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 VI
Annexes 370 through 385
ANNEX 370
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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------x
IN RE TERRORIST ATTACKS ON
SEPTEMBER 11, 2001
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FIONA HA VLISH, in her own right
and as Executrix of the ESTATE OF
DONALD G. HA VLISH, JR., Deceased,
RUSSA STEINER, in her own right
and as Executrix of the ESTATE OF
WILLIAM R. STEINER, Deceased,
CLARA CHIRCHIRILLO, in her own right
and as Executrix of the ESTATE OF
PETER CHIRCHIRILLO, Deceased,
TARA BANE, in her own right,
and as Executrix of the ESTATE OF
MICHAEL A. BANE, Deceased,
GRACE M. PARKINSON-GODSHALK, in her
own right and as Executrix of the ESTATE OF
WILLIAM R. GODSHALK, Deceased,
ELLEN L. SARACINI, in her own right
and as Executrix of the ESTATE OF
VICTOR J. SARACINI, Deceased,
THERESANN LOSTRANGIO, in her own right
and as Executrix of the ESTATE OF
JOSEPH LOSTRANGIO, Deceased, et al.,
Plaintiffs,
V.
SHEIKH USAMAH BIN-MUHAMMAD
BIN-LADEN, a.k.a. OSAMA BIN-LADEN,
AL-QAEDA/ISLAMIC ARMY,
an unincorporated association, et al.,
CIVIL ACTION NO.
03 MDL 1570 (GBD)
CIVIL ACTION NO.
03-CV-9848 - GBD
Case Transferred from the
United States District Court
for the District of Columbia
Case Number 1 :02CV00305
PLAINTIFFS' PROPOSED
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
WITH RESPECT TO
DAMAGES
Annex 370
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FOREIGN STATE DEFENDANTS:
THE ISLAMIC REPUBLIC OF IRAN,
AYATOLLAH ALI-HOSEIN! KHAMENEI,
ALI AKBAR HASHEM! RAFSANJANI,
IRANIAN MINISTRY OF
INFORMATION AND SECURITY,
THE ISLAMIC REVOLUTIONARY
GUARD CORPS,
HEZBOLLAH,
an unincorporated association,
THE IRANIAN MINISTRY
OF PETROLEUM,
THE NATIONAL IRANIAN
TANKER CORPORATION,
THE NATIONAL IRANIAN
OIL CORPORATION,
THE NATIONAL IRANIAN
GAS COMPANY,
IRAN AIRLINES,
THE NATIONAL IRANIAN
PETROCHEMICAL COMPANY,
IRANIAN MINISTRY OF
ECONOMIC AFFAIRS AND FINANCE,
IRANIAN MINISTRY OF
COMMERCE,
IRANIAN MINISTRY OF DEFENSE
AND ARMED FORCES LOGISTICS,
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THE CENTRAL BANK OF THE
ISLAMIC REPUBLIC OF IRAN, et al.,
Defendants.
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TABLE OF CONTENTS
I. PLAINTIFFS' PROPOSED FINDINGS OFF ACT
a. PROPOSEDFINDINGSOFFACTREGARDINGCLAIMANTS ..................... ,r 1 To,r 182
b. PROPOSED FINDINGS OF FACT REGARDING EXPERT REPORTS ...... ..... ,r 183 TO ,r 231
II. PLAINTIFFS' PROPOSED CONCLUSIONS OF LAW
a. DAMAGES AVAILABLE UNDER FSIA .................................... ... ,r 232 TO ,r 239
b. DAMAGE AWARDS TO DECEDENTS' ESTATES .......................... .... ,r 240 TO ,r 290
c. DAMAGE AWARDS TO INDIVIDUAL CLAIMANTS ....................... .... ,r 291 TO ,r 301
d. PUNITIVE DAMAGE AWARDS TO PLAINTIFFS ........................... ... ,r 302 TO ,r 314
PLAINTIFFS' PROPOSED FINDINGS OF FACT AND
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CONCLUSIONS OF LAW WITH RESPECT TO DAMAGES
AND NOW, with liability against all Defendants having been established by the entry of
Plaintiffs' Findings of Fact and Conclusions of Law on December 22, 2011, Plaintiffs now come
to hereby respectfully submit Plaintiffs' Proposed Findings of Fact and Conclusions of Law with
Respect to Damages.
A. PROPOSED FINDINGS OF FACT
The Claimants
a) Claims Involving Decedents' Estates and Their Families
1. Plaintiff Fiona Havlish is a resident of the Commonwealth of Pennsylvania and is the
surviving spouse of Donald G. Havlish, Jr., a decedent who was killed as a result of a
terrorist attacks on the World Trade Center Towers in New York City on September 11,
2001.1 Donald G. Havlish, Jr. was employed by AON, Inc. and worked on the 101 st
floor of the South Tower of the World Trade Center, Two World Trade Center, New
York, New York. Plaintiff Fiona Havlish has been appointed the Executrix of the Estate
of Donald G. Havlish, Jr. Fiona Havlish, under §1605(a) of the Foreign Sovereign
Immunities Act, brings a survival action in her capacity as the Executrix of the Estate.
See Folder 1, provided via CD, for photos of the Decedent. See also Third Amended
Complaint, ,r,r 4-6
2. Plaintiff Fiona Havlish also makes a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Donald
G. Havlish on September 11, 2001. It was not until April 4, 2002, that Plaintiff Fiona
1 With the exception of Ms. Havlish, who is listed as the lead Plaintiff in this case, the remaining
Plaintiffs who represent the Estates of a Decedent have been listed in alphabetical order for
organizational purposes.
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Havlish received definitive confirmation that her husband was killed as a result of the
terrorist attacks perpetrated by Defendants on September 11, 2001. On that day, the
Federal Bureau of Investigation, the local police chief, and the family's minister arrived
at the home of Plaintiff Fiona Havlish to inform her that a small part of Decedent
Donald G. Havlish, Jr.'s body had been found and identified via DNA testing. In the
context of the horrific suffering experienced by thousands of families as a result of the
9/11 attacks, Plaintiff Fiona Havlish grimly refers to herself as one of the "lucky ones"
because at least some small portion of Decedent Donald G. Havlish, Jr. was found and
identified. "On September 12, 2001," Fiona Havlish writes, "[our 3 year old daughter]
Michaela woke up and looked at me with a smile and said "Where is Daddy?" I took a
deep breath and the tears began. I held her and told her that daddy was in heaven and
was one of her guardian angels now." See Folder 2, provided via CD. See also Third
Amended Complaint, ,r,r 4-6; 375-421; Declaration of Fiona Havlish ,r 6, 9.
3. Decedent Donald G. Havlish, Jr. is also survived by his father, Donald Havlish, Sr.,
who is a resident of the State of South Carolina. Plaintiff Donald Havlish, Sr. makes a
claim for wrongful death and other causes of action against all Defendants as a result of
the murder of Donald G. Havlish, Jr. on September 11, 2001. "I miss my son very
much," Donald Havlish, Sr. writes in his Declaration. "I am sorry that I do not have the
fellowship with him that I looked forward to, particularly in my later years. Each Sunday,
at Church, I visit the columbarium where Don's ashes, those from the World Trade
Center, are buried. I say a prayer for both Don and his mother. To this day I still mourn
his absence." See Folder 3, provided via CD. See also Third Amended Complaint, ,r 69;
,r,r 375-421; Declaration of Donald Havlish, Sr. ,r 11.
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4. Decedent Donald G. Havlish, Jr. is also survived by his brother, William Havlish, who
is a resident of the State of Georgia. Plaintiff William Havlish makes a claim for
wrongful death and other causes of action against all Defendants as a result of the murder
of Donald G. Havlish on September 11, 2001. "All of the media frenzy did not allow
me to go through the normal process of grieving," William Havlish writes in his
Declaration. "When my mother had died of cancer, for instance, I had dealt with it much
better and was able to put it behind me. Don's death is different because it is brought up
year after year, again and again. It does not help the grieving process." See Folder 4,
provided via CD. See also Third Amended Complaint, ,-i 69; ,-i,-i 375-421; Declaration of
William Havlish ,-r 7.
5. Decedent Donald G. Havlish, Jr. is also survived by his sister, Susan Conklin, who is a
resident of the State of Georgia. Plaintiff Susan Conklin makes a claim for wrongful
death and other causes of action against all Defendants as a result of the murder of
Donald G. Havlish on September 11, 2001. "I gained at least 100 pounds [following the
death of Donald G. Havlish]," Susan Conklin writes in her Declaration. "Don's death
was a horrible experience for me and my family. Our family gatherings and holidays
have all changed. When you lose people, those family ties are never the same afterward.
Don's death has been a devastating thing for his daughter and the rest of the family." See
Folder 5, provided via CD. See also Third Amended Complaint, ,-r 69; ,-r,-r 375-421. See
also Declaration of Susan Conklin , 10, 11.
6. Plaintiff Tara Bane is a resident of the Commonwealth of Pennsylvania and is the
surviving spouse of Michael A. Bane, a decedent who was killed as a result of a terrorist
attacks on the World Trade Center Towers in New York City on September 11, 2001.
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Michael A. Bane was employed by Marsh & McLennan Company on the 100th floor of
the North Tower of the World Trade Center, One World Trade Center, New York, New
Yark. Plaintiff Tara Bane has been appointed the Executrix of the Estate of Michael
A. Bane. Tara Bane, under §1605(a) of the Foreign Sovereign Immunities Act, brings a
survival action against all Defendants in her capacity of the Executrix of the Estate. See
Folder 6, provided via CD, for materials from Michael A. Bane's Memorial Service and
photographs. See also Third Amended Complaint, ,r,r 13-14; 375-421.
7. Plaintiff Tara Bane also makes a claim in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Michael A.
Bane on September 11, 2001. The body of Decedent Michael A. Bane, a former high
school drop-out who eventually earned a college degree before being named an Assistant
Vice President at Marsh & McLennan Company, has never been recovered. "I never did
get a call from Michael that day," writes Tara Bane in her Declaration. "I later spoke
with his co-worker's wife who received a call from her husband, but all she could hear
were screams. He called her several times but did not speak. All she heard were the
screams of others. What is clear to me is that Michael most definitely suffered greatly. I
don't know for how long, but I do know that no human being should have had to endure
what my husband had to endure. I believe that the intense fear and panic I felt was
nothing compared to what he experienced in his last minutes, or his last hours, of his
life." See Folder 7, provided via CD. See also Third Amended Complaint, ,r,r 13-14;
375-421; Declaration of Tara Bane (now Tara Bane DellaCorte), ,r 10; Declaration of
Christina Bane-Hayes ,r 23. See also proprietary materials of Marsh & McLennan
Company filed under seal via CD.
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8. Decedent Michael A. Bane is also survived by his father, Donald Bane, who is a
resident of the State of New York. Plaintiff Donald Bane makes a claim for wrongful
death and other causes of action against all Defendants as a result of the murder of
Michael A. Bane on September 11, 2001. Of his son, Donald Bane writes, "Michael
and I had established a very good and loving adult relationship, communicating on a
mature level. He would have been a dependable and trustworthy son throughout our
lives. His loss is also great to his siblings. He made a remarkable adaptation to life in
spite of his early handicaps, completing his education, finding good employment, and
succeeding in his field to the position of Assistant Vice-President at Marsh & McLennan.
His violent departure from this life had has a terrible and profound effect on this family.
We are still devastated." See Folder 8, provided via CD. See also Third Amended
Complaint,~ 67; ~~ 375-421; Declaration of Jack Donald Bane, 18.
9. Decedent Michael A. Bane is also survived by his sister, Christina Bane-Hayes, who is
a resident of the Commonwealth of Virginia. Plaintiff Christina Bane-Hayes, under
§1605(a) of the Foreign Sovereign Immunities Act, makes a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Michael
A. Bane on September 11, 2001. Christina Bane-Hayes writes of her brother, "I have
Michael's Stony Brook sweatshirt. When I wear it I feel safe, as though he has his arms
wrapped around me, holding on to me for dear life. To take it off is a sorrowful feeling,
letting go of him again. And yet feeling him near me is worth the angst." See Folder 9,
provided via CD. See also Third Amended Complaint,~~ 66; 375-421; Declaration of
Christina Bane-Hayes~ 36.
10. Plaintiff Krystyna Boryczewski is a resident of the State of New Jersey and is the
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surviving natural mother of Martin Boryczewski, a decedent who was killed as a result
of the terrorist attacks on the World Trade Center Towers in New Yark City on
September 11, 2001. Martin Boryczewski worked on the 104th Floor of the North
Tower of the World Trade Center, One World Trade Center. Plaintiff Krystyna
Boryczewski has been appointed as the Executrix of the Estate of Martin Boryczewski.
Krystyna Boryczewski, under §1605(a) of the Foreign Sovereign Immunities Act, brings
a survival action against all Defendants in her capacity as the Executrix of the Estate.
See Folder 10, provided via CD, for a photo of the Decedent in his minor league baseball
uniform. See also Third Amended Complaint, ,-i,-i 103-105; 375-421.
11. Plaintiff Krystyna Boryczewski also makes a claim in her own right for wrongful death
and asserts other causes of action against all Defendants as a result of the murder of
Martin Boryczewski on September 11, 2001. Neither the body nor any personal effects
of Decedent Martin Boryczewski were ever recovered from Ground Zero. A Certificate
of Death was issued by The City of New York on October 20, 2001. The cause of death
is listed as homicide. "Holidays have not been the same for me and my family,"
Krystyna Boryczewski writes in her Declaration. "[The holidays] are extremely trying
and difficult. I don't like them, but when the family gets together I try to make the best
of it. I haven't had a Christmas tree since 2001 and I don't know ifl will ever have a tree
again. The pain I feel over the loss of my son Marty has not lessened in the years since
9/11. The hole that has been left in my heart as a result of my son Marty has not shrunk
one iota." See Folder 11, provided via CD. See also Third Amended Complaint, ,-i,-i 103-
105; 375-421; Declaration of Krystyna Boryczewski ,-r 13, 14.
12. Decedent Martin Boryczewski was also survived by his father, Michael Boryczewski,
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who was a resident of the State of New Jersey. Plaintiff Michael Boryczewski made a
claim for wrongful death and asserted other causes of action against all Defendants as a
result of the murder of Martin Boryczewski on September 11, 2001. Michael
Boryczewski has since expired and an award will be made to the Estate of Michael
Boryczewski. While alive, Plaintiff Michael Boryczewski composed a statement
regarding the loss of his son on September 11, 2001. It reads, in part, "I came to America
for a better life for my Family and myself. In my wildest nightmare, I never would have
imagined the fate of my only Son in the land of liberty and justice. After what I have
endured in my life,2 the fate of my only Son is physically, mentally, emotionally
devastating and horrific. If I could give my life for my Son, I would, so that He may
have the opportunity to live a beautiful, full life. I love Him, I miss Him, and I will
forever." See Folder 12, provided via CD. See also Third Amended Complaint, ,-i,-i 103-
105; 375-421; My Son, Martin Boryczewski by His Father, Michael Boryczewski.3
13. Decedent Martin Boryczewski is also survived by his sister, Julia Boryczewski, a
resident of the State of New Jersey. Plaintiff Julia Boryczewski makes a claim for
wrongful death and asserts other causes of action against all Defendants as a result of the
murder of Martin Boryczewski on September 11, 2001. Julia Boryczewski writes of
her experience, "Marty never came home. And, we never got anything of him back.
Nothing. Not any personal effects. Not a piece of him. How sick is it that you now talk
about pieces of human being identified as a good thing? Family members were
2 Mr. Boryczewski was interred in German labor camps during World War II and was hospitalized for 8
months for malnutrition after being liberated by American forces.
3 Plaintiff Michael Boryczewski expired during the pendency of this lawsuit. Any award will be made
to the Estate of Michael Boryczewski. A Suggestion of Death will be filed contemporaneously with
this document.
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encouraged when any remains of their loved one were found. It's so sick and twisted.
But that's what a post-September 11th world looks like." See Folder 13, provided via
CD. See also Third Amended Complaint, ,r,r 106; 375-421; Declaration of Julia
Boryczewski, ,r 4.
14. Decedent Martin Boryczewski is also survived by his sister, Michele Boryczewski, a
resident of the State of New Jersey. Plaintiff Michele Boryczewski makes a claim for
wrongful death and asserts other causes of action against all Defendants as a result of the
murder of Martin Boryczewski on September 11, 2001. Of the horror of the attacks of
September 11, 2001, Michele Boryczewski writes, "Although no one had spoken directly
to Marty after the attacks, I did speak to a gentleman at one of Cantor Fitzgerald's offices
that was located in another state. I don't remember his name or where his office was
located. I do know that I spoke to him prior to the North Tower collapse. He was
hysterical. He had been on a conference call with the NYC Cantor office at the time it
was hit by the plane. I asked him ifhe knew anything about how the people in the NYC
office were or what was happening there. He was crying hysterically and said that the
man he had been on the phone with at the time of and immediately after the attack was
screaming in agony, screaming that his skin was melting off his body. After hearing this,
I dropped the phone. I don't know who was on the phone from my brother's office, but I
do know it was someone on my brother's floor and someone on my brother's team.
Perhaps it was my brother, for his team was small, comprised of only 6 people. I will
never know. I do know that my brother and the rest of his team endured horrible pain
and suffering." See Folder 14, provided via CD. See also Third Amended Complaint, ,r,r
106; 375-421; Declaration of Michele Boryczewski, ,r 6.
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15. Plaintiff Richard A. Caproni and is a resident of the State of Maryland and is the
surviving father of Richard M. Caproni, a decedent who was killed as a result of the
terrorist attacks on the World Trade Center Towers in New York City on September 11,
2001. Richard M. Caproni was employed by Marsh & McLennan Company and
worked on the 98th Floor of the North Tower of the World Trade Center, One World
Trade Center, New York, New York. Plaintiff Richard A. Caproni has been appointed
as the Administrator of the Estate of Richard M. Caproni. Richard A. Caproni, Sr.,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a survival action against
all Defendants in his capacity as the Administrator of the Estate. See Folder 15, provided
via CD, for family photos and a Newsday article. See also Third Amended Complaint, ,-r,-r
147-149; 375-421.
16. Richard A. Caproni also brings a claim in his own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Richard M.
Caproni on September 11, 2001. Decedent Richard M. Caproni went to work early on
the morning of September 11, 2001, with his close friend Mike Harmon in order to catch
up on paperwork. Plaintiff Lisa Caproni-Brown was informed eight days following the
attacks perpetrated by Defendants that Decedent Richard M. Caproni was engaged in a
telephone conversation with a colleague in Chicago, IL at the time American Airlines
Flight 11 struck the North Tower. A Certificate of Death was issued by The City of New
York for Decedent Richard M. Caproni on October 11, 2001. The cause of death was
listed as homicide. An intact body was never recovered and the decedent was eventually
identified only through DNA testing a year following the attacks. The remains of
Decedent Richard M. Caproni were finally laid to rest in April 2005. Richard A.
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Caproni writes in his Declaration that, "My beautiful son was exploded all over lower
Manhattan. How could somebody do this to an innocent human being? I pray that no
other family will endure what we have had to endure since 9/11. We lost something
precious, a life that can never be replaced." See Folder 16, provided via CD. See also
Third Amended Complaint, ,r,r 147-149; 375-421; Declaration of Richard Caproni ,r,r 7,
10; Declaration of Dolores Caproni ,r,r 7-8; Declaration of Lisa Caproni-Brown, ,r 8.
17. Decedent Richard M. Caproni is also survived by his natural mother, Dolores Caproni,
who is a resident of the State of Maryland. Plaintiff Dolores Caproni brings a claim for
wrongful death and asserts other causes of action against all Defendants as a result of the
murder of Richard M. Caproni on September 11, 2001. Plaintiff Dolores Caproni
writes in her Declaration that, "[Richard] was only 34 years old. He had dreams and
ambitions. He will never have the wonderful feeling of getting married, becoming a
father, and being an uncle to his sisters' and brothers' children. This has affected my
whole life. I'm not the person I was." See Folder 17, provided via CD. See also Third
Amended Complaint, ,r,r 147-149; 375-421; Declaration of Dolores Caproni, ,r 8.
18. Decedent Richard M. Caproni is also survived by his brother, Christopher Caproni,
who is a resident of the State of Maryland. Plaintiff Christopher Caproni, under
§1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Richard
M. Caproni on September 11, 2001. Christopher Caproni had a clear view of the Twin
Towers through a window in his office building on that day. He personally saw the
North Tower, the building where Decedent Richard M. Caproni was employed, burning
after being deliberately struck by American Airlines Flight 11 following the hijacking
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effectuated by, or enabled by, Defendants. Christopher Caproni also personally
witnessed United Flight Airlines 175 slam into the South Tower following the hijacking
effectuated by, or enabled by, Defendants. Christopher Caproni's apartment was only
blocks from Ground Zero. Not only was he without access to his apartment for two
weeks, but he was forced to view the site where his brother had died every day after he
was permitted back into his apartment. See Folder 18, provided via CD. See also Third
Amended Complaint, ,r 150; ,r,r 375-421; Declaration of Christopher Caproni ,r,r 14, 20.
19. Decedent Richard M. Caproni is also survived by his brother, Michael Caproni, who is
a resident of the State of New York. Plaintiff Michael Caproni, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Richard M. Caproni
on September 11, 2001. Michael Caproni writes in his Declaration that, "To assess the
actual damage that my brother's loss has taken on our family is impossible. It is many
years later and I still have trouble sleeping. During the week of September 11 t\ I have
trouble speaking to people. I am constantly reminded of my brother's death and there are
times that I feel he will never rest in peace. I try to remember what a great person Rich
was and how influential he was in my life, but it is constantly overshadowed by the way
he died." See Folder 19, provided via CD. See also Third Amended Complaint, ,r 150; ,r,r
375-421; Declaration of Michael Caproni, ,r 8.
20. Decedent Richard M. Caproni is also survived by his sister, Lisa Caproni-Brown, a
resident of the State of New York. Plaintiff Lisa Caproni-Brown, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Richard A. Caproni
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on September 11, 2001. On December 15, 2011, Plaintiff Lisa Caproni-Brown wrote,
"We went to the World Trade Ceremony for seven years. It is like attending the same
funeral every year. No holiday or birthday or day will ever be the same. Words can't
really describe the toll this has taken on our family. It is important for people to be held
accountable for the enormous amount of pain that they have caused." See Folder 20,
provided via CD. See also Third Amended Complaint, ,r 150; ,r,r 375-421; Declaration of
Lisa Caproni-Brown, ,r,r 10-11.
21. Plaintiff Clara Chirchirillo is a resident of the Commonwealth of Pennsylvania and is
the surviving spouse of Peter Chirchirillo, a decedent who was killed as a result of a
terrorist attack on the World Trade Center Towers in New York City on September 11,
2001. Peter Chirchirillo was employed by Marsh, Inc. on the 98th floor of the North
Tower in the World Trade Center, One World Trade Center, New York, New York.
Plaintiff Clara Chirchirillo has been appointed the Executrix of the Estate of Peter
Chirchirillo. Clara Chirchirillo, under §1605(a) of the Foreign Sovereign Immunities
Act, brings a survival action against all Defendants in her capacity as the Executrix of the
Estate. See Folder 21, provided via CD for media and memorabilia related to Peter
Chirchirillo. See also Third Amended Complaint, ,r,r 10-12; 375-421.
22. Plaintiff Clara Chirchirillo also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Peter
Chirchirillo on September 11, 2001. Clara Chirchirillo wrote on January 12, 2012, that,
"To date, I have received Peter's remains on two separate occasions. Were it not for the
descriptions that accompanied the remains of my deceased husband, no one, not even my
family, would be able to recognize them. The two discoveries were years apart, opening
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up wounds once again that I thought were healed. With each find, and with each new
discovery of his remains, and with each newly revised death certificate, I revisit and
relive the most painful time in my life." See Folder 22, provided via CD. See also Third
Amended Complaint, ,r,r 10-12; 375-421; Declaration of Clara Chirchirillo, ,r 17.
23. Decedent Peter Chirchirillo is also survived by his sister, Livia Chirchirillo. Plaintiff
Livia Chirchirillo, under §1605(a) of the Foreign Sovereign Immunities Act, brings a
claim for wrongful death and asserts other causes of action against all Defendants as a
result of the murder of Peter Chirchirillo on September 11, 2001. Plaintiff Livia
Chirchirillo, who was working eight blocks from the World Trade Center Complex at
the time of the terrorist attacks, personally heard and witnessed American Airlines Flight
11 flying low overhead and its crash into the North Tower where her brother, Decedent
Peter Chirchirillo, was working. She tried reaching him on his office phone upon
arriving in her office but was unable. As she was leaving her office to rush to the World
Trade Center Complex to find her brother, the elevator in which she was a passenger
shook from the impact of United Airlines Flight 175 striking the South Tower. See Folder
23, provided via CD. See also Third Amended Complaint, ,r 12; ,r,r 375-421; Declaration
of Livia Chirchirillo, ,r 4.
24. Decedent Peter Chirchirillo is also survived by his sister, Catherine Deblieck. Plaintiff
Catherine Deblieck, under §1605(a) of the Foreign Sovereign Immunities Act, brings a
claim for wrongful death and asserts other causes of action against all Defendants as a
result of the murder of Peter Chirchirillo on September 11, 2001. On January 29, 2012,
Plaintiff Catherine Deblieck wrote of the attacks, "Peter was a victim. We are all
victims because his murder has affected my whole family." See Folder 24, provided via
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CD. See also Third Amended Complaint, ,-r 12; ,-r,-r 375-421; Declaration of Catherine
Deblieck, ,-r 19.
25. Plaintiff William Coale is a resident of the Commonwealth of Pennsylvania and is the
surviving father of Jeffrey Alan Coale, a citizen of the Commonwealth of Pennsylvania
and a decedent who was killed as a result of a terrorist attack on the World Trade Center
Towers in New York City on September 11, 2001. Jeffrey Alan Coale was employed as
the Assistant Wine Steward at the Windows on the World restaurant, located on the 106th
floor of the North Tower, One World Trade Center, New York, New York. Plaintiff
William Coale has been appointed the Administrator of the Estate of Jeffrey Alan
Coale. William Coale, under §1605(a) of the Foreign Sovereign Immunities Act, brings
a survival action against all Defendants in his capacity as the Administrator of the Estate.
See Folder 25, provided via CD, for photos and memorial service materials for Jeffrey
Alan Coale. See also Third Amended Complaint, ,-r,-r 31-33; 375-421.
26. Plaintiff William Coale also brings claims in his own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Jeffrey
Alan Coale on September 11, 2001. Decedent Jeffrey Alan Coale left the financial
world at Cantor Fitzgerald in order to work toward his dream of opening his own
restaurant. He was originally scheduled off for September 11, 2001, but came to work
because the restaurant was hosting a breakfast. On January 20, 2012, Plaintiff William
Coale wrote, "Jeffrey was only 31 when he was murdered. He had a full working life
ahead ofhim ... [a]t the time of his death he had not only a business plan but investors
committed in order to [attain] his goal. I am sure he would have owned a successful
restaurant, but that is an unknown, so we all go forward as Jeff would have wanted us to,
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thanking God for the special gift he gave us on 7/17/70 and took back on 9/11/01." See
Folder 26, provided via CD. See also Third Amended Complaint, ,r,r 31-33; 375-421;
Declaration of William Coale, ,r 8.
27. Plaintiff Frances Coffey is a resident of the State of New York and is the surviving
spouse of Daniel M. Coffey, a decedent who was killed as a result of the terrorist attack
on the World Trade Center Towers in New York City on September 11, 2001. Daniel M.
Coffey worked on the 94th Floor of the North Tower of the World Trade Center, One
World Trade Center, New York, New York. Plaintiff Frances M. Coffey has been
appointed as the Executrix of the Estate of Daniel M. Coffey. Frances M. Coffey,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a survival action against
all Defendants in her capacity as the Executrix of the Estate. See Third Amended
Complaint, ,r,r 133-135; 375-421.
28. Plaintiff Frances M. Coffey also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Daniel
M. Coffey on September 11, 2001. Decedent Daniel M. Coffey had survived the attack
on the World Trade Center in 1993. On September 11, 2001, Plaintiff Frances M.
Coffey lost both her husband and a son. "The constant media attention is also very
painful to bear," Frances M. Coffey writes in her Declaration. "We are constantly
bombarded by reporters, even now ten years later. Every year, on the anniversary, we
hear from them. It makes it very difficult to grieve, to be constantly reminded of what
happened. On one hand, I understand them. They are curious, and they want a 'story.'
But, they do not understand that we are real people and that our pain and suffering is not
a 'story.' No one can understand what we went through. No one should ever have to live
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through what I did." See Folder 28, provided via CD. See also Third Amended
Complaint, ,r,r 133-135; 375-421; Declaration of Frances M. Coffey, ,r 8.
29. Decedent Daniel M. Coffey is also survived by an adult child, Daniel D. Coffey, M.D.,
who is a resident of the State of New York. Plaintiff Daniel D. Coffey, M.D., under
§1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Daniel
M. Coffey on September 11, 2001. On February 6, 2012, Dr. Coffey wrote, "I did not
and do not want to go into the City. I could not handle seeing constant reminders of
September 11th. There was no way to escape the media attention, even around our
hometown. Many other people lost loved ones on September 111\ but we were one of the
few families that lost two loved ones that day. People knew that we had lost two people
in the attack, and receiving that kind of attention was horrible. People would say to one
another as we walked by, 'You know, they lost two."' See Folder 29, provided via CD.
See also Third Amended Complaint, ,r 136; ,r,r 375-421; Declaration of Daniel M. Coffey
,r 5.
30. Decedent Daniel M. Coffey is also survived by an adult child, Kevin M. Coffey, who is
a resident of the State of New York. Plaintiff Kevin M. Coffey, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Daniel M. Coffey on
September 11, 2001. "[On September 14, 2001], I felt like I had a definitive answer as to
whether or not [Daniel M. Coffey and Jason M. Coffey] were gone," writes Kevin M.
Coffey in his Declaration. "But I don't think this is something one comes to terms with.
I learned to deal with it. I manage. It is not like they died of cancer or another natural
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cause. This is not even like a bus accident. This is ... they are bits and pieces. All they
did was go to work. They went to work and sat at their desk and a plane hit their
building. I can't say that I will ever necessarily deal with that. I just learned to manage
it." See Folder 30, provided via CD. See also Third Amended Complaint, ,-i 136; ,-i,-i 375-
421; Declaration of Kevin M. Coffey, ,-i 7.
31. Plaintiff Frances M. Coffey is a resident of the State of New York and is the surviving
mother of Jason M. Coffey, a decedent who was killed as a result of the terrorist attack
on the World Trade Center Towers in New Yark City on September 11, 2001. Jason M.
Coffey worked on the 98th Floor of the North Tower of the World Trade Center, One
World Trade Center, New York, New York. Plaintiff Frances M. Coffey has been
appointed as Administratrix of the Estate of Jason M. Coffey. Frances M. Coffey,
under §1605(a) of the Foreign Sovereign Immunities Act, brings a survival action against
all Defendants in her capacity as the Administratrix of the Estate. See Third Amended
Complaint, ,-i,-i 137-139; 375-421.
32. Plaintiff Frances M. Coffey also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Jason M.
Coffey on September 11, 2001. "September 11, 2001, was supposed to be a happy day,"
Frances M. Coffey writes in her Declaration. "It was a day full of plans and exciting
events for [Daniel M. Coffey and Jason M. Coffey]. The father and son both worked
together in the World Trade Center and were planning to meet for lunch and pick up
Colleen's [Jason M. Coffey's girlfriend] engagement ring. Little did we suspect that this
happy, exciting day would turn out to be the most horrible one of our lives!!! It turned
out later that Jason was on the phone with Colleen when the plane hit. All she heard was
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a loud noise and they were cut off." See Folder 32, provided via CD. See also Third
Amended Complaint, ,r,r 137-139; 375-421; Declaration of Frances M. Coffey, ,r 7.
33. Decedent Jason M. Coffey is survived by his brother, Daniel D. Coffey, M.D., who is a
resident of the State of New York. Plaintiff Daniel D. Coffey, M.D., under §1605(a) of
the Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Jason M.
Coffey on September 11, 2001. "Jason and I would talk once a week," writes Dr. Coffey
in his Declaration. "The weekend before September 111\ Jason called me. Jason asked if
I was getting married any time soon. I responded that I was not and asked why he had
asked. He said, 'Good, because I am finally going to beat you at something!' He was
dating a beautiful girl named Colleen and was planning on proposing to her. In fact, he
had picked out the ring and was going to buy it [on September 11, 2001]." See Folder 33,
provided via CD. See also Third Amended Complaint, ,r,r 140; 375-421; Declaration of
Daniel M. Coffey, ,r 9.
34. Decedent Jason M. Coffey is survived by his brother, Kevin M. Coffey, who is a
resident of the State of New York. Plaintiff Kevin M. Coffey, under§ 1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Jason M. Coffey on
September 11, 2001. "I wonder how [Daniel M. Coffey and Jason M. Coffey] died, but I
didn't look into it because I did not really want the answer. As soon as we found out that
they found parts just for a lack of a better term, I didn't want to know. I do not want to
know if they burned, or if they had died when the building came down. Were these
questions going through my head? Yes. That is part of what kept me from being able to
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sleep. Not on a normal day, I wouldn't think about it but in the quiet of the night it would
sneak out." See Folder 34, provided via CD. See also Third Amended Complaint, ,r
140; ,r,r 375-421; Declaration of Kevin M. Coffey, ,r 13.
35. Plaintiff Keith A. Bradkowski is a resident of the State of California and is the
appointed Administrator of the Estate of Jeffrey D. Collman, a decedent who was killed
as a result of a terrorist attack on the World Trade Center Towers in New Yark City on
September 11, 2001. Jeffrey D. Collman was employed by American Airlines as flight
attendant on American Airlines Flight 11, which was crashed into the North Tower, One
World Trade Center by a hijacker. Plaintiff Keith A. Bradkowski, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a survival action against all Defendants in his
capacity as the Administrator of the Estate of Jeffrey D. Collman. See Folder 35,
provided via CD, for photographs and memorabilia of Jeffrey D. Collman. See also
Third Amended Complaint, ,r,r 183-184.
36. Decedent Jeffrey D. Collman is survived by his natural father, Dwayne W. Collman,
who is a resident of the State of Illinois. Plaintiff Dwayne W. Collman, under§ 1605(a)
of the Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Jeffrey D.
Collman on September 11, 2001. On December 7, 2011, Mr. Collman wrote, "[Jeffrey]
was a great son and I miss him a lot. Not a day goes by that I don't think about him, that
I do not visualize his blue eyes and blonde hair. Frequently, I get a glimpse of someone
who resembles Jeff and my heart stops for a minute. I hurt every day. On Sunday,
September 11, 2011, I read the names of the Flight 11 crew at a memorial in Oswego, IL.
They had a pair of empty shoes for each of the 2997 victims of the terrorist attack lined
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along the road to allow us to visualize the missing people. This brought tears to
everyone's eyes and illustrated yet again the enormity of America's loss and my own."
See Folder 36, provided via CD. See also Third Amended Complaint, ,r 185; ,r,r 375-
421; Declaration of Dwayne W. Collman, ,r,r 4, 7.
37. Decedent Jeffrey D. Collman is survived by his brother, Brian Collman, who is a
resident of the State ofNevada. Plaintiff Brian Collman, under §1605(a) of the Foreign
Sovereign Immunities Act, brings a claim for wrongful death and asserts other causes of
action against all Defendants as a result of the murder of Jeffrey D. Collman on
September 11, 2001. On December 16, 2011, Brian Collman wrote, "I will always
remember 9/11 with intense emotional feelings. It is now part of our American history. I
lost a brother and a friend on September 11th• My love for Jeffrey Dwayne Collman has
not died." See Folder 37 provided via CD. See also Third Amended Complaint, ,r 186;
,r,r 375-421; Declaration of Brian Collman, ,r,r 7, 10.
38. Decedent Jeffrey D. Collman is survived by his brother, Charles Collman, who is a
resident of the State of North Carolina. Plaintiff Charles Collman, under §1605(a) of
the Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Jeffrey D.
Collman on September 11, 2001. On January 24, 2012, Charles Collman wrote, "My
brother Jeffrey and I were very close. I was his younger brother by one year and eight
months. We would speak once per week or once every two weeks, at the latest. I had
spoken to him on Sunday, September 9, two days before the attacks. He did not mention
about having an upcoming flight to Los Angeles. I was told that he took another flight
attendant's place at the last minute. Every September 11 t\ I sit down and pray for my
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brother at the time when the first plane hit the World Trade Center." See Folder 38,
provided via CD. See also Third Amended Complaint, ,-i 186; ,-i,-i 375-421; Declaration of
Charles Collman, ,-i,-i 8, 16.
39. Decedent Jeffrey D. Collman is survived by his sister, Brenda Sorenson, who is a
resident of the State of Florida. Plaintiff Brenda Sorenson, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Jeffrey D. Collman
on September 11, 2001. On December 6, 2011, Brenda Sorenson wrote, "When I think
of Jeffrey I think about how much he loved traveling. His job as a flight attendant was
perfect for him as it allowed him to travel. [One] time when my parents asked Jeffrey to
watch me while they were out of town, he took me to the Bahamas! I miss Jeffrey every
day. I wish that I could talk to him. I am sad that my four daughters did not and will not
get to know their uncle. I think of him often. He was just over forty when he died. So
young, so very young, and so much life ahead of him." See Folder 39, provided via CD.
See also Third Amended Complaint, ,-i 186; ,-i,-i 375-421; Declaration of Brenda Sorenson,
,-r,-r 7-9.
40. PlaintiffLoisanne Diehl is a resident of the State of New Jersey and is the surviving
spouse of Michael Diehl, a decedent who was killed as a result of a terrorist attacks on
the World Trade Center Towers in New Yark City on September 11, 2001. Michael
Diehl was employed by Fiduciary Trust Company and worked on the 90th Floor of the
South Tower of the World Trade Center, Two World Trade Center, New York, New
Yark. Plaintiff Loisanne Diehl has been appointed the Executrix of the Estate of
Michael Diehl. PlaintiffLoisanne Diehl, under §1605(a) of the Foreign Sovereign
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Immunities Act, brings a survival action against all Defendants in her capacity as the
Executrix of the Estate of Michael Diehl. See Folder 40, provided via CD, for article
from the Newark Star-Ledger. See also Third Amended Complaint, ,r,r 43-45; 375-421.
41. Plaintiff Loisanne Diehl also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Michael
Diehl on September 11, 2001. Plaintiff Loisanne Diehl writes in her Declaration, "We
had a funeral service in a small chapel where Michael's right hand, the only part of him
that had been found, was to be entombed during the service. His hand was placed into a
rectangular urn next to the altar. Then, it was carried by the funeral director to the wall
and placed in a space that was intended for a normal-sized casket. It was a very surreal
experience. By this time I had been to three memorial services, visited 'Ground Zero,'
and been told that Michael was probably vaporized when the plane exploded near his
office. Now, with the presence of physical evidence, I did not know hot Michael had
died, or how much he had suffered. Thoughts of Michael suffering haunt me to this day."
See Folder 41, provided via CD; See also Third Amended Complaint, ,r,r 43-45; 375-421;
Declaration of Loisanne Diehl ,r 1 7.
42. Plaintiff Morris Dorf is a resident of the State of New Jersey and the surviving father of
Stephen Scott Dorf, a decedent who was killed as a result of the terrorist attack on the
World Trade Center Towers in New York City on September 11, 2001. Stephen Scott
Dorf was employed by Euro Brothers, Inc. and worked on the 84th Floor of the South
Tower of the World Trade Center, Two World Trade Center, New York, New York.
Plaintiff Morris Dorf has been appointed as the Executor of the Estate of Stephen Scott
Dorf. Plaintiff Morris Dorf, under §1605(a) of the Foreign Sovereign Immunities Act,
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brings a survival action against all Defendants in his capacity as the Executor of the
Estate of Stephen Scott Dorf. See Third Amended Complaint, ,r,r 96-98; 375-421.
43. Plaintiff Morris Dorf also brings claims in his own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Stephen Scott
Dorf on September 11, 2001. On February 19, 2010, Plaintiff Morris Dorf wrote, "My
son always stood by the family and was constantly doing things for others. I could
always depend on him to take me to the doctors or the store. He was a wonderful,
responsible son." See Folder 43, provided via CD. See also Third Amended Complaint,
,r,r 96-98; 375-421; Declaration of Morris Dorf,r,r 5,7.
44. Decedent Stephen Scott Dorf is also survived by his sister, Ann Marie Dorf, who is a
resident of the State ofNew Jersey. Plaintiff Ann Marie Dorf, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Stephen Scott Dorf
on September 11, 2001. On December 15, 2011, Plaintiff Ann Marie Dorf wrote,
"Stephen was the fire warden4 for his company [located in the South Tower]. After the
first plane hit the North Tower, he called my sister to let her know what was happening.
She called me and I turned on the radio, I then turned on the TV and saw everything.
Knowing my baby brother, the one who was always there for the family, was in a burning
building and there was nothing I could do was unbearable. My sister told him to just get
out. But knowing Stephen, he embraced his responsibilities as a fire warden. Stephen's
4 To address the problems encountered during the response to the 1993 bombing of the World Trade
Center, the Port Authority created "fire safety teams" from the civilian employees on each floor of the
building, which consisted of a fire warden, deputy fire warden, and searchers. Fire wardens would
lead co-workers during fire safety drills. Some civilians told the 9/11 Commission that their
evacuation on September 11 th was greatly aided by changes and training implemented by the Port
Authority after the 1993 bombing. See The 9/11 Commission Report, pp. 280-81.
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co-worker told me that when the second plane hit, he was on the stairwell. He said it
shook and people started running down the stairs. The man suffered a broken leg, but he
got out alive. He told me Stephen saved his life. Many people are still alive today
talking about what my baby brother did for them on Sept 11." (italics in original). See
Folder 44, provided via CD. See also Third Amended Complaint, ,r 99; ,r,r 375-421;
Declaration of Ann Marie Dorf, ,r 5.
45. Decedent Stephen Scott Dorf is also survived by his brother, Joseph Dorf, who is a
resident of the State of New York. Plaintiff Joseph Dorf, under §1605(a) of the Foreign
Sovereign hnmunities Act, brings a claim for wrongful death and asserts other causes of
action against all Defendants as a result of the murder of Stephen Scott Dorf on
September 11, 2001. "I have hesitated to write this since the terrorist attacks first
ensued," states Plaintiff Joseph Dorf in his Declaration. "There are no words profound
enough to express my feelings. Stephen will be missed dearly by everyone who knew
him." See Folder 45, provided via CD. See also Third Amended Complaint, ,r 99; ,r,r
375-421; Declaration of Joseph Dorf, ,r 8.
46. Decedent Stephen Scott Dorf is also survived by his sister, Michelle Dorf, who is a
resident of the State of New Jersey. Plaintiff Michelle Dorf, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Stephen Scott Dorf
on September 11, 2001. Plaintiff Michelle Dorf_was the last member of her family to
speak to Decedent Stephen Scott Dorf while he was alive, immediately after the North
Tower was struck by American Airlines Flight 11. "He was so upset when we were
talking that his voice was cracking every which way, he seemed scared to death," she
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writes in her Declaration. "Stephen said that bodies were being thrown from the
windows because people were killing themselves. I could not imagine what he was
saying. I told my brother to go downstairs and get out, but I did not really think his
building would get hit. If I had, I would have urged him more strongly, but I wasn't
thinking at the time. I wish I had told him, 'I love you, I do.' I got a phone call from one
of my brother's friends telling me that Stephen helped everyone get out. Stephen was a
fire warden and his friend saw him on the way back up to get others. That was so like
Stephen, even in this situation, he helped people with no fear for his own life." See
Folder 46, provided via CD. See also Third Amended Complaint, ,-i 99; ,-i,-i 375-421;
Declaration of Michelle Dorf, ,-r,-r 10, 13.
47. Decedent Stephen Scott Dorf is also survived by his brother, Robert Dorf, who is a
resident of the State ofNew Jersey. Plaintiff Robert Dorf, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Stephen Scott Dorf
on September 11, 2001. Plaintiff Robert Dorf is an elementary school teacher in
Manhattan. He writes in his Declaration, "Every time they show those planes crashing
into the towers they crash into my heart. I had to go to work each day afterwards
knowing that those planes flew over my school on the way to the World Trade Center."
Folder 47, provided via CD. See also Third Amended Complaint, ,-r 99; ,-r,-r 375-421;
Declaration of Robert Dorf, ,-r 8.
48. Decedent Stephen Scott Dorf is also survived by his sister, Linda Sammut, who is a
resident of the State of New Jersey. Plaintiff Linda Sammut, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
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causes of action against all Defendants as a result of the murder of Stephen Scott Dorf
on September 11, 2001. See Third Amended Complaint, ,r 99; ,r,r 375-421.
49. Plaintiff Corazon Fernandez is a resident of the State of New Jersey and is the surviving
mother of Judy Fernandez, a decedent who was killed as a result of a terrorist attack on
the World Trade Center Towers in New York City on September 11, 2001. Judy
Fernandez was 27 years of age and employed by Cantor Fitzgerald in the North Tower,
One World Trade Center. Plaintiff Corazon Fernandez is the Personal Representative
of the Estate of Judy Fernandez. Plaintiff Corazon Fernandez, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a survival action against all Defendants in her
capacity as the Personal Representative of the Estate of Judy Fernandez. See Folder
49, provided via CD, for family photographs of Judy Fernandez. See also Third
Amended Complaint, ,r,r 180-181.
50. Corazon Fernandez also brings claims in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Judy
Fernandez on September 11, 2001. "We planned a joint Memorial Service with my
brother's family, the Santillans, for Judy and their daughter, Maria Theresa," writes
Corazon Fernandez in her Declaration. "They were so close we had just one service.
Since we had no remains, it was a Memorial service. We really wanted to do something
special for Judy, to have a place where we could go visit every morning, but we will
never be able to do that because her body was never found. That hurts us very much, and
there is no closure. The pain will never go away no matter what." See Folder 50,
provided via CD. See also Third Amended Complaint, ,r,r 180-181; 375-421; Declaration
of Corazon Fernandez ,r 12.
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51. Plaintiff Grace M. Parkinson-Godshalk is a resident of the Commonwealth of
Pennsylvania and is the surviving natural mother of William R. Godshalk, a resident of
the State of New York and a decedent who was killed as a result of a terrorist attack on
the World Trade Center Towers in New York City on September 11, 2001. William R.
Godshalk was employed by Keefe, Bruyette & Woods located on the 89th floor of the
South Tower, Two World Trade Center, New York, New York. Plaintiff Grace M.
Parkinson-Godshalk has been appointed the Administratrix of the Estate of William R.
Godshalk. Plaintiff Grace M. Parkinson-Godshalk, under §1605(a) of the Foreign
Sovereign hnmunities Act, brings a survival action against all Defendants in her capacity
as the Administratrix of the Estate of William R. Godshalk. See Third Amended
Complaint, ,r,r 16-18; 375-421.
52. Plaintiff Grace M. Parkinson-Godshalk also brings claims in her own right for
wrongful death and asserts other causes of action against all Defendants as a result of the
murder of William R. Godshalk on September 11, 2001. Grace M. ParkinsonGodshalk,
along with Plaintiffs Fiona Havlish, Ellen Saracini, and Tara Bane were the
driving force behind creating a Memorial for not only the 18 victims of 9/11 in their
community, but for all of the all of the victims of the 9/11 terrorist attacks. It is located at
a former farm called North Park in Pennsylvania. "Bill's remains were never identified,"
Grace M. Parkinson-Godshalk writes in her Declaration. "I'm deeply hurt by not
having a grave for my son. Bill is the first thing I think about in the morning and the last
thing I think about at night." See Folder 52, provided via CD. See also Third Amended
Complaint, ,r,r 16-18; 375-421; Declaration of Grace M. Parkinson-Godshalk ,r 10, 15, 16.
53. Plaintiff Tina Grazioso is a resident of the State of New Jersey and is the surviving
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spouse of John Grazioso, a decedent who was killed as a result of a terrorist attack on
the World Trade Center Towers in New York City on September 11, 2001. John
Grazioso was employed by eSpeed (Cantor Fitzgerald) on the 105th Floor of the North
Tower of the World Trade Center, One World Trade Center, New York, New York.
Plaintiff Tina Grazioso has been appointed the Executrix of the Estate of John
Grazioso. Plaintiff Tina Grazioso, under §1605(a) of the Foreign Sovereign Immunities
Act, brings a survival action against all Defendants in her capacity as the Executrix of the
Estate of John Grazioso. See Third Amended Complaint,~~ 46-48; 375-421.
54. Tina Grazioso also brings claims in her own right for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of John Grazioso on
September 11, 2001. After being informed by the authorities that the first remains of
Decedent John Grazioso had been recovered, Plaintiff Tina Grazioso requested that she
be able to hold her husband's body one last time. She was told that this was not possible
due to fragmentation. See Folder 54, provided via CD. See also Third Amended
Complaint,~~ 46-48; 375-421; Declaration of Tina Grazioso, ~ 14.
55. Plaintiff Maureen R. Halvorson is a resident of the State of Connecticut and is the
surviving spouse of James D. Halvorson, a decedent who was killed as a result of the
terrorist attack on the World Trade Center Towers in New York City on September 11,
2001. James D. Halvorson worked on the 99th Floor of the North Tower of the World
Trade Center, One World Trade Center, New York, New York. Plaintiff Maureen R.
Halvorson has been appointed Executrix of the Estate of James D. Halvorson. Plaintiff
Maureen R. Halvorson, under §1605(a) of the Foreign Sovereign Immunities Act,
brings a survival action against all Defendants in her capacity as the Executrix of the
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Estate of James D. Halvorson. See Third Amended Complaint, ,-r,-r 123-125.
56. Plaintiff Maureen R. Halvorson also brings claims in her own right for wrongful death
and asserts other causes of action against all Defendants as a result of the murder of
James D. Halvorson on September 11, 2001. In addition to losing her husband, Plaintiff
Maureen R. Halvorson also lost her brother, William Wilson. Ms. Halvorson called
her son Doug, who was working in Manhattan, after hearing a radio report that a small
plane had hit the World Trade Center. Describing her son Doug's reaction, Maureen R.
Halvorson writes, "With a sound in his voice that I have never heard before and with the
background of hysteria, my son said, 'It was a huge plane and it went into the building
and it didn't come out.' He described a huge fire plume burning on top of the North
Tower. Then he said, 'Dad is gone."' James D. Halvorson "traveled the world for his
job, especially in the Muslim world: Iraq, Pakistan, Saudi Arabia, Lebanon and
Indonesia. He never had a complaint about his dealings there. Doug and I struggle not to
hate in memory of Jim and Bill." See Folder 56, provided via CD. See also Third
Amended Complaint, ,-i,-r 123-125; 375-421; Declaration of Maureen R. Halvorson ,-i,-r 19,
39.
57. Plaintiff Jin Liu is a resident of the State of New Jersey and is the surviving spouse of
Liming Gu, a decedent who was killed as a result of the terrorist attack on the World
Trade Center on September 11, 2001. Liming Gu was 34 years of age and worked on
the 95th Floor of the North Tower of the World Trade Center, One World Trade Center,
New York, New York. Plaintiff Jin Lu has been appointed as the Executor of the Estate
of Liming Gu. Plaintiff Jin Lu, under §1605(a) of the Foreign Sovereign Immunities
Act, brings a survival action against all Defendants in her capacity as the Executrix of the
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Estate of Liming Gu. See Third Amended Complaint, ,-r,-r 171-173; 375-421.
58. Plaintiff Jin Lu also brings claims in her own right for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Liming Gu on
September 11, 2001. "One of my co-workers had a TV in their office, and we all went to
watch Jin Liu writes in her Declaration. "That's where I watched the events that took
place on the morning of 9/11. I knew [Liming Gu] worked on one of the top floors. I
started to call him. And I think what happened is, when I was calling him he was calling
me, so I did not get a chance to speak with him. But he left me a message. I could not
really hear the message clearly; there was too much going on in the background. I can
hear people screaming. There was a lot of noise and yelling. I am guessing he was
probably hurt as well since the floor that he worked was where the plane went in." See
Folder 58, provided via CD. See also Third Amended Complaint, ,-i,-i 171-173; 375-421;
Declaration of Jin Liu ,-r 6.
59. Plaintiff Jin Lu also brings a claim for wrongful death and asserts other causes of action
against all Defendants on behalf of Alan Gu, a minor, as beneficiary of such claims as a
result of the murder of Liming Gu on September 11, 2001. "My son, Alan Gu, was one
year and nine months old on September 11, 2001. Every year, he understands more and
more about what happened to his father. At first, he used to ask, 'Where is my Daddy?'
He went to therapy for a while, and I hope now he accepts what has happened. The truth
is, I do not really know what Alan thinks. He is very quiet on the subject and does not
say much." See Folder 59, provided via CD. See Third Amended Complaint, ,-i,-i 171-173;
375-421; Declaration of Jin Liu on behalf of Alan Gu, ,-r,-r 6, 7.
60. Plaintiff Grace Kneski is a resident of the State of South Carolina and is a surviving
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relative (natural mother) of Steven Cafiero, a decedent who was killed as a result of a
terrorist attacks on the World Trade Center Towers in New York City on September 11,
2001. Steven Cafiero was employed by AON, Inc. and worked on the 92nd floor of the
South Tower of the World Trade Center, Two World Trade Center, New York, New
York. Plaintiff Grace Kneski has been appointed the Executrix of the Estate of Steven
Cafiero. Plaintiff Grace Kneski, under §1605(a) of the Foreign Sovereign Immunities
Act, brings a survival action against all Defendants in her capacity as the Executrix of the
Estate of Steven Cafiero. See Third Amended Complaint, ,r,r 52-54; 375-421.
61. Plaintiff Grace Kneski also brings claims in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Steven Cafiero
on September 11, 2001. Decedent Steven Cafiero, the only son of Plaintiff Grace
Kneski, telephoned his mother after American Airlines Flight 11 stuck the North Tower
to inform her that he was safe. She urged him to leave the South Tower, but the decedent
chose to follow the instructions over the public address system to stay at his work station
in light of the fact that he was a new employee on the job for only 22 days. During the
conversation between Decedent Steven Cafiero and Plaintiff Grace Kneski, Plaintiff
suddenly heard people screaming in the background. Decedent Steven Cafiero,
immediately before the line went dead, uttered words to the effect of, "Oh, no. Oh, my
God." It was at this time that United Airlines Flight 175 crashed into the South Tower
through the 77th to 85th Floors. Decedent Steven Cafiero was working only 7 floors
above the impact zone. Neither his body nor any remains were ever recovered, leaving
Plaintiff Grace Kneski with no sense of closure. "Losing a child is not natural," she
writes in her Declaration. "We are not supposed to outlive our children." See Folder 61,
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provided via CD. See also Third Amended Complaint, ,r,r 52-54; 375-421. See also The
9/11 Commission Report, p. 293; Declaration of Grace Kneski, ,r,r 6, 9, 19.
62. Plaintiff Roni Levine is a resident of the State of New York and the surviving spouse of
Robert Levine, a decedent who was killed as a result of the terrorist attacks on the World
Trade Center Towers in New York City on September 11, 2001. Robert Levine worked
on the 104th Floor of the North Tower of the World Trade Center, One World Trade
Center, New York, New York. Plaintiff Roni Levine has been appointed as the
Executrix of the Estate of Robert Levine. Plaintiff Roni Levine, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a survival action against all Defendants in her
capacity as the Executrix of the Estate of Robert Levine. See Folder 62, provided via
CD, for a photograph of the Decedent with family members and a photo of his charred
work badge from Cantor Fitzgerald. See Third Amended Complaint, ,r,r 113-115; 375-
421.
63. Plaintiff Roni Levine also brings claims in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Robert Levine
on September 11, 2001. Six months to the day of the attacks, the FBI visited the family
home to inform Roni Levine that a portion of her husband's skull was found with all of
his teeth intact. "He had just broken up into little pieces, spread all over the place," Roni
Levine writes in her Declaration. See Folder 63, provided via CD. See also Third
Amended Complaint, ,r,r 113-115; 375-421; Declaration of Roni Levine ,r 6.
64. PlaintiffTheresann Lostrangio is a resident of the Commonwealth of Pennsylvania and
is the surviving spouse of Joseph Lostrangio, a decedent who was killed as a result of a
terrorist attack on the World Trade Center Towers in New York City on September 11,
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2001. Joseph Lostrangio was employed by Devonshire Group on the 77th Floor of the
North Tower in the World Trade Center, One World Trade Center, New York, New
York. Plaintiff Theresann Lostrangio has been appointed the Executrix of the Estate of
Joseph Lostrangio. Plaintiff Theresann Lostrangio, under§ 1605(a) of the Foreign
Sovereign Immunities Act, brings a survival action against all Defendants in her capacity
as the Executrix of the Estate of Joseph Lostrangio. See Folder 64, provided via CD;
See also Third Amended Complaint, ,r,r 113-115; 375-421. See Third Amended
Complaint, ,r,r 113-115; 375-421
65. Plaintiff Theresann Lostrangio also brings claims in her own right for wrongful death
and asserts other causes of action against all Defendants as a result of the murder of
Joseph Lostrangio on September 11, 2001. The family's children were 19 and 17 at the
time of the attacks. Theresann Lostrangio first learned of the attacks when her son left
a message on the family answering machine that said, "Mom, I think a plane hit Dad."
The line then sounded as if it disconnected. See Folder 65, provided via CD. See also
Third Amended Complaint, ,r,r 113-115; 375-421; Declaration ofTheresann Lostrangio ,r
11.
66. Plaintiff Joanne Lovett is a resident of the State of New York and is a surviving relative
(natural mother) of Brian Nunez, a decedent who was killed as a result of a terrorist
attack on the World Trade Center Towers in New York City on September 11, 2001.
Brian Nunez was employed by eSpeed (Cantor Fitzgerald) on the 104th Floor of the
North Tower of the World Trade Center, One World Trade Center, New York, New
York. Plaintiff Joanne Lovett has been appointed the Executrix of the Estate of Brian
Nunez. Plaintiff Joanne Lovett, under §1605(a) of the Foreign Sovereign Immunities
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Act, brings a survival action against all Defendants in her capacity as the Executrix of the
Estate of Brian Nunez. See Folder 66, provided via CD; See also Third Amended
Complaint, ,r,r 113-115; 375-421.
67. Plaintiff Joanne Lovett also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Brian
Nunez on September 11, 2001. Joanne Lovett was able to clearly see the World Trade
Center, where her son was working in the North Tower, from her own place of
employment. She personally witnessed the North Tower burning and the South Tower
collapse. Her son, Decedent Brian Nunez, left a message on the family answering
machine at 8:51 a.m. Joanne Lovett says of the message, "Brian had to have been
delirious. Brian's voice continued to say that a plane had hit the World Trade Center and
he was still inside. He said there is a lot of smoke, and he said he was having a hard time
breathing. All through the short message, I could hear Brian's Heavy, labored breathing
and his voice was cracking as he continued to tell everyone he loved them, and if he
didn't make it out of here ... there was another pause and he finished his call with a 'bye.'
I could hear the panic in his voice." See Folder 67, provided via CD; See also Third
Amended Complaint, ,r,r 113-115; 375-421; Declaration of Joanne Lovett ,r,r 13-14.
68. Plaintiff Chrislan Fuller Manuel is a resident of the State of Michigan and is the
surviving aunt of Meta L. Waller, a decedent who was killed as a result of the terrorist
attack on the Pentagon on September 11, 2011. 5 Meta L. Waller worked on the 1st
Floor, "E" Wing of the Pentagon when American Airlines Flight 77, hijacked through the
actions of Defendants, was intentionally crashed crash into the building. Plaintiff
5 The Third Amended Complaint incorrectly lists the Decedent's surname as "Walker."
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Chrislan Fuller Manuel has been appointed as the Executrix of the Estate of Meta L.
Waller. Plaintiff Chrislan Fuller Manuel, under §1605(a) of the Foreign Sovereign
Immunities Act, brings a survival action against all Defendants in her capacity as the
Executrix of the Estate of Meta L. Waller. See Folder 68, provided via CD.
69. Plaintiff Chrislan Fuller Manuel also brings claims in her own right for wrongful death
and asserts other causes of action against all Defendants as a result of the murder of Meta
L. Waller on September 11, 2001. "Talking about my relationship with [Decedent Meta
L. Waller] is difficult for me and I struggle to describe it fully. I have found that people
assume that because it was only my aunt that died that we could not have been close
enough for me to need to grieve for her and to move on more quickly from her death. I
actually had a boss at my former job that asked me, 'It's only your aunt that died. Why
do you need time off for that?' I become irritated with this lack of sympathy quickly.
Meta was so many things to me and such a part of my life. She was a mother figure, a
friend and a confidant. I will grieve for her the rest of my life." See Folder 69, provided
via CD. See also Third Amended Complaint, ,r,r 110-112; 375-421; Declaration of
Chrislan Fuller Manuel. ,r 9.
70. Plaintiff Maria Regina Merwin is a resident of the Commonwealth of Kentucky and is
the sister of Ronald Gamboa, a decedent who was killed as a result of the terrorist attack
on the World Trade Center Towers on September 11, 2001. Ronald Gamboa was a
passenger on United Airlines Flight 175 which was crashed into the South Tower of the
World Trade Center by a hijacker. Plaintiff Maria Regina Merwin has been appointed
as the Executrix of the Estate of Ronald Gamboa. Plaintiff Maria Regina Merwin,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a survival action against
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all Defendants in her capacity as the Executrix of the Estate of Ronald Gamboa. See
Folder 70, provided via CD.
71. Plaintiff Maria Regina Merwin also brings claims in her own right for wrongful death
and asserts other causes of action against all Defendants as a result of the murder of
Ronald Gamboa on September 11, 2001. On the day of the attacks, Ronald Gamboa
was on the hijacked UA Flight 175 with his partner and their 3 year-old son. "I can't
imagine the terror Ron went through as he tried to save his son," Maria Regina Merwin
writes in her Declaration. "[H]e was so protective of his son and he would do anything
do keep him safe so I can't imagine how awful they felt on that plane." See Folder 71,
provided via CD. See also Third Amended Complaint, ,r,r 116-118; 375-421; Declaration
of Maria Regina Merwin.
72. Plaintiff Margaret Mauro is a resident of the State of Tennessee and is the surviving
twin sister of Dorothy Mauro, a decedent who was killed as a result of the terrorist
attack on the World Trade Center Towers in New York City on September 11, 2001.
Dorothy Mauro worked on the 97th Floor of the North Tower of the World Trade
Center, One World Trade Center, New York, New York. Plaintiff Margaret Mauro has
been appointed as the Administratrix of the Estate of Dorothy Mauro. Plaintiff
Margaret Mauro, under §1605(a) of the Foreign Sovereign Immunities Act, brings a
survival action against all Defendants in her capacity as the Administratrix of the Estate
of Dorothy Mauro. See Folder 72, provided via CD. See also Third Amended
Complaint, ,r,r 84-86; 375-421.
73. Plaintiff Margaret Mauro also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Dorothy
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Mauro on September 11, 2001. "With [Decedent Dorothy Mauro] gone, half of me is
missing," writes Margaret in her Declaration. "I have grieved a long time over her loss.
Dorothy and I looked alike and sounded alike. Sometimes when I hear myself laughing, I
hear her. When I look in the mirror, it's her image staring back at me. My sister was
more than just my twin; she was my forever friend, my confidant, and my traveling
companion. Dorothy was the most important person in my life." See Folder 73, provided
via CD. See also Third Amended Complaint, ,r,r 84-86; 375-421; Declaration of
Margaret Mauro ,r 7
74. Plaintiff Ramon Melendez is a resident of the Commonwealth of Pennsylvania and is the
surviving spouse of Mary Melendez, a decedent who was killed as a result of the
terrorist attack on the World Trade Center Towers in New York City on September 11,
2001. Mary Melendez worked on the 90th Floor of the South Tower of the World Trade
Center, Two World Trade Center, New York, New York. Plaintiff Ramon Melendez
has been appointed as the Administrator of the Estate of Mary Melendez. Plaintiff
Ramon Melendez, under §1605(a) of the Foreign Sovereign Immunities Act, brings a
survival action against all Defendants in his capacity as the Administrator of the Estate
of Mary Melendez. See Folder 74, provided via CD. See also Third Amended
Complaint, ,r,r 130-132; 375-421.
7 5. Plaintiff Ramon Melendez also brings claims in his own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Mary
Melendez on September 11, 2001. Plaintiff Ramon Melendez was speaking on the
phone with Decedent Mary Melendez after AA Flight 11 struck the North Tower while
he was simultaneously watching the television coverage of the attacks. When Mr.
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Melendez saw UA Flight 175 strike the South Tower, his wife's phone line at her office
went dead. See Folder 75, provided via CD. See also Third Amended Complaint, ,r,r
130-132; 375-421; Declaration of Ramon Melendez, ,r 5.
76. Plaintiff Patricia Milano is a resident of the State of New Jersey and is the surviving
spouse of Peter T. Milano, a decedent who was killed as a result of a terrorist attacks on
the World Trade Center Towers in New York City on September 11, 2001. Peter T.
Milano was employed by Cantor Fitzgerald on the 104th Floor of the North Tower of the
World Trade Center, One World Trade Center, New York, New York. Plaintiff Patricia
Milano has been appointed the Executrix of the Estate of Peter T. Milano. Plaintiff
Patricia Milano, under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a
survival action against all Defendants in her capacity as the Executrix of the Estate of
Peter T. Milano. See Folder 76, provided via CD. See also Third Amended Complaint,
,r,r 84-86; 375-421.
77. Plaintiff Patricia Milano also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Peter T.
Milano on September 11, 2001. With regard to her experience of losing her husband,
Plaintiff Patricia Milano writes, "[P]eople want you to move on, meet someone, and find
happiness again. I'm tired of trying to explain myself and if they really understood the
kind, thoughtful husband I had, they would be more empathetic. I feel each day is another
day of moving on without him." At the time of his death, Peter T. Milano left behind
two minor children. See Folder 77, provided via CD. See also Third Amended
Complaint, ,r,r 84-86; 375-421; Declaration of Patricia Milano ,r 4, 6.
78. Plaintiff Ivy Moreno is a resident of the State ofNew York and the surviving mother of
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Yvette Nichole Moreno, a decedent who was killed as a result of the terrorist attacks on
the World Trade Center Towers in New York City on September 11, 2001. Yvette
Nichole Moreno worked on the 92nd Floor of the North Tower of the World Trade
Center, One World Trade Center, New York, New York. Plaintiff Ivy Moreno has been
appointed Administratrix of the Estate of Yvette Nichole Moreno. Plaintiff Ivy
Moreno, under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a survival
action against all Defendants in her capacity as the Administratrix of the Estate of Yvette
Nichole Moreno. See Folder 78, provided via CD.
79. Plaintiff Ivy Moreno also brings claims in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Yvette Nichole
Moreno on September 11, 2001. The Decedent's place of employment was the North
Tower, but she survived the attack by the hijacked American Airlines Flight 11. She
perished while walking on an overpass toward her home as a result of falling debris from
the attacks. Her body was identified via dental records and a tattoo a few days following
what would have been her 25th birthday. Her mother, Plaintiff Ivy Moreno, was so
distraught that the Decedent's uncle was sent to identify the body. "I will never hug her
again, kiss her, talk and laugh with her, see her get married, or know the grandchildren
that she could have had," Ivy Moreno wrote of Yvette Nichole Moreno. "The terrorists
also killed me on that day. I only exist, I no longer live!" See Folder 79, provided via
CD. See also Third Amended Complaint, ,-r,-r 93-95; 375-421; Declaration oflvy Moreno.
,-r 5-7.
80. Plaintiff Estate of Vincent A. Ognibene is the estate of the surviving father of Philip
Paul Ognibene, a decedent who was killed as a result of the terrorist attacks on the
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World Trade Center Towers in New York City on September 11, 2001. Decedent Philip
Paul Ognibene worked on the 89th Floor of the South Tower of the World Trade Center,
Two World Trade Center, New York, New York. Plaintiff Vincent A. Ognibene has
been appointed as co-Executor of the Estate of Philip Paul Ognibene. Plaintiff Estate
of Vincent A. Ognibene, under §1605(a) of the Foreign Sovereign Immunities Act,
brings a survival action against all Defendants in his capacity as the co-Executor of the
Estate of Philip Paul Ognibene. See Folder 80, provided via CD. See also Third
Amended Complaint, ,r,r 88-90; 375-421.
81. Plaintiff Estate of Vincent A. Ognibene also brings claims in its own right for wrongful
death and asserts other causes of action against all Defendants as a result of the murder of
Philip Paul Ognibene on September 11, 2001.6 A Declaration was submitted on behalf
of the Estate of Vincent A. Ognibene by the Executrix of the Estate, Diane Ognibene.
Ms. Ognibene is the Claimant's widow and Decedent Philip Paul Ognibene's stepmother.
Ms. Ognibene states in her Declaration that, "My husband had a very close
relationship with Philip. [W]hen Philip died Vincent's whole life turned upside down.
When he found out that he had cancer back in 2005, his first words were, 'Well, I will
finally be with Philip soon."' See Folder 81, provided via CD. See also Third Amended
Complaint, ,r,r 88-90; 375-421; Declaration of Diane Ognibene on Behalf of Vincent
Ognibene, Deceased, ,r,r 5, 8.
82. Plaintiff Marie Ann Paprocki is a resident of the State ofNew York and is the surviving
sister of Denis Lavelle, a decedent who was killed as a result of the terrorist attack on the
6 Plaintiff Vincent A. Ognibene expired on April 25, 2008, during the pendency of this suit. Any award
will be made to the Estate of Vincent A. Ognibene. Diane Ognibene is the Executrix of the Estate. A
Suggestion of Death is being filed contemporaneously with this document.
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World Trade Center Towers in New York City on September 11, 2011. Denis Lavelle
worked on the 94th Floor of the North Tower of the World Trade Center, One World
Trade Center, New York, New York. Plaintiff Marie Ann Paprocki has been appointed
as Executrix of the Estate of Denis Lavelle. Plaintiff Marie Ann Paprocki, under
§1605(a) of the Foreign Sovereign Immunities Act, brings a survival action against all
Defendants in her capacity as the Executrix of the Estate of Denis Lavelle. See Folder
82, provided via CD. See also Third Amended Complaint, ,r,r 107-109; 375-421.
83. Plaintiff Marie Ann Paprocki also brings claims in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Denis
Lavelle on September 11, 2001. "[Denis Lavelle] was my mother's sole caregiver,"
writes Plaintiff Marie Ann Paprocki in her Declaration. "He lived with her, cared for
her, and supported her financially. No remains of Denis were ever recovered Because
we have no remains of Denis, we also have no real closure. Days, weeks, months, even
years later, I have a vision of my brother running to try to save himself for my mother's
sake. I am sure that my mother's face flashed before his eyes as he wondered what
would become of her without him to support or care for her." See Folder 83, provided
via CD. See also Third Amended Complaint, ,r,r 107-109; 375-421. See also Declaration
of Marie Ann Paprocki, ,r,r 9-10.
84. Plaintiff Patricia J. Perry is a resident of the State ofNew York and is the surviving
spouse of John William Perry, a decedent who was killed as a result of a terrorist attack
on the World Trade Center Towers in New York City on September 11, 2001. John
William Perry, an officer with the New York City Police Department, was last seen in
the mezzanine of the South Tower, Two World Trade Center, New York, New York just
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prior to its collapse, which was a result of the attacks perpetrated by Defendants.
Plaintiff Patricia J. Perry has been appointed the Administratrix of the Estate of John
William Perry. Plaintiff Patricia J. Perry, under §1605(a) of the Foreign Sovereign
Immunities Act, brings a survival action against all Defendants in her capacity as the
Administratrix of the Estate of John William Perry. See Folder 84, provided via CD.
See also Declaration of Patricia J. Perry, ,r 5-7.
85. Plaintiff Patricia J. Perry also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of John
William Perry on September 11, 2001. The Decedent, who had earned a law degree,
was in the process of turning in his badge when the North Tower was struck by American
Airlines Flight 11. He requested that his badge be returned to him and rushed to the
scene of the terrorist attacks, where he died while giving someone oxygen in the South
Tower. See Folder 85, provided via CD. See also Third Amended Complaint, ,r,r 34-36;
375-421. See also Declaration of Patricia J. Perry ,r 5.
86. Plaintiff Christine Papasso is a resident of the State of New York and is the surviving
spouse of Salvatore T. Papasso, a decedent who was killed as a result of a terrorist
attack on the World Trade Center Towers in New York City on September 11, 2001.
Salvatore T. Papasso was 34 years of age and employed by the New York State
Department of Tax and Finance on the 86th Floor of the South Tower in the World Trade
Center, Two World Trade Center, New York, New York. Plaintiff Christine Papasso
has been appointed the Executrix of the Estate of Salvatore T. Papasso. Plaintiff
Christine Papasso, under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a
survival action against all Defendants in her capacity as the Executrix of the Estate of
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Salvatore T. Papasso. See Folder 86, provided via CD. See also Third Amended
Complaint, ,r,r 55-57; 375-421.
87. Plaintiff Christine Papasso also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of
Salvatore T. Papas so on September 11, 2001. Plaintiff Christine Papasso worked at an
office in Manhattan and personally witnessed the attacks on the Twin Towers. See
Folder 87, provided via CD. See also Third Amended Complaint, ,r,r 55-57; 375-421;
Declaration of Christine Papasso.
88. Plaintiff Rodney Ratchford is a resident of the State of Alabama and is the surviving
husband of Marsha Dianah Ratchford, a decedent who was killed as a result of the
terrorist attack on the Pentagon on September 11, 2001. Plaintiff Rodney Ratchford has
been appointed as the Executor of the Estate of Marsha Dianah Ratchford. Plaintiff
Rodney Ratchford, under §1605(a) of the Foreign Sovereign Immunities Act, brings a
survival action against all Defendants in his capacity as the Executor of the Estate of
Marsha Dianah Ratchford. See Folder 88, provided via CD. See also Third Amended
Complaint, ,r,r 167, 169; 375-421.
89. Plaintiff Rodney Ratchford also brings a claim in his own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Marsha
Dianah Ratchford on September 11, 2001. See Folder 89, provided via CD. See also
Third Amended Complaint, ,r,r 167, 169; 375-421; Declaration of Rodney Ratchford.
90. Decedent Marsha Dianah Ratchford is also survived by a minor child, Rodney M.
Ratchford, who is a resident of the State of Alabama. Plaintiff Rodney Ratchford,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful
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death and asserts other causes of action against all Defendants on behalf of Rodney M.
Ratchford as beneficiary of such claims as a result of the murder of Marsha Dianah
Ratchford on September 11, 2001. See Folder 90, provided via CD. See also Third
Amended Complaint, ,r,r 168, 170; 375-421; Declaration of Rodney Ratchford.
91. Decedent Marsha Dianah Ratchford is also survived by a minor child, Marshee R.
Ratchford, who is a resident of the State of Alabama. Plaintiff Rodney Ratchford,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful
death and asserts other causes of action against all Defendants on behalf of Marshee R.
Ratchford as beneficiary of such claims as a result of the murder of Marsha Dianah
Ratchford on September 11, 2001. See Folder 91, provided via CD. See also Third
Amended Complaint, ,r,r 168, 170; 375-421; Declaration of Rodney Ratchford.
92. Decedent Marsha Dianah Ratchford is also survived by a minor child, Miranda C.
Ratchford, who is a resident of the State of Alabama. Plaintiff Rodney Ratchford,
under § 1605( a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful
death and asserts other causes of action against all Defendants on behalf of Miranda C.
Ratchford as beneficiary of such claims as a result of the murder of Marsha Dianah
Ratchford on September 11, 2001. See Folder 92, provided via CD. See also Third
Amended Complaint, ,r,r 168, 170; 375-421; Declaration of Rodney Ratchford.
93. Plaintiff Joyce Ann Rodak is a resident of the State of New Jersey and is the surviving
spouse of John M. Rodak, a decedent who was killed as a result of the terrorist attacks
on the World Trade Center Towers in New York City on September 11, 2001. John M.
Rodak worked on the 104th Floor of the South Tower of the World Trade Center, Two
World Trade Center, New York, New York. Plaintiff Joyce Ann Rodak has been
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appointed as the Executrix of the Estate of John M. Rodak. Plaintiff Joyce Ann
Rodak, under §1605(a) of the Foreign Sovereign Immunities Act, brings a survival
action against all Defendants in her capacity as the Executrix of the Estate of John M.
Rodak. See Folder 93, provided via CD.
94. Plaintiff Joyce Ann Rodak also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of John M.
Rodak on September 11, 2001. See Folder 94, provided via CD. See also Third
Amended Complaint, ,r,r 141, 143; 375-421; Declaration of Joyce Ann Rodak.
95. Decedent John M. Rodak is also survived by one adult child, Chelsea Nicole Rodak,
who is a resident of the State of New Jersey. Plaintiff Chelsea Nicole Rodak, under
§1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of John M.
Rodak on September 11, 2001. See Folder 95, provided via CD. See also Third Amended
Complaint, ,r,r 141, 143; 375-421
96. Decedent John M. Rodak is also survived by one minor child, Devon Marie Rodak,
who is a resident of the state of New Jersey. Plaintiff Joyce Ann Rodak brings a claim
for wrongful death and asserts other causes of action against all Defendants as a result of
the murder of John M. Rodak on September 11, 2001, with Devon Marie Rodak being
the rightful beneficiary of such claims as a result of the murder of John M. Rodak on
September 11, 2001. See Folder 96, provided via CD. See also Third Amended
Complaint, ,r,r 142, 144; 375-421; Declaration of Joyce Ann Rodak.
97. Decedent John M. Rodak is also survived by his natural father, John Rodak, who is a
resident of the Commonwealth of Pennsylvania. Plaintiff John Rodak brings a claim for
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wrongful death and asserts other causes of action against all Defendants as a result of the
murder of John M. Rodak on September 11, 2001. See Folder 97, provided via CD. See
Third Amended Complaint, ,r 146; ,r,r 375-421. See also Declaration of John Rodak.
98. Decedent John M. Rodak is also survived by his natural mother, Regina Rodak, who is
a resident of the Commonwealth of Pennsylvania. Plaintiff Regina Rodak brings a claim
for wrongful death and asserts other causes of action against all Defendants as a result of
the murder of John M. Rodak on September 11, 2001. See Folder 98, provided via CD.
See also Third Amended Complaint, ,r 146; ,r,r 375-421; Declaration of Regina Rodak.
99. Decedent John M. Rodak is also survived by his sister, Joanne Gori. Joanne Gori is a
resident of the Commonwealth of Pennsylvania and is a party to this action. Joanne
Gori brings a claim for wrongful death and asserts other causes of action against all
Defendants as a result of the murder of John M. Rodak on September 11, 2001. See
Folder 99, provided via CD. See also Third Amended Complaint, ,r 145; ,r,r 375-421;
Declaration of Joanne Gori.
100. Plaintiff Diane Romero is a resident of the State of New Jersey and is the surviving
spouse of Elvin Romero, a decedent who was killed as a result of a terrorist attack on the
World Trade Center Towers in New York City on September 11, 2001. Elvin Romero
was employed by Cantor Fitzgerald on the 104th Floor of the North Tower of the World
Trade Center, One World Trade Center, New York, New York. Plaintiff Diane Romero
has been appointed the Administratrix of the Estate of Elvin Romero. Plaintiff Diane
Romero, under §1605(a) of the Foreign Sovereign hnmunities Act, brings a survival
action against all Defendants in her capacity as the Executrix of the Estate of Elvin
Romero. See Folder 100, provided via CD.
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101. Plaintiff Diane Romero also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Elvin
Romero on September 11, 2001. See Folder 101, provided via CD. See also Third
Amended Complaint, ,r,r 61-63; 375-421; Declaration of Diane Romero.
102. Plaintiff Loren Rosenthal is a resident of the State of New Jersey and is the surviving
spouse of Richard Rosenthal, a decedent who was killed as a result of the terrorist attack
on the World Trade Center Towers in New York City on September 11, 2001. Richard
Rosenthal worked on the 101 st Floor of the North Tower of the World Trade Center, One
World Trade Center, New York, New York. Plaintiff Loren Rosenthal has been
appointed as the Executrix of the Estate of Richard Rosenthal. Plaintiff Loren
Rosenthal, under §1605(a) of the Foreign Sovereign Immunities Act, brings a survival
action against all Defendants in her capacity as the Executrix of the Estate of Richard
Rosenthal. See Folder 102, provided via CD. See also Third Amended Complaint, ,r,r
78-80; 375-421.
103. Plaintiff Loren Rosenthal also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Richard
Rosenthal on September 11, 2001. Some remains of Decedent Richard Rosenthal were
located and identified approximately 3-4 weeks following the attacks. His charred
identification card issued by Cantor Fitzgerald was also found. Plaintiff Loren
Rosenthal has this identification card in her possession to this day. See Folder 103,
provided via CD. See also Third Amended Complaint, ,r,r 78-80; 375-421; Declaration of
Loren Rosenthal.
104. Plaintiff Judith Jackson Reiss is a resident of the Commonwealth of Pennsylvania and is
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a surviving natural mother of Joshua Scott Reiss, a citizen of the Commonwealth of
Pennsylvania and a decedent who was killed as a result of a terrorist attacks on the World
Trade Center Towers in New York City on September 11, 2001. Joshua Scott Reiss was
employed by the Cantor Fitzgerald firm, located on the 105th floor of the North Tower,
One World Trade Center, New York, New York. Plaintiff Judith Reiss has been
appointed the Administratrix of the Estate of Joshua Scott Reiss. Plaintiff Judith
Reiss, under §1605(a) of the Foreign Sovereign Immunities Act, brings a survival action
against all Defendants in her capacity as the Administratrix of the Estate of Joshua Scott
Reiss. See Folder 104, provided via CD.
105. Plaintiff Judith Reiss also brings a claim in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Joshua Scott
Reiss on September 11, 2001. See Folder 105, provided via CD. See also Third
Amended Complaint, ,r,r 28-30; 375-421; Declaration of Judith Reiss.
106. PlaintiffExpedito Santillan is a resident of the State of New Jersey and the surviving
natural father of Maria Theresa Santillan, a decedent who was killed as a result of a
terrorist attacks on the World Trade Center Towers in New York City on September 11,
2001. Maria Theresa Santillan worked on the 103rd Floor of the North Tower of the
World Trade Center, One World Trade Center, New York, New York. Plaintiff
Expedito Santillan has been appointed the Administrator of the Estate of Maria
Theresa Santillan. PlaintiffExpedito Santillan, under§ 1605(a) of the Foreign
Sovereign Immunities Act, brings a survival action against all Defendants in his capacity
as the Administrator of the Estate of Maria Theresa Santillan. See Folder 106,
provided via CD.
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107. Plaintiff Expedito Santillan also brings a claim in his own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Maria
Theresa Santillan on September 11, 2001. See Folder 107, provided via CD. See also
Third Amended Complaint, ,r,r 70-73; 375-421; Declaration ofExpedito Santillan.
108. Decedent Maria Theresa Santillan is survived by her natural mother, Ester Santillan,
who is a resident of the State of New Jersey. Plaintiff Ester Santillan, under§ 1605(a)
of the Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Maria Theresa
Santillan on September 11, 2001. See Folder 108, provided via CD. See also Third
Amended Complaint, ,r,r 70-73; 375-421; Declaration of Ester Santillan.
109. Plaintiff Ellen L. Saracini is a resident of the Commonwealth of the Pennsylvania and is
the surviving spouse of Victor J. Saracini, a decedent who was killed as a result of a
terrorist attack on the World Trade Center Towers in New York City on September 11,
2001. Victor J. Saracini was employed by United Airlines and was the pilot of United
Flight 175 which crashed into the South Tower, Two World Trade Center, New York.
Victor J. Saracini was murdered by the hijackers during the flight. Plaintiff Ellen L.
Saracini has been appointed the Executrix of the Estate of Victor J. Saracini. Plaintiff
Ellen L. Saracini, under §1605(a) of the Foreign Sovereign Immunities Act, brings a
survival action against all Defendants in her capacity as the Executrix of the Estate of
Victor J. Saracini. See Folder 109, provided via CD.
110. Ellen L. Saracini also brings a claim in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Victor J.
Saracini on September 11, 2001. "Terrorists brutally murdered my husband, and
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thousands of others in cold blood," she writes in her Declaration. No remains of Victor
J. Saracini were ever identified. His daughters were 13 and 10 at the time of his death.
See Folder 110, provided via CD. See also Third Amended Complaint, ,r,r 19-21; 375-
421; Declaration of Ellen L. Saracini ,r 8, 10-11.
111. Decedent Victor J. Saracini is also survived by his mother, Anne C. Saracini, who is a
resident of the State of New Jersey. Plaintiff Anne C. Saracini brings a claim for
wrongful death and asserts other causes of action against all Defendants as a result of the
murder of Victor J. Saracini on September 11, 2001. See Folder 111, provided via CD.
See also Third Amended Complaint, ,r 65; ,r,r 375-421; Declaration of Anne C. Saracini
by Joanne Renzi, Her Daughter.
112. Decedent Victor J. Saracini is also survived by a sibling, Joanne Renzi, who is is a
resident of the State of New Jersey. Plaintiff Joanne Renzi brings a claim for wrongful
death and asserts other causes of action against all Defendants as a result of the murder of
Victor J. Saracini on September 11, 2001. See Folder 112, provided via CD. See Third
Amended Complaint, ,r 64; ,r,r 375-421. See also Declaration of Joanne Renzi.
113. Plaintiff Paul Schertzer is a resident of the State of New Jersey and is the surviving
father of Scott Schertzer, a decedent who was killed as a result of the terrorist attack on
the World Trade Center Towers in New York City on September 11, 2001. Scott
Schertzer worked on the 104th Floor of the North Tower of the World Trade Center, One
World Trade Center, New York, New York. Plaintiff Paul Schertzer has been appointed
as Executor of the Estate of Scott Schertzer. Plaintiff Paul Schertzer, under §1605(a)
of the Foreign Sovereign Immunities Act, brings a survival action against all Defendants
in his capacity as the Executor of the Estate of Scott Schertzer. See Folder 113,
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provided via CD.
114. Plaintiff Paul Schertzer also brings a claim in his own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Scott
Schertzer on September 11, 2001. See Folder 114, provided via CD. See also Third
Amended Complaint, ,r,r 100-102; 375-421; Declaration of Paul Schertzer.
115. Plaintiff Ronald S. Sloan is a resident of the State of California and is the surviving
father of Paul K. Sloan, a decedent who was killed as a result of the terrorist attack on
the World trade Center Towers in New York City on September 11, 2001. Paul K.
Sloan worked on the 89th Floor of the South Tower of the World Trade Center, Two
World Trade Center, New York, New York. Plaintiff Ronald S. Sloan has been
appointed as the Executor of the Estate of Paul K. Sloan. Plaintiff Ronald S. Sloan,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a survival action against
all Defendants in his capacity as the Executor of the Estate of Paul K. Sloan. See
Folder 115, provided via CD, for photographs and 'An Important Legacy.'
116. Plaintiff Ronald S. Sloan also brings a claim in his own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Paul K.
Sloan on September 11, 2001. See Folder 116, provided via CD. See Third Amended
Complaint, ,r,r 100-102; 375-421. See also Declaration of Ronald S. Sloan.
117. Plaintiff Raymond Anthony Smith is a resident of the Commonwealth of Pennsylvania
and is the brother of George Eric Smith, a decedent who was killed as a result of a
terrorist attack on the World Trade Center Towers in New York City on September 11,
2001. George Eric Smith was employed by SunGard Asset Management Systems on
the 97th floor of the South Tower in the World Trade Center, Two World Trade Center,
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New Yark, New Yark. Plaintiff Raymond Anthony Smith has been appointed the
Administrator of the Estate of George Eric Smith. Plaintiff Raymond Anthony Smith,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a survival action against
all Defendants in his capacity as the Administrator of the Estate of George Eric Smith.
See Folder 117, provided via CD.
118. Plaintiff Raymond Anthony Smith also brings a claim in his own right for wrongful
death and asserts other causes of action against all Defendants as a result of the murder of
George Eric Smith on September 11, 2001. See Folder 118, provided via CD. See
Third Amended Complaint, ,r,r 177-179; 375-421. See also Declaration of Raymond
Anthony Smith.
119. Plaintiff Katherine Soulas is a resident of the State of New Jersey and is the surviving
spouse of Timothy P. Soulas, a decedent who was killed as a result of a terrorist attack
on the World Trade Center Towers in New Yark City on September 11, 2001. Timothy
P. Soulas was employed by Cantor Fitzgerald on the 105th floor of the North Tower in
the World Trade Center, One World Trade Center, New York, New York. Plaintiff
Katherine Soulas has been appointed the Executrix of the Estate of Timothy P. Soulas.
Plaintiff Katherine Soulas, under§ 1605(a) of the Foreign Sovereign Immunities Act,
brings a survival action against all Defendants in his capacity as the Executrix of the
Estate of Timothy P. Soulas. See Folder 119, provided via CD.
120. Plaintiff Katherine Soulas also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Timothy
P. Soulas on September 11, 2001. At the time of his death, Plaintiff Katherine Soulas
was pregnant and had children in kindergarten, second, fourth and sixth grade. See Folder
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120, provided via CD. See Third Amended Complaint, ,r,r 174-176; 375-421. See also
Declaration of Katherine Soulas.,r,r 5, 7.
121. PlaintiffRussa Steiner is a resident of the Commonwealth of Pennsylvania and is the
surviving spouse of William R. Steiner, a decedent who was killed as a result of a
terrorist attack on the World Trade Center Towers in New Yark City on September 11,
2001. William R. Steiner was employed by Marsh, Inc. on the 97th floor of the North
Tower of the World Trade Center, One World Trade Center, New York, New York.
PlaintiffRussa Steiner has been appointed the Executrix of the Estate of William R.
Steiner. PlaintiffRussa Steiner, under§ 1605(a) of the Foreign Sovereign Immunities
Act, brings a survival action against all Defendants in his capacity as the Executrix of the
Estate of William R. Steiner. See Folder 121, provided via CD.
122. PlaintiffRussa Steiner also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of William
R. Steiner on September 11, 2001. Plaintiff and Decedent were married for 32 "happy
and successful" years and had three children. See Folder 122, provided via CD. See
Third Amended Complaint, ,r,r 7-9; 375-421. See also Declaration of Russa Steiner. ,r 7.
123. Plaintiffs George Stergiopoulos, M.D. and Angela Stergiopoulos are residents of the
State of New Yark and are the surviving parents of Andrew Stergiopoulos, a decedent
who was killed as a result of the terrorist attack on the World Trade Center Towers in
New Yark City on September 11, 2001. Andrew Stergiopoulos worked on the 105th
Floor of the North Tower of the World Trade Center, One World Trade Center, New
York, New Yark. Plaintiffs George and Angela Stergiopoulos have been appointed as
co-Executors of the Estate of Andrew Stergiopoulos. Plaintiffs George Stergiopoulos,
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M.D. and Angela Stergiopoulos, under§ 1605(a) of the Foreign Sovereign Immunities
Act, bring a survival action against all Defendants in their capacity as the co-Executors of
the Estate of Andrew Stergiopoulos. See Folder 123, provided via CD. See Third
Amended Complaint, ,r,r 120-122.
124. Plaintiff George Stergiopoulos, M.D., under §1605(a) of the Foreign Sovereign
Immunities Act, also brings a claims in his own right for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Andrew
Stergiopoulos on September 11, 2001. See Folder 124, provided via CD. See Third
Amended Complaint, ,r,r 120-122; ,r,r 375-421. See also Declaration of George
Stergiopoulos, M.D.
125. Plaintiff Angela Stergiopoulos, under§ 1605(a) of the Foreign Sovereign Immunities
Act, also bring a claim in their own right for wrongful death and asserts other causes of
action against all Defendants as a result of the murder of Andrew Stergiopoulos on
September 11, 2001. See Folder 125, provided via CD. See Third Amended Complaint,
,r,r 120-122; ,r,r 375-421. See also Declaration of Angela Stergiopoulos.
126. Plaintiff Sandra Straub is a resident of the Commonwealth of Massachusetts and is the
surviving spouse of Edward W. Straub, a decedent who was killed as a result of the
terrorist attack on the World Trade Center Towers in New York City on September 11,
2001. At the time of the attack, Edward W. Straub was located outside the South
Tower of the World Trade Center, Two World Trade Center, New York, New York.
Plaintiff Sandra Straub has been appointed as the Executrix of the Estate of Edward
W. Straub. Plaintiff Sandra Straub, under §1605(a) of the Foreign Sovereign
Immunities Act, brings a survival action against all Defendants in his capacity as the
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Executrix of the Estate of Edward W. Straub. See Folder 126 provided via CD.
127. Plaintiff Sandra Straub also brings a claim in her own right for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Edward
W. Straub on September 11, 2001. See Folder 127, provided via CD. See Third
Amended Complaint, ,r,r 81-83; 3 7 5-421. See also Declaration of Sandra Straub.
128. Plaintiff Joan E. Tino is a resident of the State of New Jersey and is the surviving mother
of Jennifer Tino, a decedent who was killed as a result of the terrorist attack on the
World Trade Center Towers in New York City on September 11, 2001. Jennifer Tino
worked on the 96th Floor of the North Tower of the World Trade Center, One World
Trade Center, New York, New York. Plaintiff Joan E. Tino has been appointed as the
Executrix of the Estate of Jennifer Tino. Plaintiff Joan E. Tino, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a survival action against all Defendants in his
capacity as the Executrix of the Estate of Jennifer Tino. See Folder 128, provided via
CD.
129. Plaintiff Joan E. Tino also brings a claim in her own right for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Jennifer Tino
on September 11, 2001. See Folder 129, provided via CD. See Third Amended
Complaint, ,r,r 151-153; 375-421. See also Declaration of Joan E. Tino.
130. Decedent Jennifer Tino was also survived by her sister, Plaintiff Pamela Schiele, who is
a resident of the State of New Jersey. Plaintiff Pamela Schiele, under§ 1605(a) of the
Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Jennifer Tino on
September 11, 2001. See Folder 130, provided via CD. See Third Amended Complaint,
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,r,r 154; 375-421. See also Declaration of Pamela Schiele.
131. Plaintiff Christine Barton (now Pence) is a resident of the State of Florida and is the
surviving mother of Jeanmarie Wallendorf, a decedent who was killed as a result of the
terrorist attacks on the World Trade Center Towers in New Yark City on September 11,
2001. Jeanmarie Wallendorf worked for Keefe, Bruyette & Woods, Inc. on the 89th
Floor of the South Tower of the World Trade Center, Two World Trade Center, New
Yark, New Yark. The Decedent was last known to be on the 86th Floor of the South
Tower. Plaintiff Christine Pence has been appointed as the Administratrix of the Estate
of Jeanmarie Wallendorf. Plaintiff Christine Pence, under §1605(a) of the Foreign
Sovereign Immunities Act, brings a survival action against all Defendants in her capacity
as the Executrix of the Estate of Jeanmarie Wallendorf. See Folder 131, provided via
CD. See Third Amended Complaint, ,r,r 155-157; 375-421. See also Declaration of
Christine Pence.
132. Plaintiff Christine Barton (now Pence) also brings a claim in her own right for wrongful
death and asserts other causes of action against all Defendants as a result of the murder of
Jeanmarie Wallendorf on September 11, 2001. See Folder 132, provided via CD. See
Third Amended Complaint, ,r,r 155-157; 375-421. See also Declaration of Christine
Pence.
133. Plaintiff Doyle Raymond Ward is a resident of the State of California and is the
surviving father of Timothy Raymond Ward, a decedent who was killed as a result of
the terrorist attack on the World Trade Center Towers in New York City on September
11, 2001. Timothy Raymond Ward was a passenger on United Airlines Flight 17 5
which was hijacked by Defendants and which Defendants caused to crash into the South
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Tower of the World Trade Center, Two World Trade Center, New York, New York.
Plaintiff Doyle Raymond Ward has been appointed as the Administrator of the Estate
of Timothy Raymond Ward. Plaintiff Doyle Raymond Ward, under §1605(a) of the
Foreign Sovereign Immunities Act, brings a survival action against all Defendants in his
capacity as the Administrator of the Estate of Timothy Raymond Ward. See Folder
133, provided via CD.
134. Plaintiff Doyle Raymond Ward also brings a claim in his own right for wrongful death
and asserts other causes of action against all Defendants as a result of the murder of
Timothy Raymond Ward on September 11, 2001. See Folder 134, provided via CD.
See Third Amended Complaint, ,r,r 177-179; 3 7 5-421. See also Declaration of Doyle
Raymond Ward.
b) Claims Involving Decedents' Families Only
135. Plaintiff Gerald Bingham is a resident of the State of Tennessee and is the surviving
father of Gerald Kendall Bingham a/k/a Mark K. Bingham, a decedent who was killed
as a result of a terrorist hijacking and subsequent crash of United Airlines Flight 93 in a
field near the town of Shanksville, Pennsylvania on September 11, 2001. Gerald
Bingham, under §1605(a) of the Foreign Sovereign Immunities Act, makes a claim for
wrongful death and asserts other causes of action against all Defendants as a result of the
murder of Gerald Kendall Bingham a/k/a Mark K. Bingham on September 11, 2001.
Decedent Gerald Kendall Bingham a/k/a Mark K. Bingham was a former rugby
player for two squads at the University of California that were crowned National
Champions. Cell phone conversations revealed that he actively participated in what The
9/11 Commission Report referred to as "The Battle for Flight 93." Decedent Gerald
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Kendall Bingham a/k/a Mark K. Bingham died as a result of fragmentation due to
blunt force trauma. He was running late for the flight and was the last to board the plane.
See Folder 135, provided via CD. See Third Amended Complaint, ,r 119; ,r,r 375-421.
See also The 9/11 Commission Report, pp. 10-14; See also Declaration of Gerald
Bingham.
136. Plaintiff Alice Carpeneto is a resident of the State of New York and is the surviving
mother of Joyce Ann Carpeneto, a decedent who was killed as a result of the terrorist
attack on the World Trade Center Towers in New York City on September 11, 2001.
Joyce Ann Carpeneto was employed by General Telecom and worked on the 83rd Floor
of the North Tower of the World Trade Center, One World Trade Center, New York,
New York. Alice Carpeneto, under §1605(a) of the Foreign Sovereign Immunities Act,
brings a claim for wrongful death and asserts other causes of action against all
Defendants as a result of the murder of Joyce Ann Carpeneto on September 11, 2001.
Decedent Joyce Ann Carpeneto was 40 years of age at the time of her death and was
planning to become engaged during Christmas 2001. The Certificate of Death issued by
The City of New Yark on November 9, 2001, states that the decedent's body was never
recovered. It lists the cause of death as homicide. It was verified that Decedent Joyce
Ann Carpeneto reported to work on the 83rd Floor of the North Tower on September 11,
2001, through electronic communications and phone records, including a call that was
placed by the decedent to co-workers of located off-site at 60 Hudson Street to inform
them that employees of General Telecom were trapped on the 83rd Floor of the North
Tower. Alice Carpeneto writes in her Declaration that, "It pains me that my daughter
will never know what it is like to have children. Nor will I [ever] be able to hold her
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children, my grandchildren, in my arms." See Folder 136 provided via CD. See Third
Amended Complaint, ,r 159; ,r,r 375-421. See also correspondence by Brian Metherell,
President, General Telecom, dated September 20, 2001; Declaration of Alice Carpeneto
,r,r 7, 8, 13.
137. Plaintiff Stephen L. Cartledge is a resident of the Commonwealth of Pennsylvania and
is the surviving spouse of Sandra Wright-Cartledge, a citizen of the Commonwealth of
Pennsylvania and a decedent who was killed as a result of a terrorist attack on the World
Trade Center Towers in New York City on September 11, 2001. Sandra Wright
Cartledge was a Facilities Manager at Aon Corporation, located on the 102nd floor of the
South Tower, Two World Trade Center, New York, New York. Stephen L. Cartledge,
under§ 1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful
death and asserts other causes of action against all Defendants as a result of the murder of
Sandra Wright-Cartledge on September 11, 2001. The Declaration of Steve Cartledge
states, "My wife's co-workers called me later that day [September 11, 2001] to ask ifl
had heard from Sandra. A group of them were about to get inside an elevator to leave the
South Tower, despite instructions to stay, and Sandra was among them. At the last
second, she returned to her desk. I later learned that she had left the group to call her
daughter, Michelle Wright, to assure her that she was safe. United Airlines Flight 175 hit
the South Tower while the two of them were on the phone." See Folder 137 provided via
CD. See Third Amended Complaint, ,r,r 41-42; ,r,r 375-421. See also Declaration of
Steve Cartledge, ,r 7.
138. Decedent Sandra Wright-Cartledge is also survived by her daughter, Michelle Wright.
Plaintiff Michelle Wright, under §1605(a) of the Foreign Sovereign Immunities Act,
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brings a claim for wrongful death and asserts other causes of action against all
Defendants as a result of the murder of Sandra Wright-Cartledge on September 11,
2001. Michelle Wright was on the telephone with her mother, Decedent Sandra
Wright-Cartledge, when United Airlines Flight 175 hit the South Tower. The decedent
was unable to escape the building. See Folder 138, provided via CD. See Third
Amended Complaint, ,r 42; ,r,r 3 7 5-421. See also Declaration of Steve Cartledge. ,r 7;
Declaration of Michelle Wright.
139. Plaintiff Maureen R. Halvorson is the surviving sister of William Wilson, a decedent
who was killed as a result of the terrorist attack on the World Trade Center Towers in
New York City on September 11, 2001. William Wilson worked in the South Tower of
World Trade Center Towers, New York, New York. Plaintiff Maureen R. Halvorson,
under §1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful
death and asserts other causes of action against all Defendants as a result of the murder of
William Wilson on September 11, 2001. See Folder 139, provided via CD. See Third
Amended Complaint, ,r 124; ,r,r 375-421. See also Declaration of Maureen R. Halvorson.
140. PlaintiffHaomin Jian is a resident of the State of New Jersey and is the surviving son of
Hweidar Jian, a decedent who was killed as a result of the terrorist attack on the World
Trade Center Towers in New York City on September 11, 2001. Hweidar Jian worked
on the 103rd Floor of the North Tower of the World Trade Center, One World Trade
Center, New York, New York. PlaintiffHaomin Jian, under §1605(a) of the Foreign
Sovereign Immunities Act, brings a claim for wrongful death and asserts other causes of
action against all Defendants as a result of the murder ofHweidar Jian on September 11,
2001. See Folder 140, provided via CD. See Third Amended Complaint, ,r 164; ,r,r 375-
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421. See also Declaration of Haomin Jian. --
141. Decedent Hweidar Jian is survived by his natural mother, FuMei Chien Huang, who is
a resident of the State of New Jersey and is the surviving mother ofHweidar Jian, a
decedent who was killed as a result of the terrorist attack on the World Trade Center
Towers in New York City on September 11, 2001. Hweidar Jian worked on the 103rd
Floor of the North Tower of the World Trade Center, One World Trade Center, New
York, New York. PlaintiffFuMei Chien Huang, under §1605(a) of the Foreign
Sovereign Immunities Act, brings a claim for wrongful death and asserts other causes of
action against all Defendants as a result of the murder ofHweidar Jian on September 11,
2001. See Folder 141, provided via CD. See Third Amended Complaint,, 165; ,, 375-
421. See also Declaration ofFuMei Chien Huang.
142. Decedent Hweidar Jian is also survived by a sibling, Huichun Jian, who is a resident of
Taiwan, Republic of China. Plaintiff Huichun Jian make claims under §1605(a) of the
Foreign Sovereign Immunities Act for wrongful death and assert other causes of action
against all Defendants as a result of the murder ofHweidar Jian on September 11, 2001.
See Folder 142, provided via CD. See Third Amended Complaint,, 163; ,, 375-421.
143. Decedent Hweidar Jian is also survived by a sibling, Hui-Chuan Jian, who is a resident
of Taiwan, Republic of China. PlaintiffHui-Chuan Jian makes claims under §1605(a)
of the Foreign Sovereign Immunities Act for wrongful death and asserts other causes of
action against all Defendants as a result of the murder ofHweidar Jian on September 11,
2001. See Folder 143, provided via CD. See Third Amended Complaint,, 163; ,, 375-
421.
144. Decedent Hweidar Jian is also survived by a sibling, Hui-Chien Chen, who is a resident
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of Taiwan, Republic of China. Plaintiff Hui-Chien Chen makes claims under §1605(a)
of the Foreign Sovereign Immunities Act for wrongful death and asserts other causes of
action against all Defendants as a result of the murder ofHweidar Jian on September 11,
2001. See Folder 144 provided via CD. See Third Amended Complaint,, 163; ,, 375-
421.
145. Decedent Hweidar Jian is also survived by a sibling, Hui-Zon Jian, who is a resident of
Taiwan, Republic of China. PlaintiffHui-Zon Jian makes claims under §1605(a) of the
Foreign Sovereign Immunities Act for wrongful death and asserts other causes of action
against all Defendants as a result of the murder ofHweidar Jian on September 11, 2001.
See Folder 145, provided via CD. See also Third Amended Complaint,, 163; ,, 375-
421.
146. Plaintiff Michael LoGuidice is a resident of the State of Florida and is the surviving
brother of Catherine LoGuidice, a decedent who was killed as a result of the terrorist
attack on the World Trade Center Towers in New York City on September 11, 2001.
Catherine LoGuidice worked 105th Floor of the North Tower of the World Trade
Center, One World Trade Center, New York, New York. Michael LoGuidice, under
§1605(a) of the Foreign Sovereign Immunities Act, makes a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of
Catherine LoGuidice on September 11, 2001. See Folder 146, provided via CD. See
also Third Amended Complaint,, 166; ,, 375-421; Declaration of Michael LoGuidice.
147. Plaintiff Ralph S. Maerz, Jr. is a resident of the Commonwealth of Pennsylvania and is
the surviving relative (natural father) of Noell Maerz, a citizen of the State of New York
and a decedent who was killed as a result of a terrorist attack on the World Trade Center
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Towers in New York City on September 11, 2001. Noell Maerz was a bond trader
employed at Euro Brokers, located on the 84th floor of the South Tower, Two World
Trade Center, New York, New York. Ralph S. Maerz, Jr., under§ 1605(a) of the
Foreign Sovereign Immunities Act, makes a claim for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Noell Maerz on
September 11, 2001. See Folder 147, provided via CD. See also Third Amended
Complaint, ,r,r 37-38; ,r,r 375-421; Declaration of Ralph S. Maerz, Jr.
148. Plaintiff Martin Panik is a resident of the Commonwealth of Pennsylvania and is the
surviving natural father of Lt. Jonas Martin Panik, a citizen of the State of Maryland
and a decedent who was killed as a result of a terrorist attack on the Pentagon on
September 11, 2001. Plaintiff Martin Panik, under §1605(a) of the Foreign Sovereign
Immunities Act, brings a claim for wrongful death and asserts other causes of action
against all Defendants as a result of the murder of Lt. Jonas Martin Panik on September
11, 2001. See Folder 148, provided via CD. See also Third Amended Complaint, ,r 39; ,r,r
375-421.
149. Plaintiff Linda Ellen Panik was a resident of the Commonwealth of Pennsylvania and
was the surviving natural mother of Lt. Jonas Martin Panik, a citizen of the State of
Maryland and a decedent who was killed as a result of a terrorist attack on the Pentagon
on September 11, 2001. Linda Ellen Panik, under§ 1605(a) of the Foreign Sovereign
Immunities Act, brings a claims in her own right for wrongful death and asserts other
causes of action against all Defendants as a result of the murder of Lt. Jonas Martin
Panik on September 11, 2001. Lt. Panik was a Navy Intelligence officer working in the
"hot wash room" of the Pentagon when American Airlines Flight 77, hijacked through
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the actions of Defendants, was intentionally crashed crash into the building. At the time
of the attack, Lt. Panik was in the process of providing a telephone briefing to other
Navy Intelligence officers concerning the terrorist attacks perpetrated by Defendants in
New York, New York. The body of Decedent Lt. Jonas Martin Panik was not found
intact. At the time of the crash of American Airlines Flight 77 into the Pentagon, as
perpetrated by Defendants, Lt. Jonas Martin Panik was briefing Commander David
Radi on the status of the terrorist attacks in New York City. When the line suddenly went
dead, Commander Radi looked out the window of his Pentagon office, which was
opposite that of the plane strike, and saw chunks of concrete and other debris in the air.
Decedent Lt. Jonas Martin Panik was identified via a fingerprint. His family was given
his charred watch and one of his lieutenant bars, which had been polished but still
showed signs of fire damage. The family was also provided his leather flight jacket,
which had been cleaned and sealed due to exposure to hazardous materials. See Folder
149, provided via CD. See also Third Amended Complaint, ,r 39; ,r,r 375-421; Declaration
of Martin Panik; Declaration of Linda Panik. 7
150. Decedent Lt. Jonas Martin Panik is also survived by his sister, Martina Lyne-Anna
Panik-Stanley, who is a resident of the State of Maryland. Martina Lyne-Anna PanikStanley,
under §1605(a) of the Foreign Sovereign Immunities Act, brings a claim in her
own right for wrongful death and asserts other causes of action against all Defendants as
a result of the murder of Lt. Jonas Martin Panik on September 11, 2001. See Folder
150, provided via CD. See also Third Amended Complaint, ,r 40; ,r,r 375-421; See also
7 Following the submission of her Declaration, Linda Ellen Panik succumbed to cancer. For this reason,
her proposed award is listed as to the Estate of Linda Ellen Panik. A Suggestion of Death has been
filed contemporaneously with this document.
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Declaration of Martina Lyne-Anna Panik-Stanley.
151. Plaintiff Helen Rosenthal is a resident of the State of New York and is the surviving
sister of Josh Rosenthal, a decedent who was killed as a result of the terrorist attacks on
the World Trade Center Towers in New York City on September 11, 2001. Josh
Rosenthal worked at Fiduciary Trust on the 97th Floor of the South Tower of the World
Trade Center, Two World Trade Center, New York, New York. Helen Rosenthal, under
§1605(a) of the Foreign Sovereign Immunities Act, makes a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Josh
Rosenthal on September 11, 2001. See Folder 151, provided via CD. See also Third
Amended Complaint, ,r 158; ,r,r 375-421; Declaration of Helen Rosenthal.
152. Plaintiff Alexander Rowe is a United States citizen residing in Simonstown, Western
Cape, South Africa and is the surviving father of Nicholas Rowe, a decedent who was
killed as a result of the terrorist attack on the World Trade Center Towers in New York
City on September 11, 2001. Nicolas Rowe was working on the 106th Floor of the North
Tower of the World Trade Center, One World Trade Center, New York, New York.
Alexander Rowe makes a claim under §1605(a) of the Foreign Sovereign Immunities
Act for wrongful death and asserts other causes of action against all Defendants as a
result of the murder of Nicolas Rowe on September 11, 2001. The body of Decedent
Nicolas Rowe, who emigrated to the United States from South Africa while in search of a
better life, was found atop the roof of the hotel adjacent to the North Tower
approximately two days after the attacks. His body was fully dressed and intact save his
left arm, which was missing, and his right hand contained bum marks. Nicolas Rowe
was forced to jump to his own death to escape the fire raging on the upper floors of the
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North Tower following the crash of American Airlines Flight 11 into the building, as
perpetrated by Defendants. The body of Decedent Nicolas Rowe_was buried in his home
country of South Africa, approximately 200 feet from the home of Plaintiff Alexander
Rowe. See Folder 152, provided via CD. See Third Amended Complaint, ,-i 87; ,-i,-i 375-
421. See also Declaration of Alexander Rowe.
153. Plaintiffs Ed Russin is a resident of the State of New Jersey and the surviving natural
father of Steven Russin, a decedent who was killed as a result of the terrorist attacks on
the World Trade Center Towers in New York City on September 11, 2001. Steven
Russin worked on the 104th Floor of the North Tower of the World Trade Center, One
World Trade Center, New York, New York. Ed Russin, under §1605(a) of the Foreign
Sovereign Immunities Act, makes a claim for wrongful death and asserts other causes of
action against all Defendants as a result of the murder of Steven Russin on September
11, 2001. See Folder 153, provided via CD. See also Third Amended Complaint, ,-r 76;
,-i,-i 375-421; Declaration of Ed Russin.
154. Decedent Steven Russin was also survived by his natural mother, Gloria Russin, who is
a resident of the State of New Jersey. Plaintiff Gloria Russin, under §1605(a) of the
Foreign Sovereign Immunities Act, make a claim for wrongful death and assert other
causes of action against all Defendants as a result of the murder of Steven Russin on
September 11, 2001. See Folder 154, provided via CD. See also Third Amended
Complaint, ,-r 76; ,-r,-r 375-421; Declaration of Gloria Russin.
155. Decedent Steven Russin is also survived by his brother, Barry Russin, who is a resident
of the State of New Jersey. Plaintiff Barry Russin brings a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Steven
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Russin on September 11, 2001. See Folder 15 5, provided via CD. See also Third
Amended Complaint, ,r 77; ,r,r 375-421; Declaration of Barry Russin.
156. Plaintiff Leonard Zeplin is a resident of the State of New York and the surviving natural
father of Marc Scott Zeplin, a decedent who was killed as a result of the terrorist attacks
on the World Trade Center Towers in New York City on September 11, 2001. Marc
Scott Zeplin worked on the 104th Floor of the South Tower of the World Trade Center,
Two World Trade Center, New York, New York. Leonard Zeplin, under §1605(a) of
the Foreign Sovereign Immunities Act, brings a claim for wrongful death and asserts
other causes of action against all Defendants as a result of the murder of Marc Scott
Zeplin on September 11, 2001. See Folder 156, provided via CD. See also Third
Amended Complaint, ,r 91; ,r,r 375-421; Declaration of Leonard Zeplin; Declaration of
Leona Zeplin.
157. Decedent Marc Scott Zeplin was survived by his natural mother, Plaintiff Leona
Zeplin, who is a resident of the State of New York. Plaintiff Leona Zeplin, under
§1605(a) of the Foreign Sovereign Immunities Act, brings a claim for wrongful death and
asserts other causes of action against all Defendants as a result of the murder of Marc
Scott Zeplin on September 11, 2001. See Folder 157, provided via CD. See also Third
Amended Complaint, ,r 91; ,r,r 375-421; Declaration of Leonard Zeplin; Declaration of
Leona Zeplin.
158. Decedent Marc Scott Zeplin is also survived by his sister, Plaintiff Joslin Zeplin, who is
a resident of the State of New York. Joslin Zeplin, under §1605(a) of the Foreign
Sovereign Immunities Act, brings a claim for wrongful death and asserts other causes of
action against all Defendants as a result of the murder of Marc Scott Zeplin on
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September 11, 2001. See Folder 158, provided via CD. See also Third Amended
Complaint, ,r 92; ,r,r 375-421.
The Decedents
159. There are 59 Decedents that are the subject of the instant lawsuit. See Third Amended
Complaint.
160. Thirty-two of the Decedents were last known to be working in the area of Floors 77 to
106 of the North Tower, One World Trade Center, New York, NY on September 11,
2001. American Airlines Flight 11 struck the North Tower at 8:46:40 a.m. The impact
area was Floors 93 to 99. Evidence placed before the 9/11 Commission suggested that
the North Tower's three stairwells became impassible from the 92nd floor up. See Third
Amended Complaint, passim; See also Declarations of Claimants, passim; The 9/11
Commission Report, p. 285.
161. American Airlines Flight 11 was a scheduled transcontinental flight from Boston to Los
Angeles. The aircraft was a Boeing 767, which carries approximately 10,000 gallons of
jet fuel. The aircraft spent approximately 48 minutes in the air. Consequently, a large
amount of its jet fuel supply was unexpended. Flight 11 impacted the North Tower at a
groundspeed of approximately 494.5 miles per hour. Upon the impact of Flight 11 with
the North Tower, as perpetrated or enabled by all Defendants, a fireball of jet fuel
"erupted upon impact and shot down at least one bank of elevators. The fireball exploded
onto numerous lower floors, including the 77th and 22nd; the West Street lobby level; and
the B4 level, four stories below ground. The burning jet fuel immediately created thick,
black smoke that enveloped the upper floors and roof of the North Tower." See The 9/11
Commission Report, pp. 32,285. See also National Transportation Safety Board, Radar
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Data Impact Study, American Airlines Flight 11, United Airlines Flight 175 by Daniel R.
Bower, Ph.D. dated February 7, 2002.
162. One Decedent, Jeffrey Collman, was a flight attendant on American Airlines Flight 11.
He spent up to 32 minutes traveling in plane that was hijacked, or enabled to be hijacked,
by Defendants. See Third Amended Complaint, ,r 183; See also Declaration of Brian
Collman; Declaration of Charles Collman; Declaration of Dwayne Collman; Declaration
of Brenda Sorenson; The 9/11 Commission Report, pp. 32
163. Sixteen of the Decedents were last known to be working in the area of Floors 84 to 104 of
the South Tower, Two World Trade Center, New York, NY on September 11, 2001.
United Airlines Flight 175 struck the South Tower at 9:03:11 at a groundspeed of 586.5
miles per hour, crashing through an area from Floor 77 to Floor 85. See The 9/11
Commission Report, pp. 32, 293-94. See also National Transportation Safety Board,
Radar Data Impact Study, American Airlines Flight 11, United Airlines Flight 175 by
Daniel R. Bower, Ph.D. dated February 7, 2002.
164. United Airlines Flight 175 was also a scheduled transcontinental flight from Boston to
Los Angeles. The aircraft was a Boeing 767-200, which carries approximately 10,000
gallons of jet fuel. It was in the air for approximately 49 minutes, leaving much of its jet
fuel supply unexpended. The heart of the impact zone was the 81 st floor, where the wing
of the aircraft has sliced through the office of the only known survivor from that area. He
described the 81 st floor "as a 'demolition' site in which everything was 'broken up' and
the smell of jet fuel was so strong that it was almost impossible to breathe." Within 15
minutes of impact, debilitating smoke had reached Floor 100. See The 9/11 Commission
Report, pp. 32, 293-94.
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165. Three of the Decedents were onboard United Airlines Flight 175 including the Captain,
Victor Saracini, who was murdered during the flight by the hijackers. The Decedents
who survived the flight were traveling in a plane that was hijacked, or enabled to be
hijacked, by Defendants for 17 to 21 minutes. See Third Amended Complaint,,, 19, 65,
65, 116; 127; 368; See also Declaration of Maria Regina Merwin; Declaration of Ellen
Saracini; Declaration of Raymond Doyle Ward; The 9/11 Commission Report, pp. 7, 32.
166. Three Decedents were working in the Pentagon when it was struck by American Airlines
Flight 77, which was hijacked, or enabled to be hijacked, by Defendants. Like the other
hijacked aircraft, American Airlines Flight 77 was a scheduled transcontinental flight
from Washington, D.C. to Los Angeles. It was in the air for approximately one hour,
seventeen minutes, leaving much of its jet fuel supply unexpended. See Third Amended
Complaint,,, 39, 110, 167. See also Declaration of Chrislan Fuller Manuel; Declaration
of Martin Panik; Declaration of Linda Ellen Panik; Declaration of Rodney Ratchford; The
9/11 Commission Report, pp. 33.
167. One Decedent, Gerald Kendall Bingham a/k/a Mark K. Bingham, was onboard United
Airlines Flight 93 on September 11, 2001, which was a scheduled transcontinental flight
from Newark, NJ to San Francisco. The Decedent was in the air on a plane hijacked, or
enabled to be hijacked, by Defendants for approximately 35 minutes. Following a battle
for control of the airplane between the passengers of Flight 93, including the Decedent,
and the hijackers, the plane flipped onto its back and crashed into a field near
Shanksville, PA at a groundspeed of 580 miles per hour. See Third Amended Complaint,
,, 119; 370. See also Declaration of Gerald Bingham; The 9/11 Commission Report, pp.
13-14, 33.
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168. One Decedent, John William Perry, was a member of the New Yark City Police
Department who was in the mezzanine of the South Tower when it collapsed on
September 11, 2001. See Third Amended Complaint, ,r 34. See also Declaration of
Patricia J. Perry, ,r 7.
169. One Decedent, Edward W. Straub, was killed on a public street near the South Tower
on September 11, 2001. See Third Amended Complaint, ,r 81; See also Declaration of
Sandra N. Straub, ,r 25.
170. One Decedent, Yvette Nichole Moreno, worked in the North Tower but called her
family from outside after American Airlines Flight 11 struck the building. She died on an
overpass while walking home, which was caused to collapse by falling debris. See
Declaration oflvy Moreno, ,r 5.
171. The passengers of American Airlines Flight 11 knew full well that their plane had been
hijacked, was flying too low to the ground, and that death was the likely result for all
aboard. See The 9/11 Commission Report, pp. 4-7.
172. The passengers of United Airlines Flight 175 knew full well that their plane had been
hijacked, was flying too low to the ground, and that death was the likely result for all
aboard. See The 9/11 Commission Report, pp. 7-8.
173. The passengers of United Airlines Flight 93 were well aware that their plane had been
hijacked, that two hijacked planes had been flown into the North Tower and South
Tower, and that death was the likely result for all aboard, despite the passengers' heroic
attempt to thwart the hijackers. See The 9/11 Commission Report, pp. 10-14.
174. Civilians in the South Tower were aware that an incident had occurred in the North
Tower, leading to a fire and billowing black smoke surrounding the North Tower. See
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Declarations of Plaintiffs, passim.
175. Civilians in the South Tower witnessed the approach of United Airlines Flight 175
toward their building. See Declaration of Grace Kneski, ,r 6.
176. Both civilians and military officials at The Pentagon were well aware that the United
States was under attack on September 11, 2001. See Declaration of Linda Ellen Panik;
See also The 9/11 Commission Report, passim.
177. Civilians trapped in the North Tower experienced horrific pain and suffering that is
almost beyond human comprehension. See Declarations of Plaintiffs, passim; See also
The 9/11 Commission Report, passim; Report of Alberto Diaz, M.D, generally.
178. Civilians trapped in the South Tower experienced horrific pain and suffering that is
almost beyond human comprehension. See Declarations of Plaintiffs, passim; See also
The 9/11 Commission Report, passim; Report of Alberto Diaz, M.D, generally.
179. Civilians and military personnel trapped in The Pentagon experienced horrific pain and
suffering that is almost beyond human comprehension. See Declarations of Plaintiffs,
passim; See also The 9/11 Commission Report, passim; Report of Alberto Diaz, M.D,
generally.
180. Emergency personnel responding to the terrorist attacks perpetrated by, or enabled by, all
Defendants experienced horrific pain and suffering that is almost beyond human
comprehension. See Declaration of Patricia Perry; See also The 9/11 Commission
Report, passim; Report of Alberto Diaz, M.D, generally.
181. All Decedents who died as a result of the terrorist attacks as perpetrated by, or enabled
by, all Defendants experienced horrific pain and suffering that is almost beyond human
comprehension. See Declarations of Plaintiffs,passim; See also The 9/11 Commission
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Report, passim; Report of Alberto Diaz, M.D, generally.
182. The pain and suffering experienced by Decedents was broadcast throughout the world in
real-time and witnessed by all Plaintiffs either as the events of September 11, 2001,
unfolded, or during the countless replays of the attacks that have continuously been aired
by various media outlets from the date of the attacks to the present day. See Declarations
of Plaintiffs,passim; See also The 9/11 Commission Report,passim; Report of Alberto
Diaz, M.D, generally.
Expert Attestation in Support of Non-Economic Damages
183. Rear Admiral Alberto Diaz, Jr., M.D. (Ret.) has submitted an expert report with regard to
the pain and suffering experienced by the Decedents and their families as a result of the
terrorist attacks perpetrated, or enabled by, all Defendants against the United States on
September 11, 2001.
184. Dr. Diaz is a member of the American Medical Association, Association of Military
Surgeons of the United States, and Association of Naval Services Officers. See
Curriculum Vitae of Alberto Diaz, Jr., RADM MC USN (Ret.).
185. Dr. Diaz received a Certification by the Board of Psychiatry and Neurology in 1985. See
Curriculum Vitae of Alberto Diaz, Jr., RADM MC USN (Ret.).
186. From 1995-97, Dr. Diaz served as Commander-in-Chief, Pacific Fleet Surgeon. See
Curriculum Vitae of Alberto Diaz, Jr., RADM MC USN (Ret.).
187. Dr. Diaz was the Senior Navy Medical Department Representative in the investigation
conducted by the U.S. Navy after the USS Vincennes shot down an Iranian Airbus on
July 3, 1988. See Report of Alberto Diaz, M.D. § Prior Expert Testimony.
188. Dr. Diaz has served as Executive Officer, Medical Director, or Commander of various
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United States Navy Medical Centers throughout the world. See Curriculum Vitae of
Alberto Diaz, Jr., RADM MC USN (Ret.).
189. Dr. Diaz completed the Combat Casualty Care Course on November 3, 1984. See
Curriculum Vitae of Alberto Diaz, Jr., RADM MC USN (Ret.).
190. Dr. Diaz has provided expert deposition testimony in a number of cases for The Wolk
Law Firm in Philadelphia, PA, which practices aviation law exclusively. See Report of
Alberto Diaz, M.D. § Prior Expert Testimony.
191. Dr. Diaz is qualified to submit an Expert Report to this Court.
192. With regard to the terrorist attacks of September 11, 2001, Dr. Diaz opines that "[t]he
express purpose of this 'operation' was to achieve the highest possible human toll in
terms of lives lost, injuries sustained and lasting psychological trauma. It also sought to
maximize human suffering through the incredibly cruel and horrific means of death and
the prolongation of that suffering." See Report of Alberto Diaz, M.D. § Case History.
193. The suffering of those trapped in the four hijacked aircraft, North Tower, South Tower,
and the Pentagon was compounded by the neurophysiology of the human brain. See
Report of Alberto Diaz, M.D. § Background.
194. The "fear circuit" in the brain has its origins in the central part of the brain called the
amygdala. The specific neural pathways which mediate the feelings of intense dread,
anxiety, fear and panic emanate downward from the central amygdala. See Report of
Alberto Diaz, M.D. § Background. ( emphasis in original).
195. These systems and responses are "not speculative or fanciful" and are "experimentally
reproducible." See Report of Alberto Diaz, M.D. § Background; See also Panksepp,
Jack: Affective Neuroscience (The Foundations of Human and Animal Emotions), Oxford
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University Press, New York, 1998.
196. The physiological response to fear, in particular extreme fear, includes: an increased heart
rate; elevated blood pressure; drying of the mouth; trembling; sweating; blanching;
feelings of faintness; nausea and vomiting; and a general homeostatic disregulation. As
the threat continues, there are hormonal changes. Cortisol and adrenalin begin to surge
through the system, causing tunnel vision and making the victim feel increasingly
confused. This disorganizes though processes further and impairs fine motor control and
hearing faculties. See Report of Alberto Diaz, M.D. § Background.
197. If there is no relief from the threat, then loss of control of the sphincters ensues, with
urinary incontinence and involuntary defecation. See Report of Alberto Diaz, M.D. §
Background.
198. The 9/11 Commission Report contains corroboration of the effects of intense fear as
described by Dr. Diaz. A passenger of doomed United Airlines Flight 175, Peter Hanson,
called his father, Lee Hanson, from the hijacked aircraft at approximately 9:00 a.m. on
September 11, 2001. Mr. Hanson was interviewed by the Federal Bureau oflnvestigation
on September 11, 2001, and relayed the contents of the phone call with his deceased son,
which included the statements: "It's getting very bad on the plane - Passengers are
throwing up and getting sick - The plane is making jerky movements - I don't think the
pilot is flying the plane - I think we are going down - I think they intend to go to
Chicago or someplace and fly into a building- Don't worry, Dad - If it happens it will be
very fast-My God, my God." See Report of Alberto Diaz, M.D. § United Airlines
Flight 175 and American Airlines Flight 11; The 9/11 Commission Report, p. 7-8.
199. It is clear that both American Airlines Flight 11 and United Airlines Flight 175 descended
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extremely rapidly, intentionally picking up speed to maximize destructive energy. They
were flying very erratically, particularly AA 11 as it flew among the skyscrapers of New
York City. Videos of AA 11 capture the sound of the engines as they roar to full throttle
just before impact. UA 175 is seen initiating a hard roll and tum to the left as the pilot
tries to ensure that the plane would strike the intended target. It is difficult to estimate the
induced "G" forces, but they added significantly to the victims' dread and terror in those
last few moments. See Report of Alberto Diaz, M.D. § United Airlines Flight 175 and
American Airlines Flight 11.
200. When the passengers of United Airlines Flight 93 revolted, the "pilot" began to roll the
aircraft violently right and left to throw them off balance. In addition, he began a series of
desperate up and down pitching movements. Recordings from the cockpit documents
shouts and screams, crashing sounds from the adjacent galley, and evidence of a
tumultuous, desperate, frenzied struggle right up to the moment of impact. In the final
seconds the pilot pulled the control yoke all the way to the right, rolling the aircraft onto
its back and putting it into a terminal dive, impacting the ground near Shanksville, PA at
580 mph. See Report of Alberto Diaz, M.D. § United Airlines Flight 93.
201. Dr. Diaz equates the last moments aboard United Airlines Flight 93 as to that of a horror
movie. The desperation and fear of impending doom was made worse by the realization
that the passengers' their efforts would come to naught. The violent maneuvering of the
aircraft certainly caused injuries beyond those that may have been inflicted by the
terrorists. Alternating cycles of weightlessness and crushing "Gs," being smashed from
wall to wall and from floor to ceiling, loss of orientation, and the final roll and dive to the
ground must have generated extreme physiological responses. By this point, most of the
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passengers would have been beyond rational thought. Some in the back would have been
paralyzed by overwhelming and unrelenting fear and stress, while most of those involved
in the assault would have added components of unfathomable rage and anger to their
terror; a truly horrible way to die. See Report of Alberto Diaz, M.D. § United Airlines
Flight 93.
202. The unrelenting, extreme anxiety experienced by those in the four hijacked aircraft, the
North Tower, the South Tower, and The Pentagon is the most intense and dreadful
feeling a human being can experience and leads to a cognitive "meltdown." Once "flight
or fight" becomes clearly impossible the mind becomes, for all intents and purposes,
immobilized. This "quiescence" had evolutionary value in order to freeze the individual
during an unexpected encounter with a dangerous predator. In the modem world, it
compounds the dangers and threats surrounding the individual. Quiescence does not
imply merciful "numbness," only a physical impossibility to react to the threat. Some
authors often refer to the "parallel mind of fear." See Report of Alberto Diaz, M.D. §
Background.
203. The horrific experience of those trapped in the four hijacked aircraft, the North Tower,
the South Tower and the Pentagon was compounded by tachypsia, which is a
consequence of overwhelming stress. Nature compounds the pain by subjectively
slowing time down. What may transpire over the course of a few seconds may be
experienced as happening in very slow motion, thus prolonging the agony. See Report of
Alberto Diaz, M.D. § Background.
204. The signals from the amygada represent inaccessible learned memories (and possibly
inherited instinctual associations). The body and brain's response is immediate and
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impossible to resist. It is said that the signals from the amygdala trump all other higher
cognitive functions. See Report of Alberto Diaz, M.D. § Background.
205. The only way that serious alarm signals from the "fear network" can be held in some
abeyance is through intense and repetitive training, such as the military, law enforcement,
and rescue personnel undergo. (For ordinary minor "threats" the frontal lobes "reassure"
the amygdala that all is under control and the fear response abates.) This explains why
rescue personnel of all types were able to perform heroically despite experiencing
(physically and subjectively) exactly the same horrible threats to their life and sanity on
September 11, 2001. See Report of Alberto Diaz, M.D. § Background. ( emphasis in
original). (parenthetical in original).
206. Death by immolation ranks as one of the greatest fears among humans and animals alike.
See Report of Alberto Diaz, M.D. § World Trade Center (WTC) and the Pentagon
Building.
207. Death by fire itself involves initial symptoms of heatstroke, followed by thermal
decomposition of organs, sloughing of the skin, bursting of the eyeballs, and finally
massive loss of blood and body fluids. Such a death is neither rapid nor merciful. See
Report of Alberto Diaz, M.D. § World Trade Center (WTC) and the Pentagon Building.
208. The need to escape the holocaust must have generated a visceral panic response amongst
all concerned. For some, tragically, severe traumatic injuries prevented their immediate
escape from the flames and they suffered the intense heat and unbearable agony that
accompanies such a fate. The lack of oxygen, which was used up quickly by the flames
from the jet fuel explosions, added a measure of additional suffering as burning was
accompanied by asphyxiation. Searing hot, noxious chemicals were inhaled by victims
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near the fires, producing severe and extremely painful irritation of the lining of the lungs.
See Report of Alberto Diaz, M.D. § World Trade Center (WTC) and the Pentagon
Building.
209. Those trapped in elevators surrounded by fire, particularly the ones located in shafts
through which the jet fuel fireball from American Airlines Flight 11 descended in the
North Tower, were even less fortunate. They literally sat in red hot ovens and slowly
cooked and asphyxiated to death. See Report of Alberto Diaz, M.D. § World Trade
Center (WTC) and the Pentagon Building.
210. The above explains why so many victims facing death by fire chose to leap from the
buildings to certain death. Approximately 200 persons are known to have chosen to end
their lives in this manner rather than face the extreme torture of death by flames. See
Report of Alberto Diaz, M.D. § World Trade Center (WTC) and the Pentagon Building.
211. Those who leapt from the buildings were subjected to another form of torture and agony.
The terminal velocity of a 170 lb human being is about 120 mph. This translates into
approximately 176 ft per second. Falling over 1000 ft will require between 5 and 6
seconds, an eternity when you are facing certain death. Subjectively, tachypsia will
prolong the fall and permits the victim to be fully conscious of the absolute certainty of
his or her death, to experience the rushing of air, the sudden feeling of weightlessness
followed by rapid acceleration downwards, and perhaps tumbling end over end as they
rush towards the ground. Were they to open their eyes they could anticipate the exact
moment of the cessation of the self. And yet, cruelly, there is enough time to think of
those you left behind, to feel regret and to feel sorrow. See Report of Alberto Diaz, M.D.
§ World Trade Center (WTC) and the Pentagon Building.
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212. After the initial impact, explosion, and fireball, survivors were faced with bleak prospects
indeed. In general, those in the floors above were trapped with no place to go. Debris and
nonexistent, or non apparent, means of egress meant that their fates were sealed.
Instinctually, many headed upwards towards the roof, some thinking that perhaps a
helicopter rescue was still possible. In the event, high winds from the blazing inferno
below made that operation an aeronautical impossibility. When they reached the top, they
found that the doors were, in fact, locked. The situation was desperate; neither flight nor
fight was possible. The flames continued to surge from below, consuming some and
forcing others into a desperate death leap. Death was certain. Only the method was yet to
be determined. At this point all hope was lost and the psychological and neurophysiologic
"storm" was inevitable for many, if not most. Background sounds and snatches of
conversations gleaned from brief cell phone conversations paint a picture of confusion,
irrational comments ("call 911 and tell them we are under the desks"), and terror. See
Report of Alberto Diaz, M.D. § World Trade Center (WTC) and the Pentagon Building.
213. For the occupants of the South Tower, their torture lasted 56 minutes before the last,
dramatic act; the collapse of the building dragging all remaining survivors down to a fiery
and crushing death. The North Tower collapsed after 75 minutes, merely prolonging the
inevitable. The victims inside the Pentagon were spared the agony of being trapped
beyond the reach of rescue services, but in every other way, the manner and extent of
their suffering was similar in every way. See Report of Alberto Diaz, M.D. § World
Trade Center (WTC) and the Pentagon Building.
214. It appears as if every conceivable horrific and gruesome way to die was present on
September 11, 2001. However, the dead will suffer no more. For the survivors and family
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members, however, this day was not the end of an incredibly tragic chapter in their lives.
Rather, it was the beginning oflong lasting, intense feelings of grief, guilt and regret. For
extremely large numbers, this is translated into significant and disabling
psychopathology. The scientific literature reveals that 67% of victims exposed to mass
violence become severely (psychologically) impaired, as opposed to only 39% of those
exposed to a technologically based disaster, or 37% of those exposed to a natural disaster.
See Report of Alberto Diaz, M.D. § Survivors and Surviving Family Members. See also
Holloway, H.C. and Fullerton, C.S., (1994) The Psychology of Terror and its Aftermath,
(in "Individual and Community Responses to Trauma and Disaster, eds. R.J Ursano, B.G.
McCaughey & C.S.Fullerton, pp. 31-45, Cambridge: Cambridge University Press; North,
C.S., Tivis, L., McMillen, J.C. et al., (2002). Psychiatric Disorders in Rescue Workers
After the Oklahoma City Bombing, American Journal of Psychiatry, pp. 159, 857-859.
215. Psychopathology runs the gamut from Major Depression, General Anxiety Disorder,
Sleep Disorders, Substance Abuse, and Adjustment Disorder, to Post Traumatic Stress
Disorder. There is also some evidence that among children (whether primary victims or
experiencing traumatic separation and dislocation as a result of the disaster) it may
contribute to various forms of ASD (Autism Spectrum Disorder). See Report of Alberto
Diaz, M.D. § Survivors and Surviving Family Members. See also Norris, F.H.,
Friedman, M.J., Watson, P.T. et al. (2002) 60,000 Disaster Victims Speak, Part 1, An
Empirical Review of the Empirical Literature; 1981-2001. Psychiatry, pp. 65, 207-239.
216. Dr. Diaz attests to a reasonable degree of medical certainty that the suffering of all the
victims on September 11, 2001, was gruesome and painful in the extreme, and that the
majority of survivors and surviving family members will continue to relive the events of
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that fateful day for a significant portion of their natural lives. See Report of Alberto Diaz,
M.D. § Conclusion.
217. For many loved ones, modem communications (cell phones) enabled them to share the
experience from a distance; experiencing the horror, but not the physical suffering. Thus,
grief becomes compounded by guilt, and enduring- and very real and vivid- memories
of the tragedy. Unfortunately they are condemned to keep reliving the experience through
the unabated media coverage that continues to this day. Many, if not most will require
ongoing psychological/psychiatric intervention. See Report of Alberto Diaz, M.D. §
Conclusion. ( emphasis in original).
218. The effects on children who lost parents on that day are immeasurable. The effects of
9/11 will thus continue across generations and for decades to come. See Report of
Alberto Diaz, M.D. § Conclusion.
219. The tragedy has become imprinted on our national psyche, and our lives have all been
negatively affected in one way or another. It contributed directly to our involvement in
two wars and the consequent additional death and suffering. Long lines at the security
checkpoints in airports, ubiquitous government surveillance, and suspiciousness of our
own Islamic countrymen are all ways in which we as a nation may have lost our
innocence. See Report of Alberto Diaz, M.D. § Conclusion.
220. The Declarations submitted by the Claimants in this matter fully support the opinions of
Dr. Diaz. Dozens upon dozens of Declarations submitted in connection with this case
document that Decedents were trapped in the World Trade Center alive and conscious
and that the surviving Claimants received multiple levels of psychological and
psychiatric intervention as a result of losing loved ones on September 11, 2001, ranging
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from participation in support groups to inpatient psychiatric care. See Declarations,
submitted via CD, passim.
221. The opinion of Dr. Diaz is firmly supported by the graphic, real-life attestations
composed by the Claimants in the instant suit, which speak to both the horror of the
Decedents' deaths and the lasting psychological impact that these deaths have wrought on
the Decedents' families. This psychological impact still continues a decade after the
terrorist attacks perpetrated by Defendants. See Declarations of Claimants, passim.
Expert Attestation in Support of Economic Damages
222. Stan V. Smith, Ph.D. is the president of Smith Economics Group, Ltd. Dr. Smith's
specific area of expertise is forensic economics. See Curriculum Vitae of Stan Smith,
Ph.D., attached to the Inquest Memorandum as Exhibit F.
223. Dr. Smith has provided expert deposition testimony thousands of times and has been
deemed qualified to testify approximately 500 times by state trial courts and U.S. District
Courts in virtually every State in the Union. See Correspondence by Stan Smith,
President, Smith Economics Group, Ltd. dated February 14, 2012.
224. Dr. Smith taught the first undergraduate course in the nation on forensic economics. See
Curriculum Vitae of Stan Smith, Ph.D., attached to the Inquest Memorandum as Exhibit
F.
225. Dr. Smith is qualified to provide an expert opinion to this Court concerning the forensic
economics arising out of the claims made on behalf of the Decedents and Plaintiffs in this
case.
226. The amount of compensatory non-economic damages in this matter, as calculated by Dr.
Smith, is $1,728,500,000 exclusive of prejudgment interest. See Correspondence by Stan
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Smith, President, Smith Economics Group, Ltd. dated February 14, 2012, attached to
Plaintiffs' Inquest Memorandum as Exhibit K.
227. The amount of compensatory economic damages in this matter, as calculated by Dr.
Smith, is $344,277,160. This amount includes prejudgment interest from September 11,
2001, to January 1, 2013, using the annual average monthly interest rates for 30 day U.S.
Treasury Bills. Id.
228. The total amount of compensatory damages in this matter, which consists of both an
economic loss and non-economic loss component, is $2,122,777,160. This is exclusive
of prejudgment interest on compensatory non-economic damages. Id.
229. The prejudgment interest calculated on the compensatory non-economic damages of
$1,728,500,000 as stated in ,r 225 was calculated using the monthly average Prime Rate
oflnterest, published by the Federal Reserve System, of 4.96%. From September 11,
2001, to January 1, 2013, the amount of prejudgment interest on the compensatory noneconomic
damages is $1,262,999,268. Id.
230. The method Dr. Smith used to arrive at this prejudgment interest amount is exactly the
same methodology as employed by Judge John M. Facciola in Baker v. Syria, 775
F.Supp.2d 48 (D.D.C. March 30, 2011). Id.
231. The total of all economic and non-economic damages in this matter, including the
prejudgment interest on both economic and non-economic damages, is $3,385,776,428.
Id.
B. PROPOSED CONCLUSIONS OF LAW
232. Incorporated herein by reference are Plaintiffs' 276 Findings of Fact and 35 Conclusions
of Law entered by The Honorable George B. Daniels, United States District Judge for the
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Southern District of New York, on December 22, 2011.
233. The 9/11 terrorist attacks are contrary to the guarantees "recognized as indispensable by
civilized peoples." 28 U.S.C. § 1350 note. Accordingly, the 9/11 attacks and the
resulting deaths constitute "extrajudicial killings" that give rise to private right of action
under 28 U.S.C. § 1605A(c).
Damages under the Foreign Sovereign Immunities Act Generally
234. Thus, this Court finds, based on the Findings of Fact at ,r,r 1-233 above, that Plaintiffs are
entitled to damages, both economic and non-economic, as a result of the extra judicial
killings perpetrated by, or enabled by, Defendants on September 11, 2001.
235. Damages available under the cause of action created under the Foreign Sovereign
Immunities Act include economic damages, solatium, pain and suffering, and punitive
damages. §1605A(c). See, e.g., Baker, supra, 775 F.Supp.2d at 78-86; Murphy v. Islamic
Republic of Iran, 740 F.Supp.2d 51 (D.D.C. 2010); Acree v. Republic of Iraq, 271
F.Supp.2d 179, 219-220 (D.D.C. 2003) (Roberts, J.), vacated on other grounds, 370 F.3d
41 (D.C.Cir. 2004); Cronin v. Islamic Republic of Iran, 238 F.Supp.2d 222, 235 (D.D.C.
2002)(Lamberth, J.), abrogated on other grounds by Cicippio-Puleo v. Islamic Republic
of Iran, 353 F.3d 1024 (D.C.Cir. 2004); Mousa v. Islamic Republic of Iran, 238
F.Supp.2d 1 (D.D.C. 2001)(Bryant, J.).
236. In evaluating the Plaintiffs' proof of economic damages, the Court may "accept as true
the plaintiffs' uncontroverted evidence." Elahi v. Islamic Republic of Iran, 124
F.Supp.2d 97, 100 (D.D.C. 2000); Campuzano v. Islamic Republic of Iran, 281 F.Supp.2d
258, 268 (D.D.C. 2003).
237. Plaintiffs may establish proof of damages by affidavit. Weinstein v. Islamic Republic of
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Iran, 184 F.Supp.2d 13, 19 (D.D.C. 2002); Polhill v. Islamic Republic of Iran, 2001 WL
34157508
238. This Court exercises its discretion to award to award Plaintiffs prejudgment interest from
the date of the terrorist attacks of September 11, 2001, until the date of final judgment.
Baker, supra.
239. Prejudgment interest will be awarded both to compensate the Decedents' Estates and
surviving Claimants for delays due to litigation and to prevent the Islamic Republic of
Iran and all other Defendants from profiting from their long history of terrorist attacks
directed toward the United States proper and the interests, persons and property of the
United States abroad. Pugh, supra, 530 F.Supp.2d at 263.
Damages Awards to the Forty-Seven (47) Decedents' Estates
240. The Estates of the 47 Decedents that are parties to the instant action shall recover
economic losses as a result of the wrongful death of each Decedent on September 11,
2001. See citations at ,r 233, supra.
241. The Estates of the 47 Decedents shall also recover non-economic damages via a survival
action due to the intense pain and suffering endured by Decedents during their
entrapment in the hijacked commercial jetliners designated as American Airlines Flight
11, United Airlines Flight 175, or United Airlines Flight 93; their entrapment in the North
Tower or South Tower of the World Trade Center, both of which were laden with
thousands of gallons of burning jet fuel and debilitating smoke before their collapse and
total destruction; or, their entrapment in The Pentagon after the crash of American
Airlines Flight 77 into the building and the resultant conflagration. Id.
242. The Estates of the 47 Decedents shall also recover for the pain and suffering specifically
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associated with each of the Decedents' horrific deaths individually. Id.
243. Both the Decedents' pain and suffering, and the resulting recovery by each of the 47
Estates, is compounded by the Decedents' mental anguish resulting from the knowledge
their deaths were imminent. Baker, supra, 775 F.Supp.2d at 81-4.
244. The Estate of Donald J. Havlish, Jr. is hereby awarded the amount of $37,864,316.8
245. The Estate of Michael A. Bane is hereby awarded the amount of$37,113,102.
246. The Estate of Martin Boryczewski is hereby awarded the amount of$48,515,853.
247. The Estate of Richard M. Caproni is hereby awarded the amount of$34,703,448.
248. The Estate of Peter Chirchirillo is hereby awarded the amount of $36,593,024.
249. The Estate of Jeffrey Coale is hereby awarded the amount of $36,711,296.
250. The Estate of Daniel M. Coffey is hereby awarded the amount of $36,211,514.
251. The Estate of Jason Coffey is hereby awarded the amount of $35,158,923.
252. The Estate of Jeffrey Collman is hereby awarded the amount of $35,470,609.
253. The Estate of Michael Diehl is hereby awarded the amount of$36,736,540.
254. The Estate of Stephen Dorf is hereby awarded the amount of $34,395,127.
255. The Estate of Judy Fernandez is hereby awarded the amount of $34,004,981.
256. The Estate of William R. Godshalk is hereby awarded the amount of $47,824,909.
257. The Estate of John Grazioso is hereby awarded the amount of $38,529,190.
258. The Estate of James D. Halvorson is hereby awarded the amount of $40,617,182.
259. The Estate of Liming Gu is hereby awarded the amount of $43,035,609.
260. The Estate of Steven Cafiero is hereby awarded the amount of $32,906,639.
8 See Summary of Certified Economic Losses of Each Plaintiff-Decedent prepared by Smith Economics
Group Ltd attached to the Inquest Memorandum as Exhibit G and List of Plaintiffs' Proposed
Compensatory Awards Per Claimant attached as Exhibit I and for specific calculations.
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261. The Estate of Robert Levine is hereby awarded the amount of$35,673,313.
262. The Estate of Joseph Lostrangio is hereby awarded the amount of $36,930,063.
263. The Estate of Brian Nunez is hereby awarded the amount of$33,652,359.
264. The Estate of Meta Waller is hereby awarded the amount of $32,352,938.
265. The Estate of Ronald Gamboa is hereby awarded the amount of$34,043,418.
266. The Estate of Dorothy Mauro is hereby awarded the amount of $32,733,016.
267. The Estate of Mary Melendez is hereby awarded the amount of$38,683,988.
268. The Estate of Peter T. Milano is hereby awarded the amount of$53,305,752.
269. The Estate of Yvette Nichole Moreno is hereby awarded the amount of $33,512,676.
270. The Estate of Philip Paul Ognibene is hereby awarded the amount of $35,587,524.
271. The Estate of Denis Lavelle is hereby awarded the amount of $35,192,429.
272. The Estate of John William Perry is hereby awarded the amount of $36,076,677.
273. The Estate of Salvatore T. Papasso is hereby awarded the amount of $37,442,117.
274. The Estate of Marsha Dianah Ratchford is hereby awarded the amount of$37,386,414.
275. The Estate of John M. Rodak is hereby awarded the amount of $55,593,184.
276. The Estate of Elvin Romero is hereby awarded the amount of $45,936,408.
277. The Estate of Richard Rosenthal is hereby awarded the amount of $38,426,641.
278. The Estate of Joshua Scott Reiss is hereby awarded the amount of $38,879,175.
279. The Estate of Maria Theresa Santillan is hereby awarded the amount of$34,407,439.
280. The Estate of Victor Saracini is hereby awarded the amount of $40,745,899.
281. The Estate of Scott Schertzer is hereby awarded the amount of $33,944,544.
282. The Estate of Paul K. Sloan is hereby awarded the amount of $37,120,133.
283. The Estate of George Eric Smith is hereby awarded the amount of $33,761,652.
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284. The Estate of Timothy P. Soulas is hereby awarded the amount of $117,948,781.
285. The Estate of William R. Steiner is hereby awarded the amount of $37,596,100.
286. The Estate of Andrew Stergiopoulos is hereby awarded the amount of $36,868,696.
287. The Estate of Edward W. Straub is hereby awarded the amount of $47,705,140.
288. The Estate of Jennifer Tino is hereby awarded the amount of $33,778,014.
289. The Estate of Jeanmarie Wallendorf is hereby awarded the amount of $32,921,240.
290. The Estate of Timothy Raymond Ward is hereby awarded the amount of $33,843,706.
Damages Awards for Individual Claimants
291. Those Plaintiffs who are family members of murder victims on September 11, 2001 are
entitled to recover compensatory damages for solatium. See, e.g., Baker, supra, 775
F.Supp.2d at 83.
292. Solatium is awarded to compensate the "the mental anguish, bereavement[,] and grief that
those with a close personal relationship to a decedent experience as the result of the
decedent's death, as well as the harm caused by the loss of the decedent['s] society and
comfort." Belkin v. Islamic Republic of Iran, 667 F.Supp.2d 8, 22 (D.D.C. 2009)(citing
Dammarell v. Islamic Republic of Iran, 281 F.Supp.2d 105, 196-7 (D.D.C. 2003); Elahi,
supra, 124 F.Supp.2d at 110).
293. In evaluating the Plaintiffs' request for pain and suffering, solatium damages, and
punitive damages, this Court must consider the particular circumstances of this horrific
event, as well as similar and recent cases which awarded compensatory and punitive
damages to victims of terrorist attacks. Baker, supra, 775 F.Supp.2d at 83.
294. The Court recognizes that it is entitled to take judicial notice of related proceedings and
records in other cases brought under the FSIA, and does so. Haim v. Islamic Republic of
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Iran, 784 F.Supp.2d 1, 6, quoting Valore IL supra, 700 F.Supp.2d at 59.
295. The accompanying Declarations by the surviving Claimants in this matter detail the
traumatic effects that the 9/11 attacks and their loss of loved ones continue to cause
Claimants today, especially in light of the constant and repetitive media attention
surrounding the attacks. See Exhibit B attached to Plaintiffs' Damage Inquest
Memorandum.
296. The award amounts proposed for individual Claimants are consistent with amounts
previously awarded in terrorist cases and consistent with the outrageousness of the 9/11
attacks.
297. The Claimants in this case will receive awards that are higher than the awards in any
previously reported terrorism case based on the unprecedented nature, scope and
catastrophic physiological and psychological violence wrought by Defendants on the
Decedents, Claimants, and the United States as a whole on September 11, 2001.
298. Each surviving Spouse that is a named Plaintiff in the instant action shall be awarded the
sum of $12,500,000 in non-economic losses plus prejudgment interest in the amount of
$9,133,637 for a total award of $21,633,637.
299. Each surviving minor or adult Child that is a named Plaintiff in the instant action shall be
awarded the sum of $8,500,000 in non-economic losses plus prejudgment interest in the
amount of $6,210,873 for a total award of $14,710,783.
300. Each surviving Parent that is a named Plaintiff in the instant action shall be awarded the
sum of $8,500,000 in non-economic losses plus prejudgment interest in the amount of
$6,210,873 for a total award of $14,710,783.
301. Each surviving Sibling that is a named Plaintiff in the instant action shall be awarded the
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sum of $4,250,000 in non-economic losses plus prejudgment interest in the amount of
$3,105,436 for a total award of $7,355,436.
302. Plaintiff Chrislan Fuller Manuel, the niece of Decedent Meta Waller, shall be treated
as an adult Child and awarded the sum of $8,500,000 in non-economic losses plus
prejudgment interest in the amount of $6,210,873 for a total award of $14,710,783 on the
following basis: she is the Personal Representative of the Estate of Meta Waller; posted
an appropriate bond in the Circuit Court of the City of Alexandria, Commonwealth of
Virginia; dutifully performed her responsibilities of the Estate; and, on the basis of the
statements in her Declaration. See Folders 68 & 69, provided via CD.
303. Nothing shall preclude Plaintiff Frances M. Coffey, as Executrix of both the Estate of
her deceased husband, Daniel M. Coffey, and the Estate her deceased son, Jason Coffey,
from recovering on behalf of both Estates.
304. Nothing shall preclude Frances M. Coffey, individually, Daniel D. Coffey, M.D. and
Kevin M. Coffey for recovering for the murder of both Daniel M. Coffey and Jason
Coffey on September 11, 2001.
305. Nothing shall preclude Maureen Halvorson, Executrix of the Estate of James D.
Halvorson, from recovering on behalf of her deceased husband's Estate, and as the
surviving Spouse of James D. Halvorson, and as a surviving Sibling of Decedent
William Wilson. Both James D. Halvorson and William Wilson were murdered on
September 11, 2001.
306. Plaintiffs are also entitled to reimbursement of the costs of bring this litigation. See, e.g.,
Murphy, supra, 740 F.Supp.2d at 77 (D.D.C. 2010). Plaintiffs' costs incurred for the
prosecution of this action thus far total $1,977,846.49. See Affidavit Regarding Plaintiffs'
- 95 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 302 Filed 02/14/12 Page 96 of 99
Costs of This Action, attached to the Inquest Memorandum as Exhibit M
Punitive Damages
307. In the instant case, the two hundred, seventy-six (276) Findings of Fact so ordered on
December 22, 2011, by The Honorable George B. Daniels demonstrates by clear and
convincing evidence that Iran/Hezbollah and their agents and instrumentalities supported,
protected, harbored, aided, embedded, enabled, sponsored, trained, conspired with and
facilitated the travel of al-Qaida for the purpose of murdering American citizens on
September 11, 2001.
308. The attacks that occurred on September 11, 2001 on the Plaintiffs individually, and our
nation collectively, is like no other in American history. The savagery and suffering
caused on September 11, 2001 has no parallel in American jurisprudence. This act of
terrorism imposed an extrajudicial sentence of death via horrific physical and
psychological injury on all Decedents and intense, repetitive psychological injury on all
surviving Claimants. Such injuries involve a lifetime of unimaginable grief and
immeasurable sorrow. See Report of Rear Admiral Alberto Diaz, MD. (U.S. Navy, Ret.).
See also Declarations of Claimants, provided via CD.
309. Accordingly, the character, nature and extent of these acts merit punitive damages.
See, e.g., Cronin, supra, 238 F.Supp.2d at 235.
310. Iran continues to fund terrorist organizations including al-Qaida as noted by Dr. Patrick
Clawson in his Affidavit, Exhibit 8, dated June 25, 2010 submitted May 19, 2011 to
Judge Daniels.
311. There a need for deterrence in this matter but there is evidence that Defendants possess
substantial wealth. The Iranian natural gas and oil reserves are the second and third
- 96 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 302 Filed 02/14/12 Page 97 of 99
largest in the world, respectively. The gross national product for the Islamic Republic of
Iran alone is estimated to be $928.9 billion by the CIA World Fact Book (2011). In short,
the requirements for punitive damages contained in the RESTATEMENT (SECOND) OF
TORTS § 908 (1) are fully complied with this case. See Supplemental Report of Stan
Smith Regarding Punitive Damages, attached as Exhibit L to Plaintiffs' Inquest
Memorandum.
312. A damages multiplier of 5.35, predicated on the United States Supreme Court's denial for
a writ of certiorari to review a decision from the Supreme Court of Tennessee that upheld
an award which amounted to a 5.35-to-1 ratio of punitive damages to actual damages, is
warranted in this case. See DaimlerChrysler Corp. v. Flax, 272 S.W.3d 521 (Tenn.
2008), cert denied, May 26, 2009, 129 S.Ct. 2433, 174 L.Ed. 2d 277.
313. The use of a damages multiplier of 5.35 in this case brings the total amount of the
damages award to $18,113,903,890.
314. Such damages are warranted in light of Defendants' outrageous, malicious, premeditated
attacks on United States soil.
Isl Thomas E. Mellon, Jr.
Thomas E. Mellon, Jr. (PA Bar No. 16767)
John A. Corr (PA Bar No. 52820)
Stephen A. Corr (PA Bar No. 65266)
Thomas E. Mellon, III (PA Bar No. 81631)
MELLON WEBSTER & SHELLY
87 North Broad Street
Doylestown, PA 18901
(215) 348-7700
Walter S. Batty, Jr. (PA Bar No. 02530)
c/o MELLON WEBSTER & SHELLY
87 North Broad Street
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Annex 370
Case 1:03-cv-09848-GBD-SN Document 302 Filed 02/14/12 Page 98 of 99
Doylestown, PA 18901
(215) 348-7700
Timothy B. Fleming (DC Bar No. 351114)
WIGGINS CHILDS QUINN
& PANTAZIS, PLLC
1850 M Street, NW, Suite 720
Washington, DC 20009
(202) 467-4123
Dennis G. Pantazis (AL Bar No. ASB-2216-A59D)
Melina Goldfarb (AL Bar No. ASB-3739-R71M)
WIGGINS CHILDS QUINN
& PANTAZIS, LLC
The Kress Building
301 19th Street North
Birmingham, AL 35203
(205) 314-0500
Richard D. Hailey (IN Bar No. 7375-49)
Mary Beth Ramey (IN Bar No. 5876-49)
RAMEY & HAILEY
9333 North Meridian Street, Suite 105
Indianapolis, IN 46260
(317) 582-0000
J.D. Lee (TN Bar No. 2030)
David C. Lee (TN Bar No. 015217)
LAW OFFICE OF J.D. LEE
422 South Gay Street, 3rd Floor
Knoxville, TN 3 7902
(865) 544-0101
Evan J. Yegelwel (FL Bar No. 319554)
TERRELL HOGAN ELLIS YEGELWEL, P.A.
233 East Bay Street
Blackstone Building, 8th Floor
Jacksonville, FL 32202
(904) 632-2424
Edward H. Rubenstone (PA Bar No. 16542)
LAMM RUBENSTONE LLC
3600 Horizon Boulevard, Suite 200
Trevose, PA 19053
(215) 638-9330
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Annex 370
Case 1:03-cv-09848-GBD-SN Document 302 Filed 02/14/12 Page 99 of 99
Donald J. Winder (UT Bar No. 3519)
Jerald V. Hale (UT Bar No. 8466)
WINDER & COUNSEL, PC
175 West 200 South, Suite 4000
P.O. Box 2668
Salt Lake City, UT 84110-2668
(801) 322-2222
Robert M. Foote (IL Bar No. 03124325)
Craig S. Meilke (IL Bar No. 03127485)
FOOTE, MEYERS, MIELKE
& FLOWERS, LLC
3 North Second Street, Suite 300
St. Charles, IL 60174
(630) 232-6333
(630) 845-8982
Attorneys for the Havlish Plaintiffs
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Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 1 of 34
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN l)ISTRICT OF NEW YORK
---------------------------------------------------------x
IN RE TERRORIST ATTACKS ON
SEPTEMBER 11 , 2001
--. ------------------------------------------------------x
FIONA HA VLISH, in her own right
and as Executrix of the ESTATE OF
DONALD G. I-IAVLISH, JR., Deceased,
RUSSA STEINER, in her own right
and as Executrix of the ESTATE OF
WlLLIAM R. STEINER , Deceased,
CLARA CHIRCHIRILLO, in her own right
and as Executrix of the ESTATE OF
PETER CHIRCHIRILLO, Deceased,
TARA BANE, in her own right,
and as Executrix of the ESTATE OF
MICHAEL A BANE, Deceased,
GRACE M. PARKINSON-GODSHALK, in her
own right and as Executrix of the ESTATE OF
WILLIAM R. GODSHALK, Deceased,
ELLEN L. SARACINI, in her own right
and as Executrix of the ESTATE OF
VICTOR .J. SARACINl, Deceased,
THERESANN LOSTRANGIO, in her own right
and as Executrix of the ESTATE OF
JOSEPH LOSTRANGIO, Deceased, et al.,
Plaintiffs,
V.
SHEIKH lJSAMAH RTN-MUHAMMAD
BIN-LADEN, a.lea. OSAMA BIN-LADEN,
AL-QAEDA/ISLAMIC ARMY,
an unincorporated association, et al.,
CIVIL ACTION NO.
03 MDL 1570 (GBD)
CIVIL ACTION NO.
03-CV-9848 ·-- GBD
Case Transferred from the
United States District Court
for the District of Columbia
Case Number 1 :02CV00305
AMENDED1
PLAINTIFFS' DAMAGES
INQUEST MEMORANDUM
This Amended Plaintiffs' Damages Inquest Memorandum, e-filed and hand-delivered February 15, 2012,
su persedes and replaces Plaint iff.<;' original Damages Inquest Memorandum, ECF No. 2552 (filed February 14,
2012).
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 2 of 34
FORE'JGN STATE DEFENDANIS:
TUE ISLAMIC REPUBLIC OF !RAN,
AYATOl,LAH ALI-HOSEIN! KHAMENEI,
AU AKBAR ll/\SHEMJ RAFSANJANl,
IRANlJ\N MINISTRY OF
JNFORMATION AND SECURJTY,
THE ISLAMIC REVOLUTIONARY
GUARD CORPS,
HEZHOI,LAH ,
an uninco rporated association,
THE IRANIAN MINISTRY
OF PETROLEUM,
THE NATIONAL lRANIAN
TANKER CORPORATION,
THE NATJONAL IRANIAN
OIL CORPORATION,
THE NATIONAL IRANIAN
GAS COMPANY,
IRAN AIRLINES,
THE NATIONAL lRANIAN
PETROCHEMICAL COMPANY,
IRANIAN MINISTRY OF
ECONOMIC AFFAIRS AND FINANCE,
IRANIAN MlNlSTRY OF
COMMERCL
IRAN IAN MINISTRY OF' DEFENSE
AND ARMED FORCES LOGISTICS,
II
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 3 of 34
THE CENTRAL BANK OF THE
ISLAMIC REPUBLIC OF IRAN, et al.,
·- -.. ----···--·-········---·····- ·-·-··· .. ········-···•··············•··-· ·····-D·~e-f---end-an-ts. ----
111
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 4 of 34
. TABLE_()/~' C'()NTENTS
L BACKGROUND AND PROCEDURAL HISTOl~Y ........ . . .. .... ... .. .. . ... . ... . ... . . . ......... 1
II. JUR ISDICTION . . ... ........... ... .. . .... . ........... . ... . ........... . . . ...... . ....... . ..... . .... 3
JI !. STANDARD OF REVIEW .. . ............... . ... . ... . ....... . ......... . ...... . ............... . .. .3
JV . DAM/\ClESAVAIL/\BLE .. . . .... . ..... . .. . ... .. .............. .. .... . .......... .. . . ... . ... .. . ... 5
V. ECONOMIC LOSSES ........ . ... . ... ••.• . ... . . . ··· · ····· . ... . ..... .. . ·•···· .. .... . .... . ......... 6
VJ. PAIN, SUFFER INC, 1\ND DEATH OF DECEDENTS ....... . .. . .... . .... . .............. .......... 7
Vil . SOI.ATIUM OF FAMILY MEMBERS .. .. .. . ........ .. .. .. . .. . . ... . ... . .................. ... .. I l
Vll l. JUSTIFICATIONS FOR UPW1\IW FNl·IANCEMl:-:NTS .. ..... . .. . .. .......... . . ... .. . . .. .. ..... . 16
IX. PUNITIVE DAMACJES .. ............. : . .. .. . .. , . .. . ...... . . . ..... ..... .... .. ... . ... . .... . ..... 18
X. P RE JUDGMENT INTEREST .. , .. . ............ . ........ . ........ . ... ... .. . . . .. ...... . ......... 23
Xl. P l.A INTIFFS' COSTS OF THIS ACTION ...... .. · .. , . .. . . , . .. ...... , ................ . ... . .... . 26
XI I. CONCLUSION .. . . .. . .. ... . . .... •· . . ....... . ..... . .. .... . ... . ........ . ........ . ......... . ... . .. 26
TA.BLE/JF.EXHIBITS
A L IST OF CLAIMAN'l'S
B. CLAliVIANTS' DECI.ARATIONS
(/'IIOl'm1;n o,v CD1)
C EXPERT REPORT OF REAR ADMIRAL ALl31::RTO DI1\Z, M.D. ( u.s·. N i /V)', Rn.)
D. CURRICULUM V ITAE OF REAR AD!vl!R AI.. ALBERTO D IA7., M.D. (U.S N,J VY, Rl,"f.)
L COVER L ETTER OF STAN SMITH, P11.D .
F. CURRICULUM VITAE OF STAN SMITH, PJI.D.
G. SUMMARY OF Cl:-:RTI FIED ECONOtvllC LOSSES OF Ef\C'.H PL,\INTIFF-DECEDl:NT
H' PERSON/\ L ECONOMIC DATA or PLAINTIFF-DECEDENTS
(CONFIDl:NTIAI. ·· P!WDlJCEI) UNDER SEAi.. l'//0/i/DU) ON CD2)
I. LIST OF PLAINTIFFS' PROPOSED COMPE'.NSATORY DAMACiE A WAlWS PER CLAIMANT
.I. 01'1NlON LETTEll. BY STAN SMITH, PH.D. RECARDINC PIU:.IUDC,MENT ]NTEREST
CALCULATIONS
K . Pl<OPOSl'.D "TOTAL DAMAC,ES SUMtvl;\ RY" BY DR. STAN SMITH
I... SUPPU:i'vlENTAI. R EPORT OF ST1\N SMIT! I REClARDINO PUNITl\/1: DAiV11\(jES
M. AFFlDi\ VIT RECARDlN() PL1\ INTIFFS' COSTS (H-' TH IS ACTION
1 ond7.. Copies of'all rnalerials .. includ i11g lhc CDs conrnining !he Declarn1io11s and the ind ivid ual economic reports
and backup data , nre be ing delivered to the Clerk ofC0111ts, United States Dist rict Co urt, S.D.N .Y., and to
tlw chambers of Un il cd States M,1gistrnte Judge Frank Mass, Uni ted Stales Courthouse, 500 Pearl St reet,
New York, New York, on Fcbnimy 15, 2012 .
]\I
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 5 of 34
Acosta v. Islamic Republic: o/Jran , 574 F.S upp.2d l 5 (D.D.C. 2008) ................... .. ....... .. .. 19
Acree v. Republic ql]raq, 271 F.Supp.2d 179 (D.D.C.2003) ........ ,. .. . .... .................. 6, I 0, 14
Anderson v. Jslamic Republic qlfmn, 90 F.Supp.2d l 07 (D.D.C. 2000) .... ..... .... ........... IJ, l 4
Argenline Republic v. Amerada Hess ShippinJ{ Corp., 488 U. S. 428, 109 S.CL 683, l 02
L.Ed .2cl 8 I 8 ( 1989) ... ... ... .. .. ........... .. .... ..... ... . .. .... .. .... .. ..... ................. 4
Baker et al. v. Socialist People 's Lihyan 1/rnh .Jamah iryu, ef al., 775 F.Supp. 2d 48
(]) ]). c· I\~·- · -. . . _. . , •i dl C1 1 ·J· o'h , ·~) (JJ J) .. .. ...... ....... . .. .......... . ........ LI ,,,s , ()., 7 , °, , J?·~ , '_) tl· , ',J..,S
Belkin v. lslmnic Repuh/ic <?/'/rem, 667 F.Su pp .2d 8 (D. D.C. 2009) ............. .. .. .. ... ....... .. ... 12
BMW (?f'Norrh America, inc. v. Uore, 517 U.S. 559 ( 1996) ... .. . .... .. ... .. . ...... .. .. ... ... .. ........ 2J
Cwnpuzono v. Islamic l?ep uh lic q/'lrnn, 28 1 F.Supp.2d 258 (D .D.C. 2003) .............. 4, 5, 12, l4
Carlson v. Islamic Republic: qf'Jran, 201 F.Supp.2cl 78 (D.D.C. 2002) ... .. ....... .... .. ...... .. .... 16
Cic 1j;pio v. Islamic Republic of' lran , 18 F.Supp.2d 62 (D.D.C. l 998) ....... ..... ... ... . 8, 10, 11, 14
Cicippio-Puleo v. lslamic Repuh!ic of'Jran, 353 F.3d I 024 (D.C.Cir. 2004) .... .... ... ... .. ... .. 6, I 0
Cielito Volencia, et al. v. Islam ic Republic <~f'Jran, et al., 774 F.Supp. 2d 1 .... .. .... .............. 20
Cronin"· Islamic Republic of /ran, 238 F. Su pp.2d 222. (D.D.C. 2002) .. ... .. .. .. .... ...... .. ... l 0, 20
DaimlerChrysler Corp. v. Flax, 272 S. W. 3d 521 (Tenn. 2008) cert denied,
May 26, 2009, 129 S.CI. 2433 , 174 L.Ed. 2d 277 .. ...... ... ....... . ..... .... ...... 21, 22
Daliberti v. Repuhlic ()j'Jroq, 146 F.Supp.2d 19 (D.D.C. 200 1) ....................................... I0
Damnwre/l v. Jslmnic Republic: ql]ran, 28 1 F.Supp.2d 105 (D.D.C. 2003) .. .. ... ..... .. .. .... .... . 12
Eisenfeld v. Nmnic Republic oj'/ran, l 72 F.Supp.2d l (D.D.C. 2000) ... .. ... ..... ........... .. 14, 16
Elahi v. !slamic Republic rf lrcm, 124 F.Supp.2d 97 (D.D.C. 2000) .. ... . ... ....... . ........... 5, 9, 12
Es fole c~/Bland v. Islamic: Republic of'lrnn, -- F.Supp.2d --··, 2011 WL 6396527
(D.D. C. , December 2 1, 2011) (Lamberth, C. J.) ...................... 13, 14, 15, 20, 2 l
Eswte of'J-Jeiser v. Islamic Repuhlic <?f'lron, 466 F.Supp. 2cl 229
(D.D.C. 2006) ("Heiser J") .. .. .. .... .. .... ....... . .... ... .. . .. ... .... .... .. .... ....... 7, 13
Fla/ow v. Islamic Republic of'lran, 099 F.Supp. l (D.D.C. l 998) .................. 12, 14, 15, 16, J C)
Gares v. Svrian Arab Repuhlic, 580 F.Supp.2d 53 (D.D.C. 2008) ..... . ......... .. .. .. .. .. ....... ... .. . 8
Greenhaum v. lslamic Repuhlic qf Iran, 451 F.Supp.2d 90 (D.D.C . 2006) .......... ..... ... ...... .... 14, 15
/-Jaim v. Islamic Republic o(Jrcm, 425 F.Supp.2d 56 (D.D.C. 2006) ................. .. ...... .. ... 11, 13
Haim v. Js lamh: Republic of'Jran, 784 F.S upp.2d I (D.D .C., May l 9, 2011 ) . ... .. ..... ........ .. ..... 5
lligKins v. The Islamic Repuhlic c)j' Iran., Not Reported in F.S upp .2d, 2000 WL
3367431 1 (D.D.C. 2000) ... ..................... . ........ .. . .. .. ... . ... . ... ..... .. .... .. .. 15
Hill v. Republic o(Jraq, 175 F.Supp.2d 36 (D.D .C. 200 l ) ..... . ..... , ............ .. ........... ....... .. I 0
Hill v. Rep11h/ic: o/Jmq, 328 F.3d 680 (D.C.Cir. 2003) .. ..... ... ..... ...... ...... ... .. ... .. ........... ... 2
l/vsell v. Iowa Puhfic Service Co .. 559 F.2d 468 (8 111 Cir. 1977) ... ... ... .. .. ... . .. .. ................. .. 8
In Re Terro rist Artw.:ks on Sep/emher J !, 200/, 2001 Wl.4903 584 (S .D.N.Y. 2011 ) .. .......... ... l
In Re Terrnrist Arracks 011 September J l , 2001, 349 F.Supp.2cl 765 (S .D.N .Y. 2005) .. .... ......... 1
.Ienco v. lslom ic Repuhlic o/frnn, 154 F.S upp. 2d 27 (D.D.C. 2001) ..... ....... .. ...... .. ....... 10, 14
,'vfouso v. Js·/omic Repuhlic of}ron, 2:l8 ,.-.Supp.2d I (D.D.C. 200 l ) .. .............. .. . ................ 6
Murphy v. Islamic Repuhlic oj'Jron, 740 F.Supp.2d 51 (D.D.C. 2010) .. . .............. .... 6, 7, 14, 21
Oveissi v. Islamic Republic ol/mn, 768 F.Supp.2d I 6 (D.D.C., March 8, 201 1) .. .. ... ... .. .... .... l A
Peterson v. lslomic Repuhlh· o/Jran, 515 F.Supp.2d 25 (D.D.C. 2007) . ......... .. ....... . ...... .. ... . 13
\I
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 6 of 34
Phil/1jJ Morris USA v. Williams. 549 U.S. 346 (2007) ... ... ... ... .. . .. ... ........... .. .. .... ... .... ... 21
Polhill v. !.~·lamic Republic lflron, Not Reported in F.Supp.2cl, 2001, WL 34157508
(D.D.C. 2001) ....... .. ....... .................. ............. . .. . ........ .. ........... 5, 8, 11
Price v. Socialist People 's Libyan Arab .!amahir(ya, 294 FJd 82 (D.D.C. 2002) ..... ... ..... ..... .. 4
Price v. Socialist People's Libyan 1lrah Jamahiri)ia, 384 F.Supp.2d 120
(D.D.C. 2005) .. ... .. .. .......... ... .... . .. ......... ....... ... ...... ... .. . .. . .............. I 0
Pu~h v. Socio/isl People ·s Libyan Arah .Jamahiriya, 530 F.Supp.2cl 216
(D.D.C. 2008) ....... .. .. . ............... . ............ .. ... ... ............ 5, 7, 8, 11 , 17, 24
Rimkus v Islamic Repuhlic ojlrm,, 750 F.Supp.2d at 163, 184 (D.D.C. 20 I 0) ... .. ..... ........... 2 l
Regier v. h-tamic Republic of"]ran, 28 I F.Supp.2d 87 (l).D.C. 2003) .............. ............. 5, 8, 11
Roeder v. Islamic Repuhlic of"}ran, 333 F.3d 228 (D.C.Cir. 2003) ...... ..... .... . .. .... .......... . 2, 5
Srare Farm Murual 1/ufomobile lnsumnce Co. v. Cumpbell. 538 U.S. 408 (2003) ..... ... . ... ... ... 23
Stern v. Islamic Republic of'lran, 27] F.Supp.2d 286, 301 (D.D.C. 2003) ........ .. ............ ... .. 13
Steen v. Islamic Republic td'lran, Nol Repor!ed in F.Supp.2d, 2003 WL 21672820
(D .D.C. 2003) ...... ... ..... .. .... .... .... ....... ... .. ... ..... ... .... .. ... ..... ...... .4, 8, l l
Stethem v. Islamic Republic cflmn, 201 F.Supp.2d 78 (D. D.C. 2002) ...... ...... ... .......... . .. 9, 11
S'uretre v. Islamh: Repuhlic q/Jmn, 23 l F.Supp.2cl 260 (D.D.C. 2002) ............ .. .. ........... I 0, 13
Sutherland v. l.\·lamic Republic <?f'lran, 151 F.Supp.2d 27 (DJ).C. 200 I) ... ... ................ .. 8, 11
Taylor v. Washington Terminal Co., 409 F.2d 145 (D.C.Cir. 1969) ..... .. ...... ... .. ....... . ... ....... 8
Vo/ore v. Islamic Republic o/Jrcm, 700 F.Supp.2d 52
(D.D.C. 2010) ("Valore 11") .. ... .... ... .......... ... ...... .. ..... ...... ... .4, 5, 13, 15, 20
Wagner v. lslamic Republic of'Jran, 172 F.Supp.2d 128 (D.D.C. 2001) .. ... ... ... .. . .. . . . .. 13
Weinstein v. ls/amic Republic qf'fran, 184 F.Supp.2d 13 (D.D.C. 2002) .. ... ......... . .... 5, 8, 9, 16
Other. So 1ll'ccs:
§ l 605A(c) ... . ........... ......... . . . .. ................... ... ... . . . .... .... . ........... . .... .. ........ . . ...... 4, 6
28 U.8.C. §l608(e), er seq ........... .... ..................... ... .. . ..... ....... ...... ...... .. ...... ... ... .4, 5
28 U.S.C. §!602,efseq. . ....... ... ... . .... .. ... . .. .. ... .. ... .. . ... .... . ....... ... .. ....... ... 4
REST1\ TUvlENT (SECOND) 01-' To1ns § 908( l )-(2) ..... ... .......... ... .......... ..... ...... .. .. ... ... l 9 .. 20
Federal Ruic of Civil Procedure 55(e) .. ..... .. ..... .. .. .... ... ... ... .. ........... . ......... ........ . ..... .. 2
Federal Ruic of Civi l Proceclure4 .. .... .. .... ... ...... .... ........ ....... .. ...... .. ... .... .. ............ .... 2
CIA World Facr Book (2011 ) .. .. .... . ... . .. . . ... . .. ... . ... ... ............. . ........ . . . . . . . ... . . .. . . .... .. .. 20
vi
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 7 of 34
PLAINTIFFS NOW COME and seek an award of compensatory and punitive damages for
the most outrageous tortious act ever committed on American soil and the most horrific
premeditated crime against American citizens in our country's history. Plaintiffs in th is action
are family members and legal representat ives of the murder victims of !"he September 11 , 2001
attacks. Pla in tiffs have proven the liability of defendants to the satisfaction of this Court.
This Court must now award dam ages commensurate with the singularly heinous ancl
resonating nature of the 9/1 l a(lacks. As demonstrated herein, the actions of the defen dants
caused the Deceden!s lo suffer horrible denths and inflicted end uring agony upon Plaintiff fomily
members. In addition to providing reparation for economic loss and the horrific pain and
suflering or the victims, damages awarded by the Court must also attempt to compensate family
members for individual emotional and mental trauma thnt will never be fully assuaged.
B,ised on established precedential case law and this par1i cularly malicio us and
spcc.tacularly devastating crime ngainst humanity committed by de fendants, Plain tiffs deserve
the highest possible justifiable compensatory and punitive damage awards.
I. BACl<GROUND AND PROCEDURAL 1-IISTORY
On September 11 , 2001, nineteen members of the nl Qaeda terrorist netvvork hij acked
four United States passenger airplanes and flev11 them into the Twin Towers of the World Trade
Center in New York City, the Pentagon in Arlington, Virginia, and, due to passengers' efforts to
foil the hijackers, an open field near Shanksville, Pennsylvania. Thousands of people on the
planes and in the buildings, including, first responders at the New York crash si te, were ki lled in
these attacks. Cou ntless others were injured, and property worth many billions of dollars \Vas
destroyed. See, e.g., In Re Terrori.1·1 t1 1{acks on Seplemher 11 . 200 I , 349 F.S upp.2cl 765, 779
(S.D.N .Y. 2005, Casey, .l .); Jn Re Terrorist Attacks on S'eplemher l 1, 2001 , 2001 WL 4903584
.. l -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 8 of 34
(S.D.N.Y. 2011, Maas, J.) .
Plainti!Ts in this action arc one hundred, eleven (l l l) fami ly members and forty-seven
( 47) legal representatives of mui·dcr victims of the 9/ l l al!acks. See Lisr qf'Plaint[fj.;• attached
hereto as Exhibit A. These Plaintiffs sought entry ofjuclgment under the Foreign Sovereign
lrnrnunitics Act, 28 U.S.C. § 1605A(tbc "FSlA"), aga inst the lslai11ic Republic of Iran., two of its
top leaders, Ayatollah Ali Hose ini Khamenei and Ali Akbar Hashcmi Rafsanjani, as well as the
Iranian Ministry of lnformation and Security {"MOIS'} the lslarnic Revolutionary Ouard Corps
("IRGC"), the Iran ian Ministry of Petroleum, the Iranian Ministry of Economic Affairs and
Finance, the Iranian Ministry of Commerce, the Iranian fvlini stry of Defense and Armed Forces
Logistics, the National Iranian Tanker Corporation, the National Iranian Oil Corporation, the
National lranian Gas Company, Iran Airl ines, the Nntional Iranian Petrochemical Company, and
the Central Bank of the Islamic R.cpublic oflran. Plainti ffs also asserted claims against nonsovereign
defendants Usama (or Osama) bin Laden, the Taliban, Muhammad Omar, the al
Qaeda/Jslamic Anny, and llizballah for wrongful death, survival, inten tional infliction of
cmol'io ua l distress, and conspirncy,
Plaintiff<;' liabili ty evidence was submitted to the Court via wrillcn filings on May 19,
2011, July 13, 200 1, and August 19, 20 11 . The Court held an evidentiary hearing on December
15, 2011 . On December 22, 201 1, .Judge George B. Daniels grantee! the PlninlifJs ' motion fo r a
default judgment against all defendants. llavlish, et al. v. bin Laden .. et al.. No. 03 Civ. 9448
(ECF No. 25 16). Judge Daniels further ordered !hat the case be rc!'en'Cd lo United S!Mcs
!Vlagislratc Judge Frank Maas "to res ol ve any remain ing issues, including but not li mited to
damages both compensatory and punitive." .Htdgc Daniels also entered Find ings of Fact ancl
Conclusi ons of Law deta iling the basis for his liab il ity rnlings. Jc/.
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On January 13, 20 12, Judge Maas issued a Scheduling Order directing Plaintiffs lo file
this Inquest Memoran<lun1, accompanied by supporting affidav its and exhibi ts, setting forth
Plaintiffs' proof of dumagcs, including the costs of thic, action and, if npplicable, Plaint iffs'
reasonable attorney's fe es, together with proposed findings of fact and co nclusions of law. In Re
Te rrorisl A/locks on Seprember 11, 200 !, No 03 -MDL- 1570 (ECF No. 2534).
I I. ,J URISl>ICTION
In its Findings of Fact and Conclusions of Law as to liability in this matter, this Court has
already determined that it has subject matter and personal j urisdiction over all defe nd ants. See
Plaintiffs' CONCLUSIONS OF LAW, Section A., ,1,12-1 6. 1
III. STANDARD OF REVIEW
This Court has already determined that Plaintiffs have established their liabilily claims
"by evidence satisfrictory lo the court," pursuant to 28 U.S.C. § I 608(c). Through the sup porli ng
Declarations, economic. evidence and ex.pert reports attached he reto, Pl ainliffs establish the
amount of the appropriate compensatory and punitive damar;e awards under lhat snrne
cviclcntiary standard .2 In evaluating the Plaintiffs' proof of economic damages, the Courl may
"aeccpt as true the plain tiffs' uncontroverted evidence. " 3 Further, Plaintiffs rnay estab lish proof
of damages by affid avit.,1 Additionally, "FSIA courts may 'take judicial notice of related
............................... __ _
Sec ,dso, /Juker, supro, 775 F. Su pp.2d al 78 -84; Sreen v. Is lamic Rep11hlic (f/ran, Not Reported in
F.S11pp.2d, 2003 WL 2 1672820 (D.D.C. 2003); Cumpuzano v. Islamic Repulilic <?f'fron, 28 1
r: Supp.2d 258 (D.D.C. 2003).
2 See Roeder t•. Islamic Republic olfran, 333 F.3d 228 (D.C.Cir. 2003).
1 Elahi v. lslwnic l?epublic oflran, 12,1 F.Supp.2d 97, 100 (D.D.C. 2000): Cmnpuzuno v. Jslumic
J?epuhl ic (~/Iran, 28 1 F.Supp.2d 258, 268 (D.D.C. 2003).
4 Wei11s1ein v. lslu111i<: Rep11h!ic qflron, 184 F.Snpp .2d l J, 19 (D.D.C. 2002); Polhill v. Islamic: Rep 11hlic
Annex 370
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,r;;c· .
proceedings and records'" llaim v. lslwnic Republic olfran, 784 F.Supp.2d I, 6, quoting Va/ore
fl, supra, 700 F.Supp.2c\ at 59. Also, in evaluating the Plaintiffs' request for pain and suffering,
solatium damages, and punitive damages, this Court must consider the pmticulnr cireumstnnccs
of this horrific event, as well as similar recent cases \;,..1hich awarded compensatory and punitive
damages to victims of terrorist attacks. 5
In suppo rr of this request for awards of compensatory and punitive damages, Plninliffs
submit lo the Court Declarations which detail the suffering endured by the victims nnd su rvivi ng
family members. See Exhibit B attached hereto.<, These PlaintiffDeclan.Hions deta il, inter alia,
the nature (i.e., closeness) of the rel~1tionship between the claimants and the decedents, as well as
the extreme mental anguish still experienced by the Declaranls \¥hich is for in excess of'that
which would have been experienced f<.l llowi ng the Decedents' natural deaths.
Plaintiffs also hereby submit !he expert report of Rear Admiral /\lbcrto Diaz, M.D . .lr.,
RADM MC USN (Rer.). See Ex!tibil C, attached hereto. Dr. Diaz's report details the horrific
last hours and minutes of the lerrorist viclirns on September 1 I, 200 l and tile excruciating pain
and suffering they endured. Dr. Diaz has served a:, Comnrnnder-in Chief~ Pacific Fleet Surgeon
and was the Senior Navy Medical Department Representative in the investigat ion conducted by
the {JS. Navy after the USS Vincennes shot down an lraninn Airbus on .I uly 3, 1988. See
Report of Alberto Diaz, M.D., § PRJOI? E,\'PDff nsnMONI'. Addit ionally, Dr. Diaz has se rved as
Executive Officer, Medical Director, or Commander of various United Slales Navy Medical
Centers throughout the world. See Curriculum Vitae of Alberto Diaz, Jr., RADtvl tvlC USN
(Ret.), auacbcd hereto as Er/Jibit D.
oj'Jm11, 200 I WL 34 157508 (D.D.C. 200 I); Pugh v. Socialist People '.1· J.ihyon /lruh .h111/i.//1ii'iyo, 530
F.Supp.2d 2 16 (D.O.C. 2008); Regier v. Islamic Republic <?f'lrnn, 281 F. Su pp.2d 87 (D.D .C. 200'.\).
5 J/aker, supra, 775 F.Supp.2d at 83.
6 Plaintiffs' declarations of damages arc numbcrccl in the snrne order that Plaintin\ nppear in Exhibit A .
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Plaintiffs also hereby submit an expert repo rt (and curriculum vitae) from Stan V. Smith,
Ph.D., detailing the economic losses suffered by the Decedent Estates, as well as calculations of
prejudgment interest. Sc(~ Exhibits E, F, and J, attached hereto,' discussed in Section V. , in.fi-a.
Dr. Smith's expert report states that, as a result of the Plaintiff Decedents' unt imely deaths,
significant economic losses were incurred by their Estates. See Exhibit E', nttachcd hereto.
Additionally, Dr. Smith has calculated the appropriate amount of prejudgment interest lo be
awmdcd. Sec Section X., i11fa, an~l E'.,Mbit J, attached hereto.
IV. Damages Available
Damages available under the FSl/\-crcnted cause of action include "economic damages,
solatium, pnin and suffering, and punitive damages." Many courts have previously assessed
these same types of damages against both sovereign and non-sovereign defendants where
liabi lity has been established based on the FSIA or common law 101·( clnims-7 Accordingly,
Decedent F~statcs can recover economic losses stemming from wrongful death of the Decedent.
Estates of Plaintiff Decedents cnn also recover damages for the intense pain and suCfcring
endured by the Decedents during their survival while trapped in rhc hijacked airlines or in the
burning Twin Towers, as vvell as for pain and suffering specifically related to the Plaintiff
Dccedcn!s' horrific dealhs.8
7 § 1605A(c). See. e,;~ .. Baker, supra. 775 F.Supp.2d al 78-86: Murphy v. lslwnic N.epublic of'/ron, 740
F.Supp.2d 51 (D.D.C. 20 IO); Acree v. Re;mhlic ojlmq. 271 F.Supp.2d 179, 219-220 (D.D.C. 2003)
(l~obe rl s, .I.), w,cated on other gro11t1d\', 370 F.Jd 41 (D.C .C ir. 2(HM); Cronin v. Jsla111ic Nepublic of'
!run, 218 F.Supp.2d 222, 235 (D.D.C. 2002)(1,ambcrU1, J.), ahrng;ated on other grounds by CicippioPuleo
v. Islamic l?epuhlic of/ran, 3 53 F.Jd I 02 ,1 ( l).C.Cir. 2004 ); Mousa v. Islamic Jfrp11hlic olfrun,
238 F.Supp.2d I (D D.C. 200 I )(Bryant, .1.).
8 Secfi.>o/11ote 7, supro.
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lmmccfo1tc family members of the deceased can recover solatium for their emotional
injuries.9 Plaintiffs rn-c also entit led to punitive damages 1°, prejudgment intcrest11 , and the costs
of bringing this litigation. 12 Pl aintiffs arc not requesting any attorneys foes in this action.
V. Economic Losses
Plainti ffs must be awarded damages fr)r their economic losses stemming from the
barbarism of the 9/1 l attacks. The beneficiaries of the Estates are cnti tied to recover lhc present
vnlue of economic damages, including lo st wages that the Decedents might reasonably have been
expected to earn but for the wrongful death. Sec, e.g., Estate o/Heiser v. Islamic Republic of'
]ran, 466 F.Supp.2cl 229 (D.D.C. 2O06)("/Jeiser J").
ln supporl of Plaimiffs' request for an award of economic damages, Plaintiffs hereby
submit extensive economiG analyses by Sian V. Smith, Ph.D. that detnil the significant economic
losses suffered by the Plainli ff Decedent EstMes. Sec Erhibit E, attached hereto. Dr. Smith is
one of' the preeminent authorities on the law of dnmages nncl, indeed, co-authored the firs!
textbook in forensic economics ("ECONOMIC/ H1 :uoN1c DAM,\GES''). He also created and taught
the first course i11 lhc nation in forensic economics . Ile has appea red in Coml to testify
approximately five hundred (500) times in alrn osl every state imd in the great majority of the
federal judicial circuits.
Dr. Smith's has su bmitted repo rts for each or lhc forty-sewn (47) Plilin tiff Decedents
detailing thal, as a result of tlrnt Decedent s' untimely deaths, significant economic losses were
9 See, e.g., /Joker. supra, 775 l-'.Supp.2d .11 8J .
lO 8uker, supra. T/5 F.Supp.2d at 8tl-6: MWJ)hy, .1u;m1, 7°10 F.Supp.2d nt 76 -- 8.
11 Pugh, s11pra, .SJO F.Supp.2d at 262--5: /Joker, .111pm. 775 F.Su pp.2d nt 86-7.
12 Sec, e.g. , Mwplw supro, 740 F.Supp.2d at 76-8.
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incurred. 13 Dr. Smith has calculated, us ing generally accepted accounting methodology, the
appropria te economic damages that should be awarded to the Estate of each Pl aintifTDecedenl.
Sec a sumn1ciry of the economic losses of each Plaintiff Decedent at E.:...:1,/bit G.
VI. Pa in nnd Suffering of Deced en ts
The Estate of each Decedent must be compensated for the pain and suffe ring endured by
lhe Decedents cluring !heir capt iv ity/ en trapmenl, torture and hor ri fic deaths on September 11,
200 l. The Estates or each decedents, through their lega lly appointed personal representatives,
arc entitled to compensation for the pain and suffering endu red by each named Decedent as they
survived in extreme pa in and menta l anguish during the attack before their eventual horrible
deaths, in add i!ion to the senseless deaths themselves.1'1
Despite the overwhelming evidence concerning the extent of the trauma, death and
devastat ion on September 11 , 2001 and the amou n! of pa in and suffering that the Plaintiffs
endured, the appropriate amount of damages tu award as compens ation for this pain and
suffering can be difficult to determi ne with precision. lndeecl, it goes without saying that no
monetary judgment v,.iould truly compensate !hcse Plai ntiffs for the pain and su ffering they
endured - and many will continue lo endure - as a resu lt of the 9/11 terrorist attacks.
Nol\-vithstanding the inherent di/'ficu lly mid subjectivity involved in awarding damages based on
ll Curric ulum vi rae and n cover lctlcr 10 the confidenlial expert reports ofStilll Sm ith, PII.D ., are
aU achcd hereto at Exhibits E and F. The in clivicl11al lina11c ia l repo rts and persona l financial re cords
of the Pla in tiff decedent estHtcs (which Stan Sm ith a1rn ly1.cd and from which he reached his econom ic
co nclusinns) is being provided under scnl conte1npora11eou s!y herewith. ,')'ee Exhihit H.
I '1 See., e.g ., Cicippio v. 11-/omic Republic olfrun, 18 F.Supp.2d 62, 69,,70 (D.D.C. 1998); Sutherland v.
Js/0111ic Repuhlic oflron, 15 1 l' .Supp.2d 27, Sll -3 {D.U.C. 200 I); J>olhill, supra, :mo l 'vVL :l,'.I 157508
al~• 4--6; /)ugh, .rnpm, 530 F.S11pp.2cl al 262--7'1; Regif,r, .wpm, 281 F.Sllpp .2d at 100--4 ; Steen, supru,
)003 WI, 21 Ci 72820 ;ir •l•,1-6
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the pain and suffering of a clainrnnL. compensation is mwircd once liability has been determined.
We instein, SUJ )ro, 184 F.Supp.2cl at 22-3; Gales v. ,"-,)irian Arab Republic, 580 F.Supp.2d 53
(D.D.C. 2008).
Because there is no precise methodology used to ca lculate dam ages for pain and
suffering, the lr ier of fact (which in this case is lhc Court) has a significant amount of di sc retion
in determin ing the amount of appropri ate compensat io n. Sec., e.g., Taylor "· Washington
Terminal Co., 409 F.2d 145 (D.C.Cir. 1969); f1vsel/ v. Iowa Public Se rvice Co., 559 F.2d 468,
4 72-73 (811\ .Cir. 1977); Gares, supra, 580 F.Supp.2d at 72.
ln making this determination, this Court shou ld not simply award what it abstractly finds
to he fa ir. Rnther, in deciding !he amount of damages to award in this case, the Court should
look at damage awards for pain and suffering in other cases brought under !he FS JA and also in
persona l inj ury lawsuits arising under a va ri ety of circumstances . Id. Prior simi lar cases in
which the courl :1wH rcled com pensato ry dm1rngcs fo r pa in and suffering lo the victims of a
terrorist act typical ly fa ll into two ca tegories: !hose in which the vicl'im died, and the pain and
suJTcring is avmrded fo r !h at endured between the attack and the victim's death; and, !hose in
which the victim was held in captivity. The Decedent victims of the September 11 , 200 l
terrori<;1 ntt acks should he viewed as filling i1110 both categories, therefore !heir pain and
suffering and survival damage awards warrant signi fic ant upward en hancem ents.
Several cases lrnve nwnrclcd damages fo r the victim's pain and su ffer in g, tlrnt occurred
between !he attack and the victim's de.n th shortly th erea ft er. ln these cases, cour(s were
influenced not only by the length of lime !hat !he vic lim en du red ph ysical suffe ri ng, bul ,ilso by
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the victims' mental anguish from rhe knowledge that death was imminent. Baker, supra, 775
F.Supp.2d at 81-4.
In recent cases involving kidnapping and captivity, courts have awarded pain and
suffering damages to victims who v,1cre held captive and/or tortured for their pain and suffering
during and after cap!ivity. ln these cases, courls typically determine the pain and suffering
award by multiplying n per diem amount by the number of days in captiv ity.15 Mosl commonly,
however, in ca:;cs involving brutal nc.t:; - :n1ch as (he 9/1 l attacks - <.:our!:, flnd that the per diem
amount will not adequately compensate victims for the pain and suffering endured both during
and after their cap(ivity. ln these cases, co urts often supplement the product of the per diem
formula wi th a lump sum in order lo reach the final damage award. 16 An alternative manner of
deal ing with the inadequncy of per diem awards is to simply grnn1 a !ump sum awnrd in lieu of
any per diem damages. 17
15 Sec Daliberti v. Repuh/ic qj'Jraq, 146 F.Supp.2d 19, 25-26 (D.D.C. 200 I )(Oberclorfor, .l .)(awarding
damages For pain and su ffering both during and after captivity a($] 0,000 per day of captivity);
Jenco v. Js/omh: Republic r~/fmn, 154 F.S upp.2cl 27, }7 (D.D.C. 200 I )( Lamberth, J.)(nwnrding
drnnages l'i>r pain and suffering both during and ~ftc r captivity at $10,000 per day of c,1ptivity).
16 Sec Price v. Socialist People's Libyan 1lrah .la11/(/hiri)la, 384 F.Supp.2d 120, IJS-36 (D.D.C. 2005)
(Lamberlh, .l.)(awnrding dnnrngcs to victims of long-1erm brutal kidnapping and to rture fi.)r pain and
suffering both during and after captivity by adding lump sum of$7 million to product of$IO,000 per
diem formula);
Sure/le v. Islamic l<epuhlic r1/'Jrc111, n I F.Supp.2d 260,269 (D.D.C. 2002)(awarding damages 1o
victim l)fkidna pping, for pain and suffering by adding lump sum of $1 million for the time that victim
fo ced certn in death alone lo product of$10,000 pl!I' diem fon1111l1,);
Ifill v. Republic of1ruq, 175 F.Supp.2d 36, 47-48 (D.D.C. 200 I )(Jackson, .1.), rev 'd 011 orher grounclv,
328 FJ<I 680 (D.C.Cir. 2001), (aw:-1rdi11g damages lo ''co11slruc{ive hostages" by adding, lump sum of
between $100,000 ;ind $500,000 to product of $3,000 to $5,000 per diem formula).
17 Sec Acree, supra, 271 F.Supp.2d at 219-220 (awarding damages for pain and sul'lering to victims ol'
{ol'lurt while 1-'0Ws by adding lump sum ofbc1wcen $10-20 111illio11 for period or'cap1ivity 10 lump
sum or bc1wec11 $2-5 million for the period afler cap! ivi1y, depend ing on length of con l'incrncnt,
bru(a!ily of treatmen t, and sever ity of remaining psychological injuries);
Cro11i11 v. !s!a11Jic Rerublic r~lfrnn, 238 F.Supp.2d 22 2, 235 (D.D.C. 2002)(1.,amberlh, .I.), ubrogoted
011 other grounds hy Cicip1,io-P11leo, .1·11;m1, 353 FJd 1024 ; (awarding lump sum of$1.2 million in
damages for pai11 a11d sufferi11 1~ lo v1eli111 of kidnapping rn1d torture);
Cicippio, supra, 18 F.Supp.2d al 69-70 (awarding lump sum of a pprnxinrntc ly $3-19 Ill illion in
damages l'or pain and suffe ri ng (o victims of kidnapping and torture).
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When the period of the victim's pain, suffering and trauma \-Vas longer, the awards have
increascc!. 13 Courts have been inJlucnccd not only by the length of time that the victim endured
phy!,icnl suffering. but by the victim's menwl anguish stemming from the knowledge that clenth
was imminent.
For exairiple, in Pugh v. ,')'ocio/is1 People's Uhyon !lroh Jamahiriya, supra, an act ion was
brought under the FSIA against J ,ibya for wrongful death, intentional infliction of emotional
distress, nnd loss of consortium by estates and survivors of American passengers killed in the
bombing of a French airliner in Africa. 530 F.Supp.2d at 219-62. The District Court ruled that
the estates of the seven U.S. citizens who died in the bombing were entitled to recover the
present value of the economic losses resulting from their wrongful deaths and that prejudgment
interest would be awarded . id., 530 F.Supp.2d nt 263-4. Fu rth er, the Pugh court determined that
the appropriate awards to passengers' es tates was economic damages plus $18 million lo each
estate for the decedent's pain, suffering and death. Id, 530 F.Supp.2d at 263-4. Applying this
established framework, courts have consistently awarded terrorism victims who were ki lled after
a brief captivity in excess of $18 million. 19
18 See, e.g., Ilaim v. Js/mnic Repuh/ic qf !rem, ,125 J-'.Supp.2d 56 , 71 --72 (D. D.C . 200(i)(cit ing S1e1/-w111 v.
Islamic Republic of'll'(ln, 20 l F.Supp.2d 78, 9 l (D .D.C. 2002) (awarding $1.5 million for pain and
sufferi ng endured ove r a 15-hour pe riod in which the victim was rep eated ly beate::n before being shot).
19 See also:
Cicippio, supra, 18 F.Supp.2d at 62 (th ree ldd1111p victims we re awarded n comb ined $4:S million in
cornpcrn;atory damages !J)r the ir pa in and suffrring);
Surherlurul, supru, 15 I F.Su pp.2d ,1l 27 (hoslage awarded cornpen~alory darnagcs of $23,540,000\
Polhill, s11pm, Not Reported in F.S upp.2d, 200 I WL ]4 157508 :il '~ I (111 ac(ion :1 g11 in st lrnn fo r
ca pti vity of Robert Po lhill, he was awa rded $15 million ); ·
Regier, supru, 28 1 F.S11pp.2cl at 87 (Abd11ctce was awarded compensatory dam,iges 0( $24,540,000);
Steen, ,\'l(Jmi, 20()3 WL 2 !672820 at * l (D.D.C. 200J )( kid1wp victim awarded $27,750 ,000: a rnte of
$10 thousand for each day pins an additional $10 111illion):
Campuzano, supra, 281 F.Supp.2d at 272-8 (Plain tiffs who sur vi ved bombing ,vere entitled t·o
damages up to $15,000,000 each for past and futmc pain and sufferin g.) .
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The attached report by Rear Admiral /\lberto Diaz, M.D. details tbe physical and
psychological damages suffered by the victims during the fi nal hours and minutes of the ir lives
and is ,1ttached hereto as E:·dlibit C. Dr. Diaz has drawn upon his extensive clin ical experience
and ti'pon medi cal. litcrnlmc regmding the physiology of fe~r , severe pain, trauma and the
enduring effects on survivo rs, fam ilies and friends. He al so discusses the neurophysio logy und
psychology of extreme fear and impend ing doom and their effects on vic tims' perceptions of
time.
Bnsed on the FS IA precedent and the extrnordinnry nature of the 9/11 Decedents'
sufferi ng, as discussed by Dr. Diaz, PlaintHTs propose that the esta tes of each decedeni be.
awa rded $18 million for their pa in and sufferi ng, in add ition lo their proven econom ic losses.
This amount is consistent with prior awards to decedents in terror cases, especially in li ght of the
upward enhancements jus tified by the brutality and scope of the 9/ l I attacks.
VII. Solatinm of Family Members
Those Plaintiffs who me fam ily members of murder vic tirns on September I ! , 2001 arc
enliOed 10 recover compensatory dmm,ges for so la tium. 20 Solat ium is awarded to compensate
the "the mental anguish, bereavement [,! Hnd gri ef lhn! those with a close personal rclalionship to
a decedent experience as the result of the decedent's death, as well as the harm caused by the
loss o!'thc dcccclcntl'sJ soc iety and comfort.'' Belkin v. lslomic Republic o/lran, 667 l-'.Supp.2d
8, 22 (D. D.C. 2009)(citi ng nammarell v. Islamic Repuh/ic o/Jrnn, 281 F.Supp.2d I 05. 196-7
(D .D. C. 2003); Elahi, s111Jra, J 2L! F.Supp.2d at 110). Drnn;1ges for solati um belong lo the
20 Sec, e .g., Boker. rnpm, 'J7S F.Supp.2d al 81 .
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individual heir persona lly for injury to the feelings and loss of a decedent's comfort and society.
F!cttow v. Islamic Republic qf'fmn, 999 F.Supp. l, 29 (D.D.C. 1998).
In determin ing the amount of compensatory dairniges awmds to family members of a
surviving victim, this Court bas held !hat these awards are dete rmined by the "nature of the
relationsh ip'' between !he family member and victim, and "the severity of' the pa in suffe red by
the family member." l!oim, .l'Upro, 425 F.Supp.2cl at 75; Es/ale o/'f!eiser ("Heiser l"), SIIJH'a, 466
F.Supp.2d at 229. "Fmlhermore, in determining !he appropriate compensatory damages f-c)r each
plaintiff's pain and suffering, courts arc gu ided not only by prior decisions awarding damages for
pain and sutlering, but also by those which awarded damages for solati um.21
Compensatory damages awa rds to fam ily members for their pain and suffering mus! be
determined by the natu re or the rela ti onship and the severity and dura ti on of the pai_n suffered by
the family member. . .
Courts have developed a s!andardized approach for FSJA solatium claims. For instance,
the c.;ourl in lleiser v. lslwnic Republic of'Jran ("Heiser!"), surveyed past awards in the context
of deceased vict ims of terrorism to de!errnine that, based on averages, " l:s]pouses typical ly
receive grca!er damage awards than parents [or ch ild ren], who, in turn, typically receive greater
awards than siblings." 466 F.Supp.2d 229, 269 (2006); Estafe q/Blcmd v. Islamic Republic of'
Iron, .. .. F.Supp.2d -.. -, 2011 WL 63%527 (D .D.C.2011 ). Relying upon the average nwnrds, the
Heiser I Corn'I. articuln\ed a framework in which spouses of deceased victims were awarded
2 l (/ Wogne1· v. Jslmnic Republic of'frm1, 172 F.Supp.2d 128, 115 11. 11 (D.D.C. 200 I )(Jackson, .J.)
(noting that, in nn in(cntional homicide case, ''solatium appears in any event 10 be indistinguishable
from the intenlional infliction of emotional distress''): see also Sure/le. supm, 231 r:.supp.2d at 267 n.
5 ("ln the context of FSI/\ cases, th is Court has recognized the claim o!' soln!iulll ns ...
ind isti ngu ishablc from the cla im of intcntion,1 I inflict ion or cmot·ional distress."); l!aim, supm, !125
F.Supp.2d 56.
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approximately $8 million, wbile parents received $5 million and siblings received $2 .5 million.
Id.; See also Va/ore fl, supra, 700 F.Supp.2d al 85 (o bserving !hat courts have "adopted lhe
framework set forth in Heiser [JJ as 'an appropria te measure of damages for the family members
of victims"')(quo!ing Peterson v. Islamic Repuhlic o(/rlm, 515 F.Supp.2d 2.5, 51 (D.D.C.
2007)); Srern v. Islomic Republic: c~f"lrun, 171 F.Supp.2d 286,301 (D.D.C. 2003). In addition to
spouses typically receive greater damage awards than parents, who, in !urn, receive greater
avmrcls than siblings;22 there are two additional considerations disccrnablc from the case law: a.)
families of hostage or captivity victims are also typically awarded greater damages thnn are the
families of victims of a single attack.; 23 and b.) families of victims who have died arc typically
awarded greater damages than families of victims who remain alivc .2'1
Courts have consistently held !hat prior pain and suffering awards should be a guide and
not adhered to blindly. "These m./lnhers, however, ore not set in .1·rone." Greenbaum v. Jsh1111ic
Republic (~/Jron, 45 l F.Supp.2d 90, 108 (D.D.C. 2006) (Lambcnh, J .)(emphosis added); Esrore
(d'Bland v. lslwnic l?epuhlic o/frun.. F.Supp.2d ----, 2011 WL 6396527 al '''8 (D.D.C.,
December 21, 2011 )(Lamberth, C..l .); Murpl~11, supro, 740 F.Supp. 2.d al 79. Deviations may be
warranted when, infer £tlia, "evidence cstablish[cs] an especially close relationship between the
plaintiff and decedent, pnnicular!y in comparison Lo the normal interactions to be expected given
--·········-·--··--··---·--------
22 Compare, e.g., Anderson v. !slmnic Republic (<flron, 90 F.Supp.2d I 07, 113 (D.D.C. 2000)(Jackson,
.1.)(awnrd ing $IO Ill ill ion lo !he wi fc of a hostage and torture victim); C'icippio, supra, 18 F.Supp.2d
al 70 (sainc), with h'isen/eld v. fl-lmnic Republic o/lrw1, 172 l-'.Sup p.2d 1, 8 (D.D.C. 2000)(Lamber!h,
.l .)(av,,1,mling $5 million each lo (he pim:nts mid $2.:'\ million each IO !he sibl ings of victims of' a
su icide bombing on a passenger bus); sec also Flormi>, suprn, 999 F.Supp. at 31 (:iwnrding parents
each $5 million and siblings each $2.5 million ofvictirn who was killed in passenger bus bombing).
23 Compure, e.g., A/1(/enon, suprn .. 90 F.S11pp.2d al I !3 (awarding $1() million to the wife of a hostage
and tor!urc victim) with Cwnp11zw10, supru. 281 1:_supp.2d at 277 (awarding to the wife ora bombing
vic tim compensat ory damages !'or solal ium in the amount of' $6 million).
2.'.J See, e.g., .Ienco, s111Jm. l 54 F.Supp.2d at 38 (relying on this dislinclion in grnnting award:; ofSI.5
million to sibl ings of H kidn appi ng vietim who wns eventually s,1fcly returned).
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the familial relationship; medical proof of severe pain, grief or suffering on behalf of the
claimant jis presented]; and circumstances surrounding the terrorist attack [rendered) the
suffering particu larly more acute or agonizing." Oveissi v. lslamic Ref)ub/ic of'!ran, 768
F Supp.2d 16, 26--27 (D.D.C., March R, 201 I). Additionally, as the Court noted in Greenbaum,
supra, "larger awards are typically reserved for cases with nggrava Lii1g ci rcum stances that
appreciably worsen the surviving spouse's pain and suffering, such as cases involving rorfure or
kid11C1pJ)i11g o('C1 spouse." 451 F.Supp.2d at l 08 (c iting Cicippio, supra, 18 F.Supp.2d ut 70;
.!lt:me, supro, 271 F.Su pp.2d at 222)(emplwsi.1· added). The Court may award greater amounts in
cases "wi th aggravating circumstances," indicated by such things as ''lt]cstirnony which
describes a general feeling of permanent loss or change caused by decedent's absence" or
"[rn Jcdical treatment for depression and related affective disorders," Flarow, supra, 999 F.Supp.
al 11; Greenhoum, supm, 451 F.Supp.2d at l 08. Significant UJ)\Vard enhancement departures arc
also warranted in cases wi th "circumstances that appreciably worsen" a claimant's "pnin and
suffering,. such as cases involv ing tor(ure or kidnapping" of the party to whom extreme and
outrageous conduct was dircctccP"
The accompanying Declarations by the surviving Claimants in this mailer detail the
traumatic effects that the 9/1 l a l tacks nncl th eir loss of a loved one continue to cause Claimants
today. Sec Ev:l,ibit B. Furtber. Dr. Dinz's accompanying report details the aggravating
circurnsl,mces •- such as the mental effects ol'lrnowing death was imminent and (he horrible
physicn l effects of the deaths themselves - tlw1 con(inue to npprcc.iably wo rsen ihe surviving
25 Greenlwum, s11prc1, 451 1:_ su pp.2d at I 08 (departing upward from $8 million to $9 million in a
widower's award upon considernl ion of " I he severity of his pain nnd su ffering due to the loss of his
\:vil'c and unborn firs! cllild"); E\·rate o/Blmu(, .1·11pm, 2011 WL 6396527 at* 9 (upward departmc to
· $8 million award warranted by :;evcre inju ri es sustained by a service member in bomb ing to United
St ates Marine harrncks in Bcirnt, Leba non on October 21, 1983) .
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family members' pa in and suffering. See Erhibit C. Claimants here suffered great personal loss
due to the captivi ty, suJfering and death of family members dearly loved nnd all su ffered the
particularly devastating and un iquely acute suJlering warranting upward enhancement
departures. See, e.g. Vo/ore I!, supra, 700 F.Supp.2cl <II 86.
fn Flotow, supra, 999 F.Supp. al I, the dis trict court held that a cla in1 for snlatium
includes claims for the mental anguish, bereavement, and grief that those with a close
relationship to the decedent experience as a result of the decedent's deaih. Besides considering
the nature of the relationship, the Fla tow court held that death as a result of terrorism, vvith its
attendant horrific surrounding circumstances, prevenrs the an1;uishji-om subsidin;s. Sec also,
Higgins v. The Islamic Republic cf.Iran, Nol Reported in F.Supp.2d, 2000 WL 336743 l I
(D.D.C. '.WOO ). This is corroborated in this matter by the report of Dr. Diaz, attached as Exldbit
C.
f n cnlcu lating damages for loss of solatium in the case of a deceased forni ly member,
courts has considered a variety of factors to include: ( l) whether the decedent's deaih was
sudden and unexpected; (2) whether the death was allriburnblc to negligence or malice; ('.l)
whether the clainrnn\s have sought medical treatment for depression and related disorders
resulting from the decedent's death; (4) the nature (i.e., closeness) of !he relationship between
!he clnirnanl and the decedent; and (5) the duration of the cla imants' mental anguish in excess of
that which would have been experienced lc)llowing the dcccden! 's nntu rn l death. Flmow, supra,
999 F.Supp. at 30--31.
'fhe " sudden and unexpected" quality of a death - as, ofcour~c, occurred in th is case -
nrny al so be taken in!o cnnsideralion in gauging the emotional impact to those k'./'1 behind.
HisenfelJ, supro, 172 r:.Supp .2cl at 8-9; Weinstein, supro, 184 F.Supp. 2d al 23. The murder of
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thousands of Americans was both sudden and unforeseen by their loved ones and the
consequences of the terrorists' actions upon them all the more intcnsc .26 That defendants acted
with extreme rnalicc is unquestioned.
Therefore, lxiscd on established precedential case law and based on the malicious and
spectaculnrly devastat ing crime against humani ty committed by defendants, Plaintiff') propose
the fo llowing family members be awarded the following amounts fo r sobtium:
Relationship to Decedent Proposed Pain mu/ S11[/t1ring / Solatium Award
Spouse $12,500,000
Parent $8,500,000
Child $8,500,000
····--····-·······- ······ ········----··-··- ·······---···-·----- - --------····--·--·-·-·····-- ····· ... - • Sibling $4,250,000
These amounts proposed by Plaintiffs are consistent ,-vilh nrnounts previously awarded in
previous tcrrorisl ca ses and consi stent with lhe outrageousness of the 9/l l a Hacks. For ex ample,
in Pugh, discussed supra, the Dislric! Court ruled thal the appropriate award to deceased
terrori sm victims' spouses included $26 million for pain, suffering and lo ss of consor!ium. 530
F.Supp.2d at 266-74 . The Pugh Court further ruled thal the appropriate award to deceased
te rrorism victims ' children incluclecl $10 million for pain and suffering; the appro])l"inle award lo
deceased terrorism vict ims ' parents included $5 million for pain and sufferin g; and the
appropriate nwnrd lo dcccnsccl lerrori sm victims' siblin g:, incl uded $8 million for pain and
suffering. /cl.
26 Sec also, C'nrl.1·011 v. !slwnic Republic qj"!nm, 20 I F.Supp.2d 78 {D. D.C. 2002) .
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VIII. ,Justifications for Upward Departures
The Plalntiffc; in this case should receive awards that arc at least as high, or higher, as the
awards in any terrorism case. This world-changing incident deserves al l possi ble upward
enhancements to the compensatory and punitive precedents al ready established against lrnn and
other sponsors of te rrorisrn.
This case invo lves Uni ted States civilians on ;\mcricnn soil; not military perso nnel,
members of n pence-kc.cpi ng force or i ndcpcndcnt conlractors on hostile fore ign soil, as many of
the previous cases have been.
·r hc most fundamental aim of terrorism is to instill foar and trepi da tion; in thi s, the
September 11 , 200 l terrorist attack was, in significan( ways, successf'ul. Not only was 9/1 l a
horrific crime, indeed the most devastating act of terrorism in world history, but it changed the
way of I ifc fcir every American, and alrnost every person in the Western world.
Never had any terrorist nttack claimed more casu,1lties; never had any terro ri st allack
targeted more than two locations si multaneously; never had a terrorist at tack caused the degree
of destruction of property and wealth that 9/ l l dicl . Never had any tcrroris! attack been so
effective in creating havoc within, or causing change to, an entire society.
The Pla intiffs were among those who paid the im med ia te price for thi s terrorist efTec t.
and it is the Pla int ilfa who are, and fo revermore will be reminded constantly that the cruel and
!crri ble deaths of their loved ones affected entire popu lntions, en ti re gencrn1ions.
The surviving fami ly members are rem inded of' this fact no! only every Sep!ernber I I 111
when the event is commemorated annunlly, but vi rt ually each and every clay of the year: hardly a
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day goes by without some reminder of the horrible deaths of their loved ones on September 11,
200 l. There nrc so many cultural, media, commercial, and interpersonal re fere nces to 9/1 l tha(
it has become commonplace, part of the vernacular of our times. It is impossible lo travel by
airplane wirhout elem- reminders of 9/11 (including the "9/11 tax'' imposed to assist funding of
the Transportation Sccmily Administration), and large office buildint.l,S, sports stadiums,
tran sporta tion hubs, cu ltural centers - almost any place where people congregate - have enhanced
security that derives direc tly from 9/11. Terrorism awareness cmnpaigns me 11()\,V ubiquitous,
advertised in public places, transportation systems, and highways. The enti re federal
government was reorganized around "homeland secwity." Lach of'these serves as a constant
painful reminder to those who lost loved ones on September 11, 2001.
Morenver, although lhe survivors now have a memo rial in New York City, another al the
Pentagon in Arlington, Virginia, and others located throughout the country, mnny of the family
members can visit no cemetery as the fina l resting place of thei r deceased loved ones. Closure
may never occur for many of the smvivors of the victims of the attacks of September 1 l, 200 I.
IX. Punitive Danrngcs
According to the Restatement (Second) of Torts, the purpose of punitive damages is "(o
punish'' a defendant for "outrageous conduct." and " lo deter hirn and others like him from similar
conduct in the future." RISIJ\TEMENT (SECOND) OF To,ns ~ 908 (I) ( 1977); see ul.\·o /IC/J.\{(/ \1•
ls/mnic: l?epuhlic f~j'/ron, 574 1:.Supp.2d l 5, JO (D.D.C. 2008). Courts evaluatc four l~1ctors in
determining a proper punitive damages nwmd: "(]) the character oflhe delcndant's aet, (2) lhc
nature and extent of harm to !he plnintiffa Lim( dcJendan(s cm1scd or intended tn cnusc, (3) the
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need for deterrence, and (4) the wealth of the defendants." Acosta, supra, 574 F.Supp.2d at 30
(quoting Flotow, supra , 999 F.Supp. al 32).
In the instant case, the two hundred, sevent y-s ix (276) Findings of Fact so ordered on
December 22, 2011 by the Honorab le ( icorgc B. Daniels dernonslrntcs by clear and convi nci ng
ev ide nce that lran/Hez bol lah and their agents and instrumentalities supported, protected,
harbored, aided, embedded, enabled , sponsored, !rained , corn;pircd wilh and fac ilitated the travel
of al-Qaida for the pur pose or murdering American citizens on September 11, 200 l.
Acc.orclingly, the character, nature and extent of these acts clearly merit punitive
damages. See, e.g., Cronin, supra, 238 F.Supp.2d at 235. lrnn cont inues lo fund lerrorist
organ izat ions including al-Qaida as noted by Dr. Patrick Clawson in his Affidavit, Exhibit 8,
datedJune25,2010 sub1nit1eclMay 19, 20ll tu.lu dge Dani cls. Cln wsonslates:
"[l]n my expert opinion a minimum estimate for lrnn's spending
on terrori sm would be the amount used in the Unilcd States
Dcpnrlrncnt of State Country Repo rts on ·rcrrorism for Iran's
support to lkzbollah; i.e. , $200 million a year .. . n more likely
estimate of the f1rnmcial malcrial supporl provided by lrnn in
support of terrorism is $400 mil lion n year though given the
imprecise evidence, l would fe el more comfortable estimating a
range of $300 million lo $5 00 million a year rather than any one
figu re."
Thus , not only is there a need ft1r deterrence but th ere is evidence that the defendant has
substanti nl wealth . In fact , the Iranian nnturnl gas and oil reserves are the second and third
largest in the world, re spec tively. The I rnn inn gross national produc t is est imated to be $928.9
bill ion by the CJA I.florid Feret /)ook (2011 ). In .short, the requirements /'or pun it ive darnngcs
contained in the RE:ST1\ TF.Ml·:NT (SECOND) OF TOtns § 908 ( l) are J'ul ly complied with this cnsc.
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According to the Congressional Research Service (August 2008) there have been over
tbi rty (30) cases that have awarded punitive damages against I ran for acts of terrorism since
1997. The law involving punitive damages is now reasonably well-scctkd,- as explained in two
.of the most recent opinions, Cielito Valencia, el o!. v. Islamic Republic of"lrcm, el al. , 774
F.Supp.2cl I and Fstate o/1Jland. supra. 201 1 WL 6396527 at *6. On iVforch 31, 20 I 0. in
Valencia, the court noted th at the compensatory damage-pu nitive damage ratio of 3.44 was
established in an earlier FSIJ\ case, Vo/ore Jl, supra, 700 F.Supp.2d at 87-90.
On December 21, 2011, _Royce C. Lamberth. Chief Judge, ordered punitive damages
applying the ratio of 3.44 to the compensatory damages. See Estare of"/3land, supra. The Court
noted the need to deter the actions o!'the Iran ian defendants in planning, supporting and aiding
the execution of terroristic attacks. See o/so, Rimkus v. Islam ic Republic ollran, 750 F.Supp.2d
at l 63, 184 (D.D.C. 20 I 0). Judge Lamberth stated in fatale of'/Jland. supra:
To accomplish this goal, this court - relying on the
Supreme Court's opinion in Phillip Morri.1· USA v. Williams, 549
U.S. 346 (2007) - he ld that the calculation of punitive damages in
subsequent related Hctions shou ld be directly tied to the rnlio of
punitive to compensatory damages set fonh in earlier cases.
Murphy, 740 F.Supp.2d at 76. Thus, in Murphy th is Comt applied
lhe ratio of$ l .00:$3.44 established in Va/ore [Ji_] - an earlier FS IA
case arising out of the !3eirut bombing. Id at 82-83 (citing Vo/ore
Ill], 700 F.Supp. 2d al 52). Here, the Court wi ll again apply this
same $1 .00:$3.44 ra tio, which has been established as the stnndard
rntio app licable to cases ,,rising out oJ' the fkirut bombing.
However, the allacks that occurred on September 11, 2001 on the Plnin ti1Ts individua lly
and our nation col lectively is like no other in ;\rncrican history. The snvngcry ancl su!Tering
caused on September 11, 2001 has no pnrallcl in /\mcricanjurisprndence. The act of terrorism
imposed n :;en(cnce of den th or horri fie physical n lld psychologi ca I injury on victims. Such
inju ries involve a lilctimc of unimaginable grief and immeasurable so rrow. J nclccd, the whole of
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humanity calls out the full measure of condemnation and punishment by this Court. Therefore,
the Plaintiffs respectfully request the Court's consideration for a multiplier of S.35 predicated on
the United States Supreme Court's denial for a writ o/certiorari to review a decision from the
Supreme Com! of Tennessee that upheld an award which mnounted to a 5.35-to-1 ratio of
puni1ivc damages to actual damages. See Doim!erChrysler C01p. v. F/ox, 272 S. W .Jd 521
(Tenn. 2008), cert denied, iWuy 26. 2009, 129 S Cr 2433, 174 L. Ed 2d 277.
The DaimlerCh1ys/er Corp. case arose out of a motor vehicle accident in June 2001,
which resulted in the dealh of an eight-month-old baby. Pliiintiffa, the parcn!s oflhe clececlent,
filed suit alleging wrongfi.il death and negligent infliction of emotional distress (NIED) against
the other driver involved in the accident and againsl DairnlerChryslcr Corp., who was !he
manufacture of plainliffs' 1998 Dodge Carn van. The jury assigned fault evenly agains t the
clefendanl driver (for speeding) ,md DaimlcrChrysler Corp. (for defective design of the car seals),
and awarded plnintiJls $5 million in compensatory damages for their wrongful death claim, ancl
$2.5 mil lion damage:, for their NIED claim. During the second phase of the 1rial, evidence was
presented that DaimlerCbrysler Corp. was aware of the dcfcc(ive dcsitm of their cm scats, they
failed to warn customers, they hid evidence of the defective design, and they continued to market
the Caravan as a vehicle that put safety Jtrst. The jury nwarded punitive damages against
DaimlerChryslcr Corp. in the amount of $65.5 mi !lion for the wrongful death claim and $32.5
mi llion for the NIED claim . The tria l _judge rcrni11ed the punitive damages do,:..1n to
$13,367345.00 for !he wrnngful death cla im and $6,632,655 .00 for NIED.
On nppcal , the Tennessee Court of /\ppcnls reversed, holding thnt there wns insufficient
evidence lo award any damages penaining to the NIED claim. Further, the court held that there
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was not clear and convincing evidence that DaimlerChrysler Corp. acted recklessly or
in tentional ly in order to warrant punitive damages, and struck !he enti re punitive damages a\"/a rcl.
On li1rthcr nppenl, 1he Supreme Court of Tennessee affi rmed the courl of appeal's
holding pcl'laining to the NIED. However, they reversed the porlion of the decision perta ining to
pun itive damages. Holding lhal there was in focl sufficient evidence lo support a finding of
punitive damages, the court reviewed whether !he size of the puni !ive damages ,H:vard was
excessive in vio lation of the due proeess standards set ou t by l lnited S!ales Supreme Court in
13MW of'North America, Inc. v. Gore, 5 l 7 U.S. 559 (1996) and Stale Farm Mulllal Aufomobile
h1.rnrcrnce Co. v. Campbell, 518 U.S. 408 (2003). Specifically, the court relied on the first lwo
guidcposl.s set out in Gore and Campbell (the reprehensibility of the defendant's conduct; and the
rat io between !he punitive dmnar;e mwll'd and !he eornpcnsatory damages).
With regard lo the first guidepost, the court noted that the ev idence in !his case "dearly
dcmcmslratcs thal !DaimlcrChrysler Corp. 's] conduct wns reprehe nsi ble." As to the second
g11iclepos1, the court no ted lha1 !he punitive-lo-compensatory ratio was 5.1.5 -l o- I and
acknowledged the lanttuage ofthe Supreme Court decisions in Gore (suggesting thnl n ratio of
grea ter than 4-to--1 approad1cs !he outer lim its or constil utionality) and c·amphe!I (suggesting
thnt a ratio or l -10-l may be all !hat is pern1i s:::;ib lc in cases where compensatory damages arc
''substantia l"). However, lhc cm.11'1 also noted that in Campbell the Supreme Court declined lo
adopt a l'ixed rnathc1rnHicnl lbrrnula to determ ine the npproprinleness of punitive dnrnnges mid
stated tha t '' the preci se cn.vnrd in any ease, nf course, rnus1 be based upon ihc facts nnd
ci rcumstances of defendanl' s conduct and the lrnnn to the plaintiff.'' The Tennessee court held
11rnt in light nf the f'irs! two guideposts, the rat io of J to S.~S would he wnrranled in the case,
noting tha1 the evidence pcrtnining to the defendant's conduct dcrnonstrntcd their conduct was
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reprehensible and the harm to the plaintiffs in this case was tragic (the death of an eight-monthold
baby). Respectfully, the hideous, monstrous events of September 11, ~001 far exceeds the
tragedy contained in the DaimlerChrysler Corp case.
The proposed compensatory award in this case is $3,385,776,428 (including prejuclgrncnl
interest, sec Section X., il?fi·a). 27 Accordingly, applying a compensatory to punitive damage
ratio of 1 :3.44 totals $11,647,070,912.
The reasonableness of the Plaintifl:s' request for a compensatory to punitive damage ratio
of l :5.35 is further demonstrated by the expert report of Stan V. Smith, PhD, attached hereto as
Exhibit L. Taking an entirely different economic viewpoint consistent with the American
Economic Association, Dr. Smith analyzes the Gross Domestic Product of Iran which is nearly
one trillion dollars. Consistent with economist principles involving punitive sanctions against
corporations. Dr. Smith suggests a two percent (2%) sanction as applied to the GDP resulting in
a punitive damage award of $17.8 billion. The application of the compensatory to punitive
damages ratio of 1:5.35 presents a punitive damage number of $18.1 billion. Dr. Smith's
approach thereby demonstrates the reasonableness of the 1 :5.35 ratio. Stated otherwise, a
multiplier of 5.35 renders an $18.1 billion result whereas the two percent of one v-,1eek 's GDP for
Iran renders $17.8 billion. Relatively speaking, the two different approaches render the same
result. Hence, the PlaintifJs pray for a 5.35 multiplier sanction or a two percent of GDP as the
appropriate sanction for the atrocities of the events of September 1 1, 200 I.
27 Also see "Total Damages Su111111ary" prepared by Dr. Stan Smith at Exhibit/(, attached hereto.
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However, Plaintiffs pray this court to apply a compensatory to punitive damage ratio of
1 :5.35 for the reasons noted above. Therefore, Plaintiffs pray the Court for a total award of
$18,113,903,889.
X. Prejudgment Interest
In the case of Baker, supra, the Court addresses the award of prejudgment interest. 'T'he
Honorable John M, Facciola, United States Magistrate Judge, notes it is within the Court's
discretion to award Plaintiffs prejudgment interest from the date of the attacks (September
11, 2001) until the date of final judgment. Not only is the decision to award prejudgment
interest in the discretion of the Court but how to compute that interest also rests with the
Court subject to equitable considerations. Baker, supra. Such prejudgment awards
compensate the victims for any delay due to li tigation and prevent Iran from profiting from its
long history of terrorist attacks. Federal Courts in the District of Columbia have awarded
prejudgment interest in cases where the victims "were delayed in recovering compensation for
their iI\juries-including, specifically, where such injuries resu lt in targeted attacks perpetrated by
foreign defendants." Pugh, supra, 530 F.Supp.2d at 263.
Plaintiffs respectfully submit the expert report from Dr. Stan Smith who analyzed the
applicable interest calculations. See Dr. Smith Report on Prejudgment Interest, attached hereto
as Exhibit J.
Plaintiffs have sustained i1,iuries involving pain and suffering by victims in the
September 11, 2001 attacks as well as the lifelong emotional distress of their immediate fomilies
as addressed by solatium claims. Accordingly, Pla intitTs urge this Court to ,l\;vard prejudgment
interest on damages for solatium and pain and suffering computed consistent in the expert report
of Dr. Stan Smith. See Exhibit J., attached; Boker, supra, 775 F.Supp.2d at 8(J-7.
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The total compensatory damage award (economic plus non-economic) plus interest, is
$3,385,776,428. See "Total Damages Summary" prepared by Dr. Stan Smith at Exhibit K,
attached hereto. Accordingly, applying a compensatory to punitive damage ratio of 1 :3.44 totals
$11,647,070,912.
However, the Plaintiffs pray this Court to award full compensatory damages (economic
and non-economic) plus totaling $3,385,776,428 - plus a l :5.35 damages ratio for a total award
of $18,113,903,889.
XI. PLAINTIFFS' COSTS OF THIS ACTION
Plaintiffs are also entitled to reimbursement of the costs of bring this litigation.28
Plaintiffs' costs of this action thus far are $1,977,846.49. See Affidavit of Thomas E.
Mellon, Jr., Esquire regarding Plaintiffs' costs of this action, attached hereto as Exhibit M.
Plaintiffs are not requesting any statutory attorneys fees in this action in as much as
Plaintiffs have executed conlracls with their counsel.
XII. CONCLUSION
Plaintiffs should be awarded damages for the unspeakable horrors committed on
September 11, 2001 attacks. Plaintiffs have proven the liability of defendants to the satisfaction
of this Court. This Court must now award damages commensurate with the devastating nature of
the 9/ 11 attacks and the pain and suffering endured by the Plaintiff Decedents that day, as well as
28 See, e.g., Murphy, supra, 740 F.Supp.2cl at 77 (D.D.C. 20 I 0).
- 25 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 32 of 34
by their family members on a daily basis to this day and for many years to come.29
Respectfully Submitted,
Isl Thomas E. Mellon, Jr.
Thomas E. Mellon, Jr. (PA Bar No. 16767)
John A. Corr (PA Bar No. 52820)
Stephen A. Corr (PA Bar No. 65266)
Thomas E. Mellon, Ill (PA Bar No. 81631)
MELLON WEBSTER & SHELLY
87 North Broad Street
Doylestown, PA 18901
(215) 348-7700
Walter S. Batty, Jr. (PA Bar No. 02530)
c/o MELLON WEBSTER & SHELLY
87 North Broad Street
Doylestown, PA 18901
(21 5) 348-7700
Timothy B. Fleming (DC Bar No. 351114)
WIGGINS CHILDS QUINN
& PANTAZlS, PLLC
1850 M Street, NW, Suite 720
Washington, DC 20009
(202) 467-4123
Dennis G. Pantazis (AL Bar No. ASB-2216-A59D)
Melina Goldfarb (AL Bar No. ASB-3739-R71M)
WIGGINS CHILDS QUINN
& P ANTAZIS, LLC
The Kress Building
301 19{11 Street North
Birmingham, AL 35203
(205) 314-0500
Richard D. Hailey (IN Bar No. 7375-49)
Mary Beth Ramey (IN Bar No. 5876-49)
RAMEY_& HAILEY
9333 North Meridian Street, Suite 105
29 Please also see Plaintiffs' proposed Fi nd ings of Fact and Conclusions of Law and proposed Order,
submitted to the Court contemporaneously herewith.
- 26 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 33 of 34
Indianapolis, IN 46260
(317) 5 82-0000
J.D. Lee (TN Bar No. 2030)
David C. Lee (TN Bar No. 015217)
LAW OFFICE OF J.D. LEE
422 South Gay Street, 3rd Floor
Knoxville, TN 3 7902
(865) 544-010 I
Evan J. Yegelwel (FL Bar No. 319554)
TERRELL HOGAN ELLIS YEGEL WEL, P.A.
233 East Bay Street
Blackstone Building, 8th Floor
Jacksonville, FL 32202
(904) 632-2424
Edward H. Rubenstone (PA Bar No. 16542)
LAMM RUBENSTONE LLC
3600 Horizon Boulevard, Suite 200
Trevose, PA 190S3
(215) 638-9330
Donald .l. Winder (UT Bar No. 3519)
Jerald V. Hale (UT Bar No. 8466)
WINDER & COUNSEL, PC
175 West 200 South, Suite 4000
P.O. Box 2668
Salt Lake City, UT 84110-2668
(801) 322-2222
Robert M. Foote (IL Bar No. 03124325)
Craig S. Meilke (IL Bar No. 03127485)
FOOTE, MEYERS, MIELKE
& FLOWERS, LLC
3 North Second Street, Suite 300
St. Charles, IL 60174
(630) 232-6333
(630) 845-8982
Allorneysfor the Havlish Plainrifh·
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Annex 370
Case 1:03-cv-09848-GBD-SN Document 303 Filed 02/15/12 Page 34 of 34
Annex 370
Case 1:03-cv-09848-GBD-SN Document 306 Filed 02/27/12 Page 1 of 6
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
IN RE TERRORIST ATTACKS ON
SEPTEMBER 11, 200 I
---------------------------------------------------------x
FIONA HAVLISH, in her own right
and as Executrix of the ESTATE OF
DONALD G. HA VLISH, JR., Deceased,
RUSSA STEINER, in her own right
and as Executrix of the ESTATE OF
WILLIAM R. STEINER, Deceased,
CLARA CHIRCHIRILLO, in her own right
and as Executrix of the ESTATE OF
PETER CHIRCHIRILLO, Deceased,
TARA BANE, in her own right,
and as Executrix of the ESTATE OF
MICHAEL A. BANE, Deceased,
GRACE M. P ARKINSON-GODSHALK, in her
own right and as Executrix of the ESTATE OF
WILLIAM R. GODSHALK, Deceased,
ELLEN L. SARACINI, in her own right
and as Executrix of the ESTA TE OF
VICTOR J. SARACINI, Deceased,
THERESANN LOSTRANGIO, in her own right
and as Executrix of the ESTA TE OF
JOSEPH LOSTRANGIO, Deceased, et al.,
Plaintiffs,
V.
SHEIKH USAMAH BIN-MUHAMMAD
BIN-LADEN, a.k.a. OSAMA BIN-LADEN,
AL-QAEDA/ISLAMIC ARMY,
an unincorporated association, et al.,
CIVIL ACTION NO.
03 MDL 1570 (GBD)
CIVIL ACTION NO.
03-CV-9848 - GBD
Case TransfctTcd from the
United States District Court
for the District of Columbia
Case Number l :02CV00305
ADDENDUM TO
PLAINTIFFS' PROPOSED
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
WITH RESPECT TO
DAMAGES
Annex 370
Case 1:03-cv-09848-GBD-SN Document 306 Filed 02/27/12 Page 2 of 6
FOREIGN STATE DEFENDANTS:
THE ISLAMIC REPUBLIC OF IRAN,
AYATOLLAH ALI-HOSEIN! KHAMENEI,
ALI AKBAR HASHEM! RAFSANJANI,
IRANIAN MINISTRY OF
INFORMATION AND SECURITY,
THE ISLAMIC REVOLUTIONARY
GUARD CORPS,
HEZBOLLAH,
an unincorporated association,
THE IRANIAN MINISTRY
OF PETROLEUM,
THE NATIONAL IRANIAN
TANKER CORPORATION,
THE NATIONAL IRANIAN
OIL CORPORATION,
THE NATIONAL IRANIAN
GAS COMPANY,
IRAN AIRLINES,
THE NATIONAL IRANIAN
PETROCHEMICAL COMPANY,
IRANIAN MINISTRY OF
ECONOMIC AFFAIRS AND FINANCE,
IRANIAN MINISTRY OF
COMMERCE,
IRANIAN MINISTRY OF DEFENSE
AND ARMED FORCES LOGISTICS,
- 2 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 306 Filed 02/27/12 Page 3 of 6
THE CENTRAL BANK OF THE
ISLAMIC REPUBLIC OF IRAN, et al.,
Defendants.
ADDENDUM TO PLAINTIFFS' PROPOSED FINDINGS
OF FACT AND CONCLUSIONS OF LAW WITH RESPECT TO DAMAGES
AND NOW, with liability against all Defendants having been established by the entry of
Plaintiffs' Findings of Fact and Conclusions of Law on December 22, 2011, Plaintiffs now come
to hereby respectfully submit this Addendum to Plaintiffs' Proposed Findings of Fact and
Conclusions of Law with Respect to Damages.
I. Plaintiffs' Proposed Findings of Fact and Conclusions of Law, iiii 1-158, inclusive,
contain a citation to the Foreign Sovereign Immunities Act ("FSIA") that is incotTect.
These above-mentioned paragraphs cite to§ l605(a) of the FSIA. The correct citation is
§1605A. 1 Plaintiffs pray that this Honorable Court will consider Plaintiffs' Addendum
and, should Plaintiffs' Proposed Findings of Fact and Conclusions of Law be entered by
this Court, that ,Iii 1-158, inclusive, will be amended to cite to § 1605A of the FSIA.
2. In the alternative, Plaintiffs pray that this Honorable Court will consider iiii 1-158,
inclusive, so-amended via the submission of this Addendum for filing.
Respectfully submitted,
Isl Thomas E. Mellon. Jr.
Thomas E. Mellon, Jr. (PA Bar No. 16767)
John A. Con- (PA Bar No. 52820)
Stephen A. Con- (PA Bar No. 65266)
Thomas E. Mellon, III (PA Bar No. 8163 I)
1 Section 1605A of the FSIA was added to the statute during the pendency of this litigation via the
National Defense Authorization Act for Fiscal Year 2008, § 1083(c).
- 3 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 306 Filed 02/27/12 Page 4 of 6
MELLON WEBSTER & SHELLY
87 North Broad Street
Doylestown, PA 18901
(215) 348-7700
Walter S. Batty, Jr. (PA Bar No. 02530)
c/o MELLON WEBSTER & SHELLY
87 No1ih Broad Street
Doylestown, PA 18901
(215) 348-7700
Timothy B. Fleming (DC Bar No. 351114)
WIGGINS CHILDS QUINN
& PANTAZIS, PLLC
1850 M Street, NW, Suite 720
Washington, DC 20009
(202) 467-4123
Dennis G. Pantazis (AL Bar No. ASB-2216-A59D)
Melina Goldfarb (AL Bar No. ASB-3 739-R 71 M)
WIGGINS CHILDS QUINN
& PANTAZIS, LLC
The Kress Building
301 19th Street North
Birmingham, AL 3 5203
(205) 314-0500
Richard D. Haiky (IN Bar No. 7375-49)
Mary Beth Ramey (IN Bar No. 5876-49)
RAMEY & HAILEY
9333 North Meridian Street, Suite I 05
Indianapolis, IN 46260
(317) 582-0000
J .D. Lee (TN Bar No. 2030)
David C. Lee (TN Bar No. 015217)
LAW OFFICE OF J.D. LEE
422 South Gay Street, 3rd Floor
Knoxville, TN 37902
(865) 544-0 IO I
- 4 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 306 Filed 02/27/12 Page 5 of 6
Evan J. Yegelwel (FL Bar No. 319554)
TERRELL HOGAN ELLIS YEGELWEL, P.A.
233 East Bay Street
Blackstone Building, 81h Floor
Jacksonville, FL 32202
(904) 632-2424
Edward H. Rubenstone (PA Bar No. 16542)
LAMM RUBENSTONE LLC
3600 Horizon Boulevard, Suite 200
Trevose, PA 19053
(215) 638-9330
Donald J. Winder (UT Bar No. 3519)
Jerald V. Hale (UT Bar No. 8466)
WINDER & COUNSEL, PC
175 West 200 South, Suite 4000
P.O. Box 2668
Salt Lake City, UT 841 l 0-2668
(801) 322-2222
Robert M. Foote (IL Bar No. 03124325)
Craig S. Meilke (IL Bar No. 03127485)
FOOTE, MEYERS, MIELKE
& FLOWERS, LLC
3 North Second Street, Suite 300
St. Charles, IL 601 74
(630) 232-6333
(630) 845-8982
Attorneys.for the Havlish Plaintffls
- 5 -
Annex 370
Case 1:03-cv-09848-GBD-SN Document 306 Filed 02/27/12 Page 6 of 6
CERTIFICATE OF SERVICE
I, Thomas E. Mellon Jr., Esquire, hereby certify that the Defendants in the matter of
Havlish, et al. v. bin Laden, et al. , are in default and have not registered for ECF and, therefore,
those Defendants have not been served with the attached Addendum to Plaintiffs' Proposed
Findings of Fact and Conclusions of Law. All other interested parties in the consolidated actions
are being served through the ECF system this 2711' day of February, 2012.
Isl Thomas E. Mellon Jr.
Thomas E. Mellon Jr., Esquire
Pa. Bar No.: 16767
MELLON, WEBSTER & SHELLY
87 N. Broad Street
Doylestown, PA 18901
(215) 348-7700
[email protected]
Counsel.for Havlish Plaint(ffs
Annex 370
ANNEX371
Republic of Kazakhstan v. Stati, 325 F.R.D. 507 (2018)
325 F.R.D. 507
United States District Court, District of Columbia.
REPUBLIC OF KAZAKHSTAN, Plaintiff,
v.
Anatolie STATI, et al., Defendants.
Synopsis
Civil Action No. 17-2067 (ABJ)
I
Signed 04/24/2018
Background: Republic of Kazakhstan brought action
against business owners and their companies, alleging
violations of the Racketeer Influenced and Corrupt
Organizations Act (RICO), and fraud and civil
conspiracy, arising from defendants allegedly obtaining
an arbitral award from the Stockholm Chamber of
Commerce (SCC) through fraud. After the Clerk of Court
entered defaults against business owners, business owners
moved to vacate entry of default.
The District Court, Amy Berman Jackson, J., held that
good cause existed to set aside entry of default judgment.
Motion granted.
Attorneys and Law Firms
*508 Matthew H. Kirtland, Norton Rose Fulbright US
LLP, Washington, DC, for Plaintiff.
Charlene C. Sun, James E. Berger, King & Spalding LLP,
New York, NY, Taylor T. Lankford, King & Spalding
LLP, Washington, DC, for Defendants.
MEMORANDUM OPINION
AMY BERMAN JACKSON, United States District Judge
Plaintiff, the Republic of Kazakhstan ("Kazakhstan"), has
brought this action against defendants, Anatolie Stati and
Gabriel Stati and the two companies they own, Ascom
Group, S.A. ("Ascom") and Terra Raf Trans Traiding Ltd.
("Terra Raf') for alleged violations of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18
U.S.C. § 1961 et seq., and the common law torts of fraud
and civil conspiracy. Compl. CJ[ 1 [Dkt. # 1]. Kazakhstan
claims that defendants obtained an arbitral award from the
Stockholm Chamber of Commerce ("SCC") in Sweden
through fraud, and it seeks damages, attorneys' fees, and
an injunction preventing defendants from enforcing the
arbitral award in the United States. Id. at 92-93 ("Prayer
for Relief'). 1
On February 26, 2018, the Clerk of Court entered defaults
against two of the four defendants-Ascom and Terra
Raf-due to their failure to answer the complaint. Clerk's
Entry of Default Re: Terra Raf [Dkt. # 8]; Clerk's Entry
of Default Re: Ascom [Dkt. # 9]. A few days later, on
March 2, 2018, defendants moved to vacate the entries of
default, see Defs.' Mot. to Vacate Entry of Default
Against Ascom and Terra Raf [Dkt. # 13] ("Defs.' Mot.");
Mem. in Supp. of Defs.' Mot. [Dkt. # 14] ("Defs.'
Mem."), and plaintiff opposed the motion. Kazakhstan's
Opp. to Defs.' Mot. [Dkt. # 15] ("Pl.'s Opp."). For the
*509 reasons that follow, the Court will grant defendants'
motion.
ANALYSIS
Under Federal Rule of Civil Procedure 55(c), "[t]he court
may set aside an entry of default for good cause." Fed. R.
Civ. P. 55(c). The Court must exercise its discretion in
making such a determination, but in this Circuit, "strong
policies favor resolution of disputes on their merits."
Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir. 1980); see
also Mohamad v. Rajoub, 634 F.3d 604, 606 (D.C. Cir.
2011) (pointing to Jackson v. Beech for the same
proposition). "In exercising its discretion, the district
court is supposed to consider 'whether (1) the default was
willful, (2) a set-aside would prejudice plaintiff, and (3)
the alleged defense was meritorious.' " Mohamad, 634
F.3d at 606, quoting Keegel v. Key West & Caribbean
Trading Co., 627 F.2d 372, 373 (D.C. Cir. 1980).
"Because of the strong preference for resolving disputes
on the merits, any doubts must be resolved in favor of the
party seeking relief from the default." Gray v. Staley, 310
F.R.D. 32, 35 (D.D.C. 2015), citing Jackson, 636 F.2d at
837.
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Annex 371
Republic of Kazakhstan v. Stati, 325 F.R.D. 507 (2018)
Before the Court can analyze whether good cause exists
to vacate the entry of default, it must first address the
threshold requirement set forth in Local Civil Rule 7(g)
which provides that "[a] motion to vacate an entry of
default, or a judgment by default, or both, shall be
accompanied by a verified answer presenting a defense
sufficient to bar the claim in whole or in part." LCvR
7(g). Defendants have not filed an answer with their
motion. Instead, they request that the Court exercise its
discretion and permit them to file a motion to dismiss by
May 4, 2018, which is sixty days from the date the last
defendant in this case was served.2 Defs.' Mem. at 5 n.3;
Defs.' Reply at 6 n.2.
The Court will grant this request as a matter of judicial
efficiency. It sees no reason why the four defendants, all
represented by the same counsel, should be required to
file separate answers or other responsive pleadings to the
same complaint.3 Furthermore, this ruling is consistent
with the Circuit's strong preference to proceed on the
merits. See Jackson, 636 F.2d at 837; see also Azamar v.
Stern, 275 F.R.D. 1, 4 n.3 (D.D.C. 2011) (noting that
"courts have proceeded with considering the merits of a
motion to vacate default despite the failure to comply
with [Local Civil Rule 7(g) ], partially due to the
preference for allowing a case to proceed on the merits
rather than allowing the entry of default to stand on a
purely procedural ground").
With respect to the motion to vacate the defaults, the
Court has considered each of the Rule 55(c) factors, and it
finds that there is good cause to vacate the defaults
entered against Ascom and Terra Raf. The first
factor-whether the default was "willful"-requires more
than negligent conduct. See, e.g., Gray, 310 F.R.D. at 35
("To show willfulness, a moving party need not establish
bad faith, though it must demonstrate more than mere
negligence."); see also Wilson v. Superclub Ibiza, LLC,
279 F.R.D. 176, 179 (D.D.C. 2012) (same). Here,
defendants contend that their failure to respond to the
complaint was "borne of negligence," Defs.' Reply at 2,
that is "a combination of miscommunication, colorable
questions concerning the sufficiency of service with
respect to ... [d]efendant Terra [Raf], lack of service on
Gabriel Stati, and [p ]laintiff s failure to file certificates of
service [on the public docket] when it considered service
to have been completed." Defs.' Mem. at 3. And they
assert that despite this initial delay in responding,
defendants are now ready and eager to defend against the
suit. Defs.' Reply at 2.
Although the Court does not condone defendants'
negligent behavior, there is no indication that they
deliberately tried to delay this case or acted with wanton
or willful *510 disregard for their legal responsibilities.
See Gray, 310 F.R.D. at 35 (holding that the defendants'
two-month delayed response was not willful under Rule
55(c) because they had not failed to defend against the
case or otherwise engaged in "dilatory tactics"); see also
Kusi v. British Airways Corp., No. 96-2868, 1997 WL
420334, at *1 (D.D.C. July 17, 1997) (holding that the
defendant's failure to respond to complaint due to
miscommunication between its foreign corporate
headquarters and its U.S. counsel was excusable neglect
since there was no indication that the defendant "acted
with willful disregard for its legal responsibilities").
In fact, a day after the Clerk of Court entered the defaults
against Ascom and Terra Raf, counsel for defendants
entered their appearance and emailed plaintiff's counsel
seeking to negotiate a briefing schedule. Ex. A to Defs.'
Reply [Dkt. # 16-3]; Notice of Appearance James E.
Berger [Dkt. # 10]; Notice of Appearance Charlene C.
Sun [Dkt. # 11]; Notice of Appearance Taylor T.
Lankford [Dkt. # 12]. And shortly thereafter, defendants
filed this motion to vacate the defaults. Defs.' Mot. So
this is not a case where defendants were "totally
unresponsive," see Jackson, 636 F.2d at 836 (noting that
default judgment should be reserved for situations
involving a "totally unresponsive party"), and since
"enforcing judgments as a penalty for delays in filing is
often contrary to the fair administration of justice," the
Court finds that this delay is excusable under Rule 55(c).
Int'[ Painters & Allied Trades Union & Indus. Pension
Fund v. H. W. Ellis Painting Co., 288 F.Supp.2d 22, 25
(D.D.C. 2003).
Moreover, plaintiff will not be prejudiced by vacating the
defaults. There is no indication that the delay in this case
has caused witnesses to disappear or physical evidence to
deteriorate. See Capital Yacht Club v. Vessel AVIVA, 228
F.R.D. 389, 394 (D.D.C. 2005), citing KPS & Assocs.,
Inc. v. Designs By FMC, Inc., 318 F.3d 1, 15 (1st Cir.
2003) (noting that prejudice results from the dangers that
accompany delay such as "loss of evidence, increased
difficulties of discovery, or an enhanced opportunity for
fraud or collusion"). Plaintiff asserts that "delay enhances
[defendants'] opportunity to perpetuate their fraudulent
scheme." Pl.'s Opp. at 9. But this claim is not
well-founded since the danger plaintiff seeks to forestall
is an effort by the defendants to enforce the arbitral award
through legal systems in "multiple jurisdictions.'' Id. And
the arbitral award has already been upheld by the Swedish
Supreme Court and recently by this Court
notwithstanding the fraud allegations. See Stati, -
F.Supp.3d at--,--, 2018 WL 1461898 at *5, 16.
Finally, defendants have met the third criteria for vacating
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Annex 371
Republic of Kazakhstan v. Stati, 325 F.R.D. 507 (2018)
the defaults because they have proffered a potentially
meritorious defense based on their contention that the
complaint fails to allege a prima facie RICO claim
because the vast majority of the conduct is lawful and
occurred outside the United States. Defs.' Mem. at 5; see
Mohamad, 634 F.3d at 606 ("[A]llegations are
meritorious if they contain even a hint of a suggestion
which, proven at trial, would constitute a complete
defense."), quoting Keegel, 627 F.2d at 374.
Accordingly, for the reasons stated, the Court will grant
Footnotes
defendants' motion, [Dkt. # 13], to vacate the defaults
entered against Ascom and Terra Raf.
A separate order will issue.
All Citations
325 F.R.D. 507
In a related case to enforce the same arbitral award, Kazakhstan raised, and the Court rejected, similar arguments
based on alleged fraud. See Anatolie Stati v. Republic of Kazakhstan, No. 14-1638, 302 F.Supp.3d 187, 193-201, 209,
2018 WL 1461898, at *3-9, 16 (D.D.C. Mar. 23, 2018) (granting petition to confirm sec arbitral award because "none
of the grounds for refusal or deferral of the award set forth in the New York Convention apply").
2 According to defendants, service of the other two defendants, Anatolie Stati and Gabriel Stati, was completed,
although no certificate of service has been filed with the Court. See Reply Mem. in Supp. of Defs.' Mot. [Dkt. # 16]
("Defs.' Reply") at 6 n.2.
3 The Court notes that all four defendants have now filed a motion to dismiss the complaint. See Defendants' Motion to
Dismiss [Dkt. # 19].
End of Document © 2021 Thomson Reuters. No claim to original U.S. Government
Works.
WEST AW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3
Annex 371
ANNEX 372
First Fidelity Bank, N.A. v. Government of Antigua& ... , 877 F.2d 189 (1989)
14 Fed.R.Serv.3d 353
877 F.2d 189
United States Court of Appeals,
Second Circuit.
FIRST FIDELITY BANK, N.A., a national
banking association, formerly doing
business as First National Bank of New
Jersey, Appellee,
v.
The GOVERNMENT OF ANTIGUA &
BARBUDA-PERMANENT MISSION,
Appellant.
No. 777, Docket 88-7863.
I
Argued Feb. 23, 1989.
I
Decided June 7, 1989.
Synopsis
Bank brought action against government of Antigua and
Barbuda on note signed by government's ambassador to
United Nations. The United States District Court,
Southern District of New York, Louis L. Stanton, J.,
entered default judgment in favor of bank and
subsequently denied government's motion for relief from
judgment. Government appealed. The Court of Appeals,
Oakes, Chief Judge, held that factual issues as to whether
ambassador had apparent authority to obtain loan and
waive governments sovereign immunity warranted setting
aside default judgment.
Reversed and remanded.
Jon 0. Newman, Circuit Judge, dissented and filed
opinion.
Attorneys and Law Firms
*190 Pamela A. Bresnahan, Laxalt, Wash., Perito &
Dubuc (Stacey E. Athans, New York City, Robert B.
Washington, Jr., Anthony M. Alexis, Washington, D.C.,
of counsel), for appellant.
William M. O'Connor, Poyen & Peri (Joseph D. Giacoia,
New York City, of counsel), for appellee.
Before OAKES, Chief Judge, NEWMAN, Circuit Judge,
and HAIGHT, District Judge.'
Opinion
OAKES, Chief Judge:
The Government of Antigua and Barbuda appeals from a
decision of the United States District Court for the
Southern District of New York, Louis L. Stanton, Judge,
which denied its motion for relief under Rule 60(b) of the
Federal Rules of Civil Procedure. First Fidelity Bank had
secured a default judgment against Antigua in a suit on a
note signed by Antigua's ambassador to the United
Nations and had then entered into a consent order also
executed by the ambassador purportedly on his country's
behalf. Antigua requested the court to set aside the default
judgment and dismiss the complaint or, in the alternative,
to vacate the consent order. The issue is the extent to
which Antigua is bound by the actions of its ambassador
to the *191 United Nations. We conclude that the default
judgment should have been set aside and therefore reverse
the decision and remand the case to the district court for
further proceedings.
BACKGROUND
In November 1983, First Fidelity's predecessor, First
National State Bank of New Jersey, loaned $250,000 to
Lloydstone Jacobs, Antigua's ambassador to the United
Nations. Jacobs signed for the loan as ambassador,
representing the "Government of Antigua &
Barbuda-Permanent Mission." The stated purpose of the
loan was to pay for the renovation of Antigua's
Permanent Mission to the United Nations in New York.
Repayment of the loan ceased in mid-1985. In September
1985, the bank contacted government officials in Antigua,
seeking repayment. The following month, the bank wrote
to Jacobs and to Prime Minister Vere C. Bird's permanent
secretary, threatening legal action. According to an officer
of the bank, the permanent secretary told the officer by
telephone in November that Jacobs and Robert Healy,
in-house counsel for Antigua's Permanent Mission, were
authorized to negotiate a settlement, but this is now
disputed by Antigua.
No settlement was reached, and in July 1986 First Fidelity
sued Antigua for repayment. Antigua did not answer the
complaint, although it concedes that it was properly
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Annex 372
First Fidelity Bank, N.A. v. Government of Antigua& ... , 877 F.2d 189 (1989)
14 Fed.R.Serv.3d 353
served. Representatives of the bank met with Jacobs and
Healy. According to the bank, Jacobs and Healy
acknowledged that Antigua had no defense against the
action and revealed that the proceeds from the loan had in
fact been invested in a casino. There was still no
settlement, however, so the bank sought a default
judgment. The bank decided, "[a]fter a review of Mr.
Healy's involvement and appearance in this action," to
obtain the default judgment by formal motion. The district
court granted the default judgment on December 19,
1986.
First Fidelity's efforts to levy upon Antigua's bank
accounts in New York provoked a response from Jacobs.
He wrote to the district court in September 1987,
acknowledging the debt and seeking a settlement. The
following month, the bank and Jacobs agreed to a
settlement and signed a consent order. The consent order
included a complete waiver of Antigua's sovereign
immunity from jurisdiction, attachment, and execution; it
was signed on behalf of the Government of Antigua and
Barbuda by Lloydstone Jacobs, "Ambassador
Extraordinary and Plenipotentiary," and by Robert Healy
as the Government's attorney.
First Fidelity received $70,000 pursuant to the consent
order, but in January 1988 payments ceased again. The
bank executed upon a New York account of Antigua's
Permanent Mission but obtained only $500. First Fidelity
then sought to attach bank accounts maintained by
Antigua's embassy in Washington, D.C. The Government
of Antigua, sitting in the capital city of St. John's, then
took its first direct action in this case: it moved in the
district court to dismiss First Fidelity's complaint for lack
of subject matter jurisdiction or, alternatively, to vacate
the consent order. Antigua claimed that it was not bound
by Jacobs' actions because he had acted without authority
in borrowing the money and in consenting to the
settlement. Since Antigua was not responsible for Jacobs'
fraudulent activities, the argument ran, it retained its
sovereign immunity. Judge Stanton denied the motion; in
a brief memorandum, he applied agency law to hold
Antigua responsible for Jacobs' actions. Antigua could
not interpose sovereign immunity, he decided, because
the loan fell within the Foreign Sovereign Immunity Act's
commercial activity exception. Antigua then filed this
appeal.'
DISCUSSION
First Fidelity asserts that Jacobs possessed the actual
authority to bind Antigua. The bank goes on to claim that,
even *192 if Jacobs lacked that actual authority, under
applicable agency law he nevertheless had ample apparent
authority to bind Antigua. In this context, First Fidelity
emphasizes the power inherent in an ambassador's
position: the bank claims that, as "Ambassador
Extraordinary and Plenipotentiary," Jacobs occupied the
highest rank in diplomacy, as established by the
Congresses of Vienna (1815) and Aix-la-Chapelle (1818).
Under the Headquarters Agreement with the United
Nations, an ambassador to the U.N. possesses the same
privileges and immunities as diplomatic envoys
accredited to the United States. See Agreement Between
the United Nations and the United States of America
Regarding the Headquarters of the United Nations, June
26, 1947, art. V, § 15, 61 Stat. 3416, 3427-28, T.I.A.S.
No. 1676, at 13-15, authorized by S.J. Res. of Aug. 4,
1947, Pub.L. No. 80--357, 61 Stat. 756, set out in 22
U.S.C. § 287 note (1982).
The powers of an ambassador may include the authority
to conclude international agreements. See Restatement
(Third) of Foreign Relations § 311 (1987). "Heads of
diplomatic missions and representatives accredited to
international organizations are regarded as possessing
powers to negotiate agreements on matters within their
jurisdiction." Id. comment b. An ambassador thus may
have the power to bind the state that he represents.
Normally, of course, a state authorizes a representative to
act on its behalf. However, a state can be bound by the
representative's unauthorized actions where the lack of
authority is not obvious. Id. § 311(3) & Reporters' Note
4. Legal Status of Eastern Greenland (Den. v. Nor.), 1933
P.C.I.J. (ser. A/B) No. 53 (Apr. 5), is an example of this.
There, the Permanent Court of International Justice held
that Norway was bound by an oral declaration of its
foreign minister that his country would not contest Danish
sovereignty over Eastern Greenland. Id. at 71. First
Fidelity argues that this application of the principles of
agency law of developed states in international law
supports its claim against Antigua here.
The implication of First Fidelity's argument is that
Antigua is bound by Jacobs' actions solely because he
was Antigua's ambassador to the U.N. In effect, First
Fidelity is telling us: "L'etat, c'est lui." If it were true, as
a matter of law, that an ambassador's actions under color
of authority automatically bind the state that he
represents, then we must affirm the decision below:
Antigua would be bound by Jacobs' settlement of this
lawsuit. We do not believe, however, that a person's
position as ambassador, and nothing more, should be
dispositive in this case, let alone all cases.
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The authority to conclude international agreements,
described in Restatement (Third) of Foreign Relations §
311, does not support an automatic rule binding the state
in any transaction with non-sovereign third parties. The
issue here is not whether Jacobs, as ambassador,
possessed the authority to borrow money or to waive
Antigua's sovereign immunity in a settlement of the
lawsuit. Assuming that he had that authority does not lead
inevitably to the conclusion that his actions here must be
attributed to Antigua. Put another way, the possession of
authority does not, ipso facto, validate every exercise of
it. In the Eastern Greenland case, it was not simply the
Norwegian minister's position or title that made his
declaration binding upon Norway. The Court carefully
examined the context in which the declaration was made.
See 1933 P.C.I.J. (ser. A/B) No. 53, at 71-73.
International agreements have considerably more dignity
than Jacobs' purely commercial transactions with First
Fidelity. See Restatement (Third) of Foreign Relations §
301(1) (defining international agreement). Even so, an
ambassador's signature does not make an international
agreement automatically binding upon the state. Coercion
of a state's representative, for example, renders an
agreement signed by that representative void, id. §
331(2)(a), and corruption of the representative permits the
state to invalidate its consent to the agreement, id. §
331(1)(c). If the circumstances surrounding an
ambassador's signature of a treaty may be grounds for
invalidating that treaty, then surely a state cannot
automatically be *193 bound by its ambassador's
settlement of a lawsuit by a non-sovereign third party
arising from a commercial transaction.
The conduct of an ambassador may be attributed to his
state under other circumstances. In the words of the
Restatement (Third) of Foreign Relations, "[a] state is
responsible for any violation of its obligations under
international law resulting from action or inaction by ...
any ... official, employee, or other agent of a government
or of any political subdivision, acting within the scope of
authority or under color of such authority." Id. § 207(c).
This rule would apply even if the act were unauthorized
by the responsible national authorities and even if it were
forbidden by law. Id. comment d. However, by its own
terms, section 207 applies only to violations of
international law. A breach of a commercial contract,
such as that alleged by First Fidelity in this case, is not a
violation of international law unless the breach is
discriminatory, or it occurs for governmental rather than
commercial reasons and the state is not prepared to pay
damages for the breach. Restatement (Third) of Foreign
Relations § 712(2) comment h & Reporters' Note 8.
Moreover, an assessment under section 207 of the scope
and color of authority introduces elements of agency law:
one must "consider all the circumstances." These include
matters that are relevant in this case: "whether the
affected parties reasonably considered the action to be
official, [and] whether the action was for public purpose
or for private gain." Id. comment d. Thus, we cannot
derive from section 207 a broader rule making every
action by an ambassador binding upon his government.
We conclude that an ambassador's actions under color of
authority do not, as a matter of law, automatically bind
the state that he represents. The facts of a given case must
be examined, and the agency law of developed states,
here our own, provides the proper framework for that
examination. Cf Restatement (Third) of Foreign
Relations § 311 Reporters' Note 4 (noting that provision
concerning apparent authority to conclude international
agreements is analogous to national laws on the authority
of agents).2
The question here would be whether Jacobs, as
Antigua's ambassador to the United Nations, in the
circumstances of this case possessed the apparent
authority to borrow the money and to waive Antigua's
sovereign immunity. See Restatement (Second) of Agency
§ 8 (1958) (defining apparent authority). Under the
Restatement (Second) of Agency, a principal causes his
agent to have apparent authority by conduct which,
reasonably interpreted, causes third persons to believe that
the principal consents to have an act done on his behalf.
Id. § 27. The appointment of a person to a position with
generally recognized duties may create apparent
authority. Id. comment a; § 49 comment c. A decision
whether apparent authority exists thus requires a factual
inquiry into the principal' s manifestations to third
persons. General Overseas Films, Ltd. v. Robin Int'l, Inc.,
542 F.Supp. 684, 689 (S.D.N.Y.1982), aff'd, 718 F.2d
1085 (2d Cir.1983). *194 In addition, under New York
law,' the circumstances of the transaction must be
examined to determine whether the person relying on the
apparent authority fulfilled his "duty of inquiry." Id.; cf
Restatement (Third) of Foreign Relations § 456 comment
b (party relying on waiver of sovereign immunity had
burden of showing that person waiving had authority to
bind the state).
Thus, agency law is flexible enough so that the fact that a
person is an ambassador can be given its appropriate
weight in determining the extent of his apparent authority.
The fact that Jacobs was Antigua's ambassador to the
U.N. does not make his settlement of the lawsuit binding
upon Antigua, but that fact is relevant in deciding whether
First Fidelity's reliance upon his authority was
reasonable.
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Antigua claims that Jacobs exceeded his authority (both
actual and apparent) in borrowing the money and, later, in
waiving Antigua's sovereign immunity. Jacobs may have
acted, the argument runs, but Antigua did nothing.
Antigua claims that it therefore retains its sovereign
immunity despite the fact that the loan itself was
commercial activity within the meaning of the Foreign
Sovereign Immunity Act (FSIA). See 28 U.S.C. §§
1603(d), 1605(a)(2) (1982) (defining commercial activity
exception). The default judgment, Antigua concludes, was
void for want of subject matter jurisdiction. This would
entitle Antigua to relief from the default judgment under
Rule 60(b)(4).
First Fidelity responds that Antigua cannot present its
substantive defense when seeking relief under Rule
60(b)(4). The bank cites Meadows v. Dominican
Republic, 628 F.Supp. 599 (N.D.Cal.1986), aff'd, 817
F.2d 517 (9th Cir.), ce-rt. denied, 484 U.S. 976, 108 S.Ct.
486, 98 L.Ed.2d 485 (1987), in support of this argument.
In Meadows, the Dominican Republic sought relief from a
default judgment under Rule 60(b)(4), arguing that its
codefendant, the Instituto de Auxilios Y Viviendas, was a
separate juridical entity under Dominican law and that the
Instituto's acts were not attributable to the Republic.
Hence, the Republic was not properly joined as a
defendant, and its contacts with the forum were not a
basis for personal jurisdiction over the Instituto. The
district court rejected this argument. The issue under Rule
60(b)(4), the district court said, is whether the default
judgment is void. Under First National City Bank v.
Banco Para el Comercio Exterior de Cuba, 462 U.S. 611,
103 S.Ct. 2591, 77 L.Ed.2d 46 (1983), juridical
separateness is a question of substantive law, not of
subject matter jurisdiction. An error of substantive law,
unlike an erroneous determination that jurisdiction exists,
is not a ground for vacating a default judgment as void.
The court therefore concluded that the issue of juridical
separateness was "not open for consideration" in
determining whether the default judgment was void. 628
F.Supp. at 608. See also Gregorian v. Izvestia, 658
F.Supp. 1224, 1236 (C.D.Cal.1987) ("An error in
interpreting material facts is not equivalent to acting with
total lack of jurisdiction.").
Meadows and Gregorian are relevant to our case, but they
are not dispositive. Closer analysis of sovereign immunity
and subject matter jurisdiction under the FSIA shows that
the distinction between substance and procedure is not so
clear-cut. Congress viewed sovereign immunity as an
"affirmative defense." See H.R.Rep. No. 1487, 94th
Cong., 2d Sess. 17, reprinted in 1976 U.S.Code Cong. &
Admin.News 6604, 6616. However, the Supreme Court
has recognized that a district court's subject matter
jurisdiction depends upon the existence of an exception to
foreign sovereign immunity. *195 Verlinden B. V. v.
Central Bank of Nigeria, 461 U.S. 480, 493 & n. 20, 103
S.Ct. 1962, 1971 & n. 20, 76 L.Ed.2d 81 (1983). It is not
surprising, then, that a decision concerning subject matter
jurisdiction under the FSIA may require the resolution of
substantive issues.
For example, in Carl Marks & Co. v. USSR, 665 F.Supp.
323 (S.D.N.Y.1987), ajf'd per curiam, 841 F.2d 26 (2d
Cir.), cert. denied, 487 U.S. 1219, 108 S.Ct. 2874, 101
L.Ed.2d 909 (1988), the Soviet Union moved under Rule
60(b) to vacate two default judgments. Judge Brieant
distinguished between 60(b)(l) and (b)(6) motions, which
require a court to examine the merits of a case, and
60(b)(4) motions, which are jurisdictional. Id. at 332-33.
He noted, however, that a 60(b)(4) dismissal in an FSIA
case can look like a decision on the merits. The FSIA
begins with a presumption of immunity which the
plaintiff must overcome by showing that the defendant
sovereign's activity falls under one of the statutory
exceptions. "Thus, ... '[i]n many cases a resolution of the
substantive immunity law issues will be required in order
to reach a decision on subject matter jurisdiction .... [A]
court may have to interpret the substantive principles
embodied in § § 1605- 1607 before deciding whether to
take jurisdiction.' " Id. at 333 (quoting Corporacion
Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d
786, 790-91 n. 4 (2d Cir.1980), cert. denied, 449 U.S.
1080, 101 S.Ct. 863, 66 L.Ed.2d 804 (1981)); see also
Upton v. Empire of Iran, 459 F.Supp. 264, 265
(D.D.C.1978) (FSIA "creates an identity of substance and
procedure"), ajf' d, 607 F.2d 494 (D.C.Cir.1979).
In Carl Marks, Judge Brieant had to consider the merits
of the case in order to determine whether his court had
jurisdiction over the case: he found that the defendant's
actions that were the basis for the suit occurred before the
effective date of the FSIA. The default judgments were
therefore void for want of jurisdiction under Rule
60(b)(4), and the complaints were dismissed. 665 F.Supp.
at 349. Thus, Carl Marks seems to open the way for a
consideration of the substantive issues here-i.e., the
extent of Jacobs' authority and the validity of the waiver
in the consent order-and indeed, Judge Stanton did
examine the merits in denying Antigua's 60(b) motion.
The facts in our record are susceptible of two opposing
interpretations. First Fidelity has alleged facts sufficient to
show Jacobs' and Healy's apparent authority under New
York law. See Hallock v. State, 64 N.Y.2d 224, 231, 474
N.E.2d 1178, 1181, 485 N.Y.S.2d 510, 513 (1984)
(apparent authority exists where principal's conduct leads
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third party reasonably to believe that agent has authority).
If Jacobs and Healy acted within their apparent authority
in their transactions with the bank, then Antigua would be
liable. See Restatement (Second) of Agency § 159
(liability created by actions within apparent authority).
However, there is also evidence that First Fidelity
mistrusted Jacobs' and Healy's bona fides, which raises
questions about the reasonableness of First Fidelity's
reliance upon their apparent authority. See Ford v. Unity
Hosp., 32 N.Y.2d 464, 472, 299 N.E.2d 659, 664, 346
N.Y.S.2d 238, 244 (1973) ("One who deals with an agent
does so at his peril, and must make the necessary effort to
discover the actual scope of authority."); General
Overseas Films, Ltd. v. Robin Int'[, Inc., 542 F.Supp. 684,
690 (S.D.N.Y.1982) (extraordinary nature of transaction
should have altered plaintiff to danger of fraud), aff' d,
718 F.2d 1085 (2d Cir.1983); Restatement (Third) of
Foreign Relations § 456 comment b (party relying on
waiver has burden of showing that person waiving had
authority to bind state); Restatement (Second) of Agency§
165 (principal is not liable for agent's improper actions if
third party knows that agent is not acting for principal's
benefit).
Thus, it may be that Antigua is the innocent victim of its
ambassador's fraud and the bank's willful ignorance of
the ambassador's lack of authority. If so, Antigua would
retain its sovereign immunity, and the default judgment
against it would be void for want of subject matter
jurisdiction. On the other hand, Antigua may simply be
trying to renege on a loan by disowning its agent who
borrowed the money. In that case, the FSIA's commercial
activity exception would strip Antigua of its sovereign
immunity, and the district court would have *196 subject
matter jurisdiction. The default judgment would be valid,
and the consent order would be enforceable. As in Carl
Marks, it is impossible to make a decision concerning
subject matter jurisdiction without considering the merits.
A decision that a default judgment is void for want of
jurisdiction must be accompanied by dismissal of the
action. See Thos. P. Gonzalez Corp. v. Consejo Nacional
de Produccion de Costa Rica, 614 F.2d 1247, 1256 (9th
Cir.1980) (per curiam); Gregorian, 658 F.Supp. at 1229.
In this case, however, since subject matter jurisdiction is
interwoven with the merits, dismissal of the suit before
trial would leave both the substantive and the
jurisdictional issues unexplored. We find that there are
enough doubts about the facts in this case (where disputed
affidavits from First Fidelity comprise vital parts of the
record) to justify setting aside the default judgment. Yet
these same doubts about the facts weigh against declaring
the default judgment void and dismissing the complaint
under Rule 60(b)(4); we cannot assess the validity of the
default judgment because we know too little about the
interwoven jurisdictional and substantive issues. We turn,
then, to Rule 60(b)(6), under which a judgment may be
set aside for "any other reason justifying relief."
Relief under Rule 60(b)(6) is appropriate only in cases
presenting "extraordinary" circumstances. See Ackermann
v. United States, 340 U.S. 193, 202, 71 S.Ct. 209, 213, 95
L.Ed. 207 (1950). Litigants may not use this clause
simply to circumvent the time limits of other provisions
of Rule 60(b). Serzysko v. Chase Manhattan Bank, 461
F.2d 699, 702 (2d Cir.), cert. denied, 409 U.S. 883, 93
S.Ct. 173, 34 L.Ed.2d 139 (1972). However, default
judgments are disfavored, especially those against foreign
sovereigns. Restatement (Third) of Foreign Relations §
459 comment c & Reporters' Note 1. Courts go to great
lengths to avoid default judgments against foreign
sovereigns or to permit those judgments to be set aside.
See, e.g., Jackson v. People's Republic of China, 794 F.2d
1490, 1494-96 (11th Cir.1986), cert. denied, 480 U.S.
917, 107 S.Ct. 1371, 94 L.Ed.2d 687 (1987); Carl Marks,
665 F.Supp. at 329-30. In this case, the fusion of
substantive and jurisdictional issues also militates in favor
of setting aside the default judgment under Rule 60(b)(6);
the parties must proceed to discovery and possibly to trial
before a court can rule on either substance or jurisdiction.
We conclude that it was an abuse of discretion not to set
aside the default judgment under Rule 60(b)(6). See
Bankers Mortgage Co. v. United States, 423 F.2d 73, 77
(5th Cir.) (Rule 60(b) should be interpreted "to preserve
the delicate balance between the sanctity of final
judgments ... and the incessant command of the court's
conscience that justice be done in light of all the facts"),
cert. denied, 399 U.S. 927, 90 S.Ct. 2242, 26 L.Ed.2d 793
(1970); Radack v. Norwegian American Line Agency,
Inc., 318 F.2d 538, 542 (2d Cir.1963) (Rule 60(b)(6)
"should be liberally construed when substantial justice
will thus be served").
Antigua should, then, have an opportunity to defend this
case on its merits. Cf Practical Concepts, Inc. v. Bolivia,
811 F.2d 1543, 1551-52 (D.C.Cir.1987) (vacating district
court's decision to set aside default judgment and dismiss
case; nonetheless declining to reinstate default judgment
for policy reasons, instead remanding for consideration of
defendant's substantive defenses). At the same time, First
Fidelity's rights must be protected, for there is some
evidence that Antigua responded to this lawsuit only
when First Fidelity began to grasp its assets. Rule 60(b)
provides for relief "upon such terms as are just." See, e.g.,
Bennett v. Circus U.S.A., 108 F.R.D. 142, 149
(N.D.Ind.1985). The default judgment is vacated and the
case is remanded to the district court for further
proceedings on the condition that Antigua post a bond
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covering the amount claimed by First Fidelity, including
interest.
Judgment in accordance with opinion; costs to neither
party.
JON 0. NEWMAN, Circuit Judge, dissenting:
This case has serious implications for the relationships
between the United States *197 and all foreign states that
send duly accredited ambassadors to head their diplomatic
missions in this country. Because I believe the majority
has fashioned a rule of law that risks impairment of those
relationships, I respectfully dissent.
Though the case comes to us after entry of a default
judgment, certain key facts are undisputed. In 1983,
Lloydstone Jacobs was an Ambassador Extraordinary and
Plenipotentiary of the Government of Antigua and
Barbuda and the Permanent Representative of that
government to the United Nations. He headed the
Antiguan Mission to the UN in New York City.
Ambassador Jacobs signed a note for the repayment of
money borrowed from what is now known as the First
Fidelity Bank. The note states that the borrower is the
"Government of Antigua & Barbuda-Permanent
Mission." Ambassador Jacobs represented that the loan
proceeds were to be used for renovations at his
government's UN Mission and its New York City tourist
office. He subsequently used the funds for construction of
a casino resort in Antigua, in which he and other officials
of the Antiguan government held ownership interests.
Antigua contends that under the Antiguan Constitution
and statutes, the authority to borrow funds requires the
prior approval of the cabinet and a delegation of authority
to the Minister of Finance, and that neither had occurred
in this case. For purposes of this appeal, I accept that
contention.
Litigation brought by the Bank to collect the loan resulted
initially in a default judgment against the Government of
Antigua and Barbuda and subsequently in a stipulation of
settlement, which was "so ordered" by the District Court.
The stipulation contained an express waiver of the
immunity of Antigua from the jurisdiction of the courts of
the United States under the Foreign Sovereign Immunities
Act of 1976, 28 U.S.C. §§ 1604, 1605(a)(l) (1982). The
stipulation was signed on behalf of Antigua by Jacobs in
his capacity as Ambassador Extraordinary and
Plenipotentiary and by an attorney representing Antigua.
The majority directs that the default judgment be vacated
and that the District Court conduct an inquiry into
whether the Bank was entitled to rely on the apparent
authority of Ambassador Jacobs to borrow the money and
to settle the ensuing litigation. In that inquiry, Antigua
will be entitled to a dismissal of the Bank's claim on the
basis of sovereign immunity if it can establish "that
Antigua is the innocent victim of its ambassador's fraud
and the bank's willful ignorance of the ambassador's lack
of authority." 877 F.2d at 195. The majority decides the
case by rejecting the proposition that Antigua is bound by
the actions of its Ambassador solely by virtue of his office
and by concluding that the only inquiry left once that
proposition is rejected is whether Antigua is bound under
the doctrine of apparent authority.
The initial question concerns choice of law. Though
foreign states, if amenable to suit in this country, may, in
most circumstances, be obliged to accept state substantive
law that normally applies to such matters as contracts and
creditors' rights, they are entitled to expect that this
country will have a uniform body of federal law that
determines those issues of agency law that implicate
relationships between a foreign government and its
ambassador accredited within this country. In this respect,
it should make no difference that Jacobs was his country's
Ambassador to the UN, rather than to the Government of
the United States. As the host country to the United
Nations headquarters, this country has an obligation to
develop federal law on the sensitive subject of a UN
ambassador's authority to bind his government on
ordinary commercial matters. In the absence of federal
legislation on the subject, the matter is appropriate for the
development of federal common law. Cf First National
City Bank v. Banco Para el Comercio Exterior de Cuba,
462 U.S. 611, 623, 103 S.Ct. 2591, 2598, 77 L.Ed.2d 46
(1983) (federal common law is appropriate for deciding
whether separate juridical status of foreign state's
instrumentality should shield it from liability).
Turning, then, to the issue of agency law, as a matter of
federal common law in *198 this context, I can agree with
the majority that a person's role as his country's UN
ambassador does not automatically entitle him to bind his
government in all cases. For example, that role would not
entitle an ambassador to bind his government to an
obligation collusively entered into between the
ambassador and a third party for the third party's benefit.
Nor would the foreign government automatically be
bound when its ambassador contracts, without actual
authority, as to matters far removed from the routine
functioning of a diplomatic mission.
However, the fact that an ambassador's office does not
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suffice to authorize him to bind his government in all
cases does not inevitably lead to a conclusion that only
apparent authority furnishes the appropriate standard
whenever, as here, the ambassador/agent lacks actual
authority from his government/principal. In addition to
actual authority, which may be lacking in this case, and
apparent authority, which is now to be explored on
remand, there exists what the Restatement of Agency calls
"Inherent Agency Power":
Inherent agency power is a term used in the restatement
of this subject to indicate the power of an agent which
is derived not from authority, apparent authority or
estoppel, but solely from the agency relation and exists
for the protection of persons harmed by or dealing with
a servant or other agent.
Restatement (Second) of Agency§ 8A (1958).
Though the circumstances of the government-ambassador
relationship are not precisely within the examples of
inherent agency power set forth in the Restatement, id.
comment b, that relationship is especially suitable for
application of this doctrine. An ambassador is accredited
to another country so that he will be his government's
representative in that country. We are not concerned in
this case with the extent of his authority to commit his
government on matters of international affairs. ' Instead,
our context concerns only actions of an ambassador
dealing with third parties on ordinary commercial matters
ostensibly of benefit to his government's ability to
maintain its presence in this country. In that context,
whether to bind a government by the actions of its
ambassador, under the doctrine of inherent agency power,
poses this choice: Will the relationships between our
government and foreign governments be better served by
ensuring that an ambassador can promptly obtain the
goods and services needed to operate his embassy or
mission, even if on occasion a foreign government is held
responsible for incurring obligations his government
neither authorized nor condones, *199 or by obliging
third parties who supply such goods and services to
ascertain from the foreign government in each instance
whether the ambassador has actual authority. The latter
option strikes me as the one to be avoided.
Though the Government of Antigua may find it preferable
to tolerate an inquiry into its ambassador's authority in
this case if it will thereby obtain a chance to avoid
liability for the funds he borrowed, foreign governments
generally will not appreciate inquiries from American
vendors as to the authority of their ambassadors to obtain
goods or services. They send their ambassadors here, as
we do to their countries, in the expectation that they can
carry out the normal incidents of living in the host
country. There is nothing extraordinary about borrowing
money to refurbish an embassy, or in this case, a UN
mission. And how is the vendor to avoid all risk? It
cannot obtain a routine resolution of borrowing authority
from a corporation's board of directors. Must it inquire of
the foreign ministry, the parliament, the head of state? Or
should it examine the internal legal regulations that
govern the purchasing and borrowing authority of each
country's ambassadors? None of these alternatives seems
likely to promote this country's relationships with foreign
states.
Under the majority's approach, the third party's reliance
on the apparent authority of an ambassador remains
available, but, as the remand in this case demonstrates, it
is an uncertain ground of support. A third party who
supplies an embassy ( or a UN mission) with champagne
or credit expects payment, not an opportunity to persuade
a trial court that its ignorance of an ambassador's lack of
actual authority was not willful. The majority's
unwillingness to recognize an ambassador's inherent
authority in this context will, I fear, have the unfortunate
consequences of making some vendors unwilling to
extend credit for goods and services ordered by embassies
and impelling others to make potentially intrusive and
resented inqumes of foreign governments. An
ambassador may not be "l'etat" for all purposes, but in the
context of purporting to obtain goods and services for his
country's diplomatic mission, I believe "c'est lui" indeed.
The majority suggests that the Restatement 's principle of
inherent agency power should not apply to ambassadors
because some circumstances can be imagined in which
the principle would not apply. If that is a "defect" in the
principle or in its application to an ambassador, it is one
shared by every legal principle ever announced. In urging
that the relationship of an ambassador to his government
is one appropriate for the application of the inherent
agency principle, I do not suggest that the transaction
need not be examined to see if it is one to which the
principle applies. In this case, however, there is no claim
whatever by Antigua that the bank engaged in any
unlawful or even questionable activities with the
Ambassador, nor that the bank had any knowledge or
basis for suspicion that the Ambassador was not
borrowing the money for the stated purposes.
Relationships with foreign governments are not put at risk
by subjecting those who supply goods and services to
foreign embassies to the prospect of an inquiry
concerning the legitimacy of the transaction. Whenever a
bank lends money, it faces the possibility of subsequent
inquiry concerning the bona fides of the transaction. But
relationships with foreign governments are put at risk by
rules that oblige vendors to probe the relationship of an
ambassador to his government in order to avoid the risk of
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Annex 372
First Fidelity Bank, N.A. v. Government of Antigua& ... , 877 F.2d 189 (1989)
14 Fed.R.Serv.3d 353
subsequent disputes concerning the ambassador's actual
or apparent authority.
In any event, we ought not to reject inherent authority in
this context without having the benefit of the views of the
Executive Branch officially presented to this Court in an
amicus curiae brief. We are informed that counsel for
Antigua sought to have the State Department present an
amicus brief in this case on behalf of Antigua, a request
that was declined.
Even if this case should be governed solely by the
principle of apparent authority, rather than inherent
agency power, I fail to see why the judgment of the
District Court should not be affirmed. In seeking *200 to
vacate the default judgment, Antigua has made no claim
nor produced any affidavit that puts in issue the
reasonableness of First Fidelity's reliance on the apparent
authority of Ambassador Jacobs at the time the funds
were borrowed. Any information that First Fidelity may
Footnotes
have acquired concerning the need for explicit
authorization for the loan from the Antiguan government
came to its attention in the course of trying to collect the
loan, long after the loan agreement was signed. Since
Jacobs indisputably had the apparent authority to bind
Antigua to the obligation to repay the funds and since
sovereign immunity is not a defense to liability for this
commercial transaction, 28 U.S.C. § 1605(a)(2), Antigua
should be bound by Jacobs' action in borrowing the funds
and by the subsequent default judgment entered upon the
repayment obligation.
For these reasons I respectfully dissent.2
All Citations
877 F.2d 189, 14 Fed.R.Serv.3d 353
Of the United States District Court for the Southern District of New York, sitting by designation.
Antigua asked the United States Department of State to file an amicus curiae brief on its behalf in its appeal to this
court. In response, the Legal Advisor declined to file a brief and informally took a position favorable to First Fidelity.
2 The dissent asserts that, in view of the inherent authority of an ambassador, a foreign state should be bound when the
ambassador acts "in the context of purporting to obtain goods and services for his country's diplomatic mission."
Dissenting op. at 199. Yet the dissent also recognizes that the state should not automatically be bound if the
ambassador collusively entered into an obligation with a third party for the third party's benefit or if the transaction
concerned something "far removed from the routine functioning of a diplomatic mission." Id. at 198. These exceptions
would swallow the rule of inherent authority proffered by the dissent. Examples that combine both the procedural and
the substantive irregularities that the two exceptions guard against are easy to imagine: An ambassador might use
embassy funds to purchase cocaine from a drug trafficker-and label the drugs "medical supplies for the embassy." Or
an ambassador might borrow money from a bank to invest in a casino-and, with the bank's connivance, secure a
favorable rate of interest by pretending that the money would be used to refurbish the embassy .... In other words, there
cannot really be a rule of inherent authority that automatically binds a foreign government whenever its ambassador
purports to obtain goods and services for the embassy. It must always be possible to look behind the deal.
3 The Supreme Court has held that the Foreign Sovereign Immunity Act does not affect the substantive law determining
the liability of a foreign state. First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611,
620-21, 103 S.Ct. 2591, 2597, 77 L.Ed.2d 46 (1983). We shall assume without deciding here that New York law
governs Jacobs' transactions with the bank, although we do not believe that the federal common law rule, were we to
follow the suggestion in Judge Newman's dissent, would be any different.
Thus, with deference, I suggest that the majority's citation to cases and to those passages of the Restatement ol
Foreign Relations concerning actions of an ambassador in the arena or international agreements between nations
have little, if any, relevance to this case. It may be entirely appropriate, as the Permanent Court of International Justice
held, to examine the entire context in which a foreign minister's disclaimer of sovereignty over disputed territory is
made. Legal Status of Eastern Greenland (Den. v. Nor.), 1933 P.C.I.J. (ser. NB) No. 53 (Apr. 5). And, even in the
context of international agreements, the examples cited by the majority do not cast doubt on the appropriateness of
binding a government by its ambassador's ordinary commitments to third parties ostensibly made in the course of
carrying on the affairs of his diplomatic mission. The coercion of a state's representative, cited in section 331 (2)(a) of
the Restatement as grounds for permitting a state to invalidate its consent to an international agreement, is simply an
example of a defense that is available to a principal because its agent has not acted under circumstances in which the
law attaches consequences to his actions, let alone those of his principal. The example of a representative of a
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Annex 372
First Fidelity Bank, N.A. v. Government of Antigua& ... , 877 F.2d 189 (1989)
14 Fed.R.Serv.3d 353
negotiating state corrupted by a party to the negotiation, cited in section 331 (1 )(c) of the Restatement, also has no
bearing on whether the law of this country ought to bind governments when their ambassadors deal with third parties
on ordinary commercial matters.
The majority maintains that because international agreements have "more dignity" than Ambassador Jacobs'
commercial transactions with First Fidelity, the binding effect of his signature on the loan agreement and the stipulation
must be less than would arise from his signature on an international agreement. 877 F.2d at 192. I should think the
"dignity" factor has precisely the opposite effect. A foreign state needs more insulation when its ambassador purports
to commit it to an international treaty than when he orders groceries or borrows money to renovate a diplomatic
mission.
2 Because I would affirm on the basis of Ambassador Jacobs' inherent authority to borrow the funds and to consent to a
judgment settling the claim for collection, I need not consider whether Antigua became bound solely because the
stipulation settling the litigation was signed by a lawyer purporting to represent the Government of Antigua.
End of Document © 2021 Thomson Reuters. No claim to original U.S. Government
Works.
WEST AW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 9
Annex 372
ANNEX 373
Friends Christian High School v. Geneva Financial Consultants, 321 F.R.D. 20 (2017)
321 F.R.D. 20
United States District Court, District of Columbia.
FRIENDS CHRISTIAN HIGH SCHOOL,
Plaintiff,
v.
GENEVA FINANCIAL CONSULTANTS,
et al., Defendants.
Synopsis
Civil Action No. 13-1436 (ESH)
I
Signed 05/18/2017
Background: Prospective borrower brought action
against escrow agent, its managing partner, and others,
asserting claims for breach of contract, and fraud, relating
to failure to return the $250,000 escrow deposit when
funding for construction loan could not be obtained.
Borrower moved for default judgment against managing
partner.
The District Court, Ellen Segal Huvelle, J., held that
borrower was entitled to default judgment against
managing partner.
Motion granted.
Attorneys and Law Firms
Terry L. Goddard, Jr., pro hac vice, James Dygert Skeen,
Skeen & Kaufman, LLP, Baltimore, MD, for Plaintiff.
Peter L. Goldman, O'Reilly & Mark, P.C., Alexandria,
VA, for Defendants.
MEMORANDUM OPINION
ELLEN SEGAL HUVELLE, United States District Judge
Plaintiff Friends Christian High School ("Friends
Christian") filed the above-captioned diversity action
against defendants Geneva Financial Consultants, LLC
("Geneva"), Isam Ghosh, and Mark Lezell, alleging
various state law torts and seeking compensatory *21 and
punitive damages. (Compl., Sept. 20, 2013, ECF No. 1.)
Before the Court is Friends Christian's motion for entry
of a default judgment against defendant Ghosh. (Mot. for
Default Judgment, Apr. 24, 2017, ECF No. 46.) For the
reasons stated herein, the motion will be granted and a
default judgment entered against Ghosh and in favor of
plaintiff in the amount of $252,249.14.
BACKGROUND
Friends Christian is a California religious corporation that
"engages in the business of religious instruction through
various mediums, including educational institutions like a
high school." (Compl. CJ[ 3.) On September 14, 2010,
Friends Christian entered into a financing commitment
agreement ("Loan Commitment Letter") with Geneva and
Ghosh, who advertised himself as Geneva's managing
member. (Compl. lj[lj[ 5, 9.) Pursuant to the Loan
Commitment Letter, Geneva and Ghosh were to secure
$30 million in construction loan funding for Friends
Christian in exchange for $3 million in fees reduced by an
initial escrow deposit of $250,000. (Compl. lj[lj[ 9, 10.)
Exhibit A to the Loan Commitment Letter was an Escrow
Agreement between Friends Christian and Lezell, an
attorney in the District of Columbia. (Compl. CJ[ 13.) If
financing could not be obtained by October 31, 2010, the
$250,000 in escrow was to be returned to Friends
Christian. (Compl. CJ[ 14.)
Friends Christian wired $250,000 into Lezell's escrow
account on September 16, 2010. (Compl. CJ[ 16.) No
financing was ever obtained and the escrow funds were
never returned to Friends Christian. (Compl. CJ[ 15.) On
January 26, 2011, Friends Christian tried to contact Ghosh
to check on the current state of funding for the project.
(Compl. CJ[ 18.) On February 1, 2011, Friends Christian
made its initial request for return of the escrow funds.
(Compl. CJ[ 19.) On September 8, 2011, Friends Christian
asked Lezell for return of the escrow funds. (Compl. CJ[
20.) On or about March 21, 2012, Ghosh acknowledged
liability for the escrow funds and that the escrow funds
were to be returned to Friends Christian. (Compl. CJ[ 21.)
On August 3, 2012, Friends Christian sent Lezell and
Ghosh its final demand for payment and received no
response. (Compl. lj[ 22.)
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Annex 373
Friends Christian High School v. Geneva Financial Consultants, 321 F.R.D. 20 (2017)
On September 20, 2013, Friends Christian filed suit
against Geneva, Ghosh and Lezell, alleging breach of
contract, civil conspiracy, breach of fiduciary duty,
negligence, and fraud/intentional misrepresentation and
seeking return of the $250,000 it had put into the escrow
account plus punitive damages. (Compl. lj(l][ 23--49.)
Friends Christian served Ghosh with a summons and a
copy of the complaint on February 18, 2014. (Return of
Service/Affidavit, Mar. 4, 2014, ECF No. 16.) After
Ghosh failed to timely file an answer or otherwise
respond to the complaint, plaintiff filed its affidavit for
entry of default as to Ghosh pursuant to Federal Rule of
Civil Procedure 55(a).1 (Aff. for Entry of Default, May 1,
2014, ECF No. 25.) On May 19, 2014, the Clerk of Court
entered a default against Ghosh (see Clerk's Entry of
Default, May 19, 2014, ECF No. 30), but proceedings
against him were then stayed due to Ghosh' s bankruptcy
proceeding in the Eastern District of Virginia. (See
Suggestion of Bankruptcy, Oct. 29, 2014, ECF No. 38;
Minute Order, Jan. 28, 2015 (staying case against
Ghosh).) Friends Christian has now settled its claims
against Lezell (see Minute Order, Jan. 28, 2015), and
secured a default judgment against Geneva in the amount
of $250,000. (See Order and Default Judgment, May 28,
2015, ECF No. 43.)
On March 21, 2017, Friends Christian notified the Court
that the bankruptcy stay against Ghosh had been
terminated and that it wished to pursue its claims against
him. (Notice of Termination of Bankruptcy Stay, ECF
No. 44.) The Court lifted the stay, allowing Friends
Christian's claims to proceed, but it also gave Ghosh until
April 10, 2017, to move to vacate the 2014 default. (See
Order, Mar. 22, 2017, ECF No. 45.) That Order was
served on Ghosh and on Ghosh's bankruptcy counsel.
Ghosh did not move to vacate the default. On April 24,
2017, pursuant to *22 Federal Rule of Civil Procedure
55(b)(2),2 Friends Christian filed the pending motion for
default judgment. As of the date of this Memorandum
Opinion, Ghosh has not entered an appearance nor filed
any responsive pleadings.
DISCUSSION
Waiving any claim for pumtlve damages, Friends
Christian seeks a default judgment against Ghosh in the
amount of $250,000, the amount it put into the escrow
account, plus costs totaling $2,249.14. (See Mot. for
Default Judgment at 1 & Ex. 1, CJ[ 13 (Affidavit of Terry L.
Goddard, Jr., Apr. 24, 2017) ("Goddard Aff.").)
The "entry of a default judgment is not automatic."
Mwani v. bin Laden, 417 F.3d 1, 6 (D.C. Cir. 2005). First,
the procedural posture of a default does not relieve a
federal court of its "affirmative obligation" to determine
whether it has subject-matter jurisdiction over the action.
James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1092 (D.C.
Cir. 1996). Here, the Court has jurisdiction over this
matter pursuant to 28 U.S.C. § 1332(a)(l), and venue is
proper under 28 U.S.C. § 1391(b)(2) ("A civil action may
be brought in ... a judicial district in which a substantial
part of the events or omissions giving rise to the claim
occurred .... ")
Moreover, the determination of whether default judgment
is appropriate is committed to the discretion of the trial
court. Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir.
1980). Courts strongly favor resolution of disputes on
their merits. Id. However, default judgment is available
"when the adversary process has been halted because of
an essentially unresponsive party .... The diligent party
must be protected lest he be faced with interminable delay
and continued uncertainty as to his rights." Jackson v.
Beech, 636 F.2d 831, 835-36 (D.C. Cir. 1980) (internal
quotations omitted). Where, as here, there is a complete
"absence of any request to set aside the default or
suggestion by the defendant that it has a meritorious
defense, it is clear that the standard for default judgment
has been satisfied." Int'[ Painters and Allied Trades
Indus. Pension Fund v. Auxier Drywall, LLC, 531
F.Supp.2d 56, 57 (D.D.C. 2008) (internal quotations
omitted).
Finally, while the entry of default establishes defendant's
liability for the well-pleaded allegations of the complaint,
Adkins v. Teseo, 180 F.Supp.2d 15, 17 (D.D.C. 2001), it
"does not ... establish liability for the amount of damages
claimed." Boland v. Elite Terrazzo Flooring, Inc., 763
F.Supp.2d 64, 67 (D.D.C. 2011). If necessary, a court
may hold a hearing to "(A) conduct an accounting; (B)
determine the amount of damages; (C) establish the truth
of any allegation by evidence; or (D) investigate any other
matter." Fed. R. Civ. P. 55(b)(2). Here, though, no
hearing is necessary as there are sufficient "detailed
affidavits [and] documentary evidence" to allow the Court
to independently assess "the appropriate sum for the
default judgment." Flynn v. Mastro Masonry Contractors,
237 F.Supp.2d 66, 69 (D.D.C. 2002) (citing United Artists
Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979)).
Specifically, Friends Christian has filed an affidavit
executed by its attorney, Terry L. Goddard, Jr., which has
attached signed copies of the Loan Commitment Letter
and Escrow Agreements and a cost summary sheet with
copies of available receipts. (See Goddard Aff. CJ[ 15 &
Exs. 1-3.) The Court has reviewed these documents and
finds that they substantiate its claim for compensatory
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Annex 373
Friends Christian High School v. Geneva Financial Consultants, 321 F.R.D. 20 (2017)
damages in the amount of $250,000.00 and for costs
totaling $2,249.14.
and against Ghosh in the amount of $250,000.00 plus
$2,249.14 in costs. A separate Order of Judgment
accompanies this Memorandum Opinion.
All Citations
CONCLUSION
321 F.R.D. 20
Accordingly, and for the reasons set forth above, the
Court will grant Friends Christian's motion for default
judgment and enter judgment in favor of Friends Christian
Footnotes
Rule 55(a) states: 'When a party against whom a judgment for affirmative relief is sought has failed to plead or
otherwise defend, and that failure is shown by affidavit or otherwise, the clerks must enter the party's default." Fed. R.
Civ. P. 55(a).
2 Rule 55(b)(2) allows a party to "apply to the court for a default judgment" against a party in default.
End of Document © 2021 Thomson Reuters. No claim to original U.S. Government
Works.
WEST AW © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3
Annex 373
ANNEX 374
INTERNATIONAL LEGAL MATERIALS
VOLUME7
1968
Annex 374
O.E.C.D. DRAFT CONVENTION
ON THE PROTECTION OF FOREIGN PROPERTY*
On 12th October. 1967. the-Council of the Organisation
for Economic Co-operation and Development
adopted a Resolution on the. Draft Convention on the
Protection of Foreign Property. which was drawn up
by one of the Committees of the Organisation.
The text of that Resolution is reproduced hereafter.
RESOLUTION OF THE COUNCIL
ON THE DRAFT CONVENTION
ON THE PROTECTION OF .FOREIGN PROPERTY
(Adopted by the Council at its 15oth meeting,
on 12th October, 1967)*
The Council
HAVING REGARD to the provisions of the Convention on the
Organisation for Economic Co-operation and Development concerning
economic expansion and assistance to developing countries;
HAVING REGARD to the Reports by the Committee for Invisible
Transactions and the Comments by the Payments Committee on the
Draft Convention on the Protection of Foreign Property;
HAVING REGARD to the text of the Draft Convention on the Protection
of Foreign Property and to the Notes and Comments constituting
its interpretation (hereinafter called the "Draft Convention");
OBSERVING that the Draft Convention embodiesrecognisedprinciples
relating to the protection of foreign property, combined with rules
to render more effective the application of these principles;
CONSIDERmG that a clear statement of these principles will be a
valuable contribution towards the strengthening of international economic
co-operation on the basis of international law and mutual confidence;
CONSIDERiliG that a wider application of these principles in
domestic legislation and in international agreements would encourage
foreign investments;
BELIEVING that the Draft Convention will be a useful document in
the prep~ation of agreements on the protection of foreign property;
• NOTmG the •conclusion of a Convention on the Settlement oflnve stment
Disputes between States and Nationals of Other States;
I. REAFFmMS the adherence ofMemberStates tothe principles
of international law embodied in the Draft Convention;
II. COMMENDS the Draft Convention as a basis for further extending
and rendering more effective the application of these principles;
m. APPROVES the publication of the Draft Convention as well as
this Resolution,
* The Delegates for Spain and Turkey abstained.
5
*[Reproduced with permission from Draft Convention. 2!!. the Protection
of Foreign Property and Resolution of the Council of the.
O.E.C.D. 2!!. the Draft Convention, Organisation for Economic Cooperation
and Development Public-ation No. 23081 {November 1967) •
[An earlier draft of the Convention appears at 2 International
.Legal Materia~s. 241 (1963).]
117
Annex 374
118 DRAFT CONVENTION
ON THE
PROTECTION OF FOREIGN PROPERTY
Text with Notes and Comments
TABLE OF CONTENTS
Preamble ........................................... , .. .
Article 1 - Treatment of Foreign Property •••••••••••••••
Article 2 -
Article 3 -
Article 4 -
Article 5 -
Article 6 -
Article 7 -
Article 8 -
Article 9 -
Article 10 -
Observance of Undertakings
Taking of Property ........................•
Recommendation on Transfers •••••••••••••••
Breaches of the Convention ••••••••••••••••••
Derogations ...................... ! •••••••••
Disputes
Other International Agreements ••••••••••••••
Definitions
Ratification
Article 11 - Territorial Application
Article 12 -
Article 13 -
Article 14 -
Coming Into Force
Termination .............................. .
Signature and A~cession .• ..................•.
Annex relating to the Statute of the Arbitral Tribunal
9
PREAMBLE
Page
11
13
19
23
Z9
31
33
37
43
45
49
51
53
55
57
59
DESIROUS of strengthening international economic cooperation
on a basis of international law and mutual confidence;
RECOGNISING the importance of promoting the flow of
capital for economic activity and development ;
CONSIDERING the contribution which will be made towards
this end by a clear statement of recognised principles relating
to the protection of foreign property, combined with rules
designed to render more effective the application of these
principles within the territories of the Parties to this Convention;
and
DESIROUS that other States will join them in this en-
deavour by acceding to this Convention ;
The ST ATES signatory to this Convention HAVE AGREED
as follows :
11
I.L.M:
Page
118
119
123
124
129
129
130
132
137
137
140
140
140
141
141
142
Annex 374
Article 1
TREATMENT OF FOREIGN PROPERTY
(a) Each Party shall at all times ensure fair and equital::!le
treatment to the property of the nationals of the other Parties.
It shall accord within its territory the n.ost constant protection
and security to such property and shall not in ~y way impair
the management, maintenance, use, enjoyment or disposal
thereof by unreasonable or discriminatory measures. The fact
that certain nationals of any State are accorded treatment more
favourable than that provided for in this Convention shall not
be regarded as discriminatory against nationals of a Party. by
reason only of the fact that such treatment is not accorded to
the latter.
(b) The provisions of this Convention shall not affect
the right of any Party to allow or prohibit the acquisition of
property or the investment of capital within its territory by
nationals of another Party.
13
NOTES AND COMMENTS TO ARTICLE 1
Paragraph (a): GENERAL STANDARD OF TREATMENT
OF FOREIGN PROPERTY
1. The Obligations
It is a well-established general principle of international law that a
State is bound to respect and protect the property of nationals of other
States. From this basic principle flow the three rules contained in
paragraph (a) of Article 1 - that is to say, that, as towards the other
Parties to the Convention, each Party must assure to the property of
its nationals which comes within its jurisdiction (A) fair and equitable
treatment ; (B) most constant protection and security ; and (C) that
each Party must ensure that the exercise of rights relating to such
property and mentioned in paragraph (a) shall not be impaired by unreasonable
or discriminatory measures. Each of these rules is discussed
in turn in Notes 4 to B. That, however, Article 1 (or, for that
matter, the other provisions of the Convention) does nqt provide a right
for a national of one Party to acquire property in the territories of
other Parties, nor for their duty to admit his property or investments,
is expressly stated in paragraph (b) of Article 1 (see Note 9 below).
2. Object of Protection: Property
(a) In international law the rules contained in the Convention -
and therefore in Article 1 - apply to property in the widest sense of
the term which includes, but is not limited to, investments. For a
definition of "property" see Article 9 (c) of the Convention and the Notes
thereto.
(b) Within the jurisdiction of a Party, the provisions of the
Convention apply to all property of nationals of the other Parties ir-
119
Annex 374
120
respective of whether it was acquired before or after the date on which
the Convention has come into force as regards the Party concerned.
However, legislative or administrative measures taken by that Party
before that date and relating to such pr_gperty are not covered by the
Convention as such /Jee Article 12 (c}J. Generally, to come within
the provisions of the Convention, the property must be lawfully acquired
or invested by the foreign national or his predecessor in title.
3. Nationals
The duty qf a State to respect the property of alien nationals is
owed, in the fiI'st instance, not to the alien concerned, but to his State;
it is only on behalf of its own nationals that the State may claim from
other States compliance with that duty. This right is necessarily so
14
Notes and Comments to Article 1 (cont'd}
limited because - in the words of the· Permanent Court of International
Justice* - "it is the bond of nationality between the State and the individual
which alone confers upon the State the right to diplomatic protection"
[see also on the concept of nationality in relation to diplomatic
protection Article 9 (a} and Note 1 to that Articl~. And, again, as
that Court said in another case** : "By taking up the case of one of its
subjects and by resorting to diplomatic action or international judicial
proceedings on its behalf, a State is in reality asserting its own rights -
its right to ensure, in the person of its subjects, respect for the rules
of international law". The bond of nationality becomes apparent not
only in the person of the national who is abroad, but also in his property
within the jurisdiction of another State while he himself may remain
within his own country.
First Rule : Fair and Equitable Treatment
4. (a} The phrase "fair and equitable treatment", customary in
relevant bilateral agreements, indicates the standard set by international
law for the treatment due by each State with regard to the property
of foreign nationals. The standard requires that - subject to
essential security interests /jee Article 6 (i}] - protection afforded
under the Convention shall be that generally accorded by the Party
concerned to its own nationals, but, being set by international law, the
standard may be more exacting where rules of national law or national
administrative practices fall short of the requirements of international
law. The standard required conforms in effect to the "minimum
standard" which forms part of customary international law.
(b} Each Party must not only grant, but "ensure", fair and
equitable treatment of the property of nationals of the other Parties.
It will, of course, incur responsibility for any acts or omissions·which
may be properly attributed to it under customary international law (see
Article 5).
Second Rule : Most Cqnstant Protection and Security
5. "Most constant protection and security" must be accorded in the
territory of each Party to the property of nationals of the other Parties.
Couched in language traditionally used in the United States Bilateral
Treaties***, the rule indicates the obligation of each Party to exercise
due diligence as regards actions by public authorities as well as others.
in relation to such property.
* The Panevezys•Saldutiskls Railway Case. quoted in Edvard Hambro. The Case Law of the Inter•
national Court, Vol. I, (hereinafter referred to as ·Hambro r) No. 348, p. 289.
** Mavrommatls Case. quoted in Hambro I. No.34'1, p. 289. * ** See, for instance, United States-German Treaty, Article V (1); United States-Nicaraguan
Treaty. Article VI(l); arul also United Kingdom-Iranian Treaty. Article 8 (1).
15
Annex 374
Notes and Comments to Article 1 (cont• d)
Third rule: Exclusion of Unreasonable and Discriminatory Measures
6. General
(a) In addition to the obligations examined in Notes 4 and 5,
Article 1 provides that "management, maintenance, use, en~oyment or
disposal" of property of nationals of other Parties shall not 1in any
way11 be impaired by unreasonable or discriminatory measures*.
11Maintenance11 is probably implicit in the concept of 11management11 and,
moreover, as a precondition, in 11use11 and 11enjoyment11 • The term is
added for the sake of clarity. It is more doubtful whether 11disposal11
is implicit in these notions. Yet knowledge alone of measures taken
that prevent or limit the 11disposal11 of the property reduces its value
and interferes with its 11enjoyment11 • The term indicates therefore
with greater precision the limits to which, under the Convention, the
exercise of rights arising out of property is r.rotected. It cannot, on
the other hand, be assumed that the right to 'enjoyment" of property
implies for the Party concerned the obligation to permit automatically
transfers in connection with that property.
(b) Exercise of the riw.its quo:ted in the preceding paragraph shall
not in any way be "impaired I by unreasonable or discriminatory measures.
This means that a breach of the obligation is established if it
can be shown that a certain measure :
(i) is 11unreasonable11 or 11discriminatory11 - for an analysis
of these terms see Notes 7 and 8 below;
(ii) may be attributed to tl:ie Party against whom complaint is
made - see Article 5 ; and that it
(iii) impairs the exercise of any of the rights quoted. Thus it
is insufficient to prove - as in the case of 11fair and
equitable treatment" (see Note 4) - that the measure
complained of is contrary to a standard set by international
law; it must also·be established that, as its consequence,
actual possibilities for the exercise of the
right in question are reduced.
7. Unreasonable' Measures
(a) A breach of obligations by a Party is established if it can be
shown that the exercise of any right referred to in Article 1 is impaired
by an 11unreasonable11 measure that may be attributed to that Party
(see Article 5).
(b) The measure in issue may have been taken by or on behalf of
the Party concerned in the exercise of its sovereign powers. The fact
that it has thus ~een taken will undoubtedly carry weight in the determination
of the question whether it is lawful. However, though the power
by virtue of which the measure is taken may not be contested, the latter
may be unlawful in view of the manner or circumstances in which the
* Recent bilateral treaties frequently provide for the exclusion of unreasonable and discriminatory
measures. See United States-Netherlands Treaty, Article Vl(3): also United States-Japanese Treaty,
Ani.:le V(l): United Kingdom-Iranian Treaty, Article 8(2), etc.
16
Notes and Comments to Article 1 (cont• d)
power has been exercised. In many cases such a measure will also
violate the standard of 11fair and equitable treatment11 (see Note 4).
(c) Thus, in interpreting Article 4 of the United Nations Charter,
concerned with the admission to the United Nations, Judge Azvedo
(quoting Brazilian, Soviet and Swiss law) in his Individual Opinion
declared that under any legal system a right must be exercised in
accordance with standards of what is normal, having in view the social
purpose of the law and that there are, moreover, restrictions on an
121 ·
Annex 374
122 arbitrary decision taken in the exercise of the right in question*.
Again, it has been repeatedly held by the Permanent Court of International
Justice that the abuse or misuse of a right would endow an act
otherwise lawful with the character of a breach of treaty**•
(d) That a measure is unreasonable cannot be presumed; it must
be proved,
8. Discriminatory Measures
(a). A breach of obligations by a Party is establisqed if it can be
shown that the exercise of any right relatinf to property referred to in
Article 1 is impaired by a "discriminatory' measure that can be attributed
to that Party (see Note 1 to Article 5),
(b) This, again, is a restatement of the law. For the very fact
that the history of international relations abounds in examples of representations
by Governments against measures of economic discrimination
resulting in injury, implies the recognition of the principle that
measures, otherwise lawful, may be deprived of the protection of the
law on the grounds of discrimination, Prohibition of discrimination is
in accordance with the principles laid down by the Permanent Court of
International Justice in the Case of Certain German Interests in Polish
Upper Silesia and the Case of Treatment of Polish Nationals in
Danzig***•
(c) It is immaterial whether the measure complained of is expressly
or exclusively directed against the property of the national for whom re•
dress is sought or is couched in l?jeneral terms which brinf such property
within its scope. In other words, 1pe facto discrimination' is unlawful,
(d) The essence of discrimination, from the point of view of
Article 1, is differentiation introduced in the treatment of property as
a result of the measures in question, which is not justified by legitimate
considerations. That differentiation consisting in the more favourable
treatment of certain persons - whatever their nationality - does not
constitute in itself discriminatiqn- against other nationals, is re•
affirmed in the last sentence of paragraph (a).
(e) Such discrimination may take four forms, viz. represent·
differentiation as regards the treatment of property of : (i) nationals of
the same (foreign) Party to the Convention; (ii) nationals of different
* Advisory Opinion on Conditions of Admission 10 the United Nations, ICJ Repon 1947·48,
p, 57 top. 80 ; see also p. 83.
** Polish Upper Silesia Case and Free Zones of Upper Savoy Case, .quoted in Hambro I, Nos, 100·
101, p. 73.
*** See Hambro I. Nos 246 and 3~, at pp. 201 and 261,
17
Notes and Comments to Article 1 (cont'd)
Parties ; (iii) nationals of a Party and of those of a third State ; and
(iv) nationals of another Party and of its own nationals.
Paragraph (b) : THE CONVENTION AND THE ACQUISITION
· OF PROPERTY
9. (a) While respect is owed by each State to property of aliens which
is in its jurisdiction (see Note 1), no State is bound - unless it agrees
otherwise - to admit aliens into, or permit the acquisition of property
by aliens in, its territory. Consequently, paragraph (b) of Article 1
confirms that the provisions of the Convention do not affect the right of
each Party to control the acquisition of property and investment of
capital by nationals of other Parties within its territory. The Convention
is designed to safeguard property after its acquisition or investments
after they have been made.
(b) Nothing in the Convention should be construed as prohibiting a
Party from requiring divestiture of property obtained by inheritance by
foreign nationals, provided that where such requirements are imposed,
such nationals are allowed reasonable time and conditions in which to
dispose of the property so obtained.
18
Annex 374
ANNEX 375
ORGA.NISATrOH ?OR. ECONOMIC
CO-OPERAT:ION·. AND · DEVELOPKEtf.'!".
RESTRICTED
•
P&ris, .dra.'fted; 27th Kay .198-'·
di~t·. 24th . juiy 1984
I:l:!8(84) 14'
Scale 4
·CO'MMiff2E ON l:Jn'ERNATl:ONA(.' I NVESTKF.NT AND
. ,, . 'l!ltlt..TXNAT:tONAt. SN'rJ!;RPIUSBS .
IHTERCOVERNKENTAL AC:REEKSttts.' RBLATif,IG TQ :INVESTMENT· IN
DEV£L0P:tlfG· COUHTRXES ·
CRepoz:-t by_ the· Co~it.te~ -~n Intei-national Invs5tment and
HultiQationa.l Eaterpri:.e$)
.Or. Engl.
J.. :I~·.· is . t.lie :put';~:::c · o;:: t~is. r~por~ · to · revi.'=w tbe expe~1ence wi tb ·t.be main
types of. intergovcrnnicnta1.agreements that can.be V5ed ·ror tbe'prbtection and
promotion of foreign di.r.ect ·1nve:.bnent in. cleveloping c:oimtrles. i.e.
friendship, commcrc~ ·anci' ·Ji~v:i:gation tt-aaue; (FNC). investment gU&l:'&ntee
a.srccinent-s, inve$tment··pr!)tec:tion .treat.le:;, genera1 ~greements for- economic
co-opera.ti.on vi th lrives,tdieht-:celated. c::1auses and set:tor- or project~l:'8la.ted·
s.grae111ent.::. 'To thh end. ,tb~·-~eport' £.ics.~· llieti. ovt the obje•ctlves ·an·d
emer:-sing t~end: of in•t.er5overnmeot·a1 c::o-;-operatioo in· 'tbis. are·~ (Section I'.).
an·s.1y~e= the :cope.'_an4·.-maiil· f'eat.ir:es of t.he variot.i& types of agreements
(Soction :r:t) a.:: well:· ·a.:; :their effectivene$S io tenas of' the POlh:y objectives
p1.1rsuecJ. (Section: :b::u o.iul,· flii'a:.11y, di's..:vs·;ies t:be pn1$,pects f'o~ £u'iure
d~V9l(?p:ne'nl;s. Con't:-.i:-l'bQ~·1on:= received f'roru 'Mem~er cou~tdes· _in response to a
ques~ionna.ire f'ora t'be ba:1:. of tbc P,re:sent analysis.
1. HA4?f ·ouo11SCTrns. ·oii" AND ·ooaaxKG .·-rRBHDs IN INTERG~VJ!;·tumENTAL·
.AGMEMiμn:'S IN. THZ f'IEt.D.' Of Ih"V'ESnmtt
2. I\.&· it appears' fr.-~~ ·.the. Co~i ttt?~~ s lai.~t. survey of rec~nc internat.io.na.l .
i.nvc:tmcnt tread& _:cu·, 'since: l.971\. there-·bas bee~ a :-iignifl'ci.nt ·use in direct ·
forc.isn invesbaent 1~ ··develop1~g c:o\lntries. Fu~tbermora·~ ·. ~he Clevel.opi,ng
countr-ies•. share osJ\o=t ·coun~ric:; of the fo;-eigo d.ire~.t· investment stocks of
a1most all majo~ .i~ve~l:.ing, c:ounl:.z:-lca has.: inci:eased, ·tbus i:.eve'~sing: tbe .
general.ly dec1inin·g· t~ends· h c~~1icz:- ·p~i'-io~s'. (2}, At. the. same. time. the
!:hare- oE dil."QCt: lnvestti,,int:· 'in. o~eral.1 noii-c,oncc::;ion&l flow.s was sigQif'iea.nt'ly
U.072'.1.V
2,3073
Annex 375
' . ''
reduced. due mosciy to the· t-Ei-p!J exp&nsion of· export and .nnancia.1 credits.
'1'h.,r11 has· b~en a rema.t"Ic.e.bl·e ·shif't of". foreign direct inve$tment·· from mineral
exploration and expl6it~tion ·to manu:ac~ucin6 ind~strie~ and'service$. and th~
b~lk of investment flowing to developing· countries is coneentratini on a very
$n'le.ll number of these ·c·ountria~ a · Thes:e tl:'end:S e.ppea.r t'o resuit. f'rom· n.
combination of economic- and political factors sueh as ·inadeguat:c ·maJ:"ket si.%.e
arid lac); of basic inf~astru·cttire, inadegua.te· ccoaomic ·str.u~tures. restr:-iction~
to the- ac:cess of produc.ts from .~P.velopiftg countries to mar~ets of .
indu:.tdalJ.sed CQuntrles. and instabil'ity ~E relevant host: country polides.
·If efforts ~o encourage a; new phase of gr-owth and & more balanced 'distdbution
of .forelgn t1ir~cc investma:tn·t: in .develop'ins. countde~ are· to .be successfu1.
they wi 11 · ·ha,ve to tackle a.11 · of these probl~ms in the fr-amewo~k. of a ·
multl-facet.ed poli'cy rc;,~pon:e ·of whieh ii:itei:-gove"nml?n~a.l ggreeft\ents .a!."a an
impo4tant ingredient. ·
:3. Among thQ above-mentioned c~n:tra.ints·, t~e perception Of' ritk --· both of a.n economic and· political natu."e -=-- :cem:. to 'be e. major :impediment f.or- .
invest;ment, particularly in sectors involv·=.!Jg c·apital-intensive and oft:~n· very
la;.-ge projects· wi tb. lous · 1:ead 'time$. Altho115b · ec:onomlc- and· ~Clllttierci!!,1
considerat.ions conti.nue: to be tbe p:-imary factors in the ·decision-ma.king
process of· potential investors:. the pc;l'i!:'ica.l env.iionment ha.s · become ove~ the
last t'WO d"cades an: i,mportant element in the formulation· of sti:-itegy by .
lnternatione.l firms. Ji:nt,erp,ri'ses ccnt::emp!.a.tins foreign direct..inv.estmfi!rit face
a broad range of contingencies. arising from th~ ·p~litical and economic ·
envi!."onment which a.ffeet the ~wnez::ship• of &S$ets, sucli. as full or .p.ru:_tial
di-venment thi:-ough nationa.lisatioc or equivalent action and pracHceS& tbet
affect operations: ind.- u1timate1y ~onstre.in ~a·:..b .flows or returns. . .
Vulnerability to con.tingencies· arising fro."'ll the politi.cal enviir-onment •:sd
theii:- potential cost var.,. aci:-oss . ind.:istri~$, firms and projec.ts ... Ap,a.~t. from
the i:-isk of' eipropriat,ion ·directed against ·foreign firms .in a given country,
,.,h icr, seems to h,.1.~e .con~iderabl.y ·de.creased over· the last· dee ace. vulnerabi li_ty
is ~eJ1e.r:ally a function of 'factor:; su~h as· industrial secco·ts. 1evcal of· ·
tcchnol.ogy; owners:hi·p· stl:"uct.t.u.•e. e.nd. manegement ·s·t.yles. ,
· 4. · Ci ven th4l' stt"u.cl:ura1 ·be.ncfi ts· of fgc-elgn investment. for' both home a.nd.
host countries, the·· encourag·ement of· inve0sbnent ~1ows through. a.pproprh.te
poll cy measures is in the .i:ntereat 0£ a.ll c:ounti=-ies an<l, . as pa.rt of ov~ra.11
efforts to increase the tranifer of resources to-developing countriQs,
cons~itutes an important eie~ent• iQ No~tb-Soutb relations. How cou1d·
i.ntergoverruneota.l agro~111eots related to investment make ·a· usef.u1 con~.ribution
in this area? By pr-oviding legal prot~etioii· under interna.tiona1. -la.v, s:uch
agreements can 'help red~ce to a. cons'iderable extent the political·. !."li:k
at·ta.ched to· .fot"eign. invect:11\ent and c:l:'ea.te ·a climate of confidence bet:w~en ho:ne
and host countries and-potential investors. They can also be desigDed to
acconvnodat.e specif'ic: .. 1nt:elC"eSt$ · and COD~~rns · Of the participating countr-ies i.n
sucb key areas a.s indU:stri.al' policy, market· .ac·cess and finance; includir.6 ,;uch
pt"ovis.ions as c:o--finllnc:ing, and new form:; ·.of iodustrU.l co-oper:atioQ not
involving for:-eign aqui-°ty p·ar-th:ipal::.io~ •. On a multinationa1· bash. they ca.ri
constitute e: framework· for co.::opelC'ation. bet1ire~o· groups. of count:>iQs; n!')t only
in tne worth-Sout!i context but .. als:o in joint e'fforts by developing counta:-.ha
to promou, investment:: on a. regi.(?nal basis_.
Annex 375
3 - IHJl(84)1A
S. Are ther-e signs that the practice of intergovei-nmental agr:-eeinents is
cvolvi'ns i.n these•uirc,.;tion:s? Some not11.ble features relating·botn to the
diversification of the· pa:.ti1!'.& invclved a.nd the content$· of t.?le agi.-eeaients a.re
t.~ be noted, i.11 particu1ar, the network or intergovernmental agreements he.s
developed ~&pidly and, ~t th~ present· ti~e. more an4 more count~ies. both
devolopins and developed, are .showing int~rest in this approach. At.tbe same
tlme, there has .been· a r'emarkable· div~it':iif'ica.ton la i;be forms of ·such
ca-ope'°at:.lon. -.r~c traditlonal patterns of investment treaties conclucled
between wcs~crn indu~t~ialised co~ntries and developing countries have been
cho.nging G:, new p~•rt;i.es ha'\'e entered the =-cene cf international. ivestment and
a.s · govei:-nmcnt:. :.e.ck• ·to· e:ictond agreements to cover a wider' range of issues.
Thh pa.lC"ti.cula.r1y· Gppl.ie'~ to tho:.e developing· countries wtiic:h now a1so begin
to find them=clvo~ cast in.the role of home a~ well as host ·0untries for
foreisn investment. Such c:.ountd.es are int.erestecl in pc-otect•lng tbei~
investment; con~c~U:e~tly, 5.nteq,overnmental i'nve:.tment. ag.reements between
devel,;,,piilr; countric::i. ha;vc: bec.ome .mo~~ n~e:rou~ and teiid to show basical.ly the
s=.me £ca.t.urc:; as those c:onc:ludell.between developed &Ad deve1oping countries.
In l:.he fr.amework of the Eu"opean.;..Arab dialogue, negotiatit:1ns on a mu1tilater-al
invc~tmcnt convention which woul.4 provide $trong re~lpro~al guarantees for
inve~tmcnt:; of ·al.1 pa:rticipan.ts have. reac:bed an advanced stage (-3}' •. In
conjunction with the expansion of East-West.trade. cc-operation has extended
to investment matters which are c:ove~ed by a conslderab1e number Of'bilateral
co-operation agreements, and t~o· $Ocialist countries have.entered into a
nu.-nber .o·f moc-e spec:i'fic 1nvestriaent protectloG tre&t.ies.
6. 1:be form a.nd c·ontent of such agreements. ba,re become more diversified.
Thec-e bas been a shift away !',;om global agreements on. f·~ien<1s.hiP, commerce and
nevi&a.tion, which inc1uded investment· p~otection clauses, to more specific
invesl:.roent protec'ticll treatie:.. General agreements for. technica1. scientific
ar.d economic co-ope.ation are also being used more freguent1y·as a f~Ulewo~~
for promoting inv.e:r;tment. in particular f.or major industrial a·r:- !!lining
projects. Arr innovative 'approach bas. b.eeri taken. by tbe second Lome Convention
'between EEC and ACP countries. whic~ prov.ides for the possibiiity:of
concluding projec~-5pecific agreements in·tbe mineral sector involving home ·
and ho:st t.ountrie:s•and. under- certain circumstuces. entei:-pc:-ises participating
in & given project,.although e~perienee within the 1iaited time frame since
th'e entry into for~e of thl5 convention has shown that it .°l's .dlffir:u.1t to
identify ·suitable projects for sucb a.greemen~s. Final.~7, the ·nuabe~ of t&X
t:.reaties betwe~n deve'l,ope.d and deve1op1ag· countries i-s gr~ing. · Kany of these
treaties·~ont&in tax-=-p~riug.clauses designed to maiut&iD for enterprises
investing in the bg:st country tbe beneflt Of. investment iAcentivea (6). The
£o11owin6 sections of thi:s report provide an anaiysis of the main types of
agreement which .a.e·. relevant to the protection and Pl:'milOtiOll of foreign
investmeflt in tbe ·develo·ping countries.
Annex 375
·· ... · ..
•:, .. · ,' ,• ··.: .. : . . , ... ·'
'.··:'
. ·., .. :,-, ::.:,.•: . ,:: ',' ' .... ··•. ' .. .-.; .• t••, .: •' ,'
IKE(86)14.- 4
.tI . AMALYSIS OF.,'THE KAIN °1'YPES0 OF .A.GQZEHEN'l'S RELA'l'ED TO IHVESTKENT
A. Vriendgh'lp~ Conwnti!r-,:e an,a :Na~iu.tion CFCN) Tr:oa.tie::
7. Ris~o~ically,. FCN tteatles were. the .first type oE igreement concluded
by ca.pif:a.1-oxpol!"l:.iag. iounti;:-i..es ·w1 tb · a view to obtaining' lega.l p"otection· for
theit" investsnents.• an a bllater,al basS.!!:. rn. it;; pres~nt •.fora, this ·type of
ag£"eeJ11..-nt arose c.fter the Second World War. but its -or-'ir;in goes· bac:k to the .
comm~rcial- ti-eaU~s 'of· the 19th-and f.irst bJA.lf of tile 2ot'b C:e.nt.ui-y.
,~iendship, commerQe and navigation -treatiR~ wero used first by the'
United Sta.tes a.nci ·1e.ter \,y 3a.p&il ·cs). 'l'he b;e&ti~s between t'he. United Kingdom
and Iz:'an (l.9S9) •. · and· between the Fedel"a.1 Republic of Gennc.ny an·d the Dominican
Republic. (l<;S7> .. ·ti1:.o fall into· thi's categot-y. OE the 4'.3 FC!fi tree.ti.es
eurc-eotly in effect betwiien tbe Uni ~ed. Stat.a$ and other-. co14~tc-ies,
:tpr;>i:oz:°i"1nately IL dozen o'E · t;bese treatlc·s vere ,;:c;mc1udeCl wi't.h deve1opiog
countries sine~· the end of· tbe S@con4·wor1d ~ar (6).· 'Ihc latest &greement of
this t:.y:r,• sign_cd by tb~ ·un~-ted Sta~es dates: from th& _mi~~1e of the 1960s.
' ' ..
8. . While indivi.dua1' tc-~a.tie:!1: Jaesotia.ted wit:.h specific deve.loping countr·~es
vary accor:dinis ·to tb~· rel.eve.nt cifeumstances, t.bo ata.nd'a.rd US ·draft FCN Treaty
cont&ins the fo'l1owing principal· provisions which a~e relevant to invesl:1':lent: ' . .
o.) Equil::a1;,1·e tr.cia.trnen~ o~ per-s=ons:, property. enterpi.-ises and. other
interest:. or na.:tional.s and companies of the 'other ~al"ty.:- ' .
·'b) Natio:ials. ac-e per.!Q1tted to qater.- and rem~in• _for;- p"rposes of
. deve1o~lng and d~rectin~ op•~ations of ecte~p~is~s within _which they
have'inyested or are act.ivej,y in:tbe pC"OCC:S& of investinc a
si.ibsliantial amoun.c of c_a.pit.t1-l; ·
C) Nat:.J.gn~1 ~r·eat:mcnt and 81,;,;;t !'9-VOUC'ed ~a.ti OD ·(l!FN) treatment with
re:s.pec:.t· to &CCe$S. to l~eal cou~t:s;
d) E~forc:eabi1i'tJ' of arbitr-a.Uon pr-occcding~ 1U1d aware1s pur:--su.ant to
c:ont;ra.ccc:
e) Protectio~ of_p~operty;
E) .Pro111pti.· e.dcq-~e.te· an·c;1 eff'ec:ci.ve compensation in tl'le event of
~xpropriation: .
g) Treat1111utt no ·.1•·~s than na.tiona'l and HFM treatment. wi'th -~espect to.
al.l t::ype=::•.oi 'C::om111•~1:i&1, in4o=t..-!;?:;. fi:nanclal &nd other act:.ivity
incluc&i~C· establis::hment: of b~a.nc~es·, organ1sat'ion· of' coms,ani.es,
contc-·01 and .,ne.nage1DA!\t ~f enter-prises. et~. : · ·
h) P~rmlscion-to c~gage .t~ohn1ca.l. e~~crts, executlve pe~sannel.
attotn~ys. agent~; etc.;
i) Hatione.l treatment With E'es:p~ct;, to lei,.::ing land, bul°ldiogs; offiCG$1,
etc.;
j >' National treatment c0nc.er!'ling. pal::ents. tt"o.dcmei:-ks and· other
industt"i al pre1perty ~- Annex 375
s
k) · Prov"!!. slons on ta.x ma.tters·,
1) National and MFN·treatment OR remittances an~ other ·transfers of
·-fu.nd:.,
m) Ge-ant 1 pg of· KFI( c u:st~ms treiitiiieot· ·t:o ·c:ommerc i al ·t:"avel.l.ers
represent_ing· ·ne.t.ional& and· co~p&Ji~e_&i
n) MPH treatment for product&, and ~ther pro~isions concer~~ns duties,
taxes• et:f. ;
o) Hairitenance·oE competitive-egu.•lity with respect to purchases and
sal.es by g'~venuiients, a.5encies' a.nd-moqopolies and .with respect to
special econ.omic. advf\.nta.r;e:. enjoyed by r;overnment agencies aqd
monopolies_; ·
p) Provisionli fgr- c:cin:iultation 'in ·the· event that restrictive busi'11ess
'prac:tic:~s c:.u.se han1.fu.l ef'fec:tli, \IPQR CQ'IDlllerce between the two
c:ou.ntrieli.
9. 'In the Et::tperience of· tbe United: ·states, the existence of ~n FCN treaty
. can have an encour:ag1Dg" e~fect :·ror investor~ i.t tbe investment climate io tlie
. llOSt count·ry ls· favour'able>- While tbe .111stances. in which the US has invo~ed
' trCN treaties for·: the j>rotec:tlon ·,of' foreign inv~stment e.re not gr~&t I there
have. nevertheless-~ be~n a n~er of specl·tlc cases. I:n some case5. the
provisions of 'these treaties bave been.cited during tbe course ot·nonau.l
dipl.omatiC -disc:ussi9ns when· lnvestment_probiems bave If.risen. · Furtbe~ore,
t.llere is a fairly la.rge .'body ·or l1tigatlon ·w1tbin the us judic-ial. sy5teiu
concerning various provisions. of rCH treaties. Whlle the Un1ted States will
continue ~o rely on ... FCN t~eaties as .the -basic frafflework f'or investment with
t.hose countries witl'l.wnicb ic has such trea.ti'es. it 1s unl.l'k.eiy that.a
significant m.uuber'of .. new !"CR 'treaties w11i be_negotlated ia t.be f'ut11re.
-.rbere are a nwnl>er· of reasons for this policy. ·Trade re'latlo'ls · sre n·ow
generally subject to GATI'.-: r~ie·s tha.t cha.ages are made vi thin tbe GA'IT
framework. Recent practice in tbe_united states ~as been _to.seek s~parate
bilateral a.rrangement.s, on. marl ti111e • ancl co.nsular matters S.n s1 tuatlons where
thls is deemed to be· des·1rab1e· .. ·. Finally. ·1t is more ci1.rncult to negotiate ·
. the comprehensive FCN-treatles unde~.present conditions. ·p&rtic:u1ar1y with
·devel.oping. countries~ · ·
. B ·, Inves tmen·t Guaran i:ee Agreements... ·
10. . Thi.'s typo ·of· agre~ent bas 'been used on1J .by tbe United ·s~a.~es and
Canada and-is designed .to provide ·a·r~amework ror extendng·el1g1b1iltJ' under
an investinent insurance scheme·for investment in a particular country. To
date, 116 .countrie~ ~ave conclu~ed sucb a&,reements w1tb tbe United Sta~es and
30·w1tb Canada. It· is importan-t to emphasise that these a_gl:'~eme?ts are :
procedura.1.· in nature. .i.e.· they serve as. an instrument f'or.· the operation of
·national. investment imnir.ar.ce· scherne5 but do·. n0t c:ont1J.in any p~ovlslon ·
concerning the tre&tment:of the investment by the host country~ They,
thererorP.,. do not c:0nstit1Jte an ·ai'ternat.ive· to more comprehensi~e forms of
investment protection·~nd ·promotion agreemen~s.
Annex 375
..
11. The US in,restment guarantee agreement covers tbe ~ollowiri'g el~ment.s:
Foreign government approval of.the investment. It is stipulated
tbat the US Over~~~s PrivAte Invesbncnt Corporation (OPIC)'will not
issue investment .guarantees with respect to any .project without the
approva1 of th~_bost 60Vernmon~. This provision allow$ host.. '
countries· a. deg~stA of seleetivh:y in tlic lish\::. of· their de.velgpment
strategy and tbu~ r~duces the.li~lihood of cxp~opriation;
' . . .
Sub~ogation.· In the ev~nt that OPIC pays an inve$t0.·s clalm, it
. llas the right · to assume all rights,· titles, claims, etc. -previously
held by t:hst invesiot; · ·
Arbitrat:.ion ~ The a.gteernent : provjdcs for thh·d-party int.ernatlona.1
ar:.-'bi tration i~ the .cas.e of a disp"te ·be'tw=cn the US government and
the hos·t. &ov@rnm~nt which ·~elates to t.he interpnitatio1J of the ._
agreel'llent or which, in •.. the opinion of one of th·e governments,
i'nv~lve!: a. 13:uestion· of intor:natl.onAl ·10.w ar:isiog ·out gf ·any··
·investment project for which OPIC covera,e has 'been issued.-
•
• · 12. The· ·investment tl:Lal."antee agre.ements signed by Canada essentially
eon ta.in subrogation· elauses and provision:: for dhpute $t:ttleme·nts between the
host· goverruaent a.nd the Canadian !zport Development Corporation C.EDC) -with
respect to in~~r~d inve~biients; Accordins to the C~nadian exp~rience. tbe
signing of such agreements with part-ieula.r· coun.t::-ies has increased- th4!
intere!:t or potEtntia1 iaves-t.ors. in these count:~ies •. Thus ·far•. canaCla • ba.s not
·· . bad to exercise its l"'ights under .the agree!Ue.nt to settle an outs·tandi,ng clai,:n. '•, .
C ~ I:nvas.::trnE"nt Pc-otec~ion Treat.i-es (I:PT) ·
' ' '
13. .:tPT •6reemen~s are. specifica1l.y de5igp'ed.· to· provide l.@ga1 protection t:o
tbe inves~.ment covered. While.· t'he details of such agr-eements vary from
·country to country, ~hey genc~ally con~a~o the·fol1owing basic p~ovision~!
D'ofinitlon' of the investment:: to be protecteel t1n.det" the agrli!Etll\ent;
P"ir and equitable tc-c;1,tment of the investo:-. na.tionai. treatment. -e.nc!
IIIO~t favoured. ,nation ~re~tftlcnt;
Nat.i onalisation. and compensation; ' . . .
Transfer of iaeoMe · from inv~sted capi ta.l and the l:'ep.~triat.ion. of
ca.pit al in. c~aes of· di :in:ves~ent>;·
$ubrogation·.in case -0£ p'a.Ylllent of 1;:laims by the llome country (e.g.·
the Cerma!ly a'nd.. Uni ~ed K_ingdom ·prototype>;
Dispute .sP.ttlement (United ·States) •.
Many agreements ·concluded by.Member countries also contain clause!: relating t:.o
. t.:Otnpensat.ion fol" dmnages due ~o war or ·-simil.ar. events.
Annex 375
1 IME(86)14
Sef'ore o.n.,,l,y~ing the~e main elements or investment protection treaties
in the light of t;l1e ·experience of Kembe·r· c:ountrles. it. is interesting t.o
review the main development& in the pr•c~ice of these types of agreement_
a) The Bvolvin0 Practice of ~nv.e$tment Protection Treaties
-14. 'l'he flr:=t .IPTt. were c:.oncl.uded with developing· countr.ies in the eai:-l.y
. ·l960s by t~o count~ie~, the Federal ~epublic: ·of Germany and Switzerland.·
Cennany concluded its firzt.a5reement in l9S9 witb ~&kist&n an~ bas since
~ig~ed agreement: wi~b numet"OU$ other developing countr-\es, so that lt ls
today the count~y with t~e mos~ extensive and c~mprehenslve treaty
a~i-angernents Eo·r the ·pr.~t:ection and promotion of iov.estmant ·(7). SWi tzerland
is purguing the same policy Q: Geatiany. Startin~ at an ear1y 4ate Can
~gre-ement vitb Tu.nis:ia. on· 2nd .De.:cm'bcr :t961). it. has con.c.luded an extensive
S:.ti\dei:· oE a,reement.s dea1'ing with invc::baent protection aod pi;-amotlon. Both
countrie: seem _to be continuing in t~e ~IM'Rc direct1ou as negotiations · for
£u~tber treaties a~e currently under ~ay.
lS. 'l'owa.rcb the -en·a "f,f the 1960::. and, ino~e pa.r~ic.u1ar1y. c.iuring the l.97Os.
& s~cond group 0£ countries became intcrc;tcd in tbese agreemeats &nd st~rted
to adopt them. 'l'his group of countric~ h4vc ~isned· nWl!erous treatie~ and
inc1udes France •. the.United· Ki~gdom, the Bclgiu.m-LQ~embourg Economic Union and
the Hetherla.nos, as folell ;s~ coun-tr:ics. •i th only & fe,,i, S\lcb . as Horway ( 8) •
16- A third 0roup'of countries has ouly more recently <towards tbe end of
the ~970s) begun to. tGkc an inte~est •io a5ree~ents of ·this kind. Notable 'in
this group are Japan,. ~h\~b ~i0ncd it~ fi.at two •nd so fa~ only •sr~e111ents
with Egypt. in 1977 ;i.nd Si:-i L€mk.11 i.c 19.82. and the United _Sta~es, whi~b has
cir~wn up o. model: .-igrccmcnt, and· in 1982 concluded treaties with Egyp~ and
Panama. It .i~ 'clear tbat tb1s group cf countri~s. which appear to have opted
for these a5ree~ent~ at_ a later stage, are ti!Lkia5 a great· interest in them •nd
are fol1o...-in~ po1icies !o~ tbeir ~idesprea4 use.
l 7. "l'be developi_n0 . countr-ies which bave eotered into· investment protection
treaties a~e to be foun~ p~imari1y in Africa and Zou~h-Sust Asia.· Ho$t
countrie3 of Latin .Ame~ica bave so Ear been-reluctant to conc;~ude such
agreements (9), since they genera11y ·consider that suc.h agree~eats conflict
with the Calvo doctrine which i:-eflects t:he South .American co·ncept ·of tbe
3overeign'.ty of 3tates.
18- LD tbe·Hiddie Bast, a number of countries seem prepa~ed to sign,
agi;-eements. par"t\cularly. Esypt. which, since.the middle oE l:.b'e 19?0s, has be-en
particularly acti.~e. (10) ~ Mention can also be 111ade ·ot Jorda.o~ wb·lch signed
ag~eements with Ge~~any-and Switzerland lo 1977 end with France and the
United ~ingdom in 1979 •. an6 of Syri& whic.h r.eacbed ag~eement wlth,Gena•ny
in 1cn7·• Switz.es;-land i·n 1978 and Fi.e.nce in 1980. Another b1po~tant event is
the multi.later.al convention which is cu~rently beiog oegotiated between t~e
Member :Gta.tc:: 0£ the EEC aod-t.he Ar.s.b Leag~e and wbich should ·prove beneficial
since f'C1if trca.tic:s ·~xi:st b'ct'Cecn the two regions.
\9. 'l'hu3 it can·. be seen that _the same 'dev.el.oping c.auntries are frequently
partic:: ~o ::cvcral nsrccmcnt3. This seeNs to indicate that & developing
· count~y which.h~= ~ecidcd to enter into a first agreement will then conclude
ot.ho'°:. The iritei-e::::.t. ·of t.vo Ba.::t European count.r:ies, Yugoslavia. .and
~wn4nh (11) in ~uc:h ~si:-cemcnt:: ~ho\lld al.::;o be mentioned. Annex-375
:J:K£(811)14_ · · - · 8' -
: ·. 20. . .A.lmos:.t all atsr.eoinerita .for the protec-tit,n and .Promot.io.n of inves:tm~nt
concluded batwaoa .industri•lised and developing count~ies \except the first
genel."ation. of •g~eeme11t·s,, entered int.a by .. France) p'rovide. fot" ·i:-ecip.1..•ocity.
rhis means that thl'y ·apply.· in a.n·. equal man·ncr to inyestme;J'ts ·by ·nationals of
each contracting st.a.ta· on the t~rritor.Y of the·· ether state. · Neverthelti'is:s, the
va.lue of reciprocity fo~ many .of these agreements has in p~a.ctice been
limit:ecl. since csi.~S.tal. st,:~a:ns have been· ~at.her cne-sleie<l.
21.. A new trend howeve.c-'seoma to be emergir:g due to the fact tba.t e.n
increas1ng·nwuber of deve1oping countries find themselves. in che role ·of·home
QS -..rell as ·bos:t o:o"nt.ri'es. fo~ international investment. This observation '
particularl-y ~pplies to the ::;o-ec.1led n~ly industr'ial.ised · col!.ntrie.s,. which
are now begi·nni.ns to ~nga.ge in investment:s ln otber- Clevei'oplng cou"-tc-i~s a.rid,
to a le$Set" ,,.~tent, in.developcG countries. Within the ~ra.mework of
South-South co-op~~ation, effort: ~re being·undertake~ to stimulate.fiows of
investment bet:.woqn developing countries·, .parti.t::uler1y on a regione.J. 'scale. Xt
is therefore nol: r;urprisd,ng ths.t the dev~l·opin& ccu::itrles concerned attach
great importa~ce to ·the pl:"otection of :.ucb inve:itment' against political or
other risks=. For. ex2mple, thi$ eoncer.n ·is reflected in t:ie worJI:. of the
Asian-Afric~n Letsa1 Consultative· Committee 0&nd has re$Ulted 1n a draft model
agreement which ia many ,.aapect= i~ c·ompa.ra.ble to tbe invest.men~ ,protec.t:ion
agreements: c:onclude!d bet~~ea devc.1ope!! and developing countries {12).
22. 1:he nog~t:i•ation:s referred to above f'or. the. conclusion of a Jilllltilateral
agr~R~~nt between the .Hem~cr·~tates of the EEC and of tbe Arab Le~gue should
a.ho o·e s:oer. i.:i this 'lisht~ Bti.s.ed c;,n the commonality of' inte:.-ests · of all
partno::-s: in· _rec::i.pr:-oea.1 pro~ecti011 of their ·investments.' t'en-ta.tiv~. agreement
ba.s ·beQn re&:ched on the· ·ai&in principl.es· which should. 'be inc~u'ded i:r this
·treaty ~lthaugb some 'difflc~1tie$ have·ye~ to be ove~eome. Tha ~nvisaged
mu1tilatera1 instrwnent ~il.1 be ·$imil.ar to·standard bilatera1 investment
protection a~d promotion agre·ements·~ parei•ca:.l.arly as regard!: the catego~y of·
risks: cover-ed and the tl:'e&tcnent gf the investor. Its m~:in di~tinctive Eeatu,:e
bowQver is t:.he fa.ct that it wo1iid. cover• not cnly dit'<?Ct in~g_st~ent bu~ .a1so
portfolio inve:t.cncot, m1;m'etary i!.$Sets, governments stocks &qd bonds and other
~QCUrities ~hich are nonnally,exc1uded from bi1ateral IPT~-
b) The Contents of rnvestment. Protect'ien Treaties:
23. Bo.:cd · upon t~e. informa.tie>D ·provided by Member- couni::cies and .. t.be text.,:
of_represent~tivc asreeaent~ ~oncluded over the past 20 year~. it. appeQrs that
mos:~ bilaterol invesbnen.t prote.ction tr:-eaties ·cont.ain simi1lll" ma.in el~men~s.
There &re two rca.sons for·tb~ie 5imi1a~ities:
Tbc cxten$iO~ 'of the network Of'bUatera1 treaties .was preceded in
tbc early 1960s by· intensive discussions:within OEC~-oo a draft ·
convention £.or the protection of foreign prop\:rty. ·on . . .
12th October. 1967, the OECD Colinci1 a'1optE!d a i:-,._sol.ut.ion rea£flrmlng
the· adhef'ence of Hem,ber countries to. ·the principl~s of i.nte:-no.ti.onal
l~w cmbo~ied in the Drart convention Cl3>:
Ho.ny Hc::m'ber: .countrie;. _inte:rested in a.C10,?ting bii'J.l.t9r&1 'inve:stfflent
tc-~aties with dcve'lopi.ng cou::itrles a.re exchanging. ·on ·a bilateral
bo.s:is, exp~ricn~c wit~ the negotlation·or such•treatie!i:.•
·Annex 37~
: .
- 9 'IKE( 84) 14.
'rt should'not be o;e~looked •. howeve~. that· a number or provisions in the
vaz,-ious agreements sho'W notable differences, reflect.int c1ifferi'ng ncgotie.',ti.ng,
situat.ions and to some extent. a va:z::i.ety o·f policy approa.:he$ and degl"ees o·r ·
emphasis.
24. · · 'I'.WO approaches towaras r.egotiations of IPrs with deve1oping countrie!!i:
can be ij.isUnguished. Fix:-st·. a pre-existing. mode1 agreement may be used G.s a
basis for negotiatic,n, This ls the procedure adopted by most o:e:cn.·aember
countries for such agreements. notably Germany. Switzerland. Netherlands.
Sweden. tne United Kingdom and Franc'-· · I.tis also.the method used by t.he
United States. whir :l ha.s recently· completed th@ draft. of sucb a model
agreement .. However. otner .. ·c:ountries. in particul.ar Belgium. follow a somewhat
more flexible approacb.·involving the Qegoti&tion o.f .each treaty without
reference to a pre-4etermine4 ~ode1. 'Kost Member count~ies· sbat"t a conunon
vlew as to essential ·e1ements of tne,treaties. These inc1ude t.he p,..incip1e offair
and eguit.a?>1·~ tt~a~ent 0of· the. investor, guarai;itees. as to tbe .t.cansfer-· of
income from investment and· ~epatria.tion of capital. acceptable p,:ovisions
gover~ing nationa1isation and c9inpensation and dispute setele~ent,
2s. :rhe fol1owing paragraphs bighl'ight the main e1einent.s of these
agreements. togetlier with·the relative impor-tance att'ac:hed thereto by the
various countries_. •
i> Tbe coverage·of tbe Agreem,ents.
26, In order to obtain maxit11wn p'r'otection, a.11 countries. favour a very: ·.
'bz:-oad deHni~fon of the investment cover~d. l'o the e::c\:.e.nt that an exbau!.tive
ot coio,p~ebe"sive definition of the tenn .invest.rnent seems oifficult or even
iirapossible to t"ea.cn, many_ countries opt for: t.be 'following f'onnula:· .. The tel"ln
inves.troent rnean·s -assets of. all.. kinds and in pax.-tieu1&t" but not
e:xc1usively . '_." .. l'lli_s: .fol:'Jn of. drafting is used by, .emong .others, .
Swi tzerlanc1. Bel.gitie\; the N'etberl.e.nds. Frtu1ce. tbe Uni'ted Kingdom and Swede·n.
The ~ennan.model ag~eement eontains the wording ~shall compri~e every.kind of
asset, in pa~ticula.r .a." and is si~i1ar to.that in the _agreement between
Ja.p~n and £~ypt.: The μs model a&~ee~ent. ·uses the foilowing·£ormula.:
"J:nvest:-ment. means every ~i:ic! of .invest:m.ent, owne.d or controlled direct1y or
indi~ect'l.y,_ ~nc'lud'ing equity. debt and se,:-vice a.nd investment contracts; a.nd
i nc1udes, but. is not U.zni ted to .•• ". ·
27. These various introductory statements are fol.1owed by an illn~t~Ativ~
list,. which in most instances includes::
a) Movable and immovable property• and all· _otber pc-opq'l:"ty dghts such
as mortgages;· pledges, sureties si!cured on rea.l . 111:s:·t-.t.", • lif'l"
interes't:s · arid' dmila.r rights:
·b) Shares or·other interests;
c) Debts and.other valuable rights to services; .
d) copyright.· i11dustr-ial ·_propei:-t.y .("ights, ao.d rights in ·tC!!chnicai ·.
processes. know-how, tra.~ emarks. ·~usiness names and goodwill; ' ' . .
e> comml!rcia.1 concessions ·un·cter publ.ic law • . including those for the
prospecting, extraction and exploitation of nat~r&l resource$.
Annex 375
10
This very broad def'ini.tion of inves:tment ·. is pi:'cdominant · in c:urrent pract·fc~
and fits in we11 with the. desire·of·OECD Member countries to p,otect the
widest. p~ss.i ble r•.nge of· as:,1;:ets abroad~
28. The dafini.ld.ons: retained in the ~i;rcc~ents can be ':s·een to be
su.fficientl·Y broad to apply. not only to ·traditional !or:ns· of eg~ity and debt
investment but also' to ''industrial pr"perty ri'g'ht:." I '"knoW-•hO_.. ,a.nd
"trademarks", term~ th~t appear to he most relevant to non-equity
investments .. Nevec-t'h•l@ss, it is:: fot- conaidcrc.tion.wbet·her the list·s of
e:z::unples given in tbe agreements should no.t b~· expa.nded to include more
explicitly other categor:i~•f, of new ~orm=' of invest:.m~nt :such &S. contractua1 and
service type ar::-a.ng'e111en·ts (1.14). In many agreements, the dividing line ,is
drai.m bQ!t.we~n direct· inves;tment .implying· :.0111e 'de-gr~e · cf control. a.n~ lasting.
i'~terest in an undertaking· and indirect or po::tfolio inves~ment;. While tl'.e
former are inv~ri&Dly co~ered, the latter 4rc excl~ded .in many ·agreements.
29. Broad defini~·i..ons also apply to the investors protected b:; the ·~- .
t.t;reements an~. genera.lly include natural persons a.nd companies. Th'e· term
"co~p~r.i~~" in most ag~eement~ is deflnod to ~ove~ a wide range oC.
orga.nisat~or.a.l forms, regard.less of ne.ture· and exte.it of liabi,lity or- nature
of on~er,;:h.~p- '.the defir.ition given in the US model .agreement· explicit1y
includes the assets of charitable and non-pr~fit organisations and eriterp~iies
vilh parti~l or total stat~ ~wn_erchif.
JO. Concerning the ge05raphi-c:a.l coverage of' the p.:-otec:tion of' '",comga.nies"'.
t~o app:-oac:hes ca.n be· distinguished. In the treaties concluded· accordin.g to ·
th,;i Cqrrn&c . a.r.d UK inodel's; s.nd ,in most t.rcntics conc:1.uc!ed by Fn1.m:e, the
territo~i&lity principle is used, i~e: only companies incorporated in, ,having
th~ir seat in or beicg conat.il::u~e<l ;s.c:cordinl, to tbe law of ·one ot .the
contracting parties· are covered. · The treaties cooc.luced b·y most other
i:ountdes. in P,B.rticula.r the French in som~ cases. and us models.' use the '
G.ddil:i.cns.1 critei:-i.on of direct or indii;ect cont'"ol of companies 1:,y nationa1s
of one of the conb:·act-in~ p~r~ie:s. Tb.is: def'ini. tioo a.11ows. treaty covet>&ge of
subsidiaries ~hich.are owned·or cont~olled.by nationals of a·eontractinc
party-. but organised in ·third countc-ies .and wbic:h have inv.es~ents .. cr .othei:-·
oper-ations in the ter·ritorr of t,he other party. In the swiss api,roach ~he
prlnc:iple,of control eon::ti~utc:::. the e$Seot.i'al'element ln determining t~:!
nationality of & compe.ny. Although some inVe$tment protection agr'eements ·
concluded 'bet,.,een Swit-c.erla.nd a.nd clevelop.iag· c;ou.ntrie$ c:ontain a· reference t:o
tht• prlneiple •of ter-ritoriO:lit.y, the latte~ may only be. ~ppl.ied a.s• a
subs;ti tut:e to the pr-iriciple o~ ~ontro1. · l"he ~.ethe,l'ands model' takes .an
intermediate approa.~h defining nationals ,to .include legal persons controlled
directly os:- indiroc:c1y, by 'na.tiono.l:; of on·e eon'tractir:i~ paz;-ty but constitut.ed
in· accordi.nee ~i th the law of t.he · other cont·racting pa:--ties. This provision
:.c identlce.l l:o .Article 2S (2) .('b). of·t.he :rcsI_., Convention. 'Ibe·purpose -is to
enable the .subsidiary to act• in.dependently ·ft-om the parent and· to. ensure that
inw~stmenl:s made by. the subsidia;-y in other affi'liate$ a:c-11a, c:overed. Tb~ ·
H~thQrlands t.~QG.ty •lso covers investment: via third count~ie5 on the·,
condition that ~he inves~meot is c~nstit~ted in accordance with' the law of tbe.
ote~ contracting party •.
31.. Kost IPTs protect botli in.itial and. subsequent investments. In those
agrcu~mr>n'l:.s: .in which £ubs~quer&t invesl:men~s. by ~ubs!dia"ies ·c;ont;~olled by
Annex 375
r
11
nationals of the contrac:t:ing pa.i-ty are not explicitly covered,· the 1;1pplicatlon
of the pt"inciple. of national t,:@a.tment s=tipuletcd in ··ot!'-.er part$. of the
agreement would.provide _protqc~ion only to the extent .lba~ dorue5t~c ·comp&nieS
are allowed to.m~ke such inv~$bn~nt~. ·
:3Z. Kost agr~ements thusi f~,: concluded,' while cncoura.ging t.he pr·cmotJ.on of
investment· flows becween the contr-actin15 parti·es, do not confer a right of
entry or establisbJllent- Under: thets@o ·aisreernents ent.r.y 'or admi.s-:::lon h: subject
to the law. regulations and. Pl"OCedu,:qs of bos=t countd'c=. A:. :.ta.ted fc,r ' '
in.~t.ance in. paragx:-apb '2 of the C:el:'fflan model, each contracting party admits the
investment of C:apit:.e.l by na.Honals: o,: cC>r11panies= of the other. contracting pEL°r•tY
in accordance with its letislatioo_ Accoi:.-ding to .the tc~:; use·d in the French
model. the obligatio~s under the trQaty apply t.o invesl:me41t: of a contracth1g . ·
party on the un~e~stancJ.ing that ~h~sc.,, i.nvesbrtent:= ac-e to be me.d.e or have been
made in conroi:-mity-vith the legi~l.ation of ~he ~ther con~racti~g party. The··
us model ~oes f'urt.ber. extendin: th• pl:'5.nciple of n&t:io11e.l trcatrnen·t· and most
favoured nat'ion · tre·at.ment not ·only ,to ·investmcmt made according to host.
countries•· legislation- ano. procedures:'. but al.so to the ent.ry ·a.nd establ.ishment
of such investment. As s~ipulated in Al:'ticle 2 of that inodel, each party
shall endea.vo-ur to maintain a favourabl.e q~vironme,if;. for investments in its
territory by nationals and compa~ies oE th• ~tber part~ and shal.l permit sue~
investment to be establi$bed and acguir~d .on terms and cond~~ions that·accord
treatment no less favourable than th~ treat:ment it accord: in l.ike situations
to investments of ~ts own.companies: or to n~~~onals o~ compnnies of any third
country_, whicheve~ is the n,ost favouro.b1e.
33. One final proble~··conc~z:-nin,s the coverage of 5.nvc:;t.ment t:re&tles h
whe·ther t.be:f app1y to· inves:tmR.rit:.~ made p~ior to· t:be cffcct:ive date of the
tre_at:,. !t is. clear tha.~ tb"E"t c:leve1oped countries wAnt _the agreements to apply .
co ear1ie~-invest.ment_ t.ong-standing 1inks with deve1oping ~ount~ies have
often resulted in s:ignificant existing invesblent which itse1f can·be a source
of·r.ew.invesbnent; ~d pot~ntia1 investora will oftcu judge·the iuve$buent
climat:.e by _the ,e~p~ricmce of tho5.e a1ready e::to.b1i.shed 'in the host countries.
Hence the impo~tanc9 attached by maay Memh~r countries to 'the coverage of
existing ir.vas:tmQnt_ Not al.1 eiitis=t.iag tlC'es.t.ie:=, h.owever,· cover sucli
investm,,nt$_ '
JA_ Th~ agr9ement.s ana1ysed follow tbe=c different pat~erns;
Som~ agreemenh~ o~ly app1y to invcstlbeut·uudert&ken after their
entry lnto force aad mor-e ~r l.esz · e::ii::p1icit;1y:_eJte1ude e.arlie~
o·p~ra:tloo~. %his i!: so .in most.' oE the treatie=:i. ado.pted by Belgium
and for some by Franpe ·and the HethcrlAnds; ·
The second po~s=ibilit.~- invo1vc= t;he ~eve~se situatlon. as prior
investment i~ o.zpres!:l.y oovered •. · 'rbi:= i:s f;he · ca:a;e in the agreement
between 3ap:a.zi and.Eaypt, ·in-some agreements cogc1~ded by Be1glum and
the Netherlands: a.nd in most· of .thos~ concl1,1dcd. by. Gennao7,
Switzerland a.nd S~~d~n;
The third possibi1i~y fa~ls betwoon t.be two extremes and is.often a
compromise: the agraa;tm~nt..covers invect:ment ~ub=c1u~nt to a certain
date but earlier than the effective date of tbc ·Ggrccment itsel~.
l'l'lis _i's found f'or exa111pl.- in some agreements conc::l.udcd. b7 th~
N. etberl.a rids. Sweden, G. @rmany' and Swi t~eC"land (1S >• A nn~ 37.5.
12 -
ii) Fair and Equitable Tr~~t~ent
3S. :rhe principle of· fair.a.?d e-quitable ti-eatment to be accorded to
investJ11ents of the conl:.ra.ct:ing'. paC"ties is a.n ecsentis.l cl.cn:enl. ·of inv1utrnent
protection treaties. Alm?st a.11 '.Kl!mber:- countries conclndias su<:)1 treatie:;
insist on such a clause beini includad in the agreement. Zn most treaties,
thil- principle is supple.mented by detailed provis;iona t"e!e~ri.ns· · for .i.nst11.nce
to .nor.-discrimine.tion e.nd :tbe r-e!:~9ct: of c·ontr:-actue.l 0blig4f:ions entered into
between the investor and o·~@ of· thE> contraoting pa::-tie~.
36. A.ccording t:o all .~e.mb@i- co~ntries wh~ch llave_· COIMlented 0!:! this, point,·
fai·r and equitable trcutb:n~nt intr.-oduc~d a: aubsta.ntive lei;a.l stand&rd ref"ei-ring
to gene.r:al principles: 0£. int..ernati;;su1.l law even 'if this is- oot. e:Eplicitly
stated· and is a geneC'al ·cl~u,:;e which cc.n be used for· a.ll aspects' of the·
~reat:Jnent Of tbe ·inve:st.mRnt, in the' absence of mo·r·c :;pecif!c' guarantees. In
addition. it pt'ovide:s gi:anc;.~~l guid:a.nae £or t:he interpretation or t.h~ ~greenient
and t:he t'es~lution of ~ifficult'ies· wh_ie.'h 1110.y .. a.rise. '·
3'7. In e: sub:st:a.nti:l.l num'bei of. t:.i:-ea.~iee .. t.he h1port.a.nce of £air ilnd
e1;1ui table tr:eatroent is . i'nciudR1d by clauses $peci'.fica.l~y· rcfcrriqg · to th·e c-ules
-~nd principles of internationai la~~ Some tr:-o&ties. for cxample.•those
concluded by France with El ~~lvlJ.dor, jordc.n, Pa~a.gua~, Sri La~ka, Suda~ and
Syria? p,:-ovide for "jugt ·:u1d P.quit·a.b'le treatment. in- con.Eoraiitv with·
. inte·rnation&l law or thcf g"n~z:oal pri~cipl~s of :.nternc.t:iona.l iaw". The US
model states t:h.a.t thQ tz:o~at:ment:. ps:-otection· a.nd =ccud ty of. the. invn'tmeut
shall in no case be l~~s tb&n that 'roquired by intcrnatioDal 1aw .. Ho5t
UK treati.es.. provid4? that, a.f't::c;ir. tenn~natio.1, of the 'treaty, t ·he :i~·ve$tment will ·
continue to bo pr-otected .. fo~· 11. stated. number ~f years, without prejudice· to ·
· the applic-ation t.h-r.-reafi:.er of the ,gene.i:-'41 principle:. of international l.aw.
iii) :tfat:ional .Tr-ea:bnent. and 1!o~t Fa.vour.c:d Hat ion Tre:abnent
38. The mos~ ft"equently en.count:~~cd p~o;i~i.ons .(16), es.peci.ally in. model
agt:"eement::,=. me-nt'ion both,' t.ypei; of'· tC"eat.Jacn't:~ and · itipulate .that the most
ad\."a.~ta.goous: _of thQ two wq.1 app1y~ Thi_:: ic tbe· case in agre:e~elits conclud.ed
by aermA.ny, Japan, Switzez:oland~. the Vnit.ed.~ingdom, France: and·the
Uni l:;ed St.a.tu. 'X'be eozn\)inat:'i~n of the two. piinciples· is important 1n
ins;t.ances: where hos:t. countries ·S~CLDt to foreign investors specific f',avoura.ble
condition not available ~o- nal:.lonal -investoi:-z. •. :rn this ·context .• the princip1e
of JI\OS:t favo~rQd D&tio,n ~ceabnent ·for inves~nt: under the second Lomt .
Conv~ntion between te EBC and ~he ACP. count.ie5· is wort~ uientioning •. ·
.A.rti'cle 64 of the Convention -and: the Jont .Oec:la.ration relating to Article 64
creah a. r.-iishl to non-die·cr_imi.n~~oey trcat.me~t. Tbi_s rir;bt consists of ea.ch
ggc K~mber state boing a.b1e·~o aek the ACP 'State conc~rned for tbe same·
· t:.raa.U11,-nt: •t: tha.t grant.ed · t:o qa.tioi:ia.l: of' o.nothe/r Kember :State unde·r. the· t.erms
of invest:m,ui~ plf:'ot:eotion.ags:-eements:which ::crve as t"efet'ence a.greemelits. rt .
is. neverthele$~; understood ~hat-this treat.rdcnt iG ~ot &~tom&tic Cthe~e has .
. to be a bi 1.atei-a.l i ntArgoverrun~nlal QX¢lu1n5e' oE 1ct'tcr:::. betwee.~ the '
governments conc~rm~d) ll.'nd certain a<lj\lst.znen\:s c~n be t:1a.de with respect to the
reference a.gr~uunant lri spe-clfi!!~ c-i~_cunu;t~nces. .
Annex 375 :
IHE{84)14
.3·9_ Sweden ·does n.ot include th~· n4tional tre~t111ent ~la.use· in it:i· agree~ents ·
but P.Xclusively relies ".on the most favoured nat~on .clause. Belgi~ als~
considers the Ki'.N pr-inciple to be more i.mp_ort;s.nt to _foc-eisn inve~t.ors than
national treatment and consequently •insisted on tile inclusion of tl1e latter
pr~nciple in most of•it= ~gr~em~nts. ~be NQtherlands, on the other.band, have
u:p.i.-esse.,d reservation's. .a:~ to l:h'l' ~u.rrent 11se of t.he MF'N principle 'in .
inves~ent treaties, , ri,··t.heit- vi~w. this -principle, if not comb!ne-d with
·substantive standards· for foreign investment such as fair and e~uitable
treacment. c:a.n still open the possibility for overall cond-itions detrimcnt:.111
to t.h e interests ot the foreign . investor.
40. . Finally• it should be mentioned .that. a number of. bil&:oteral investment
treaties. recognise ·certain 1imi ted exee!'ptions to either n'at:iona1. t-reo.t:JT1cnt or
Hf'N t:reat.men t or both. Exceptions: are ·provided is, ces::ta.in. ca,s.es for the
part:lclp.a.tion 0~ 'the. con~ract:ing p::1.1:"l:y in & COffllllOJ'I ~&~'ket, cus~oms, union• or .
free trade as~ociat'ion or ev_en, as ·specified in certain ·agt"eements, for "other
forms of regiona1 co-op~ration". SOllle countries ala~ p~ovidc for exceptions
in tax mat tei-s wh i-ch a.c-e 'dealt with throagb Double Tax a ti on Agreements. In
or;.l'ler cases,. agreement!: ~peci.Fy t:b,11.t ln certaia circwn8ta.nces :i:peciol
incentives granted by tbe host countries to stimulate·· tbe creation of local
,i.ndustr1es are cor.s.idered coin£,atible with national tres.tmen·t:. · s'ti'll ot.ber
countries provide for limited exceptlons'to national treat~ent for specific
sectors or for s:p~c.i£ie mea.c~rea uhich ·wcn•e. in effect pl:"iOE" to' the treaty date.
iv) Ns.t.ionalis:at:j'on o.n4 ·co111pens;s.tic:;>J!.
4\. F0:r: S:11 OECO Hezn\>er GOUntrleis ·part;:, 'to 1nvecstment tt"~at.ie:s, cl&u:se:s
dea\ing•with the ·problems of nationali$ation ·are of special importance and
conse~11ent.1y· s·v.ch clause$ can be found in al.1 tr-ea.ties ·t:hat: have been
concluded. Nevertheles~, d~pendiag· on ·specific ~egotis.tin& situetions, thc~e
is J:onsider.-ablq variety in the scope and degree QE precd.=·~on .'of these
provisions. ·
42. A first point concerns the defin•ition of na.tionalisa.tlon/exprop?"iation
whi'c:h 1T1ay be . in 'bro.a.cl or. ns.rraw t:ecm:i .iind ma.:y. c:over mef'.~u.ces -ot.he:t'- than direct'·
nationalisation ·in tbe'strict sensQ of the term. Vith· the·esception of
trQaticu:' concluded 'b,- Be1giwn~ "7her-e. the l:.ei:"'11\ S10.t.iona.li::G.t.ion a::. llml~cd t:o
direct 'int.erforence with 'pc-op_ert.y rigb'ts. mos't. trea.ti'cs u::c Q. br-o.id dcf'i'nit.ion
inc1uding not only the .taking of pr~pe~ty b11t al.so-othe~ mc~~ur-es cur-tailing
or limiting the investment ·wJii,ch &l"e eCJuiva.lent to na:tionallsation ("indirect:.
conceal.eel or creeping no.t:.iol\ali.sa.tion"). Sucb p~ovi::::lon::::· can 'be parti.cul..irl.y
useful at: dispossessi~n of foreign propel"ty,,bas bec0111e· much· less· •freguent t.ban.
othet" actions by host- 'countl:"ies severel.y af'.f'ectini; the subs'tance or' the
invsstment.
b.3- Tb<- most pre~i.se aqd. explicit cl.a.us.es -in this Gt'Ctl are probably those
us:Qd• by ~b"i> Un-S. ted. 'Ki.ngdom • t:ermany • J'ci.~n and· the .Uni t.ed. S~.itc= model. The
J'apanes·e · treaty .'with· Etypt contains th'll following clause: . Article S •
p~ra_ 2 ! ••Invas:bn,mts: and rel:ui:-ns ••• shal.1·· not 'be subjec.l:.ed ·.1:.0
expropriation, natio_nalisation, restriction or any other- measures, the effects
of' which .would be buitRJn~unt to- c,xpi:-op~ia.tion • nati'ona1i$a.l:.ion or
rest,ietiori." A si~ilar. clause 'is. to _be found in some· ~greements .co:icludt:d by
France (e_g, those ~ith Rum~nia and· Morocco)~ The. Be15iwa~~ux~mbourg Economic -
Annex 375
lA -
Uni0n is a.lsc looking ror a .. de.finit.io.n as broad ~s !)Ossi.ble oE
·proper ty-depri Ving. ~easures· vb i ch g·i ve the. ri,g-ht: to co~pens:at ion... It uses the
ezp~c~:ioQ_"property-deP,rlving-measure~·and other ~imiiar m~a~ure:". This is
the definition which· it would like to s!,!e inserhd in its .,ag:-eomenh u'nlc;;;s
this p:ove;a inipo:s:sible ·in' pat'ticular negotiations:. Other .. eountii-i'es .
(Switzerland, !l'ra.nce, ·.Netheriarids) ienerally opt .. for 3- 'l.lot"d'ing inter,decl to be
j~st as br~~d, ~ef~rripg to ~direct and indi~ect moasurQ~ oE exp~opciation,
nationali~4tion o~ ~ispossession••. :rhe language used by·Swed~n refers t~ ~he
concept of "fot"~ign_ ~altb. dep'rlvationH: This .tet"!tl is .v~~y genera.1 and ::eeks
to define nationalis~tion/expropriation b,:-oadly. covt:dnis a.11 c-eia.ted direct
or. indirect ~easures.
~'-. Alth<>ul:;h capi ta1 exporting count.t"-ies try and O:l. th~ whol.e · ~\lccc'cd in
givin'g a .broad'defini~ion to the term.s ne.'tioha.lis£t:.0n/9:r:p'r-opriation 1 t.liey
still mu:t.recognise that .expropriation by the host c~un~ry i$ possible ~nd
have thel."efo:.e $OV.gh.t. to' :.ti.r,ulat.e on Wh&C g.t"ounds e.nd in "lhat . ci1:cwnstancc:::.
Thus·. a.ll cou.ntc-ie_s· p'"'ovide that. dispo-sseiss-ion of foreign invos:.trnents i= only
. a.t:teptable whe.11 it is in the ''public interest" .. Three. £u't"th9r. condii::.ons
fo..i.nd in many agt"eement~. ~re:' first. that nation::i.lisati.0!1/0Xpropria.tlon
mea~u:-e$ must follow a procedure la.id do-.r.i.by l.aw.C .. due process"); :;ceond,
that t:hey n:1.t:st not involve di-scriinination; a.nd. third, ·they l'llu:t r.ot inf'rir.5e
on al'\J spe~ific contC"acttial _cbligatio~.. Tl'u~ claiases or.· due p:-occ~s. 0£ ·1aw ar.e
sometimes :$peci.OecS bY provisions 'that the inv~~~or $~.a.l.l. ho.vc :the C'igbl:. to
p:-orapt OJ;' SiJ':'edy .review by judkial or otbot" indep~n~ent:. s.ut.hortty. ·
4S. Oi:e final eondi~ion add,:-.esses. eonip-,uisa.t.ion :or the invc:..tol:" ... Although
1110st a1,4eementG staee that e,b;.•s ,n.ust be prOr.!pi:, ·a~eqaate. and effective, ··some
countdes are more' specific .. on this, pois:al:::. than. oth,u:·$ Ce.g • .io.p4n., F~e.nce,
Germany end the oni.ted St.ates). 'Ihe· term ."'a.deg~_ate compens4t:iontt is· generally
undel"stood to ref'et- ~o. the a.mount of com.ponsatioo, whi1e th.c;, term .. effective•·
r:e1ate:s to the at:"rangements· _to·~ pe.yent Ce. g. · the payment mu.st be ma.de . in s:
fr-r~ly converclOle eurrency).· rt is inter~st:in~ ·1:0 note that the concept of
prompt, s.cle_quate an,(l eff~c~ive eornper.sa.tion .can. also oe fo·u.nd ·in .the de-aft
model agt>eemen~ for th~. promotion. encour:,1.gement o.nd prote~_tion .of' investmen.t:s
i"re:_:,a.t"ed by t'he Asian-African ·Legal Coi>i:ult;ativci Conaitlec f_or ·use· in. t.-eat.ies.
between developing count~ies~· ·The ~ame t~rm is: alco employed iQ a recent IrT
concluded ~etw~en Sri L~ka and Singapo~e.
116. some tree.ties pr:-ovide for coru:idera.bl·e detei1 concccning the modalities
of compensation. Thus,·cbe Get?Qan model ig~eement provides in it~ .
'At"t.h:1e 4,2): ..... such s:ompen.sation .du1.ll be eciuival.ent. to, the ·va.lue or· the
investment expropriated ifflll\ediat·ety beforct the .day !:h9 e:1tpc-opr'ia.tion or
n.a.tionalisat.ion was pub1i'c1y. announced. Tb~• conpens:ation ·=h:.11 be paid
wi tho~t delay and shall car:-ry ~be usu.a.1 .bank. ill.tQi'Ht. until' the· t~me· of
peytl\ent: tt s'hall be ac_tu~1ly··ree..lioJ:abltr> and frRely transf'cra.bl°e ••• ••. The
treaty between Japan and Jgypt is ·even mo.t"4 specific.· :In Arti'cle .. S(3), it·
.state:. tllat .. the co~p_ensat.ion referred to in the pi-ovisioi,: of p$1:"&graph 2 · of'
the p~escnt Article sh~ll ~epresent tb~-~~uivalent of the normal mark~t v&lue
or the investments and ret:irns affected a.t th@- time when e:r;pl:'opri·ation,
na,lion~l isation, res.tric~ion or any other con,parabl~· sneasu.t"e va:s ·.publicly
anno..i.nced or when sucn me·a.sure ~as taken~ whi_chqver i ~ t;be· earl icr ~ without
reduction ln ~hat value- due _to the prospect 01' th,a, very ~o•i2.u'r-e' which
Annex 375
- 1S I'!m<84)1Q
ultim&tely occurs-·-••- ~ho US model treaty de£iac= the concept of adeq~ate,
prompt. and ef.fe~tiV'e compensatio·n in term&· of fa.ii:" 11\&rket vo.luc immediately
before the exp.ropr-i,ation occurc-ed oi- becaffle pubiic bowl.edge, ~nd bearing
i~tere~t eguivalent to ·current .inl~~nati.onal rates until da~e of payment.
tH. . !!an'y treaties require t.ha.t. the compensablon ·t.e. fixed or provided fo"
all the time Wh.en, or ~efore, : the expropriation aea.suc-ec 'a.re t:t'-ken. SY.ch
provision can a1so be touna in I:PT.sz concluded between de!Ye1oping co,antries •
the agreement between Egypt, and Yugo~lAYia beiDG one esample .. Virtu411y ~11
tl"ea,tles require that compensation be ef'fective, i.e. t.c-anifer:a.blc to the home
count~y to the extent nece!l:sary to make it. c;1ffective. P.ina.lly, it is alrocst.·.
i~variably provided that thA p~J111ent.be prompt and without dc1ay •.
. V) Cl.atts.:u~ do11.lin15 with ·Free ·'1'1:'&ns=Eer
48, Agreement~ concluded by tbe di.f£et'.ent ~ountrics are essentially similar
as re~ards acceptll.ftc(I: of the i,rinc_iftl9 of fr:-ee tra.n::fcr~ All. countries i.eem·
acreed on ~he nAAd.to guara.a~ee ~he·~ree·~ranstcr of ~apita1 investedt of
income from the capit•l ~nd the proceeds of·any di:invc::tment. On the othe~
hand. while somQ couJ1tries invoke the principle vit.b ~ v.iew t~ tot·a1 freedom, .
others provid(II Eo~ :pi-ssib1e. restrictions.. &non5 countries requiriRg total· ·
freedom of t;-ansfer are Gensiany and Swib:.erlci.nd and the United State·s (17) •.
49. · According to ~he tJS mo.de1 . asc:ccmcnt.· gov~roments may c,n1y n:aintain laws
aud rc,-gultt.ti.ons· refiuiring reports· a£ cvrz:-cncy t.ram;;·fers and impo:iing 1nc'0111e
taxciis: by ,aich ,nean·s && • a withholding .ta.x oa ~ividend&. :to contrast, a second.·· ·
group ~f c::ountz:-i'es w,aich includes· Swed~n oiad·the Retber1ands, a.ccept5 that
trans:CQt~ ~ ~fEected in accoz:-d~nce witb·~elcvGnt nation~. 1egisl~tion
~pacif~ing, howeve~,. in. ~be case oE the Hethcr1a.nds, tba~ trc.nsfer& &bogld be
a.uthos:-i&c.\d without &tDdue restrictions oc:·dcla.,..
SO- A.Doth~ approacb is tha.f: chozcn b:J th~ United Kingdom. Although·, here
ag11.ln, some de15ree. of c-e,.: .. ;, ·;.'!'!.,i.on is accepted. it does- no~ ez~end 11,s. far as· .
compliance with ·national .~~aula.tions out i~ i~ set out io 11mit•d terms. The
wording· of ~he Bril:i$b D10del agreeeen~·=ta.tc=, inter alia. that: "Ea~h
Conl:rga.cting Part1' shal1 ia reli1P,eCt• 0£ inve:tao~t= guaraatee ~o· natioual:=- .or
cOJ!lp•nleg of the other Contracting Party t~c unrc=tricted·tr&n$fer to the
coun~ry where they .resi.d~ ·of t):lelr inve=:tmcat: and· c-etur1u~, :nabject. to tbe
s:-ight of e&cb Contractlag P~~ty in exceptiona.l bcil.azace of pa~ents
difficulties and for a limited period· to e:a:ercl:sc eci~ite.b1y and io go·od faith
powers conferre-cl by· it:;$ la..,s. Such power=· :ha11 not·. however, be u:sed to·
impede the transfer of profits, intere=ts., dividends, · i;oyalti~s or tees; as .
~•sa.rds lnvect.mant& and any othor fora ·of rot~rD, tran$£er 0£ & minimum of
20 ,:. ~ yea.r i& 81.&aranteeo ... '
vi) Dispute s~t~lement Procedure~
51. Virst, two types oE di~pute·sbou1d be diz:tingui=bed; · OD the one baud,
differancas: · bQtWAc-n tb·-.. contracting parties themse1ves ton.'thc.'•interp~et.ation
and appl..icAtion of tn'=" trea,ty), an~ on the other ha.cul, 'tbo:;c between on.e of·
t.hl'l! contra~ting part::i1;>s: A.~d na.tlonal.s. of· the ·other con'tracti.ag party or e.
company cont~o11ed direct1y or i°ndi~ectly by:·such nati.onal.s.· All cou.nt.rie::.
·Annex 375
Dm(84)1'--, J.6
providci in thci.:- Qgrco:ncnh. t.hat. the :£-ir:t kind of di·::put:c ::h·a.ll _be :.ubinit:tcd
·to an ad hoc arbitration tribunal when it ·ee.nnot be resolved througb
diplomctlc chonncl:::. · . The t~:.buna.i me.ets ·on the reque::t of· one of the two
parties wltbin the time limits laid downi it gener.ally has_· thre.e_members, one
nctr.inat:cd bJ co.ch pa.c-t.y o.nd the thj.'rd by the1 other t:wo member::. The ta·i'bunol ·
establishes its own procedure and its decisions are binding on the parties.
Tha OS model. trco.ty I in t:.hc event of di:=pute:::: 'between_ the cont.ril-cting pa.rt:ic:i
on t:hc o.pplico.tion of t:hc·-.t.rea.ty, provide= three options: diplomo.tic
~on::u.lt.o.t.ion::. submi::::ion by consent to 'the :Cn~er:-na.tiona.l Court of Justi.ce OC'
binding a.rbitnton u·s_ing ar:, ad hoc arbitration procedut"e.
Si. Disp~ttes between host countries and foreign private ·_i'nve~tors a.re dealt
with ia Q. VAriety of wo.y:;. ~ueb di::pute~ O.C'e defined in the us 'model ti:-eatyto
include disputes involving the interpretati~n- or application of an
i.nvc:.:tmcnt contra.ct cQncl.udcd between 4 ·cont·c-4cting po.rtJ a.nd a. 'na.t:iona.l. or
compo.ny of the other J>4rty. the intci-prcta.tion of o.n ,itlVC::it.mcnt a.lithori~ntion
granted by the forci5n invc:;tmcnt. a.uthority of a. contrncting pa.rty t~ ::iU.ch
· national or- company .or an· alleged· breach. of any right conferre.d or. created by
t.he tr-eaty with ~e&p'ect to any investment. Altbou&b tre.e.ties conclud~d by
·ct.her countries ~re less. e:iplicit in . this· :-espect, they seem to reflect a.
similar- understanding of the tcrm'"inve:;tment di':rputc:s".
S3. As a res~lt of the creation of the :rnternatioal. Center· for the
Settlement ·of Investment ·Disputes ('ICSID) by the Washington Convention.
in 1965 • ma.Dy trea.~ies ~ow privide for tbe. $iUbJ11-is$iOn of investment. ~isp~tes;
to that institution, For this purpose.the treaties concluded by countries
such as the Unit.ell Ki'ngdom and Belgiwo litipuiate regulatory- ·consent to use
these faciities. The cle,a.rest wording used· ·:.n this respect i's that· of
Belgi wu, which :itates that "'~a.ch of the contracti!lg parties, by virtue ·of the
present provision, s~all be deemed to have consented irrevocably to the
submission of any dispute to the Centi:-e-. Some of. the Frenc:h ·tn~aties provi~e
tba.t; thic iavestmoi::nt contra.ct be-t:wcen the investor and. 0 tbe htist • CO\ln;t~y mu:.t. ·
include an :CCSit> &rbi tration cla,,se or- that· tbei· host co11ntry sb.a.11 ar;ree to
include such a provision in the investment contract at the request of the
i.nvestoc-. x·t. is intere$tlng to o'ote that· seirec:a1 agreement's concluded between
developing countri~s, e.g. Egypt/Yugoslavia. Sri Lanka/Singapore·provlde for
. :.'ubmissi.on of iave:;bnent. .dhpu.te:s to J:CSXD e.nd recourse to XCSII> is mentioned
as one of the opHons .for dispute settlement in tbe draft model° tt"eat:,
developed by' t:he. As ian-A~ricali t:e5a1 Coiisult.atlve Comzai ttee;.
54. Ger:ma.n treaq_es .onl,- allow for intra-state ar'bitc-atiou according- to the
pr-oeeduC"es described· in paragraph .S1 above.·. ·Hovever·, the introduction of
ZCStt>-l"ela.ted p'C"ovhions· foi- the· settlement· of dispu.tes between· inves,t.Qrs and
host countries is under- consider-ation.
SS. As regards· prior·e~baustion of local.remedies, tbe. treaties prov.iding
• for arb,itrat:.ion in ca:re oE investment disputes ·follow 4iff'~rent approaches.
l:t. i:r relatively :-a.re· (18) ·that any prior recoui;-se .to local ·remeclie5 i.5 ·
~pccific~l1J' cxclu.dcd_ but. ··a nwnbcl:' of trc'1f;~c:: set time l,imits ·reqi;ing. between
five and twelve months for the exhaustion of local remedies'(l9). Kost
Ggrccmcnt~ con::luclcd oy the Ncthcc-lo.nd:; h~vc. provided that ·consent of the
state concerned be obtained before a dispute could be submit~ed.to ICSID.
Annex 375
17 -
This allowed &Of: the possibility fof; 'the host· _country t.o reguest tba.t pdoc- .. to
a.rb.it.ra.tioo oc- conctlial:.ion throug~ ICSID. local. remedies 'be exhausted· without:·
time 1imi't.s· being sl:iipu1ated.· New tl:'ea.ti~s~ however. P.a:.-ovide t;hat e&cb.
contrac·tin& pai:-ty "hereby consents~• to submit a 1egal dispute to inter-national
arbitration. Furth~pnote~ the Nethei:laods bas· adopted.the po1icy to include a
rc::ltrict;ed time,period for th~ submh~i~n t'o ·ai:-bitratio~-
vi 1 > The Relation:=hie of :tnvestmeot P·rntect:ion ·-rreaties to Otbel"'
Instrwnents for the l'ro~oti·on of Foreign 'Investment
56, Having reviewed the content of the·varlous investment protection and
pramcl;ioq treaties, :1t lllU~t fi.z;-5t be ·ask.ed how they tit in: With other measures
taken by c:ol!ntr:-i!a!S to ·pi:otec:t and pr·omote· thelr investments·. In t?lis resi,ect.
the most· interesting point is tbe possible l.1nk between the treaties• an4
investment guarantee. .schemes • . .: In · thi'5· i:egard. three approac' .h es can be .
discerned:
-- Fkst, 'the~e .i~· ~0 lin·k between the two systems, aithough they have
· some common el.ements .uid.~ay ~e.seeo as comp1ementary. This is so
notab1y for swedeu, Japan 'and the United stat~s and generally for
all co~ntries whi~h .are not ,parties to many agreements and thererore
net in a ·position to take any ~tber course of ac·tion;
. .
Next, there are countries, .e.g. Germany, the He~berlan~s an¢ Frar.ce,
for which at 1east lo principle the grant of an investment guarantee
· $h01Jld be· dep~_ndent on the ·existence· ·of a protection treaty. bet:ween
the c;:11.pit.al· e;a;~rting country and tbe host cou.ntr:y .. -I~ France. ~or
instance, the.1971 Supp1ementar:r·F:Lnance Act (Section 26) provides
that the grant or··a guarantee 1.s subject to tbe ·prior conc1usicn o.(
an inves,=ment protection agreement. This provision was amended and
relu:ed· by Section 14 or the 1973• supp1ementary Finance Act. Vhich
provided tor poss1'bl.e.exceptlons·oa.·a case by ·case basis, .. Where the
. t:.ountry concerned is· ·~ot generall:J ·prepared to sign such
international.: treattes bvt does·accord satisfactorj.treacment to
fo,eign investments•. For tbe·countries in.this group, ad.equate
lega.l protection·or·tbe lnvestinent Wliicil is a pre-requisite for
elll:tending.'el.i,gibil.ity under tbelr insurance schemes is . automatically
deeraed to e:ds·t where an ~avestment 'treaty h-.S been cc,nc1uded·
be tween . the' country. concerned and tbe· bost. eountry· •. : Beverthe1e s s •.
investment·ins~rancr. coverage·may be·granted on.u· individual-basis
in the absence··a.t 11 treaty i.f' tbe, nationa1 1egai• syst~ a,nd more
particul'arl.y • · f'avourable policy ·pursued by ~be bosit country assure
satlsf&ctory prot·ection;
--.A third approach ls tbat ·tollovea ,Dy the unit:ed icinr;dom. :swttzerl.an.d
and to some. estent'Belr;iwn •. In·tbese countries, the esistence·of an
investment. prote·ctlon treaty is not a necessary condition of
eUglb11l'ty. ·under .tbe investment insurance scheme but 1s ·
nevertheless taken into consi~e~ation.
S7. Anothe. impoi:tant ~spect. the c1ose relationship between investmen~
protection t"eaties v.ml investment c;:1mtr&cts CDQC:luc1ed between' ·host countries
party to the b;·eaty and nati.ona.is or companies or the otl'1er par-ty. should b~
Annex 375
IIIB(84.)14 •.
mentioned. J:avc::st:.mcnt tr:~o.tlc:: creath1g obligations . . under lnterna.tion&l la.w
can provide a legal· framework for inveitment contracts betwee·n investors and
bos_t countdes. 'In pari:1.~u.lat, tbe complementary cbaract.~r of. botb ·types of.
igre.e m. ent can be seen in. tbe following ·elements: .
-- .the dispute set.tlement provisions of. tbe tt'eaties .providing for
o.rbitr~tlo.n in ca.se ·of dii.putes arising from hive·:.trnent c:o'ntracts; . . . '
The ti:-ee.ty ··pr:-~hion·of f'air and' e9uit~ble tl:'e&tmeo~-whi,ch i 's
understood g,s· a reference to general principles of law,. including
those ,:elating to Ste.t.e contract:i_i
The provision in~erted in ·& ·number of tre&ties.•notsb1y those
.. ·concluded by Germany:, th~t contractual .c~itments entered into by
·the countric:; concero~c! wi_ll be. observed.
_S8. As sb.ted c:zplicitiy 'i.n a nwabec•_of' treaties, for .i.nstao·ce thos_e . ,
concluded by Switzerland. Germany and -France .in the us model. treaty~ it is not
the int.ent.iosi ·of the troo.tic'::; to disp1a~e applicab1e0 previously .agreed upon
contl"act11a1· arrangements· be.tvee.n the. invest:or and the host government to the
esteat th&t these a~e 111o~e. fa.vour~'bl.c t.ba.o. those provided ·in·. t.be tree.ty.
Wbe~e su.c:b tavourab1~ contractua.l arrangements exist, in 'par'ticular in the ·
~irao.~ of ti:-e&t.meat • ~ompensa.cioli or ~:zpropriatiou transfers or· settlements of
investment disputes, they remain unaffected by the treaty provisions covering
$imilar area~. ·
tr. The I nclusion of ·investment-Related Provisions in Bi14tera.i or
Multilateral Co-operation Agreements
S9. A nwnber of. OBCD Member countries ~d tbe DC have concluded genera1
co-opcra~ion e.5reementa. ·which ~ogether w1tb gtber area.s such as t~•c:l~··a.ncl
financial, techoi~a.l. ·aud ·scientiEic co-:Qpera~ion· inc1ude· provisions for the .
promo,ti~n of direct inve.staent .. Such agreements a.re. characterised ·by their
fle~ibility. %ypica1ly,·tbey oEfer the 'co~tract1ug state~ aa .institutional
fr&111ewot'k ia which they ~an .implement a co-op~ration progr8JlWe: ~hus. they
.ara operational. ~•~he~ t~•~ normative or regulatory standard~. Tbis means the
use of genei-al provis·ions with i:'ela_tively unconstra.injng declarations of
intent., u~ual1y set.ting up a -.joint c~ission and providing in bt'.Oad terms for ·
stc,.te ~ntc~cnti.on to· fa.cilitate co-operatiou. ·A'S far as 1·nvestment is .
concerned• the inst.i-t.u.t1on&l · setting ot tbe agreements (mi:1ed commissions.
joint techni~&l working groups) can be us,ed.for &ll ezcbange·:of in.formation on
inve8t.mcnt opportll.ni tic~ and tbe · ideotiEicati'QA of sui ta'b1e projects.
a> Znvc~tmcnt Cl.a.uses in Bilater~1. Co-operation Ag£~ements
·io. A whole ::cric= ot bilatere.1 co-op~i.-atioa a1,reements con.talns more or
loss general invest~e~t· clau=cs. Thi5 i~ particu1arl~ evident lo some.·
agreemenl;a ·c:oncluclecl. by Sweden.·. Bcl:sium, Switzerland. the . Netherlands and also
Spain. As regards cont.ent._.bcwever, fair-ly clear distinctions have to be made
l>etveen t.heS!·e di Eferent c;Lau'ses •. s i. nee 1;hci~ scope may vary: i:onsiderii.bly ..
Annex 375-
.•. •·;
..
,, ...
19, llSB(84)14
.61, On the one band, there are general cl~uses whieh tend to provide
explicitly for the P1:0Jtlotion of capital inves:tment.:., but whose ~eopc i~ very
liroited so far as· ~•gal protection is concerned, in=ofar 4: they o..rc not
accompanied bJ any concrete means to·achie~e tbis end. Such· 0cncr&l ,lauses
are found· in co-op~rat~·on· &&l"ee111ents concluded by Bclgiwa. Thus, , in a t"'eaty
signed on lOtb Hay· \(j78 with S'a.udia Aro.bi a,' Article 4 provide: that; ""The
e0ntracting, partie9 ~h~ll'mutually ~ncourage capital inve~tment in their
.i:-espectiV@ counti.-le!:i"~. ,Att regards other·a·e1gian co-operation o.grccmcnts, the
refe~ence to any inv~sbn@at protection or promo~ion is evea le:: obvious.
SwecS;ish and Spani~h co-oper-a.tion 'and trade ·agreements 11lso "mbody, aJ,thou.gb
· .frequent1y indir ... ctl:,, · the de_sirv to pro.mote iave~tmcnt. .A treaty between
Sweden and Nigoria thus provides in its: Article 11 0 ,Scction 2 ~hat: -~The
co-operation betwe•.n ~hfit two countries Slho.11 involve:
Estab1is.Junenl:: of i.nd.us~ries;
Setting up e.nd z:-wining joint- ·ventures·."
The desire to promota·tbe settin~-up,of joint venture~ i: oxprcGsl~ mentioned
in t.J'le co~peration. agreements. conduct·~cl by Spain -.,;it.h Bol.ivis. (1969), Ecuador
(1974). Medco (1977)". Libya (1974) and Rwna.niA <1977). The pro"oti.on of
invest.ment. tbrougb ·vholl.J'--OWDed s:u'bsidia.ri·e·s·, . joint ventures, liccn:;in& and.
management cootra.cts i's aisio one. ~t the uin· objectivea of the
New Zealand-Singapore Ag~~wnent °for ~ndu~trial, Techno1o~ical a.nd scienti£ic
Co-operation CI976) .. : .
62. :Mor-e concrete and broader -.in scope · e.r:-e clau11•• .. provid.in15 most fa.voured
nat\on t~e&tlllent fo~ capital. from one. of th~ contrta-cting parties. Such
clauses are found' in agreelllents: h•tw••n Spa.in and .Z.,ar:-a.15uo.y (1971), Co.1:t• Rica
'cl972). Cua.tema1a (1972·)',. · Honcluras (1972)' a,qcl .Argentin• (1974) • : . .
63. [email protected]~uses witb the broadest scope ~d wbicb are mo=t :imil~r to the
provi:!:ions ,in inv•~tme·Dt pro~ect.ion and plC"Olllotion agreornont.s Ar~ found. in
Sw.iu~ and 'Dutch treaties. These are "by'brid" agreementa wbich. caver-. bol:h
inves:tmQnt.'and 1110~e·gcttnerai co..:opera~ion. This t.ype of agreement .Falls
somewhere bQtwaRn the investment protection and promotion trest.y·and the
co-opcerA.tion tr1t1~'ty. The t:itl.e given to the swiss treaties is. signiE,ic~nt i.r,
thi~ ra~p•ct. For •zaiiip1e,. a·1966 ~rea~y vith Mauritania ie entit1ed
"Connercial.. rnvlll~bnent. 'Promo~ion and Protection, and Economic and Technic~l
Co-operaUon ".t'tP.ta-t:, 'b@tween tbe. Swiss Coiifedora.tion and l:be .:Islomic-. Republic
of Hauri~A.niA". Some tea·treatie$ of ~his type bave so f~r been concluded by
Svit:2.er1a~d.
61&. :rn t.ernu: of c;ant:e'nt., · these latl:.er :a.g~cciacnt;:. (SWis~ oc DL&tc:h) ma.in1y
.fo11ow tho. , provi.sio,ia 111: t::rculitional inveztnient: .prot~_tion &P.d pconrotion
t.,:-eatie!ll •. particul~ly those coocernin'g t.r9&tment, Erec tc-a.c:::fcr,
. nca.tion.ii.li!i::ation tLnci !!i.s'pi&te ~ettlwneat. ' Tbis category ·;u.:o include~ t:.hree
tr:-ctdQ ~gr,u:amPn~~ con_cl.uded bJ · Swedon in the micl-1960.s • r-c:pcc_t:.ively with t:.be
Ivory Coa.s:I:. (1066) • liadai5a£C<lr (19r,7) and Senegal. (1968) •. rhe':.e tc-eatie$
contain clau~p~ more or'le£S Q1uiv~lont· to tbose in invc:tmcnt 0protection
agreement!:.
Annex 375
. IKB(84)1~- · 20 . -
b) Invptment Cla."':aes ~n !Sultii12;tcra.1 ·-co-operation Agreements
65. For i:omo years:, in.tensive discu:~ion= ha.vc been t·s.king pla.ce within
·the EEC concerning the inclusion of investm~nt:-related clauses in.general
co-oporat:~on agr1o1~ments ·c.oncluded. a.t Co~un'ity 1evel. The EC Councii of
Ministers confirznc,ad t.his tr-end. in its: · conclusions of 18th Noveucr 198'0 whic:h
constitute~ an i~po~tant landmark in che ef.for~s to prepare a-common polic:1,
for the protection and promot_ioa of guropeaD "pri-ve.te investment in· developing
countrie~-- Th" Council dec·icled tbo.t. the·.Comunity should in princ·iplc ra.ise
the subject of inv~sl:ment when negotiatig with the developing ·count~ies with
thQ Aim of obta.inin.s ~he. incl.us: i.on ·. of inv:~·stment-relatcd cla.u=cs i:D e.ny .
agreements with these countries. At th~ same time. the ·council confirmed that
thi~ attempt to institute & joint. approach to ·the prosnot:ton.of .European ·
inv~s:bl\Qnt i.n deve1oping countrios: ~es::- par-t of its o.im to comp1ement e.nd.
9uppoi-t na.t:'lona1 action but was not j ntendeci · to repla.cc ·cu.ch e.ctiou. ·
Accordingly. national ·re·sponsibiliti•1:s ·in -this respect would not be•
c;liminis:hecl.. Finally,. the ·counc'il p~inted .out. tha.t · sucb clav.ses.-were intended
to impl".ove· the. climate .for inv~stfflent ·and. shou1d include,. among otb'er things. .
r"'f"'="r1ttonc~ to the ovez.--al.l ob,:ictive of non.:...c!iscri111in.'ation botvccn Mcmbci.· &tates.
66. F'o1lowing this: .r.:o·uncil: decision, the zauada.tc: for negotieting commu.~i_ty
co-operation agreements with LDCs will therefo~e, as a genera1 rule, include
one or more pr-ovis:ioris: concer'ning the objective o.ad~ wh·cre· app~op.:ia.te ~ the
means of co-oper:-at'ion. in investment matters~ This is the · case· in. the current
11Pgot.i.at.ions "'ith the Andean· C,:-oup, 'and th'e CoJllll\unity wi1l., in. prhi~iple.
a_dopt. the same procedure when· nego.t"iating ·new· agreements or renegotiating
~:i.rliE"r ones·.
67. Existing inves~eQt; clav:=e=. wi'thin EC co-opei;e.tion ·agreements ref'le~t.
the divers:it.y ot at·tit.~dec emo,ig :the Co11111Wnity•= pa.rt0cr:; 9 ezistios .sit"c1tions
as: rega.rds:: the t.rea.tment. of foreign, .invc:=t.mcat a.nd t.bc Comanunity•s OWi&
interests. ·What is. common to a.11 these clauses is a statement of intent on
the part of the cigna~ories to take approprintc steps.to pr~te investment on
a red procal· basis. · ·
· 68. 'Ihe agr-eements be.t~een· · th~ EEC· and B-raz.il and. the EEC and India ·are
confi~od t.o. this geneJ:'al·statement of.intent. ~he agi;eemeDt wit~ Yu50$lavia
5oes fur~hRr by s::t.i.pu.lati.ng tha.t l:.he con'tio.cting ·parties will endeavour to
conclude .reciprocal inve~tmect: pro~otion·~d protcctioQ aa;reemen~s.
69. A E,u:·thol' step wa.s taken ir. the a.srccme~.t with ASRAN of
6th Kar-ch 1980. This·agreemen~ refers to the extension. by member. countries
of l>oth groups. of investment ·promot.-i'on And. protection &rr&ilgemeuts wbicb
endeavour to ·apply the pf'inciple of non-c:Hscrimi'natlon, aim to ensure fa.ir•. and
. oqui.tablo ts:-eat.ment and refl.ect· th·e pi:-in'ciplc· ·of rccipc-0ci·ty. :In the: ASEAN
Agr-ecnncu1t. tho pri-n~iplo of non.:..discl!'imin&tion which the Council. of.
Wovember 1980 hA.d stressed is ~tated iA very general tec.n&. Xt imp1ies that
any new agreements .concluded within the EEC-ASEAJI framework.should not depart
·unduly from e::icis:ting· 0:zroell'lents so as to limit differences in t'°'eatment
afforded to investors f~om differe~t Member states. The principle .of
no"-6i~eri~in&tlon ~ml>odied in thR Lomi ' XI ·convention has ~lrc4dy been
mentioned above in the context of the analys-is' of investment protection
~L"''="ti-tlec.
Annex 375
IKR(86)14 .
70. The Comm1&nlty• $ co-operation ag.eements.·.a1·so incl.Ude various c1e.us·es OD
e~onomic or iod1&stc-ial co-operat;ion,. whi:c:h .make special reference to tbe
acpect of promoUog· ii'..-.rei.tment·. A case irf point is the chapter on ":Indu!:t:r-.i al
· c~-OpelC"a~i·o1111 in the, Lome .•:I'I:'• co,:rvent.i.on. and, ~t.icle 77 i,n pareicular regarding
indu~tr.i.al inEormation· Gnd.p~omotion activities as well as tne provisions or. ·
mining co-ope~ation whereby 'invc=t.mcnt.:s may be made f'oi- • ·the purpose of
~ev~iopin1. ~- and, ~here applicable, maintaining -- the ~inin& and energy
pot.enti!iLl of t.he ACP. sta~es.
B. see~or- or Project-Related AgrEements
71. A new ca.t.cgory of· agreements de~i1>ned .. to promote and 'Pt'Otect specific
projecta has att~a.ctcd ~ttention in ·recent. yea.5. sucb agreements may be of
two ,distinct .typcl::: framewoi:-k. a.greementz between governments referring to a
pa~ticular project involvins the participation ·o~ privace inves~ors. or
tr-ila.teral. a.r,:~nscmcn.~s i:ncluding the hcime ·and- host count.ries .. as well. as · trie
invest.or in o. :;pcc:ifi_c: pc-oject.
i2. A:; ·yct, thei;-e. i~ very little exp~rience with sucirag~eemencs an~ they
do not. appear to h~vc bee:Q u.:.ed very ex·ten::ii vel.y. 'Illus, a.ltbough they may·
provide G u:;cful tool .under·certaiq circwnstances to overcome specific.
~on~l:r4ints to hive$tment:., Member countries relllain ·very ca~tious . as to their·
u:=e. At the bile.te-=-a.l. · ·level, ·sector.:..· er project-related· agi:'ee,neots. e.re
prc=cntl.y found pdm~il.Y. in· the ~rea of development co-operation·, w'here tbey
~ervc a.= a. means f.o~ _1110bilisiog privat.e· funds · ror development. ·pJ:"ojeets. One
e~amplc i.:; the US Agency for %nterne.ti.ona1 Development (A.II>) ffousfng Guarantee
l'l"OGl:'4.flllllC. which fa.c·i1i tate~ ·~onsti-"ction in bousing ancl' related .
infr4~trgct1&~e. -.rhi$ progr~e.guarantees projects of us in•estors When tbese
projects are found technically acceptable· and after conc1us~oo of
inte~goveromental negotlatioris·concerning the specific p~oject- Other
AID programmes com:erri funds slloea.ted · for inves~ent in a. specifie. !:ecto:
with the p&ramet~r5 ·0£ the uses for these funds set by intergovernmental
agreement.
73. Within the·~EC •. th~ ·PGtentia.1 exi!:tS fo~ the development of_ .
project-~pecific in•estment ~greements under the second Lome Convention.
Anne:it· VI'I of that Convention pr:ovides· •for the ·possib1e eonc1usion.between t.he
ACP co1&nt.ries concerned, the Community an4 one or more Community eount~ies of.
agreemeots relating. to ·miulng and energy projec.ts When cbe Ca11111lUnity considers
t~at sQcb ·projects a:re. ~-f interest to. it aad. wriere European capital.
conti-ibQtes to t.beii- finau.:l'ug •. Sucb projects. aside from .being ."t.echniea.11,a.
nd economically viable, must meet a number .of specific r~qu:.reimetat·s: .
' '. . ...
First, pt'opos4;11s· for such projects must. come from the ACP states as
6n indi~.tlou or.their interest in promocing invest:m~nt;
•Second •. the pr:opose-d p,roject must be ·consistent .with one of:· thQ
Comm11nity•s 'pi-iorlty interests (.e.g·. t}ae supplying. of Europe with
'pt"odgct5· deriv.lng. Cram the project in quest.ion>; .
:In order to jusitity th.e community•s COllllllitment, sucb projects wil.1
as a senec-al ·ruie. involve investors• o~. purc.'hasers of the product
from sue~ invesqnent. from se~eral nember states;
Annex 375
IISE(86)14_.
This evidently concern$ projqcta involving.large ·amounts. of cApltal ~nd lor.g
l.ead tlmes .. since .these ue pc-qciaely the fac;tors which.make suc:h investments
vulnera.ble to tb@ ·rhks the· ag£>eemcnt._s· ~re iJ_Jt.end.ec1 'to l'llinimis:·a.· ·
74. Tli~ possi:bi1it:y oE concluding· pl:'oject-speciri'c agreements has: -not ·yet
been tf'aJISl.ated into a.c·tion, al~hough suita.ble projects are currently. being
Ee~pl.ored. Tbis is due primarq.y to.the inno:vatlve cbar<acter of th~ concQpt..
the risks invo1ved. and l::h~· cons:qqu.ent · i.mpol:'tance of' careful · prepa.r.:l.t:.ion of the
£i~st_project invo~ving an· 461"Qement oE. this typ~. which is bound t:o
constitute a precedent foe- subsequent _operation$,
. .
I·II. THE . l?Fli'Ec.tIVEHB&S OE" INTBRGOVERHMENTM. A'GREEKENTg
-FOR ·THE·. i-20-rEcrioN" AHl>. PRono-r:roN · oF IHVEstHEir:r:
A'PRELIMI:NARY ~~SKS~MENT
7S. Before undel"tak.ing· an ovore.11 ·a:.ie$sment of the eff''eeti:veae~s: of the
-va~io~$ types ,cf intet"gov'?l-rnmil!ntal a.glC'pcments ·""elated· to investment, fo ·tight.
of actua.1 .· experience, ~~ is important to rec;ali ~he diffe:c:e.nt poli~y
objectives men~~oned in S~c~ion I above. wbic~ ·e.re or coul4 be assigned· to
these agreements_· · The ha.sic commosi' purpoie of the agreements. r'!lgardless of
their na~ure or 1eca1 ~cope, i~ t:.o p;:ovide pi:-otecUon .to foreign investment -
and at the same time to stimulate incre~sed flows of such inve$bra~nt to the
devel.op1ng countri'es: pa.1:"ty to.the agreement. But this is no longer- seen to be
sufficient. "ba.t i!I l!tmer1ing i:n ::ome f'ono or other is a· co-opq,rat-ion be.tween
two or more countrie~ in l;be .area oE ·111dustriai co-operation a.nd fi::uince. ·In
trying to answe~ this:q~estion, it i~. necessary· to differentiate between the
various categot"ies of t.he. agr_eements analysed in tbe previous section• which
correspond a.s ·it: we~e t::.o d~Eferent. .levels oE_ c::o~nizance ·of these ·1a.tt:er is:sue::.
76. As .i:-egard!:l inveii~ent promotion and protection t,:-@a.~i'1ts ,· iii is· cle~r .
tbat countries which. have os:ily recently sta~ted to adopt. such tr~·aties are not
. yet ia a position to· auLke a valid Judpent as to theil". ·ef.fectivones~. · For
other countries. two distinct though closely rel~ted questions -should be·
asked. First. bave the treaties f~1filled tbeir or1gina1 pu~pos:q, i.Q. the
.protection· of existi~g-inv.estmeat? Secon~, have the. agreements themselves .led
to further investment?
77. on · tbe basis: o·f the ezpericnce of H~ber ·countries, th-. an11;wer · t.c the
f'irst of these q~e.stian,;: mui:I:. be affirmative. Countries such .as: S:wit-z;ec-l'a.nd.
!"ranee. Gennaoy. the Uni~ecl KiDgdcim end. Bel.-glwu do in fact be1icev'" that their
._ezper1ence vlth tbe.se 3g:reet11entc ha:: t-een se.tisf'a.ct.ory •..
78.· on tlle whole, _develciping CO\lntde$_ seem .. tc fulfill their commitments.
Of course. tbare ·a.r-~ some . obvious cz~eptiom, of' margina1 cai:"1ls • such a·s th~
radical change in reeiae in,ire.n. This ~aused consia.era.ble p'rejudic.e to-·
. ~e~many. whic.h hAd siGned ari . invcGt~ent protec~ion and promotiQn·~reat~ with
Iran in 1965. The implications of any opeD breach· of the ~greement ·upon the
acti tude of i11Va!:tor'& ~ot onl:r of the t;'.e5pect.ive home country but: s.l::o ·Of
at.her cc~ntries: Al'ld'.t:.he .r.epercu~slor.s for overall· image and credit worthines
of the country 'hq.ving violated the treaty are ·disti!:lc.t dat,arr12nts -to.·
v·iol.a.tlcns-of 1:roe.~:r obliga.t:ioni. 'thus, a..niunt>er: of Member countries have
rP,po~ted positiv• gzperi9DCe wieh the o~e~atlon _or e~isting t~~aties whl~h
·ett'heE' bad ·• p,r-evenHve fuaction ;a,gains.t eip'ropriation .or a.t least permitt~d a
sa~i~factorT ~esolutidn of dl~~u.te:. '
Annex 375
ANNEX 376
FRIENDSHIP, COMMERCE, AND. NAVIGATION
I
Treaty, protocol, additional protocol, and exchanges of notes signed at
Rome February 2, 1948
Senate advice and consent to ratification June 2, 1948
Ratified by the President of the United States June 16, 1949
Ratified by Italy June 18, 1949
Ratifications exchanged at Rome July 26, 1949
Entered into .force July 26, 1949
Proclaimed by the President of the United States August 5, 1949
Supplemented by agreement of September 26, 1951 1
63 Stat. 2255; Treaties and Other
International Acts Series 1965
TREATY OF FRIENDSHIP, COMMERCE AND NAVIGATION BETWEEN THE
UNITED STATES OF AMERICA AND THE ITAtIAN REPUBLIC
The UNITED STATES OF AMERICA and the ITALIAN REPUBLIC, des_irous of
strengthening the bond of peace artd the traditional ties of friendship between
the two countries and of promoting closer intercourse between their respective
territories through provisions responsive to the spiritual, cultural, economic
· and commercial aspirations of their peoples, have resolved to conclude a
Treaty of Friendship, Commerce and Navigation based in general upon the
principles of national and of most-favored-nation treatment in the unconditional
form, and for that purpose have appointed as their Plenipotentiaries,
The President of the United States of America:
Mr. James Clement Dunn, Ambassador Extraordinary and Plenipotentiary
of the United States of America to the Italian Republic,
and,
The President of the Italian Republic:
The Honorable Carlo Sforza, Minister Secretary of State for Foreign Affairs.
Who, having communicated to each other their full powers found to be
in due form, have agreed upon the following Articles:
1 12 UST 131; TIAS 4685.
261
Annex 376
262 ITALY
ARTICLE I
1. The nationals of either High Contracting Party shall be permitted to
enter the territories of the other High Contracting Party, and shall be permitted
freely to reside and travel therein.
2. The nationals of · either High Contracting Party shall, within the
territories of the other High Contracting Party, be permitted, without inter{
erence, to exercise, in conformity with the applicable laws and regulations,
the following rights and privileges upon terms no less favorable than those
now or hereafter accorded to nationals of such other High Contracting
Party:
(a) to engage in commercia], manufacturing, processing, financial, scientific,
educational, religious, philanthropic and professional activities except
the practice of law; 2
( b) to acquire, own, erect or lease, and occupy appropriate buildings,
and to lease appropriate lands, for residential, commercial, manufacturing,
processing, financial, professional, sc;ientific, educational, religious, philanthropic
and mortuary purposes;
( c) to employ agents and employees of their choice regardless of nationality;
and
( d) to do anything incidental to or necessary for the enjoyment of any of
the foregoing rights and privileges.
3. Moreover, the nationals of either High Contracting Party shall not in
any case, with respect to the matters referred to in paragraphs 1 and 2 of
this Article, receive treatment less favorable than the treatment which is or
may hereafter be accorded to the nationals of any third country.
4. The provisions of paragraph 1 of this Article shall not be construed to
preclude the exercise by either High .Contracting Party of reasonable surveillance
over the movement and sojourn of aliens within its territories or
the enforcement of measures for the exclusion or expulsion of aliens for
reasons of public order, morals, health or safety.
ARTICLE II
1. As used in this Treaty the term "corporations and associations" shall
mean corporations, companies, partnerships and other associations, whether
or not with limited liability and whether or not for pecuniary profit, which
have been or may hereafter he created or organized under the applicable laws
and regulations.
2. Corporati~ns and associations created or organized under the applicable
laws and regulations within the tcr.ritories of either High Contracting
Party shall be deemed to be corporations and associations of such High
2 See also para. 4 of protocol, p. 283.
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 263
Contracting Party and shall have their juridical status recognized within
the territories of the other High Contracting Party whether or not they have
a permanent establishment, branch or agency therein.
3. Corporations and associations of either High Contracting Party shall,
within the territories of the other High Contracting Party, be permitted,
without interference, to exercise all the rights and privileges enumerated in
paragraph 2 of Article I, in conformity with the applicable laws and regulations,
upon tenns no less favorable than those now or hereafter accorded to
corporations an_d associations of such other High Contracting Party. The preceding
sentence, and all other provisions of this Treaty according to corporations
and associations of the Italian Republic rights and privileges upon
terms no less favorable than those now or hereafter accorded to corporations
and associations of the United States of America, shall be construed as
according such rights and privileges, in any state, territory or possession of
the United States of America, upon terms no less favorable than those upon
which such rights and privileges are or may hereafter be accorded therein
to corporations and associations created or organized in other states, territories
or possessions of the United States of America.
4. Moreover, corporations and associations of either High Contracting
Party shall not in any case, with respect to the matters ref erred to in this
Article, receive treatment less favorable than the treatment which is or may
hereafter be accorded to corporations and associations of any third country.
ARTICLE III
1. The nationals, corporations and associations of either High Contracting
Party shall enjoy, throughout the territories of the other High
Contracting Party, rights and privileges with respect to organiz'ation of and
participation in corporations and associations of such other High Contracting
Party, including the enjoyment of rights with respect to promotion and
incorporation, the purchase, ownership and sale of shares and, in the case
of nationals, the holding of executive and official positions, in conformity
with the applicable laws and regulations, upon terms no less favorable than
those now or hereafter accorded to nationals, corporations and associations
of any third country. Corporations and associations of either High Contracting
Party, organized or participated in by nationals, corporations and
associations of the other High Contracting Party pursuant to the rights and
privileges enumerated in this paragraph, and controlled by such nationals,
corporations and associations, shall be permitted to exercise the functions_
for which they are created or organized, in• conformity with the applicable
laws and regulations, upon terms no less favorable than those now or hereafter
accorded to corporations and associations that are similarly organized
or participated in, and controlled, by nationals, corporations and associations
of any third country.
Annex 376
264 ITALY
2. The nationals, corporations and associations of either High Contracting
Party shall be permitted, in conformity with the applicable laws and
regulations within the territories of the other High Contracting Party,
to organize, control and manage corporations and associations of such other
High Contracting Party for engaging in commercial, manufacturing,
proces.5ing, mining, educational, philanthropic, religious and scientific activities.
Corporations and associations, controlled by nationals, corporations and
associations of either High Contracting Party and created or organized under
the applicable laws and regulations within the territories of the other High
Contracting Party, shall be permitted to engage in the aforementioned
activities therein, in conformity with the applicable laws and regulations,
upon terms no less favorable than those now or hereafter accorded to corporations
and associations of such other High Contracting Party controlled
by its own nationals, corporations and associations.
ARTICLE IV
The nationals, corporations and associations of either High Contracting
Party shall be permitted within the territories of the other High Contracting
Party to explore for and to exploit mineral resources, in conformity with the
applicable laws and regulations, upon terms no less favorable than those now
or hereafter accorded to nationals, corporations and associations of any
third country.
ARTICLE V
1. The "nationals of each High Contracting Party shall receive, within
the territories of the other High Contracting Party, the most constant
protection and security for their persons and property, and shall enjoy in
this respect the full protection and security required by international Jaw.
To these ends, persons accused of crime shall be brought to trial promptly,
and shall enjoy all the rights and privileges which are or may her~ter be
accorded by the applicable laws and regulations; and nationals of either High
Contracting Party, while within the custody of the authorities of th,~ other
High Contracting Party, shall receive reasonable and humane treatment. In
so far as th~ term "nationals" where used in this paragraph is applicable
in relation to property it shall be construed to include corporations and
associations.
2. The property of nationals, corporations and associations of either High
Contracting Party shall not be taken within the territories of the other High
Contracting Party without due process of law and without the prompt payment
of just and effective compensation. The recipient of such compensation
shall, in conformity with such applicable laws and regulations as are not
inconsistent with paragraph 3 of Article XVII of this Treaty, be permitted
without interference to withdraw the compensation by obtaining foreign
exchange, in the currency of the High Contracting Party of which such
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 265
recipient is a national, corporation or association, upon the most favorable
temtS applicable to such currency at the time of the taking of the property,
and exempt from any trans£ er or remittance tax, provided application for
such exchange is made within one year after receipt of the compensation to
which it relates. 8
3. The nationals, corporations and associations of either High Contracting
Party shall within the territories of the other High Contracting Party
receive protection and security with respect to the matters enumerated in
. paragraphs 1 and 2 of this Article, upon compliance with the applicable
laws and regulations, no less than the protection and security which is or may
hereafter be accorded to the nationals, corporations and as.5ociations of
such other High Contracting Party and no less than that which is or may
hereafter be accorded to the nationals, corporations and associations of any
third country. Moreover, in all matters relating to the taking of privately
owned enterprises into public ownership and the placing of such enterprises
under public control, enterprises in which nationals, corporations and
associations of either High Contracting Party have a substantial interest
shall be accorded, within the territories of the other High Contracting Party,
treatment ~10 less favorable than that which is or may hereafter be accorded
to similar enterprises· in which nationals, corporations and associations of
such other High Contracting Party have a substantial interest, and no less
favorable than that which is or may hereafter be accorded to similar enterprises
in which nationals, corporations and associations of any third country
have a substantial interest.
4. The nationals, corporations and associations of either High Contracting
Party shall enjoy freedom of access to the courts of justice and to administrative
tribunals and.agencies in the territories of the other High Contracting
Party, in all degrees of jurisdiction established by law, both in pursuit and
in defense of their rights; shall be at liberty to choose and employ lawyers
and representatives in the prosecution and defense of their rights before
such courts, tribunals and agencies; and shall be permitted to exercise all
these rights and privileges, in conformity with the applicable laws and
regulations, upon terms no less favorable than the terms which are or may
hereafter be accorded to the nationals, corporations and· associations of the
other High Contracting Party and no less favorable than are or may hereafter
be accorded to the nationals, corporations and associations of any
third country. Moreover, corporations and associations of either High· Contracting
Party which are not engaged in business or in nonprofit activities
within the territories of the other High Contracting Party shall be permitted
to exercise the rights and privileges accorded by the preceding sentence
without any requirement of registration or domestication.
1 See also para. 1 of protocol, p. 282, and paras. 5 and 6 of additional protocol, p. 285.
Annex 376
266 ITALY
ARTICLE VI
The dwellings, warehouses, factories, shops, and other places of business,
and all premises thereto appertaining, of the nationals, corporations and
associations of either High Contracting Party, located in the territories of
the other High . Contracting Party, shall not be subject to unlawful entry
or molestation. There shall not be made any visit to, or any search of, any
such dwellings, buildings or premises, nor shall any books, papers or accounts
therein be examined or inspected, except under conditions and in conformity
with procedures no less favorable than the conditions and procedures prescribed
for nationals, corporations and associations of such other High
Contracting Party under the applicable laws and regulations within the
territories thereof. In no case shall the nationals, corporations or associations
of either High Contracting Party in the territories of the other High Contracting
Party be treated less favorably with .respect to the foregoing matters
than the nationals, corporations or associations of any third country. Moreover,
any visit, search, examination or inspection which may be permissible
under the exception stated in this Article shall [be] made with due regard
for, and in such a way as to cause the least possible interference with, the
occupants of such dwellings, buildings or premises or the ordinary conduct
of any business or other enterprise.
ARTICLE VII
1. The nationals, corporations and associations of either High Contracting
Party shall be permitted to acquire, own and dispose of immovable
property or interests therein within the territories of the other High Contracting
Party upon the following terms:
(a) in the case of nationals, corporations and associations of the Italian
Republic, the right to acquire, own and dispose of such property and interests
shall be de.pendent upon the laws and regulations which are or may hereafter
be in force within the state, territory or possession of the United States of
America ,_vherein such property or interests are situated; and
( b) in• the case of nationals, corporations and associations of the United
States of America, the right to acquire, own and dispose of such property and
interests shall be upon t~rins no lhs favorable than those which are or may
hereafter be accorded py 'the state,;territory or possession of the United States
of America in which such national is domidled, or under the laws of which
such corporation or association is created or o~ganized, to nationals, corporations
and associations of the Italian Republic; provided that . the Italian
Republic shall not be obligated to accord to national~, corporations and
associations of the United States of America rights in this connection more
extensive than those which are or may hereafter be accordeo within the
Annex 376
FRIENDSH~P, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 267
territories of such Republic to nationals, corporations and associations of
such Republic.
2. If a national, corporation or association of either High Contracting
Party, whether or not resident and whether or not engaged in business or
other activities within the territories of the other High Contracting Party,
is on account of alienage prevented by the applicable laws and regulations
within such territories from succeeding as devisee, or as heir in the case of a
national, to immovable property situated therein, or to interests in such
property, then such national, corporation or association shall be allowed a
term of three years in which to sell or otherwise dispose of such property
or interests, this term to.be reasonably prolonged if circumstances render it
necessary. The transmission or receipt of such property or interests shall be
exempt from the payment of any estate, succession, probate or administrative
taxes or charges higher than those now or hereafter imposed in like cases
of nationals, corporations or associations of the High Contracting Party
in whose territory the property is or the interests therein are situated.
3. The nationals of either High Contracting Party shall have full power
to dispose of personal property of every kind within the territories of the other
High Contracting Party, by testament, donation or otherwise and their heirs,
legatees or donees, being persons of whatever nationality or corporations or
associations wherever created or organized, whether resident or non-resident
and whether or not engaged in business within the territories of the High
Contracting Party where such property is situated, shall succeed to such
property, and shall themselves or by their agents be permitted to take possession
thereof, and to retain or dispose of it at their pleasure. Such disposition,
succession and retention shall be subject to the provisions of Article IX
and exempt from any other charges higher, and from any restrictions more
burdensome, than those applicable in like cases of nationals, corporations
and associations of such other High Contracting Party. The nationals, corporations
and associations of either High Contracting Party shall be per- ·
mitted to succeed, as heirs, legatees and donees, to personal property of
every kind within the territories of the other High Contracting Party, left
or given to them by nationals of either High Contracting Party or by nationals
of any third country, and shall themselves or by their agents be permitted
to take possession thereof, and to retain or dispose of it at their pleasure.
Such disposition, succession and retention shall be subject to the provisions
of Article IX and exempt from any other charges, and from any restrictions,
other or higher than those applicable in like cases of nationals, corporations
and associations of such other High Contracting Party. Nothing in this paragraph
shall be .construed to affect the laws and regulations of either High
Contracting Party prohibiting or restricting the direct or indirect ownership
by aliens or foreign corporations and associations of the shares in, or instru-
Annex 376
268 ITALY
ments of indebtedness of, corporations and associations of such High
Contracting Party carrying on particular types of activities.
4. The nationals, corporations and associations of either High Contracting
Party shall, subject to the exceptions in paragraph 3 of Article IX, receive
treatment in respect of all matters which relate to the acquisition, ownership,
lease, possession or disposition of personal property, no less favorable than the
treatment which is or may hereafter be accorded to nationals, corporations
and as.sociations of any third country.
ARTICLE VIII
The nationals, corporations and associations of either High Contracting
Party shall enjoy, within the territories of the other High Contracting Party,
all rights and privileges of whatever nature in regard to patents, trade marks,
trade labels, trade names and other industrial property, upon compliance with
the applicable laws and regulations respecting registration and other formali- ·
ties, upon terms no less favorable than are or may hereafter be accorded to
the nationals, corporations and associations of such other High Contracting
Party, and no less favorable than the treatment now or hereafter accorded
to nationals, corporations and as.sociations of any third country.
ARTICLE IX
1. Nationals, corporations and associations of either High Contracting
Party shall not be subjected to the payment of internal taxes, fees and charges
imposed upon or applied to income, capita], transactions, activities or any
other object, or to requirements with respect to the levy and collection thereof,
within the territories of the other High Contracting Party:
(a) more burdensome than those borne by nationals, residents, and corporations
and associations of any third country;
( b ) more burdensome than those borne by nationals, corporations and
associations of such other High Contracting Party, in the case of persons resident
or engaged in business within the territories of such other High Contracting
Party, and in the case of corporations and associations engaged in
busin~ therein, or organized and operated exclusively for scientific, educational,
religious or philanthropic purposes.
2. In the case of corporations and associations of either High Contracting
Party engaged in business within the territories of the other High Contracting
Party, and in the case of nationals of either High Contracting Party engaged ·
in business within the territories of the other High Contracting Party but not
resident therein, such other High Contracting Party shall not impose or apply
any internal tax, fee or charge upon any income, capital or other basis in excess
of that reasonably allocable or apportionable to its territories, nor grant
deductions and exemptions less than those reasonably allocable or apportion-
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 269
able to its territories. A comparable rule shall apply also in the case of corporations
and associations organized and operated exclusively for scientific, educational,
religious or philanthropic purposes.
3. Notwithstanding the provisions of paragraph 1 of the present Article,
each High Contracting Party reserves the right to: (a) extend specific advantages
as to taxes, fees and charges to nationals, residents, and corporations
and associations of all foreign countries on the basis of reciprocity; ( b) accord
to nationals, residents, .and corporations and associations of a third country
special advantages by virtue of an agreement with such country for the avoidance
of double taxation or the mutual protection of revenue; and ( c) accord
to its own nationals and to residents of contiguous countries more favorable
exemptions of a personal nature than are accorded to other nonresident
persons.
ARTICLE X
Commercial travelers representing nationals, corporations or associations
of either High Contracting Party engaged in busines.s withln the territories
thereof, shall, upon their entry into and sojourn within the territories of the
other High Contracting Party and on departure therefrom, be accorded treatment
no less favorable than the treatment now or hereafter accorded to commercial
travelers of any third country in respect of cust~ms and other rights
and privileges and, subject to the exceptions in paragraph 3 of Article IX, in
respect of all taxes and charges applicable to them or to their samples.
ARTICLE XI
1. The nationals of either High Contracting Party shall, within the territories
of the other High Contracting Party, be permitted to exercise liberty of
conscience and freedom of worship, and they may, whether individually, collectively
or in religious corporations or associations, and without annoyance
or molestation of any kind by reason of their religious belief, conduct services,
either within their own houses or within any other appropriate buildings, provided
that their teachings or practices are not contrary to public morals or
public order.
2. The High Contracting Parties declare their adherence to the principles
of freedom of the pres.sand of free interchange of information. To this end,
nationals, corporations and associations of either High Contracting Party shall
have the right, within the territories of the other High Contracting Party, to
engage in such activities as writing, reporting and gathering of information
for dissemination to the public, and shall enjoy freedom of transmisson of
material to be used abroad for publication by the press, radio, motion pie~
tures, and other means. The nationals, corporations and associations of either
High Contracting Party shall en joy freedom of publication in the territories
of the other High Contracting Party, in accordance with the applicable laws
Annex 376
270 ITALY
and regulations, upon the same terms as nationals, corporations or associations
of such other High Contracting Party. The term "information", as used in
this paragraph, shall include all forms of written communications, printed
matter, motion pictures, recordings and photographs.'
-3. The nationals . of either High Contracting Party shall be permitted
within- the territories of the other High Contracting Party to bury their dead
according to their religious customs in suitable and convenient places which
are or may hereafter be established and maintained for the purpose, subject
to the applicable mortuary and sanitary laws and regulations.
ARTICLE XII
1. The nationals of either High Contracting Party, regardless of alienage
or place of residence, shall be accorded rights and privileges no less favorable
than those accorded to the nationals of the other High Contracting Party,
under laws and regulations within the territories of sucli other High Contracting
Party that (a) establish a civil liability for injury or death, and give a
right of action to an injured person, or to the relatives, heirs, dependents or
personal representative as the case may be, of an injured or deceased person,
or that ( b) grant to a wage earner or an individual receiving salary, commission
or other remuneration, or to his relatives, heirs or dependents, as the
case may be, a right of action, or a pecuniary compensation or other benefit
or service, on acco'l,lnt of occupational disease, injury or death arising out of
and in the course of employment or due to the nature of employment.
2. In addition to the rights and privileges provided in paragraph 1 of
this Article, the nationals of either High Contracting Party shall, within the
territories of the other High Contracting Party, be accorded, upon terms no
less favorable than those applicable to nationals of such other High Contracting
Party, the benefits of laws and regulations establishing systems of compulsory
insurance, under which benefits are paid without an individual test
of financial need: (a) against loss of wages or earnings due to old age, unemployment
or sickness or other disability, or ( b) against Joss of financial support
due to the death of father, husband or other person on whom such support
had depended.
ARTICLE XIII
I. The nationals of each High Contracting Party shall be exempt, except
as otherwise provided in paragraph 2 of this Article, from compulsory train- .
ing or service in the armed forces of the other High Contracting Party, and
shall also be exempt fr9m all contributions in money or in kind imposed in lieu
thereof.
2. During any period of time when both of the High Contracting Parties
are, through armed action in connection with which there is gfneral com-
' See also para. 5 of protocol, p. 283.
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 271
pulsory service, (a) enforcing measures against the same third country or
countries in pursuance of obligations for the maintenance of international
peace and security, or ( b) concurrently conducting hostilities against the
same third country or countries, the exemptions provided in paragraph 1 of
this Article shall not apply. However, in such an event the nationals of either
High Contracting Party in the territories of the other High Contracting
Party, who have not declared their intention to acquire the nationality of
such other High Contracting Party, shall be exempt from service in the armed
~orces of such other High Contracting Party if within a reasonable period of
time they elect, in lieu of such service, to enter the armed forces of the High
Contracting Party of which they are nationals. In any such situation the
High Contracting Parties will make the necessary arrangements for giving
effect to the provisions of this paragraph.
ARTICLE XIV
1. In all matters relating to (a) customs duties and subsidiary charges of
every kind imposed on imports or exports and in the method of levying such
duties and charges, ( b) the rules, formalities, and charges imposed in connection
with th~ clearing of articles through the customs, and ( c) · the taxation,
sale, distribution or use within the country of imported articles and of articles
intended for exportation, each High Contracting Party shall accord to
articles the growth, produce or manufacture of the other High Contracting
Party, from whatever place arriving, or to articles destined for exportation ·
to the territories of such other High Contracting Party, by whatever route,
treatment no less favorable than the treatment now or hereafter accorded to
like articles the growth; produce or manufacture of, or destined for, any third
country.
2. With respect to the matters referred to in paragraph 1 of this Article,
the nationals, corporations and associations of either High Contracting Party
shall be accorded, within the territories of the other High Contracting Party,
treatment no less favorable than the treatment which is or may hereafter be ·
accorded to the nationals, corporations and associatiqns of such_ other High
Contracting Party; and with respect to such matters the nationals, corpora~
tions and associations, vessels and cargoes of either High Contracting Party
shall be accorded, within the territories of the ,other High Contracting Party,
treatment no less favorable than the treatment which is or may hereafter be
accorded to nationals, _corporations and associations, vessels and cargoes of
any third country.
3. No prohibition or restriction of any kind shall be imposed by either
High Contracting Party on the importation, sale, distribution or use of any
article the growth, produce or manufacture of the other High Contracting
Party, or on the exportation of any article destined for the territories of the
other High Contracting Party, unless the importation, sale, distribution or
Annex 376
272 ITALY
use of the like article the growth, produce or manufacture of all third countries,
or the exportation of the like article to all third countries, respectively, is
similarly prohibited or restricted.11
4. If either High Contracting Party imposes any quantitative regulation,
whether made effective through quotas, licenses or other measures, on
the importation or exportation of any article, or on the sale, distribution
or use of any imported article, it shall as a general rule give public notice
of the total quantity or value of such article permitted to be imported, exported,
sold, distributed or used during a specified period, and of any change
in such quantity or value. Furthermore, if either High Contracting Party
allots to any third country a share of such total quantity or value of any
article in which the other High Contracting Party has an important interest,
it shall as a general rule allot to such other High Contracting Party a share
of such total quantity or value based upon the proportion of the total quantity
or value supplied by, or in the case of exports a share based upon the
' proportion exported to, the territories of such other High Contracting Party
during a previous representative period, account being taken in so far as
practicable of any special factors which may have affected or may be affecting
the trade in that article. The provisions of this paragraph relating
to imported articles shall also apply in respect of_ the quantity or value of
any article permitted to be imported free of duty or tax, or at a lower rate
of duty or tax than the rate of duty or tax imposed on imports in excess of
such quantity or value.6
5. If either High Contracting Party requires documentary proof of
origin of imported articles, the requirements imposed therefor shall be rea•
·sonable a11d shall not be such as to constitute an unnecessary hindrance to
indirect trade.
ARTICLE xv
1. Laws, regulations of administrative authorities and decisions of administrative
or judicial authorities of each High Contracting Party that
have general application and that pertain to the classification of articles
for customs purposes or to rates of duty shall be published promptly in such
a manner as to enable traders to become acquainted with them. Such laws,
regulations and de, isions shall be applied uniformly at all ports of each
High Contracting Party, except as otherwise specifically provided for in
statutes of the United States of America with respect to the importation of
articles into its insular territories and possessions.
2. No administrative ruling by the United States of America effecting
advances in rates of duties or charges applicable under an established and
uniform practice to imports originating in the territories of the Italian Republic,
or imposing any new requirement with respect to such importations,
shall as a general rule be applied to articles the growth, . produce or manua
See also paras. 1 and 2 of additional protocol, p. 283.
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 273
facture of the Italian Republic already en route at the time of publication
thereof in accordance with the preceding paragraph; rec~procally, no administrative
ruling by the Italian Republic effecting advances in rates of
_duties or charges applicable under an established and uniform practice .to
imports originating in the territories of the United States of America, .or
imposing any new requirement with respect to such importations, shall as
a general rule be applied to articles the growth, produce or manufacture
of the United States of America already en route at the time of publication
thereof in accordance with the preceding paragraph. However, if either
High Contracting Party customarily exempts from such new or increased
obligations articles entered for consumption or withdrawn from warehouse
for consumption during a period of thirty days after the date of such pub:
i~cation, such practice shall be considered full compliance by such High
Contracting Party with this paragraph. The provisions of this paragraph
shall not apply to administrative orders imposing antidumping or countervailing
duties or relating to regulations for the protection of human, animal
or plant life or health, or relating to public safety, or giving effect to judicial
decisions.
3. Each High Contracting Party shall provide some administrative or
judicial procedure under which the nationals, corporations and associations
of the other High Contracting Party, and importers of articles the growth,
produce or manufacture· of such other High Contracting Party, shall be
permitted to appeal against fines and penalties imposed upon them by the
customs authorities, confiscations by such authorities and rulings of such
authorities on questions of customs classification and of valuation of articles
for customs purposes. Greater than nominal penalties shall not be imposed
by either High Contracting Party in connection with any importation by the
nationals, corporations or associations of the other High Contracting Party,
or in connection with the importation of articles the growth, produce or
manufacture of such other High Contracting Party, because of errors in
documentation which are obviously clerical in origin or with regard to which
good faith can be established.
4. Each High Contracting Party will accord sympathetic consideration
to such representations as the other High Contracting Party may make with
respect to the operation or administration of import or export prohibitions
or restrictions, quantitative regulations, customs regulations or formalities,
or sanitary laws or regulations for the protection of human, animal or plant
life or health.
ARTICLE XVI
,
1. Articles the growth, produce or manufacture of either High Contracting
Party, imported into the territories of the. other High Contracting Party,
shall be accorded treatment with respect to all matters affecting internal
taxation, or the sale, distribution or use within such territories, no less favor-
239-517-72-19
Annex 376
274 ITALY
able than the treatment which is or may hereafter be accorded to like articles
of national origin.6
2. Articles grown, produced or manufactured within the territories of
either High · Contracting Party in whole or in part by nationals, corporations
and associations of the other High Contracting Party, or by corporations
and associations of the High Contracting Party within the territories
of which such articles are grown, produced or manufactured which are controlled
by nationals, corporations· and associations· of the other High Con-
. tracting Party, shall be accorded within such territories treatment with
respect to all matters affecting internal taxation, or the sale, distribution
or use therein, or exportation therefrom, no less favorable than the treatment
now or hereafter accorded to like articles grown, produced or manufactured
therein in whole · or in part by nationals, corporations and
associations of the High Contracting Party within the territories of which
the articles are grown, produced or manufactured, or by corporations and
associations of such High Contracting Party which are controlled by such
nationals, corporations and associations. The articles specified in the preceding
sentence shall not in any case receive treatment less favorable than ·
the treatment which is or may hereafter be accorded to like articles grown,
produced or manufactured in whole or in part by nationals, corporations
and associations of any third country, or by corporations and associations
controlled by such nationals, corporations and associations.
3. In all matters relating to export bounties, customs drawbacks and
the warehousing of articles intended for exportation, the nationals, corporations
and associations of either High Contracting Party shall be accorded
within the tenitories of the other High Contracting Party treatment no less
favorable than the treatment which is or may hereafter be accorded to the
nationals, corporations and associations of such other High Contracting
Party.
ARTICLE XVII
1. The treatment prescribed in this Article shall apply to all fonns of
control of financial transactions, including (a) limitations upon the availability
of media necessary to effect such transactions, ( b) rates of e.xchange,
and ( c) prohibitions, restrictions, delays, taxes, charges and penalties on
such transactions; and shall apply whether a transaction takes place directly,
or through an intermediary in another country. As used in this Article,
the tenn "financial transactions" means all international payments
and transfers of funds effected through the medium of currencies, securities,
bank deposits, dealings in foreign exchange or other financial arrangements,
regardless of the purpose or nature of such payments and transfers.
2. Financial transactions between the territories of the two High Contracting
Parties shall be accorded by each High Contracting Party treatment
0 See also para. 3 of additional protocol, p. 284.
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 275
no less favorable than that now or hereafter accorded to like transactions
between the territories of such High Contracting Party and the territories
of any third country.
3. Nationals, corporations and associations of either High Contracting
Party shall be accorded by the other High Contracting Party treatment no
less favorable than that now or hereafter accorded to nationals, corporations
and associations of such other High Contracting ~i!.rty and no less
favorable than that now or hereafter accorded to natim~ls, corporations
and as5ociations of any third country, with respect to financial transactions
between the territories of the two High Contracting Parties or between the
tenitories of such other High Contracting Party and of any third country.
4. In general, any control imposed by either High Contracting Party
over financial transactions shall be so administered as not to influence disadvantageously
the competitive position of the commerce or investment of
capital of the other High Contracting Party in comparison with the commerce
or the investment of capital of any third country.
ARTICLE XVIII
1. If either High Contracting Party establishes or maintains a monopoly
or agency for the importation, exportation, purchase, sale, distribution or
production of any article, or grants exclusive privileges to any agency to
import, export, purchase, sell, distribute or produce any article, such monopoly
or agency shall accord t:o the commerce of the other High Contracting
Party fair and equitable treatment in respect of its purchases of articles the
growth, produce or manufacture of foreign countries and its sales of articles
destined for foreign countries. To this end, the monopoly or agency shall,
in making such purchases or sales of any article, be influenced solely by
considerations, such as price, quality, marketability, transportation and terms
of purchase or sale, which would ordinarily be taken into account by a private
commercial enterprise interested solely in purchasing or selling such article
on the most favorable terms. If either High Contracting Party establishes
or maintains a monopoly or agency for the sale of any service or grants exclu•
sive privileges to any agency to sell any service, such monopoly or agency
shall accord fair and equitable treatment to the other High Contracting
Party and to the nationals, corporations and associations and to the commerce
thereof in respect of transactions involving such service as compared with
the treatment which is or may hereafter be accorded to any third country
and to the nationals, corporations and associations and to the commerce
thereof.7
2. Each High Contracting Party, in the awarding of concessions and
other contracts, and in the purchasing of supplies, shall accord fair and
equitable treatment to the nationals, corporations and associations and to
7 See also para. 3 of protocol, p. 283.
Annex 376
276 ITALY
the commerce of the other High Contracting Party as compared with the
treatment which is or may hereafter be accorded to the nationals, corporations
and associations and to the commerce of any third country.
3. The two High Contracting Parties agree that business practices which
restrain competition, limit access to markets or foster monopolistic control,
and which are engaged in or made effective by one or more private or public
commercial enterprises or by combination, agreement or other arrangement
among public or private commercial enterprises may have harmful effects
upon the commerce between their respective territories. Accordingly, each
High Contracting Party agrees upon the request of the other High Contracting
Party to consult with respect to any such practices and to take such
measures as it deems appropriate with a view to eliminating such harmful
effects.
ARTICLE XIX
1. Between the territories of the High Contracting Parties there shall
be freedom of commerce and navigation.
2. Vessels under the flag of either High Contracting Party, and carrying
the papers required by its. national law in proof of nationality, shall be
deemed to be ve~els of that High Contracting Party both within the ports,
places and waters of the other High Contracting Party and on the high seas.
As used in this Treaty, "vessels" shall be construed to include all vessels of
either High Contracting Party whether privately owned or operated or
publicly owned or operated. However, the provisions of this Treaty other
than this paragraph and paragraph 4 of Article XX shall not be construed
to accord rights to vessels of war or fishing vessels of the other High Con~
tracting Party; nor shall they be construed to extend to nationals, corporations
and associations, vessels and cargoes of, or to articles the growth, produce
or manufacture of, such other High Contracting Party any special privileges
restricted to national fisheries or the products thereof.
3. The vessels of either High Contracting Party shall have liberty, equally
with the vessels of any third country, to come with their cargoes to all ports,
places and waters of the other High Contracting Party which are or may
hereafter be open to foreign commerce and navigation.
ARTICLE xx
1. The vessels and cargoes of either High Contracting Party shall, within
the ports, places and waters of the other High Contracting Party, in all
respects be accorded treatment no less favorable than the treatment accorded
to the vessels and cargoes of such other High Contracting Party, irrespective
of the port of departure or the port of destination of the vessel, and irrespective
of the origin or the destination of the cargo.
2. No duties of tonnage, harbor, pilotage, lighthouse, quarantine, or
other similar or corresponding duties or charges, of whatever kind or denom-
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 277
ination, levied in the name or for the profit of the government, pub1ic
functionaries, private individuals, corporations or establishments of any kind,
shall be imposed in the ports, p1aces and waters of either High Contracting
Party upon the vessels of the other High Contracting Party, which shall not
equally and under the same conditions be imposed upon national vessels.
3. No charges upon passengers, passenger fares or tickets, freight moneys
paid or to be paid, bills of lading, contracts of insurance or re-insurance, no
conditions relating to the employment of ship brokers, and no other charges
or conditions of any kind, sh:~.ll be imposed in a way tending to accord any
advantage to national vessels as compared with the vessels of the other High
Contracting Party.
4. If a vessel of either High Contracting Party shall be forced by stress
of weather or by reason of any other distress to take refuge in any of the ports,
places or waters of the other .High Contracting Party not open to foreign
commerce and navigation, it shall receive friendly treatment and assistance
and such repairs, as well as supplies and materials for repair, as may be
necessary and available. This paragraph shall apply to vessels of war and
fishing vessels, as well as to vessels as defined in paragraph 2 of Article XIX.
5. The vessels and cargoes of either High Contracting Party shall not in
any case, with respect to the matters referred to in this Article, receive
treatment less favorable than the treatment which· is or may hereafter be
accorded to the vessels and cargoes of any third country.
ARTICLE XX.I
1. It shall be permissible, in the vessels of either High Contracting
Party, to import into the territories of the other High Contracting Party,
or to export therefrom, all articles which it is or may hereafter be permissible
to import into such territories, or to export therefrom, in the vessels of such
other · High Contracting Party or of any third country; and such articles
shall not be subject to any higher duties or charges whatever than those to
which the articles would be subject if they were imported or exported in
vessels of the other High Contracting Party or of any third country.
2. Bounties, drawbacks and other privileges qf this nature of whatever
kind or denomination which are or may hereafter be allowed, in the territories
of either High Contracting Party, on articles imported or exported
in national vessels or vessels of any third country shall also and in like manner
be allowed on articles imported or exported in vessels of the other High
Contracting Party.
ARTICLE XX.II
1. Vessels of either High Contracting Party shall be permitted to discharge
portions of cargoes, including passengers, at any ports, places or waters
of the other High Contracting Party which are or may hereafter be open
to foreign commerce and navigation, and to proceed with the remaining
Annex 376
278 ITALY
portions of such cargoes or passengers to any other such ports, places or
waters, without paying higher tonnage dues or port charges in such cases
tha.n'""would be paid by national vessels in like circumstances, and they shall
be pennitted to load in like manner, in the same voyage outward, at the
various ports, places and waters which are or may hereafter be open to
foreign commerc~ and navigation. The ves.sels and cargoes of either High
Contracting Party shall be accorded, with respect to the matters referred to
in this paragraph, treatment in the ports, places and waters of the other High
Contracting Party no less favorable than the treatment which is or may
hereafter bt accorded to the vessels and cargoes of any third country.
2 .· The coasting trade and inland navigation of each High Contracting
Party are excepted from the requirements of national and most-favored-nation
treatment.
ARTICLE XXIII
Th~re shall be freedom of transit through the territories of each High Contracting
Party by the routes most convenient for international transit (a) for
persons who are nationals of any third country, together with their baggage,
directly or indirectly coming from or going to the territories of the other High
Contracting Party, ( b) for persons who are nationals of the other High Contracting
Party, together with their baggage, regardless of whether they are
coming from or going to the territories of such other High Contracting Party,
and ( c) for articles directly or indirectly coming from or going to the territories
cif the other High Contracting Party. Such persons, baggage and articles
in transit shall not be subject to arty transit duty, to any unnecessary delays or
restrictions, or to any discrimination in respect of charges, facilities or any
other matter; and all charges and regulations prescribed in respect of such
· persons, bagg!lge or articles shall be reasonable, having regard to the conditions
of the traffic. Either High Contracting Party may require that such
baggage.and articles be entered at the proper customhouse and that they be
kept whether or not under bond in customs custody; but such baggage and
articles shall be exempt from all customs duties or similar charges if such
requirements for entry and retention in customs custody are complied with
and if they are exported within one year and satisfactory evidence of such
exportation is presented to the customs authorities. Such nationals, baggage,
persons ·a-.rrd articles shall be accorded treatment with respect to all charges,
rules and formalities in connection with transit no less favorable than the
treatment which is or may hereafter be accorded to the nationals of any third
-country, together with their baggage, or to pt;rsons and articles coming from
or going to the territories of any third country.
ARTICLE XXIV
1. Nothing in this Treaty shall be construed to prevent the adoption or
. enforcement by. either High Contracting Party of measures:
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 279
(a) relating to the importation or exportation of gold or silver;
( b) relating to the exportation of objects the value of which derives primarily
from their character as works of art, or as antiquities, of national interest
or from their relationship to national history, and which are not in
general practice considered articles of commerce;
( c) relating to fissionable materials, to materials which are the source of
fis.sionable materials, or to radio-active materials which are by-products of
fis.5ionable materials;· ·
( d) relating to the production of and traffic in arms, ammunition and
implements of war and to such traffic in other goods and materials as is
carried on for the purpose of supplying a military establishment;
( e) necessary in pursuance of obligations for the maintenance of international
peace and security, or necessary for the protection of the essential
interests of such High Contracting Party in time of national emergency; or
(f) imposing exchange restrictions, as a member · of the International
Monetary Fund, in conformity with the Articles of Agreement thereof signed
at Washington December 27, 1945,8 but without utilizing ·its privileges
'under Article VI, section 3, of that Agreement so as to impair any provision
of this Treaty; provided that either High Contracting Party may, nevertheless,
regulate capital transfers to the extent necessary to insure the importation
of essential good or to effect a reasonable. rate c>f increase in very low
monetary reserves or to prevent its monetary reserves from falling to a very
low level. If the International Monetary Fund should cease to function, or if
either High Contracting Party should cease to be a member thereof, the two
High Contracting Parties, upon the request of either High Contracting Party,
shall consult together and may conclude such arrangements ·as are necessary
to permit appropriate action in contingencies relating to international financial
transactions comparable with those under which exceptional action had
previously been permissible.
2. Subject to the requirement that, under like circumstances and conditions,
there shall be no arbitrary discrimination by either High Contracting
Party against the other High Contracting Party or against the nationals,
corporations, associations, vessels or commerce thereof, in_favor of any third
country or the nationals, corporations, associations, vessels or commerce
thereof, the provisions of this Treaty shall not extend to prohibitions or
restrictions:
(a) imposed on moral or humanitarian grounds;
( b) designed to protect human, animal or plant life or health;
( c) relating to prison-made goods; or
( d) relating to the enforcement of police or revenue laws.
8 TIAS 1501, ante, vol. 3, p. 1351.
Annex 376
280 ITALY
3. The provisions of ·this Treaty. according treatment no less favorable
than the treatment accorded to any third country shall not apply to:
(a) advantages which are or may hereafter be accorded to adjacent countries
in order to facilitate frontier traffic;
( b) advantages accorded by virtue of a customs union of which either
High _Contracting Party may, after consultation with the other High Contracting
Party, become a member so long as such advantages are not extended
to any country which is not a member of such customs union;
. ( c) advantages accorded to third countries pursuant to a multilateral
economic agreement of general applicability, including a trade area of substantial
size, having as its objective the liberalization and promotion of intern~
tional trade or other international economic intercourse, and open to
adoption by all the United Nations; 9
( d) advantages now accorded or which may hereafter be accorded by
the Italian Republic to San Marino, to the Free Territory of Trieste or to
the State of Vatican City, or by the United States of America or its-territories
or possessions to one another, to the Panama Canal Zone, to the Republic
ing Party to-areas other than those enumerated in subparagraph ( d) of the
Pacific Islands; or
( e) advantages which, pursuant to a decision made by the United Nations
or an organ thereof or by an appropriate specialized agency in relationship
with the United Nations, may hereafter be accorded by either High Contracting
Party to areas other than those enumerated in subparagraph ( d) of the
present paragraph.
The provisions of subparagraph ( d) shall continue to apply in respect
of any advantages now or hereafter accorded by the United States of America
or its territories or possessions to one another irrespective of any change in
the political status of any of the territories or possessions of the United States
of America.
4. The provisions of this Treaty shall not be construed to accord any
rights or privileges tQ persons, corporations and associations to engage in
political activities, or to organize or participate in political corporations and
associations.
5. Each High Contracting Party reseives the right to deny any of the
rights and privileges accorded by this Treaty to any corporation or association
created or organized under the laws and regulations of the other High Contracting
Party .in the ownership or direction of which nationals of any third
country or countries h',Lve directly or indirectly a controlling interest.
6. No enterprise of either High Contracting Party which is publicly
owned or controlled shall, if it engages in commercial, manufacturing, proc-
~For an ·understanding relating to para. 3(c) of art. XXIV, see exchange of notes,
p. 287.
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 281
essing, shipping or other business activities within the territories of the other
High Contracting Party, claim or enjoy, either for itself or for its property,
immunity therein from taxation, 'from suit, from execution of judgment, or
from any other liability to which a privately owned and controlled enterprise
is subject therein.
7. The provisions of this Treaty shall not be construed to affect existing
laws and regulations of either High Contracting Party in relation to· immi~
gration or the right of either High Contracting Party to adopt and enforce
laws and regulations relating to immigration; provided, however, that nothing
in this paragraph shall prevent the nationals of either High ·contracting
Party from entering, traveling and residing in the territories of the other High
Contracting Party in order to carry on trade between the two High Contracting
Parties or to engage in any commercial activity related thereto or connected
therewith; upon terms as favorable as are or may_hereafter be accorded
to the nationals of any third country entering, traveling and residing in such
territories in order to carry on trade between such other High Contracting
Party and such third country or to engage in commerciai activity related to
or connected with such trade.
ARTICLE XXV
Subject to any limitation or exception provided in this Treaty or ~ereafter
agreed upon between the High Contracting Parties, the territories of the High
Contracting Parties to which the provisions of this Treaty extend shall be
understood to comprise all areas of land and water under the sovereignty or
authority of either of the High Contracting Parties, other than the Canal
Zone, and other than the Trust Territory of the Pacific Islands except to the
extent that the President of the United States of America shall by proclamation
extend provisions of the Treaty to such Trost Territory.
ARTICLE XX.VI
Any dispute between the High Contracting Parties as to the interpretation
or the application of this Treaty, which the High Contracting Parties shall
not satisfactorily adjust by diplomacy, shall be submitted to the· International
Court of Justice, unless the High Contracting Parties shall agree to settle-:
ment by some other pacific means.
ARTICLE XXVII .
1. This Treaty shall be ratified, and the ratifications thereof shall be
exchanged at Rome as soon as possible. · 0
•
2. This Treaty shall enter into force on the day of the exchange of
ratifications, and shall continue in force for a period° of ten years from that
day.
'.!59-517-7,2-20
Annex 376
282 ITALY
3. Unless one year before the expiration of the aforesaid period of ten
years either High Contracting Party shall have given written notice to the
other High Contracting Party of intention to terminate this Treaty upon
the expiration of the aforesaid period, the Treaty shall continue in force
thereafter _until one year from the date on which written notice of intention
to terminate it shall have been given. by either High Contracting Party.
IN WITNESS WHEREOF the respective Plenipotentiaries have signed this
Treaty and have affixed hereunto their seals.
DONE in duplicate, in the English and Italian languages, both equally
authentic, at Rome, this second day of February one thousand nine hundred
forty-eight.
For the Government of the United States of America:
JAMES CLEMENT DUNN
For the Italian Government:
SFORZA
PROTOCOL
At the time of signing the Treaty of Friendship, Commerce and Navigation
be~een the United States of America and the Italian Republic, the
undersigned Plenipotentiaries, duly authorized by their respective Governments,
have further agreed on the following provisions, which shall be
considered as integral parts of said Treaty:
1. The provisions of paragraph 2 of Article V, ,providing for the payment
of compensation, shall extend to interests held directly or indirectly by
nationals, corporations and associations of either High Contracting Party in
property which is taken within the territories of the other High Contracting
Party.
2. Rights and privileges with respect to commercial, manufacturing and
processing activities accorded, by the provisions of the Treaty, to privately
owned and controlled enterprises of either High Contracting Party within
the territories of the other High Contracting Party shall extend to rights and
privileges of an economic nature granted to publicly owned or controlled
enterprises of such other High Contracting Party, in situations in which such
publicly owned or controlled enterprises operate in fact in competition with
privately owned and controlled enterprises. The preceding sentence shall not,
however, apply, tp subsidies granted to publicly owned or controlled enterprises
in connection with: (a) manufacturing or processing goods for
government use, or supplying good.5 and services ~o the government for government
use; or ( b) supplying, at prices substantially below competitive
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION_.:_FEBRUARY 2, 1948 283
prices, the needs of particular population groups for essential goods and
services not otherwise practicably obtainable by such groups.
3. The concluding sentence of paragraph 1 of Article 'XVIII shall not
be construed as applying to postal services.
4. The provisions of paragraph 2 (a) of Article I shall not be construed
to extend to the practice of professions the members of which are designated
by law as public officials.
5. The provisions of paragraph 2 of Article XI shall not be construed to
affect measures taken by either High Contracting Party to safeguard military
secrets.
IN WITNESS WHEREOF the respective Plenipotentiaries have signed this
Protocol and have affixed hereunto their seals.
DoNE in duplicate, in the English and· Italian languages, both equally
authentic, at Rome this second day of February one thousand nine hundred
forty-eight. .
For the Government of the United States of America:
JAMES CLEMENT DUNN
For the Italian Government:
SFORZA
ADDITIONAL PROTOCOL
In view of the grave economic difficulties facing Italy now and prospectively
as a result of, inter alia, the damage caused by the late military operations
on Italian soil; the looting perpetrated by the German forces following
the Italian declaration of war against Germany; the present inability of
Italy to supply, unassisted, the minimum needs of its people or the minimum
requirements of Italian economic recovery; and Italy's lack of monetary
reserves; at the time of signing the Treaty of Friendship, Commerce and
Navigation between the United States of America and the Italian Republic,
the undersigned Plenipotentiaries, duly authorized by their respective Gov~
ernments, have further agreed on the following provisions, which shall be
considered as integral parts of said Treaty:
1. The provisions of paragraph 3 of Article XIV of the abovementioned
Treaty and that part of paragraph 4- of the same Article which rdates to the
allocation of shares, shall not obligate either High Contracting Party with
respect to the application of quantitative restrictions on imports and
exports:
(a) that have _effect equivalent to exchange restrictions authorized in
conformity with section 3 ( b) ~f Article VII of the Articles of Agreement of
the International Monetary Fund;
Annex 376
284 ITALY
( b) that are necessary to secure, during the early post-war transitional
period, the equitable distribution among the several consuming countries of
goods in short supply;
( c) that are necessary in order to effect, for the purchase of imports, the
utilization of accumulated inconvertible currencies; or
( d) that have effect equivalent to exchange restrictions permitted under
section 2 of Article XIV of the Articles of Agreement ·of the International
Monetary Fund.
2. The privileges accorded to either High Contracting Party by subparagraphs
( c) and ( d), paragraph 1, of the present Protocol, shall be
limited to situations in which (a) it is necessary for such High Contracting
Party to apply restrictions on imports in order ·to forestall the imminent
threat of, or to stop, a serious decline in the level of its monetary reserves er,
in the case of very low monetary reserves, to achieve a reasonable rate of
increase in its reserves, and ( b) the application of the necessary restrictions
in the manner permitted by _the aforesaid paragraph 1 will yield such High
Contracting Party· a volume of imports above the maximum level which
would be possible if such restrictions were app1ied in the manner prescribed
in paragraphs 3 and 4 of Article XIV of the Treaty.
3. During the current transitional period of recovery from the recent
war, the provisions of Article XVI, paragraph 1, of the Treaty shall not
prevent the application by either High Contracting Party of needed controls
to the internal sale, distribution or use of imported articles in short supply,
other than or different from controls applied with respect to like articles of
national origin. However, no such controls over the internal distribution of
imported articles shall be (a) applied by either High Contracting Party in
such a manner as to cause unnecessary. injury to the competitive position
within its territories of the commerce of the other High Contracting Party,
or ( b) continued longer than required by the supply situation.
4. Neither High Contracting Party shall impose any new restriction
under paragraph 1 of the present Protocol without having given the other
High Contracting Party notice thereof which shall, if possible, be not less
than thirty days in advance ahd shall not in any event be less than ten days in
advance. Each High Contracting Party shall afford to the other High
Contracting Party opportunity for consultation at any time concerning the
need for and the application of restrictions to which such paragraph relates
as well as concerning the application of paragraph 3; and either High Contracting
Party shall have the right to invite the International Monetary Fund
to participate in such consultation, with reference to ~estrictions to which
subparagraphs (a), ( c) and ( d) of paragraph I relate.
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 285
5. Whenever exchange difficulties necessitate that pursuant to Article
XXIV, paragraph 1 (f), the Italian Government regulate the withdrawals
provided for in Article V, paragraph 2, the Italian Government may give
priority to applications made by nationals, corporations and associations of
the United States of America to withdraw compensation received on account
of property acquired on or before December 8, 1934, or, if subsequently
acquired:
(a) in the case of immovable property, if the owner at the time of acquisition
had permanent residence outside Italy, or, if a corporation or association,
had its center of management outside}yaly;
( b) in the case of shares of stoek; if a~ the time of acquisition Italian laws ·
and regulations penni tted such sh~res to be traded outside Italy;
( c) in the case of bank deposits, if ~arried on free account at the time of
taking;
( d) in any case, if the property was acquired through importing foreign
exchange, goods or services into Italy, or through reinvestments of profits or
accrued interest from such imports whenever made.
The Italian Government undertakes to grant every facility to assist applicants
in establishing their status for the purposes of this paragraph; and to
accept evidence of probative value as establishing, in the absence of preponderant
evidence to the contrary, a priority claim.
6. Whenever a multiple exchange rate system is in effect in Italy, the rate
of exchange which shall be applicable for the purposes of Article V, paragraph
2, need not be the most favorable of all rates applicable to international
financial transactions of whatever nature; provided, however, that the rate
applicable will in any event permit the recipient of compensation actually to
realize the full economic value thereof in United States dollars. In case dispute
arises as to the rate applicable, the rate shall be determined by agreement
between the High Contracting Parties.
IN ..WITNESS WHEREOF the respective Plenipotentiaries have signed this
frotocol and have affixed hereunto their seals.
DoNE in duplicate, in the English and Italian languages, Loth equally authentic,
at Rome, this second day of February one thousand nine hundred
forty-eight.
For the Government of the United States of America
JAMES CLEMENT DUNN
For the Italian Government
SFORZA
Annex 376
286 ITALY
ExCHANGES OF NOTES
The American Ambassador to the Minister of Foreign Affairs
F.o. No. s21 ROME, February 2, 1948
EXCELLENCY:
I have the honor to refer to the proposals advanced by representatives of
your Government, during the course of negotiations for the Treaty of Friendship,
Commerce and Navigation signed this day, for facilitating and expanding
the cultural relations between the pepples of our two countries.
I take pleasure in informing you that my Government, recognizing the importance
of cultural ties between nations as developing increased understanding
and friendship, will undertake to stimulate and foster cultural relations
between our two countries, induding the interchange of professors, students,
and professional and academic personnel between the territories of the United
States of America and of Italy, and agrees to discuss at a later time the possibility
of agreements designed to establish arrangements whereby such interchange
may be facilitated and whereby the cultural bonds between the two
peooles may generally be strengthened .
. cept, Excellency, the renewed assurances of my highest consideration.
JAMES CLEMENT DUNN
His Excellency
Count CARLO SFORZA,
Minister of Foreign Affairs,
Rome.
The k-{inister of Foreign. Affairs to the American Ambassador
[TRANSLATION)
THE MINISTER OF FOREIGN AFFAIRS
ROME, February 2, 1948
EXCELLENCY:
I have the honor to refer to Your ExceUency's note of this date, which reads
as fo11ows:
[For text of U.S. note, see above.]
I have the honor to inform Your Excellency that the Italian Government
. will W1dertake, for its part, to stimulate and foster cultural relations, including
the interchange of professors, students and academic personnel, and to discuss
the possibility of cultural agreements between our two Governments in accordance
with the ideas expressed in Your Excellency's note.
Annex 376
FRIENDSHIP, COMMERCE, NAVIGATION-FEBRUARY 2, 1948 287
I take pleasure in availing myself of thls occasion, Excellency, to renew to
you the assurances of my highest consideration.
To His Excellency
JAMES CLEMENT DUNN;
Ambassador of the United States of America
Rome.
The American Ambassador to the Minister of Foreign Affairs
EMBASSY OF THE
F .O. No. 3170 UNITED STATES OF AMERICA
EXCELLENCY,
I have the honor to refer to paragraph 3 ( c) of Article XXIV of the
Treaty of Friendship, Commerce and Navigation between the United States
of •.merica and the ltalian Republic signed at Rome on February 2, 1948,
and to inform Your Excellency that it is the understanding of the Government
of the United States of America that the provisions of the afore.53.id
Treaty relating to the treatment of goods do not preclude action by either of
the parties thereto which is required or specifically permitted by the General
Agreement on Tariffs and Trade 10 or by the Havana Charter for an International
Trade Organization, 11 during such time as the party applying such
measures is a contracting party to the General Agreement or is a member
of the International Trade Organization, as the case may be.
I shall be glad if Your Excellency will confirm this understanding on behalf
of the Government of the Italian Republic.
Accept, Excellency, the renewed assurances of my highest consideration.
JAMES CLEMENT DUNN
ROME, July 26, 1949.
His Excellency
Count CARLO SFORZA
Minister of Foreign Affairs
Rome
10 TIAS 1700, ante, ·vol. 4, p. 641.
11 Unperfected; for excerpts, see A Decade of American Foreign Policy: Basic Documents,
1941-49 ( S. Doc. 123, 81st Cong., 1st sess.), p. 391.
Annex 376
288 ITALY
The Minister of Foreign Affairs to the American Ambassador
[TRANSLATlON]
MINISTRY OF FOREIGN AFFAIRS
ROME, July 26, 1949
EXCELLENCY:
I have the honor to refer to your letter dated today in which, referring to
paragraph 3 ( c) of Article XXIV of the Treaty of Friendship, Commerce
and Navigation between the United States of America and the Italian Republic,
signed at Rome on February 2, 1948, you inform me that it is the understanding
of the Government of the United States of America that the provisions
of the aforesaid Treaty relating to the treatment of goods do not preclude
action by either of the parties thereto which is required or specifically permitted
by the General Agreement on Tariffs and Trade or by the Havana
Charter for an International Trade Organization, during such time as the
party applying such measures is a contracting party to the General Agreement
or is a member of the International Trade Organization.
I have the honor to inform you that the Italian Government agrees to the
foregoing.
Accept, Excellency, the assurances of my high consideration.
SFORZA
His Excellency
JAMES CLEMENT DUNN
Ambassador of the United States of America
Rome
Annex 376
ANNEX 377
Date of dispcdch to the pmties:
AWARD
in the Arbitration ARB/94/2 oftl1e
International Centre for Settlement of Investment Disputes
(ICS ID)
Tradex Hellas S.A. (Greece)
represented by Mr. E. Koronis
Counsel: Prof. L. Georgakopoulos
VS .
Republic of Albania
represented by the
Ministiy of Agriculture and Food
which was represented
by Ms. Rezruta Gaba
by Mr. Sali Metani
ru1d by Ms. Julinda Hajno
Counsel: Prof. James Crawford
Mr. Philippe Sru1ds
by the Arbitral Tribunal
consisting of
Prof. Dr. Karl-Heinz Bockstiegel, Pres ident
Mr. Fred F. Fielding, Esquire, Arbitrator
Prof. Andrea Giardina, Arbitrator
Date of Awru·d:
April 29, 1999
Annex 377
TABLE OF CONTENTS
Abbreviations used
A.
B.
Introduction
Procedure
2.
3.
Procedure Leading to Decision on Jurisdiction
Procedure Leading to Award on Merits
Decision on Documents Submitted by Tradex with
Letter of 4 December 1998
4. Declaration of Closure of Proceeding (Rule 38)
C.. Relief Sought
D. Sunuumy of Facts and Contentions
E. Legal Scope of Decision on Me1its, Applicable Law
F. Reasons for the Decisions
1. Burden of Proof
2.
3.
4.
5.
Rules of Evidence
Major Disputed Conditions for the Claim
a) "Foreign Investment"
b) Expropriation
c) Illegality or Wrongfulness
d) Compensation
Foreign Investment by Tradex
a) Investment by Tradex
b) Broad Interpretation of "Foreign Investment"
c) Relevance of Financial Sources of Such Foreign Investment
d) Fach.ial Considerations Investment
e) Legal Considerations-Investment
Expropriation
a) Preliminaiy Observations
b) Ptivatization Process prior to August 1992
c) Decision No. 364 of22 August 1992
d) Alleged Invasion August/September 1992
e) Decision 452 of 17 October 1992
f) Berisha Speech of27 October 1992
g) Alleged Occupation October ovember 1992
2
page m
Paragraph
4
4
4
7
12
12
12
14
18
19
19
19
22
22
23
23
24
25
25
25
26
27
29
30
31
32
32
33
34
35
35
Annex 377
h) Alleged Occupation and Destmction of Crops
by Animals on 4 December 1992 36
i) Alleged Occupation by Villagers in December 1992 37
j) Dissolution of tl1e Joint Venture in April 1993 38
k) Issuance of Titles to Mr. Pellumbi and Others 40
1) Decisions and Measures after the Dissolution
Agreement of 21 April 1992 40
m) Combined Evaluation of the Decisions and
Events as Expropriation 41
n) General Conclusion 44
6. Costs of the Proceedings 44
G. Decisions 44
3
Annex 377
72. Though Aliicle 4 also mentions ' ationalization" as a possible basis for a claim, Tradex has not
alleged that its investment was nationalized and, therefore, this aspect of a possible claim also does not
have to be considered.
F. Reasons for the Decisions
1. Burden of Proof
73. As many factual aspects of this Case are disputed between the Pmties, the Tribunal at the outset has
to establish who has the burden of proof, i.e. who has to show the elements required as conditions for the
claim, and- insofm· as they are disputed- has to prove them to the satisfaction of the Tribunal.
74. As seen above, the conditions for the compensation claimed by Tradex are mentioned in Alt. 4 and
5 of the 1993 Law. TI1e wording of these provisions confirms what can be considered as a general principle
of international procedure-and probably also of viltually all national civil procedural laws- , namely that
it is the claimant who has the burden of proof for the conditions required in the applicable substantive rnles
of law to establish the claim. In the ICSID Case Al-b/87/3, Asian Agiiculh1ral Products Ltd. v. Republic of
Sri Lm1ka (published in 6 ICSID Review- Foreign Investment Law Journal (1991 ), p. 527 seq.) the
T1ibunal considered this to be one of the "established international law rules" (at p. 549), relying on Bin
Cheng, General Principles of Law as Applied by International Comis m1d Tribunals, Cambridge 1987, p.
327, and fmiher sources. Relying also on Bin Cheng (p. 329-331 , with quotations from fiuther supp01i ing
authorities), the Tribunal also considered as an established international law rule that "A Pa1ty having the
burden of proof must not only b1ing evidence in supp01t of his allegations, but must also convince the
T1ibunal of their truth, lest they be disregarded for want, or insufficiency, of proof' (at p. 549).
75. Tims, taking these considerations into account, this T1ibunal concludes that Tradex has the burden
of proof, in the above sense, for the conditions required in the 1993 Law to establish its claim for
compensation.
2. Rules of Evidence
76. Aft.er having established which Pmty, in principle, has the burden of proof, the Tribunal must now
clmify the mles of evidence applicable in tl1is Case in order to establish the procedmal framework within
which it has to decide whether or not a disputed fact has, indeed, been proved.
77. P1i111arily, the rules on evidence in this Case m·e established by Rules 33 to 3 of the ICSID
Al-bitration Rules. Paiticulai·ly relevant is Rule 34 (1):
20
Annex 377
ANNEX 378
II Ubra,.,, HDOm li4l2 ueor. ot •
GENERAL PRINCIPLES
OF LAW
as applied by
INTERNATIONAL COURTS AND TRIBUNALS
Department of State ----
BY DEC 7 1987
BIN CHENG, PH.D., LICENCIJ ~ DRO~'!'::i'./ U.ltctf~I
Lt1ctur,r in Int,rnational Lm p • ___ -· -----
Univ,rnty Coll,g,, London
WITH A FOREWORD BY
GEORG SCHW ARZENBERGER, PH.o., DR.JOB.
R11ad1r in Int,rnational Law in th• Unit11rrit11 of London;
Vic,-D,an of th, Faculty of La'rD•, Uni'D1rrit11 CoU1gt1, London
CAI\I BRI OGE
GROrrIUS PUBLICArfIONS LII'vll rED
IH87
Annex 378
t""
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ADMINISTRATION
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Annex 378
326 Judicial P·roceedings
of information exclusively in the possession of another party, and
this well-known principle of domestic law is one which it seems to
me an international tribunnl is justified in giving application in a
proper case. " '
An attempt hns been made above to elicit some of Lhe
" common-sense principles underlying rules of evidence u as
they have been applied by international tribunals. It is quite
natural, if not inevitable, that these principles should be the
same in different legal systems, since, in the final analysis, they
merely represent the concrete embodiment of the long experience
of judges in seeking to ascertain the truth. To sum up, the
words of the British Commissioner in the Alenco City Bombardment
Claims (1930) may be quoted: -
" If, after giving due weight to all these considerations, it [the
Commission] feels a reo.sonable doubt ns to the truth of any alleged
fact, that fact cannot be said to be proved. But if the Commissioners,
acting as reasonable men of the world and bearing in mind
the facts of human nature, do feel convinced that o po.rticular event
occurred or state of affairs existed, they should accept such things
as established.'' 5
In dubio pro rco. •
nURDEN OF PROOF
We may now turn to the question of burden of proof and inquire
whether international tribunals admit the existence of any
general principles of law governing its incidence.
In this connection, the Parker Case (1926), decided by the
Mexic~n-United States General Claims Commission (1923},
needs to be carefully examined; for the language used by tlie
Commission in that case has sometimes given rise to the
impression 7 that, contrary to the view generally accepted by
' Me:1.-U.8. G.C.C. (1023}: Op. of Com., 1929, p. 61, o.t p. 65.
5 Brit .• Mex. Cl.Com, (1026): D.O. by Britisl1 Commi:!Jsiooer, Dec. ,! Op. of Com.
p. 100, at p. 109.
• Spu.n •• U.8. Cl.Com. (1871): Zaldioar Ca1e (1882), 8 Int.Arb., p. 2982. U.S.Ven.
M.C.C. (1008): Gaae Ca1e, Ven.Arb. 1908, p. lfW, at p. 167. ICJ:
Corfu Channel Caae (Merits) (HJ4!J), D.O. by Efcr, !CJ Report, 1949, p. 41
at pp. 120, 124, 129.
1 See Fran.,Mex. Cl.Com. (1024): Pimon Ca,e (1028), Juri1prudence, p. 1, &t
pp. 94-5.
Annex 378
Proof and Bur,len of Proof 327
international tribunals, it gave n negative answer to the
question. 11
In the first place, the Commission held as follows: -
" The Commission expressly decides thnt municipnl restrictive
rules of ndjective law or of evidence o.nnot be here introduced nnd
given effect by clothing them in such phrases as ' universal principles
of law,' or' the general theory of law,' and the like. On the contrary,
the greatest liberality will obtain in the admission of evidence before
this Commission with o. view of discovering the whole truth with
respect to each clnim submitted .... As nn international tribunal,
the Commission denies the existence in international procedure of
rules governing the burden of proof borrowed from municipal
procedure." '
It mny, however, be pointed out thnt, with regnrd to principles
of adje tive law in general, the reference in the decision to
" 'universal principles of law,' or 'the genernl theory of lnw,'
and the- like,'' relates only to the misuse of these terms to cover
" municipal restrictive rules of adjective law or of evidence "
and in no way excludes a priori, the existence of true general
principles of adjective lnw applicable to all legal systems; for
the same Commission clearly recognised that " with respect
to matters of evidence they [international tribunals] must give
effect to common-sense principles underlying rules of evidence
in domestic law.'' 10 ,
With regard to the incidence of the burden of proof in
particular, international judicial decisions are not wanting
which expressly hold that there exists a general principle of
law plncing tl1e burden of proof upon the claimant and thnt this
principle is applicable to international judicial proceedings. In
Tho Queen Gase (1872), for inst0:nce, it was held that: -
"One muat follow, ns a general rule of solution, the principle
of jurisprudence1 accepted by the law of all countries, that it is
for the claimant to make the proof of his claim. n 11
8 Op. of Com., 1927, p. 85, at pp, 89-40.
9 Ibid., o.t p. :m.
10 Bee 8upra, p. 808.
11 2 Arb.Int., p. 706, at p. 708. (Tran~l.}
S~e Lord Phillimore in the Advir,ory Committee of Jurists for the Eetn.bliel1•
mcnt of the PCI.T, Procls,"crbau:r:, p. 816. Speo.king of the " principcs du
droit commun 9ui sont applico.hles aux rapports intemationaux," be said:
" Another erinctple of the eame kind ia tbn.t by which the plaintiff must prove
hie contention under penalty of having his e&ee refuecd,"
Fran.•Germ. M.A.T.: Firme Ruinart Per, et Fil, Ca,e (1927), 7 T.A.M.,
Annex 378
328 Judicial Proceedinys
It may, therefore, be asked whether the Mexican-United
States General Claims Commis ion (1923) really maintained
tho.t the maxim onu.s probandi adori incu1nbit did not ex.press
a generul prin iplc of law or that in any event it was not
applicable to international judicial proceedings, thus contrndi
•ting The Queen. Case (1872). 'l'he answer would appear to
be in the negative. It would seem that the Commission did not
use the term " burden of proof H in its usual sense. Thus after
saying that "as an international tribunal, the Commission
denies the existence in international procedure of rules
governing the burden of proof borrowecl from municipal
procedure," the Conunia ion continued: -
" On tho contrary, it holds that it i·s the duty of the re ·pectivo
Agencies to co.operate in scar hing out and presenting to this tribunal
all facts throwing any light on the merits of the claim pre ented.'' 12
I
} 1rom the context of this passage, it is clear th~t the Commission
used the term " burden of proof " in the sense of a duty to
produce evidence, and to disclose the facts of the case. But
the tenn is used in a. different sense when it is asked on whom
the burden of proof falls, or when it is said that the burden of
proof rests upon this or the other party.
To illustrate the distinction between these two meanings of
the term, the Taft Case (192G), de ·ided by the German.United
States Mixed Claims Commission (1922) may be mentioned. In
this case, the claimants alleged that their ship the Avon had
been sunk by a German submarine. On behalf of the claimants,
0 all available evidence tending however remotely to establish
the loss of the .11110n through an net of war has been diligently
assembled and presented by able counsel," while on behalf of
p. 600, at p. 601: The Tribunal, " in the absence of any contrary provision of
tho Treaty, cnn only rely on the usual principle that lays the burden or proof
on the plaintiff" ('l'ransl.).
Greco-Turk. M.A.T.: Banque d'Orient Case (1028), 7 T.A.M., p. 967, ai
p. 978.
Bee oleo cases cited infra pauim.
12 Op._~/ Com. 102'1, p. 35, at p. OU. The Coll_owing paHal{el! from .th~ same
dec1s1on are to tho so.mo effect: " The Parties before this Cornmumon arc
sovereign Nations who are in honour bound tD make full dill!!clgijuree of th facts
in each case eo Car 11.11 eucb facts are within their knowledge, or can reasonably
be ascertained by them " (p. 40). " Article 75 0£ the eaid Hague Convention
o( 1907 affirms the tenet adopted here by providing that the parties undertake
to supply the tribunal, ae fully as they con ider po 11ible, with all the information
required for deciding the case '' (p. 40).
Annex 378
Proof and Burden oj Proof 329
the clefendant, " o. full disclosure has been made to the Commission
by the German Agent '' of the activities of German
submarines operating at the material time in the vicinity of
the Avon's projected course. In his conclusion the Umpire
held, however, that:-
" Weighing the evidence as a whole ... , the claimants have
foiled to discharge the burden resting upon them to prove that the
Avon was lost through an act of war.'' u
Thus although both parties had scrupulously observed the duty
of disclosing all material facts relative to the merits of the
claim, it was held that the claimants hncl failed to discharge
their burden of proof. Durden of proof, however closely related
to the duty to produce evidence, therefore implies something
more. i.t. It means that a party having the burden of proof must
not only bring evidence in support of his allegations, but must
also convince the Tribunal of their truth, lest they be disregarded
for want, or insufficiency, of proof.
The real intention of the Yexicnn-United States General
Claims Commission (1923) may be gathered from what it went
on to say, nf ter the above quoted passage : -
" The Commission denies the ' right• of the respondent merely
to wait in silence in cases where it is reasonable that it should speak.
... On the other hand, the Commission rejects the contention that
evidence put forward by the claimant and not rebutted by the
respondent must necessarily be considered os conclusive. But, when
the claimant hos estnblished a prime. focie co.se and the respondent
has afforded no evidence in rebuttal tqe latter may not insist that
the former pile up evidence to establish its allegations beyond a
reasonable doubt without pointing out some reason for doubting.
While ordinarily it is encumbent [sic] upon the party who alleges o.
.fact to introduce evidence to establish it, yet before this Commission
this rule does not relieve the respondent from its obligo.tion to lay
before the Commission all evidence within its possession to establish
the truth, whatever it may be .... In any case where evidence
which would probably influence its decision is peculiarly within the
knowledge of the claimant or of the respondent government, the
u Dec. 4 Op., p. 801, at p. 805.
u The Mex.-U.8. G.C.C. (1023) itself seems also ta have accepted this view, since,
despile the fact that it identified the principle it enunciated with Art. 75 of the
Hague Coovention of 1007, it ,111aid that that Convention contained no provision
ae to burden of proof (loo. oit., p. 40).
Annex 378
330 Judicial Procecdin9s
failure to produce it, unexplnined, may be taken into account by
the Commission in renching n decision.'' u
'fhis, then, is not so much a denial of the validity of the maxim
onus prol1muli llCtorr: incmnbit us n general principle of lnw,
but rather a stntement that in proper cases the Commission
might be satisfied with primn facie evidence whenever the
allegations, if unfounded, could be easily disproved by the
opposing party. Strictly speaking, however, this is a question
of the quantum of evidence required to sustain nn allegation
or a claim, and not of the burden of proof.
1.'hat the Commission in the Parker Ca.Je (192G) was not
speaking of burden of proof, and thnt in practice it admitted
the validity of the general principle omts probandi actori
incumbit may also be gathered from its decision in the Pomeroy' s
El Paso Transfer Co. Case (1930). In this case, although the
deciding Commissioner was of the 6pinion that:-
" The Mexicnn Agency has not fully complied, in regard to
evidence, with the duties imposed upon it by this arbitration as
defined by the Commission in pnrngrnphs 5, 6, 7 of its decision in
the case of William A. Parker," 18
he disallowed the claim because : -
" lJ! this case it appears that the evidence submitted by the
claimnnt government is not sufficient to establish a prima fo.cie
case." 11
Indeed, the Commission on several occasions held that:-
" The mere fact that evidence produced by the respondent
government is meagre, cannot in itself justify on award in the
absence of concrete and convincing evidence produced by t.he
claimant government." 18
This is all that is meant by the general principle of law that
the burden of proof is upon the claimant.
u Loa. cit., pp. 80-40.
11 Op. of Com. 1981, p. 11 at p. 4.
11 Ibid., at p. 7.
u Melczcr Mining Co. Ca,e (1929), Op. of Com. 19!W, p. 228, at p. ~- See also,
Archuleta Ca,e (1928), -ibid., p. 78, at p. 77; Co,tello Ca,e (1929), ibid., p. 252,.
at p. 264..
Annex 378
Proof and Burden of Proof 331
Thus, in spite of appearance to the contrary, the Parker
Case (1926), when properly understood, does not deny the
validity and applicability of the general principle onus probandi
actori incumbit in international judicial proceedings. In the first
plucet when the Tribunal denied the existence of any general
legal principles governing the incidence of the burden of proof,
it was not using the term in its commonly accepted meaning.
Moreover, the Tribunal in practice applied the principle onus
probandi actori incumbit.
Another point raise,l by the Parker Case (1926) may also
be m~ntioned. The Commission said : -
" The absence of international rules relative to a division of the
burden of proof between the pnrties is especially obvious in international
arbitrations between governments in their own right, os in
those cases the distinction between a plaintiff and a respondent
often is unknown, and both parties often have to file their pleadings
at the same time.'' 11
To this the Chevreatt Ca$e (1931) provides a ready answer.
The case which was between France and Great Britain concerned
alleged unlawful arrest and improper treatment of a
French national.
" The Arbitrator, before examining these various grievances,
deems it his duty to make some observation concerning the burden
of proof. While the British Government asserts that the burden is
upon the French Government ns the plaintiff, the latter maintains
that in the present case there is neither plaintiff nor defendant. In
this connection, it calls attention to an Order issued on .\ ugust 15,
1920, by the Permanent Court of International Justice, where it
was said that, the case in issue having been submitted by a
compromis, there was neither plaintiff nor defendant, But on that
point, in the opinion of the Arbitrator, there is a. misunderstanding.
The Order only refers to a question of procedure and decides nothing
in regard to questions relating to the burden of proof. The matter
is complicated, and if Article 3 of the compromis imposes upon both
Parties the duty of 'determining to the satisfaction of the Arbitrator
the authenticity of all points of fact offered to establish or disapprove
responsibility,' that provision, in the Arbitrator's opinion, is not
intended to exclude the application of the ordinary rules of evidence.
n Loo, cit., p. 40,
Annex 378
Judicial Proceedings
It only shows that there can also be a duty to prove the existence
of facts alleged in order to deny responsibility." :o
Tlius, despite the fuct that there was no procedural distinction
between the plaintiff and defendant, the burden of prdof was laid
upon France, who was the claimant in fact. 21
That, in nny given case, it is possible to determine the effective
positions of the parties without reference to questions of
procedure is shown by the Corfu Cham1el C<1.'le (Jurisdiction)
(1948), wliere, without considering the form in which the case
was submitted, the International Court of Justice held that:-
" There is in £net a claimant, the United Kingdom, and n
defendant, Albania." 22
The Corfu Channel Case was first brought before the Court by
a unilateral application of the United Kingdom (May 22, 1947).
When the Albanian Preliminary Objection to the Court's jurisdiction
was rejected by the Court on March 25, 1948, the two
parties notified the Court on the same day of the conclusion of a
Special Agreement. That Special Agreement formed the basis
of subsequent proceedings before the Court in that case. 23 But
the respective positions of the parties as regards buTden of proof
was not thereby altered. As far ns the British claim was concerned,
the burden of proof was undoubtedly laid upon the United
Kingdom. 2' The Court expressly held that the mere fact that
an act contrary to international law had occurred in Albanian
territory did not shift the burden of proof to Albania. :is
Indeed, it may be said that the term actor in the principle
..._ onus probandi actori incumbit is not to be taken to mean the
,. plainti_ff from the procedural standpoint, but the real claimant
'- in view of the issues involved. The ultimate distinction between
the claimant and the defendant lies in the fact that the claimant's
submission requires to be substantiated, whilst that of the
defendant does not.
It may in fa.ct happen that the claimant is procedurally the
defendant, as in tq.e United States National., in '!tf OTocco Case
20 r .c.A.: 2 UNRIAA, p. 1118, a.t pp. 1124-26.
21 CJ. PCIJ: O«car Chinn Cau (1~). A/B 68. Bee pa.rticularly, p. 81.
22 ICJ Reports 1947- 1948, p. 15, at p. 28.
2:1 (Order or M1uch 26, 1948), ibid., p. 53, at p. 55. 2, (Meritr ), ICJ Reports 1949, p. 4, at pp. 18 et ,eq.
:u Ibid., p. 18.
Annex 378
I •
Proof and Burden of Proof 333
(1952), between France and the United States. 241 In that cnse,
the United ~tates was in fnct in the position of a clnimnnt, in
that it claimed special rights und privileges in the French
Zone of :Morocco and nlleged that certain nets of the Moroccan
authorities were contrary to such rights and privileges. France,
in denying the existence of these rights and privileges and
maintaining the legality of the acts of the Moroccan authorities,
was in fact. in the position of a defendant; for she could rely
on the principle thnt neither restrid.tions on sovereignty nor
international responsibility are to be presumed. 27
For political reasons, however, the French Government, in
order to bring the dispute before the Court, took the initiative and·
applied to the International Court of J usticc under the Optional
Clause, thus abandoning, as it said in its :Memorial,28 its logical
position as defendant and placing itself, from the procedural
standpoint, in the position of a plnintiff. Thereupon, the United
States claimed that the burden of proof lay upon France because
the latter had assumed the position of plaintiff, and because
of " the nature of the legal issues inv6lv.ed." =11
This, however, ·wns not the view taken by the Court. What
the Court in fort did in its judgment was to examine each of
the United States claims, and rejected them to the extent to
which they were not supported by treaties which the United
States was entitled to invoke against Morocco. 30 The United
States also adduced "custom and usage" nR a basis for some
of its alleged special rights and privileges. The Court here
specifically laid the burden of proof upon the United States and
rejected the allegation for want of sufficient evidence of surh
a custom binding upon Morocco. 31 In the operative part of the
judgment, the Court referred to only one of th~ Submissions of
the French Government. But, even in this cnse, its rejection of
the French Submission that the Decree of December 30, 1948,
issued by the French Resident General in Morocco, was lawful,
was in fact only a favourable decision on the United States
Submission tliat the Decree violated the treaty rights of the
211 ICJ Rtp;!)rt.a 1952, p. 176, See the present writer's " Rights or United States
Natiooafe in the French Zone or Morocco," 2 I.C.L.Q. (1968), p. 854.
21 Bee 8Upra, pp. 805-6.
:H /CJ Plcading8, 1 Moroc co Ca8c, pp. 29-30.
n Ibid., p. 180; /CJ Report, 1952, p. 176, at p. 180.
:,o Cf. ICJ Report8 1952, p. 170, at pp. 212-18.
:11 Ibid ., at pp. 200, 202.
Annex 378
334 Judicial Proceeding!
United States derived from th~ Act df Algeciras of 1906 and
its treaty of 1836 with Morocco. Thus, notwithstanding its
procedural position of respondent, the burden of proof was Ju.id
upon the United States, the claimant in fact.
There may, however, be cases where there is genuinely no
distinction between claimant and defendant. Thus in the case
of a territorial dispute, both parties put fonvard rival claims.
It will then be incumbent upon each party to substantiate its
contention. In the Palmas Case (1928), the ATbitrator held
that: -
,' Ench party is called upon to establish the arguments on which
it relies in support of its clnim to sovereignty over the object in
dispute." :i:1
This is not, however, an exception to the general principle that
the burden of proof fnlls upon the claimant, hut is due to the
fact that both parties are. in the position of claimants before
the tribunal.
Taking into consideration that tlie actor, whether termed
claimant or plaintiff, is to be determined according to the issues
involved rather than the incidents of procedure, what has been
said above shows that there is in substance no disagreement
among international tribunals on the general legal principle that
the burden of proof falls upon the claimant, i.e., "the plaintiff
must prove his contention under penalty of having his c1u;e
refused." 3 :s Actore non probante reus absolvitwr.
The burden of proof so far discussed relates to the proof of the
factual basis of the claim ns a whole, although in a single action,
there may be several claims, as well as counter-claims. '£his
mny be called the ultimate burden of proof.34 The term burden
of proof may, however, also b~ used in a more restricted sense as
referring to the proof of individual allcgntions advanced by the
parties in the course of proceedings. '11his burden of proof may
be called procedural. As has been seen at the beginning of
the present Chapter, in this sense of the term, the burden of
proof rests upon the party alleging the fact, unless the truth
of the fact is within judicial knowledge or is presumed by the
32 P.C.A.: 2 H.C.R., p. 83, at p. 00.
:s:i Supra, p. 827, note 11.
3-' Cf. A. T. Denning, "Presumptions and Burdens," 61 L.Q.R. (1046), pp.
879-88.
Annex 378
Proo/ and Burden of Proof 335
Tribunal. In the absence of convincing evidence, the Tribunal
will disregard the allegation. 33
In conclusion, it may be said that the aim of a judicial
inquiry is to establish the truth of a case, to which the law may
tl1en be applied. While the greatest latitude is enjoyed by
international tribunals in the carrying out of their task, their
activity is nevertheless governed by certain general principles
of law based on common sense and developed through human
experience. These ... principles crente certain initial presumptions,
guide the weighing of evidence and determine the incidence
of the burden of proof.
35 Supra, pp~ 807 et ,eq.
Annex 378
ANNEX 379
Date of dispatch to the parties: December 16, 2002
International Centre for
Settlement of Investment Disputes
MARVIN FELDMAN
V.
MEXICO
CASE No. ARB(AF)/99/1
President
Members of the Tribunal
Secretary of the Tribunal
In Case No. ARB(AF)/99/1,
AWARD
: Prof. Konstantinos D. KERAMEUS
: Mr. Jorge COVARRUBIAS BRA VO
Prof. David A. GANTZ
: Mr. Alejandro A. ESCOBAR
and Ms. Gabriela ALVAREZ A VILA
between Mr. Marvin Roy Feldman Karpa,
represented by
Mr. Mark B. Feldman, Ms. Mona M. Murphy, Mr. Douglas R.M. King
of Feldman Law Offices, P.C. (formely Feith & Zell, P.C.), and
and
Mr. Nathan Lewin and Ms. Stephanie Martz of the Law Firm of Miller, Cassidy,
Larroca & Lewin, L.L.P.
The United Mexican States,
represented by Lie. Hugo Perezcano Diaz, Consultor Juridico Subsecretaria de
N egociaciones Comerciales Internacional es
Ministry of Economy
THE TRIBUNAL,
Composed as above,
Makes the following Award
Annex 379
TABLE OF CONTENTS
A Introduction and Summary of the Dispute ................................................................................................ 1
B Representation ............................................................................................................................................. 1
C The Arbitral Agreement. ............................................................................................................................. 1
D Facts and Allegations .................................................................................................................................. 2
E The Proceedings .......................................................................................................................................... 8
F Jurisdiction ................................................................................................................................................ 13
F.1 Standing ............................................................................................................................................. 14
F.2 Time Limitation ................................................................................................................................ 15
F .3 Admissibility of an Additional Claim under NAFTA Article 1102 .............................................. 15
F .4 Relevance of Claims Pre-Dating N AFT A's Entry into Force ....................................................... 15
G Additional Jurisdictional Issues ............................................................................................................... 15
G.1 Estoppel with regard to the Period of Limitation and the Basis of the Claim .............................. 15
G.2 Exhaustion of Local Remedies ........................................................................................................ 21
G.3 Analysis ............................................................................................................................................. 23
G.4 Other Jurisdictional Constraints ....................................................................................................... 26
H Merits ......................................................................................................................................................... 30
H.1 Expropriation: Overview of the Positions of the Disputing Parties .............................................. 30
H.2 Applicable Law: NAFTA Article 1110 and International Law ..................................................... 33
H.3 Respondent's Actions as an Expropriation Under Article 1110 .................................................... 39
H.3.1 Many Business Problems Are Not Expropriations ................................................................ 41
H.3.2 Gray Market Exports and International Law .......................................................................... 42
H.3.3 Continuing Requirements of Article 4(III) ofIEPS Law ....................................................... 44
H.3.4 Public Purpose .......................................................................................................................... 54
H.3.5 Non-Discrimination .................................................................................................................. 55
H.3.6 Due Process/Fair and Equitable Treatment/Denial of Justice ............................................... 56
H.3.7 The Claimant in Control of CEMSA ...................................................................................... 58
H.3.8 Other NAFTA Decisions ......................................................................................................... 59
I National Treatment (NAFTA Article 1102) ............................................................................................ 63
I. l Views of the Disputing Parties ........................................................................................................ 64
I.2 Analysis by the Tribunal .................................................................................................................. 67
Annex 379
I.2.1 In Like Circllillstances .................................................................................................................. 69
I.2.2 Existence of Discrimination ......................................................................................................... 71
I.2.3 Discrimination as a Result of Nationality ................................................................................... 75
I.2.4 Most Favored Investor Requirement? ......................................................................................... 77
J Damages .................................................................................................................................................... 79
K Costs and Fees ........................................................................................................................................... 86
L. Decision ..................................................................................................................................................... 88
Annex 379
1.2.2 Existence of Discrimination
173. The limited facts made available to the Tribunal demonstrate on balance to a
majority of the Tribunal that CEMSA has been treated in a less favorable manner than
domestically owned reseller/exporters of cigarettes, a de facto discrimination by SHCP, which is
inconsistent with Mexico's obligations under Article 1102. The only confirmed cigarette
exporters on the limited record before the tribunal are CEMSA, owned by U.S. citizen Marvin
Roy Feldman Karpa, and the Mexican corporate members of the Poblano Group, Mercados I and
Mercados II. According to the available evidence, CEMSA was denied the rebates for OctoberNovember
1997 and subsequently; SHCP also demanded that CEMSA repay rebate amounts
initially allowed from June 1996 through September 1997. Thus, CEMSA was denied IEPS
rebates during periods when members of the Poblano Group were receiving them (see supra
para. 167, memorial, p. 3).
174. Even if Mexico is auditing Mr. Poblano, the process was begun long after the
audit of CEMSA, and according to the files provided to the Tribunal concerning this audit, there
is no documentation that the audit continued after approximately March 2000, or that it even
involved IEPS rebates (transcript, July 11, 2001, p. 2). CEMSA's rebates (before and after
audits) have already been denied, and several years later no such action has been taken with
regard to the Poblano Group. Arguably, the fact that CEMSA has been audited well before any
other domestic reseller/exporters is in itself evidence of discrimination, even if SHCP is legally
authorized to audit all taxpayers. If Mexican authorities are auditing or intend to audit other
taxpayers who are in like circumstances with CEMSA, the Government of Mexico, as the only
party with access to such information, has not been particularly forthcoming in presenting the
necessary evidence. The two files presented to the Tribunal during the hearing ( designated nos.
328 and 333) are incomplete, indicating no final or even continuing audit action (transcript, July
11, 2001, p. 2). The only clear knowledge that Mr. Poblano is subject to some sort of audit was
supplied by the Claimant (first Feldman affidavit, para. 92), and counsel for the Claimant asserts
that the evidence in the record demonstrates only that Mr. Poblano is subject to a personal audit
for 1997 (transcript, July 13, 2001, p. 155). The Mexican Government has declined to provide
any specific information as to the number of other possible taxpayers in like circumstances
(resellers). The government's witness, Mr. Obregon-Castellanos, admitted that there were more
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Annex 379
than five, and likely more than ten firms registered as cigarette exporters (transcript, July 9,
2001, p.141), but was evasive with regard to tobacco exporter numbers even though he testified
confidently and explicitly that there were 400 registered exporters of alcoholic beverages
(transcript, July 11, 2001, p. 10).
175. The evidence also shows that CEMSA was denied registration as an export
trading company, apparently in part because this action was filed, and in part as a result of the
ongoing audit of the rebates for exports during 1996 and 1997, even though, as Mr. Diaz
Guzman indicated, three other cigarette export trading companies had been granted registration.
An unsigned memorandum which reasonably could have been generated only in SHCP indicates
that registration was being denied on the basis of the audit of the Claimant's rebate payments.
There is no evidence that any domestic reseller/exporter has been denied export privileges in this
manner. Moreover, there appears to have been differential treatment between CEMSA and Mr.
Poblano with regard to registration issues as well. According to the Claimant's witness, Mr.
Carvajal, taxpayer CEMSA filed its application for export registration status on June 30, 1998;
information was still being requested in writing seven months later. For taxpayer Mr. Poblano,
information was requested by SHCP orally within 14 days of the date of Poblano' s application,
and any questions were apparently resolved (transcript, July 11, 2001, p. 3).
176. The extent of the evidence of discrimination on the record is admittedly limited.
There are only a few documents in the record bearing directly on the existence of differing
treatment, particularly the statement of Mr. Diaz Guzman, the "mystery" memorandum from
SHCP's files, and the tax registration statement for Mercados Regionales, owned by the Poblano
Group. One member of this Tribunal believes that this evidence on the record is insufficient to
prove discrimination (see dissent). The majority's view is based first on the conclusion that the
burden of proof was shifted from the Claimant to the Respondent, with the Respondent then
failing to meet its new burden, and on an assessment of the record as a whole. But it is also
based on a very simple two-pronged conclusion, as neither point was ever effectively challenged
by the Respondent:
a. No cigarette reseller-exporter (the Claimant, Poblano Group member or otherwise) could
legally have qualified for the IEPS rebates, since none under the facts established in this
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Annex 379
case would have been able to obtain the necessary invoices stating the tax amounts
separately.
b. The Claimant was denied the rebates at a time when at least three other companies in like
circumstances, i.e. resellers and exporters ( see supra para. 171) apparently including at
least two members of the Poblano Group, were granted them.
177. On the question of burden of proof, the majority finds the following statement of
the international law standard helpful, as stated by the Appellate Body of the WTO:
. . . various international tribunals, including the International Court of Justice,
have generally and consistently accepted and applied the rule that the party who
asserts a fact, whether the claimant or respondent, is responsible for providing
proof thereof. Also, it is a generally accepted canon of evidence in civil law,
common law and, in fact, most jurisdictions, that the burden of proof rests upon
the party, whether complaining or defending, who asserts the affirmative of a
claim or defence. If that party adduces evidence sufficient to raise a presumption
that what is claimed is true, the burden then shifts to the other party, who will fail
unless it adduces sufficient evidence to rebut the presumption. (Emphasis
supplied.)38
Here, the Claimant in our view has established a presumption and a prima facie case that the
Claimant has been treated in a different and less favorable manner than several Mexican owned
cigarette resellers, and the Respondent has failed to introduce any credible evidence into the
record to rebut that presumption.
178. In weighing the evidence, including the record of the five day hearing, the
majority is also affected by the Respondent's approach to the issue of discrimination. If the
Respondent had had available to it evidence showing that the Poblano Group companies had not
been treated in a more favorable fashion than CEMSA with regard to receiving IEPS rebates, it
38 United States - Measures Affecting Imports of Woven Wool Shirts and Blouses from
India, Adopted 23 May 1997, WT/DS33/AB/R, p. 14. Accordingly, Asian Agricultural Products
Limited v. Republic of Sri Lanka, ICSID Reports, pp. 246, 272, 1990. ("In case a party adduces
some evidence which prima facie supports his allegation, the burden of proof shifts to his
opponent.").
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Annex 379
has never been explained why it was not introduced. Instead, the Respondent spent a substantial
amount of its time during the hearing and in its memorials seeking (unsuccessfully in the
Tribunal's view) to demonstrate that CEMSA and the Poblano Group were related companies (as
there could be no discrimination, presumably within a single company group)39. Yet, if the
Poblano Group firms had not received the rebates, that evidence of relationship would have been
totally irrelevant. Why would any rational party have taken this approach at the hearing and in
the briefs if it had information in its possession that would have shown that the Mexican owned
cigarette exporters were being treated in the same manner as the Claimant, that is, denied IEPS
rebates for cigarette exports where proper invoices were not available? Thus, it is entirely
reasonable for the majority of this Tribunal to make an inference based on the Respondent's
failure to present evidence on the discrimination issue. It is also notable that despite the lengthy
presentation of evidence by the Respondent seeking (unsuccessfully in the Tribunal's view) to
link the Claimant with an alleged smuggling operation operated by or on behalf of Mr. Poblano,
export registration was nevertheless granted for Mr. Poblano's companies. This occurred at
approximately the same time as registration was being denied for CEMSA, apparently because of
the pending CEMSA audit. Again, the differing treatment of CEMSA and the Poblano Group is
obvious.
179. There is also evidence in the record to suggest that Lynx, an earlier Poblano
Group company, was treated somewhat more favorably by Mexico, as the Federal Fiscal
Tribunal decided in February 1996 that Lynx was entitled to IEPS rebates on cigarette exports,
39 Counter-memorial, para. 488; see, e.g., transcript, July 10, 2001, pp. 110-113. It
is undeniable that CEMSA and the Poblano Group maintained a business relationship; CEMSA,
inter alia, was a seller of cigarettes to several of the Poblano Group companies from time to
time, and had borrowed working capital from Mr. Poblano (memorial, paras. 101-102).
However, there is no evidence of any common stock ownership, common membership on
corporate boards of directors or any of the normal indices of common ownership and control.
Moreover, SHCP has treated the two as completely separate taxpayers, audited CEMSA early on,
while more than three years later no final action has been taken against the Poblano Group.
Clearly, there is no evidence that the Mexican government considered CEMSA and the Poblano
Group companies to be a common enterprise prior to this proceeding. Accordingly, this Tribunal
would not be inclined to treat them as such so as to defeat the Claimant's assertion of
discrimination.
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Annex 379
despite the likely absence of invoices stating the tax amounts separately (e.g. memorial, para. 36;
App. 1047-1070). As a result of this decision and Lynx' Amparo victory (which applied
specifically only to alcoholic beverage exports), SHCP also paid rebates to Lynx for IEPS taxes
applicable to cigarette exports in 1992, along with substantial additional amounts for interest and
inflation.40 This was a period during which CEMSA faced uncertainty over the availability of
rebates for cigarette exports, despite the fact that limited exports were made in 1992 by CEMSA.
However, by 1996, when SHCP recognized Lynx' right to the rebates, SHCP had denied rebates
to CEMSA for test shipments for several years.
180. All of this confirms a further weakness in the Respondent's argument that there
can be no de facto discrimination under circumstances where rebates are essentially granted
initially on the basis of a ministerial decision, with the detailed analysis coming later in the event
of questions or an audit. Given the Claimant's notoriety at SHCP over the years, the newspaper
articles and threats of litigation against SHCP officials, the audit that was initiated and then
abruptly terminated in 1995, the multiple meetings with SHCP officials, etc., it is difficult for the
Tribunal to believe that the Claimant's requests and actions were not well-known to and
carefully monitored by SHCP officials. Those factors certainly created the necessary conditions
for discrimination.
1.2.3 Discrimination as a Result of Nationality
181. It is clear that the concept of national treatment as embodied in NAFTA and
similar agreements is designed to prevent discrimination on the basis of nationality, or "by
reason of nationality." (U.S. Statement of Administrative Action, Article 1102.) However, it is
not self-evident, as the Respondent argues, that any departure from national treatment must be
40 See Zaga-Hadid testimony, transcript, July 13, 2001, p. 142, tables introduced into
evidence during the hearing. Allegations that Lynx had been intentionally paid excessive rebates
by SHCP were denied (third witness statement of Diaz-Guzman, App. 06455-06456) and further
disputed at the hearing by both parties. The evidence on this issue before the Tribunal is
conflicting, and the Tribunal is not convinced that the amounts paid, including interest paid and
the inflation adjustment for the 1993-1996 period, were in fact excessive.
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Annex 379
explicitly shown to be a result of the investor's nationality. There is no such language in Article
1102. Rather, Article 1102 by its terms suggests that it is sufficient to show less favorable
treatment for the foreign investor than for domestic investors in like circumstances. In this
instance, the evidence on the record demonstrates that there is only one U.S. citizen/investor, the
Claimant, that alleges a violation of national treatment under NAFTA Article 1102 (transcript,
July 13, 2001, p. 178), and at least one domestic investor (Mr. Poblano) who has been treated
more favorably. For practical as well as legal reasons, the Tribunal is prepared to assume that
the differential treatment is a result of the Claimant's nationality, at least in the absence of any
evidence to the contrary.
182. However, in this case there is evidence of a nexus between the discrimination and
the Claimant's status as a foreign investor. In the first place, there does not appear to be any
rational justification in the record for SHCP's less favorable de facto treatment of CEMSA other
than the obvious fact that CEMSA was owned by a very outspoken foreigner, who had, prior to
the initiation of the audit, filed a NAFTA Chapter 11 claim against the Government of Mexico.
Certainly, the action of filing a request for arbitration under Chapter 11 could only have been
taken by a person who was a citizen of the United States or Canada (rather than Mexico), i.e., as
a result of his (foreign) nationality. While a tax audit in itself is not, of course, evidence of a
denial of national treatment, the fact that the audit was initiated shortly after the Notice of
Arbitration (first Feldman affidavit, paras. 85-86) and the existence of the unsigned memo at
SHCP noting the filing of the Chapter 11 claim in the context of the Claimant's export
registration efforts, at minimum raise a very strong suspicion that the events were related, given
that no similar audit action was taken against domestic reseller/exporter taxpayers at the time.
183. More generally, requiring a foreign investor to prove that discrimination is based
on his nationality could be an insurmountable burden to the Claimant, as that information may
only be available to the government. It would be virtually impossible for any claimant to meet
the burden of demonstrating that a government's motivation for discrimination is nationality
rather than some other reason. Also, as the Respondent argues, if the motives for a government's
actions should not be examined, there is effectively no way for the Claimant or this Tribunal to
make the subjective determination that the discriminatory action of the government is a result of
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Annex 379
the Claimant's nationality, again in the absence of credible evidence from the Respondent of a
different motivation. If Article 1102 violations are limited to those where there is explicit
(presumably de Jure) discrimination against foreigners, e.g., through a law that treats foreign
investors and domestic investors differently, it would greatly limit the effectiveness of the
national treatment concept in protecting foreign investors.
184. This conclusion is consistent with that reached in an earlier Chapter 11
proceeding, Pope & Talbot v. Government of Canada. The Pope & Talbot tribunal indicated its
inclination to presume that discriminatory treatment of foreign investors in like circumstances
would be in violation of Article 1102. According to that tribunal such differences between
domestic and foreign investors would "presumptively violate Article 1102(2), unless they have a
reasonable nexus to rational government policies that (1) do not distinguish, on their face or de
facto, between foreign-owned and domestic companies, and (2) do not otherwise unduly
undermine the investment liberalizing objectives of NAFTA." One of that tribunal's concerns
was that if there had to be a showing that the discrimination was based on nationality, it would
"tend to excuse discrimination that is not facially directed at foreign owned investments" (Pope
& Talbot v. Government of Canada, Award on the Merits of Phase 2, April 10, 2001, paras. 78,
79, http://www.dfait-maeci.gc.ca/tna-nac/Award_Merits-e.pdf) (The Pope & Talbot tribunal, on
the facts, ultimately declined to find a violation of national treatment). In the instant case, the
treatment between the foreign investor and domestic investors in like circumstances is different
on a de facto basis, and such discrimination is clearly in conflict with the investment
liberalization objective found in Article 1102. This Tribunal sees no reason to disagree with the
Pope & Talbot tribunal's articulation in this respect.
1.2.4 Most Favored Investor Requirement?
185. NAFTA is on its face unclear as to whether the foreign investor must be treated in
the most favorable manner provided for any domestic investor, or only with regard to the
treatment generally accorded to domestic investors, or even the least favorably treated domestic
investor. There is no "most-favored investor" provision in Chapter 11, parallel to the most
favored nation provision in Article 1103, that suggests that a foreign investor must be treated no
less favorably than the most favorably treated national investor, if there are other national
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Annex 379
investors that are treated less favorably, that is, in the same manner as the foreign investor. At
the same time, there is no language in Article 1102 that states that the foreign investor must
receive treatment equal to that provided to the most favorably treated domestic investor, if there
are multiple domestic investors receiving differing treatment by the respondent government.
186. It may well be that the size of the domestic investor class here is larger than two -
one Mexican government witness stated that there might be 5-10 or more registered to export
cigarettes - and it may also be that some of those other investors have been treated in a manner
more similar to the Claimant's treatment than to the more favorable treatment afforded to the
Poblano Group. However, in the absence of evidence to this effect presented by Mexico - the
only party in a position to provide such information - the Tribunal need not decide whether
Article 1102 requires treatment equivalent to the best treatment provided to any domestic
investors. Presumably, ifthere was evidence that another domestic investor had been treated in a
manner equivalent to the Claimant, in terms of export registration, audit, and granting or
withholding of rebates, the Respondent would have provided that evidence to the Tribunal. In
this case, the known "universe" of investors is only two, or at the most three, one foreign (the
Claimant) and one domestic (the Poblano Group companies), and the Tribunal must make its
decision on the evidence before it. Thus, the only relevant domestic investor is the Poblano
Group and the comparison must be between the Poblano Group and Claimant.
187. On the basis of this analysis, a majority of the Tribunal concludes that Mexico has
violated the Claimant's rights to non-discrimination under Article 1102 of NAFTA. The
Claimant has made a prima facie case for differential and less favorable treatment of the
Claimant, compared with treatment by SHCP of the Poblano Group. For the Poblano Group and
for other likely cigarette reseller/exporters, the Respondent has asserted that audits are or will be
conducted in the same manner as for the Claimant, and implied that they will ultimately be
treated in the same way as the Claimant. However, the evidence that this has occurred is weak
and unpersuasive. The inescapable fact is that the Claimant has been effectively denied IEPS
rebates for the April 1996 through November 1997 period, while domestic export trading
companies have been given rebates not only for much of that period but through at least May
2000, suggesting that Article 4(III) of the law has been de facto waived for some if not all
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Annex 379
domestic firms. While the Claimant has also been effectively precluded from exporting
cigarettes from 1998 to 2000, there is evidence that the Poblano Group companies have
apparently been allowed to do so, notwithstanding Article 11 of the IEPS law. Finally, the
Claimant has not been permitted to register as an exporting trading company, while the Poblano
Group firms have been granted this registration. All of these results are inconsistent with the
Respondent's obligations under Article 1102, and the Respondent has failed to meet its burden of
adducing evidence to show otherwise.
188. In reaching the conclusion that the Respondent has breached its obligations to the
Claimant under Article 1102, the majority observes that the cigarette exports by the Claimant
and other similar situated resellers may be economically unsustainable, if IEPS rebates are
unavailable, but there is nothing in the IEPS law during the relevant period ( after the 1993
Amparo decision and before the 1998 amendments) that legally precludes the exports per se.
The majority is also of the view that the factual pattern in this case reveals more than a minor
error or two by the Respondent. Rather, it demonstrates a pattern of official action ( or inaction)
over a number of years, as well as de facto discrimination that is actionable under Article 1102.
That being said, there is no disagreement that Chapter 11 jurisdiction over tax matters is
carefully circumscribed by Article 2103, or that this Tribunal would be derelict in its duties if it
either expanded or reduced that jurisdiction.
J DAMAGES
189. Concerning the quantum of damages to be awarded to the Claimant, the Tribunal
observes at the outset that the appropriate measure and amount of damages is only generally and
cursorily discussed by the Parties. Still more limited is the amount of evidence presented to the
Arbitral Tribunal in this respect.
190. The Claimant assumes that CEMSA's damages for the Respondent's unlawful
discrimination under Article 1102 are identical to those claimed for the unlawful expropriation,
without either allowing for any divergence in both cases or taking into account the particular
-79-
Annex 379
ANNEX 380
INTERNATIONAL CENTRE FOR THE SETTLEMENT OF
INVESTMENT DISPUTES
(ADDITIONAL FACILITY)
Washington, D.C.
(ICSID Case No. ARB(AF)/05/2)
Cargill, Incorporated
(Claimant)
-ANDUnited
Mexican States
(Respondent)
AWARD
Before the Arbitral Tribunal
constituted under Chapter 11
of the North American Free Trade
Agreement, and comprised of:
Dr. Michael C. Pryles
Professor David D. Caron
Professor Donald M McRae
Secreta,y of the Tribunal
Mr. Gonzalo Flores
Legal Assistant to the Tribunal
Ms. Leah D. Harhay
Date of dispatch to the parties: 18 September 2009
Annex 380
000015
TABLE OF CONTENTS
TABLE OF CONTENTS ......................................................................................................... ii
FREQUENTLY USED ABBREVIA'IlONS AND ACRONYMS .................................................... v
I. INTRODUCTION AND SU!\11\1ARY ............................................................................ 1
II. THE PARTIES .......................................................................................................... 3
Ill PROCEDURAL IIISTORY ......................................................................................... 4
Initial Party Submissions .................................................................................. 4
Constitution of the Arbitral Tribunal ............................................................... 6
First Session of the Tribunal ............................................................................ 7
Party Submissions ............................................................................................ 9
Challenge to Jurisdiction ................................................................................ 10
Arbitral Hearing ............................................................................................. 11
Post-Hearing Submissions ........ : ..................................................................... 12
IV. SU1VIJ\1ARY OF THE FACTS AND ARGUl\llENTS ....................................................... 13
V. A.PPLICABLE LAW AND RULES ............................................................................ 32
Procedural Rules ............................................................................................ 32
Applicable Law ........................ ................ ................... ............ ... .. .... ......... , .... 32
VI. JURlSDICTION ...................................................................................................... 35
Objections Raised ................................................................................... ........ 35
Scope and Coverage of Chapter 11 ................................................................ 36
Competence ................................................. ................................................... 42
Consent ........................................................................................................... 49
Conclusion of the Tribunal with respect to Jurisdiction ................................ 50
VII. AR'IlCLE 1102-NATIONAL TREATl\fENT ........................................................... 50
"Like Circwnstances" .................................................................................... 51
"Treatment No Less Favorable" ..................................................................... 58
Treatment "with respect to the Establishment, Acquisition, Expansion,
Management, Conduct, Operation, and Sale or Other Disposition of
Investments" ................................................................................................... 60
Final Disposition of the Tribunal with respect to Claim Arising
w1der Article 1102 .................... ...................................................................... 60
VIIL ARTICLE 1103 - MOST FAVOURED NA TlON ("MFN") TREATMENT ................. 60
Conclusion of the Tribunal with respect to Claim Arising
w1der Article 1103 ............................................................................. ............. 62
ii
Annex 380
000016
IX. ARTICLE 1105-FAIR AND EQUITABLE TREATMENT ......................................... 63
Contentions of the Parties with respect to Claim Arising
under Article 1105 ..................... ..................................................................... 64
Conclusion of the Tribunal with respect to Claim Arising
under Article 1105 .......................................................................................... 73
The Fair and Equitable Treatment Standard ........................................ 73
Final Disposition of the Tribunal with respect to the Standard of
Conduct Required by the Obligation of Fair and Equitable
Treatment ............................................................................................. 83
Conclusion of the Tribunal with respect to whether the Mexican Measures
at Issue in this Proceeding Breach the Fair and Equitable Treatment
Requirement of A.iticle 1 105 ................... ....................................................... 83
Final Disposition of the Tribunal with respect to Claim A.rising
under Article 1105 .......................................................................................... 86
X. ARTICLE 1106 - PERFORMANCE REQUIREMENTS .............................................. 87
Contentions of the Patties with respect to Claim A.i·ising
under Article 1106 .......................................................................................... 87
Conclusion of the Tribunal with respect to Claim Arising
under Article 1106 .......................................................................................... 88
Final Disposition of the Tribunal with respect to Claim Arising
under Article 1106 .......................................................................................... 90
XL ARTICLE 1110- EXPROPRIATION ........................................................................ 90
Contentions of the Parties with respect to Claim A.rising
under Article 1110 .......... ............ ..... ........ ......................... .......................... .... 91
Conclusion of the Tribunal with respect to Claim Arising
under Article 1110 .......................................................................................... 98
Final Disposition of the Tribunal with respect to Claim A1ising
under Article 1110 ........................................................................................ 108
XII. RESPONDENT'S DEFENSE THAT ITS ACTIONS WERE LEGITIMATE
COUNTERMEASURES PRECLUDING TllE WRONGFULNESS OF ITS ACTS .........• 109
Contentions of the Parties with respect to Countermeasures .................... ... 111
The ADM v. Mexico Award ......................................................................... 117
Conclusion of the Tribunal with respect to Respondent's Defense that Its
Actions were Legitimate Countermeasures Precluding the Wrongfulness
of Its Acts ....................... .............. .............. ..... ............................................. 122
Final Disposition of the Tribunal with respect to Respondent's Defense
that Its Actions were Legitimate Countermeasures Precluding the
Wrongfulness of Its Acts .............................................................................. 125
XIIL DETERMINATION OF DAMAGES .................................................... ~ .................... 125
The Measure of Damages ............... ..................... ......................... ... ....... ...... 126
iii
Annex 380
000017
Claimant's Alternative Damage Model: The Influence to be Given the
Antidumping Duties ..................................................................................... 131
The Compensable Period of Loss ................................................................. 134
The Model's Projection of the Mexican HFCS Market over the
Compensable Period .................................................................................. ... 135
The Model's Projection of Claimant's Share of the Mexican HFCS
Market over the Compensable Period ........ ................................ .................. 142
The Model's Projection of the Mexican Market Price of HFCS over the
Compensable Period ................................ ..................................................... 144
The Scope of Loss to Claimant to be Included in the Model: Whether
Cargill, Inc.'s Loss of Sales to Cargill de Mexico is a Separate Export or
a Part of the Investment ...... .......................................................................... 150
Accounting for the Effect of the Katrina Swaps ....... , ... ::·· .. ···· ····· ............ .... I53
Accounting for the Effect of the Zucarmex Investment ............................... 155 ·
Tribunal's Final Disposition with respect to Damages ................................ 156
XIV. COSTS AND INTEREST ........................................................................................ 157
XV. FINAL DISPOSITION OF Tiffi TRIBUNAL ............................................................. 159
XVI. A WARD AND ORDER ........................................................................................... 160
iv
Annex 380
000018
Conclusion of the Tribunal with respect to Claim Arising under Article 1105
The Fair and Equitable Treatment Standard
266. Article 1105(1) of the NAFTA provides: "Each Party shall accord to investments of
investors of another Party treatment in accordance with international law, including
fair m1d equitable treatment m1d full protection and security." The content of this
obligation has been difficult to define with precision and the statements of various
NAFT A tribunals are difficult to apply to particular facts.
267. The Tribunal first observes that it is beyond cavil that the reference to "fair and
equitable treatment" in Article 1105(1) is to be understood by reference to customary
international law. On 31 July 2001, in response to the concern of State Parties that
tribunals were reading this provision over-broadly, the NAFTA Free Trade
Commission issued an FTC Note providing, inter alia, that:
1. Article 1105(1) prescribes the customary international law minimum
standard of treatment of aliens as the minimum standard of treatment to be
afforded to investments of investors of another Party.
2. The concepts of 'fair and equitable treatment' and 'full protect.ion and
security' do not require treatment in addition to or beyond that which is
required by the customary international law minimum standard of treatment
of aliens.
3. A determination that there has been a breach of another provision of the
NAFTA, or of a separate international agreement, does not establish that
there has been a breach of Article I 105(1).
268. In light of the FTC's interpretation and the binding force of that interpretation on this
Tribunal by virtue of Article 1132(2),39 the Tribunal joins all previous NAFTA
tribunals in the view that A1ticle 1105 requires no more, nor less, than the minimum
standard of treatment demanded by customary international law. As stated by the
Mondev tribunal, the FTC Note made "clear that Article 1105(1) refers to a standard
existing under customary international law, and not to standards established by other
treaties of the three NAFTA Parties."40 Likewise, as explained by Mexico in its 1128
39 Article I 131, titled "Governing Law," in its second paragraph provides: "An interpretation by the Commission of
a provision of this Agreement shall be binding on a Tribunal established under this Section."
40Mondev Int'l Ltd. v. United States ("Mondev"), NAITA/ICSID Case No. ARB(AF)/99/2, Award, ,r 121 (11 Oct.
2002). See also ADF Group Inc. v. United States ("ADF Group"), NAFfA/ICSID Case No. ARB(AF)/00/1, Award,
,r I 78 (9 Jan. 2003) (holding that the FTC Note "clarifies that so far a~ the three NAFT A Parties are concerned, the
Cargill, Inc. v. United Mexican States - Page 73
Annex 380
000093
Submission to the ADF tribunal, "'fair and equitable treatment' and 'full protection
and security' are provided as examples of the customary international law standards
incoiporated in Article 1105(1 ). . . . The international law minimum standard [ of
treatment] is an umbrella concept incorporating a set of rules that has crystallized over
the centuries into customary international law in specific contexts."41
269. Although Claimant initially argued that the meaning of "fair and equitable treatment"
should be approached as a question of treaty interpretation, both Claimant and
Respondent agreed by the time of the hearing that Article 1105 is a codification of the
customary international law minimum standard of treatment. The Patties, however,
continue to disagree as to the content of that customary international law standard.
270. In approaching the task of ascertaining the customary international law standard of
"fair and equitable treatment," the Tribunal emphasizes a foundational point to its
mode of reasoning, which it simulta11eously views as a point of weakness in some of
the awards it has reviewed.
271. The shift in approach from seeking the meaning of "fair and equitable treatment" as a
matter of treaty interpretation to seeking to ascertain the content of custom has
fundamental implications for the legal reasoning of a tribunal. A tribunal confronted
with a question of treaty interpretation can, with little input from the parties, provide a
legal answer. It has the two necessary elements to do so; namely, the language at issue
and rules of interpretation. A tribunal confronted with the task of ascertaining custom,
on the other hand, has a quite different task because ascertainment of the content of
custom involves not only questions of law but involves primarily a question of fact,
where custom is found in the practice of States regarded as legally required by them.
The content of a particular custom may be clear; but where a custom is not clear, or is
disputed, then it is for the party asserting the custom to establish the content of that
custom.
272. In the case of the customary international law standard of "fair and equitable
treatment," the Parties in this case and the other two NAFTA State Parties agree that
long-standing debate as to whether there exists such a thing as a minimum standard of treatment of non-nationals
and their property prescribed in customary international law, is closed.").
41 ADF Group, Second Article 1128 Submission of the United Mexican States, p. 8 (22 July 2002).
Cargill, Inc. v. United Mexican States - Page 7 4
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000094
the customary international law standard is at least that set foith in the 1926 Neer
arbitration. In that award it was held that "the treatment of an alien ... should amount
to an outrage, to bad faith, to willful neglect of duty, or to an insufficiency of
governmental action so far short of international standards that every reasonable and
impartial man would readily recognize its insufficiency .',42 The Parties and the other
two NAFTA State Patties also agree that the standard may evolve and, indeed, may
have evolved since 1926.
273. The Parties disagree, however, as to how that customary standard has in fact, if at all,
evolved since that time. The burden of establishing any new elements of this custom is
on Claimant. The Tribunal acknowledges that the proof of change in a custom is not
an easy matter to establish. However, the burden of doing so falls clearly on Claimant.
If Claimant does not provide the Tribunal with the proof of such evolution, it is not the
place of the Tribunal to assume this task. Rather the Tribunal, in such an instance,
should hold that Claimant fails to establish the particular standard asserted.
274. The initial issue before the Tribunal therefore is to evaluate Claimant's assertions as to
the content of the customary international law standard of "fair and equitable
treatment" in light of the sources placed before the Tribunal. Consistent and
widespread State practice conducted out of a sense of legal obligation would establish
the content of customary international law. The Tribunal acknowledges, however, that
surveys of State practice arc difficult to undertake and particularly difficult in the case
of nonns such as "fair and equitable treatment" where developed examples of State
practice may .n ot be many or readily accessible. Claimant has not provided the '
Tribm1al with such a survey of recent State practice, nor is the Tribunal aware of such
a survey.
275. In such instances, recourse may be made to other evidence of custom. The statements
of States can-with care--serve as evidence of the content of custom. In the case of
the NAFT A State Parties, they have made statements in the context of their position as
respondents or as non-disputing State Parties in Chapter 11 arbitrations. Thus, Mexico
has not only presented its view on the content of customary international law standard
in this proceeding, but also as a non-disputing State Party in an Article 1128
42 Neer, 4 LR.A.A 60 (15 Oct. 1926).
Cargill, Inc. v. Unfted Mexican States - Page 75
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000095
Submission in the ADF proceeding. In ADF, Mexico's Article 1128 Submission
approvingly quotes Canada's submission as respondent in Pope & Talbot, which
states: "The conduct of the government toward the investment must amount to gross
misconduct, manifest injustice or, in the classic words of the Neer claim, an outrage,
bad faith or the willful neglect of duty.'143 The Tribunal acknowledges that the weight
of these statements needs to be assessed in light of their position as respondents at the
time of the statement. However, the Tribunal also observes that, for example, the
United States maintains a similar position as to the customaiy international law
standard of fair and equitable treatment in its model bilateral investment treaty, a
situation in which it is at least equally possible that the United States would be in the
position of either respondent or the state of nationality of the claiming investor.
276. It also is widely accepted that extensive adoption of identical treaty language by many
States may in and of itself serve-again with care-as evidence of customary
international law. The Tribunal notes that Claimant has not attempted to establish such
a circumstance to this Tribunal except in the most general terms. Even accepting that
such clauses are widespread, the Tribunal views the evidentiary weight of this
possibility cautiously. The Tribunal observes that the requirement to provide "fair and
equitable treatment" is included in many bilateral investment treaties ("BITs"). The
Tribunal notes first that some of these clauses involve a reference to customary
international law, while others apparently involve autonomous treaty language. It is
the Tribunal's view that significant evidentiary weight should not be afforded to
autonomous clauses inasmuch as it could be assumed that such clauses were adopted
precisely because they set a standard other than that required by custom. It may be
that widespread adoption of a strict autonomous meaning to "fair and equitable
treatment" may in time raise international expectations as to what constitutes good
governance, but such a consequence is different than such clauses evidencing directly
an evolution of custom. The Tribunal notes second that the explosion in the number of
BITs is a recent phenomenon and that responses of States to the questions presented in
terms, for example, of calls for renegotiation or statements of approval is only now
43 ADF Group, Second Article 1128 Submission of the United Mexican States, p. 15 (22 July 2002), quoting Pope &
Talbot, Post-Hearing Submission of the United Mexican States (Damages Phase), ,i 8 (3 Dec. 2001), quoting Pope
& Talbot, Respondent Canada's Counter-Memorial (Phase 2), ,i 309 (JO Oct. 2000).
Cargill, Inc. v. United Mexican States - Page 76
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000096
emerging. In such a fluid situation, the Tribunal does not believe it prudent to accord
significant weight to even widespread adoption of such clauses.
277. Finally, the writings of scholars and the decisions of tribunals may serve as evidence
of custom.44 It is important to emphasize, however, as Mexico does in this instance,
that the awards of international tribunals do not create customary international law but
rather, at most, reflect customary international law. Moreover, in both the case of
scholarly writings and arbitral decisions, the evidentiary weight to be afforded such .
sources is greater if the conclusions therein are supported by evidence and analysis of
custom.
278. A substantial number of arbitral decisions have been rendered over the last decade in
proceedings based on such BITs. In the Tribunal's view, these decisions are relevant
to the issue presented in Article 1105(1) only if the fair and equitable treatment clause
of the BIT in question was viewed by the Tribunal as involving, like Article 1105, an
incorporation of the customary international law standard rather than autonomous
treaty language.
279. The Tribunal observes that Claimant in the instant case has not offered a survey of all
arbitral decisions bearing on the customruy international law of fair and equitable
treatment. Claimant's effort to establish the current customary content of "fair and
equitable treatment" relies rather heavily on the award rendered in Teemed, a reliance
that Respondent contends is misplaced. The Tribunal agrees.
280. . The Tribunal notes that the claim in Teemed alleges violations of a BIT between Spain
and Mexico.45 · Article 4(1) of the BIT involved in the Teemed proceeding provides
that each party guarantees in its territory just and equitable treatment, confonning with
"International Law", to the investments of investors of the other contracting party.
Article 4(2) explains further that this treatment will not be less favourable than that
granted in similar circumstances by each contracting party to the investments in its
territory by an investor of a third State. Although the language of Article 4(2) permits
several interpretations, the Teemed tribunal specifically states that it "understands that
44 See, e.g., The Statute of the International Court of Justice, Article 38 (l)(d).
45 See Agreement on the Reciprocal Promotion and Protection of Investments signed by the Kingdom of Spain and
the United Mexican States (1996).
Cargill, Inc. v. United Mexican States - Page 77
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000097
the scope of the undertaking of fair and equitable treatment under Article 4(1) of the
Agreement described ... is that resulting from an autonomous interpretation .... "46 The
award and statements of the Teemed tribunal thus do not bear on the customary
international law minimum standard of treatment, but rather reflect an autonomous
standard based on an interpretation of the text. Thus, the Tribunal determines that the
holding in Teemed is not instructive in this arbitration as to the scope and bounds of
the fair and equitable treatment required by Article 1105 of the NAfTA.
281. The Tribunal observes that several NAFTA arbitrations, the significance of which was
argued before this Tribunal, _in contrast do analyze and elaborate upon the customary
international law minimuin standard of treatmen:t:as required by NAFTA Article 1105. ·
These tribunals agree, for instance, that the customa1y international law minimum
standard of treatment is dynamic and therefore evolves with the rights of individuals
under international law. As the ADF tribunal wrote: the customary international law
minimum standard of treatment is "constantly in a process of dcvclopment."47 The
Mondev tribunal held similarly:
[B]oth the substantive and procedural rights of the individual in international
law have undergone considerable development. In the light of these
developments it is unconvincing to confine the meaning of 'fair and
equitable treatment' and ' full protection and security' of foreign investments
to what those tenns - had they been current at the time - might have meant
in the l 920s when applied to the physical security of an alien.48
282. As stated above, the Parties in this proceeding and this Tribunal agree with the view
that the customary international law minimum standard of treatment may evolve in
accordance with changing State practice manifesting to some degree expectations
within the international community. As the world and, in particular, the international
business community become ever more intertwined and interdependent with global
trade, foreign investment, BITs and free trade agreements, the idea of what is the
minimum treatment a country must afford to aliens is arising in new situations simply
not present at the time of the Neer award which dealt with the alleged failure to
properly investigate the murder of a foreigner.
46 Teemed, Award, 1155 (29 May 2003) (emphasis added).
41 ADF Group, Award, 1179 (9 Jan. 2003).
4& Mondev, Award, 1 116 ( 11 Oct. 2002).
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000098
283. The central inquiry therefore is: what does customary international law currently
require in terms of the minimum standard of treatment to be accorded to foreigners?
The Waste Management II tribunal concluded that a general interpretation was
emerging from NAFfA awards:
Taken together, the S.D. Myers, Mondev, ADF and Loewen cases suggest that
the minimum standard of treatment of fair and equitable treatment is
infringed by conduct attributable to the State and harmful to the claimant if
the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is
discriminatory and exposes the claimant to sectional or racial prejudice, or
involves a lack of due process leading to an outcome which offends judicial
propriety - as might be the case with a manifest failure of natural justice in
judicial proceedings or a complete lack of transparency and candour in an
administrative process. In applying this standard it is relevant that the
treatment is in breach of representations made by the host State which were
reasonably relied on by the claimant.49
284. In reviewing the awards cited and, as importantly, the evidence of custom analyzed in
those proceedings, this Tribunal agrees in part with the assessment cited above. The
Tribunal observes a trend in previous NAFT A awards, not so much to make the
holding of the Neer arbitration more exacting, but rather to adapt the principle
underlying the holding of the Neer arbitration to the more complicated and varied
economic positions held by foreign nationals today. Key to this adaptation is that,
even as more situations are addressed, the required severity of the conduct as held in
Neer is maintained. In this regard, the Tribunal finds particularly significant the
statement of the standard found in the Article 1128 Submissions of Mexico and
Canada in ADF. That standard is:
[T]he conduct of the government toward the investment must amount to
gross misconduct, manifest injustice or, in the classic words of the Neer
claim, bad faith or the willful neglect of duty .50
285. As outlined in the Waste Management II award quote above, the violation may atise in
many forms. It may relate to a lack of due process, discrimination, a lack of
transparency, a denial of justice, or an unfair outcome. But in all of these various
fonns, the "lack" or "denial" of a quality or right is sufficiently at the margin of
acceptable conduct and thus we find-in the words of the 1128 submissions and
49 Waste Management, Inc. v. United Mexican States ("Waste Management II"), NAFTAIICSID Case No.
ARB(AF)/00/3, Award, 4j 98 (30 Apr. 2004).
so ADF Group, Second Article 1128 Submission of the United Mexican States, p. 15 (22 July 2002), quoting Pope &
Talbot, Post-Hearing Submission of the United Mexican States (Damages Phase), ,i 8 (3 Dec. 2001), quoting Pope
& Talbot, Respondent Canada's Counter-Memorial (Phase 2), ,i 309 (10 Oct. 2000).
Cargill, Inc. v. United Mexican States - Page 79
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000099
previous NAFTA awards-that the lack or deniaJ must be "gross," ''manifest,"
"complete," or such as to "offend judicial propriety." The Tribunal grants that these
words are imprecise and thus leave a measure of discretion to tribunals. But this is not
unusual. The Tribunal simultaneously emphasizes, however, that this standard is
significantly narrower than that present in the Teemed award where the same
requirement of severity is not present.
286. The Tribunal thus holds that Claimant has failed to establish that the standard present
for example in the Teemed award reflects the content of customary international law.
The Tribunal holds that the current customary international law standard of "fair and
equitable treatment" at least reflects the adaptation of the agreed Neer standard to
current conditions, as outlined in the Article 1128 submissions of Mexico and Canada.
If the conduct of the government toward the investment amounts to gross misconduct,
manifest injustice or, in the classic words of the Neer claim, bad faith or the willful
neglect of duty, whatever the particular context the actions take in regard to the
investment, then such conduct will be a violation of the customary obligation of fair
and equitable treatment.
287. In articulating the above standard, the Tribunal finds the four "implications" identified
by the GAMI tribunal to be both helpful and consistent. The Tribunal therefore joins
the GAMI tribunal in the adoption of these four implications: ( 1) "The failure to fulfill
the objectives of administrative regulations without more does not necessarily rise to a
breach of international law"; (2) "A failure to safofy requirements of national law does
not necessarily violate international law"; (3) "Proof of a good faith effort by the
Government to achieve the objectives of its laws and regulations may counter-balance
instances of disregard of legal or regulatory requirements"; and (4) "The record as a
whole-not isolated events--determines whether there has been a breach of
international law."51
288. As noted above, Claimant argues that fair and equitable treatment creates several
specific obligations for each State Party: the provision of a stable and predictable
environment that does not offend reasonable expectations; a general lack of
arbitrariness, ambiguity and inconsistency; transparency; and a lack of discrimination,
51 GAMI Investments, Final Award, at ii 97 (15 Nov. 2004).
Cargill, Inc. v. United Mexican States - Page 80
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000100
As far as these particular requirements, the Tribunal examines each briefly as to how it
is to be approached in light of the Tribunal's holding in the previous paragraph.
Stable and Predictable Environment that Does Not Frustrate
Reasonable Expectations
289. Claimant provides the Preamble to the NAFTA as its sole legal or textual support for
its contention that NAFTA State Parties are bound to provide a stable and predictable
environment in which reasonable expectations are upheld.52
290. The Tribunal notes that there are at least two BIT awards, both involving a clause
viewed as possessing autonomous meaning, that have found an obligation to provide a
predictable investment environment that does not affect the reasonable expectations of
the investor at the time of the investment.53 No evidence, however, has been placed
before the Tribunal that there is such a requirement in the NAFTA or in customary
international law, at least where such expectations do not arise from a contract or
quasi-contractual basis.
Arbitrariness, Ambiguity and Inconsistency
291. With respect to arbitrariness, the Tribtma1 agrees with the view expressed by a
Chamber of the International Court of Justice in the ELSI case, where it is stated:
Arbitrariness is not so much something opposed to a rule of law, as
something opposed to the rule of law. This idea was expressed by the court
in the Asylum case, when it spoke of 'arbitrary action' being 'substituted for
the rule oflaw' ... It is a wilful [sic] disregard of due process oflaw, an act
which shocks, or at least surprises, a sense of juridical propriety.54 •
This holding, though not based on the NAFTA, has been accepted by at least two of
the State Parties to the NAFTA as the "best expression" of arbitrariness. 55
sz Claimant also cites to Teemed to support its arguments with respect to the alleged requirement to provide a stable
and predictable environment. However, as the Tribunal has determined that Teemed arose from an autonomous
interpretation of "fair and equitable treatment," as opposed to that drawn from the customary international law
minimum standard of treatment, the Tribunal does not consider the Teemed award a persuasive authority in
evaluating these allegations.
53 See Teemed, Award,~ 154 (29 May 2003); Snluka Investments BV (Netherlands) v. Czech Republic ("Saluka v.
Czech Republic"), UNCITRAL, Partial Award, ffll 301-02 (17 Mar. 2006).
~4 ELSI, Judgment,~ 128 (1989) (internal citation omitted).
55 See ADF Group, Award,~ 121 (9 Jan. 2003) (describing Canada's approval of1he standard); ADF Group, Second
Article 1128 Submission of the United Mexican States, pp. 16-18 (22 July 2002) (detailing Mexico's view of the
standard as instructive).
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292. The Tribunal also agrees with the view expressed in S.D. Myers that a tribunal, in
assessing whether an action of a State is arbitrary, need recognize that governments
"make many potentially controversial choices" and, in doing so, may "appear to have
made mistakes, to have misjudged the facts, proceeded on the basis of a misguided
economic or sociological theory, placed too much emphasis on some social values
over others and adopted solutions that are ultimately ineffective or
counterproductive.":;6 Therefore, an actionable finding of arbitrariness must not be
based simply on a tribunal's dete1mination that a domestic agency or legislature
inc01Tectly weighed the various factors, made legitimate compromises between
disputing constituencies, or applied social or economic reasoning in a manner that the
tribunal criticizes.
293. The Tribunal thus finds that arbitrariness may lead to a violation of a State's duties
under Article 1105, but only when the State's actions move beyond a merely
inconsistent or questionable application of administrative or legal policy or procedure
to the point where the action constitutes an unexpected and shocking repudiation of a
policy's very purpose and goals, or otherwise grossly subverts a domestic law or
policy for an ulterior motive.
Transparency
294. The Tribunal holds that Claimant has not established that a general duty of
transparency is included in the customary international law minimum standard of
treatment owed to foreign investors per Article llOS's requirement to afford fair and
equitable treatment. The principal authority relied on by the Claimant-Tecmedinvolved
the interpretation of a treaty-based autonomous standard for fair and
equitable treatment and treated transparency as an element of the "basic expectations"
of an investor rather than as an independent duty under customary international law.
Discrimination
295. The Tribunal finds that a discussion of whether a finding of discrimination will
independently violate Article ll05 of the NAFTA is not called for at thls time. In
support of its contention that the customary international law minimum standard of
56 S.D. Myers, Partial Award, ,i 261 (13 Nov. 2000).
Cargill, Inc. v. UnitedMexican States - Page 82
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ANNEX381
Draft conclusions on identification of customary international law,
with commentaries
2018
Adopted by the International Law Commission at its seventieth session, in 2018,
and submitted to the General Assembly as a part of the Commission's report covering
the work of that session (A/73/10). The report, which also contains commentaries to the
draft articles (para. 66), will appear in Yearbook of the International Law Commission,
2018, vol. II, Part Two.
Copyright © United Nations
2018
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Part Seven
Particular customary international law
Conclusion 16
Particular customary international law
1. A rule of particular customary international law, whether regional, local or
other, is a rule of customary international law that applies only among a limited
number of States.
2. To determine the existence and content of a rule of particular customary
international law, it is necessary to ascertain whether there is a general practice among
the States concerned that is accepted by them as law ( opinio juris) among themselves.
2. Text of the draft conclusions and commentaries thereto
66. The text of the draft conclusions, together with commentaries thereto, adopted by the
Commission on second reading, is reproduced below.
Identification of customary international law
General commentary
(1) As is always the case with the Commission's output, the draft conclusions are to be
read together with the commentaries.
(2) The present draft conclusions concern the methodology for identifying rules of
customary international law. They seek to offer practical guidance on how the existence of
rules of customary international law, and their content, are to be determined. This is not only
of concern to specialists in public international law: others, including those involved with
national courts, are increasingly called upon to identify rules of customary international law.
In each case, a structured and careful process of legal analysis and evaluation is required to
ensure that a rule of customary international law is properly identified, thus promoting the
credibility of the particular determination as well as that of customary international law more
broadly.
(3) Customary international law is unwritten law deriving from practice accepted as law.
It remains an important source of public international law. 663 Customary international law is
among the sources of international law listed in Article 38, paragraph 1, of the Statute of the
International Court of Justice, which refers, in subparagraph (b ), to "international custom, as
evidence of a general practice accepted as law".664 This wording reflects the two constituent
663 Some important fields of international law are still governed essentially by customary international
law, with few if any applicable treaties. Even where there is a treaty in force, the rules of customary
international law continue to govern questions not regulated by the treaty and continue to apply in
relations with and among non-parties to the treaty. In addition, treaties may refer to rules of
customary international law; and such rules may be taken into account in treaty interpretation in
accordance with article 31, paragraph 3 ( c ), of the Vienna Convention on the Law of Treaties (United
Nations, Treaty Series, vol. 1155, No. 18232, p. 331 ("1969 Vienna Convention")). Moreover, it may
sometimes be necessary to determine the law applicable at the time when certain acts occurred ("the
intertemporal law"), which may be customary international law even if a treaty is now in force. In any
event, a rule of customary international law may continue to exist and be applicable, separately from a
treaty, even where the two have the same content and even among parties to the treaty (see Military
and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.CJ. Reports 1986, p. 14, at pp. 93-96, paras. 174-179; Application of the
Convention on the Prevention and Punishment of the Crime of Genocide (Croatia v. Serbia),
Judgment, I.CJ. Reports 2015, p. 3, at pp. 47--48, para. 88).
664 This wording was proposed by the Advisory Committee of Jurists, established by the League of
Nations in 1920 to prepare a draft statute for the Permanent Court oflnternational Justice; it was
retained, without change, in the Statute of the International Court of Justice in 1945. While the
drafting has been criticized as imprecise, the formula is nevertheless widely considered as capturing
the essence of customary international law.
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elements of customary international law: a general practice and its acceptance as law (the
latter often referred to as opinio Juris). 665
( 4) The identification of customary international law is a matter on which there is a wealth
of material, including case law and scholarly writings. 666 The draft conclusions reflect the
approach adopted by States, as well as by international courts and organizations and most
authors. Recognizing that the process for the identification of customary international law is
not always susceptible to exact formulations, the draft conclusions aim to offer clear guidance
without being overly prescriptive.
(5) The 16 draft conclusions are divided into seven parts. Part One deals with scope and
purpose. Part Two sets out the basic approach to the identification of customary international
law, the "two-element" approach. Parts Three and Four provide further guidance on the two
constituent elements of customary international law, which also serve as the criteria for its
identification: "a general practice" and "acceptance as law" ( opinio Juris). Part Five addresses
certain categories of materials that are frequently invoked in the identification of rules of
customary international law. Whereas rules of customary international law are binding on all
States, Parts Six and Seven deal with two exceptional cases: the persistent objector; and
particular customary international law (rules of customary international law that apply only
among a limited number of States).
Part One
Introduction
Part One, comprising a single draft conclusion, defines the scope of the draft
conclusions, outlining their function and purpose.
Conclusion 1
Scope
The present draft conclusions concern the way in which the existence and
content of rules of customary international law are to be determined.
Commentary
(1) Draft conclusion 1 is introductory in nature. It provides that the draft conclusions
concern the way in which rules of customary international law are to be determined, that is,
the legal methodology for undertaking that exercise.
(2) The term "customary international law" is used throughout the draft conclusions,
being in common use and most clearly reflecting the nature of this source of international
law. Other terms that are sometimes found in legal instruments, in case law and in scholarly
writings include "custom", "international custom", and "international customary law" as well
as "the law of nations" and "general international law".667
665 The Latin term opinio Juris has been retained in the draft conclusions and commentaries alongside
"acceptance as law" because of its prevalence in legal discourse (including in the case law of the
International Court of Justice), and also because it may capture better the particular nature of the
subjective element of customary international law as referring to legal conviction and not to formal
consent.
666 The present commentary does not contain references to scholarly writings in the field, though they
may be useful (and were referred to extensively in the Special Rapporteur's reports). For a
bibliography, including sections that correspond to issues covered by individual draft conclusions, as
well as sections addressing customary international law in various fields, see annex II to the fifth
report (A/CN.4/717/Add.l ).
667 Some of these terms may be used in other senses; in particular, "general international law" is used in
various ways (not always clearly specified) including to refer to rules of international law of general
application, whether treaty law or customary international law or general principles oflaw. For a
judicial discussion of the term "general international law" see Certain Activities Carried Out by
Nicaragua in the Border Area (Costa Rica v. Nicaragua) and Construction of a Road in Costa Rica
along the San Juan River (Nicaragua v. Costa Rica), Judgment, I.CJ. Reports 2015, p. 665, at p. 782
(separate opinion of Judge Donoghue, para. 2) and pp. 846-849 (separate opinion of Judge ad hoc
Dugard, paras. 12-17).
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(3) The reference to "rules" of customary international law in the present draft
conclusions and commentaries includes rules of customary international law that may be
referred to as "principles" because of their more general and more fundamental character. 668
(4) The terms "identify" and "determine" are used interchangeably in the draft
conclusions and commentaries. The reference to determining the "existence and content" of
rules of customary international law reflects the fact that while often the need is to identify
both the existence and the content of a rule, in some cases it is accepted that the rule exists
but its precise content is disputed. This may be the case, for example, where the question
arises as to whether a particular formulation (usually set out in texts such as treaties or
resolutions) does in fact correspond precisely to an existing rule of customary international
law, or whether there are exceptions to a recognized rule of customary international law.
( 5) Dealing as they do with the identification of rules of customary international law, the
draft conclusions do not address, directly, the processes by which customary international
law develops over time. Yet in practice identification cannot always be considered in
isolation from formation; the identification of the existence and content of a rule of customary
international law may well involve consideration of the processes by which it has developed.
The draft conclusions thus inevitably refer in places to the formation of rules of customary
international law. They do not, however, deal systematically with how such rules emerge,
change, or terminate.
( 6) A number of other matters fall outside the scope of the draft conclusions. First, they
do not address the substance of customary international law: they are concerned only with
the methodological issue of how rules of customary international law are to be identified. 669
Second, no attempt is made to explain the relationship between customary international law
and other sources of international law listed in Article 38, paragraph 1, of the Statute of the
International Court of Justice (international conventions, whether general or particular, and
general principles of law); the draft conclusions touch on the matter only in so far as is
necessary to explain how rules of customary international law are to be identified. Third, the
draft conclusions are without prejudice to questions of hierarchy among rules of international
law, including those concerning peremptory norms of general international law (jus cogens),
or questions concerning the erga omnes nature of certain obligations. Fourth, the draft
conclusions do not address the position of customary international law within national legal
systems. Finally, the draft conclusions do not deal in general terms with the question of a
possible burden of proof of customary international law.
Part Two
Basic approach
Part Two sets out the basic approach to the identification of customary
international law. Comprising two draft conclusions, it specifies that determining a
rule of customary international law requires establishing the existence of two
constituent elements: a general practice, and acceptance of that practice as law ( opinio
Juris). This requires a careful analysis of the evidence for each element.
Conclusion 2
Two constituent elements
To determine the existence and content of a rule of customary international
law, it is necessary to ascertain whether there is a general practice that is accepted as
law (opinio Juris).
668 See also Delimitation of the Maritime Boundary in the Gulf of Maine Area, Judgment, I. C.J. Reports
1984, p. 246, at pp. 288-290, para. 79 ("the association of the terms 'rules' and 'principles' is no
more than the use of a dual expression to convey one and the same idea, since in this context [ of
defining the applicable international law] 'principles' clearly means principles oflaw, that is, it also
includes rules of international law in whose case the use of the term 'principles' may be justified
because of their more general and more fundamental character").
669 Thus, reference in these commentaries to particular decisions of courts and tribunals is made in order
to illustrate the methodology of the decisions, not for their substance.
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Commentary
(1) Draft conclusion 2 sets out the basic approach, according to which the identification
of a rule of customary international law requires an inquiry into two distinct, yet related,
questions: whether there is a general practice, and whether such general practice is accepted
as law (that is, accompanied by opinio Juris). In other words, one must look at what States
actually do and seek to determine whether they recognize an obligation or a right to act in
that way. This methodology, the "two-element approach", underlies the draft conclusions and
is widely supported by States, in case law, and in scholarly writings. It serves to ensure that
the exercise of identifying rules of customary international law results in determining only
such rules as actually exist. 670
(2) A general practice and acceptance of that practice as law ( opinio Juris) are the two
constituent elements of customary international law: together they are the essential conditions
for the existence of a rule of customary international law. The identification of such a rule
thus involves a careful examination of available evidence to establish their presence in any
given case. This has been confirmed, inter alia, in the case law of the International Court of
Justice, which refers to "two conditions [that] must be fulfilled"671 and has repeatedly laid
down that "the existence of a rule of customary international law requires that there be "a
settled practice" together with opinio Juris". 672 To establish that a claim concerning the
existence or the content of a rule of customary international law is well-founded thus entails
a search for a practice that has gained such acceptance among States that it may be considered
to be the expression of a legal right or obligation (namely, that it is required, permitted or
prohibited as a matter oflaw).673 The test must always be: is there a general practice that is
accepted as law?
(3) Where the existence of a general practice accepted as law cannot be established, the
conclusion will be that the alleged rule of customary international law does not exist. In the
Asylum case, for example, the International Court of Justice considered that the facts relating
to the alleged existence of a rule of (particular) customary international law disclosed:
so much uncertainty and contradiction, so much fluctuation and discrepancy in the
exercise of diplomatic asylum and in the official views expressed on various occasions,
there has been so much inconsistency in the rapid succession of conventions on
asylum, ratified by some States and rejected by others, and the practice has been so
much influenced by considerations of political expediency in the various cases, that it
is not possible to discern in all this any constant and uniform usage, accepted as law,
with regard to the alleged rule of unilateral and definitive qualification of the
offence. 674
670 The shared view of parties to a case is not sufficient; it must be ascertained that a general practice that
is accepted as law actually exists. See also Military and Paramilitary Activities in and against
Nicaragua (see footnote 663 above), at pp. 97-98, para. 184 ("Where two States agree to incorporate
a particular rule in a treaty, their agreement suffices to make that rule a legal one, binding upon them;
but in the field of customary international law, the shared view of the Parties as to the content of what
they regard as the rule is not enough. The Court must satisfy itself that the existence of the rule in the
opinio Juris of States is confirmed by practice").
671 North Sea Continental Shelf, Judgment, I.CJ. Reports 1969, p. 3, at p. 44, para. 77.
672 See, for example, Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening),
Judgment, I.CJ. Reports 2012, p. 99, at pp. 122-123, para. 55; Continental Shelf (Libyan Arab
Jamahiriya/Malta), Judgment, I.CJ. Reports 1985, p. 13, at pp. 29-30, para. 27; and North Sea
Continental Shelf (see footnote above), at p. 44, para. 77.
673 For example, in the Jurisdictional Immunities of the State case, an extensive survey of the practice of
States in the form of national legislation, judicial decisions, and claims and other official statements,
which was found to be accompanied by opinio Juris, served to identify the scope of State immunity
under customary international law (Jurisdictional Immunities of the State (see footnote 672 above), at
pp. 122-139, paras. 55-91).
674 Colombian-Peruvian asylum case, Judgment of 20 November 1950, I.CJ. Reports 1950, p. 266, at p.
277.
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(4) As draft conclusion 2 makes clear, the presence of only one constituent element does
not suffice for the identification of a rule of customary international law. Practice without
acceptance as law ( opinio Juris), even if widespread and consistent, can be no more than a
non-binding usage, while a belief that something is ( or ought to be) the law unsupported by
practice is mere aspiration; it is the two together that establish the existence of a rule of
customary international law. 675 While writers have from time to time sought to devise
alternative approaches to the identification of customary international law, emphasizing one
constituent element over the other or even excluding one element altogether, such theories
have not been adopted by States or in the case law.
(5) The two-element approach is often referred to as "inductive", in contrast to possible
"deductive" approaches by which rules might be ascertained other than by empirical evidence
of a general practice and its acceptance as law ( opinio Juris). The two-element approach does
not in fact preclude a measure of deduction as an aid, to be employed with caution, in the
application of the two-element approach, in particular when considering possible rules of
customary international law that operate against the backdrop of rules framed in more general
terms that themselves derive from and reflect a general practice accepted as law, 676 or when
concluding that possible rules of international law form part of an "indivisible regime". 677
(6) The two-element approach applies to the identification of the existence and content of
rules of customary international law in all fields of international law. This is confirmed in the
practice of States and in the case law, and is consistent with the unity and coherence of
international law, which is a single legal system and is not divided into separate branches
with their own approach to sources. 678 While the application in practice of the basic approach
may well take into account the particular circumstances and context in which an alleged rule
has arisen and operates, 679 the essential nature of customary international law as a general
practice accepted as law (accompanied by opinio Juris) must always be respected.
Conclusion 3
Assessment of evidence for the two constituent elements
1. In assessing evidence for the purpose of ascertaining whether there is a general
practice and whether that practice is accepted as law (opinio Juris), regard must be
had to the overall context, the nature of the rule and the particular circumstances in
which the evidence in question is to be found.
675 In the Right of Passage case, for example, the Court found that there was nothing to show that the
recurring practice of passage through Indian territory of Portuguese armed forces and armed police
between Daman and the Portuguese enclaves in India, or between the enclaves themselves, was
permitted or exercised as of right. The Court explained that: "Having regard to the special
circumstances of the case, this necessity for authorization before passage could take place constitutes,
in the view of the Court, a negation of passage as ofright. The practice predicates that the territorial
sovereign had the discretionary power to withdraw or to refuse permission. It is argued that
permission was always granted, but this does not, in the opinion of the Court, affect the legal position.
There is nothing in the record to show that grant of permission was incumbent on the British or on
India as an obligation" (Case concerning Right of Passage over Indian Territory (Merits), Judgment
of 12 April 1960, I.CJ. Reports 1960, p. 6, at pp. 40--43). In Legality of the Threat or Use of Nuclear
Weapons, the Court considered that: "The emergence, as lex lata, of a customary rule specifically
prohibiting the use of nuclear weapons as such is hampered by the continuing tensions between the
nascent opinio Juris on the one hand, and the still strong adherence to the practice of deterrence on the
other" (Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, I. CJ. Reports 1996, p.
226, at p. 255, para. 73). See also Prosecutor v. Sam Hinga Norman, Case No. SCSL-2004-14-
AR72(E), decision on preliminary motion based on lack of jurisdiction (child recruitment) of 31 May
2004, Special Court for Sierra Leone, p. 13, para. 17.
676 This appears to be the approach in Pulp Mills on the River Uruguay (Argentina v. Uruguay),
Judgment, I.CJ. Reports 2010, p. 14, at pp. 55-56, para. 101.
677 Territorial and Maritime Dispute (Nicaragua v. Colombia), Judgment, I.CJ. Reports 2012, p. 624, at
p. 674, para. 139.
678 See also conclusions of the work of the Study Group on fragmentation of international law,
Yearbook ... 2006, vol. II (Part Two), para. 251 (1).
679 See draft conclusion 3 below.
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2. Each of the two constituent elements is to be separately ascertained. This
requires an assessment of evidence for each element.
Commentary
(1) Draft conclusion 3 concerns the assessment of evidence for the two constituent
elements of customary international law. 680 It offers general guidance for the process of
determining the existence and content of a rule of customary international law from the
various pieces of evidence available at the time of the assessment, which reflects both the
systematic and rigorous analysis required and the dynamic nature of customary international
law as a source of international law.
(2) Paragraph 1 sets out an overarching principle that underlies all of the draft conclusions,
namely that the assessment of any and all available evidence must be careful and contextual.
Whether a general practice that is accepted as law (accompanied by opinio juris) exists must
be carefully investigated in each case, in the light of the relevant circumstances. 681 Such
analysis not only promotes the credibility of any particular decision, but also allows the twoelement
approach to be applied, with the necessary flexibility, in all fields of international
law.
(3) The requirement that regard be had to the overall context reflects the need to apply
the two-element approach while taking into account the subject matter that the alleged rule
is said to regulate. This implies that in each case any underlying principles of international
law that may be applicable to the matter ought to be taken into account. 682 Moreover, the type
of evidence consulted (and consideration of its availability or otherwise) depends on the
circumstances, and certain forms of practice and certain forms of evidence of acceptance as
law (opinio juris) may be of particular significance, according to the context. For example,
in the Jurisdictional Immunities of the State case, the International Court of Justice
considered that
[i]n the present context, State practice of particular significance is to be found in the
judgments of national courts faced with the question whether a foreign State is
immune, the legislation of those States which have enacted statutes dealing with
immunity, the claims to immunity advanced by States before foreign courts and the
statements made by States, first in the course of the extensive study of the subject by
the International Law Commission and then in the context of the adoption of the
United Nations Convention [on Jurisdictional Immunities of States and Their
Property]. Opinio juris in this context is reflected in particular in the assertion by
680 The term "evidence" is used here as a broad concept relating to all the materials that may be
considered as a basis for the identification of customary international law, not in any technical sense
as used by particular courts or in particular legal systems.
681 See also North Sea Continental Shelj(footnote 671 above), dissenting opinion of Judge Tanaka, at p.
175 ("To decide whether these two factors in the formative process of a customary law exist or not, is
a delicate and difficult matter. The repetition, the number of examples of State practice, the duration
of time required for the generation of customary law cannot be mathematically and uniformly
decided. Each fact requires to be evaluated relatively according to the different occasions and
circumstances"); Freedom and Justice Party v. Secretary of State for Foreign and Commonwealth
Affairs, Court of Appeal ofEngland and Wales, [2018] EWCA Civ 1719 (19 July 2018), para. 19
("the ascertainment of customary international law involves an exhaustive and careful scrutiny of a
wide range of evidence").
682 In the Jurisdictional Immunities of the State case, the International Court of Justice considered that
the customary rule of State immunity derived from the principle of sovereign equality of States and,
in that context, had to be viewed together with the principle that each State possesses sovereignty
over its own territory and that there flows from that sovereignty the jurisdiction of the State over
events and persons within that territory (Jurisdictional Immunities of the State (see footnote 672
above), at pp. 123-124, para. 57). See also Certain Activities carried out by Nicaragua in the Border
Area and Construction of a Road in Costa Rica along the San Juan River (footnote 667 above),
separate opinion of Judge Donoghue (paras. 3-10). It has also been explained that "a rule of
international law, whether customary or conventional, does not operate in a vacuum; it operates in
relation to facts and in the context of a wider framework of legal rules of which it forms only a part"
(Interpretation of the Agreement of 25 March 1951 between the WHO and Egypt, Advisory Opinion,
I.C.J. Reports 1980, p. 73, at p. 76, para. 10).
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States claiming immunity that international law accords them a right to such immunity
from the jurisdiction of other States; in the acknowledgment, by States granting
immunity, that international law imposes upon them an obligation to do so; and,
conversely, in the assertion by States in other cases of a right to exercise jurisdiction
over foreign States. 683
( 4) The nature of the rule in question may also be of significance when assessing evidence
for the purpose of ascertaining whether there is a general practice that is accepted as law
(accompanied by opinio juris). In particular, where prohibitive rules are concerned, it may
sometimes be difficult to find much affirmative State practice (as opposed to inaction684);
cases involving such rules are more likely to turn on evaluating whether the inaction is
accepted as law.
( 5) Given that conduct may be fraught with ambiguities, paragraph 1 further indicates that
regard must be had to the particular circumstances in which any evidence is to be found; only
then may proper weight be accorded to it. In the United States Nationals in Morocco case,
for example, the International Court of Justice, in seeking to ascertain whether a rule of
(particular) customary international law existed, said:
There are isolated expressions to be found in the diplomatic correspondence which, if
considered without regard to their context, might be regarded as acknowledgments of
United States claims to exercise consular jurisdiction and other capitulatory rights. On
the other hand, the Court can not ignore the general tenor of the correspondence,
which indicates that at all times France and the United States were looking for a
solution based upon mutual agreement and that neither Party intended to concede its
legal position. 685
Similarly, when considering legislation as practice, what may sometimes matter more than
the actual text is how it has been interpreted and applied. Decisions of national courts will
count less if they are reversed by the legislature or remain unenforced because of concerns
about their compatibility with international law. Statements made casually, or in the heat of
the moment, will usually carry less weight than those that are carefully considered; those
made by junior officials may carry less weight than those voiced by senior members of the
Government. The significance of a State's failure to protest will depend upon all the
circumstances, but may be particularly significant where concrete action has been taken, of
which that State is aware and which has an immediate negative impact on its interests.
Practice of a State that goes against its clear interests or entails significant costs for it is more
likely to reflect acceptance as law.
(6) Paragraph 2 states that to identify the existence and content of a rule of customary
international law each of the two constituent elements must be found to be present, and
explains that this calls for an assessment of evidence for each element. In other words, while
practice and acceptance as law (opinio juris) together supply the information necessary for
the identification of customary international law, two distinct inquiries are to be carried out.
The constituent elements may be intertwined in fact (in the sense that practice may be
683 Jurisdictional Immunities of the State (see footnote 672 above), at p. 123, para. 55. In the
Navigational and Related Rights case, where the question arose whether long-established practice of
fishing for subsistence purposes (acknowledged by both parties to the case) has evolved into a rule of
(particular) customary international law, the International Court of Justice observed that "the practice,
by its very nature, especially given the remoteness of the area and the small, thinly spread population,
is not likely to be documented in any formal way in any official record. For the Court, the failure of
Nicaragua to deny the existence of a right arising from the practice which had continued undisturbed
and unquestioned over a very long period, is particularly significant" (Dispute regarding
Navigational and Related Rights (Costa Rica v. Nicaragua), Judgment, I.C.J. Reports 2009, p. 213, at
pp. 265-266, para. 141). The Appeals Chamber of the International Criminal Tribunal for the Former
Yugoslavia has noted the difficulty of observing State practice on the battlefield: Prosecutor v. Tadic,
Case IT-94-1-AR72, Decision on the Defence Motion for Interlocutory Appeal on Jurisdiction of2
October 1995, para. 99.
684 On inaction as a form of practice see draft conclusion 6, below, and paragraph (3) of the commentary
thereto.
685 Case concerning rights of nationals of the United States of America in Morocco, Judgment of 27
August 1952, I.C.J. Reports 1952, p. 176, at p. 200.
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accompanied by a certain motivation), but each is conceptually distinct for purposes of
identifying a rule of customary international law.
(7) Although customary international law manifests itself in instances of conduct that are
accompanied by opinio juris, acts forming the relevant practice are not as such evidence of
acceptance as law. Moreover, acceptance as law (opinio juris) is to be sought with respect
not only to those taking part in the practice but also to those in a position to react to it. 686 No
simple inference of acceptance as law may thus be made from the practice in question; in the
words of the International Court of Justice, "acting, or agreeing to act in a certain way, does
not of itself demonstrate anything of a juridical nature". 687
(8) Paragraph 2 emphasizes that the existence of one element may not be deduced merely
from the existence of the other, and that a separate inquiry needs to be carried out for each.
Nevertheless, the paragraph does not exclude that the same material may be used to ascertain
practice and acceptance as law (opinio juris). A decision by a national court, for example,
could be relevant practice as well as indicate that its outcome is required under customary
international law. Similarly, an official report issued by a State may serve as practice (or
contain information as to that State's practice) as well as attest to the legal views underlying
it. The important point remains, however, that the material must be examined as part of two
distinct inquiries, to ascertain practice and to ascertain acceptance as law.
(9) While in the identification of a rule of customary international law the existence of a
general practice is often the initial factor to be considered, and only then is an inquiry made
into whether such general practice is accepted as law, this order of examination is not
mandatory. Thus, the identification of a rule of customary international law may also begin
with appraising a written text allegedly expressing a widespread legal conviction and then
seeking to verify whether there is a general practice corresponding to it.
Part Three
A general practice
As stated in draft conclusion 2, above, the indispensable requirement for the
identification of a rule of customary international law is that both a general practice
and acceptance of such practice as law ( opinio juris) be ascertained. Part Three offers
more detailed guidance on the first of these two constituent elements of customary
international law, "a general practice". Also known as the "material" or "objective"
element, 688 it refers to those instances of conduct that (when accompanied by
acceptance as law) are creative, or expressive, of customary international law. A
number of factors must be considered in evaluating whether a general practice does
in fact exist.
686 See also paragraph (5) of the commentary to draft conclusion 9, below.
687 North Sea Continental Shelf(see footnote 671 above), at p. 44, para. 76. In the Lotus case, the
Permanent Court oflnternational Justice likewise held that: "Even if the rarity of the judicial
decisions to be found among the reported cases were sufficient to prove in point of fact the
circumstance alleged ... it would merely show that States had often, in practice, abstained from
instituting criminal proceedings, and not that they recognized themselves as being obliged to do so;
for only if such abstention were based on their being conscious of having a duty to abstain would it be
possible to speak of an international custom. The alleged fact does not allow one to infer that States
have been conscious of having such a duty" (The Case of the S.S. "Lotus", P.C.I.J., Series A, No. 10
(1927), p. 28). See also draft conclusion 9, paragraph 2, below.
688 Sometimes also referred to as usus (usage), but this may lead to confusion with "mere usage or habit",
which is to be distinguished from customary international law: see draft conclusion 9, paragraph 2,
below.
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Conclusion 4
Requirement of practice
1. The requirement of a general practice, as a constituent element of customary
international law, refers primarily to the practice of States that contributes to the
formation, or expression, of rules of customary international law.
2. In certain cases, the practice of international organizations also contributes to
the formation, or expression, of rules of customary international law.
3. Conduct of other actors is not practice that contributes to the formation, or
expression, of rules of customary international law, but may be relevant when
assessing the practice referred to in paragraphs 1 and 2.
Commentary
(1) Draft conclusion 4 specifies whose practice is to be taken into account when
determining the existence and content of rules of customary international law.
(2) Paragraph 1 makes clear that it is primarily the practice of States that is to be looked
to in determining the existence and content of rules of customary international law: the
material element of customary international law is indeed often referred to as "State
practice".689 Being the primary subjects of the international legal system and possessing a
general competence, States play a pre-eminent role in the formation of customary
international law, and it is principally their practice that has to be examined in identifying it.
Indeed, in many cases, it will only be State practice that is relevant for determining the
existence and content of rules of customary international law. As the International Court of
Justice stated in Military and Paramilitary Activities in and against Nicaragua, in order "to
consider what are the rules of customary international law applicable to the present dispute ...
it has to direct its attention to the practice and opinio juris of States". 690
(3) The word "primarily" serves a dual purpose. In addition to emphasizing the primary
role of State practice in the formation and expression of rules of customary international law,
it serves to refer the reader to the other practice that contributes, in certain cases, to the
formation, or expression, of rules of customary international law, which is the subject of
paragraph 2.
(4) Paragraph 2 indicates that "[i]n certain cases", the practice of international
organizations also contributes to the formation and expression of rules of customary
international law.691 While international organizations often serve as arenas or catalysts for
the practice of States, the paragraph deals with practice that is attributed to international
organizations themselves, not practice of States acting within or in relation to them (which is
attributed to the States concerned). 692 In those cases where the practice of international
organizations themselves is of relevance (as described below), references in the draft
conclusions and commentaries to the practice of States should be read as including, mutatis
mutandis, the practice of international organizations.
689 State practice serves other important functions in public international law, including in relation to
treaty interpretation, but these are not within the scope of the present draft conclusions.
690 Military and Paramilitary Activities in and against Nicaragua (see footnote 663 above), at p. 97,
para. 183. In the Continental Shelf (Libyan Arab Jamahiriya/Malta) case, the Court similarly stated
that "[i]t is of course axiomatic that the material of customary international law is to be looked for
primarily in the actual practice and opinio Juris of States ... " ( Continental Shelf (Libyan Arab
Jamahiriya/Malta) (see footnote 672 above), at p. 29, para. 27); and in the Jurisdictional Immunities
of the State case, the Court again confirmed that it is "State practice from which customary
international law is derived" (Jurisdictional Immunities of the State (see footnote 672 above), at p.
143, para. 101).
691 The term "international organizations" refers, in these draft conclusions, to organizations that are
established by instruments governed by international law (usually treaties), and possess their own
international legal personality. The term does not include non-governmental organizations.
692 See draft conclusions 6, 10 and 12, below, which refer, inter alia, to the practice, and acceptance as
law, of States within international organizations.
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(5) International organizations are not States. 693 They are entities established and
empowered by States (or by States and/or other international organizations) to carry out
certain functions, and to that end have international legal personality, that is, they have their
own rights and obligations under international law. The practice of international
organizations in international relations694 (when accompanied by opinio juris) may count as
practice that gives rise or attests to rules of customary international law, but only those rules
(a) whose subject matter falls within the mandate of the organizations, and/or (b) that are
addressed specifically to them (such as those on their international responsibility or relating
to treaties to which international organizations may be parties). The words "in certain cases"
in paragraph 2 indeed serve to indicate that the practice of international organizations will
not be relevant to the identification of all rules of customary international law, and further
that it may be the practice of only some, not all, international organizations that is relevant.
(6) Within this framework, the practice falling under paragraph 2 arises most clearly
where member States have transferred exclusive competences to the international
organization, so that the latter exercises some of the public powers of its member States and
hence the practice of the organization may be equated with the practice of those States. This
is the case, for example, for certain competences of the European Union. Practice within the
scope of paragraph 2 may also arise where member States have not transferred exclusive
competences, but have conferred competences upon the international organization that are
functionally equivalent to powers exercised by States. Thus the practice of international
organizations when concluding treaties, serving as treaty depositaries, in deploying military
forces (for example, for peacekeeping), in administering territories, or in taking positions on
the scope of the privileges and immunities of the organization and its officials, may contribute
to the formation, or expression, of rules of customary international law in those areas. 695
(7) At the same time, caution is required in assessing the weight of the practice of an
international organization as part of a general practice. International organizations vary
greatly, not just in their powers, but also in their membership and functions. As a general rule,
the more directly a practice of an international organization is carried out on behalf of its
member States or endorsed by them, and the larger the number of such member States, the
greater weight it may have in relation to the formation, or expression, of rules of customary
international law. Among other factors that may need to be considered in weighing the
practice are: the nature of the organization; the nature of the organ whose conduct is under
consideration; whether the conduct is ultra vires the organization or organ; and whether the
conduct is consonant with that of the member States of the organization.
693 See also the draft articles on the responsibility of international organizations adopted by the
Commission in 2011, paragraph (7) of the general commentary: "International organizations are quite
different from States, and in addition present great diversity among themselves. In contrast with
States, they do not possess a general competence and have been established in order to exercise
specific functions ('principle of speciality'). There are very significant differences among
international organizations with regard to their powers and functions, size of membership, relations
between the organization and its members, procedures for deliberation, structure and facilities, as well
as the primary rules including treaty obligations by which they are bound" (Yearbook ... 2011, vol. II
(Part Two), p. 47). See also Reparation for injuries suffered in the service of the United Nations,
Advisory Opinion, L C.J. Reports 1949, p. 174, at p. 178 ("The subjects oflaw in any legal system are
not necessarily identical in their nature or in the extent of their rights").
694 "Established practice" of the organization (that is, practice forming part of the rules of the
organization within the meaning of article 2, paragraph 1 (j), of the 1986 Vienna Convention on the
Law of Treaties between States and International Organizations or between International
Organizations) is not within the scope of the present conclusions.
695 In this vein, the Standard Terms and Conditions for loan, guarantee and other financing agreements of
the European Bank for Reconstruction and Development and the General Conditions for Sovereignbacked
Loans of the Asian Infrastructure Investment Bank both recognize that the sources of public
international law that may be applicable in the event of dispute between the Bank and a party to a
financing agreement include, inter alia, " ... forms of international custom, including the practice of
states and international financial institutions of such generality, consistency and duration as to create
legal obligations" (European Bank for Reconstruction and Development, Standard Terms and
Conditions (1 December 2012), Sect. 8.04(b)(vi)(C); Asian Infrastructure Investment Bank, General
Conditions for Sovereign-backed Loans (1 May 2016), Sect. 7.04(vii)(c) (emphasis added)).
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(8) Paragraph 3 makes explicit that the conduct of entities other than States and
international organizations - for example, non-governmental organizations (NGOs) and
private individuals, but also transnational corporations and non-State armed groups - is
neither creative nor expressive of customary international law. As such, their conduct does
not contribute to the formation, or expression, of rules of customary international law, and
may not serve as direct (primary) evidence of the existence and content of such rules. The
paragraph recognizes, however, that such conduct may have an indirect role in the
identification of customary international law, by stimulating or recording the practice and
acceptance as law (opiniojuris) of States and international organizations.696 For example, the
acts of private individuals may sometimes be relevant to the formation or expression of rules
of customary international law, but only to the extent that States have endorsed or reacted to
them.697
(9) Official statements of the International Committee of the Red Cross (ICRC), such as
appeals for and memorandums on respect for international humanitarian law, may likewise
play an important role in shaping the practice of States reacting to such statements; and
publications of the ICRC may assist in identifying relevant practice. Such activities may thus
contribute to the development and determination of customary international law, but they are
not practice as such. 698
Conclusion 5
Conduct of the State as State practice
State practice consists of conduct of the State, whether in the exercise of its
executive, legislative, judicial or other functions.
Commentary
(1) Although in their international relations States most frequently act through the
executive branch, draft conclusion 5 explains that State practice consists of any conduct of
the State, whatever the branch concerned and functions at issue. In accordance with the
principle of the unity of the State, this includes the conduct of any organ of the State forming
part of the State's organization and acting in that capacity, whether in exercise of executive,
legislative, judicial or "other" functions, such as commercial activities or the giving of
administrative guidance to the private sector.
(2) To qualify as State practice, the conduct in question must be "of the State". The
conduct of any State organ is to be considered conduct of that State, 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. An organ includes any person or entity that has that status
in accordance with the internal law of the State; the conduct of a person or entity otherwise
empowered by the law of the State to exercise elements of governmental authority is also
conduct "of the State", provided the person or entity is acting in that capacity in the particular
instance. 699
696 In the latter capacity their output may fall within the ambit of draft conclusion 14, below. The
Commission has considered a similar point with respect to practice by "non-State actors" under its
topic "Subsequent agreements and subsequent practice in relation to interpretation of treaties": see
draft conclusion 5, paragraph 2, adopted on second reading under that topic (see chapter IV above).
697 See, for example, Dispute regarding Navigational and Related Rights (footnote 683 above), at pp.
265-266, para. 141.
698 This is without prejudice to the significance of acts of the ICRC in exercise of specific functions
conferred upon it, in particular by the Geneva Conventions for the protection of war victims of 12
August 1949.
699 See articles 4 and 5 of the articles on responsibility of States for internationally wrongful acts,
General Assembly resolution 56/83 of 12 December 2001, annex. For the draft articles adopted by the
Commission and the commentaries thereto, see Yearbook ... 2001, vol. II (Part Two) and
corrigendum,paras. 76-77.
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(3) The relevant practice of States is not limited to conduct vis-a-vis other States or other
subjects of international law; conduct within the State, such as a State's treatment of its own
nationals, may also relate to matters of international law.
(4) State practice may be that of a single State or of two or more States acting together.
Examples of practice of the latter kind may include joint action by several States patrolling
the high seas to combat piracy or cooperating in launching a satellite into orbit. Such joint
action is to be distinguished from action by international organizations. 700
(5) In order to contribute to the formation and identification of rules of customary
international law, practice must be known to other States (whether or not it is publicly
available).701 Indeed, it is difficult to see how confidential conduct by a State could serve
such a purpose unless and until it is known to other States.
Conclusion 6
Forms of practice
1. Practice may take a wide range of forms. It includes both physical and verbal
acts. It may, under certain circumstances, include inaction.
2. Forms of State practice include, but are not limited to: diplomatic acts and
correspondence; conduct in connection with resolutions adopted by an international
organization or at an intergovernmental conference; conduct in connection with
treaties; executive conduct, including operational conduct "on the ground"; legislative
and administrative acts; and decisions of national courts.
3. There is no predetermined hierarchy among the various forms of practice.
Commentary
(1) Draft conclusion 6 indicates the types of conduct that are covered under the term
"practice", providing examples thereof and stating that no form of practice has a priori
primacy over another in the identification of customary international law. It refers to forms
of practice as empirically verifiable facts and avoids, for present purposes, a distinction
between an act and its evidence.
(2) Given that States exercise their powers in various ways and do not confine themselves
only to some types of acts, paragraph 1 provides that practice may take a wide range of forms.
While some have argued that it is only what States "do" rather than what they "say" that may
count as practice for purposes of identifying customary international law, it is now generally
accepted that verbal conduct (whether written or oral) may also count as practice; indeed,
practice may at times consist entirely of verbal acts, for example, diplomatic protests.
(3) Paragraph 1 further makes clear that inaction may count as practice. The words "under
certain circumstances" seek to caution, however, that only deliberate abstention from acting
may serve such a role: the State in question needs to be conscious of refraining from acting
in a given situation, and it cannot simply be assumed that abstention from acting is deliberate.
Examples of such omissions (sometimes referred to as "negative practice") may include
abstaining from instituting criminal proceedings against foreign State officials; refraining
from exercising protection in favour of certain naturalized persons; and abstaining from the
use of force. 702
( 4) Paragraph 2 provides a list of forms of practice that are often found to be useful for
the identification of customary international law. As the words "but are not limited to"
emphasize, this is a non-exhaustive list: given the inevitability and pace of change, both
political and technological, it would be impractical to draw up an exhaustive list of all the
700 See also draft conclusion 4, paragraph 2, above, and the commentary thereto.
701 In the case of particular customary international law, the practice must be known to at least one other
State or group of States concerned (see draft conclusion 16, below).
702 For illustrations, see The Case of the S.S. "Lotus" (footnote 687 above), at p. 28; Nottebohm Case
(second phase), Judgment of 6 April, 1955, I. C.J. Reports 1955, p. 4, at p. 22; and Jurisdictional
Immunities of the State (see footnote 672 above), at pp. 134-135, para. 77.
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forms that practice might take. 703 The forms of practice listed are no more than examples,
which, moreover, may overlap (for example, "diplomatic acts and correspondence" and
"executive conduct").
(5) The order in which the forms of practice are listed in paragraph 2 is not intended to
be significant. Each of the forms listed is to be interpreted broadly to reflect the multiple and
diverse ways in which States act and react. The expression "executive conduct", for example,
refers comprehensively to any form of executive act, including executive orders, decrees and
other measures; official statements on the international plane or before a legislature; and
claims before national or international courts and tribunals. The expression "legislative and
administrative acts" similarly embraces the various forms of regulatory disposition effected
by a public authority. The term "operational conduct 'on the ground"' includes law
enforcement and seizure of property as well as battlefield or other military activity, such as
the movement of troops or vessels, or deployment of certain weapons. The words "conduct
in connection with treaties" cover acts related to the negotiation and conclusion of treaties,
as well as their implementation; by concluding a treaty a State may be engaging in practice
in the domain to which the treaty relates, such as maritime delimitation agreements or host
country agreements. The reference to "conduct in connection with resolutions adopted by an
international organization or at an intergovernmental conference" likewise includes acts by
States related to the negotiation, adoption and implementation of resolutions, decisions and
other acts adopted within international organizations or at intergovernmental conferences,
whatever their designation and whether or not they are legally binding. Whether any of these
examples of forms of practice are in fact relevant in a particular case will depend on the
specific rule under consideration and all the relevant circumstances. 704
(6) Decisions of national courts at all levels may count as State practice705 (though it is
likely that greater weight will be given to the higher courts); decisions that have been
overruled on the particular point are generally not considered relevant. The role of decisions
of national courts as a form of State practice is to be distinguished from their potential role
as a "subsidiary means" for the determination of rules of customary international law. 706
(7) Paragraph 2 applies mutatis mutandis to the forms of practice of international
organizations in those cases where, in accordance with draft conclusion 4, paragraph 2, above,
such practice contributes to the formation, or expression, of rules of customary international
law.
(8) Paragraph 3 clarifies that no form of practice has a higher probative value than others
in the abstract. In particular cases, however, as explained in the commentaries to draft
conclusions 3 and 7 above, it may be that different forms ( or instances) of practice ought to
be given different weight when they are assessed in context.
Conclusion 7
Assessing a State's practice
1. Account is to be taken of all available practice of a particular State, which is
to be assessed as a whole.
2. Where the practice of a particular State varies, the weight to be given to that
practice may, depending on the circumstances, be reduced.
703 See also "Ways and means for making the evidence of customary international law more readily
available", Yearbook ... 1950, vol. II (Part Two), p. 368, para. 31; and document A/CN.4/710: Ways
and means for making the evidence of customary international law more readily available:
memorandum by the Secretariat (2018).
704 See paragraph (3) of the commentary to draft conclusion 3, above.
705 See, for example, Jurisdictional Immunities of the State (footnote 672 above), at pp. 131-135, paras.
72-77; and Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium),
Judgment, I.CJ. Reports 2002, p. 3, at p. 24, para. 58. The term "national courts" may also include
courts with an international element operating within one or more domestic legal systems, such as
courts or tribunals with mixed national and international composition.
706 See draft conclusion 13, paragraph 2, below. Decisions of national courts may also serve as evidence
of acceptance as law ( opinio Juris), on which see draft conclusion 10, paragraph 2, below.
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Commentary
(1) Draft conclusion 7 concerns the assessment of the practice of a particular State in
order to determine the position of that State as part of assessing the existence of a general
practice (which is the subject of draft conclusion 8, below). As the two paragraphs of draft
conclusion 7 make clear, it is necessary to take account of and assess as a whole all available
practice of the State concerned on the matter in question, including its consistency.
(2) Paragraph 1 states, first, that in seeking to determine the position of a particular State
on the matter in question, account is to be taken of all available practice of that State. This
means that the practice examined should be exhaustive (having regard to its availability) and
include the relevant practice of all of the State's organs and all relevant practice of a particular
organ. The paragraph also makes it clear that relevant practice is to be assessed not in
isolation but as a whole; only then can the actual position of the State be determined.
(3) The need to assess available practice "as a whole" is illustrated by the Jurisdictional
Immunities of the State case, in which the International Court of Justice took note of the fact
that although the Hellenic Supreme Court had decided in one case that, by virtue of the
''territorial tort principle", State immunity under customary international law did not extend
to the acts of armed forces during an armed conflict, a different position was adopted by the
Greek Special Supreme Court; by the Government of Greece when refusing to enforce the
Hellenic Supreme Court's judgment, and in defending this position before the European
Court of Human Rights; and by the Hellenic Supreme Court itself in a later decision.
Assessing such practice "as a whole" led the Court to conclude "that Greek State practice
taken as a whole actually contradicts, rather than supports, Italy's argument" that State
immunity under customary international law does not extend to the acts of armed forces
during an armed conflict. 707
(4) Paragraph 2 refers explicitly to situations where there is or appears to be inconsistent
practice of a particular State. As just indicated, this may be the case where different organs
or branches within the State adopt different courses of conduct on the same matter or where
the practice of one organ varies over time. If in such circumstances a State's practice as a
whole is found to be inconsistent, that State's contribution to "a general practice" may be
reduced.
(5) The words "may, depending on the circumstances" in paragraph 2 indicate that such
assessment needs to be approached with caution, and the same conclusion would not
necessarily be drawn in all cases. In the Fisheries case, for example, the International Court
of Justice held that "too much importance need not be attached to the few uncertainties or
contradictions, real or apparent ... in Norwegian practice. They may be easily understood in
the light of the variety of facts and conditions prevailing in the long period. "708 Thus, a
difference in the practice oflower and higher organs of the same State is unlikely to result in
less weight being given to the practice of the higher organ. Practice of organs of a central
government will usually be more significant than that of constituent units of a federal State
or political subdivisions of the State. The practice of the executive branch is often the most
relevant on the international plane and thus has particular weight in connection with the
identification of customary international law, though account may need to be taken of the
constitutional position of the various organs in question.709
Conclusion 8
The practice must be general
1. The relevant practice must be general, meaning that it must be sufficiently
widespread and representative, as well as consistent.
707 Jurisdictional Immunities of the State (see footnote 672 above), at p. 134, para. 76, and p. 136, para.
83. See also Military and Paramilitary Activities in and against Nicaragua (footnote 663 above), at p.
98, para. 186.
708 Fisheries case, Judgment of 18 December 1951, I.C.J. Reports 1951, p. 116, at p. 138.
709 See, for example, Jurisdictional Immunities of the State (footnote 672 above), at p. 136, para. 83
(where the Court noted that ''under Greek law" the view expressed by the Special Supreme Court
prevailed over that of the Hellenic Supreme Court).
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2. Provided that the practice is general, no particular duration is required.
Commentary
( 1) Draft conclusion 8 concerns the requirement that the practice must be general; it seeks
to capture the essence of this requirement and the inquiry that is needed in order to verify
whether it has been met in a particular case.
(2) Paragraph 1 explains that the notion of generality, which refers to the aggregate of the
instances in which the alleged rule of customary international law has been followed,
embodies two requirements. First, the practice must be sufficiently widespread and
representative. Second, the practice must exhibit consistency. In the words of the
International Court of Justice in the North Sea Continental Shelf cases, the practice in
question must be "both extensive and virtually uniform":710 it must be a "settled practice".711
As is explained below, no absolute standard can be given for either requirement; the threshold
that needs to be attained for each has to be assessed taking account of context. 712 In each case,
however, the practice should be of such a character as to make it possible to discern a virtually
uniform usage. Contradictory or inconsistent practice is to be taken into account in evaluating
whether such a conclusion may be reached. 713
(3) The requirement that the practice be "widespread and representative" does not lend
itself to exact formulations, as circumstances may vary greatly from one case to another (for
example, the frequency with which circumstances calling for action arise). 714 As regards
diplomatic relations, for example, in which all States regularly engage, a practice may have
to be widely exhibited, while with respect to some other matters, the amount of practice may
well be less. This is captured by the word "sufficiently", which implies that the necessary
number and distribution of States taking part in the relevant practice (like the number of
instances of practice) cannot be identified in the abstract. It is clear, however, that universal
participation is not required: it is not necessary to show that all States have participated in
the practice in question. The participating States should include those that had an opportunity
or possibility of applying the alleged rule. 715 It is important that such States are representative,
which needs to be assessed in light of all the circumstances, including the various interests at
stake and/or the various geographical regions.
(4) Thus, in assessing generality, an indispensable factor to be taken into account is the
extent to which those States that are particularly involved in the relevant activity or are most
likely to be concerned with the alleged rule ("specially affected States") have participated in
the practice. 716 While in many cases all or virtually all States will be equally affected, it would
clearly be impractical to determine, for example, the existence and content of a rule of
710 North Sea Continental Shelf(see footnote 671 above), at p. 43, para. 74. A wide range of terms has
been used to describe the requirement of generality, including by the International Court of Justice,
without any real difference in meaning being implied.
711 Ibid., at p. 44, para. 77.
712 See also draft conclusion 3, above.
713 Divergences from the alleged rule may suggest that no rule exists or point, inter alia, to an admissible
customary exception that has arisen; a change in a previous rule; a rule of particular customary
international law; or the existence of one or more persistent objectors. It might also be relevant to
consider when the inconsistent practice occurred, in particular whether it lay in the past, after which
consistency prevailed.
714 See also the judgment of 4 February 2016 of the Federal Court of Australia in Ure v. The
Commonwealth of Australia [2016] FCAFC 8, para. 37 ("we would hesitate to say that it is
impossible to demonstrate the existence of a rule of customary international [law] from a small
number of instances of State practice. We would accept the less prescriptive proposition that as the
number of instances of State practice decreases the task becomes more difficult").
715 A relatively small number of States engaging in a certain practice might thus suffice if indeed such
practice, as well as other States' inaction in response, is generally accepted as law (accompanied by
opinio Juris).
716 The International Court of Justice has said that "an indispensable requirement would be that within
the period in question, short though it might be, State practice, including that of States whose interests
are specially affected, should have been both extensive and virtually uniform", North Sea Continental
Shelf (see footnote 671 above), at p. 43, para. 74.
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customary international law relating to navigation in maritime zones without taking into
account the practice of relevant coastal States and flag States, or the existence and content of
a rule on foreign investment without evaluating the practice of the capital-exporting States
as well as that of the States in which investment is made. It should be made clear, however,
that the term "specially affected States" should not be taken to refer to the relative power of
States.
( 5) The requirement that the practice be consistent means that where the relevant acts are
divergent to the extent that no pattern ofbehaviour can be discerned, no general practice (and
thus no corresponding rule of customary international law) can be said to exist. For example,
in the Fisheries case, the International Court of Justice found that "although the ten-mile rule
has been adopted by certain States . . . other States have adopted a different limit.
Consequently, the ten-mile rule has not acquired the authority of a general rule of
international law". 717
( 6) In examining whether the practice is consistent it is of course important to consider
instances of conduct that are in fact comparable, that is, where the same or similar issues
have arisen so that such instances could indeed constitute reliable guides. The Permanent
Court of International Justice referred in the Lotus case to "precedents offering a close
analogy to the case under consideration; for it is only from precedents of this nature that the
existence ofa general principle [of customary international law] applicable to the particular
case may appear".718
(7) At the same time, complete consistency in the practice of States is not required. The
relevant practice needs to be virtually or substantially uniform, meaning that some
inconsistencies and contradictions are not necessarily fatal to a finding of"a general practice".
In Military and Paramilitary Activities in and against Nicaragua, the International Court of
Justice held that:
[i]t is not to be expected that in the practice of States the application of the rules in
question should have been perfect . . . The Court does not consider that, for a rule to
be established as customary, the corresponding practice must be in absolutely rigorous
conformity with the rule. In order to deduce the existence of customary rules, the
Court deems it sufficient that the conduct of States should, in general, be consistent
with such rules .... 719
(8) When inconsistency takes the form of breaches of a rule, this, too, does not necessarily
prevent a general practice from being established. This is particularly so when the State
concerned denies the violation or expresses support for the rule. As the International Court
of Justice has observed:
717 Fisheries case (see footnote 708 above), at p. 131. A chamber of the International Court ofJustice
held in the Gulf of Maine case that where the practice demonstrates "that each specific case is, in the
final analysis, different from all the others .... This precludes the possibility of those conditions
arising which are necessary for the formation of principles and rules of customary law" (Delimitation
of the Maritime Boundary in the Gulf of Maine Area (see footnote 668 above), at p. 290, para. 81).
See also, for example, Colombian-Peruvian asylum case (footnote 674 above), at p. 277 ("The facts
brought to the knowledge of the Court disclose so much uncertainty and contradiction, so much
fluctuation and discrepancy in the exercise of diplomatic asylum ... that it is not possible to discern in
all this any constant and uniform usage ... with regard to the alleged rule of unilateral and definitive
qualification of the offence"); and Interpretation of the air transport services agreement between the
United States of America and Italy, Advisory Opinion of 17 July 1965, United Nations, Reports of
International Arbitral Awards (UNRIAA), vol. XVI (Sales No. E/F.69.V.1), pp. 75-108, at p. 100 ("It
is correct that only a constant practice, observed in fact and without change can constitute a rule of
customary international law").
718 The Case of the S.S. "Lotus" (see footnote 687 above), at p. 21. See also North Sea Continental Shelf
(footnote 671 above), at p. 45, para. 79; and Prosecutor v. Moinina Fofana and Allieu Kondewa, Case
No. SCSL-04-14-A, Judgment (Appeals Chamber) of 28 May 2008, Special Court for Sierra Leone,
para. 406.
719 Military and Paramilitary Activities in and against Nicaragua (see footnote 663 above), at p. 98,
para. 186.
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instances of State conduct inconsistent with a given rule should generally have been
treated as breaches of that rule, not as indications of the recognition of a new rule. If
a State acts in a way prima facie incompatible with a recognized rule, but defends its
conduct by appealing to exceptions or justifications contained within the rule itself,
then whether or not the State's conduct is in fact justifiable on that basis, the
significance of that attitude is to confirm rather than to weaken the rule. 720
(9) Paragraph 2 refers to the time element, making clear that a relatively short period in
which a general practice is followed is not, in and of itself, an obstacle to determining that a
corresponding rule of customary international law exists. While a long duration may result
in more extensive practice, time immemorial or a considerable or fixed duration of a general
practice is not a condition for the existence of a customary rule. 721 The International Court of
Justice confirmed this in the North Sea Continental Shelf cases, holding that "the passage of
only a short period of time is not necessarily, or of itself, a bar to the formation of a new rule
of customary international law".722 As this passage makes clear, however, some period of
time must elapse for a general practice to emerge; there is no such thing as "instant custom".
Part Four
Accepted as law (opinio juris)
Establishing that a certain practice is followed consistently by a sufficiently
widespread and representative number of States does not in itself suffice in order to
identify a rule of customary international law. Part Four concerns the second
constituent element of customary international law, sometimes referred to as the
"subjective" or "psychological" element, which requires that in each case, it is also
necessary to be satisfied that there exists among States an acceptance as law (opinio
Juris) as to the binding character of the practice in question.
Conclusion 9
Requirement of acceptance as law (opinio juris)
1. The requirement, as a constituent element of customary international law, that
the general practice be accepted as law (opinio Juris) means that the practice in
question must be undertaken with a sense oflegal right or obligation.
2. A general practice that is accepted as law ( opinio Juris) is to be distinguished
from mere usage or habit.
Commentary
(1) Draft conclusion 9 seeks to encapsulate the nature and function of the second
constituent element of customary international law, acceptance as law ( opinio Juris).
(2) Paragraph 1 explains that acceptance as law ( opinio Juris), as a constituent element of
customary international law, refers to the requirement that the relevant practice must be
undertaken with a sense of legal right or obligation, that is, it must be accompanied by a
conviction that it is permitted, required or prohibited by customary international law. 723 It is
thus crucial to establish, in each case, that States have acted in a certain way because they
felt or believed themselves legally compelled or entitled to do so by reason of a rule of
customary international law: they must have pursued the practice as a matter of right, or
submitted to it as a matter of obligation. As the International Court of Justice stressed in the
North Sea Continental Shelf judgment:
720 Ibid. See also, for example, Prosecutor v. Sam Hinga Norman (footnote 675 above), para. 51. The
same is true when assessing a particular State's practice: see draft conclusion 7, above.
721 In fields such as international space law or the law of the sea, for example, customary international
law has sometimes developed rapidly.
722 North Sea Continental Shelf(see footnote 671 above), at p. 43, para. 74.
723 While acceptance of a certain practice as law ( opinio Juris) has often been described in terms of "a
sense oflegal obligation", draft conclusion 9 uses the broader language "a sense oflegal right or
obligation" as States have both rights and obligations under customary international law and they may
act in the belief that they have a right or an obligation. The draft conclusion does not suggest that,
where there is no prohibition, a State needs to point to a right to justify its action.
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Not only must the acts concerned amount to a settled practice, but they must also be
such, or be carried out in such a way, as to be evidence of a belief that this practice is
rendered obligatory by the existence of a rule of law requiring it. The need for such a
belief, i.e., the existence of a subjective element, is implicit in the very notion of the
opinio juris sive necessitatis. The States concerned must therefore feel that they are
conforming to what amounts to a legal obligation. 724
(3) Acceptance as law (opinio juris) is to be distinguished from other, extralegal motives
for action, such as comity, political expediency or convenience: if the practice in question is
motivated solely by such other considerations, no rule of customary international law is to be
identified. Thus in the Asylum case the International Court of Justice declined to recognize
the existence of a rule of customary international law where the alleged instances of practice
were not shown to be, inter alia:
exercised by the States granting asylum as a right appertaining to them and respected
by the territorial States as a duty incumbent on them and not merely for reasons of
political expediency .... considerations of convenience or simple political expediency
seem to have led the territorial State to recognize asylum without that decision being
dictated by any feeling of legal obligation. 725
(4) Seeking to comply with a treaty obligation as a treaty obligation, much like seeking
to comply with domestic law, is not acceptance as law for the purpose of identifying
customary international law: practice undertaken with such intention does not, by itself, lead
to an inference as to the existence of a rule of customary international law. 726 A State may
well recognize that it is bound by a certain obligation by force ofboth customary international
law and treaty, but this would need to be proved. On the other hand, when States act in
conformity with a treaty provision by which they are not bound, or apply conventional
provisions in their relations with non-parties to the treaty, this may evidence the existence of
acceptance as law ( opinio juris) in the absence of any explanation to the contrary.
(5) Acceptance as law (opinio juris) is to be sought with respect to both the States
engaging in the relevant practice and those in a position to react to it, who must be shown to
have understood the practice as being in accordance with customary international law. 727 It is
not necessary to establish that all States have recognized (accepted as law) the alleged rule
as a rule of customary international law; it is broad and representative acceptance, together
with no or little objection, that is required. 728
724 North Sea Continental Shelf (see footnote 671 above), at p. 44, para. 77; see also paragraph 76
(referring to the requirement that States "believed themselves to be applying a mandatory rule of
customary international law"). The Court has also referred, inter alia, to "a practice illustrative of
belief in a kind of general right for States" (Military and Paramilitary Activities in and against
Nicaragua (see footnote 663 above), at p. 108, para. 206).
725 Colombian-Peruvian asylum case (see footnote 674 above), at pp. 277 and 286. See also The Case of
the S.S. "Lotus" (footnote 687 above), at p. 28 ("Even if the rarity of the judicial decisions to be
found among the reported cases were sufficient to prove in point of fact the circumstance alleged ... it
would merely show that States had often, in practice, abstained from instituting criminal proceedings,
and not that they recognized themselves as being obliged to do so; for only if such abstention were
based on their being conscious of having a duty to abstain would it be possible to speak of an
international custom. The alleged fact does not allow one to infer that States have been conscious of
having such a duty; on the other hand ... there are other circumstances calculated to show that the
contrary is true"); and Military and Paramilitary Activities in and against Nicaragua (see footnote
663 above), at pp. l 08-110, paras. 206-209.
726 See, for example, North Sea Continental Shelf (footnote 671 above), at p. 43, para. 76. A particular
difficulty may thus arise in ascertaining whether a rule of customary international law has emerged
where a non-declaratory treaty has attracted virtually universal participation.
727 See Military and Paramilitary Activities in and against Nicaragua (footnote 663 above), at p. 109,
para. 207 ("Either the States taking such action or other States in a position to react to it, must have
behaved so that their conduct is 'evidence ofa belief that this practice is rendered obligatory by the
existence of a rule oflaw requiring it"' ( citing the North Sea Continental Shelf judgment)).
728 Thus, where "the members of the international community are profoundly divided" on the question of
whether a certain practice is accompanied by acceptance as law ( opinio Juris), no such acceptance as
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(6) Paragraph 2 emphasizes that, without acceptance as law (opinio juris), a general
practice may not be considered as creative, or expressive, of customary international law; it
is mere usage or habit. In other words, practice that States consider themselves legally free
either to follow or to disregard does not contribute to or reflect customary international law
(unless the rule to be identified itself provides for such a choice). 729 Not all observed
regularities of international conduct bear legal significance: diplomatic courtesies, for
example, such as the provision of red carpets for visiting heads of State, are not accompanied
by any sense oflegal obligation and thus could not generate or attest to any legal duty or right
to act accordingly. 730
Conclusion 10
Forms of evidence of acceptance as law (opinio juris)
1. Evidence of acceptance as law ( opinio juris) may take a wide range of forms.
2. Forms of evidence of acceptance as law (opinio juris) include, but are not
limited to: public statements made on behalf of States; official publications;
government legal opinions; diplomatic correspondence; decisions of national courts;
treaty provisions; and conduct in connection with resolutions adopted by an
international organization or at an intergovernmental conference.
3. Failure to react over time to a practice may serve as evidence of acceptance as
law (opinio juris), provided that States were in a position to react and the
circumstances called for some reaction.
Commentary
( 1) Draft conclusion 10 concerns the evidence from which acceptance of a given practice
as law (opinio juris) may be ascertained. It reflects the fact that acceptance as law may be
made known through various manifestations of State behaviour, which should be carefully
assessed to determine whether, in any given case, they actually reflect a State's views on the
current state of customary international law.
(2) Paragraph 1 sets forth the general proposition that acceptance as law (opinio juris)
may be reflected in a wide variety of forms. States may express their recognition ( or rejection)
of the existence of a rule of customary international law in many ways. Such conduct
indicative of acceptance as law supporting an alleged rule encompasses, as the subsequent
paragraphs make clear, both statements and physical actions (as well as inaction) concerning
the practice in question.
(3) Paragraph 2 provides a non-exhaustive list of forms of evidence of acceptance as law
( opinio juris ), including those most commonly resorted to for such purpose. 731 Such forms of
law could be said to exist: see Legality of the Threat or Use of Nuclear Weapons (footnote 675
above), at p. 254, para. 67.
729 In the Right of Passage case the International Court of Justice thus observed, with respect to the
passage of armed forces and armed police, that "[t]he practice predicates that the territorial sovereign
had the discretionary power to withdraw or to refuse permission. It is argued that permission was
always granted, but this does not, in the opinion of the Court, affect the legal position. There is
nothing in the record to show that grant of permission was incumbent on the British or on India as an
obligation" (Case concerning Right of Passage over Indian Territory (see footnote 675 above), at pp.
42--43). In the Jurisdictional Immunities of the State case, the International Court of Justice similarly
held, in seeking to determine the content of a rule of customary international law, that, "[ w ]hile it may
be true that States sometimes decide to accord an immunity more extensive than that required by
international law, for present purposes, the point is that the grant of immunity in such a case is not
accompanied by the requisite opinio Juris and therefore sheds no light upon the issue currently under
consideration by the Court" (Jurisdictional Immunities of the State (see footnote 672 above), at p.
123, para. 55).
730 The International Court of Justice observed that indeed "[t]here are many international acts, e.g., in
the field of ceremonial and protocol, which are performed almost invariably, but which are motivated
only by considerations of courtesy, convenience or tradition, and not by any sense of legal duty"
(North Sea Continental Shelf(see footnote 671 above), at p. 44, para. 77).
731 See also document A/CN .4/710: Ways and means for making the evidence of customary international
law more readily available: memorandum by the Secretariat (2018).
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evidence may also indicate lack of acceptance as law. There is some common ground
between the forms of evidence of acceptance as law and the forms of State practice referred
to in draft conclusion 6, paragraph 2 above; 732 in part, this reflects the fact that the two
elements may at times be found in the same material (but, even then, their identification
requires a separate exercise in each case733). In any event, statements are more likely to
embody the legal conviction of the State, and may often be more usefully regarded as
expressions of acceptance as law ( or otherwise) rather than instances of practice.
(4) Among the forms of evidence of acceptance as law (opinio juris), an express public
statement on behalf of a State that a given practice is permitted, prohibited or mandated under
customary international law provides the clearest indication that the State has avoided or
undertaken such practice ( or recognized that it was rightfully undertaken or avoided by others)
out of a sense of legal right or obligation. Similarly, the effect of practice in line with the
supposed rule may be nullified by contemporaneous statements that no such rule exists. 734
Either way, such statements could be made, for example, in debates in multilateral settings;
when introducing draft legislation before the legislature; as assertions made in written and
oral pleadings before courts and tribunals; in protests characterizing the conduct of other
States as unlawful; and in response to proposals for codification. They may be made
individually or jointly with others.
( 5) The other forms of evidence listed in paragraph 2 may also be of particular assistance
in ascertaining the legal position of States in relation to certain practices. Among these, the
term "official publications" covers documents published in the name of a State, such as
military manuals and official maps, in which acceptance as law ( opinio juris) may be found.
Published opinions of government legal advisers may likewise shed light on a State's legal
position, though not if the State declined to follow the advice. Diplomatic correspondence
may include, for example, circular notes to diplomatic missions, such as those on privileges
and immunities. National legislation, while it is most often the product of political choices,
may be valuable as evidence of acceptance as law, particularly where it has been specified
(for example, in connection with the passage of the legislation) that it is mandated under or
gives effect to customary international law. Decisions of national courts may also contain
such statements when pronouncing upon questions of international law.
(6) Multilateral drafting and diplomatic processes may afford valuable and accessible
evidence as to the legal convictions of States with respect to the content of customary
international law, hence the reference to "treaty provisions" and to "conduct in connection
with resolutions adopted by an international organization or at an intergovernmental
conference". Their potential utility in the identification of rules of customary international
law is examined in greater detail in draft conclusions 11 and 12, below.
(7) Paragraph 2 applies mutatis mutandis to the forms of evidence of acceptance of law
( opinio juris) of international organizations.
(8) Paragraph 3 provides that, under certain conditions, failure by States to react, within
a reasonable time, may also, in the words of the International Court of Justice in the Fisheries
case, "[bear] witness to the fact that they did not consider ... [a certain practice undertaken
by others] to be contrary to international law".735 Tolerance ofa certain practice may indeed
732 There are also differences between the lists, as they are intended to refer to the principal examples
connected with each of the constituent elements.
733 See draft conclusion 3, paragraph 2, above.
734 At times the practice itself is accompanied by an express disavowal oflegal obligation, such as when
States pay compensation ex gratia for damage caused to foreign diplomatic property.
735 Fisheries case (see footnote 708 above), at p. 139. See also The Case of the S.S. "Lotus" (footnote
687 above), at p. 29 ("the Court feels called upon to lay stress upon the fact that it does not appear
that the States concerned have objected to criminal proceedings in respect of collision cases before
the courts of a country other than that the flag of which was flown, or that they have made protests:
their conduct does not appear to have differed appreciably from that observed by them in all cases of
concurrent jurisdiction. This fact is directly opposed to the existence of a tacit consent on the part of
States to the exclusive jurisdiction of the State whose flag is flown, such as the Agent for the French
Government has thought it possible to deduce from the infrequency of questions of jurisdiction before
criminal courts. It seems hardly probable, and it would not be in accordance with international
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serve as evidence of acceptance as law ( opinio Juris) when it represents concurrence in that
practice. For such a lack of open objection or protest to have this probative value, however,
two requirements must be satisfied in the circumstances of each case in order to ensure that
such inaction does not derive from causes unrelated to the legality of the practice in
question.736 First, it is essential that a reaction to the practice in question would have been
called for: 737 this may be the case, for example, where the practice is one that affects -
usually unfavourably- the interests or rights of the State failing or refusing to act. 738 Second,
the reference to a State being "in a position to react" means that the State concerned must
have had knowledge of the practice (which includes circumstances where, because of the
publicity given to the practice, it must be assumed that the State had such knowledge), and
that it must have had sufficient time and ability to act. Where a State did not or could not
have been expected to know of a certain practice, or has not yet had a reasonable time to
respond, inaction cannot be attributed to an acknowledgment that such practice was mandated
( or permitted) under customary international law. A State may also provide other
explanations for its inaction.
Part Five
Significance of certain materials for the identification of customary
international law
(1) Various materials other than primary evidence of alleged instances of practice
accepted as law (accompanied by opinio Juris) may be consulted in the process of
determining the existence and content of rules of customary international law. These
commonly include written texts bearing on legal matters, in particular treaties, resolutions of
international organizations and intergovernmental conferences, judicial decisions ( of both
international and national courts), and scholarly works. Such texts may assist in collecting,
synthesizing or interpreting practice relevant to the identification of customary international
law, and may offer precise formulations to frame and guide an inquiry into its two constituent
elements. Part Five seeks to explain the potential significance of these materials, making
clear that it is of critical importance to study carefully both the content of such materials and
the context within which they were prepared.
(2) The output of the International Law Commission itself merits special consideration in
the present context. As has been recognized by the International Court of Justice and other
courts and tribunals, 739 a determination by the Commission affirming the existence and
content of a rule of customary international law may have particular value, as may a
conclusion by it that no such rule exists. This flows from the Commission's unique mandate,
practice, that the French Government in the Ortigia-Oncle-Joseph case and the German Government
in the Ekbatana-West-Hinder case would have omitted to protest against the exercise of criminal
jurisdiction by the Italian and Belgian Courts, if they had really thought that this was a violation of
international law"); and Priebke, Erich s/ solicitud de extradici6n, Case No. 16. 063/94, Judgment of 2
November 1995, Supreme Court ofJustice of Argentina, Vote ofJudge Gustavo A. Bossert, at p. 40,
para. 90.
736 See also, more generally, North Sea Continental Shelf(footnote 671 above), at p. 27, para. 33.
737 The International Court of Justice has observed, in a different context, that "[t]he absence ofreaction
may well amount to acquiescence .... That is to say, silence may also speak, but only if the conduct of
the other State calls for a response" (Sovereignty over Pedra Branca/Pu/au Batu Puteh, Middle Rocks
and South Ledge (Malaysia/Singapore), Judgment, I.CJ. Reports 2008, p. 12, at pp. 50--51, para.
121). See also Dispute regarding Navigational and Related Rights (footnote 683 above), at pp. 265-
266, para. 141 ("For the Court, the failure ofNicaragua to deny the existence ofa right arising from
the practice which had continued undisturbed and unquestioned over a very long period, is
particularly significant").
738 It may well be that a certain practice would be seen as affecting all or virtually all States.
739 See, for example, Gabcikovo-Nagymaros Project (Hungary/Slovakia), Judgment, I.CJ. Reports 1997,
p. 7, at p. 40, para. 51; Responsibilities and obligations of States with respect to activities in the Area,
Advisory Opinion, 1 February 2011, ITLOS Reports 2011, p. 10, at p. 56, para. 169; Prosecutor v.
Elizaphan Ntakirutimana and Gerard Ntakirutimana, Cases Nos. ICTR-96-10-A and ICTR-96-17-A,
Judgment (Appeals Chamber) of 13 December 2004, International Criminal Tribunal for Rwanda,
para. 518; Dubai-Sharjah Border Arbitration (1981), International Law Reports, vol. 91, pp. 543-
701, at p. 575; and 2 BvR 1506/03, German Federal Constitutional Court, Order of the Second Senate
of5 November 2003, para. 47.
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as a subsidiary organ of the United Nations General Assembly, to promote the progressive
development of international law and its codification;740 the thoroughness of its procedures
(including the consideration of extensive surveys of State practice and opinio Juris); and its
close relationship with the General Assembly and States (including receiving oral and written
comments from States as it proceeds with its work). The weight to be given to the
Commission's determinations depends, however, on various factors, including the sources
relied upon by the Commission, the stage reached in its work, and above all upon States'
reception of its output. 741
Conclusion 11
Treaties
1. A rule set forth in a treaty may reflect a rule of customary international law if
it is established that the treaty rule:
(a) codified a rule of customary international law existing at the time when
the treaty was concluded;
(b) has led to the crystallization of a rule of customary international law
that had started to emerge prior to the conclusion of the treaty; or
( c) has given rise to a general practice that is accepted as law ( opinio Juris),
thus generating a new rule of customary international law.
2. The fact that a rule is set forth in a number of treaties may, but does not
necessarily, indicate that the treaty rule reflects a rule of customary international law.
Commentary
(1) Draft conclusion 11 concerns the significance of treaties for the identification of
customary international law. The draft conclusion does not address conduct in connection
with treaties as a form of practice, a matter covered in draft conclusion 6 above, nor does it
directly concern the treaty-making process or draft treaty provisions, which may themselves
give rise to State practice and evidence of acceptance as law (opinio Juris) as indicated in
draft conclusions 6 and 10 above.
(2) While treaties are, as such, binding only on the parties thereto, they "may have an
important role to play in recording and defining rules deriving from custom, or indeed in
developing them".742 Their provisions (and the processes of their adoption and application)
may shed light on the content of customary international law. 743 Clearly expressed treaty
provisions may offer particularly convenient evidence as to the existence or content of rules
of customary international law when they are found to be declaratory of such rules. Yet the
words "may reflect" caution that, in and of themselves, treaties cannot create a rule of
customary international law or conclusively attest to its existence or content.
(3) The number of parties to a treaty may be an important factor in determining whether
particular rules set forth therein reflect customary international law; treaties that have
740 See the statute of the International Law Commission (1947), adopted by the General Assembly in
resolution 174 (II) of21 November 1947.
741 Once the General Assembly has taken action in relation to a final draft of the Commission, such as by
annexing it to a resolution and commending it to States, the output of the Commission may also fall to
be considered under draft conclusion 12, below.
742 Continental Shelf (see footnote 672 above), at pp. 29-30, para. 27 ("It is of course axiomatic that the
material of customary international law is to be looked for primarily in the actual practice and opinio
Juris of States, even though multilateral conventions may have an important role to play in recording
and defining rules deriving from custom, or indeed in developing them"). Article 38 of the 1969
Vienna Convention refers to the possibility of"a rule set forth in a treaty ... becoming binding upon a
third State as a customary rule of international law, recognized as such".
743 See Jurisdictional Immunities of the State (footnote 672 above), at p. 128, para. 66; "Ways and means
for making the evidence of customary international law more readily available", Yearbook ... 1950,
vol. II (Part Two), p. 368, para. 29 ("not infrequently conventional formulation by certain States of a
practice also followed by other States is relied upon in efforts to establish the existence of a rule of
customary international law. Even multipartite conventions signed but not brought into force are
frequently regarded as having value as evidence of customary international law").
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obtained near-universal acceptance may be seen as particularly indicative in this respect. 744
But treaties that are not yet in force or which have not yet attained widespread participation
may also be influential in certain circumstances, particularly where they were adopted
without opposition or by an overwhelming majority of States. 745 In any case, the attitude of
States not party to a widely ratified treaty, both at the time of its conclusion and subsequently,
will also be ofrelevance.
(4) Paragraph 1 sets out three circumstances in which rules set forth in a treaty may be
found to reflect customary international law, distinguished by the time when the rule of
customary international law was ( or began to be) formed. The use of the term "rule set forth
in a treaty" seeks to indicate that a rule may not necessarily be contained in a single treaty
provision, but could be reflected by two or more provisions read together. 746 The words "if it
is established that" make it clear that establishing whether a conventional rule does in fact
correspond to an alleged rule of customary international law cannot be done just by looking
at the text of the treaty: in each case the existence of the rule must be confirmed by practice
(together with acceptance as law). It is important that States can be shown to engage in the
practice not (solely) because of the treaty obligation, but out of a conviction that the rule
embodied in the treaty is or has become a rule of customary international law. 747
(5) Subparagraph (a) concerns the situation where it is established that a rule set forth in
a treaty is declaratory of a pre-existing rule of customary international law. 748 In inquiring
whether this is the case with respect to an alleged rule of customary international law, regard
should first be had to the treaty text, which may contain an express statement on the matter. 749
The fact that reservations are expressly permitted to a treaty provision may suggest that the
treaty provision does not reflect customary international law, but is not necessarily
conclusive. 750 Such indications within the text, however, may be lacking, or may refer to the
744 See, for example, Eritrea-Ethiopia Claims Commission, Partial Award: Prisoners of War, Ethiopia's
Claim 4, 1 July 2003, UNRIAA, vol. XXVI (Sales No. E/F.06.V.7), pp. 73-114, at pp. 86-87, para.
31 ("Certainly, there are important, modem authorities for the proposition that the Geneva
Conventions of 1949 have largely become expressions of customary international law, and both
Parties to this case agree. The mere fact that they have obtained nearly universal acceptance supports
this conclusion" (footnote omitted)); and Prosecutor v. Sam Hinga Norman (see footnote 675 above)
at paras. 17-20 (referring, inter alia, to the "huge acceptance, the highest acceptance of all
international conventions" as indicating that the relevant provisions of the Convention on the Rights
of the Child had come to reflect customary international law).
745 See, for example, Continental Shelf (footnote 672 above), at p. 30, para. 27 ("it cannot be denied that
the 1982 Convention [ on the Law of the Sea - which was not then in force] is of major importance,
having been adopted by an overwhelming majority of States; hence it is clearly the duty of the Court,
even independently of the references made to the Convention by the Parties, to consider in what
degree any of its relevant provisions are binding upon the Parties as a rule of customary international
law").
746 It may also be the case that a single provision only partly reflects customary international law.
747 In the North Sea Continental Shelf cases, this consideration led to the disqualification of several of the
invoked instances of State practice (North Sea Continental Shelf(see footnote 671 above), at p. 43,
para. 76).
748 See, for example, Application of the Convention on the Prevention and Punishment of the Crime of
Genocide (footnote 663 above), at pp. 46--47, para. 87.
749 In the 1948 Convention on the Prevention and Punishment of the Crime of Genocide (United Nations,
Treaties Series, vol. 78, No. 1021, p. 277), for example, the Parties "confirm that genocide, whether
committed in time of peace or in time of war, is a crime under international law" (art. 1) (emphasis
added); and the 1958 Geneva Convention on the High Seas contains the following preambular
paragraph: "Desiring to codify the rules of international law relating to the high seas" (ibid., vol. 450,
No. 6465, at p. 82). A treaty may equally indicate that it embodies progressive development rather
than codification; in the Colombian-Peruvian asylum case, for example, the International Court of
Justice found that the preamble to the Montevideo Convention on Rights and duties of States of 1933
(League ofNations, Treaty Series, vol. CLXV, No. 3802, p. 19), which states that it modifies a
previous convention (and the limited number of States that have ratified it), runs counter to the
argument that the Convention "merely codified principles which were already recognized by ...
custom" (Colombian-Peruvian asylum case (see footnote 674 above), at p. 277).
750 See also the Commission's Guide to Practice on Reservations to Treaties, guidelines 3.1.5.3
(Reservations to a provision reflecting a customary rule) and 4.4.2 (Absence of effect on rights and
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treaty in general rather than to any specific rule contained therein;751 in such case, resort may
be had to the treaty's preparatory work (travaux preparatoires),752 including any statements
by States in the course of the drafting process that may disclose an intention to codify an
existing rule of customary international law. If it is found that the negotiating States had
indeed considered that the rule in question was a rule of customary international law, this
would be evidence of acceptance as law (opinio juris), and would carry greater weight the
larger the number of negotiating States. There would, however, still remain a need to consider
whether sufficiently widespread and representative, as well as consistent, instances of the
relevant practice supported the existence of a rule of customary international law ( as distinct
from a treaty obligation). This is both because the fact that the parties assert that the treaty is
declaratory of existing law is no more than one piece of evidence to that effect, and because
the rule of customary international law underlying a treaty text may have changed or been
superseded since the conclusion of the treaty. In other words, relevant practice will need to
confirm, or exist in conjunction with, the opinio juris.
(6) Subparagraph (b) concerns the case where it is established that a general practice that
is accepted as law (accompanied by opinio juris) has crystallized around a treaty rule
elaborated on the basis of only a limited amount of State practice. In other words, the treaty
rule has consolidated and given further definition to a rule of customary international law
that was only emerging at the time when the treaty was being drawn up, thereby later
becoming reflective of it. 753 Here, too, establishing that this is indeed the case requires an
evaluation of whether the treaty formulation has been accepted as law and does in fact find
support in a general practice. 754
obligations under customary international law), Official Records of the General Assembly, Sixty-sixth
session, Supplement No. 10 (A/66/10 and Add. I).
751 The 1930 Convention on Certain Questions relating to the Conflict ofNationality Laws (League of
Nations, Treaty Series, vol. CLXXIX, No. 4137, p. 89), for example, provides that: "The inclusion of
the above-mentioned principles and rules in the Convention shall in no way be deemed to prejudice
the question whether they do or do not already form part of international law" (art. 18). Sometimes a
general reference is made to both codification and development: in the 1969 Vienna Convention, for
example, the States parties express in the preamble their belief that "codification and progressive
development of the law of treaties [are] achieved in the present Convention"; in the 2004 United
Nations Convention on Jurisdictional Immunities of States and Their Property (General Assembly
resolution 59/38 of2 December 2004), the States parties consider in the preamble "that the
jurisdictional immunities of States and their property are generally accepted as a principle of
customary international law" and express their belief that the Convention "would contribute to the
codification and development of international law and the harmonization of practice in this area". See
also Benkharbouche v. Secretary of State for Foreign and Commonwealth Affairs and Secretary of
State for Foreign and Commonwealth Affairs and Libya v. Janah, United Kingdom Supreme Court,
[2017] UKSC 62 (18 October 2017), para. 32.
752 In examining in the North Sea Continental Shelf cases whether article 6 of the 1958 Convention on
the Continental Shelf (United Nations, Treaty Series, vol. 499, No. 7302, p. 311) reflected customary
international law when the Convention was drawn up, the International Court of Justice held that
"[t]he status of the rule in the Convention therefore depends mainly on the processes that led the
[International Law] Commission to propose it. These processes have already been reviewed in
connection with the Danish-Netherlands contention of an a priori necessity for equidistance [in
maritime delimitation], and the Court considers this review sufficient for present purposes also, in
order to show that the principle of equidistance, as it now figures in Article 6 of the Convention, was
proposed by the Commission with considerable hesitation, somewhat on an experimental basis, at
most de lege ferenda, and not at all de lege lata or as an emerging rule of customary international law.
This is clearly not the sort of foundation on which Article 6 of the Convention could be said to have
reflected or crystallized such a rule" (North Sea Continental Shelf(see footnote 671 above), at p. 38,
para. 62). See also Jurisdictional Immunities of the State (footnote 672 above), at pp. 138-139, para.
89.
753 Even where a treaty provision could not eventually be agreed, it remains possible that customary
international law has later evolved "through the practice of States on the basis of the debates and
near-agreements at the Conference [where a treaty was negotiated]": Fisheries Jurisdiction (Federal
Republic of Germany v. Iceland), Merits, Judgment, I.CJ. Reports 1974, p. 175, at pp. 191-192, para.
44.
754 See, for example, Continental Shelj(footnote 672 above), at p. 33, para. 34 ("It is in the Court's view
incontestable that ... the institution of the exclusive economic zone, with its rule on entitlement by
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(7) Subparagraph (c) concerns the case where it is established that a rule set forth in a
treaty has generated a new rule of customary international law. 755 This is a process that is not
lightly to be regarded as having occurred. As the International Court of Justice explained in
the North Sea Continental Shelf cases, for it to be established that a rule set forth in a treaty
has produced the effect that a rule of customary international law has come into being:
[i]t would in the first place be necessary that the provision concerned should, at all
events potentially, be of a fundamentally norm creating character such as could be
regarded as forming the basis of a general rule of law. . . . [ A ]n indispensable
requirement would be that within the period in question, short though it might be,
State practice, including that of States whose interests are specially affected, should
have been both extensive and virtually uniform in the sense of the provision invoked;
- and should moreover have occurred in such a way as to show a general recognition
that a rule of law or legal obligation is involved. 756
In other words, a general practice accepted as law ( accompanied by opinio juris) "in the sense
of the provision invoked" must be observed. Given that the concordant behaviour of parties
to the treaty among themselves could presumably be attributed to the treaty obligation, rather
than to acceptance of the rule in question as binding under customary international law, the
practice of such parties in relation to non-parties to the treaty, and of non-parties in relation
to parties or among themselves, will have particular value.
(8) Paragraph 2 seeks to caution that the existence of similar provisions in a number of
bilateral or other treaties, thus establishing similar rights and obligations for a possibly broad
array of States, does not necessarily indicate that a rule of customary international law is
reflected in such provisions. While it may indeed be the case that such repetition attests to
the existence of a corresponding rule of customary international law ( or has given rise to it),
it "could equally show the contrary" in the sense that States enter into treaties because of the
absence of any rule or in order to derogate from an existing but different rule of customary
international law. 757 Again, an investigation into whether there are instances of practice
accepted as law (accompanied by opinio juris) that support the written rule is required.
reason of distance, is shown by the practice of States to have become a part of customary law"
(emphasis added)).
755 As the International Court of Justice confirmed, "this process is a perfectly possible one and does
from time to time occur: it constitutes indeed one of the recognized methods by which new rules of
customary international law may be formed" (North Sea Continental Shelf (see footnote 671 above),
at p. 41, para. 71). One example frequently cited is the Hague Regulations annexed to the 1907 Fourth
Hague Convention respecting the Laws and Customs of War on Land: although these were prepared,
according to the Convention, "to revise the general laws and customs of war" existing at that time
(and thus did not codify existing customary international law), they later came to be regarded as
reflecting customary international law (see Legal Consequences of the Construction of a Wall in the
Occupied Palestinian Territory, Advisory Opinion, I.C.J. Reports 2004, p. 136, at p. 172, para. 89).
756 North Sea Continental Shelf(see footnote 671 above), at pp. 41--43, paras. 72 and 74 (cautioning, at
para. 71, that "this result is not lightly to be regarded as having been attained"). See also Military and
Paramilitary Activities in and against Nicaragua (footnote 663 above), at p. 98, para. 184 ("Where
two States agree to incorporate a particular rule in a treaty, their agreement suffices to make that rule
a legal one, binding upon them; but in the field of customary international law, the shared view of the
Parties as to the content of what they regard as the rule is not enough. The Court must satisfy itself
that the existence of the rule in the opinio Juris of States is confirmed by practice").
757 See Ahmadou Sadia Diallo (Republic of Guinea v. Democratic Republic of the Congo), Preliminary
Objections, Judgment, I.C.J. Reports 2007, p. 582, at p. 615, para. 90 ("The fact invoked by Guinea
that various international agreements, such as agreements for the promotion and protection of foreign
investments and the Washington Convention, have established special legal regimes governing
investment protection, or that provisions in this regard are commonly included in contracts entered
into directly between States and foreign investors, is not sufficient to show that there has been a
change in the customary rules of diplomatic protection; it could equally show the contrary").
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Conclusion 12
Resolutions of international organizations and intergovernmental conferences
1. A resolution adopted by an international organization or at an
intergovernmental conference cannot, of itself, create a rule of customary
international law.
2. A resolution adopted by an international organization or at an
intergovernmental conference may provide evidence for determining the existence
and content of a rule of customary international law, or contribute to its development.
3. A provision in a resolution adopted by an international organization or at an
intergovernmental conference may reflect a rule of customary international law if it is
established that the provision corresponds to a general practice that is accepted as law
(opinio juris).
Commentary
(1) Draft conclusion 12 concerns the role that resolutions adopted by international
organizations or at intergovernmental conferences may play in the determination of rules of
customary international law. It provides that, while such resolutions, of themselves, can
neither constitute rules of customary international law nor serve as conclusive evidence of
their existence and content, they may have value in providing evidence of existing or
emerging law and may contribute to the development of a rule of customary international
law.758
(2) As in draft conclusion 6, the word "resolution" refers to resolutions, decisions and
other acts adopted by international organizations or at intergovernmental conferences,
whatever their designation759 and whether or not they are legally binding. Special attention
should be paid in the present context to resolutions of the General Assembly, a plenary organ
of the United Nations with virtually universal participation, that may offer important
evidence of the collective opinion of its Members. Resolutions adopted by organs ( or at
conferences) with more limited membership may also be relevant, but their weight in
identifying a rule of customary international law is likely to be less.
(3) Although resolutions of organs of international organizations (unlike resolutions of
intergovermental conferences) emanate, strictly speaking, not from the States members but
from the organization, in the context of the present draft conclusion what is relevant is that
they may reflect the collective expression of the views of such States: when they purport
(explicitly or implicitly) to touch upon legal matters, the resolutions may afford an insight
into the attitudes of the member States towards such matters. Much of what has been said of
treaties in relation to draft conclusion 11, above, applies to resolutions; however, unlike
treaties, resolutions are normally not legally binding documents, and generally receive less
legal review than treaty texts. Like treaties, resolutions cannot be a substitute for the task of
ascertaining whether there is in fact a general practice that is accepted as law (accompanied
by opinio juris).
(4) Paragraph 1 makes clear that resolutions adopted by international organizations or at
intergovernmental conferences cannot independently constitute rules of customary
international law. In other words, the mere adoption of a resolution ( or a series of resolutions)
purporting to lay down a rule of customary international law does not create such law: it has
to be established that the rule set forth in the resolution does in fact correspond to a general
practice that is accepted as law (accompanied by opinio juris). There is no "instant custom"
arising from such resolutions on their own account. 760
(5) Paragraph 2 states, first, that resolutions may nevertheless assist in the determination
of rules of customary international law by providing evidence of their existence and content.
758 See Legality of the Threat or Use of Nuclear Weapons (footnote 675 above), at pp. 254-255, para 70;
SEDCO Incorporated v. National Iranian Oil Company and Iran, second interlocutory award, Award
No. ITL 59-129-3 of27 March 1986, International Law Reports, vol. 84, pp. 483-592, at p. 526.
759 There is a wide range of designations, such as "declaration" or "declaration of principles".
760 See also para. (9) of the commentary to draft conclusion 8, above.
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The word "may" seeks to caution that not all resolutions serve such a role. As the
International Court of Justice has observed, resolutions "even if they are not binding ... can,
in certain circumstances, provide evidence important for establishing the existence of a rule
or the emergence of an opinio Juris".761 This is particularly so when a resolution purports to
be declaratory of an existing rule of customary international law, in which case it may serve
as evidence of the acceptance as law of such a rule by those States supporting the resolution.
In other words, "[t]he effect of consent to the text of such resolutions ... may be understood
as an acceptance of the validity of the rule or set of rules declared by the resolution". 762
Conversely, negative votes, abstentions or disassociations from a consensus, along with
general statements and explanations of positions, may be evidence that there is no acceptance
as law.
( 6) Because the attitude of States towards a given resolution ( or a particular rule set forth
in a resolution), expressed by vote or otherwise, is often motivated by political or other nonlegal
considerations, ascertaining acceptance as law ( opinio Juris) from such resolutions must
be done "with all due caution".763 This is denoted by the word "may". In each case, a careful
assessment of various factors is required in order to verify whether indeed the States
concerned intended to acknowledge the existence of a rule of customary international law.
As the International Court of Justice indicated in Legality of the Threat or Use of Nuclear
Weapons, "it is necessary to look at [the resolution's] content and the conditions of its
adoption; it is also necessary to see whether an opinio Juris exists as to its normative character.
Or a series of resolutions may show the gradual evolution of the opinio Juris required for the
establishment of a new rule."764 The precise wording used is the starting point in seeking to
evaluate the legal significance of a resolution; reference to international law, and the choice
( or avoidance) of particular terms in the text, including the preambular as well as the
operative language, may be significant. 765 Also relevant are the debates and negotiations
leading up to the adoption of the resolution and especially explanations of vote and similar
statements given immediately before or after adoption. 766 The degree of support for the
resolution (as may be observed in the size of the majority and where there are negative votes
or abstentions) is critical. Differences of opinion expressed on aspects of a resolution may
indicate that no general acceptance as law ( opinio Juris) exists, at least on those aspects, and
resolutions which attract negative votes or abstentions are unlikely to be regarded as
reflecting customary international law. 767
(7) Paragraph 2 further acknowledges that resolutions adopted by international
organizations or at intergovernmental conferences, even when devoid of legal force of their
own, may sometimes play an important role in the development of customary international
law. This may be the case when, as with a treaty, a resolution (or a series of resolutions)
provides inspiration and impetus for the growth of a general practice accepted as law
(accompanied by opinio Juris) conforming to its terms, or when it crystallizes an emerging
rule.
761 Legality of the Threat or Use of Nuclear Weapons (see footnote 675 above), at pp. 254-255, para. 70
(referring to General Assembly resolutions).
762 Military and Paramilitary Activities in and against Nicaragua (see footnote 663 above), at p. 100,
para. 188. See also The Government of the State of Kuwait v. The American Independent Oil
Company (AMINOIL), Final Award of24 March 1982, International Law Reports, vol. 66, pp. 518-
627, atpp. 601-602, para. 143.
763 Military and Paramilitary Activities in and against Nicaragua (see footnote 663 above), at p. 99,
para. 188.
764 Legality of the Threat or Use of Nuclear Weapons (see footnote 675 above), at p. 255, para. 70.
765 In resolution 96 (I) of 11 December 1946, for example, the General Assembly "Affirm[ed] that
genocide is a crime under international law", language that suggests that the paragraph was intended
to be declaratory of existing customary international law.
766 In the General Assembly, explanations of vote are often given upon adoption by a main committee, in
which case they are not usually repeated in plenary.
767 See, for example, Legality of the Threat or Use of Nuclear Weapons (footnote 675 above), at p. 255,
para. 71 ("several of the resolutions under consideration in the present case have been adopted with
substantial numbers of negative votes and abstentions; thus, although those resolutions are a clear
sign of deep concern regarding the problem of nuclear weapons, they still fall short of establishing the
existence of an opinio Juris on the illegality of the use of such weapons").
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(8) Paragraph 3 makes it clear that provisions of resolutions adopted by an international
organization or at an intergovernmental conference cannot in and of themselves serve as
conclusive evidence of the existence and content of rules of customary international law. This
follows from the indication that, for the existence of a rule to be demonstrated, the opinio
juris of States, as may be evidenced by a resolution, must be borne out by practice; other
evidence is thus required, in particular to show whether the alleged rule is in fact observed in
the practice of States. 768 A provision of a resolution cannot be evidence of a rule of customary
international law if practice is absent, different or inconsistent.
Conclusion 13
Decisions of courts and tribunals
1. Decisions of international courts and tribunals, in particular of the International
Court of Justice, concerning the existence and content of rules of customary
international law are a subsidiary means for the determination of such rules.
2. Regard may be had, as appropriate, to decisions of national courts concerning
the existence and content of rules of customary international law, as a subsidiary
means for the determination of such rules.
Commentary
(1) Draft conclusion 13 concerns the role of decisions of courts and tribunals, both
international and national, as an aid in the identification of rules of customary international
law. It should be recalled that decisions of national courts may serve a dual role in the
identification of customary international law. On the one hand, as the above draft conclusions
6 and 10 indicate, they may serve as practice as well as evidence of acceptance as law ( opinio
juris) of the forum State. Draft conclusion 13, on the other hand, indicates that such decisions
may also serve as a subsidiary means (moyen auxiliaire) for the determination of rules of
customary international law when they themselves examine the existence and content of such
rules.
(2) Draft conclusion 13 follows closely the language of Article 38, paragraph 1 (d), of the
Statute of the International Court of Justice, according to which, while decisions of the Court
have no binding force except between the parties, judicial decisions are a subsidiary means
for the determination of rules of international law, including rules of customary international
law. The term "subsidiary means" denotes the ancillary role of such decisions in elucidating
the law, rather than being themselves a source of international law (as are treaties, customary
international law and general principles oflaw). The use of the term "subsidiary means" does
not, and is not intended to, suggest that such decisions are not important for the identification
of customary international law.
(3) Decisions of courts and tribunals on questions of international law, in particular those
decisions in which the existence of rules of customary international law is considered and
such rules are identified and applied, may offer valuable guidance for determining the
existence or otherwise of rules of customary international law. The value of such decisions
varies greatly, however, depending both on the quality of the reasoning (including primarily
the extent to which it results from a thorough examination of evidence of an alleged general
practice accepted as law) and on the reception of the decision, in particular by States and in
subsequent case law. Other considerations might, depending on the circumstances, include
the nature of the court or tribunal; the size of the majority by which the decision was adopted;
and the rules and the procedures applied by the court or tribunal. It needs to be borne in mind,
moreover, that judicial pronouncements on customary international law do not freeze the law;
rules of customary international law may have evolved since the date of a particular decision.
768 See, for example, KAING Guek Eav alias Duch, Case No. 001/18-07-2007-ECCC/SC, Appeal
Judgment, Extraordinary Chambers in the Courts of Cambodia, Supreme Court Chamber (3 February
2012), para. 194 ("The 1975 Declaration on Torture [resolution 3452 (XXX) of9 December 1975,
Declaration on the Protection of All Persons from Being Subjected to Torture and Other Cruel,
Inhuman or Degrading Treatment or Punishment] is a non-binding General Assembly resolution and
thus more evidence is required to find that the definition of torture found therein reflected customary
international law at the relevant time").
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(4) Paragraph 1 refers to "international courts and tribunals", a term intended to cover any
international body exercising judicial powers that is called upon to consider rules of
customary international law. Express mention is made of the International Court of Justice,
the principal judicial organ of the United Nations whose Statute is an integral part of the
Charter of the United Nations and whose members are elected by the General Assembly and
Security Council, in recognition of the significance of its case law and its particular position
as the only standing international court of general jurisdiction. 769 In addition to the
predecessor of the International Court ofJustice, the Permanent Court oflnternational Justice,
the term "international courts and tribunals" includes (but is not limited to) specialist and
regional courts, such as the International Tribunal for the Law of the Sea, the International
Criminal Court and other international criminal tribunals, regional human rights courts and
the World Trade Organization Dispute Settlement Body. It also includes inter-State arbitral
tribunals and other arbitral tribunals applying international law. The skills and the breadth of
evidence usually at the disposal of international courts and tribunals may lend significant
weight to their decisions, subject to the considerations mentioned in the preceding paragraph.
(5) For the purposes of this draft conclusion, the term "decisions" includes judgments and
advisory opinions, as well as orders on procedural and interlocutory matters. Separate and
dissenting opinions may shed light on the decision and may discuss points not covered in the
decision of the court or tribunal, but they need to be approached with caution since they
reflect the viewpoint of the individual judge and may set out points not accepted by the court
or tribunal.
(6) Paragraph 2 concerns decisions of national courts (also referred to as domestic or
municipal courts).770 The distinction between international and national courts is not always
clear-cut; in these draft conclusions, the term "national courts" includes courts with an
international composition operating within one or more domestic legal systems, such as
"hybrid" courts and tribunals involving mixed national and international composition and
jurisdiction.
(7) Some caution is called for when seeking to rely on decisions of national courts as a
subsidiary means for the determination of rules of customary international law. 771 This is
reflected in the different wording of paragraphs 1 and 2, in particular the use of the words
"[r]egard may be had, as appropriate" in paragraph 2. National courts operate within a
particular legal system, which may incorporate international law only in a particular way and
to a limited extent. Their decisions may reflect a particular national perspective. Unlike most
international courts, national courts may sometimes lack international law expertise and may
have reached their decisions without the benefit of hearing argument advanced by States.772
Conclusion 14
Teachings
Teachings of the most highly qualified publicists of the various nations may
serve as a subsidiary means for the determination of rules of customary international
law.
769 Although there is no hierarchy of international courts and tribunals, decisions of the International
Court of Justice are often regarded as authoritative by other courts and tribunals. See, for example,
Jones and Others v. the United Kingdom, Application nos. 34356/06 and 40528/06, European Court
of Human Rights, ECHR 2014, para. 198; M/V "SAIGA" (No. 2) (Saint Vincent and the Grenadines
v. Guinea), Judgment, ITLOS Reports 1999, p. 10, at paras. 133-134; and Japan -Taxes on
Alcoholic Beverages, WTO Appellate Body Report, WT/DS8/AB/R, WT/DSl0/AB/R and
WT/DSl 1/AB/R, adopted on 1 November 1996, sect. D.
770 On decisions of national courts as a subsidiary means for the determination of rules of customary
international law see, for example, Mohammed and others v. Ministry of Defence, United Kingdom
Supreme Court, [2017] UKSC 2 (17 January 2017), paras. 149-151 (Lord Mance).
771 See also Minister of Justice and Constitutional Development v. Southern African Litigation Centre,
Supreme Court of Appeal of South Africa (2016) 3 SA 317 (SCA) (15 March 2016), para. 74.
772 See also "Ways and means for making the evidence of customary international law more readily
available", Yearbook ... 1950, vol. II (Part Two), p. 370, para. 53.
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Commentary
(1) Draft conclusion 14 concerns the role of teachings (in French, doctrine) in the
identification of rules of customary international law. Following closely the language of
Article 3 8, paragraph 1 ( d), of the Statute of the International Court of Justice, it provides
that such works may be resorted to as a subsidiary means (moyen auxiliaire) for determining
rules of customary international law, that is to say, when ascertaining whether there is a
general practice that is accepted as law (accompanied by opinio juris). The term "teachings",
often referred to as "writings", is to be understood in a broad sense; it includes teachings in
non-written form, such as lectures and audiovisual materials.
(2) As with decisions of courts and tribunals, referred to above in draft conclusion 13,
writings are not themselves a source of international law, but may offer guidance for the
determination of the existence and content of rules of customary international law. This
auxiliary role recognizes the value that teachings may have in collecting and assessing State
practice; in identifying divergences in State practice and the possible absence or development
of rules; and in evaluating the law.
(3) There is need for caution when drawing upon writings, since their value for
determining the existence of a rule of customary international law varies: this is reflected in
the words "may serve as". First, writers sometimes seek not merely to record the state of the
law as it is (lex lata) but to advocate its development (lexferenda). In doing so, they do not
always distinguish (or distinguish clearly) between the law as it is and the law as they would
like it to be. Second, writings may reflect the national or other individual viewpoints of their
authors. Third, they differ greatly in quality. Assessing the authority of a given work is thus
essential; the United States Supreme Court in the Paquete Habana Case referred to:
the works of jurists and commentators who by years oflabor, research and experience
have made themselves peculiarly well acquainted with the subjects of which they treat.
Such works are resorted to by judicial tribunals, not for the speculations of their
authors concerning what the law ought to be, but for trustworthy evidence of what the
law really is. 773
(4) The term "publicists", which comes from the Statute of the International Court of
Justice, covers all those whose writings may elucidate questions of international law. While
most such writers will, in the nature of things, be specialists in public international law, others
are not excluded. The reference to "the most highly qualified" publicists emphasizes that
attention ought to be paid to the writings of those who are eminent in the field. In the final
analysis, however, it is the quality of the particular writing that matters rather than the
reputation of the author; among the factors to be considered in this regard are the approach
adopted by the author to the identification of customary international law and the extent to
which his or her text remains loyal to it. The reference to publicists "of the various nations"
highlights the importance of having regard, so far as possible, to writings representative of
the principal legal systems and regions of the world and in various languages when
identifying customary international law.
(5) The output of international bodies engaged in the codification and development of
international law may provide a useful resource in this regard. 774 Such collective bodies
include the Institute oflnternational Law (Institut de droit international) and the International
Law Association, as well as international expert bodies in particular fields and from different
regions. The value of each output needs to be carefully assessed in the light of the mandate
and expertise of the body concerned, the extent to which the output seeks to state existing
law, the care and objectivity with which it works on a particular issue, the support a particular
output enjoys within the body, and the reception of the output by States and others.
773 The Paquete Habana and The Lola, US Supreme Court 175 US 677 (1900), at p. 700. See also The
Case of the S.S. "Lotus" (footnote 687 above), at pp. 26 and 31.
774 The special consideration to be given to the output of the International Law Commission is described
in paragraph (2) of the general commentary to the present Part (Part Five) above.
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Part Six
Persistent objector
Part Six comprises a single draft conclusion, on the persistent objector rule.
Conclusion 15
Persistent objector
1. Where a State has objected to a rule of customary international law while that
rule was in the process of formation, the rule is not opposable to the State concerned
for so long as it maintains its objection.
2. The objection must be clearly expressed, made known to other States, and
maintained persistently.
3. The present draft conclusion is without prejudice to any question concerning
peremptory norms of general international law (jus cogens).
Commentary
(1) Rules of customary international law, "by their very nature, must have equal force for
all members of the international community, and cannot therefore be the subject of any right
of unilateral exclusion exercisable at will by any one of them in its own favour". 775
Nevertheless, when a State has persistently objected to an emerging rule of customary
international law, and maintains its objection after the rule has crystallized, that rule is not
opposable to it. This is sometimes referred to as the persistent objector "rule" or "doctrine"
and not infrequently arises in connection with the identification of rules of customary
international law. As the draft conclusion seeks to convey, the invocation of the persistent
objector rule is subject to stringent requirements.
(2) The persistent objector is to be distinguished from a situation where the objection of
a significant number of States to the emergence of a new rule of customary international law
prevents its crystallization altogether (because there is no general practice accepted as law). 776
(3) A State objecting to an emerging rule of customary international law by arguing
against it or engaging in an alternative practice may adopt one or both of two stances: it may
seek to prevent the rule from coming into being; or it may aim to ensure that, if it does emerge,
the rule will not be opposable to it. An example would be the opposition of certain States to
the then-emerging rule permitting the establishment of a maximum 12-mile territorial sea.
Such States may have wished to consolidate a three-, four- or six-mile territorial sea as a
general rule, but in any event were not prepared to have wider territorial seas enforced against
them. 777 If a rule of customary international law is found to have emerged, it will be for the
State concerned to establish the right to benefit from persistent objector status.
775 North Sea Continental Shelf(see footnote 671 above), at pp. 38-39, para. 63. This is true of rules of
"general" customary international law, as opposed to "particular" customary international law ( on
which see draft conclusion 16, below).
776 See, for example, Entscheidungen des Bundesverfassungsgerichts (German Federal Constitutional
Court), vol. 46 (1978), Judgment of 13 December 1977, 2 BvM 1/76, No. 32, pp. 34--404, at pp. 388-
389, para. 6 ("This concerns not merely action that a State can successfully uphold from the outset
against application of an existing general rule of international law by way of perseverant protestation
of rights (in the sense of the ruling of the International Court of Justice in the Norwegian Fisheries
case ... ); instead, the existence of a corresponding general rule of international law cannot at present
be assumed").
777 In due course, and as part of an overall package on the law of the sea, States did not in fact maintain
their objections. While the ability effectively to preserve a persistent objector status over time may
sometimes prove difficult, this does not call into question the existence of the rule reflected in draft
conclusion 15.
Annex 381 GE.18-13644
(4) The persistent objector rule is not infrequently invoked and recognized, both in
international and domestic case law778 as well as in other contexts.779 While there are differing
views, the persistent objector rule is widely accepted by States and writers as well as by
scientific bodies engaged in international law. 780
(5) Paragraph 1 makes it clear that the objection must have been made while the rule in
question was in the process of formation. The timeliness of the objection is critical: the State
must express its opposition before a given practice has crystallized into a rule of customary
international law, and its position will be best assured if it did so at the earliest possible
moment. While the line between objection and violation may not always be an easy one to
draw, there is no such thing as a subsequent objector rule: once the rule has come into being,
an objection will not avail a State wishing to exempt itself.
( 6) If a State establishes itself as a persistent objector, the rule is not opposable to it for
so long as it maintains the objection; the expression "not opposable" is used in order to reflect
the exceptional position of the persistent objector. As the paragraph further indicates, once
an objection is abandoned (as it may be at any time, expressly or otherwise), the State in
question becomes bound by the rule.
(7) Paragraph 2 clarifies the stringent requirements that must be met for a State to
establish and maintain persistent objector status vis-a-vis a rule of customary international
law. In addition to being made before the practice crystallizes into a rule oflaw, the objection
must be clearly expressed, meaning that non-acceptance of the emerging rule or the intention
not to be bound by it must be unambiguous. 781 There is, however, no requirement that the
objection be made in a particular form. A clear verbal objection, either in written or oral form,
as opposed to physical action, will suffice to preserve the legal position of the objecting State.
(8) The requirement that the objection be made known to other States means that the
objection must be communicated internationally; it cannot simply be voiced internally. It is
for the objecting State to ensure that the objection is indeed made known to other States.
(9) The requirement that the objection be maintained persistently applies both before and
after the rule of customary international law has emerged. Assessing whether this
requirement has been met needs to be done in a pragmatic manner, bearing in mind the
circumstances of each case. The requirement signifies, first, that the objection should be
reiterated when the circumstances are such that a restatement is called for (that is, in
circumstances where silence or inaction may reasonably lead to the conclusion that the State
has given up its objection). It is clear, however, that States cannot be expected to react on
778 See, for example, the Fisheries case (footnote 708 above), at p. 131; Michael Domingues v. United
States, Case No. 12.285 (2002), Inter-American Commission on Human Rights, Report No. 62/02,
paras. 48 and 49; Sabeh El Lei/ v. France [GC], No. 34869/05, European Court of Human Rights, 29
June 2011, para. 54; WTO Panel Reports, European Communities - Measures Affecting the
Approval and Marketing of Biotech Products, WT/DS291/R, WT/DS292/R and WT/DS293/R,
adopted 21 November 2006, at p. 335, footnote 248; and Siderman de Blake v. Republic of Argentina,
United States Court of Appeals for the Ninth Circuit, 965 F.2d 699; 1992 U.S. App., at p. 715, para.
54.
779 See, for example, the intervention by Turkey in 1982 at the Third United Nations Conference on the
Law of the Sea, document A/CONF.62/SR.189, p. 76, para. 150 (available from
http://legal.un.org/diplomaticconferences/lawofthesea-l 982N oll 7 .html); United States Department
of Defense, Law of War Manual, Office of General Counsel, Washington D.C., December 2016, at
pp. 29-34, sect. 1.8 (Customary international law), in particular at p. 30, para. 1.8 ("Customary
international law is generally binding on all States, but States that have been persistent objectors to a
customary international law rule during its development are not bound by that rule") and p. 34, para.
1.8.4.
780 The Commission itselfrecently referred to the rule in its Guide to Practice on Reservations to
Treaties, where it stated that "a reservation may be the means by which a 'persistent objector'
manifests the persistence of its objection; the objector may certainly reject the application, through a
treaty, of a rule which cannot be invoked against it under general international law" (see paragraph
(7) of the commentary to guideline 3 .1.5 .3, Official Records of the General Assembly, Sixty-sixth
session, Supplement No. 10 (A/66/10/ Add. I )).
781 See, for example, C v. Director of Immigration and another, Hong Kong Court of Appeal, [2011]
HKCA 159, CACY 132-137/2008 (2011), at para. 68 ("Evidence ofobjection must be clear").
GE.18-13644 Annex 381
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A/73/10
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every occasion, especially where their position is already well known. Second, such repeated
objections must be consistent overall, that is, without significant contradictions.
(10) Paragraph 3 provides expressly that draft conclusion 15 is without prejudice to any
question concerning peremptory norms of general international law (jus cogens). The
commentary to draft conclusion 1 already makes clear that all of the present draft conclusions
are without prejudice to questions of hierarchy among rules of international law, including
those concerning peremptory norms of general international law (jus cogens), or questions
concerning the erga omnes nature of certain obligations. 782
Part Seven
Particular customary international law
Part Seven consists of a single draft conclusion, dealing with particular
customary international law (sometimes referred to as "regional custom" or "special
custom"). While rules of general customary international law are binding on all States,
rules of particular customary international law apply among a limited number of
States. Even though they are not frequently encountered, they can play a significant
role in inter-State relations, accommodating differing interests and values peculiar to
only some States. 783
Conclusion 16
Particular customary international law
1. A rule of particular customary international law, whether regional, local or
other, is a rule of customary international law that applies only among a limited
number of States.
2. To determine the existence and content of a rule of particular customary
international law, it is necessary to ascertain whether there is a general practice among
the States concerned that is accepted by them as law ( opinio juris) among themselves.
Commentary
(1) That rules of customary international law that are not general in nature may exist is
undisputed. The case law of the International Court of Justice confirms this, having referred,
inter alia, to customary international law "particular to the Inter-American Legal system"784
or "limited in its impact to the African continent as it has previously been to Spanish
America",785 "a local custom",786 and customary international law "of a regional nature".787
Cases where the identification of such rules was considered include the Asylum case788 and
the Right of Passage case. 789 The term "particular customary international law" refers to these
rules in contrast to rules of customary international law of general application. It is used in
preference to "particular custom" to emphasize that the draft conclusion is concerned with
rules of law, not mere customs or usages; there may well be "local customs" among States
that do not amount to rules of international law. 790
(2) Draft conclusion 16 has been placed at the end of the set of draft conclusions since
the preceding draft conclusions generally apply also in respect of the determination of rules
of particular customary international law, except as otherwise provided in the present draft
782 See paragraph ( 5) of the commentary to draft conclusion 1, above.
783 It is not to be excluded that such rules may evolve, over time, into rules of general customary
international law.
784 Military and Paramilitary Activities in and against Nicaragua (see footnote 663 above), at p. 105,
para. 199.
785 Frontier Dispute, Judgment, I. CJ. Reports 1986, p. 554, at p. 565, para. 21.
786 Case concerning rights of nationals of the United States of America in Morocco (see footnote 685
above), at p. 200; and Case concerning Right of Passage over Indian Territory (see footnote 675
above), at p. 39.
787 Dispute regarding Navigational and Related Rights (see footnote 683 above), at p. 233, para. 34.
788 Colombian-Peruvian asylum case (see footnote 674 above).
789 Case concerning Right of Passage over Indian Territory (see footnote 675 above).
790 See also draft conclusion 9, paragraph 2, above.
Annex 381 GE.18-13644
conclusion. In particular, the two-element approach applies, as described in the present
commentary. 791
(3) Paragraph 1, which is definitional in nature, explains that particular customary
international law applies only among a limited number of States. It is to be distinguished
from general customary international law, that is, customary international law that in
principle applies to all States. A rule of particular customary international law itself thus
creates neither obligations nor rights for third States. 792
( 4) Rules of particular customary international law may apply among various types of
groupings of States. Reference is often made to customary rules of a regional nature, such as
those "peculiar to Latin-American States" (the institution of diplomatic asylum commonly
being cited). 793 Particular customary international law may cover a smaller geographical area,
such as a sub-region, or even bind as few as two States. In the Right of Passage case the
International Court of Justice explained that:
It is difficult to see why the number of States between which a local custom may be
established on the basis of long practice must necessarily be larger than two. The
Court sees no reason why long continued practice between two States accepted by
them as regulating their relations should not form the basis of mutual rights and
obligations between the two States.794
Cases in which assertions of such rules of particular customary international law have been
examined have concerned, for example, a right of access to enclaves in foreign territory; 795 a
co-ownership (condominium) of historic waters by three coastal States; 796 a right to
subsistence fishing by nationals inhabiting a river bank serving as a border between two
riparian States; 797 a right of cross-border/international transit free from immigration
formalities; 798 and an obligation to reach agreement in administering the generation of power
on a river constituting a border between two States. 799
(5) While some geographical relationship usually exists between the States among which
a rule of particular customary international law applies, that may not necessarily be the case.
The expression "whether regional, local or other" is intended to acknowledge that although
particular customary international law is mostly regional, subregional or local, there is no
reason in principle why a rule of particular customary international law could not also
develop among States linked by a common cause, interest or activity other than their
geographical position, or constituting a community of interest, whether established by treaty
or otherwise.
(6) Paragraph 2 addresses the substantive requirements for identifying a rule of particular
customary international law. In essence, determining whether such a rule exists consists of a
search for a general practice prevailing among the States concerned that is accepted by them
791 The International Court of Justice has treated particular customary international law as falling within
Article 38, paragraph 1 (b), of its Statute: see Colombian-Peruvian asylum case (footnote 674 above),
at pp. 276-277.
792 The position is similar to that set out in the provisions of the 1969 Vienna Convention concerning
treaties and third States (Part III, sect. 4).
793 Colombian-Peruvian asylum case (see footnote 674 above), at p. 276.
794 Case concerning Right of Passage over Indian Territory (see footnote 675 above), at p. 39.
795 Ibid., p. 6.
796 See the claim by Honduras in Land, Island and Maritime Frontier Dispute (El Salvador/Honduras:
Nicaragua intervening), Judgment of 11 September 1992, p. 351, at p. 597, para. 399.
797 Dispute regarding Navigational and Related Rights (see footnote 683 above), at pp. 265-266, paras.
140-144; see also Judge Sepulveda-Amor's Separate Opinion, at pp. 278-282, paras. 20-36.
798 Nkondo v. Minister of Police and Another, South African Supreme Court, 1980 (2) SA 894 (0), 7
March 1980, International Law Reports, vol. 82, pp. 358-375, at pp. 368-375 (Smuts J. holding that:
"There was no evidence of long standing practice between the Republic of South Africa and Lesotho
which had crystallized into a local customary right of transit free from immigration formalities" (at p.
359)).
799 Kraftwerk Reckingen AG v. Canton of Zurich and others, Appeal Judgment, BGE 129 II 114, ILDC
346 (CH 2002), 10 October 2002, Switzerland, Federal Supreme Court [BGer]; Public Law Chamber
II, para. 4.
GE.18-13644 Annex 381
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155
A/73/10
156
as governing their relations inter se. The International Court of Justice in the Asylum case
provided guidance on this matter, holding with respect to the argument by Colombia as to
the existence of a "regional or local custom particular to Latin-American States" that:
The Party which relies on a custom of this kind must prove that this custom is
established in such a manner that it has become binding on the other Party. The
Colombian Government must prove that the rule invoked by it is in accordance with
a constant and uniform usage practised by the States in question, and that this usage
is the expression of a right appertaining to the State granting asylum and a duty
incumbent on the territorial State. This follows from Article 38 of the Statute of the
Court, which refers to international custom "as evidence of a general practice accepted
as law". 800
(7) The two-element approach requiring both a general practice and its acceptance as law
(opinio juris) thus also applies in the case of identifying rules of particular customary
international law. In the case of particular customary international law, however, the practice
must be general in the sense that it is a consistent practice "among the States concerned", that
is, all the States among which the rule in question applies. Each of these States must have
accepted the practice as law among themselves. In this respect, the application of the twoelement
approach is stricter in the case of rules of particular customary international law.
80° Colombian-Peruvian asylum case (see footnote 674 above), at pp. 276-277.
Annex 381 GE.18-13644
ANNEX382
I
l
!
I
The Statute of the
International Court
of Justice
A Commentary
Second Edition
Edited by
ANDREAS ZIMMERMANN
CHRISTIAN TOMUSCHAT KARIN OELLERS-FRAHM
CHRISTIAN J. TAMS
Assistant Editors
MARAL K.ASHGAR DAVID DIEHL
OXFORD
UNIVERS[TY ?RESS
Annex 382
OXFORD
UNIVERSITY !'REIS
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Preface
Ninety years ago, in 1922, the Permanent Court of International Justice held its first
sittings, initially to deal with preliminary matters, then to render its first advisory opinions.
Since then, permanent international courts have become an important feature
of international relations. And while their number has increased in recent times, the
International Court of Justice, as the principal judicial organ ofche United Nations and
rhe Permanent Court's successor, has retained a unique position, symbolizing the international
community's quest for justice administered according ro law.
Six years have passed since the first edition of this Commentary on the Statute of the
International Court of j~tice was published. This period has been a busy time for the
Court, whose caseload provides ample evidence of the confidence of States, and that of
the main organs of the United Nations, which have referred ro the Court an extremely
broad range of international legal issues. In its judgments and advisory opinions rendered
since 2006, the Court has been able 10 confirm and, at rimes, develop its jurisprudence
both on substantive international law and with regard to its own jurisdiction and
procedure. In particular, questions of evidence and proof have assumed prominence.
Moreover, there has been debate about the scope of res judicata, about the relevance of
decisions rendered. by other bodies for the Court's understanding of international law,
and abour participation in advisory proceedings.
The second edition of ch is Commentary seeks to take account of these and ocher new
developments. To rhat end, all contributions have been carefully updated. New crosscurti
ng sections on evidence and coumer-claims have been included in order ro allow
for a fuller treatment of two increasingly relevant issues chat cannot easily be discussed
under one specific provision of the Court's Statute. On the other hand and for reasons of
space, we have now omitted the full text of the Court's Statute and Rules. If necessary,
both can easily be consulted on the Court's website.
As editors, we have been fortunate to count on the continued cooperation of rhe vast
majority of comributors to rhe first edition, ro whom we express our sincere gratitude. At
rhe same time, we would like to renew our thanks, noted in the Preface co the fim edition,
m those authors who, for various reasons, have no longer been able to participate.
Moreover, we most heartily welcome six new contributors who have kindly agreed to
participate in the second edition of this Commentary. On the whole, we have continued
ro work along che editorial policy explained in further detail in the Preface to the first
edition.
All in all, this work constitutes the combined work of, by now, 51 authors from
diverse jurisdictions, among them academics as well as lawyers practising international
law, and (current and former) judges and officers of the Court. In our view, rhis diversity
should be seen as a strength reflecting the international character of che college of inrernarional
lawyers following rhe work of the Court.
Just as the circle of contributors, so the composition of the 'editorial ream' has undergone
organic change. David Diehl and Mara! Kashgar have been extremely diligent
a5sistant editors of this second edition. The assistant edirors of the first edition, Christian
Annex 382
852 Statuu of The /nunuzrifJnat Court of Ju.rtice
which is not jwlified on sped.al grounds caking prcccdtnce, is therefore incompatible with the
regime cstabl ishcd by the Convention.'°'
300 The indisputable reluctance of the Court to resort to general principles oflaw can be
easily understood: they are difficult to handle;,;~ :md it is a fact that the provision of Art.
38, para. l (c) 'confliccs with the voluntariscic point of view','°" which certainly increues
the risk chat parties will be les.s ind ined to accept rhe judgment. 867 Whatever the positivist
view on the macter, customary rules of course do not fl.ow from rhc will of States
either. However, there arc two important differences:
• Firsc, the practice to be taken into account in order co establish the exisrence of cuscom
is co be sought in the internaMnal sphere and States arc (or should be) aware that what
they do in this sphere might form pare of such a practice; this is not so concerning
general principles of law which must be discovcm:I in domestic rules, de:irly nor
envisaged as possible material sources of international norms-even if they are.
Second, more dearly thw custom, general principles of law are 'cransitory' in the sense
clm their repcatod use at the international levd transforms chem into custom and therefore
makes it unnecessary to have recourse to the underlying general principles of law.
301 As Sir Humphrey Waldock explained, 'there will always be a cendency for a general
principle of national law recognized in incemational law co crym.llize into customary
law'.a,,e There are numerous examples of this phenomenon of'cransition'. To cake a striking
one: at the origin of modem arbitration, the Kompetmz-Kompetmz principle was
but a general principle of law recognized by States in faro t:UJmmico; it was transpo~
into international law, not without difficulties, by the first arbitrators™ and was then
considered as a general principle of intrn'Ultunu:t law, quite freq uendy expressly sec our
in rreatie.s, including the Statute of che Court itself (Art. 36, para. 6). Indeed, there is no
need for the Court to refer co chis principle as a general principle of law-which, however,
did nor prevent it from acknowledging chat such provisions 'conform with rules
generally laid down in stacuces or laws issues for courts of ju.stice'.170 Similar remarks c.ui
be made concerning rhe principle: of m jwlica;a which, through repeated invocation by
arbimrors and recognition of their awards by State5, mu.st be considered a general rule
of public international law,171 even if, here again, the underlying principle is sometimes
recalled e;r; abundante cauula.
"" Cm.in Gm,,u, /nNmts =e, "'P'Q, fn. 125, PCIJ, $,eric, A, No. 7, p. 22. For a slmilu rcuoning if.
Judge Lo.u«rpacht's S<parate opinion appended co the Coun's advisory opinion on the Vorint Proudur, en
Qumi.o,u Rll,11i,rt tc R,pom and Petitimr Ctmumlnt th, Ttrritcry oJS,,.,,J, Wm AfrnQ, !CJ Repom (1955),
pp. 90, 118.
.., Cf "'P"'• MN 250 et~-
.,,. Nonh Su CrmlinmtlU S!,,if =•• supl'd , fn. 115, Sq,. Op. Ammocn, [CJ R.eporu (1969), pp. 100,
134-5.
'" Cf supr,,, MN 274-275 .
,.. 'General Cour..: on Public International Liw', &c. M: C,uus 106 0962-U), pp. 1-251, p. 62.
""' Cf '·t· tho &t,q ~ U•r Treoty Arbitration, 19 Noveml>er 1794, rtproduc,d In Moore. supra, fn.
3-05, p. 179) orthe AJ.sb.,,,.. ubltmion (14 Scp«mbtt 1872, reprodu<:ed ibid., and wo in dd.apra.ck!le, A.I
Polltls, N .. R.m«II us nbirr•t" ;,,,nn,u;o,.,,ux [1932], vol. II, p. 910).
"" £.fftct of Awards CdSI, sr,p,..., fn. 136, !CJ Rcporu (1954), pp. 47, 52.
"' Cf•·! · t-:cmer Caldeira Bn.n,, L., L~Mlcritl ck i,, ,1,.,, Jut;dt ni droit ln«T11Atlmd p,J,lir {2003), pp.
15-44. The Court duracterizcd It a, a principle of 'fundornental chmctcr': cf (&mi.,,n) Gnt«iie =•
,,,,,.,., fo. 93, !CJ R.eporu (2007), pp. 43, 90 (pan. 115). In the judgmen, concetning the application
to intervene of Honduras in th< c:ue cooccrning the Territorul .,,uJ M4ritim, DiJp•tr c= (Nicaragua/
PELLl!1'
Article 38 853
Anzi1otti's d~nt appended to the PCIJ judgmem of 16 December 1927 in the 302
Chorzow F=ry = is a good Hlusrrarion:871
As I have already ob5"rved, rhe Court's Statute, in Art. 59, clearly refers to a tradicional and gencr:
illy accepced theory in regud to the mater41 limir.s of ns judfrata; ir waJ only natural therefore
to keep to the cs,ential factors and fundamental dataofthac theory, falling any lndlc,ition to the
concr.iry, which I find nowhere, either in the Stature itself or in international law.
In chc second place, it appears co me th.at if there be a case in which it is legitimate to have
recourse. in the absence of conventions and cusrom, to 'the gcner:il principles oflaw recognized
by civilized nations', mentioned in N° 3 of Article 38 of the Smute, that case is usu redly the
prcs,nr one. Not without reason w.u che binding effect of m judi.ata expressly mentioned by the
Committee of J urisu entrusted wich the preparation of a plan for the c.mu,llshmentof a Permanent
Court of Interruitio~l J=ice, amongst the principles included in the above-mentioned article
(Minute.i, p. 335).m
It is an interesting demonstration: tbc general principle lying 'behind' Art. 59 is 303
invoked in order to reinforce a treaty law argument which could be ~rfcctly self-sufficient.
Bur this way of reasoning-which is not at all an isolated incidenr37'-shows chat
general principles arc well anchored in the 'legal conscience' of juriscs and that, even
when not a direct soucce of the rights and obligations at stake, they serve as a confirming
element in the persuasiveness oflegal reasoning. Moreover, there is no doubt chat,
when eclipsed by a customary or treaty norm flowing from them, they explain the particular
mength of cbc said norm, which will be described as 'basic' or 'fundamental' or
'essential•. !?S
E. The Subsidiary Means for the Determination of Rules of Law
The positions taken by the members of the Committee of Jurists of 1920 on the 'subsidi- 304
ary means for the determinarion of rules of law', now appc:a.ring under Arc. 38, para.
I (d), were extremely confusing. 876 le may, however, be inferred from the-sometimes
passionate-discussions among the members chat the intention behind the final wording
of this provision was that jurisprudence and doctrine were supposed to ducidatc
what the rules to be applied by the Court were, not to cre.i.te them. 877
Colombia), the Court recilled: 'It is• wcll-es<ablished and generally recognized prlndpk of law that• judgment
rendered by a judicial body has binding force berween the pateies to the dispute (Effect of Awtrrd.s of
C•mpmutlbn M.uk by ti,, Unii,d N<1tiom .luiministraJi,.,, TrilniNJ!, Aslwory Opinlan, l.C.]. Repom 1954,
p. 53)' (rupra, fn. 508, Application by Honduras for PcrmiMion to lotcrvcr,e, Judgmem of 4 May 2011, avalltble
at <hnp:l/www.i<:j-.:ij .org>, para. 67).
rn All the more .so given th.at ,he rigid po,,itivi,, views of Anulotti did not predirpo,,: bi1I1 to invoke
general principle, of la., lighrly.
"' Cb.mnv F=ry c,u,, "'/>'"· fn. 307. PC(J, 5':ries A, No. 13, p. 27.
"' Cf the example. given ln MN 299.
m Cf"'/>"'• MN 259.
.,. Cf the clca, =nury of ,tu,,,: unclor cilicu...loru in von Su.uffenbe,g, p. 2n. The most troubling
aspect is ,he COfltraSt between the me.mbm of the Committee who iruisted char doctrine and jurisp,ud.c:nce
were pu.rtly !ll!nldluy (nu;h .. R.icci-Bww:i, Proooa-Verboux, "'P"'• fn. 16, p. 332. or, but much (cs; rductaot,
Dacamps, //,Jd., p. 334 or p. 336) on the one hand, and tbo.e who peremptorily conndcred thom ..
,oun:cs of law (Phillimo,e, i~id.. p. 333). The cxp=aion 'a, ,ubrid~ry m.,..ru for the detmnloation of rule.
of lzw' wu added in txtrnnis by the Committee following a propos,J by Dc=mps (Ibid., p. 6-05) .
m For a concurring view ef. Shahabuddc,:n, p. 77,
PELLET
Annex 382
854 StatuU of The lnurnational Court of Justice
305 Be that a.s it may, in itself, para. I (d) as finally adopted d=rvcs less criticism ~
usually alleged-at least if re.id in French and in isolation from the introductory phrase
of Art. 38. As noted by Manley Hudson, while the expression 'subsidiary means' could
~ 'thought to mean that these sources [sic] arc to be subordinated co others mentioned
in che article, i.e., to be regarded only when sufficient guidance cannot be found in international
conventions, international customs and general principles of law[,] the French
word auxilutire seems, however, to indicate that confirmation of rules found to exist
may be sought by referring to jurisprudence and doccrine'.an In the fortunate words
of Shabtai Roscnne,879 the 'subsidiary means' of para. l (d) arc 'the score-house from
which the rules of heads (a), (b) and (c) can be extracted': in marked contra5t to the
sources luted in the previous sub-paragraphs, jurisprudence and doctrine are not sources
of /aw-or, for that marrer, of rights and obligations for the contesting Scates; they are
dlJcummtary 'sou.recs' indicating where the Court can find evidence of the existence of
the rules it is bound to apply by virtue of the three other sub-paragraphs. Therefore, the
ph.ra.sing of the chapeau of para. I is unfortunate: strictly speaking, the Court docs not
'apply' those 'means', which :i.rc only tools which it is invited to use in order to investigate
the th rec sources listed previously.
The appropriatcnw of placing doctrine and jurisprudence on the same footing has
also been criticized. 380 Intelleccually, this criticism is misplaced.: in che abstract, both
perform the same function; they are means of ascertaining chat a given rule is of a legal'
character because it pertains to a formal source of law. Ho~er, concretely, they can
certainly not be assimilated; while the doctrine has a discreet (but probably efficient) role
to that end, the use of the jurisprudence by the Court goes, in fact, fat beyond what the:
expression 'awdliary means' implies}81
I. Judicial Decisions
306 The: role of jurisprudence in the developmc:m ofimernation;tl law would deserve a booklength
treatment4'2 rather than the cursory analysis it will necessarily receive here. The
"' Hudson, p. 603, Cf ilio Sluhabuddeen, p. 80.
""" R.o,cnne, uw,v,.,I Pr,m-u,, vol. III, p. 1551.
"" Cf '·l· F'itt=1uri<:e, In S1mboi,,w Ytnijl pp. 153, 174-5.
131 Juri<prndencc :u,d doctrine luve rarely b<en uudied together, buc ef Roucoun.,,.s, E., 'luppo,t cntre
"moyen.s auxillar!eo" de determination du droir inrcrnatioru.l ', 71,,uz.unu kroui""' XIX (1992), pp. 259- 86;
., well a, rhe ~neral iite=e on me sour= of international u.w, n,pr4, fn. 460.
"' Among the numcrow m1dics devoted to the rok of jumprudencc (and more specificolly of the World
Court) in intcrn.otlonal law ef. '·I· Ahl-Sub. G., 'De la juri,prudence, quelque, rt8aion.s rur son r6le dan.s
le doveloppcment du drolt International' in Mi'4nttt M11J1..el Dia ,I, V,l.tm, (1993), pp. 2-8; uhicr, P., 'Le
r6ie du Jug• dan.s l'&.boration du droit lntenwional', In 71,,ory of11!Unt4tklflli l.,:w IZI th, 1hmhold ofrht
21't Cm11U]: En,,y$ In H-,,,r ef Krrptto{Slc.bisuw,lti (Makarc:zylt. J .. ed., I~. pp. 353-66: Condocelli,
L., Tautorlt<' de la deci,ion des /urldict.ions internaclonale, permanence,' ln /..a jt,rillic#o/lJ l111en11JtitmttJ.es
p<TIM1ml~. C,,ll#que ti, LJOfl (So,:ii!tt! fnn~•i.$e de droit intcrrudonal C<i., 1987), pp. 277-313: Guillaume,
G., in Ju,tfrt ,r j,<~,u J,rtll11Jlti,,.,,J,s; JV, RtMonm inter'M:tirm.d, J, I,, F=dtf da xi= fal'Wlf>"',
poliri,p,a ,r r,xi,,ln J, Tunis (Zbldi/<t .J., eds .. 2000), pp. 175-92; Guillaume, G., '1he US< of Prcc«knt by
lnternatlonal Judges and Arhlcnuors', jMtm.J ef /~ Disp,.,, S.tdnnmt 2 (2011), pp. 5- 23 and in
Fren<h In/DI 137 (3) (2010), pp. 685-703; l..u~rpacht (1958), ,up,,. fn. 776; Milkt. N ., 'An fo~mulonal
Juri.sprudence? The Operation of "Precedent" A.crou lntornarion.t.l Tribunm', wdm jll 15 (2002), pp .
483-501: ~ . V., 'Le pn!ct<kn, dan.s Lt juri,prudence de la C.I.J.', GYIL 32 (1989), pp. 382-407;
S,lcmo, F. (td.), 1/ nu,/o u/ ~ ~MIW n,/i'n,o~,u ti,/ diri= intn114.r.ion,u, t <ommw11iurk
(1995); S,renl, A.I'., 'Opinions i!>dividuell~ et dlrudeores des ju~ des ttibunaux intcmationaux', RGDIP
68 (196-4 ).pp. 819-57.
PELLET
Artick38 855
present contribution will ooly very lightly touch upon two main questions: what are the
'judicial decisions' 'applied' by the Court? And what part do they play ln the development
of international law?
J. Jurisprudence, Not Particular Decisions
The reference to Art. 59 of the Statute in para, l (d) of Art. 38 sounds like a warning: 307
the Court is not bound by the common law rule of mm dtrim, even if some judges of
Anglo-Sax.on origin seem co have 5omewhat ignored this guiddinc. m At the same time
chi5 reference clearly encourages the Court to ca.Ice into account its own case law as a
privileged means of determining the rules of law to be applied in a particular case.
In effect, the judicial decisions to which the Coun refers first and foremost :i.re, by far, 308
ics own (and, concerning the present Court, those of ics predecessor)-without making
any distinction between its judgments aod ics advisory opinions which arc clearly placed
on an equal footing even though the latter do not qualify as 'decisions' properly speaking.
The record of the PCIJ in this respect is quite impICSSivc;8" that of the IC] no less
so: already in its second judgment, in 1949, the Coutt referred 'to the views expressed by
che Permanent Court of International Justice with regard to similar questions of interpretation'
and quoted extracts of an advisory opinion and an order of the PCIJ."'1 It has,
since then, constantly followed this praccice, sometimes quoting extracts of its previous
<ilecisions, sometimes only citing them. It can be noted that, as its case law expands, the
list of previous cases gets longer without discouraging the Cowt from expressly referring
to all or many of them. Thus, ju.st to give two recent examples, in KasiltiWSedudu, it
cited seven previous cases in order co make the rather obvious point chat the subsequent
practice of the parties is relevant to interpreting trcaties,st$ and in only three printed
pages of its 2004 Wall advisory opinion, the Court made no less than 28 cross-references
to its previous decision.s. "'7
lt might ~ doubted whether this method adds much to the authority of the Court's 309
decisions,™ bur it certainly shows that, at least in some fields, the case law of the Court
is fully documented and firmly established. The observation made more than 60 years
ago with respect to the case law of the Permanent Court proves even more convincing
today: 'Without exaggeration, the cumulation may be said to point toward "the harmonious
dcvclopmenc of the lawn which wa.s a desideratum with the draftsmen of the
Statute in 1920 ..... The perrua.sive force of the Court's case law is all the greater in chat it
is globally consistent. As the Court it.1clf m=d, the justice it is called co render 'is not
abstract justice but justice according to the rule oflaw; which is to say rhat its application
.., Cf in panicu1u A11tfa•frtt,ria11 O/J ""'• Dw. Op. R<ad, !CJ Reporu (1952), pp. 142, 143; u well
as the advisory opinion of the PCIJ on the Grte#-T,,,..;m Afr,,,,,,.,.,,,,,,, In which the C:O..rt decided 'following
the prec.edent afforded by it5 Advuory Opinion No. 3'. However, the Fnendi. :wchorintivc tat ('on
s' irupirant du pn!ce<knt fuurni par son Avu no. 3') clarifies that the Court did'''" fed bound by .,..id p=edcm
(sup,.., fn. 501, PCIJ. Setie, B, :-So. 16, p. 15).
114 Cf. the rttollcction of the rdev>nt judgmcnu and advi>ory oplaloiu io Hud.son, PCIJ. p. 627.
.., Corfa Chtrmu/ cast, ruprtt, fn . 125, !CJ Report.I (1949), pp. 4, 24 .
,.. KAsi!i/iJS,d,,Ju CAtt, r»prtt. fn . 115, !CJ Rcporu (1999), pp. 1045. 1076 (par>.. 50) .
,., W.Jl c,u,, n,pr,1., fn. 104, !CJ R,poru (2004), pp. 135, 154-6.
.., Even ifit i1 indeed extremdy uieful to Hudents of international law .. .
.., Hud.son, PC!/, p. 63-0. The author rcfcti tx> the Record; of the Firn Aacmbiy of the League of Nations,
CommitcCCi, I, p. 4n. Thu pa=.ge concludes a concise md pcnuulv< description of ,be 'cumulation of case
u.w• b7 th.c Perm•nenr Court (ibid., pp. 628-9). Cf ilio l..auterpa.cht (1958), ,upra, fn.. 776. p. 18.
PELLl!T
Annex 382
856 Statute of The International Court of justice
should display consistency and a degree of predictability'. 890 Even though ic is not bound
to apply the precedents, the Court is usually careful to avoid self-contradiction.
310 'Precedent plays an important, but not a controlling role.'891 The judgment of 11 June
I 998 on the preliminary objections of Nigeria in the Land and Maritime Boundary case
faichfully reflects che Court's position in th is respect:
It is true thac, in accordance with Article 59, the Court's judgments bind only the parties to and
in respect ofa particular case. There can be no question of holding Nigeria 10 decisions reached
by the Court in previous cases. The real question is whether, in ch is case, there is cause not to
follow the reasoning and conclusions of earlier cases. 192
In that case, the Court found chat there was not such cause. Similarly, in the (Croatian)
Genoride case, the Court noted:
While some of the facts and the legal issues dcalc with in chose cases arise also in che present case,
none of chose decisions were given in proceedings between the cwo Parties t0 the present case
(Croatia and Serbia), so chat, as tbe Parties recognize, no question of m judicara arises (Article 59
of che Statute of the Court). To the extent that the decisions contain findings oflaw, rhe Court
will treat them as it crea1s all previous decisions: chat is co say chat, while those dedsions are in
no way binding on the Court, it will not depart from its settled jurisprudence unless it finds very
particular reasons ta do so. ,,;
311 However, exaccly as 'there are awards and awards, some destined to become ever
brighter beacons, ochers to flicker and die near-instant deaths',s94 there are judgments
and judgments. Central co the question is the persuasiveness of the legal reasoning:
As it is evident from Articles 38 and 59 of the !CJ Smure, the international legal order does
not recognize a legal obligation to abide by the essential reasoning by previously decided cases,
dissimilar from what is considered one of the hallmarks of the common law. The law-making
effect of a judicial decision, in particular its general and abscracc dimension, hence rescs not only
on irs volunras, but also on its rario: legal scholars, advisers, other courcs, and certainly not least
the deciding court itself ar a lacer point in time must be convinced of the soundness-broadly
defined-of a prior decision. '"1
312 Generally speaking: 'The Court very rarely finds it necessary to make generalizations,
least of all in its decisions. Applying the law to the concrete case before it, the full import
of its dicta can be ascertained only in the light of all the circumscances.'896 Consequently,
it should be a rather easy cask to explain different solutions by reference to the different
'''° Contintntal Sh,lf cttlt (Libya/Maka), rupra, fn. 92, JCJ Rcpom ( 1985), pp. 13, 39 (para. 45). Cf also
Jan May,i, cast, supra, fn. 92, IC) Repom (1993), pp. 38, 64 (para. 58), buc contrast Judge Schwebel's separate
opinion, whic~ puts into doubt the 'principled consimncy' of the Cou11's decision wich irs earlier case
law: 'the Coun jettisons what ics case-law. and th~ accepted customary law of the question) have provided'
(ibid., p. 118).
~" Laucerpachc, Sir E., 'The Role of the International Judge', in Lib,r amicorum Jran-Pi,rr, Cot-L,
prods int,rnationa/ (2010), p. 187.
"' Land and Maritim, B,undary ca1,, tupra, fn. 92, Prdiminary Objections, ]CJ Reports (1998), pp. 275,
292 (~ara. 28).
" '. (Cr,ation) Grnociduast, s•pra, fo. 496, !CJ Rcporrs (2008), pp. 412,428 (para. 53): if. also para. 54:
'le would require compelling reasons for che Court to depart from the conclusions reached in those previous
decisions.'
,.,. Paulsson, supra, fn . 192, p. 881.
"' von Bogdandy, A., 'The Judge as Law-Maker: Thoughts on Bruno Simma's Declaration in the Korovo
Opinion', in Fascencarh. supra, fo. 564, p. 822.
'"' Rosmne, Law and Practi<t, vol. lll, p. 1555.
PELLET
Article 38 857
circumstances of a case compared with a precedent which could be seen prima facie
as rather similar or had been presented as such by the parties-and sometimes it is.
However, in ocher cases it proves less obvious.
Thus, e.g., in the separate opinion he appended co the Court's judgment on the pre· 313
lirninary objections of Spain in Barcelona Traction, Judge Tanaka convincingly showed
that the continuity of the Court's jurisprudence in char case, in the 1961 judgment
on preliminary objections in the Preah Vihear case and the 1959 judgment in the Case
Concerning the Aerial Incident of 27th July, 1955 (Israel/Bulgaria) was nothing less than
obvious. 897 More recently, the Court squarely assumed a clear contradiction in judgments
concerning one and the same State, in one case as a defendant, in the ochers as
the claimant: after having clearly recognized its jurisdiction in a case brought before it
by Bosnia and Herzegovina against the former Yugoslavia on the basis of Arc. IX of the
Genocide Convention and reconfirmed this decision following the application for revision
of Serbia and Momenegro,898 the Court in eight similar judgments of 15 December
2004 found that it had 'no jurisdiction to entertain the claims made in the Application
filed by Serbia and Montenegro on 29 April 1999' against eight States Members of
NATO on the basis of this same provision of the 1948 Convenrion.899
In support of its decision, che Court asserted that 'it cannot decline to entertain a case 314
simply ... because irs judgment may have implications in another case'.900 In a robustly
argued joint declaration, seven judges strongly criticized this unusual position:
The choice of the Court [between several possible grounds for its decision] has to be exen:iscd in a
manner chat reflects its judicial function. That being so, ,here are three criteria chat muse guide rhe
Court in selecting between possible options. First, in exercising its choice, it must ensure consistency
with its own past case law in order co provide predictability. Consistency is the essence of judicial
reasoning. This is especially true in different phases of the same case or with regard to closely related
cases. Second, 1he principle of certitude will lead the Court 10 choose the ground which is most
secure in law and 10 avoid a ground which is less safe and, indeed, perhaps doubtful. Third, as the
principal judicial organ of che United Nations, the Court will, in making its selection among possible
grounds, be mindful of the possible impUcations and consequences for the ocher pending cases.
In that sense, we believe rhac paragraph 40 of the Judgment does nor adequacdy reflect the
proper role of the Court as a judicial institution. The Judgment thus goes back on decisions previously
adopted by the Courc.' 0'
" 7 Bar«t.na Traction case, ,upra, fn. 296, Preliminary Objections, Sep. Op. Tanaka, !CJ Reports (1964),
pp. 65, 66-72. The Court may face the problem, as it did in che Preah Vih,arcas, (supra, fn. 234, Preliminary
Objections, !CJ Reports [196l], pp. 6, 27-8), or ic can deal with it by paralipsis, as it did in its advisory
opinionof30 March 1950 (lnterpmati,n of Ptac, Tr,atits, supra, fo. !08, !CJ Repor1s (1950], pp. 65 ttseq.)
where: ic did noc cake pains ac ex.plaining che consistency of the soludon ic gave co the issue of jurisdiction
by comparison with cha, retained in Easttm Care/ia (tf Judge Au:vedo's Sep. Op., ibid., p. 81 and Judge
Winiarski, Zoricic, and Krylov's Diss. Ops., respectivdy pp. 69 - 91, 102- 4. and 108-11).
,.,. (Bosnian) Genocide cast, ,upra, fn. 93, Prclimin>ry Objections, !CJ Repom (1996), pp. 595, 623 (para.
47 12] [al); and che application for revision of that decision, Application far Rtvisio• of 1h, Jiuil(>"mt of 11
July 1996 in th, Cast conctrning th, Application of th, Convrnrion on the Prevention and Puni,hm,nr of th,
Crim, of Gmoddt (Bosnia and Herzegovina v. Yugoslavia), Preliminary Object/um (Yugoslavia/Bosnia and
Herzegovina), !CJ Reports (2003), pp. 3, 31 (paras. 70-71).
.,,, Ltgaury of Use of Fom (Serbia and Montenegro/Belgium), supra, fn. 163, Preliminary Objections, !CJ
Reports (2004), pp. 279, 328 !para. 129). The seven orher judgments contain identical smements.
'" Ibid., para. 40.
"" Joint Declamion, ibid., paras. 3 and 13. Cf also the embarrassed devclopmenu in ,he 2008 lCJ
Judgment on the (Croation) Genocide care, supra, fn. 496, !CJ Reports (2008), pp. 412, 428-9 {paras.
52 - 54).
PELLET
Annex 382
ANNEX383
Case 1 :09-cv-00248-RBW Document 1-2 Filed 02/06/2009 Page 1 of 133
IN THE MATTER OF AN UNCITRAL ARBITRATION
between
NATIONAL GRID P.L.C.,
CLAIMANT
V.
ARGENTINE REPUBLIC,
RESPONDENT
AWARD
Date: November 3, 2008
RENDERED BY AN ARBITRAL TRIBUNAL COMPOSED OF
ALEJANDRO MIGUEL GARRO, ARBITRATOR
JUDD L. KESSLER, ARBITRATOR
ANDRES RIGO SUREDA, PRESIDENT
SECRETARY OF THE TRIBUNAL:
MERCEDES CORDIDO-FREYTES DE KUROWSKI
Seat of the arbitration: Washington, D.C.
Annex 383
Case 1 :09-cv-00248-RBW Document 1-2 Filed 02/06/2009 Page 3 of 133
TABLE OF CONTENTS
PAGE
I. PROCEDURE ...................................................................................................... 3
A. PROCEDURE LEADING TO THE DECISION ON JURISDICTION ................................... 3
B. PROCEDURE LEADING TO THE AWARD ON THE MERITS ......................................... 4
1. Scheduling of submissions ........................................................................... 4
2. Replacement of Mr. Whitney Debevoise by Mr. Judd Kessler as
party-appointed arbitrator by the Claimant ................................................ 5
3. Preliminary motions and organization of the hearing on the merits .............. 6
4. Evidentiary hearing and additional documentary evidence
requested by the Tribunal .......................................................................... 9
5. Challenge of Mr. Kessler and its resolution ................................................ 10
6. Filing of Post-Hearing Briefs ....................................................................... 11
7. Appointment of Professor Calvet as the Tribunal-Appointed Expert
and the Filing of his Report ...................................................................... 11
II. FACTUAL BACKGROUND ................................................................................ 13
A. THE PRIVATIZATION OF STATE-OWNED ELECTRICAL POWER COMPANIES ............ 13
B. CLAIMANT'S INVESTMENTS ............................................................................... 15
C. MEASURES ADOPTED BY THE ARGENTINE REPUBLIC TO ADDRESS THE
CRISIS ...................................................................................................... 17
Ill. OVERVIEW OF THE POSITIONS OF THE PARTIES ....................................... 18
A. POSITION OF THE CLAIMANT ............................................................................ 18
B. POSITION OF THE RESPONDENT ....................................................................... 25
IV. APPLICABLE LAW ............................................................................................ 28
A. SOURCES GOVERNING THE SETTLEMENT OF THIS DISPUTE ................................ 28
B. HIERARCHY OF SOURCES AND GAP-FILLING METHODOLOGY .............................. 30
V. PRELIMINARY MATTERS ................................................................................. 33
A. RELEVANCE OF WHETHER THE MEASURES WERE TAKEN IN ACCORDANCE
WITH ARGENTINE LAW ................................................................................ 33
1. Positions of the Parties ............................................................................... 33
2. Considerations of the Tribunal ................................................................... 34
B. NATURE OF THE DISPUTE ................................................................................ 34
1. Positions of the Parties ............................................................................... 34
2. Considerations of the Tribunal ................................................................... 35
C. CUT-OFF DATE ............................................................................................... 36
1. Positions of the Parties ............................................................................... 36
2. Considerations of the Tribunal ................................................................... 36
D. WAS THE CLAIMANT A DILIGENT INVESTOR? ...................................................... 36
1. Positions of the Parties ............................................................................... 36
2. Considerations of the Tribunal ................................................................... 38
Annex 383
Case 1 :09-cv-00248-RBW Document 1-2 Filed 02/06/2009 Page 4 of 133
E. CURRENCY OF THE CONTRACT, ASSUMPTION OF THE EXCHANGE RISK AND
LINKAGE OF THE CALCULATION OF THE TARIFF IN DOLLARS TO
CONVERTIBILITY ......................................................................................... 40
1. Positions of the Parties ............................................................................... 40
2. Considerations of the Tribunal ................................................................... 43
F. THE INVESTMENT OF NATIONAL GRID ............................................................... 47
1. Positions of the Parties ............................................................................... 4 7
2. Considerations of the Tribunal ................................................................... 48
G.THE ISSUE OF WHETHER TRANSBAAND THE FOURTH LINE ARE "REGULATED
INVESTMENTS" ........................................................................................... 48
1. Positions of the Parties ............................................................................... 48
2. Considerations of the Tribunal ................................................................... 50
VI. BREACH OF THE TREATY ............................................................................... 52
A. ARTICLE 5( 1) .................................................................................................. 52
1. Positions of the Parties ............................................................................... 52
2. Considerations of the Tribunal ................................................................... 55
8. FAIR AND EQUITABLE TREATMENT .................................................................... 62
1. Positions of the Parties ............................................................................... 62
2. Considerations of the Tribunal ................................................................... 66
C. PROTECTION AND CONSTANT SECURITY ........................................................... 73
1. Positions of the Parties ............................................................................... 73
2. Considerations of the Tribunal ................................................................... 75
D. UNREASONABLE AND DISCRIMINATORY MEASURES ............................................ 77
1. Positions of the Parties ............................................................................... 77
2. Considerations of the Tribunal ................................................................... 79
E. THE UMBRELLA CLAUSE .................................................................................. 82
1. Positions of the Parties ............................................................................... 82
2. Considerations of the Tribunal ................................................................... 83
VII. STATE OF NECESSITY .................................................................................... 83
A. POSITIONS OF THE PARTIES ............................................................................. 83
8. CONSIDERATIONS OF THE TRIBUNAL ............................................................... 102
VIII. COMPENSATION ............................................................................................ 109
A. POSITIONS OF THE PARTIES ........................................................................... 109
8. CONSIDERATION OF THE TRIBUNAL ................................................................. 112
C. ACTUALIZATION OF THE Loss ......................................................................... 125
IX. COSTS ............................................................................................................. 128
X. DECISION ........................................................................................................ 128
Annex 383
ii
Case 1 :09-cv-00248-RBW Document 1-2
8. FAIR AND EQUITABLE TREATMENT
1. Positions of the Parties
Filed 02/06/2009 Page 64 of 133
156. The Claimant notes that Article 2(2) does not define specifically the protections
provided and observes that this "omission reflects the widely accepted principle
that the fair and equitable treatment standard cannot be summarized in a precise
statement of [a] legal obligation."45 The Claimant then goes on to argue that,
based on recent case law, the fair and equitable treatment standard requires that
investors be treated in accordance with their legitimate expectations including the
maintenance of a stable and predictable investment environment. The Claimant
asserts that "a state violates the fair and equitable treatment standard when it
fails to respect the very assurances that it made to investors as an inducement to
invest and on which investors relied."46
157. According to the Claimant, this standard does not require proving bad faith in the
actions of the State and is separate from the customary international law
minimum standard of treatment of aliens. The Claimant observes that, unlike
other treaties, the Treaty does not refer to the international minimum standard of
the treatment of aliens, and that, if the parties had wanted to equate these two
concepts, they would have done so expressly. In any case, argues the Claimant,
even if the minimum standard of treatment did apply, it would require that the
Government respect the stability and predictability of the investment framework
as held by the CMS and Occidental tribunals.
45 Statement of Claim, para. 290.
46 Ibid., para. 297.
Annex 383
62
Case 1 :09-cv-00248-RBW Document 1-2 Filed 02/06/2009 Page 65 of 133
158. The Claimant recalls the statement by Minister Cavallo on the occasion of the
signature of the Treaty in London where he referred to the "legal certainty"
provided by the Treaty. 47 Similarly, when the President of the Argentine Republic
presented the Treaty to the Congress he stated that "through [bilateral
investment treaties] states agree, while they are in force, to maintain certain
investment regulations unchanged, in the hope of establishing a stable and
confident climate to attract investment."48
159. The Claimant alleges that the Respondent breached this standard of protection
when it destroyed the remuneration regime provided for in the Regulatory
Framework. The stability of this regime was critical in the electricity transmission
sector and an absolutely necessary condition for Transener to obtain the required
long-term financing to improve, upgrade, maintain and expand the electricity
transmission infrastructure. The Claimant affirms that it on the basis of the
Respondent's promise of a stable investment environment that it decided initially
to invest in the Argentine Republic and, later, to expand on the initial investment.
160. The Claimant concludes by asserting that "the test of fundamental alterations of
the investment framework against legitimate investor expectations in this
situation results in the Respondent's liability for breach of this standard of
treatment."49 The Claimant adds that the Respondent also acted unfairly and
inequitably in forcing Transener and Transba to renegotiate and waive claims on
pain of rescission of their contracts.
47 Ibid., para. 300
48 Ibid., para. 301. (Emphasis added by the Claimant.)
49 Reply, para. 444. (Emphasis added by the Claimant).
Annex 383
63
Case 1 :09-cv-00248-RBW Document 1-2 Filed 02/06/2009 Page 66 of 133
161. The Respondent denies that it breached Article 2(2) of the Treaty and argues
that the standard embodied in the Treaty is the minimum standard of treatment of
aliens under international law. The Respondent adduces case law to show that,
even if the standard has evolved since Neer, the standard still has a high
threshold as expressed, for instance, in Genin: "Acts that would violate this
minimum standard would include acts showing a willful neglect of duty, an
insufficiency of action falling far below international standards, or even subjective
bad faith." 50
162. The Respondent affirms that the process of contract renegotiation was
conducted in good faith with impartiality, consistency and transparency, while the
Claimant's conduct showed anything but good faith when it presented irrational
demands in the circumstances of the Argentine Republic thus evidencing the
Claimant's true objective to get rid of the investment.
163. The Respondent argues that the "fair'' and "equitable" standard does not require
an absolute obligation to maintain a stable and foreseeable framework for the
investment in accordance with the legitimate expectations of the investors. The
concept of legitimate expectations does not have the reach in international law
that the Claimant contends. The investor must be aware of the political and
economic realities of the country in which it invests. Investors made investments
in the Argentine Republic because there was an opportunity to obtain a rate of
return higher that in other countries with more stable conditions.
50 Alex Genin and others v. Republic of Estonia (ICSID Case No. ARB/99/2), Award of June 25, 2001
[hereinafter, Genin v. Estonia], para. 367 (Legal Authorities LA-103).
64
Annex 383
Case 1 :09-cv-00248-RBW Document 1-2 Filed 02/06/2009 Page 67 of 133
164. In any case, argues the Respondent, the Argentine Republic did not breach this
standard of treatment even if judged in accordance with the expansive
interpretation contended by the Claimant. There is no proof that the Respondent
acted unjustly or inequitably before 2002 and even thereafter the authorities
acted in good faith by initiating a process of renegotiation notwithstanding the
investor's assumption of the economic risk of the Concession. Furthermore, the
assessment of the Respondent's conduct must take into account all
circumstances of the case.
165. On the breach of the just and equitable treatment standard, the Respondent
considers that definition of this standard is too broad and would be surprising to
the drafters of the Treaty. The Respondent refers to recent case law to support
its contention that the threshold for breaching this standard remains high. The
Respondent points out that, if this Tribunal were to find that the standard of
protection provided in the Treaty goes beyond the minimum international
standard, then it should apply the standard relying on objective criteria and taking
into account all the circumstances of the case.
166. The Respondent questions Claimant's legitimate expectations in light of the
excessive price Claimant paid for the shares of Citelec, its increase in said
participation, the acquisition of Transba and the participation in the Fourth Line.
As recognized by the Claimant, the Respondent argues that the respect of the
legitimate expectations of an investor does not mean respecting all expectations
of an investor but only those which are based on specific representations or clear
commitments. The Respondent then argues that there is no proof of declarations
65
Annex 383
Case 1 :09-cv-00248-RBW Document 1-2 Filed 02/06/2009 Page 68 of 133
or clear commitments of the Respondent and that Claimant's legitimate
expectations need to be considered in the context of a legal framework that did
not provide Transener or Transba with absolute protection against the
devaluation of the currency. The measures taken by the Respondent were in
response to the economic crisis; it is illogical to suggest, first, that under
international law the State has a right to adopt emergency measures and then, at
the same time, to insist that investors not be prejudiced by such measures. The
Respondent acted in a proportionate and reasonable manner in response to the
crisis; a decision that such conduct breaches the standard of just and equitable
treatment under those circumstances would constitute unjustified interference
with a sovereign's legitimate regulatory authority and contrary to the "high
measure of deference that international law generally extends to the right of
domestic authorities to regulate matters within their own borders."51
2. Considerations of the Tribunal
167. The Tribunal recalls that it has been established under the Treaty and is bound
by the terms of the Treaty, which it must interpret in accordance with Article 31 of
the Vienna Convention on the Law of Treaties. Hence, after first observing that
there is no reference to the minimum standard of treatment under international
law in the Treaty in contrast to the language of NAFTA, the Tribunal will proceed
to examine the ordinary meaning of the terms "fair" and "equitable."
51 S.O. Myers, Inc. v. Canada (UNCITRAL Arbitration), Partial Award of November 13, 2000 [hereinafter
S.D. Myers v. Canada], para.272. Quoted in the Rejoinder, para. 567 (Legal Authorities LA RA-102).
66
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ANNEX384
IN THE MATTER OF AN ARBITRATION UNDER CHAPTER ELEVEN OF
THE NORTH AMERICAN FREE TRADE AGREEMENT
BETWEEN:
AND:
AND THE UNCITRAL ARBITRATION RULES (1976)
ELI LILLY AND COMPANY
Claimant/Investor
GOVERNMENT OF CANADA
Respondent/Party
(Case No. UNCT/14/2)
GOVERNMENT OF CANADA
COUNTER MEMORIAL
January 27, 2015
Trade Law Bureau
Departments of Justice and of
Foreign Affairs, Trade and
Development
Lester B. Pearson Building
125 Sussex Drive
Ottawa, Ontario
K1A0G2
CANADA
Annex 384
Volume I
Volume II
Volume III
Volume IV
Volume V
COUNTER MEMORIAL
INDEX
Counter Memorial
Expert Reports
Ronald E. Dimock
Dr. Daniel J. Gervais
Timothy R. Holbrook
Heidi Lindner
T. David Reed
Witness Statements
Kimby Barton
Dr. Marcel Brisebois
Dr. Michael Gillen
Exhibits
Legal Authorities
Annex 384
TABLE OF CONTENTS
I. PRELIMINARY STATEMENT .......................................................................... 1
II. FACTS .................................................................................................................. 11
A. Canadian Courts Reached Just and Principled Decisions and Granted
Full Due Process to Claimant .................................................................... 11
1) Claimant's atomoxetine patent ...................................................... 11
2) Claimant's olanzapine patent ......................................................... 18
B. The Federal Court Performed Its Expected Statutory Role as Ultimate
Arbiter of Patent Validity ........................................................................... 28
1) The Patent Office makes an initial determination of
patentability .................................................................................... 29
2) The determination of the Patent Office is based on a limited
record and adopts assumptions in favour of the applicant ............. 31
3) The Patent Office lacks authority to issue binding
interpretations of patent law ........................................................... 33
4) The Federal Court has sole authority to interpret the law .............. 35
C. Claimant's Patents Were Invalidated on the Basis of Long-Standing
Patent Law Rules That Are Grounded in the Patent Act and Serve
Rational Policy Objectives ......................................................................... 36
1) Claimant's so-called "promise utility doctrine" is in fact
several distinct patent law rules, all of which were part of
Canadian law when Claimant filed its patents ............................... 38
2) Promises in the patent must be met for an invention to have
utility .............................................................................................. 39
3) Courts interpret patents using settled principles of patent
construction to determine ifthere is a promise ............................. .44
4) The utility of the invention must be established at the filing
date, and cannot be retroactively proved with post-filing
evidence ......................................................................................... 48
5) Canadian courts fairly adjudicate whether utility has been
established based on the evidence put before them by the
parties ............................................................................................. 53
6) Where utility is merely predicted at the filing date, the patent
must disclose a sound basis for the prediction ............................... 55
D. There Is No "Systemic Discrimination" Against Pharmaceutical
Patents ........................................................................................................ 60
1) The pharmaceutical sector is uniquely litigious ............................. 61
2) Overall rates of invalidation have not increased ............................ 63
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3) Only three, not twenty-three, pharmaceutical patents were true
invalidations ................................................................................... 64
E. Claimant's Own Patenting Behaviour Illustrates Why Rules to
Prevent Speculative Patenting Are Needed ............................................... 65
F. Health Canada Approval of Zyprexa and Strattera Has Nothing to Do
with the Validity of Claimant's Patents ..................................................... 70
G. United States "Enablement" and "Written Description" Doctrines Are
Similar to Canada's Utility Doctrine, and United States Patent Law
Has Evolved Since NAFTA ....................................................................... 72
H. Mexican Patent Law Does Not Apply the Same Criteria and Has
Continued to Evolve Since NAFTA .......................................................... 75
I. Substantive International Patent Law Is Not Harmonized ......................... 78
J. The Patent Cooperation Treaty Addresses Only Procedural Issues ........... 85
III. JURISDICTION .................................................................................................. 90
IV. MINIMUM STANDARD OF TREATMENT ................................................... 91
A. Summary of Canada's Position on NAFTA Article 1105(1) ..................... 91
B. Article 1105(1) Accords the Minimum Standard of Treatment of
Aliens as Established by Customary International Law ............................ 94
1) The threshold for a violation of the minimum standard of
treatment is high and requires a finding of egregious or
manifestly unfair behaviour ........................................................... 94
2) Denial of justice is the only basis upon which the judgments of
a domestic court interpreting domestic law may be found in
violation of the customary international law minimum
standard of treatment. ..................................................................... 98
C. The Canadian Federal Courts Did Not Engage in Any Egregious, or
Grossly Unfair Conduct That Could Amount to a Breach of the
Customary Minimum Standard of Treatment .......................................... 106
1) The judgments were not arbitrary ................................................ 106
2) The judgments were not discriminatory ...................................... 112
D. Claimant Has Not Established That "Legitimate Expectations" Are
Protected by the Minimum Standard of Treatment under Customary
International Law, or That It Had Any Legitimate Expectations to
Begin With ............................................................................................... 114
11
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1) Claimant has failed to prove that "legitimate expectations" is a
rule of customary international law protected by NAFTA
Article 1105(1) ............................................................................. 115
a) Claimant has the burden of proving the existence of a rule
of customary international law........................................ 115
b) Claimant fails to submit evidence of state practice and
opinio juris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 7
c) Mere failure to fulfil an investor's "expectations" does not
breach the minimum standard of treatment protected in
Article 1105(1) ................................................................ 121
2) The theory of "legitimate expectations" does not apply to the
adjudicative role of the judiciary ................................................. 126
3) Canada did not frustrate Claimant's "legitimate expectations" ... 127
V. EXPROPRIATION ............................................................................................ 132
A. Summary of Canada's Position on NAFTA Article 1110 ....................... 132
B. NAFTA Article 1110(1) Incorporates Customary International Law
Rules on Expropriation ............................................................................ 134
C. Claimant's Expropriation Claim Fails Because an Invalid Patent Is
Not a Property Interest Capable of Expropriation ................................... 135
1) Domestic law determines the property interests protected by
NAFTA Article 1110(1) .............................................................. 135
2) Absent a denial of justice, international tribunals must accept
domestic court determinations that a property right does not
exist under domestic law .............................................................. 13 8
3) Claimant's patents were invalid, hence there is no
expropriation ................................................................................ 142
D. Claimant's Proposed Judicial Expropriation Rule Would Tum
Investment Tribunals into Supranational Courts of Appeal .................... 144
1) Claimant is attempting an end-run around the requirements of
the international law of expropriation .......................................... 144
2) Claimant mischaracterizes the doctrine and arbitral
jurisprudence on expropriation by judicial measures .................. 146
E. NAFTA Article 1110(7) Further Bars a Finding of Expropriation in
This Case .................................................................................................. 151
1) NAFTA Article 1110 does not apply because the measures are
consistent with Chapter Seventeen .............................................. 151
2) The Measures are Consistent with NAFTA Article 1709(1) ....... 153
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a) Claimant has failed to establish any special meaning for the
terms ''utility "and "capable of industrial application" ... 154
b) Claimant's "ordinary meaning" interpretation fails ........ 156
c) The context, object and purpose ofNAFTA Chapter
Seventeen reinforces the analysis ................................... 158
d) Subsequent practice in the application of the treaty ....... 161
e) The PCT is of no assistance to Claimant . . . . . . . . . . . . . . . . . . . . . . . . 162
3) The measures are consistent with NAFTA Article 1709(7) ........ 164
4) The measures are consistent with NAFTA Article 1709(8) ........ 166
5) The measures are consistent with NAFTA Article 1701 ( 1) ........ 170
F. Even ifNAFTA Article 1110 Applies, There Was No Expropriation
in This Case .............................................................................................. 171
1) There was no direct expropriation ............................................... 1 71
2) There was no indirect expropriation ............................................ 172
a) The economic impact of the measures does not amount to a
substantial deprivation of Claimant's investment in Canada
......................................................................................... 174
b) The measures did not interfere with Claimant's distinct,
reasonable investment-backed expectations ................... 175
c) The character of the measures is not consistent with a
finding of indirect expropriation..................................... 17 5
VI. CONCLUSION .................................................................................................. 176
VII. REQUEST FOR RELIEF ................................................................................. 178
IV
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264. Claimant's protest regarding discrimination does not withstand scrutiny.
Claimant argues that the principle beneficiaries of this approach are generic drug
makers.473 But among generic companies operating in Canada, half of the top 18 (based
on sales) are not Canadian-owned .474 Claimant also says that foreign brand-name drug
makers are being discriminated against as a result of the Federal Courts interpretation of
the law, but Canadian innovator companies including biopharmaceutical companies, are
subject to the same rules as Claimant. 475 Finally, as set out in Part D above and
described in Dr. Brisebois statement, Claimant's statistics regarding patent invalidation
in the pharmaceutical industry are misleading: in reality, there have been only three
invalidations based solely on utility, two of which are the subject of this arbitration. It is
impossible to draw the sweeping conclusion at "discrimination" the Claimant advocates.
D. Claimant Has Not Established That "Legitimate Expectations" Are
Protected by the Minimum Standard of Treatment under Customary
International Law, or That It Had Any Legitimate Expectations to Begin
With
265. Claimant also argues that its "legitimate expectations" were breached by the
Canadian federal judiciary when it ruled that the atomoxetine and olanzapine patents
were invalid under the Patent Act. 476 Claimant says that the doctrine of "legitimate
expectations" is a rule of customary international law and asserts that Canada is liable
under Article 1105 because (1) it reasonably expected the Federal Court to adopt a
definition of utility that would have resulted in the validation of its patents, and (2) it
expected Canada to conform to the PCT.
473 Claimant's Memorial, para. 291.
474 Claimant's Memorial, para. 291. Of the eighteen generic drug companies operating in Canada (based
on sales), nine are Canadian-owned (Apotex, Pharmascience, Sanis Health Inc (Shoppers Drug Mart), Pro
Doc (Jean Coutu), AA Pharma Inc., Riva, Jamp Pharma, Mint Pharma and Sterimax) and nine are foreignowned
(Teva, Actavis, Mylan, Ranbaxy, Sivem (Mckesson), Hospira, Taro Pharma, Aptalis and Pharma
Partners (Fresnius Kabi).
475 See Claimant's Memorial, para. 291, fu. 539.
476 Claimant's Memorial, paras. 272-289.
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266. Claimant's arguments are defective on multiple levels. First, Claimant has failed
to prove that the theory of "legitimate expectations" has become a rule of customary
international law that is protected by NAFTA Article 1105(1 ). Second, regardless of its
status generally in international law, it is a doctrine which fundamentally cannot be
applied to judgments of the domestic judiciary acting in an adjudicative function of
domestic statutory interpretation. Third, even if the theory of legitimate expectations is
now a rule of custom protected under Article 1105(1 ), and even if it were applicable to
the judiciary, Claimant could not have reasonably had the expectations claimed. Rules
regarding utility are long-standing in Canadian law and the grant of a patent is always
contingent on future confirmation by the courts for compliance with Canadian law.
Claimant could not have had a "legitimate expectation" of how a court would rule in the
future in light of the law, facts, evidence and other considerations presented before the
court at the time of challenge. To assert otherwise would give every disappointed litigant
an automatic remedy in international law against any adverse domestic ruling that it
"expected" to win.
1) Claimant has failed to prove that "legitimate expectations" is a rule of
customary international law protected by NAFTA Article 1105(1)
a) Claimant has the burden of proving the existence of a rule of
customary international law
267. It is axiomatic that in order to prove the existence of a rule of customary
international law, two requirements must be met: substantial state practice and an
understanding that such practice is required by law (opinio Juris sive necessitatis).477
477 United Nations, Statute of the International Court of Justice, 18 April 1946, Article. 38(1)(b) ("ICJ
Statute") (RL-034) (providing that in making decisions in accordance with international law, the Court
shall apply, inter alia, "international custom, as evidence of a general practice accepted as law."); North
Sea Continental Shelf Cases (Federal Republic of Germany v. Denmark; Federal Republic of Germany v.
The Netherlands), Judgment [1969] ICJ, p. 43 (RL-035) (it is an "indispensable requirement" to show that
"State practice, including that of States whose interests are specially affected, should have been both
extensive and virtually uniform in the sense of the provision invoked; -- and should moreover have
occurred in such a way as to show a general recognition that a rule of law or legal obligation is involved");
Case Concerning the Continental Shelf, (Libyan Arab Jamahiriyah v. Malta) [1985] ICJ Rep., p. 29, para.
27 (RL-036) ("it is of course axiomatic that the material of customary international law is to be looked for
primarily in the actual practice and opinio juris of states ... "); Case of Nicaragua v. United States (Merits),
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268. It is also unassailable that the burden of proving the existence of a rule of
customary international law rests on the party that alleges it. The International Court of
Justice wrote that "the Party which relies on a custom of this kind must prove that this
custom is established in such a manner that it has become binding on the other party."478
The Cargill tribunal confirmed that "where a custom is not clear, or is disputed, then it is
for the party asserting the custom to establish the content of that custom."479 Other
NAFTA tribunals have affirmed the same.480
ICJ Rep. 14 (1986), p. 108, para. 207 (RL-037) ("For a new customary rule to be formed, not only must
the acts concerned "amount to settled practice," but they must be accompanied by the opinio Juris sive
necessitates. Either the States taking such action or the other States in a position to react to it, must have
behaved so that their conduct "is evidence of a belief that this practice is rendered obligatory by the
existence of a rule oflaw requiring it."); United Parcel Service of America Inc. v. Canada, Award on
Jurisdiction (UNCITRAL) 22 November 2002, ("UPS Jurisdiction Award"), para. 84 (RL-038); Glamis
Award, paras. 602-603 (RL-006).
478 Case Concerning Rights of Nationals of the United States of America in Morocco (France v. United
States), [1952] ICJ Rep. 176, p. 200 (RL-039) (quoting Asylum (Colom. v. Peru), 1950 ICJ 266).
479 Cargill Award, para. 271 (RL-015). The Cargill tribunal continued: "The burden of establishing any
new elements of this custom is on Claimant. The Tribunal acknowledges that the proof of change in a
custom is not an easy matter to establish. However, the burden of doing so falls clearly on Claimant. If
Claimant does not provide the Tribunal with the proof of such evolution, it is not the place of the Tribunal
to assume this task. Rather the Tribunal, in such an instance, should hold that Claimant fails to establish
the particular standard asserted." Cargill Award, para. 273 (RL-015).
480 ADF Award, paras. 183-184 (RL-005) ("We are not convinced that the Investor has shown the
existence, in current customary international law, ofa general and autonomous requirement (autonomous,
that is, from specific rules addressing particular, limited, contexts) to accord fair and equitable treatment
and full protection and security to foreign investments [ ... ] any general requirement to accord "fair and
equitable treatment" and "full protection and security" must be disciplined by being based upon State
practice and juridical or arbitral caselaw or other sources of customary or general international law.");
UPS Jurisdiction Award, para. 84 (RL-038) ("[R]elevant practice and the related understandings must still
be assembled in support of a claimed rule of customary international law."); Glamis Award, paras. 601-
603 (RL-006) ("If, as Claimant argues, the customary international law minimum standard of treatment
has indeed moved to require something less than the "egregious," "outrageous," or "shocking" standard as
elucidated by Neer, then the burden of establishing what the standard now requires is upon Claimant [ ... ]
it is necessarily the Claimant's place to establish a change in custom"); Mobil Decision on Liability (RL-
007); Apotex Award (RL-016). See also Nguyen, Quoc Dinh, Dallier & Pellet, Droit International Public,
6th ed., (LGDJ 1999), p. 330 (R-329) (burden on party "who relies on a custom to establish its existence
and exact content.") ("c'est a [la partie] qui s'appuie sur une coutume d'en etablir !'existence et la portee
exacte."); Ian Brownlie, "Principles of Public International Law", Seventh Edition, 2008, p. 12 (R-330)
("In practice, the proponent of a custom has the burden of proof the nature of which will vary according to
the subject-matter and the form of the pleadings.").
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b) Claimant fails to submit evidence of state practice and opinio
juris
269. Claimant has submitted no evidence of state practice or opinio juris to support its
assertion that the minimum standard of treatment of aliens in customary international
law now includes a protection of an investor's "legitimate expectations." Claimant fails
to demonstrate the practice of the three NAFTA Parties, let alone evidence of practice by
any of the other 193 members of the United Nations sufficient to show that an investor's
expectations are protected by customary international law.
270. Instead, Claimant relies almost exclusively on non-NAFTA arbitration awards
interpreting autonomous "fair and equitable treatment" provisions in investment treaties
and which do not require, as does NAFTA Article 1105(1), the application of the
customary international law minimum standard of treatment of aliens. This same flawed
approach to proving custom and the same arguments regarding legitimate expectations
have been made and rejected before by the Cargill, Glamis and Mobil tribunals.481 This
Tribunal should do the same.
271. First, as a threshold evidentiary issue, arbitral awards cannot create customary
international law- only states can create custom.482 As Professor Lauterpacht wrote,
"[d]ecisions of international courts are not a source of international law ... [t]hey are not
direct evidence of the practice of States or of what States conceive to be the law."483 The
481 Claimant in this case repeats most of the same arguments the claimant in Mobil made with respect to
legitimate expectations. See Mobil Decision on Liability, paras. 111-113, 127-130 (RL-007). As
described below, the tribunal did not endorse the Claimant's position.
482 As noted in Statute of the Court, International Court ofJustice, /CJ Statute, Article 38(1)(d) (RL-034),
judicial decisions are a "subsidiary means for the determination of rules of law."
483 Sir Hersch Lauterpacht, The Development of International Law by the International Court, (London:
Stevens, 1958), pp. 20-21 (R-331). See also Mohamed Shahabuddeen, Precedent in the World Court
(Cambridge University Press, 1996), pp. 71-72 (R-332) ("The development of customary international law
depends on state practice. It is difficult to regard a decision of the Court as being in itself an expression of
State practice .... A decision made by it is an expression not of the practice of the litigating States, but of
the judicial view taken of the relations between them on the basis oflegal principles which must
necessarily exclude any customary law which has not yet crystallised. The decision may recognise the
existence of a new customary law and in that limited sense it may no doubt be regarded as the final stage
of development, but, by itself, it cannot create one. It lacks the element of repetitiveness so prominent a
feature of the evolution of customary international law.").
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Glamis tribunal endorsed the position of the United States on this point: "Arbitral
awards, Respondent rightly notes, do not constitute State practice and thus cannot create
or prove customary international law."484 While arbitral awards may contain valuable
analysis of State practice and opinio juris in relation to a particular rule of custom, and
can be considered accordingly,485 they cannot by themselves substitute for actual
evidence of state practice and opinio juris as the ICJ confirmed in Diallou. 486
Accordingly, Claimant cannot point to arbitral awards endorsing its theory oflegitimate
expectations as evidence of customary international law unless the awards themselves
have examined evidence of state practice and opinio juris.
272. Second, the non-NAFTA arbitral decisions upon which Claimant relies to
support its "legitimate expectations" argument were mostly interpreting autonomous
stand-alone Fair and Equitable Treatment ("FET") clauses that were not specifically
conditioned on the minimum standard of treatment of aliens under customary
international law. Such awards are not relevant in the context ofNAFTA Article
1105(1). The Cargill tribunal noted that such awards are only relevant "if the fair and
equitable treatment clause of the BIT in question was viewed by the Tribunal as
involving, like Article 1105, an incorporation of the customary international law
484 Glamis Award, para. 605 (RL-006). The Cargill tribunal also noted that "the awards of international
Tribunals do not create customary international law but rather, at most, reflect customary international
law." Cargill Award, para. 277 (RL-015).
485 The Cargill tribunal cautioned that "the evidentiary weight to be afforded [arbitral awards] ... is greater
if the conclusions therein are supported by evidence and analysis of custom." Cargill Award, para. 277
(RL-015). The Glamis tribunal affirmed the same: "The Tribunal therefore holds that it may look solely to
arbitral awards - including BIT awards - that seek to be understood by reference to the customary
international law minimum standard of treatment, as opposed to any autonomous standard." Glamis
Award, para. 611 (RL-006).
486 See Case Concerning Ahmadou Sadia Diallo (Republic of Guinea v. Democratic Republic of The
Congo), Judgment on Preliminary Objections, ICJ, 24 May 2007, paras. 88-91 (RL-041). In that case,
the ICJ held that reliance on investor-state arbitration awards and foreign investment protection
agreements could not substitute for evidence of state practice and opinio Juris to show a change in the
customary international law rules governing diplomatic protection. The ICJ found that the claimant had
failed to prove the alleged rule of custom.
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standard rather than autonomous treaty language. "487 As Professors Dolzer and Schreuer
have written, "in the context ofNAFTA, the three state parties decided that the standards
of "fair and equitable treatment" and "full protection and security" must be understood
to require host states to observe customary international law and not more demanding
autonomous treaty-based standards. "488
273. A close reading of the awards relied on by Claimant shows that none of them,
including Biwater Gau.ff, Azurix, CMS, LG&E, Occidental, TECMED and Duke Energy,
examined actual state practice and opinio juris to establish that protection of an
investor's legitimate expectations is now a rule of customary international law.489 In
fact, most of those tribunals expressly noted there was no need for them to do so because
the applicable fair and equitable treatment provision was not limited to the customary
487 Cargill Award, para. 278 (RL-015). The Cargill tribunal said that "significant evidentiary weight
should not be afforded to autonomous clauses inasmuch as it could be assumed that such clauses were
adopted precisely because they set a standard other than that required by custom." Cargill Award, para.
276 (RL-015). The tribunal also considered the number of treaties which contain a provision that requires
fair and equitable treatment but noted that States are beginning to renegotiate that provision. According to
the tribunal, "[i]n such a fluid situation, the Tribunal does not believe it prudent to accord significant
weight to even widespread adoption of such clauses." Cargill Award, para. 276 (RL-015).
488 Dolzer and Schreuer, Principles of International Investment Law (Oxford: Oxford University Press,
2008), p. 16 ( emphasis added) (R-327). See also, p. 126: "In contrast to the NAFTA practice, arbitral
awards applying treaties that do not contain statements about the relationship ofFET to customary
international law have interpreted the relevant provisions in BITs autonomously on the basis of their
respective wording."
489 Biwater Gau.ff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID ARB/05/22, Award, 24 July
2008, ("Biwater Gau.ff Award''), para. 586 (RL-043); Azurix v. Argentine Republic, ICSID ARB/01/12,
Award, 14 July 2006, ("Azurix Award''), paras. 361, 363 (RL-044); Occidental Award, paras. 180, 192
(RL-033); CMS Gas Transmission Co. v. Argentine Republic, ICSID ARB/01/8, Award, 12 May 2005,
("CMS Award''), para. 284 (RL-047); LG&E Liability, para. 122 (RL-030); Duke Energy Electroquil
Partners & Electroquil S.A. v. Republic of Ecuador, ICSID ARB/04/19, Award, 18 August 2008, ("Duke
Energy Award''), paras. 333-337 (RL-048). Occidental is similarly unhelpful. In that case, the Tribunal
noted that the question of whether the FET standard in the treaty was more demanding than the minimum
standard of treatment under customary international law did not arise, so it had no need to undertake the
analysis of state practice and opinio juris that Article 1105 requires. Occidental Final Award, para. 192
(RL-033) ("The question whether there could be a Treaty standard more demanding than a customary
international law standard that has been painfully discussed in the context ofNAFTA and other free trade
agreements does not therefore arise in this case.") There was no reference to the minimum standard of
treatment under customary international law in Article II (3)(a) of the US-Ecuador BIT, which was at
issue in that case.
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international law minimum standard of treatment of aliens.490 This is why NAFTA
tribunals like Glamis, Cargill and Mobil declined to endorse TECMED in the NAFTA
context with respect to legitimate expectations. 491
274. The FTC Note of Interpretation is clear: Article 1105 "[does] not require
treatment in addition to or beyond that which is required by the customary international
law minimum standard of treatment of aliens." 492 Thus, without real evidence of state
practice and opinio juris to show that the protection of legitimate expectations is now a
rule of customary international law, the Claimant's assertion that it is must fail. 493
490 The TECMED tribunal stated that the FET standard in the applicable BIT was "autonomous" and did
not undertake any examination of customary international law. Technicas Medioambientales Teemed, S. V.
v. United Mexican States, ICSID ARB(AF)/00/2, Award, 29 May 2003, ("TECMED Award''), paras. 155-
156 (RL-049). See also Biwater Gauff Award, paras. 591, 595 (RL-043) (noting there was no reference to
the minimum standard of treatment under customary international law and concluded that the BIT's
"autonomous standard" left it open to the Tribunal to determine the precise scope based on whether the
Tribunal felt the conduct "is fair and equitable or unfair and inequitable."). None of the cases cited by the
Biwater Gauff tribunal undertook an analysis of customary international law either. See for example
Saluka Investments B. V. v. Czech Republic, UNCITRAL, Partial Award, 17 March 2006, ("Saluka Partial
Award''), para. 294 (RL-050) ("[T]his Tribunal has to limit itself to the interpretation of the "fair and
equitable treatment" standard as embodied in Article 3 .1 of the Treaty. That Article omits any express
reference to the customary minimum standard. The interpretation of Article 3 .1 does not therefore share
the difficulty that may arise under treaties (such as the NAFTA) which expressly tie the "fair and
equitable" treatment standard to the customary minimum standard. Avoidance of these difficulties may
even be regarded as the very purpose of the lack of a reference to an international standard in the Treaty.
This clearly points to the autonomous character of a "fair and equitable treatment" standard such as the
one laid down in Article 3.1 of the Treaty.").
491 Glamis Award, para. 610 (RL-006); Cargill Award, paras. 280, 286 (RL-015); Mobil Decision on
Liability, paras. 113, 148-151 (RL-007).
492 FTC Notes of Interpretation, para. 2 (RL-009). See Mondev Award, para. 122 (RL-004) ("The FTC
interpretation makes it clear that in Article 1105(1) the terms "fair and equitable treatment" and "full
protection and security" are, in the view of the NAFTA Parties, references to existing elements of the
customary international law standard and are not intended to add novel elements to that standard.). See
also UPS Jurisdiction Award, para. 97 (RL-038) ("[W]e agree in any event that the obligation to accord
fair and equitable treatment is not in addition to or beyond the minimum standard."); Loewen Award, para.
128 (RL-013) ("'fair and equitable treatment' and 'full protection and security' are not free-standing
obligations. They constitute obligations only to the extent that they are recognized by customary
international law."); Glamis Award, para. 609 (RL-006) ("Claimant has agreed with this distinction
between customary international law and autonomous treaty standards but argues that, with respect to this
particular standard, BIT jurisprudence has 'converged with customary international law in this area.' The
Tribunal finds this to be an over-statement.").
493 The Article 1105 claims in UPS, ADF, Glamis, and Apotex all failed in part on the ground that the
Investor had not fulfilled its burden to establish state practice and opinio juris. UPS Jurisdiction Award,
para. 86 (RL-038) (" ... UPS has not attempted to establish that that state practice reflects an understanding
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c) Mere failure to fulfil an investor's "expectations" does not
breach the minimum standard of treatment protected in
Article 1105(1)
275. Previous NAFTA tribunals have already expressed the view that mere failure to
meet an investor's expectations does not breach Article 1105(1). While the unjustified
repudiation of specific representations made to the investor in order to induce an
investor can be a factor in assessing whether the minimum standard of treatment has
been breached, the open-ended insurance policy against regulatory change Claimant
advocates has not be endorsed.
276. The Waste Management II tribunal said that the breach of representations made
by the host State to the investor and which were reasonably relied on by the investor
may be "relevant" as to whether the NAFTA party acted in a way that was "grossly
unfair, unjust or idiosyncratic" or exhibited "a complete lack of transparency and
candour in an administrative process."494 Similarly, the Thunderbird tribunal considered
expectations of the investor as part of the "context" of the measure but found that the
impugned actions would still have to rise to a level that amounted to a "gross denial of
justice or manifest arbitrariness falling below acceptable international standards."495
The Glamis tribunal considered it possible that the repudiation of specific assurances or
commitments to the investor to induce an investment could be a factor in deciding
whether a measure is sufficiently egregious so as to fall below the minimum standard of
treatment but took "no position on the type or nature of repudiations measures that
would be necessary to violate international obligations."496
of the existence ofa generally owed international legal obligation"); ADF Award, para. 183 (deciding that
claimant had not proven that customary international law includes an "a general and autonomous
requirement ... to accord fair and equitable treatment and full protection and security to foreign
investments" simply by pointing to bilateral investment treaties which contain such provisions); Glamis
Award, para. 627 (RL-006) ("The Tribunal holds that Claimant has not met its burden of proving that
something other than the fundamentals of the Neer standard apply today"); Apotex Award (RL-016).
494 Waste Management II, para. 98 (RL-014).
495 Thunderbird Award, paras. 147, 194 (RL-003).
496 Glamis Award, paras. 620, 627 (RL-006). In fact, the Glamis tribunal decided that a legal opinion
issued by the United States Department of the Interior (known as the "M-opinion") which eventually led
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277. The Mobil tribunal concluded that the repudiation by a State of its "clear and
explicit representations" made to induce an investment and which were objectively and
reasonably relied upon by the investor is a "relevant factor" in determining whether
there has been a breach of Article 1105, but only when it amounts to "egregious
behaviour."497 The Mobil tribunal stated:
[Article 1105] does not require a State to maintain a stable legal and
business environment for investments, if this is intended to suggest that
the rules governing an investment are not permitted to change, whether to
a significant or modest extent. Article 1105 may protect an investor from
changes that give rise to an unstable legal and business environment but
only if those changes may be characterized as arbitrary or grossly unfair
or discriminatory, other otherwise inconsistent with the customary
international law standard. In a complex international and domestic
environment, there is nothing in Article 1105 to prevent a public
authority from changing the regulatory environment to take account of
new policies and needs, even if some of those changes may have farreaching
consequences and effects, and even if they impose significant
additional burdens on an investor. Article 1105 is not, and was never
intended to amount to, a guarantee against regulatory change, or to reflect
a requirement that an investor is entitled to expect no material changes to
the regulatory framework within which an investment is made.
Governments change, policies change and rules change. These are facts
of life with which investors and all legal and natural persons have to live
with. 498
278. Canada's position has always been that mere failure to fulfil "expectations,"
however characterized, does not automatically fall below the customary international
law standard of treatment required byNAFTA Article 1105.499 The United States has
taken the same view on several occasions that "states may amend or modify their
regulations to achieve legitimate public welfare objectives and will not incur liability
to the rejection of the claimant's mining project did not breach customary international law even though it
was a dramatic change to the legal interpretation oflong-standing rules upon which Claimant had relied to
make its investment. See id., paras. 136-147, and 758-772. See also Mobil Decision on Liability, para. 147
(RL-007).
497 Mobil Decision on Liability, paras. 152-153 (RL-007).
498 Mobil Decision on Liability, para. 153 (emphasis added) (RL-007).
499 See Mobil Decision on Liability, paras. 133-134 (RL-007) quoting Canada's position.
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under customary international law merely because such changes interfere with an
investor's "expectations" about the state of regulation in a particular sector." 500
279. Claimant, on the other hand, does not even believe it necessary that Canada make
specific representations or promises to it before its "legitimate expectations" can arise
and be guaranteed under NAFTA Article 1105 because that is too "narrow" a standard
and "not found in customary international law."501 Claimant disputes the findings of the
Mobil and Glamis tribunals, both of which have the opposite position as what Claimant
argues here. 502
280. This is an illogical and revisionist statement. It is illogical because the theory of
legitimate expectations has not been proven to be a rule of customary international law
in the first place, so disputing one element of a rule which is not actually a rule does
nothing to assist Claimant. It is revisionist because the requirement that an investor's
legitimate expectations must be based on specific promises or representations to the
investor is by no means a "narrow standard" - it is the standard. The Mobil and Glamis
tribunals were not the only NAFTA tribunals to make this conclusion: Meta/clad, Waste
Management IL International Thunderbird and Grand River all considered it essential
evidence as to whether the respondent NAFTA Party had made specific assurances to
the investor that were later repudiated. 503
500 Mesa Power Group LLC v. Government of Canada, Submission of the United States of America, 25
July 2014, para. 8 (RL-051). The United States has expressed the same position in non-NAFTA
arbitrations. See for example, TECO Guatemala Holdings LLC v. Republic of Guatemala, ICSID Case No.
ARB/10/23, 23 November 2012, para. 6 (RL-052). This is consistent with what the United States argued
in the Glamis Award arbitration, arguments which the tribunal in that case accepted. See Glamis Award,
paras. 575-582, 618-622 (RL-006).
501 Claimant's Memorial, para. 284.
502 Mobil Decision on Liability, para. 152 (RL-007) (there must be "(i) clear and explicit representations
made by or attributable to the NAFT A host State in order to induce the investment, and (ii) were by
reference to an objective standard, reasonably relied on by the investor, and (iii) were subsequently
repudiated by the NAFT A host state" in order to be "relevant" in assessing whether the impugned
behavior was "arbitrary, grossly unfair, unjust or idiosyncratic."); Glamis Award, paras. 620, 621 (RL-
006).
503 Meta/clad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Award, 30
August 2000, ("Metalclad Award"), para. 89 (RL-053) ("Metalclad was entitled to rely on the
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281. Even non-NAFTA arbitral tribunals interpreting autonomous fair and equitable
treatment provisions have insisted on more rigorous criteria than what Claimant
advocates. For example, the tribunal in EDF v. Romania stated:
The idea that legitimate expectations, and therefore FET, imply the
stability of the legal and business framework, may not be correct if stated
in an overly-broad and unqualified formulation. The FET might then
mean the virtual freezing of the legal regulation of economic activities, in
contrast with the State's normal regulatory power and the evolutionary
character of economic life. Except where specific promises or
representations are made by the State to the investor, the latter may not
rely on a bilateral investment treaty as a kind of insurance policy against
the risk of any changes in the host State's legal and economic framework.
Such expectation would neither be legitimate nor reasonable. 504
282. Accordingly, legitimate expectations must, first, be based on objective rather
than subjective, expectations of the investor.505 Second, there must have been a specific
assurance or promise by the State to induce the investment which was relied on by the
representations of federal officials and to believe that it was entitled to continue its construction of the
landfill. In following the advice of these officials, and filing the municipal permit application on
November 15, 1994, Metalclad was merely acting prudently and in the full expectation that the permit will
be granted."); Waste Management II, para. 98 (RL-014) ("In applying this standard, it is relevant that the
treatment is in breach of representations made by the host State which were reasonably relied on by the
claimant."); Thunderbird Award, paras. 146-148 (RL-003) ( concept of legitimate expectations involves
reliance on the specific assurances provided by government officials but concluding that the Mexican
SEGOB did not generate such expectations through its Oficio relating to gambling machines). See also
Grand River Award, para. 141 (RL-010) ("Ordinarily, reasonable or legitimate expectations of the kind
protected by NAFT A are those that arise through targeted representations or assurances made explicitly or
implicitly by a state party.").
504 EDF Award, para. 217 (emphasis added) (RL-008). See also id. para. 218 (RL-008) (citing
Parkerings-Compagniet AS v. Republic of Lithuania, ICSID ARB/05/8, Award, 11 September 2007, para.
332 (RL-040): "It is each State's undeniable right and privilege to exercise its sovereign legislative power.
A State has the right to enact, modify or cancel a law at its own discretion. Save for the existence of an
agreement, in the form of a stabilization clause or otherwise, there is nothing objectionable about the
amendment brought to the regulatory framework existing at the time an investor made its investment."),
505 Mobil Decision on Liability, para. 152 (RL-007); EDF Award, para. 219 (RL-008) ("Legitimate
expectations cannot be solely the subjective expectations of the investor. They must be examined as the
expectations at the time the investment is made, as they may be deduced from all the circumstances of the
case, due regard being paid to the host State's power to regulate its economic life in the public interest.");
Glamis Award, para. 627 (RL-006) ("Creation by the state of objective expectations in order to induce
investment ... ").
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investor. 506 Third, the relevant expectations must be those existing at the time the
investor decided to make the investment.507 Finally, to assess the reasonableness of an
investor's expectations, "all circumstances, including not only the facts surrounding the
investment, but also the political, socioeconomic, cultural and historical conditions
prevailing in the host State" need to be taken into account.508
283. In summary, while NAFTA tribunals have considered the repudiation of
legitimate expectations of foreign investors by officials of the executive or legislative
branch of government, assuming they reasonably existed at the time the investment was
made and were based on specific representations to induce the investment, as relevant in
determining whether the measure in question was egregious enough to breach customary
international law, no NAFTA tribunal has found that the mere failure to fulfil an
investigator's expectations constituted in and of itself a breach of the minimum standard
of treatment under Article 1105( 1 ). Something more is required.
506 Mobil Decision on Liability, para. 152 (RL-007); Glamis Award, para. 620 (RL-006) ("Merely not
living up to expectations cannot be sufficient to find a breach of Article 1105 of the NAFT A. Instead,
Article 1105(1) requires the evaluation of whether the State made any specific assurance or commitment
to the investor so as to induce its expectations."); Waste Management II, para. 98 (RL-014) (noting the
relevance of a "breach of representations made by the host State which were reasonably relied on by the
claimant."); EDF Award, para. 217 (RL-008) ("Except where specific promises or representations are
made by the State to the investor, the latter may not rely on a bilateral investment treaty as a kind of
insurance policy against the risk of any changes in the host State's legal and economic framework. Such
expectation would be neither legitimate or reasonable.")
507 Bayindir Insaat Turizm Ticaret Ve Sanayi A.$. v. Islamic Republic of Pakistan, ICSID ARB/03/29,
Award, 27 August 2009 ("Bayindir Award''), paras. 190-191 (RL-054) ("Several awards have stressed
that the expectations to be taken into account are those existing at the time when the investor made the
decision to invest. There is no reason not to follow this view here."); Duke Energy Electroquil Partners &
Electroquil S.A. v. Republic of Ecuador, ICSID ARB/04/19, Award, 18 August 2008, ("Duke Energy
Award''), para. 340 (RL-048).
508 Duke Energy Award, para. 340 (RL-048), cited with approval in Bayindir Award, para. 192 (RL-054).
See also Saluka Partial Award, para. 304 (RL-050) ("This Tribunal would observe, however, that while it
subscribes to the general thrust of these and similar statements, it may be that, if their terms were to be
taken too literally, they would impose upon host States' obligations which would be inappropriate and
unrealistic. Moreover, the scope of the Treaty's protection of foreign investment against unfair and
inequitable treatment cannot exclusively be determined by foreign investors' subjective motivations and
considerations. Their expectations, in order for them to be protected, must rise to the level oflegitimacy
and reasonableness in light of the circumstances.").
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2) The theory of "legitimate expectations" does not apply to the
adjudicative role of the judiciary
284. The debate regarding the current status of the "legitimate expectations" theory in
international law is ultimately irrelevant in the context of the current dispute.
285. The doctrine of legitimate expectations as advocated by Claimant is
fundamentally inapplicable with respect to the rulings of domestic courts acting in their
bona fide role of interpreting and applying domestic law. As described above, it is wellsettled
that the judgments of domestic courts interpreting domestic law can only be
considered in violation of customary international law if there has been a denial of
justice. There is no authority to suggest that this rule can be circumvented by arguing
that an investor's legitimate expectations were breached because a domestic court set out
a new interpretation of a domestic law, regardless of how significant that new
interpretation might be or interpreted the evidence in a way Claimant did not expect. 509
286. Indeed, not a single arbitral award cited by Claimant applying the doctrine of
legitimate expectations deals exclusively with the judgments of domestic courts
exercising their adjudicative role of interpreting and applying domestic law. All of the
precedents relied upon by Claimant focus on measures taken by the respondent State's
executive, legislative or bureaucratic branches, not solely its judiciary. 510 None endorse
or even lends support to Claimant's position.
287. To the contrary, the tribunal in Jan de Nu[ v. Egypt rejected the claimant's
argument that Egyptian court rulings be assessed in the broader context of the fair and
equitable treatment provision in the applicable treaty, including the protection of its
legitimate expectations. 511 The tribunal affirmed that when a judgment of a domestic
509 To the contrary, as the Mondev Tribunal explained, even if Supreme Judicial Court of Massachusetts
had "made new law" in its judgments, this would fall "well within the interstitial scope oflaw-making
exercised by courts such as those of the United States." Mondev Award, para. 137 (RL-004).
510 See for example TECMED (deals with citations of Mexican environmental authorities); Occidental
(tax authorities); Duke Energy (which involved, inter alia, a state owned entity and customs).
511 Jan de Nu! Award, paras. 176-178 and 191 (RL-028). The fair and equitable provision in the EgyptBelgium
treaty did not contain a reference to the minimum standard of treatment of aliens in customary
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court is the object of the complaint, "the relevant standards to trigger State responsibility
for the [judicial proceedings] are the standards of denial of justice ... holding otherwise
would allow to circumvent the standards of denial of justice."512
288. International law simply does not recognize the doctrine oflegitimate
expectations as applying to judgments of domestic courts, not only because of the
special adjudicative of the judiciary and the great deference afforded to domestic courts
in interpreting and applying domestic law, but because judges do not - and cannot -
make promises or representations to a foreign investor. Courts interpret and apply the
law as it exists and in light of the evidence presented. No investor, domestic or foreign,
can have the reasonable expectation that it will always prevail in litigation or that a
court's interpretation of the law will never evolve. It is the very essence of the judicial
process to develop principles of law through incremental decisions based on the facts,
parties and rules presented before them, especially in a jurisdiction like Canada where
judicial decision-making is inherently evolutionary.
289. It would be an unprecedented and radical expansion of the theory of legitimate
expectations if the long-standing customary rules regarding denial of justice were cast
aside and an obligation was imposed on a State's domestic courts to ensure that their
interpretation of domestic law and adjudication of evidence presented to them do not
violate the expectations of foreign investors.
3) Canada did not frustrate Claimant's "legitimate expectations"
290. Even if it were true that the doctrine oflegitimate expectations is now a standalone
rule of customary international law, and even if it were theoretically possible to
apply the doctrine to domestic court rulings in the absence of a denial of justice,
Claimant would still fail in its attempt to hold Canada liable under NAFTA Article
international law, making the tribunal's reasoning that denial of justice is the only remedy against a
domestic court ruling all the more compelling.
512 Jan de Nu! Award, para. 191 (RL-028). The Jan de Nu! tribunal went on to endorse the views of
Loewen and Mondev tribunals with respect to denial of justice and concluded that the Egyptian courts had
not breached those rules. Id., paras. 192-193 (RL-028).
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1105(1). The Federal Court did nothing to violate any expectation Claimant could
reasonably have held.
291. Claimant says that it "could not have reasonably expected that Canada would
promulgate the unique promise utility doctrine, which has no basis in Canada's statutory
patent law ... "513 As a basis for such allegations, Claimant relies on witness statements
from its employees who testify that they did not know of any reason why their patents
would be invalid for lack of utility. 514
292. The expert opinion of Mr. Dimock and Part C above establish that there is no
merit to such allegations. The "promise of the patent" is merely an articulation of the
long-standing utility requirement in Canadian law that the patent must do what the
patent says that the invention will do. This is completely consistent with the Supreme
Court of Canada's reasoning in Consolboard (and prior case law and academic
literature). 515 This is not a "heightened" or "new" requirement: patent applicants are
free to define what their invention will do, Canadian patent law merely requires that the
patent actually do what is claimed. These are long-standing rules of Canadian patent law
which, when applied to Claimant's patents for atomoxetine and olanzapine in light of the
facts and expert testimony, revealed that they were latently defective as at the time of
filing. Claimant's subjective view of how it would like the law to be interpreted is not a
"legitimate expectation" - it is a mere viewpoint with which the Federal Court, the
Federal Court of Appeal, and the Supreme Court of Canada disagree.
293. As for the recollections of Claimant's employees, (Messrs. Stringer, Armitage,
Postlethwaith and Ms. Nobles), none of them offer evidence that they had any real
understanding of Canadian patent law at the time and none of them even testified in
support of the atomoxetine and olanzapine patents before the Federal Court - their
513 Claimant's Memorial, para. 279.
514 Stringer Statement, para. 25; Armitage Statement, para. 8, 12, and 16; Noble Statement, para. 23;
Poitlethewait Statement, paras. 22, 29.
515 Dimock Report, para. 56.
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testimony would have had no value in determining whether the patents were valid under
the Patent Act or not, and their testimony has no value in this arbitration either.
294. More to the point is that Canada made no promise or assurance to the Claimant
with respect to its patents. As described at Part B above, the grant of a patent by the
Patent Office is only presumptively valid and always subject to final determination by
the Federal Court based on the evidence presented to the court. It is for this reason
Claimant's argument regarding a patent being a "bundle oflegally enforceable rights"
which it relied on to make further investment decisions is deficient. 516 The grant of a
patent monopoly is not unconditional - it requires the patentee to uphold the patent
bargain by proving, if challenged before the Federal Court at any time within those
twenty years of exclusivity, that it actually had sufficient evidence at the time the patent
was filed to prove it was not engaged in mere speculation.
295. Claimant also says it could not have expected that Canada would have developed
a utility doctrine in violation ofNAFTA Chapter Seventeen. 517 As set out in detail
below, there is no violation ofNAFTA Chapter Seventeen. But even if there was, this
would still not establish a violation of the minimum standard of treatment in customary
international law - the FTC Note of Interpretation makes it clear that a breach of another
provision ofNAFTA does not equate to a breach of Article 1105(1).518 Furthermore, it
cannot be a reasonable expectation of any investor that the courts will not evolve in its
interpretation of the law. The evolution of the court's interpretation of patent law is
neither unusual nor undesirable. 519 As the Mondev tribunal explained, judicial "law-
516 Claimant's Memorial, paras. 286-287.
517 Claimant's Memorial, para. 279.
518 FTC Notes of Interpretation, s. 2(3) (July 31, 2001) (RL-009).
519 Indeed, as Professor Holbrook's expert opinion on United States patent law demonstrates, Claimant
and other investors in the United States are well-accustomed to evolutionary, sometimes radical, changes
in the patent law regime as U.S. Federal Courts are faced with new circumstances. Holbrook Report,
paras. 62-75.
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making" in this fashion is reasonable and, in the absence of a denial of justice, cannot be
challenged under Article 1105. 520
296. Claimant also says it expected that its PCT application for atomoxetine would be
sufficient to meet Canada's requirements relating to the disclosure of utility. Claimant
also argues that it did not expect Canada, a PCT contracting state, to impose "additional
and retroactive disclosure" requirements beyond those provided for in the PCT. 521
297. These are frivolous assertions. First, Claimant cannot ground its "legitimate
expectations" in the PCT when it did not even file both patents at issue in this
proceeding under that treaty - its olanzapine patent was not a PCT application but was
filed directly with the Patent Office. Second, Claimant cannot have had a "legitimate
expectation" that Canada would not "impose additional disclosure obligations beyond
those contained" in the PCT,522 when the PCT is strictly a procedural treaty which
expressly provides that it does not prescribe substantive patent law obligations. 523 Third,
Claimant could not have had expected that mere compliance with the PCT' s bare "form
and contents" requirements would mean its patent automatically complied with
Canada's substantive disclosure requirements.524 No patentee could have such an
expectation in any jurisdiction, let alone Canada - the PCT only sets out general
requirements regarding the categories of information and the format that must be
520 Mondev Award, paras. 133, 136-137 (RL-004).
521 Claimant's Memorial, para. 28.
522 Claimant's Memorial, para. 280.
523 PCT, Article 27(5) ("Nothing in this Treaty and the Regulations is intended to be construed as
prescribing anything that would limit the freedom of each Contracting State to prescribe such substantive
conditions of patentability as it desires [ ... ]") (R-037). Indeed, the courts in Canada have already
considered this issue with regards to Canada's utility-related disclosure requirement and have disagreed
with Claimant's argument. In Eli Lilly Canada Inc. v. Apotex Inc., 2009 FCA 97, para. 19 (R-354), the
court found that "The appellant further argues that requiring the complete disclosure of the factual basis
underlying the sound prediction is inconsistent with the Patent Cooperation Treaty, 1970, 28 U.F.T. 7647
(Treaty). However, this Treaty specifically contemplates the supremacy of national law in setting the rules
for substantive conditions ofpatentability (see article 27(5) of the Treaty). We are concerned here with
substantive conditions ofpatentability."
524 Claimant's Memorial, para. 280.
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included in a PCT patent application.525 It is well-known by users of the PCT system
that applications filed under the PCT must, in addition to fulfilling "form and contents"
requirements, always fulfil the substantive patentability criteria relevant to jurisdictions
in which they might seek patent protection. 526 Claimant's self-serving view of the PCT
is not a proper interpretation of that instrument.
298. Claimant knew ( or should have known if it had read the case-law and treatises
referred to in Mr. Dimock's expert report) what Canadian patent law required in order
for its patents to be valid. There were extensive warnings in the jurisprudence and
literature that promises in the patent had to be met, that utility had to be established at
the filing date, and the basis for mere predictions of utility had to be disclosed in the
patent. 527 Claimant knew ( or should have known) that the legal requirements could
make it difficult to defend the validity of its patent if it were challenged in the future. It
also knew (or should have known) that the legal meaning ofpatentability standards is
constantly being clarified and elaborated through court decisions. In any legal system
( especially in a common law jurisdiction), this can produce an evolution in the law as
broad legal terms are applied in new and different factual contexts over time. Indeed,
Claimant's own annual public report filings contain warning statements that "there is no
assurance that the patents we are seeking will be granted or that the patents we have
been granted would be found valid if challenged." 528
525 Reed Report, para. 33 and Gillen Report, para. 56, both citing PCT Article 3 (R-037).
526 Reed Report, paras 44-45. See WIPO PCT Applicant's Guide, at paras 5.094 to 5.095 ('The
Description'). http://www.wipo.int/pct/en/appguide/text.jsp?page=ip05.html# 5.094 (R-042).With regards
to the content of the description in a PCT application, the Applicant's Guide explicitly warns applicants
that "The details required for the disclosure of the invention so that it can be carried out by a person
skilled in the art depend on the practice of national Offices. It is therefore recommended that due account
be taken of national practice (for instance in Japan and the United States of America) where the
description is drafted. The need to amend the description during the national phase (see para. 5.111 below)
may thus be avoided." ( emphasis added)
527 Dimock Report, paras. 147-152.
528 See for example, Eli Lilly Annual Report, Fiscal Year 1999 (R-303)("Patents, Trademarks and Other
Intellectual Property Rights. Intellectual property protection is, in the aggregate, material to our ability to
successfully commercialize our life sciences innovations. We own, have applied for, or are licensed under,
a substantial number of patents, both in the United States and in other countries, relating to products,
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299. In light of the circumstances of this dispute, the only legitimate expectation
Claimant could have had is that it would receive a fair hearing from the Federal Court in
the case of a challenge to its patents. That is exactly what it got.
V. EXPROPRIATION
A. Summary of Canada's Position on NAFTA Article 1110
300. Claimant alleges that the court decisions determining that its patents were invalid
amounted to an expropriation because "no special rules attach to claims of expropriation
based on judicial measures."529 This assertion drastically oversimplifies the
expropriation analysis. Claimant's position overlooks the unique and essential role
played by domestic courts in declaring entitlements under domestic property law, which
are in fact the starting point of the analysis under the international law of expropriation.
301. The first step in the expropriation analysis is to determine whether there was a
property interest capable of expropriation. NAFTA Article 1110(1) protects investments
against expropriation, and the definition of "investment" under NAFTA encompasses a
range of property interests, including "real estate or other property, tangible or
intangible". While NAFTA protects these categories of property interests, the legal
source of these entitlements is domestic law. Nothing in NAFTA determines whether an
asserted property right actually exists at domestic law, or the nature and scope of such
rights.
302. Therefore, at the outset of the expropriation analysis, it is necessary to look to
domestic law to determine whether there was in fact a property interest capable of
expropriation that is protected by NAFTA Article 1110(1). The body of domestic law
that must be considered includes domestic court rulings on the validity of asserted
product uses, formulations, and manufacturing processes. There is no assurance that the patents we are
seeking will be granted or that the patents we have been granted would be found valid if challenged.
Moreover, patents relating to particular products, uses, formulations, or processes do not preclude other
manufacturers from employing alternative processes or from successfully marketing alternative products
that might successfully compete with our patented products." ) ( emphasis added).
529 Claimant's Memorial, para. 179.
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Annex 384
ANNEX385
IN THE MATTER OF AN ARBITRATION UNDER THE DOMINICAN REPUBLIC - CENTRAL
AMERICA- UNITED STATES FREE TRADE AGREEMENT AND THE 2010 UNCITRAL RULES
OF ARBITRATION
Between:
DAVID R. AVEN, SAMUEL D. AVEN, CAROLYN J. PARK, ERIC A. PARK, JEFFREYS.
SHIOLENO, DAVID A. JANNEY AND ROGER RAGUSO
Claimants
- and -
THE REPUBLIC OF COSTA RICA
Respondent
RESPONDENT'S POST-HEARING BRIEF
Submitted on behalf of the Respondent by:
MINISTERIO DE COMERCIO EXTERIOR DE COSTA RICA
Autopista Prospero Fernandez,
Centro Comercial Plaza Tempo,
Costado Oeste del Hospital Cima, tercer piso, Escazu
San Jose, 10201, Costa Rica
HERBERT SMITH FREEHILLS NEW YORK LLP
450 Lexington Avenue, 14th Floor
New York, NY 10017
USA
March 13, 2017
Annex 385
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY .......................................................................................................... 1
II. INTRODUCTION .................................. ........ ... ..... ........ ... ........ ........ ... ........ ... ........ ........ ... ...... 14
Ill. COSTA RICA'S CHRONOLOGY ............................................................................................ 15
A. Claimants' decision to invest in Costa Rica .................................................................. 16
B. Awareness of the law - advice taken upon acquiring the land and
thereafter ...................................................................................................................... 18
C. Profile of Development - Phases .................................................................................. 22
D. EDSA/NORTON Consulting ......................................................................................... 23
E. The First EV Application Process was not completed .................................................. 27
F. The Burden of Proof in the EV Process ....................................................................... 30
1. The law does not support Claimants' interpretation of Article 109 ................ 30
2. Claimants' witnesses recognize the burden was on Claimants .................... 33
G. Developments in 2005 and 2006 .................................................................................. 36
H. Claimants unlawfully executed the EV application ................................... ........ ............ 38
1. Fragmentation as undertaken by Claimants was unlawful ........................... 38
2. Red flags existed regarding the presence of wetlands ................................. 50
a) Development of the Las Olas Site in 2007: D1 Application
(Condominium Section) ...................................................................... 50
b) The Protti Report ................................................................................ 51
i. Respondent's Interpretation of the Protti Report ...................... 52
c) The Castro de la Torre Report ............................................................ 57
I. Development on the Easements was illegal ................................................................ 58
J. Easements 8 & 9 never received construction permits ................................................ 61
K. The scientific evidence supports the existence or possible existence of
wetlands ....................................................................................................................... 69
L. Costa Rica's expert testimony ...................................................................................... 71
1. KECE ............................................................................................................ 71
2. Green Roots .................................................................................................. 74
3. Critique of Claimants' Experts (re: Wetlands}: ERM, Barboza,
Baillie ............................................................................................................. 77
a) ERM evidence of wetlands identified .................................................. 78
b) ERM Report is woefully lacking in critical analysis and data
and yet the conclusion still shows signs of wetlands .......................... 79
c) ERM failure to opine on the Precautionary Principle .......................... 82
d} ERM confirm development on Easements ......................................... 82
e) Conclusion regarding ERM Report ..................................................... 82
4. Dr Baillie's Report on Soils Confirms Hydric Soils Exist at the Las
Olas Project. .................................................................................................. 83
5. Barboza Report on existence of wetlands at Las Olas ................................. 86
M. Claimants' illegal cutting of trees on the Project Site ................................................... 86
N. Costa Rica's enforcement of its laws: the issuance of the Injunctions ......................... 87
0. Illegal works after Injunctions ....................................................................................... 89
P. Mr Aven fled the country without reasonable justifications ........... ........ ... ..... ... ............ 90
Q. Claimants' Criticisms of Respondent in the Arbitration ................................................ 91
IV. THE LAW APPLICABLE TO THE DISPUTE .......................................................................... 94
A. Chapter 10 of DR-CAFTA is applicable together with other chapters of the
Treaty, and particularly, Chapter 17 ............................................................................. 94
1. A proper interpretation of DR-CAFTA under the VCL T mandates
the Tribunal to balance Chapter 10 with other Chapters of the
Treaty ............................................................................................................ 95
2. Claimants have failed to argue that Chapter 10 of DR-CAFTA
should be applied in isolation ........................................................................ 99
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a) Claimants' narrow interpretation of Article 10.2(1) expressly
contradicts the text of DR-CAFTA .................................................... 100
b) Claimants' reliance on a NAFTA interpretation of Article
10.2(1) is inappropriate in the context of DR-CAFTA ....................... 102
c) Claimants' new documents on the alleged interpretations of
Costa Rica relating to Article 10.2(1) ................................................ 104
B. The Tribunal should apply environmental rules of international law .......................... 104
1. The environmental principles stemming from "rules of
international law" are applicable under Article 10.22 of DRCAFTA
........................................................................................................ 104
a) Environmental principles contained in international
agreements form part of the applicable law ...................................... 105
b) The precautionary principle also stems from customary
international law ................................................................................ 107
C. Costa Rica's environmental domestic law is also relevant to the Tribunal's
adjudication ................................................................................................................ 110
1. Environmental principles stemming from Costa Rican law frame
Claimants' rights and obligations and inform the content of
commitments made by Respondent ........................................................... 110
2. Claimants misconstrue Respondent's argument on domestic law
- a strategy to dismiss applicable environmental rules .............................. 112
3. The content and effect of environmental principles under Costa
Rican law ..................................................................................................... 114
a) The precautionary principle is a key principle in Costa
Rican environmental law ................................................................... 115
b) The preventative principle is the other side of the
precautionary principle which should inform the Tribunal's
decision ............................................................................................. 117
c) The non-regression principle is also an interpretative tool
for environmental laws ...................................................................... 118
D. CONCLUSION ............................................................................................................ 119
V. JURISDICTION OF THE TRIBUNAL TO HEAR THE CLAIMS ............................................ 121
A. Mr Aven is not a protected investor under DR-CAFTA .............................................. 121
B. Mr Shioleno and Mr Raguso do not hold a covered investment under DRCAFT
A ........................................................................................................................ 122
C. The Tribunal has no jurisdiction over the properties that Claimants do not
own ............................................................................................................................. 123
D. The Tribunal has no jurisdiction over the Concession site ......................................... 123
1. Claimants' defences conflate the Tribunal's jurisdiction ratione
materiae over the Concession site with legal standing issues ................... 125
2. Claimants have the burden to prove the legitimate ownership of
their investment ........................................................................................... 129
3. Mr Aven acquired the totality of the shares in La Canfcula in
violation of the ZMT Law ............................................................................. 131
4. The lack of evidence shows that on the Trust Agreement's
termination, Mr Aven held the totality of the shares in La Canfcula
in violation of the ZMT Law ......................................................................... 133
5. The constitutionality of the 51 % rule precludes any defense from
Claimants based on an alleged discrimination against foreigners .............. 136
6. Claimants dodged the proper procedure to acquire interests in La
Canfcula ...................................................................................................... 138
7. Conclusion .................................................................................................. 139
VI. ADMISSIBILITY OF THE CLAIMS ....................................................................................... 140
A. Claimants' unlawful and illegal conduct in the operation of their alleged
investment render their claims inadmissible .............................................................. 140
1. International law does not uphold the protection of illegal claims ............... 140
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2. Claimants' arguments have failed to camouflage the
incontestable illegalities in relation to their investment.. ............................. 142
a) Respondent's "innovative jurisdictional theory" ................................ 143
b) Claimants' allegation that an admissibility defense is not
embedded in the text of DR-CAFTA ................................................. 143
c) Claimants' misunderstanding of "compliance with local
laws" .................................................................................................. 144
3. Respondent is not estopped from raising Claimants' illegalities ................. 145
B. Claimants have not put forward a claim for full protection and security and
the Tribunal must dismiss any attempt to do so ......................................................... 147
VII. CLAIMANTS HAVE BROUGHT CLAIMS NOT SUPPORTED UNDER ARTICLE
10.5 OF THE TREATY ......................................................................................................... 150
A. The standards of protection that Respondent allegedly breached are not
provided in Article 10.5 DR-CAFT A ............................................................................ 150
1. Legitimate expectations are not encompassed under the fair and
equitable treatment standard of protection ................................................. 153
2. The prohibition against arbitrariness and abuse of authority ...................... 154
3. Due process is not an independent standard according to DRCAFTA
........................................................................................................ 155
4. Conclusion .................................................................................................. 156
B. Claimants' efforts to extend the protection contained in Article 10.5 DRCAFT
A are fruitless .................................................................................................... 156
VIII. ALTERNATIVELY, COSTA RICA COMPLIED AT ALL TIMES WITH ARTICLE
10.5 ....................................................................................................................................... 160
A. Claimants have failed to assert a claim that Respondent frustrated their
legitimate expectations ............................................................................................... 160
1. Claimants have not met the elements of a legitimate expectations
claim under international law ...................................................................... 160
a) Claimants admit that their legitimate expectations were that
Costa Rica would enforce its environmental laws ............................ 161
b) Claimants' alleged expectations have to be assessed at
the time the investment was made ................................................... 161
c) Claimants' based their alleged expectations on an
improper subjective analysis ............................................................. 164
d) The granting of EVs or construction permits does not
provide a basis for Claimants' frustration of legitimate
expectations claim ............................................................................ 165
e) Claimants have failed to show that their reliance on EVs
and construction permits to defeat environmental
protection was "legitimate" ................................................................ 166
f) Claimants' ignorance of the law is not an excuse for a
claim on legitimate expectations to proceed ..................................... 167
2. Costa Rica enforced its environmental law in a manner consistent
with DR-CAFTA ........................................................................................... 171
a) What Claimants should have known when they decided to
invest in Costa Rica .......................................................................... 172
b) The injunctions did not have to follow the 15-day term .................... 172
c) Respondent's conduct was in keeping with good faith
principles under Costa Rican law ..................................................... 174
d} To date, Claimants still have options available to them ................... 177
e) Claimants' new arguments on administrative law violations
do not stand up under Costa Rican law ............................................ 181
B. Claimants have failed to assert a claim of denial of justice ........................................ 182
1. Claimants' disguised denial of justice claim brought under Article
10.5 must fail ............................................................................................... 182
2. Claimants were afforded due process at all times ...................................... 183
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a) The Las Olas Project has not been shut down without a
final administrative decision .............................................................. 183
b) Ms Dfaz and Ms Vargas did not act in an "utterly nontransparent
manner" ......................................................................... 184
c) Costa Rican agencies did not ignore prior agency
determinations .................................................................................. 185
d} Mr Briceiio's recommendations to the Municipal Council
show no violations of due process .................................................... 187
i. Mr Briceiio's recommendations to the Municipal
Council have no bearing on Costa Rica's
responsibility under DR-CAFTA ............................................. 187
ii. Claimants' position on Mr Briceiio's
recommendations ................................................................... 189
iii. Conclusion .............................................................................. 193
3. Mr Martfnez did not conduct himself arbitrarily ........................................... 193
a) The Tribunal cannot rely on Mr Morera's erroneous
understanding of Costa Rican criminal law ...................................... 195
b) Mr Bucelato's alleged "personal vendetta" and lack of
technical qualifications ...................................................................... 198
c) Mr Martfnez had enough elements to show Mr Aven's
intent ................................................................................................. 199
d) Mr Martfnez charged Mr Aven under the correct law ....................... 200
e) Mr Martfnez did not ignore contradictory reports, rather he
balanced the evidence available to proceed with the
bringing of criminal charges .............................................................. 202
i. The INTA Report .................................................................... 202
ii. The July 2010 SINAC Report ................................................. 204
f) Mr Martfnez conducted an appropriate investigation into
the Forged Document's authorship and use ..................................... 206
g) Mr Martfnez did investigate the Municipality's works offsite
of the Las Olas Project Site .............................................................. 207
h) Mr Martfnez's refusal to extend the trial was legitimate .................... 208
i) Mr Martfnez did not "ignore" the Public Prosecutor's Office
guidelines when conducting his investigation ................................... 209
j) Mr Martfnez acted reasonably when he requested an
international arrest warrant against Mr Aven .................................... 211
k) Claimants had plenty of administrative and judicial
remedies to pursue any grievances .................................................. 212
I} Criminal proceedings are ongoing and Claimants enjoy
different avenues to which they have not yet resorted ..................... 212
m) Conclusion ........................................................................................ 213
C. Respondent did not engage in abuse of rights or abuse of authority against
Claimants .................................................................................................................... 213
1. Claimants' bribery allegations have not been proven and
therefore cannot support Claimants' abuse of rights claim ......................... 214
2. Costa Rica's request for an INTERPOL Red Notice did not entail
an abuse of rights ....................................................................................... 215
IX. COSTA RICA DID NOT EXPROPRIATE ANY OF CLAIMANTS' ALLEGED
INVESTMENT ....................................................................................................................... 217
A. What is Claimants' investment under Article 10.28 of DR-CAFTA ............................ 217
1. Claimants' alleged investment comprises the raw land which they
still own to date ........................................................................................... 218
2. Claimants' EVs and construction permits are not covered
investments capable of being subject to indirect expropriation .................. 218
B. Respondent's conduct falls within the exception established in paragraph
4(b)ofAnnex 10-C ..................................................................................................... 221
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C. Alternatively, the Tribunal would have to apply paragraph 4(a) of Annex 1 OC
................................................................................................................................. 223
1. Respondent has not permanently deprived Claimants of their
alleged investment's value or control .......................................................... 223
2. Respondent's actions did not interfere with any "reasonable
investment-backed expectations" ............................................................... 225
3. Respondent's actions ought to be characterized as bona fide
exercise of police powers which do not support a claim for
indirect expropriation under the Treaty ....................................................... 225
D. For compensation purposes, the Tribunal should consider whether an
expropriatory measure was unlawful .......................................................................... 226
E. Conclusion .................................................................................................................. 226
X. DAMAGES ............................................................................................................................ 228
A. The quantification of Claimants' damages should be based on a costapproach
method ........................................................................................................ 230
1. Dr Hart's cost approach is the appropriate method for the
valuation of the Las Olas Project ................................................................ 230
2. Dr Abdala's "hybrid approach" is completely flawed ................................... 232
a) Dr Abdala's approach is entirely speculative .................................... 232
b) Dr Abdala omitted crucial information in his calculation of
damages ........................................................................................... 236
B. Mr Aven is not entitled to moral damages .................................................................. 240
XI. COUNTERCLAIM: CLAIMANTS ARE LIABLE FOR ENVIRONMENTAL
DAMAGE AND THEREFORE, MUST RESTORE THE LAS OLAS ECOSYSTEM ............. 241
A. The Tribunal has jurisdiction over counterclaims under DR-CAFTA ......................... 241
1. The text of the DR-CAFTA envisages the possibility for
respondent states to bring counterclaims against investors ....................... 241
2. Reasons of procedural economy and efficiency justify that the
claim and its counterclaim shall be resolved in the same
proceeding .................................................................................................. 242
B. Respondent has proven the existence of damages to the Ecosystems on
the Project Site ........................................................................................................... 243
1. Claimants unlawfully impacted a wetland, which caused
environmental damage to the Project Site .................................................. 244
2. Claimants ought to repair the damage caused to the ecosystem ............... 248
XII. PRAYER OF RELIEF ........................................................................................................... 251
ANNEX l .......................................................................................................................................... 253
ANNEX ll ......................................................................................................................................... 259
ANNEX lll ........................................................................................................................................ 265
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VII. CLAIMANTS HAVE BROUGHT CLAIMS NOT SUPPORTED UNDER ARTICLE 10.5 OF
THE TREATY
A. The standards of protection that Respondent allegedly breached are not
provided in Article 10.5 DR-CAFTA
727. During these proceedings, Claimants have asserted various claims under "customary
international law doctrines recalled in DR-CAFTA Article 10.5. ,.434 In particular, they allege
that Respondent's conduct entails: (i) a breach to provide protection and security; (ii) a
frustration of their legitimate expectations under the standard of fair and equitable
treatment; (iii) a breach of due process; (iv) what they now call abuse of authority, bad faith;
and (v) abuse de droit, arbitrariness. 435
728. Regarding Claimants' allegation that Respondent has violated the standard of providing
protection and security to the investors, Respondent has already explained that because
the breach was never raised as a claim in the Request for Arbitration, the Tribunal must
dismiss such claim as inadmissible. 436
729. In relation to the remaining claims raised under Article 10.5 of DR-CAFTA, Claimants have
failed to demonstrate that they involve a breach of a standard encompassed in the Treaty.
Therefore, none of Claimants' claims allegedly brought under Article 10.5 DR-CAFTA is
supported by the protections afforded by the Treaty.
730. Article 10.5 provides:
"Article 10.5: Minimum Standard of Treatment
1. Each Party shall accord to covered investments treatment in
accordance with customary international law, including fair and
equitable treatment and full protection and security.
2. For greater certainty, paragraph 1 prescribes the customary international
law minimum standard of treatment of aliens as the minimum standard
of treatment to be afforded to covered investments. The concepts of
"fair and equitable treatment" and "full protection and security" do not
require treatment in addition to or beyond that which is required by that
standard, and do not create additional substantive rights. The obligation
in paragraph 1 to provide:
(a) "fair and equitable treatment" includes the obligation not to deny justice in
criminal, civil, or administrative adjudicatory proceedings in accordance with
the principle of due process embodied in the principal legal systems of the
world; and
(b) "full protection and security'' requires each Party to provide the level of
police protection required under customary international law.
434 Claimants' Closing Statement Demonstrative, Day 6, slide 4.
435 Claimants' Closing Statement Demonstrative, Day 6, slide 4.
436 See, Section VI.B.
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3. A determination that there has been a breach of another provision of this
Agreement, or of a separate international agreement, does not establish that
there has been a breach of this Article." (emphasis added)
731. A careful analysis of the text shows that neither the concept of legitimate expectations,
arbitrariness, due process nor abuse of authority are standards of protection that DRCAFTA
Parties envisaged to be part of the Treaty.
732. In this regard, the United States of America in its submission as a non-disputing Party
-filed immediately before the commencement of the Hearing- has shed light on the extent
of the protection that DR-CAFT A Parties intended to provide to investors pursuant to Article
10.5.
733. Article 10.5(1) requires that each Party "accord to covered investment treatment in
accordance with customary international law, including fair and equitable treatment and full
protection and security." In order to avoid any misunderstanding, DR-CAFTA Parties
included a clarification in the second paragraph of Article 10.5 on the meaning of "treatment
in accordance with customary international law." In this regard, the Parties expressly
agreed that that is "the minimum standard of treatment to be afforded to covered
investments." In addition, they agreed that the concepts of "fair and equitable treatment"
and "full protection and security" do not imply treatment in addition to or beyond that
which is required by the standard, and most importantly, they do not create additional
substantive rights.
734. Investment tribunals have extensively discussed the minimum standard of treatment with
the aim of determining which its threshold is. The United States has clearly pointed out
that tribunals interpreted "minimum" as "[a] floor below which treatment of foreign investors
must not fall. ,A37 Arbitral decisions support this conclusion. In effect, in Glamis Gold v
United States, the tribunal concluded that:
"The customary international minimum standard of treatment is just that, a
minimum standard. It meant to serve a floor, an absolute bottom, below which
conduct is not accepted by the international community."438
735. The "floor" below which treatment of foreign investors must not fall has to be analyzed in
light of customary international law, as required by Article 10.5 of DR-CAFT A. Therefore, it
is relevant to determine what is the content of customary international law in the protection
of a minimum standard. As explained in Respondent's Opening Statement:
"Customary international law is not a redundant term. It forms the backbone
of Chapter 10 for a very specific reason."439
437 United States of America submission as a non-disputing party, Attachment, Submission of the United
States of America in Spence International Investments LLC, Berkowitz et al v The Republic of Costa
Rica, ICSID Case No UNCT/13/2, para.12.
438 RLA-38, Glamis Gold Ltd v United States of America, NAFTA/UNCITRAL, Award, June 8, 2009,
para.615.
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Annex 385
"Customary international law holds this Tribunal to judge Costa Rica bJ
reference to a very limited and minimum standard of treatment." 4
(emphasis added)
736. The United States made it clear that only few areas have been sufficiently crystallized as to
be considered a minimum standard of treatment. 441 DR-CAFTA Parties seemed to have
identified those areas because they have expressly included the obligation to provide "fair
and equitable treatment" (Article 10.5.2(a)) on the one hand, and "full protection and
security" (Article 10.5.2(b)) on the other. The former includes the obligation, as provided in
the text of the Treaty, not to deny justice.
737. Furthermore, DR-CAFTA Parties included in Annex 10-B an understanding of what they
consider customary international law rules covered by Article 10.5 of the Treaty, requiring
general and consistent practice of States and opinion iuris; i.e. practice that they follow
from a sense of legal obligation. Thus, "the annex provides important guidance for
assessing whether an alleged norm has been sufficiently demonstrated to be an element of
customary international law". 442
738. In this sense, the Tribunal must analyze whether the claims alleged by Claimants can be
deemed part of the customary international law minimum standard of treatment, and
therefore, be considered within Article 10.5 DR-CAFTA. We would urge the Tribunal not to
lose sight of this restrictive standard, which is expressly linked to the standard of customary
international law. 443
739. Even if it was Claimants burden to prove the existence of a rule of customary international
law, 444 Claimants have failed to do so. Respondent's position is that there is not a
customary rule of international law which proves that the standards of protection that
Claimants have raised (legitimate expectations, arbitrariness, due process and abuse of
authority) have the status of a rule of customary international law. Consequently,
Respondent's international responsibility cannot arise simply because it has not assumed
those alleged obligations under the commitments imposed by DR-CAFTA.
740. Respondent will now address each of Claimants' unsupported claims allegedly covered by
the scope of Article 10.5.
439 Respondent's Opening Statement, Day 1 Transcript, 166:11-13.
440 Respondent's Opening Statement, Day 1 Transcript, 163:1-3.
441 United States of America submission as a non-disputing party, Attachment, Submission of the United
States of America in Spence International Investments LLC, Berkowitz et al v The Republic of Costa
Rica, ICSID Case No UNCT/13/2, para.13.
442 Id., para.15.
443 Respondent's Opening Statement, Day 1 Transcript, 294:12-16.
444 RLA-38, Glamis Gold Ltd v United States of America, NAFTA/UNCITRAL, Award, June 8, 2009, paras.
601-602.
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1. Legitimate expectations are not encompassed under the fair and equitable
treatment standard of protection
7 41. Legitimate expectations cannot be considered under the umbrella of FET protection, taking
into account the ordinary meaning of FET:
"The assertion that fair and equitable treatment includes an obligation to
satisfy or not to frustrate the legitimate expectations of the investor at the time
of his/her investment does not correspond, in any language, to the ordinary
meaning to be given to the terms "fair and equitable ... " Therefore, prima facie,
such a conception of fair and equitable treatment is at odds with the rule of
interpretation of international customary law expressed in Article 31.1 of the
Vienna Convention on the Law of Treaties (VCL T) [ ... ]."445
742. Furthermore, as the United States points out, "legitimate expectations" are not a
component element of "fair and equitable treatment" under customary international law that
give rise to an independent state obligation:
"[ ... ] an investor may develop its own expectations about the legal regime
governing its investments, but those expectations impose no obligations on
the State under the minimum standard of treatment. The United States is
aware of no general and consistent State practice and opinion iuris
establishing an obligation under the minimum standard of treatment not to
frustrate investor's expectations; instead, something more is required than
mere interference with those expectations."446
743. This powerful statement not only forms part of the United States' view on the test that the
Tribunal should follow, but this view is also shared by other DR-CAFT A Parties. For
instance, in ROG v Guatemala, El Salvador appeared as a non-disputing Party and pointed
out that:
"[ ... ] the requirement to provide 'Fair and Equitable Treatment' under CAFT A
Article 10.5 does not include obligations of transparency, reasonableness,
refraining from mere arbitrariness, or not frustrating investor's legitimate
expectations."447
744. The same understanding was followed by The Republic of Honduras:
"However, because the focus should be on the conduct of the State, the
Republic of Honduras does not consider it valid or necessary to refer to
investor's expectations in order to decide whether there has been a violation
of the minimum standard of treatment."448
745. The Dominican Republic also held that:
445 RLA-172, Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine
Republic, ICSID Case No. ARB/03/19, Separate Opinion of Arbitrator Pedro Nikken, para. 3.
446 Id., p. 18.
447 RLA-164, Railroad Development Corporation v. Republic of Guatemala, ICSID Case No ARB/07/23,
Submission of El Salvador as a Non-Disputing Party, January 1, 2012, para. 7. This opinion was also
reiterated in RLA-165, Teco Guatemala Holdings LLC v. Republic of Guatemala, ICSID Case No
ARB/12/23, Submission of El Salvador as a Non-Disputing Party, October 5, 2012, para. 16.
448 RLA-166, Railroad Development Corporation v. Republic of Guatemala, ICSID Case No ARB/07/23,
Submission of the Republic of Honduras as a Non-Disputing Party, January 1, 2012, para. 10. This
opinion was also reiterated in RLA-170, Teco Guatemala Holdings LLC v Republic of Guatemala, ICSID
Case No ARB/12/23, Submission of the Republic of Honduras as a Non-Disputing Party October 5,
2012, para. 10.
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Annex 385
"Given that the focus should be on the practice and conduct of the State, the
Dominican Republic also notes that it is wrong to include the investor's
expectations of the treatment they expect to receive based on what has been
offered, in deciding whether the State has complied with the minimum
standard of treatment."449
746. Therefore, it cannot be denied that among DR-CAFTA Parties, the understanding is that
"legitimate expectations" cannot be considered part of the minimum standard of treatment,
and then, the Tribunal should not consider it as a standard provided in Article 10.5 DRCAFT
A. As it has been held:
"[i]t is not the function of an arbitral tribunal established under NAFTA to
legislate a new standard which is not reflected in the existing rules of
customary international law."450
747. In sum, since the minimum standard of treatment provided under customary international
law does not encompass the legitimate expectations, there is no support for a claim of
violation of legitimate expectations under Article 10.5 of DR-CAFTA.
2. The prohibition against arbitrariness and abuse of authority
748. As stated in Respondent's Rejoinder Memorial, DR-CAFTA does not contain any express
provision on prohibition of arbitrary measures or abuse of authority. 451 In effect, this has
been recognized by Claimants in footnote 329 of their Memorial. 452 Thus, the analysis that
the Tribunal must follow is whether the minimum standard of customary international law
prohibits arbitrary measures and abuse of authority.
749. The analysis should then start in the context of the minimum standard of treatment. Arbitral
tribunals have considered that the minimum standard of treatment was breached when
they found an egregious and shocking conduct on the part of the State:
"[l]t must be borne in mind that the fact that an act of a public authority may
have been unlawful in municipal law does not necessarily mean that that act
was unlawful in international law, as a breach of treaty or otherwise [ ... ] To
identify arbitrariness with mere unlawfulness would be to deprive it of any
useful meaning in its own right. Nor does it follow that an act was unjustified,
or unreasonable, or arbitrary that, that act is necessarily to be classed as
arbitrary in international law, though the qualification given to the impugned
act by a municipal authority may be a valuable indication."453
"Arbitrariness is not so much something opposed to a rule of law, as
something opposed to the rule of law ... It is a wilful disregard of due process
449 RLA-171, Teco Guatemala Holdings LLC v Republic of Guatemala, ICSID Case No ARB/12/23,
Submission of the Dominican Republic as a Non-Disputing Party October 5, 2012, para. 10.
450 RLA-167, Mobile Investments Canada Inc & Murphy Oil Corp v Canada, NAFTA/ICSID Case No
ARB(AF)/07/4, Decision on Liability and Principles of Quantum, May 22, 2012, para. 153.
451 Respondent's Rejoinder Memorial, paras. 925-933.
452 Claimants' Memorial, para. 307 and fn. 329.
453 RLA-42, Elettronica Sicula SP.A. (ELSI) (United States of America v. Italy), International Court of Justice
(1.C.J.), July 20, 1989, para. 124
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of law, an act which shocks, or at least surprises, a sense of judicial
property."454
750. Therefore, in the absence of egregious and shocking conduct that can be deemed part of
the minimum standard of treatment that host States must apply to foreign investments,
Claimants' case must fail. As it will be demonstrated below, 455 the conduct that Claimants
purport as arbitrary and allegedly entailing an abuse of authority does not meet the
standard to constitute a breach of the minimum standard of treatment. Consequently, the
prohibition of arbitrariness and abuse of authority are not within the minimum standard of
treatment and therefore, they are not standards of protection envisaged in DR-CAFT A.
3. Due process is not an independent standard according to DR-CAFTA
751. DR-CAFTA frames the obligation of due process alongside the promise not to deny justice.
In accordance with international law, no claim for denial of justice can be levelled in the
absence of domestic proceedings having been exhausted, or proven to have been futile.
Therefore, and in light of the plain text of the Treaty, due process is not an independent
obligation of the host State, and therefore, is not a standard of protection provided in DRCAFT
A, unless the lack of due process could be considered a denial of justice.
752. Article 10.5.2 (a) of DR-CAFTA expressly includes the obligation not to deny justice in
criminal, civil, or administrative adjudicatory proceedings as part of the "fair and equitable
treatment" that the host State has committed to comply with. In particular, the Treaty
provides that:
"'fair and equitable treatment' includes the obligation not to deny justice in
criminal, civil, or administrative adjudicatory proceedings in accordance with
the principle of due process embodied in the principal legal systems of the
world."
753. Following Article 31 of the VCL T -certainly encouraged by Claimants- an interpretation
based on the plain text of the treaty indicates that the obligation not to deny justice is just
an element of FET and any breach of this obligation is to be analysed in accordance with
the principle of due process. Thus, the provision envisages that due process is not a
standard per se under Article 10.5.2(a) but a factor that the adjudicator must take into
account when analysing a denial of justice claim. 456
754. As stated in Respondent's Opening Statement:
"It should not trouble any members of the Tribunal for too long to immediately
discern that the drafters of DR CAFTA had a very specific objective when
considering the scope and application of FET. Consistent with the restrictive
interpretation of FET is the minimum standard of treatment; FET is focused on
the denial the justice. But more than this, the denial of justice and the principle
of due process are explicitly and inextricably connected. Therefore, the
454 Id., para. 128.
455 See, Sections VIII.B.3 and VIII.C.
456 Respondent's Rejoinder Memorial, para.874. See also paras.870-878.
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standard of due process is a reference point when determining a denial of
justice. It is not an independent standard."457
755. Although due process can be considered as one of the basic principles governing the
administration of justice, it cannot be considered itself a source of obligation in light of the
plain text of the Treaty.
756. Furthermore, as in the case of prohibition of arbitrariness and abuse of authority, due
process can only be considered included in the minimum standard of treatment when the
conduct that allegedly breaches such standard can be deemed as egregious and
shocking under the "ELSI test."
757. As it will be demonstrated below, 458 the actions that Claimants purport as violations of due
process do not meet the standard to constitute a breach of the minimum standard of
treatment. Thus, due process is not within the minimum standard of treatment and
therefore, it could not be considered a standard of protection envisaged in DR-CAFT A.
4. Conclusion
758. In sum, an analysis of the plain text of Article 10.5 evinces that neither the concept of
legitimate expectations, arbitrariness, due process nor abuse of authority are standards of
protection that DR-CAFTA Parties envisioned to be part of the Treaty. In addition,
customary international law minimum standard of treatment has proven not to be of any
assistance for Claimants to incorporate those claims.
759. In addition, no rule of customary international law allows Claimants' inclusion of the
protection of investment-backed legitimate expectations as an obligation under the
minimum standard of treatment.
760. Finally, the minimum standard of treatment imposes a high threshold to allege that
arbitrariness, due process and abuse of authority are protected under such standard and
capable of serving as a basis for international liability of Costa Rica under the Treaty. In
any case, Claimants have not shown any egregious or shocking conduct on the part of
Costa Rican agencies that could lead the Tribunal to find a violation of the minimum
standard of treatment.
B. Claimants' efforts to extend the protection contained in Article 10.5 DRCAFT
A are fruitless
761. In its Closing Statement, Claimants addressed the extent of the protection contained in
Article 10.5 of DR-CAFTA. In particular, Claimants consider that the standards of
protection they have alleged in the present case are within the text of Article 10.5 or
457 Respondent's Opening Statement, Day 1 Transcript, 295:13-22; 296:1-2.
458 See, Section VIII.B.2.
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Volume VI - Annexes 370-385