources of positive international law. By no means does this writer
purport to presume to know better or more, but only to know enough
to wage a critical re-examination.
In less than two decades, }us cogens emerged out of "General Principles"
and, for its ardent proponents, immediately moved up to become
a separate and higher ranking source of law, though technically
the positive legal recognition of jus cogens only comes under the label
of "General Principles."
The jurisprudence of the PCIJ and the ICJ has not yet been affected
by the jurisprudential, and, I suspect, ideological debate concemingjus
cogens. In fact, the position of the two courts has been, in
the aggregate of its opinions, reserved in its reliance on "General Principles"
as a source of international law. Whenever the two courts did
rely on "General Principles," they were mainly using principles as a
means to interpret positive international law and only rarely to supersede
it. Only a few cases give us a glimpse of how the courts applied
jus cogens. The tension between proponents of jus dispositivium and
jus naturales as well as between advocates of the lex lata and those
arguing for a lexe desiderata has become particularly evident in the
legal literature of the last decade. But the passion of their advocacy is
Annex 282
818 Michigan Journal of International Law [VoJ. 11:768
not necessarily matched by the intellectual and legal technical rigors
which such important legal issues deserve.
Regardless, these legal traditions are evolving and have achieved in
contemporary times a significant rapprochement. Similarly, differences
in legal philosophies are being compromised by greater concessions
to pragmatism. Modem positivists have lessened their historical
rigidity; some have even conceded that legitimacy may be found elsewhere
than in positive texts. Thus, differences between modem positivism
and the new socio•ethical foundation of modern naturalism are
gradually being narrowed.
The gray areas that have developed as a result of the reduction of
these dual contrasting lines of legal and philosophical analysis have,
however, added to the lack of clarity of the entire subject. What is
needed, perhaps, is a convention to codify "General Principles of International
Law," much as the Vienna Convention on the Law of
Treaties codified customary international law and those "General
Principles" relating to treaty law.
Annex 282
Annex 282
ANNEX283
REPORTS OF INTERNATIONAL
ARBITRAL A WARDS
RECUEIL DES SENTENCES
ARBITRALES
Mixed Claims Commission (France-Venezuela)
1903-1905
VOLUME X pp. 9-355
NATIONS UNIES - UNITED NATIONS
Copyright ( c) 2006
Annex 283
MIXED CLAIMS COMMISSION
FRANCE - VENEZUELA
CONSTITUTED UNDER THE PROTOCOL
SIGNED AT WASHINGTON
ON 27 FEBRUARY 1903
REPORT: Jackson H. Ralston-W. T. Sherman Doyle, Venezuelan Arbitrations
uf I 903, including Protocols, personnel and Rules of Couunission,
Opinions, and Summary of Awards, etc., published as Senate Document
No. 316, Fifty-eighth Congress, second session, Washington, Government
Printing Office, 1904, pp. 483-493.
Annex 283
PROTOCOL, FEBRUARY 27, 1903 1
[Washington protocol.]
3
The undersigned, Herberl W. Bowen, Plenipolentiary of the Republic or
Venezuela, and J. J. Jusserand, Ambassador of the French Republic at
Washington, duly authorized by their respective Governments, have agreed
upon and signed the following protocol:
ARTICLE I
All French claims against the Republic of Venezuela, which have not been
settled by diplomatic agreement or by arbitration between the two Governments,
shall be presented by the French foreign office or by the French legation
at Caracas, to a mixed commission, which shall sit at Caracas, and which shall
have power to examine and decide the said claims. The Commission to
consist of two members, one of whom is to be appointed by the President of
Venezuela and the other by the President of the French Republic.
It is agreed that Her Majesty the Queen of the Netherlands will be asked tu
appoint an umpire.
If either of said commissioners or the umpire shall fail ur cease to act, his
successorshall beappointedforthwith in the same manner as his predecessor was.
Said commissioners and umpire are to be appointed before the first day of May,
1903. The commissioners and the umpire shall meet in the City of Caracas on the
first day of June, 1903. The umpire shall preside over their deliberations and shall
be competent to decide any question on which the commissioners disagree. Before
assuming the functions of their office, the commissioners and the umpire shall
take solemn oath carefully to examine and impartially decide, according to
justice and the provisions of this convention, all claims submitted to them, and
such oaths shall be entered on the record of their proceedings. The Commissioners,
or in case of their disagreement, the umpire, shall decide all claims upon
a basis of absolute equity without regard to objections of a technical nature,
or of the provisions of local legislation.
The decisions of the Commissioners, and, in the event of their disagreement,
those of the umpire, shall be final and conclusive. They shall be in writing. All
awards shall be made payable in French gold or its equivalent in silver.
ARTICLE II
The commissioners, or the umpire, as the case may be, shall investigate an<l
decide said claims upon such evi<lem·e or infomiation only as shall be furnished
by or on behalf of the respective Governments. They shall be bound to receive
and consider all written documents or statements which may be presented to
them by or on behalf of the respecti\'e C:,0vemments in support of or in answer
to any claim, and to hear oral or read written arguments made by the agent
of each Government on every claim. In case of their failure to agree in opinion
upon any individual claim, the umpire shall decide.
1 Original texts : English and French: For the French text see the Report mentioned
on the previous μage.
Annex 283
4 FRENCH-VENEZUELAN COMMISSION, 1903
Every claim shall be formally presenled to the commissioners within thirty
days from thr day of their first meeting. unless the Commissioners, or Lhe umpire,
in any case extend the period for presenting the claim, not exceeding three
months longer. The commissioners shall be bound to examine and decide
upon every claim within six months from the day of its first formal presentation,
and, in case of their disagreement, the umpire shall examine and decide within
a corresponding period from the date of such disagreement.
ARTICLE III
The comm1ss10ners and the umpire shall keep an accurate record of their
proceedings. For that purpose, each commissioner shall appoint a secretary
versed in the language of both countries to assist them in the transaction of the
business of the Commission. Except as herein stipulated, all questions of procedure
shall be left to the determination of the Commission, or in case of their
disagreerneut. to the umpire.
ARTICLE IV
Reasonable compensation to the commissioners and to the umpire for their
services and expenses, and the other expenses of said arbitration, are to be paid
in equal moieties by the contracting parties.
ARTICLE V
In order to pay the total amount of the claims to be adjudicated as aforesaid,
and other claims of citizens or subjects of other nations, the Government
of Venezuela shall set apart fur this purpose, and alienate to no other purpose,
beginning with the month of March, 1903, thirty per cent. in monthly payments
of the customs-revenues of La Guaira and Puerto Cabello, and the payments
thus set aside shall be divided and distributed in conformity with the decision
of the Hague Tribunal.
In case of the failure to carry out the above agreement, Belgian officials shall
be placed in charge of the customs of the two ports and shall administer them
until the liabilities of the Venezuelan Government in respect of the above claims
shall have been discharged.
The reference of the question above stated to the Hague Tribunal will be
the subject of a separate prulocol.
ARTICLE VI
All existing and unsatisfied awards in favor of France shall be promptly paid
according to the terms of the respective awards.
Dune in duplicate in the French and English texts at Washington,
February 27, 1903.
.J USSERAND [SEAL]
H. W. BOWEN [SEAL]
PERSONNEL OF FRENCH-VENEZUELAN COMMISSION 1
Umpire. - J. Ph. F. Filtz.
French Commissioner. - Peretti de la Rocca.
Venezuelan Commissioner. - Jose de Jesus Paul.
French Secretary. - Charles Piton.
Venezuelan Secretary. - J. Padron Ustariz.
1 No rules of procedure were formulated by this Commiso;;ion.
Annex 283
ANNEX284
REPORTS OF INTERNATIONAL
ARBITRAL A WARDS
RECUEIL DES SENTENCES
ARBITRALES
Aroa Mines Case (on merits)
1903
VOLUME IX pp. 402-445
NATIONS UNIES - UNITED NATIONS
Copyright ( c) 2006
Annex 284
402 BRITISH-VENEZUELAN COMMISSION
ARDA I\-lINm, (LIMITED) CAsE - SuPPLEMENTARY CLAIM
(By the Umpire: )
Damages will not be allowed for injury to persons, or for injury to or wrongful
seizure of property of resident aliens committed by the troops of unsuccessful
rebels. 1
Interpretation of the mca111ng of the words" claim."" injury,'' "seizure,''" justice:
' and" equity," as used in the protocol.
CONTENTION OF BRITISH AGENT
In supporting the: claim of the Aroa mines for damages due to the action of
revolutionaries. it is desirable that the position taken up by His Majesty's
Government should be clearly stated and explained.
During the events which led to the signing of the protocol of February 13,
1903. and when a decision was necessary as to what demands ought to be made
on the Venezuelan Government. the question of damage <luc to the acts of
insurgents naturally became prominent. His Majesty's Government, having
carefully considered the past and present circumstances of Venezuela, which
are of a very exceptional kind. came to the conclusion that in dealing with
claims of this nature two alternative methods were possible:
( l ) That foreign claimants should not receive compensation for damage
caused by revolutionaries.
(2) That if any foreign claimants received such compensation British subjects
should receive the same treatment.
Great Britain enjoys by treaty the advantages of the most-favored nation,
and for this as well as other reasons took the view stated above. To show that
His Majesty's Government had always consistently held this view, it may be
pointed out that in forwarding claims to the Venezuelan Government the British
minister had, long before the blockade. always asked that they should be settled
on the same principle as might be- applic-d to other nations.
In the view of His Majesty's Government it was preferable that of the two
principles stated above No. I should be the one adopted, failing this it was
esse:ntial to secure the alternative-, No. 2.
At the same time it was considered that , owing to the light in which revolutions
had come to be regarded by the people of Venezuela, there would be
nothing contrary to justice in acting upon the latter principle.
The only way to give effe"ct to these. views seemed to be to obtain from Venezuela
an agreement wide enough to cover the second principle if it should become
necessary to act upon it.
His Majesty's Government have throughout acted consistently on these lines
and have made no secret of the position taken up by them on the matter.
Accordingly, upon the sitting of the Commission, Hi~ Majesty's Government
brought foward only such claims as were based upon the acts of the Venezuelan
Government itself, without in any way giving up the right to present those of
the other category if it should prove neces<;ary. This course was followed until
revolutionary awards had been made in favor of French and German claimants.
1 This principle was followed in the c-ases of A. A. Pearse, F. G. Fitt, heirs of
Christian Philip, W. N .. Meston, W_ A. Guy, Fortunato Amar, L. L. M1chenaux,
and Abdool Currim, which are not report~d in this volume_ For discussion of
principle here laid down see the Geiman - Venez.uelan Commission (Kummerow
Case), the Italian - Venezuelan Commission (Sambiaggio Case, Guastini Casf')
and the Spanish - Venezuelan Commission (Padron Case, .Mena Case), in Volume
~{ of thC'sf' Reparts.
Annex 284
AROA MINES ~ CONTEt\TION OF DRITISH AGENT 403
Since therefore, it was no longer possible to ad upon the prim:iple originally
favored, it was decided to present to 1he Commission claims for damages due
to the acts of the insurgent forces. These claims are supported upon the ground
that the recovery of damages so caused is recognized by the protor:ol of
February 13.
In order to show what the terms of the protocol were meant to include. it is
necessary to refer tu the r:ircumstanccs uncle,· which the protocol was signed
and to what had occurred previously.
His Majesty's Government having for a long time presented to the Venezuelan
Government daims due nut only to the acts of their own troop'>, but
also to the acts of insurgents, without being able to obtain any redress, were at
length compelled, in common ,vith the German Government, to declare a
blockade of Venezuelan ports. This blockade was not raised until after the
signing, and upon the tenns of the protocol of February 13.
This protocol was settled after negotiations between His Majesty's representative
and Mr. Bowen as representing 1 he Venezuelan Government. In order
correctly to interpret the terms of the protocol regard should be paid to the
stage of the negotiations at which the exact words ultimately used lirst appear,
and to the connection in which they are there used.
The first step taken by the Venezuelan Government toward the raising of
the blockade was a communication from Mr. Bowen through the Government
of the United States to His Majesty's Government, asking that they and the
German Government would refer " the settlcmt>nt of claims fur alleg-cd damage
to the subjects of the two nations during the civil war to arbitration."
To this a reply was sent by the two Governments. which is here: quoted,
December 23, 1902:
His Majesty's Govf"rnment have in consultation with the German Government
taken into their careful consideration tht· proposal communicated by the United
States Government at the instance of that of Venezuela.
The proposal is as follows;
That the present difficulty respecting the man11er· of settling claims for injuries to
British and Gt"rman subjects during the msurrection be submitted to arbitration.
The scope and intention of this proposal would obviously require further explanation.
Its effect would apparently be to refer to arbitration only such claims as had
reference to injuries resulting from the recent insurrection. This formula would
evidently include a part only of the claims put forward by the two Governments,
and we are left m doubt as to the manner in which the remaining claims are to be
dealt with.
Apart, however, from this some of the claims are of a kind which no government
would agree to submit to arbitration. The claims for injuries to Lhe persons and
properties of Rritish subjects owing to the confiscation of British vessels, the plundering
of their contents and the maltreatment of their crews, as well as some claims
for the ill usage and false imprisonment of British subjects, are of this description.
The amount of these claims is apparently insignificant, but the principle at slake is
of the first importance, and His Majesty's Govf"rnment could not admit that there
was any doubt as to the liability of the Venezuelan Government in respect of them.
His Majesty's Government desire, mon:over, to draw attention to the circumstances
under which arbitration is now proposed to them.
The Venezudan Government have, during the last six months, had ample opportunities
for submitting such a proposal. On the 29th of July and again on the 11th
of November it was intimated to them in the clearest language that unless His
Majesty's Government received satisfactory assurances from them, and unless some
steps were taken to compensate the parties injured by their conduct, it would become
nt>cessary for His Majesty's Government to enforce their just demands. No
attention was paid to these solemn warnings. and, in consequence of the manner
in which they Wf"re disregarded, His Majesty's Government found themselves
27
Annex 284
404 BRITISll-VENEZUELAN COMMISSION
~eluctantly compelled to have recourse to the measures of coercion which are now
m progress.
His l\tlajesty's Government have, moreover, agreed already that in the event of
the Venezuelan Government making a declaration that they will recognize the
principle of the justice of the British claims, and that they will at once pay compensation
in the shipping cases and in the cases where British subjects have been falsely
imprisoned or maltreated, His Majesty's Government will be ready, so far as the
remaining claims are concerned, to accept the decision of a mixed commission which
will determine the amount to be paid and the security to be given for payment.
A corresponding intimation has been made by the German Government.
This mode of procedure seemed to both Governments to provide a reasonable and
adequate mode of disposing of their claims. They have, however, no objection to
substitute for the special Commission a reference to arbitration with certain essential
reservations. These reservations, so far as the British claims are concerned, are as
follows:
l. The claims (small, as has already been pointed out, in pecuniary amount) arising
out of the seizure and plundering of British vessels and outrages on their crews
and the maltreatment and false imprisonment of British subjects, are not to be
referred to arbitration.
2. In cases where the claim is for injury to or wrongful seizure of property, the
question which the arbitrators will have to decide will only be (a) whether the
injury took place and whether the seizure was wrongful, and (b) ifso, what amount
of compensation is due. That in such cases a liability exists must be admitted in
principle.
3. In the case of claims other than the above, we are ready to accept arbitration
without any reserve. * * *
It will be seen from this that in the first place all claims are to be submitted
to arbitration; that as regards claims " arising from the recent insurrection"
where such claims are for injury to or wrongful seizure of property the allied
Governments will only accept arbitration on the express terms " that in such
cases a liability exists must be admitted in principle." Finally, in the case of
other claims arbitration without any reserve is accepted.
It is clear that a meaning beyond the ordinary submission to arbitration must
be given to thi5 very pointed and special admission of liability. It admits as
not open to discussion some principle which might be open to argument if
nothing more than a bare submission to arbitration were found.
As it occurs in this document the meaning is plainly that -
As regards all claims arising out of the rr.cent insurrection, whether due to their
own acts or to those of insurgents, the Venezuelan Government must admit their
liability. Otherwise the blockade will not be raised.I
These particular terms were never afterward,; discussed_ In the protocol the
Venezuelan Government admir their liability in these very words, and therefore
with the same meaning.
There is nothing unreasonable in this. This tre-aty was made under pressure
of a blockade. Under such circumstances what is more natural than to find
that the blockading power has insisted upon its own standard of right?
To say that in face of the words '' the Venezuelan Government admit their
liability" the Venezuelan Government are only to be held liable under accepted
and recognized principles of international law is to say that these words carefully
and deliberately inserted in an important section of a treaty are without
meaning or bearing on the effect of the treaty.
If it be suggesled that "admit their liability" means that the Venezuelan
Government agree not to raise as a defense that these specially mentioned
1 See Appendix to original report, p. 1033. Not reproduced in this series.
Annex 284
AROA MINES -- CONTE~TION OF BRITISH _-\GE:--IT 405
claims are a matter for the law courts, it may be pointed out that if a claim
which would othen\·ise be the subject of ordinary litigation be submitted to
arbitration, that fact alone means that all other jurisdictions are, as regards
that claim, set aside and superseded by the jurisdiction of the arbitral tribunal.
Therefore, the further provision that the Venezuelan Government admit their
liability would be superfluous and meaningless in the dass of claims here submitted
to arbitration.
This admission, then, is an acknowledgment on the part of the Venezuelan
Government that they take upon themselves liability for all claims of the kind
specified arising out of the insurrection, whether done by themselves or by
insurgents.
Since injury to or seizure of property is necessarily wrongful in the case of
insurgent forces, it is only needful lo prove that they took place and arose out
of the insurrection, and liability at once attaches to the Venezuelan Government,
the only remaining question being one of amount_
It has already been indicated that this liability for the acts of insurgents in
the case of a country so circumstanced is a doubtful point of international law.
depending as it does upon the question whether the country is " well-ordered
to an average extent" (Hall, p. 226). a point difficult and embarrassing to
di~cuss. The admission of liability found here i'i therefore just such as would be
expected under the circumstances.
It is not necessary to pursue the matter further, since, for the present purpose,
it is sufficient to rely on the liability admitted in the protocol, without reference
to the principles of international law. Attention is called to the point merely to
show that His Majesty's Government have not acted in an arbitrary or unreasonable
manner.
Upon another ground also this tribunal ought to interpret the words" admit
their liability" in the sense above stated.
The treaty between Great Britain and Venezuela contains the following
prov1s1on:
In whatever relates to the safety of * * * merchandise, goods, or effects,
* * * as also the administration of justice, the subjects and citizens of the two
contracting parties shall enjoy * * * the same liberties, privikges, and rights
as the most favored nation.
All awards given by the Mixed Commissions are Lo be paid out of one fund.
It would therefore, in view of the above treaty. be a denial of equity if the
subjects of any other n2tion wen". to be paid sums of money out of this fund
upon a more favorable principle- than British subject~-
German and French subjects have now obtained awards for damage caused
by revolutionaries, which will Le so paid.
\Vhen, therefore. \\Ords have to be interpreted which admit of any possible
doubt as to their meaning--- though it is contended that no such doubt exists
here - regard must be paid first to the treaty, and secondly to the provision
of the protocol, that decisions are to be based upon absolute equity. In such
a case it is the duty of thi[-, tribunal to give to the words the most favorable
possible interpretation as 1-egards British subjects if by so doing the treaty rights
of British subjects will be the better maintained. Therefore, in view of the
treaty, the admission of liability must be read in the sense of a stipulation that,
in awarding payments out of the common fund, British subjects shalJ be paid
on as favorable a principle as the st1bjects of any other nation.
That is. since subjects of other nations receive payments on the ground of the
liability of the Venezuelan Government for acts of insurgents, " admit their
liability " must be read as conceding to Dri tish subjects the ri,ght to be paid
Annex 284
ARDA MINES - OPINION OF UMPIRE 443
France-Mexico, 1886; 1 France-Colombia, 1892; 2 Germany Mexico; San
Salvador-Venezuela, 1883.a
The learned British agent also raises the point that an international rule
applicable to "well-ordered States" in regard to the irresponsibility of governments
for the acts of unsuccessful revolutionists may not be easily applied to
States possessing the history of the respondent Government.
Concerning this point the umpire is content to accept the concrete judgment,
practically uniform, of States whose skilled and trained diplomatists have given
this question long years of patient consideration. This concrete judgment he
has in the treaties made between Germany and Colombia and Italy and
Colombia heretofore quoted and between the other countries above cited, as
well as by the historic attitude of the British Government and the Government
of the United States of America in their diplomatic treatment of these question
in relation to countries having the same general characteristics, in this regard,
as Venezuela.
There now remains to consider only the " most favored-nation " proposition.
Regarding this it is sufficient in the judgment of the umpire to say that
Venezuela has granted to no other country any favors in these protocols not
granted to the Government of His Britannic Majesty. He says this modestly,
but conscientiously, after careful study. He would avoid, if he could, the clash
in judgment this statement involves, but he can not do so and be true to his
solemn convictions. That there have been interpretations of several protocols
with which the present umpire can not agree and with which this opinion will
not accord, he admits to be true. Bue these interpretations were had and the
consequent results followed against the earnest protest and vigorous opposition
of the Government of Venezuela, and were therefore dearly not favors grante<l
by her.
In considering, determining, and applying the protocols to this case and to
all others; in weighing and settling the facts and the law in each case; in meeting
and answering every proposition connected with the proceedings of this Mixed
Commission the umpire must never lose sight of the most essential part of the
protocols which is none other than the solemn oath or declaration which it
prescribes. Before we were allowed to assume the functions of our high office
we were required by its provisions to make solemn agreement and declaration -
carefully to examine and impartially decide, according to justice and th~ provisions
of the protocol of the 13th :February, 1903, and of the present agreement, all claims
submitted to them (us).
While the oath adds to the requirements of administering our Lrust according
to justice the provisions of the protocol, it is not to be presumed or admitted that
there is aught in either of those protocols which is contrary to or subversive
of its high and principal behest - justice. This, then, is the ultimate purpose and
required result of all our inquiries, examinations, and decisions. It is made, as
it should be made, the chief cornerstone of this arbitral structure. There is one
other and very important rule of action prescribed to govern us in our deliberations:
it is that we " shall decide all claims upon a basis of absolute equity."
The way is equity, the end is justice. There is no other way and no other end
within the purview of the protocol. Not only must each particular case be
determined on these two bases, but each part of the protocols relating to this
Commission must be interpreted and construed in accordance therewith. If
there be two views of some provisions which, although differing, strike the mind
1 British and Foreign St. Papers, vol. 77, p. 1090.
2 Id., vol. 84, p. l:l7.
3 Id., vol. 74, p. 298.
Annex 284
4-14 BRITISH-VENEZUELAN COMMISSlON
with equal force and there is a hesitancy which to adopt, the one must be taken
which best withstands the application of this supreme test. The protocols will
permit no construction of any part which in its adaptation may deviate from
the chosen path or lead to a condusion at war with the required end. All and
every part thereof must be read and interpreted with this fact always predominant.
If a question arises, not readily to be apprehended, wherein equity and
justice differentiate, then the former must yield, because the obligation of the
prescribed oath is Lhe superior rule of aclion.
International law is not in terms invoked in these protocols, neither is it
renounced. But in the judgment of the umpire, since it is a part of the law of
the land of both Governments, and since it is the only definitive rule between
nations, it is the law of this tribunal interwoven in every line, word, and syllable
of the protocols. defining their meaning and illuminating the text; restraining,
impelling, and directing every acl thereunder.
Webster thus defines equity:
Equality of rights; natural juslice ur right; •
of conflicting claims; impartiality.
Bouvier says in part:
* * fairness in determination
In a more limited application, it denotes equal justice between contending parties.
This is its moral signification, in reference to the rights of parties having conflicting
claims; but applied to courts and their jurisdiction and proceedings it has
a more restrained and limiLed signification. (Vol. I, p. 680.)
The phrase," absolute equity," used in the protocols the umpire understands
and interprets to mean equity unrestrained by any artificial rules in its appliccation
to the given case.
Since this is an inLernational tribunal established by the agreement of nations
there can be no other law, in the opinion of the umpire, for its government than
the law of nations; and it is, indeed, scarcely necessary to say that the protocols
are to be interpreted and this tribunal governed by that law, for there is no
other; and that justice and equity are invoked and are to be paramount is not
in conflict with this position, for international law is assumed to conform to
justice and to be inspired by the principles of equity.
lnlernational law is founded upon nalural reason and justice. * * * (Wharton,
vol. I , sec. 8, p. 32.)
The law of nations is the law of nature realized in the rel a lions of separate political
communities. (Holland's Studies in Int. Law, 169.)
IL is the necessary law of nations, because nalions are bound by lhe law of nature
to observe it. It is termed by others the natural law of nations because it is obligatory
upon them in point of conscience. (Kent's Com., vol. 1, 2. )
The end of the law of nations is the happiness and perfection of the general
society of mankind, etc. (lb. )
International law * * * is a sy~tem of rules * * * not inconsistent with
the principles of nalural justice. (Woolsey, lntrod. to Int. Law, secs. 2 and 3.)
The rules of conduct regulating the intercourse of States. (Halleck, chap. 2,
sec. 1. )
The intercourse of nations, therefore, gives rise to international rights and duties,
and these require an international law for their regulation and enforcement. Thal
law is not enacted by the will of any common superior upon earth, but it is enacted
by the will of God; and is expressed in the consent, tacit or declared, of independent
nations. * * * Custom and usage, moreover, outwardly express the consent of
nations to things which are naturally - that is, by the law of God - binding upon
them. (lb., sec. 6, quoting Phillimore, vol. 1, preface.)
That when international law has arisen by the free assent of those who enter into
certain arrangements, obedience to its provisions is as truly in accordance with
Annex 284
BOLIVAR RAILWAY - OPINION OF UMPIRE 445
natural law -- which requires the observance of contracts - as if natural law had
been intuitively discerned or revealed from Heaven, and no consent had been necessary
at the outset. (Bouvier's Law Diet., vol. I, p. I l02.)
The rules which determine the conduct of the general body of civilized States in
their dealings with one another. (Lawrence, Int. Law, sec. l.)
International law consists in certain rules of conduct which modern civilized states
regard as being binding on them in their relations with one another with a force
comparable in nature and degree to that binding the conscientious person to obey
the laws of his country. (Hall, Int. Law, 1. )
In what has been stated I have referred exclusively to the international obligations
imposed on the United States by the general principles of international law,
which are the only standards measuring our duty to the Government of Hondura:;.
(Mr. Barard, Sec. of State, to Mr. Hall, Feb. 6, 1886.)
International Jaw in its practical result guides, restricts, and restrains the
strong states, guards and protects the weak.
The guide, commonly safe and constant and usually to be followed , is international
law. But if in the given case, not easily to be assumed, it ~hould occur
that its precepts arc opposed to justice, or lead away from it, or are in disregard
of it , or are inadequate or inapplicabk, then the determination must be made
by recourse to the underlying principles of justice and equity applied as best
may be to the cause in hand. The umpire will apply the precepts of international
law in all cases where such use will insure justice and equity for this
reason, if for no other - that well-defined principles and precepts which have
successfully endured lhe test of time and the crucible of experience and criticism
,ue safe in use, and should never carelessly be departed from in order that one
may step out into a way unknown to walk by a course unmarked. But these
precepts are to be used as a means to Lhe end. which end is justice.
The rule of justice, equity, and Jaw deduced by the umpire and to be applied
here is well expressed in the treaties of Germany and Italy with Colombia hereinbefore
quoted. Adapted for our use, the rule will read as follows:
The Government of Venezuela will not be held liable lo the British Government
for injuries to property or wrongful seizures thereof, or for damages, vexations, or
exactions committed upon or suffered by British subjects in Vene:.1:uela during any
unsuccessfull insurrection or civil war which has occurred in that count, y unless
there be proven fault or want of due diligence on the part of the Venezuelan authorities
or Lheir agents.
The Arna mines supplementary claim is based wholly on the seizure of their
property by revolutionary troops without proof of any fault or lack of due diligence
on the part of the titular and respondent Government.
Under the rule adopled this claim must be. and is hereby, disallowed, and
judgment will be entered to that effect.
BOLIVAR RAILWAY COMPANY CASE
A nation is responsible for the acts of a successful revolution from the time such
revolution began. I
PLUMLEY, Umpire:
When this claim came to the umpire on the disagreement of the honorable
commissioners, as to parts thereof there had been agreed to and allowed by the
commissioners the following amounts:
1 See abo Supra, p. I 19.
Annex 284
ANNEX285
ADJUSTMENT OF CLAIMS
Convention signed at Guayaquil November 25, 1862
Senate advice and consent to ratification January 28, 1863
Ratified by the President of the United States February 13, 1863
Ratified by Ecuador July 26, 1864
Ratifications exchanged at Quito July 27, 1864
Entered into force July 27, 1864
Proclaimed by the President of the United States September 8, 1864
Terminated in March 1874 upon payment of claim
13 Stat. 631; Treaty Series 77 1
The United States of America and the Republic of Ecuador desiring to
adjust the Claims of citizens of said States against Ecuador, and of citizens
of Ecuador against the United States, have, for that purpose, appointed,
and conferred full powers respectively, to wit: The President of the United
States on Frederick Hassaurek, Minister Resident of the United States in
Ecuador, and the President of Ecuador on Juan Jose Flores, General-in-Chief
of the armies of the Republic, who, after exchanging their fttll powers, which
were found in good and proper form, have agreed on the following articles:
ARTICLE 18'
All claims on the part of Corporations, Companies, or individuals,
citizens of the United States upon the Government of Ecuador, or of
Corporations, Companies or individuals, citizens of Ecuador, upon the
Government of the U nJ.ted States, shall be referred to a board of Com•
missioners consisting of two members one of whom shall be appointed
by the Government of the United States, and one by the Government
of Ecuador. In case of death, absence, resignation, or incapacity of
either Commissioner, or in the event of either Commissioner omitting
or ceasing to act the Government of the United States, or that of Ecuador
respectively, or the Minister of the United States in Ecuador, in the
name of his Government, shall forthwith proceed to fill the vacancy
thus occasioned. The Commissioners so named shall meet in the City
of Guayaquil, within ninety days from the exchange of the ratifications
of this Convention; and before proceeding to business, shall make
1 For a detailed study of this convention, see 8 Miller 869.
316
Annex 285
CLAIMS-NOVEMBER 25. 1862 317
solemn oath that they will carefully examine, and impartially decide,
according to justice, and in compliance with the provisions of this
Convention, all Claims that shall be submitted to them; and such oath
shall be entered on the record of their proceedings.
The Commissioners shall then proceed to name an arbitrator or
umpire, to decide upon any case or cases concerning which they may
disagree, or upon any point of difference which may arise in the course
of their proceedings. And if they cannot agree in the selection, the
umpire shall be appointed by Her Britannic Majesty's Charge d'Affaires,
or (excepting the Minister Resident of the United States) by any other
Diplomatic Agent in Quito whom the two high contracting parties
shall invite to make such appointment.
ARTICLE 2d
The arbitrator or umpire being appointed the Commissioners shall,
without delay, proceed to examine the claims which may be presented
to them by either of the two Governments; and they shall hear, if
required, one person in behalf of each Government on every separate
claim. Each Government shall furnish, upon request of either commis•
sioner, such papers, in its possession, as may be deemed important to
the just determination of any claim or claims.
In cases where they agree to award an indemnity, they shall de•
termine the amount to be paid. In cases in which said commissioners
cannot agree, the points of difference shall be referred to the umpire
before whom each of the Commissioners may be heard, and whose
decision shall be final.
ARTICLE 3d
The Commissioners shall issue Certificates of the Sums to be paid to
the claimants, respectively, whether by virtue of the awards agreed to
· between themselves, or of those made by the umpire; and the aggregate
amount of all sums decreed by the Commiss ioners, and of all sums
accruing from awards made by the Umpire under the authority conferred
by the fifth Article, shall be paid to the Government to which
the respective claimants belong. Payment of said sums shall be made
in equal annual instalments to be completed within nine years from the
date of the termination of the labors of the Commission; the first payment
to be made six months after the same date. To meet these payments
both Governments pledge the revenues of their respective nations.
ARTICLE 4th
The Commission shall terminate its labors in twelve months from
the date of its organization. They shall keep a record of their proceedings
and may appoint a Secretary versed in the knowledge of the
English and Spanish 1anguages.
Annex 285
318 ECUADOR
ARTICLE 5th
The proceedings of this Commission shall be final and conclusive
with respect to all pending claims. Claims which shall not be presented
to the Commission within the twelve months it remains in existence,
will be disregarded by both Governments and considered invalid. In ·
the event that, upon the termination of the labors of said Comqussion,
any case or cases should be pending before the Umpire, and awaiting
his decision, said umpire is hereby authorised to make his decision or
award in such case or cases, and his certificate thereof, in each case,
transmitted to each of the two Governments, shall be held to be binding and
conclusive; provided, however that his decision shall be given within
thirty days from the termination of the labors of the Commission, at
the expiration of which thirty days his power and authority shall cease.
ARTICLE 6th
Each Government shall pay its own Commissioner; but the umpire
as well as the incidental expenses of the commission shall be paid one
half by the United States and the other half by Ecuador. ·
ARTICLE 7th
. The present Convention shall be ratified, and the ratifications exchanged
in the City of Quito.
In faith whereof we, the respective Plenipotentiaries, have signed
this Convention and hereunto affixed our Seals in the City of Guayaquil
this twenty fifth day of November, in the year of our Lord 1862.
F. HASSAUREK [SEAL]
JUAN JOSE FLORES [SEAL]
Annex 285
ANNEX286
GENERAL
OF
PRINCIPLEs ·-LA
W
as applied by
INTERNATIONAL ·coURTS AND"TRIBUNALS
- · r
BY
BIN CHENG, PH.n., LICENcx47™ DRO~ i.:~h ·J•T,fY J
Lecturer in International Lat. _ __ ._ .... ~-· --- --
Univernty College, I:iond-On
WITll A FOREWORD BY
GEORG SCHW ARZENBERGER, PB.D., DR.JlJR.
Reader in International Law in the Um'Derrity of London;
Vice-Dea1". of the Faculty of Law,, Uni'Oerlity ColllJge, L1mdon
CAMBRIDGE
GROTIUS PUBLICATIONS LIMITED
1987
Annex 286
SALES&
AfJM..I. N,- f-·~S ·,.:T R.:A T..-l :'O ~N; •· t
GROTIUS PUBLICATIONS LTD.
R,l?°~Q~ l t 5, CA1v1l~)Up_Gt ~CBS 9B'P, UK
:• ! .
~ . ~ . . ..._ ...
. .
, "·j. :~.tvt~ i~:.•;
- r
T his work was first published by S_tevens·~ Sons Limited in 1953, under Lhe auspices of
the London Institute of World Affairs, as Number 21 in the series "The Library of
World Affairs" (Editors: George W. Keeton and Georg Schwarzcnberger). It is now
reprinted from the original with the kind perinission of Sweet and Maxwell Limited and
the London Institute of Wo.~l~ _A(fai_r~.
°' •. ;,- 1 .. : I -. -.. '" • ." J •
",....o.. I • • •- t
1. ~ I ••• -•• ' -
• ~ J &
,I I 11
©
BIN CHENG
1987
All rights reserved. No pan of this publication may be reproduced or transmitted in any form
<?r by any means, including photocopying and recording, without the written permission of
the "copyright holder, application for which should be addressed to the publisher. Such
written permission must also be obtained before any part of this publication is stored in a
retrieval system of any nature.
~ \"'"=~'.:" ~-- ,.. .• -♦~.\ _;;;
International Staridard .~9ok__Numo'f r: 0 949009 067
-~¥ ,t. .
Reprinted by irhe Burling_fo.n P.~fJi iO:~,~ bridg~) Ltd., Foxton, Cambridge
ii'';!i\t
f • '· ••
. '•.
:
Annex 286
Fo.reword
Preface
CONTENTS
Table of Oases (Alphabetical)
Table of Cases- (Accor.dinrrtv Courts and .Tribunals)Table
of Diplomatic Incidents
Table of 'freaties
Abbreviations
IN'rRODUCTION·
PART _ONE
page
THE PRINCIPLE OF SELF-PRESERV ATJON
INTRODUCTORY
1. 'J'ERRITORIAL APPLICATION OF THE PRINCIPLE
.l1.. Exclusion and _Expulsion of Aliens _.
B. Measures to Promote Public Welfare
I. Expropriation
· II. Requi~ition
Ill. Compensation
IV. Conclusions
C. Measures to Ensure Public Safety
I. Administrative ·Meas.ures
II. Forcible Measures
D. Conclusions
2. 'EXTERNAL APPLICATION OF THE PRINCIPLE
A. Necessity
B. Self-Defence
I. On the High Seas
1. In Time of Peace
2. In ·Time of War
II. In Foreign Territory
III. Self-Defence as a Juridical Concept
1. Meaning
Vll
XI
Xlll
XVll
·X:XXI
xliv
xlv
xlvii
1
29
32
32
36
37
40
4_7:,
49
51
5.2,
58
67
69
69
'17
77
79
80
83
92
92
Annex 286
•:
Contents
2. EXTERNAL APPLICATION (Self-Defence)-cont.
.~. . ' .-· ... ~ J •' f 2.'
2. Object 93
3. CQ:rulitfo~'; G.~v~tilin its Existence (~ 3- ~-:.-....! :t ~ •. , ••• g
and Exei:cise 94
(a) Instant Dang~r 94
(b) Unjustifiable Character of ~hr~.:· : i ';
- ... ·.~ J. ·J t \
Dang~~-.- ,:,._,/ i; , ,. :, ~ \,, ,, . ~~!;,.
:·.,_(.-,,-·.. . •.:-..._- J~)• .~ 1:>~~nqe·:.. f( -_.b:~~.¥ .· ;~ e~~~~ ,-9£ r-.-. ~~-\-
' -- ·. Protectio.tf . . . _ . . ,.· , . 95
~-~ :"t :.• ·t-· .1 .-.,..•··~ '~ ·-~'l 1 · · ,'". -t.., . •. ~
(d) Reasonableness -·1n· it~ -~.~~~ci~-~- -~ j l6
4. Self-Defence as a Justiciable"!ssrie -· ... 96
,:,-,: '•· ' 't.·: .._ _;_: 97 C. Sell-Help
D. Conclusions 99
PART TWO
THE PRINCI'P-iJE {jj_i 'GOOD FAITH
-; ~ -- GOOD FAITH IN TREATY RELATIONS
A. Formation of Treaties_ 106
'. ,.••
B . Treaties 8./t~P,!§P~ r.f.l~t#:•::' ,-,: " 'J.~·:·r_·.;_;':·!l ·. 0 1;,.): ::•~!-~ ·· 1Q9
C. Pacta Suni S;~!,1?~1:,,p:~J ,_._:,; ... :;- . . ·J{ ; ,.,_ 1, ii.v.~-;:-~:,-'_i .:. 112
D. Performan~~1;0~i·,~e~tY:, 0bμ,g~Aiom. , ,:.- :. ,-; H•. ;: · .\·_.· . . .f 114
E. Denunciation of Treaties :,i·,: ~<·1 , 1: -.. ,, j . , 119
·t . Goon FAITH IN THE EXERCISE OF R'ihH-rs· ·(Tim TimoRY OF
· 1·~ ~- -. -~,. t · ~ · j ":j""j ~ .. ,r ABusE oF R10HTs) *' --- · ,, -__, 5 _~ ,,,) · • · ·: : 121
A. The Malicious Exercise of a R1glit' !- ls ' · ! · t 121
E . The Fictitious ·<E1fe¥°6isfit' ~-lti~Iit -~ · · .'. , > ~.' ·; ·' · '~ · · 1 122
I. Evasion 'of!t 1:fe,.,lia:w r:_:,.:·n-·· •·: _ n\,, ·' 122
II. Evasion of Treaty' iObligatii~ns'·~ 'i f 123
l ' : • . . ! .. .. • .. • j ·\• . C. Interdependence of Rights an~ Obliga'tlons0 ··,- ,; _, . • • ~ 123
I. Right~ l~μ,t'Fma~r.P~~g, ~ig1;1;s ., ,._. ,, . •:.~'•:'., ·!•" off' 123
II. Rights"ind .. OBiigations tinder' General" Inter- - • • • ·: . ·- • "r!' •; ~ • j national Law · · - 129
,:,\· •.. , ~ .. J· - ;,_ :•.
D. · Abuse of Discretion 132
.-· : -..~\c. i : · ~ ·, · ; ), 1 ! H.. r J. -
; !j~ qTHER APPLICATIONS OF,.'JfHE F..RI_N.e.IPLR-; : .t 137
:J.37
140
141
149
158
A. Duty to Notify a Ohange,·in · P-0liey 1 :;
B. Duty to Maintain the- -Status ·Quo·:·? ~- ,_ f}'.
C. Allegar:sAJop, t.-ra.iiii:·:Non-.- Est Audi"eiii.dlzis -~' ; -' !
D. Nullus Commodum Caper& De: S:u.a lnjuria Propria
E. Fraus Omnia Corrumpit ' ..
Annex 286
Oontents ix
. ··. : GE°t'JERAL PRINCIPLES OF L4-llb JN. ,~":·.:
· .,, 'l'H!fl.;:-9/JNQ~.PT ,, Qf:1ll!1.$I'iQN&!~JL..J%¥, . .,·r.:._
• • , 'l' •¢ • •• ! r - . • -, '.l •• ·i I • 'l" . :;_ . i ··~ • ~ - - ·: t .. • • • ' 6·, GENERAL NoTio'N's' · ·· .: · ' •·.: ·-- 1 , . , .,:,.; .. . ,., ,,. ,_._,_ - L. , ,,.. 163
• • ' ·- f • •
:: A. Responsibility as a Juridical Co:!ie~p"t::Jc :N _:,,, ,,· :·.,:• . 163
B. Unla~ful-Act in. Internatioiial"tia'W:· ( t,;; ·'·. r .. '··' !•: 170
C. Imputa-bility in -Internationl½P 'La~ :f.J! •jl>~<' :-•'..'c: 180
\ '. :'! I. The· State ··.,-,Ji·=·.<: \ ;: .'t.1.::-,,':··:·;i 181
II. State Representatioii!,.,,:;,,J ··/,:1 ,_.:·.:: ; :. ,, ·· ·
III. Rival Governments ': ;-···r:r 'ir ' ,..·.• .•. , I
TV. Acts of Offici~l.s.:.1;,; ·i \ . :_~:;,Y, -l. •J ,'. :,;r · .-· ._ , <
183
185
i~-
_7~ TBE PRINCIPLE OF INDIVIDUAL RE's:P-◊NSIBILITt -~· ,;,i:,. 200
:· .:_~ ; •:· -z ."-. J f ~ ·' }r~ ~
9". ~ i ~:a,rng~i,~~ oJ ;.~•N'l'.Ji!qRA~-,~~A,RA_'.££0~-!:::.._/
.... .'
":.? t
: f: '. lJJ ~; t~~ :_ r! (/,) ;;_iii :,I ~,,". --~-fl 4 rt :
,._ , _. .. -,>,, F:-.') h-, . ~A.,ij/f_ F.QU~. J; •;.': ·< ..
GENERJ,L;)rP~J,NQJf)Iif!i,$_ .Plf:,,P4Wi .IN
JUDICIAL Pl/0J};f4}fJ.l)~NG;~ _ · .
lN"TRODUCTORY
·:\ ·~,-
11. JURISDICTION
218
233
241
257
\\-';, A. Extra Oompromisum Arbiter Nihit F~etJ ·Po-test 259
B. Jurlsdicti<?n ove~:)1;1-.cJ~~~Y~.L~u~stions 266
c. Competence to ' 'lridi'cat&· ·,; hlterim Me~sures of
267
. .! , , ~ f 1· r; :J~-it:·~;: _1q l .. ~".t:_; jl.-J .:.::L:--:· ::.~t ':· {; ~,J~ r: .z .- .
;t;g~-Pow~-:l~ iJ'.?:t~~P,:~!dI~E. r~,Jj:f'~x~~~·~: Qg lPl'H~P.J9TIO;N (COM·
, -, .,:. PETE•N·cE DE LA CoMiETENCE"J, - .. . . , 27-5
:_ ~} _._ .... . 4 :~ ·i ·:\ { -~•• :.::,, 1, ! l' : J· :•.\.~· j~-," .. "".: ..; i . .
13; NEMO DEBET ESSE . .fuDEX "rn'· P.RoPRiA- SuA CAUS·A • ' • r ~ • • ,
14. AUDIATUR ET ALTERA PARS·
15, ·JURA Novrr CURIA
279
290
.299
Annex 286
X Contents'
16. PROOF AND BURDEN OF :f>RooF
Judicial Notice
Presumptions
302
303
304
307
309.
312
318
320
322
323
326
The Admission and the Apprisal of Evidence
Statements and Affidavits of the Claimant
Testimonial Evidence
Documentary. Evidence.
'' Best Evidence '' 'Rule
Circumstantial Evidence
Prima Facie Evidence
Burden of Proof
17 .. TBE PRINCIPLE OF RES JUDICATA 336
A. Meaning 336
B. Limits 339
C. Scope 348
D. Nullity and Voidability 357
I. Incompetence 357
II. Violation of the Principle Nemo Debet
Esse Judex In Propria S11.a Oausa 357
III. Violation of the Principle Audiatur Et
Altera Pars 357
IV. Fraud and Corruption 359·
V. Fraud of- the Parties and Collusion of
Witnesses
VI. Manifest and Essential Error
VII. Fresh Evidence
358
361
364
18. EXTI CTIVE PRESCRI.PTION 373
CONCLUSIONS 38!7
APPENDICES
1. Draft Code of General Principles of Law 39-7
2. Municipal Codes which Provide for the Appl,ication of the
General Principles of Law, Equity, or Natural Law 400
8. Bibliography 409
A. General.Works on International Decisions 409
B. Works on General Principles of Law 412
C. Select Specialised Bibliography 416
Index 439 ,
Annex 286
/ :'
156 The Principle of Good Fa:ith
Venezuela on the other hand, the claims of Oapt. Clark were
successively and separately put forward before these commissions.
These claims were allowed by Umpire Upham before the
Granadine-United States Claims Commission (1857). 11
The Ecuadorian-United States Claims Commission (1862),
however, rejected them. The American Commissioner Ha.ssaure~
after pointing out that the conduct 0£ Clark was in
violation of both United States municipal law and treaty provisions
between the United States and Spain, the latter considering
such conduct ;:is piracy, asked:-
.. What right, under these circumstances, has Captain Clark, or
his representatives, to call upon the United States to enforce his
claim on the Colombian Republics? Can he be allowed, as iar as
the United States are concerned, to pront by his own wrong? Nemo
ex suo delicto meliorem suam condition.em fa.cit. He has violated
the laws of our land. He has disregarded solemn treaty stipulations.
He has compromised our neutrality. . . . What would be
the object of enacting penal laws, if their transgression were to
entitle the offender to a premium instead of a punishment ? . . . I
bold it to be the duty of the American Government and my o·wn
duty as commissioner to state that in this case Mr. Clark has no
sta.nding as an American citizen. A party who asks for redress must
present himself with clean hands." 12
Subsequently a new Claims Commission. (1864) was set up
between the United States and New Granada (which had by
then changed its name to Columbia). Sir Frederick Bruce, the
Umpire of this Commission, adopted the views of Commissioner
Hassaurek and reversed the decision of Umpire Upham. ~3
Finally, on the same principle, the case was dismissed by
Umpire Findlay before the United States-Venezuelan Claims
Commission (1885). 74
n 8 lnt.Arb. , p. 2730.
72 Ibid., p. 2731, e.t pp. 2738-9.
u Ibid., p. 2743.
1, Ibid., p. 2743, at p. 27!9. Hassaurek'a opinion wa.a cited and the same
principle was applied in U.S.-Ven.M.C.C. (1903) : Jar1Jis Cate, Ven.Arb.1908,
p. 145. See also Spa.n.-U.S. CJ.Com. (1871) : The Ma.ry Lowell (1879)
S 111t.A1'b ., p. 2772. Claimants who a.ided insurgents by supplying a.rms were
estopped from cla.iming damages for ca.pture of these arms on the high sea.s bl the Spanish Government (pp. 2774 , 2775 , 2776). 'On those principles
o equity which the Umpire does not feel a.t liberty to disregard he is bound
to decide that the owners '?f the ship and cargo a.re as rncb , estopped in their
present cla.im to indemnity fo~ tbe consequences of their _unla.wful venture "
(p. 2776) . . Cf. also Mex.-U.S. Cl.Com. (1868): Ct1(!U/lu [1.e., Cuculla] Case,
4 Int.Arb. , p. 3477, at p. 3479.
Annex 286
Nullus Commodum Capere De S-ua lnjuria Propria 157
The principle does not, however, appear to be 7us cogens.
For although. a Government
'· could not be justified, under the law of nations, in interposing
its authority to enforce a claim of one of ·its citizens growing out of
services rendered in violation of its own laws, and its duties as a
neutral nation, yet if the nation against whom such claim exists
sees proper to waive the objection, and agrees to recognise the claim
as valid and binding against it, the trihunal to which it is referred
for settlement cannot assume for it a defence which it has expressly
waived." 15
Unless, however, there is such a waiver, the principle is of such
a fundamental character that where an award disregarded it, a
State, even if the award were in its favour, would hesitate to
insist upon its enforcement. In the Pelletier Case (1885 ),
compensation was allowed to an American claimant whose ship
was seized by Haiti for an attempt at slave trading. In
recommending that it should not be en.forced, the United States
Secretary of State, Mr. Bayard, took occasion to say: -
"Even.were we to concede that these out:tages in Haitian waters
were not within Ha.itian jurisdiction, I do now affirm that the claim
of Pelletier against Haiti . . . must be dropped, and dropped
peremptorily and immediately by the ... United States ...
Ex turpi causa non oritur actio : by innumerable rulings under
Roman common law, as held by nations holding Latin traditions,
and under the common Jaw as held in England and the United
States, has this principle been applied." 76
The award ,,·as nev-er enforced.r7
The principle, however, only applies in so far as the claim
itself is based upon an unlawful act. It does not apply to cases
~5 U.S. Domestic Commission for Claims against Mexico (1849): Meade Claim,
4 Int.Arb., p. 3430, at p. 3432. The waiver referred to was deduced from
decisions of the Mex.-U.S. Cl. Com. (1830) which dealt with a number of
claims arising out of supplies furnished to the Mexican revolutionaries in
t,heir struggle for independence against Spain . In these cases, no question
was raised by either the Mexican or the U. S. Commissioners as to the
ad~issibility of the claims. The Mexica,n Commissioners concurred in allowing
the claims without discussion, except where questions of evidence gave rise
to differences of opinion. In each case, the Commissioners referred to the
supplies as having been ~urnisbed for " the promotion of the grea.t object
aforesaid," viz ., i he independence and ·self-government of Mexico. The
Meade Claim. arose out of similar circumstances. See ibid., pp. 3426---8.
16 D.S.F.R. (1887), pp. 606-7.
, 7 See Pelletier Gase (1885) 2 Int.Arb., pp. 1749-1805.
Annex 286
ANNEX287
DIPLOMATIC PROTECTION
[Agenda item 2]
DOCUMENT A/CN.4/546
Sixth report on diplomatic protection, by Mr. John Dugard, Special Rapporteur
[ Original: English]
[ 11 August 2004]
CONTENTS
Paragraphs Page
Works cited in the present report ............. ..... ..... ......... ..... ......... ..... ......... ..... .............. ..... ......... ..... ......... ..... ......... ..... ..... ......... ..... ................... .
INTRODUCTION ............................................................................................................................................................................ .
Chapter
I. NON-APPLICABILITY OF THE CLEAN HANDS DOCTRINE TO DISPUTES INVOLVING INTER-STATE RELATIONS PROPERLY SO
CALLED ......................................................................................................................................................................... .
II. APPLICABILITY OF THE CLEAN HANDS DOCTRINE TO DIPLOMATIC PROTECTION ...................................................................... .
III. CASES OF APPLICATION OF THE CLEAN HANDS DOCTRINE IN THE CONTEXT OF DIPLOMATIC PROTECTION .................................. .
IV. A PLEA TO ADMISSIBILITY? ............................................................................................................................................. .
V. CONCLUDING REMARKS .................................................................................................................................................. .
Works cited in the present report
CARREAU, Dominique MALANCZUK, Peter
1-4
5-7
8-9
10-15
16
17-18
2
2
4
4
5
5
Droit international. 7th ed. Paris, Pedone, 2001. 688 p. Akehurst's Modern Introduction to International Law. 7th rev. ed.
CHENG, Bin
General Principles of Law as Applied by International Courts and
Tribunals. London, Stevens, 1953. 490 p.
CoMBACAu, Jean and Serge SUR
Droit international public, 5th ed. Paris, Montchrestien, 2001. 814 p.
FENWICK, Charles G.
Cases on International Law. Chicago, Callaghan, 1935.
FITZMAURICE, Sir Gerald
"The general principles of international law considered from the
standpoint of the rule of law", Recueil des cours de l'Academie
de droit international de La Haye, 1957-II. Leiden, Sijthoff,
1958. Vol.92,pp. 1-227.
GARCIA-ARIAS, Luis
"La doctrine des 'clean hands' en droit international public",
Yearbook of the Association of Attenders and Alumni of The
Hague Academy of International Law, vol. 30, 1960, pp. 14-22.
1
London and New York, Routledge, 1997.
MooRE, John Bassett
A Digest of International Law, vol. II, Washington, D.C.,
Government Printing Office, 1906.
RoussEAU, Charles
Droit international public. Vol. V, Les rapports conflictuels. Paris,
Sirey, 1983.
RuZIE, David
Droit international public. 14th ed. Paris, Dalloz, 1999. 250 p.
SALMON, Jean J. A.
"Des 'mains propres' comme condition de recevabilite des reclamations
internationales", AFDI, vol. X, 1964, pp. 225-266.
SALMON, Jean, ed.
Dictionnaire de droit international public. Brussels, Bruylant, 2001.
Annex 287
2 Documents of the fifty-seventh session
Introduction
1. It has been suggested that the clean hands doctrine
should be reflected in an article in the draft articles on diplomatic
protection approved by the Commission in 2004.1
The present report considers that suggestion.
2. According to the clean hands doctrine no action arises
from wilful wrongdoing: ex dolo malo non oritur actio. It
is also reflected in the maxim nullus commodum capere
potest de injuria sua propria. According to Fitzmaurice:
"He who comes to equity for relief must come with clean hands." Thus
a State which is guilty of illegal conduct may be deprived of the necessary
locus standi in judicio for complaining of corresponding illegalities
on the part of other States, especially if these were consequential on
or were embarked upon in order to counter its own illegality-in short
were provoked by it.2
In the context of diplomatic protection the doctrine is
invoked to preclude a State from exercising diplomatic
protection if the national it seeks to protect has suffered an
injury in consequence of his or her own wrongful conduct.
3. The following arguments have been raised in support
of the suggestion that the clean hands doctrine should be
included in the draft articles on diplomatic protection:
(a) The doctrine does not apply to disputes relating to
inter-State relations where a State does not seek to protect
a national;3
1 Yearbook ... 2004, vol. II (Part Two), para. 54.
2 "The general principles of international law considered from the
standpoint of the rule oflaw", p. 119.
3 See Yearbook ... 2004, vol. I, 2792nd meeting, pp. 10-11, para. 48,
and 2793rd meeting, p. 11, para. 2.
(b) The doctrine does apply to cases of diplomatic
protection in which a State seeks to protect an injured
national. On 5 May 2004, Mr. Alain Pellet, who supported
the inclusion of a provision on clean hands, declared:
The vague concept of "clean hands" was not very different from the
general principle of good faith in the context of relations between
States, and had no autonomous consequences and little practical effect
on the general rules of international responsibility. However, in the
context of diplomatic protection, which involved relations between
States and individuals, the concept took on new significance: it became
functional, for in the absence of "clean hands" the exercise of diplomatic
protection was paralysed. If a private individual who enjoyed
diplomatic protection violated either the internal law of the protecting
State-and it should be noted that internal law played no role at all in
cases involving relations between States----or international law, then in
the general context of the claim, the State called upon to exercise protection
could no longer do so.4
The doctrine produces an effect only in the context of diplomatic
protection;5
(c) "Numerous cases"6 have applied the clean hands
doctrine in the context of diplomatic protection. The Ben
Tillett arbitration case is a good example; 7
(d) Invocation of the clean hands doctrine renders a
request for diplomatic protection inadmissible. 8
4. The present report will address the above four
arguments.
4 Ibid., 2793rd meeting, para. 5.
5 Ibid.
6 Ibid.
7 See Fenwick, Cases on International Law, pp. 181-184. See also
RGDIP, vol. 6, No. 46 (1899).
8 See Yearbook ... 2004, vol. I, 2793rd meeting, p. 12, para. 5.
CHAPTER I
Non-applicability of the clean hands doctrine to disputes involving
inter-State relations properly so called
5. It may be correct that the clean hands doctrine does
not apply to disputes involving inter-State relations.
However, in practice the doctrine has most frequently
been raised in the context of inter-State relations where
States or dissenting judges have sought to have a claim
declared inadmissible or dismissed for the reason that the
applicant State's hands are unclean. The following cases
illustrate that practice:
(a) Most recently the argument has been raised by
Israel in the advisory proceedings on Legal Consequences
of the Construction of a Wall in the Occupied Palestinian
Territory. In that case, Israel contended that:
Palestine, given its responsibility for acts of violence against Israel
and its population which the wall is aimed at addressing, cannot seek
from the Court a remedy for a situation resulting from its own wrongdoing.
In this context, Israel has invoked the maxim nullus commodum
capere potest de sua injuria propria, which it considers to be as relevant
in advisory proceedings as it is in contentious cases. Therefore,
Israel concludes, good faith and the principle of"clean hands" provide
a compelling reason that should lead the Court to refuse the General
Assembly's request.9
ICJ did not consider this argument to be "pertinent"10 on
the ground that the opinion was to be given to the General
Assembly, and not to a specific State or entity. Significantly
the Court did not reject the relevance of the argument
to inter-State disputes in contentious proceedings;
(b) In the Oil Platforms case, the United States of
America raised an argument of a "preliminary character""
in which it asked ICJ to dismiss the claims of the Islamic
Republic of Iran because of the latter's own unlawful
9 Legal Consequences of the Construction of a Wall in the Occupied
Palestinian Territory, Advisory Opinion. IC.J. Reports 2004, p. 163,
para. 63. See also A/ES-10/273 and Corr.I.
10 Ibid., p. 164, para. 64.
11 Oil Platforms (Islamic Republic of Iran v. United States of
America), Judgment, IC.J. Reports 2003, p. 176, para. 27.
Annex 287
Diplomatic protection 3
conduct. The Islamic Republic of Iran categorized the
argument as a "clean hands" argument, which was, so
it claimed, irrelevant in direct State-to-State claims, as
opposed to claims for diplomatic protection, as a ground
for inadmissibility of a claim. The Islamic Republic of
Iran did acknowledge that the principle might have significance
at the merits stage. The Court rejected the argument
that the claim of the United States was one of inadmissibility
and found that it was unnecessary to deal with
the request of the United States to dismiss the claim of the
Islamic Republic oflran on the basis of conduct attributed
to the latter. The Court made no comment on the argument
of the Islamic Republic of Iran that the clean hands doctrine
might only be raised as a ground for inadmissibility
of a claim in the context of diplomatic protection.12
( c) In La Grand, the United States raised an argument
against Germany's claim that appeared to fall into the category
of clean hands. The United States contended that
Germany's submissions were inadmissible on the ground
that Germany sought to have a standard applied to the
United States that was different from its own practice.
According to the United States, Germany had not shown
that its system of criminal justice required the annulment
of criminal convictions where there had been a breach of
the duty of consular notification; and that the practice of
Germany in similar cases had been to do no more than
offer an apology. The United States maintained that it
would be contrary to basic principles of administration
of justice and equality of the parties to apply against the
United States alleged rules that Germany appeared not to
accept for itself. Germany denied that it was asking the
United States to adhere to standards that Germany itself
did not comply with. The Court found that it need not
decide whether the argument of the United States, if true,
would result in the inadmissibility of Germany's submissions
as the evidence adduced by the United States did
not justify the conclusion that Germany's own practice
failed to conform to the standards it demanded from the
United States;13
(d) An argument similar to that described above in
La Grand was raised in Avena. 14 The United States did not,
however, describe it as a "clean hands" argument. Instead
the objection was presented in terms of the interpretation
of article 36 of the Vienna Convention on Consular
Relations15 in the sense that, according to the United
States, a treaty may not be interpreted so as to impose
a significantly greater burden on any one party than the
other. ICJ dismissed the argument, citing LaGrand. It
added that:
Even if it were shown, therefore, that Mexico's practice as regards the
application of Article 36 was not beyond reproach, this would not constitute
a ground of objection to the admissibility of Mexico's claim.16
(e) In the case concerning the Gabcikovo-Nagymaros
Project ICJ declined to apply the clean hands doctrine. It
stated:
12 Ibid., pp. 177-178, paras. 28-30.
13 See LaGrand (Germany v. United States of America), Judgment,
I.C.J. Reports 2001, pp. 488--489, paras. 61-63.
14 Avena and Other Mexican Nationals (Mexico v. United States of
America), Judgment, I.C.J. Reports 2004, p. 12.
15 Vienna Convention on Consular Relations (Vienna, 24 April 1963 ),
United Nations, Treaty Series, vol. 596, No. 8638, p. 261.
16 I.C.J. Reports 2004 (see footnote 14 above), p. 38, para. 47.
The Court, however, cannot disregard the fact that the Treaty has
not been fully implemented by either party for years, and indeed that
their acts of commission and omission have contributed to creating the
factual situation that now exists. Nor can it overlook that factual situation-
or the practical possibilities and impossibilities to which it gives
rise---when deciding on the legal requirements for the future conduct
of the Parties.
This does not mean that facts-in this case facts which flow from
wrongful conduct-determine the law;17
(j) In the Arrest Warrant case the Belgian judge ad
hoc, Judge van den Wyngaert, in her dissenting opinion,
held that:
The Congo did not come to the Court with clean hands. In blaming
Belgium for investigating and prosecuting allegations of international
crimes that it was obliged to investigate and prosecute itself, the Congo
acts in bad faith; 18
(g) In the Military and Paramilitary Activities in and
against Nicaragua case, Judge Schwebel, in his dissenting
opinion, held that the clean hands doctrine should be
applied against Nicaragua:
Nicaragua has not come to Court with clean hands. On the contrary,
as the aggressor, indirectly responsible---but ultimately responsible-for
large numbers of deaths and widespread destruction in El Salvador
apparently much exceeding that which Nicaragua has sustained,
Nicaragua's hands are odiously unclean. Nicaragua has compounded
its sins by misrepresenting them to the Court. Thus both on the grounds
of its unlawful armed intervention in El Salvador, and its deliberately
seeking to mislead the Court about the facts of that intervention through
false testimony of its Ministers, Nicaragua's claims against the United
States should fail. 19
In support of that reasoning he cited a number of PCIJ
and ICJ decisions. All of the cases cited can be labelled as
direct inter-State cases;
(h) In the oral argument at the phase of both provisional
measures and jurisdiction in the cases brought by
Yugoslavia against members of NATO concerning the
Legality of the Use of Force, several respondents argued
that the injunctions sought by Yugoslavia should not be
granted because Yugoslavia did not come to Court with
clean hands.20
6. The above-mentioned cases make it difficult to sustain
the argument that the clean hands doctrine does not
apply to disputes involving direct inter-State relations.
States have frequently raised the clean hands doctrine in
direct inter-State claims and in no case has ICJ stated that
the doctrine is irrelevant to inter-State claims.
7. While it is possible to draw a distinction between
direct and indirect claims for some litigational purposes
17 Gabcikovo-Nagymaros Project (Hungary/Slovakia), Judgment,
I.C.J. Reports 1997, p. 76, para. 133.
18 Arrest Warrant of 11 April 2000 (Democratic Republic of the
Congo v. Belgium), Judgment, I.C.J. Reports 2002, p. 160, para. 35.
19 Military and Paramilitary Activities in and against Nicaragua
(Nicaragua v. United States of America), Merits, Judgment, I.C.J.
Reports 1986, p. 392, para. 268.
20 Legality of the Use of Force (Yugoslavia v. Belgium; Yugoslavia
v. Canada; Yugoslavia v. France; Yugoslavia v. Germany; Yugoslavia
v. Italy; Yugoslavia v. Netherlands; Yugoslavia v. Portugal; Yugoslavia
v. Spain; Yugoslavia v. United Kingdom, and Yugoslavia v. United
States of America), Provisional Measures, Order of 2 June 1999, I. C.J.
Reports 1999, pp. 124,259,363,422,481,542,656,761,826 and 916,
respectively.
Annex 287
4 Documents of the fifty-seventh session
(notably in respect of the exhaustion of local remedies),
it is a distinction that should be drawn with great caution
as a result of the fiction that an injury to a national is an
injury to the State itself. This fiction introduced by Vattel,
proclaimed in the Mavrommatis case21 and adopted by
the Commission in the draft articles on diplomatic protection,
is fundamental to an understanding of diplomatic
21 Mavrommatis Palestine Concessions, Judgment No. 2, 1924,
P.C.I.J., Series A, No. 2.
protection. One of the cornerstones of diplomatic protection
is that "[o]nce a State has taken up a case on behalf
of one of its subjects before an international tribunal, in
the eyes of the latter the State is sole claimant".22 Surely
it is not suggested that this fiction should be abandoned
and instead the State in a claim for diplomatic protection
should be seen as simply the agent acting on behalf of its
national?
22 Ibid., p. 12.
CHAPTER II
Applicability of the clean hands doctrine to diplomatic protection
8. If an alien is guilty of some wrongdoing in a foreign
State and is as a consequence deprived of his liberty or
property in accordance with due process of law by that
State, it is unlikely that his national State will intervene
to protect him. Indeed it would be wrong for the State of
nationality to intervene in such a case because no internationally
unlawful act will have been committed in most
circumstances. In this sense, the clean hands doctrine
serves to preclude diplomatic protection. The position
assumes a different character, however, where an internationally
wrongful act is committed by the respondent
State in response to the alien's wrongful act-where, for
instance, an alien suspected of committing a criminal
offence is subjected to torture or to an unfair trial. In such
a case, the State of nationality may exercise diplomatic
protection on behalf of the individual because of the internationally
wrongful act. The clean hands doctrine cannot
be applied in the latter case to the injured individual for
a violation of international law, first, because the claim
has now assumed the character of an international, State
v. State claim and secondly, because the individual has
no international legal personality and thus cannot ( outside
the field of international criminal law) be held responsible
for the violation of international law. In short, as a consequence
of the fiction that an injury to a national is an
injury to the State itself, the claim on behalf of a national
subjected to an internationally wrongful act becomes an
international claim and the clean hands doctrine can be
raised against the protecting State only for its conduct and
not against the injured individual for misconduct that may
have preceded the internationally wrongful act.
9. As a consequence of the above reasoning, it follows
that the clean hands doctrine has no special place in claims
involving diplomatic protection. If the individual commits
an unlawful act in the host State and is tried and punished
in accordance with due process of law, no internationally
wrongful act occurs and the unclean hands doctrine is
irrelevant. If, on the other hand, the national's misconduct
under domestic law gives rise to a wrong under international
law as a result of the respondent State's treatment
of the national's misconduct, the claim becomes international
if the injured national's State exercises diplomatic
protection on his behalf. Then the clean hands doctrine
may only be raised against the plaintiff State for its own
conduct. This is illustrated by the LaGrand and Avena
cases. In both cases, foreign nationals committed serious
crimes, which warranted their trial and punishment, but in
both cases the United States violated international law in
respect of their prosecution by failing to grant them consular
access. At no stage did the United States argue that
the serious nature of their crimes rendered the hands of the
foreign nationals unclean, thereby precluding Germany
and Mexico respectively from protecting them under the
Vienna Convention on Consular Relations. On the contrary,
in both cases (as has been shown above) the United
States contended that the plaintiff States themselves had
unclean hands by virtue of their failure to apply the Vienna
Convention in the manner required of the United States.
CHAPTER III
Cases of application of the clean hands doctrine in the context of diplomatic protection
10. Unlike cases involving direct inter-State claims
in which the clean hands doctrine has been frequently
raised, the cases involving diplomatic protection in which
the doctrine has been raised are few.
11. The cases relied upon by some authors are the Ben
Tillett arbitration23 and the Virginius. 24 Carreau cites there
two incidents as examples to support his statement that
"[l]'individu pour qui l'Etat exerce ou pretend exercer
sa protection diplomatique ne doit pas lui-meme avoir
23 See footnote 7 above.
24 See Moore, A Digest of International Law, p. 895.
eu une 'conduite blamable"'.25 A close consideration of
Ben Tillett and Virginius reveals that neither of them has
anything to do with the clean hands doctrine, nor do they
employ the language of the doctrine.
12. First, the Ben Tillett case.26 On 21 August 1896,
Ben Tillett, a British national and a labour union activist,
arrived in Belgium to participate in a meeting of
dock workers. The day he arrived in Belgium, he was
arrested, detained for several hours and deported back
25 Carreau, Droit international, pp. 467-468.
26 See footnote 7 above.
Annex 287
Diplomatic protection 5
to the United Kingdom. The latter, claiming on behalf
of Ben Tillett, argued that Belgium had violated its own
law and demanded monetary compensation of 75,000
francs. After negotiations failed, the case was decided by
an arbitrator. It is clear from the text of the arbitration
agreement between Belgium and the United Kingdom, as
well as from the arbitral award, that the issue of inadmissibility
of diplomatic protection was not even considered.
The United Kingdom undoubtedly exercised diplomatic
protection on behalf of Ben Tillett. It lost the case on substantive
grounds, the main reason being that the act committed
by Belgium was not an internationally wrongful
act ( contrary to Carreau's interpretation, who states that
"l'arbitre debouta la Grande-Bretagne en raison de la violation
par Ben Tillett du droit belge. En bref, il n'avait pas
les 'mains propres "'). 27
13. Secondly, the case of the Virginius. 28 On 31 October
1873, the steamer Virginius was captured by a Spanish
man-of-war on the high seas. Virginius, which flew
an American flag (as later determined, without a right to
fly it), carried arms, ammunition and potential rebels destined
for Cuba. Virginius was taken to Santiago de Cuba,
where 53 persons out of 155 crew members and passengers
were summarily condemned for piracy by courtmartial
and executed. Among the executed persons were
nationals of the United Kingdom and the United States. It
is clear from the documents produced during negotiations
between Spain and the United States that there was no
disagreement between the parties involved about the right
of the United States to exercise diplomatic protection in
this particular situation. Also, both countries agreed that
Spain was responsible for a violation of international
27 Carreau, op. cit., p. 468.
28 See footnote 24 above.
law regardless of whether "Virginius" rightfully flew the
United States flag and was engaged in transporting military
supplies and potential rebels to Cuba. The case was
not referred to arbitration, as Spain paid compensation to
both the United Kingdom and the United States for the
families of the executed British and American nationals.
14. Several writers express support for the clean hands
doctrine in the context of diplomatic protection, but they
offer no authority to support their views. 29 Cheng does,
however, cite the Clark claim of 1862, in which the American
Commissioner disallowed the claim on behalf of an
American national in asking: "Can he be allowed, so far
as the United States are concerned, to profit by his own
wrong? ... A party who asks for redress must present himself
with clean hands."30
15. Many writers are sceptical about the clean hands
doctrine and the weight of authority to support it (see, in
particular, the views of Salmon,31 Rousseau32 and GarciaArias33).
Rousseau's views are of special importance. He
states: "[I]l n'est pas possible de considerer la theorie des
mains propres comme une institution du droit coutumier
general, a la difference des autres causes d'irrecevabilite
a l'etude desquelles on arrive maintenant."34
29 Ruzie, Droit international public, p. 95; Combacau and Sur, Droit
international public, pp. 596--597; and Malanczuk, Akehurst's Modern
Introduction to International Law, pp. 263-269.
3° Cheng, General Principles of Law as Applied by International
Courts and Tribunals, p. 156.
31 "Des 'mains propres' comme condition de recevabilite des reclamations
intemationales", and Dictionnaire de droit international public,
pp. 677-678.
32 Droit international public, p. 172.
33 "La doctrine des 'clean hands' en droit international public".
34 Op. cit., p. 177.
CHAPTER IV
A plea to admissibility?
16. On occasion, an argument premised on the clean
hands doctrine has been raised as a preliminary point in
direct inter-State cases before ICJ. It is not clear, however,
whether the intention has been to raise the matter as a plea
to admissibility. If the doctrine is applicable to claims
relating to diplomatic protection, it would seem that the
doctrine would more appropriately be raised at the merits
stage, as it relates to attenuation or exoneration of responsibility
rather than to admissibility.
CHAPTER V
Concluding remarks
17. In paragraph 332 of his second report on State
responsibility,35 Mr. James Crawford suggested that the
defence of clean hands was raised "mostly, though not
always, in the framework of diplomatic protection". In
paragraph 334, he added:
Even within the context of diplomatic protection, the authority
supporting the existence of a doctrine of "clean hands", whether as
a ground of admissibility or otherwise, is, in Salmon's words, "fairly
35 Yearbook ... 1999, vol. II (Part One), document A/CN.4/498 and
Add.1--4, p. 82.
long-standing and divided".36 It deals largely with individuals involved
in slave-trading and breach of neutrality, and in particular a series of
decisions of the United States-Great Britain Mixed Commission set up
under a Convention of 8 February 1853 for the settlement of shipowners'
compensation claims. According to Salmon, in the cases where the
claim was held inadmissible:
"In any event, it appears that these cases are all characterized by the fact
that the breach of international law by the victim was the sole cause
of the damage claimed, [and] that the cause-and-effect relationship
36 Loe. cit., p. 249.
Annex 287
6 Documents of the fifty-seventh session
between the damage and the victim s conduct was pure, involving no
wrongful act by the respondent State.
"When, on the contrary, the latter has in turn violated international law
in taking repressive action against the applicant, the arbitrators have
never declared the claim inadmissible."37
18. The present report has shown that the evidence in
favour of the clean hands doctrine is inconclusive. Arguments
premised on the doctrine are regularly raised in
direct inter-State cases before ICJ, but they have yet to be
upheld. Whether the doctrine is applicable at all to claims
involving diplomatic protection is highly questionable.
There is no clear authority to support the applicability
37 Ibid., p. 259.
of the doctrine to cases of diplomatic protection. Such
authority as there is is uncertain and of ancient vintage,
dating mainly from the mid-nineteenth century-as the
above-cited passages from Salmon demonstrate. Although
some authors support the existence of the doctrine in the
context of diplomatic protection, they are unsupported
by authority. Moreover, there are strong voices-Salmon
and Rousseau-against such a doctrine. In these circumstances
the Special Rapporteur sees no reason to include a
provision in the draft articles dealing with the clean hands
doctrine. Such a provision would clearly not be an exercise
in codification and is unwarranted as an exercise in
progressive development in the light of the uncertainty
relating to the very existence of the doctrine and its applicability
to diplomatic protection.
Annex 287
ANNEX288
The Journal of
World
lnv~shmml & Trade
BRILL
NIJHOF F
JOURNAL OF WORLD INVESTMENT &
TRADE 21 (2020) 489-527 Lawsa l1conom,cs • ?ol1tKs
brill.com/jwit
The Clean Hands Doctrine as a General Principle of
International Law
Patrick Dumberry
University of Ottawa, Ottawa, Canada
[email protected]
Abstract
The question of the scope and application of the doctrine of clean hands by investment
tribunals is controversial. This article examines how scholars, international
courts and tribunals and investment tribunals have analysed the concept. I will show
that while the doctrine has rarely been used by international tribunals, they have
nonetheless recognised and applied the clean hands doctrine in several awards. I will
critically assess the reasoning of the Yukos award and, most importantly, the recent
South American Silver Limited award, which have both held that the clean hands doctrine
is not a general principle of law. I will argue, like many writers, that the doctrine
should be considered as a general principle of international law. The article examines
this concept and describes how such principles emerge on the international plane in
a manner different from general principles grounded in the domestic laws of States.
Keywords
doctrine of clean hands - general principle of international law - general
principle of law - investment arbitration - Yukos award - South American Silver
Limited award
* Patrick Dumberry, PhD (HEI, Geneva), Full Professor, Faculty of Law (Civil Law Section),
University of Ottawa, Canada. This article is a modified ( updated with additional new material)
of one section of my book: Patrick Dumberry, A Guide to General Principles of Law in
International Investment Arbitration ( 0 UP 2020) 194-231. This article reflects facts current
as of April 2020.
© KONINKLIJKE BRILL NV, LEIDEN, 2020 I DOI:10.1163/22119000-12340182
Annex 288
490 DUMBERRY
1 Introduction
The clean hands doctrine ( or 'unclean' hands) is often defined as 'he-she who
comes into equity must come with clean hands'. The principle is also sometimes
expressed in a number of Latin maxims, including ex delicto non oritur
actio ('an unlawful act cannot serve as the basis of an action at law') and ex
turpi causa non oritur actio ('an action cannot arise from a dishonourable
cause').1 In simple terms, it means that 'if some form of illegal or improper conduct
is found on the part of the investor, his or her hands will be "unclean", his
claims will be barred and any loss suffered will lie where it falls'. 2 Importantly,
the act must be 'connected with the instant litigation and of such a nature as to
affect the clean hands of the applicant'. 3 In the words of Cheng, the 'claim itself
[ must be] based upon the unlawful act'.4
The question of the scope and application of the doctrine of clean hands
by investment tribunals is highly controversial. I have published an article in
this Journal on this topic in 2016. 5 Since then, many writers have participated
in this debate,6 including one article in this Journal in 'response' to my earlier
1 Richard Kreindler, 'Corruption in International Investment Arbitration: Jurisdiction and
the Unclean Hands Doctrine' in Kaj Hober and others (eds), Between East and West: Essays
in Honour of Uif Franke (Juris Publication 2010) 319: 'Reliance on the maxim ex turpi causa
non oritur actio can and should be considered as another application of the Unclean Hands
Doctrine'.
2 Aloysius Llamzon, 'Yukos Universal Limited (Isle of Man) v The Russian Federation: The State
of the "Unclean Hands" Doctrine in International Investment Law: Yukos as Both Omega and
Alpha' (2015) 30(2) IC SID Rev 316.
3 Aloysius Llamzon and Anthony Sinclair, 'Investor Wrongdoing in Investment Arbitration:
Standards Governing Issues of Corruption, Fraud, Misrepresentation and Other Investor
Misconduct' in Albert Jan van den Berg ( ed), Legitimacy: Myths, Realities, Challenges (Kluwer
2015) 451,509.
4 Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens
1953) 156. See also ibid at 157-58: the doctrine 'does not apply to cases where, though the
claimant may be guilty of an unlawful act, such act is judicially extraneous to the cause of
action'.
5 Patrick Dumberry, 'State of Confusion: The Doctrine of "Clean Hands" in Investment
Arbitration After the Yukos Award' (2016) 17 JWIT 229.
6 See Mariano De Alba Uribe, 'Drawing the Line: Addressing Allegations of Unclean Hands in
Investment Arbitration' (2005) 12 Brazilian JIL 323; Marcin Kaldunski, 'Principle of Clean
Hands and Protection of Human Rights in International Investment Arbitration' (2015) 4(2)
Polish Rev of Intl and Eur L; Caroline Le Moullec, 'The Clean Hands Doctrine: A Tool for
Accountability of Investor Conduct and Inadmissibility of Investment Claims' (2018) 84(1)
Arbitration 15-37; T Leigh Anenson, 'Announcing the "Clean Hands" Doctrine' (2017) 51(5)
UC Davis L Rev1829;JulienAncelin, 'Apropos de la "theorie des mains propres": Observations
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 491
paper.7 The present article examines additional (and sometimes new) evidence
and material and arrives at the conclusion that the doctrine of clean
hands should be considered as a general principle of international law in the
context of international investment law. 8 The article also critically assesses
the opposite conclusion reached by the recent South American Silver Limited
award that the doctrine is not a general principle of law ( G PL). 9
This article is structured as follows. I will first briefly examine the scope
of the doctrine of clean hands and its controversial application in general
international law (Section 2). This will be followed by an analysis of how
the concept has been considered by scholars and investment tribunals in
the specific field of investment arbitration (Section 3). In that section, I will
show that investment tribunals have recognised and applied the clean hands
doctrine in several awards. I will also critically examine the reasoning of the
Yukos and South American Silver Limited awards which have both held that the
clean hands doctrine is not a G PL. Section 4 will introduce the concept of 'general
principle of international law' and describe how such principles emerge
on the international plane in a manner different from G PL grounded in the
domestic laws of States. I will explain the reasons why, in my view, the doctrine
of clean hands should be considered as a general principle of international
law. Finally, I will say a few words on how tribunals could concretely apply the
doctrine in arbitration proceedings (Section 5).
2 The Doctrine Under International Law
2.1 Numerous Scholars Have Considered the Doctrine as a
General Principle of Law
The doctrine of clean hands has been endorsed by several public international
law scholars.10 One such author is Schwebel, who was one of the three arbitrasur
les sentences arbitrales Yukos de la Cour Permanente d'Arbitrage du 18 juillet 2014'
(2015) 6IAFDI 831.
7 Ori Pomson, 'The Clean Hands Doctrine in the Yukos Awards: A Response to Patrick
Dumberry' (2017) 18(4)JWIT 712-34.
8 Patrick Dumberry, A Guide to General Principles of Law in International Investment
Arbitration (OUP 2020), examining 17 concepts (including the doctrine of clean hands)
and assessing whether or not they should be considered as G PL.
9 South American Silver Limitedv Bolivia, PCA Case No 2013-15, Award (22 November 2018).
1 o Cheng ( n 4) 155; Elisabeth Zoller, La bonne Joi en droit international public (Pedone 1977)
298; Gerald Fitzmaurice, 'The General Principles of International Law, Considered from
the Standpoint of the Rule of Law' (1957) 92 Recueil des Cours 119; Hersch Lauterpacht,
Recognition in International Law (CUP 194 7) 420-21; James Crawford, Brownlie's Principles
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
492 DUMBERRY
tors in the Yukos case (further examined below). A number of scholars have
also considered the doctrine as a G PL.11 I have come to the same conclusion in
previous writings.12
The question as to whether or not the doctrine should indeed be considered
as a G PL is controversial. The starting point of the analysis is to mention
the undeniable fact that the doctrine exists under common law. This obvious
point has been recognised by several scholars,13 as well as by a few investment
tribunals. Thus, in the Niko case, the Tribunal agreed with the Respondent's
affirmation stating that the clean hands principle is 'well recognised in common
law'.14 The same conclusion was reached by the Churchill Mining tribunal
referring to the 'common law doctrine of unclean hands'.15 Similarly, in the
World Duty Free v Kenya case, the Tribunal examined English law ( which
was the governing law of the contract) in some detail, and concluded that
the maxim ex turpi causa non oritur actio (which has been considered by
authors as one element of the clean hands doctrine16) was undoubtedly part of
of Public International Law ( 8th edn, 0 UP 2012) 701; Margaret White, 'Equity - A General
Principle of Law Recognised by Civilised Nations?' (2004) 4 Queensland U Tech L J no;
Christopher R Rossi, Equity and International Law: A LegalRealistApproach to the Process of
International Decision Making (Transnational Publication 1993) 81; Aleksandr Shapovalov,
'Should a Requirement of "Clean Hands" Be a Prerequisite to the Exercise of Diplomatic
Protection? Human Rights Implications of the International Law Commission's Debate'
(2005) 20 Am U Intl L Rev 829, 840-42; Kevin Lim, 'Upholding Corrupt Investors' Claims
Against Complicit or Compliant Host States - Where Angels Should Not Fear to Tread'
(2011-2012) YB Intl Invest L & Pol 608.
11 One example is Kreindler (n 1) 317-18. Many writers have also adopted the same position,
as further examined below.
12 Patrick Dumberry and Gabrielle Dumas-Aubin, 'The Doctrine of "Clean Hands" and the
Inadmissibility of Claims by Investors Breaching International Human Rights Law' in
Ursula Kriebaum ( ed), Transnational Dispute Management Special Issue: Aligning Human
Rights and Investment Protection (2013) 3; Dumberry, 'State of Confusion' (n 5) 246 et seq;
Dumberry, Guide to Genera/Principles (n 8) 194 et seq.
13 Llamzon and Sinclair (n 3) 508; Llamzon (n 2) 316; Le Moullec (n 6) 14.
14 Niko Resources (Bangladesh) Ltd v People's Republic of Bangladesh, Bangladesh Petroleum
Exploration & Production Company Limited, Bangladesh Oil Gas and Mineral Corporation,
ICSID Case No ARB/10/11 and ICSID Case No ARB/10/18, Decision on Jurisdiction
(19 August 2013) para 476. The Tribunal also stated: 'The principle of clean hands is known
as part of equity in common law countries' (para 477).
15 Churchill Mining PLC and Planet Mining Pty Ltd v Indonesia, IC SID Case No ARB/12/14
and 12/40, Award (6 December 2016) para 493. See Glencore Finance (Bermuda) Limited
v Bolivia, PCA Case No 2016-39, Procedural Order No 2: Decision on Bifurcation
(31 January 2018) para 46, where the Tribunal agreed with the statement made by the
Churchill tribunal.
16 See Kreindler (n 1) 319; Llamzon and Sinclair (n 3) 510.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 493
English law.17 The concept is also part of US law; the Supreme Court stated that
'[H]e who comes into equity must come with clean hands'.18
The recognition of the doctrine extends beyond common law. According to
one author, 'the general principle underpinning the clean hands doctrine dates
to antiquity', adding that 'commentators have traced the genesis of unclean
hands to Chinese customary law and to the Roman period of Justinian'.19 He
also noted that 'in civil law countries without a separate body of law called
"equity," a kindred idea can be found in the recognition of wrongdoing for
an abuse of right'. 20 The same assessment was made by the US Secretary of
State (Mr Bayard) in the Pelletier case of 1885 where he mentioned that the
doctrine ( specifically referring to the maxim ex turpi causa non oritur actio)
had been recognized 'by innumerable ruling under roman common law' and
was 'held by nations holding Latin traditions, and under the common law as
held in England and the United States'.21 Notably, the principle is also found
in Islamic law.22 The existence of the doctrine in different legal systems led
Judge Weeramantry to conclude in his dissenting opinion in the Legallty of
Use of Force that '[t]he Respondent invokes the "clean hands" principle, a principle
of equity and judicial procedure, well recognized in all legal systems, by
which he who seeks the assistance of a court must come to the court with
clean hands. He who seeks equity must do equity'.23
Investment arbitration scholars have also come to the same conclusion.
Two authors have recently indicated that the doctrine was 'a well-established
principle of equity jurisprudence found in many municipal systems of law'. 24
17 World Duty Free Co Ltd v Kenya, ICSID Case No ARB/00/7, Award (4 October 2006) para
179. It should be added that recently, the Supreme Court of the United Kingdom in Patel
v Mirza [ 2016] UKSC 42 adopted a 'proportionality' analysis rather than the strict clear
hands doctrine ( the question as to whether a 'proportionality' test should be applied is
further examined in Section 5, below). This new case does not undermine per se the status
of the clean hands doctrine as a G PL. This is because, as further discussed below, the
concept can be considered as a 'general principle of international law', based on international
law material, rather than one grounded in domestic laws.
18 Precision Instrument Mfg Co v Automotive Co, US Supreme Court, 324 US 806 (1945) 814,
quoted in Llamzon ( n 2) 316.
19 Leigh Allenson ( n 6) 1848.
20 ibid.
21 Pelletier Case (1885), referred to in Cheng (n 4) 157.
22 See Ancelin (n 6) 837, indicating that the concept is included in the notion of abuse of
right and referring to the work of writers on Islamic law.
23 Legality of Use of Force (Serbia and Montenegro v Belgium) (Order on Precautionary
Measures), dissenting opinion ofJudge Weeramantry [1999] ICJ Rep 184.
24 Llamzon and Sinclair (n 3) 508 (referring to John Norton Pomeroy, Equity Jurisprudence
(5th edn, Filmer Brothers 1941) s 397-404).
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
494 DUMBERRY
Writers have indeed indicated that the principle is found in 'many' States25
of both civil and common law jurisdictions. 26 More generally, a number of
authors have highlighted the fact that the principle is rooted in Roman law, 27
'which form the basis of the laws of most civilised countries'. 28 The position of
many scholars has been summarized as follows by one author:
Considering that the idea underlying the clean hands doctrine has been
recognized in both common and civil law systems since ancient times
through several legal maxims, I believe that it would very difficult to
conclude that the clean hands doctrine does not constitute a principle
derived from the municipal law of at least a majority of the States of the
international community. Thus, recognizing that the Yukos tribunal was
limited on its findings by the evidence cited by the parties to that dispute,
this author believes that irrespectively of the finding of such tribunal,
there are sufficient grounds to conclude that, although circumvented
with controversy, the clean hands doctrine amounts to a general principle
of international law. 29
A crucial point to add is that none of these investment arbitration scholars
have actually undertaken a comparative study of different legal orders. While
some authors have been more reluctant to recognize the doctrine as having
GPL status,30 to the best of one's knowledge, only one author, Pomson, seems
25 Kreindler (ni) 317, indicating that the principle could be found in the laws of 'many jurisdictions'
of both common law and civil law traditions ( explicitly referring to the German
Civil code). See also: Llamzon and Sinclair (n 3) 508 (the doctrine 'today can be found
in the laws of many civil and common law jurisdictions'), 511 ( the doctrine 'having been
adopted in the domestic legal orders of many States, is frequently asserted to qualify as a
"general principle oflaw" pursuant to art 38(1)( c) of the ICJ Statute').
26 Kreindler (n 1) 317; Llamzon (n 2) 316; Andrea K Bjorklund and Lukas Vanhonnaeker,
'Yukos: The Clean Hands Doctrine Revisited' (2015) 9(2) Diritti umani e diritto intemazionale
367 ('The clean hands doctrine can be found in the laws of both common and civil
law jurisdiction. It is rooted in the general principle of good faith and is closely related to
several Latin maxims'); De Alba Uribe (n 6) 323 ('the doctrine has been no stranger in civil
law systems').
27 Aloysius P Llamzon, 'On Corruption's Peremptory Treatment in International Arbitration'
in Domitille Baizeau and Richard H Kreindler (eds), Addressing Issues of Corruption in
Commercial and Investment Arbitration (Kluwer Law International 2015) 37.
28 Kreindler (n 1) 317.
29 De Alba Uribe (n 6) 324-25.
30 Charles T Kotuby Jr and Luke A Sobota, General Principles of Law and International Due
Process: Principles and Norms Applicable in Transnational Disputes ( 0 UP 2017) 132, noting
that 'there is no strict or uniform principle in national legal orders that prohibits judicial
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 495
to be strongly opposed to such a conclusion. In a recent article, Pomson indicated
that the clean hands doctrine 'manifests itself in different ways, based
on the circumstances where it is invoked' and that, in fact, it can 'be broadly
divided into three variations, one of these being divided into three further
variations'.31 He conducted an analysis of four laws (Unites States, United
Kingdom, Germany and France).32 While acknowledging the non-exhaustive
nature of his analysis, 33 he came to the conclusion that none of the three distinct
'variations' of the doctrine he identified were firmly established under
these laws. 34 Therefore, he concluded that the doctrine of clean hands does
not exist as a GPL.35
I have found no comparative law scholarship that specifically examines the
doctrine in varying jurisdictions. I have myself not conducted a comprehensive
analysis of domestic legal orders. Nevertheless, in my opinion, it is probably
unnecessary to undertake any such a comparative study looking at different
laws to determine whether they include the doctrine ( or any of its variations).
This is because I believe that the doctrine should be considered as a general
principle of international law. The reasons for arriving at this conclusion are
discussed further below when dealing with investment arbitration case law
(Section 3). Before doing so, I will examine how international law tribunals
have analysed the doctrine.
2.2 There Is Limited Support for the Doctrine in International Case Law
As rightly acknowledged by the Yukos tribunal, the status of the clean hands
principle is 'controversial' in international law. 36 Thus, in the context of State
responsibility, the International Law Commission (ILC) Special Rapporteur
James Crawford explained that 'if it exist[ s] at all,' the doctrine would operate
as a ground of inadmissibility rather than as a circumstance precluding
relief whenever a Claimant has contravened the law or fulfilled its contractual obligations'.
See also Ancelin (n 6) 837.
31 Pomson (n 7) 715.
32 ibid 728-29.
33 ibid 729. He also noted that this small sample is sufficient based on the affirmation by
Malcolm Shaw, International Law (7th edn, CUP 2014) 71, that 'Anglo-Anlerican common
law has influenced a number of states throughout the world, as have the French and
Germanic systems'.
34 Pomson (n 7) 729 et seq, 733.
35 ibid 729 et seq, 733 ('In light of the above, it would seem difficult to conclude that any
of the different forms of the clean hands doctrine today constitute general principles
oflaw').
36 Hulley Enterprises (Cyprus) Limited v Russia., PCA Case No AA226, UNCITRAL, Final
Award (18 July 2014) paras 1358-59.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
496 DUMBERRY
wrongfulness or responsibility.37 International tribunals have been reluctant
to recognize the existence of the doctrine. As noted by two authors, the actual
application of the principle by courts and tribunals has been so far 'rare'. 38
Consequently, the status of the doctrine has been described by many as 'unsettled'
in international law.39 In fact, some authors consider that case law shows
that the doctrine is not a G PL.40
In a 2007 Permanent Court of Arbitration (PCA) arbitration between
Guyana and Suriname, the Tribunal underlined that the clean hands doctrine
had been inconsistently applied by tribunals:
No generally accepted definition of the clean hands doctrine has been
elaborated in international law. Indeed, the Commentaries of the ILC
Draft Articles on State Responsibility acknowledge that the doctrine
has been applied rarely and, when it has been invoked, its expression has
come in many forms. The I CJ has on numerous occasions declined to
consider the application of the doctrine, and has never relied on it
to bar admissibility of a claim or recovery. However, some support for the
doctrine can be found in dissenting opinions in certain I CJ cases, as well
as in opinions in cases of the Permanent Court of International Justice
(PCIJ) ... These cases indicate that the use of the clean hands doctrine
has been sparse, and its application in the instances in which it has been
invoked has been inconsistent.41
37 'Second Report on State Responsibility by Mr James Crawford, Special Rapporteur'
(30 April 1999) UN Doc A/CN.4/498/Add.2, para 334, in International Law Commision
Yearbook, vol 2(1) (1999) 83, 333, 336. See also, James Crawford, The International
Law Commission's Articles on State Responsibility: Introduction, Text and Commentaries
(CUP 2002) 162.
38 Kotuby and Sobota (n 30) 133.
39 Llamzon and Sinclair (n 3) 510. See also: Andreas R Ziegler and Jorun Baumgartner,
'Good Faith as a General Principle of (International) Law' in Andrew D Mitchell,
Muthucumaraswamy Sornarajah, and Tania Voon (eds), Good Faith and International
Economic Law ( 0 UP 2015) 29; Attila Tanzi, 'The Relevance of the Foreign Investor's Good
Faith in Andrea Gattini, Attila Tanzi and Filippo Fontanelli (eds), General Principles of
Law and International Investment Arbitration (Brill 2018) 207 ('the notion has not established
itself with certainty as a general principle of international litigation').
40 Ancelin (n 6) 837-38.
41 Guyana v Suriname, Arbitral Tribunal Constituted Under Annex VII of the United Nations
Convention on the Law of the Sea (UN CLOS), Award (17 September 2007) para 418. See
also, para 421, where the Tribunal used expressions such as 'to the extent that such a doctrine
may exist in international law' as well as 'even if it were recognised as a rule of
international law'.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 497
For these reasons, ILC Special Rapporteur Crawford concluded ( quoting
Rousseau42) that 'it is not possible to consider the "clean hands" theory as
an institution of general customary law'.43 However, the relevant question is
whether the doctrine is a G PL, not a rule of custom.
At the opposite end of the spectrum, ILC Special Rapporteur Dugard (in
a report dealing with clean hands in the specific context of diplomatic protection)
stated that international law cases 'make it difficult to sustain the
argument that the clean hands doctrine does not apply to disputes involving
direct inter-State relations'.44 While ultimately denying the application of the
doctrine in the context of diplomatic protection,45 Dugard also rightly noted
that 'States have frequently raised the clean hands doctrine in direct interState
claims'.46 The doctrine has indeed been invoked by States in many ICJ
cases.47 Dugard mentioned that 'in no case has ICJ stated that the doctrine is
irrelevant to inter-State claims'.48 While it is true that the Court never denied
the existence of the doctrine ( despite having had many opportunities to do
so ),49 it must also be recognised that it has never upheld the doctrine either.
42 Charles Rousseau, Droit international public Tome v Les rapports conjlictuels (5th edn,
Sirey 1983) 177, para 170 ('il n'est pas possible de considerer la theorie des mains propres
comme une institution de droit coutumier general').
43 Crawford (n 37) 83, para 334.
44 See 'Sixth Report on Diplomatic Protection by John Dugard' (57th Session, ILC, 2005) A/
CN-4/ 546, para 6.
45 ibid para 18, stating that the 'evidence in favour of the clean hands doctrine is inconclusive'
and that there was 'no clear authority to support the applicability of the doctrine to
cases of diplomatic protection'. On this specific question, see: Shapovalov (n 10) 829-66;
Jean Salmon, 'Les principes generaux du droit: une insaisissable source du droit applicable
aux contrats d'Etat' in Raymond Vander Elst ( ed), Melanges Raymond Vander Elst,
vol II (Nemesis 1986).
46 ibid.
4 7 See eg, Legal Consequences of the Construction of a Wall in the Occupied Palestinian
Territory (Advisory Opinion) [ 2004] ICJ Rep 136, paras 63-64; Case Concerning the Oil
Platforms (Iran v United States) (Judgment) [ 2003] ICJ Rep 161, paras 29-30. See analysis
of Dugard (n 44) paras 5 et seq, also referring to three other cases. See recently Maritime
Delimitation in the Indian Ocean (Somalia v Kenya) (Preliminary Objections) [ 2017] ICJ
Rep paras 139-40, with Kenya endorsing the doctrine and Somalia indicating that it 'has
never been recognized by the Court' and that 'the Court's case law confirms that accusations
of bad faith of the type levelled against Somalia cannot bar the admissibility of an
Application'. The Court said that in that case there was no need 'to address the more general
question whether there are situations in which the conduct of an applicant would be
of such a character as to render its application inadmissible' (para 143).
48 Dugard ( n 44) para 6.
49 Rahim Moloo, 'A Comment on the Clean Hands Doctrine in International Law' (2011) 8(1)
TDM4.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
498 DUMBERRY
In other words, the ICJ has adopted a rather 'neutral' position regarding the
application of the concept under general international law. In a recent 2019
case before the ICJ, the United States acknowledged that situation,50 but the
Court decided that it was not necessary to take position on the question of the
status of the doctrine. 51
Although one can agree with the general assessment that the doctrine of
clean hands has rarely been applied by international law tribunals, it remains
that there is, nevertheless, some support for its recognition in older international
law cases. Thus, Cheng cites several older arbitration cases where
tribunals have indeed applied the doctrine, including the Medea and the Good
Return cases decided by an Ecuador-United States Commission.52 Some have
also pointed out that support in favor of the doctrine can be found in the separate
opinion ofJudge Hudson53 and the dissenting opinion ofJudge Anzilotti54
in the 1937 PCIJ case of The Diversion of Water from the Meuse. In a recent
50 Certain Iranian Assets (Islamic Republic of Iran v United States of America) (Preliminary
Objections) (13 February 2019) para 117: 'The United States recognizes that in the past the
Court has not upheld an objection based on the "clean hands" doctrine, but argues that it
has not rejected the doctrine either, and that, in any event, the time is ripe for the Court
to acknowledge it and apply it. According to the United States, the Court need not address
the merits of this case to assess the legal consequences of Iran's conduct'. Iran's position
was slightly different, para 119 ('Iran also points out that there is uncertainty about the
substance and binding character of the "clean hands" doctrine and that the Court has
never recognized its applicability').
51 ibid para 121.
52 Cheng (n 4) 155, citing several cases, including: Cases of the Good Return and the Medea,
opinion of Hassaurek (8 August 1865) in John Bassett Moore, History and Digest of the
International Arbitrations to Which the United States Has Been a Party, vol 3 (Washington
Government Print Office, 1898) 2739: 'I hold it to be the duty of the American Government
and my own duty as commissioner to state that in this case Mr. Clark has no standing as
an American citizen. A party who asks for redress must present himself with clean hands.
His cause of action must not be based on an offense against the very authority to whom
he appeals for redress. It would be against all public morality, and against the policy of all
legislation, if the United States should uphold or endeavor to enforce a claim founded on
a violation of their own laws and treaties, and on the perpetration of outrages committed
by an American citizen against the subjects and commerce of friendly nations'.
53 The Diversion of Water from the Meuse (Netherlands v Belgium) ( opinion of Judge Hudson)
PCIJ Ser A/B, No 70, 77, 87, referring to the principle that 'who seeks equity must do
equity' and concluding that a tribunal will 'refus[ e] relief to a plaintiff whose conduct in
regard to the subject-matter of the litigation has been improper' ( quoting from Douglas
McGarel Hogg (ed), Halsbury's Laws of England, vol 13 (2nd edn, Butterworths 1934)).
54 ibid, dissenting opinion of Judge Anzilotti, 50, stating that the principle of inadimplenti
non est adimplendum 'is so just, so equitable, so universally recognized that it must be
applied in international relations'. He also referred to the doctrine in his dissenting opinion
in Legal Status of Eastern Greenland (Judgment) PCIJ Ser A/B, No 53, 95.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 499
article, one author argued, however, that these two examples are instances of
the application of one 'variation' of the clean hands doctrine. He referred to
this variation as 'reciprocal obligations' and defined it as follows: 'a party to a
case may not argue that the other party has committed some illegality if the
former itself has committed a reciprocal illegality in their relations'. 55 It is true
that the two judges were, in fact, referring to the specific maxim of inadimplenti
non est adimplendum ('one has no need to respect his obligation if the
counter-party has not respected his own') which is not usually identified with
the clean hands doctrine per se (the question is further examined below).56 In
other words, these two opinions do not seem to provide much support to the
more specific aspect of the doctrine which is examined in this section.
Yet, one can hardly deny the existence of some support for the doctrine
in the opinions of other judges. Thus, the principle has also been endorsed
by several ICJ judges in their dissenting opinions,57 including that of Judge
Schwebel in the Nicaragua case.58 In this context, it seems that one can agree
with the conclusion reached recently by the Churchill Mining tribunal which
noted that the doctrine of 'unclean hands' had 'found expression at the international
level, although its status and exact contours are subject to debate and
have been approached differently by international tribunals'. 59
One author has dismissed the relevance of the separate and dissenting
opinions of judges mentioned in the previous paragraph as examples of
55 Pomson (n 7) 716.
56 Military and Paramilitary Activities in and Against Nicaragua (Nicaragua v United States)
(Merits) Dissenting Opinion of Judge Schwebel [ 1986] ICJ Rep 259, para 269, indicating
that this is a 'variation' of the doctrine.
57 See eg Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v Belgium)
(Judgment) Dissenting Opinion of Judge ad hoc Van den Wyngaert [ 2002] ICJ Rep 137,
para 35 ('The Congo did not come to the Court with clean hands. In blaming Belgium for
investigating and prosecuting allegations of international crimes that it was obliged to
investigate and prosecute itself, the Congo acts in bad faith') 84; Tehran Hostages (United
States v Iran), ICJ Rep 1980, dissenting opinion of Judge Morozov, para 3.
58 Nicaragua v United States (n 56) dissenting opinion of Judge Schwebel, paras 240, 268-72.
See para 268: 'Nicaragua has not come to Court with clean hands. On the contrary, as
the aggressor, indirectly responsible - but ultimately responsible - for large numbers of
deaths and widespread destruction in El Salvador apparently much exceeding that which
Nicaragua has sustained, Nicaragua's hands are odiously unclean. Nicaragua has compounded
its sins by misrepresenting them to the Court. Thus, both on the grounds of
its unlawful armed intervention in El Salvador, and its deliberately seeking to mislead
the Court about the facts of that intervention through false testimony of its Ministers,
Nicaragua's claims against the United States should fail.'
59 Churchill Mining (n 15) para 493. See Glencore Finance (Bermuda) Limited v Bolivia (n 15)
para 46, where the Tribunal agrees with the statement made by the Churchill tribunal.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
500 DUMBERRY
'variations' of the doctrine which are said to be different from the one at the
heart of this section. 60 It is not entirely clear whether the sophisticated distinctions
made by Pomson are actual very useful in practice. As a matter of fact,
all these different 'variations' ( except for the specific maxim inadimplenti non
est adimplendum mentioned in the opinions of Judges Hudson and Anzilotti
in The Diversion of Water from the Meuse) have been considered by scholars,
such as Cheng, as being under the umbrella of the clean hands doctrine. In
any event, the present discussion focuses on investment arbitration proceedings
commenced by an investor against the host State of the investment. To
use Pomson's own terminology, this is the so-called third 'variation' of the doctrine
('unlawful conduct relating to the subject-matter of the case'61). This is
the only 'variation' that is relevant in the context of investment arbitration. 62
I will show in the next section that investment tribunals have both implicitly
and explicitly endorsed the doctrine of clean hands. 63
3 The Doctrine in International Investment Law
In recent years, a number of authors have openly supported the application
of the doctrine of clean hands in the field of investment arbitration to operate
as a bar to the admissibility of claims submitted by investors that have committed
violations of host States' laws. 64 It seems that only one author, Pomson,
60 Thus, Pomson (n 7) believes that the opinion of Judge Anzilotti in the Legal Status of
Eastern Greenland ( n 54) is an illustration of the 'causal link' approach which he defines
as 'an instance in which the alleged right the claimant is invoking against the respondent
was obtained through an unlawful act' (ibid 719). He also believes that the opinion of
Judge Schwebel in the Nicaragua case (n 56) is an illustration of yet another 'variation' of
the 'causal link' approach to the clean hands doctrine which he called 'provocation' (ibid
721). He also refers (ibid 723) to the dissenting opinion of Judge Morozov in the Tehran
Hostages ( n 57) as a third form of the doctrine he calls 'unlawful conduct relating to the
subject-matter of the case' ('in circumstances where a claimant has committed an illegality
related to the subject-matter of a case, the claimant is precluded from invoking the
respondent's alleged illegality').
61 Pomson (n 7) 723.
62 ibid 723.
63 Pomson believes on the contrary that investment tribunals have 'implicitly reject the existence
of a variation of the clean hands doctrine according to which illegal activity related
to the subject-matter of a claim may render it inadmissible' (ibid para 726).
64 Kreindler (n 1) 309; Carolyn B Lamm, Hansel T Pham and Rahim Moloo, 'Fraud and
Corruption in International Arbitration' in Ballesteros MA Fernandez and David Arias
(eds), Liber Amicorum Bernardo Cremades (Kluwer 2010) 723-26; Moloo (n 49); Rahim
Moloo and Alex Khachaturian, 'The Compliance with the Law Requirement in
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 501
strongly rejects the application of the doctrine in investor-State arbitration.65
Writers who are sceptical about the status of the doctrine have relied on
the Yukos award (Section 3.1). I will also highlight that other investment tribunals
have recognised and applied the clean hands doctrine in previous
awards (Section 3.2 ). Finally, I will critically assess the South American Silver
Limited award which has also held that the clean hands doctrine is not a
G PL (Section 3.3).
3.1 The Yukos Award:S Confusing Analysis on General Principles
The Yukos awards involved three separate claims filed by three controlling
shareholders of OAO Yukos Oil Company (Yukos).66 The same Tribunal
( composed of the same three arbitrators) rendered three awards in July 2014
(they will be collectively referred to as the Yukos award).67 The Yukos award
was, until very recently, the most important investment award examining the
question of clean hands.68 This specific feature of the award has been analysed
by numerous authors, 69 including myself. 7° For the purpose of this
article, suffice it to focus on the Tribunal's findings regarding the G PL status of
the doctrine.
The Yukos tribunal rejected the proposition that the unclean hands doctrine
was a general principle of law on the following ground:
The Tribunal is not persuaded that there exists a 'general principle of law
recognized by civilized nations' within the meaning of Article 38(1)( c) of
the I CJ Statute that would bar an investor from making a claim before
an arbitral tribunal under an investment treaty because it has so-called
'unclean hands'.
International Law' (2010) 34 Fordham Intl L J 1485-86; Bjorklund and Vanhonnaeker
(n 26) 367-68. See also, Dumberry and Dumas-Aubin (n 12).
65 Pomson (n 7) 724 et seq.
66 Hulley Enterprises Limited (a company organized under the laws of Cyprus), Yukos
Universal Limited ( a company organized under the laws of the Isle of Man), and Veteran
Petroleum Limited ( a company organized under the laws of Cyprus).
67 Hulley Enterprises ( n 36) para 1360. See also Yukos Universal Limited (Isle of Man) v Russia,
UNCITRAL, PCA Case No AA227, Final Award (18 July 2014); Veteran Petroleum Limited
(Cyprus)vRussia, UNCITRAL, PCA Case NoAA228, Final Award (18July 2014).
68 It should be added that the final awards in all three cases were subsequently set aside by
the The Hague District Court in a Judgment of 20 April 2016. The Dutch Appeals Court
overturned that ruling in its judgement of February 2020.
69 See Bjorklund and Vanhonnaeker (n 26) 365-86; Llamzon (n 2); Ancelin (n 6).
70 Dumberry, 'State of Confusion' ( n 5 ).
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
502 DUMBERRY
General principles of law require a certain level of recognition and
consensus. However, on the basis of the cases cited by the Parties, the
Tribunal has formed the view that there is a significant amount of
controversy as to the existence of an 'unclean hands' principle in international
law. 71
The Tribunal's remark that the clean hands doctrine is not a G PL is open to criticism.
72 One cannot help noticing a certain degree of confusion in the award
regarding the proper terminology. Thus, it is unclear whether the Tribunal
actually dealt with one concept ( G PL foro domestico) or the other (general
principle of international law). The confusion may be the result of the parties'
own pleadings and the way they have used these terms. The Claimants seem to
have considered the doctrine both from the perspective of a general principle
of international law73 and a GPLforo domestico.74 The Respondent used the
term as a GPLforo domestico.75 It is quite possible that this confusing terminology
may have led the Tribunal to view the two synonymously. This seems
to be the case when considering the manner in which the Tribunal started and
ended its analysis of this point. Thus, the Tribunal started its analysis by asking
the following question in the title of the section devoted to this issue: 'Does the
71 Hulley Enterprises (n 36) paras 1358-59.
72 Dumberry, 'State of Confusion' (n 5); Chester Brown, 'The End of the Affair? Hulley
Enterprises Ltd (Cyprus) v Russian Federation' (2016) 17(1) JWIT 137 (noting that the reasoning
of the Tribunal on this point 'may be questioned; is the rule against profiting from
one's wrongs, which is analogous to the 'clean hands' doctrine, not a general principle of
law?') 138 ('The Tribunal's findings on the 'clean hands' doctrine is therefore open to question');
De Alba Uribe (n 6) 324 (rejecting the position of the tribunal that the principle is
not a G PL). Other writers have taken a different position: Pomson ( n 7) ( arguing that the
reasoning of the Tribunal was correct); Llamzon (n2) 317 ('There seems to be no reason to
doubt the Yukos Tribunal's conclusion that no unclean hands doctrine 'proper' exists as a
principle of international law').
73 Hulley Enterprises ( n 36). This is clear from para 80 of the Claimants' Skeleton Arguments
cited at ibid para 108 of the award:
The Respondent's position is fundamentally unfounded for several reasons. First, the
so-called 'unclean hands' theory finds no support in the text of the ECT, customary
international law, or investment treaty jurisprudence. Second, even assuming the existence
of such a general principle of international law, which the Claimants deny, its
scope would be dramatically more limited than the Respondent contends, such that
the Respondent has not alleged any facts that could establish its applicability in the
present case ( emphasis added).
See also ibid para 1329 ('Claimants emphasize that the bar for recognition of general principles
of international law is set "extremely high"') ( emphasis added).
7 4 See ibid paras 1326, 1330.
75 See ibid para 1325.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 503
"Clean Hands" Doctrine Constitute a "General Principle of Law Recognized by
Civilized Nations"?' ( quoting Article 38(1)( c) of the ICJ Statute).76 Two pages
of analysis later, the Tribunal closed its reasoning by indicating: 'The Tribunal
therefore concludes that "unclean hands" does not exist as a general principle
of international law which would bar a claim by an investor, such as Claimants
in this case'. 77 Therefore, the Tribunal introduced the word 'international'
when referring to GPL under Article 38(1)(c) of the Statute of the ICJ. The
same expression is also used earlier in the award. 78 In sum, it remains unclear
whether the Tribunal had in mind one concept or the other, or (perhaps) both.
The next paragraphs examine these two scenarios separately.
On the one hand, in the event that the Tribunal was actually dealing with
G PL faro domestico, I have explained in prior publication, 79 that it should have
undertaken a comparative analysis to assess whether the doctrine could be
found in the most representative legal systems of the world. 80 Instead, the
Tribunal seems to have relied on what other courts and tribunals have concluded
about the status of the clean hands doctrine. Such renvoi to the work of
other tribunals is, of course, not problematic in and of itsel£ This is certainly
the case whenever the referred decision of the tribunal does contain a comprehensive
analysis of the issue. 81 A good example is the Niko award ( discussed
below) where the Tribunal made reference to the World Duty Free case as an
authoritative analysis on the status of the prohibition of corruption. 82 Yet,
there is no evidence in the Yukos award that the decisions mentioned by the
parties in their pleadings ( and cited by the Tribunal in its award) have actually
done such a comparative analysis of the status of the clean hands doctrine
under municipal law. 83 Moreover, since the pleadings are not publicly available
76 ibid, see title just before para 1357.
77 ibid para 1363 ( emphasis added).
78 ibid para 1347: 'The Parties dispute whether "clean hands" exists as a "general principle of
international law recognized by civilized nations" in the meaning of Article 38( 1) ( c) of the
Statute of the I CJ'.
79 Dumberry, 'State of Confusion' (n 5).
80 Dumberry, Guide to General Principles (n 8) 93, explaining the proper methodology that
should be (in an ideal world) followed.
81 C McLachlan, 'Investment Treaties and General International Law' (2008) 57(2) ICLQ
391-92.
82 Niko Resources (n 14) paras 431-33.
83 In its award, the Tribunal noted that 'the Parties have dedicated to this controversy [ie the
clean hands doctrine] several hundreds of pages of pleadings in the merits phase alone,
citing in the process dozens of arbitral awards and decisions rendered by the Permanent
Court of Internationaljustice ( the "PCIJ"), the International Court of Justice ("I CJ") and
mixed-claims commissions' (Hulley Enterprises (n 36) para 1312). See also ibid fn 1714,
where the Tribunal lists all cases referred to by the Respondent.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
504 DUMBERRY
in this case, it is impossible to know whether any such analysis of municipal
law was actually put forward by the parties.
On the other hand, if the Tribunal's goal was to examine the doctrine of clean
hands as a 'general principle of international law', the analysis can be considered
as technically sound. Thus, such principles emerge on the international
plane (not under domestic law) and can be identified by, inter alia, examining
how other international tribunals have analysed the issue and whether the
principle is found in treaties ( a point further discussed in Section 4 ). In short,
the Tribunal looked at the right place to determine the issue.
At the end of the day, all will agree with the Yukos tribunal's observation that
the doctrine is ( at the very least) controversial under international law and
that it has received uneven support amongst other international law courts
and tribunals. In my opinion, however, the Tribunal's analysis of how other
investment tribunals have assessed the clean hands doctrine is more problematic.
This question is examined in the following section.
3.2 Investment Tribunals Have Already Recognised and Applied the
Clean Hands Doctrine in Previous Awards
In its award, the Yukos tribunal noted that the Respondent referred to a number
of dissenting opinions by judges in ICJ and PCIJ cases where the principle
of 'unclean hands' was invoked (including the dissenting opinion of Judge
Schwebel, a member of the Tribunal, in the Nicaragua case).84 Importantly,
the Yukos tribunal added that the Respondent had been
unable to cite a single majority decision where an international court
or arbitral tribunal ha[ d] applied the principle of "unclean hands" in an
inter-State or investor-State dispute and concluded that, as a principle of
international law, it operated as a bar to a claim. 85
This remark about the (alleged) absence of any 'majority decision' applying
the doctrine may have been designed by the Tribunal to distance itself from
the position previously adopted by Judge Schwebel in his dissenting opinion
in the Nicaragua case, 86 and in his earlier writing. 87 As noted by two authors,
84 Hulley Enterprises (n 36) para 1361.
85 ibid para 1362.
86 Nicaragua v United States (n 56), dissenting opinion of Judge Schwebel.
87 In an article published in 1999 (Stephen Schwebel, 'Clean Hands in the Court' (1999) 31
Studies in Transnatl Legal Policy 74), Schwebel affirmed that the doctrine of clean hands
'is supported in international law' and referred to the 'equitable considerations that are at
the heart of the general principles of law that the doctrine of clean hands embodies' ( ibid
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 505
Schwebel had 'unambiguously acknowledged the nature of the clean hands
doctrine as being that of a general principle of law'. 88 In other words, the
Tribunal had no other choice but to make some fine distinguishing in order to
conclude that the doctrine was not a GPL.89
Nonetheless, some may question the accuracy of the Tribunal's observation
about the lack of any 'majority decision' in favour of the doctrine. For instance,
a number of authors90 have argued that the doctrine of clean hands has, in
fact, been adopted by the majority of the Permanent Court of International
Justice (PCIJ) in the 1937 Meuse River case.91 According to Schwebel himself,
the majority decision in this case is indeed 'the most notable exposition and
application of the principle [ of 'unclean hands'] ( or more precisely, of an allied
principle) in modern international law'. 92 However, Schwebel pointed out that
this case did not involve the application of the clean hands doctrine per se,
78). In an updated version of this article later published (Stephen Schwebel, 'Clean Hands,
Principle' in Rudiger Wolfrum ( ed), Max Planck Encyclopedia of Public International Law
( 0 UP 2009)) he, however, seems to have adopted a different position on the matter. Thus,
he mentioned that the question as to whether the principle of clean hands is a principle
of contemporary international law 'is a question on which opinion is divided' (ibid
para 3), noting that while 'a number of States have maintained the vitality and applicability
of the principle of clean hands in inter-State disputes', '[ t ]he I CJ has not rejected the
principle though it has generally failed to apply it' (ibid para 12).
88 Bjorklund and Vanhonnaeker (n 26) 368.
89 See the comment ibid 373: 'it is interesting to note that the Tribunal, composed inter alia
of Judge Schwebel, reached the conclusion that the clean hands doctrine is not a general
principle of public international law despite Judge Schwebel's earlier finding to the
contrary. Judge Schwebel did not issue a dissenting or concurring opinion in the Yukos
decision'.
go Llamzon and Sinclair (n 3) 511 (The PCIJ 'applied the clean hands doctrine'); Le Moullec
(n 6) 17.
91 In this case, the Netherlands sought to prevent Belgium from making use of waters from
the Meuse River which it considered contrary to the terms of a bilateral 1863 treaty relating
to the regime of diversions from the River Meuse. Importantly, the Netherlands had
itself constructed certain works contrary to the terms of the treaty. Belgium therefore
argued that the Netherlands should not be permitted to invoke the treaty against it. The
Court mentioned that '[i]n these circumstances, the Court finds it difficult to admit that
the Netherlands are now warranted in complaining of the construction and operation of
a lock of which they themselves set an example in the past' (The Diversion of Water from
the Meuse (n 53)).
92 Schwebel, 'Clean Hands' (n 87) para 2. See also, in his dissenting opinion in Nicaragua v
United States (n 56) para 240, where he refers to the opinion of Judge Husdon and mentions
the work of C Wilfred Jenks, The Prospects of International Adjudication (Stevens
and Sons 1964) 326, stating that the majority of the Court had endorsed the position of
Hudson. This reference suggests that Schwebel also believe that the majority of the Court
adopted the doctrine in this case. See also Nicaragua v United States (n 56) para 269.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
506 DUMBERRY
but a 'variation' of the doctrine. 93 As mentioned above, one can agree with the
positioning of Pomson on the specific point94 that the Court (and both Judges
Hudson and Anzilotti in their opinions) actually applied the principle inadimplenti
non est adimplendum, which is typically considered as different from
the clean hand doctrine per se. In any event, it should be added that the Court,
in this case, applied that principle more as a supplementary argument, rather
than as the main reason for rejecting the claim.95
In my opinion, there is another reason why the previously mentioned affirmation
by the Yukos tribunal is incorrect. 96 I have examined elsewhere how
investment tribunals have analysed the concept of clean hands97 and argued
that the inclusion of a provision in an investment treaty to the effect that
protected investments are only those made 'in accordance with the law' is a
manifestation of the doctrine of clean hands. The same position has also been
adopted by other authors. 98 Investment tribunals have thus already used the
doctrine of clean hands to decide cases. 99 One clear example is the Inceysa
award where the Tribunal stated that a 'foreign investor cannot seek to benefit
from an investment effectuated by means of one or several illegal acts and,
consequently, enjoy the protection granted by the host State, such as access
to international arbitration to resolve disputes, because it is evident that its
act had a fraudulent origin and, as provided by the legal maxim, "nobody can
93 Nicaragua v United States ( n 56) dissenting opinion of Judge Schwebel, paras 269 et seq.
94 Pomson (n 7) 716-17.
95 The Diversion of Water from the Meuse ( n 53). Thus, the Court made this observation after
having already concluded that Belgium's Neerhaeren Lock was not contrary to the treaty.
96 Against cf Llamzon (n 2) 317, stating that 'no international court or tribunal - or more
precisely, no majority decision or award - has ever explicitly recognized the existence of
the unclean hands doctrine'.
97 Dumberry, 'State of Confusion' (n 5).
98 Moloo (n 49) 6-7; Moloo and Khachaturian (n 64) 1485; Llamzon and Sinclair (n 3) 509;
Bjorklund and Vanhonnaeker (n 26) 367,369 ('the translation of the doctrine into treaty
language can be found in explicit provisions that an investment, for example, must be
undertaken 'in accordance with the law' of the host state'); De Alba Uribe (n 6) 324 ('the
doctrine has been recognized (and embodied) ... in the express text of some BITs, which
require that any investment be made in compliance with the laws and regulations of the
host State'); Kaldunski (n 6) 96 (arguing that 'the principle of clean hands does not have
an autonomous character and that it is enshrined in the obligation to make investments
in accordance with law'). Against cf Le Moullec (n 6) 24, 29; Pomson (n 7) 724-25.
99 Moloo (n 49) 7.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 507
benefit from his own fraud".'100 This Latin maxim is an expressions of the clean
hands doctrine.101
Many other tribunals have also concluded to the existence of an implicit
legality requirement even in the absence of such a clause in the instrument.102
This is also an expression of the clean hands doctrine.103 A good illustration
is the Plama case.104 Having concluded that the investment was 'obtained by
deceitful conduct that is in violation of Bulgarian law', the Tribunal stated that
granting the Energy Charter Treaty (ECT)'s protections to Claimant's investment
would be contrary to the principle nemo auditor propriam turpitudinem
allegans and 'the basic notion of international public policy - that a contract
obtained by wrongful means (fraudulent misrepresentation) should not be
enforced by a tribunal'.105 Therefore, the Tribunal held that 'in light of the ex
turpi causa defense' it could not 'grant the substantive protections of the ECT'
as requested by the Claimant.106 While the Plama tribunal did not use the
term 'clean hands', it nevertheless based its decision on Latin maxims which
are manifestations of the doctrine.107 It can be argued that the Plama award
is an example of a majority decision where a tribunal concretely applied the
1 oo Inceysa Vallisoletana SL v El Salvador, IC SID Case No ARB /o3/ 26, Award ( 2 August 2006)
para 242.
101 Kreindler (n 1) 317-19; Llamzon and Sinclair (n 3) 509-10; Schwebel, 'Clean Hands
Principle' ( n 87) para 1.
102 See for instance, Phoenix Action, Ltd v Czech Republic, IC SID Case No ARB/06/5, Award,
(15 April 2009) para 101 (while the bilateral investment treaty (BIT) in this case included
an 'in accordance with the law' provision, the tribunal indicated that the obligation for
investors to make their investments in accordance with the host State's law 'is implicit
even when not expressly stated in the relevant BIT'). See also Gustav F W Hamester
GmbH & Co KG v Ghana, ICSID Case No ARB/o7/24, Award (18 June 2010) paras 123-
24 (it should be noted that this case involved a BIT containing a legality requirement);
Yaung Chi Oo Trading Trading Pte Ltd v Myanmar, ASEAN Case No ARB/01/01, Award
(31 March 2003) para 58; Fraport Ag Frankfurt Airport Services Worldwide v Philippines,
ICSID Case No ARB/11/12, Award (10 December 2010) para 328. SAUR International v
Argentina, IC SID Case No ARB/o4/ 4, Decision sur la competence et sur la responsabilite
(6 June 2012) para 306; Mamidoiljetoil Greek Petroleum Products Societe Anonyme SA v
Albania, IC SID Case No ARB/11/24, Award (30 March 2015) para 293.
103 Moloo and Khachaturian (n 64) 1485: Bjorklund and Vanhonnaeker (n 26) 370; De Alba
Uribe (n 6) 324-25, 326.
104 Pluma Consortium Limitedv Bulgaria, IC SID Case No ARB /o3/ 24, Decision on Jurisdiction,
(8 February 2005).
105 ibid para 143.
106 ibid para 146. The Tribunal also indicated that the principle of nemo auditur propriam
turpitudinem allegans was one of the 'applicable rules and principles of international law'
applicable to the case (para 140 ).
107 Llamzon and Sinclair (n 3) 515.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
508 DUMBERRY
principle of clean hands operating as a bar to the investor's claim.108 The same
position has been adopted by the Fraport II tribunal in its 2014 award:
Investment treaty cases confirm that such treaties do not afford protection
to illegal investments either based on clauses of the treaties, as in the
present case according to the above analysis, or, absent an express provision
in the treaty, based on rules of international law, such as the 'clean
hands' doctrine or doctrines to the same effect.109
Another relevant case not mentioned in the Yukos award (but which was
actually rendered in August 2013, i.e. one year before the award110) is Niko v
Bangladesh.111 The Niko tribunal ( quoting from the aforementioned Guyana
v Suriname award) stated that 'the question whether the principle of clean
hands forms part of international law remains controversial and its precise
content is ill defined'.112 The Tribunal did not itself take position on this
issue, remaining neutral.113 The Tribunal ultimately concluded that the 'application
of the [ clean hands] principle requires some form of reciprocity'114
and specifically referred to three criteria which had been developed by the
United Nations Convention on the Law of the Sea (UN CLOS) Arbitral Tribunal
in Guyana v Suriname.115 The reasoning of the Niko tribunal suggests that it
viewed the doctrine as a valid ground of defence in arbitration proceedings.116
As such, it actually applied the doctrine to the facts of the case.117 Thus, had
the Tribunal rejected the very existence of such a doctrine, it would have
108 Plama Consortium (n 104). This is clear from the Tribunal's conclusion at para 147.
1 og Fraport ( n 102) para 328.
11 o On this point, Llamzon ( n 2) 318, noted that one reason which may explain why the Yukos
tribunal did not mention the Niko award is because the hearing on the merits in Yukos was
in October-November 2012, ie almost a year before the August 2013 decision in Niko.
111 Niko Resources ( n 14).
112 ibid para 477.
113 ibid para 478. Thus, on the one hand, it referred to the above-mentioned sceptical position
of ILC Special Rapporteur Crawford (n 37) regarding the G PL status of the doctrine.
Yet, on the other hand, it also referred to the fact that 'others are of the view that, primarily
because of its recognition in the domestic orders of many States, it must be qualified
as a general principle oflaw'.
114 ibid para 480.
115 ibid para 481.
116 See for instance ibid para 482.
11 7 See ibid para 480, indicating that the 'application of the principle requires some form of
reciprocity'. One question addressed in Dumberry, Guide to General Principles (n 8) 224,
is whether the Tribunal adopted a narrower test of the doctrine when compared to that
used under domestic law. See Llamzon ( n 2) 318, 321.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 509
surely not wasted any time in examining its concrete application in this case. 118
Importantly, the Niko tribunal ultimately held that the objection raised by
the Respondents did not meet the three criteria which had been identified
by the UN CLOS Arbitral Tribunal for the application of the doctrine.119
A few words should be said about the Niko award's reference to this condition
of 'a relationship of reciprocity between the obligations'120 of the investor
and the host State. For this 'reciprocity' requirement to be fulfilled, the investor's
wrongdoing and the treaty breach committed by the host State need to
arise from the same sets of facts. The Niko tribunal found that 'there [was] no
relation of reciprocity between the relief which the Claimant' was seeking in
this arbitration proceedings and the acts of corruption involving the claimant.121
One author noted that the Tribunal's emphasis on this condition of 'reciprocity'
shows that it has, in fact, adopted a narrower test of the doctrine which is
'markedly different from those in national legal systems' and 'echoing the purer
form of the unclean hands doctrine seen in inter-State claims commissions
dating back over a century'.122 He also noted that this condition of reciprocity
is difficult to fulfill in the context of investment arbitration.123
In fact, the three-part 'test' developed by the UN CLOS Arbitral Tribunal in
Guyana v Suriname was based on the reasoning of Judge Hudson in his individual
opinion in the Diversion of Water from the Meuse case.124 The specific facts
of the Meuse case explain why the question of a continuing violation was so
118 Yet, it should be added that the Tribunal when referring to the test developed by the
UNCLOS Arbitral Tribunal in Guyana v Suriname does mention that Tribunal's important
caveat: 'to the extent that such a doctrine may exist in international law' (ibid para
481).
u g ibid para 483.
120 ibid para 480, referring to Guyana v Suriname (n 41) para 481.
121 ibid para 484.
122 Llamzon, 'Yukos' (n 2) 318, see also ibid 321 speaking of the 'stringent requirements of
unclean hands set in Niko'.
123 ibid 328: 'However, can reciprocity truly occur at the making of an investment? Instances
of investor wrongdoing such as corruption or fraud at the inception of the investment
usually do not concern exactly the same set of facts on which the investor relies in making
its claims against the host State. Only by considering the facts that attended the securing
of the investment, rather than the facts related to the claimant's strict cause of action ( for
example, denial of justice, expropriation, fair and equitable treatment violations) as the
juridical link between investor claim and host State defence, can the legality doctrine
truly be said to be of sufficient identity with the unclean hands doctrine.'
124 As the UN CLOS Arbitral Tribunal noted ( Guyana v Suriname (n 41) para 420 ): 'an important
aspect of Judge Hudson's expression of the doctrine is the continuing nature of the
non-performance of an obligation'.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
510 DUMBERRY
central to his analysis.125 But why should a breach only concern a 'continuing
violation' for the clean hands doctrine to apply?126 Violations committed by
an investor in the past ( and which are not ongoing at the time the arbitration
proceedings have started) may be very relevant to determine whether it has
'unclean' hands. Such would be the case, for instance, in the event of human
rights atrocities committed by an investor against the local population of the
host State in the context of a mining project. In my opinion, any such violation
should not have to be necessarily 'continuing' ( or on-going) for the clean hands
doctrine to apply. What matters is that these violations are directly related to
the subject-matter of the claim filed by the investor.127 That would be the case
in the event that an investor would allege that the host State expropriated the
investor's investment in that same mining project. As further discussed below, 128
the clean hands doctrine should apply regarding post-establishment conduct.
In sum, the test adopted by the Niko tribunal is probably too strict and may
have the adverse effect of unnecessarily restricting the application of the clean
hands doctrine in investment arbitration.
In any event, since the Yukos award was rendered, one award certainly
qualifies as a 'majority decision' of an international tribunal applying the
principle of clean hands as operating as a bar to a claim.129 This is the case of
Hesham Talaat M Al-Warraq v Indonesia rendered in December 2014.130 The
case involved an individual from Saudi Arabia filing a claim under the O IC
Agreement131 (which contains a clause regarding the admissibility of claims,
Article g) and the UNCITRAL Arbitration Rules. The Tribunal held that: 'The
125 ibid. The Tribunal succinctly summarized the facts as follows: 'The Netherlands was seeking
an order for Belgium to discontinue its violation of a treaty between the two countries
while The Netherlands itself was engaging in "precisely similar action, similar in fact and
similar in law" at the time its claim was brought before the PCIJ'.
126 Niko Resources (n 14) para 481.
127 This is indeed one of the 'variations' identified by Pomson (n 7) 723, to the 'causal link'
form of the clean hands doctrine: 'According to this form of the clean hands doctrine, in
circumstances where a claimant has committed an illegality related to the subject-matter
of a case, the claimant is precluded from invoking the respondent's alleged illegality'.
128 See infra Section 5.
129 It should be added that the award indicates that a member of the Tribunal disagreed
on this last point, without however further discussing the issue. See Hesham Talaat M
AL-Wa"aq v Indonesia, Arbitration Under the Agreement on Promotion, Protection and
Guarantee of Investments Among Member States of the Organisation of the Islamic
Conference, Final Award (15 December 2014) fn 217.
130 ibid. See analysis in Dumberry, 'State of Confusion' (n 5).
131 Agreement on the Promotion, Protection and Guarantee of Investments Among Member
States of the Organisation of the Islamic Conference ( adopted June 1981, effective
February1988) (OIC Agreement).
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 511
Claimant having breached the local laws and put the public interest at risk,
he has deprived himself of the protection afforded by the OIC Agreement'.132
The Tribunal then added that the Claimant's conduct 'falls within the scope
of application of the "clean hands" doctrine, and therefore cannot benefit
from the protection afforded by the O IC Agreement'133 and 'renders the
Claimant's claim inadmissible'. 134 In support of this affirmation, the Tribunal
stated: 'As Professor James Crawford observes, the "clean hands" principle
has been invoked in the context of the admissibility of claims before international
courts and tribunals'.135 This is a rather unusual reference considering
that Crawford is clearly not the most favourable authority in support of the
existence of the clean hands principle. 136 In any event, the Tribunal held that
the claim was inadmissible as a result of the application of Article g and the
clean hands doctrine.137 Yet, it may be that the Tribunal's observations on
the clean hands doctrine was simply an obiter, since it had already decided
that the Claimant could not benefit from the protection offered under the
Agreement by virtue of the application of Article g.138 Nevertheless, the award
is noteworthy for its endorsement of the application of the clean hands doctrine
to post-investment conduct.
Importantly, since the Al-Warraq award, a number of other investment tribunals
have not adopted the reasoning of the Yukos award. Thus, in the more
recent cases of Churchill Mining and Copper Mesa (both rendered in 2016), the
tribunals did not reject the clean hands doctrine.139 The Churchill Mining tribunal
noted that the doctrine 'has also found expression at the international
level, although its status and exact contours are subject to debate and have
been approached differently by international tribunals'.140 In a footnote, it
referred to the Al-Warraq and Niko awards, but, very surprisingly, did not mention
the Yukos award at all.
For a while, the Yukos award was, in fact, the only award which had explicitly
denied the existence of the doctrine as a G PL and its application in investment
132 Al-Warraq (n 129) para 645.
133 ibid para 647.
134 ibid para 646.
135 ibid ( emphasis in the original).
136 Pomson (n 7) 724.
137 Andrew Newcombe and Jean-Michel Marcoux, 'Hesham Talaat M Al-Warraq v Republic of
Indonesia: Imposing International Obligations on Foreign Investors' (2015) 30(3) ICSID
Rev 530.
138 SeeAl-Warraq (n 129) para 648. On this point see Le Moullec (n 6) 26-27; Tanzi (n 39) 208.
139 Le Moullec (n 6) 28.
140 Churchill Mining ( n 15) para 493.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
512 DUMBERRY
arbitration.141 Very recently a new award has rejected the doctrine (it will be
examined in the next section).
3.3 The South American Silver Award's Flawed Analysis of the Doctrine
The South American Silver Limited case involves the termination of mining
concessions in Bolivia following protests and troubles with indigenous local
populations.142 Bolivia argued, inter alia, that the tribunal should decline jurisdiction
over the case due to the Claimant's alleged breach of the clean hands
doctrine, which it considered to be a G PL. The Tribunal came to the conclusion
that 'based on the arguments and the evidence on the record' it was 'not
convinced' that the doctrine was a GPL.143 The Tribunal affirmed that 'it is
undisputed that general principles of law require certain degree of recognition
and consensus', adding ( referring to the position of the Respondent) that
'the analysis of these principles should principally consider "the practice of the
States".'144 The Tribunal rejected that argument put forward by the Claimant on
the following ground:
Bolivia did not submit sufficient evidence to establish that the clean
hands doctrine enjoys the required recognition and consensus among
the States to reach the status that Bolivia attributes to it. Bolivia asserted
that the clean hands doctrine is widely recognized in civil law and
common law systems, and cites some decisions of the British House of
Lords and the French Court of Cassation, as well as scholarly articles on
the existence of the principle in the United States and Germany.145
In the opinion of this Tribunal, these are insufficient and not determinative
141 Other authors believe, on the contrary, that the Hesham v Indonesia award is the only
award which has dismissed an investor's claims based on the clean hands doctrine. See:
Le Moullec (n 6) 724.
142 South American Silver Limited (n 9).
143 ibid para 443.
144 ibid para 445.
145 John Norton Pomeroy, A Treatise on Equity Jurisprudence (5th edn, Bancroft-Whitney
Company 1941) respondent's rejoinder, paras 303-06, citing RLA-228; RLA-230, Jones
C Lenthal, House of Lords, Decision [1669] 1 Chan Cas 153; RLA-233, Stone & Rolls Ltd
(in Liquidation) v Moore Stephens (a firm), House of Lords, Decision (2009) 1 AC; RLA-
234, Safeway Stores Ltd and others v Twigger and others, House of Lords, Decision ( 2010)
EWCA Civ 1472; RLA-66, Richard H Kreindler, 'Corruption in International Investment
Arbitration: Jurisdiction and the Unclean Hands Doctrine' in Kai Hober and others (eds),
Between East and West: Essays in Honour of Ulf Frank (Juris Publishing 2010 ); RLA-235,
French Court of Cassation, 2nd Civil Chamber,Judgment (4 February 2010) No 09-11.464;
RLA-236, French Court of Cassation, 2nd Civil Chamber, Judgement (24 January 2002)
No 99-16.576.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 513
regarding the alleged status of the clean hands doctrine as a general
principle of international law under the terms of article 38(1)(c) of the
ICJ Statute.146
This statement is questionable on many grounds. First, the Tribunal is using in
the award a confusing terminology by referring to different expressions ('principle
of international law', 'general principle of international law' and 'general
principle of law') as synonymous.147 This is clear from the passage quoted
above where the Tribunal is clearly examining the question from the angle
of GPLforo domestico (i.e. grounded in domestic law) but nevertheless oddly
concludes that it is not a 'general principle of international law'.
Second, the Tribunal wrongly disregarded Bolivia's unquestionable assertion
that the clean hands doctrine 'is widely recognized in civil law and common
law systems'. As mentioned above, all writers ( except for one) have come to
the same conclusion. Yet, the Tribunal concluded, without giving any explanation,
that this was 'insufficient and not determinative'. What was actually
'insufficient and not determinative' is unclear. Was it the fact that the doctrine
is 'only' recognized in civil law and common law systems? That would be very
odd considering that both the home State of the investor (United Kingdom)
and the host State of the investment belong to these two families oflaw. In fact,
for Schill, any comparative analysis to assess the existence of a G PL should
'encompass representative legal systems of the common and civil law, as
these two traditions have influenced most domestic legal systems worldwide'.148
Pellet also noted that 'probably all contemporary municipal laws borrow part
of their rules' from civil and common law.149 According to one recent estimate,
146 South American Silver Limited (n g) paras 445-46 ( emphasis added).
147 ibid paras 440-44.
148 Stephan W Schill, 'General Principles of International Law and International Investment
Law' in Tarcisio Gazzini and Eric De Brabandere (eds), International Investment Law - The
Sources of Rights and Obligations (Brill 2012) 147, fn 62, adding: 'While there are also other
conceptions of law and distinct legal traditions, common law and civil law cover a broad
spectrum of domestic legal systems in all continents, as these legal traditions have spread
from their European roots to many other countries, partly because they were enacted in
dependencies or former colonies, but also because in legal reform processes many countries
around the world adopted the well-developed public law systems of one of the major
civil or common law countries.'
He also added that 'nothing, in principle, prevents one from drawing on legal systems
outside this classical comparative canon' and that in fact 'including other legal systems
enriches and strengthens a comparative law argument' (ibid 148).
149 Alain Pellet, 'Article 38' in Andreas Zimmermann and others (eds), The Statute of the
International Court of Justice: A Commentary ( 2nd edn, 0 UP 2012) 770.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
514 DUMBERRY
nowadays, both common law and civil law systems represent about 80% of
the World's domestic legal orders.150 In other words, even if the doctrine was
'only' found in these two legal families (which is obviously not the case as mentioned
above), such a demonstration would have been 'sufficient' to prove the
existence of the G PL in the context of this case. It may be that the Tribunal
considered that what was 'insufficient and not determinative' is the reference
to only four domestic laws. But how many States' legal orders should have been
put forward by the Respondent? To which legal families should these domestic
laws belong? It is quite striking that the Tribunal is unable to cite a single
domestic law of civil or common law tradition where the doctrine is not present.
The Tribunal did not even bother to assess whether the concept exists
under the laws of Bolivia. It may be that it was the Respondent's reference to
case law or scholars' works which the Tribunal considered to be 'insufficient
and not determinative'. Did the Respondent refer to enough authorities? Were
these sources authoritative? Maybe the Tribunal would have preferred that the
Respondent conducts its own comprehensive comparative analysis of domestic
laws. The Tribunal completely failed to explain what kind of demonstration
and analysis would have been considered as 'sufficient evidence' to establish
that the clean hands doctrine 'enjoys the required recognition and consensus'
in domestic legal orders. The Tribunal's unexplainable silence on these fundamental
questions seriously undermines its conclusion.
The Tribunal then seems to change its focus to general principles of international
law: 'Respondent also invoked various international court and tribunal
decisions that would confirm that the clean hands doctrine is a principle of
international law'.151 The Tribunal rejected the 'various opinions by members
of the PCIJ and the IC]' on the ground that they 'do not seem even to reflect
the majority position of the respective courts in connection with the application
of the clean hands doctrine' and that, in any event, the doctrine was 'not
applied in any of the decisions the Respondent cited as grounds to decline
jurisdiction or to declare the inadmissibility of the claims'.152
In this context, the Tribunal examined the numerous investment decisions
cited by the Respondent in favour of the recognition of the clean hands doctrine.
It concluded that 'they do not support the premise that the clean hands
doctrine is a general principle of international law', adding that these tribunals
have 'reached their respective conclusions based on the appropriate treaty
150 Valentina Vadi, Analogies in International Investment Law and Arbitration (CUP 2015)
126, referring to Wayne R Barnes, 'Contemplating a Civil Law Paradigm for a Future
International Commercial Code' (2004-2005) 65 La L Rev 769.
151 South American Silver Limited (n g) para 447.
152 ibid.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 515
provisions or the applicable national law without basing their decisions on the
clean hands doctrine or advancing it as a general principle of international
law.'153 This affirmation is simply incorrect. As mentioned above, many investment
tribunals have held that there exists an implicit legality requirement
even in the absence of such a clause in the treaty. They have considered such
a requirement as an expression of the clean hands doctrine and have rejected
claims on that basis. The Plama award is a prime example.
On that point, the Tribunal stated that 'The Respondent also referred to
certain authors who have stated that the clean hands doctrine constitutes a
principle of international law. However, as the Claimant notes, those same
authors recognize that the existence and application of this doctrine, as a matter
of international law, are still controversial.'154 Contrary to what the Tribunal
seems to be suggesting, there is no contradiction between these two ideas. One
can indeed be in favor of recognising the GPL status to the doctrine, while
at the same time acknowledging that the issue is still controversial. In any
event, the Tribunal failed to cite a single writer who rejects the claim that
the doctrine is a G PL. It is troubling that the Tribunal seems to be unaware
of the recent work of many investment scholars who have explicitly recognised
the clean hands doctrine as a G PL.
Finally, the Tribunal referred to the Al-Warraq award as the 'only exception'
where a 'tribunal majority considered that the clean hands doctrine made the
Claimant's claims inadmissible.'155 Yet, the Tribunal dismissed this case on this
ground:
However, in the dispositif of its decision, the tribunal referred expressly to
Article g of the OIC Agreement as the basis to conclude that the Claimant
was not entitled to any damages in respect of the breaches of the fair and
equitable treatment standard, and not that its claims were inadmissible
due to the clean hands doctrine.156
This statement is misleading. The Al-Warraq tribunal did state that the claim
was inadmissible as a result of the clean hands doctrine (in addition to its inadmissibility
based on the application of Article g of the OIC Agreement).157 In
this respect, it is very surprising that the Tribunal does not even mention the
153 ibid para 448.
154 ibid para 450.
155 ibid para 449.
156 ibid (italics in the original).
157 Al-Warraq (n 129) para 647: 'The Tribunal finds that the Claimant's conduct falls within
the scope of application of the "clean hands" doctrine, and therefore cannot benefit from
the protection afforded by the OI C Agreement'.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
516 DUMBERRY
Niko case, which is also considered by writers as supporting the application
of the doctrine. Rather bizarrely, the award also says nothing about the Yukos
case. In sum, the Tribunal's analysis on the clean hands doctrine is not convincing
and is likely to be discarded by future tribunals.
4 The Relevance of the Concept of 'General Principle of
International Law' in Investment Arbitration
In my view, one can agree with Moloo that even if 'historical application of
the clean hands doctrine has been inconsistent, and as such, inconclusive',
it remains 'that recent decisions in the investment arbitration context suggest
that the doctrine has a place in international law'.158 Bjorklund and
Vanhonnaeker came to the conclusion that 'the doctrine has been indeed
recognized and applied in numerous instances by international tribunals',159
and that, in the context of investor-State arbitration, 'the issue is not so much
whether the doctrine should apply but rather on what basis it will be invoked'.160
In my view, the doctrine should be recognised as a 'general principle of international
law'.161
International law has its own structure different from municipal law.162 As
a result, it has been noted by Bassioni that 'principles deemed basic to international
law can emerge in the international legal context without having a
specific counterpart in national legal systems because of the differences that
158 Moloo (n 49) 10.
159 Bjorklund and Vanhonnaeker (n 26) 367. It should be noted, however, that not everyone
shares this position. See Llamzon and Sinclair (n 3) 513 ('Arbitral practice in investment
treaty arbitration is also mixed, with some tribunals determined to forge their own path
but others firmly unpersuaded of the existence of the principle').
160 Bjorklund and Vanhonnaeker (n 26) 367-68. Against Llamzon and Sinclair (n 3) 516
('there is significant doubt as to the status of the clean hands doctrine as a general principle
of international law') and 517 ('Where the doctrine has been invoked and applied
in the investment treaty context, those cases might be better explained by reference
to the applicable investment treaty's legality clause').
161 The same position is adopted by Kreindler (n 1) 317-19, arguing that the doctrine can be
qualified as both a G PL faro domestico and a general principle of international law.
162 Johan Lammers, 'General Principles of Law Recognized by Civilized Nations' in Frits
Kalshoven and others (eds), Essays in the Development of the International Legal Order:
InMemoryofHaroFVanPanhuys (Springer1980) 67.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 517
characterize these two legal systems'.163 For the majority of scholars,164 a
number of judges,165 and the ILA,166 Article 38 of the ICJ Statute refers not
only to foro domestico principles, but also includes those principles existing
under international law. In his separate opinion in the Pulp Mills case, Judge
Canc;ado Trindade mentioned that looking solely at municipal law to find G PL
today 'seems to amount to a static, and dogmatic position'.167 He argued that
'given the extraordinary development of the law of nations ( droit des gens),
there is epistemologically no reason not to have recourse to general principles
of law as recognized in domestic as well as international law'.168 He also noted
that the Court has indeed interpreted the expression G PL as including those
existing under international law.169 In fact, for him, GPL 'find concrete expression
not only in foro domestico, but also at international level' because 'there
can be no legal system without them'.170
Importantly, these general principles specifically grounded in international
law should not be confused (as some investment scholars have in the past171)
with other sources of law, such as custom ( or jus cogens norms). The undeniable
fact that 'general principles of international law' are clearly a different
163 MC Bassiouni, 'A Functional Approach to "General Principles of International Law"'
(1990) 11 MichJ Intl L 772.
164 See for instance Frede Castberg, 'La methodologie du droit international public' (1933) 43
Recueil des Cours 331, 369-70. See also analysis in Lammers ( n 162) 58 et seq, 66 et seq;
Cheng (n 4) 2-3, for a list of authors.
165 South West Africa Cases (Ethiopia v South Africa; Liberia v South Africa) (Judgment),
Dissenting Opinion of Judge Tanaka [ 1966] I CJ Rep 295.
166 ILA, 'The Use of Domestic Law Principles in the Development of International Law'
(Report of the Sidney Conference, 2018) 16.
167 Pulp Mills on the River Uruguay (Argentina v Uruguay) (Judgment), Separate Opinion of
Judge Cancado Trindade [2010] ICJ Rep 156, para 27. See his long and comprehensive
survey of doctrine on this question (ibid paras 29 et seq).
168 ibid para 27.
169 ibid para 21.
1 70 ibid para 28.
1 71 Tarcisio Gazzini, 'General Principles of Law in the Field of Foreign Investment' ( 2009) 10
JWIT 104 (referring to GPL having their origin in international law but indicating that
they 'can be assimilated for all practical purposes to customary international rules'); Ioana
Tudor, The Fair and Equitable Treatment Standard in International Foreign Investment Law
(OUP 2008) 96 (indicating that 'the general principles of international law mostly refer
to a method that uses existing sources and is not so much considered as a real source of
law' and is not an autonomous source of law since 'this category of principles is difficult
to distinguish' from custom. But see her comments at ibid 98 downplaying the difference
with GPL).
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
518 DUMBERRY
source of law from rules of customary law172 has been recognised by the ad
hoc Annulment Committee in the Mobil case.173 One important distinction
to bear in mind is the way through which both sources emerge. While the
creation of customary rules is regulated by strict conditions,174 in contrast,
'general principles of international law' is a much more flexible concept. As
noted by Bassiouni, these principles 'have been identified by examining State
conduct, policies, practices, and pronouncements at the international level,
which may be different from domestic legal principles'.175 General principles
may indeed have their foundation on treaties, case law of international courts
and tribunals176 as well as in the writings of scholars. Over time, the development
of consistent awards on a specific matter has an important impact on the
emergence of general principles.177 In his First Report, ILC Special Rapporteur
Vazquez-Bermudez noted that 'the existence of a category of general principles
of law that find their origin in the international legal system is corroborated by
the practice of States and the decisions of international courts and tribunals'.178
In my opinion, the clean hands doctrine should be considered as a 'general
principle of international law'. This is not as a result of the few dissenting opinions
of PCIJ and ICJ judges supporting its existence, but rather because it is
an implicit and inherent feature of all investment treaties. This conclusion
is also supported by the fact that the doctrine has been recognised and applied
frequently by arbitral investment tribunals and is also supported by large number
of scholars in the context of investment arbitration. These are precisely the
circumstances under which 'general principles of international law' emerge.
172 Chester Brown, A Common Law of International Adjudication (OUP 2007) 54.
1 73 Venezuela Holdings BV et al ( case formerly known as Mobil Corporation, Venezuela Holdings
BVetal) v Venezuela, IC SID Case No ARB/07/27, Decision on Annulment (9 March 2017)
paras 154, 159.
174 It should be recalled that two basic requirements (State practice and opiniojuris) are necessary
to conclude to the existence of a customary rule. The practice of States must not
only be frequent, uniform and consistent, but it must also be shown that they believe
that such practice is required by law ( opinio Juris). See Patrick Dumberry, The Formation
and Identifi.cation of Rules of Customary International Law in International Investment Law
(CUP 2016).
175 Bassiouni (n 163) 789.
1 76 Samantha Besson, 'General Principles in International Law - Whose Principles?' in
Samantha Besson and Pascal Pichonnaz (eds), Les principes en droit europeen - Principles
in European Law (Schulthess 2011) 44.
1 77 Valentina Vadi, Proportionality, Reasonableness and Standards of Review in International
Investment Law and Arbitration (Elgar 2018) 89.
178 ILC, 'First Report on General Principles of Law by Marcelo Vazquez-Bermudez, Special
Rapporteur' (71st Session, ILC, Geneva, 29 April-7 June and 8 July-9 August 2019) UN
Doc A/CN.4/732, para 235, referring to several cases.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 519
It has been argued by Bjorklund that the doctrine of clean hands is also one
aspect of the basic notion of 'international public policy'.179 A number of writers
( including myself)180 have argued that the concept of 'transnational public
policy' is akin to the notion of 'general principle of international law' specific
to the field of investment arbitration. 181 While an examination of the elusive
concept of 'transnational public policy' is beyond the scope of this article,182
suffice it to note that they emerge in the same way as general principles of
international law.183 The Plama,184 Inceysa,185 and World Duty Free186 awards
179 Bjorklund and Vanhonnaeker (n 26) 373 et seq. See also Llamzon (n 2) 321, 325 (who
generally supports the reasoning of the Yukos award on the question of the clean hands
doctrine) noting that the award 'does not reject, strictly speaking, the idea of unclean
hands forming part of transnational public policy, which has largely been considered an
independent source of rights and duties in international arbitration, irrespective of the
applicability of public international law'.
180 Dumberry, Guide to Genera/Principles (n 8) 230.
181 Bjorklund and Vanhonnaeker (n 26) 374: 'The outstanding question is, however, how do
rules of international public policy differentiate themselves from general principles of
international law? Indeed, the elements required to establish the existence of such a rule
are similar to those required to ascertain the existence of a general principle of international
law'.
182 In World Duty Free v Kenya (n 17) para 1391 the Tribunal (distinguishing the term from
the other notion of 'international public policy') defined it as 'signifying an international
consensus as to universal standards and accepted norms of conduct that must be applied
in all fora'. See also ILA, 'Report on Public Policy as a Bar to Enforcement of International
Arbitral Awards' (2003) 19(2) Arb Int, Recommendation 2(b); Lamm and others (n 64)
707; Audley Sheppard, 'Public Policy and the Enforcement of Arbitral Awards: Should
There Be a Global Standard?' (2004) 1 TDM 1.
183 In this context, the Tribunal in World Duty Free v Kenya (n 17) noted that 'tribunals must
be very cautious in this respect and must carefully check the objective existence of a
particular transnational public policy rule in identifying it through international conventions,
comparative law and arbitral awards' (para 141, emphasis added). The Tribunal
concluded that 'in light of domestic laws and international conventions relating to corruption,
and in light of the decisions taken in this matter by courts and arbitral tribunals',
it was 'convinced that bribery is contrary to the international public policy of most, if not
all, States or, to use another formula, to transnational public policy' (para 157). Thus, to
arrive at its conclusion, the Tribunal looked beyond the domestic legal orders of States;
it also examined international conventions and arbitral awards. According to Lamm and
others (n 64) 707, 'these rules of transnational public policy are developed over time by
identifying international consensus on a particular issue', adding that such 'consensus', in
fact, 'derives from the convergence of national laws, international conventions, arbitral
case law and scholarly commentary'. General principles of international law emerge in
the same way.
184 Plama Consortium ( n 104) para 143.
18 5 Inceysa ( n 100) paras 245-52, especially para 252.
186 World Duty Free (n 17) paras 139,161, 192(1).
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
520 DUMBERRY
have explicitly stated that providing investment protection under a treaty to
an investor who has committed violation of the domestic law would be against
international public policy.187 In this context, Le Moullec (who generally
rejects the idea that investment tribunals have so far endorsed the doctrine)
stated that 'regardless of its status as a general principle of law, the clean hands
doctrine could come through the "back door" of international public policy'.188
She rightly noted that this is exactly what happened in the recent Churchill
Mining case.189
5 How Should Tribunals Apply the Clean Hands Doctrine?
As mentioned above, based on the presence of 'in accordance with the law'
clauses, tribunals have held that the substantive protections offered under BITs
cannot apply to investments made contrary to the host country's domestic
law. The prevalent view amongst scholars190 is that this is a matter of jurisdiction
rather than admissibility.191 Several tribunals have come to the same
conclusion.192 Tribunals have also concluded that the obligation for investors to
187 See however Le Moullec (n 6) 32.
188 ibid 33.
189 Churchill Mining (n 15). In this case, while the Tribunal did not formally use the clean
hands doctrine to dismiss the claim as a result of fraud and forgery committed by the
Claimant, it nevertheless applied the concept of international public policy to come to
the exact same result: 'The Tribunal agrees with the Respondent that claims arising from
rights based on fraud or forgery which a claimant deliberately or unreasonably ignored
are inadmissible as a matter of international public policy' (paras 508 and 528).
190 Moloo, (n 49) 7; Moloo and Khachaturian (n 64) 1482, 1488; Llamzon and Sinclair (n 3)
498. Against Zachary Douglas, 'The Plea of Illegality in Investment Treaty Arbitration'
(2014) 29(1) IC SID Rev 155. See also the analysis of Stephan WSchill, 'Illegal Investments
in Investment Treaty Arbitration' (2012) 11(2) LPICT 288 et seq; Andrew Newcombe,
'Investor Misconduct: Jurisdiction, Admissibility, or Merits?' in Chester Brown and Kate
Miles (eds), Evolution in Investment Treaty La:w and Arbitration (CUP 2011) 198.
191 The distinction between admissibility and jurisdiction is well explained by Keith
Highet in his dissenting opinion in Waste Management, Inc v Mexico (no 2), ICSID
No ARB(AF)/00/3, Award (30 April 2004) paras 57-58: 'International decisions are
replete with fine distinctions between jurisdiction and admissibility. For the purpose of
the present proceedings it will suffice to observe that lack of jurisdiction refers to the
jurisdiction of the Tribunal and inadmissibility refers to the admissibility of the case ...
Jurisdiction is the power of the tribunal to hear the case; admissibility is whether the case
itself is defective - whether it is appropriate for the tribunal to hear it. If there is no title
of jurisdiction, then the tribunal cannot act.'
192 One example is Inceysa ( n 100) para 335. See also Fraport ( n 102) para 401; Alasdair Ross
Anderson et al v Costa Rica, IC SID Case No ARB(AF)/07 /3, Award (19 May 2010) paras 57,
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 521
make their investments in accordance with the host State's law 'is implicit even
when not expressly stated in the relevant BIT'.193 Such an implicit obligation
should not, however, be considered as a jurisdictional prerequisite, but as a
matter of admissibility.194 This is the viewpoint which has been supported by
several tribunals, including the Plama and the Yukos tribunals. In my view, the
'legality' requirement is an application of the clean hands doctrine. The 'legality'
requirement has, however, a limited temporal scope of application.195 Thus,
many tribunals (including Yukos) 196 have held that the legality requirement
only obliges an investor to make its investment 'in accordance with the law' of
the host State.197 In fact, many BITs explicitly limit the legality requirement
to compliance with the law at the establishment phase of the investment.198
In this context, one writer asked the following question: 'does unclean hands
merit a separate existence from the legality doctrine because of certain policy
objectives that the latter does not cover?'199 He noted that the clean hands
doctrine's 'moral underpinnings bear far more potential for fairness and
nuance than the legality doctrine and have special resonance to investment
arbitration'. 200 In his view, the legality requirement 'is a blunt substitute for
59; Metal-Tech Ltd v Uzbekistan, ICSID Case No ARB/10/3, Award (4 October 2013)
para 389.
193 One example is Phoenix Action ( n 102) para 101 ( the BIT in this case included an 'in accordance
with the law' provision). See also Yaung Chi Oo Trading Trading Pte Ltd v Myanmar,
ASEAN Case No ARB/01/01, Award (31 March 2003) para 58; SAUR International v
Argentina, IC SID Case No ARB/04/ 4, Decision sur la competence et sur la responsabilite
( 6 June 2012) para 306.
194 Llamzon and Sinclair (n 3) 499; Le Moullec (n 6) 35-36.
195 Llamzon and Sinclair (n 3) 478,500; Fontanelli (n 39) 133.
196 Hulley (n 36) paras 1354-55.
197 See, for instance, Hamester (n 102) para 127: 'a distinction has to be drawn between
(1) legality as at [sic] the initiation of the investment ("made") and (2) legality during the
performance of the investment. Article 10 [ie the clause providing that the BIT applied to
investment made in accordance with host State law prior to the Treaty's entry into force]
legislates for the scope of application of the BIT, but conditions this only by reference to
legality at the initiation of the investment ... Thus, on the wording of this BIT, the legality
of the creation of the investment is a jurisdictional issue; the legality of the investor's
conduct during the life of the investment is a merits issue' ( emphasis in the original).
198 Mo loo ( n 49) 15. On this question see Schill ( n 190) 297.
199 Llamzon ( n 2) 321.
200 ibid 323-24. See also: 'Keen to show that it does not coddle the 'bad' investor, the clean
hands doctrine has special resonance in international investment arbitration, where the
need to maintain the integrity of a largely disaggregated and supra-national arbitral system
is acutely felt'.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
522 DUMBERRY
unclean hands' given that the former 'is only capable of binary outcomes'
(i.e. accept or reject a claim on grounds of jurisdiction/admissibility).201
The central question is whether or not the clean hands doctrine should find
application whenever an investor has breached the host State's law during the
post-establishment phase of its investment. As mentioned above, theAl-Warraq
v Indonesia tribunal answered that question in the affirmative. 202 However,
the Yukos award clearly closed the door on such a possibility. It explained that
there was 'no compelling reason to deny altogether the right to invoke the ECT
to any investor who has breached the law of the host State in the course of its
investment'.203 For the Tribunal, once the investor has made the investment,
the host State is in a position to police and sanction appropriately any investor's
wrongdoing by applying and enforcing domestic law. It is true that, in
general (with one possible exception),204 the fact that an investor has committed
a wrong in violation of the host State's laws during the post-establishment
phase of its investment should not result in a tribunal concluding that the
claim is inadmissible.205 Such allegations of misconduct should be dealt with
by a tribunal at the merits stage of the proceedings and may be relevant when
assessing issues in relation to liability, damages, and costs.206 It is noteworthy
that while the Yukos tribunal rejected the application of the clean hands doctrine
(because it considered it not to be a G PL), it added that it 'could have an
impact on the Tribunal's assessment of liability and damages'. 207 The Tribunal
ultimately held that the Claimants had 'contributed to the extent of 25 percent
to the prejudice they suffered at the hands of the Russian Federation'. 208
The Tribunal therefore did take into account the post establishment conduct
of the investor when assessing the quantum of damages. It did so under the
legal principle of contributory fault or negligence. On this note, some writers
have argued that in doing so, the Yukos tribunal actually took into account
201 ibid 324.
202 Al-Warraq (n 129) paras 158-62.
203 Hulley (n 36) para 1355.
204 Dumberry, Guide to General Principles (n 8) 215, there is one specific situation where
the clean hands doctrine should apply as a matter of admissibility regarding violations
committed during the post-establishment phase of an investment. This is whenever an
investor has committed serious violations of the host State's laws, such as human rights
violations, corruption, fraud, etc. On this question see De Alba Uribe (n 6) 326 et seq, 334.
205 Moloo and Khachaturian (n 64) 1350-51; De Alba Uribe (n 6) 327.
206 Some arbitral awards have reduced the amount of compensation based on the investor's
behavior:MTD EquitySdnBhd&MTD Chile SA v Chile, ICSID Case No ARB/01/7,Award
( 25 May 2004) para 243.
207 Hulley (n 36) para 1374.
208 ibid para 1827 and s X.E.4.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 523
the doctrine of clean hands.209 From that perspective, for two authors the
Yukos award may have the effect of affirming the doctrine as a G PL, rather than
denying it. 210
Another relevant case is the recent Copper Mesa award.211 The Tribunal
considered that the allegations raised by the Respondent about human rights
violations committed by the Claimant212 in the post-establishment phase of
its investment213 was a matter of admissibility.214 The Tribunal asked the following
question: 'After the making of an investment, what is the scope of the
application of the doctrine of unclean hands?'215 The Tribunal therefore did
not deny the relevance of the clean hands doctrine to address allegations of
post-establishment misconduct in terms of admissibility.216 The Tribunal
decided not to apply the clean hands doctrine for another specific reason:
'all, or almost all' of the alleged acts of conduct by the Claimant 'took place
in Ecuador, openly and in view of the Respondent's governmental authorities'
and that 'as regards international law, international public policy and
human rights, not a single complaint was made by the Respondent against
the Claimant at the time'. 217 In this sense, it can be argued that the Tribunal
dismissed the allegations regarding the Claimant's misconduct based on the
application of the different principles of estoppel and acquiescence. 218 In
fact, the Tribunal decided that it would take into account the Claimant's argument
'not in the form of the doctrine of unclean hands as such, but rather
under analogous doctrines of causation and contributory fault applying to the
209 Bjorklund and Vanhonnaeker (n 26) 382-83, 384 ('As for the investor's conduct during
the time it held and operated its investment, the clean hands idea manifested itself
in the concept of contributory negligence'). See detailed analysis in Ancelin (n 6)
851 et seq.
210 Bjorklund and Vanhonnaeker (n 26) 384-85. See, however, Ancelin (n 6) 851 et seq.
211 Copper Mesa Mining Corp v Ecuador, Award, PCA Case No 2012-2 (14 March 2016).
212 ibid paras 6.99, 6.100.
213 ibid para 5.63.
214 ibid para 5.62: 'Tribunal considers that the Respondent's case on unclean hands is not
a jurisdictional objection, but rather an objection to the admissibility of the Claimant's
claims based upon its alleged post-acquisition misconduct'.
215 ibid para 2.10.
216 Fontanelli (n 39) 135; Le Moullec (n 6) 28.
217 Copper Mesa (n 211) para 5.63. The Tribunal added (ibid paras 5.63, 5.64) that 'such a complaint
surfaced for the first time after the commencement of this arbitration' and that it
was 'far too late for the Respondent to raise such objections' in this arbitration.
218 See also ibid para 2. 7, where the Tribunal asked the following question: 'Is the Respondent
estopped or otherwise precluded from alleging any breach of Ecuadorian law or any
breaches of the doctrines of international public policy and unclean hands?' On this
point, see the comments by De Alba Uribe (n 6) 324.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
524 DUMBERRY
merits of the Claimant's claims arising from events subsequent to the acquisition
of its investment'.219 The Tribunal explained that '[ t ]hat result, based on
the Respondent's case on the merits, strikes the tribunal as more legally appropriate
to this case than an outright dismissal of the Claimant's claims ... on the
ground of inadmissibility'.220 The Tribunal assessed the Claimant's contribution
to its own injury at 30%.221
The Cooper Mesa case (and to some extent the Yukos case as well) support the
proposition that the question of an investor's unclean hands may be taken into
account at the merits stage of the dispute in the context of determining the
quantum of damage. Writers have recently supported this position. 222 Indeed,
this is the position which ILC Special Rapporteur Dugard took some years
ago in the specific (and different) context of diplomatic protection.223 In my
view, what really matters is that an investor's 'unclean' hands be taken into
account one way or the other by a tribunal. Whether this is done through the
application of the principle of contributory fault or negligence by reducing
the amount of compensation awarded to the claimant is not significant in
itself. As noted by the Mesa Cooper tribunal, these are after all 'analogous
doctrines'. 224 While it is true that the clean hands doctrine is 'traditionally
understood as one of admissibility', there is no inherent reason why its role
should only be limited to that. 225 Thus, it has been highlighted that the doctrine
of clean hands, based on equity, 'is far more nuanced - its policy goals
are not only to protect court or arbitral integrity but also to bring principles of
proportionality and reciprocity to bear in an area where, too often, all parties
have engaged in illicit conduct'. 226 It may sometimes be more appropriate to
219 ibid para 5.65. The Tribunal also noted that: 'this is not a case where an essential part of
the Claimant's claim is necessarily founded upon its own illegal acts or omissions, regardless
of any defence by the Respondent. In other words, this case is materially different
from cases such as World Dut:y Free v Kenya or (more recently) Al-Warraq v Indonesia
where the claim, as a cause of action, was directly based from the beginning upon the
claimant's own illegal act' (para 5.66).
220 ibid para 5.65.
221 ibid para 6.102.
222 Kotuby and Sobota (n 30) 134; Ancelin (n 6) 851 et seq, 855.
223 See Dugard (n 44) para 16: 'On occasion, an argument premised on the clean hands doctrine
has been raised as a preliminary point in direct inter-State cases before I CJ. It is not
clear, however, whether the intention has been to raise the matter as a plea to admissibility.
If the doctrine is applicable to claims relating to diplomatic protection, it would seem
that the doctrine would more appropriately be raised at the merits stage, as it relates to
attenuation or exoneration of responsibility rather than to admissibility.'
224 Copper Mesa (n 211) para 5.65.
225 Kotuby and Sobota ( n 30) 134.
226 Llamzon (n 2) 324.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 525
take into account the conduct of the investor in the context of a broader proportionality
analysis rather than to simply flatly reject its claims on grounds of
inadmissibility. This could be the case whenever violations have been committed
by both the investors and the host State. The rejection of an investor's claim
on the basis of its 'unclean' hands could result in not addressing at all BIT
breaches committed by the host State (for instance, acts of expropriation).227
Violations committed by the host State should not go unpunished.228 In such
circumstances, it would seem more appropriate to take into account all violations
committed by all sides as part of a global proportionality analysis. In fact,
more recent cases have shown that even an explicit legality requirement contained
in a BIT can be applied in a flexible manner taking into account matters
of proportionality.229
6 Conclusion
In my view, several concepts ( including estoppel, res judicata, abuse of rights,
unjust enrichment) should be considered as general principles of international
law based on the available material ( treaties, State practice, awards and
decisions, works of scholars, etc.) showing that they have been frequently
and consistently recognised and applied by States and tribunals. 230 The important
point is that these principles can be recognized as general principles
of international law even if they may not be systematically found in States'
domestic laws. Thus, tribunals should not be been somewhat 'intimidated' by
what scholars often describe as the complicated and burdensome requirement
to conduct a comprehensive comparative analysis of the most representative
227 ibid.
228 ibid.
229 Vladislav Kim and others v Uzbekistan, I CSID Case No ARB /13/ 6, Decision on Jurisdiction
(8 March 2017) paras 20-21. The case involved a dispute under the Kazakhstan-Uzbekistan
BIT, which contains an explicit legality requirement clause. The Tribunal stated that
the interpretation of this clause must be 'guided by the principle of proportionality':
'The denial of the protections of the BIT is a harsh consequence that is a proportional
response only when its application is triggered by noncompliance with a law that results
in a compromise of a correspondingly significant interest of the Host State. The Tribunal,
by majority, finds that Respondent either has failed to establish that Claimants were not
in compliance with various laws or that such acts of noncompliance do not result in a
compromise of an interest that justifies, as a proportionate response, the harshness of
denying application of the BIT.'
230 Dumberry, Guide to Genera/Principles (n 8).
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
526 DUMBERRY
domestic legal systems of the world. 231 They can use a different and perfectly
legitimate and reasonable path to arrive at the conclusion that a given concept
is a general principle. The existence of such a flexible methodology is
clearly one reason why the concept of 'general principle of international law' is
particularly relevant and useful in the specific context of international investment
law.
In fact, in my opinion, tribunals should use G PL in a manner that goes
beyond the traditional functions that are typically identified in doctrine. Thus,
G PL should not just be used as 'gap-filling' whenever treaty provisions or rules
of customary international law do not provide a solution to a particular issue.
They should also not be simply used to provide guidance for the interpretation
and application of vague or uncertain terms contained in treaties. Schill
has long argued that G PL 'should play an increasingly important role in international
investment law'.232 He believes in the potential of G PL 'to reshape
investor - State arbitration and international investment law'. 233 Kotuby and
Sobota also speak of the 'corrective' function of GPL.234 In their opinion,
G PL could indeed be used by tribunals to improve the outcome of decisionmaking
by achieving a better balance between investors' rights and States'
public interests that is acceptable to all different stakeholders in the process
(including civil society). General principles of international law are perfectly
suited for that task. One reason is because they (just like the concept
of transnational public policy) impose obligations on all parties, both investors
and States. 235 It should be recalled that investment treaties are, at least
in their present form, asymmetrical. Thus, foreign investors ( overwhelmingly
being corporations, but sometimes individuals) are being accorded
substantive rights under these treaties without being subject to any specific
obligations. This is, at least, the situation prevailing at the moment, with very
rare exceptions. 236 General principles can be used by tribunals to impose
231 See analysis in Dumberry, Guide to General Principles (n 8). See also on this question:
Anthea Roberts and others, 'Comparative International Law: Framing the Field' (2015)
109(3) AJIL 467-74; Vadi (n 150 ); Michael D Nolan and Frederic Gilles Sourgens, 'Issues of
Proof of General Principles of Law in International Arbitration' ( 2009) 3( 4-5) World Arb
& Med Rev 506.
232 Schill (n 148) 138.
233 ibid 136.
234 Kotuby and Sobota (n 30) 31.
235 Bjorklund and Vanhonnaeker (n 26) 373-74.
236 One such exception is the Nigeria-Morocco BIT signed in 2016, which explicitly
imposes some human rights obligations upon investors. See art 18(2): 'Investors and
investments shall uphold human rights in the host state'; art 18(3): requiring investors
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
THE CLEAN HANDS DOCTRINE 527
some obligations on investors. In my view, this is a perfect example of the
'transformative potential' of G PL and how they can be used by tribunals to
adapt international investment law 'without modifying substance or procedure
of the existing international law framework'. 237 Tribunals should use general
principles of international law in the future to better balance the rights and
obligations of varying actors involved in international investment law.
The clean hands doctrine (whether used as a matter of admissibility or as
part of a proportionality analysis at the merits) is a very useful tool to recalibrate
international investment law in reaction to the current backlash against
the legitimacy of the system perceived by some as inherently favorable to the
interests of foreign corporations.
to 'act in accordance with core labour standards as required by the ILO Declaration on
Fundamental Principles and Rights of Work, 1998'.
237 Schill (n 148) 181.
JOURNAL OF WORLD INVESTMENT & TRADE 21 (2020) 489-527
Annex 288
Annex 288
ANNEX289
BROWNLIE'S PRINCIPLES OF
PUBLIC
INTERNATIONAL
LAW
Ninth Edition
BY
JAMES CRAWFORD, SC, FBA
OXFORD
V N!VERSITY PRESS
Annex 289
OXFORD
UNIVERSITY PRESS
Great Clarendon S1reet, Oxford, OX2 6DP,
United Kingdom
Oxford University Press is • department of the University of Oxford.
It fu:rth~rs the Univcrsiti~ objectiVe of excellence in rcscarch1 ,cholar.ship,
and education by puhllshjng worldwide. Oxford is a regist~rcd tr.id~ mark or
Oxford University Press in the UK and in certain other countries
(9 Estate of Sir Ian Brownlie and James Crawford 2019
The moral rights of the author have been asserted
Sixth edition 2003
Seventh edition 2008
Eighth edition 2012
fmpression: I
All rights reserved. No part of this publication may be reproduced, stored in
a retrieval sy$lCm, or transmitted, in any form or by any means, without th~
prior permission in writing <lf Oxford Univcrsiiy Press, or as expressly permitted
by law, by licence or under terms agreed with the appropri1te r<prographics
rights organization. Enquiries conc~rning reproduction outside: the scope of the
above should be sen! to the Righ:s Department, Oxford University Press, at the
~ddress a:>ovc
You must not circulate this work in any mher form
and you must impose this sa mt:: condition on any a..:-qdrcr
Public: sector information reproduced under Open Govcrnmen: Licence v.3.0
(http://www.nationalarchives.gov. uk/ do,c/ open -govern men l'~liccncdopcn -governmtn t-lk:~n.:e .htm}
Published in the United States of Arni?rica by Oxford Univer.s ity Prt!ss
198 Madison Avenue, New York, NY 10016, United States of America
Brilish Library Cataloguing in Publication Data
Data available
Librery of Conwess Cuntrol Number: 2018964838
ISBN 978 - 0- 19- 873744--5
Printed in Great Britain by
Bell & Bain Ltd .. Glasgow
Links to third party websites are provided by Oxford in good faith and
for information only. Oxford disclaims any responsibility for the materials
,ontained in any third party website referenced in this work.
I ·,
:1
." i
. I
. I
I
' I
OUTLINE CONTENTS
PART I PRELIMINARY TOPICS
INTRODUCTION 3
2 THE SOURCES OF INTERNATIONAL LAW 18
3 THE RELATIONS OF INTERNATIONAL AND NATIONAL LAW 45
PART II PERSONALITY AND RECOGNITION
4 SUBJECTS OF INTERNATIONAL LAW 105
5 CREATION AND INCrDENCE OF STATEHOOD 11 i
6 RECOGNITION OF STATES AND GOVERNMENTS 134
7 INTERNATIONAL ORGANIZATIONS 156
PART III TERRITORIAL SOVEREIGNTY
8 FORMS OF GOVERNMENTAL AUTHORITY OVER TERRITORY 191
9 ACQUISITION AND TRANSFER OF TERRITORIAL SOVEREIGNTY 203
10 STATUS OF TERRITORY: FURTHER PROBLEMS 231
PART IV LAW OF THE SEA
II THE TERRITORIAL SEA AND OTHER MARITIME ZONES 241
12 MARITIME DELIMITATION AND ASSOCIATED QUESTIONS 267
13 MARITIME TRANSIT AND THE REGIME OF THE HIGH SEAS 280
PART V THE ENVIRONMENT AND NATURAL RESOURCES
14 COMMON SPACES AND COOPERATION IN THE CSE OF
NATURA!. RESOURCES 317
15 LEGAL ASPECTS OF THE PROTECTION OF THE ENVIRONMENT 336
PART VI INTERNATIONAL TRANSACTIONS
16 THE LAW OF TREATIES 353
Annex289
674 DISPUTES
Lands, the International Court rejected a preliminary objection based on delay in submission
of the claim. The Court nevertheless recognized that delay might, in particular circumstances,
render a claim inadmissible.511 Conceivably, a claim by a state could be denied
because of the difficulty the respondent has in establishing the facts but, where there is no
irreparable disadvantage to the respondent, tribunals will be reluctant to allow mere lapse
of time to bar claims, given the conditions under which interstate relations are conducted,
Thus, in the Cayuga Indians Claim the respondent was held not to be prejudiced by significant
delay on the part of the UK, which claimed on behalf of a protected minority, 59
Indeed, Article 45 of the ILC Articles on State Responsibility, which refers only to
waiver or acquiescence in the loss of a claim, may be read as denying the preclusive
effect of delay as such, According to the commentary, Article 45:
emphasizes conduct of the State, which could include, where applicable, unreasonable delay,
as the determining criterion for the lapse of the claim. Mere lapse of time without
a claim being resolved is not, as such, enough to amount to acquiescence, in particular
where the injw-ed State does everything it can reasonably do to maintain its clairn.60
A number of cases which are cited as instances of prescription are actually based on
lapse of time as evidence of acquiescence or waiver.61
(E) WAIVER
Abandonment of claims may occur by unilateral acts of waiver or acquiescence implied
from conduct, or by agreement. Given that in cases of diplomatic protection the
state is asserting its own rights, it may compromise or release the claim, leaving the
individual or corporation concerned without an international remedy.62 Conversdy,
the waiver of a claim by a national does not bind the state. Hence the Calvo clause, by
which aliens are called on to waive d iplomatic protection at the time of entry, is considered
legally ineffective.63 The application of these principles to the field of investment
arbitration is an open question.M
,. [CJ Reports 1992 p 240, 247 - 50. Cet1ain aspects of th< ques tion were reserved to the Mer:t.s phase, ibid,
255. Als-0: laGmnd (G trma,ry v US), IC) Reports 2001 p 466. 486-7,
s• (1926) 6 RIAA 17}; ( 1926) 20 A/IL 574.
60 Wltenberg (1932) 41 Hague Recu.,il I. 31-3; Garcia-Amador, !LC Ybk I 9S8/11. 57: Suy, Les Acte.s ju•
ridlq= unifatfraux en droll intmu,llonal public ( 1962) 154-7; Rousseau, 5 Droit International Public (1974)
182--ii, Alro: Wa/Cemborg ( ! 956) 24 !LR 654; H= v Humphny, 246 F2d 682 (DC Cir, 1957) .
61 E,g. Surropoulos vBulgarian State (1927) 4 ILR 245. Cf Tam., in Crawford. Pellet, & Olleson (2010) 1035.
"' Cf Er~o Horimoto v The Srate (1954) 32 !LR 161 : Public Truste, v Chartered Bank of India. Au.s :ralw an,/
China (19~) 13 ILR 687. 698-9; Austrian Citiur., C,:,mp,nsation (1960) 32 !LR 153; Tosen Akiyama v Th,
State (1963) 32 ILR 233: R,st/twion of Ho=hold Ejfect.s B.Conging w Jews Dtported from Hungary (196$) «
!LR 30!; Rudo/f He,s (1980) 90 !LR 386; K,:wnda v President of the RepublicofSoutl1 Africa (2004) 136 ILR452;
R (Al Rawi) v Foreign Stermry (2006) 13<i !LR 624.
63 On the C,lvoclause: Manning-Cabrol (1995) 26 LPIB 1169; Diliymple (19%) 29 Ccrne/C ILJ 161; Paulsson,
v.n;.,f of Ju.s t/ct in !ntematioruJl Law (2005) 20-4: Julll.3rd, 'Calvo Doctrine/Calvo Clause' (2007) MP£P/L,
Am«aslnghe, Dlplamatic Protection (2008) ch 12.
... Cf uiewen Group, UnU,d States of America (2003) 7 ICSID Repom 421; (2004) 128 !LR 334: Eumo BV
v Republic of Poland (2005) 12 [CSlD Reports 33 I: and sec chapter 28.
THE CLAIMS PROCESS
(F) OTHER GROUNDS OF INADMISSIBILITY
Other grounds exist which deserve brief notice.
675
( l) Conceivably a failure to comply with the rules of court of the tribunal in making
an application may provide a ground for an objection as to admissibility,
although tribunals are reluctant to give much significance to matters of forrn.6'
(2) Analogously to the local remedies rule, it may happen that a respondent can
establish that adequate remedies have been or ought to be obtained in another
tribunal, whether national or international, Whether there is any international
equivalent to the national law doctrines of /is alibi pendens and forum non
conveniens is doubtful.66
(3) There may be a residue of instances in which questions of inadmissibility and
'substantive' issues are difficult to distinguish. This is the case with the so-called
'clean hands' doctrine, according to which a claimant's involvement in activity
unlawful under either municipal or international law may bar the claim. It has
often been invoked, rarely applied.67
4. DIPLOMATIC PROTECTION
The heads of inadmissibility dealt with above are applicable to international claims,
whatever their character. By contrast, the nationality of claims and exhaustion of local
remedies rules were specifically developed in the context of diplomatic protection. In
2006, they were restated by the International Law Commission (lLC) in a text some
aspects of which reflect progressive development.61\
., Witonberg (1 932) 41 Hague R«ueii ! , 90- 4; Northern Cumeroo11J. !CJ Reports 1%3 p IS , 27-8; 42-3
(ludg~ Wellington Koo); 173 - 4 (Judge B'1.Stamante). Also on procedural inadmissibility: ibid, 172-3 (Judge
Bustamante),
'° Shany, The Comp,Ung Juri sdictions of /11ternational Cou rlJ and Tribunal, (2003) es? chs 4-6; Shany, Regulating
Jurisdiction,,/ Relatio11S between National and lnternatlona! Ccur/$ (2007): Md.,a,hlan (2009) 336 Hague
Recudl 199, 441-500; Brand, 'Forum Non Ccnv,niens' (2013) MPEPIL; Salle., (2014) 220-5; Lock, The fun,.
pean Court of Ju.s t ice and Intema1iorwl Cou rts (20 I 5) 63-70. Also: Hober (2014) 366 H,guc Recueil 99, 324-3 [,
342-76, For a review of national law rules for declining or restraining the exercise of 1urlsdictlon: Fentiman,
foternational Commercial Litigation (2nd edn, 2015) chs 10-16.
'" The dean hands doctrine is to the effec t that an ~ctlon may not be maintained by S<Jro<:one who has misbehaved
in relation to the subject matter of the claim: Cheng (I 953, n,pr 2006) 155-8. The !CJ ha., neverappHed the
doctr.ne. even in cases where it might have done so: see Oil Platfomu, [CJ Reports 2003 p 161: Canstrw:lion of a
Wall m t/u Oaupid Palestinian T,rriJory, lCJ Reports 2004 p 136, 149-50, 163. CT NicaJ>JgU<1. IC/ Reports I 986
p 14, 392 (fudge Schwebd, diss): Mrat Wammt of 11 Aprif 2000, [CJ Reports 2002 p 3, 160-1 (Judge ad hoc van
den Wyngaen, diss). The only lnvostment tribunal aw.ud to apply the deon h.lnds doctrine did so on the basi!
of applicable national law: foceysa Vailisoktan,, v Rtpub/ic of El Salvcu!or, 2 A118U5t 2006, paras 231-42. Generic
daims of wrongdoing have not succeeded: e. g. Gustaf FW Hamt1ter GmbH ~ Cc KG v Republic oJGhana, 18 June
20 I 0, p:lr.lS !27- 8. For !LC con.!lderaUon, see C..-.wford. !LC Ybk I 999/11( l), 82- 3; Du~, !LC Ybk 2005/11( 1),
2 (concluding that 'the <Vld<nce in fa-,ow-ofthe clean han~ doctrine is incondlUive'). Also: Salmon (1964) IO
AFDI 225: Schwcbd. 'Clean Hands, Principle' (2013) MPEPIL; Llamzoo (2015) 30 ICSID Rev-FILI 3 l 5.
., ILC Ora~ Artides on Diplomatic Proteclion, !LC Ybk 2006/11(2), 24-5S.
Annex 289
ANNEX290
251
Date of decision:
May 24, 1999
INTERNATIONAL CENTRE FOR THE SETTLEMENT
OF INVESTMENT DISPUTES
Washington, D.C.
CASE No. ARB/97/4
CESKOSLOVENSKA OBCHODNI BANKA, A.S.
(Claimant)
versus
THE SLOVAK REPUBLIC
(Respondent)
Decision of the Tribunal on Objections to Jurisdiction
Members of the Tribunal
Professor Thomas Buergenthal, President
Professor Piero Bernardini
Professor Andreas Bucher
Secretary of the Tribunal
Ms. Margrete Stevens
Representing the Claimant Representing Respondent
Mr. Charles Brower Mr. Henry Weisburg
Ms. Abby Cohen Smutny Shearman & Sterling
White & Case New York, New York
Washington, D.C.
Professor Emmanuel Gaillard
Shearman & Sterling
Paris, France
and, as co-counsel
Mr. Igor Palka
Cernejova & Hrbek
Bratislava, Slovak Republic
Annex 290
CASES 257
14. Although the January 5–7, 1999 hearing was originally intended to
address only the issue of jurisdiction, the Tribunal granted Claimant’s
motion to permit the parties also briefly to address Claimant’s request for
provisional measures.3 By agreement of the parties, no witnesses were
heard during this entire hearing. Instead, both parties submitted and
relied on witness affidavits and expert opinions.
II. IS CLAIMANT A NATIONAL OF A CONTRACTING STATE?
15. The first ground on which Respondent challenges the jurisdiction
of the Centre and the competence of the Tribunal is that Claimant does
not meet that requirement of Article 25(1), which provides that the dispute
must be between a Contracting State and a national of another Contracting
State. According to Respondent, the instant dispute is between
two Contracting States because: a) Claimant is a state agency of the Czech
Republic rather than an independent commercial entity; and b) the real
party in interest to this dispute is the Czech Republic.
A. National of Another Contracting State
16. The language of Article 25(1) of the Convention makes clear that
the Centre does not have jurisdiction over disputes between two or more
Contracting States. Instead, the dispute settlement mechanism set up by
the Convention is designed to deal with disputes between Contracting
States and nationals of other Contracting States. Although the concept of
“national”, as that term is used in Article 25(1), is in Article 25(2)
declared to include both natural and juridical persons, neither term is
defined as such in the Convention. The legislative history of the Convention
does provide some answers, however, that bear on the issues presented
in this case. It indicates that the term “juridical persons” as employed in
Article 25 and, hence, the concept of “national,” was not intended to be
limited to privately-owned companies, but to embrace also wholly or partially
government-owned companies. This interpretation has found general
acceptance.
17. It follows that the question whether a company qualifies as a
“national of another Contracting State” within the meaning of Article
3 For the outcome of the Tribunal’s deliberations relating to this request for provisional
measures, see para. 9, supra.
Annex 290
258 ICSID REVIEW—FOREIGN INVESTMENT LAW JOURNAL
25(1) does not depend upon whether or not the company is partially or
wholly owned by the government. Instead, the accepted test for making
this determination has been formulated as follows: “... for purposes of the
Convention a mixed economy company or government-owned corporation
should not be disqualified as a ‘national of another Contracting State’
unless it is acting as an agent for the government or is discharging an
essentially governmental function.”4 Both parties to this dispute accept
this test as determinative.
18. The soundness of Respondent’s contention that Claimant is not “a
national of another Contracting State” must therefore be judged by reference
to this test. Standing alone, Respondent’s submission that more than
65% of CSOB’s shares are owned in one form or another by the Czech
Republic and that some 24% are owned by the Slovak Republic demonstrate
that CSOB is a public sector rather than a private sector entity, does
not address the here crucial issue. Neither does the submission that the
Czech Republic’s 65% stock ownership gives it absolute control over
CSOB. For, as has been shown above, such ownership or control alone will
not disqualify a company under the here relevant test from filing a claim
with the Centre as “a national of a another Contracting State.”
19. Respondent does not, however, rest this aspect of its case solely on
the above arguments. It contends further that CSOB is a government
agency which has been discharging essentially governmental functions
throughout its existence and, more specifically, with regard to all events
pertinent to this dispute. In this regard, Respondent seeks to show that
since its inception CSOB has served as agent or representative of the State
to the international banking and trading community, that its subsequent
reorganization has not changed its status, and that, moreover, the instant
dispute arises out of the functions CSOB performed in that capacity.
20. It cannot be denied that for much of its existence, CSOB acted on
behalf of the State in facilitating or executing the international banking
transactions and foreign commercial operations the State wished to support
and that the State’s control of CSOB required it to do the State’s bidding
in that regard. But in determining whether CSOB, in discharging
these functions, exercised governmental functions, the focus must be on
4 A. Broches, The Convention on the Settlement of Investment Disputes between States and
Nationals of Other States, 135 Hague Rec. d. Cours 331, at 354–5 (1972).
Annex 290
CASES 259
the nature of these activities and not their purpose. While it cannot be
doubted that in performing the above-mentioned activities, CSOB was
promoting the governmental policies or purposes of the State, the activities
themselves were essentially commercial rather than governmental in
nature.
21. It also appears that beginning in the early 1990’s and following the
1989 “Velvet Revolution,” as the State began to transform its command
economy into a market economy, CSOB took various steps to gradually
throw off its exclusive economic dependence on the State and to adopt
measures to enable it to function in this new economic environment as an
independent commercial bank. By 1993, CSOB seemed to have basically
achieved that purpose, although its competitive position continued to be
adversely affected by the existence on its books of non-performing receivables.
These receivables, which became the subject of the Consolidation
Agreement and play a role in the instant dispute, grew out of CSOB’s earlier
lending activities during the State’s non-market economy period.
Although these activities were driven by State policies, as was true generally
of economic activities during the country’s command economy, the
banking transactions themselves that implemented these policies did not
thereby lose their commercial nature. They cannot therefore be characterized
as governmental in nature. Moreover, even if one were to conclude
that the non-performing assets derived from activities conducted by
CSOB as an agent of the State, the measures taken by CSOB to remove
them from its books in order to improve its balance and consolidate its
financial position in accordance with the provisions of the Consolidation
Agreement, must be deemed to be commercial in character.
22. In support of its contention that the dispute is between two Contracting
States, Respondent also submits that the ultimate goal of the
Consolidation Agreement was the privatization of CSOB. Characterizing
privatization as a State function, Respondent argues that in concluding the
Consolidation Agreement, CSOB was performing State functions and
could therefore not claim to be a private investor. In this connection,
Respondent submits that
The principal ingredient in the Consolidation Agreement
preparing CSOB for privatization was the proposed removal
of the poor-quality assets resulting from CSOB’s role in
financing the Czechoslovak State’s foreign trade .... The
Annex 290
260 ICSID REVIEW—FOREIGN INVESTMENT LAW JOURNAL
whole structure of Consolidated Agreement, Loan Agreement
and Collection Companies, which is central to this arbitration,
was thus conceived and implemented with the express
purpose of facilitating CSOB’s privatization. (Respondent’s
Reply Memorial, at 34.)
23. It cannot be denied that a State’s decision to transform itself from a
command economy to a free market economy involves the exercise of governmental
functions. The same is no doubt true of legislative and administrative
measures adopted by the State that are designed to enable or
facilitate the privatization of State-owned enterprises. It does not follow,
however, that a State-owned enterprise is performing State functions when
it takes advantage of these State policies and proceeds to restructure itself,
with or without governmental cooperation, in order to be in a position to
compete in a free market economy. Nor does it follow that the measures
taken by such an enterprise to achieve this objective involve the performance
of State or governmental functions. In both instances, the test as to
whether or not the acts are governmental or private turn on their nature.
24. There appears to be some disagreement between the parties to this
case as to whether the conclusion of the Consolidation Agreement and the
Loan Agreement was driven by or was part of the privatization process
instituted by the Government or whether it was the result largely of
CSOB’s unrelated business decision to strengthen its financial position.
The Tribunal does not believe that it matters which of these views is
accepted, for whether CSOB’s actions were or were not driven by the
privatization process set in motion or facilitated by the State is not determinative
of the issue to be decided. What is determinative is the nature of
these acts.
25. In the instant case, the steps taken by CSOB to solidify its financial
position in order to attract private capital for its restructured banking
enterprise do not differ in their nature from measures a private bank might
take to strengthen its financial position. It is no doubt true that CSOB’s
ability to negotiate the Consolidation Agreement and Loan Agreements on
favorable conditions can be attributed to the interest both the Czech and
Slovak Governments had in seeing CSOB survive in a free market environment
and continue to provide needed banking services. But that fact does
not transform the otherwise commercial or private transactions here at
issue into governmental acts.
Annex 290
CASES 261
26. Finally, in support of its submission that the instant dispute is
between two States Parties, Respondent contends that all the parties to the
Consolidation Agreement are State entities and that they include, in addition
to CSOB and the Czech and Slovak Republics, the Czech National
Bank, the Czech National Property Fund and the National Bank of Slovakia.
Even assuming, without deciding, that these other entities had also
become parties to the Consolidation Agreement, this fact would not
weaken or overcome the Tribunal’s conclusions, set out in the preceding
paragraphs, about the commercial character of the Consolidation Agreement
or the functions CSOB performed.
27. The Tribunal concludes, accordingly, that Respondent has failed to
sustain its contention that the Centre lacks jurisdiction and the Tribunal
competence to hear this case on the ground that Claimant was acting as an
agent of the State or discharging essentially governmental activities as far
as this dispute is concerned. This is so whether or not this determination
is made by reference to the date of the conclusion of the Consolidation
Agreement (December 19, 1993) or the date when the Request for Arbitration
was registered by the Centre (April 25, 1997).
B. Real Party in Interest
28. Respondent next points to two assignments, dated April 24, 1998
and June 25, 1998, respectively, which CSOB concluded with the Czech
Ministry of Finance. These assignments, according to Respondent, have
transformed the Czech Republic—the assignee—into the real party in
interest to the instant arbitration by relieving CSOB of the economic risk
arising from the claims relating to the Slovak Collection Company receivables.
Respondent argues that the assignments require the Tribunal to dismiss
the case for lack of jurisdiction because Claimant no longer has the
requisite standing under Article 25(1) and because the Czech Republic is
disqualified under the same provision from stepping into CSOB’s shoes.
29. In view of the fact that the first assignment has been fully superseded
by the second, the Tribunal needs to focus here only on the latter. In
that instrument CSOB agrees to assign to the Czech Republic on a socalled
“effective date” all claims CSOB has against the Slovak Collection
Company relating to the receivables transferred to the latter under the
Loan Agreement as well as the claims CSOB has against the Slovak Republic
under the Consolidation Agreement. The “effective date” is three days
Annex 290
ANNEX291
UNDER THE ARBITRATION RULES OF THE UNITED NATIONS
COMMISSION ON INTERNATIONAL TRADE
For Claimants:
IN THE PROCEEDING BETWEEN
SERGEI PAUSHOK
CJSC GOLDEN EAST COMPANY
CJSC VOSTOKNEFTEGAZ COMPANY
Claimants
-ANDTHE
GOVERNMENT OF MONGOLIA
Respondent
AWARD ON JURISDICTION AND LIABILITY
APRIL 28, 2011
Members of the Tribunal
The Honorable Marc Lalonde, P.C., O.C., Q.C. (President)
Dr. Horacio A. Grigera Na6n (Arbitrator)
Professor Brigitte Stern (Arbitrator)
Secretary of the Tribunal
Me Lev Alexeev
For Respondent:
Mr. George M. von Mehren
Mr. Stephen P. Anway
Mr. Michael D. Nolan
Mr. Edward G. Baldwin
Mr. Rostislav Pekaf Mr. Frederic G. Sourgens
Mr. Stephen Fazio
Mr. Ivan Trifonov
Milbank Tweed Hadley & McCloy L.L.P.
Ms. Tainvankhuu Altangerel
Ms. Irina Golovanova
Mr. Sergey Treshchev et al.
Squire, Sanders & Dempsey L.L.P.
Ministry of Justice and Home Affairs,
Mongolia
Annex 291
-138-
MFN clause to introduce into the Treaty completely new substantive rights, such as
those granted under an umbrella clause.
571. This being said, a clause in a BIT whereby the definition of fair and equitable treatment
would be written in broader terms than in the case of the Treaty would clearly be
covered by the MFN clause contained in it. In that regard, the Tribunal notes that the
Denmark-Mongolia BIT548 quoted by Claimants is of particular relevance. It provides in
its Article 3 (2) as follows:
"Each Contracting Party shall in its territory accord investors of
the other Contracting Party, as regards their management,
maintenance, use, enjoyment or disposal of their investment, fair
and equitable treatment which in no case shall be less favourable
than that accorded to its own investors or to investors of any third
state, whichever of these standards is the more favourable."
572. This puts to rest Respondent's argument about the restrictive interpretation it wishes to
apply to the words "fair and equitable treatment excluding the application of measures
that might impair the operation of or disposal of investment" in Article 3(1) of the
Treaty. That Article cannot have a more limited meaning than that found in Article 3(2)
of the Denmark-Mongolia BIT.
573. The next step for the Tribunal is therefore to determine whether Mongolia has breached
any article of the Treaty, including the broad application of the fair and equal treatment
provision imported through the MFN clause, but not through the application of an
umbrella clause which Claimants cannot invoke.
5.6.2.2.2 Mongolia's liability for the acts of MongolBank
574. In order to determine whether Mongolia bears any liability for MongolBank's actions,
one must first consider its status under Mongolian law. The issue here is not about the
nature of the SCSA itself but whether the disputed actions of MongolBank in the
implementation of the SCSA were actions attributable to Mongolia and thereby might
constitute breaches of the Treaty.
575. MongolBank has been established as the Central Bank (Bank of Mongolia) under a law
of September 3, 1996. Under Article 3 of that law, MongolBank is to be 11the competent
organization authorized to implement State monetary policy" and it is defined as 11a legal
entity established by the State". Under Article 4, its main objective is described as 11 (to)
promote balanced and sustained development of the national economy, through
maintaining the stability of money, financial markets and the banking system.11 Its
President is appointed by the State Khural (Article 26) to which he reports but the State
Khural cannot interfere with the activities relating to the implementation of State
monetary policy by MongolBank (Article 30). Article 31(2) provides specifically that 11the
Bank of Mongolia shall be independent from the Government. 11
548 CE-78.
Annex 291
-139-
576. It is in that legal context that the Tribunal must find whether MongolBank' s actions are
attributable to Respondent under the international law rules of attribution. For the
purpose of this case, those rules are reflected particularly in Articles 4, 5 and 9 of the
International Law Commission Articles on Responsibility of States for internationally
wrongful acts ("ILC Articles"), which are generally considered as representing current
customary international law.
577. Article 4 reads as:
"1. The 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 functions, 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.
2. An organ includes any person or entity which has that status in
accordance with the internal law of the State."
578. Article 5 reads as:
"The conduct of a person entity which not an organ of the State
under article 4 but which is empowered by the law of that Sate to
exercise elements of the governmental authority shall be
considered an act of the State under international law, provided
the person or entity is acting in that capacity in the particular
instance."
579. And Article 9 reads as:
"The conduct of an organ of a State or of a person or entity
empowered to exercise elements of the governmental authority
shall be considered an act of the State under international law if
the organ, person or entity acts in that capacity, even if it exceeds
its authority or contravenes instructions."
580. The distinction between organs of the State and other entities is of particular relevance in
the determination of potential liability of the State. As stated in the Commentary to the
ILC Articles, "It is irrelevant for the purposes of attribution that the conduct of a state
organ may be classified as "commercial" or as acta jure gestionis. Of course, the breach by
a State of a contract does not as such entail a breach of international law. [ ... ] But the
entry into or breach of a contract by a State organ is nonetheless an act of the State for
the purposes of article 4, and it might in certain circumstances amount to an
internationally wrongful act."549 That situation is different from the case of other entities
exercising elements of governmental authority as described in Article 5 of the ILC
549 Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentary, 2001, Report of the
ILC on the work of its fifty-third session, p. 41.
Annex 291
-140-
Articles, where the liability of the State is engaged only if they act jure imperii and not
jure gestionis.
581. The ILC Articles do not contain a definition of what constitutes an organ of the State and
the Mongolian law is not very helpful in that regard either. The mention in Article 2 of
the MongolBank Act that it is "a legal entity established by the State" and that it is "the
competent authority authorized to implement monetary policy" is not sufficient to
support a conclusion that it is not an organ but an entity of the type mentioned in
Article 5 of the ILC. If this were the case, one would be left with a very narrow definition
of organs of the State since most of the executive and judiciary functions of the State are
fulfilled by legal entities established by the State and adopting and/ or implementing
public policy. The Tribunal has long debated whether MongolBank is an organ of the
State of Mongolia.
582. According to one view, the fact that the Mongolian Parliament has created it as an
institution independent of the Government does not per se make it lose its status as an
organ of the State. In fact, it fulfills a major State function and the list of its
responsibilities clearly demonstrates that it fulfills a role that only a State can fulfill:
exclusive right to issue currency, formulation and implementation of monetary policy,
acting as the Government's financial intermediary; supervising activities of other banks;
holding and managing the State's reserves of foreign currencies.550 As stated in the
Commentary to the ILC Articles: "The reference to a "State organ" covers all the
individual or collective activities which make up the organization of the State and act on
its behalf."551 Like other central banks in the world, MongolBank assumes part of the
executive responsibility of the State; and, if one were to argue for a more limited
definition of the executive power of the State, Mongolbank would still qualify as an
organ of the State under the words "any other functions" mentioned in Article 4 of the
ILC Articles.
583. Such role differentiates MongolBank from other institutions found, in other cases, not to
be organs of the State. Thus, in Jan de Nul N. V., Dredging International N. V. v. Arab
Republic of Egypt,552 the Tribunal concluded that the Suez Canal Authority ("SCA") was
not an organ of the State. Noting that the SCA was created to take over the management
and utilization of the Suez Canal after its nationalization and recognizing that it could be
said to carry out public activities, it relied on Articles 4, 5 and 6 of its constitutive law to
conclude that it was not part of the Egyptian State. Article 4 states that the SCA is to be
managed like" business enterprises without any commitment by the governmental
systems and conditions". Article 5 provides that the SCA "shall have an independent
budget that shall be in accordance with the rules adopted in business enterprises" and
Article 6 states that the "SCA's funds are considered private funds". Another relevant
case is that of Bayindir Insaat Turizim Ticaret Ve Sanayi A.S. v. Islamic Republic of
550 Article 5 of the Law on Central Bank.
551 Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentary, 2001, Report of the
ILC on the work of its fifty-third session, p. 40.
552Jan de Nul N. V. and Dredging International N. V. v. Arab Republic of Egypt, ICSID Case No. ARB/04/13 ICSID Case
No. ARB/04/13, Award November 6, 2008, ifl62.
Annex 291
-141-
Pakistan.553 In that case, the Tribunal had to decide whether the acts of the National
Highway Authority of Pakistan (11NHA'1) allegedly in breach of a BIT were attributable
to Pakistan. Having noted that the NHA had a distinct legal personality under the laws
of Pakistan, it decided that 11(b)ecause of its separate legal status, the Tribunal discards
the possibility of treating NHA as a State organ under Article 4 of the ILC Articles." The
simple fact that an institution has separate legal status does not allow one to conclude
automatically that that institution is not an organ of the State; in order to reach such a
conclusion, a tribunal has to engage in a broader analysis which includes the functions
assigned to that entity. There is a huge difference to be found between public authorities
established to operate and maintain a navigational canal or to construct and maintain
highways and a central bank charged with the issuance of the currency and running the
State's monetary policy.
584. According to that analysis, MongolBank being recognized as an organ of the State, the
question whether MongolBank in entering into and implementing the SCSA acted jure
imperii or jure gestionis would therefore become irrelevant in terms of the liability of the
State.
585. According to another interpretation, MongolBank is not an organ of the State since
Article 2 of the MongolBank Act specifies that it is established as "a legal entity" and, as
such, it is exercising elements of governmental authority, as described in Article 5 of the
ILC Articles. In support of that view, one can mention the Genin case554 where the Bank
of Estonia is described as II an agency of a Contracting State". The Tribunal concluded
that Estonia was the appropriate respondent because the related BIT provided that the
State was to be responsible for the activities of any state enterprise when it was
exercising delegated governmental authority. However, that case does not definitely
answer the question whether such a state enterprise was an organ of the State or a State
entity; the legal notion of "agent" does not exist in the international law of State
responsibility. The choice has to be between being an organ under Article 4 of the ILC
Articles or an "entity empowered to use governmental authority" under Article 5.
Another case more to the point however is an English court case involving the Bank of
Nigeria, the charter of which was modeled on that of the Bank of England, and where
the Court of Appeal, under the leadership of Lord Denning, reversing the decision of the
judge of first instance, denied the Bank of Nigeria its plea of sovereign immunity in
connection with an irrevocable letter of credit issued by the Bank in favor of the claimant
for a sale of cement to an English company, for the purpose of building army barracks in
Nigeria. The Court ruled that "the bank, which had been created as a separate legal
entity with no clear expression of intent that it should have governmental status, was
not an emanation, arm, alter ego or department of the State of Nigeria and was therefore
553, Bayindir Insaat Turizim Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award,
August 27, 2009, if119.
554 Alex Genin, Eastern Credit Limited, Inc. et A.S. Baltoil v. Republic of Estonia, ICSID Case No. ARB/99/2, Award, June
25, 2001, if 327.
Annex 291
-142-
not entitled to immunity from suit."555 The difficulty of making the distinction was
pointed out by Lord Denning (and shared by his two colleagues) when he wrote:
11In these circumstances, I have found it difficult to decide whether
or no the Central Bank of Nigeria should be considered in
international law a department of the Federation of Nigeria, even
though it is a separate legal entity. But, on the whole, I do not
think it should be.
This conclusion would be enough to decide the case, but I find it
so difficult that I prefer to rest my decision on the ground that
there is no immunity in respect of commercial transactions, even
for a government department."
586. The Tribunal however does not need to decide the question whether MongolBank is or is
not an organ of the State, since as will be shown below, even if it were merely an entity
exercising governmental authority, at least some of the disputed actions in connection
with GEM' s gold were in any event actions de jure imperii.
587. While claiming that the SCSA is a purely commercial transaction, Respondent also
argues that MongolBank entered into the SCSA within the exercise of its functions
related to the management of Mongolia's foreign reserves.556 Moreover, by proceeding to
export and refine the gold deposited by GEM, and depositing it or its value in an
unallocated account, MongolBank was clearly exercising specific powers granted to it
under the Law on Central Bank and the Treasury Law. In that regard, a press release of
MongolBank of August 24, 2007 states:557
11Mongo1Bank implementing the Law on Central Bank
(MongolBank) and the Law on Precious Metals and StoneFund
and with the purposes of increasing the country's currency
reserves purchases from gold producing business entities and
individuals unrefined gold at the market price, published as of a
certain date. [ ... ] This gold, which according to the agreement
made with KOO Golden East-Mongolia, will be definitely
purchased by MongolBank, has been refined and placed abroad. 11
588. That press release was issued in answer to a statement by GEM that three tons of gold
held in custody in MongolBank had disappeared. Such a view was repeated by
MongolBank when, on November 19, 2007, it answered a previous letter of GEM of
November 16,) n the following terms:558
555 Trendtex Trading Corporation v. Central Bank of Nigeria, (1977) 2 W.L.R. 356.
556 R. Rejoinder, 1194 and fn. 374.
557 Paushok Ex-81.
558 CE-85.
Annex 291
-143-
"With the purpose of increasing state currency reserves
MongolBank when purchasing business entities purified gold
produced by them would calculate its pure weight according to
common practice of the international financial markets and would
make settlements for the value of the gold based on the markets
price of the gold as of a particular day.
Given that MongolBank has an obligation to refine the purified
gold purchased into the state currency reserves and place the
same in the international financial markets pursuant to the most
favourable arrangements, MongolBank refined 3.1 tons of your
gold, being in possession of MongolBank in accordance with the
law. 11
589. Furthermore, in its Statement of Defense, Respondent argued that the sale/purchase of
the gold deposited by GEM "served a public purpose, i.e the increase of Mongolia's gold
reserves."
590. A related decision by the Court of Appeal (England) involving GEM and the Bank of
Nova Scotia and others 559 further supports the conclusion that MongolBank was in part
acting de jure imperii in connection with the SCSA. That decision was referred to by each
side.560 In that case MongolBank was the third defendant, the second defendant being
Scotia Capital (Europe) Limited. The appeal was only concerned with GEM's attempt to
obtain information and documents from the Bank of Nova Scotia. Without entering into
the details of the case, suffice to say that it was established that GEM' s gold deposited
with MongolBank was refined by a gold refiner outside Mongolia but that it was not
clear where the refined gold was held physically after refining and by whom; pursuant
to a contract with MongolBank, the Bank of Nova Scotia simply had an unallocated
account in which a certain quantity of gold was credited to MongolBank' s account, the
bank not physically holding any gold for MongolBank. The Bank of Nova Scotia, in the
English proceedings, refused to authorize the release of any information concerning its
contract with MongolBank or who had refined and who had physical possession of the
gold concerned, by invoking state immunity, in favor of MongolBank.
591. The Court first stated: 11 [ ••• ] the question is whether MongolBank entered into the
contract (with the Bank of Nova Scotia) in the exercise of sovereign authority11561 and it
answered: 11Th(e) evidence shows that the purpose of the transactions including the
refining of the gold and the placing of a quantity of refined gold on the unallocated
account of the bank was for the purposes of increasing Mongolia's currency reserves. In
my judgment that was an exercise of sovereign authority within the meaning of the 1978
Act (State Immunity)11562 It may be that, under English Law, the definition of State
559 KOO Golden East Mongolia and Bank of Nova Scotia and others, (2007) EWCA Civ 1443.
560 Paushok-II, if102; R. Defense, if374; C. Reply, ifif 646-647; CE-152; RIM, if 31.
561 KOO Golden East Mongolia and Bank of Nova Scotia and others, (2007) EWCA Civ 1443, if 40.
562 Ibid., if 42.
Annex 291
-144-
immunity has a different scope than under international law. But what is interesting for
our purpose is that evidence upon which the Court of Appeal bases its decision is
constituted of the 19 November 2007 letter of MongolBank to GEM and the press release
of 24 August 2007, both quoted above. In addition, the refining of the gold abroad and
the placing of it or its value in an unallocated account in the Bank of Nova Scotia are
exactly the breaches alleged by Claimants in the present case.
592. The Tribunal therefore has no hesitation in concluding that MongolBank acted de jure
imperii, if not in entering into the SCSA, at least when it exported GEM's gold for
refining and deposited it or its value in an unallocated account in England "with the
purposes of increasing the country's reserves." Those actions were de jure imperii and
went beyond a mere contractual relationship. Therefore, even if MongolBank were not
to be considered an organ of the State but merely an entity exercising elements of
governmental authority, Claimants would be entitled to pursue their claim against
Respondent in connection with the actions mentioned above.
593. The question which then remains is whether such actions by MongolBank constituted
breaches of the Treaty. In the opinion of the Tribunal, they did so.
594. First, it is important to note that, in the first half of 2007, MongolBank recorded the gold
deposited by GEM as sold and owned by Mongolia, exported it, and provided for its
refinement without GEM' s knowledge and permission, the whole in violation of Article
4 of the SCSA. It thereby, without any justification, seized ownership of GEM's gold
when it had absolutely no right to do so.
595. Secondly, on the basis of the evidence before the Tribunal, MongolBank first tried to
hide that fact and, for a significant period of time, misled Claimants who had legitimate
expectations that they would retain full ownership of their gold until the issuance of Sale
Letters or the termination of the SCSA.
596. In the opinion of the Tribunal, GEM was prematurely and without any right deprived of
the continuing ownership of its deposited gold in breach of Article 3.1 of the Treaty
which provides for "fair and equitable treatment excluding the application of measures
that might impair the operation or disposal with investments", expanded through the
MFN clause to include the text of the Denmark-Mongolia BIT.
597. It will be up to Claimants to prove what damages, if any, they suffered from such
actions.
5.6.2.2.3 Lack of standing
598. Respondent contends that Claimants do not have standing to bring claims in connection
with the SCSA because GEM did not exhaust the contractual remedies provided by the
Agreement. But the right of an investor to claim under a BIT is a separate right from that
of a company it controls to sue under the dispute resolution of a particular commercial
contract and there is no obligation for such an investor to require that company to resort
first to the dispute resolution procedure of its contract, before the investor can exercise
its own rights available to it under the provisions of a BIT.
Annex 291
ANNEX292
Neutral Citation Number: [2005] EWHC 2239 (Comm).
IN THE IIlGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Case No: 2004/536
ROY.al Courts of Justice
Strand, London, WC2A 2LL
Date: 20/10/2005
Before:
MR JUSTICE AIKENS
Between:
(1) AIG Capital Partners, Inc Claimants
(2) CJSC Terna Real Estate Company
Limited
-and-
The Republic of Kazakhstan Defendant
(1) ABN AMRO Mellon Global Securities Third Parties
Services B.V.
(2) ABN AMRO Bank N.V.
The National Bank of Kazakhstan Intervener
Mr R Salter QC, Mr D Lloyd Jones QC and Mr Paul Key (instructed by Holman Fenwick
Willan, Solicitors, London) for the Claimants
Mr A Malek QC and Mr D Quest (instructed by Richards Butler, Solicitors, London) for the
Defendants
Hearing dates: 26th and 27th July 2005
Judgment)
Mr Justice Aikens :
A. The Main Issue
1. This case concerns a claim for state immunity by the Republic of Kazakhstan ("the RoK'~
and its central bank, the National Bank of Kazakhstan (''the NBK"). The Claimants have
obtained an arbitration award from the International Centre for the Settlement of
Investment Disputes (''ICSID '') in Washington, DC, against the RoK. The Award
Annex 292
88. Conclusions on the ECHR points.
For the reasons I have given, I have concluded that the proper construction of sec.ion
14(4) on common law principles is consistent with the Claimants' ECHR rights under
Article 6(1) and Article 1 of the Protocol. Therefore there is no need to "read down"
sec.ion 14(4).
I. Issue Five: What are the characteristics of the Cash Accounts and the Securities
Accounts held in London by AAMGS for the NBK; in particular are they (a) ''property of
a State's central bank" within section 14( 4) of the SIA; (b) if not, are they ''property [of a
State] which is for the time being in use or intended for use for commercial purposes" within
section 13(4) of the SIA?
89. Given the conclusions I have reached on Issues One to Four, I can deal with this issue
briefly. AAMGS holds the cash and securities that constitute the London Assets to the
order of NBK. NBK has the contractual right to payment of the debt that is constituted
by the Cash Accounts: clause 16(i) of the GCA. AAMGS records the NBK as being
the owner of the securities it
holds in the Securities Accounts: clause 5(b) of the GCA. On my construction of
sec.ion 14( 4) of the SIA, in particular the word ''property", that makes the London
Assets the ''property" of the NBK, which, everyone agrees, is the central bank of the
RoK. Therefore all the London Assets are within sec.ion 14(4) and so cannot be the
subject of enforcement processes by the UK courts at all.
90. In my view that conclusion is not affected by the fact that, as the experts on Kazakhstan
law agree, the NBK holds those assets as part of the National Fund of Kazakhstan under
the Trust Management Agreement with the RoK, by which the government of the RoK is
the beneficiary: clause 7 .1. Professor Didenko appears to contemplate ( at para 60 of his
report) that there can be ''property held by the trust manager", ie. the NBK, which
"remains under the fall ownership of the trust founder", ie. the RoK. Professor
Suleimenov does not dissent from this view. Therefore, as a matter of Kazakhstan law,
the RoK remains the owner, but gives the trust manager the power to deal with the
relevant property. That is enough, in my view, to bring the London Assets within
sec.ion 14(4).
91. The conclusion that the London Assets are within section 14(4) means that they are
immune from enforcement proceedings in the UK courts. So I think I do not need to
decide whether, for the purposes of sec.ion 13(4) of the SIA, the London Assets were,
at the time the enforcement processes were started, ( a) also the property of the RoK and, if
so, (b) "in use or intended for use for commercial purposes". However, on the first
of these points it is agreed that the RoK is the beneficial owner of the London Assets.
Therefore they must, on my reading of the word ''property", constitute "the property of a
State" within sec.ion 13(2)(b) and sec.ion 13(4).
92. On the second point, my firm view is that the London Assets were not in use or intended
for use for commercial purposes at any stage. My reasons, briefly, are as follows:
Annex 292
( 1) The London Assets formed part of the National Fund. That Fund was, in my
opinion, created to assist in the management of the economy and government
revenues of the RoK, both in the short and long term. Management of a State's
economy and revenue must constitute a sovereign activity.
(2) The National Fund had to be managed by the NBK in accordance with the law set
out in the Budget Code, in particular Article 24. That demanded that the National
Fund be invested: Article 24 para 2. I accept that this required that investment
had to be placed in authorised financial assets in order to secure, amongst other
things, "high profitability levels of the [National Fund} in the long term outlook at
reasonable risk levels". I also accept the uncontroverted evidence that the
Securities Accounts held by AAMGS on behalf of the NBK were actively traded
at all times and that the NBK obtained from the RoK a commission on good
results and paid a penalty for poor ones. But I cannot accept that this activity is
inconsistent with the Stability and Savings Funds of the National Fund being used
or intended for use for sovereign purposes. The aim of the exercise, at all times,
was and is to enhance the National Fund. To do that the assets have to be put to
use to obtain returns which are reinvested in the National Fund, ie. to assist the
sovereign actions.
(3) Mr Salter relies on the definition of "commercial purposes" set out in section
17(1) of the SIA and points to the fact that "commercial purposes" means
transactions and activities mentioned in sec.ion 3(3) of the Act. Those include "any
transaction or activity (whether of a commercial ... .financial ... or similar
character) into which a State enters or in which it engages otherwise in the
exercise of sovereign authority". He says that the trading activities of the
Securities Accounts by AAMGS are clearly financial transactions and their aim is
to make profits. Therefore they could not be transactions "in the exercise of
sovereign authority" within section 3(3). So, for the purposes of 13(4), at
least the Securities Accounts of the London Assets constitute ''property in use or
intended for use for commercial purposes". Again, I must disagree. The
dealings of the Securities Accounts must, in my view, be set against the
background of the purpose of the GCA. That was established to assist in running
the National Fund. The Securities Accounts contain assets which are part of the
National Fund. In my view the dealings are all part of the overall exercise of
sovereign authority by the Republic of Kazakhstan.
( 4) Last, but not least, there is the certificate of the Ambassador. That is clear and
unambiguous. I have seen no evidence to contradict it other than the fact that the
Securities Accounts are traded. For the reasons I have given, the trading of those
accounts does not mean they were being used or were intended for use for
commercial purposes.
93. Conclusion on Issue Five
My conclusion is that all the London Assets were, at all times, in use for sovereign
purposes and pursuant to the exercise of sovereign authority of the RoK, acting through
the National Bank and AAMGS as the Global Custodian of the National Fund. Therefore
even ifl had concluded that secti.on 14(4) should be construed more narrowly and in the
Claimants' favour, I could not have avoided a conclusion that the London Assets
constituted property held by the NBK in its capacity as such and it does not matter that it
Annex 292
held them simply as trust manager for the RoK and had only a limited interest in those
assets.
94. Further, even if I were wrong about the construction of the word ''property" in section
14( 4), and I should conclude ( on the facts of this case) that the London Assets cannot be
regarded as property of the NBK at all, my conclusion would be that the London Assets
were at all times the ''property" of the Republic of Kazakhstan (within S.13(2)(b)) and
were the subject of transactions that were (through the NBK and AAMGS) the exercise
of sovereign authority. Accordingly, the London Assets do not fall within section 13(4),
so are immune from the enforcement process of the UK courts.
J. Overall Conclusions
95. In summary, my conclusions are:
(1) As to the Third Party Debt Order, the cash accounts held by AAMGS in London
are in the name of the NBK. The cash accounts constitute a debt owed by
AAMGS to the NBK, which is the account holder. The RoK has no contractual
rights to that debt against AAMGS. Therefore there is no "debt due or accruing
due" from AAMGS (the third party) to the judgment debtor. So the court has no
power under CPR Pt 72.2(1)(a) to make a Third Party Debt Order in respect of the
cash accounts. The Third Party Debt Order must be discharged on this ground.
(2) The meaning of sec.ion 14(4) of the SIA, using "common law" rules of
construction, is clear. In particular:
(a) the word ''property" must have the same meaning in sec.ion 14(4) as it
does in section 13(2)(b) and 13(4).
(b) "Property" has a wide meaning. It will include all real and personal
property and will embrace any right or interest, legal or equitable, or
contractual, in assets that are held by or on behalf of a State or any
"emanation of the State" or a central bank or other monetary authority that
comes within sections 13 and 14 of the SIA.
( c) The words ''property of a State's central bank or other monetary
authority" mean any asset in which the central bank has some kind of
property interest as described above, which asset is allocated to or held in
the name of the central bank, irrespective of the capacity in which the
central bank holds the asset or the purpose for which the asset is held.
(3) The immunity created by section 14(4) does concern the rights of access to the
court of a claimant who wishes to enforce against the assets of a central bank. In
this case section 14(4) does affect the right of the Claimants to enforce an ICSID
arbitration award that has been legitimately registered as a judgment under sec.ion
1 of the Arbitration (Internadonal Investment Disputes) Act 1966. Therefore
section 14(4) does concern the right of a claimant to a civil right to have access to
the courts, in accordance with Article 6(1) of the European Convention on Human
Rights.
( 4) However, that right is not absolute. The immunity granted to assets of central
Annex 292
banks, as set out in secdon 14(4), is both legitimate and proportionate and is in
accordance with the expectations of States. Therefore there is no violation of the
Claimants' rights under Article 6( 1 ).
(5) Secdon 14(4) does not deprive the Claimants of their possession, ie. the ICSID
A ward or the judgment that has been registered. The A ward was always subject
to the restrictions on enforcement that existed at the time it was made. Those
restrictions are clear from Article 55 of the Washington Convention which set up
the ICSID arbitration procedure. Therefore there is no infringement of Article 1
to the Protocol to the European Convention on Human Rights.
(6) Accordingly, there is no requirement to modify the "common law" construction of
section 14(4) of the SIA in order to give it effect in a way which is compatible
with Convention Rights, because it is compatible anyway.
(7) On the facts of this case, the London Assets, held by AAMGS on behalf of the
NBK are ''property of a central bank", ie. the property ofNBK, within the
meaning of secdon 14(4). This is because NBK has an interest in that property
within the definition of ''property" that I have set out above. Therefore all the
London Assets are immune from the enforcement jurisdiction of the UK courts.
(8) If, contrary to my view, the London Assets are not the property ofNBK within
the meaning of section 14(4), then, on the facts of this case, they constitute "the
property of a State" within the meaning of section 13(2)(b) and 13(4) of the SIA.
The London Assets were not at any time either in use or intended for use for
"commercial purposes" within the meaning of secdon 13(4) of the SIA.
Therefore they are immune from the enforcement jurisdiction of the UK court by
virtue of section 13(2)(b) of the SIA.
(9) Accordingly, the court must discharge the Interim Charging Order. As the same
reasoning applies to both the cash and securities accounts within the London
Assets, even if the court had otherwise had jurisdiction to make the Third Party
Debt Order, it would have to discharge it because the cash accounts are immune
from enforcement proceedings for the reasons set out above.
96. Therefore I must discharge both Interim Orders.
Annex 292
ANNEX293
65 ILR 348 348
The NETHERLANDS1
Sovereign immunity - Foreign States and agencies - Central bankRequirement
for deposit of gold with bank under foreign exchange control
procedures - Claim for compensation for loss of gold - Whether bank entitled
to jurisdictional immunity - Acts iure imperii and iure gestionis - Whether
bank acting on behalf of foreign State - Whether monetary policy a sovereign
function - The law of Italy
NV EXPLOITATIE-MMTSCHAPPIJ BENGKALIS v. BANK INDONESIA
Netherlands, Court of Appeal of Amsterdam. 23 October 1963
SUMMARY: The Jacts:-In 1958 gold belonging to the plaintiff, a Dutch company,
was deposited at a branch office of Bank Indonesia in Sumatra pursuant to Indonesian
foreign exchange control regulations. The gold was alleged to have been forcibly taken
by revolutionary forces during a local insurrection. The plaintiff brought an action
against the Bank claiming that it was obligated to pay compensation for the loss of the
gold under Indonesian law. The District Court of Amsterdam held that the Bank was
entitled to jurisdictional immunity since the obligation in question was of a public law
character. The plaintiff appealed.
Held:-The appeal was dismissed.
(1) It was possible for private individuals and legal entities under private law to have
public law obligations. Obligations imposed by a State in accordance with its exchange
control legislation were to be regarded as obligations under public law of those
individuals or legal entities upon which they were imposed. The acceptance of the
deposit of gold by the defendant Bank therefore constituted the performance of an
obligation under public law.
(2) Though there might be a generally recognised rule of international law according
to which a sovereign State, at least with respect to its specifically sovereign acts, was
immune from the jurisdiction of other States this did not involve a rule exempting
private individuals from the jurisdiction of the courts of another State in the case of
obligations under public law. The public law character of the obligation did not
therefore constitute a valid criterion for deciding on the jurisdiction of Dutch courts
and the relevant question was rather whether or not the acts were performed by a
private individual or private legal entity or on behalf of a foreign State.
(3) Any obligation upon the defendant Bank to pay compensation in one of
its public capacities was only conceivable if the payment of this compensation
1 All the reports of Dutch cases printed here, with the exception of the first, are English translations extracted
with permission from the Netherlands Yearbook of International Law. Concise statements entitled "The facts" appear
in the Netherlands Yearbook before the text of the relevant part of each judgment and these statements have been
reproduced, with some exceptions, in the summaries prepared for this volume and introduced at the head of each
case. The texts of the judgments printed in this volume are normally the complete extracts published in the
Netherlands Yearbook. In some cases short additional passages have been added from the original reports.
Annex 293
349 65 ILR 348
was in fact an obligation of the State which it undertook within the orbit of its
monetary policy and whose performance it had entrusted to the Bank. The refusal of
the Bank to pay compensation to the plaintiff was therefore a refusal of the Indonesian
State in the exercise of a specifically sovereign function, namely the maintenance of the
monetary position of the country. The Bank had acted not as a private bank but as a
bank of issue and/or administrator of the foreign exchange reserves of the State. In these
circumstances the Dutch courts had no jurisdiction over the claim.
The following is a statement of the facts as reported in the Netherlands International
Law Review:
Until 12 June 1958, the NV Exploitatie-Maatschappij Bengkalis (hereinafter:
Bengkalis), a Netherlands legal entity having its seat at The Hague, exploited a goldmining
plant near Pakan Baru, Sumatra. Pursuant to Indonesian Foreign Exchange
Control legislation Bengkalis deposited some parcels of gold produced by the plant with
the branch office of the Bank Indonesia (hereinafter: the Bank) at Padang, Sumatra,
which should have paid due compensation to Bangkalis. During a local insurrection
against the Republic of Indonesia around the beginning of 1958, officials of the Bank
were allegedly forced to hand over the branch office's assets, the parcels of gold
included, to commanders of revolutionary forces. The gold was not restored to
Bengkalis, nor was the said compensation ever paid to it.
Bengkalis sued the Amsterdam branch office of the Bank before the District Court of
Amsterdam to pay a sum of 119,097.32 Netherlands guilders which was said to
represent either compensation for failure to pay the sum due under Indonesian law or
damages at civil law for loss suffered by Bengkalis and caused by failure of performance
by the Bank with regard to a contract of deposit which, according to Bengkalis, was in
force between the parties.
The District Court of Amsterdam held that it had no jurisdiction to hear the case on
the primary ground, but that it could decide on the alternative ground. It admitted
Bengkalis to give evidence as to the existence of a contract of deposit. Bengkalis
appealed to the Court of Appeal of Amsterdam.
The following is the text of the judgment of the Court of Appeal:
The District Court in the first place observed in its judgment that Bengkalis based
its claim on two grounds, a primary one and an alternative one which it summarised
as follows: the primary ground: damage caused by the fact that whereas the Bank was
obliged to pay a sum of money under the Foreign Exchange Control Ordinance of
Indonesia as a consequence of the deposit of parcels of gold at its Padang branch
office, the said amount was never paid; the alternative ground: damage
Annex 293
65 ILR 348 350
caused by failure to return the gold deposited with the Padang office.-The District
Court went on to recall that the Bank alleged that no Netherlands court had
jurisdiction, this would mean that the Amsterdam District Court had no competence to
hear the case on either of the two grounds. With regard to its jurisdiction to adjudicate
upon the primary ground, the District Court said:
In the first place it must be observed that the parties in this case drew a sharp distinction
between "taking possession" (by the Bank) which might be compatible with retention of title
in the gold by Bengkalis and "take over" which might entail either a transfer of title to the
Bank or merely a loss of title by Bengkalis.-Bengkalis, while formulating the primary
ground of its claim, explicitly selected the second notion as being relevant adding that the
take over was based upon Article 8 of the said Ordinance in connection with a decision taken
by the Indonesian Foreign Exchange Control Agency with respect to Bengkalis on 17 May
1952, partially exempting Bengkalis from an obligation, laid down in Article 6 of this
Ordinance, to notify all stocks of gold. Bengkalis based its allegation that the Bank was
obliged to pay compensation-the non-payment of which constituted the first ground of the
claim-on the second section of Article 8 of the said Ordinance.-ln this connection the
Bank motivated its challenge of the Court's jurisdiction firstly, by arguing that the Bank by
acting as it did exercised a function under public law and, further, that legal relations between
the parties were of a public law character.-Bengkalis contested this argument by stating that,
apart from its functions under public law, the Bank also acts as a private bank and that in the
present case it acted in the latter capacity and that, besides the Bank Indonesia, other banks
could be and have been designated by the Indonesian Foreign Exchange Control Agency to
receive gold against payment of compensation. It may be conceded to Bengkalis that the
Bank did not in the present case exercise a function strictly reserved to it as a State bank or as
a bank of issue.-The District Court need not go into the question as to whether or not the
function performed by the Bank shall be regarded as an official act, since in either case the
obligation to pay compensation on which Bengkalis primarily based its claim partakes of the
character of public law.-Bengkalis' obligation to deposit the gold which it produced wasas
it did not deny-of a public law character, but this also applies to the obligation of the
banks designated by virtue of the said Article 8, the Bank Indonesia included, to pay
compensation on the occasion of their receiving gold, the amount of which compensation
must be settled in consultation with the Foreign Exchange Control Agency and which
payment certainly is a public law duty.-Since the obligation of the Bank, invoked by
Bengkalis, is of a public law character under Indonesian law, the Bank rightly argued that this
District Court lacks jurisdiction to hear the claim on its primary ground.
Against this decision Bengkalis advanced its first grievance:
The District Court wrongly accepted the Bank's plea with respect to its jurisdiction,
on the following grounds:
(a) The obligation of the Bank to pay compensation upon which Bengkalis
primarily based its claim, has no character of public law.
Annex 293
351 65 ILR 348
The same applies to Bengkalis' obligation to offer the gold produced. In this regard the
Bank neither acted in a function reserved for it as a State Bank or as a bank of issue, nor
did it perform an act of State, or yet exercise a public law function.
(b) Even if the said obligation of the Bank can be regarded as having a public law
character, this is no bar to the jurisdiction of a Netherlands court in general or of the
District Court of Amsterdam in particular, since Netherlands courts are competent and
obliged to apply the public law of a foreign State and to order payment on the basis of
such law. This is particularly so, if the legal relations involved in the action are governed
by the foreign law concerned as a whole, as is the case here, at least if the relevant
provisions of public law are intended to protect the interests of private individuals
and/or of private legal intercourse. There might be an exception, if Netherlands public
policy were to be involved. The latter was not even alleged, There is no need to examine
the question as to what law would apply, if an obligation under Indonesian public law
vis-a-vis the Indonesian State were concerned, the enforcement of which was sought in
the Netherlands either by that State or the Bank.
(c) In no case can the grounds advanced by the District Court lead to a rebuttal of
jurisdiction, but at most to an irreceivability or a rejection of Bengkalis' action for
which, having regard to what is said above sub (a) and (b), there is no ground.
With regard to this grievance the Court of Appeal in the first place observes that it is
apparently the opinion of Bengkalis that the question of obligations under public law can
only arise in relation to legal entities underpublic law. This explains why, in its view,
Bengkalis' obligation to notify gold and the obligation of the banks designated to take over
this gold against payment of a compensation, have a private law character. However, this
Court of Appeal is of the opinion that it is possible for private individuals and legal entities
under private law to have public law obligations and that, in particular, obligations
imposed by a State in accordance with its foreign exchange control legislation are
obligations under public law of individuals or legal entities upon whom they are imposed.
The obligations of Bengkalis involved here are therefore not obligations under private law
but obligations under public law. Consequently, even had the Bank not been designated in
its quality as a bank of issue for the reception of gold, by accepting the deposit of the gold
it performed an obligation under public law. The thesis of Bengkalis in sub (a) of its
grievance that this obligation is in the nature of private law, is therefore incorrect.-It may
be conceded to Bengkalis that, with regard to the question as to whether a Netherlands
court has jurisdiction to adjudicate upon the primary ground of the action, it rightly
deemed it to be of importance whether the Bank, while receiving the gold against
Annex 293
65 ILR 348 352
compensation, acted as a bank of issue or as a private bank or whether it acted as a
private or public law agency. The question to be answered is whether restrictions of
jurisdiction pursuant to exceptions recognised by international law prohibit a
Netherlands court from taking cognizance of the primary ground of Bengkalis' action.
It may be true that there is a generally recognised rule of international law, according to
which a sovereign state at least with respect to its specifically sovereign acts is immune
from jurisdiction of other States, but this does not involve a rule exempting private
individuals from the jurisdiction of the courts of another state in the case of obligations
under public law. This means that the public law character of the obligation does not
constitute a valid criterion for deciding on the jurisdiction of Netherlands courts, but
that the question whether the acts were performed by a private individual or private
legal entity or on behalf of a foreign. State is very relevant.-lt is the task of this Court
of Appeal to enter into this matter.-In this connection the Bank advanced that the
adjudication of the present dispute is so closely related to official duties imposed upon
it, i.e. its function as a bank of issue and as administrator of the Indonesian gold and
foreign exchange reserves and, generally, to the sovereign power and official policy of
the Republic of Indonesia, that a Netherlands court cannot decide in this case without
judging such relations as it may not and cannot review. In addition it invoked its
immunity from Netherlands jurisdiction.-Against this argument Bengkalis argued that
the Bank cannot invoke immunity since Bengkalis' primary claim is directed against it
as one of the banks in the sense of Article of the Foreign Exchange Control Ordinance.
This claim is exclusively a matter of private law and has no connection with any public
legal function entrusted to the Bank or with any official duty, official care or sovereign
rights of the Republic of Indonesia itself.-The Court of Appeal is of the opinion that
the Bank does not deny, that-if compensation had been paid to Bengkalis-not
another bank, but the Bank Indonesia should have done so, but that it merely contends
that in that case such an obligation would not devolve upon it as a private bank instead
of in its function as a bank of issue and as an administrator of the State's foreign
exchange and gold reserves.-Bengkalis did not give an opinion as to whether-in the
event of the Bank's being obliged to fulfil this duty to pay compensation in one of its
official capacities-a Netherlands court might not rule on the point whether the Bank
should have accorded this compensation to Bengkalis. In so far as Bengkalis is not
willing to recognise this and this Court must pronounce itself on the dispute in this
connection, this Court of Appeal shares the opinion of the Bank that, having regard to
the above-mentioned rule of international law according to which a sovereign State
with regard to its specifically sovereign acts 1s not subject to the
Annex 293
353 65 ILR 348
jurisdiction of the courts of another State, a Netherlands court shall In that case
abstain from ruling on the question as to whether the Bank should have paid
compensation to Bengkalis and likewise also from ordering payment of damages for
failure to pay such compensation. An obligation of the Bank to pay such
compensation in one of its public capacities is only conceivable if the payment of this
compensation was in fact an obligation of the State which it undertook within the
orbit of its monetary policy and the performance of which obligation it entrusted to
the Bank Indonesia. In this light the refusal of the Bank to pay a compensation to
Bengkalis has been a refusal of the Indonesian State, in the exercise of a specifically
sovereign function (the maintenance of the monetary position of the country). For
this reason a Netherlands court shall on the basis of the said rule of international law
abstain from ruling on this question.-The question must now be examined as to
whether the Bank acted as a private bank or as a bank of issue and/or administrator of
the foreign exchange reserves of the State.-Bengkalis admitted that the gold to be
handed over was destined for the Foreign Exchange Fund. Since this was a fund
created by the State and since that State could make use of the assets of that Fund in
the case of executing its monetary policy, the gold was in fact placed at the State's
disposal. It stands to reason that, since the gold ultimately came into the hands of the
State, it was the State which ultimately paid the compensation and not a private bank
which derived no profit at all from the gold. With regard to this aspect Bengkalis
advanced nothing more than that not only the Bank Indonesia but also the other
banks were bound, according to the Foreign Exchange Control Ordinance, to take
over the gold offered against payment of due compensation as fixed by a State organ.
This does not mean that the compensation was ultimately for the account of those
banks, since this was not the case when via the Bank Indonesia the State reimbursed
those other banks for the sums paid by them in compensation, a practice which,
according to the Bank, was frequently adopted. For these reasons, it must be accepted
that the Bank Indonesia had to pay the compensation in its capacity as a bank of issue
and/or administrator of the foreign exchange reserves and that, consequently, a
Netherlands court is not allowed to adjudicate upon the question as to whether the
Bank should in this case have paid the compensation to Bengkalis.-In part (b) of its
grievance Bengkalis alleged that a foreign court shall eventually apply the public law of
another State, but there can be no question of application of foreign public law when
the dispute is withdrawn from the jurisdiction of the foreign court which will
therefore never reach the stage at which it can review and apply any rule of law.-The
parts (a) and (b) of the grievance cannot lead to reversal of the decision of the lower
Court against which the appeal is directed.
Annex 293
65 ILR 348 354
[The remainder of the judgment is omitted since it is not of interest to international
law.]
[Reports: Nederlandse Jurisprudentie, 1965, No. 357 (in Dutch); 13 Netherlands
International Law Review (1966), p. 318. (English translation)]
NOTE.-In its judgment of 26 June 1958, in Krol v. Bank Indonesia (26 ll.R. 180)
the Court of Appeal of Amsterdam decided that Bank Indonesia could not invoke
immunity for its acts done iure gestionis.
Annex 293
ANNEX294
63 65 ILR 63
Sovereign immunity - Foreign States and agencies - Bank of Japan - Foreign
exchange control procedures - Subjection of international film distribution
agreement to authorisation - Non-execution of agreement - Liability of Bank
of Japan - Whether Bank of Japan entitled to jurisdictional immunity - Acts
iure imperii and iure gestionis - The law of France
BLAGOJEVIC v. BANK OF JAPAN
France, Court ofCassation (First Civil Chamber). 19 May 1976
(Bellet, President; Ponsard, Rapporteur; Boucly, Advocate-Genera~
SUMMARY: The facts:-The appellant entered into a 10-year exclusive distribution
agreement with a Japanese film company. Shortly afterwards the company notified
the appellant of difficulties raised by the Bank of Japan, allegedly in the exercise of
its responsibility for foreign exchange control, and the company later repudiated the
agreement on the ground that it violated Japanese rules of public policy. The
appellant brought an action against the company and the Court of Appeal of Paris,
in a judgment of 14 May 1970 which became final, held that the contract was not
void but could not be executed since it had not been authorised by the Japanese
authorities. The company was therefore held liable to pay compensation but went
into liquidation before doing so. The appellant then brought an action for damages
against the Bank of Japan1 claiming that it had connived with the company
1 The appellant subsequently also brought an action for damages against the Japanese Minister of Finance and
those proceedings are reported below at p. 86.
Annex 294
65 ILR 63 64
to obtain the repudiation of the agreement when the company got into difficulties,
under the guise of operating exchange control procedures which did not apply to the
agreement in question. The Bank claimed jurisdictional immunity. The Tribunal de
Commerce of Paris held on 19 September 1972 that the Bank was only entitled to
immunity in respect of acts carried out in the normal exercise of the responsibilities
delegated to it by the State for exchange control but that such immunity did not apply
to acts alleged to have been committed outside the normal exercise of those
responsibilities. The claim of the appellant was nevertheless rejected on the merits. He
appealed and the Court of Appeal of Paris held on 16 March 197 4 that the Bank of
Japan was entitled to absolute immunity from jurisdiction. The appellant again
appealed.
Held:-The appeal was dismissed.
The Bank of Japan when carrying out its responsibilities for foreign exchange control
did so upon the instructions and on behalf of the Japanese State and as such acted in
the interests of the public service so that it was entitled to the benefit of jurisdictional
immunity. The Court of Appeal had properly justified its granting of jurisdictional
immunity in this ease by its finding that the bank had not acted pursuant to any object
other than the interest of the public service.
The following is the text of the judgment of the Court:
On the two parts of the first ground of appeal-The facts, as stated by the judges in the
lower courts, are that Zavicha Blagojevic entered into a contract on 1 September 1966
with the Japanese company Daiei Motion Picture Company Limited under the terms of
which he was made sole distributor in Europe of films produced by Daiei and sole agent
for the purchase of European films for showing in the cinemas which Daiei owned in
Japan. In June 1967 Daiei informed Zavicha Blagojevic that since the agreement
violated Japanese laws of public policy it considered itself to be discharged from its
obligations. It appeared, from an affidavit made by the Bank of Japan and an oral
statement by the Ministry of Foreign Affairs passing on information given by the bank
that, according to the director of the bank, a request for authorization of the contract
entered into with Zavicha Blagojevic could only be granted if following further
communications with the latter it was specified firstly whether the contract was for
services or for the establishment of an overseas office of the company and secondly what
was the basis of the payment of a bonus provided for in Article 7 of the contract. On
the basis of these statements it was held, in a judgment of the Court of Appeal of Parts
of 14 May 1970 which became final, that the contract was not void but that since it
had not been authorized by the Japanese authorities it could not be executed. Daiei was
ordered to repair the damage which it had caused Zavicha Blagojevic by not applying
for the required authorization.
Annex 294
65 65 ILR 63
Having failed to receive these damages from Daiei, which had gone into liquidation,
Zavicha Blagojevic brought an action against the Bank of Japan for damages of
20,500,000 francs, alleging various wrongful dealings, namely:
-the refusal, contrary to the Articles of Agreement of the International Monetary
Fund, to approve the contract of 1 September 1966 despite the fact that it was a current
international transaction which was not subject to authorization as a result of exchange
regulations;
-a praetorian practice of preliminary verbal communications which was irreconcilable
with the normal role of the Bank of Japan and was used to exercise illegal control over
current international transactions;
-the deliberate refusal to reply to requests from Zavicha Blagojevic in order to hide
from him the reasons for the illegal refusal to approve the contract;
-affidavits made by the Bank of Japan so as to deceive the French courts and
containing false allegations to the effect that authorization was necessary for contracts of
the nature of the agreement in question;
-the presentation of an application for approval to the bank by means of preliminary
verbal communications;
-the withholding of approval because of the form of the contract and its doubts both
as to its object and as to the basis of the bonus;
-and the attested fact that it made its approval subject to fuller particulars being
adduced on these points.
The Bank of Japan, claiming to have acted in the circumstances pursuant to
instructions and on behalf of the Japanese State, in execution of its responsibilities for
exchange control, denied that the French courts were competent.
The judgment under appeal granted the benefit of immunity from jurisdiction to the
Bank of Japan. It is argued Firstly that this bank, a body governed entirely by private
law, subject to Japanese commercial law and having a separate legal personality, cannot
be considered to be an emanation of the Japanese state. Secondly, it is contended that
whilst Japanese legislation authorises the bank to act in certain circumstances in liaison
with the Minister of Finance in the field of foreign exchange control and therefore on
the instructions and on behalf of the Japanese state, it is amply shown by the
submissions of the parties, in particular by those of the bank, that it did not intervene
in any way in the present case in its capacity as an "exchange control office" since it did
not give a refusal to approve the disputed contract but merely replied to unofficial
requests for clarification from the Daiei Company in the context of a quite
extraordinary procedure which has no basis in any Japanese legal provision.
Annex 294
65 ILR 63 66
[This Court] considers, however, that the Court of Appeal correctly remarked that
immunity from jurisdiction can be pleaded by foreign States and bodies acting pursuant
to their instructions or on their behalf in respect of acts of public power or acts
performed in the interest of a public service. It then stated that according to the
Japanese legal texts which it had analysed the Bank of Japan in exercising its
responsibility for exchange control acts pursuant to the instructions and on behalf of
the Japanese state. Making a sovereign interpretation of the same texts the Court of
Appeal considered that the attitude of the Bank of Japan, whether it consisted, as the
bank claims, in asking for clarifications of the clauses of the contract or rather involved,
as is alleged by Zavicha Blagojevic, a refusal at a certain moment to approve the
contract, as well as its practice of "preliminary verbal communications" or unofficial
consultations, corresponded to the very object of the power delegated to it by the State.
The Court of Appeal properly concluded from these facts that this attitude and this
practice were covered by immunity from jurisdiction and could not give rise to an
action before the French courts. This ground of appeal is therefore unfounded.
On the three parts of the second ground of appeal-It is further alleged that the Court
of Appeal departed from the distinction made by the judges in the lower courts between
the various acts carried out by the bank and the false affidavits made by it and wrongly
granted the benefit of immunity from jurisdiction with regard to both. It is argued
firstly that the benefit of immunity should have been refused en bloc to the bank which
only intervened after the Daiei Company had met with its initial difficulties in order to
assist it in discharging itself from its contractual obligations and thus for a private
interest disguised under the appearance of acts of public authority. Secondly it is
claimed that in behaving in this way the Bank of Japan became an accomplice or
collaborator in the violation of contractual obligations and that immunity from
jurisdiction cannot allow it to escape from the consequences of its wrongful acts. Finally
it is argued that the "improper and incoherent" transposition of the distinction in
municipal administrative law between a wrong committed outside the performance of a
public duty (faute personnelle) and a wrong committed in the performance of a public
duty (faute de service) rests on the unproven and even false assumption that the bank
acted in the interests of the public service.
[This Court] considers, however, that the Court of Appeal did not find that the Bank
of Japan had acted so as to enable the Daiei Company to discharge itself from its
obligations. The first two parts of this ground of appeal based on the existence of such
an intention must therefore be rejected. Furthermore in stating expressly that the
affidavit of 9 March 1968 was made in the interests of the public service the
Annex 294
67 65 ILR 63
Court gave a justification for its decision to grant immunity from jurisdiction to the
Bank of Japan, even disregarding the superfluous reason based on the fact that Zavicha
Blagojevic had not sued any natural person who could have committed a wrong outside
the performance of a public duty (faute personnelle). It follows that this ground of
appeal must also be rejected in all its parts.
For these reasons the Court dismisses the appeal against the judgment of the Court
of Appeal of Paris of 16 March 1974.
[Reports: Bull. Civ., I, No. 181, p. 145; Clunet, 1976, p. 687; Revue critique, 1977, p.
359; R.G.D.I.P., 1977, p. 1208. (In French)]
Annex 294
ANNEX295
A/CN.4/SER.A/2(XJ6/Add. I (Part 2)
YEARBOOK
OFTHE
INTERNATIONAL
LAW COMMISSION
2006
Volume II
Part Two
Report of the Commission
to the General Assembly
on the work
of its fifty-eighth session
UNITED NATIONS .I~1 1. -1. New York and Geneva, 2013 • · "ii/
......,,~
Annex 295
NOTE
Symbols of Unilcd Nations docmucnts arc composed of capital lcticrs combined with figures.
Mention of sucb a symbol indicates a reference to a United ations document.
References to the YPorbook of rhe lmematio110/ Law Commis.1·in11 are ahhrevinted to Yeorhook ... ,
followed hy the year (for example, Yearbook ... 2006).
The Yearbook for ea<.:h session of the International Law Commission <.:ompri~es two volumes:
Volume I : summary records of the meetings of the session:
Volume H (Part One): reports of special rapporteurs and other documents considered during the
session:
Volume II (Part Two): report of the Commission to the General Assemhly.
All references to these works and quotations from them relate to the final printed texts of tJ1e
volumes of the Yearbook issued as United Nations publirntions.
,\/CN.4/SER./\f2((lll/ Add.I (Part 2)
UNITED NATIO:--JS PUBLICATION
Sales :-,lo.: 12.V. I: (Part 2)
ISBN 978-92- 1- 133798-3
dSBN 97X-92- l -0.5.'\6.5X-J
ISSN OllX2-X2XlJ
Annex 295
46 Report of the International Law Commission on the work of its fifty-eighth session
and consuls, but at the same time there was injury to the
person of the nationals ( diplomats and consuls) held hostage;
and in the Interhandel case, 191 there were claims
brought by Switzerland relating to a direct wrong to itself
arising out of breach of a treaty and to an indirect wrong
resulting from an injury to a national corporation. In the
United States Diplomatic and Consular Staff in Tehran
case, the Court treated the claim as a direct violation of
international law; and in the Interhandel case, the Court
found that the claim was preponderantly indirect and that
Interhandel had failed to exhaust local remedies. In the
Arrest Warrant of 11 August 2000 case there was a direct
injury to the Democratic Republic of the Congo and its
national (the Foreign Minister), but the Court held that the
claim was not brought within the context of the protection
of a national so it was not necessary for the Democratic
Republic of the Congo to exhaust local remedies.192 In
the Avena case, Mexico sought to protect its nationals on
death row in the United States through the medium of the
Vienna Convention on Consular Relations, arguing that
it had "itself suffered, directly and through its nationals"
as a result of the United States' failure to grant consular
access to its nationals under article 36, paragraph 1 of the
Convention. The Court upheld this argument because of
the "interdependence of the rights of the State and of individual
rights". 193
(11) In the case of a mixed claim, it is incumbent upon
the tribunal to examine the different elements of the claim
and to decide whether the direct or the indirect element
is preponderant. In the ELSI case, a Chamber of the ICJ
rejected the argument of the United States that part of its
claim was premised on the violation of a treaty and that
it was therefore unnecessary to exhaust local remedies,
holding that "the Chamber has no doubt that the matter
which colours and pervades the United States claim as a
whole, is the alleged damage to Raytheon and Machlett
[United States corporations]". 194 Closely related to the
preponderance test is the sine qua non or "but for" test,
which asks whether the claim comprising elements of
both direct and indirect injury would have been brought
were it not for the claim on behalf of the injured national.
If this question is answered negatively, the claim is an
indirect one and local remedies must be exhausted. There
is, however, little to distinguish the preponderance test
from the "but for" test. If a claim is preponderantly based
on injury to a national, this is evidence of the fact that the
claim would not have been brought but for the injury to
the national. In these circumstances only one test is provided
for in paragraph 3, that of preponderance.
(12) Other "tests" invoked to establish whether the
claim is direct or indirect are not so much tests as factors
that must be considered in deciding whether the
claim is preponderantly weighted in favour of a direct or
an indirect claim or whether the claim would not have
been brought but for the injury to the national. The principal
factors to be considered in making this assessment
191 See footnote 170 above.
192 Arrest Warrant of 11 April 2000 (Democratic Republic of Congo
v. Belgium), Judgment, I.C.J. Reports 2002, p. 3, at pp. 17-18, para. 40.
193 Avena (see footnote 29 above), pp. 35-36, para. 40.
194 ELSI (see footnote 149 above), at p. 43, para. 52. See also Interhandel
(footnote 170 above), at p. 28.
are the subject of the dispute, the nature of the claim and
the remedy claimed. Thus where the subject of the dispute
is a Government official, 195 diplomatic official'96 or State
property197 the claim will normally be direct, and where
the State seeks monetary relief on behalf of its national as
a private individual the claim will be indirect.
(13) Paragraph 3 makes it clear that local remedies are
to be exhausted not only in respect of an international
claim, but also in respect of a request for a declaratory
judgment brought preponderantly on the basis of an injury
to a national. Although there is support for the view that
where a State makes no claim for damages for an injured
national, but simply requests a decision on the interpretation
and application of a treaty, there is no need for local
remedies to be exhausted, 198 there are cases in which
States have been required to exhaust local remedies where
they have sought a declaratory judgment relating to the
interpretation and application of a treaty alleged to have
been violated by the respondent State in the course of, or
incidental to, its unlawful treatment of a national.199
(14) Draft article 14 requires that the injured person
must himself have exhausted all local remedies. This does
not preclude the possibility that the exhaustion of local
remedies may result from the fact that another person has
submitted the substance of the same claim before a court
of the respondent State.200
Article 15. Exceptions to the local remedies rule
Local remedies do not need to be exhausted where:
(a) there are no reasonably available local remedies
to provide effective redress, or the local remedies
provide no reasonable possibility of such redress;
(b) there is undue delay in the remedial process
which is attributable to the State alleged to be
responsible;
(c) there was no relevant connection between the
injured person and the State alleged to be responsible
at the date of injury;
(d) the injured person is manifestly precluded
from pursuing local remedies; or
(e) the State alleged to be responsible has waived
the requirement that local remedies be exhausted.
195 See Arrest Warrant of 11 August 2000,1. C.J. Reports 2000 (footnote
192 above), para. 40.
196 See the United States Diplomatic and Consular Staff in Tehran
case (footnote 190 above).
197 The Co,fu Channel case, Merits, Judgment, I.C.J. Reports 1949,
p.4.
198 See Air Service Agreement of27 March 1946 between the United
States of America and France, Decision of9 December 1978, UNRIAA,
vol. XVIII (Sales No. E/F.80.V.7), p. 417; Applicability of the Obligation
to Arbitrate under Section 21 of the United Nations Headquarters
Agreement of 26 June 1947, Advisory Opinion, I.C.J. Reports 1988,
p. 12, at p. 29, para. 41.
199 See Interhandel (footnote 170 above), at pp. 28-29; and ELSI
(footnote 149 above), at p. 43.
200 See ELSI (footnote 149 above), at p. 46, para. 59.
Annex 295
Diplomatic protection 47
Commentary
(1) Draft article 15 deals with the exceptions to the
exhaustion oflocal remedies rule. Paragraphs (a) and (b),
which cover circumstances in which local courts offer no
prospect ofredress, and paragraphs (c) and (d), which deal
with circumstances which make it unfair or unreasonable
that an injured alien should be required to exhaust local
remedies as a precondition for the bringing of a claim, are
clear exceptions to the exhaustion of local remedies rule.
Paragraph (e) deals with a different situation-that which
arises where the respondent State has waived compliance
with the local remedies rule.
Paragraph (a)
(2) Paragraph (a) deals with the exception to the
exhaustion oflocal remedies rule sometimes described, in
broad terms, as the "futility" or "ineffectiveness" exception.
Three options require consideration for the formulation
of a rule describing the circumstances in which local
remedies need not be exhausted because of failures in the
administration of justice:
(i) the local remedies are obviously futile;
(ii) the local remedies offer no reasonable prospect of
success;
(iii) the local remedies provide no reasonable possibility
of effective redress.
All three of these options enjoy some support among the
authorities.
(3) The "obvious futility" test, expounded by Arbitrator
Bagge in the Finnish Ships Arbitration,201 sets too high a
threshold. On the other hand, the test of"no reasonable prospect
of success", accepted by the European Commission of
Human Rights in several decisions,202 is too generous to
the claimant. This leaves the third option, which avoids the
stringent language of "obvious futility" but nevertheless
imposes a heavy burden on the claimant by requiring that
he prove that in the circumstances of the case, and having
regard to the legal system of the respondent State, there is
no reasonable possibility of effective redress offered by the
local remedies. This test has its origin in a separate opinion
of Sir Hersch Lauterpacht in the Certain Norwegian Loans
case203 and is supported by the writings of jurists.204 The
test, however, fails to include the element of availability
201 Finnish Ships Arbitration (see footnote 178 above), p. 1504.
202 See Retimag S.A. v. Federal Republic of Germany, Application
No. 712/60, Decision of 16 December 1961, European Commission and
European Court of Human Rights, Yearbook of the European Convention
on Human Rights 1961, pp. 385 et seq., at p. 400; X, Y and Z v. the
United Kingdom, Application Nos. 8022/77 and 8027/77, Decision of
8 December 1979, European Commission of Human Rights, Decisions
and Reports, vol. 18, pp. 66 et seq., at p. 74. See also the commentary
to article 22 of the draft articles on State responsibility adopted by the
Commission at its twenty-ninth session (footnote 173 above), p. 50,
para. (60).
203 Certain Norwegian Loans, Judgment, I.CJ Reports 1957, p. 9,
at p. 39.
204 See G. Fitzmaurice, "Hersch Lauterpacht-the scholar as judge",
BYBIL, vol. 37 (1961), pp. 1 et seq., at pp. 60-61; and M. Herdegen,
"Diplomatischer Schutz und die Erschiipfung von Rechtsbehelfen", in
G. Ress and T. Stein (eds.), Der diplomatische Schutz im Volker- und
Europarecht: Aktuelle Probleme und Entwicklungstendenzen (1996),
pp. 63 et seq., at p. 70.
of local remedies which was endorsed by the Commission
in its articles on responsibility of States for internationally
wrongful acts205 and is sometimes considered as a component
of this rule by courts206 and writers.207 For this reason
the test in paragraph (a) is expanded to require that there
are no "reasonably available local remedies" to provide
effective redress or that the local remedies provide no reasonable
possibility of such redress. In this form, the test is
supported by judicial decisions which have held that local
remedies need not be exhausted where: the local court has
no jurisdiction over the dispute in question;208 the national
legislation justifying the acts of which the alien complains
will not be reviewed by local courts;209 the local courts are
notoriously lacking in independence;210 there is a consistent
and well-established line of precedents adverse to the
alien;211 the local courts do not have the competence to
grant an appropriate and adequate remedy to the alien;212 or
the respondent State does not have an adequate system of
judicial protection.213
205 Article 44 requires local remedies to be "available and effective"
(Yearbook ... 2001, vol. II (Part Two) and corrigendum, p. 120).
206 In Loewen (see footnote 59 above), the tribunal stated that the
exhaustion oflocal remedies rule obliges the injured person "to exhaust
remedies which are effective and adequate and are reasonably available"
to him (para. 168).
207 See C. F. Amerasinghe, Local Remedies in International Law
(footnote 174 above), pp. 181-182, 203-204.
208 See Panevezys-Saldutiskis Railway (footnote 26 above), at p. 18;
Arbitration under Article 181 of the Treaty of Neuilly, AJIL, vol. 28
(1934), p. 760, at p. 789; Claim of Rosa Gelb trunk, Award of 2 May 1902,
and the "El Triunfo Company" (footnote 136 above), atpp. 463-466 and
pp. 467-479 respectively; The Lottie May Incident (arbitration between
Honduras and the United Kingdom), Arbitral Award of 18 April 1899,
UNRIAA, vol. XV, p. 23, at p. 31; Judge Lauterpacht's separate opinion
in the Certain Norwegian Loans case (footnote 203 above), pp. 39-40;
and the Finnish Ships Arbitration (see footnote 178 above), p. 1535.
209 See Arbitration under Article 181 of the Treaty of Neuilly (footnote
above). See also Affaire des Forets du Rhodope central (fond),
Decision of 29 March 1933, UNRIAA, vol. III (Sales No. 1949.V.2),
p. 1405; the Ambatielos Claim (footnote 174 above), p. 119; and the
Interhandel case (footnote 170 above), p. 28.
210 See Robert E. Brown (United States) v. Great Britain, Arbitral
Award of 23 November 1923, UNRIAA, vol. VI (Sales No. 1955.V.3),
p. 120; and Velasquez Rodriguez v. Honduras, Judgement of 29 July
1988, Inter-American Court of Human Rights, Series C, No. 4 (see also
ILM, vol. 28 (1989), pp. 291 et seq., at pp. 304-309).
211 See Panevezys-Saldutiskis Railway case (footnote 26 above); S.S.
"Lisman", Award of 5 October 1937, UNRIAA, vol. III, p. 1767, at
p. 1773; S.S. "Seguranca", Award of27 September 1939, ibid., p. 1861,
at p. 1868; Finnish Ships Arbitration (see footnote 178 above), p. 1495;
Xv. Federal Republic of Germany, Application No. 27/55, Decision of
31 May 1956, European Commission of Human Rights, Documents and
Decisions, 19 55-19 56-19 57, p. 138; Xv. Federal Republic of Germany,
Application No. 352/58, Decision of 4 September 1958, European Commission
and European Court of Human Rights, Yearbook of the European
Convention on Human Rights, 1958-1959, p. 342, at p. 344; andX v.
Austria, Application No. 514/59, Decision of 5 January 1960, Yearbook
of the European Convention on Human Rights, 1960, p. 196, at p. 202.
212 See Finnish Ships Arbitration (see footnote 178 above), pp. 1496-
1497; Velasquez Rodriguez (see footnote 210 above); Yagci and Sargin
v. Turkey, Judgment of 8 June 199 5, European Court of Human Rights,
Series A: Judgments and Decisions, vol. 319, p. 3, at p. 17, para. 42; and
Hornsby v. Greece, Judgment of 19 March 1997, ibid., Reports of Judgments
and Decisions, 1997-11, No. 33, p. 495, at p. 509, para. 37.
213 See Mushikiwabo and Others v. Barayagwiza, Decision of 9 April
1996, ILR, vol. 107 (1997), pp. 457 et seq., at p. 460. During the military
dictatorship in Chile, the Inter-American Commission on Human Rights
resolved that the irregularities inherent in legal proceedings under military
justice obviated the need to exhaust local remedies (see resolution No.
01 a/88 of12 September 1988, case 9755: Chile,Annual Report of the InterAmerican
Commission on Human Rights, 1987-1988, OEA/Ser.LN /II. 7 4
document l0rev.1,p.136).
Annex 295
48 Report of the International Law Commission on the work of its fifty-eighth session
( 4) In order to meet the requirements of paragraph (a),
it is not sufficient for the injured person to show that the
possibility of success is low or that further appeals are
difficult or costly. The test is not whether a successful
outcome is likely or possible, but whether the municipal
system of the respondent State is reasonably capable of
providing effective relief. This must be determined in the
context of the local law and the prevailing circumstances.
This is a question to be decided by the competent international
tribunal charged with the task of examining the
question whether local remedies have been exhausted.
The decision on this matter must be made on the assumption
that the claim is meritorious.214
Paragraph (b)
( 5) That the requirement of exhaustion oflocal remedies
may be dispensed with in cases in which the respondent
State is responsible for an unreasonable delay in allowing a
local remedy to be implemented is confirmed by codification
attempts,215 human rights instruments and practice,216
judicial decisions217 and scholarly opinion. It is difficult
to give an objective content or meaning to "undue delay",
or to attempt to prescribe a fixed time limit within which
local remedies are to be implemented. Each case must be
judged on its own facts. As the British-Mexican Claims
Commission stated in the El Oro Mining case: "The Commission
will not attempt to lay down with precision just
within what period a tribunal may be expected to render
judgment. This will depend upon several circumstances,
foremost amongst them upon the volume of the work
involved by a thorough examination of the case, in other
words, upon the magnitude of the latter."218
(6) Paragraph (b) makes it clear that the delay in the
remedial process is attributable to the State alleged to be
responsible for an injury to an alien. The phrase "remedial
process" is preferred to that of "local remedies" as it is
meant to cover the entire process by which local remedies
are invoked and implemented and through which local
remedies are channelled.
214 See Finnish Ships Arbitration (footnote 178 above), at p. 1504;
and theAmbatielos Claim (footnote 174 above), atpp. 119-120.
215 See the discussion of early codification attempts by F. V. Garcia
Amador, Special Rapporteur, in his preliminary report on State responsibility,
Yearbook ... 1956, vol. II, documentNCN.4/96, pp. 173-231,
at pp. 223-225; and article 19, paragraph 2, of the draft convention on
the international responsibility of States for injuries to aliens, prepared
in 1960 by the Harvard Law School, in Sohn and Baxter, lac. cit. (see
footnote 71 above), atp. 577.
216 International Covenant on Civil and Political Rights (art. 41,
para. 1 (c)); American Convention on Human Rights: "Pact of San Jose,
Costa Rica" (art. 46, para. 2 (c)); Weinberger v. Uruguay, Communication
No. 28/1978, Human Rights Committee, Selected Decisions under
the Optional Protocol (second to sixteenth sessions) (United Nations
publication, Sales No. E.84.XIV.2), vol. 1, p. 57, at p. 59; Las Palmeras,
Preliminary Objections, Judgment of 4 February 2000, Inter-American
Court of Human Rights, Series C: Decisions and Judgments, No. 67,
p. 64, para. 38; and Erdogan v. Turkey, Application No. 19807/92,
Decision of 16 January 1996, European Commission of Human Rights,
Decisions and Reports, vol. 84-A, pp. 5 et seq., at p. 15.
217 See El Oro Mining and Railway Company (Litd.) (Great Britain)
v. United Mexican States, Decision No. 55 of 18 June 1931, UNRIAA,
vol. V (Sales No. 1952.V.3), p. 191, at p. 198; and the Case concerning
the Administration of the Prince van Pless, Order of 4 February 1933,
PC.I.J, Series AIB, No. 52, p. 11, at p. 16.
218 See footnote 217 above.
Paragraph ( c)
(7) The exception to the exhaustion of local remedies
rule contained in draft article 15, paragraph (a), to the
effect that local remedies do not need to be exhausted
where they are not reasonably available or "provide no
reasonable possibility of effective redress", does not cover
situations where local remedies are available and might
offer the reasonable possibility of effective redress but
it would be unreasonable or cause great hardship to the
injured alien to exhaust local remedies. For instance, even
where effective local remedies exist, it would be unreasonable
and unfair to require an injured person to exhaust
local remedies where his property has suffered environmental
harm caused by pollution, radioactive fallout or a
fallen space object emanating from a State in which his
property is not situated, or where he is on board an aircraft
that is shot down while flying over another State's
territory. In such cases it has been suggested that local
remedies need not be exhausted because of the absence
of a voluntary link or territorial connection between the
injured individual and the respondent State.
(8) There is support in the literature for the proposition
that in all cases in which the exhaustion oflocal remedies
has been required, there has been some link between the
injured individual and the respondent State, such as voluntary
physical presence, residence, ownership of property
or a contractual relationship with the respondent
State.219 Proponents of this view maintain that the nature
of diplomatic protection and the local remedies rule has
undergone major changes in recent times. Whereas the
early history of diplomatic protection was characterized
by situations in which a foreign national resident
and doing business in a foreign State was injured by the
action of that State and could therefore be expected to
exhaust local remedies in accordance with the philosophy
that the national going abroad should normally be
obliged to accept the local law as he finds it, including
the means afforded for the redress of wrong, an individual
may today be injured by the act of a foreign State
outside its territory or by some act within its territory in
circumstances in which the individual has no connection
with the territory. Examples of this are afforded by transboundary
environmental harm (for example, the explosion
at the Chernobyl nuclear plant near Kiev in the
Ukraine in 1986, which caused radioactive fallout as far
away as Japan and Scandinavia) and the shooting down
of an aircraft that has accidentally strayed into a State's
airspace (as illustrated by the Aerial Incident of 27 July
1955 case, in which Bulgaria shot down an El Al flight
that had accidentally entered its airspace).220 The basis
for such a voluntary link or territorial connection rule is
the assumption of risk by the alien in a foreign State. It
is only where the alien has subjected himself voluntarily
to the jurisdiction of the respondent State that he would
be expected to exhaust local remedies.
219 See C. F. Amerasinghe, Local Remedies in International Law
(footnote 174 above), at p. 169; and T. Meron, "The incidence of the
rule of exhaustion oflocal remedies", BYBIL, 1959, vol. 35, pp. 83 et
seq., at p. 94.
22° Case Concerning the Aerial Incident of 27 July 1955 (Israel v.
Bulgaria), Preliminary Objections, Judgment of 26 May 1959, I.CJ
Reports 1959, p. 127.
Annex 295
Diplomatic protection 49
(9) Neither judicial authority nor State practice provide
clear guidance on the existence of such an exception
to the exhaustion of local remedies rule. While there
are tentative dicta in support of the existence of such an
exception in the InterhandeP21 and Salem222 cases, in
other cases223 tribunals have upheld the applicability of
the local remedies rule despite the absence of a voluntary
link between the injured alien and the respondent State.
In both the Norwegian Loans case224 and the Aerial Incident
of 27 July 1955 case,225 arguments in favour of the
voluntary link requirement were forcefully advanced, but
in neither case did the ICJ make a decision on this matter.
In Trail Smelter,226 involving transboundary pollution in
which there was no voluntary link or territorial connection,
there was no insistence by Canada on the exhaustion
of local remedies. This case and others227, in which local
remedies were dispensed with where there was no voluntary
link, have been interpreted as lending support to the
requirements of voluntary submission to jurisdiction as
a precondition for the application of the local remedies
rule. The failure to insist on the application of the local
remedies rule in these cases can be explained, however,
on the basis that they provide examples of direct injury, in
which local remedies do not need to be exhausted, or on
the basis that the arbitration agreement in question did not
require local remedies to be exhausted.
(10) Paragraph (c) does not use the term "voluntary
link" to describe this exception, as this emphasizes the
subjective intention of the injured individual rather than
the absence of an objectively determinable connection
between the individual and the host State. In practice, it
would be difficult to prove such a subjective criterion.
Hence paragraph ( c) requires the existence of a "relevant
connection" between the injured alien and the host State
and not a voluntary link. This connection must be "relevant"
in the sense that it must relate in some way to the
injury suffered. A tribunal will be required to examine not
only the question whether the injured individual was present,
resided or did business in the territory of the host
State but whether, in the circumstances, the individual,
by his conduct, had assumed the risk that if he suffered
an injury it would be subject to adjudication in the host
State. The word "relevant" best allows a tribunal to consider
the essential elements governing the relationship
between the injured alien and the host State in the context
of the injury in order to determine whether there
221 Here the ICJ stated: "it has been considered necessary that the
State where the violation occurred* should have an opportunity to
redress it by its own means" (see footnote 170 above), at p. 27.
222 In the Salem case, an arbitral tribunal declared that"[ a ]s a rule, a
foreigner must acknowledge as applicable to himself the kind of justice
instituted in the country in which he did choose his residence" ( see
footnote 72 above), at p. 1202.
223 Finnish Ships Arbitration (see footnote 178 above) and the
Ambatielos Claim (see footnote 174 above).
224 Case of Certain Norwegian Loans (France v. Norway), Oral
Pleadings of France, I.C.J. Pleadings 1957, vol. I, p. 408.
225 Case concerning the Aerial Incident of 27 July 1955 (Israel v.
Bulgaria), Preliminary Objections, Oral Pleadings of Israel, I.C.J.
Pleadings 1959, pp. 531-532.
226 Trail Smelter, UNRIAA, vol. III (Sales No. 1949.V.2), p. 1905.
227 Case of the "Virginius" , reported in J. B. Moore, A Digest of
International Law, vol. 2, Washington D.C., United States Government
Printing Office, 1906, p. 895, at p. 903; and the Jessie case, reported in
AJIL, vol. 16 (1922), pp. 114-116.
had been an assumption of risk on the part of the injured
alien. There must be no "relevant connection" between
the injured individual and the respondent State at the date
of the injury.
Paragraph (d)
(11) Paragraph (d) is designed to give a tribunal the
power to dispense with the requirement of exhaustion of
local remedies where, in all the circumstances of the case,
it would be manifestly unreasonable to expect compliance
with the rule. This paragraph, which is an exercise
in progressive development, must be narrowly construed,
with the burden of proof on the injured person to show
not merely that there are serious obstacles and difficulties
in the way of exhausting local remedies, but that he is
"manifestly" precluded from pursuing such remedies. No
attempt is made to provide a comprehensive list of factors
that might qualify for this exception. Circumstances that
may manifestly preclude the exhaustion of local remedies
possibly include the situation in which the injured person
is prevented by the respondent State from entering its territory,
either by law or by threats to his or her personal
safety, and thereby denying him or her the opportunity to
bring proceedings in local courts, or where criminal syndicates
in the respondent State obstruct him or her from
bringing such proceedings. Although the injured person
is expected to bear the costs of legal proceedings before
the courts of the respondent State, there may be circumstances
in which such costs are prohibitively high and
"manifestly preclude" compliance with the exhaustion of
local remedies rule.228
Paragraph ( e)
(12) A State may be prepared to waive the requirement
that local remedies be exhausted. As the purpose of the
rule is to protect the interests of the State accused of mistreating
an alien, it follows that a State may waive this
protection itself. The Inter-American Court of Human
Rights has stated:
In cases of this type, under the generally recognized principles of
international law and international practice, the rule which requires the
prior exhaustion of domestic remedies is designed for the benefit of the
State, for that rule seeks to excuse the State from having to respond to
charges before an international body for acts which have been imputed
to it before it has had the opportunity to remedy them by internal means.
The requirement is thus considered a means of defence and, as such,
waivable, even tacitly. 229
(13) Waiver of local remedies may take many different
forms. It may appear in a bilateral or multilateral treaty
entered into before or after the dispute arises; it may
appear in a contract between the alien and the respondent
State; it may be express or implied; or it may be inferred
from the conduct of the respondent State in circumstances
in which it can be described as estoppel or forfeiture.
228 On the implications of costs for the exhaustion of local remedies,
see Loewen (footnote 59 above), at para. 166.
229 Viviana Gallardo et al., Decision of 13 November 1981, No. G
101/81, Inter-American Court of Human Rights, Series A: Judgments
and Opinions, para. 26 (see also /LR, vol. 67 (1984), p. 587). See also
ELSI (footnote 149 above), p. 42, para. 50; and the De Wilde, Ooms and
Versyp cases ("Vagrancy Cases"), Judgment of 18 June 1971, European
Court of Human Rights, Series A: Judgments and Decisions, p. 12
(see also /LR, vol. 56 (1980), p. 337, at p. 370, para. 55).
Annex 295
50 Report of the International Law Commission on the work of its fifty-eighth session
(14) An express waiver may be included in an ad hoc
arbitration agreement concluded to resolve an already
existing dispute or in a general treaty providing that disputes
arising in the future are to be settled by arbitration
or some other form of international dispute settlement. It
may also be included in a contract between a State and an
alien. There is a general agreement that an express waiver
of the local remedies is valid. Waivers are a common feature
of contemporary State practice and many arbitration
agreements contain waiver clauses. Probably the bestknown
example is to be found in article 26 of the Convention
on the settlement of investment disputes between
States and nationals of other States, which provides:
Consent of the parties to arbitration under this Convention shall,
unless otherwise stated, be deemed consent to such arbitration to the
exclusion of any other remedy. A Contracting State may require the
exhaustion oflocal administrative or judicial remedies as a condition of
its consent to arbitration under this Convention.
It is generally agreed that express waivers, whether contained
in an agreement between States or in a contract
between State and alien, are irrevocable, even if the contract
is governed by the law of the host State.230
(15) Waiver of local remedies must not be readily
implied. In the ELSI case, a Chamber of the ICJ stated
in this connection that it was "unable to accept that an
important principle of customary international law should
be held to have been tacitly dispensed with, in the absence
of any words making clear an intention to do so".231
(16) Where, however, the intention of the parties to
waive the local remedies is clear, effect must be given
to this intention. Both judicial decisions232 and the writings
of jurists233support such a conclusion. No general
rule can be laid down as to when an intention to waive
local remedies may be implied. Each case must be determined
in the light of the language of the instrument and
the circumstances of its adoption. Where the respondent
State has agreed to submit disputes to arbitration that may
arise in future with the applicant State, there is support
for the view that such an agreement "does not involve the
abandonment of the claim to exhaust all local remedies
in cases in which one of the Contracting Parties espouses
the claim of its national".234 That there is a strong presumption
against implied or tacit waiver in such a case
was confirmed by the Chamber of the ICJ in the ELSI
case.235 A waiver of local remedies may be more easily
230 See Viviana Gallardo et al. (footnote 229 above) and the De Wilde,
Ooms and Versyp cases ("Vagrancy Cases") (ibid.).
231 ELSI (see footnote 149 above), at p. 42, para. 50.
232 See, for example, Steiner and Gross v. Polish State, Case No. 322
(30 March 1928), Annual Digest of Public International Law Cases:
Years 1927 and 1928, A. D. McNairandH. Lauterpacht (eds.), London,
Longmans, Green and Co., 1931, p. 472; and American International
Group, Inc. v. The Islamic Republic of Iran, Award No. 93-2-3 of 19
December 1983, Iran-United States Claims Tribunal Reports, vol. 4,
Cambridge, Grotius, 1985, p. 96.
233 See, for example, S. M. Schwebel,InternationalArbitration: Three
Salient Problems, Cambridge, Grotius Publishers, 1987, pp. 117-121.
234 F. A. Mann, "State contracts and international arbitration",
BYBIL, 1967, vol. 42, p. 32.
235 See footnote 149 above. In the Panevezys-Saldutiskis Railway case
( see footnote 26 above), the PCIJ held that acceptance of the optional
clause under Article 36, paragraph 2, of the Statute of the Court did not
constitute implied waiver of the local remedies rule (as had been argued
by Judge van Eysinga in his dissenting opinion, ibid., pp. 35-36).
implied from an arbitration agreement entered into after
the dispute in question has arisen. In such a case, it may
be contended that such a waiver may be implied if the
respondent State entered into an arbitration agreement
with the applicant State covering disputes relating to the
treatment of nationals after the injury to the national who
is the subject of the dispute and the agreement is silent on
the retention of the local remedies rule.
(17) Although there is support for the proposition that
the conduct of the respondent State during international
proceedings may result in that State being estopped
from requiring that local remedies be exhausted,236 paragraph
(e) does not refer to estoppel in its formulation of
the rule governing waiver on account of the uncertainty
surrounding the doctrine of estoppel in international law.
It is wiser to allow conduct from which a waiver of local
remedies might be inferred to be treated as implied waiver.
PART FOUR
MISCELLANEOUS PROVISIONS
Article 16. Actions or procedures other than
diplomatic protection
The rights of States, natural persons, legal persons
or other entities to resort under international law to
actions or procedures other than diplomatic protection
to secure redress for injury suffered as a result of
an internationally wrongful act, are not affected by the
present draft articles.
Commentary
(1) The customary international law rules on diplomatic
protection and the rules governing the protection of human
rights are complementary. The present draft articles are
therefore not intended to exclude or to trump the rights of
States, including both the State of nationality and States
other than the State of nationality of an injured individual,
to protect the individual under either customary international
law or a multilateral or bilateral human rights treaty
or other treaty. They are also not intended to interfere with
the rights of natural and legal persons or other entities
involved in the protection of human rights to resort under
international law to actions or procedures other than diplomatic
protection to secure redress for injury suffered as
a result of an internationally wrongful act.
(2) A State may protect a non-national against the State of
nationality of an injured individual or a third State in interState
proceedings under the International Covenant on Civil
and Political Rights ( art. 41 ), the International Convention
on the Elimination of All Forms of Racial Discrimination
(art. 11), the Convention against Torture and Other Cruel,
Inhuman or Degrading Treatment or Punishment (art. 21),
the European Convention on Human Rights (art. 24), the
American Convention on Human Rights: "Pact of San
236 See the ELSI case (footnote 149 above), p. 44, para. 54; United
States-United Kingdom Arbitration concerning Heathrow Airport User
Charges, Award of 30 November 1992, ILR, vol. 102 (1996), pp. 216
et seq., at p. 285, para. 6.33; and the Foti and Others Case, Merits,
Judgement of 10 December 1982, ibid., vol. 71 (1986), pp. 366 et seq.,
at p. 380, para. 46.
Annex 295
ANNEX296
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
WASHINGTON, D.C.
AMBIENTE OFFICIO S.P.A. AND OTHERS
(Case formerly known as GIORDANO ALPI AND OTHERS1)
(CLAIMANTS)
and
THE ARGENTINE REPUBLIC
(RESPONDENT)
(ICSID Case No. ARB/08/9)
DECISION ON JURISDICTION AND ADMISSIBILITY
ARBITRAL TRIBUNAL
Judge Bruno Simma, President
Professor Karl-Heinz Bockstiegel, Arbitrator
Dr. Santiago Torres Bernardez, Arbitrator
Secretary of the Tribunal:
Mrs. Anneliese Fleckenstein
Assistant to the President of the Tribunal
Dr. Andreas Th. Muller
Representing the Claimants: Representing the Respondent:
Avv. Piero G. Parodi,
Avv. Luca G. Radicati di Brozolo and
Prof. Abogado Rodolfo Carlos Barra
Via S. Maurilio 14
Dra. Angelina Maria Esther Abbona
Procuradora del Tesoro de la Nacion Argentina
Posadas 1641 - Piso 1
CP 1112 Buenos Aires
20123 Milan Argentina
Italy
Date: February 8, 2013
1 For the change of name, see infra para. 354.
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
TABLE OF CONTENTS
Page
TABLE OF CONTENTS ................................................................................................................. i
ABBREVIATIONS OF THE SUBMISSIONS OF THE PARTIES ............................................ vii
FURTHER ABBREVIATIONS USED IN THE DECISION ..................................................... viii
INTRODUCTION .......................................................................................................................... 1
PROCEDURAL HISTORY ............................................................................................................ 5
FACTS OF THE CASE ................................................................................................................ 11
PRAYERS OF RELIEF ................................................................................................................ 13
I. CONSENT OF THE RESPONDENT .............................................................................. 16
A. Positions of the Parties ...................................................................................................... 16
1. Contentions by Respondent .......................................................................................... 16
a) The ICSID Convention does not authorize collective actions nor did Argentina
consent to such proceedings in the Argentina-Italy BIT ........................................... 16
b) Claimants' submission as to the nature of the action brought by them is not
convincing .................................................................................................................. 20
c) Violation of fundamental principles of due process ................................................... 21
2. Contentions by Claimants ............................................................................................. 23
a) The nature of the action brought by the Claimants .................................................... 23
b) Possibility of bringing multi-party arbitrations before an IC SID tribunal
without special consent of the Parties ........................................................................ 25
c) No risk for due process by admitting multi-party arbitrations ................................... 28
B. Findings of the Tribunal. ................................................................................................... 29
1. The nature of the claim submitted to the Tribunal.. ...................................................... 29
a) The present action is not a "class action" and should not be referred to as a
"mass proceeding" ..................................................................................................... 30
(1) The "class action" issue ....................................................................................... 30
(2) The "mass claim" issue ....................................................................................... 32
b) The character of the present action as a "multi-party" proceeding ............................ 33
c) The present claim is not the result of a j oinder of proceedings .................................. 34
2. Consent to multi-party proceedings within the framework of the ICSID
Convention and the Argentina-Italy BIT ..................................................................... 35
a) Existence of the Parties' consent to multi-party proceedings ..................................... 36
b) Scope of the Parties' consent to multi-party proceedings .......................................... 44
(1) The question of a maximum number of Claimants ............................................. 45
1
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
(2) The question of the need of a link between the claims in dispute ....................... 46
3. Due process and manageability concerns ..................................................................... 51
II. CONSENT OF THE CLAIMANTS ................................................................................. 54
A. Positions of the Parties ...................................................................................................... 54
1. Contentions by Respondent .......................................................................................... 54
a) Lack of the signature of Claimants themselves .......................................................... 54
b) Lack of consent for IC SID arbitration in the Power of Attorney ............................... 54
c) Purported legal defects of the Power of Attorney and the NASAM Mandate ........... 55
(1) Purported legal defects of the Power of Attorney ............................................... 56
(2) Purported legal defects of the NASAM Mandate negatively affecting the
Power of Attorney ............................................................................................... 57
(3) The nature ofNASAM's funding arrangement. .................................................. 58
2. Contentions by Claimants ............................................................................................. 58
a) Lack of the signature of Claimants themselves .......................................................... 5 8
b) Lack of consent for IC SID arbitration in the Power of Attorney ............................... 59
c) Purported legal defects of the Power of Attorney ...................................................... 60
(1) Purported legal defects of the Power of Attorney ............................................... 60
(2) Purported legal defects of the NASAM Mandate negatively affecting the
Power of Attorney ............................................................................................... 62
(3) The nature ofNASAM's funding arrangement.. ................................................. 63
B. Findings of the Tribunal. ................................................................................................... 64
1. The prerequisite of written consent of Claimants ......................................................... 64
a) The structure of the legal problem .............................................................................. 65
(1) Written consent to submit the dispute pursuant to Art. 25 .................................. 65
(2) Submission of the request in writing pursuant to Art. 36 .................................... 66
(3) Interplay of the two provisions in the case of expression of consent by
instituting arbitral proceedings ............................................................................ 66
b) Application to the present case ................................................................................... 67
2. The question of the lack of Claimants' signatures from the Request ........................... 69
3. The question of defects of the Power of Attorney given to Avv. Parodi ...................... 72
a) The purported invalidity of the Power of Attorney .................................................... 73
b) Purported defects in the scope of the Power of Attorney ........................................... 78
4. The questions of the lack of Avv. Parodi's signature from the Request and of the
authorization of Avv. Radicati di Brozolo to sign on his behalf ................................. 81
5. The role ofNASAM in the present proceedings .......................................................... 87
11
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
III. NATIONALITY AND STANDING OF CLAIMANTS .................................................. 90
A. Positions of the Parties ...................................................................................................... 90
1. Contentions by Respondent .......................................................................................... 90
a) The nationality requirement under Art. 25 of the ICSID Convention and Art.
1(2) of the Argentina-Italy BIT ................................................................................. 90
b) Number and identity of the Claimants ........................................................................ 90
c) Lack of standing due to Claimants' legal proceedings against the seller banks ......... 91
d) Lack of standing due to Claimants' impermissible pursuing of claims on behalf
of a third party in abuse of process ............................................................................ 91
2. Contentions by Claimants ............................................................................................. 92
a) The nationality requirement under Art. 25 of the ICSID Convention and Art.
1(2) of the Argentina-Italy BIT ................................................................................. 92
b) Number and identity of the Claimants ........................................................................ 93
c) No lack of standing due to legal proceedings against the seller banks ....................... 93
d) No lack of standing due to Claimants' pursuing of claims on behalf of a third
party ........................................................................................................................... 94
B. Findings of the Tribunal. ................................................................................................... 95
1. The relevant provisions for the determination of jurisdiction ratione personae .......... 95
2. The requirements of jurisdiction ratione personae in the present case ........................ 97
a) The requirements under Art. 25 of the ICSID Convention ........................................ 97
b) The requirements under Art. 1 of the Argentina-Italy BIT and its Additional
Protocol ...................................................................................................................... 98
3. Allocation of the burden of proof regarding the nationality and domicile
requirements ................................................................................................................ 99
4. Application to the present case ................................................................................... 100
a) The Claimants' duty to substantiate the nationality requirement.. ........................... 100
b) The Respondent's claims regarding dual nationality and the lack of the
domicile requirement ............................................................................................... 103
c) Conclusion ................................................................................................................ 104
5. The Respondent's claims regarding the purported lack of standing of the
Claimants ................................................................................................................... 105
6. Discontinuance of proceedings, consolidated list of Claimants, implications for
the allocation of costs and renaming of the proceedings ........................................... 107
a) Discontinuance of proceedings in regard to several Claimants ................................ 107
b) Consolidated list of Claimants .................................................................................. 111
c) Implications of discontinuance for the allocation of costs ....................................... 114
d) Renaming of the case ................................................................................................ 115
111
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
IV. EXISTENCE OF A LEGAL DISPUTE DIRECTLY ARISING OUT OF AN
INVESTMENT ............................................................................................................... 116
A. Positions of the Parties .................................................................................................... 116
1. Contentions by Respondent ........................................................................................ 116
a) The relationship of Art. 25 of the ICSID Convention and Art. 1 of the
Argentina-Italy BIT ................................................................................................. 116
b) The security entitlements in question do not qualify as investment under Art. 25
of the IC SID Convention ......................................................................................... 116
(1) The investment in the present case .................................................................... 117
(2) The concept of "investment" in Art. 25 of the IC SID Convention ................... 118
(3) Relevance and application of the so-called "Salini test" ................................... 118
c) The security entitlements in question do not qualify as investment under Art. 1
of the Argentina-Italy BIT ....................................................................................... 121
(1) The scope of the list in Art. 1 para. 1 lit. a-f of the BIT .................................... 121
(2) The requirements of the investment being made "in the territory" of the
Respondent and of it being a "foreign" investment .......................................... 122
(3) The requirement of the investment being made "in accordance with the
laws" of the Respondent .................................................................................... 123
2. Contentions by Claimants ........................................................................................... 125
a) The relationship of Art. 25 of the ICSID Convention and Art. 1 of the
Argentina-Italy BIT ................................................................................................. 125
b) The bonds in question qualify as investment under Art. 25 of the IC SID
Convention ............................................................................................................... 126
(1) The investment in the present case .................................................................... 126
(2) The concept of"investment" in Art. 25 of the ICSID Convention ................... 127
(3) Relevance and application of the so-called Salini test ...................................... 128
c) The bonds in question qualify as investment under Art. 1 of the Argentina-Italy
BIT ........................................................................................................................... 130
(1) The scope of the list in Art. l(l)(a)-(f) of the BIT ............................................ 130
(2) The requirements of the investment being made "in the territory" of the
Respondent and of it being a "foreign" investment .......................................... 131
(3) The requirement of the investment being made "in accordance with the
laws" of the Respondent .................................................................................... 133
B. Findings of the Tribunal. ................................................................................................. 135
1. The relevant provisions for the determination of the jurisdiction ratione materiae ... 13 5
2. The relevant economic operation at stake in the present proceedings and the
purported lack of standing of the Claimants in this context ...................................... 13 8
IV
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
3. The nature and legal relevance of the "double barreled" test ..................................... 142
4. The meaning of "investment" under Art. 25(1) of the ICSID Convention ................. 144
a) The background of the adoption of Art. 25(1) of the ICSID Convention ................ 146
b) Interpretation of the concept of "investment" in the light of Art. 31 of the
VCLT and its application to the financial instruments in the present case ............. 150
(1) Ordinary meaning .............................................................................................. 150
(2) Context .............................................................................................................. 151
(3) Object and purpose ............................................................................................ 151
(4) Subsequent State practice .................................................................................. 155
(5) Pertinent case-law and doctrine ......................................................................... 155
(6) Conclusion ......................................................................................................... 157
5. The relevance of the so-called Salini test in the interpretation of the concept of
"investment" in Art. 25(1) of the ICSID Convention ............................................... 159
a) The non-jurisdictional nature of the so-called Salini test.. ....................................... 159
b) The application of the Salini test to the bonds/security entitlements in the
present case .............................................................................................................. 162
6. The meaning of "investment" under Art. 1(1) of the Argentina-Italy BIT ................. 164
7. Investment made "in the territory" of Argentina ........................................................ 167
8. Investment made "in accordance with the laws and regulations" of Argentina ......... 171
9. Conclusion .................................................................................................................. 17 4
V. EXISTENCE OF PRIMA FACIETREATY CLAIMS .................................................. 175
A. Positions of the Parties .................................................................................................... 175
1. Contentions by Respondent ........................................................................................ 175
2. Contentions by Claimants ........................................................................................... 176
B. Findings of the Tribunal. ................................................................................................. 178
1. Basis of the prima facie test ........................................................................................ 179
2. Alleged breaches of the Argentina-Italy BIT .............................................................. 180
3. Conclusion .................................................................................................................. 184
VI. COMPLIANCE WITH ARTICLE 8 OF THE ARGENTINA-ITALY BIT-THE
PREREQUISITES OF AMICABLE CONSULTATIONS AND RECOURSE TO
ARGENTINE COURTS ................................................................................................. 185
A. Positions of the Parties .................................................................................................... 185
1. Contentions by Respondent ........................................................................................ 185
2. Contentions by Claimants ........................................................................................... 188
B. Findings of the Tribunal. ................................................................................................. 191
1. Nature of the obligations enshrined in Art. 8(1)-(3) of the Argentina-Italy BIT ........ 191
V
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
2. The prerequisite of amicable consultations ................................................................. 194
3. The prerequisite of having recourse to domestic courts ............................................. 199
a) Binding character of the requirement ....................................................................... 199
b) Legal consequences of disregarding the requisite of having recourse to
Respondent's courts ................................................................................................. 201
c) The futility exception ................................................................................................ 202
(1)
(2)
(3)
Existence of the futility exception ..................................................................... 202
Threshold of the futility exception .................................................................... 206
Application of the futility exception to the present case ................................... 208
( 4) The Tribunal's conclusions and the Decision in the Abaclat case .................... 213
d) No need to rely on the most favoured nation clause of Art. 3(1) of the BIT ............ 216
DISSENTING OPINION BY ARBITRATOR TORRES BERNARDEZ ................................. 217
DECISIONS TAKEN BY THE TRIBUNAL. ............................................................................ 217
VI
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
VI. COMPLIANCE WITH ARTICLE 8 OF THE ARGENTINA-ITALY BITTHE
PREREQUISITES OF AMICABLE CONSULTATIONS AND RECOURSE
TO ARGENTINE COURTS
A. Positions of the Parties
1. Contentions by Respondent
552. Respondent argues that Art. 8 of the Argentina-Italy BIT provides for a multi-layered,
sequential dispute resolution system (RI§ 269; R II§ 429; R III§ 88). It gives rise to
mandatory jurisdictional requirements; failure to respect them implies a bar to the
jurisdiction of the Tribunal (Tr p. 22/3). As the prerequisites of Art. 8 of the BIT must be
satisfied before Argentina can be considered to have consented to arbitration through the
BIT and as Claimants have improperly skipped the first two steps (i.e. amicable
consultations and recourse to the Argentine courts), it follows that Argentina has not
consented and that the Centre has no jurisdiction (RI§ 273; R II§ 431; R III§ 84).
553. As to the amicable consultations requirement of Art. 8(1), Respondent points out that
Claimants have acknowledged their failure to make any attempt to resolve their purported
claims against Argentina (R I§ 271). Furthermore, Respondent submits that it conducted
good-faith consultations with innumerable purchasers and creditor groups since its
default in 2001 and that the 2005 Exchange Offer was a product of these substantial
discussions and reflected the contributions of many creditor groups (RI§§ 278, 279; R II
§§ 459, 460; Tr p. 418/6). Moreover, Law No. 26.017 did not make settlement with
Argentina impossible or futile. It only required legislative consent to any settlement
which is corroborated by the reopening of the Exchange Offer in 2010 (RI§ 280; R II§
462). Argentina further contends that Claimants could have attempted to negotiate with
Respondent before Law No. 26.017 was enacted (R II§ 461; Tr p. 34/15).
554. Moreover, Respondent considers the prerequisite to have recourse to domestic courts for
18 months to be mandatory. It is a precondition to avail oneself of international
arbitration according to Art. 8(3) of the Argentina-Italy BIT (R I§§ 283, 286, 287).
Respondent points out in that regard that Claimants do not dispute their failure to submit
their claims to the Argentine courts (RI§ 282).
- 185 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
555. In addition, Respondent contests that the Claimants can rely on "the so-called futility
exception" (R I § 288). Respondent submits in that regard that Claimants err when
claiming futility because it would be impossible for Argentine courts to resolve the
dispute within 18 months. For one, it is far from impossible for Argentine courts to
decide a case similar to the present one in 18 months (R I §§ 289, 293). More
importantly, Art. 8(3) of the BIT does not require the dispute to be resolved within the
timeframe stipulated therein, but only that the dispute is submitted to domestic courts (R I
§§ 291, 294; R II§ 466; R III§ 94).
556. In Respondent's opinion, there are at least two reasons to include a requirement to have
recourse to domestic courts in the Argentina-Italy BIT: On the one hand, the Contracting
Parties intended to give local courts an opportunity to decide a dispute before it could be
submitted to international arbitration so that judicial authorities would be afforded the
opportunity to review - and, if appropriate, to correct - government acts before setting in
motion the intricacies and consequences associated with international investment
arbitration. The provision gives the host State the opportunity to address the allegedly
wrongful act within the framework of its domestic legal system, thus avoiding potential
international responsibility therefor. On the other hand, the Contracting Parties could
have the chance to resolve the dispute in their territories in a shorter period of time than
international arbitration (RI§§ 292, 293; R II§§ 467, 468).
557. As regards Claimants' reference to Law No. 26.017, Argentina contends that the law in
no way inhibits Claimants from submitting the dispute to local courts (R I § 297).
Furthermore, Respondent deems Claimants' reference to the 2005 Galli Judgment of the
Supreme Court of Argentina282 and its progeny unavailing since this was a purely
domestic case. By virtue of Art. 75 para. 22 of the Argentine Constitution, international
treaties such as the Argentina-Italy BIT rank above domestic legislation in the legal
282 Corte Suprema de Justicia de la Nacion, Galli, Hugo G. y otro/Poder Ejecutivo Nacional sf amparo, Final
decision, 5 April 2005 (Fallos: 328:690), Case No. G. 2181 XXXIX; see Annex CLA 37.
- 186 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
hierarchy. 283 Accordingly, Claimants could have relied on the BIT before the Argentine
courts in order to have Law No. 26.017 (assuming that it was not in compliance with the
international obligations of Argentina, which is disputed by Respondent) set aside by the
domestic courts as unconstitutional (RI§ 296; R II§ 473; Tr pp. 36/21, 431/6, 433/15).
558. In regard to Claimants' submissions regarding futility due to the high costs of
commencing proceedings in local courts, Argentina contends that the mere fact that such
recourse might be burdensome or would cause the investor to incur costs does not defeat
the requirement for Claimants to meet the conditions of Art. 8 of the BIT. High costs do
not render the local recourse option futile, just expensive (R II§§ 470, 471). Furthermore,
Respondent submits that remedies before Argentine courts are inexpensive (Tr p. 434/9).
Should any investor consider that the costs incurred by him to satisfy the BIT
requirements are unreasonable, he may attempt to recover such costs by resorting to the
international arbitral tribunal (R III§ 114).
559. Concerning the most-favoured nation clause (hereinafter "MFN clause") argument made
by the Claimants, Respondent contends, first, that the MFN clause does not apply to
dispute resolution mechanisms (R I§ 272; R II§ 477). Secondly, the MFN clause only
applies to investments in the territory of Argentina (R II§ 491). Thirdly, even if the
clause applied to dispute resolution provisions, Claimants have not shown that the dispute
settlement provisions contained in the Argentina-US BIT284, notably its Art. VII para. 3,
are more favourable than those of the Argentina-Italy BIT. In particular, it does not
amount to less favourable treatment for Claimants to be first required to resolve the
dispute in domestic courts (R II§§ 494, 495).
283 Constitution of Argentina, as sanctioned by the Constituent General Congress on 1st May 1853, reformed by the
National Convention "ad hoc" on 25 September of 1860 and with the Reforms of the Conventions of 1866, 1898,
1957 and 1994, Art. 75 para. 22: "Corresponde al Congreso [ ... ] Aprobar o desechar tratados concluidos con las
demas naciones y con las organizaciones intemacionales y los concordatos con la Santa Sede. Los tratados y
concordatos tienenjerarquia superior a las leyes."; Translation: "Congress is empowered[ ... ] To approve or reject
treaties concluded with other nations and international organizations, and concordats with the Holy See. Treaties and
concordats have a higher hierarchy than laws."
284 Treaty between the USA and the Argentine Republic Concerning the Reciprocal Encouragement and Protection
oflnvestment of 14 November 1991; see Annex CA 39 (hereinafter "Argentina-US BIT").
- 187 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
2. Contentions by Claimants
560. Claimants accept that there exists an obligation for the Parties, under Art. 8 of the
Argentina-Italy BIT, to resort to amicable consultations and to have recourse to domestic
courts prior to taking a dispute to international arbitration (Tr p. 226/10). However, in
their opinion, this provision does not lay down mandatory jurisdictional requirements but
merely provides for procedural prerequisites which do not need to be strictly followed.
Thus, non-compliance is not a bar to ICSID jurisdiction (CI§ 382; C II § 164).
According to the Claimants, these procedural prerequisites constitute reasonable prior
steps to avoid an international arbitration which could prove useless if other simpler or
less costly solutions to the dispute could be found. In contrast, recourse to international
arbitration should not be unduly jeopardized or procrastinated where there are no realistic
prospects that the other means for the settlement of the dispute will prove workable or
successful (CI§ 3 79). The Claimants submit that, in the case at hand, any effort to resort
to the mechanisms indicated in arts. 8(1) and (2) of the BIT would have proved futile
since there was no realistic prospect for the Parties to reach an agreement on the present
dispute or to obtain justice at the hands of the courts of Argentina (CI§ 388).
561. As regards more specifically the prerequisite of amicable consultations pursuant to Art.
8(1) of the BIT, the Claimants submit that the Respondent has always displayed a hostile
and uncooperative attitude towards them (Request§ 87). They refute the argument that
the 2005 Exchange Offer showed Argentina's willingness to consult the bondholders
since the terms of the offer were elaborated unilaterally by Argentina and then imposed
on bondholders who were not involved in the negotiations (CI§§ 391 et seq.; C II§ 170;
Tr p. 227/21).
562. According to the Claimants, the possibility of reaching an amicable settlement was
finally precluded by Art. 3 of Law No. 26.017 which forbids Respondent from entering
into any judicial, out-of-court or private settlement with bondholders who did not
participate in the 2005 Exchange Offer (Request§ 87; CI§§ 393 et seq.; C II§ 178; Tr
p. 229/18; C III§ 174). The Claimants consider the absence of consultations before the
enactment of Law No. 26.017 to be irrelevant since consultations were only required
before the request for international arbitration was submitted, so that Claimants were
- 188 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
certainly not under an obligation to consult before 2005 (Tr pp. 229/7, 464/21; C III§
173). Given the fact that Art. 8 para. 1 of the Argentina-Italy BIT merely requires
amicable consultations to be pursued "insofar as possible", Claimants cannot be blamed
for not having had recourse to consultations since these were impossible (CI§ 387; C II
§ 180).
563. Concerning the prerequisite to have recourse to the domestic courts of the host State for a
period of 18 months prior to resorting to international arbitration according to Art. 8(2) of
the BIT, Claimants have contended that this is not a mandatory requirement, but merely
an option for the investor (CI§ 398). To this effect, they rely on the language of the
provision according to which disputes "may" be submitted to the courts. Claimants
contrast this wording with that of Art. 10 of the Argentina-Germany BIT ("shall") which
was pertinent in the Winters hall case and seek to distinguish that case on this basis ( C I
§§ 385, 387).
564. Furthermore, even if recourse to domestic courts were considered mandatory, Claimants
submit that any legal action before Argentine courts on their part would have been
entirely futile, and this for several reasons: First, it is clearly impossible for the local
courts to decide a case of such magnitude in only 18 months (Request § 89; CI§ 419; C
II§§ 208, 211; Tr p. 234/10).
565. Secondly, Law No. 26.017, notably its arts. 3285 and 6286, is considered by Claimants to
have been absolutely categorical in shutting the door to any possibility to obtain redress
285 Law No. 26.017, Art. 3: "Prohibese al Estado nacional efectuar cualquier tipo de transacci6n judicial,
extrajudicial o privada, respecto de los bonos a que refiere el articulo 1 ° de la presente ley." (as to the Spanish
original see Annex RA 72). See also the translation provided by the Respondent: "The national Government is
precluded from entering into in [sic] any type of judicial, extra-judicial or private settlement with respect to the
bonds to which Article 1 of the present law refers." (Annex RA 72). The translations as provided by the Claimants
read: "It is prohibited to the National Government to make any kind of [C II: The national Government is precluded
from entering into in (sic) any type of] judicial, out-of-court or private settlement, in respect of the bonds referred to
in article 1 of this Act [i.e. the bonds that were not tendered for exchange in the 2005 Exchange Offer]." (CI§ 393,
n. 326; C II§ 174 n. 76).
286 Law No. 26.017, Art. 6: "Sin perjuicio de lo establecido precedentemente, los bonos del Estado nacional
elegibles de acuerdo a lo dispuesto por el Decreto N° 1735/04, depositados por cualquier causa o titulo a la orden de
tribunales de cualquier instancia, competencia y jurisdicci6n [ ... ] quedanin reemplazados, de pleno derecho, por los
'BONOS DE LA REPUBLICA ARGENTINA A LA PAR EN PESOS STEP UP 2038', en las condiciones
establecidas para la asignaci6n, liquidaci6n y emisi6n de tales bonos por el Decreto N° 1735/04 y sus normas
complementarias." The English translation provided by the Respondent reads: "Notwithstanding the above
- 189 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
before Argentine courts (Request§ 88; CI§ 411; C II§ 201). This is corroborated by the
legal stance taken by the Supreme Court of Argentina in the afore-mentioned judgment in
the Galli case287 which demonstrated that any bondholder attempting to obtain payment
by resorting to the courts of Argentina will face a rejection of its claims so that any such
attempt would have proven a totally useless and frustrating exercise (CI§§ 415, 418; C
II§ 203; Tr p. 231/7). Furthermore, Claimants refute Respondent's argument that Galli
only related to domestic cases and that the Claimants could have relied before the
Argentine courts on the supremacy of the Argentina-Italy BIT over Law No. 26.017
according to Art. 75 para. 22 of the Constitution of Argentina (C II§ 204; Tr p. 233/16;
C III § 179). In Galli, the Supreme Court declared the restructuring legislation to be a
non-justiciable political question and recognized in this and subsequent decisions the
constitutionality of Law No. 26.017 (C II§ 205; C III§ 180). Moreover, the position
taken by the Argentine Government in the present proceedings squarely contradicts the
one which the same Government vigorously defended in domestic litigation (CI§§ 416-
418; C II§ 206; Tr p. 234/3).
566. Thirdly, Claimants contend that to bring proceedings before the Argentine courts they
would have to pay a judicial tax (tasa de justicia) in an amount of 3 % of the amount
claimed. In addition, since they are not domiciled and do not possess real estate in
Argentina, they would also have to submit a guarantee (garantia de arraigo) which can
be very costly. Moreover, if the Claimants abandoned the proceedings after the elapse of
the 18 months, they would be required to pay the costs of the proceedings and would not
be entitled to recover their own costs (CI§ 422; Tr p. 235/6; C III§ 182).
established, the bonds of the national Government eligible under the terms of Decree No. 1735/04, deposited
pursuant to any cause or title on the order of any court of any venue, competence, and jurisdiction [ ... ] shall be
replaced, by operation oflaw, with the 'BONDS OF THE ARGENTINE REPUBLIC AT PAR IN PESOS STEP UP
2038,' according to the terms established for the assignment, liquidation and issue of such bonds by Decree
No. 1735/04 and its complementary norms." (see Annex RA 72). As to the Claimants' translation see C II§ 174,
n. 76: "Notwithstanding the above provisions, the bonds of the national Government eligible under the terms of
Decree No. 1735/04, deposited pursuant to any cause or title to the order of any court or any instance, competence,
and jurisdiction[ ... ] shall be replaced, by operation oflaw, with the 'BONDS OF THE ARGENTINE REPUBLIC
AT PAR IN PESOS STEP UP 2038', according to the terms established by Decree No. 1735/04 and its
complementary norms for the assignment, liquidation and issue of such bonds."
287 See supra note 282.
- 190 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
567. In any event, the Claimants contend that they are not required to have recourse to
domestic courts on account of the MFN clause contained in Art. 3 of the Argentina-Italy
BIT. In the eyes of the Claimants, this clause applies to all matters covered by the BIT ( C
I§ 406). According to the Claimants, both the wording of the provision and ICSID case
law admit that MFN clauses extend to dispute resolution mechanisms (CI§§ 404, 406).
Hence, Art. 3 of the Argentina-Italy BIT allows Claimants to rely on Art. VII para. 3 of
the Argentina-US BIT and thus to refer the dispute to ICSID arbitration with no need to
satisfy the 18-month period before the domestic courts (CI§ 400; C II§ 189).
B. Findings of the Tribunal
568. According to Art. 8(1)-(3) of the Argentina-Italy BIT,
(1) Any dispute relating to investments that arises between an investor from one
of the Contracting Parties and the other Party, with respect to matters regulated
by this Agreement, shall be, insofar as possible, resolved through amicable
consultations between the parties to the dispute.
(2) If such consultations do not provide a solution, the dispute may be submitted
to a competent administrative or judicial jurisdiction of the Contracting Party in
whose territory the investment is located.
(3) If a dispute still exists between investors and a Contracting Party, after a
period of 18 months has elapsed since notification of the commencement of the
proceeding before the national jurisdictions indicated in paragraph 2, the dispute
may be submitted to international arbitration.
569. Respondent has contended, and Claimants have agreed (Tr p. 226/10), that these
provisions give rise to obligations for a party who wants to avail itself of the dispute
resolution mechanism offered by the Argentina-Italy BIT. The Parties disagree, however,
on the precise legal nature of these obligations (1.) as well as on the scope of the
prerequisites of amicable consultations (2.) and of recourse to the domestic courts (3. ).
1. Nature of the obligations enshrined in Art. 8(1)-(3) of the ArgentinaItaly
BIT
570. Respondent has insisted throughout the proceedings that Art. 8(1)-(3) of the ArgentinaItaly
BIT create a "multi-layered, sequential dispute resolution system" constituting
"mandatory jurisdictional requirements". In contrast, in Claimants' view, these only give
rise to "procedural prerequisites". Both Parties have drawn the Tribunal's attention to
- 191 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
numerous authorities and cases in which legal issues which they deemed comparable to
those in the present dispute were at stake. In particular, the International Court of Justice,
relying on its case-law on the matter, recently qualified negotiation requirements
stemming from Art. 29 of the Convention on the Elimination of all Forms of
Discrimination against Women as affecting its jurisdiction. 288 In contrast, the Tribunal in
the Abaclat case - which had the same BIT before it as the present Tribunal - concluded
that Art. 8(1)-(3) of the Argentina-Italy BIT were requirements of admissibility rather
than jurisdiction. 289
571. Further examples could be added at will. The major conclusion to be drawn for them,
however, is that there has not been a consistent approach on these matters by investment
treaty tribunals290, let alone in international law more generally. This does not come as a
surprise since each international arbitral tribunal or judicial body must craft its decision
on the basis of the applicable substantial provisions of international law and within the
specific institutional and procedural framework in which it is embedded. This limits the
extent to which a tribunal such as the present one can rely on distinctions made by other
tribunals which may perfectly make sense from their respective viewpoint.
572. The present Tribunal is called to interpret and apply the Argentina-Italy BIT which does
not differentiate between "mandatory" and "non-mandatory" requirements as well as
'jurisdictional", "admissibility" or "procedural" prerequisites. Nor is such distinction
contained in the ICSID Convention or the Arbitration Rules. Hence, as far as the
288 See Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of the Congo
v. Rwanda), Jurisdiction and Admissibility, Judgment, ICJ Reports 2006, 6, para. 88; as to Art. 75 of the WHO
Constitution, Art. XIV para. 2 of the Unesco Constitution, and Art. 14 para. 1 of the Montreal Convention for the
Suppression of Unlawful Acts against the Safety of Civilian Aviation see, in a similar vein, ibid., paras. 99 et seq.,
107 et seq. as well as 117 et seq. Furthermore, in Application of the International Convention on the Elimination of
all Forms of Racial Discrimination (Georgia v. Russia), Preliminary Objections, Judgment, 1 April 2011, para. 141,
the negotiation requirement in Art. 22 of the Convention was considered a precondition to be fulfilled before the
seisin of the Court, i.e. a precondition to the exercise of the Court's jurisdiction (ibid., para. 183). See, however, the
jurisprudence constante of the International Court of Justice which treats the requirement of exhaustion of local
remedies (in the context of diplomatic protection) as an admissibility issue; see e.g. Interhandel Case (Switzerland v.
USA), Preliminary Objections Judgment, ICJ Reports 1959, 6, 23 et seq.; see also/. Brownlie, Principles of Public
International Law, 7th ed., 2008, 492 et seq.
289 Abaclat Decision, para. 496.
290 See Williams, Jurisdiction and Admissibility (note 202) 919.
- 192 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
applicable law is concerned, there is no a priori reason for the Tribunal to enter into the
doctrinal intricacies of these distinctions and the related academic and judicial discourse.
573. That being said, the mandate given to the Tribunal by the Parties states that there should
first be "a preliminary phase in the proceedings covering Jurisdiction and
admissibility". 291 For this reason, these concepts are relevant to the Tribunal and this
becomes manifest in the very title of its present Decision, i.e. "Decision on Jurisdiction
and Admissibility". At the same time, this does not force the Tribunal to draw a neat
dividing line between these two concepts and to endorse one of the many controversial
views articulated as to where the exact difference lies between them. The Tribunal would
like to note in this context that the terminology applied by the Parties themselves does not
seem to be free from ambiguities. 292
574. The Tribunal would consider that the mission with which it has been entrusted by the
Parties does not call it, in the first place, to give an answer as to whether the legal issues
at stake are to be classified as questions of jurisdiction or admissibility. The Tribunal's
mandate - and it is to this mandate that the title of the present Decision refers - rather
requires it to take note of and thoroughly examine all legal claims made by the Parties
under the labels of both jurisdiction and admissibility and to decide whether these are
justified in law or not.
575. What is thus crucial, in the Tribunal's opinion, is that all claims of lack of jurisdiction
and admissibility filed by Respondent in its Memorial and elaborated upon in its further
written and oral submissions will have to be perused and, if considered as not justified,
rejected before the dispute could proceed to the merits phase. In no way would the
distinction between jurisdictional and admissibility issues suggest a different degree of
"bindingness". Hence, irrespective of whether others may identify a different degree of
"bindingness" with regard to the two notions, in this Tribunal's view and at least with
regard to the requirements set forth by Art. 8(1)-(3) of the Argentina-Italy BIT, if any of
291 See Minutes of the First Session, point 14 (emphasis added); supra para. 5.
292 For instance, while some of Respondent's submissions qualify violations of obligations under Art. 8 of the
Argentina-Italy BIT as obstacles to the admissibility of the claims at stake (R I§ 282), other passages suggest the
opposite, i.e. that such violations would give rise to jurisdictional obstacles (RI§§ 273, 287, 298).
- 193 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
these requirements in their interpretation by the Tribunal and applied to the facts of the
case, has not been met by Claimants, the Tribunal would have to dismiss the case
irrespective of whether the requirement would qualify as one of jurisdiction or
admissibility.
576. In order to answer these questions, the Tribunal will now turn to the submissions of the
Parties as to whether the Claimants have complied with the requirements of prior
amicable consultations and recourse to the domestic courts of Argentina, respectively.
2. The prerequisite of amicable consultations
577. Art. 8(1) of the Argentina-Italy BIT states the requirement that any dispute relating to
investments falling into its scope of application "shall be, insofar as possible, resolved
through amicable consultations". In the Tribunal's opinion, the language of the provision
clearly suggests that it creates a duty for the Parties to enter into consultations. This
becomes manifest in the authentic versions of Art. 8(1) of the BIT where the use of "sera
[ ... ] solucionada" in Spanish and "sara [ ... ] risolta" in Italian indicates the existence of a
legal obligation. 293 This result is corroborated by the conditional clause in para. 2 which
authorizes the Parties to proceed to subsequent dispute resolution mechanisms ( only) "if
such consultations do not provide a solution".
578. The present Tribunal is aware that the Tribunal in the Abaclat case came to a different
result in view of the very same provision of the Argentina-Italy BIT. It notably concluded
that "the consultation requirement set forth in Article 8(1) BIT is not to be considered of
a mandatory nature but as the expression of the good will of the Parties to try firstly to
settle any dispute in an amicable way. "294 The Tribunal justified this conclusion chiefly
by relying on the use of the phrase "insofar as possible" (in Spanish: "en la medida de lo
posible"; in Italian: "per quanto possibile") in Art. 8 para. 1 of the Argentina-Italy BIT.
293 See the analogous situation in Wintershall AG v. Argentine Republic, ICSID Case No. ARB/04/14, Award,
8 December 2008 where Art. 10 para. 2 of the Argentina-Germany BIT similarly provided for that a "dispute[ ... ]
shall [ ... ] be submitted" ("la controversia [ ... ] sera sometida" in Spanish and "Meinungsverschiedenheit [ ... ] ist [ ... ]
zu unterbreiten" in German) and where the deciding arbitral tribunal correctly identified this wording as being
"indicative of an 'obligation' - not simply a choice or option" and "legally binding" (ibid., para. 119).
294 Abaclat, Decision, para. 564.
- 194 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
579. In contrast, the present Tribunal would rather follow the reasoning in the Dissenting
Opinion of Professor Abi-Saab who has rightly pointed out that the addition of this
phrase does not eliminate the binding character of the provision, but characterizes it as a
certain type of binding provision, namely an "obligation of means" or of "best efforts".295
As also the International Court of Justice has emphasized on several occasions,
provisions directing the parties to consult or negotiate may well constitute legally binding
obligations, non-compliance with them having legal effects, including the dismissal of
the case. Whether and to which extent they set forth binding obligations, is a matter of
interpretation of the relevant provisions. 296
580. A party defying a duty to engage, as far as possible, in amicable consultations would
therefore have to be prepared to see its claim denied to be admitted to the merits phase.
However, before reaching such conclusion, the Tribunal must clarify the exact nature of
the "duty to consult insofar as possible". Two remarks are in place in this regard:
581. First, from its very character as an obligation of means and not of result follows that "an
obligation to negotiate does not imply an obligation to reach an agreement."297 Some
tribunals go even so far as to qualify consultation or negotiation clauses as mere
procedural requirements whose violation would have no effect on jurisdiction or the
admissibility of the claim. 298 Yet, this is not the view taken by this Tribunal. At the same
time, one must take note of the fact that in the few cases where investment tribunals
295 Dissenting Opinion of Professor Abi-Saab in the Abaclat case, para. 26.
296 See, e.g., Railway Traffic between Lithuania and Poland, Advisory Opinion, 15 October 1931, PCIJ Series A/B,
No. 42, 116; North Sea Continental Shelf (Germany/Denmark; Germany/Netherlands), Judgment, ICJ Reports 1969,
3, para. 85; Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment, ICJ Reports 2010, 14, paras. 149,
150; see also supra note 288.
297 Railway Traffic between Lithuania and Poland, Advisory Opinion, 15 October 1931, PCIJ Series A/B, No. 42,
116.
298 See, e.g., UNCITRAL (NAFTA), Ethyl Corp. v. Canada, Award on Jurisdiction, 24 June 1998, para. 85; Salini
Costruttori Sp.A. and Italstrate Sp.A. v. Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 23 July
2001, paras. 74-88 and 187; UNCITRAL, Ronald S Lauder v. Czech Republic, Final Award, 3 September 2001,
para. 187; SGS Societe Generale de Surveillance S.A. v. Pakistan, ICSID Case No. ARB/01/13, Decision on
Jurisdiction, 6 August 2003, para. 184; Bayindir Insaat Turizm Ticaret Ve Sanayi A.S v. Pakistan, ICSID Case
No. ARB/03/29, Decision on Jurisdiction, 14 November 2005, para. 100; see, however, the approach in Antoine
Goetz and others v. Burundi, ICSID Case No. ARB/95/3, Award, 10 February 1999, paras. 90-93; Enron
Corporation and Ponderosa Assets, L.P. v. Argentina, ICSID Case No. ARB/01/3, Decision on Jurisdiction, 14
January 2004; see furthermore Schreuer, Consent to Arbitration (note 100) 844 et seq.
- 195 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
struck out cases for a violation of a consultation or negotiation requirement, this was
mostly for the reason that the respective clauses contained minimum periods of time for
consultations which were not respected by the claimants. 299 This is not the case here,
however, where we have a simple consultation clause which does not reserve any
minimum requirement of time for consultations.
582. Secondly, the qualifying phrase "insofar as possible" which is commonly found in
international investment treaties, 300 indicates that if the Claimants can show that
consultations were not possible, they cannot be held to have breached the duty incumbent
upon them. This does not mean reading a futility exception into Art. 8(1) of the
Argentina-Italy BIT, but it is a direct and independent consequence of the very wording
of the provision in question. Furthermore, there is considerable authority for the
proposition that mandatory waiting periods for consultations (let alone a simple duty to
consult, as in the present case) do not pose an obstacle for a claim to proceed to the
merits phase if there is no realistic chance for meaningful consultations because they
have become futile or deadlocked. 301 In this regard and particularly taking note of the fact
that Art. 8(1) of the Argentina-Italy BIT envisages consultations with a view of
"resolving" the dispute at stake, the Tribunal would endorse the Abaclat Tribunal's
299 Burlington Resources, Inc. v. Ecuador, ICSID Case No. ARB/08/5, Decision on Jurisdiction, 2 June 2010,
para. 315; Murphy Exploration and Production Company International v. Ecuador, ICSID Case No. ARB/08/4,
Award, 15 December 2010, paras. 90 et seq., in particular paras. 131 and 132.
300 See, e.g., Art. 26 para. 1 of the Energy Charter Treaty; Art. XIII para. 1 of the Agreement between the
Government of Canada and the Government of Barbados for the Reciprocal Promotion and Protection of
Investments; Art. X para. 1 of the Agreement between the Government of the Kingdom of Norway and the
Government of the Republic of Hungary on the Promotion and Reciprocal Protection of Investments; Art. 8 para. 1
of the Agreement between the Republic of Austria and Romania on the Promotion and Reciprocal Protection of
Investments.
301 As to the pertinent case-law of the International Court of Justice see the references in Application of the
International Convention on the Elimination of all Forms of Racial Discrimination (Georgia v. Russia), Preliminary
Objections, Judgment, 1 April 2011, para. 159. In the field of arbitration see, for instance, Occidental Petroleum
Corporation and Occidental Exploration and Production Company v. Ecuador, ICSID Case No. ARB/06/11,
Decision on Jurisdiction, 9 September 2008, para. 92: "attempts at a negotiation solution [prove] futile"; Biwater
Gauff (Tanzania), Ltd. v. Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, para. 343: "settlement
obviously impossible" and "negotiations obviously futile"; UNCITRAL, Ronald S. Lauder v. Czech Republic, Final
Award, 3 September 2001, paras. 188-191; SGS Societe Generate de Surveillance S.A. v. Pakistan, ICSID Case
No. ARB/01/13, Decision on Jurisdiction, 6 August 2003, para. 184. See also Schreuer, Consent to Arbitration (note
100) 846 stating in relation to mandatory waiting periods: "What matters is whether or not there was a promising
opportunity for a settlement. There would be little point in declining jurisdiction and sending the parties back to the
negotiation table if these negotiations are obviously futile."
- 196 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
conclusion that consultation "is to be reasonably understood as referring not only to the
technical possibility of settlement talks, but also to the possibility, i.e. the likelihood, of a
positive result" and that "it would be futile to force the Parties to enter into a consultation
exercise which is deemed to fail from the outset. Willingness to settle is the sine qua non
condition for the success of any amicable settlement talk. "302
583. Hence, while a consultation as far as possible requirement of the type enshrined in Art.
8(1) of the Argentina-Italy BIT creates a legal obligation, this obligation is not violated if
it is established that (a) the sufficient minimum amount of consultations was actually
conducted, or at least offered, or that (b) amicable consultations in order to resolve the
case at stake were not possible in the first place.
584. Applying these considerations to the facts of the present case, no consultations between
the Parties have taken place. To be sure, Claimants submit that after 2001 "there were
several attempts by groups of holders of Argentine bonds to enter into negotiations with
Argentina for a reasonable proposal" ( C II§ 167). However, Respondent contends (R I§
2 71; R IV § 16), and Claimants concede, that they "did not personally attempt
consultations with Argentina before the commencement of these proceedings" ( C IV §
19). In this respect, the Tribunal concludes that Claimants could not establish that a
minimum amount of consultations between them and the Respondent were conducted.
585. The Tribunals thus turns to the second alternative, i.e. that meaningful consultations with
a view of resolving the dispute at stake were not possible. In 2005, during the time the
Exchange Offer was open for acceptance by Argentina's creditors, the Argentine
Congress adopted Law No. 26.017 which forbade the country's government from
entering into any judicial, non-judicial or private settlement with the non-participating
bondholders as well as from reopening the Exchange Offer. 303 In fact, this law prevented
the Argentine Government from "enter[ing] into negotiations with a view to arriving at
an agreement, and not merely to go through a formal process of negotiation as a sort of
302 Abaclat Decision, para. 564.
303 As to Art. 3 of Law No. 26.017 see supra note 285.
- 197 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
prior condition". 304 The Government could have discharged its duty "so to conduct
[itself] that the negotiations are meaningful, which will not be the case when either of
them insists upon its own position without contemplating any modification of it"305 only
at the cost of violating Law No. 26.017. Hence, at least since the adoption of this law it
was clear that no realistic possibility of meaningful consultations to settle the dispute
with the Argentine Government existed.
586. This result is not affected by the fact that the Argentine Congress could have at any time
suspended or eliminated the ban on consultations and negotiations and that it actually did
so in 2010 in order to open the way for the new Exchange Offer (RI§ 280; R II§ 462).
What is crucial in this regard is that, first, the potential partner for negotiations, i.e. the
Argentine Government, was not in a position to act accordingly while the law was in
force, i.e. from 2005 onwards, and, second, that the very reason for the non-availability of
a venue for meaningful consultations was above all Congress' adoption of Law No.
26.017.
587. As far as Respondent argues that Claimants were free to initiate consultations before the
adoption of Law No. 26.017, the Tribunal would consider that there existed no duty for
the Claimants to do so in order to comply with Art. 8(1) of the Argentina-Italy BIT. The
provision is entirely silent regarding the time when consultations have to take place. The
only temporal requirement to be drawn from the provision is that this must be done
before the party in question has recourse to the domestic courts and proceeds to
international arbitration. As the Request was filed on 23 June 2008, the Tribunal cannot
therefore see why the Claimants would have fallen short of complying with Art. 8(1) of
the BIT by not having had initiated consultations before 2005 (i.e. the year of adoption of
Law No. 26.017).
304 North Sea Continental Shelf Cases (Germany/Denmark; Germany/ Netherlands), Judgment, ICJ Reports 1969,
48, para. 85.
305 Ibid., para. 85.
- 198 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
588. Accordingly, the Tribunal concludes that Claimants did not violate the requirement to
engage in amicable consultations incumbent upon them by virtue of Art. 8(1) of the
Argentina-Italy BIT.
3. The prerequisite of having recourse to domestic courts
a) Binding character of the requirement
589. As regards the second element in the three-step dispute resolution system, i.e. the
requirement to have recourse to domestic courts, the Tribunal is of the opinion that the
clear wording of Art. 8 paras. 2 and 3 of the Argentina-Italy BIT permits of no other
conclusion than that the provision sets forth a binding precondition for access to
international arbitration.
590. This follows first from the unqualified "if'' at the beginning of para. 3 - "if such
consultations do not provide a solution" (in Spanish: "Si esas consultas no aportaran una
soluci6n"; in Italian: "Se tali consultazioni non consentissero una soluzione") - which
makes the very right to start an arbitration dependent on prior submission of the dispute
to the local courts of the Respondent and the lapse of a period of 18 months since the
notification of the commencement of national proceedings.
591. Secondly, this holds true in spite of the use of the word "may" (in Spanish: "podra"; in
Italian: "potra") in Art. 8 para. 2 of the BIT. This paragraph speaks of the possibility to
submit a dispute to the domestic courts of the host State in case of the continuing
existence of a dispute subsequent to ( or for lack of) consultations. If an investor does not
want to abandon his claims at this point, he "may" proceed in the order envisaged by the
BIT's dispute settlement system by approaching the host State's courts. Far from
characterizing the recourse to domestic courts as a voluntary exercise on the way to
international arbitration, para. 2 must be read in context with para. 3. There, the further
possibility (in Spanish: "podra"; in Italian: "potra"; in English: "may") to submit the
dispute to international arbitration is conditioned by the twofold obligation (a) to
previously have recourse to the host State's courts and (b) to notify the commencement of
these national proceedings. As a consequence, the possibility to proceed to international
- 199 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
arbitration is at the disposal of the investor only when not having failed to satisfy the
obligation of having recourse to domestic courts.
592. Thirdly, the reference to the Winters hall case where in Art. 10(2) of the pertinent
Argentina-Germany BIT the wording "shall [ ... ] be submitted" ("sera sometida" in
Spanish; "ist [ ... ] zu unterbreiten" in German) is used in relation to the recourse to
domestic tribunals306, as opposed to the phrase "may be submitted" in Art. 8(2) of the
Argentina-Italy BIT, is of no avail to the Claimants. As has been pointed out, the term
"may" refers to the possibility for the investor to further proceed with the claim, but does
not dispose of the need to make use of this possibility in the manner prescribed by the
BIT, i.e. his obligation to have recourse to domestic courts before submitting an
arbitration request. To suggest an argumentum e contrario here would be tantamount to
ignoring the logic structure, and interdependence of the different steps, of Art. 8 paras. 1-
3 of the Argentina-Italy BIT.
593. This Tribunal is not called upon to interpret similar provisions in other treaties. But at
least in application to the specific rulings regarding Art. 8 of the BIT, the Tribunal is for
the above reasons not convinced by the concerns and criticism raised vis-a-vis clauses
"provid[ing] for a mandatory attempt at settling the dispute in the host State's domestic
courts for a certain period of time"307 inasmuch as this has prompted investment arbitral
tribunals or distinguished scholars in the field to challenge the binding character of such
clauses. 308 The Tribunal cannot ignore the fact that such clauses are commonly found in
investment treaties309 and that they are typically drafted in a manner that manifests their
306 Wintershall AG v. Argentine Republic, ICSID Case No. ARB/04/14, Award, 8 December 2008, paras. 119 et seq.
307 Schreuer, Consent to Arbitration (note 100) 847; see also L. Markert, Streitschlichtungsklauseln in
Investitionsschutzabkommen (2010) 210 referring to such clauses as "temporary limited local remedies clauses"
("befristete local remedies-Klauseln").
308 Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, 8 February 2005,
para. 224 which speaks in respect of an analogous clause in the applicable BIT of a "curious requirement" and
"sympathizes with a tribunal that attempts to neutralize such a provision that is nonsensical from a practical point of
view". See also C. Schreuer, Calvo's Grandchildren: The Return of Local Remedies in Investment Arbitration, 4
The Law and Practice oflntemational Courts and Tribunals (2005) 1, at 4, 5; see similarly id., ICSID Convention
Commentary, Art. 26, para. 204; P. Peters, Exhaustion of Local Remedies: Ignored in Most Bilateral Investment
Treaties, 44 Netherlands International Law Review (1997) 233, at 245.
309 See Schreuer, Calvo's Grandchildren (note 308) 16.
- 200-
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
binding nature. These characteristics are clear indications that the Contracting Parties of
the respective BIT intended to give such clauses some effect. Treaty provisions should
not be construed in a way that takes away from them all useful effect ( ut res magis val eat
quam pereat). It is thus necessary for a tribunal called to interpret such a clause to duly
acknowledge its binding character and to identify which purposes it may serve in the
context of the applicable BIT. This also holds true in the present case.
b) Legal consequences of disregarding the requisite of having
recourse to Respondent's courts
594. Given the fact that Art. 8(2) and (3) of the Argentina-Italy BIT give rise to a legally
binding requirement of prior recourse to the Respondent's courts and that it is undisputed
between the Parties that Claimants did not submit the dispute to Argentine courts before
initiating the present arbitration proceedings on 23 June 2008310, the Respondent
contends that the Tribunal should reject to hear the case.
595. The Abaclat Tribunal which had to deal with a similar situation and the very same BIT
reached the following conclusion in this regard: "[T]he wording of Article 8 BIT itself
does not suffice to draw specific conclusions with regard to the consequence of noncompliance
with the order established in Article 8. [ ... ] Claimants' disregard of the 18
months requirement is in itself not yet sufficient to preclude Claimants from resorting to
arbitration."311 These statements were harshly criticized in Professor Abi-Saab's
Dissenting Opinion, where they were qualified as "very odd indeed", since they ignored
that
no instrument, laying down jurisdictional limits or admissibility conditions,
specifies the legal consequences of non observance of these limits or non
fulfilment of these conditions. These consequences are embedded in the very
legal classification of these as jurisdictional limits or admissibility conditions.
According to the general rules of law and rules of general international law, non
310 See RI§ 282 referring to Claimants' Reply to Respondent's First Set of Documents Requests, para. 25 (Annex
RA 113, para. 25): "There are no documents relating to any attempt of NASAM's or of any of the Claimants to
resolve any of the claims at issue in this arbitration through resort to local courts or tribunals [ ... ]."
311 Abaclat Decision, paras. 579, 580.
- 201 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
compliance begets the inevitable legal sanction of dismissing the case, as falling
outside the jurisdiction of the tribunal or as inadmissible. 312
596. This Tribunal would be inclined to endorse the latter position. If a requirement set forth
by Art. 8 of the Argentina-Italy BIT were not complied with, the venue to international
arbitration would not be open. However, at this stage the Tribunal would consider it
premature to come to such conclusion. Claimants argue that the prerequisite of having
recourse to the domestic courts of Argentina has not been violated by, or does not apply
to, Claimants, and this for two reasons: First, they argue that paras. 2 and 3 of Art. 8 of
the BIT are inapplicable in the present case because recourse to Respondent's courts
would have been futile. Secondly, the Claimants seek to take refuge to the MFN clause in
Art. 3 para. 1 of the Argentina-Italy BIT in combination with Art. VII(3) of the
Argentina-US BIT. The Tribunal will now examine the futility argument (c) and the
MFN clause argument ( d) in tum.
c) The futility exception
(1) Existence of the futility exception
597. Claimants submit that there exists an exception to the duty to have recourse to
Respondent's courts in case such recourse would be futile. Respondent implicitly accepts
the existence of a futility exception, but argues that the relevant threshold is very high
and that the facts of the case do not lend themselves to give rise to a situation of futility
(RI§§ 290, 291).
598. Even though the Parties do therefore not disagree as to the existence of a futility
exception with regard to prerequisite of having recourse to domestic courts, as laid down
in Art. 8(2) and (3) of the Argentina-Italy BIT, the Tribunal must assure itself that this
view of the Parties constitutes a sound interpretation of these provisions. The question of
the applicable threshold can only be addressed once it is clear that the exception exists in
the first place. 313
312 Dissenting Opinion of Professor Abi-Saab in the Abaclat case, para. 28.
313 See infra paras. 608 et seq.
- 202 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
599. It appears to be generally accepted in international law that obligations requiring an
individual to approach a State's local courts before a claim may be taken to the
international plane do not apply unconditionally. Under certain circumstances, the lack of
a claim's prior submission to domestic courts does not lead to the dismissal of the claim,
notably in the law of diplomatic protection. Indeed, for a State to bring a claim on behalf
of one of its nationals under the title of diplomatic protection, the individual concerned
must, as a matter of principle, exhaust the legal remedies available to him in the State
where the alleged injury took place. 314 However, only those remedies must be used which
are available "as a matter of reasonable possibility."315 This exception to the local
remedies rule, the so-called futility rule, is now universally recognized in the law of
diplomatic protection. It is set out in Art. 15(a) of the Draft Articles of the International
Law Commission on Diplomatic Protection of 2006 (hereinafter "2006 ILC Draft
Articles on Diplomatic Protection") in the following manner: "Local remedies do not
need to be exhausted where [ ... ] [t]here are no reasonably available local remedies to
provide effective redress, or the local remedies provide no reasonable possibility of such
redress."316
600. That being said, Art. 8(3) of the Argentina-Italy BIT does not mention or refer to such
exception. This is not the end of the matter, however. According to the general rules of
treaty interpretation as codified in Art. 31 of the VCLT, it is required that when
interpreting a treaty provision "any relevant rules of international law applicable in the
relations between the parties" shall be "taken into account, together with the context"
(Art. 31 para. 3 lit. c of the VCLT). 317 The term "relevant rules of international law" also
includes pertinent customary international law. 318
314 See Elettronica Sicula S.p.A. (ELSI) (USA v. Italy), Judgment, ICJ Reports 1989, 15, para. 50; see further Art. 14
of the 2006 ILC Draft Articles on Diplomatic Protection; Brownlie, Principles of Public International Law (note
288) 492.
315 See Certain Norwegian Loans (France v. Norway), Judgment, ICJ Reports 1957, 9, Separate Opinion of Judge
Lauterpacht, 34, at 39; Barcelona Traction, Light and Power Company, Limited (Second Phase), Judgment, ICJ
Reports 1970, 3, Separate Opinions of Judge Tanaka, 114, at 144, 145 and of Judge Gros, 267, at 284; see Brownlie,
Principles of Public International Law (note 288) 495 with further references.
316 Art. 15 lit. a of the 2006 ILC Draft Articles on Diplomatic Protection.
317 As to the relevance of this provision in treaty interpretation see notably the Oil Plaiforms Case (Iran v. USA),
Judgment, ICJ Reports 2003, 161, paras. 41 et seq. as well as Certain Questions of Mutual Assistance in Criminal
- 203 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
601. Thus, in order to determine whether the futility exception also applies in the context of a
provision such as Art. 8 (3) of the Argentina-Italy BIT, it is necessary for the Tribunal to
assess whether the customary law exception of futility regarding the rule of exhaustion of
local remedies in diplomatic protection is sufficiently comparable to the requirement of
recourse to the domestic courts of Art. 8 (3) of the Argentina-Italy BIT to identify the
former as a rule of international law "relevant" to the latter.
602. In that regard, the Tribunal would consider that exhaustion of local remedies clauses and
the prerequisite to have recourse to domestic courts for a certain amount of time are
similar inasmuch as they both require to tum to the local judicial authorities before the
claim can be successfully brought to the international plane. Both serve the purpose of
honoring the host State's sovereignty by providing the latter the opportunity to settle a
dispute in its own fora before moving on to the international level. In a similar vein,
Respondent has submitted that clauses of the type of Art. 8 (3) of the Argentina-Italy BIT
intend to give local courts an opportunity to decide a dispute before turning to
international arbitration so that judicial authorities would be afforded the opportunity to
review - and, if appropriate, to correct - government acts before setting in motion the
intricacies and consequences associated with international investment arbitration. Indeed,
the provision gives the host State the opportunity to address the allegedly wrongful act
within the framework of its own domestic legal system, thus avoiding potential
international responsibility therefor (RI§ 292; R II§ 467). Furthermore, the Contracting
Matters (Djibouti v. France), Judgment, ICJ Reports 2008, 177, paras. 112 et seq.; in particular regarding
investment law see A. van Aaken, Fragmentation of International Law: The Case of International Investment Law,
17 Finnish Yearbook oflnternational Law (2008), 91, at 103 and 108; see Markert, Streitschlichtungsklauseln in
Investitionsschutzabkommen (note 307) 167, 168 and 213 et seq. It is worth noting that also Professor Abi-Saab's
Dissenting Opinion in the Abaclat case, para. 28 refers to the relevance of "general rules of law and rules of general
international law".
318 loannis Kardassopoulos v. Georgia, ICSID Case No. ARB/05/18, Decision on Jurisdiction, 6 July 2007,
para. 208; C. McLachlan, The Principle of Systemic Integration and Article 31 (3)( c) of the Vienna Convention, 54
International and Comparative Law Quarterly (2005) 279, at 310 et seq. with further references to the pertinent caselaw;
International Law Commission, Report on Fragmentation of International Law (2006), 7; A. van Aaken,
De-fragmentation of Public International Law Through Interpretation: A Methodological Proposal, 16 Indiana
Journal of Global Legal Studies (2009), 483, at 497,498.
- 204-
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
Parties could have the chance to resolve the dispute in their territories in a shorter period
of time than international arbitration (RI§ 293; R II§ 468). 319
603. Accordingly, in view of the strong structural parallels between these two types of clauses,
the Tribunal does not consider it a far-fetched conclusion to assume that the futility
exception to the exhaustion of local remedies rule in the field of diplomatic protection is,
in the light of Art. 31(3)(c) of the VCLT, also applicable to clauses requiring recourse to
domestic courts in international investment law. The conclusion that the futility of local
remedies constitutes an exception to the duty of having recourse to local courts is also
affirmed in the case-law and in legal academia. 320
604. Yet, there is a major difference between these two types of clauses. While in the field of
diplomatic protection the affected individual is generally required to "exhaust" local
remedies, in the case of requirements of recourse to domestic courts the investor typically
has to submit the dispute to the local courts for a certain amount of time. Given the
realities of settlement of complex disputes and the multi-stage character of domestic
judicial proceedings, of which the Contracting States of BITs are certainly well aware, it
is hardly plausible (and insofar everyone seems to agree) to impute to such clauses the
purpose of resolving an investment dispute by passing through the domestic legal system
and obtaining a final judgment within that amount of time. The consequence of the
319 For further reasons see UNCITRAL (PCA), JCS Inspection and Control Services Limited v. Argentina, PCA Case
No. 2010-9, Award on Jurisdiction, 10 February 2012, para. 269, n. 298.
320 Biwater Gauff (Tanzania), Ltd. v. Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, para. 343;
Saipem Sp.A. v. Bangladesh, ICSID Case No. ARB/05/7, Decision on Jurisdiction and Recommendation on
Provisional Measures, 21 March 2007, para. 153. See, however, for the opposite view (regarding the UK-Argentina
BIT) UNCITRAL, BG Group Pie. v. Argentina, Final Award, 24 December 2007, para. 146 (but accepting a
variation of the futility argument on the basis of Art. 32 of the VCLT; see ibid., para. 147) as well as the subsequent
decision of the US Court of Appeals for the District of Columbia Circuit, Argentina v. BG Group Pie., 665 F.3d
1353 (D.C. Circuit, 17 January 2012), 2 and 17; on which 106 AJIL (2012) 393 et seq. See further - again regarding
the US-Argentina BIT - JCS Inspection and Control Services Limited v. Argentina, PCA Case No. 2010-9, Award
on Jurisdiction, 10 February 2012, para. 263, citing the Abaclat Decision as the only decision brought to the
Tribunal's attention where an element of futility had been used successfully to allow derogation from the
prerequisite of recourse to domestic courts, and concluding that futility had not been demonstrated to the Tribunal's
satisfaction (see ibid., paras. 269 and 273); see, in a similar vein, (regarding the Germany-Argentina BIT) Daimler
Financial Services AG v. Argentina, ICSID Case No. ARB/05/1, Award, 22 August 2012, para. 198, where the
Tribunal appears to affirm, in principle, the existence of a futility exception, but concludes that futility was not
demonstrated by the Claimant in the case in question (see ibid., para. 191); see, however, the Dissenting Opinion of
Judge Brower, para. 15. See in general C. Schreuer, Travelling the BIT Route. Of Waiting Periods, Umbrella
Clauses and Forks in the Road, Journal of World Investment and Trade (2004), 231, at 238.
- 205 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
recognition of the limited purpose of such clauses is not, however, to challenge the
soundness and relevance of the latter at all 321 , but to direct the attention on these very
purposes and enquire about the functions which such clauses may actually serve in the
limited time foreseen, in the present case 18 months. 322
605. Such amount of time may indeed be sufficient for the commencement of formal court
proceedings to prompt the Parties to the dispute to agree on a court or out-of-court
settlement or for the national courts to render a first-instance judgment in the investor's
favour which the host State does not appeal. Since the domestic judicial system may
precisely serve such purposes where and inasmuch as there exist "reasonably available
local remedies to provide effective redress", the futility exception appears to be the
appropriate standard also in regard to recourse to domestic courts clauses.
606. What is more, since the futility exception is even capable of disposing of a duty to
exhaust local remedies - i.e. the use of (virtually) all means offered by the domestic
dispute settlement system for a (virtually) unlimited amount of time-, this must hold true
a fortiori for a duty to have recourse to local remedies for a limited amount of time.
Accordingly, the only aspect where there exists a major difference between the two types
of clauses, i.e. the time aspect, does not prevent the drawing of a parallel between them
regarding the futility exception; it rather militates in favour of drawing this parallel.
607. Hence, the Tribunal concludes that an interpretation of BIT clauses such as Art. 8(3) of
the Argentina-Italy BIT, in the light of Art. 31(3)(c) of the VCLT, results in admitting a
futility exception also in respect to such clauses, on the model of the futility exception to
the exhaustion of local remedies rule in the field of diplomatic protection.
(2) Threshold of the futility exception
608. Given the widely analogous structure and purposes of clauses on the exhaustion of local
remedies in the law of diplomatic protection and clauses providing for recourse to
321 See, however, P. Juillard, Chronique de droit international economique - Investissements, 41 Annuaire Frarn;:ais
de Droit International (1995) 604, at 608; A. Crivellaro, Consolidation of Arbitral and Court Proceedings in
Investment Disputes, 4 Law and Practice oflnternational Courts and Tribunals (2005) 371, at 399.
322 See supra para. 593.
- 206 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
domestic courts such as Art. 8(3) of the Argentina-Italy BIT, the Tribunal considers it
appropriate to also draw on the International Law Commission's work on diplomatic
protection as regards the threshold for the futility exception. The standard was articulated
in the afore-cited Art. 15(a) of the 2006 ILC Draft Articles on Diplomatic Protection in
the following manner: "Local remedies do not need to be exhausted where [ ... ] [t]here
are no reasonably available local remedies to provide effective redress, or the local
remedies provide no reasonable possibility of such redress [ ... ]". 323
609. This standard was carefully drafted and documented by the International Law
Commission, as becomes manifest in the Commentary to the Draft Articles.
(3) The "obvious futility" test, expounded by Arbitrator Bagge in the Finnish
Ships Arbitration, sets too high a threshold. On the other hand, the test of "no
reasonable prospect of success", accepted by the European Commission of
Human Rights in several decisions, is too generous to the claimant. This leaves
the third option which avoids the stringent language of "obvious futility" but
nevertheless imposes a heavy burden on the claimant by requiring that he prove
that in the circumstances of the case, and having regard to the legal system of
the respondent State, there is no reasonable possibility of effective redress
offered by the local remedies.
This test has its origin in a separate opinion of Sir Hersch Lauterpacht in the
Norwegian Loans case and is supported by the writings of jurists.[ ... ]
In this form the test is supported by judicial decisions which have held that local
remedies need not be exhausted where the local court has no jurisdiction over
the dispute in question; the national legislation justifying the acts of which the
alien complains will not be reviewed by local courts; the local courts are
notoriously lacking in independence; there is a consistent and well-established
line of precedents adverse to the alien; the local courts do not have the
competence to grant an appropriate and adequate remedy to the alien; or the
respondent State does not have an adequate system of judicial protection.
( 4) In order to meet the requirements of paragraph (a) it is not sufficient for the
injured person to show that the possibility of success is low or that further
appeals are difficult or costly. The test is not whether a successful outcome is
likely or possible but whether the municipal system of the respondent State is
reasonably capable of providing effective relief. This must be determined in the
context of the local law and the prevailing circumstances. This is a question to
be decided by the competent international tribunal charged with the task of
examining the question whether local remedies have been exhausted. The
323 See supra para. 599.
- 207 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
decision on this matter must be made on the assumption that the claim is
meritorious. 324
610. In the light of the International Law Commission's well-reasoned and well-balanced
restatement of the threshold applicable to the futility exception, the Tribunal does not
consider it necessary to rely on alternative standards proposed by the Parties. In that
regard, it will not follow Claimants' submission that recourse to international arbitration
"should not be unduly jeopardized or procrastinated where there are no realistic prospects
that other means for the settlement of the dispute will prove workable or successful" (CI
§ 379). Likewise, in view of what has been stated above, the Tribunal is not convinced
that "according to international arbitration panels, the test of futility is 'obvious futility'
or 'manifest ineffectiveness' - in other words, more than alleged probability of failure is
required", as argued by the Respondent (RI§§ 290, 296, n. 402f; R II§§ 465, 473). 325
611. Furthermore, the Tribunal would wish to point out that since the present case only
regards a requirement to have temporary recourse to domestic courts, as opposed to a
fully-fledged exhaustion of local remedies requirement, the threshold to be met for the
futility exception to be realized in the present case cannot possibly be considered higher
than in the context of diplomatic protection; on the contrary, it is arguably rather lower.
(3) Application of the futility exception to the present case
612. Claimants marshal three separate arguments in favour of the futility exception being
fulfilled in the present case, with the Respondent opposing all of these. The Tribunal will
now examine them in turn.
613. (a) Claimants submit that any legal action on their part before Argentine courts would
have been an entirely futile exercise since it is clearly impossible for the local courts to
decide a case of such magnitude in only 18 months (Request§ 89; CI§ 419; C II§§ 208,
211; Tr p. 234/10). However, as has been already pointed out above326, Respondent (RI
324 ILC Draft Articles on Diplomatic Protection, Commentary, Art. 15, nr. 3 (footnotes omitted).
325 Respondent notably refers to the United States Restatement (Third) of Foreign Relations Law according to which
the futility exception applies only when local remedies are "clearly sham or inadequate, or their application is
unreasonably prolonged", § 713 cmt. f ( 1986).
326 See supra para. 604.
- 208 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
§§ 291, 294; R II§ 466; R III§ 94) is right to submit that Art. 8(3) of the BIT may not be
construed to require the dispute to be resolved by a final judgment in the domestic court
system within 18 months, but only that the dispute is submitted to the domestic courts.
614. To begin with, the provision solely calls for the dispute not to be submitted to
international arbitration before "a period of 18 months has elapsed since notification of
the commencement of the proceeding before the national jurisdictions" ( emphasis added).
Furthermore, the very existence of Art. 8(4) of the Argentina-Italy BIT327 confirms that
the Parties to the BIT considered it not to be a rare case that domestic proceedings would
still be pending when the arbitration is initiated. In addition, by expressly recognizing
that a case with a certain complexity in the factual and legal realm could hardly be dealt
with in a period of 18 months in any legal system (notably further taking into account the
multi-level nature of national court systems) (Tr p. 468/12), Claimants themselves
suggest that construing the provision as setting forth a time standard for the final disposal
of the dispute cannot be a sound interpretation of the provision in question. Otherwise,
the 18 months period which was expressly agreed upon by the Parties would be rendered
nugatory in most real-life investment disputes.
615. (b) In Claimants' view, Law No. 26.017 was absolutely categorical in shutting the door to
any possibility to obtain redress before Argentine courts (Request§ 88; CI§ 411; C II§
201). They consider this to notably hold true for Art. 6 of the Law328 since it prevented
the domestic courts from fulfilling the very functions the recourse to domestic courts
prerequisite was said to serve. Respondent counters that Claimants could have set aside
Law No. 26.017 (assuming that it was not in compliance with the international
obligations of Argentina) by arguing before the domestic courts that, by virtue of Art. 75
para. 22 of the Argentine Constitution, international treaties to which Argentina is a party
rank higher in the hierarchy of the Argentine legal system than laws adopted by Congress
(RI§ 296; RII § 473; Tr pp. 36/21; 431/6; 433/15).
327 "From the moment an arbitral proceeding is commenced, each of the parties to the dispute will adopt all the
necessary measures in order to desist from the ongoing judicial proceeding."
328 See supra note 286.
- 209 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
616. Claimants contend, however, that such a course of action was not to be expected from the
Argentine courts, since the legal stance taken by the Supreme Court of Argentina in its
2005 Galli Judgment329 demonstrated that any bondholder attempting to obtain payment
by resorting to the domestic courts of Argentina would face a rejection of his claims, so
that any such attempt would have constituted a totally useless and frustrating exercise ( C
I §§ 415, 418; C II § 203; Tr p. 231/7). Respondent counters this argument by
emphasizing that Galli was a purely domestic case including exclusively domestic
bondholders so that it cannot be taken as guidance for how the Argentine judicial system
would have treated non-domestic bondholders, notably in view of Art. 75 para. 22 of the
Constitution.
617. In Galli, the Supreme Court remanded an appellate court decision which had ordered
Respondent to pay certain amounts due to certain Argentine nationals under bonds which
the latter had not tendered for exchange, and upheld the compatibility of the debt
restructuring legislation with the Argentine Constitution. As regards the reasons for this
decision, they are laid out in quite some detail in the Opinion of the Procurator-General
of the Nation (pp. 1-29) which the seven Justices of the Supreme Court expressly
endorsed (p. 30). Against this background, the Galli judgment can be said to be based on
the following findings:
Both the Procurator-General and the Justices emphasize the powers of Congress,
under arts. 75 paras. 7 and 8 of the Argentine Constitution, to settle the payment
of the domestic and foreign debt of the Nation and to fix the general budget, and
refer to the "monetary sovereignty" (soberania monetaria) of Congress (p. 23;
per Justices Zaffaroni and Lorenzetti, § 10, p. 55).
Against this background, the debt restructuring process is qualified as belonging
to the political sphere and thus generally not being subject to judicial review,
notwithstanding a rather generic test of "reasonability" (caracter razonable) and
non-discrimination of the measures in question, but which does not change the
general picture of judicial deference vis-a-vis the political echelons (p. 26; per
329 See supra para. 557.
- 210 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
Justices Maqueda and Highton de Nolasco, § 12, p. 42; per Justices Zaffaroni and
Lorenzetti,§ 9, p. 54; per Justice Argibay, § 4, p. 64).
Furthermore, it is pointed out that participation in the Exchange Offer was an
option for the bondholders and that those who did not participate acted
voluntarily and thus exposed themselves to the consequences of their behaviour
(per Justices Maqueda and Highton de Nolasco, §§ 18, 19, pp. 46, 47). The
investors were aware that the laws adopted by Congress forbade the executive
power to reopen the exchange process as well as the possibility of entering into
any kind of judicial, out-of-court or private transaction with regard to the bonds
that were not exchanged (per Justice Argibay, § 7, pp. 65, 66).
The Procurator-General and the Justices of the Supreme Court strongly draw
upon the Supreme Court's Brunicardi case330 which dealt with the foreign
sovereign debt of Argentina and measures taken in this regard by the Argentine
Government in 1983. Accordingly, if a Government decided to suspend the
payment of debt for reasons of financial necessity or public interest, this was
generally accepted by the international community (p. 20). According to the
Supreme Court in Brunicardi, there exists a principle of international law that
precludes a State's international responsibility in case of suspension or
modification, in whole or in part, of the payment of the external debt, in the event
the State is forced to do so due to reasons of financial necessity (p. 22; per
Justices Maqueda and Highton de Nolasco, § 10, p. 39; per Justices Zaffaroni and
Lorenzetti, §§ 13, 14, pp. 59, 60).
618. The Tribunal would consider that these arguments apply, in principle, with equal force to
non-domestic bondholders. In particular given the Supreme Court's stance on
international law, it is very doubtful whether a reference to Art. 75 para. 22 of the
Argentine Constitution and to Argentina's international obligations under the BIT would
have changed the picture. It may well be that the Constitution endows international
treaties which a higher normative rank than laws, but a BIT would still be inferior to the
provisions of the Constitution itself. The Supreme Court in Galli emphasizes the powers
33° Fallos 319:2886.
- 211 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
of Congress to settle domestic and foreign debt, notably in emergency situations, and
accepts the debt restructuring process as emanating from this constitutional power. The
fact that the Supreme Court qualifies the restructuring legislation to be generally nonjusticiable
by the courts and confirms its reasonable character suggests that the Supreme
Court was not prepared to interfere with the exercise of powers by Congress which, in the
Supreme Court's view, were reserved to Congress by the Constitution itself.
619. Furthermore, Galli was followed by two later decisions of the Argentine Supreme Court
in 2008 in which it expressly upheld the approach taken in Galli. 331 Hence, when
Claimants submitted the Request in 2008 - and this is the perspective from which the
futility vel non of having recourse to Argentine courts must be assessed - they were
confronted with a line of Supreme Court cases manifesting that the latter was not willing
to let the judiciary interfere with the debt restructuring decisions of Congress regarding
the emergency situation of the early 2000s.
620. Given the jurisprudence of the Supreme Court of Argentina and in the light of the
circumstances prevailing in the present case, the Tribunal concludes that having recourse
to the Argentine domestic courts and eventually to the Supreme Court would not have
offered Claimants a reasonable possibility to obtain effective redress from the local courts
and would have accordingly been futile. Hence, Claimants did not violate the duty to
have recourse to Argentine courts under Art. 8(2) and (3) of the Argentina-Italy BIT
when they submitted the Request for Arbitration on 23 June 2008.
621. The Tribunal would like to add, to its knowledge, since 1994, i.e. the introduction of the
new Art. 7 5 para. 22 into the Argentine Constitution, no domestic law was struck down
for being incompatible with a BIT.
622. ( c) As regards the cost argument, there can be no doubt that approaching the local courts
will create additional costs for the investor. However, as the International Law
Commission has rightly pointed out in the context of the duty to exhaust local remedies
331 Lucesoli, Daniel Bernard cl Poder Ejecutivo Nacional sf amparo, Case No. L. 542. XLIII, 9 September 2008
(Annex CLA-38) and Rizzuti, Carlos Pablo cl Poder Ejecutivo Nacional sf amparo, Case No. R. 483. XLIV, 22
December 2008 (Annex CLA-39).
- 212 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
in cases of diplomatic protection, it is not sufficient to show that those remedies are
"difficult or costly. The test is [ ... ] whether the municipal system of the respondent State
is reasonably capable of providing effective relief."332 While Claimants contend that
filing their claim in the Argentine courts may have given rise to substantial costs, they
have not established that the financial burden imposed upon them would reach an extent
that the Argentine court system cannot be deemed reasonably capable of providing
effective relief. To reach such conclusion on the basis of mere financial reasons can only
be envisaged, if at all, in exceptional circumstances.
623. In addition, Art. 8(4) of the Argentina-Italy BIT provides that "[f]rom the moment an
arbitral proceeding is commenced, each of the parties of the dispute will adopt all the
necessary measures m order to desist from the ongoing judicial proceeding." This
provision may help to alleviate the financial burden by avoiding or reducing costs
incumbent upon Claimants inasmuch as it also commits a Party to take the necessary
steps to allow the other Party to desist from the domestic proceedings. Hence, once the 18
months term has expired and a Party decides to proceed to international arbitration, the
other Party must, to the extent possible, adopt the necessary measures so that no
additional costs will arise for the former Party due to the mere fact of exercising a right
expressly granted to it by the BIT, namely Art. 8(3) of the BIT. Any other interpretation
would not be consistent with an application of Art. 8(4) in good faith. As a possible
consequence, if a Party used instruments of domestic law available to it to make the other
Party leaving the domestic proceedings overly costly so as to actually restrain it from
proceeding to international arbitration, this might constitute a violation of Art. 8( 4) of the
BIT and might lead the aggrieved Party to sue for the loss incurred in the subsequent
arbitral proceedings.
( 4) The Tribunal's conclusions and the Decision in the
Abaclat case
624. The Tribunal in the Abaclat case came to the same result, viz., that the duty to have
recourse to Argentine courts, according to Art. 8(2) and (3) of the Argentina-Italy BIT,
was not violated by Claimants, albeit on the basis of a different reasoning. It did not want
332 ILC Draft Articles on Diplomatic Protection, Art. 15(a), Commentary; see supra note 324.
- 213 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
to rely so much on the "general principle of futility" but rather on a "weighting of the
specific interests at stake." This weighing of interests of the Parties aims at taking into
serious consideration the host State's interest of having an opportunity to address the
allegedly wrongful act within the framework of its own domestic legal system before
resorting to international arbitration, and then at comparing this interest with that of the
Claimants of being provided with an efficient dispute resolution mechanism. In the
Abaclat Tribunal's opinion, "the relevant question is not 'could the dispute have been
efficiently settled before the Argentine courts?', but 'was Argentina deprived of a fair
opportunity to address the dispute within the framework of its own domestic legal system
because of Claimants' disregard of the 18 months litigation requirement?"'333 "[T]his
opportunity must not only be a theoretical opportunity, but there must be a real chance in
practice that the Host State, through its courts, would address the issue in a way that
could lead to an effective resolution of the dispute". 334
625. On the basis of that approach to the question, the Abaclat Tribunal concluded that "[i]n
the light of the Emergency Law335 and other relevant laws and decrees, which prohibited
any kind of payment of compensation to Claimants, the Tribunal finds that Argentina was
not in a position to adequately address the present dispute within the framework of its
domestic legal system. As such, Argentina's interest in pursuing this local remedy does
not justify depriving Claimants of their right to resort to arbitration for the sole reason
that they decided not to previously submit their dispute to the Argentinean courts."336
626. The reasoning of the Abaclat Tribunal is committed to an approach focusing on "the
context, as well as [ ... ] the purpose and aim of Article 8."337 While this wording evokes
elements of Art. 31 of the VCLT, the Tribunal's decision was harshly criticized in the
Dissenting Opinion of Professor Abi-Saab for "tak[ing] the liberty of striking out a clear
333 Abaclat Decision, para. 581 as well as paras. 582 and 584.
334 Ibid., para. 582.
335 The Abaclat Tribunal hereby refers to Law No. 26.017, also referred to as ley Cerrojo (see ibid., para. 78). As to
the ambiguity of the majority decision in this regard (which also refers to the Public Emergency and Reform Law of
2002 as "Emergency Law"; ibid., para. 60) see C IV§ 19, n. 12 and R IV 16, n. 62.
336 Abaclat Decision, para. 588.
337 Ibid., para. 579.
- 214 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
conventional requirement, on the basis of its purely subjective judgment."338 The present
Tribunal has chosen a different path for its own reasoning on the matter and has, in the
previous sub-section, laid out in detail how an interpretation strictly faithful to the
requirements of Art. 31 of VCLT, notably including Art. 31(3)(c) of the Vienna
Convention, leads to identify a futility exception in the pertinent lex lata, i.e. Art. 8(2)
and (3) of the Argentina-Italy BIT.
627. The Tribunal cannot ignore, however, that on a more general level the "futility"
reasoning which governs the present Decision and the "fair opportunity" approach
endorsed by the Abaclat Tribunal are not mutually exclusive, but complement each other.
In fact, they seem to be based on different perspectives on the same reality of competing
interests. Whilst the "futility" reasoning rather looks at the problem from Claimants' side,
the "fair opportunity" approach, by asking whether Respondent is given a fair opportunity
to address the dispute through its local courts, takes the latter's perspective. Similarly,
whereas the emphasis of the "futility" approach is on the existence for Claimants of an
effective remedy, the "fair opportunity" approach draws on the idea of forfeiture of
Respondent's right to preferential dealing with the case due to its inability or
unwillingness to provide effective legal means ofredress to the investor(s).
628. In sum, the challenge is to strike a balance between these equally legitimate and
important interests under the circumstances of a concrete case. In view of Respondent's
acts, notably the adoption of Law No. 26.017, it would seem to the Tribunal to impose an
undue burden on Claimants and not to be compatible with the Tribunal's responsibility to
guarantee fair and effective arbitration proceedings to construe Art. 8 of the ArgentinaItaly
BIT so as to require Claimants to have recourse to Argentine courts when being
placed in a situation such as the present one and sanction their not having done so by
dismissing the case. After all, it was acts clearly attributable to the Respondent, namely
arts. 3 and 6 of Law No. 26.017, which prevented both the executive and judicial
authorities of Argentina by legislative fiat of the Argentine Congress - laws enacted by
Congress being, according to Art. 13 of the Argentine Constitution, alongside the
338 Dissenting Opinion of Professor Abi-Saab in the Abaclat case, para. 30.
- 215 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
Constitution itself, "the supreme law of the Nation" - from addressing, let alone
effectively settling, the claims of the Claimants within the domestic legal system of
Argentina. Accordingly, it cannot be concluded that the requirement of having recourse
to Respondent's domestic courts, as set forth in Art. 8(2) and (3) of the Argentina-Italy
BIT, was violated by Claimants.
d) No need to rely on the most favoured nation clause of Art. 3(1) of
the BIT
629. In view of this result, it is not necessary for the Tribunal to enter into the question
whether the most favoured nation clause contained in Art. 3 para. 1 of the Argentina-Italy
BIT may have entitled Claimants to rely on the allegedly more favourable dispute
resolution clause contained in Art. VII(3) of the Argentina-US BIT.
- 216 -
Annex 296
Ambiente Ufficio S.p.A. v. Argentine Republic (ICSID Case No. ARB/08/9)
DISSENTING OPINION BY ARBITRATOR TORRES BERNARDEZ
630. Arbitrator Dr. Torres Bernardez will issue a Dissenting Opinion to the present Decision
on Jurisdiction and Admissibility. In agreement with Dr. Torres Bernardez, the text of the
Dissenting Opinion will be published subsequently.
DECISIONS TAKEN BY THE TRIBUNAL
631. In view of the above reasoning and subject to the mandate given to it by the Parties to
restrict its decision at this stage of the proceedings to "preliminary objections of a general
character only"339, the Tribunal
339 See supra para. 5.
Decides that the present case falls within the jurisdiction of the Centre and
that the Tribunal has competence to decide the present case;
Decides that the Claimants' claims are admissible;
Therefore dismisses all Respondent's objections as regards jurisdiction and
admissibility;
Takes note of the discontinuance of proceedings as of 8 February 2103 in
regard to the 29 Claimants listed in para. 343 above;
Orders the afore-mentioned Claimants and the Respondent to bear the
arbitration costs and their own costs as set out in paras. 348-352 above and in
a separate Procedural Order;
Reserves the decision on the costs not decided upon in the present Decision
and in the separate Procedural Order to the merits phase of the proceedings;
Decides to rename the present proceedings "Ambiente Ufficio S.p.A. and
others v. Argentine Republic".
- 217 -
Annex 296
Done in English and Spanish, both versions being equally authentic.
Judge Bruno Simma
Professor Karl-Heinz Bockstiegel Dr. Santiago Torres Bernardez
Annex 296
ANNEX297
THE
AMERICAN JOURNAL
OF
INTERNATIONAL LAW
VOLTJM:E ~8
1934
PUBLISHED BY
THE AMERICAN SOCIETY OF INTERNATIONAL LAW
PUBLICATION OFFICE:
THE RU:M:FORD PRESS
CoNCORD1 N. H.
EDITORIAL AND EXECUTIVE OFFICE:
700 JACKSON PLACE
WASHINGTON~ D. C.
Copyright, 1934, by the American Society of International Law
Annex 297
BOARD OF EDITORS OF THE AMERICAN JOURNAL OF
INTERNATIONAL LAW
CHANDLER P. ANDERSON, New York, N. Y.
EDWIN M. BORCHARD, Yale Law School.
PHILIP MARSHALL BROWN, Princeton University.
EDWIN D. DICKINSON, University of California.
CHARLES G. FENWICK, Bryn Mawr College.
JAMES W. GARNER, University of Illinois.
MANLEY 0. HunsoN, Harvard Law School.
CHARLES CHENEY HYDE, Columbia University.
PHILIP C. JESSUP, Columbia University.
A.RTHURK.KuHN,NewYork,N. Y.
JESSE S. REEVES, University of Michigan.
ELLERY C. STOWELL, American University.
LESTERH. WooLsEY, Washington, D. C.
QumcY WRIGHT, University of Chicago.
Honorary Editor-in-Chief
JAMES BROWN Sco'IT, Washington, D. C.
Editor-in-Chief
GEORGE GRAFTON Wn,soN, Harvard University.
Managing Editor
GEORGE A. FINCH, 700 Jackson Place, N. W., Washington, D. C.
The object of the AMERICAN SoCIETY OF INTERNATIONAL LAW is to foster the study of
international law and promote the establishment of international re1o.tions on the basis 0£
law and justice. For this purpose it will cooperate with other societ.ies in this and other
countries having the same object.
THE AMEa1cAN JOURNAL oF INTERN.~TtONAt, LAW is supplied to all members of the SOCIETY
without extra charge, as the membership fee of five dollars per annum includes the right to
all issues of the JOURNAL published during the year for which the dues are paid. (Members
residing in foreign countries out.side the domestic postal zone pay one dollar extra.
per annum for foreign postage; Canada fifty cents extra.)
The annual subscription to non-members of the SoCIETY is five dollars per annum (plus
the above mentioned sums for foreign postage) and should be placed with the AMERICAN
SoCIETY OF INTERNATIONAL LAw, 700 Jackson Place, N. W., Washington, D. C. Single
copies of the JoURNAL will be supplied at $1.50 per copy.
Applicatioll? for membership in the SoCIETY, correspondence with reference to tho
JoURNAL, and books for review should be sent to GEORGE A. FmcH, Secretary and Managing
Editor, 700 Jackson Place, N. W., Washington, D. C.
Annex 297
JUDICIAL DECISIONS 773
arbitral settlement of claims relative to private rights acquired in all the
territories ceded by Turkey in 1913 and 1914.
The Arbitrator has arriv-ed at the conclusion, therefore, that Article 181 of
the Treaty of N euilly is applicable in the matter of the territory where the
disputed forests are located. This conclusion is the result of an examination
of the terms and the purpose of the article. The defendant government
maintains that, in case of doubt as to the meaning of an arbitral clause, the
incompetence of the Arbitrator must be presumed, according to the general
rule by which a state is not obliged to have recourse to arbitration except
when a formal agr~ement to that effect exists. The Arbitrator cannot
agree with this principle of interpretation of arbitral clauses. Such a clause
should be interpreted in the same way as other contractual stipulations. H
analysis of the text and examination of its purpose show that the reasons in
favor of the competence of the Arbitrator are more plausible than those
which can be shown to the contrary, the former must be adopted.
For these reasons,
The Arbitrator judges and _decides,
(1) That the application of Article 181 of the Treaty of Neuilly to the
Greek claim is not excluded by the fact that the forests which are the object
of this claim are situated in a region which was not transferred by virtue of
said treaty;
(2) That, consequently, the Arbitrator retains jurisdiction for the purpose
of deciding the other points in dispute. ·
(Signed) OsTEN UNDEN,
PRINCIPAL QUESTION
Stockholm, ~1 arch 29, 1933
Stajfan Soderblom.
The Arbitrator designated by the League of Nations Council in its session of October 2,
1930, to settle a dispute between Greece and Bulgaria concerning certain forests in Central
Rhodopia, has, by arbitral award of November 4, 1931, judged and decided that the application
of Article 181 of the Treaty of Neuilly to the Greek claim is not excluded by the fact that
the forests which are the subject of that claim are situated in territory which was not transferred
by virtue of Sfl.id treaty. Consequently the Arbitrator retained jurisdiction of the
ca.se to pass upon the other points at issue.
With the consent of the parties, the Arbitrator on January 5, 1932, laid down the rules of
procedure to be followed in the second phase of the case. The rules contemplated the presentation
of a. memorial by the party plaintiff, a. counter-memorial by the party defendant, a
replication by the plaintiff and, finally, a rejoinder by the defendant. They also contemplated,
of course, the communication of these memorials to the adverse party, as well as
the eventual institution of oral proceedings at the request of the Arbitrator or of one of
the parties. The memorials provided for in the rules of procedure were duly presented by the
agents of the parties and communicated to those concerned. By the terms of the rules, the
last memori:ll was to be presented before June 15, 1932. Owing to a series of postponements
caused by one or the other of the parties, this memorial, however, did not come before the
Arbitrator until August 24, 1932, and documents were annexed thereto still lat-er. It having
Annex 297
774 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
been judged desirable to have oral arguments, this procedure was first fi."ed for October 27,
1932. Postponement of the meeting having been requested at various times by each sido,
the argument finally took place in Geneva, February 13-15, 1933. Bulgaria was represented
by M. TModoroff, Agent for the Bulgarian Government, assisted by M. Gidel, Professor of
the Faculty of Law of Paris, and Greece by M. Politis, Greek Minister at Paris, assisted by
M. Iaonnides, lawyer of Athens.
During the oral argument, the plaintiff produced a number of documents not previously
presented. At the request of the defendant, the Arbitrator decided not to admit certain of
these documents as proof by reason of their delayed production.
The Arbitrator has pronounced this
ARBITRAL AW ARD
(Points at issue between the parties, other than the preliminary question
decided by arbitral award of November 4, 1931)
The undersigned, appointed Arbitrator by the Council of the League of
Nations to decide a dispute between
The Greek Government, "Plaintiff," and
The Bulgarian Government, "Defendant,"
After having heard the arguments and conclusions of the parties, has made
the following decision:
The Greek Government requested that the Arbitrator decide:
(1) That the claimants possess in the forests in question property
rights and rights of exploitation acquired in conformity with Turkish
· legislation prior to the annexation to Bulgaria of the territory in which
these forests are located.
(2) That Bulgaria had the obligation towards Greece of recognizing,
respecting and causing to be respected these rights, which were envisaged
and protected by the provisions of Articles 10 and 11 of the
Treaty of Constantinople and of Article 181 of the Treaty of Neuilly.
(3) That in spite of its international obligations, the Government of
Bulgaria has manifestly violated these rights by depriving the claimants
of their property and preventing them from exercising their rights.
(4) That Bulgaria could plead in excuse neither the Turkish laws, the
import of which is absolutely favorable to the claimants, nor her own
legislation, which cannot for any reason defeat her international obligations
and of which the meaning is, moreover, contrary to her contentions.
(5) That the Bulgarian Government has thereby made itself inter ..
nationally responsible toward the Greek Government and consequently
assumed the duty to make reparations to the claimants adequate to the
damage which it unjustly caused them;
(6) That this reparation must include restitution of the property of
which the claimants were disposses::.ed, or, failing that, the payment as
indemnity of its actual value, and the payment of an indemnity for the
deprivation of enjoyment suffered by the claimants, representing in
regard to each of the forests in question the exact amount of damage
suffered, calculated according to the rules in force in the forest adminis~
tration and taking into account the value of the woods and pasture
lands in Bulgaria during the deprivation of said enjoyment.
(7) That, calculated upon these bases, the indemnity due on these
Annex 297
JlJDICIAL DECISIONS 775
various counts amounts to a total of 20,880,000 gold Leva, or of 40,710,-
977.50, dependent upon whether or not the claimants secure effective
restitution of their property.
(8) That interest will accrue upon the sum charged to the Bulgarian
Government from the date of the award and shall be paid to the Greek
Government at the intervals and under the conditions fixed by the
Arbitrator.
The Bulgarian Government requested the Arbitrator to:
(1) Declare himself incompetent;
(2) Hold that the demand of the Greek Government cannot be entertained
until the remedies before Bulgarian tribunals have first been
exhausted;
(3) That in any case it cannot be entertained so far as concerns the
brothers Tevfik and Hakki Hadji Ahmed, and the Bulgarians Pierre
Sallabacheff, Minko Semerdjieff and Pantcho Apostoloff;
(4) That even reduced to the interests of the Greek nationals alone,
Ath. Christophacopoulos, Jani Doumas and Demetrios Kehaiya, the
claim cannot be entertained as to the fourteen yailaks in which claimants
allege they have concessions for exploitation;
(5) Exclude from the present case the claims pertaining to the forestpasturage
Kara-Bouroun and to those parts of the ya'Uaks Gougouche,
Chabanitza and Toursounitza which are situated in Greek territory.
Collaterally to the main issue:
(6) Hold that the Greek nationals on whose behalf the Greek Government
brought the present suit had not legally acquired any rights in the
nineteen yailaks with the forests in dispute, either under the Turkish
regime up to the Turco-Bulgarian Treaty of Constantinople of September
16/ 29, 1913, or under the Bulgarian regime after that time;
(7) That, t.heref ore, the Bulgarian Government in not recognizing
these alleged rights of the claimants in the aforesaid public forests did
not violate its international obligations (Articles 10 and 11 of the Treaty
of Constantinople and Art. 181 of the Treaty of Neuilly);
(8) That consequently the Bulgarian State owes no reparation to the
Greek Government acting in behalf of its nationals.
Incidentally,
(9) Appoint a commission of assessors, which1 after study on the spot,
shall render its opinion as to the damages eventually owing by Bulgaria
and as to the determination of the amount of interest damages.
At the close of the oral arguments the two parties announced that they
maintained without any change the above-mentioned conclusions reached
in their respective memorials. However1 the representative of the Greek
Government declared that his government was disposed to accept the mediation
of the Arbitrator in the matter of an agreement upon the amount of
damages to be paid in case he should hold the Bulgarian Government responsible
in the present case.
In regard to the incidental request of the defendant for the appointment
of a commission of assessors to determine the e:,...-tent of the alleged damage,
the agent of the plaintiff declared he left this question to the discretion of the
Arbitrator.
Annex 297
776 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
FINDINGS OF FACT
I
As indicated by the summary exposition of the basis of the present case,
outlined in the arbitral award of November 4, 1931, the Greek Government
is acting in the case in the interest of certain private persons, styling themselves
Greek subjects, who assert rights of property and of exploitation in
forests situated in Central Rhodopia. This territory was ceded in 1913 to
Bulgaria by the Turkish Empire by the Treaty of Constantinople and has
since then remained annexed to Bulgaria, which has exercised sovereignty
there without interruption.
In the opinion of the Greek Government, the Bulgarian Government did
not respect said rights of property and exploitation that those entitled to
them had acquired prior to the annexation to Bulgaria of the territories
where the forests are situated. The claimants whose cause the Greek Government
espouses in this dispute are the following five persons: Athanasius
Christofacopoulos, Tevfik Hadji Ahmed, Hakki Hadji Ahmed, Demetrius
Kehaiyas and Jean Doumas. They were all Greek subjects at the time of
the acquisition of the rights in question, but changed their nationaJit.y in
consequence of the provisions of the peace treaties concluded in 1913 between
Turkey, on the one hand, and Bulgaria and Greece, respectively, on
the other. Having acquired their rights in conformity with Turkish law,
they should have benefited by the principle of respect for acquired rights
expressly sanctioned by the Treaty of Constantinople.
II
In regard to the acquisition of timber and proprietary rights in the forests,
the following information was furnished by Greece. The above-mentioned
Christofacopoulos and Tevfik were the chief promoters of the forest enterprise.
They took in as associates a few friends and members of their families,
that is, the persons designated above, as well as the person named
Sadik Ibrahim, a Turkish subject, with whom they formed L' Association
exploitante des For~ts de Dospat Dagh. Tevfik and Christofacopoulos directed
the enterprise. But in most of the important contracts by which the
association secured the exploitation of the principal forests of Dospat Dagh,
it appeared under the name of Maison de Commerce du Gumuldjinali Tevfik
e:ff endi & (fie, or merely Societe Tevfik effendi & <Jie. This name was assumed
as a matter of prudence, the company being anxious to appear as a
venture carrying the name of a Turk.
The forests in which the timber was bought by the associates are called
Avanli, Kara-Bouroun, Korfanli, Chabanidja, Kodja Kargalik, Tchal,
Bitchaktchi-Diranli, Tilkili, Souloudjak, Hamam-Bounar, Olouk-Yedik,
Sabourdja-Alan, Kemali-Tchoral and Toursounidja. The Greek Government
produced the contracts of "sale," signed in 1910-1912, as well as regis•
Annex 297
JUDICIAL DECISIONS 777
tered titles relative to the forests to establish the property right of the
"sellers.'; Reports of an official survey and specifications, required by
Turkish law, were also introduced. The registered titles were delivered
during the period September, 1913-June, 1914, by the General Land Registry
at Constantinople. They all constitute "certificates of ownership in
place of definitive titles."
The forests of which the associates acquired ownership are called Kavgali,
Tchakmakli, Barakli, Kadjarli and Gougouche. For these also the titles
produced were ''certificates of ownership in place of definitive titles." Certain
acts of sale and surveyors' reports pertaining to the five forests mentioned
above were likewise introduced. The titles and acts recited above
will be the subject of a more detailed analysis later on. However, it should
be brought out at this point that the Greek Government insists that the
authority or probative value of the proprietary titles of the Turkish Land
Registry is great, and deservedly so, and formulates as follows the rule of the
Turkish doctrine and jurisprudence governing the matter: "Every title is to
be presumed in principle to be authentic; but it can be contradicted in court.
But as long as the one who attacks it does not furnish written proof, of certain
date, in support of his contentions, the court must hold the title good
and rely upon its terms."
On the other hand, the Bulgarian Government formulated certain observations
concerning the official documents above mentioned, notably on the
subject of the "certificates of ownership taking the place of definitive titles",
the probative value of which it formally denies. Besides a great number of
inaccuracies and irregularities with which these certificates were tainted, the
Bulgarian Government emphasizes the fact that they are a special kind of
certificates issued pursuant to an ad hoc decision after the Bulgarian occupation
and not in use before that time. The Bulgarian Government thinks
it very unusual that all the original titles should have been lost, and alleges
that the Bulgarian tribunals and administrations had previously, that is,
immediately following the liberation of the country in 1878, been flooded
with a quantity of Turkish titles to property, more or less inexact, given by
conniving employes of the Turkish Land Registry for realty situated in Bulgaria.
It had even been necessary to warn the Bulgarian authorities by
ministerial circulars of 1882 and 1884 against Turkish titles of this kind.
The Bulgarian Government is thoroughly convinced that the certificat-es of
ownership introduced in evidence are false and not in conformity with the
original titles and with the registry of titles. As to the reports and specifications,
the Bulgarian Government maintains that they were not drawn up
in conformity with the regulations covering the matter and that they are defective
in several ways.
In reckoning the purchase price of the forests, the associates, according to
the statements of the Greek Government, put into the enterprise a total sum
of 73,000 Turkish pounds. The Bulgarian Government brought out the
Annex 297
778 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
fact that, according to the titles and documents presented by the claimants,
they had paid for the right of exploiting the fourteen forests above-mentioned
the total sum of 13,260 Turkish pounds, and for the acquisition of
ownership of the five forests also mentioned above, 4,700 Turldsh pounds,
that is to say, 18,000 gold Turkish pounds, or about 400,000 gold francs in all
for the nineteen forests in dispute.
III
After the cession to Bulgaria of the territory in which the enterprise was
situated, the associates formed on February 9, 1915, under the firm name
Dospath-Dagh with offices at Philippopoli, a limited liability company, t.aking
in with them two new Bulgarian associates, General Sallabache:ff and M.
Semerdjieff. The contribution of the two new associates was only that of
skill and acquaintance with the administration and proper exploitation of
the forests. By a company letter of May 15, 1915, a one-sixteenth share in
the profits of the forests Souloudjak, Bitchaktchi-Diranli and Kodja-Karga~
was allowed M. Apostoloff, a Bulgarian subject. On the other hand,
the Greek Government asserts that the participation in profits, never
realized, offered to Apostolo:ff and promised in exchange for services never
rendered, gave him no right in the assets of the company. The statutes
provided for the transfer to the name of the company of the forests of which
the former associates were the owners, as soon as the transfer of property
rights in the new Bulgarian territory had been authorized by legislative action.
Among the provisions of the charter of the company the following should
be cited:
This day, the 9th of February, 1915, at Sofia, the undersigned Tevfik H. Ahmedov of
Gumuldjina., Hakki H. Ahmedov, of Gumuldjina, Sadik Ibrahimov of Salonika, Athnnasius
N. Christofacopoulos, of the village of Klissoura (Kostour), Dimitre N. Kehaya of tho vilJage
of Klissoura (Kostour) and Yani N. Douma of Salonika, acting in our name and on our behalf,
on the one part, and the undersigned Peter Sallabascheff, of Sofia, retired genera], and
Minko Chr. Semerdjiev of Varna., acting in our name and on our own behalf, have agreed
upon and undertaken the following:
1. The two contracting parties have organized a commercial limited liability company
under the firm name Dospath-Dagh.
2. The main office of the company is at Philippopoli. It may open as many branch offices
in the Kingdom as may be necessary.
3. The company has for its purpose the exploitation in a modern and proper way of tho
private forests granted in the Rhodope mountains, bought together with the land, as well as
those leased solely for exploitation by the parties of the first part, as follows:
4. The company is organized for a period of six years from the 19th of February, 1015.
5. The parties of the first part, namely, Tevfik H. Ahmedov, Hakki H. Ahmedov, Sa.dik
Ibrnhimov, Atlumasius N. Christofacopoulos, Dim.itre Kehaya, Yani N. Douma.s, have
raised a capital of 2,600,000 (two million six hundred thou.sand) levas for expenses and purchase
by contract of wood material from the forests mentioned in letters c, i, j, k, 1, m, n, 0 1
p, q, r, of Art. 3 of the present contract, and from the forests bought with the land, mentioned
in letters a, b, d, e, f, g, h, s, of the same Art. 3 of the present contract. The contracts of
exploitation of the forest.s, the procurations in the names of the parties of the first part, shall
Annex 297
JUDICIAL DECISIONS 779
be immediately transferred by notarial act to the name of our company as soon as the Ministry
of Agriculture shall have approved them, and the right of ownership in the forests
purchu.sed with the land, mentioned in letters a, b, d, e, f, g, h, s, of Art. 3 of the present
contr.o.ct, shall be transferred to the name of the company by notarial act as soon as the transfer
of property rights in the new territory of the Kingdom shall be authorized by legislative
act. The rights of the parties of the :first part in the forest~ enumerated in Art. 3 of the
present contra.ct are transferred to the company. The documents relating to these forests
are kept in the company safe.
6. The parties of the second part, namely, Petro Sallabascheff, retired genera.I, and M.
Chr. Semerdjiev, shall contribute as capital their knowledge of the administration and proper
exploitation of the forests of the company, which are valued at 600,000 (six hundred thousand)
levas.
7. The capital contributed by the parties of the first part, composed of real estate valued
at 2,660,000 (two million six hundred sixty thousand) 1 levas, and the intellectual capital of
the parties of the second part estimated at 600,000 (sL"{ hundred thousand) levas, constitute
the capital of the company, the total of which is 3,200,000 (three million two hundred
thousand) levas. Shares to the number of 640 shall be issued immediately after the signature
of the present contract for this capital. The shares shall carry the signatures of the
Board of Directors. Every twenty shares is entitled to a vote.
8. The shares are divided as follows:
(a.) The parties of the fir.st part, namely, Tevfik H . .Ahmedov, Hakki H. Ahmedov, Sadik
Ibrahimov, Athanasius N. Christofa.copoulos, Dimitri y Kehaya and Yani N. Doumas, receive
520 {five hundred twenty) shares, of which they become absolute owners.
(b) The parties of the second part, namely, Petro Sallbascheff, retired general, and M.
Chr. Semerdjiev, receive 120 (one hundred twenty) shares of which they become absolute
owners.
Concerning the functioning of the new company, the two governments
disagree completely. The Greek Government asserts that the transfer of
the forests to the company never took place, so that the rights acquired by
the associates never changed owners and that the new company could never
in fact have functioned in Bulgaria. As a consequence of the refusal of the
Bulgarian Government to recognize the proprietary rights of the claimants
in the five forests belonging to them in their own right, on the one hand, and
the rights accruing to them from the fourteen contracts acquiring timber
rights, on the other hand, there was no realization of the contributions
promised by the associates and the company remained without capital.
The prohibition of trading between enemies, a principle of international law
affirmed by the laws promulgated in 1917 in Bulgaria as well as in Greece,
implied, moreover, in consequence of the entrance into the war by Greece on
the side of the Allies and against Bulgaria, the annulment of the very agreement
of organization. This annulment was confirmed by Article 180 of the
Treaty of N euilly. On this point it must also be recalled that the general
meeting of stockholders on June 20, 1920, proceeded to rescind the acts of
t,he company.
1 This figure is very probably due to an error. As a matter of fact, the capital coo.tributed
amounts, according to paragraph 5, to 2,600,000 levas, and the total of 3,200,000 levas, indicated
below, supposes, if the intellectual capital is 600,000 levas, a contributed capital of
2,600,000 levas.
Annex 297
780 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
The Bulgarian Government presents the character of the Dospath-Dagh
Company and its role in the case under consideration in a totally different
light. This company was not only validly constituted and registered as a
Bulgarian company, but also existed and functioned in fact. It was nover
dissolved and still exists today. By the contribution in kind of the nineteen
disputed forests on the part of the associates, it acquired the right of property
or concessions in said forests, the agreement of organization being under
Bulgarian law a purely consensual contract which was perfect and produced
all its effects by the sole agreement of the parties. The reference in the
agreement of organization to the approval of the Ministry of Agriculture
and to legislative authorization had no other purpose but to assure formally
the rights of the company in regard to third persons. The notarial trans£ er
was made subordinate to the legislative authorization because at that timo
notarial sales were still governed by a royal proclamation of December 1,
1912, forbidding all sales and transactions concerning real property in the
new territories acquired from the Turkish Empire. On the Bulgarian side,
it was emphasized also that the Dospath-Dagh Company acted, after 1920
also, as owner or concessionnaire of the disputed forests.
IV
There is a difference of opinion not only on the question of knowing who is
the owner of·the alleged rights of property and concession, but also on the
nature and extent of these rights. The Bulgarian Government argues that
no private individual could, according to Turkish law, acquire complete
ownership in these forests, which had the character of public property in
which individuals could possess only very limited rights of enjoyment.
It was therefore legally impossible, according to the Bulgarian argument,
that the disputed forests should be the absolute property of the claimants or
their grantees. The "certificates of ownership" were consequently inaccurate
on this point, besides not conforming with the original deeds and the
records of the General Land Registry at Constantinople. The latter contained
no mention of "forest," falsely carried in the certificates produced by
the claimants as the result of the culpable connivance of some Turkish employe.
In reality it was a matter of public lands, of winter and summer pasture lands.
The fundamental Turkish law limited the extent of the right of enjoyment
of the possessor of land according to its intended purpose, and pasture lands
were exclusively intended for the pasturing and watering of cattle. While
the forests were intended for the cutting and commercialization of the tim ..
ber, which was the result of the possessive title, the enjoyment and utilization
of winter and summer pasturage consisted solely of a right to the grass
and running water, a right of pasturing and watering, to the exclusion of every
other right. The inhabitants bad, however, permission to cut wood for their
personal needs in return for payment to the Treasury of certain taxes. The
Greek Government refuses to yield to this point of view: the physical origin
Annex 297
.TUDICL\L DECISIONS 781
of the land would be, according to that government, pastures, become forests
in the course of time by the natural growth of trees. The registered titles
carried, respectively, under the heading concerning the nature of the land,
mention of "pasture land" concurrently with that of "forest."
V
Next, the question of the nationality of the claimants must be considered,
granting that the defendant denies the right of the plaintiff to speak before
an international tribunal for the interests of the two brothers, Tevfik and
Hakki, because of the nationality which they possessed at the time the
damage was caused them by the alleged confiscation of the forests.
All five original associates were undeniably Turkish subjects prior to the
Balkan wars of 1912 and 1913, and one of them, Sadik Ibrahim, remained so
without ever changing his nationality. His share in the disputed· forests,
therefore, is not included in the claims of the Greek Government. The two
partners Sallabacheff and Semerdjieff, associated with the others in 1915,
and Apostoloff, accepted as a partner in the course of the same year, so far as
is known, always had Bulgarian nationality during the period covered by the
present case.
In regard to the brothers, Tevfik and Hakki, the Greek Government asserts
that they changed nationality twice. Having obtained Bulgarian
nationality in 1913, they then acquired Greek nationality in 1920, due to
intervening territorial changes and by reason of the fact that they had established
themselves in Western Thrace, which passed successively from
Turkey to Bulgaria and from the latter to Greece. The acquisition by the
two brothers of Greek nationality took place legally when Western Thrace
was given over to Greece according to the Treaty of Neuilly, and, from the
point of view of Greek domestic law, by virtue of the Greek law on the global
nationalization of the inhabitants of the annexed territories. That was
binding upon Bulgaria by reason of Articles 44 and 158 of the Treaty of
Neuilly. The Greek Government also invokes in support of its argument
certain documents, among which were documents issued March 30, 1931, by
a Mh:ed Subcommission for Exchange of Populations and establishing the
fact that Tevfik and Hakki were recognized as non-exchangeable Greek
subjects, settled in Gumuldjina, as well as certificates drawn up by the Consul
General of Greece at Constantinople and establishing that the two
brothers were undeniably Greek subjects and had the right to reside freely
in Constantinople. Although they were Bulgarians from 1913 to 1920, it
should be kept in mind that the rights claimed by them dated from the time
when they were Turks and that the violations of which they complain were
not consummated until after the conclusion of the Treaty of Neuilly, when
they became Greeks and thereby acquired the right to invoke the intema•
tional protection of the Greek Government. To deprive them of this
protection in the present case would be at variance with the present tendency
Annex 297
782 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
of international law to consider diplomatic protection as the necessary means
of safeguarding individual rights in international intercourse.
The Bulgarian Government does not deny formally that the three associates
Christofacopoulos, Doumas and Kehaiyas became Greek subjects,
expressing, however, a doubt in this regard. Concerning the brothers
Tevfik and Hakki, it maintains on the contrary that they were not Greek
subjects. After having acquired Bulgarian nationality by virtue of the
Treaty of Constantinople of September 16/29, 1913, the two brothers settled
in Turkey and were treated by the Turkish Government as Turkish subjects.
The Bulgarian Government, therefore, formally denies their Greek nationality,
and invokes in support of its assertion certain information and documents.
In any case, Tevfik and Hakki could not, according to that government,
have become Greek subjects before August 20, 1924, the date of the
ratification of the Treaty of Sevres, under the terms of the third protocol of
Lausanne, signed July 24, 1923, and on condition that they were actually
settled in Thrace as the Greek Government alleges. But the Mixed Commission
for Exchange of Populations by the two certificates of March 30,
1931, relied upon by the Greek Government, recognized them as non-exchangeable
because they had been domiciled in Constantinople at the time
of the entry into force of the instruments signed at Lausanne. Moreover,
it was proved that one of the brothers, Hakki, died in Sofia, leaving heirs.
While referring to the Arbitrator the task of determining the alleged Greek
nationality of the two brothers, the Bulgarian Government states as an
added fact that they could not in any case have become Greek subjects
before the 20th of August, 1924.
VI
The Bulgarian Forestry Administration took possession of the disputed
forests in February, 1913, after the military occupation of those regions by
Bulgarian troops. The two parties are in disagreement upon the point of
whether the Bulgarians, in occupying the region of Doevlen and taking
possession of the forests, could reasonably doubt that they held property
possessed and exploited by private individuals. The Greek Government
alleges that the associates had had installed in these forests sawmills run by
water or motor and all the other mechanical means necessary for the sawing
and squaring of timber, that they had proceeded to lay out ways of access
to the interior of the forests, and had constructed depots and storehouses.
At Kienstendjik a dozen sawmills had been set up, and charge of them given
to an Italian expert with the assistance of 84 foremen and 600 workmen,
housed in special buildings. Numerous Decauville roads ran the length of
the forests and a route of 50 kilometers had been constructed by the associates.
The picture drawn by the Bulgarian Government is quite different:
the Bulgarian occupation found in the litigated regions and forests nothing
in particular in the nature of a large, well organized timber exploitation. A
Annex 297
JUDICIAL DECISIONS 783
few small sawmills run by water, of meager output and quite primitive,
scattered in the forests of the frontier region, with huts or very light sheds,
some mountain paths, no carriage route, no Decauville road, only a few
habitations in the wood clearings authorized in the public forests. The
configuration of the land, very mountainous, covered in all directions by
vast domanial forests, likewise indicated the improbability of the existence
of private forests in the midst of these vast mountainous wilds belonging to
the state. Under these conditions the Bulgarian authorities did not hesitate
to assume charge of all the forests in Central Rhodopia, which aroused no
protest until the latter part of 1914. It was during that year that the
claimants were in communication with the Ministry of Agriculture of Bui~
garia with a view of establishing their alleged rights in the disputed forests.
Judging by the allegations of the Greek Government, the associates were
able to carry on their venture on a reduced scale during 1914 and 1915 under
an authorization given Tevfik Hadji Ahmed by a ministerial order of
November 21, 1914. The Bulgarian Government is anxious to emphasize
on this point that it would have been necessary for Tevfik to have been
elected Deputy to the Bulgarian Parliament, a member of a group producing
the necessary number to constitute the majority of the Radoslavoff government,
in order that the protests should have been addressed to the Ministry
of Agriculture. The documents concerning the forests in dispute having
been presented to the Ministry of Agriculture, the Minister, on August 10,
1915, appointed a commission composed of eminent Bulgarian jurists and
officials, to examine the Turkish law in connection with the alleged rights of
the interested parties. This commission made its report on January 22,
1916. That same year the Ministry of Agriculture sent two of its officials
to Constantinople for the purpose of verifying the titles and documents produced
by the associates. Two other commissions were successively appointed:
the first, created 1\1:arch 9, 1917, presented its report on May 10,
1917; the second, constituted on March 21, 1918, presented its report on
July 23, 1918. The Ministry of Agriculture also ordered an inquiry to be
held on the spot by a high forestry official. The conclusions reached by
these various inquests are differently interpreted by the two parties.
During all this time the Bulgarian Government, while awaiting the definitive
settlement of the controversy, did not permit the cultivation of the
forests except upon payment of the price of cut wood at the rate fixed for
state forests. In the ministerial ordinance of August 4, 1916, mention is
made of a dispute, and in that of July 28, 1917, of the absence of a solution
of the question of ownership of the forests.
On September 20, 1918, the Minister of Agriculture addressed to the forest
inspectors in the annexed territories an order by which all the forests in the
category of those forming the subject of the present litigation were to be
considered as property of the state. The text of this order was worded
thus:
Annex 297
784 THE AMERICAN JOUBNAL OF INTERNATIONAL LAW
In conformity with Art. I of the Forest Law, all the yaUaks within the
limits of your district are property of the state.
The right of pasturing and watering of the former owners of the
yailaks will be appropriated within a short period.
I cancel all prior orders of the ]\,!inistry by which the owners of the
yailaks were given the right of enjoyment of the natural growth in tho
yailaks, as contrary to the provisions of the Forest Law.
All taxes paid up to the present time by the owners of the yailaks for
the exploitation of the trees in the yailaks shall be deposited in the
Treasury.
The cultivation of these forests shall be carried out according to Art..
24 of the Forest Law.
The owners of the yailaks shall be entitled only to the enjoyment of
pasturing and watering in accordance with the proper documents verified
by the public authorities with the originals. Otherwise, the right
of pasturage shall be utilized as belonging to the state in accordance
with the orders given by the Forest Law.
It followed that the various measures attempted by the parties were in
vain. In September, 1919, they addressed to the Bulgarian Government a
formal protest signed by Tevfik, in which there was, in addition, the question
of eventual recourse to the courts. By a request presented December
22, 1921, the parties then carried their complaint to the Greco-Bulgarian
Mixed Arbitral Tribunal in Paris, which declared itself by decision of March
22, 1924, without jurisdiction in the case. Since the spring of 1921, the
Greek Government has extended diplomatic protection to the parties u.nd
made representations to the Bulgarian Government in their behalf. In a
note verbale of January 10, 1925, the M:inistry of Foreign Affairs of Bulgaria
finally informed the Greek Legation at Sofia that the l\liinistry of Agriculture
and Public Domains, having examined the case, would hold that the Dospath-
Dagh forests were yailaks and that the servitudes of pasturage and
watering were, by virtue of Article 5 of the Forest Law, taken over for the
benefit of the state, which, in accordance with Article 4 of the same law, had
taken possession of the forests. The interested part,y in the case, the Dospath
Dag~ Company, could, if it was not satisfied, safeguard its rights by
taldng the case into court, especially since the Ministry of Agriculture was
not competent to pass upon the validity of titles to property.
The facts concerning the examination of the affair by the Council of the
League of Nations, which resulted in the appointment of an Arbitrator under
Article 181 of the Treaty of Neuilly, are set out in the arbitral award of
November 4, 1931.
FINDINGS OF LAW
A, UPON THE PRELIMINARY QUESTIONS
I
Before proceeding to the consideration of the different legal questions
raised by the parties, the Arbitrator wishes to point out that his rl>le in the
Annex 297
JUDICIAL DECISIONS 785
present case is defined by Article 181 of the Treaty of Neuilly7 the tenor of
which may be cited here:
Transfers of territory made in execution of the present treaty shall
not prejudice the private rights referred to in the Treaties of Constantinople,
1913, of Athens, 1913, and of Stamboul, 1914.
All transfers of territory made by or to Bulgaria in execution of the
present treaty shall equally and on the same conditions, ensure respect
for these private rights.
In case of disagreement as to the application of this article1 the difference
shall be submitted to an arbitrator appointed by the Council of the
League of Nations.
It follows from this text that the contracting parties7 among them Bulgaria,
bound themselves reciprocally by virtue of the provisions of said
Article 181 to respect the acquired rights referred to in the treaties concluded
following the Balkan Wars, especially in the Treaty of Constantinople signed
in 1913 between Bulgaria and the Ottoman Empire. Said treaty contains
the following provisions:
ARTICLE 10
Rights acquired previous to the annexation of the territories, as well
as the judicial documents and official titles emanating from the competent
Ottoman authorities, shall be respected and held inviolable until
there is legal proof to the contrary.
ARTICLE 11
The right of holding landed property in the ceded territories by virtue
of the Ottoman law on urban and rural properties shall be recognized
·without any restriction.
The proprietors of real or personal property in the said territories
shall continue to enjoy their property rights, even if they fix their personal
residence temporarily or permanently outside of Bulgaria. They
shall be able to lease their property or administer it through third
parties.
The Treaty of Constantinople contains no provision concerning the nationality
of the individuals whose acquired rights Bulgaria engaged to respect.
This being the case, one might ask whether Articles 10 and 11 of the
treaty apply only to invididuals who were Turkish subjects before the annexation
and remained so afterwards, or whether they are equally applicable
to persons possessing another nationality. Neither of the parties in the
course of the present case has attempted to so limit the application of the
two articles mentioned above, according to the nationality of the parties
entitled. It also appears more likely that the purpose of the aforesaid provisions
was to establish a. guarantee of respect for rights acquired under the
protection of Turkish legislation, independently of the nationality of the
parties entitled. This guarantee was, however, incomplete and of a very
limited practical value as long as it could not be invoked by a signatory of
the treaty other than Turkey.
Annex 297
786 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
In the opinion of the Greek Government, the conclusion of the Treaty of
Neuilly has had the result of rendering more efficacious the above-mentioned
provisions. Article 181 of said treaty changed the obligation assumed in
1913 and 1914 toward the Turkish Empire by the three Balkan States into
a general obligation of each of them toward all the signatories of the Treaty
of Neuilly, and increased its practical value by assuring its observation
through the guarantee of final recourse to arbitration. It is therefore by
virtue of Article 181 that the Greek Government feels justified in invoking
before the arbitral tribunal provided by that article the obligation assumed
in 1913 by Bulgaria towards the Turkish Empire of respecting acquired
rights. It is understood that the Greek Government does not claim the
right to exercise diplomatic and legal protection in behalf of persons other
than those possessing Greek nationality.
This argument means, as regards the acquired rights of the claimants who
had become Greek subjects following the Treaty of Athens of 1913, that
these rights were already protected by the existence of the material provisions
of Articles 10 and 11 of the Treaty of Constantinople. But until the
entry into force of the Treaty of Neuilly, the Greek Government, not being
a signatory of the Treaty of Constantinople, had no legal grounds to set up
a claim based upon the relevant stipulations of that treaty. Article 181 of
the Treaty of Neuilly created this legal basis.
This point of view was not expressly contradicted by the defendant. It
rather impliedly admitted it in its pleadings by invoking in its argument
Articles 10 and 11 of the Treaty of Constantinople.
The Arbitrator adopts the interpretation of the Treaty of Neuilly according
to which the Greek Government can invoke in behalf of its nationals the
provisions of Articles 10 and 11 of the Treaty of Constantinople.
This conclusion, however, concerns only the three claimants who had acquired
Greek nationality in 1913, that is, Christofacopoulos, Doumas and
Kehaya. The question of the other claimants is considered below (see
Section III).
II
To the Greek claim the Bulgarian Government raised certain preliminary
objections, reproduced below, relating to the incompetence of the Arbitrator
or to the inadmissibility of the claim of the adverse party. It is therefore
necessary to examine first of all the basis of these objections.
In its first two exceptions the defendant asks the Arbitrator to (1) declare
himself incompetent, and (2) hold that the demand of the Greek Govern ..
ment cannot be entertained prior to the exhaustion of remedies before the
Bulgarian courts.
The tenor of the written and oral arguments of the representatives of the
Bulgarian Government is that the objection of incompetence is based on the
argument that the dispute relates to questions of internal law. The func-
Annex 297
JUDICIAL DECISIONS 787
tion of the Arbitrator was discharged by the award already pronounced upon
the applicability to the case, of Article 181 of the Treaty of Neu.illy, that
being the only question of an international nature. The Arbitrator is not
competent to pass upon the question of whether the claimants obtained in a
regular way proprietary and exploiting rights in the disputed forests. Only
national courts are qualified to pass upon the very existence of a real property
right.
The exception taken on the principle of exhaustion of local remedies can
be considered as subsidiary to the first one. An action before an international
tribunal to enforce private acquired rights is not, in any case, entertainable
before the exhaustion of local remedies at the disposition of the
claimant. This condition not having been fulfilled in the present case, the
result of the action can only be a dismissal of the suit.
Although these two exceptions are not absolutely identical, they include
each other in part, and evidently arise from the same point of view; as a
general rule, an international tribunal ought not to undertake the hearing of
a. dispute normally within the jurisdiction of national courts. It is expedient,
then, to consider the two objections at the same time.
The provisions of Articles 10 and 11 of the Treaty of Constantinople impose
upon Bulgaria the obligation to respect certain acquired rights and,
besides, to respect the judicial acts and official titles emanating from the
competent Turkish authorities. Said rights and titles ''shall be respected
and held inviolable until there is legal proof to the contrary." Article 11
imposes upon Bulgaria the obligation to recognize without any restriction
the right of I&nd ownership in the ceded territories under the Turkish law
concerning urban and rural realty.
In the present case, the defendant admitted itself bound, by virtue of an
international agreement, to respect the acquired rights referred to in Articles
10 and 11. There is no divergence of opinion, therefore, on the validity of
the principle itself. It is the opinion of the defendant, apparently, that,
under these circumstances, there exists no dispute according to the last paragraph
of Article 181 of the Treaty of Neuilly.
It is evident that this interpretation of the relevant texts is too restricted.
When an international convention imposes upon one of the contracting
parties the obligation to respect acquired rights and to recognize official
titles until legal proof to the contrary, a general refusal to conform to the
rule embodied in the treaty may e,ridently constitute a violation of that obligation.
But this violation can take other forms as well. It may also consist
of a refusal to recognize in a given case the validity of a law, under the
pretext that the law has not been sufficiently proved. The adoption by
Bulgaria of an attitude implying the refusal of the Bulgarian authorities to
respect the presumption in favor of the acquired rights and Turkish official
titles, provided for in Article 10, may evidently constitute a violation of that
article. In the present case, the Bulgarian authorities have denied the
Annex 297
788 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
claimants the right to avail themselves of the presumption created by
Article 10. The Bulgarian Government now maintains that it had special
reasons for its refusal. This question belongs to the main point of the dispute
and will be considered later. But the Bulgarian Government cannot
withdraw from the examination of the Arbitrator the question of whether or
not it was justified in refusing to recognize the contracts and titles of ownership
produced by the claimants.
· It may be noted, however, that, in exercising the jurisdiction created by
Article 181 of the Treaty of Neuilly, the Arbitrator will examine, as inci ..
dental only, the question of the actual existence of proprietary or other rights
in respect to Turkish legislation (cf. judgment No. 7 of the Permanent Court
of International Justice, page 42). But he cannot evaluate the attitude of
the defendant in regard to provisions 10 and 11 without considering to a
certain extent the questions of the existence, according to civil law, of the
rights invoked by the claimants.
The Bulgarian Government also relied upon the well-known principle of
international law of prior exhaustion of local remedies. When, following the
occupation of the territory by the Bulgarian troops in 1912 and 1913, the
Bulgarian Forestry Administration took possession of the disputed forests,
it considered them as Turkish domanial property, destined to become the
property of the Bulgarian State by the final annexation of the territory. The
possession of the Forestry Administration having been thus established, the
individuals claiming rights in the forests should, according to the defendant,
have asserted their rights in the usual legal way by resorting to the Bulgarian
courts of competent jurisdiction. The demands of the claimants are therefore
hardly justified on their face. The Bulgarian Government alleged,
moreover, that the titles produced by the claimants are tainted with irregN
ularities of form so obvious that they could not be considered as establish ..
ing the so-called acquired rights. This fact constitutes an additional
reason for considering the question as belonging to the jurisdiction of the
national courts.
On the Greek side, on the other hand, the special aspects of the present
dispute are insisted upon. The rule of exhaustion of local remedies cannot
be pleaded in the present case against the Greek Government, first, because
recourse to national courts offers the claimants no possibility of obtaining
justice, these tribunals being bound on the mattet by Bulgarian national
legislation, and next because Article 181 of the Treaty of Neuilly carries the
implicit exclusion of the rule. Concerning the Bulgarian national legislation,
the plaintiff cites the law of 1904 which renders useless all recourse to
Bulgarian courts.
The objection here considered is not justified either, and for several
reasons.
First of all, under the legal presumption embodied in Article 10 of the
Treaty of Constantinople, the Bulgarian Forestry Administration could not
Annex 297
JUDICIAL DECISIONS 789
refuse to recognize the rights and titles of the claimants without "legal proof
to the contrary." The exception of e:iliaustion of local remedies would
have more foundation if the Forestry Administration had itself taken the
initiative in a suit against those holding title and this action had been pending,
or even if the Bulgarian Government had raised this objection so that
it could later institute a legal action before those tribunals against the parties
allegedly entitled. But the Bulgarian Government has in no way manifested
such an intention. Under these circumstances, it is the duty of the
Arbitrator to declare that, in case the Bulgarian Government had wished to
contest the validity of the contracts and titles produced, their annulment,
except in case of manifest irregularities of form, could have been brought
about only by judicial decision (cf. Judgment No. 7 of the Permanent Court
of International Justice, page 42). The examination made by the :i.dministrative
authorities was not sufficient to satisfy the requirement of Article 10,
according to which the presumption shall prevail "until legal proof to the
contrary." l\foreover, the Bulgarian Government itseH admitted-see the
text of the note verb(!,le addressed on January 10, 1925, to the Greek Legation
at Sofia, cited above-that the Ministry of Agriculture which examined the
titles of the claimants "is not a tribunal which can pass upon the validity
of titles of ownership." The rule of exhaustion of local remedies is necessarily
restricted in its application by the establishment in the terms of the
treaty of said legal presumption.
Besides, the rule of exhaustion of local remedies does not apply generally
when the act charged consists of measures taken by the government or by a
member of the government performing his official duties. There rarely
exist local remedies against the acts of the authorized organs of the state.
To this consideration the plaintiff adds another. The Ministry of Agriculture,
in proceeding definitely to confiscate the forests, relied upon the
above-mentioned Bulgarian law of 1904 according to which all the yailaks
were to be considered as domains of the state. Considering that this law
was not modified so as to admit of the application of a special regime in the
annexed territories, the claimants had reasons for considering as useless any
action before the Bulgarian courts against the Bulgarian Treasury.
The conclusion from the foregoing considerations is that the objection on
the ground of incompetence and of inadmissibility of the Greek claim must
be overruled.
III
It is proper to consider next the competence of the Greek Government to
act in behalf of the brothers Tevfik and Hakki Ahmed who acquired Bulgarian
nationality in 1913.
On this question the defendant has drawn up an exception thus
worded:
That in any case, it (that is, the demand of the Greek Government)
Annex 297
790 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
cannot be entertained in so far as concerns the participation of the
brothers Tevfik and Hakki Hadji Ahmed, and the Bulgarians Poter
Sallabacheff, Minko Semerdjieff and Pantcho Apostoloff.
Of the two questions thus mentioned, only the first has a preliminary character
and will be treated here. The defendant denies that the Greek Government
can act as protector of the Ahmed brothers in this case. On the
other hand, the plaintiff claims nothing for the benefit of the three Bulgarian
associates, and the defendant's exception therefore only has the result of
reducing the eventual shares of the other associates in a sum corresponding
to the :financial interests of the Bulgarian subjects in the forestry enterprise.
The two parties argued at some length the nationality of the brothers
Tevfik and Hakki Hadji Ahmed, upon which they hold rather divergent
opinions. However, they are agreed that in 1918 the brothers were both
Bulgarian subjects. At the time of the act complained of-the alleged confiscation
of the forests-they were therefore undeniably nationals of the
country which took the steps charged. Under these circumstances it is not
admissible, according to common international law, to admit the right of the
Greek Government to present claims in their behalf for these injurious acts,
inasmuch as the latter were caused by their own government. "By taking
up the case of one of its subjects and by resorting to diplomatic action or
international judicial proceedings on his behalf, a state is in reality asserting
its own right-its right to ensure, in the person of its subjects, respect for
the rules of international law." (Judgment No. 2 of the Permanent Court
of International Justice, page 12.) This being so, Greece cannot base a
claim on the fact that a Bulgarian national was injured by confiscatory
measures on the part of the Bulgarian Government, even though he later
became a Greek subject. Neither is there ground for interpreting Article 181
of the Treaty of Neuilly and the provisions of the Treaty of Constantinople
to which that article refers, as extending to such a degree the right of the
Greek Government to undertake the diplomatic and ]egal protection of
persons acquiring Greek nationality as a result of various recent peace
treaties.
The conclusion is that the reclamation of the Greek Government cannot
be entertained as regards the two claimants Tevfik and Hakki Ahmed.
IV
The Bulgarian Government has requested the Arbitrator, as an exception
(under No. 5) to
Exclude from the present case the claims pertaining to the forestpaeturage
Kara-Bouroun and to those parts of the yailaks Gougouche,
Chabanitza and Toursounitza which are situated in Greek territory.
On this point the defendant declared that the forest of Kara-Bouroun wns
situated in a region in dispute between the Bulgarian and Turkish Govern-
Annex 297
JUDICIAL DECISIONS 791
ments before the wars of 1912-13. In the opinion of the Bulgarian Government,
this region was part of the territory formerly Bulgarian. In support
of its allegation, the defendant produced a letter issued from the Forests and
Hunting Section of the Bulgarian Ministry of Agriculture and Public Lands,
dated August 12, 1932. It states particularly:
Concerning the forest in the yailak Kara-Bouron, this forest, situated
west of the former Turco-Bulgarian frontier and forming part of the
State Forest of Fotene, has always been, as well before the Balkan War
as at the present time, in the possession and under the administration of
the Forestry Office of FoUme, District of Pechtera.
There was also produced a letter from the Bulgarian General Staff, dated
August 16, 1932, in which it is declared that the said lands of Kara-Bouroun
have always been a part of Bulgarian territory and have been guarded by
Bulgarian troops. A map published in 1907 by the General Staff, a copy of
which was introduced during the argument, confirms that the frontier was,
according to Bulgarian opinion, laid out in the manner indicated thereon.
The plaintiff maintains that the fact that the territory was in dispute before
the conclusion of the treaty is not important, and that it did not actually
belong to Bulgaria except by virtue of the treaty.
In view of the precise data furnished by the Bulgarian Government on
this question, and in view of the limits upon the jurisdiction of the Arbitrator
laid down by Article 181 of the Treaty of N euilly, the Arbitrator is of opinion
that the plaintiff has not proved its right to bring before him a claim against
the Bulgarian Government on the subject of the rights of Greek citizens in
the forest of Kara-Bouroun.
As to the other three forests which are partly situated in Greek territory,
the plaintiff denied the allegation of the defendant, but maintained, in addition,
that the quantity of wood sold in accordance with the cutting contracts
could have been obtained in any case in Bulgarian territory. The Arbitrator
could not, in view of this latter possibility, allow the Bulgarian objection as
a preliminary exception.
V
The defendant presented, in the form of an objection of inadmissibility,
a request to remove from the case the claim of the plaintiff concerning the
fourteen yailaks in which claimants allege rights of exploitation.
This point, which is rather a question of substance, will be considered later.
B. ON THE MAIN ISSUE
I
In declaring admissible the reclamation of the Greek Government, the
Arbitrator has not taken a final position concerning the existence of the ac~
quired rights claimed by the plaintiff on behalf of its nationals. The pre-
Annex 297
792 THE A..i.'\IERICAN JOURNAL OF INTERNATIONAL LAW
liminary question includes in effect the jurisdiction of the Arbitrator as it
has been established by the provisions of Article 181 of the Treaty of Neuilly.
The conclusion to which the Arbitrator has come in the first part of that
judgment is that the defendant is not justified in withdrawing from the consideration
of the Arbitrator the question whether or not the acquired rights
of certain Greek subjects have been violated. In the opinion of the Arbitrator,
that is not a question which is within the exclusive jurisdiction of the
national courts of Bulgaria. The rule of prior exhaustion of local remedies
cannot be invoked in the case as a defense intended to prevent the examination
of the main point of the dispute. It is the Arbitrator's function to
judge whether or not the attitude of Bulgaria towards the parties in interest
implies, on the part of that country, a failure in its international obligations
contained in Article 181 of the Treaty of Neuilly.
The general argument of the defendant concerning the jurisdiction of the
Arbitrator being thus rejected, it remains for the Arbitrator to consider in
order each of the claims presented by the plaintiff. First, however, it will be
proper to consider certain questions, raised by either one or the other of the
parties in the course of the case, which concern all the claims, or most of
them, and are therefore of a rather general character.
II
It follows from the preceding arguments that the Greek Government
bases its claim on the fact that the Bulgarian Government took possession of
several forest tracts in which Greek nationals held certain rights and declared
them state property. When the Bulgarian Forestry Administration took
possession of them-which appears to have taken place in February, 1913-
a state of war existed between Bulga1ia and the Turldsh Empire. It has
been stated on the part of Bulgaria that there was then no ground for supposing
the existence of private forests. No claim was asserted before the
last half of 1914. The claimants having brought their complaints to the
attention of the proper authorities, the Bulgarian Ministry of Agriculture
and the special commissions appointed by it for this purpose submitted them
to a scrupulous examination. It was not until 1918 that the inquiry was
completed. A letter from the Minister of Agriculture, dated September 20,
1918, gave notice of the final decision to treat the disputed forests as public
forest lands.
The Bulgarian Government now declares that that measure was proper,
chiefly because the forests had, according to Turkish legislation, the character
of public domains in which individuals could generally have no other rights
than a very restricted right of enjoyment (right of pasturage). Private
owners of yailaks (public pasture land placed at the disposition of private
cattle) could not, according to the opinion of the defendant, exploit the trees
thereon. These yailaks, according to this argument, were in the category
of real property, denominated miri in Turkish terminology, as distinguished
Annex 297
JUDICIAL DECISIONS 793
from that called mulk, that is to say, realty owned by individuals with full
rights of ownership.
That question constituted the main subject of the inquiry undertaken by
the commissions appointed by the l'v.Iinister of Agriculture of Bulgaria to examine
the claims. The first of these commissions, according to a procesverbal
of January 22, 1916, arrived at the conclusion that the proprietors
(possessors), of the yaUaks are at the same time owners (possessors) of the
natural forests situated within the limits of these yailaks, and that in order
that they should be treated as such it was sufficient for them to present
either the proces-verbal of the execution of the judicial inquiry and the formal
decision, or other documents stating that the judicial inquiry had been
completed and that the fixation of the tax Orman R~mi (a kind of tithe on
forests) had been proceeded with. The second commission, according to the
proces-verbal of l'viay 10, 1917, made a similar decision. In its opinion, the
judicial inquiry and the fixation of the Orman Resmi tax serve to confirm
the right of possession (ownership) and of enjoyment of the yaUaks in the
forests to the proprietors to whom titles of possession of yail,aks had been
delivered, thus legally modifying the very nature of the property which is
thus transformed from yailaks into forests. The result is that the commissions
admitted the possibility of the existence of private rights in the
trees growing in a yailak, although private rights of this kind can be conceded
only in pursuance of a special procedure and on the basis of an inquiry
undertaken by the competent authority.
In finally declaring on September 20, 1918, that the disputed forests were
to be treated as public forests, the Bulgarian Minister of Agriculture did not
rely upon the Turkish law in force in the territory before annexation, but on
the Bulgarian Forest Law of 1904: "In conformit.y with Art. 1 of the Forest
Law, ull the yailaks within the limits of your district are property of the
state."
In the note verbale addressed on January 10, 1925, to the Greek Legation
at Sofia by the ~Iinistry of Foreign Affairs of Bulgaria, mention is likewise
made of the fact that the Bulgarian State had taken possession of the forests
in dispute conformably to Article 4 of the Bulgarian Forest Law. Nor did
this note invoke the Turkish law in force prior to the annexation.
It may be noted here that one of the commissions above mentioned expressly
pointed out certain differences existing between the Bulgarian law as
applied by the courts, on the one hand, and the Turkish law, on the other,
in regard to the treatment of realty of the kind in question.
It may be concluded from the lengthy discussion which took place in the
course of the case on the question whether the disputed forests had the character
of rnulk or of miri, that the Bulgarian thesis is accurate as regards the
assertion that the properties were miri lands aJ:!d not mulk lands. But it was
prayed on t.he part of Greece that individuals could also, under Turkish
law, obtain concessions of miri lands with rights so extensive that they were
Annex 297
794 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
permitted to utilize or even dispose of the timber growing thereon. The
question whether it is necessary to characterize as a right of ownership the
legal situation of the possessors of yailaks who have duly secured such extensive
rights seems to be a rather theoretical one. This is confirmed by a
letter of the Ministry of Foreign Affairs of Turkey to the Bulgarian Legation
at Ankara, dated August 18, 1932, in which the following passage appears:
Those persons having a right of ownership in property in the categories
of miri and vakouf enjoy all the rights recognized by the law in
every owner of mulk property. They also possess, equally with the
latter, the free and entire disposition of this property and consequently
can alienate it, pledge it as security, bestow it as a gift; and on their decease
this property passes into the ownership of their legal heirs. This
property cannot return under the administrations of the M iri or of the
Vakouf except only in the cases provided by law and notably in the case
of escheat. Likewise, these administrations have no legal right to reenter
into possession of this property in any other guise. The fact
that this property has been recorded in the land register or indicated in
the title deeds as 1vfiri, Vakou or Mulk could not give rise to any distinction
between them as to the right of disposal of such property.
It may be mentioned that the Mbced Commission on Greco-Bulgarian
Emigration was confronted with the same problem and that in 1929 it
decided to consider the forests situated on the yailaks as private property.
The conclusion of the Arbitrator is, therefore, that according to Turldsh
law, the possessors of yailaks could have been in a legal situation essentially
similar to that of an owner and consequently could have had the right to use
and dispose of the trees. The Turkish law in force in the annexed territory
before 1913 did not forbid the concession to private persons of rights in the
timber growing on the yailaks. Under these circumstances, it is not indispensable
to the settlement of the present dispute to decide the point of
whether these rights must be considered rights of full ownership or rather as
in the nature of a permanent usufruct.
III
As said above, the defendant formulated a preliminary exception requesting
the Arbitrator to hold
That even reduced to the interests of the Greek nationals only1 Ath.
Christophacopoulos, Jani Doumas and Demetre Kehaya, the claim
cannot be entertained as to the fourteen yailaks in which claimants
allege they have concessions for exploitation.
We will now proceed to consider this exception, which touches on a rather
basic question.
The defendant asserts that the claims of the plaintiff founded on the fourteen
cutting contracts made by claimants with the owners of certain forests,
could not be very well based upon the juridical nature of cutting rights,
for such rights include only personal obligations toward the grantee and not
Annex 297
.JUDICIAL DECISIONS 795
rights of property or other real rights. The measures of the Bulgarian Government
were therefore aimed at the proprietors and not directly at the persons
holding the right to cut. If the rights in question are personal obligations,
the action of the claimants should be directed against their grantors,
and the Greek Government has no direct recourse against the Bulgarian
Government. The defendant refers on this point to a clause inserted in the
contracts, according to which the "vendor" agrees to take all useful and
proper measures to remove any obstacles which might later arise to injure
his property rights. Added thereto is the following passage:
In case he cannot succeed in so doing, and it is shown that all the
rights of the vendee are destroyed, the vendor agrees to indemnify the
vendee for all the damage suffered by the latter, without recourse to
any protest or questioning whatsoever.
The plaintiff asserts in rebuttal that the cutting contracts imply the sale
of the trees and that the buyer must be considered as the owner. The
clause in the contracts cited above does not mean that the obligation imposed
by it upon the grantor is the only possibility open to the parties having
the rights in question. The latter were, as owners of the trees, victims
of confiscatory measures taken by the Bulgarian Government.
The two parties have developed in detail the reasons working in favor of
both theses. The Arbitrator has concluded that the rights of cutting of the
kind in question-rights not recorded in the land register-belonged under
Turkish law to the domain of personal contract rights.
It remains then to determine whether the legal nature of the cutting rights
prevents the Greek Government from presenting claims based on international
law.
It should first be recalled that the right of a state to assert claims under
common international law is disputed in cases of the kind here in question.
According to one generally accepted opinion, a claim can be made not only
in case of violation of property rights resulting from measures taken by the
authorities of another country, but also, for example, when the claimant
possesses in a foreign country a mortgage on realty or on a ship which has
been confiscated. But generally, in a case in which the demand of the
claimant is based, for example, upon the fact that his debtor in the foreign
country bas become insolvent as a result of confiscation, diplomatic intervention
or action before an international tribunal based on common international
law will not be allowed (cf. Borchard, Diplomatic Protection of
Citizens Abroad, 295-300).
There are frequently found in international treaties provisions for the protection
of rights other than real ones. Several instances may be cited in the
peace treaties concluded following the last World War.
In the present case it is a question of the interpretation of Article 181 of
the Treaty of Neuilly and of Article 10 of the Treaty of Constantinople.
The first of these two articles speaks of "private rights," and the second of
Annex 297
796 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
"acquired rights." Article 11 of the Treaty of Constantinople enunciates,
moreover, a special rule concerning "property rights in land." It seems
necessary, because of the context, to interpret the first two expressions as
not limited to real rights. Hence, if, after the annexation of the territory
in dispute, the Bulgarian Government had promulgated a law annulling, for
example, all the personal contract rights acquired before the annexation
in relation to the inhabitants of the territory, that law would have to be considered
as incompatible with Article 10 of the Treaty of Constantinople.
Concerning the cutting rights, it can be said that they are not entirely
annulled since the subsidiary right to an indemnity accorded the part.ies in
interest by the grantors in the cutting contracts has not, so far as known,
been abrogated. Some doubts may therefore arise as to the competence of
the Greek Government to interpose in behalf of persons holding cutting
rights. It is also possible that, according to Turkish law/rights of cutting
were so precarious that a regular cession of the realty to a new owner would
have resulted in the impossibility of asserting the cutting right against the
latter by transforming it into a right to indemnity against the grantor.
This point was not entirely clarified during the hearings. But, in the present
case, the Bulgarian lv.linister of Agriculture prohibited all further cutting,
with full knowledge of the claims of the contending parties, giving as t.he sole
reason the fact that the forests were state property according to the Bulgarian
Forest Law of 1904. The Bulgarian Government therefore took a
step directly aimed at the rights of cutting as well, and based on the unjustifiable
ground that the concession of that kind of rights was not allowable
because the forests were the property of the state. Under these circumstances,
it can hardly be doubted that the attitude of the Bulgarian
Government concerning the cutting rights was incompatible with the respect
for "acquired rights" imposed upon Bulgaria by Article 10 of the
Treaty of Constantinople.
IV
The defendant made several observations on the subject of the proofs
introduced by the plaintiff in support of the right of the claimants in the
forests. The documents produced were, in its opinion, filled with such
manifest irregularities that they could not uphold the presumption of the
existence of the alleged rights of the claimants.
First, it is proper to make an observation of a general kind as to the nature
of the titles of ownership produced by the claimants. As was mentioned
above, the claimants sought to prove their rights of ownership in the forests
-either those of the persons who granted the cutting rights to the claimants
or those of the latter themselves-by invoking a species of documents called
"certificates of ownership in plac~ of definitive titles." No original title of
ownership or of possession (tapou) was produced. Nor does the defendant
think it very probable that all the originals without exception were lost; it
Annex 297
JUDICIAL DECISIONS 797
advances the hypothesis that the tapou.s were not produced because they
contained references disadvantageous to the allegations of the claimants.
On the subject of the certificates produced, the defendant remarks that they
are a hitherto unknown and unused form of proprietary titles. It was by
virtue of a special decision of the Grand Vizier of May 1, 1329 (1913), that
the Turkish authorities issued these certificates, which were not in use prior
to that time in Turkey, and then only for real property situated in the territories
taken away from the Turkish Empire after the Balkan War. Hence
the Government of Constantinople at the time of that decision of the Grand
Vizier in fact no longer exercised authority in the territories occupied by the
Allied Powers. Under these circumstances, the Bulgarian Government
denies that the acts and decisions of the Turkish authorities of Constantinople
have any effect in relation to the territories under Bulgarian occupation
and jurisdiction.
While admitting that the new form of titles of ownership was not in use
in 1913, the plaintiff maintains that even after the occupation or annexation
of the territory by Bulgaria, the Turkish authorities retained the right to
determine the form of the certificates confirming the rights in real property
which such persons had acquired in the past under the Ottoman regime.
The Arbitrator agrees with the opinion in that regard expressed by the
plaintiff. The obligation assumed by Bulgaria to respect official titles
emanating from the Turkish authorities implies the obligation to recognize
the certificates of ownership duly iEsued by the competent Turkish authority
on the basis of the Turkish land register in which the property was recorded.
But the defendant raises objections likewise in regard to the content of the
certificates. Relying upon an attestation issued by a Turkish official upon
whom it devolved to keep the land title register, it asserts that the certificates
contain certain indications not conforming to the register. This inaccurate
information in the certificates relates, on the one hand, to the juridical nature
of the forests and, on the other, to their extent. Thus one finds in
certain certificates the indication that the forests had the character of mulk
(full ownership), while the register does not contain such an indication at all,
but contains others according to which the forests are miri land. In addition,
certain certificates mention "forest," while the register designates the
same property only as "yatlak" (pasturage land).
The Arbitrator does not see any reasons for him to cast doubt upon the
accuracy of the defendant's allegation concerning the non-conformity on
certain points of the certificates with the land title register-being based
upon the attestation of a Turkish official, and obtained through the Ministry
of Foreign Affairs of Turkey. However, it seems probable that it was the
competent Turkish authority who inserted the information in question in
the certificates at the time of their issuance. If the Bulgarian administration
had thought that the certificates were falsified it could at any time, by
bringing action before the proper Bulgarian court, have called for a judicial
Annex 297
798 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
decision concerning their validity or their probative value. It appears,
however, that the allegation of falsity was formulated only during the present
litigation.
It is nevertheless decisive that the certificates produced by the def end ant
on the subject of the contents of the land title register confirm the fact that
in essential points these titles are in conformity with the land register. In
view of the conclusion to which the Arbitrator came above on the question of
the difference existing between mulk and miri according to Turkish law, decisive
importance should not be given to the question whether one or the
other of these terms was employed in the register for the property in dispute.
V
1. Concerning the forests of Kavgali and Tchakmakli, the plaintiff
asserted the right of ownership for Christofacopoulos and Tevfik, relying
upon six "certificates of ownership in place of definitive titles." No conM
tract of sale was produced. The certificates establish the fact that the
grant of the right of ownership was recorded in the land register in May,
1913. The defendant called attention to the fact that the acquisition of the
right of ownership took place after the Bulgarian occupation of the territory
in which the forests are situated and in violation of the proclamation of
King Ferdinand of December 1, 1912, providing as follows:
On and after the day of occupation it is forbidden to enter into contracts
or transactions of any sort whatever dealing with immovable
property located in the occupied territories.
All instruments concluded after the 5th of October, 1912, are held
void at law.
It is evident that the certificates of ownership lose their probative value
as proofs of acquired rights if it appears from them that the cession of those
rights took place at a time when such cession was not allowed. The question
therefore arises whether there are grounds for taking into consideration
the proclamation of King Ferdinand from the point of view of international
law.
The Treaty of Constantinople provides that "rights acquired previous to
the annexation of the territories ... shall be respected." We should compare
with this text the declaration annexed to the treaty, in which the
Turkish Government declares as follows:
In regard to Article 10 of the treaty, the Imperial Ottoman Government
declares that it has not consented, since the occupation of the
ceded territories by Bulgarian forces, to transfers of rights to individuals
for the purpose of limiting the sovereign rights of the State of Bulgaria.
The terms of Article 10 of the Treaty of Constantinople might lead to the
conclusion that Bulgaria engaged to respect rights acquired in the territory
in question before the entry into force of the treaty. At that time only did
the sovereignty pass definitively to Bulgaria. The word "annexation" is
Annex 297
JUDICIAL DECISIONS 799
not so exact, however, that it necessarily excludes an interpretation fixing
the crucial moment at a prior date. It should be noted that the Treaty of
Athens of November 1/ 14, 1913, between Turkey and Greece (Article 6), as
well as the Treaty of Stamboul of lvlarch 1/14, 1914, between Turkey and
Serbia (Article 5), contain the word "occupation" instead of "annexation"
in the text of the corresponding provisions. The two allies of Bulgaria in
these two treaties with Turkey did not engage to respect rights acquired
after occupation. This fact is not without importance in the interpretation
of the Treaty of Constantinople, since it is hardly likely that the contracting
parties would have wished to make a distinction on this point between the
treaties. Besides, it should be noticed that the Treaty of Constantinople
does not invalidate the proclamation of King Ferdinand but, on the contrary,
contains in an annex a declaration tacitly expressing the same idea as
the proclamation in regard to grants of property by the Turkish Government
to private individuals.
Exclusive of the argument concerning the meaning of the word "annexation"
in Article 10 of the Treaty of Constantinople, an argument which
touches on the preliminary question of the competence of the Arbitrator, a
still more definite conclusion may be arrived at by other means. Bulgaria
promised to respect rights validly acquired before the annexation. The
aforesaid proclamation of King Ferdinand forbade grants of realty. If this
prohibition was legally valid, the acquisition in May, 1913, of the two forests
now in question is not valid. One may set aside here the question of
how this problem should be considered from the point of view of common
international law. But it is important to establish that Turkey, by the
Treaty of London of May 17 /30, 1913, previously alienated her sovereignty
over this territory in favor of the Allied Powers, that is, Bulgaria, Greece,
Montenegro and Serbia. It is true, as the plaintiff pointed out, that the
Treaty of London was never ratified and its provisions were modified in part
by later treaties. But a provision of the Treaty of Constantinople declares
that the pro,isions of the Treaty of London are to be enforced in regard to
the Imperial Turkish Government and the Kingdom of Bulgaria in so far
as they are not abrogated or modified by the stipulations of the Treaty of
Constantinople. It follows, in the opinion of the Arbitrator, that the
proclamation of King Ferdinand had full legality for the territory, at least
from the date of the signature of the Treaty of London. It has not been established
by the plaintiff that the sale took place prior to that date.
It may be presumed also, with reference to what has been said above,
that the expression "annexation" in Article 10 of the Treaty of Constantinople
contemplates a date which is not subsequent to May 17 /30, 1913.
As a result of the foregoing, the plaintiff cannot base any claim in favor of
the claimants on a right of ownership acquired in these two forests.
2. With regard to the forests of Barakli and Madjarli, the defendant maintained
that they were acquired by Christofacopoulos and Tevfik by contract
Annex 297
800 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
of sale drawn up on April 1, 1914, before the second notary at the cotirt of
first instance of Sofia. The plaintiff, however, could not produce any other
proofs of the acquisition of proprietary rights except a copy from the register
kept by the aforesaid notary showing that a contract of sale concerning a
forest was entered into on the above-mentioned day by Christofacopoulos
and Tevfik and certain designated persons, and certificates of ownership
delivered for the vendors and other persons concerning the two forests. On
the Bulgarian side, it was pointed out that the contract of sale was not pro~
duced and that, in any case, it did not fulfill the condition required by
Bulgarian law by which the grant of real property must be made by notarial
deed drawn up by the notary under whose jurisdiction thepropertyislocated,
under penalty of being void. On the Greek side, the opinion was expressed
that a deed to which the signatures of the contracting parties are legalized
before a notary, and which is copied in the notary's book, takes on the character
of a notarial deed. Moreover, in case the Arbitrator decides that the
bare ownership of these two forests was not transferred to the claimants,
due to an irregularity of form, the plaintiff bases its claim on a prior contract
for the purchase of the wood cuttings from these forests.
The results of this recital is that the plaintiff has produced no title of
ownership nor any other conclusive proof concerning the two forests of
Barakli and Madjarli. The legal presumption of acquired property rights
is therefore not established. In this case there is still less proof of a right
acquired before the annexation of the territory and consequently falling
within the jurisdiction of the Arbitrator. The exploitation contract likewise
invoked by the plaintiff was concluded March 16, 1908, for a period of
ten years from the beginning of the cutting, without right of renewal. According
to the very terms of the contract, it must have expired in 1918.
Under these conditions it could not serve as the basis for a claim.
3. In regard to the forest of Gougouche, the plaintiff maintained that
Tevfik acquired ownership of it in January, 1908.2 In support of this allegation
plaintiff invoked a certificate showing that Tevfik is the owner of the
forests and that a statement to that effect was entered in the land register in
January, 1908. The certificate was delivered September 21, 1913. Certain
observations were made on behalf of Bulgaria in regard to the certificate.
And it must be admitted that the certificate contains certa.in irregularities.
Under the heading "Explanation of reasons for drawing up the title," the
following information is found:
Copy taken from the official records on written demand of Tevfik
Effendi who, in his quality as lessee duly established by certificate, requested
the delivery of this copy, pleading the loss of the original in his
possession delivered in January 1326, based upon entries inscribed at
that date by purchase from Edhem Effendi.
2 The plaintiff dates its title from "1324-1909" and an expert's report from "1325--1910."
It appears, however, that it should have placed the dates at "1324-1908" and "1325--1900."
Annex 297
JUDICIAL DECISIONS 801
In this note Tevfik is designated as "lessee," while he is named "owner''
in another place in the same certificate. Neither does the year 1326 (1910)
indicated in the certificate conform to another statement made in the certificate
according to which the acquisition of the right of ownership by Tevfik
was registered in 1324 (1908). It appears, however, from the copy of the
register produced by the defendant that the entry was made in 1908. In
one (copy of a) "letter of specification" of September 5, 1325 (1909), Tev:fik
is likewise designated as the owner entered in the register. Another inaccuracy
in the certificate, it appears, is the indication of the area as 140
ancient deunums while the register shows the figure 40.
In spite of the irregularities pointed out on this subject, the Arbitrator is
of the opinion that the documents produced ought to have been recognized
by Bulgaria as titles of ownership until proof to the contrary by judicial
means. In refusing to recognize these titles the defendant, therefore, failed
in its international engagements.
4. Concerning the forest of Toursounidja, the defendant observed that
no cutting contract was produced. It objects therefore to this claim being
taken into consideration. The plaintiff alleges that the contract was lost,
but submits at the same time that its existence is sufficiently established by
the tenor of the titles of ownership appertaining to this forest.
It is true that Tevfik is designated in these deeds as "the lessee of the
forest," a status "duly proYed by certificate." But, on the other hand,
there exists no information concerning the content of the contract. The
plaintiff has not proved therefore that the defendant failed in its obligations
concerning respect for acquired rights, or rather concerning the rule of presumption
contained in Article 10 of the Treaty of Constantinople. The
Arbitrator is therefore obliged to reject the claim presented on the subject of
this forest.
5. The contract produced by the plaintiff concerning the cutting rights in
the forest of Hamam-Bounar was drawn up on February 7, 1910, for a period
of five years, without the privilege of renewal. This contract does not provide
for the sale of a fixed quantity of wood. Therefore, according to its
own terms, it must have expired in 1915. The Arbitrator, therefore, cannot
do otherwise than reject the claim concerning this forest.
6. Concerning the other cutting rights, the defendant raised various objections
to their validity. These observations are aimed at either the incompetence
of the alleged owner of a forest to grant a right of cutting, or at
some irregularities in the form of the statements covering the description of
the forests which are obligatory according to Turkish law, or else at the
absence of a decision of the proper authorities concerning the approval of
such statements.
After examining all the documents concerning the various forests, the
Arbitrator has, however, arrived at the conclusion that, there being no
judicial decision invalidating the alleged rights, he must proceed on the
Annex 297
802 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
presumption of their validity, assuming that no manifest and serious irregularities
have been shown.
The result of the examination of the various points at issue may be summed
up as follows:
The defendant's claim in regard to the forest of Kara-Bouroun cannot be
considered (see Title IV, A) and the claims concerning the forests of Kn.vgali,
Tchakmakli, Madjarli, Barakli, Toursounidja and Hamam-Bounar must be
rejected.
Among the claims based on the right of ownership there is ground for allowing
only that concerning the forest of Gougouche.
Among the claims based on the right of cutting for a limited time and a
fixed quantity of wood, there is ground for a1lowing the following eleven,
that is, those concerning the forests of Avanli, Olouk-Yedik, Korfanli,
Tchal, Souloudjak, Kodja-Kargalik, Sabourdja-Alan, Bitchaktchi-Diranli,
Chabanidja, Tilkili and Kemali-Tchoral.
VI
It follows from the conclusion drawn by the Arbitrator above, that the
attitude of the defendant in regard to the claimants did not accord, as far
as concerns certain of the forests in question, with Article 10 of the Treaty
of Constantinople and with Article 181 of the Treaty of Neuilly. Considering
the damage thus caused the plaintiff by the defendant, the latter must be
held to pay an indemnity.
It was suggested in the course of the proceedings that, should the claim be
upheld in whole or in part, the defendant should be obliged to restore the
forests to the claimants. The plaintiff, however, left to the discretion of the
Arbitrator the expediency of such restitution.
The Arbitrator is of the opinion that the obligation of restoring the forests
to the claimants cannot be imposed upon the defendant. There are several
reasons which may be given in favor of this opinion. The claimants in whose
behalf a claim put forward by the Greek Government has been held admissible,
are partners in a commercial organization composed of other partners as
well. It would therefore be inadmissible to compel Bulgaria to restore
integrally the disputed forests. Moreover, it is hardly likely that the forests
are in the same condition that they were in 1918. Assuming that most of
the rights in the forests are rights of cutting a fixed quantity of wood, to be
removed during a certain period, a decision holding for restitution would be
dependent upon an examination of the question whether the quantity contracted
for could be actually obtained. Such a decision would also require
examining and determining the rights which may have arisen meanwhile in
favor of other persons, and which may or may not be consistent with the
· rights of the claimants.
The only practicable solution of the dispute, therefore, is to impose upon
the defendant the obligation to pay an indemnity. This solution also en-
Annex 297
JUDICIAL DECISIONS 803
counters serious difficulties by reason of conditions peculiar to the instant
case.
Here may be discussed a preliminary objection raised by Bulgaria, which
was not considered along with the other objections because it belongs rather
to the main issue of the dispute. The defendant alleged that the demand
"is not admissible in so far as concerns the participation of the Bulgarians
Pierre Sallabache:ff, Minko Semerdjieff and Pantcho Apostoloff."
As was remarked before, this objection implies the obligation, in calculating
the final indemnity, to deduct the shares which would have reverted to
the three persons above mentioned according to the partnership contract.
Of these three persons, Apostoloff's share would be ½6 of the net profits of
three forests, while the share of the other two would be that indicated in the
partnership contract. On behalf of Greece it was observed, as mentioned
above, that the participation of Apostoloff was subject to certain conditions
which were not fulfilled, and that, besides, Apostoloff was not authorized to
receive any profit in case the Bulgarian Government did not recognize the
rights of the claimants in the forests. As regards Semerdjieff, the plaintiff
asserted that he was excluded from the partnership and therefore did not
possess any share in the assets of the company.
In regard to Sallabacheff, the plaintiff alleges that a right could not be
claimed in his behalf unless the company established in Bulgaria had itself
acquired as an entity ownership of the five forests and the wood cuttings derived
from the fourteen exploitation contracts. According to the plaintiff,
the Dospath-Dagh Company, although regularly organized, never actually
existed because the capital fund provided for in the contract was never established.
It never realized on the capital assets promised by the partners,
and for that reason the company never became the owner of any right. The
result is that Sallabacheff never became a participant in any capital fund.
The plaintiff added still another consideration, that is, that the partnership
contract concluded in Sofia in 1915, according to Article 180 of the Treaty of
Neuilly ceased to exist following the entry of Greece into the war on the side
of the .Allies. Several of the contracting parties having become enemies, the
contract was abrogated by operation of law.
Taking up first this last allegation, the defendant's observation should be
emphasized, according to which certain exceptions are foreseen to the general
principle of Article 180 of the Treaty of Neuilly, especially in relation to
contracts having for their object the transfer of ownership of goods and
effects, personal or real, in case of the transfer of the property or of the delivery
of the article before the parties became enemies. As the defendant
also asserted, the Dospath-Dagh Company did not consider itself as having
been dissolved by the Treaty of Neuilly. The claim presented December
22, 1921, against Bulgaria before the Greco-Bulgarian Mixed Arbitral Tribunal
was made in the name of the partners in the Dospath-Dagh Company,
Limited. The diplomatic representations of the Greek Government were
Annex 297
804 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
likewise made in behalf of the stockholders and representatives of the company.
The existence of a number of proofs of the functioning of tho company
even after the World War does not permit the Arbitrator to hold, against
the denial of the defendant, that the company had legally ceased to exist.
If the argument of the plaintiff were upheld on the subject of the abrogation
of the partnership contract, the consequence would be perhaps, in addition,
the total or at least partial collapse of the foundation of the claims.
The defendant has observed in this connection that, according to the point
of view just indicated, one could not understand on what ground would be
justified the claims of persons other than those whose names appear as ownerpurchasers
in the certificates of ownership or as owners of concessions in the
exploitation contracts. One can image still other consequences of the argument
for the abrogation of the partnership contract. But there is no reason
for discussing this eventuality in more detail.
And while on the subject of the claims made in the present proceeding,
this is the place to examine the question as to what persons are to be considered
as shareholders in the assets of the company, keeping in mind the
date of the confiscation of the forests. According to the minutes of the meeting
of the company held May 18, 1918, there were eight interested parties,
namely, besides the five persons whose rights the Greek Government invokes
in this case, the two Bulgarians, Sallabacheff and Semerdjieff, and the Turk,
Sadik Ibrahim. Admitting that it has not been proved that any of them
withdrew from the company before September 20, 1918, the date on which
the forests were declared the property of the Bulgarian State, the Arbitrator
can only presume that there were at that time eight persons interested in the
company, in which Sallabacheff and Semerdjieff together owned 120/640
shares and the others together held 520/640 shares. The contract contains no
clause relating to the proportion in which each of the latter six shared in the
company. It may be presumed, however, that their shares were equal. It
follows that the three claimants whose interests the Greek Government is
competent to represent in the present case hold in the company a financial
interest corresponding to 260/640 of its assets.
VII
In figuring the indemnity which it feels justified in claiming, the plaintiff
has based its calculation as regards the exploitation contracts on certain
admitted facts concerning the quantity of wood the claimants had the right
to utilize according to the terms of the contract, as well as on an average price
of 10 gold levas a cubic meter (m3) of standing wood. Concerning the forests
as to which the claimants asserted a right of ownership, the valuation is
based upon the extent, the density of the forest, the rapidity of the new
growth, and the average price of the above-mentioned wood. In addition,
payment of interest is claimed from the date on which this arbitral award
shall have been rendered.
Annex 297
JUDICIAL DECISIONS 805
Such a method of evaluation raises some legitimate objections as to the
value of the standing wood; it is well known that the latter is subject to very
serious fluctuations according to contingencies, the location of the forest, the
possibilities for use of the wood for various purposes in the industrial establishments
of that locality, t,he existence of means of communication, etc.
Standing wood can, therefore, in certain places and at a certain specified
time, have a comparatively high value, while in other places or at another
time it will have no commercial value at all, and therefore cannot be utilized.
It is true that the plaintiff produced some information on the sale by auction
of various quantities of wood in the regions where the forests in litigation are
situated, but these facts are not of sufficient probative value when evaluating
forest lands of large extent. Moreover, this fact is accentuated by the
enormous difference existing between the sums for which the claimants acquired
their rights in the forests and those at which they estimate their actual
value.
The defendant has insisted upon the institution of a local survey by the
Arbitrator in case he decides upon the payment of damages. The plaintiff
left to the Arbitrator the duty of judging of the expediency of such an assessment
by experts. The Arbitrator does not believe that it would be
practical at the present time to proceed with such a survey, considering the
length of time that has elapsed since the date of the seizure of the forests by
Bulgaria, and considering the fact that considerable cutting may have been
done in that interval for the benefit of other persons. It may also be noted
that in most of the cases it is a matter of cutting contracts concluded for a
definite period and that any evaluation should therefore take into account
the question of whether the exploitation contemplated in the contracts could
have profitably been exercised on such a scale during the time fixed.
In the Arbitrator's opinion this case presents several elements giving the
impression that the acquisition of the forests in question and the conclusion
of the cutting contracts reveal speculative characteristics in which the
chances of success were from the beginning of the most doubtful nature.
The location of the forests in a frontier region, as well as the uncertainty of
political conditions at the time of the purchases, are in themselves of a nature
to give the transactions a hazardous character.
It is ha.rdly possible, without taking into account these special conditions,
to make an equitable estimate of the indemnity which should be awarded the
Greek Government because certain of its nationals have received treatment
incompatible with the international obligations of Bulgaria.
It may be recalled that the claimants bought all the forests and all cutting
rights, according to calculations of the defendant on the basis of the contracts
produced by the plaintiff, for a total sum of 18,000 Ltqs. According to the
plaintiff, the capital invested in the various installations for exploitation
including the sums paid for the forests, amounted to 73,000 Ltqs.
At the time of the conclusion of the contract of the Dospath-Dagh Com-
Annex 297
806 THE .AMERICAN JOURNAL OF INTERNATIONAL LAW
pany, Ltd., which took place several years later, February 9, 1915, an indication
of the value of the forests, as well as the equipment, was inserted in the
contract. That value was placed at 2,600,000 levas. The value of Bulgarian
currency at that date was, 118.50 levas to 100 Swiss francs (according
to the comparative study of world exchange published by M. Emil Diesen).
The claimants ultimately fixed the value of the forest enterprise a few
months before the date when they were declared state property in 1918.
According to the memorandum of May 18, 1918, the members of the company
decided to sell all the forests and all the exploitation rights for a total
sum of 3,200,000 levas. At that date the current rate of the leva was, ac•
cording to the above-mentioned author.ty, 158 levas to 100 Swiss francs.
According to the general principles of international law, interest-damages
must be determined on the basis of the value of the forests, respectively of
the exploitation contracts, at the date of the actual dispossession, that is, on
September 20, 1918, in addition to an equitable rate of interest estimated on
that value from the date of dispossession. The only certified indication
which exists concerning the value of the forests in 1918 is the sum just mentioned,
which is considerably higher than the purchase price but does not
vary too much from the value indicated in the partnership contract of 1915.
It is true that the plaintiff alleged that this price was fi."{ed under pressm·e of
the attitude of the Bulgarian authorities. But it has been emphasized above
that the value of the rights in question was influenced by several other uncertain
factors capable of lowering it, the same factors, moreover, which
doubtless have been felt since the fixing of the purchase price and the value
placed in the partnership contract.
In the total value of the alleged rights of the claimants, estimated in 1918
at about 2,025,000 Swiss francs, are also included the forests on account of
which the claim of the plaintiff cannot be allowed. Therefore, there should
be deducted from this total value, the value of four of the five forests of
which the claim.ants allege they are the owners, as well as the value of three
of the fourteen exploitation contracts. It is obviously difficult enough to
determine, on the basis of the information at the Arbitrator's disposal, the
proportion of the total value represented by these forests and contracts.
However, the Arbitrator believes he can calculate approximately, on the
basis of the data furnished by the plaintiff concerning the value of the different
contracts and forests, that two-thirds of the damages demanded are on
account of the forests concerning which the plaintiff has not sufficiently established
his claims. There then remains a third of the total sum indicated
above, that is, 675,000 Swiss francs. It has also been shown above that the
plaintiff is competent only to act concerning the shares of three of the eight
associates comprising the company in 1918. These three associates held
260/640 of the assets of the company. Their share in the above-mentioned
total would therefore amount to 274,219 Swiss francs, or in round fi~ures,
275,000 Swiss francs. According to the method of evaluation applied by
the Arbitrator, interest should be calculated at 5% on that sum from 1918.
Annex 297
JUDICIAL DECISIONS 807
The total amount of the indemnity to be paid according to this valuation
comes to 475,000 Swiss francs or gold levas.
For these reasons the Arbitrator
UPON THE PRELIMINARY EXCEPTIONS
1. Rejects the exception of incompetence raised by the Bulgarian Government;
2. Rejects the preliminary objection of the Bulgarian Government that the
demand of the Greek Government is not admissible before the prior exhaustion
of local remedies;
3. Rejects the preliminary objection of the Bulgarian Government that the
claim of the Greek Government is not admissible as to the fourteen yailaks
in which the claimants assert the right of exploitation;
4. Allows the preliminary objection of the Bulgarian Government that
the claim of the Greek Government is not admissible in so far as it concerns
the rights of the brothers Tevfik and Hakki Hadji Ahmed;
5. Allows the preliminary objection of the Bulgarian Government that the
claim of the Greek Government is not admissible in so far as it concerns the
reclamation relative to the forest of Kara-Bouroun;
ON THE A:rAIN ISSUE
Decides and judges
1. That it is necessary to overrule the claims of the Greek Government concerning
the forests of Kavgali, Tchakmakli, Madjarli, Barakli, Toursounidja,
and Hamam-Bounar;
2. That the decision of the Bulgarian Government, announced in the letter
of the Minister of Agriculture of September, 1918, showing the non-recognition
by the Bulgarian authorities of the rights acquired by the three Greek
nationals, Athanasius Christofacopoulos, Demetrius Kehayias and Jean
Doumas, in common with the other partners of the Dospath-Dagh Company,
in the forest of Gougouche as well as in the forests of Avanli, Olouk-Yedik,
Korfanli, Tchal, Souloudjak, Kodja-Kargalik, Sabourdja-Alan, BitcbaktchiDiranli,
Chabanidja, Tilkili and Kemali-Tchoral, before the annexation by
Bulgaria of the territory where the said forests are situated, was not consistent
with the international obligations of Bulgaria;
3. That by virtue of Article 181 of the Treaty of Neuilly, Bulgaria is
responsible to Greece for failing to respect the acquired rights of said nationals
of Greece, and that, consequently, an indemnity on this account is
due to Greece;
4. That the damage suffered by the three Greek nationals furnishes an
equitable measure of the reparation due the Greek Government;
5. That the indemnity due to the Greek Government is fixed at the global
sum of 475,000 (four hundred seventy-five thousand) gold levas, plus five
per cent interest from the date on which this arbitral award is rendered.
(Signed) <JsTEN UNDEN,
Staff an Soderblom.
Annex 297
ANNEX298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
139 S.Ct. 1048
Supreme Court of the United States.
REPUBLIC OF SUDAN, Petitioner
v.
Rick HARRISON, et al.
No. 16-1094
I
Argued November 7, 2018
I
Decided March 26, 2019
Synopsis
Background: Navy servicemembers and their spouses
brought action against Republic of Sudan under Foreign
Sovereign Immunities Act (FSIA) to recover for injuries
servicemembers sustained in terrorist attack. After entry of
default judgment against Sudan, 882 F.Supp.2d 23, plaintiffs
sought to enforce it against funds held by banks. The United
States District Court for the Southern District of New York,
Tina Cheryl Torres, J., issued turnover orders, and Sudan
appealed. The Court of Appeals for the Second Circuit, Denny
Chin, Circuit Judge, affirmed, 802 F.3d 399, and subsequently
denied Sudan's petitions for rehearing, 838 F.3d 86, and
rehearing en bane. Certiorari was granted.
[Holding:] The Supreme Court, Justice Alito, held that the
third means enumerated in the FSIA for a litigant to serve a
foreign state in the courts of the United States is not satisfied
when a service packet that names the foreign minister is
mailed to the foreign state's embassy in the U.S. but, instead,
requires that a mailing be sent directly to the foreign minister's
office in the minister's home country.
Reversed and remanded.
Justice Thomas filed a dissenting opinion.
West Headnotes (23)
[l] International Law ~ Scope of Immunity;
Nature of Claims Assertable
[2]
[3]
[4]
Under the Foreign Sovereign Immunities Act
(FSIA), a foreign state is immune from the
jurisdiction of courts in the United States
unless one of several enumerated exceptions
to immunity applies. 28 U.S.C.A. §§ 1604,
1605-1607.
1 Cases that cite this headnote
International Law
immunity in general
Exceptions to
If a lawsuit falls within one of the exceptions
to immunity set forth in the Foreign Sovereign
Immunities Act (FSIA), the FSIA provides
subject-matter jurisdiction in federal district
courts. 28 U.S.C.A. §§ 1330(a), 1604,
1605-1607.
International Law ~ Process
Foreign Sovereign Immunities Act (FSIA)
provides for personal jurisdiction where service
has been made under the section of the statute
governing service of process on a foreign state
or political subdivision of a foreign state. 28
U.S.C.A. §§ 1330(b), 1608.
7 Cases that cite this headnote
International Law ► Process
Section of the Foreign Sovereign Immunities
Act (FSIA) governing service of process on
foreign state or political subdivision of foreign
state sets out, in hierarchical order, four
methods by which service shall be made: first
method is by delivery of copy of summons
and complaint in accordance with any special
arrangement for service between plaintiff and
foreign state or political subdivision, ifno special
arrangement exists then service may be made
by second method, namely, delivery of copy
of summons and complaint in accordance with
applicable international convention on service
of judicial documents, third method, whereby
service packet is mailed to foreign state's head
of ministry of foreign affairs, may be used if
service is not possible under either of the first
two methods, and fourth method, which involves
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
sending service packet to Secretary of State for
transmittal through diplomatic channels, may be
used if service cannot be made within 30 days
under third method. 28 U.S.C.A. §§ 1608(a),
1608(a)(l), 1608(a)(2), 1608(a)(3), 1608(a)(4).
8 Cases that cite this headnote
[5] International Law ► Pleading
[6]
[7]
[8]
Under the Foreign Sovereign Immunities Act
(FSIA), once it has been served, a foreign state
or political subdivision has 60 days to file a
responsive pleading. 28 U.S.C.A. § 1608(d).
1 Cases that cite this headnote
International Law ► Default; proceedings
and judgment thereon
Under the Foreign Sovereign Immunities Act
(FSIA), if a foreign state or political subdivision
does not file a responsive pleading within 60
days after it has been served, it runs the risk of
incurring a default judgment, a copy of which
must be sent to the foreign state or political
subdivision in the same manner prescribed for
service. 28 U.S.C.A. §§ 1608(d), 1608(e).
Statutes Language
In interpreting a statutory provision, court begins
where all such inquiries must begin: with the
language of the statute itself.
3 Cases that cite this headnote
International Law ► Process
Third means enumerated in the Foreign
Sovereign Immunities Act (FSIA) for a litigant
to serve a foreign state in the courts of the United
States, which requires that service be sent "by
any form of mail requiring a signed receipt, to
be addressed and dispatched by the clerk of the
court to the head of the ministry of foreign affairs
of the foreign state concerned," is not satisfied
when a service packet that names the foreign
minister is mailed to the foreign state's embassy
in the U.S. but, instead, requires that a mailing
be sent directly to the foreign minister's office
[9]
in the minister's home country; this reading of
statute, while not the only plausible reading,
is the most natural reading, is supported by
several related provisions of the Act, and avoids
potential tension with a treaty and the civil
procedure rules. 28 U.S.C.A. § 1608(a)(3).
5 Cases that cite this headnote
International Law Process
For purposes of third means enumerated in the
Foreign Sovereign Immunities Act (FSIA) for a
litigant to serve a foreign state in the courts of the
United States, which requires that service be sent
"by any form of mail requiring a signed receipt,
to be addressed and dispatched by the clerk of
the court to the head of the ministry of foreign
affairs of the foreign state concerned," a letter or
package is "addressed" to an intended recipient
when his or her name and "address" is placed on
the outside of the item to be sent. 28 U.S.C.A. §
1608(a)(3).
2 Cases that cite this headnote
[10] International Law ► Process
[11]
For purposes of third means enumerated in the
Foreign Sovereign Immunities Act (FSIA) for
a litigant to serve a foreign state in the courts
of the United States, which requires that service
be sent "by any form of mail requiring a signed
receipt, to be addressed and dispatched by the
clerk of the court to the head of the ministry of
foreign affairs of the foreign state concerned,"
the noun "address" means the designation of a
place, such as a residence or place of business,
where a person or organization may be found or
communicated with. 28 U.S.C.A. § 1608(a)(3).
International Law Process
For purposes of third means enumerated in the
Foreign Sovereign Immunities Act (FSIA) for a
litigant to serve a foreign state in the courts of the
United States, which requires that service be sent
"by any form of mail requiring a signed receipt,
to be addressed and dispatched by the clerk of the
court to the head of the ministry of foreign affairs
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Annex 298
2
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
of the foreign state concerned," to "dispatch" a
communication means to send it off or away,
as to a special destination, with promptness or
speed, often as a matter of official business. 28
U.S.C.A. § 1608(a)(3).
1 Cases that cite this headnote
[12] International Law ► Process
For purposes of third means enumerated in the
Foreign Sovereign Immunities Act (FSIA) for a
litigant to serve a foreign state in the courts of the
United States, which requires that service be sent
"by any form of mail requiring a signed receipt,
to be addressed and dispatched by the clerk of the
court to the head of the ministry of foreign affairs
of the foreign state concerned," to "dispatch" a
letter to an addressee connotes sending it directly.
28 U.S.C.A. § 1608(a)(3).
4 Cases that cite this headnote
[13] Contracts ► Contracts by correspondence
Pursuant to the venerable "mailbox rule," there
is a presumption that a mailed acceptance of an
offer is deemed operative when "dispatched" if
it is "properly addressed," though no acceptance
would be deemed properly addressed and
dispatched if it lacked, and thus was not sent to,
the offeror's address or an address that the offeror
held out as the place for receipt of an acceptance.
Restatement (Second) of Contracts § 66.
3 Cases that cite this headnote
[14] Statutes o,- Express mention and implied
exclusion; expressio unius est exclusio alterius
Congress generally acts intentionally when it
uses particular language in one section of a
statute but omits it in another.
8 Cases that cite this headnote
[15] Statutes ... Superfluousness
Courts are hesitant to adopt an interpretation
of a congressional enactment which renders
superfluous another portion of that same law.
4 Cases that cite this headnote
[16] International Law .,. Process
Third means enumerated in the Foreign
Sovereign Immunities Act (FSIA) for a litigant
to serve a foreign state in the courts of the United
States, which requires that service be sent "by
any form of mail requiring a signed receipt, to
be addressed and dispatched by the clerk of the
court to the head of the ministry of foreign affairs
of the foreign state concerned," does not deem
a foreign state properly served solely because
the service method is reasonably calculated to
provide actual notice. 28 U.S.C.A. § 1608(a)(3).
6 Cases that cite this headnote
[17] International Law ... Process
Subsection of the Foreign Sovereign Immunities
Act (FSIA) providing for delivery of a service
packet to an officer or a managing or general
agent of the agency or instrumentality of a
foreign state or to any other agent authorized
by appointment or by law to receive service of
process in the United States expressly allows
service on an agent and makes clear that service
on the agent may occur in the U.S. if an
agent here falls within the provision's terms. 28
U.S.C.A. § 1608(b)(2).
1 Cases that cite this headnote
[18] International Law ► Process
Under first three methods enumerated in the
Foreign Sovereign Immunities Act (FSIA) for a
litigant to serve a foreign state in the courts of the
United States, service is deemed to have occurred
on the date shown on a document signed by
the person who received it from the carrier. 28
U.S.C.A. §§ 1608(a), 1608(c).
1 Cases that cite this headnote
[19] International Law .., Process
Under fourth means enumerated in the Foreign
Sovereign Immunities Act (FSIA) for a litigant
to serve a foreign state in the courts of the United
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Annex 298
3
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
States, which requires the Secretary of State to
transmit a service packet to the foreign state
through diplomatic channels, service is regarded
as having occurred on the transmittal date shown
on the certified copy of the diplomatic note sent
by the Secretary to the clerk of the court. 28
U.S.C.A. §§ 1608(a)(4), 1608(c)(l).
3 Cases that cite this headnote
[20] International Law ► Process
Under all four methods enumerated m the
Foreign Sovereign Immunities Act (FSIA) for a
litigant to serve a foreign state in the courts of the
United States, service is deemed to have occurred
only when there is a strong basis for concluding
that the service packet will very shortly thereafter
come into the hands of a foreign official who will
know what needs to be done. 28 U.S.C.A. §§
1608(a), 1608(c).
[21] International Law ► Assertion by United
States government
Because the State Department helped to draft the
language of the Foreign Sovereign Immunities
Act (FSIA), courts pay "special attention" to the
Department's views on sovereign immunity. 28
U.S.C.A. § 1602 et seq.
[22] International Law ► Legislative or
executive construction
Interpretation of a treaty by the Executive Branch
is entitled to great weight.
[23] International Law ► Process
Service rules set out in the third subsection of
the section of the Foreign Sovereign Immunities
Act (FSIA) enumerating the means by which a
litigant may serve a foreign state in the courts
of the United States, which apply to a category
of cases with sensitive diplomatic implications,
involve circumstances in which the rule of law
demands adherence to strict requirements even
when the equities of a particular case may seem
to point in the opposite direction. 28 U.S.C.A. §
1608(a)(3).
*1051 Syllabus *
The Foreign Sovereign Immunities Act of 1976 (FSIA)
generally immunizes foreign states from suit in this country
unless one of several enumerated exceptions to immunity
applies. 28 U.S.C. §§ 1604, 1605- 1607. If an exception
applies, the FSIA provides subject-matter jurisdiction in
federal district court, § 1330(a), and personal jurisdiction
"where service has been made under section 1608," §
1330(b). Section 1608(a) provides four methods of serving
civil process, including, as relevant here, service "by any
form of mail requiring a signed receipt, to be addressed and
dispatched ... to the head of the ministry of foreign affairs of
the foreign state concerned,"§ 1608(a)(3).
Respondents, victims of the bombing of the USS Cole and
their family members, sued the Republic of Sudan under
the FSIA, alleging that Sudan provided material support to
al Qaeda for the bombing. The court clerk, at respondents'
request, addressed the service packet to Sudan's Minister
of Foreign Affairs at the Sudanese Embassy in the United
States and later certified that a signed receipt had been
returned. After Sudan failed to appear in the litigation, the
District Court entered a default judgment for respondents and
subsequently issued three orders requiring banks to tum over
Sudanese assets to pay the judgment. Sudan challenged those
orders, arguing that the judgment was invalid for lack of
personal jurisdiction, because § 1608(a)(3) required that the
service packet be sent to its foreign minister at his principal
office in Sudan, not to the Sudanese Embassy in the United
States. The Second Circuit affirmed, reasoning that the statute
was silent on where the mailing must be sent and that the
method chosen was consistent with the statute's language
and could be reasonably expected to result in delivery to the
foreign minister.
Held: Most naturally read,§ 1608(a)(3) requires a mailing to
be sent directly to the foreign minister's office in the foreign
state. Pp. --- --.
(a) A letter or package is "addressed" to an intended recipient
when his or her name and address are placed on the outside.
The noun "address" means "a residence or place of business."
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
Webster's Third New International Dictionary 25. A foreign
nation's embassy in the United States is neither the residence
nor the usual place of business of that nation's foreign
minister. Similarly, to "dispatch" a letter to an addressee
connotes sending it directly. It is also significant that service
under§ 1608(a)(3) requires a signed returned receipt to ensure
delivery to the addressee. Pp. --- --.
(b) Several related provisions in § 1608 support this
reading. Section 1608(b)(3)(B) contains similar "addressed
and dispatched" language, but also says that service by its
method is permissible "ifreasonably calculated to give actual
notice." Respondents' suggestion that§ 1608(a)(3) embodies
a similar standard runs up against well-settled principles
of statutory interpretation. See Department of Homeland
Security v. MacLean, 574 U.S. --, --, 135 S.Ct. 913,
919, 190 L.Ed.2d 771 , and Mackey v. Lanier Collection
Agency & Service, Inc., 486 U.S. 825, 837, 108 S.Ct. 2182,
100 L.Ed.2d 836. Section l 608(b )(2) expressly allows service
on an agent, specifies the particular individuals who are
permitted to be served as agents of the recipient, and makes
clear that service on the agent may occur in the United States.
Congress could have included similar terms in § 1608(a)(3)
had it intended the provision to operate in this manner. Section
1608(c) deems service to have occurred under all methods
only when there is a strong basis for concluding that the
service packet will very shortly thereafter come into the hands
of a foreign official who will know what needs to be done.
Under§ 1608(a)(3), that occurs when the person who receives
it from the carrier signs for it. Interpreting § 1608(a)(3) to
require that a service packet be sent to a foreign minister's
own office rather than to a mailroom employee in a foreign
embassy better harmonizes the rules for determining when
service occurs. Pp. --- --.
(c) This reading of § 1608(a)(3) avoids potential tension
with the Federal Rules of Civil Procedure and the Vienna
Convention on Diplomatic Relations. If mailing a service
packet to a foreign state's embassy in the United States
were sufficient, then it would appear to be easier to serve
the foreign state than to serve a person in that foreign
state under Rule 4. The natural reading of § 1608(a)(3)
also avoids the potential international implications arising
from the State Department's position that the Convention's
principle of inviolability precludes serving a foreign state by
mailing process to the foreign state's embassy in the United
States. Pp. --- --.
( d) Respondents' remaining arguments are unavailing. First,
their suggestion that § 1608(a)(3) demands that service be
sent "to a location that is likely to have a direct line of
communication to the foreign minister" creates difficult linedrawing
problems that counsel in favor of maintaining a clear,
administrable rule. Second, their claim that § 1608(a)(4)which
requires that process be sent to the Secretary of State
in "Washington, District ofColumbia"-shows that Congress
did not intend § 1608(a)(3) to have a similar locational
requirement is outweighed by the countervailing arguments
already noted. Finally, they contend that it would be unfair
to throw out their judgment based on petitioner's highly
technical and belatedly raised argument. But in cases with
sensitive diplomatic implications, the rule of law demands
adherence to strict rules, even when the equities seem to point
in the opposite direction. Pp. --- --.
802 F.3d 399, reversed and remanded.
ALITO, J., delivered the opinion of the Court, in
which ROBERTS, C. J., and GINSBURG, BREYER,
SOTOMAYOR, KAGAN, GORSUCH, and KAVANAUGH,
JJ., joined. THOMAS, J., filed a dissenting opinion.
ON WRIT OF CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
Attorneys and Law Firms
Christopher M. Curran, Washington, DC, for Petitioner.
Kannon K. Shanmugam, Washington, DC, for Respondents.
Erica Ross for the United States as amicus curiae, by special
leave of the Court, supporting the Petitioner.
Andrew C. Hall, Roarke Maxwell, Hall, Lamb, Hall &
Leto, P.A., Miami FL, Nelson M. Jones III, Houston, TX,
Kannon K. Shanmugam, Masha G. Hansford, Benjamin
E. Moskowitz, J. Matthew Rice, Williams & Connolly
LLP, Washington, DC, Kevin E. Martingayle, Bischoff
Martingayle, P.C., Virginia Beach, VA, for Respondents.
Christopher M. Curran, Nicole Erb, Claire A. DeLelle,
Nicolle Kownacki, Celia A. McLaughlin, White & Case LLP,
Washington, DC, for Petitioner.
Opinion
Justice AUTO delivered the opinion of the Court.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 5
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
This case concerns the requirements applicable to a particular
method of serving civil process on a foreign state. Under the
Foreign Sovereign Immunities Act of 1976 (FSIA), a foreign
state may be served by means of a mailing that is "addressed
and dispatched ... to the head of the ministry of foreign affairs
of the foreign state concerned." 28 U.S.C. § 1608(a)(3). The
question now before us is whether this provision is satisfied
when a service packet that names the foreign minister is
mailed to the foreign state's embassy in the United States. We
hold that it is not. Most naturally read, § 1608(a)(3) requires
that a mailing be sent directly to the foreign minister's office
in the minister's home country.
I
A
[l] [2] [3] Under the FSIA, a foreign state is immune
from the jurisdiction of courts in this country unless one
of several enumerated exceptions to immunity applies. 28
U.S.C. §§ 1604, 1605- 1607. Ifa suit falls within one of these
exceptions, the FSIA provides subject-matter jurisdiction in
federal district courts. § 1330(a). The *1054 FSIA also
provides for personal jurisdiction "where service has been
made under section 1608." § 1330(b).
[4] Section 1608(a) governs service of process on "a foreign
state or political subdivision of a foreign state." § 1608(a);
Fed. Rule Civ. Proc. 4(j)(l). In particular, it sets out in
hierarchical order the following four methods by which
"[s]ervice ... shall be made." 28 U.S.C. § 1608(a). The
first method is by delivery of a copy of the summons and
complaint "in accordance with any special arrangement for
service between the plaintiff and the foreign state or political
subdivision." § 1608(a)(l). "[I]f no special arrangement
exists," service may be made by the second method, namely,
delivery of a copy of the summons and complaint "in
accordance with an applicable international convention on
service of judicial documents." § 1608(a)(2). If service is
not possible under either of the first two methods, the third
method, which is the one at issue in this case, may be used.
This method calls for
"sending a copy of the summons and complaint and a
notice of suit, together with a translation of each into the
official language of the foreign state, by any form of mail
requiring a signed receipt, to be addressed and dispatched
by the clerk of the court to the head of the ministry of
foreign affairs of the foreign state concerned." § 1608(a)
(3) (emphasis added).
Finally, if service cannot be made within 30 days under §
1608(a)(3), service may be effected by sending the service
packet "by any form of mail requiring a signed receipt, to
be addressed and dispatched by the clerk of the court to the
Secretary of State in Washington, District of Columbia," for
transmittal "through diplomatic channels to the foreign state."
§ 1608(a)(4).
[5] [6] Once served, a foreign state or political subdivision
has 60 days to file a responsive pleading. § 1608(d). If the
foreign state or political subdivision does not do this, it runs
the risk of incurring a default judgment. See § 1608( e ). A copy
of any such default judgment must be "sent to the foreign state
or political subdivision in the [same] manner prescribed for
service." Ibid.
B
On October 12, 2000, the USS Cole, a United States
Navy guided-missile destroyer, entered the harbor of Aden,
Yemen, for what was intended to be a brief refueling stop.
While refueling was underway, a small boat drew along the
side of the Cole, and the occupants of the boat detonated
explosives that tore a hole in the side of the Cole. Seventeen
crewmembers were killed, and dozens more were injured. Al
Qaeda later claimed responsibility for the attack.
Respondents in this case are victims of the USS Cole
bombing and their family members. In 2010, respondents
sued petitioner, the Republic of Sudan, alleging that Sudan
had provided material support to al Qaeda for the bombing.
See 28 U.S.C. §§ 1605A(a)(l), (c). Because respondents
brought suit under the FSIA, they were required to serve
Sudan with process under § 1608(a). It is undisputed that
service could not be made under § 1608(a)(l) or § 1608(a)
(2), and respondents therefore turned to § 1608(a)(3). At
respondents' request, the clerk of the court sent the service
packet, return receipt requested, to: "Republic of Sudan,
Deng Alor Koul, Minister of Foreign Affairs, Embassy of
the Republic of Sudan, 2210 Massachusetts Avenue NW,
Washington, DC 20008." App. 172. The clerk certified that
the service packet had been sent and, a few days later, certified
that a signed receipt had been *1055 returned.1 After Sudan
failed to appear in the litigation, the District Court for the
District of Columbia held an evidentiary hearing and entered
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 6
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
a $314 million default judgment against Sudan. Again at
respondents' request, the clerk of the court mailed a copy of
the default judgment in the same manner that the clerk had
previously used. See § 1608( e ).
With their default judgment in hand, respondents turned to the
District Court for the Southern District of New York, where
they sought to register the judgment and satisfy it through
orders requiring several banks to tum over Sudanese assets.
See 28 U.S.C. § 1963 (providing forregistration of judgments
for enforcement in other districts). Pursuant to§ 1610(c), the
District Court entered an order confirming that a sufficient
period of time had elapsed following the entry and notice of
the default judgment, and the court then issued three turnover
orders.
At this point, Sudan made an appearance for the purpose of
contesting jurisdiction. It filed a notice of appeal from each
of the three turnover orders and contended on appeal that the
default judgment was invalid for lack of personal jurisdiction.
In particular, Sudan maintained that § 1608(a)(3) required
that the service packet be sent to its foreign minister at his
principal office in Khartoum, the capital of Sudan, and not to
the Sudanese Embassy in the United States.
The Court of Appeals for the Second Circuit rejected this
argument and affirmed the orders of the District Court. 802
F.3d 399 (2015). The Second Circuit reasoned that, although
§ 1608(a)(3) requires that a service packet be mailed "to the
head of the ministry of foreign affairs of the foreign state
concerned," the statute "is silent as to a specific location
where the mailing is to be addressed." Id., at 404. In light of
this, the court concluded that "the method chosen by plaintiffs
-a mailing addressed to the minister of foreign affairs at
the embassy-was consistent with the language of the statute
and could reasonably be expected to result in delivery to the
intended person." Ibid.
Sudan filed a petition for rehearing, and the United States
filed an amicus curiae brief in support of Sudan's petition.
The panel ordered supplemental briefing and heard additional
oral argument, but it once again affirmed, reiterating its view
that § 1608(a)(3) "does not specify that the mailing be sent
to the head of the ministry of foreign affairs in the foreign
country." 838 F.3d 86, 91 (CA2 2016). The court thereafter
denied Sudan's petition for rehearing en bane.
Subsequent to the Second Circuit's decision, the Court of
Appeals for the Fourth Circuit held in a similar case that §
l 608(a)(3) "does not authorize delivery of service to a foreign
state's embassy even if it correctly identifies the intended
recipient as the head of the ministry of foreign affairs." Kumar
v. Republic of Sudan, 880 F.3d 144, 158 (2018), cert. pending,
No. 17-1269.
We granted certiorari to resolve this conflict. 585 U.S. ~-,
138 S.Ct. 2671, 201 L.Ed.2d 1070 (2018)
II
A
[7] The question before us concerns the meaning of§ 1608( a)
(3), and in interpreting *1056 that provision, "[w]e begin
'where all such inquiries must begin: with the language of the
statute itself.' " Caraco Pharmaceutical Laboratories, Ltd.
v. Novo Nordisk A/S, 566 U.S. 399, 412, 132 S.Ct. 1670,
182 L.Ed.2d 678 (2012) (quoting United States v. Ron Pair
Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103
L.Ed.2d 290 (1989)). As noted, § 1608(a)(3) requires that
service be sent "by any form of mail requiring a signed
receipt, to be addressed and dispatched by the clerk of the
court to the head of the ministry of foreign affairs of the
foreign state concerned."
[8] The most natural reading of this language is that service
must be mailed directly to the foreign minister's office in the
foreign state. Although this is not, we grant, the only plausible
reading of the statutory text, it is the most natural one. See,
e.g., United States v. Hohri, 482 U.S. 64, 69-71, 107 S.Ct.
2246, 96 L.Ed.2d 51 (1987) (choosing the "more natural"
reading of a statute); ICC v. Texas, 479 U.S. 450, 456-457,
107 S.Ct. 787, 93 L.Ed.2d 809 (1987) (same); see also Florida
Dept. of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33,
41, 128 S.Ct. 2326, 171 L.Ed.2d 203 (2008) (similar).
[9] [10] A key term in § 1608(a)(3) is the past participle
"addressed." A letter or package is "addressed" to an intended
recipient when his or her name and "address" is placed on the
outside of the item to be sent. And the noun "address," in the
sense relevant here, means "the designation of a place (as a
residence or place of business) where a person or organization
may be found or communicated with." Webster's Third New
International Dictionary 25 (1971) (Webster's Third); see also
Webster's Second New International Dictionary 30 (1957)
("the name or description of a place of residence, business,
etc., where a person may be found or communicated with");
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 7
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
Random House Dictionary of the English Language 17
(1966) ("the place or the name of the place where a person,
organization, or the like is located or may be reached");
American Heritage Dictionary 15 (1969) ("[t]he location at
which a particular organization or person may be found or
reached"); Oxford English Dictionary 106 (1933) (OED)
("the name of the place to which any one's letters are
directed"). Since a foreign nation's embassy in the United
States is neither the residence nor the usual place of business
of that nation's foreign minister and is not a place where
the minister can customarily be found, the most common
understanding of the minister's "address" is inconsistent with
the interpretation of§ 1608(a)(3) adopted by the court below
and advanced by respondents.
We acknowledge that there are circumstances in which a
mailing may be "addressed" to the intended recipient at a
place other than the individual's residence or usual place of
business. For example, if the person sending the mailing does
not know the intended recipient's current home or business
address, the sender might use the intended recipient's last
known address in the hope that the mailing will be forwarded.
Or a sender might send a mailing to a third party who is
thought to be in a position to ensure that the mailing is
ultimately received by the intended recipient. But in the great
majority of cases, addressing a mailing to X means placing
on the outside of the mailing both X's name and the address
of X's residence or customary place of work.
[11] Section 1608(a)(3)'s use of the term "dispatched" points
in the same direction. To "dispatch" a communication means
"to send [it] off or away (as to a special destination) with
promptness or speed often as a matter of official business."
Webster's Third 653; see also OED *1057 478 ("To send off
post-haste or with expedition or promptitude (a messenger,
message, etc., having an express destination)"). A person who
wishes to "dispatch" a letter to X will generally send it directly
to X at a place where X is customarily found. The sender
will not "dispatch" the letter in a roundabout way, such as by
directing it to a third party who, it is hoped, will then send it
on to the intended recipient.
[12] A few examples illustrate this point. Suppose that a
person is instructed to "address" a letter to the Attorney
General of the United States and "dispatch" the letter (i.e.,
to "send [it] off post-haste") to the Attorney General. The
person giving these instructions would likely be disappointed
and probably annoyed to learn that the letter had been sent
to, let us say, the office of the United States Attorney for
the District of Idaho. And this would be so even though a
U.S. Attorney's office is part of the Department headed by the
Attorney General and even though such an office would very
probably forward the letter to the Attorney General's office in
Washington. Similarly, a person who instructs a subordinate
to dispatch a letter to the CEO of a big corporation that
owns retail outlets throughout the country would probably be
irritated to learn that the letter had been mailed to one of those
stores instead of corporate headquarters. To "dispatch" a letter
to an addressee connotes sending it directly.
[13] A similar understanding underlies the venerable
"mailbox rule." As first-year law students learn in their course
on contracts, there is a presumption that a mailed acceptance
of an offer is deemed operative when "dispatched" if it
is "properly addressed." Restatement (Second) of Contracts
§ 66, p. 161 (1979) (Restatement); Rosenthal v. Walker,
111 U.S. 185, 193, 4 S.Ct. 382, 28 L.Ed. 395 (1884). But
no acceptance would be deemed properly addressed and
dispatched if it lacked, and thus was not sent to, the offeror's
address ( or an address that the offeror held out as the place for
receipt of an acceptance). See Restatement § 66, Comment b.
It is also significant that service under § 1608(a)(3) requires
a signed returned receipt, a standard method for ensuring
delivery to the addressee. Cf. Black's Law Dictionary 1096
(10th ed. 2014) (defining "certified mail" as "[m]ail for which
the sender requests proof of delivery in the form of a receipt
signed by the addressee"). We assume that certified mail
sent to a foreign minister will generally be signed for by
a subordinate, but the person who signs for the minister's
certified mail in the foreign ministry itself presumably has
authority to receive mail on the minister's behalf and has been
instructed on how that mail is to be handled. The same is much
less likely to be true for an employee in the mailroom of an
embassy.
For all these reasons, we think that the most natural reading
of § 1608(a)(3) is that the service packet must bear the
foreign minister's name and customary address and that it
be sent to the minister in a direct and expeditious way. And
the minister's customary office is the place where he or she
generally works, not a farflung outpost that the minister may
at most occasionally visit.
B
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 8
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
Several related provisions in § 1608 support this reading. See
Davis v. Michigan Dept. of Treasury, 489 U.S. 803,809, 109
S.Ct. 1500, 103 L.Ed.2d 891 (1989) ("It is a fundamental
canon of statutory construction that the words of a statute
must be read in their context and with a view to their place in
the overall statutory scheme").
*1058 1
One such provision is § 1608(b)(3)(B). Section 1608(b)
governs service on "an agency or instrumentality of a foreign
state." And like § 1608(a)(3), § 1608(b)(3)(B) requires
delivery of a service packet to the intended recipient "by any
form of mail requiring a signed receipt, to be addressed and
dispatched by the clerk of the court." But § 1608(b)(3)(B),
unlike § 1608(a)(3), contains prefatory language saying that
service by this method is permissible "if reasonably calculated
to give actual notice."
Respondents read § 1608(a)(3) as embodying a similar
requirement. See Brief for Respondents 34. At oral
argument, respondents' counsel stressed this point, arguing
that respondents' interpretation of§ 1608(a)(3) "gives effect"
to the "familiar" due process standard articulated in Mullane
v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct.
652, 94 L.Ed. 865 (1950), which is "the notion that [service]
must be reasonably calculated to give notice." Tr. of Oral Arg.
37-38.
If respondents were correct that "addressed and dispatched"
means "reasonably calculated to give notice," then the phrase
"reasonably calculated to give actual notice" in § l 608(b)
(3) would be superfluous. Thus, as the dissent agrees, §
1608(a)(3) "does not deem a foreign state properly served
solely because the service method is reasonably calculated to
provide actual notice." Post, at --(opinion of THOMAS,
J.).
2
[17] Section 1608(b )(2) similarly supports our interpretation
of § 1608(a)(3). Section 1608(b)(2) provides for delivery of
a service packet to an officer or a managing or general agent
of the agency or instrumentality of a foreign state or "to any
other agent authorized by appointment or by law to receive
service of process in the United States."
This language is significant for three reasons. First, it
expressly allows service on an agent. Second, it specifies the
particular individuals who are permitted to be served as agents
of the recipient. Third, it makes clear that service on the agent
may occur in the United States if an agent here falls within
the provision's terms.
If Congress had contemplated anything similar under §
1608(a)(3), there is no apparent reason why it would not have
included in that provision terms similar to those in § l 608(b)
(2). Respondents would have us believe that Congress was
[14] [15] [16] This argument runs up against two well- content to have the courts read such terms into § 1608(a)
settled principles of statutory interpretation. First, "Congress (3). In view of § 1608(b)(2), this *1059 seems unlikely.2
generally acts intentionally when it uses particular language
in one section of a statute but omits it in another." Department
of Homeland Security v. MacLean, 574 U.S.--,--, 135
S.Ct. 913, 919, 190 L.Ed.2d 771 (2015). Because Congress
included the "reasonably calculated to give actual notice"
language only in § 1608(b), and not in § 1608(a), we resist
the suggestion to read that language into § 1608(a). Second,
"we are hesitant to adopt an interpretation of a congressional
enactment which renders superfluous another portion of that
same law." Mackey v. Lanier Collection Agency & Service,
Inc., 486 U.S. 825, 837, 108 S.Ct. 2182, 100 L.Ed.2d 836
(1988). Here, respondents encounter a superfluity problem
when they argue that the "addressed and dispatched" clause
in § 1608(a)(3) gives effect to the Mullanedue process
standard. They fail to account for the fact that § l 608(b)
(3)(B) contains both the "addressed and dispatched" and
"reasonably calculated to give actual notice" requirements.
See also post, at-- ("Nor does the FSIA authorize service
on a foreign state by utilizing an agent designated to receive
process for the state").
3
[18] [19] Section 1608( c) further buttresses our reading of§
1608(a)(3). Section 1608(c) sets out the rules for determining
when service "shall be deemed to have been made." For
the first three methods of service under § 1608(a), service
is deemed to have occurred on the date indicated on "the
certification, signed and returned postal receipt, or other proof
of service applicable to the method of service employed." §
1608(c)(2). The sole exception is service under § 1608(a)(4),
which requires the Secretary of State to transmit a service
packet to the foreign state through diplomatic channels. Under
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 9
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
this method, once the Secretary has transmitted the packet,
the Secretary must send to the clerk of the court "a certified
copy of the diplomatic note indicating when the papers were
transmitted." § 1608(a)(4). And when service is effected
in this way, service is regarded as having occurred on the
transmittal date shown on the certified copy of the diplomatic
note. § 1608(c)(l).
[20] Under all these methods, service is deemed to have
occurred only when there is a strong basis for concluding that
the service packet will very shortly thereafter come into the
hands of a foreign official who will know what needs to be
done. Under § 1608(a)(4), where service is transmitted by
the Secretary of State through diplomatic channels, there is
presumably good reason to believe that the service packet will
quickly come to the attention of a high-level foreign official,
and thus service is regarded as having been completed on the
date of transmittal. And under §§ 1608(a)(l), (2), and (3),
where service is deemed to have occurred on the date shown
on a document signed by the person who received it from the
carrier, Congress presumably thought that the individuals who
signed for the service packet could be trusted to ensure that
the service packet is handled properly and expeditiously.
It is easy to see why Congress could take that view with
respect to a person designated for the receipt of process in
a "special arrangement for service between the plaintiff and
the foreign state or political subdivision," § 1608(a)(l ), and
a person so designated under "an applicable international
convention," § 1608(a)(2). But what about § 1608(a)(3),
the provision now before us? Who is more comparable to
those who sign for mail under §§ 1608(a)(l) and (2)? A
person who works in the office of the foreign minister in
the minister's home country and is authorized to receive
and process the minister's mail? Or a mailroom employee
in a foreign embassy? We think the answer is obvious, and
therefore interpreting § 1608(a)(3) to require that a service
packet be sent to a foreign minister's own office better
harmonizes the rules for determining when service is deemed
to have been made.
Respondents seek to soften the blow of an untimely delivery
to the minister by noting that the foreign state can try to vacate
a default judgment under Federal Rule of Civil Procedure
55(c). Brief for Respondents 27. But that is a poor substitute
for sure and timely receipt of service, *1060 since a foreign
state would have to show "good cause" to vacate the judgment
under that Rule. Here, as with the previously mentioned
provisions in § 1608, giving § l 608(a)(3) its ordinary meaning
better harmonizes the various provisions in § 1608 and avoids
the oddities that respondents' interpretation would create.
C
The ordinary meaning of the "addressed and dispatched"
requirement in § 1608(a)(3) also has the virtue of avoiding
potential tension with the Federal Rules of Civil Procedure
and the Vienna Convention on Diplomatic Relations.
Take the Federal Rules of Civil Procedure first. At the time
of the FSIA's enactment, Rule 4(i), entitled "Alternative
provisions for service in a foreign-country," set out certain
permissible methods of service on "part[ies] in a foreign
country." Fed. Rule Civ. Proc. 4(i)(l) (1976). One such
method was "by any form of mail, requiring a signed receipt,
to be addressed and dispatched by the clerk of the court to the
party to be served." Rule 4(i)(l)(D) (emphasis added). Rule
4(i)(2) further provided that "proof of service" pursuant to
that method "shall include a receipt signed by the addressee
or other evidence of delivery to the addressee satisfactory to
the court." (Emphasis added.) The current version of Rule 4
is similar. See Rules 4(f)(2)(C)(ii), 4(/)(2)(B).
The virtually identical methods of service outlined in Rule 4
and § 1608(a)(3) pose a problem for respondents' position: If
mailing a service packet to a foreign state's embassy in the
United States were sufficient for purposes of § 1608(a)(3),
then it would appear to be easier to serve the foreign state than
to serve a person in that foreign state. This is so because a
receipt signed by an embassy employee would not necessarily
satisfy Rule 4 since such a receipt would not bear the signature
of the foreign minister and might not constitute evidence that
is sufficient to show that the service packet had actually been
delivered to the minister. It would be an odd state of affairs
for a foreign state's inhabitants to enjoy more protections in
federal courts than the foreign state itself, particularly given
that the foreign state's immunity from suit is at stake. The
natural reading of§ 1608(a)(3) avoids that oddity.
2
[21] [22] Our interpretation of § 1608(a)(3) avoids
concerns regarding the United States' obligations under
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 10
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
the Vienna Convention on Diplomatic Relations. We have
previously noted that the State Department "helped to
draft the FSIA's language," and we therefore pay "special
attention" to the Department's views on sovereign immunity.
Bolivarian Republic of Venezuela v. Helmerich & Payne Int'/
Drilling Co., 581 U.S.--,--, 137 S.Ct. 1312, 1320, 197
L.Ed.2d 663 (2017). It is also "well settled that the Executive
Branch's interpretation of a treaty 'is entitled to great weight.'
" Abbott v. Abbott, 560 U.S. 1, 15, 130 S.Ct. 1983, 176
L.Ed.2d 789 (2010) (quoting Sumitomo Shoji America, Inc.
v. Avagliano, 457 U.S. 176, 185, 102 S.Ct. 2374, 72 L.Ed.2d
765 (1982)).
Article 22(1) of the Vienna Convention provides: "The
premises of the mission shall be inviolable. The agents of
the receiving State may not enter them, except with the
consent of the head of the mission." Vienna Convention on
Diplomatic Relations, Apr. 18, 1961, 23 U.S.T. 3237, T.I.A.S.
No. 7502. Since at least 1974, the State Department has
taken the position that Article 22(1 )'s principle of inviolability
precludes serving a foreign state by mailing process to the
foreign state's embassy *1061 in the United States. See
Service of Legal Process by Mail on Foreign Governments in
the United States, 71 Dept. State Bull. 458-459 (1974). In this
case, the State Department has reiterated this view in amicus
curiae briefs filed in this Court and in the Second Circuit. The
Government also informs us that United States embassies do
not accept service of process when the United States is sued
in a foreign court, and the Government expresses concern that
accepting respondents' interpretation of§ 1608 might imperil
this practice. Brief for United States as Amicus Curiae 25-26.
Contending that the State Department held a different view
of Article 22(1) before 1974, respondents argue that the
Department's interpretation of the Vienna Convention is
wrong, but we need not decide this question. By giving §
1608(a)(3) its most natural reading, we avoid the potential
international implications of a contrary interpretation.
III
Respondents' remammg arguments do not alter our
conclusion. First, respondents contend that § 1608(a)(3)
says nothing about where the service packet must be sent.
See Brief for Respondents 22 ("the statute is silent as to
the location where the service packet should be sent").
But while it is true that § 1608(a)(3) does not expressly
provide where service must be sent, it is common ground
that this provision must implicitly impose some requirement.
Respondents acknowledge this when they argue that the
provision demands that service be sent "to a location that is
likely to have a direct line of communication to the foreign
minister." Id., at 34; cf. post, at -- (stating that sending
a letter to a Washington-based embassy "with a direct line
of communication" to the foreign minister seems as efficient
as sending it to the minister's office in the foreign state).
The question, then, is precisely what § 1608(a)(3) implicitly
requires. Respondents assure us that a packet sent to "an
embassy plainly would qualify," while a packet sent to "a
tourism office plainly would not." Brief for Respondents 34.
But if the test is whether "a location ... is likely to have a
direct line of communication to the foreign minister," ibid., it
is not at all clear why service could not be sent to places in
the United States other than a foreign state's embassy. Why
not allow the packet to be sent, for example, to a consulate?
The residence of the foreign state's ambassador? The foreign
state's mission to the United Nations? Would the answer
depend on the size or presumed expertise of the staff at the
delivery location? The difficult line-drawing problems that
flow from respondents' interpretation of§ 1608(a)(3) counsel
in favor of maintaining a clear, administrable rule: The service
packet must be mailed directly to the foreign minister at the
minister's office in the foreign state.
Second, respondents ( and the dissent, see post, at --
--) contrast the language of § 1608(a)(3) with that
of § 1608(a)(4), which says that service by this method
requires that process be sent to the Secretary of State in
"Washington, District of Columbia." If Congress wanted
to require that process under § 1608(a)(3) be sent to a
foreign minister's office in the minister's home country,
respondents ask, why didn't Congress use a formulation
similar to that in § 1608(a)(4)? This is respondents' strongest
argument, and in the end, we see no entirely satisfactory
response other than that § 1608(a) does not represent an
example of perfect draftsmanship. We grant that the argument
based on the contrasting language in § 1608(a)(4) cuts in
respondents' favor, but it is outweighed in our judgment by
the countervailing arguments already noted.
*1062 [23] Finally, respondents contend that it would be
"the height of unfairness to throw out [their] judgment"
based on the highly technical argument belatedly raised by
petitioner. See Brief for Respondents 35. We understand
respondents' exasperation and recognize that enforcing
compliance with § 1608(a)(3) may seem like an empty
formality in this particular case, which involves highly
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 11
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
publicized litigation of which the Government of Sudan may
have been aware prior to entry of default judgment. But there
are circumstances in which the rule oflaw demands adherence
to strict requirements even when the equities of a particular
case may seem to point in the opposite direction. The service
rules set out in § 1608(a)(3), which apply to a category of
cases with sensitive diplomatic implications, clearly fall into
this category. Under those rules, all cases must be treated the
same.
Moreover, as respondents' counsel acknowledged at oral
argument, holding that Sudan was not properly served under
§ 1608(a)(3) is not the end of the road. Tr. of Oral Arg. 56.
Respondents may attempt service once again under § 1608(a)
(3), and if that attempt fails, they may tum to § 1608(a)(4).
When asked at argument to provide examples of any problems
with service under § 1608(a)(4), respondents' counsel stated
that he was unaware of any cases where such service failed.
Id., at 59-62.
***
We interpret § 1608(a)(3) as it is most naturally understood:
A service packet must be addressed and dispatched to the
foreign minister at the minister's office in the foreign state.
We therefore reverse the judgment of the Court of Appeals
and remand the case for further proceedings consistent with
this opinion.
It is so ordered.
Justice THOMAS, dissenting.
The Court holds that service on a foreign state by certified
mail under the Foreign Sovereign Immunities Act (FSIA) is
defective unless the packet is "addressed and dispatched to the
foreign minister at the minister's office in the foreign state."
that Sudan's Embassy declined the service packet addressed
to its foreign minister-as it was free to do--I would hold that
respondents complied with the FSIA when they addressed
and dispatched a service packet to Sudan's Minister of
Foreign Affairs at Sudan's Embassy in Washington, D. C.
Accordingly, I respectfully dissent.
I
To serve a foreign state by certified mail under the FSIA,
the service packet must be "addressed and dispatched by the
clerk of the court to the head of the ministry of foreign affairs
of the foreign state concerned." Ibid. In many respects, I
approach this statutory text in the same way as the Court. I
have no quarrel with the majority's definitions of the relevant
statutory terms, ante, at -- - --, and I agree that the
FSIA does not deem a *1063 foreign state properly served
solely because the service method is reasonably calculated
to provide actual notice, ante, at --- --, --- --.
Nor does the FSIA authorize service on a foreign state by
utilizing an agent designated to receive process for the state.
Ante, at --- --. At the same time, the FSIA stops short
of requiring that the foreign minister personally receive or
sign for the service packet: As long as the service packet
is "addressed and dispatched ... to" the foreign minister, §
1608(a)(3), the minister's subordinates may accept the packet
and act appropriately on his behalf. Ante, at --.
In short, I agree with the majority that § 1608(a)(3) requires
that the service packet be dispatched to an address for
the foreign minister. The relevant question, in my view, is
whether a foreign state's embassy in the United States can
serve as a place where the minister of foreign affairs may be
reached by mail. Unlike the majority, I conclude that it can.
Ante, at -- (emphasis added). This bright-line rule may II
be attractive from a policy perspective, but the FSIA neither
specifies nor precludes the use of any particular address.
Instead, the statute requires only that the packet be sent to
a particular person-"the head of the ministry of foreign
affairs." 28 U.S.C. § 1608(a)(3).
Given the unique role that embassies play in facilitating
communications between states, a foreign state's embassy in
Washington, D. C., is, absent an indication to the contrary,
a place where a U.S. litigant can serve the state's foreign
minister. Because there is no evidence in this case suggesting
A foreign state's embassy in Washington, D. C., is generally
a place where a U.S. court can communicate by mail with the
state's foreign minister. Unless an embassy decides to decline
packages containing judicial summonses-as it is free to do,
both in individual cases or as a broader policy-a service
packet addressed and dispatched to a foreign minister at the
address of its embassy in the United States satisfies § 1608(a)
(3).
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 12
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
Because embassies are "responsible for state-to-state
relationships," Malone, The Modem Diplomatic Mission,
in The Oxford Handbook of Modem Diplomacy 124 (A.
Cooper, J. Heine, & R. Thakur eds. 2013), an important
function of an embassy or other "diplomatic mission" is
to "act as a permanent channel of communication between
the sending state and the receiving state." G. Berridge &
A. James, A Dictionary of Diplomacy 73 (2d ed. 2003).
Embassies fulfill this function in numerous ways, including
by using secure faxes, e-mails, or the "diplomatic bag" to
transmit documents to the states they represent. A. Aust,
Handbook of International Law 122 (2d ed. 2010); see
ibid. (the diplomatic bag is a mailbag or freight container
containing diplomatic documents or articles intended for
official use). Thus, as one amicus brief aptly puts it, embassies
"have direct lines of communications with the home country,
and a pipeline to route communications to the proper
offices and officials." Brief for Former U.S. Counterterrorism
Officials et al. as Amici Curiae 29.
Numerous provisions of the Vienna Convention on
Diplomatic Relations (VCDR) confirm this reality, Apr.
18, 1961, 23 U.S.T. 3227, T.I.A.S. No. 7502. Under the
VCDR, an embassy "may employ all appropriate means" of
communicating with the state whose interests it represents,
Art. 27(1), including "modem means of communication
such as (mobile) telecommunication, fax, and email,"
Wouters, Duquet, & Meuwissen, The Vienna Conventions on
Diplomatic and Consular Relations, in The Oxford Handbook
of Modem Diplomacy, supra, at 523. The VCDR provides
substantial protections for the "official correspondence of
the mission" and the diplomatic bag, which may include
"diplomatic documents or articles intended for official
use." Arts. 27(1)-(5); cf. Vienna Convention on Consular
Relations, Arts. 3, 5(j), 35, Apr. 24, 1963, 21 U.S.T. 77,
T.I.A.S. No. 6820 (recognizing that embassies may perform
"[c]onsular functions," such as "transmitting judicial and
extrajudicial documents," and affording protections to official
communications).
The capability of an embassy to route service papers to the
sending state is confirmed by the State Department regulation
*1064 implementing § 1608(a)(4), which provides for
service on the foreign state through diplomatic channels.
Under this regulation, the Department may deliver the
service packet "to the embassy of the foreign state in the
District of Columbia" "[i]f the foreign state so requests
or if otherwise appropriate." 22 CFR § 93.l(c)(2) (2018).
Although the service packet under § 1608(a)(4) need not
be addressed and dispatched to the foreign minister, the
regulation implementing it nevertheless demonstrates that
embassies do in fact provide a channel of communication
between the United States and foreign countries.
It was against this backdrop that respondents requested
that their service packet be "addressed and dispatched by
the clerk of the court to the head of the ministry of
foreign affairs of [Sudan]," § 1608(a)(3), at the address
of its embassy in Washington, D. C. Because an embassy
serves as a channel through which the U.S. Government
can communicate with the sending state's minister of foreign
affairs, this method of service complied with the ordinary
meaning of § 1608(a)(3) on this record. There is-and this
is critical-no evidence in the record showing that Sudan's
foreign minister could not be reached through the embassy. As
the majority acknowledges, the clerk received a signed return
receipt and a shipping confirmation stating that the package
had been delivered. Ante, at--. Nothing on the receipt or
confirmation indicated that the package could not be delivered
to its addressee, and both the clerk and the District Judge
determined that service had been properly effectuated.
Of course, the FSIA does not impose a substantive obligation
on the embassy to accept or transmit service of process
directed to the attention of the foreign minister. A foreign state
and its embassy are free to reject some or all packets addressed
to the attention of the foreign minister. But, as detailed above,
Sudan has pointed to nothing in the record suggesting that
its embassy refused service, or that its embassy address was
not a place at which its foreign minister could be reached. On
these facts, I would hold that the service packet was properly
"addressed and dispatched by the clerk of the court to the head
of the ministry of foreign affairs." § 1608(a)(3).
III
A
Instead of focusing on whether service at an embassy satisfies
the FSIA, the Court articulates a bright-line rule: To comply
with § 1608(a)(3), "[a] service packet must be addressed and
dispatched to the foreign minister at the minister's office in
the foreign state." Ante, at --( emphasis added). Whatever
virtues this rule possesses, the Court's interpretation is not the
"most natural reading" of§ 1608(a)(3), ante, at--.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 13
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
The Court focuses on the foreign minister's "customary
office" or "place of work," ante, at --, --, but these
terms appear nowhere in § 1608. The FSIA requires that the
service packet be "addressed and dispatched" to a particular
person-"the head of the ministry of foreign affairs." §
1608(a)(3). It does not further require that the package be
addressed and dispatched to any particular place. While I
agree with the Court that sending the service packet to the
foreign ministry is one way to satisfy § 1608(a)(3), that
is different from saying that § 1608(a)(3) requires service
exclusively at that location.
The absence of a textual foundation for the majority's rule
is only accentuated when § 1608(a)(3) is compared to §
1608(a)(4), the adjacent paragraph governing service through
diplomatic channels. *1065 Under that provision, the
service packet must be "addressed and dispatched by the clerk
of the court to the Secretary of State in Washington, District of
Columbia, to the attention of the Director of Special Consular
Services." § 1608(a)(4) (emphasis added); see 22 CFR §
93 .1 ( c) (State Department regulation governing service under
this provision). Unlike § 1608(a)(3), this provision specifies
both the person to be served and the location of service. While
not dispositive, the absence ofa similarlimitation in § 1608( a)
(3) undermines the categorical rule adopted by the Court.
The Court offers three additional arguments in support of its
position, but none justifies its bright-line rule.
First, the Court offers a series of hypotheticals to suggest
that the term "dispatched" not only contemplates a prompt
shipment, but also connotes sending the letter directly to a
place where the person is likely to be physically located. Ante,
at --- --. In my opinion, these hypotheticals are inapt.
The unique role of an embassy in facilitating communications
between sovereign governments does not have an analog in
the hypotheticals offered by the majority. 1 And to the extent
the statute emphasizes speed and directness, as the majority
suggests, dispatching a letter to a Washington-based embassy
with a direct line of communication to the foreign ministerincluding
the ability to communicate electronically-seems
at least as efficient as dispatching the letter across the globe
to a foreign country, particularly if that country has recently
experienced armed conflict or political instability.
Second, the Court notes that, under its rule, the effective
date of service under § 1608(c) will be closer in time to
when the service packet reaches a foreign official who knows
how to respond to the summons. Ante, at --- --. That
contention assumes embassy employees are less capable of
responding to a summons than foreign-ministry employees.
But even granting that premise, this argument falls short. An
embassy is capable of quickly transmitting a summons to the
foreign minister, whether electronically, by diplomatic bag,
or by some other means. Any time lost in transmission is not
significant enough to warrant the Court's departure from the
text of the statute.
Third, the Court argues that allowing service at the embassy
would make it easier to serve a foreign state than it is to
serve a person in that foreign state under Federal Rule of Civil
Procedure 4. Ante, at--- --. I am not persuaded. Under
the FSIA, service by mail is not effective until "the date of
receipt indicated in the ... signed and returned postal receipt."
§ 1608(c)(2). That is no more generous than practice under
Rule 4, especially since the foreign minister need not accept
service. To the extent that embassies accept service of process
directed to the foreign minister, it is that decision that eases
the burden on the plaintiff, not § 1608(a)(3).
B
Sudan also argues that allowing service by mail at an embassy
would violate Article *1066 22(1) of the VCDR. The Court
does not adopt Sudan's argument, stating only that its decision
has "the virtue of avoiding potential tension" with the VCDR.
Ante, at 1060. But there is no tension between my reading of
the FSIA and the VCDR.2
Article 22(1) of the VCDR provides that the premises of
the mission-that is, "the buildings or parts of buildings
and the land ancillary thereto .. . used for the purposes of
the mission," Art. l(i}-"shall be inviolable." The VCDR
consistently uses the word "inviolable" to protect against
physical intrusions and similar types of interference, not
the jurisdiction of a court. The concept of "inviolability" is
used, for instance, to protect the mission's "premises," Art.
22(1); the "archives and documents of the mission," Art. 24;
the "official correspondence of the mission," Art. 27(2); the
"private residence of a diplomatic agent," Art. 30(1 ); and the
diplomatic agent's "person," "papers, correspondence, and,"
with certain exceptions, "his property," Arts. 29, 30(2).
The provisions of the VCDR that protect against assertions
of jurisdiction, by contrast, speak in terms of "immunity."
Thus, in addition to physical inviolability, the premises of
the mission (and "other property thereon") are separately
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 14
Annex 298
Republic of Sudan v. Harrison, 139 S.Ct. 1048 (2019)
2019 A.M.C. 609, 203 L.Ed.2d 433, 19 Cal. Daily Op. Serv. 2571 ...
"immune from search, requisition, attachment or execution."
Art. 22(3). And a diplomatic agent is separately "immun[e]
from the criminal jurisdiction of the receiving State" and,
generally, from "its civil and administrative jurisdiction." Art.
31(1). Several provisions of the VCDR distinguish between
"immunity from jurisdiction, and inviolability." Art. 38(1);
see Arts. 31(1), (3).
Given the VCDR's consistent use of"inviolability" to protect
against physical intrusions and interference, and "immunity"
to protect against judicial authority, Article 22(l)'s protection
of the mission premises is best understood as a protection
against the former. Thus, under the VCDR, the inviolability of
the embassy's premises is not implicated by receipt of service
papers to any greater degree than it is by receipt of other
mail. Cf. Reyes v. Al-Malki, [2017] UKSC 61, i!l 6 (holding
Footnotes
that service via mail at the diplomatic residence-which is
afforded the same level of protection as the mission premises
under Article 30(1}-does not violate the VCDR).
***
Because the method of service employed by respondents here
complied with the FSIA, I would affirm the judgment of the
Second Circuit.
All Citations
139 S.Ct. 1048, 203 L.Ed.2d 433, 2019 A.M.C. 609, 19 Cal.
Daily Op. Serv. 2571, 2019 Daily Journal D.A.R. 2410, 27
Fla. L. Weekly Fed. S 741
* 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 Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 50
L.Ed. 499.
1 Sudan questions whether respondents named the correct foreign minister and whether the Sudanese Embassy received
the service packet. Because we find the service deficient in any event, we assume for the sake of argument that the
correct name was used and that the Embassy did receive the packet.
2 Notably, the idea of treating someone at a foreign state's embassy as an agent for purposes of service on the foreign
state was not unfamiliar to Congress. An earlier proposed version of the FSIA would have permitted service on a foreign
state by sending the service packet "to the ambassador or chief of mission of the foreign state." See S. 566, 93d Cong.,
1st Sess., § 1608, p. 6 (1973).
1 To the extent the relationship between a U.S. Attorney's office and the Attorney General is analogous, the majority
correctly acknowledges that the office would "very probably forward" a letter directed to the attention of the Attorney
General. Ante, at --. The majority nevertheless believes that it would be improper or unusual to dispatch that letter
to a local U.S. Attorney's office. I disagree. It seems entirely likely that a person residing in the District of Idaho would
dispatch a letter to the Attorney General through the U.S. Attorney's office serving his District-even if it would be odd
for a resident of the District of Columbia to use that Idaho address.
2 Even if there were, the FSIA postdates the VCDR and thus " 'renders the treaty null' " " 'to the extent of conflict.' " Breard
v. Greene, 523 U.S. 371, 376, 118 S.Ct. 1352, 140 L.Ed.2d 529 (1998) (per curiam) (quoting Reid v. Covert, 354 U.S.
1, 18, 77 S.Ct. 1222, 1 L.Ed.2d 1148 (1957) (plurality opinion)).
End of Document © 2021 Thomson Reuters. No claim to original U.S.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Government Works.
15
Annex 298
ANNEX299
Hausler v. JP Morgan Chase Bank, N.A., 770 F.3d 207 (2014)
770 F.3d 207
United States Court of Appeals,
Second Circuit.
Jeannette Fuller HAUSLER, as Successor
Personal Representative of The Estate of
Robert Otis Fuller, Deceased, on behalf of
Thomas Caskeyas Personal Representative
of The Estate of Lynita Fuller Caskey
surviving daughter of Robert Otis Fuller,
and Jeannette Hausler, PlaintiffThird-
Party Defendants-Appellees,
Estate of Robert Otis Fuller,
Frederick Fuller, Grace Lutes,
Irene Moss, and Frances Fuller,
Plaintiffs-Third-Party Defendants,
v.
JP MORGAN CHASE BANK, N.A.,
Citibank, N.A., Royal Bank of Scotland
N.V., fka ABN Amro Bank N.V., Bank of
America Corporation, UBS AG, and Bank
of America N.A., Defendants-GarnisheesThird-
Party Plaintiffs-Appellees,
Dresdner Lateinamerika AG, fka
Dresdner Bank Lateinamerika AG,
Abbott Laboratories, Inc., Petroleos
De Venezuela, S.A., Fundacion Benfica
Nicolas S. Acea, Pablo Alcazar, as trustee
of Fundacion Benefica Nicolas S. Acea,
Mayra Bustaments, and Rene Silva,
Jr., as trustee of Fundacion Benefica
Nicolas S. Acea, Third-Party Defendants,
Republic Of Cuba, Fidel Castro Ruz,
Individually, As First Vice President of the
Council of State and Council of Ministers
and Head of the Cuban Revolutionary
Armed Forces, Cuban Revolutionary
Armed Forces, El Ministerio Del Interior,
Defendants-Third-Party Defendants,
v.
LTU Lufttransportunternehmen, LTU
Gmbh In Care Of Kirstein & Young
PLLC 1750 K Street NW, Suite 200
Washington, DC 20006, ConsolidatedThird-
Party Defendant-Appellant,
Banco Bilbao Vizcaya Argentaria,
S.A., Banco Bilbao Vizcaya Argentaria
Panama, S.A., Claimants-Appellants,
Estudios Mercados y Suministros, S.L.,
Philips Mexicana S.A. DE C.V., Novafin
Financiere, S.A., Respondents-Appellants,
Caja De Ahorros y Monte de
Piedad de Madrid, Premuda
S.P.A., Interpleaders-Appellants,
Shanghai Pudong Development Bank Co.
Ltd., Third-Party Defendant-Appellant,
Aeroflot Russian Airlines,
ADR Provider-Appellant,
Banco Santander S.A., Caja Madrid,
Banco Espanol De Credito, Banco
Santander Totta, S.A., Union Bancaire
Privee, Banco Central De Venezuela,
and Banco De Desarrollo Economico
y Social De Venezuela, Respondents,
San Paolo Bank S.A. and
ING Bank N.V., Claimants. *
Nos. 12-1264 (Lead), 12-1272(Con),
12-1384(Con), 12-1386(Con), 13-
1463(Con), 12-1466(Con), 12-1945(Con).
I
Argued: Feb. 11, 2013.
I
Decided: Oct. 27, 2014.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. Annex 299 1
Hausler v. JP Morgan Chase Bank, N.A., 770 F.3d 207 (2014)
Synopsis
Background: Family members or trustees of estates of
victims of state-sponsored terrorism filed turnover petitions
pursuant to Terrorism Risk Insurance Act (TRIA) to enforce
default judgment entered by Florida court holding Republic
of Cuba and Cuban officials liable for torture and extrajudicial
killing by executing upon accounts created and maintained
by garnishee banks as repositories for sums blocked in
course of electronic funds transfers (EFT) involvingjudgment
debtors or their agencies or instrumentalities. The United
States District Court for the Southern District of New York,
Marrero, J., 845 F.Supp.2d 553, entered summary judgment in
plaintiffs' favor, and banks and adverse claimant respondents
appealed.
Holding: The Court of Appeals held that EFTs were not
subject to attachment while in possession of intermediary
banks.
Reversed and remanded.
West Headnotes (1)
[l] International Law ~ Persons and Property
Subject; Immunity and Exceptions Thereto
Under New York law, electronic funds transfers
(EFT) were neither property of originator nor
beneficiary while briefly in intermediary bank's
possession, and thus EFTs to Republic of
Cuba and its agencies or instrumentalities were
not subject to attachment as "property of a
foreign state" or "property of an agency or
instrumentality of such a state" pursuant to
Foreign Sovereign Immunities Act (FSIA) or
Cuban Assets Control Regulations while in
possession of intermediary banks, where no
Cuban entity transmitted blocked EFTs. 28
U.S.C.A. §§ 1605(a)(7), 1610(g); 31 C.F.R. §
515.311(a).
26 Cases that cite this headnote
Attorneys and Law Firms
*209 David Alan Baron, James Wilson Perkins, Robert
Phillip Charrow, and Laura Metcoff Klaus, Greenberg
Traurig, LLP, Washington, D.C. for Jeannette Hausler, Estate
of Robert Otis Fuller, Frederick Fuller, Grace Lutes, Irene
Moss, and Frances Fuller.
Kenneth Caruso ( argued), and Matthew Belz, White &
Case LLP, New York, New York for Banco Bilbao
Vizcaya Argentaria Panama, S.A. and Banco Bilbao Vizcaya
Argentaria, S.A.
Juancarlos Sanchez, Esq. And Wilfredo A. Rodriguez, Avila
Rodriguez Hernandez Mena & Ferri LLP, Coral Gables, FL,
for Banco Santander, S.A., Caja Madrid, Caja de Ahorros y
Monte do Piedad de Madrid, and Caja Madrid.
Bernard James Garbutt, III, Morgan, Lewis & Bockius LLP,
New York, NY, for Banco Espanol De Credito, Banco
Santander Totta, S.A., Union Bancaire Privee, Banco Central
de Venezuela, Banco de Desarrollo Economico y Social
de Venezuela, Estudios Mercados y Suministros, S.L., and
Philips Mexicana S.A. de C.V.
Glenn M. Kurtz, White & Case LLP, New York, NY, for
Shanghai Pudong Development Bank Co. Ltd.
James L. Kerr and Karen E. Wagner, Davis Polk & Wardwell
LLP, New York, New York for San Paolo Bank, S.A., ING
Bank, N.V., JPMorgan Chase Bank, N.A., Citibank, N.A., The
Royal Bank of Scotland N.V., Bank of America, Corp., UBS
AG, and Bank of America N.A.
David Michael Kirstein, Kirstein & Young PLLC,
Washington, DC, for LTU LuftransportUnternehmen, LTU
Gmbh In Care of Kirstein & Young PLLC
Claurisse Campanale--Orozco, Tisdale Law Offices, LLC,
New York, NY, for Premuda S.p.A.
David S. Jones, United States Attorney's Office for the
Southern District ofN ew York, New York, NY, for the United
States of America.
Before: HALL, LYNCH, and CARNEY, Circuit Judges.
Opinion
PERCURIAM:
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. Annex 299 2
Hausler v. JP Morgan Chase Bank, N.A., 770 F.3d 207 (2014)
Before us on appeal is a matter of first impression regarding
the interpretation of *210 § 201 of the Terrorism Risk
Insurance Act of 2002 (codified at 28 U.S.C. § 1610 note)
("TRIA"). The plaintiffs-appellees ( collectively "Hausler")
are family members or trustees of the estates of victims of
state-sponsored terrorism. They seek to enforce their 2009
Florida state court judgment ("the underlying judgment")
obtained against, among others, the Republic of Cuba
("Cuba") by attaching the blocked assets of that state pursuant
to TRIA § 201. Specifically, Hausler seeks to satisfy the
underlying judgment from electronic fund transfers ("EFTs")
blocked pursuant to the Cuban Assets Control Regulations,
31 C.F.R. Part 515.1 The defendant-garnishee banks at which
the EFTs are stopped pursuant to the block oppose turning
over the value of the EFTs. The dispositive questions are
whether and under what factual circumstances TRIA permits
the attachment of mid-stream EFTs.
BACKGROUND
A. Underlying Judgment
The appellees are family members and estate representatives
of Bobby Fuller, an American citizen who was arrested
and executed by Cuban government forces on October
16, 1960. In 2005, the Hausler plaintiffs sued Cuba and
others under the Foreign Sovereign Immunities Act, 28
U.S.C. § 1602 et seq., in the Eleventh Judicial District,
Miami-Dade County, Florida. Cuba did not appear and after
conducting a hearing, the Florida state court awarded the
Hausler plaintiffs $400,000,000 in combined compensatory
and punitive damages. Cuba did not appeal this judgment. The
judgment remains unsatisfied.
Since March 1, 1982, Cuba has been continuously designated
as a state sponsor of terrorism under section 6(j) of the Export
Administration Act of 1979 by the United States Department
of State.
B. Judgment Collection and Proceedings Before the
District Court
To enforce the judgment, Hausler sought in the Florida state
courts writs of garnishment on United States companies
which, according to Hausler, were indebted to Cuba. The
garnishees removed the garnishment proceedings to the
United States District Court for the Southern District of
Florida, arguing that federal subject matter jurisdiction
existed under 28 U.S.C. §§ 1330, 1332, and TRIA.
In a parallel action, Hausler sought a full faith and credit
determination for the underlying state judgment in the United
States District Court for the Southern District of Florida.
That request was granted on August 20, 2008. The judgment
was then registered in the United States District Court for
the Southern District of New York, and Hausler commenced
additional collection proceedings in that court. The Florida
garnishment actions were (1) ultimately transferred to the
Southern District of New York and consolidated with the
actions there or (2) dismissed without prejudice to be
pursued in the Southern District of New York along with the
transferred and consolidated actions.
On July 6, 2010, Hausler filed three petitions (hereinafter
petitions I, II, and III) under Fed.R.Civ.P. 69 and N.Y.
C.P.L.R. § 5225(b) against the defendant-garnishee banks
to turn over the value of the EFTs at issue in this case.
The garnishee banks moved to dismiss turnover petition III,
arguing, among other things, that Cuba had no property
interest in the *211 EFTs. The district court denied the
motion, holding that TRIA preempted state law with respect
to which entities had a property interest in mid-stream EFTs
and that Cuba had a sufficient property interest in the EFTs for
Hausler to execute upon them. The banks then commenced
an interpleader action regarding Petitions I and III. Numerous
adverse claimant respondents appeared ( collectively "the
ACRs"), each claiming to have an interest in the blocked EFTs
superior to Hausler's. Hausler then moved for judgment on the
pleadings or, in the alternative, summary judgment regarding
Petitions I and III. The garnishee banks and ACRs crossmoved
for summary judgment. The district court granted
summary judgment in favor of Hausler for essentially the
same reasons given in its earlier decision.2 This appeal
followed.
DISCUSSION
On appeal the garnishee-banks and ACRs argue that the
blocked EFTs are not attachable "assets of' Cuba under
TRIA § 201. We review de nova the "threshold issue of
whether EFTs are ... property" ofa particular party. CalderonCardona
v. JPMorgan Chase Bank, NA., 770 F.3d 993, 1000
(2d Cir.2014) (quoting Shipping Corp. of India Ltd. v. Jaldhi
Overseas Pte Ltd., 585 F.3d 58, 66--67 (2d Cir.2009)).
In the ordinary case, a foreign state will be "immune from
the jurisdiction of the courts of the United States and of the
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. Annex 299 3
Hausler v. JP Morgan Chase Bank, N.A., 770 F.3d 207 (2014)
States" pursuant to the Foreign Sovereign Immunities Act
("FSIA"). 28 U.S.C. § 1604 (1988). Congress, however, has
created terrorism-related exceptions to immunity under FSIA.
See Calderon-Cardona, 770 F.3d at 998. One such exception
is TRIA's authorization of the attachment of the property of
terrorist parties and that of their agencies or instrumentalities
to satisfy certain judgments issued against them. See TRIA §
201(a). In particular, TRIA provides that:
Notwithstanding any other provision oflaw, and except as
provided in subsection (b ), in every case in which a person
has obtained a judgment against a terrorist party on a claim
based on an act of terrorism, or for which a terrorist party
is not immune under [28 U.S.C. § 1605(a)(7) ], the blocked
assets of that terrorist party (including the blocked assets
of any agency or instrumentality of that terrorist party)
shall be subject to execution or attachment in the aid of
execution in order to satisfy such judgment to the extent of
any compensatory damages for which such terrorist party
has been adjudged liable.
TRIA § 201(a) (emphasis supplied).
"[W]hether or not midstream EFTs may be attached or seized
depends upon the nature and wording of the statute pursuant
to which attachment and seizure is sought." Export-Import
Bank of U.S. v. Asia Pulp & Paper Co., 609 F.3d 111, 116
(2d Cir.2010). As with FSIA § 1610(g), Congress did not
define the "type of property interests that may be subject to
attachment under" TRIA § 201(a). Calderon-Cardona, 770
F.3d at 1001 (interpreting FSIA § 1610(g)). While the Cuban
Assets Control Regulations, for purposes of those regulations,
include a non-exhaustive list of types of property that may
be attached, 31 C.F.R. § 515.311(a), EFTs involving a Cuban
*212 bank are not among the types of property identified.
When Congress leaves a gap in a statute that "has not created
any new property rights, but 'merely attaches consequences,
federally defined, to rights created under state law,' we must
look to state law to define the 'rights the judgment debtor
has in the property the [creditor] seeks to reach.' " CalderonCardona,
770 F.3d at 1001 (quoting Asia Pulp, 609 F.3d at
Footnotes
117). Here, the banks at which the EFTs are blocked are in
New York, so we look to New York property law to fill the
gap.
We recently explained in Calderon-Cardona "that under New
York law 'EFTs are neither the property of the originator
nor the beneficiary while briefly in the possession of an
intermediary bank.' " Id. at 1001 ( quoting Jaldhi, 585 F.3d at
71 ). As such, "the only entity with a property interest in the
stopped EFT is the entity that passed the EFT on to the bank
where it presently rests." Id. at 1002. Thus, inorderforanEFT
to be a "blocked asset of' Cuba under TRIA § 201(a), either
Cuba "itself or an agency or instrumentality thereof ( such as a
state-owned financial institution) [ must have] transmitted the
EFT directly to the bank where the EFT is held pursuant to
the block." Id.
Unlike in Calderon-Cardona, where a remand was necessary
to determine whether the EFTs at issue were attachable, it
is undisputed that no Cuban entity transmitted any of the
blocked EFTs in this case directly to the blocking bank.
As a result, neither Cuba nor its agents or instrumentalities
have any property interest in the EFTs that are blocked at
the garnishee banks. Because no terrorist party or agency or
instrumentality thereof has a property interest in the EFTs,
they are not attachable under TRIA § 201.
CONCLUSION
We have reviewed the parties' additional arguments and
find them unavailing. In light of the foregoing analysis, the
judgment of the District Court is REVERSED, and the case
is REMANDED for further proceedings consistent with this
opinion.
All Citations
770 F.3d207
* The Clerk of Court is respectfully directed to amend the caption to conform to that above.
1
2
For a detailed explanation of how EFTs function, see Shipping Corp. of India Ltd.v. Jaldhi Overseas Pte Ltd., 585 F.3d
58, 60 n. 1 (2d Cir.2009).
Judge Marrero also ruled on the priority of claims between the ACRs and Hausler. However, because this case can be
resolved on the basis of whether the funds can be attached under TRIA at all, we do not reach those issues.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. Annex 299 4
ANNEX300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
821 F.3d 196
United States Court of Appeals,
First Circuit.
Alfredo VILLOLDO, individually;
Gustavo E. Villoldo, individually,
and as Administrator, Executor
and Personal Representative of the
Estate of Gustavo Villoldo Argilagos,
Plaintiffs-Appellants/Cross-Appellees,
V.
Fidel CASTRO RUZ, as an individual,
and as an official, employee, or agent
of The Republic of Cuba; Raul Castro
Ruz, as an individual, and as an official,
employee, or agent of The Republic of
Cuba; The Ministry of Interior, an agency
or instrumentality of The Republic of
Cuba; The Army of the Republic of Cuba,
an agency or instrumentality of The
Republic of Cuba; The Republic of Cuba,
a foreign state, Defendants-Appellees,
Computershare, Inc., TrusteeAppellee/
Cross-Appellant.
Nos. 15-1808, 15-2080.
I
May 12, 2016.
Synopsis
Background: Following entry of default judgment on
wrongful death claim against Cuban government, judgment
creditors brought action seeking turnover of 383 securities
accounts allegedly held by Cuban citizens. The United States
District Court for the District of Massachusetts, Timothy
S. Hillman, J., 113 F.Supp.3d 435, dismissed the action
and denied trustee's motion for attorneys' fees. Trustee and
creditors appealed.
Holdings: The Court of Appeals, Barron, Circuit Judge, held
that:
[1] under the extraterritorial exception to the act of state
doctrine, confiscatory law enacted in Cuba that nationalized
assets held abroad would not be given extraterritorial effect in
the United States, so as to permit attachment in United States
of securities accounts opened by Cuban nationals prior to the
confiscatory law's enactment, and
[2] dismissal order was a separate document that triggered the
14-day clock for seeking attorneys' fees following entry of
judgment.
Affirmed.
West Headnotes (14)
[l]
[2]
[3]
[4]
Federal Courts ~ Particular Issues
Turnover order in post-judgment collection
proceeding was not a final judgment, and could
be revisited by the district court, where the
order did not resolve judgment creditors' claims
against certificated shares in securities accounts
controlled by trustee or their claim against any
accounts owned by an objecting party. Fed.Rules
Civ.Proc.Rule 54(b), 28 U.S.C.A.
Federal Courts Multiple claims
A trustee faced with a turnover order can
move to have the order certified as final, even
if the turnover of other assets remains to be
adjudicated. Fed.Rules Civ.Proc.Rule 54(b), 28
U.S.C.A.
International Law ~ Act-of-state doctrine
Under the "act of state doctrine," the act within
its own boundaries of one sovereign State
becomes a rule of decision for the courts of the
United States.
International Law .., Property and
Confiscation Thereof
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Annex 300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
[5]
[6]
[7]
[8]
Under the "extraterritorial exception" to the act
of state doctrine, when property confiscated is
within the United States at the time of the
attempted confiscation, United States courts will
give effect to acts of state only if they are
consistent with the policy and law of the United
States.
2 Cases that cite this headnote
International Law ► Bank accounts and
financial instruments
International Law ► Nationalization of
property
Under the extraterritorial exception to the act of
state doctrine, confiscatory law enacted in Cuba
that nationalized assets held abroad would not be
given extraterritorial effect in the United States,
so as to permit attachment in United States of
securities accounts opened by Cuban nationals
prior to the confiscatory law's enactment, where
the United States government opposed giving
the confiscatory law extraterritorial effect. 28
U.S.C.A. § 1604.
2 Cases that cite this headnote
International Law ► Property and
Confiscation Thereof
Normally, United States courts will not give
extraterritorial effect to a confiscatory decree of
a foreign state, even where directed against its
own nationals.
1 Cases that cite this headnote
International Law ► Act-of-state doctrine
As a general matter, courts are required to
accord some deference to the executive's position
concerning the application of the act of state
doctrine.
International Law ► Property and
Confiscation Thereof
International Law ► Terrorism and related
activity
[9]
Terrorism Risk Insurance Act (TRIA) only
tells United States courts that property that is
owned by a foreign state should be used to
pay judgments held by victims of terrorism;
nothing in the text or legislative history ofTRIA
suggests that the extraterritorial exception to the
act of state doctrine should be disregarded so that
certain assets become the property of the foreign
country. 28 U.S.C.A. § 1610 note.
1 Cases that cite this headnote
Federal Civil Procedure ► Attorney fees
The 14-day clock for seeking an award of
attorneys' fees begins to run when the separate
document required for entry of judgment is
issued. Fed.Rules Civ.Proc.Rules 54(d)(2)(B)(i),
58, 28 U.S.C.A.
[10] Federal Civil Procedure ► Mode and
sufficiency; separate document rule
Although the separate document rule does
not require that a separate judgment use any
particular words or form of words, the judgment
should be self-sufficient, complete, and describe
the parties and the relief to which the party
is entitled. Fed.Rules Civ.Proc.Rule 58, 28
U.S.C.A.
[11] Federal Civil Procedure ► Mode and
sufficiency; separate document rule
Dismissal order entered in turnover proceeding
was a separate document that triggered the 14-
day clock for seeking attorneys' fees following
entry of judgment, although the order referred
to a memorandum and order entered the
same day, where the terms of the dismissal
could be determined without referring to the
memorandum and order, as the order made it
clear on its face that the case was dismissed.
Fed.Rules Civ.Proc.Rules 54(d)(2)(B)(i), 58, 28
U.S.C.A.
[12] Creditors' Remedies ► Costs and fees
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Annex 300
2
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
Following entry of order dismissing turnover
proceeding, district court did not abuse its
discretion by refusing to allow trustee to file a
motion for attorneys' fees 10 days late, where
only reason given by trustee for its lateness was
the misunderstanding of its counsel. Fed.Rules
Civ.Proc.Rule 54(b), 28 U.S.C.A.
[13] Costs Taxation of costs on appeal or error
On appeal from order dismissing turnover
proceeding, trustee would not be permitted to file
an application for its attorneys' fees incurred in
district court, based on the Massachusetts trustee
process statute, where trustee had not first made
such a request to the district court, and did not
purport to be appealing from the dismissal order
on ground that district court erred in not ordering
discharge as the trustee requested. M.G.L.A. c.
Opinion
BARRON, Circuit Judge.
These cross-appeals arise from the ongoing efforts by two
brothers to satisfy a multi-billion dollar judgment they won
against the Republic of Cuba and other Cuban parties. In
the appeal that the brothers bring, they challenge the District
Court's ruling that certain assets they seek to attach to satisfy
that judgment are not the property of the Cuban government
and thus are not subject to attachment in satisfaction of
their judgment. The cross-appeal is brought by the trustee
who controls the assets in question. The trustee challenges
the District Court's denial of its motion for attorneys' fees
incurred in proceedings concerning whether it had to tum over
the assets in question to the brothers. We affirm the District
Court in both appeals.
1, §§ 69, 70. I.
[14] Federal Courts ► Briefs
New arguments may not be raised for the first
time in a reply brief.
2 Cases that cite this headnote
Attorneys and Law Firms
*198 Andrew C. Hall, with whom Hall, Lamb and Hall, P.A.
was on brief, for Plaintiffs-Appellants/Cross-Appellees.
Michael C. Gilleran, with whom Bums & Levinson, LLP was
on brief, for Trustee-Appellee/Cross-Appellant.
Benjamin M. Shultz, Attorney, Appellate Staff Civil Division,
United States Department of Justice, with whom Benjamin C.
Mizer, Principal Deputy Assistant Attorney General, Carmen
M. Ortiz, United States Attorney, Sharon Swingle, Appellate
Staff, Civil Division, United States Department of Justice,
Lisa J. Grosh, Assistant Legal Advisor, Department of State,
of counsel, were on brief, for The United States of America,
amicus curiae.
Before THOMPSON, Circuit Judge, SOUTER, Associate
Justice,* and BARRON, Circuit Judge.
The primary legal dispute in this case concerns how the law
of foreign relations *199 affects the attempted satisfaction
of a judgment. The judgment itself, however, is not at issue.
Nevertheless, because the circuitous route that led from that
judgment to these cross-appeals is relevant to the issues in
dispute, we begin by briefly retracing how we got from there
to here.
The brothers who are seeking to satisfy the judgment are
Alfredo and Gustavo Villoldo, each of whom moved from
Cuba to the United States in 1960. In 2008, they filed suit
in Florida state court and named as defendants: Fidel Castro
Ruz; Raul Castro Ruz; the Republic of Cuba; the Cuban
Ministry of the Interior; and the Army of the Republic of Cuba
(together, the "Cuban defendants").
The brothers' complaint alleged state-law causes of action
for economic loss, intentional infliction of emotional distress,
and wrongful death. The complaint alleged that after
Fidel Castro assumed power, on January 1, 1959, his
government began to target the Villoldos. In particular, the
complaint alleged that the targeting involved the following
actions. Cuban security forces threatened, beat, and arrested
both brothers. Cuban officials threatened Gustavo Villoldo
Argilagos, the brothers' father, and promised to kill the entire
family unless the brothers' father committed suicide and
turned his property over to the Cuban government. The Cuban
government confiscated Gustavo Villoldo Argilagos's land,
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3
Annex 300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
company, and bank accounts after he was found dead on
February 16, 1959, apparently having committed suicide. And
the Cuban government continued to threaten the brothers with
assassination even after they fled Cuba for the United States
in 1960.
In 2011, a Florida court awarded the brothers a $2.79 billion
judgment against the Cuban defendants on their state-law
claims. The judgment followed the defendants' default and a
bench trial on damages.
Soon thereafter, the brothers sued the Cuban defendants in
the Southern District ofNew York, seeking recognition of the
Florida judgment under the Full Faith and Credit Clause of
the United States Constitution. U.S. Const. art. IV, § 1. The
Cuban defendants defaulted again, and the Southern District
ofNew York awarded the brothers a federal judgement in the
amount of$2.79 billion, plus interest.
The brothers then sought to execute the federal judgment,
including by pursuing assets located in Massachusetts and
allegedly owned by the Cuban government. So, as part of
that quest, on May 17, 2013, the brothers registered the New
York federal judgment in the District of Massachusetts. And
on June 6, 2013, the District Court authorized the brothers
to seek attachment. The brothers then served a subpoena
on Computershare, Inc., a transfer agent located in Canton,
Massachusetts.
The subpoena sought information about any securities
accounts controlled by Computershare that were blocked
pursuant to the Cuban Assets Control Regulations, 31
C.F.R. Subt. B, ch. V, pt. 515, the Cuba sanctions regime.
The brothers hoped to identify accounts that Cuba owns.
Computershare produced a chart identifying 383 accounts
that had been blocked by the Cuban sanctions regime, which
had been opened by 70 different individuals.
Having received that information, the brothers, in December
of 2013, filed an ex parte motion in the District Court
for a turnover order against Computershare. The brothers'
motion argued that the accounts identified by Computershare
had been opened in the 1950s by Cuban nationals, but had
since become the property of Cuba by operation of a Cuban
confiscatory law. Thus, the brothers argued that the *200
accounts are subject to attachment in light of the federal
judgment from New York. The brothers requested that the
District Court (a) find the accounts subject to attachment
and execution; (b) allow the issuance of a trustee summons
to Computershare; and ( c) establish a procedure to notify
potential parties in interest.
The District Court granted the motion, established a detailed
notice protocol, and set January 31, 2014, as the deadline for
any interested party to file an objection. The District Court
also ordered Computershare to tum over the accounts of any
non-objecting parties by February 7, 2014.
Following the District Court's ruling, the brothers served
Computershare with a trustee summons. Computershare
filed a trustee answer shortly afterwards. Computershare
contended that the accounts at issue contained three
different types of assets: shares of common stock held by
physical stock certificates ("certificated shares"); shares of
common stock held electronically ("book shares"); and cash.
Computershare asserted that it could tum over the cash and
the book shares but that it could hand over the certificated
shares only if the brothers provided a surety bond and the
Court made a finding that the original shares were deemed
"lost, stolen or wrongfully taken."
Following the passing of the January 31, 2014 objection
deadline-by which time only one objection had been filed
-the District Court, on February 12, 2014, issued a followon
turnover order. This order required Computershare to tum
over the book and cash assets within 60 days. The order
did not address the certificated shares. The order also stated
that the District Court would set a briefing schedule for the
objecting party.
Another flurry of motions followed the February 12 order.
As relevant here, Computershare at this point argued for the
first time-in its briefing regarding whether it should be given
extra time to comply with the February 12 order-that the
blocked accounts should not be considered the property of
Cuba. The United States then filed a statement of interest that
also argued that the accounts should not be considered the
property of Cuba. The brothers responded that the February
12 turnover order was a final judgment and thus that the
District Court lacked the authority to revisit it.
The District Court, however, determined that the February
12 order was not a final judgment. Then, on July 7, 2015,
the District Court ruled that-contrary to the conclusion it
had reached in its original turnover order-the blocked assets
were not the property of the Cuban government, denied the
brothers' pending motions, and dismissed the case.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4
Annex 300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
That day, the District Court entered both its memorandum and
order as well as a document entitled "Order of Dismissal,"
which read: "In accordance with the Court's Memorandum
and Order dated 7/7/15, it is hereby ORDERED that the
above-entitled action be and hereby is dismissed." Three days
later, the brothers appealed from the dismissal.
On July 31, 2015-24 days after the dismissalComputershare
filed a motion seeking attorneys' fees.
Computershare argued that the motion was timely because
the July 7 "Order of Dismissal" did not satisfy the separate
document requirement set forth in Federal Rule of Civil
Procedure 58 and so had not started Federal Rule of Civil
Procedure 54's 14-day clock for moving for attorneys' fees.
The District Court denied Computershare's motion. The
District Court ruled that the July 7 order was a final judgment
that satisfied Rule 58's separate document rule and that
"Computershare ha[ d] not *201 shown good cause or
excusable neglect for failing to make a fee request within
the required period." Computershare cross-appeals from that
denial.
II.
[l] The threshold issue is whether the District Court had the
authority to revisit its initial determination that Cuba owned
the assets subject to the February 12 turnover order. The
parties agree that the District Court did have such authority if
the February 12 order was not a final judgment. And so the
dispute turns on whether it was. We conclude that it was not.
When "an action presents more than one claim for relief,"
or involves multiple parties, Rule 54(b) applies. Fed.R.Civ.P.
54(b ). And, under that Rule, an order "that adjudicates fewer
than all the claims or the rights and liabilities of fewer than
all the parties does not end the action as to any of the claims
or parties and may be revised at any time before the entry of a
judgment adjudicating all the claims and all the parties' rights
and liabilities." Id.
The February 12 turnover order did not resolve the brothers'
claims against the certificated shares or the claim against any
accounts owned by the objecting party. Therefore, under Rule
54(b ), that order was not a final judgment.
The brothers make only one argument against this conclusion.
They argue that Rule 54(b) should not apply to post-judgment
collection proceedings such as this one. Otherwise, they
contend, trustees may be forced to turn over assets before they
would be able to appeal the turnover order.
[2] Notably, the trustee in this case does not argue that Rule
54(b) must be so read in order to protect the interests of
trustees. And for good reason. Nothing in the text or history
of Rule 54 supports the brothers' construction of the Rule.
Nor, as far as we are aware, does any precedent. Moreover,
the argument fails on its own terms. Under Rule 54(b ), district
courts "may direct entry of a final judgment as to one or more,
but fewer than all, claims or parties ... if the court expressly
determines that there is no just reason for delay." Thus, a
trustee faced with a turnover order can move to have the order
certified as final, even if the turnover of other assets remains
to be adjudicated. See id.
Because the February 12 turnover order was not a final
judgment, the District Court was entitled to revisit it. We thus
must address whether the District Court erred in dismissing
the case on the ground that the accounts Computershare
possessed were not owned by Cuba and so not subject to
attachment in satisfaction of the New York judgment.
III.
There is no dispute that if the accounts subject to the initial
turnover order are the property of Cuba, then they are subject
to attachment, even though the Foreign Sovereign Immunity
Act generally immunizes "foreign state[ s ]" in United States
courts, 28 U.S.C. § 1604, and protects the property of foreign
states from attachment and execution. Id. § 1609. The reason
is that an exception to the general rule regarding foreign
sovereign immunity applies to cases related to terrorism, see
id. §§ 1605A; 1610(a)(7); see also Terrorism Risk Insurance
Act of2002 ("TRIA"), Pub. L. No. 107-297, 116 Stat. 2322,
2337 (codified in relevant part at 28 U.S.C. § 1610 note), and
there is no dispute that this exception would apply here.
[3] Thus, the key question for us is whether the accounts are
the property of *202 Cuba. The answer depends on foreign
relations law, and, in particular, the scope of what is known as
the "act of state" doctrine. Under that doctrine, "the act within
its own boundaries of one sovereign State becomes a rule of
decision for the courts of this country." WS. Kirkpatrick &
Co., Inc. v. Envir. Tectonics Corp., Int'!., 493 U.S. 400, 406,
110 S.Ct. 701, 107 L.Ed.2d 816 (1990) (quoting Ricaud v.
Am. Metal Co., 246 U.S. 304, 310, 38 S.Ct. 312, 62 L.Ed. 733
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 5
Annex 300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
(1918) (ellipses omitted)); see also Banco Nacional de Cuba
v. Sabbatino, 376 U.S. 398,416, 84 S.Ct. 923, 11 L.Ed.2d 804
(1964).
[4] There is, however, "a well-established corollary to the
act of state doctrine, the so-called 'extraterritorial exception.'
" Tchacosh Co., Ltd. v. Rockwell Int'! Corp., 766 F.2d 1333,
1336 (9th Cir.1985). Under that exception, "when property
confiscated is within the United States at the time of the
attempted confiscation, our courts will give effect to acts of
state 'only if they are consistent with the policy and law of
the United States.' " Republic of Iraq v. First Nat'! City Bank,
353 F.2d 47, 51 (2d Cir.1965) (Friendly, J.).
[5] The brothers contend that the assets at issue are Cuba's
-although the accounts were opened by individual Cuban
nationals-by reason of a confiscatory law that Cuba enacted
in September of 1959, Law 568.1 The brothers contend that
Law 568 requires Cuban nationals to repatriate to Cuba any
assets held abroad and provides that failure to repatriate those
assets results in nationalization of the assets. And the brothers
contend that, under the act of state doctrine, Law 568 must be
given effect, as that law, by its terms, confiscates the assets
in question because they are located abroad. In consequence,
the brothers argue that the blocked accounts are the property
of the Cuban government.
We may assume the brothers' interpretation of Law 568 is
sound-although the United States contends that it is not. And
that is because we conclude that, in light of the extraterritorial
exception to the act of state doctrine, Law 568 should not be
given effect with respect to the assets at issue.
United States courts have often given effect under the act of
state doctrine to foreign sovereigns' nationalizations of assets
that are located within their own territories at the time of
confiscation. See, e.g., Sabbatino, 376 U.S. at 417-18, 439,
84 S.Ct. 923. Indeed, "[a] confiscation decree ... is the very
archetype of an act of state." Republic of Iraq, 353 F.2d at 50.
But the rule is different when the nationalization purports to
confiscate assets that are located in the United States at the
time that they are putatively taken.
[6] Normally, "our courts will not give extraterritorial effect
to a confiscatory decree of a foreign state, even where directed
against its own nationals." Maltina Corp. v. Cawy Bottling
Co., 462 F.2d 1021, 1025 (5th Cir.1972) (internal quotation
marks omitted, collecting cases). After all, United States law
and policy-as evidenced by the Fifth Amendment of the
United States Constitution-does not support the taking of
private property without just compensation. See e.g., Republic
of Iraq, 353 F.2d at 51-52.
There might be reason to make an exception to this exception
if this were a case in which the executive branch was urging
us to give extraterritorial effect in this *203 country to the
foreign nation's confiscatory law. See, e.g., United States v.
Pink, 315 U.S. 203, 213-14, 234, 62 S.Ct. 552, 86 L.Ed. 796
(1942); United States v. Belmont, 301 U.S. 324, 57 S.Ct. 758,
81 L.Ed. 1134 (1937); see also Republic of Iraq, 353 F.2d at
52. But the government is not urging us to do so. Nor is the
executive branch even simply silent on the matter. Compare
Banco Nacional de Cuba v. Chem. Bank of N. Y., 658 F.2d
903, 909 (2d Cir.1981) (giving effect to an extraterritorial
taking when the United States apparently did not weigh in and
no party asked the Court not to recognize the confiscation)
with Republic of Iraq, 353 F.2d at 52 & n. 5 (declining to
give effect to an extraterritorial taking even when the United
States expressly disclaimed an interest in the case). Rather,
the United States is urging us not to give extraterritorial effect
to Law 568, and we are aware of no precedent for giving
extraterritorial effect to a foreign nation's confiscatory law
when our own government opposes doing so.
[7] As a general matter, we are required to accord
some deference to the executive's position concerning the
application of the act of state doctrine, see First Nat'! City
Bank v. Banco Nacional de Cuba, 406 U.S. 759, 764-67, 92
S.Ct. 1808, 32 L.Ed.2d 466 (1972) (the opinions cumulatively
reflecting eight votes indicate that the view of the executive is
due substantial weight), especially given "[t]he Court's more
recent justification for the doctrine," which emphasizes that
it is "an expression of the domestic separation of powers."
Estados Unidos Mexicanos v. DeCoster, 229 F.3d 332, 340
n. 11 (1st Cir.2000) (citing WS. Kirkpatrick & Co. Inc.,
493 U.S. at 404, 110 S.Ct. 701 (noting that the act of
state doctrine reflects " 'the strong sense of the Judicial
Branch that its engagement in the task of passing on the
validity of foreign acts of state may hinder' the conduct
of foreign affairs" (quoting Sabbatino, 376 U.S. at 423, 84
S.Ct. 923))). And here the government contends that adhering
to the extraterritorial exception to the act of state doctrine
furthers United States foreign policy interests by enabling the
government to use the blocked assets at issue in connection
with ongoing negotiations with Cuba on matters of foreign
affairs. As the government points out, if we were to decline
to adhere to the extraterritorial exception to the act of state
doctrine, Cuba would gain the benefit-through the reduction
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 6
Annex 300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
of the amount Cuba owes on the judgment against it-of
assets of Cuban nationals that are located in the United States
and that have been frozen by the executive branch pursuant to
discretion granted by Congress to impose sanctions in order
"to curtail the flow of hard currency to Cuba."2 See Regan
v. Wald, 468 U.S. 222, 243, 104 S.Ct. 3026, 82 L.Ed.2d 171
(1984).
[8] The brothers do contend that TRIA-in making an
exception to foreign sovereign immunity---embodies a policy
in favor of allowing victims of terrorism to collect on
judgments. But TRIA only tells us that the property that
is owned by a foreign state should be used to pay such
judgments. See Heiser v. Islamic Republic of Iran, 735 F.3d
934, 938-39 (D.C.Cir.2013). Nothing in the text or legislative
history ofTRIA suggests that the extraterritorial exception to
the act of state doctrine should be disregarded so that certain
assets become the property of the foreign country. 3 See id.
*204 We thus decline to deviate in this case from the general
rule that United States courts will not give extraterritorial
effect to a foreign state's confiscatory law. See Williams &
Humbert Ltd. v. W. & H Trade Marks (Jersey) Ltd., 840
F.2d 72, 75 (D.C.Cir.1988); United Bank Ltd. v. Cosmic Int'!,
Inc., 542 F.2d 868, 872-877 (2d Cir.1976); Menendez v.
Saks & Co., 485 F.2d 1355, 1364 (2d Cir.1973), rev'd on
other grounds, Alfred Dunhill of London, Inc. v. Republic of
Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976);
Maltina, 462 F.2d at 1027; Republic of Iraq, 353 F.2d at 51-
52; Tabacalera Severiano Jorge, S.A. v. Standard Cigar Co.,
392 F.2d 706, 716 (5th Cir.1968). We therefore affirm the
District Court's ruling and dismissal of the case.4
IV.
We turn now to Computershare's cross-appeal. At issue is the
District Court's denial of Computershare's motion to extend
its time to file a motion for attorneys' fees.
judgment should be self-sufficient, complete, and describe the
parties and the relief to which the party is entitled." Mullane
v. Chambers, 333 F.3d 322, 336 (1st Cir.2003).
As we have said, Computershare filed its motion for attorneys'
fees on July 31, 2015-24 days after the order of dismissal
was entered. For that reason, the District Court denied it as
untimely.
Computershare argues on appeal that this denial was
erroneous, because, Computershare contends, the 14-day
clock never started running. Computershare contends that
is so because the July 7 "Order of Dismissal" did not
satisfy the separate document rule and thus did not start
the clock for filing a motion for attorneys' fees. In the
alternative, Computershare argues that the District Court
abused its discretion by refusing to grant Computershare a
ten-day extension to file its motion for attorneys' fees. Finally,
Computershare separately argues that it should be able to
request attorneys' fees now, as it does not *205 have a
judgment charging or discharging it as trustee, but will once
this Court passes on the case. We address each of these
arguments in turn.
A.
[11] Computershare first argues that the July 7 order was
not a separate document under Rule 58-and thus did not
trigger Rule 54's 14-day clock for seeking attorneys' feesbecause
the July 7 order was not labeled "judgment." But this
Court has previously rejected the argument that an order must
be so labelled to constitute a separate document under Rule
58, see Mirpuri v. ACT Mfg., Inc., 212 F.3d 624, 628 (1st
Cir.2000), and many other circuits have, too. See LeBoon v.
Lancaster Jewish Community Center Ass 'n, 503 F.3d 217, 224
(3d Cir.2007); Bourg v. Continental Oil Co., 192 F.3d 127,
1999 WL 684161, at *2 (5th Cir.1999) (unpublished); Grun v.
Pneumo Abex Corp., 163 F.3d 411,422 & n. 8 (7th Cir.1998).
Computershare also argues that the July 7 "Order of
[9] [10] Under Rule 54, a motion seeking an award of Dismissal" was not a separate document under Rule 58
attorneys' fees must be made "no later than 14 days after
the entry of judgment." Fed.R.Civ.P. 54(d)(2)(B)(i). And that
clock begins to run when the separate document required
by Rule 58 is issued. See United Auto. Workers Local 259
Social Sec. Dept. v. Metro Auto Ctr., 501 F.3d 283, 287 (3d
Cir.2007). "Although Rule 58 does not require that a separate
judgment use any particular words or form of words .... the
because it was not "self-contained." Computershare rests this
contention on the fact that the order referred to the District
Court's Memorandum and Order entered the same day. But
here, one need not refer to the Memorandum and Order to
determine the terms of the dismissal, as the July 7 order on
its face makes clear that the case is dismissed. Thus, the
Seventh Circuit's decision in Massey Ferguson Div. of Varity
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 7
Annex 300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
Corp. v. Gurley, 51 F.3d 102, 104-05 (7th Cir.1995), is ofno
help to Computershare. In that case, it was necessary to refer
to the district court's related opinion to determine in which
part the motion in question was granted and in which part it
was denied. Id. The District Court thus correctly concluded
that the July 7 "Order of Dismissal" constituted a separate
document under Rule 58.
B.
[12] We turn then to Computershare's contention that-if
the July 7 order was a separate document-the District Court
abused its discretion by refusing to allow Computershare
to file the motion for attorneys' fees ten days late. The
District Court declined to allow the late filing because
"Computershare ha[ d] not shown good cause or excusable
neglect for failing to make a fee request within the required
period."
The only reason Computershare gives for its lateness here
is the misunderstanding of its counsel. But, "[ o ]nly in 'rare
cases' have we found that a district court abused its discretion
in refusing to grant an extension of time." Cortes-Rivera
v. Dep't of Corrs. & Rehab. of Com. of P.R., 626 F.3d
21, 26 (1st Cir.2010) (quoting Perez-Cordero v. Wal-Mart
P.R., 440 F.3d 531, 534 (1st Cir.2006)). And generally those
cases have involved circumstances in which "a litigant was
'reasonably surprised' by a court's deadline or 'the events
leading to the contested decision were unfair.' " Id. ( quoting
Perez-Cordero, 440 F.3d at 534). We thus cannot say that
the District Court abused its broad discretion by refusing
to excuse Computershare's lateness on this ground. RiveraAlmodovar
v. lnstituto Socioeconomico Comunitario, Inc.,
730 F.3d 23, 27 (1st Cir.2013) ("[A] lawyer's 'inattention or
carelessness,' without more, 'normally does not constitute
excusable neglect.)' " ( quoting Dimmitt v. Ockenfels, 407 F.3d
21, 24 (1st Cir.2005)).
C.
[13] Finally, Computershare asks for permission "to file
a fee application with *206 this Court for its fees
Footnotes
incurred in the District Court." Computershare relies on the
Massachusetts trustee process statute. Under that statute, a
trustee process defendant ( such as Computershare) is entitled
to costs, including attorneys' fees, when it is "adjudged
a trustee" (when it has assets subject to attachment) or
"discharged" (when it does not). See Mass. Gen. Laws ch. 246
§§ 69, 70.
Computershare argues that the District Court's dismissal
of the case did not itself "discharge" Computershare.
Computershare thus argues that, because it has not yet
been either adjudged a trustee or discharged, its request for
attorneys' fees was "premature" and thus that it should be
allowed to seek attorneys' fees now.
[14] This argument fails, however, on Computershare's own
logic. Computershare has not explained how the affirmance of
a judgment it agrees did not discharge it now would discharge
it. Nor has Computershare explained how we, as an appellate
court, could consider a request for discharge in the first
instance, without such a request having been presented first
to the District Court. And, finally, Computershare does not
purport to be appealing from the District Court's dismissal
order on the ground that the District Court erred in not
ordering discharge as Computershare requested. Nor could
Computershare do so, as it did not timely file a notice
of appeal from the dismissal. See 28 U.S.C. § 2107; Fed.
R.App. P. 4; Bowles v. Russell, 551 U.S. 205, 127 S.Ct. 2360,
168 L.Ed.2d 96 (2007) ("This Court has long held that the
taking of an appeal within the prescribed time is 'mandatory
and jurisdictional.' " ( quoting Griggs v. Provident Consumer
Disc. Co., 459 U.S. 56, 61, 103 S.Ct. 400, 74 L.Ed.2d 225
(1982) (per curium))).5
V.
For the foregoing reasons, the District Court's order and
judgment of dismissal and denial of Computershare's motion
for attorneys' fees are affirmed.
All Citations
821 F.3d 196, 94 Fed.R.Serv.3d 1378
*
1
Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation.
The brothers cite both Law 567 and Law 568, but Law 567 appears to be of little relevance to this case.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 8
Annex 300
Villoldo v. Castro Ruz, 821 F.3d 196 (2016)
94 Fed.R.Serv.3d 1378
2 The brothers argue that the Fifth Amendment does not apply to prevent foreign governments from taking the property of
its own citizens, but that is beside the point. See Republic of Iraq, 353 F.2d at 52.
3 The brothers' reliance on the Supreme Court's recent decision in Bank Markazi v. Peterson, - U.S.--, 136 S.Ct.
1310, 194 L.Ed.2d 463 (2016), is misplaced. In that case, the Court upheld a statute, 22 U.S.C. § 8772, which Congress
passed in order to make certain specific assets subject to attachment in order to satisfy terrorism related judgments
against Iran, regardless of whether those same assets would have been attachable under TRIA. Id. at 1317. But neither
the act of state doctrine, nor the extraterritorial exception to it, were at issue in that case, and nothing about the Court's
decision upholding Congress's authority to make those assets attachable remotely suggests that TRIA itself reflects
Congress's intent that an exception to the extraterritorial exception to the act of state doctrine should be created. If
anything, the fact that Congress specifically intervened to make certain that the assets at issue in Bank Markazi could
be attached cautions against reading TRIA itself to manifest a similarly specific intention regarding the assets at issue
in this case.
4 Because we decide the case on this ground, we need not address the alternative argument made by Computershare
and the United States that the "penal law rule" provides a separate ground for declining to give effect to Law 568. See
United States v. Federative Republic of Brazil, 748 F.3d 86, 92 {2d Cir.2014).
5 In its cross-appeal reply brief Computershare argues in the alternative-and contrary to the position that it takes in its
opening brief-that the District Court's dismissal of the case did "implicitly discharge[] Computershare." Computershare
thus argues that it is due attorneys' fees even at this late date. Computershare makes no argument, however, that, if
the District Court's order had discharged it, it was entitled to more than the 14 days Rule 54 provides to file its motion
for attorneys' fees. And, in any event, new arguments may not be raised for the first time in a reply brief. See RiveraMuriente
v. Agosto-Alicea, 959 F.2d 349,354 (1st Cir.1992).
End of Document © 2021 Thomson Reuters. No claim to original U.S.
Government Works.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 9
Annex 300
ANNEX301
Jerez v. Republic of Cuba, 775 F.3d 419 (2014)
413 U.S.App.D.C. 378,113 U.S.P.Q.2d 1517
775 F.3d419
United States Court of Appeals,
District of Columbia Circuit.
Nilo JEREZ, Appellant
v.
REPUBLIC OF CUBA, et al., Appellees.
No. 13-7141.
I
Argued Nov. 10, 2014.
I
Decided Dec. 30, 2014.
I
Rehearing En Banc Denied Jan. 28, 2015.
Synopsis
Background: After obtaining default judgment in a
Florida state court against the Republic of Cuba, Cuban
officials, and the Cuban armed forces, in his action, under
the Torture Victim Protection Act (TVP A) and the Alien
Tort Claim Act (ATCA), alleging that he had been
subjected to torture while incarcerated in Cuba, judgment
creditor brought action to enforce the judgment. The
United States District Court for the Southern District of
Florida awarded default judgment to creditor, and he
registered the judgment and sought to attach certain
patents and trademark registrations held by alleged
agencies and instrumentalities of the Cuban government.
Those alleged agencies and instrumentalities, along with
the Cuban chamber of commerce, moved to vacate a writ
of attachment that had been issued, and creditor
cross-moved for order to show cause why a new writ of
attachment should not issue. The United States District
Court for the District of Columbia ruled, 964 F.Supp.2d
52, that the Florida courts had lacked jurisdiction, under
the Foreign Sovereign Immunities Act (FSIA), to grant
the default judgments, and creditor appealed.
Holdings: The Court of Appeals, Williams, Senior
Circuit Judge, held that:
creditor's claims did not fall within scope of FSIA's
non-commercial tort exception, and
claims did not fall within scope of FSIA's terrorism
exception.
Affirmed.
*420 Appeal from the United States District Court for the
District of Columbia (No. 1 :09-mc--00466).
Attorneys and Law Firms
Richard J. Oparil argued the cause and filed the briefs for
appellant.
*421 Michael R. Krinsky argued the cause for appellees.
With him on the brief was David B. Goldstein.
Before: BROWN, Circuit Judge, and WILLIAMS and
GINSBURG, Senior Circuit Judges.
Opinion
Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
WILLIAMS, Senior Circuit Judge:
**380 Nilo Jerez filed suit in Florida state court against
the Republic of Cuba and various codefendants, including
Fidel Castro and the " Cuban Revolutionary Armed
Forces," alleging that he had suffered horrifying torture at
their hands and continued to suffer the consequences.
Having obtained a default judgment in state court, Jerez
now seeks to execute that judgment on patents and
trademarks held or managed by the appellees in this
action, who are allegedly agents and instrumentalities of
Cuba. Because the Florida state court lacked
subject-matter jurisdiction to grant the default judgment,
we affirm the district court's denial of Jerez's request.
***
In the 1960s and 1970s, while incarcerated in Cuba, Nilo
Jerez allegedly endured unlawful incarceration and torture
committed by the Cuban government and its
codefendants. The torture allegedly included such features
as having electricity run through his body causing loss of
bodily functions and consciousness and being forced to
live surrounded by his own urine and feces. Readers
familiar with Against All Hope, Armando Valladares's
account of his incarceration by the same parties, will find
much of Jerez's treatment similar to that inflicted on
WEST AW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Annex 301
Jerez v. Republic of Cuba, 775 F.3d 419 (2014)
413 U.S.App.D.C. 378,113 U.S.P.Q.2d 1517
Valladares and depicted by him as having been extended
to many of his fellow prisoners. In Jerez's case, he
alleges, the defendants also purposefully injected him
with the hepatitis C virus and subjected him to other
conditions also causing hepatitis C, which has in turn
caused him ongoing cirrhosis of the liver.
In 2005, years after arriving in the United States, Jerez
sued the defendants for compensatory and punitive
damages in Florida state court (specifically the Eleventh
Judicial Circuit in and for Miami-Dade County, Florida).
After the defendants failed to appear, the court found
them liable under the Torture Victim Protection Act and
granted Jerez a default judgment for $200 million.
Although Jerez's complaint alluded to the Foreign
Sovereign Immunities Act ("FSIA"), he claimed
jurisdiction under the Alien Tort Claim Act, and the court
found jurisdiction on that basis.
To enforce the default judgment, Jerez sued in the United
States district court for the Southern District of Florida.
The defendants again defaulted. The court granted full
faith and credit to the Florida state court judgment and
granted Jerez judgment for $200 million plus interest. The
Florida district court made no mention of the basis for its
jurisdiction.
Jerez registered the Florida district court's default
judgment in the United States district court for the District
of Columbia. He also applied for various writs of
attachment on certain patents and trademark registrations
held by alleged agencies and instrumentalities of Cuba;
the latter, together with intervenor Camara de Comercio,
manager of a trademark on Cuban cigars, are collectively
the appellees in this action. The history of the successive
writs is tangled and irrelevant to the outcome of the case.
The appellees moved to vacate a writ of attachment that
had been issued, while Jerez cross-moved for an order to
show cause why a new writ of attachment should not
issue against them. A magistrate **381 *422 judge found
that the Florida state and district courts lacked jurisdiction
under the FSIA to grant the default judgments, and
accordingly granted the appellees' motions to vacate the
writ. Jerez v. Republic of Cuba, 777 F.Supp.2d 6
(D.D.C.2011). The district judge overruled Jerez's
objections to the magistrate judge's order, Jerez v.
Republic of Cuba, 964 F.Supp.2d 52 (D.D.C.2013), and
issued an order to that effect. We affirm the district court.
***
A default judgment rendered in excess of a court's
jurisdiction is void. See Bell Helicopter Textron, Inc. v.
Islamic Republic of Iran, 734 F.3d 1175, 1181
(D.C.Cir.2013). Thus, a court asked to enforce a default
judgment must entertain an attack on the jurisdiction of
the court that issued the judgment. If it finds that the
issuing court lacked jurisdiction, it must vacate the
judgment.
Then-Judge Ginsburg put the rules clearly and succinctly
in Practical Concepts, Inc. v. Republic of Bolivia, 811
F.2d 1543 (D.C.Cir.1987):
A defendant who knows of an action but believes the
court lacks jurisdiction over his person or over the
subject matter generally has an election. He may
appear, raise the jurisdictional objection, and ultimately
pursue it on direct appeal. If he so elects, he may not
renew the jurisdictional objection in a collateral
attack. ...
Alternatively, the defendant may refrain from
appearing, thereby exposing himself to the risk of a
default judgment. When enforcement of the default
judgment is attempted, however, he may assert his
jurisdictional objection. If he prevails on the objection,
the default judgment will be vacated.
Id. at 1547. See also Insurance Corp. of Ireland v.
Compagnie des Bauxites de Guinee, 456 U.S. 694, 706,
102 S.Ct. 2099, 72 L.Ed.2d 492 (1982); Restatement
(Second) of Judgments§ 65 cmt. b (1982).
Jerez points to Insurance Corp. of Ireland, where the
Court said that "principles of res judicata apply to
jurisdictional determinations." Insurance Corp. of
Ireland, 456 U.S. at 702 n. 9, 102 S.Ct. 2099. He also
cites language from a number of cases to the effect that a
judgment rendered by a court assuming subject-matter
jurisdiction is preclusive, even if the judgment was
incorrect, as long as the court did not "plainly usurp
jurisdiction." Weininger v. Castro, 462 F.Supp.2d 457,
475 (S.D.N.Y.2006) (citing Cantor Fitzgerald, L.P. v.
Peaslee, 88 F.3d 152, 155 n. 2 (2d Cir.1996); Nemaizer v.
Baker, 793 F.2d 58, 65 (2d Cir.1986)). But those
principles apply not to default judgments but only to
contested cases, where the defendant "had an opportunity
to litigate the question of subject-matter jurisdiction."
Insurance Corp. of Ireland, 456 U.S. at 702 n. 9, 102
S.Ct. 2099. It is clear from the context of the Supreme
Court and circuit court cases that "opportunity" means not
only awareness of the litigation but the defendant's
actually appearing in it. See id.; Chicot County Drainage
Dist. v. Baxter State Bank, 308 U.S. 371, 376-78, 60 S.Ct.
317, 84 L.Ed. 329 (1940); Nemaizer, 793 F.2d at 65. In
contrast, a defendant that has never appeared is always
free under Insurance Corp. of Ireland and Practical
Concepts to assert a jurisdictional attack later, in the court
WEST AW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2
Annex 301
Jerez v. Republic of Cuba, 775 F.3d 419 (2014)
413 U.S.App.D.C. 378,113 U.S.P.Q.2d 1517
where enforcement of the default judgment is sought, and
to have its jurisdictional objections considered de novo.
See Practical Concepts, 811 F.2d at 1547. To the extent
that Weininger suggests the contrary, we respectfully
disagree (and are in any event precluded from agreement
by Practical Concepts and Bell Helicopter).
We would reach the same result if we approached the
judgment of the **382 *423 Florida state court through
the lens of the Full Faith and Credit Act, 28 U.S.C. §
1738. Under the Act, federal courts are "to accept the
rules chosen by the State from which the judgment is
taken," including the rules with respect to jurisdiction.
Kremer v. Chem. Constr. Corp., 456 U.S. 461, 482, 102
S.Ct. 1883, 72 L.Ed.2d 262 (1982); see also Marrese v.
Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 381,
105 S.Ct. 1327, 84 L.Ed.2d 274 (1985). Florida law, like
federal law, calls for a de novo examination of the Florida
state court's jurisdiction: "A judgment entered by a court
which lacks subject matter jurisdiction is void and subject
to collateral attack under [Florida] rule 1.540 at any
time." McGhee v. Biggs, 974 So.2d 524, 526
(Fla.Dist.Ct.App.2008). And if the issuing court "did not
have jurisdiction over the subject matter or the relevant
parties, full faith and credit need not be given."
Underwriters Nat'[ Assurance Co. v. N.C. Life & Accident
& Health Ins. Guar. Ass'n, 455 U.S. 691, 705, 102 S.Ct.
1357, 71 L.Ed.2d 558 (1982).
The FSIA contains a separate provision regarding default
judgments, 28 U.S.C. § 1608(e), but it does not controvert
the principles of Practical Concepts. The statute provides
that no 'judgment by default shall be entered by a court ...
unless the claimant establishes his claim or right to relief
by evidence satisfactory to the court." 28 U.S.C. §
1608(e). This provides foreign sovereigns a special
protection akin to that assured the federal government by
Fed.R.Civ.P. 55(e). See Commercial Bank of Kuwait v.
Rafidain Bank, 15 F.3d 238, 242 (2d Cir.1994);
Restatement (Fourth) of The Foreign Relations Law of the
United States § 463 reporters' note 2 (Preliminary Draft
No. 2, 2014). The rationale for such extra protection of
sovereigns is that "the government is sometimes slow to
respond and that the public fisc should be protected from
claims that are unfounded but would be granted solely
because the government failed to make a timely
response." Marziliano v. Heckler, 728 F.2d 151, 157-58
(2d Cir.1984). In providing this additional protection,
Rule 55(e) obviously complements rather than replaces
the res judicata principles governing a defendant's
challenge to jurisdiction.
The process required by § 1608(e) is therefore a
supplement to, not a substitute for, the right of a foreign
sovereign defendant who has not appeared in the
judgment-granting court to obtain de novo assessment of
his jurisdictional objections. In Commercial Bank of
Kuwait, for example, the court of appeals initially
addressed jurisdiction independently, 15 F.3d at 241, and
then reviewed the district court's application of § 1608(e),
id. at 241-42. To the extent that the decision in Weininger
rests on a view that the mandate of § 1608(e) is a
substitute for the ordinary rules of res judicata, see 462
F.Supp.2d at 475, we again respectfully disagree.
Finally, the jurisdiction of the Florida district court, which
issued a default judgment on the strength of the state
court's judgment, is equally subject to de novo
consideration here and presents no additional questions.
***
We turn now to a de novo assessment of the Florida state
court's jurisdiction.
The FSIA, 28 U.S.C. §§ 1602- 11, is "the sole basis for
obtaining jurisdiction over a foreign state in our courts."
Argentine Republic v. Amerada Hess Shipping Corp., 488
U.S. 428, 434, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989).
Under the FSIA, "a foreign state shall be immune from
the jurisdiction of the courts of the United States and of
the States except as provided in sections 1605 to 1607 of
this chapter." 28 U.S.C. § 1604. If no exception applies,
**383 *424 then the court lacks subject-matter
jurisdiction. Mwani v. bin Laden, 417 F.3d 1, 15
(D.C.Cir.2005).
Jerez argues that two statutory exceptions apply here: the
non-commercial tort exception, 28 U.S.C. § 1605(a)(5),
and the terrorism exception, which at the relevant time
was codified as 28 U.S.C. § 1605(a)(7) (2006).
The non-commercial tort exception provides jurisdiction
for cases alleging "personal injury or death, or damage to
or loss of property, occurring in the United States and
caused by the tortious act or omission of that foreign state
or of any official or employee of that foreign state while
acting within the scope of his office or employment." 28
U.S.C. § 1605(a)(5). "[B]oth the tort and the injury must
occur in the United States." Persinger v. Islamic Republic
of Iran, 729 F.2d 835, 842 (D.C.Cir.1984). "Congress'
primary purpose in enacting § 1605(a)(5) was to eliminate
a foreign state's immunity for traffic accidents and other
torts committed in the United States, for which liability is
imposed under domestic tort law." Amerada Hess, 488
U.S. at 439-40, 109 S.Ct. 683.
The problem for Jerez is that the defendants' alleged
WEST AW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3
Annex 301
Jerez v. Republic of Cuba, 775 F.3d 419 (2014)
413 U.S.App.D.C. 378,113 U.S.P.Q.2d 1517
tort-purposefully injecting him with hepatitis C,
otherwise subjecting him to conditions that caused
hepatitis C, and failing to warn him of the
virus-occurred in Cuba. This is obvious as to the first
two. As to the failure to warn, to the extent that such
warnings might have had any value to Jerez after he
reached the United States, the omissions might seem to
have taken place in the United States. But none of the
defendants sued here was within the United States, and
we agree with the district court that under those
circumstances the omissions cannot reasonably be said to
have occurred within the United States. Jerez, 964
F.Supp.2d at 56-57. Jerez has suggested that unnamed
representatives in the Cuba Interest Section in
Washington similarly failed to warn him, but has afforded
no reason to believe that these representatives were aware
of any relevant information. Id. at 57.
To overcome this difficulty, Jerez argues that the virus
continues to replicate in his body even now, and that
"each deployment (through such viral replication) of the
biological agent is an independent event" and "a separate
and distinct tort." But the continued replication of
hepatitis C and Jerez's cirrhosis of the liver describe an
ongoing injury that he suffers in the United States as a
result of the defendants' acts in Cuba. The law is clear
that "the entire tort"-including not only the injury but
also the act precipitating that injury-must occur in the
United States. Asociacion de Reclamantes v. United
Mexican States, 735 F.2d 1517, 1525 (D.C.Cir.1984).
Jerez seeks to reinforce the redeployment analysis by
analogizing the defendants' actions to a foreign agent's
delivery into the United States of an anthrax package or a
bomb. But here the defendants' infliction of injury on
Jerez occurred entirely in Cuba, whereas the infliction of
injury by the hypothetical anthrax package or bomb
would occur entirely in the United States.
Jerez's invocation of the FSIA's terrorism exception is
equally problematic. In the version operative when Jerez
sued in Florida, the statute provided an exception to
sovereign immunity for cases alleging "personal injury or
death that was caused by an act of torture." 28 U.S.C. §
1605(a)(7) (2006). Jurisdiction is subject to two
conditions: first, the state must have been "designated as a
state sponsor of terrorism ... at the time the act occurred,"
or it must have been designated later because of the act in
question; and **384 *425 second, the claimant must have
been "a national of the United States ... when the act upon
which the claim is based occurred." Id. (That section has
since been replaced by 28 U.S.C. § 1605A.)
Jerez fails to satisfy either of these two independent
conditions. First, Cuba was not designated a state sponsor
of terrorism until 1982, and the defendants subjected
Jerez to torture in 1970 and 1971. Further, Cuba was
designated a state sponsor not because of the torture
inflicted on Jerez, but because of "support for acts of
international terrorism" such as those committed by the
terrorist group M-19. Regulation Changes on Exports:
Hearing Before the Subcomm. on Near E. & S. Asian
Affairs of the S. Comm. on Foreign Relations, 97th Cong.
13 (1982) (statement of Ernest Johnson, Jr., Deputy
Assistant Secretary for Economic Affairs, Department of
State).
Faced with these obstacles, Jerez again invokes the
redeployment theory-that hepatitis C continues to
replicate in his body, daily inflicting new acts of torture.
Now that Cuba is designated as a state sponsor of
terrorism and he is a citizen of the United States, he
reasons, the continued replication of the virus in his body
constitutes a stream of contemporaneous acts of torture
and thus satisfies both requirements of the terrorism
exception. But in ordinary language the ongoing
replication of hepatitis C and the cirrhosis of the liver are
the injuries that Jerez is suffering, not acts of torture.
Those acts occurred in Cuba before 1982, before Jerez
became a United States national and before Cuba was
designated a state sponsor.
Because no statutory exception to sovereign immunity
under the FSIA applies, the Florida state court and the
Florida district court lacked subject-matter jurisdiction.
See Amerada Hess, 488 U.S. at 433, 109 S.Ct. 683. Their
default judgments are therefore void. As a result there is
no legal basis for the writ of attachment that Jerez seeks
and the appellees are entitled to grant of their motion to
vacate the previously outstanding writ. See Practical
Concepts, 811 F.2d at 1547. Accordingly we need not
address the appellees' other arguments.
***
The judgment of the district court is
Affirmed.
All Citations
775 F.3d 419, 413 U.S.App.D.C. 378, 113 U.S.P.Q.2d
1517
End of Document © 2021 Thomson Reuters. No claim to original U.S. Government
WEST AW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4
Annex 301
ANNEX302
Concise
Oxford
English
Dictionary
ELEVENTH EDITION, REVISED
Edited by
Catherine Soanes
Angus Stevenson
OXFORD
UNIVERSITY PRESS
Annex 302
r
regrow I rein
typically after being attacked or defeated
- DERIVATIVES 1'911raupm■nt n.
regrow ■ v. (pa>11'911rww; pa,t pa,1 1'911rawn) grow or
cause to grow again.
- DERIVATIVES regrowth n.
Regt ■ abbrev. Regiment.
regular ■ aclj. t arranged in a constant or definite
pattern, especially with the same space between
individual instances. 2 recurring at short uniform
intervals: a regular monllrlycheclc. ► done or
happening frequently. ► doing the same thing often
or at uniform intervals: rtgular wordlippcrs.
3 conforming to or governed by an acce111ed standard
of procedure or convention. ► of or bclonKing to the
permanent professional armed forces of a country.
► properly trained or qualified and pursuing a full
time occupation. ► Clvb1ian Chuich subject to or bound by
religious rule. Contrasted with 11cuuo". 4 u1ual or
customary. ► chiefly N.Ame<. of an ordinary kind. ► N.Allll"I.
not pretentious or arrogant; ordinary and friendly: a
regular guy, ► denoting merchandise of average size.
5 Grammar (of a word) following the normal pattern of
innectlon. & Geometry (of a figure) having all sides and
all angles equal. ► (of a solid) bounded by a number of
equal figures. 7 Botany (of a flower) having radial
symmetry. ■ n. a regular customer, member or a team,
etc. ► a regular member of the armed forces. ► one of
the Christian regular clergy.
- DERIVATIVES 1'911Ularlty n. (pl 1'911Ularltles).
1'911Ularlatlon or regularlsatlan n. regularlH or
1'911ularlse v. regularlr •
- ORIGIN ME: from OFr. regu/er, from L. regu/ariJ, from
ntula 'rule'.
regular canon ■ n. see CMoDN'.
regular expression ■ n. Comp,i.g a sequence of
symbols and characters which uses syntax rules 10
express a string or pattern to be searched for within a
11st, piece of text, etc.
regulate ■ v. 1 control or maintain the rate or speed of
(a machine or process). 2 control or supervise by
means of rules and regulations
- DERIVI\TIVtS 1'911Ulableadj. rogulatlv• adj 1'911Ulatorn
1'911ulatorv Id;.
- ORIGIN ME: from late L. regu/at·, rc,u/are 'direct.
regulate', from L. regula 'rule'.
regulation ■ n. 1 a rule or directive made and
maintained by an authority. ► las mod,foerj in accordance
with regulations. ► las modifiorj informal of a familiar or
predictable type. 2 the action or process of regulating
or being regulated.
regulo l'rtgJl,la11/ • n. Brit. trademark used before a
numeral 10 denote a setting on a temperature scale in
a gas oven
regulus f n:gJolos/ ■ n. (pl. rwguluses or 1'911uH /·IAt,
•Ii·/) Chtmil tly, archai< a mctal1ic form of a substance,
obtained by smelting or reduction.
- ORIGIN C16: from L., dlmin. of re~. reg• 'king': orig. as
regulus of antimaey, appar. so named because or its
readiness to combine with gold,
regurgitate /n 'go:d3t1ct1/ ■ v. 1 bring (swallowed
food) up agam to the mouth. 2 repeat (information)
without analysing or comprehending i1.
- DERIVATIVES 1'911Urgltatlon n.
• ORIGIN C16; from med. t. rcgurgi1a1, rcgurgitare
from L re· 'again'+ guf'II••• g11rgit 'whirlpool'. '
rehab {'ri:hnb/ inlom,al ■ n. 1 rehabilitation. z us a
building that has been rchabili1a1cd. ■ v. (rehabs,
twhabblng, rwhabbed) N. Amot rehabilitate.
reh~bllltate ■ v. 1 restore to health or normal life by
!raining and therapy after imprisonment, addiction, or
illness. 2 restore the standing or reputation of.
l restore to a rormer condition.
- DHIVATIVES rehabllltatlon n rehabllltath,e adj.
- ORIGIN C16 (earlier (C15) as rehabilitalion): from
med. L r,habili1111-, rehabilirare (sec ... , NA■ILIIAR).
rehang ••· /ri:'hao/ (past and past parL rehung) hang
(something) again or diffe-ently. ■ n. f rl:hno/ an act of
rehanging works of art in a gallery.
rehash ■ v. rcuiO (old ideas or material) without
significant change or improvement, ■ n. an instance or
rehashing.
rehear • " (past and 1>111 "'" rwhurd) hear
again. ► Law [often as """" rehewingl hear ( 11111111 •
plaintifO in a court again. a Cl1t m
rehearsal ■ n. a trial perrormance of a play or Od!lr
work ror later pubHc performance. >-the action
process of rehearsing Ill'
rehearse ■ v. 1 practise (a play, piece of musiJ::, Dr ,
w~rk) for later public performance. 2 srate (a hst,...
_ ~~:,'~1~~!E~a::==~dc many limes before~
ORl<llN ME (in the sense 'repeat aloud'):fromOFr
relier, .. ,, pcrh. rrom re- 'again'+ ~ra,r ,a ha,n,w
from horse (see ->·
reheat ■ v .. heat again. ■ n. the process of 11Sin1 th• r.,.
exhaust to burn extra rucl in a jet engine and....,...;
eitra power. ► an arrerburner
- DERIVATIVES rwheat•r •
rehire ••· hire (a rormer employee) again.
rehoboain ■ n. a wine bottle of about six timos the
standard size
- ORIGIN C19: rrom 11,lrobottm, a k1n1 or ancient lsl'OIL
rehome ■ v. find a new home for (a pel).
rehouse ■ v. provide with new housing.
rehung past and past partlciple oho11ANa.
rehydrate••· absorb or cause to absorb moisture lfttt
dehydration.
- DERIVATIVES rwh,dratabl■ adj rwhi,dratfon n
Reich /rA1k, -x.' ■ n, the former German state, most
often used to refer to the Third Reich (the Nari
regime, 1933- 45)
- ORIGJN Ce r., lit 'empire'.
Relchs,tag /'TAJXS,la:o. 'fAlkS•/ • ft. the main legislal ...
of the German state under the Second and Thad
Rcichs.
- ORIGIN Ger., from R,iclu 'of the empire'+ TIit
'assembly'.
relfy r r1:1fA1, 'nlll•/ ■-. (ntlfles, relfi,lng, mtledl
make (something abstract) more toncrete or....._
- DERIVATIVES relfl .. tlon •. relflcatol'l' ad!
- ORIGIN C19: from L ..... ,.. 'lhing' ~ - -
reign ■ v. 1 rule as monarch. 2 las adj rwlgnlngJ(af •
sports player or team) currently holdlnl a panJC11lrrr
title. :1 prevail: canf11sion reigned. ■ ft. 1 the period ,I
rule of a monarch, 2 the period during whleh so..or
something Is predominant or pre·emln•m.
- ORIGIN ME: from OFr. rcignier 'to reign', mfM
'kingdom', from L regnum.
USAGE
The correct phr- Is a hff rein. not • 1'N nlgn.
reignite ■ v. Ignite again.
reign of terror ■ n. a period or rcmorsele5' ropres,19
or bloodshed, in particular (Reign of-) the
period of the Terror during the French RevolU!IOIL
relkl f n,1kl/ ■ n. a healing technique based on~
principle that the therapist can channel eneflY :.C
the patient by means of touch, 10 activate the nat
healing processes of the patient's body, .
ORIGIN Japanese, lit. 'universal life energy•
reimburse (, rt 1m'ba:s/ ■ ~repay (a person wha :: ,
spent or lost money). ► repay (a sum of money '
has been spent or lost).
- DERIVATIVES reimbursable"'%- ... ~~ant
- ORIGIN C17: from••·+ obs. imburse put 1n 1 ~ 1
from med. L imbursare, boscd on late L = f 11111
reimport ••· import (goods processed or ~ ~
••ported materials). ■ n. rhc ac1ion of roJmpo
rcimponed ilem-
- DERIVATIVES relmportatlon n . a law)
reimpose ■ v. impose (somethinll. espec1allY
again after a lapse,
• DERIVATIVES ntlmposltlon n tnd Ill
rein ■ n. 1 a long. narrow map at1ad1ed : 0:: dl<"k •
horse's bit, 1ypically used in pairs to gu e 1'111" •'""
horse in riding or driving. ► B111 a pafrof :!.,, 10 ,t,,t'CI
10 restrain a young child 2 (reins) tlJI!: awrtltl
and control: a new manager will saonbt p~llillS o•"'
reins ■ v. 1 check or guide (a horse) Y J,acll) ~
reins. z (o(ten rwln someone/th!"' In/ C•> ,,_. ,_
- r11RASES draw rein Brit stop ones horSe tfllht ,e111 ..
freedom of action or expression. k .. p •
a l!H reln. whi<h cler[.es £ram the literal
of •II-Ing a hone ta move freely without
- •oiled by reim, is sometimes misinterpreted
'!"itten os • f,- reign
_ ■ v. /,rl:m'ko:neit/ cause (someone) 10
reblnh in another body. ■ adj, /. rl:in ka:nal/
I reborn in another body.
'on ■ n. the rebinh of • soul in a new body
or animal in whom a soul is believed 10
,nrebom.
.nitw ■ v. make (something) a pan or
it11 else again.
,TIVIS rwlnaarporatlon ll
r .,,. (pl same or relnde■ rs) a deer with large
,,. antlers, native to the northern tundra and
'cuiddomesticated in parts of Eurasia.
r r,randus.J
Ml!:·from ON hrernrfyn, from httinn 'reindeer'
er'.
mass ■ n. a bluish-grey arctic lichen, eaten
!er In winter. [□adonia ran,if•rina ,I
,■ v. cause to become infected again.
'ATIVE5 rwlnfectlon n
t■ ■ v. 1 fill (something. especially a tyre) with
ps again. 2 cause innation of (a currency) or in
.. amy) 11ain.
'ATIYES relnflatable adj. relnflatlon n.
■ v. strengthen or support; give added
ta. ► strengthen (a military force) with
11 personnel or material
'ATIVES ralnfon::ement n. relnfan::er n.
N M&::from Fr. rr:nforcer, innuenced by infarce,
....i11n1 of !NfORa.
■cl cancrete ■ n. concrete in which metal
wire are embedded to strengthen it.
■ 1.·pface (something) back into its previous
,TIVE5 ralnsartlon n.
II ■ v. (rwlnstall1, r■lnstalllng, rwlnstalled)
or fix In position again. ► install (computer
'!) !Pin. 2 reinstate in a position or authority.
,TIVES rel111tallatlon n.
■ ." restore to a former position or state.
YH reinstatement n.
■v. (of an tnsurer) transfer (all or pan or a
ta another insurer 10 provide protection against
fat of the first insurance.
1ATIV1.s ralnsurance n. rainsu.nr n.
~;■ v.1 restore (elements regarded as
-l ~unity. z Integrate back Into society.
'ATIVES rwlntegratlan n.
!!!t ■ v. (rwlnterptwb, relnterptwtlng,
-,_..) Interpret in a new or different light.
YES rwlnlerpr■tatlon n.
'llall■ v. 1 bring (something, especially a law
m) Into effect again. 2 put (a species of animal
,t) back Into a rormer habitat,
,Tl9Es rwlntraductlon n.
■ •· change so much so as to appear entirely
,t the wheel waste time or eff,ort in
hlng that already exists.
s ralnv•ntlon n.
••PUt (the proH.t on a previous investment)
me scheme.
1lnve1tment n.
v. give new energy or strength to.
,Invigoration ll
n. a mushroom found growing on dead
In Asia and North America, prepar•
•m which are credited with various
·operties. lGanodl!rllla lucidum.]
1u■1, rwl11ulng, rwl11u■d) make a new
·ent rorm of (a book, record, etc.)
le, ■ n. a new issue of such a product.
reincarnate I relate
reiterate ■ v. say something again or repeatedly.
- DERIVATIVES rwlteratlon •. r■ltefath,■ ad~
- ORIGIN ME: from L. reirerar . rciterare 'go over again',
relve /ri:Y/ ■ •. [usu. as - .. 1vlngl cllltf~ Smt1i,h another
term for """'VI!.
- DERIVATIVES relver n
- ORIGIN ME! var. of ..... vr. the usual spelling when
ref erring to the former practice of cattle· raiding on
the Scottish Borders.
ntject ■ v. lri'd3,kt/ 1 dismiss as inadequate or faulty.
► refuse to consider or agree to. 2 fail to show due
affection or concern for. 3 Mod"<ine show a damaging
immune response to (a transplanted organ or 11ssue).
■ n. f ri:"3ck1/ a rejected person or thing.
- DERIVATIVES rwjectlon • rwje<llve adj. (rar,). rejectar •
- ORIGIN ME from L reject ·, rtictr• 'throw back'
rejedlonlst ■ n. an Arab who refuses to accept a
negotiated peace with Israel.
rejlg ■ v. (rwjlgs, rwjlgglng, rwjl99ed) k 1 rearrange
(something) 2 dllOd re equip with machinery; refit.
rejigger ■ v. US term for R!lta (in sense t)
rejoice ■ v. 1 reel or show great joy. ► ""11a: cause joy
10, 2 (r■jalce In) Iii! have (a strange or lnappro•
priale name): rfre guard rejoic~ in th• name of
Blossom
- .D.E.R IVATIVES rejoicer " rwjolclng n. & ~ rwjolclngl1,1 - ORIGIN ME: from OFr. rcjaiu·, lengthened stem or
rejoir, from re· + joir 'experience joy'.
rejoin' ■ v .. 1 join together agam. 2 return 10.
rejoin• ■ v. say in reply; retort.
- ORIGIN ME (in the sense 'reply to a charge or pleading
in a lawsuit'}: from OFr. rcjoindrt, from r~· &again'+
Joindn! 'to join'.
rejoinder ■ n. 1 a sharp or witty reply. 21.aw, daltd a
derendant's answer to the plalntifrs reply or
replication.
- ORIGIN ME: from Anglo-Norman Fr .• rejoindre (see
IWOIN') .
rejuvenate /n'd3u:voncn/ ••· 1 make or cause to
appear younger or more vital. z (often as adj.
rejuvenated! restore (a river or stream) to a condition
characteristic of a younger landscape.
- DERIVATIVES rwjuvenatlon n. rwjuvenator n.
- ORICIN C19: from ... + L. ju11tni1 1young' + •ATl1•
rejuvenescence /rr.d3u:vo'n,:sans/ ■ n. 1 the renewal
of youth or vitality. z Biology the reactivation or
vegetative cells, resulting in regrowth from old or
injured parts.
- DEIUVA TIVES rejuv-scent ad~
- ORIGIN C17: from late L reiuvenesccr• (from L. re·
'again' + juvonis 'young') t -ENa.
rekey ■ v. (1'91nrrs, rwke,lng, r■k■yed) key (text or
other data) again.
rekindle ■ •· 1 relight (a fire). 2 revive (something
lapsed or lost).
-rel ■ ••ffi• rorming nouns with diminutive or
derogatory force such as cockerel or wastrel.
- ORIGIN from OFr. ·•rtl(lt),
relabel ■ v. (relabels, relabelling, rwlabell■d; US
re!abals, relaballng, rwlabaled) label again or
differently.
relaid past and past participle of Huov•.
relapse /n'lnps/ ■ v. 1 (or a sick or injured person)
deteriorate after a period of improvement. 2 (rwlapse
Into) return to (a worse or less active state). ■ n. /also
'rt-/ a deterioration in health after a temporary
improvement.
- DERIVATIVES rela,ner n.
- ORIGIN ME: rrom L. relaps•, rolrllri 'slip back'.
relapsing fever ■ n. an infectious bacterial disease
marked by recurrent rever.
relatable ■ adj. 1 enabllng a person to reel that they
can relate to someone or something: Mar;t·Kate's
problems make her more ro/11t11blo. z able to be related
to something else.
relate ■,. 1 give an account or. 2 (ba related) be
connected by blood or marriage, 31 make or show a
connection between. ► (relate to) concern. 4 (rwlate
to) feel sympathy for or identify with.
- DERIVATIVES relatable adj. rwlated adj. nlatedness n.
nlat■r (also nlator) n.
r
Annex 302
t
trade book I tragic
members from workers and management. set up to
settle disputes and regulate conditions of employment
in certain industries.
trade book ■ •· a book published by a commercial
publisher and lnlended for general readership .
trade deficit ■ n. the amount by which the cost of a
country's impons exceeds the value of its exports.
trade discount ■ n. a discount on a retail price
allowed or agreed between traders or to a retailer by a
wholesaler.
traded option ■ n. an option on a stock exchange or
futures exchange which can itself be bought and sold.
trade edition ■ n, an edition of a book Intended for
general sale rather than for book clubs or specialiJt
suppliers.
trade gap ■ n. another term for 111ADI! n•Flcn,
trade-In ■ n. a used ankle accepled by a relaller in
pan paymenl for another,
trademark ■ n. 1 a symbol, word, or words legally
regluered or established by use as representing a
company or product, 2 a distinctive !haracteristk or
object. ■ •·!usu. as adj. trademarked] provide with a
trademark.
trade name ■ n. 1 a name thal has the sta1us of a
trademark. 2 a name by which something is known In
a panicular trade or profession,
trade-off ■ n. a balance achieved between two
desirable but incompatible features: a compromise.
trade plates ■ pl. n. ~"I. temporary number plates used
by car dealers or manufocturers on unlicensed cars,
trade price • n. the price paid for goods by a retailer
to a manufacturer or wholesaler.
trader ■ n. 1 a person who trades goods, currency, or
shares. 2 a merchant ship.
tradescantia / ,1rad1'skant10/ ■ n. an American plant
with triangular three-petalled nowers, often grown as
a house plant. !Genus Tradescantia.I
- ORIGIN mod. L., named in honour or the English
botanist John Tradcscant (1570• 1638).
trade secret ■ n, a secret device or technique used by
a company in manufacturing its products.
tradesman • n. (ii tradesmen) a person engaged in
trading or a trade, typically on a relatively smal! scale.
tradespeople ■ pl. n. people engaged in trade.
trade surplus ■ n. the amount by which the value of a
country's expons exceeds the cost of its impons.
trade union (Bril. also trades union) • n, an organized
association or workers in a trade1 group or trades, or
profession, formed to protect and funh~r their rights
and interests.
.. DERIVATIVES trade unionism 11. trade unionist n.
trade-weighted ■ adj. (esp, clally of exchan!fl! roles)
weighlcd according to the imponance of tht! In.de
with the various counlries involved .
trade wind ■ n. a wind blowing stoadily lowards the
equator from 1he nonh-east in the nonhern hemi•
sphere or the south-east in the s.outhern hemisphere,
especially at sea,
HISTORY
Trade wind Is first recoroed from tho mid 17th ci,ntury,
and com .. from th• ob<olot• phro>e blow trade
meaning 'blow steadily In the same d:re<tton'. Trade
fcrme,ly meant ~course. directlon1 and 'trade' before It
acquire-cl Its modern meanings of •an occupation, and
'buying and "'lling'. The lmportanc• of the trade
wind• to the transport of goods by sea ml,led 18th•
century etymologists Into conne<tlng the word trade
wtth 'commerce•~
trading card • n. each of a set of picture cards that are
collected and traded, especially by children.
trading estate ■ n. Birt, an area designated for
industrial and commercial use.
trading post ■ n. a store or small settlement
established for trading, typically in a remote place.
tradition ■ n. 1 the transmission or customs or beliefs
from generation to generation, or the fact of be!ng
passed on in this way. ► a long-established custom or
belief passed on from one generation to another. 2 an
1521
anistic or lllcrary me1hod or style established by an
nrtist, writer, or movcmem. and subsequently follow~
by others. l (in Christianity) doctrine not eJ<pliclt in
the Bible but held to derive from the oral teaching or
Christ and the Apos1les, ► (in Judaism) an ordinance
of the oral law nor in the Torah but held to have been
given by God to Moses. >(in Islam) a saying or act
ascribed to the Prophet but not recorded in the Koran,
See H""'™·
- DERIVATIVES tradltlonary adj. tradltlonlst
tradltl.,.,leP ad).
- ORIGIN ME: from OFr. tradicion, or from L.
1radi1io(n·), from tradcrc 'deliver, betray', from trans•
·across'+ dare ' give'.
traditional ■ adj. 1 relating to or following tradition.
2 (of jazz) in the s1Yle of the early 201h century.
- DERIVATIVES tradltlonallJ adv.
tradltlonallsm ■ n. 1 the upholding of tradition,
especially so as to resist change. 2 diielly hi>ta,icai the
theory that all moral and religiou, truth comes from
divine revelation passed on by triildition, human reason
being incapable of altalning it.
- DERIVATIVES tradltlonallst n. & ad, tradltlonallstlc adj.
traduce / lra'dju:s/ ••· speak badly of; tell lies about.
- DERIVATIVES traducement n. traducer 111
- ORICIN C16: from L. traduccre 'lead in front of 01hers,
expose to ridicule'.
traffic ■ n. 1 vehicles moving on a public highway.
2 the movement of ships, trains, or aircraft l the
commercial transportation of goods or passengers.
4 the messages or signals transmitted through a
communications system. 5 the action of trafficking.
6 "'1llit dealings or communication between people.
■ v. (1raffla, trafficking, trafficked) deal or trade in
something illegal.
- DERIVATIVES trafficker . traffldess ldj
- ORIGIN C16: from Fr. trajJiqu,, Sp. trdfico, or Ital.
traffico, of unknown origin.
trafflcator /'trn!'Jkeita/ • n. • 1. an obsolele kind of
siiinalling device on the side of a motor vehicle, in !he
form of a small extendable illuminated pointer.
- ORIGIN 1930s: blend or TIIAfflC and INOICAlDll
traffic calming ■ n. the deliberate slowing of traffic in
residential areas, by building road humps or other
obn ructions.
traffic circle ■ n. Nonh American term for RDUNI>.......,
(in senH 1) .
traffic Island ■ n. a small raised area in 1he middle or
a road which provides a safe place for pedestrians to
stand and divides two streams of traffic.
traffic jam ■ n. a line or lines of traffic at or vinually
at a stam4till.
traffic lights (also traffic light or traffic signal)
■ pl. n. a set or automatically operated coloured lights
for controlling traffic at road junctions, pedestrian
cros.s ings~ and roundabouts.
traffic warden ■ n. l •il. an official who locates nnd
reports on infringements of parking regula1ions.
tragacanth /'lragoknn8/ (also gum tragacanth) • n. a
white or reddish gum obtained from a plant
(Astragalus gummifcr), used in the food, textile, and
pharmaceutical indumies.
- ORIGIN C16: from Fr. traaacantc, via L. from Gk
tragakantha (name of the plant, lit. 'goat's thorn').
tragedian /lro'd3l:d,on/ ■ n. 1 (!, m. trng.-llenrMI
/lra,d3l:d1'cn/) a traJ ic actor or actre$S. 2 a wnter of
tragedies.
tragedy ■ n. (pt tragedies) 1 an evenl causing great
suffering, destruction, and distress. 2 a serious play h
with an unhappy ending, especially one concerning I e
downfall of 1he main character.
- ORIGIN ME: from OFr. tragcdlc. via L. from Gk Ins
tragoidia, appar. from tragos 'goat' (the reason rema
unexplained) + iiidc 'song. ode'. .
tragic ■ ad/. 1 extremely distressing or sad. ► suffennl
extreme distress or sadness. 2 relating to tragedy In a
literary work.
• DERIVATIVES traglcal adj. traglcallr adv. gikDt.
- ORIGIN C16: from Fr. rragique, via L. from Gk rra
from rragos 'goat', but assoc. with ,ragoidia (see
111AGIDY).
1529
tragic flaw ■ n. less technical term for HAMAlntA.
tragicomedy /,trad31'knn11dl/ ■ n. (!II. tragicomedlH)
a play or novel containing elements or both comedy
and tragedy.
- OERIVA1'1VES tragicomic adj traglcomlullr adv.
- ORIGIN C16: from Fr. rragicomedie or Ital.
traaicomedia, based on L. tragicocomo,,dia, from
traaicu, (see 111AG1c) + comoedia (see COMEDV),
tragopan ('tragapan/ • n. an Asian pheasant, the male
of which has neshy horns on iu head. !Genus
Tragopan: several species.I
- ORIGIN mod. L., from Gk, the name of a horned bird,
from rragos 'goat' + the name or the Greek god Pan.
tragus /'tre1gas/ ■ n. (pl tr•gl f'l.rc1gA1, 'trotd3,AJ/)
Analomy & Zoology a prominence on the inner side or the
external ear, in fronl of and panly closing the passage
10 the organs or hearing.
~ ORIGIN C17: from late L., via L. from Gk traaos 'goat'
(with ref, 10 the characteristic tuft of hair resembling
a goal's beard).
trahlson des clercs /,tro:1zi> de, 'klc:/ ■ •· liteoary a
betrayal of intellectual, artistic. or moral standards by
writer.s, academics, or anists.
- ORIGIN Fr., lit. 'treason of !he scholars', the 1itle of a
book by Julien Benda (1927).
trail ■ n. 1 a mark or a series or signs or objects left
behind by the passage of someone or something. ► a
track or scllnt used in following someone or hunting
an animal. 2 a long 1hin pan stretching behind or
hanging down from something. l a beaten path
through rough country. 4 a route planned or followed
for a panlcular purpose: the rourlst trail. 5 the rear
end of a RU!I carriage, resting or sliding on the ground
when the gun is unlimbered. ■ v. 1 draw or be drawn
along behind. ► (of a plant) grow along the ground or
so as to hang down, 2 walk or move slowly or wearily.
► (of the voice or a speaker) fade gradually before
stopping. 3 follow the trail or. 4 be losing to an
opponent in a game or contest. 5 advertise with a
trailer. 6 apply (slip) through a nozzle or spout to
decorate ceramic ware.
• PHRASES at the trall Mililary with a rine hanging
balanced in one hand and (In Britain) parallel to the
1round. trall arms !,1:111,ry let a rlne hang In such a way.
trall one·• coat deliberately provoke a quarrel or fight.
• ORIGIN ME: from Ofr. tl'tlillier 'to tow', or Mid, Low
Ger. trtilcn 'haul a boat', based on L. traaula 'dragnet',
from 1rahcn 110 pult.
tra il bike ■ n. a li1h1 motorcycle for use in rough
terrain.
tfallblazer ■ n. 1 a person who makes a new track
' through wild country. 2 an innova1or.
- DERIVATIVES trallblaalng n & adj.
trailer ■ n. 1 an unpowercd vehicle towed by another.
► !he rear section of an aniculated truck. ► N. Arni< a
caravan. 2 an extract from a film or programme used
for advance advenising. l a trailing plant. ■ v.
1 advenise with a trailer. 2 transpon by trailer.
~ lier park ■ n. 1 N. Amor. a caravan site. 2 las m!dli;,J US
lacking refinement, taste, or quality: a trailer-park
floozy.
trailer trash ■ n. US inla mal, deoogatory poor, lower·class
While people, typified as living in mobile homes.
tra iler truck ■ n. us an articulated truck.
tnlllng arbutus ■ n. a creeping Nonh American plant
or the heather family, with leothery evergreen leaves
and clusters of pink or white nowers. !Epigaca r,pens.l
tralllng edge ■ n. 1 the rear edge of a moving body,
especially an aircraft wing or propeller blade.
2 Eimroniu the pan or a pulse in which the amplitude
diminishes.
tralllng wheel ■ n. a wheel on a railway locomotive or
other vehicle that is not given direct motive power.
trall mix ■ n. a mixture of dried fruit and nuts eaten as
a snack.
train ■ v. 1 teach (a person or animal) a sklll or type of
behaviour through res ular practice and instruction,
► be taught in such a way, 2 make or become
Physically lit through a course of exercise and diet.
3 (train 10m•thlng on) point or aim something at.
4 cause (a plant) to grow in a panlcular direction or
into a required shape. 5 datod go by train. 6 ,,.ha< entice
tragic flaw I Trakehner
(someone). ■ n. 1 a series of railway carriages or
wagons moved as a unit by a locomotive or by integral
motors. 2 • number or vehicles or pack animals
moving in a line. ► a retinue of attendants accompan f•
ing an important person. J a series or connected
events or 1houghts. 4 a long piece of trailing
material attached lo the back of a formal dress or
robe. 5 a series of gears or other connected parts in
machinery, & a trail of gunpowder for firing an
explosive charge,
• PHRASES In train in progress. In the train of following
behind. In (or out of) training undergoing (or no
longer undergoing) physical training for a sponing
event. ► physically fit (or unlit) as a result of this.
• DERIVATIVES tralnablllty .. trainable Jl!j. training •.
trainload n.
• oklGIN ME (as a noun in the sense 'delay'): from OF,.
train (masc.), trainc (fem.), from trahiner (v.), from L.
trahere 'pull, draw',
tralnband ■ n. histan<lll a division of civilian soldiers in
London and other areas, especially in the Stuan
period.
trainee • n. a person undergoing training for a
panicular job or profession.
- DERIVATIVES tralneHhlp ~-
trainer ■ n. 1 a person who trains people or animals.
► Informal an aircraft or simulator used to train pilots,
2 Brit a soft shoe, suitable for spans or casual wear.
training college ■ n. (in the UK) a college where
people. especially prospective teachers, are trained .
training shoe ■ n. another term for 111A1NE11 (in
sense 2).
training wheels • pl. n. Nonh American term for
stablllzon (see n,.aouzH sense 3).
train mile ■ n. one mile travelled by one train, as a
unit of traffic.
train oll ■ n. thl,fly his10,1o11 oil obtained from !he blubb!tf
of a whale, especially the right whale.
• ORIGIN Ct 6: from obs. train 'train oil', from Mid, Low
Ger. min, MDu. traen, lit. 'tear' (because it was
extracted in droplets).
train shed ■ n. a large structure providing a shelter
over the tracks and platforms of a railway station.
trainspotter ■ n. a,i1. 1 a person who collects
locomotive numbers as a hobby. 2 • ~•n de,og,1ory a
person who obse,sively studies the minutiae of any
minority interen or specialized hobby.
- DERIVATIVES tralnspattlng n.
train wreck ■ n. infttmal a chaotic or disastrous
situation that holds a ghoulish fascination for
onlookers or observers: his rrain wreck of a private life
guarantetd front·page treatment.
traipse /lre1ps/ ■ •· walk or move wearily. reluctantly,
or ahnlessly. ■ n. 1 a tedious or tiring walk, 2 artfooic a
slovenly woman.
- ORIGIN Ct 6: of unknown origin.
trait /tre11 , trer/ ■ n. a distinguishing quality or charac,
teristic. ► a genetically determined characteristic.
- ORIGIN C16 (an early sense was 'stroke of the pen or
pencil in a picture'): from Fr., from L. tractus (sec
TitAcr').
tralteur /trc'ta:/ ■ n. (in France or French speaking
countries) a delicatessen.
- ORIGIN Fr .• from traiter 'to treat'.
traitor ■ n. a person who betrays their country, a cause,
a person, etc.
- DERIVATIVES traitorous adj. traltorauslr OIi,.
• ORIGIN ME: from OFr. traitour, from L. traditor, from
trader• 'hand over',
trajectory /tra'd:ickt(a)rl, 'trad31kt(a)rl/ ■ n. (it. traJ■c·
torles) 1 the path described by a projectile nying or""
object moving under the action or given forces.
2 ~ uy a curve or surface cutting a family of curves
or surraccs nt a constant angle.
• ORIGIN C17: from mod. L. 1raj,c1orio (fem ,), from L.
rraject·, troiccre 1throw across'.
Trakehner /tra'kema/ ■ n. a saddle horse of a liRht
breed first developed at the TrakehA~':;:x_"'3 02
t
ANNEX303
644 PUBLIC LAW 212--0CT. 26, 1961 (66 S,.u.T,
Pro-uided fvrtMr That the instrnment of conveyance shall reserve
ro the Carolina-Virginia Coastal Highway Co!'l)Oration necessary
rights-of-way and easements as may be required for the construction,
maintenance, and .repair of a toll road across the Currituck Beacli
Lighthouse Reservation: P~ ~AM, That the instrument of
conveys.nee shall reserve to the Virginia Electric and Power Company
a perpetual easement and righ~:--w&y across the Currituck Beach
Lighthouse Reservation as may be required for an electric distribution
line from Duck to Ca.Beys Inlet along the Great Barrier Reef
located in Currituck and Dare Counties, together with $11Ch easement
ria'hts and privileges for construction, operation, and maintenance
of such pole and wire lines across the sald Currituck Beach Lighthouse
Reservation.
Approved October 251 1951.
(J'or addft!oDll l'D!lllo Laws ~otobw ~ 111Sl,
• l'llllllo L&1fl aiHai 1111 PIIIS eaH57'.}
Public Law 212 CHAPTER 574
AN ACT
Oetollet!c.!!11
-~18..-. . B.. ~-~-'•- To amend the.A.et of .Tmie 28.1948 (62 Stat.1061), to provide for the operatlon,
JDalUIPIDeDt. mainteD&Dca, and dem.olitlon ot federally &C!QlllNd properttea
tollowJq the aCIIOl!dtlon ot 811ch properttea and before the eetabllebmeDt oi
the Independence National Biatoffilal Park, and for other purposes.
Be if; eMCte<l by tM Senate tmtl Howe of Repruentatwea of. the J::~:i::· UmtetlStatao/ A'lnMicu,i11,0~reaa as&e?MW,,_ThattheA.ctof June
· 28, 1948 (69 Stat. 1061), is hereby amended to aad thereto the followint
section:
~eta., 'Sm T. Following the acquisition by the Federal Government of
:Rropetties pursuant to this Act and until such time as the buildings
thereon are demolished or the properties and buildings thenon are
devoted to purposes of the In.dependence National Historical Park as
provided here~!':i Secretary 1s authorized. with ~t to the said
properties, to · ·ster, ~erate, manage, le~ and mainta.in such
:properties, and lease,. demolish, o:t remove buil~ or apace in build-
1ngs thereon, in such manner as he shall consider t.o be in the public
Funaa. interest. by funds received from leasing the said properties, build~
thereon, or space in buildings thereon, shall be deposited to the
cr~it of~ sp~_al receipt accou1;1t and exp~nded. for purposes of o_per~
ting, mamtaμnng, and .~aging the said properties and; d~olisp-
CoDCncra. mg or removmg the bwldings thereon. The Secretary, m his discretion
and notwithstanding other requirements of law, may exel'Cise
and carry out the functions authorized herein by entering into agreemenf.
s or contracts with publie or frivate a~cies, corporations2 or
persons, upon such terms and conditions as he deems to be appropnate
m carrying out the purp<>Qee of this Act."
Approved October 26, 1951.
Public Law 213 CHAPTER. 575
AN A.CT
Otlilber26.ltl41
PI. B.-4SGOJ To pl'OV'ide for the control by tbe Uni~ States and eoo»eratlng foreign nations
ot ~rt.a to any ~tiOn or eomblllatton of natlona ~atentq tbe eecurtt.Y ot
the l)'Dited Statee, lnclucllDg the Unton of Soviet SoclaU.at Repuhllet! and all
CO'Glltrlfi!S wder Its d!QD.hiatlOil, and tor 0~ P1U'{JO!IE!8.
Be it enacUtl l>y the Seni.ltc, a:n4 HouH oi llepruenti!,ti1J6ll of tM
~&!'t?f: fl~ StafM "' A~ m Cong~, aa,em~~ That this Act may
0111111. be cited as the "Mutual Defense .A8Sista.nce Oontrol .A.ct of 1961".
Annex 303
PUB LIO LA. W 213-0CT. 26, UHll 645 •
TITLE I-WAR XATElUA.LS
$Ee. 101. The Congress -of the United States, recognizing that in a u. s. policy or emworld
threatened by ~on the United States can best preserve t,e,go.
and maintain peace by develoJ?ing maximum national strength and by
utilizing all of its resources in cooperation with other free nations,
hereby dee.la.res it to be the 1olicy of tile United States to apply an
embargo on the shipment o arms, ammunition, and implements of
war, atomic energy materials, -petroleum, transJ,><>rtation 1118,terials of
strategic value, and items of er1mal'J' strategic significance used in the
production of arms, ammunition, and implements of war to any nation
or combination of nations threatening the security of the United
States, including the Union of Soviet Socialist Republics and all
countries under its domination, in order to ( 1) increase the national
strength of the United State. s and of the cooperating nat.ions; (2)
impede the ability of nations threatening the security of the United
States to conduct military operations; and (8) to assist the people
of the nations wider the domination of foreign aggressors to reestablish
their freedom.
It is further declared to be the policy of the United States that no
milito.ry, economic, or .financial assistance shall be supplied to any
nation ~nl~ it appll:es an emba.r~o on such s~pments to !)-DY nation
or combination of nations tbl'eaten1~the security of the Urutea States,
including the Union of Soviet Socialist Republics and all countries
under its domination.
This Act shall be administered in such a. way as to bring &bout the A1dmlnfstratlon ° r
fullest support for any resolution of the General Assembly of the
United Nations, support.ed by the United States, to prevent the shipment
of certain commodities to areas under the control of governments
engaged in hostilities in defiance of the United N a.tions.
$Eo. 102. ~ponsibility for givinJ effect to ~e pu11J<?9eS of this.Act Administrator.
shall be vested m the person occupying the semor position authonzed
by subsection ( e) of section 406 of the Mutual Defense Assistance Act
of 1949, as amended, or in any pe1'SOn who may hereafter be charged :t~fi.7C.·, 11177
with principal reSponsibility for the administration of the provisions
of the Mutual Defense Assistance Act of 1949. Such person is hereinafter
referred to RS the "Administrator".
SEo.108. (a) The Administrator is hereby authorized and directed Determination of
to d etemu•n e w·i th in t hi rty da ys n.f te r enactment of tl11' s A ct a ft.er full lgtoee'mc15. to be emb&r•
nnd complete consideration of the views of the Departments of State,
Defense, and Commerce; the Economic Cooperation Administration;
apd any other appropriate. a~cies, and notwithstanding the _provis,
ons of any other law, which items are, for the J?Urpose of this Act,
arms, ammunition, and implements of wa.r, atomic energy materials,
petroleum, transportation materials of strateaic value, and those items
of primary strate¢c significance used in ille production of arms,
ammunition, and 1mplements of war which should be embargoed to
effectuate the purposes of this Act: Provided, That such determinations Ar1tPn1118111-,
shall be eontmuously adjusted to current conditions on the basis of
investigation and consultation, and that all nations recei~ Unit.ed In1ormat1on to :naSta.
tes tnilitary1 economic, or fuiancial a.asistance shall be kept informed ~re:,vtng u. s.
of such detenru.nations.
(b) All military, economic, or financial assistance to any nation ~on ot •
shall, UJ.>.?n the ~mmendation of the Administrator, be terminated alatanoe.
forthwith if such nation a.ft.er sixty days from the dat.e of a determinat!
on under ~on. 103 (a) Jc:,.owingly Pffl!rlts the shipm~t to any
nation ol' eombmation of nations threatening the secunty of the
United StateS, includi!tg the Union of Soviet S-ooialist ReJ>ublics and
all countries under its domination, of anyitem. which he has cietermined
under section 103 (a) aft.er a full and complete investigation to be
Annex 303
• 646 PUBLIC LAW 213-0CT. 28, 19Sl
included in any of the following categories: Arms, ammunition, and
implements of war, atomic energy ma.t8rials, petroleum, tra.nsporta.tion
materials of strategic value, and items of primary strategic significance
used in the_production of .arms, ammunitio.n, and impfemen. ts
ConthlWIDtlll at u- of war: Pr<Wi,tkd That the President after receiving the advice of
solfl tParneqseid ebnyt . dbecllon •LLU e Administr" atoi.-' -.n d a.Aa.w. r "---'n-= g m• to a.ccount th e contr·i•b uti. on o f
sucl1 countr, to the mutU&l security of the free world, the. importance
of such assistance to the security of the United States, the stra.tegic
importance of imports received from countries of the. Soviet bloc, and
the ad~uacy of such country's controls over the export to the Soviet
bloc of items of stra.tegic importance, may direct the continuance of
such assistance to a country which permits shipments of items other
than arms, ammunition, implement.s of war, and atomic energr
materials when unusual circumsta.nces indicat.e that the cessation of
aid would cJearly be detrimental t.o the security of the United States:
Report.atoConcrea. Provided fur . th.er, That the President shall immediately report any
det.ermination made pursua.nt to the first, J!roviso of th.is section with
reasons therefor to tlie Appropriations and A.rmed Services Committees
of the Senate and of the House of :Representatives, the Committee
on Foreign Relations of the Senate, and the Committee on Fo~
Affa-irs of the House of Represent.ativ~ and the President shall at
least once each quarter review all determinations made previous!! and
shall report his conclusions to the foregoing committees of the House
and Senate, which reports shall contain an analysis of the trade with
the Soviet bloc of countries for which det.erminations have been made.
a1a~~t1on or u- SEc. lM. Whenever mili~t economic, or financial assists.nee has
been terminated as provided in this A.ct, such assistance ca.n be resumed
only upon determination by the President that adequate measures have
been taken by the na.tion concerned to a~ full compliance with the
provisions of this A.ct.
tt!:f~=~~tv- SEC. 105. For the purposes of this A.ct the term "assistancen does
not include activities carried on for the purpose of facilit.ating the
procurement of materials in which the United States is deficient.
TlTLE n-OTHEll MA'IDIALS
Regulation or e :t• SEC. 201. The Congress of the United States further declares it to be
port11. the policy of the United States to regulate the export of commodities
other than those specified in title I of this Act to any nation or com~
bination of nations threa~ the security of the United States,
including the Union of Soviet Socialist Republics and all countries
under its domination, in order to strengthen the Unit.eel States and
other cooperating nations of the free world and to oppose and off'set
~ nonmilitary action a.ct.s which threaten the security of the United
5tates and the peace of the world.
re:~~~tions~'I; S1t0. 202. The United States shall negotiate with any country receiv~~
e•• ing military, economic, or financial assistance arrangement-a for the
pons. recipient country to un9-ertake a pro~am for control1i!!i exports of
A,ru, p. 645. items not subject to embargo under title I of this Act, but which in
the judgment of the Administrator should be controlled to any nation
or combination of nations threatening the security of the Uni™1 States,
including the Union of Soviet Socia.list Republics and all countries
under its domination.
TertlltD&tlou or .. SEO. 203. AU milita!'Y, economic, and financial assistance shall be
eJst&noe. terminated when the President determines that the recipient country
(1) is not effectively cooperating with the United States _pursuant to
th1s title, or (2) is failing t.o furnish to the United States information
Annex 303
65 8TA.T.) PUBLIC LAW 2lt-OOT. 26, 1951
sufficient for the President to determine that the recipient country is
effectively cooperating with the United St.ates.
TITLE IIl-OENEJlAL 1':ROVIBIONS
647
Sr.c. 301. AU ot161er na~o1ns !those not receiving United States mili- ~~011-
tary, economic, or nanc1a assistance} shall be invited by the President
to cooperate jointly in a group or grou~ or on s.n individual basis in
controlling the export of the commodities referred to in title I and
title II of this Act to any nation or combination of nations threatening ..tnu, PP. Ma. Ma.
the securit1 of the United States, incJuding the Union of Soviet Socialist
Republics and all countries under its domination.
Sro. 802. The Administrator wjth regard to a.11 titles of this Act D1111ea 01 A.dmln- shall- 1strat4r,
(a) coordinat<, those activities of the various United States dep&rtments
and agencies .which are concerned with security controls over
exports from other countries·
(b) make a continu~ stud1 of the administration of export control
measures w1dertaken by foreign governments in accordance with the
provisions of this Act, and shall report t.o the Congress from time t.o
time but, not leas than once every six months recommending action
where appropria~; and
( e) make available technical advice and ~istance on export control
procedures to any nation d~ such cooperation.
S1:0. 303. The provisions of subsection ( a.) of section 403, of section ~==de,- 404 and of subsections (e) and (d) of section 406 of the Mutual ·
Deien.se Assistance Act of 1949 (Public Law 329, Eight_;y-firat Congress),
as atnended, insofar as they are consistent with this Act, shall I itat 78· 11 1674
be applicable to this Act. Funds made available for the Mutual U74, 1i>11: • •.
DefeilS8 Assistance Act of 1949 as amended shall be available for Avallahlllty 01
' ' t funds.
carry~ out this Act in such amounts as the President shall direct.
SEO. 04. In every recipient.country where local currency is made toE~ ~=':
available for local currency e:q>enses of the United Stat.es m eonnec- hJl>da.
tion with assistance furnished by the United States, the local currency
administrative and operating expenses incurred in the administration
of this Act shall be charged to such local currency funds to the extent
available.
Sm. 805. Subsection (d) of section 117 of the Foreign Aasistance RapeeJs.
Act of 1948 (Public Law 472, Ei~tieth Co!}gress), a.s a.mended, and ~ stat. 154•
subsection ( 11,) of section 1302 of the Third Supplemental Appropria.- 23 u. s. 0 • t 1315•
tion Act, 1951 (Public Law 45, Eighty-second Congress), a.re repealed. A.Ilk, P, a:i.
Approved October 26, 1951.
Public Law 214 CHAPTER 577
AN ACT
To amend cert.aln houstng Jeglsllltlon to grant preferences to veterans of the
Korean con1llct.
Be it tMCted by the 8e'llate a,ul. HOUIJe of Rep-resen;tativeB -0f tlWJ.
Uni.ted,8tatu of America in Congress aaBembled, That paragl'!l,ph (14)
of section 2 of the United States. Housing Act of 1937 ( 50 Stat. ass,
u.s a.mended; 42 U.S. C. 1402) is amended t.o read as follows:
''(14) The term 'veteran' shall :mean a person who has served
in tb.e active military or naval service of the United States at any
time (i) on or after September 16, 1940, and prior to July 26,
Octoller 96. lffl
tB. :iml
Korean veterans,
-e~ondng preter• 68 lltat. ffl
.. Veteran."
Annex 303
ANNEX304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
Columbia Law Review
May, 1967
Harold J. Bermanal John R. Garsonaal
67 Colum. L. Rev. 791
Copyright© 1967 Directors of The Columbia Law Review Association, Inc.; Harold J. Berman, John R. Garson
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, AND FUTURE
Introduction
Traditionally, the United States Government has restricted exports only in time of war or in special emergency situations.1 With
the end of World War II, however, drastic wartime controls over exports were continued from *792 year to year until February
28, 1949,2 when the Export Control Act3 was enacted, the first comprehensive system of export controls ever adopted by the
Congress in peace time. Even that Act was initially conceived as a temporary measure, and might well have been allowed to
lapse in 1951 but for the Korean War. The Export Control Act was renewed in 1951, and again in 1953, 1956, 1958, 1960, 1962,
and 1965. It is due to come before the Congress again in 1969.4
Probably no single piece of legislation gives more power to the President to control American commerce. Subject to only the
vaguest standards of"foreign policy" and "national security and welfare," he has authority to cut off the entire export trade of the
United States, or any part of it, or to deny "export privileges" to any or all persons. Moreover, the procedures for implementing
this power are left almost entirely to his discretion, and at the same time heavy administrative and criminal sanctions may be
imposed for violation of any export regulations he may introduce.
Under the Export Control Act, the Executive regulates all exports from the United States regardless of destination. In addition,
he may invoke the Trading With the Enemy Act of 1917 against designated countries. 5 That Act was employed by the President
in December 1950, following the entrance of *793 Communist Chinese forces into Korea, as the basis for the issuance of
regulations designed to prevent virtually all economic dealings (including imports and financial transactions, as well as exports)
with Communist China and North Korea. 6 In 1953, another set of regulations was also issued under the Trading With the Enemy
Act, controlling exports to Communist countries by persons subject to the jurisdiction of the United States, of goods produced
outside the United States. 7 In 1961, the Trading With the Enemy Act also provided the foundation for the imposition of controls
on economic dealings with Cuba similar to (though not quite as severe as) those previously made applicable to China.8
The Export Control Act is administered by the Commerce Department. The three sets of regulations issued under the Trading
With the Enemy Act are administered by the Treasury Department. In addition, the State Department administers a licensing
system regulating the export of arms, ammunition, and other implements of war, and technical data relating thereto, under the
Mutual Security Act of 1954. 9 These are the most important-although by no means the only10-govemmental controls over
exports.
The time has come to re-examine seriously both the Export Control Act and the Treasury Regulations issued under the Trading
With the Enemy Act. *794 The question must be asked: Can methods of export control which were adopted initially as a
temporary wartime expedient serve adequately for the indefinite future? We must also ask whether, if export licensing has in
fact become a permanent part of our economic and legal order, it is wise to divide the main burden of administering it between
three different departments of the Government. Closely related to the question of methods of control is the question of criteria
for granting or denying license applications; these criteria must be analyzed in order to determine whether they in fact promote
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works.
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
the aims of national security and foreign policy which the Export Control Act affirms. Finally, we must ask to what extent
the United States, by "going it alone" in many of its export control policies, is adversely affecting the competitive interests of
American exporters and of the American economy, and is also risking American leadership in the international community.
While we mean to answer these questions as impartially as possible, we do not wish to conceal our conviction-which is
perhaps apparent from the questions themselves-that our system of export controls needs a drastic revision. We believe that
the methods of administering export controls are in many respects arbitrary; that the existing division of controls among three
different departments is unwise, and at times bureaucratic and oppressive; and that some of the criteria for granting or denying
license applications are specious. Moreover, we are convinced that the United States, by refusing to adapt its export controls
to those of the countries of Western Europe, is doing a disservice to American exporters, who are thus deprived of markets; to
the American economy, whose balance of payments thereby suffers; and to American leadership in the world, which incurs the
charge that it lacks both realism and idealism-the realism to recognize that one can trade even with one's enemies on the basis
of mutual advantage, and the idealism that places the long-range development of an international economic and legal order
ahead of short-range national political interests.
I. The Legislative History of the Export Control Act of 1949
Although most other special wartime controls withered away in the period from 1945 to 194 7 with the transition to a peacetime
economy, 11 it was necessary to continue to restrict exports for two main reasons: first, our domestic economy was faced with
world-wide shortages of critical items such as steel, chemicals, drugs, and building supplies, and thus, in the absence of controls,
exports could have drained away-or bid up the price of-many goods vitally needed at home; and second, our policy of
aiding the post-war recovery of the *795 European economies-symbolized in the Marshall Plan-required the channelling
of particular goods to particular countries on a priority basis. In addition, there was a third reason-which ultimately became
the main reason for continuing the controls, but which in the period of 1945-1947 was considered only a subsidiary reason:
the need for close scrutiny over shipments to the USSR and other Communist countries of industrial materials which might
have military significance. In this connection it should be noted that in 1947 it was still open to the Soviet Union to join the
Marshall Plan; that the Communist victory in China was secured only in 1948 and 1949; and that the phrase "Cold War" was
only beginning to penetrate our national consciousness.
In 1948 it was apparent that the repeated annual extensions of the 1940 law authorizing export controls were meeting
congressional opposition, and that new legislation was required which would more adequately reflect the post-war situation.
A Senate investigation in 1948 disclosed substantial weaknesses in the administrative system of export controls, and made
several recommendations, some of which were of a restrictive character (a greater degree of consultation by the Commerce
Department's Office of International Trade, which was administering the controls, with other executive departments and with
private traders) and some of which involved an expansion of administrative rule-making power (the authority to promulgate
regulations applicable to financing, transporting, and other servicing of exports).12 In addition, the officials of the Office of
International Trade wished to be expressly relieved by statute from the requirements of the Administrative Procedure Act,
especially section 4 thereofrequiring hearings on proposed regulations. 13
A. The Congressional Hearings
The major reason advanced by the Administration for the extension of export controls was that certain goods continued to
be in short supply throughout the world and that, in the absence of controls, exports of these scarce commodities would be
greatly increased to the detriment both of our national economy and of our obligations to aid European recovery. Given existing
scarcities, Secretary of Commerce Sawyer stated, exports must be channelled to countries "where our foreign-policy interest
would be served best," namely to Western Europe. 14 By the end of 1948, however, high levels of United States production had
overcome most shortages, even in the light of European *796 demand. 15 Indeed, at the time that the Export Control Act was
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
passed, shortages of supply accounted for only about one-third of the export licensing activities of the Office of International
Trade.16
It seems clear that the Administration exaggerated the dimensions of the short supply situation and that, notwithstanding State
Department controls over exports of military goods, the Administration was most concerned to exercise, in the words of the
statute, "the necessary vigilance over exports from the standpoint of their significance to the national security." As early as March
1, 1948-shortly after the Communist coup in Czechoslovakia-the Department of Commerce had placed under licensing
control most exports to the Soviet Union and the countries of Eastern Europe. And in the same month, Congress enacted an
amendment to the pending Marshall Plan bill which directed the President "to refuse delivery insofar as practicable to [Marshall
Plan participants] of commodities which go into the production of any commodity for delivery to any nonparticipating European
country which commodity would be refused export licenses to those countries by the United States in the interest of national
security. "17 In December 1948 a Senate committee investigating the administration of export controls reported that "The national
security aspects of our export control program are of transcendent importance, particularly in view of the present activities of
the Soviet Union and its satellites."18 Thus, in the period March 1948 to February 1949 (when the Export Control Act was
passed), so-called security controls replaced short supply controls as the principal regulator of the American export trade. At
the same time, however, the Administration was hopeful that export controls might no longer be needed by June 30, 1951-
the expiration date of the new legislation.
Apart from the reasons for the extension of export controls, the congressional hearings focused on three questions: (1) the
licensing policies of the Office oflntemational Trade, (2) the effect of excluding the operation of section 4 of the Administrative
Procedure Act, and (3) the criminal penalties for violation ofregulations under the Act.
1. The Licensing Policies of the Office of International Trade. The business community generally, and the small merchant
exporters in particular, were especially concerned with the licensing policies of the Office of International Trade. The most
general complaint was that there was no equitable or systematic method of granting licenses in most commodity branches;
witnesses testified that applications to export similar goods were treated unequally, that is, that some licenses were approved
while others were denied *797 and that export quotas were not evenly or fairly divided. Several representatives of the business
community urged that the Office oflntemational Trade establish and follow workable and uniform standards in the issuance of
export licenses and, in addition, that the Congress define more sharply its policy in sections 1 and 2 of the Act and thereby place
express restraints on the limits of the Office oflntemational Trade's authority. "All we ask for," said one lawyer, "is that we have
a little more definitive language in the statute. With that definitive language we can then go to the officials who may be trampling
on the intent of the statute and point out this language."19 Unfortunately, no way was found to satisfy these complaints.
In addition, the merchant exporters were concerned with licensing practices which discriminated in favor of the manufacturers.
They charged that Office oflntemational Trade officials were trying to eliminate the "middleman" from the export business.20
As a result of such devices as "price criterion" as a factor in licensing, a "historical" method of licensing for basic goods (which
discriminated against export houses whose principals had served in the war as well as against newcomers), and a "letter of
commitment" procedure by which an exporter holding firm orders could not get an export license without a letter of commitment
from a supplier (who, in tum, would not furnish such a letter without presentation of an export license), the merchant exporters
were effectively precluded from a large part of the export business. On the other hand, by reserving even a small share of the
available quotas to merchant exporters, the Office of International Trade may in fact have secured for some of them a larger
volume of export sales than they might have been able to make in an uncontrolled market. The congressional remedy for this
dilemma was a directive in section 4(b) of the Act that "insofar as practicable" consideration be given "to the interests of
small business, merchant exporters as well as producers, and established and new exporters," and that provisions "be made for
representative trade consultation to that end."21
2. Section 4 of the Administrative Procedure Act.22 Section 2 of the Administrative Procedure Act provides that that Act shall
not apply to activities of an emergency character, except for section 3 thereof, which requires publication of information, rules,
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
opinions, orders and public records. The Commerce Department contended that since the Office of International Trade was a
"temporary emergency agency,"23 it should be exempt from the *798 operation of the Administrative Procedure Act altogether
( except for section 3). The business community generally urged that it not be exempted from section 4, which requires notice and
public hearing on agency rule-making activities but which does not apply to interpretive rules, general statements of policy, or to
any situation in which the agency for good cause finds that "notice and public procedure thereon are impracticable, unnecessary,
or contrary to the public interest." Business representatives agreed with the Office of International Trade that the voluminous
applications for export licenses made it impracticable to hold hearing procedures on individual license applications but they
did argue forcefully that the Office should not be exempt from "notice and hearing on substantive and legislative rules to be
promulgated which may effectively curtail the right to remain in business."24 The Senate Report, adopting the Administration's
view, concluded that only section 3 of the Administrative Procedure Act should be applicable to the export control program
"in view of the temporary character of this legislation and its intimate relation to foreign policy and national security."25 Other
temporary regulatory activities had been granted comparable exemptions, including the Sugar Control Extension Act of 194 7, 26
the Housing and Rent Act of 1947,27 the Veterans Emergency Housing Act of 1946,28 and the War Housing Insurance Act.29
Section 7 of the Export Control Act embodied the Senate recommendation. 30
3. Criminal Penalties. The Administration proposed, and the Congress accepted, a change in the criminal sanctions of the
export control law of 1940, which had provided a maximum penalty of $10,000 and two years in prison for "the violation
of any provision of any proclamation, or of any rule, or regulation issued hereunder."31 Section 5 of the 1949 Act reduced
the maximum sentence to one year and thus changed the nature of the offense, under federal criminal law, from a felony to a
misdemeanor. 32 This was done in order to eliminate the requirement of a grand jury indictment and thus to expedite prosecution
of violators. Neither the Senate nor the House hearings give any indication as to whether the omission-as in the 1940 lawofwords
relative to intent or negligence on the part of the violator serves to eliminate the requirement thereof.
To facilitate both criminal and administrative proceedings, section 6 of the Act grants to the Executive the power to conduct
investigations, to issue *799 subpoenas, and to require testimony under oath. Such powers were lacking in the pre-existing
law. The Senate Committee considered that:
[a]mple safeguards against administrative misuse of these enforcement powers [were] provided [(a)] by the
requirement that they be utilized solely "to the extent necessary or appropriate to the enforcement of this
act...;" [(b)] by the intervention of the United States district courts in any proposed enforcement of a subpoena;
[(c)] by the inclusion of the standard immunity provisions of the Compulsory Testimony Act of 1893 ... ; and [(d)]
by the prohibition against disclosure of confidential information furnished. 33
B. Extensions and Amendments of the Export Control Act
Whatever doubts may have been entertained in 1948-1949 about the propriety and wisdom of maintaining a comprehensive
system of export controls were dispelled by the outbreak of armed conflict in Korea in June 1950. When the Export Control
Act came up for renewal in June 1951, shortages of goods had become more acute, and national security required an even
more careful scrutiny of exports to the Communist countries allied with North Korea. Nevertheless, the Administration was
still willing to treat the Export Control Act as a temporary measure and frequently declared its intention to eliminate controls
under it at the earliest possible moment. Congress also insisted on periodic review of the Act, which was extended-without
amendment-first to 1953, then to 1956, then to 1958, then to 1960, and again to 1962.34
With the end of the Korean War in 1953, however, the reasons for maintaining export controls under the Act changed
substantially. Short supply controls were progressively eliminated; by 1956, only eight items were controlled for reasons of
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
scarcity, and in 1960 there were none. Indeed, it is doubtful that the domestic supply situation at any time warranted the
application of controls as comprehensive in scope as those imposed by the Office of International Trade ( or by its successors,
the Office of Export Supply and the Office of Export Control).35 Moreover, considerations of national security also became less
important: on the one hand, Stalin's successors in the Soviet Union-first Malenkov and then Khrushchev-adopted a more
friendly posture toward Western Europe and the United States, and the possibility of a European War, though always present,
appeared to be greatly reduced; on the other hand, in view of the economic recovery of the countries of Western Europe, and
their declared policy to expand trade with Eastern Europe and the Soviet Union, American restrictions became less and less
effective from a security standpoint. Under these circumstances, the continuation *800 of controls under the Export Control
Act came to be justified almost wholly in terms of foreign policy, and their severity fluctuated with successive international
crises and accommodations. Throughout the 1950's, the Administration spoke of a "Sino-Soviet bloc" and of a "Sino-Soviet
policy" which, with respect to trade, consisted of a complete embargo on all economic dealings with Communist China, North
Korea, and North Vietnam, and selective controls on shipments to the USSR and Eastern Europe (excluding Yugoslavia). From
1957 on, Poland was accorded special treatment.
During the 1950's and early 1960's there was little if any substantial opposition to the systematic use of export controls as a
foreign policy weapon, either in the Congress or in the business community. Whatever congressional debate accompanied the
successive extensions of the Export Control Act was directed largely to the Administration's failure to secure a greater degree
of cooperation from friendly foreign nations in the implementation of multilateral trade controls.
1. The 1962 Amendments. In June 1962 the Administration sought a single change in the existing law, namely, the repeal of
section 12, establishing a date for the expiration of the Act. The Commerce Department strongly urged that Congress make
the Act permanent, instead of following the previous practice of two-year or three-year extensions. The reasons given for
permanence were (a) that there was no substantial likelihood that the Act would not be needed in the foreseeable future, (b)
that the establishment of a permanent system of controls would make it easier to persuade other friendly countries to maintain
their own export controls at an appropriate level, and ( c) that temporary extensions create difficulties in obtaining qualified
employees to administer the Act. This was the first such request by the Administration in the history of the Act. The Senate
bill adopted the Administration's request, but the House bill granted only a three-year extension, and the conference substitute,
subsequently enacted, followed the House amendment.
At the same time Congress on its own initiative introduced certain changes in the language of the Act which in terms substantially
broadened the scope of the controls, though in fact the changes only reflected previous licensing practices. An amendment to
section 1 (b) set forth the finding of Congress that "umestricted export of materials without regard to their potential military
and economic significance [ and not only, as before, their potential military significance] may adversely affect the national
security of the United States";36 and an addition to section 3(a), sponsored by the Chairman of the House Select Committee
on Export Control, Paul Kitchin, provided for the denial of any license to export any item "to any nation or combination of
nations threatening the national security of the United States, *801 if the President shall determine that such export makes
a significant contribution to the military or economic potential of such nation or nations which would prove detrimental to the
national security and welfare of the United States."37
These amendments, which were opposed by the Administration, underscored the broad economic aspects of what had come to
be called "strategic," in contradistinction to military, controls and reflected a widespread sentiment that exports of nonmilitary
items which might assist the industrial development of the Soviet Union would be detrimental to the national security of the
United States.38
Congress also amended the Act in order to confront the problems created by the fact that the less restrictive policies of other
non-Communist countries toward trade with Communist countries were frustrating United States controls. Senator Jacob K.
Javits ofNew York sponsored an addition to section 2 which, as finally adopted, declared it to be the policy of the United States
"to formulate, reformulate, and apply such controls to the maximum extent possible in cooperation with all nations with which
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 5
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
the United States has defense treaty commitments, and to formulate a unified commercial and trading policy to be observed by
the non-Communist-dominated nations or areas in their dealings with the Communist-dominated nations."39 In the words of
Senator Javits, "the line of economic action must run along the outside boundary of the community of industrialized nations."40
There is, of course, a glaring ambiguity here which was not resolved in the language of the amended section 2. A "unified
commercial and trading policy" could be achieved either by inducing the European countries to raise their restrictions to the
level of ours or by reducing American restrictions to the lower European levels. Nothing said by Senator Javits in support of the
amendment suggested that he intended the second of these two alternatives. In its published interpretation of the amendment, the
Department of Commerce stated that it was formulating, reformulating, and applying U.S. export controls as much as possible
to accord with the multilateral agreement level, "subject, of course, to one major qualification .... that the United States should
not refrain from exercising control over any item or toward any country, which is regarded as important to U.S. national security
or foreign policy, merely because multilateral agreement cannot be obtained."41 Thus *802 the Javits amendment merely has
the effect of declaring a new policy for other countries rather than a new policy for the United States.
The 1962 amendments also included a declaration of the policy of the United States "to use its economic resources and
advantages in trade with Communist-dominated nations to further the national security and foreign policy objectives of the
United States."42 The Department of Commerce-which did not seek this amendment-has given it the following interpretation:
... Having in mind that the economic resources and advantages in trade possessed by the United States obviously
includes much more than the power to impose export controls, the Department construes the scope of this
amendment as transcending the preexisting statutory authority and responsibility vested in the Department under
the act .... [T]he Department construes this amendment as providing congressional policy authorization to vary
the scope and severity of export control to particular countries, from time to time, as national security and foreign
policy interests require .... 43
Clearly, however, the new language of "economic resources and advantages" was not needed to give the Department flexible
power "to vary the scope and severity of export control to particular countries ... as ... foreign policy interests require." In
the first place, the inherent difficulties of classifying goods for strategic purposes are so great, and the standards so obscure,
that Department officials had always been able to vary the scope and severity of export control towards individual Communist
nations. The Department of Commerce has always treated Yugoslavia-since it asserted its independence from the USSR-as
a Western European nation and, as early as August 1957, the Department of Commerce initiated a more liberal export policy
with regard to Poland, in recognition of various changes in Poland's domestic and foreign policy. More recently-since July
1964-the Department has accorded Rumania more favorable treatment than the other "Soviet bloc" countries ( except Poland).
The congressional amendment implies that American economic resources and advantages in trade can be used as a bargaining
instrument to influence the internal evolution and external behavior of Communist countries and, in particular, to encourage the
movement toward greater national independence in Eastern Europe.
Finally, the Export Control Act was amended in 1962 to increase the maximum penalty for a second and subsequent violation to
three times the value of the exports involved or $20,000, or five years' imprisonment, or both; 44 and also to impose a maximum
penalty of five times the value of the exports involved or $20,000, or five years' imprisonment, or both, for a ''wilful exportation"
made "with knowledge that such exports will be used for the benefit of any Communist-dominated nation. "45 Previously there
had *803 been no provision for increased penalties in case of repeated violations, and no provision relating to wilful violations.
2. The 1965 Amendments. In 1965 as in 1962, the Administration sought the indefinite extension of the Act by the repeal of
section 12 thereof. Congress again rejected this proposal. It did, however, extend the expiration date for four years-the longest
in the history of the Act-to June 30, 1969.46
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 6
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
The Administration bill also sought the amendment of section 5 to authorize the administrative imposition of a civil penalty not
exceeding $1000 for a violation of any regulation, order, or license issued under it. The Administration's reason, as expressed by
Secretary of Commerce Connor, was that "license revocation or denial in many cases is too much a punishment for the crime. "4 7
The final amendment-sections 5( c )-(g)48 -differs from the bill originally proposed by the Department of Commerce in two
major respects. First, the proposed bill would have given to the Commerce Department, by implication, the power to withhold
or suspend export licenses or privileges until the civil penalty was paid. The Senate decided that this was too important a feature
of the statutory scheme to be left to implication. Congress therefore limited to a maximum of one year the period for which
export privileges may be withheld as a means of inducing payment of a penalty. 49 In addition, the amendment as finally adopted
clarifies the rights of persons who wish to contest in court the imposition of any civil penalty. In the case of a person who does
not pay the penalty, the revised amendment provides that the Government may collect it only by bringing a civil action, in
which the court is to determine de novo all issues necessary to the establishment of liability. 50 However, in order to preclude
the possibility that an offender may pay the fine in order not to lose his export privileges and then sue for a refund of the fine,
the amendment provides that no suit for refund may be brought in any court.51 Thus the administrative character of the penalty
is preserved, and an exporter who chooses to challenge it in court must risk the cessation of his export business for one year.
The amendment does not prescribe any period following an offense within which the civil penalty must be imposed. The Senate
Report, however, states that the general five-year limitation imposed by 28 U.S.C. § 2462 shall govern both administrative and
judicial proceedings. 52
The Act was further amended by the addition of a new paragraph stating *804 that it is the policy of the United States to oppose
restrictive trade practices or boycotts fostered or imposed by foreign countries against other countries friendly to the United
States and to encourage domestic export firms to refuse to take any action which has the effect of furthering such restrictive trade
practices or boycotts.53 This amendment, which was proposed in various forms in both the Senate and the House, was directed
exclusively against the Arab boycott of American firms doing business with Israel. To effectuate the boycott, the League of
Arab States sends questionnaires to American firms, and it was the object of the various bills presented on this subject to require
the Department of Commerce to issue regulations prohibiting American exporters from responding to such questionnaires. The
proposed amendments were vigorously opposed by the Department of State and the Department of Commerce and the final
version merely "encourages" and "requests" exporters to refuse to furnish such information as will assist the boycott practices.
Although one may sympathize with the objectives of the proponents of the amendment, it may be seriously questioned whether
the export control law is the proper means to implement them. This was the first amendment in the history of the Act which
introduced provisions wholly outside the scope of export controls.
Finally, the President's authority under section 3(a) of the Act to prohibit or curtail exportations from the United States was
extended to cover "any other information" (in addition to technical data).54 The Senate Banking and Currency Committee
Report states that the new term was added "in connection with the new policy provision relating to boycotts, since controls
over furnishing of information may be deemed appropriate as a part of the regulations issued in connection with this new policy
provision."55
II. The Administrative Structure of Export Controls
It was easy enough for Congress to give the President virtually unlimited power to prohibit or curtail exports; it proved more
difficult for him to create a rational administrative structure for exercising that enormous power- involving, as it now does,
the control of some $30 billion worth of exports to all countries of the world.
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 7
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
*805 The Export Control Act does not indicate what department of the Executive branch shall administer export controls.
It merely states that "the President may delegate the power, authority, and discretion conferred upon him by this Act to such
departments, agencies, or offcials of the Government as he may deem appropriate";56 and that the "department, agency, or
official" charged with determining what exports shall be controlled, and to what extent, "shall seek information and advice from
the several executive departments and independent agencies concerned with aspects of our domestic and foreign policies and
operations having an important bearing on exports."57
These provisions of the Export Control Act, which have remained unchanged since 1949, hardly disclose the actual structure of
controls. In fact from the early 1940's on, the day-to-day regulation of exports has been in the hands of a relatively autonomous
body of administrators, relatively constant in personnel, now called the Office of Export Control, formerly the Office of Export
Supply, before that the Office oflnternational Trade, and at one time the Board of Economic Warfare. During the period from
1940 to 1945, economic defense and economic warfare were vested in an Administrator of Export Control and successive
independent agencies.58 In 1945, export controls were transferred to the jurisdiction of the Secretary ofCommerce,59 where
they have been ever since-under a succession of bureaus (Bureau of Foreign and Domestic Commerce, Bureau of Foreign
Commerce, Bureau of International Programs, and now Bureau of International Commerce)60 responsible to the Assistant
Secretary of Commerce for Domestic and International Business. However, whatever the name of its superior agency within the
Commerce Department, the Office of Export Control is bound to feel a certain lack of congeniality in its surroundings, since the
main purpose of export controls is to restrict exports, whereas a primary function of the Department of Commerce as a whole
is to foster, promote, and develop exports.61 Indeed, in 1949 Secretary of Commerce Sawyer frankly said of export control
that "[i]t is a rather difficult and somewhat unpleasant task," *806 and that "I would be very glad if some other department
would take it all over. "62
The principal tasks of the Office of Export Control are to issue export regulations, to grant or deny applications for export
licenses, and to investigate violations of the Export Control Act and of its own regulations thereunder. The Office of Export
Control has four licensing divisions-for Technical Data and Services, Scientific and Electronic Equipment, Production
Materials and Consumer Products, and Capital Goods, respectively. 63 In addition, an Operations Division is responsible for
the mechanical processing of license applications and for maintaining liaison with the Customs Bureau, the Post Office, and
the Bureau of the Budget, An Investigation Division cooperates with the General Counsel of the Department of Commerce in
the prosecution of violations. Finally, a Policy Planning Division reviews all license applications forwarded to it by the four
licensing divisions, and prepares documentation on those applications to be forwarded to higher reviewing bodies; also the
Policy Planning Division classifies commodities and technical data and reviews the items on the various strategic lists.64
Although the Office of Export Control is located within the Commerce Department's Bureau of International Commerce, it is
advised by a three-tier hierarchy of interdepartmental committees, on which are represented the Departments of Commerce,
State, Defense, and Treasury, in conjunction with that amorphous body known as the "intelligence community." Each of the
three committees is chaired by a Commerce Department official. Also, representatives of the Departments of Agriculture and
Interior, as well as of various administrative agencies (the Federal Aviation Agency, the National Aeronautical and Space
Agency, the Atomic Energy Commission, the Office of Emergency Planning), occasionally serve on these committees in an
ad hoc capacity. 65
At the first level of interdepartmental review stands the Operating Committee, which is consulted in determining what items shall
be controlled and the extent to which exports thereof shall be limited. The Operating Committee considers all matters referred
to it by the Policy Planning Division of the Office of Export Control (license applications, licensing requirements, programs
affecting particular countries or areas); in addition, each of the permanent representatives on the Operating Committee may bring
policy *807 matters directly to it for consideration. Ad hoc representatives may bring before the Operating Committee license
applications relating to their special interests or expertise. The recommendations of the Operating Committee are supposed to
be based on the policies and guidelines set down by the higher level interdepartmental committees. 66
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 8
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
When unanimity is not reached in the Operating Committee-whether on specific license applications or on general
policy matters-the subject is pushed up to the Advisory Committee on Export Policy, which consists of interdepartmental
representatives at the Assistant Secretary level and which is chaired by the Assistant Secretary of Commerce for Domestic and
International Affairs. 67 Presumably because of disagreements within the Advisory Committee, or dissatisfaction with some
of its decisions, or both, President Kennedy in 1961 established a still higher committee, the Export Control Review Board,
consisting of the Secretaries of Defense, State, and Commerce, and chaired by the latter, to assure the highest level consideration
of trade control policies and actions and to obtain, as far as possible, agreed action among the departments chiefly concerned
with advising the Secretary of Commerce in accordance with section 4(a) of the Export Control Act.68 The Export Control
Review Board is, of course, subject to major policy decisions established on the cabinet level or by the President himself.
Thus section 4(a) of the Act, which provides that the department, agency, or official in charge of export controls "shall seek
information and advice" from other departments and agencies, has served as a basis for integrating the work of the Office of
Export Control with that of governmental bodies other than the Department of Commerce. Indeed, it is sometimes said that
the Office of Export Control could be shifted from Commerce to State, or even to Treasury, without substantially affecting its
operations. Yet there are sound technical and policy reasons for continuing export controls in the Department of Commerce, since
this ensures that at higher levels above the Office of Export Control there will be officials who are involved in the promotion, and
not merely the restriction, of exports. In addition, the Office of Export Control must have access to the expertise of Commerce
Department desk officers for each basic commodity (copper, steel, sugar, etc.), who are also concerned with the promotion of
exports.69
*808 The work of the Office of Export Control and of its superior interdepartmental committees is made still more complex
by the necessity of relating controls under the Export Control Act to export controls under two other pieces of legislation: the
Mutual Security Act of 1954,70 which created an office of Munitions Control in the Department of State, and the Trading With
the Enemy Act of 1917,71 pursuant to which the Treasury Department in 1950 created an Office of Foreign Assets Control.
The regulations and controls administered by these two offices are intimately-though in quite different ways-connected with
controls under the Export Control Act.
The State Department's Office of Munitions Control, in administering the United States Munitions Fist, licenses the export and
import of arms, ammunition, and implements of war, and also technical data relating thereto, as well as classified technical
data.72 However, items on the Munitions List sometimes overlap with items on the Commodity Control List73 administered
by the Office of Export Control. For example, while the Office of Export Control regulates the shipment of wooden gun stock
blanks, the Office of Munitions Control licenses the export of all firearms and firearms silencers. And while the Commodity
Control List includes sidearms, not elsewhere classified, and parts, export authorization is required from the Department of State
for bayonets and parts. So too, parts and components for ammunition fall within the licensing jurisdiction of the Office of Export
Control but cartridge cases, powder bags, and shells fall within the licensing jurisdiction of the Office of Munitions Control.
The Treasury Department's Office of Foreign Assets Control licenses (1) commercial transactions by United States persons
or firms (including foreign affiliates or subsidiaries of United States persons or firms) with the government or nationals of
Communist China, North Korea, North Vietnam, 7 4 *809 and Cuba, 75 and (2) exports of strategic materials by foreign affiliates
or subsidiaries or United States persons or firms to the Soviet Union and all the countries of Eastern Europe ( excluding
Yugoslavia). 76 To the extent that these regulations overlap Commerce Department controls over exports from the United States,
the Office of Foreign Assets Control has created a general license under which exports to Communist China, North Vietnam,
North Korea, and Cuba which have been licensed by the Office of Export Control are automatically licensed by the Office of
Foreign Assets Control.77 However, if an export is made to some other country under authority of a Commerce Department
license, and it is thereafter desired to re-export the goods to one of the four designated countries, the general license exemption
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 9
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
does not apply and a specific Treasury Department license is required.78 For all practical purposes, then, the Treasury's export
control authority is restricted to exports made by foreign subsidiaries or affiliates of United States firms.
Until April 1, 1964, the Foreign Assets Control Regulations and the Transaction Control Regulations of the Office of Foreign
Assets Control were applicable to patent and know-how licensing agreements with foreign firms. On that date control of exports
of technical data from the United States (but not of exports of technical data by foreign subsidiaries of United States firms) was
transferred to the Department of Commerce. As a result of this change, the Treasury exercises no control over patent or technical
data licensing agreements entered into by United States firms on or after April 1, 1964, but pre-April 1 agreements are still
subject to the previous Treasury restrictions unless the agreement has been brought under the new Commerce Regulations by
the voluntary execution on the part of the foreign licensee of a new (Commerce) undertaking in substitution for the pre-existing
(Treasury) undertaking.79 However, these changes in the field of technical data in *810 no way alter Treasury's controls
affecting foreign firms which are subsidiaries of, or are otherwise controlled by, Americans. 80
If the tasks of the Office of Export Control are made more complex by the necessity of relating its functions to those of the
Office of Munitions Control and the Office of Foreign Assets Control,81 the real burden of these overlapping controls must
nevertheless fall on the United States exporter. Although the rules and regulations promulgated by these several agencies have
been coordinated to a considerable degree, nevertheless the businessman or lawyer who seeks to comprehend the relation
between one set ofregulations and another is sometimes confronted with gaps and ambiguities. For example, there are situations
in which an exporter would have very great difficulty in determining whether a proposed exportation of technical data falls under
State, Commerce, or Treasury controls---each of which apply different criteria and impose different sanctions for violations.
Further, the Office of Munitions Control, the Office of Foreign Assets Control, and the Office of Export Control carry on a
measure of secret interdepartmental consultation which may work to the disadvantage of the would-be exporter. For example,
wholly apart from the published "black list" of the Office of Export Control, 82 the Departments of State, Treasury, and
Commerce collectively maintain a confidential list of importing firms in friendly foreign countries, known as the "Economic
Defense List" or "gray list"; the listing of a firm in this document means that there is some question about the propriety of
granting a license in any transaction in which the listed firm might be involved, presumably because it has engaged in illicit
transactions with Communist countries. It appears that the list is made up by an inter-agency committee; however, the committee
as a whole does not make any collective decision as to whether a particular firm should be listed, but instead lists firms at the
request of any one of the member agencies. Even if one could determine that a particular firm is on the list-perhaps through the
inadvertence of a government official-there may be no forum in which to seek redress since there is no way of knowing which
agency or department was responsible for putting the particular firm on the *811 list. In most cases, any of the agencies would
presumably be willing to undertake a review of a listing action, alone or in concert with other interested agencies. Nevertheless,
if the "gray list" were the exclusive preserve of the Office of Export Control, for example, there might be greater possibilities
for remedial action, as well as more likelihood of a uniform standard for listing.
Finally, in analyzing the administrative structure of export controls, mention must be made of the Mutual Defense Assistance
Control Act of 1951, 83 commonly called the Battle Act, which is designed in part to secure the cooperation of friendly foreign
nations in the maintenance of a multilateral embargo on strategic exports to Communist countries. The Battle Act Administrator,
appointed within the State Department, 84 proclaims an internationally agreed upon list of embargoed items and in addition draws
up a secret list of items of"lesser strategic significance," export of which to Communist countries is unilaterally prohibited by
the United States. 85 Licensing of exports of Battle Act items is vested chiefly in the Office of Export Control. 86 Since the Battle
Act Administrator does not himself license exports, no additional overlapping of administrative controls is involved.
Although the Office of Export Control could conceivably be crushed by the weight of its superior committees and by the
overlapping controls of other departments, it has in fact developed a high degree of autonomy and maintains a fairly smooth
operation. It has been estimated that about 12% of the total volume of United States export shipments (some $3 billion annually)
moves out under specific (i.e., "validated") licenses.87 In 1966, fewer than 270 employees were processing more than 3,000
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 10
Annex 304
UNITED STATES EXPORT CONTROLS-PAST, PRESENT, ... , 67 Colum. L. Rev. 791
license applications each week, 88 and over 90% of all applications were being processed within 5 days of receipt, and 98%
within 10 days. 89 The Office of Export Control is staffed with highly experienced personnel, most of whom have been with the
Office for ten to fifteen years. They have evolved a sophisticated and effective licensing system, certainly more responsive to
the needs of the business community than the controls administered by the Departments of State and Treasury.
The self-restraint and the expertise of American exporters also contribute *812 to the overall efficiency of export licensing,
and these qualities are encouraged by the educational activities of the Office of Export Control. In accordance with section 4(b)
of the Export Control Act,90 which provides for representative trade consultation, the Office of Export Control has followed
the practice of its predecessor agencies in organizing commodity advisory panels to give advice and make recommendations
on export licensing policies and procedures affecting various parts of the export trade. Members of panels or committees are
selected by the Office of Export Control: the committees are "formed of the minimum number of persons necessary to represent
a fair cross-section of the trade" in a given commodity or group of commodities.91 The meetings are called and conducted by
officials of the Office of Export Control but a meeting of a panel or committee may be proposed by any three of its members. 92
Meetings are called prior to the promulgation of new licensing policies or procedures "except where the necessary timing or
other public exigency does not permit such prior consultation."93 Unfortunately, however, a "public exigency" often precludes
prior consultation,94 and in fact the commodity advisory panels are not used nearly as much as the length of the regulations
relating thereto might suggest. The Office of Export Control does, however, consult frequently with various other representative
exporter groups.
Perhaps the chief reason, however, for the relative smoothness of export licensing is that exporters generally have become
attuned to the harshness of licensing standards and have developed some skill at predicting the course of export applications.
During the calendar year 1965, the total value of all exports to the USSR and Eastern Europe for which licenses were sought
amounted to only $150.1 million; 951 /2% (in value) of these license applications were approved-amounting to less than $143.4
million.95 This fact suggests that exporters do not submit license applications unless they are reasonably confident that the
licenses will be approved. It also indicates that the actual operation of export controls is in the hands of a fairly independent body
of experienced bureaucrats who are able to exert a very strong influence on the volume and direction of exports through their
relations with potential exporters. By the same token, however, the Office of Export Control may be to some extent insulated,
both by its independence and by its contact with *813 the exporting community, from shifts in policy at the higher levels
of Government.
III. The Export Regulations96
To implement the broad political, economic, and strategic objectives of the Export Control Act, as it has been interpreted by the
complex interagency structure established to supervise its administration, the Office of Export Control has created a veritable
labyrinth of regulations concerning what may be exported to what countries under what conditions and by what procedures.
A. General and Validated Licenses
The enormous complexity of the regulations is due to several factors, the first of which is that the United States exerts a
substantially greater degree of. control over exports to Communist countries than that exercised by any other government. As
a result, the United States must guard against the possibility that goods or technical data permitted to be shipped to "friendly"
countries may be transshipped from those countries to "unfriendly" (or less friendly) countries. As long as it is forbidden to
ship even chewing gum to Communist China, or Cuba, some care must be taken to see that chewing gum exported to England
or Switzerland will not be diverted from those countries to Peking or Havana. Even more care must be taken if the product is
not chewing gum but machinery, and it is to be prevented from going not only to China or Cuba but also to Eastern Europe or
WESTLAW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 11
Annex 304
Volume II - Annexes 279-304