Volume VIII - Annexes 403-428 | INTERNATIONAL COURT OF JUSTICE

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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 VIII
Annexes 403 through 428

ANNEX403

THE
AMERICAN JOURNAL
OF
INTERNATIONAL LAW
VOLUME 24
1930
PUBLISHED BY
THE .AMERICAN SOCIETY OF INTERNATIONAL LA w
PcraLICATION OFF.ICE:
THE RilldFORD PRESS
CoNcoBD, N. ll.
EDITORIAL AND EXECUTIVE OFFICE:
700 JACKSON PLACE
w ASHINGTON, D. C.
Cop)'Jlsht. 1930, by the American Society or Intcmatlonal Law
Annex 404
BOARD OF EDITORS OF THE AMERICAN JOURNAL OF
INTERNATIONAL LAW
CHANDLER P. ANDERSON, New York, N. Y.
EDWIN M. BORCHARD, Yale Law School.
PHILIP MARSHALL BROWN, Princeton University.
EDWIN D. DICKINSON, University of Michigan Law School.
CHARLES G. FENWICK, Bryn Mawr College.
JAMES W. GARNER, University of Illinois.
MANLEY 0. HunsoN, Harvard Law School.
CHARLES CHENEY HYDE, Columbia University.
PHILIP C. JESSUP, Columbia University.
ARTHUR K. KUHN, New York, N. Y.
PITMAN B. POTTER, University of Wisconsin.
JESSE S. REEVES, University of Michigan.
ELLERY C. STOWELL, American University.
LESTER H. WooLSEY, Washington, D. C.
QumcY WRIGHT, University of Chicago.
Honorary Editor-in-Ohief
JAMES BROWN ScoTr, Washington, D. C.
Editor-in-Okie/
GEORGE GRAFTON WILSON, Harvard University.
Managing Editor
GEORGE A. FINcH, 700 Jackson Place, Washington, D. C.
THE AHEmoAN JoUBNAL OF INTERNATIONAL L.A.w iB supplied to all members of the
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The annual subscription to non-members of the Society is five dollars per annum (plus
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Single copies of the JOURNAL will be supplied by the Society at $1.50 per copy.
Applications for membership in the Society, correspondence with reference to the Joun~
NAL, and books for review should be sent to GEORGE A. FINCH, Secretary and Managing
Editor, 700 Jackson Place, Washington, D. C.
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE
CODIFICATION CONFERENCE
By EDWIN M. BORCHARD
Professor of Law, Yale University
Among the three subjects which the Committee of Experts for the Progressive
Codification of International Law considered ripe for codification
was the subject of "Responsibility of States for Damage Caused in Their
Territory to the Person or Property of Foreigners." Acting on that assumption,
the Committee sent out to the Governments at least three separate
documents between 1925 and 1929: first, a Report of its Sub-committee,
consisting of Messrs. Guerrero of Saivador, and Wang Chung Hui of China;1
second, a Schedule of Points drawn up by the so-called Preparatory Committee
of Experts, a smaller body, and designed to elicit replies from the different
governments, presenting their views on different aspects of the general
subject; and finally, the Bases of Discussion,2 consisting of the replies to the
Schedule of Points made by some thirty governments, the substance of
these replies being then crystallized into propositions called Bases of Discussion,
on which The Hague Conference of the governments, called for March
13, 1930, was to conduct its deliberations. Perhaps that Conference was
handicapped from the start by the fact that the Guerrero report, which had
been circulated, departed materially, in some of its fundamental postulates
and premises (representing minority views) from the subsequent Bases of
Discussion, which reflected the views of the majority of the replying governments.
Of the Latin-American nations, Chile was practically the only
country to respond to the Schedule of Points on the Responsibility of States,
and then only within the narrowest limits.
'With this preparation, the Commission appointed at The Hague to deal
with the Responsibility of States held sixteen meetings between March 17
and April 11, when it confessed its inability to arrive at a convention. Some
42 states, were represented in the Commission, of which eight only were
Latin-American, namely, Brazil, Chile, Uruguay, Colombia, Cuba, Nicaragua.,
:Mexico, and Salvador. Besides the full meetings of the Commission,
three sub-committees and a drafting committee functioned throughout the
sessions. Although no final convention was concluded, the Commission
did vote a tentative and partial list of ten articles, which commanded
the support of majorities, some of them preponderant. But inasmuch as
1 Printed in Special Supplement to this JOURNAL, Vol. XX (1926), pp. 177-203; see edi-_
torial comment on the report in this JOURNAL, Vol. XX (1926), pp. 738-747.
2 League of NatioDB, C. 75. M. 69. 1929. V, 253 pp., double folio pages (French and English),
with a 811pplement containing late replies from the United States a.nd Canada.
517
Annex 404
518 THE AMERICAN JOURNAL OF INTERNATIONAL LA. W
the article predicating state responsibility upon lack of due diligence in preventing
or punishing the acts of private individuals, one of the most well-established
rules of international law, commanded a majority only of twenty-one
to seventeen-for reasons to be mentioned hereafter-it became evident that
on second reading the required two-thirds vote would be unobtainable ..
Whereupon, the minority of seventeen, as a condition of its support for a
convention, submitted proposals for the amendment of some of the articles
already agreed upon-proposals which the majority found itself unable to·
accept. Efforts at negotiation to bridge the differences proving fruitless,
it was ultimately decided not to conclude a convention or even to submit a
report which would do more than record the inability to reach an agreement ..
Notwithstanding this apparent failure, the articles tentatively agreed upon
and the debates in support may exert some influence, for good or ill, upon the
further development of international law, for the evidence afforded by the
deliberations, under the somewhat liberal privilege of citing authority which
international legal procedure admits, may be adduced, as occasion permits or
requires, in support of particular legal views by interested governments,
counsel, or tribunals. For that reason, interest attaches to the articles arrived
at, to their evolution in the Commission and in the subcommittees, and
to the views advanced and expounded by the several delegations in the course
of the proceedings.
At the first session of the Commission on Responsibility of States, Prof essor
Basdevant of France was elected Chairman; His Excellency A. Diaz de
Villar, Cuban Minister at The Hague, Vice-Chairman; and Professor de
Visscher of Belgium, Reporter. The Chairman proposed the appointment
by the Commission of a drafting committee to act with the Reporter, consisting
of His Excellency G. de Vianna Kelsch (Brazil), Professor Cavaglieri
(Italy), and Mr. Borchard (United States). Three sub-committees, to
which particular problems were assigned, were also appointed. With this
organization, the Commission proceeded to the consideration of the articles
of a convention.
The French Government on the opening day moved the adoption of a.
proposition, independently of any Basis of Discussion, which was designed
to lay the legal foundation for international responsibility. This proposal,
adopted unanimously, became Article 1 of the tentative convention, and as
revised read as follows:
International responsibility is incurred by a state if there is any failure
on the part of its organs to carry out the international obligations of the
state which causes damage to the person or property of a foreigner on
the territory of the state.
This proposal was supported by the argument that it carries out the theory
of Articles 1382 and 1384 of the French Civil Code to the effect that a person
is responsible for the damages that by fault he or his employees cause to
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 519
another.3 It was believed that this article would incorporate in international
law the theory of fault as the basia of responsibility, as distinct from
the theory of risk. A certain amount of discussion took place in the Confere
nee on the theoretical basis of responsibility-a question which it was ultimately
decided to leave unsolved except as embodied in the French proposal.
In the first place, it is doubtful whether the article is as clear as might be
supposed, either as a question of theory or practice. The first question that
arises is, Who are the "organs" of the state whose function it is to carry out
the state's international obligations? The term "organs," in speaking of
state agents, was given modern currency by Otto Gierke, the celebrated
German jurist. It was his view, derived from the "real theory" of the corporation,
that the corporation and its officers were one, like the hand or
mouth is to man. 4 But it has been denied that the supposed rule of liability
for the acts of organs represents liability for one's own acts (Art. 1382), but
that it represents rather vicarious liability for the acts of another (Art.
1384); whereas some schools of thought have considered only the higher
authorities as embraced within the category of "organs" (Art. 1382), minor
officials being deemed preposes or employees (Art. 1384). Also, "organs"
for municipal and for international obligations may well be different. The
French proposal did not solve these theoretical doubts.
Moreover, the word "failure" may not imply fault at all. Failure through
inability or constitutional lack of authority to perform a duty, e.g., a federal
inability to try mob violence crimes, would equally impose international
liability. Indeed, should we question the validity of the identification theory
of Gierke and consider an officer an employee of the state, it seems rather
that the basis of the state's responsibility is risk, that is, the state must assume
the risk of the officer's inefficient conduct in injuring others, leaving
aside for the moment the vital distinctions between municipal liability and
international liability. It seems rather futile to enter into a long theoretical
discussion on the particular basis of responsibility, whether for fault or for
risk, because international tribunals and Foreign Offices do not concern
themselves with such theories in dealing with international claims. A developing
jurisprudence, moreover, as municipal experience has shown,
necessarily departs from the theory of fault, which constitutes a subjective
3 Article 13S4 covers the principal's responsibility for the wrongful act~ of various types of
agents, e.g., parents for children, masters for servants, schoolmasters (now the state) for
pupils, artisans for apprentices, etc. But an amendment of 1899 gives parents, artisans, and
schoolmasters an opportunity to escape liability by proving that they could not prevent the
wrongful act. Section 831 of the German Civil Code also limits the principal's liability by
enabling him to disprove any implication of fault on his pa.rt. On private law theories of
governmental responsibility in tort, see Borchard, Theories of Governmental Responsibility
in Tort, 28 Columbia Law Review (1928) 577, 597 et seq., 607, note 82.
' Gierke, Genossenschaf~tM()rie (1887), 743, 750 et seq.; Hafter, Die Delikts- und Strajf iili,.
igke-if. der Personent'erbtinde (Berlin, 1903), 25 et seq.; Michoud, "De la responsabiliU de
l'Etat a raison des faufes de ses agents," 3 Rev. de Droit Pub. (1895) 401.
Annex 404
520 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
factor in liability. Practical administrators of the law must look to the results
of human action; and all tribunals, municipal and international, have
been led gradually to enlarge upon the theory of subjective fault by holding
a principal liable for the results of acts or omissions of agents or employees
without inquiring into the state of mind actuating the individual who caused
the damage. This has been the experience of the common law, the experience
of the French Council of State in dealing with the municipal responsibility of
the French Government for the acts or omissions of its officials, 6 and it will
doubtless be the experience in ever greater degree of international tribunals.0
Some consideration was given by the drafting committee and others to the
question whether the word "responsibility" was an accurate translation of
the French responsabilite. Several delegates preferred "liability," because
the English word "responsible" or "responsibility," even in this narrow connection,
is used in English in several senses, e.g., accountable, answerable,
and liable, and in the proposed convention frequently has all three senses.
Inasmuch as it is a direct derivative from the Latin respondere, to respond (in
satisfaction or reparation), or to make answer-a procedural as well as sub4
stantive institution-it was thought by some that the Reporter might, in his
eventual report, mention the fact that the word "responsibility" was used
for convenience only and was to be understood in the sense of liability for the
breach of an international obligation to be discharged by international
reparation in damages or othexwise.
Article 2 of the tentative convention, as redrafted, read as follows:
The expression "international obligations" in the present convention
means obligations resulting from treaty, as well as those based
upon custom or the general principles of law, which are designed to assure
to foreigners in respect of their persons and property a treatment in
conformity with the rules accepted by the community of nations.
It may be of interest to state the reason why such an article found its way
into the convention. It arose at the demand of the delegate from Salvador,
Dr. Guerrero, and the delegate from Rumania, Professor Sipsom, in connection
with Basis of Discussion No. 2, which read as follows:
A state is responsible for damage suffered by a foreigner as the result
either of the enactment of legislation incompatible with its international
obligations, resulting from treaty or otherwise, or a failure to enact the
legislation necessary for carrying out those obligations.
Doctor Guerrero stated that, unless he knew what the international obligations
were to which he was expected to subscribe, he could not sign the convention
on behalf of his Government. He considered it necessary, therefore,
5 28 Columbia. Law Review (1928) 734, 748 el seq.
6 For further elaboration or these ideas, see Borchard, "Theoretical aspects or the international
responsibility of states" in Bruns' Zeitachriftfur au.slandwches ojfenlliches Recht und
Volkerrecht (1929), 223, 224 et seq.
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 521
to have a definition of international obligations and, in fact, proposed a
definition by sources, reading:
International obligations are those arising from treaty or from established
custom recognized as law by all states.
A considerable number of the delegates felt that it was impossible to define
such a phrase as "international obligations" and, indeed, undesirable to do so,
inasmuch as the scope of the term would be evolved by courts and practice as
time went on. There was much support, -therefore, for the Italian proposal
to strike out of Basis of Discussion No. 2 the words "resulting from treaty or
otherwise," which would have left "international obligations" undefined.
In order, however, to bring about unanimity if possible, a sub-committee
was appointed whose function it was to define or indicate the sources of the
term "international obligations."
At this early stage of the proceedings, a difference of policy appeared
among the delegates. The representatives of certain states, including
Salvador and Rumania, were amrlous to limit international responsibility as
much as possible, feeling, doubtless, that the existing law had gone beyond
what they considered just. It appeared in the course of the discussion of the
sub-committee that Dr. Guerrero was particularly anxious to limit the scope
of international obligations to treaties and custom accepted as law by all
states, including the smaller states. Apparently it was believed that, by
narrowing the definition or sources of international obligations in this form,
certain rules which tribunals had developed on such subjects as denial of
justice could be limited, because they were not recognized as law or as sound
law by some of the smaller states, but were in fact disputed. Thus, the
minority group of seventeen states, in their proposals to the majority near
the end of the Conference, suggested that the last line of Article 2 be changed
to read: "in conformity with the rules indisputably admitted by the international
community." It was pointed out by numerous delegates that Article
38 of the Statute of the Permanent Court of International Justice gave to
that court a series of sources upon which they could draw for the rules of law
to be applied. Aside from treaty and custom, which by practice had developed
into a rule of law, there were two additional sources admitted,
namely, (3) the general principles of law recognized by civilized states, and
(4) the doctrines of jurists.
It was to these third and fourth sources that Dr. Guerrero was particularly
hostile. It was argued by some delegates that, inasmuch as so
many of the countries were already signatories of the Statute of the Perma•
nent Court, it would now be impossible for them to suggest that international
law or international obligations had a narrower scope or source.
Indeed, in the sub-committee the proposal of the United States that "international
obligations in the sense of this Convention are derived from international
law" received nine votes out of eleven; but a desire for unanimity
Annex 404
522 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
induced a further attempt to bring about the accession of the Salvadorean
and Rumanian delegates. After several meetings, the sub-committee finally
evolved the draft above mentioned as Article 2, which, though agreed to by
Salvador and Ru.mania in the sub-committee, was finally adopted by the
Commission by an overwhelming majority, twenty-eight to three, with
Rumania and Salvador not voting. Possibly the reason for their abstention
was the introduction of the phrase "or the general principles of law" which
are by the definition recognized as a source of international obligations.
Inasmuch as the definition was an amalgam of several di:ff erent proposals,
it is perhaps inevitably open to criticism. The Italian delegate poked some
fun at it and stated that he would vote for it only because he considered it
meaningless. Possibly he is right. The purpose was to indicate that the
several sources of international law which create international obligations
have as their aim the assurance to a foreigner of a certain minimum of
civilized treatment. That this adds but little if anything to our knowledge
of international law and leaves as much vagueness in "international obliga•
tions" as there is now, is probably not to be doubted. This also may account
for the abstention from vote in the Commission by the Salvadorean and
Rumanian delegates, who may have felt that their desire to specify the
sources of international obligations was not met by the draft finally evolved.
Article 3 of the tentative convention read:
The international responsibility of a state imports the duty to make
reparation for the damage sustained in so far as it results from failure to
comply with its international obligation.
This is practically the first sentence of original Basis of Discussion No. 29.
That Basis was designed to present certain rules governing the measure of
damages. The above-mentioned article merely stated the general principle
that international responsibility implies an obligation to make reparation for
the damage caused. The United States had suggested this obvious fact in
its original proposal for Article 1 of the Convention, which had read as
follows:
The term "responsibility" as used in this convention involves a duty
on the part of the State concerned to make reparation for damage
suffered by a foreigner in its tenitory as the result of its failure to comply
with an international obligation.
Several other delegations had made somewhat the same proposal. It
seemed to them unnecessary to make two separate articles to the effect that
failure to comply with an international obligation created responsibility,
and that responsibility imported a duty to make reparation.
The third sub-committee, to whom had been referred Bases 19 and 29,7
7 "The extent of the state's respon.sibility depends upon all the circumstances and, in
particular, upon whether the act of the private individual wa.s directed against a foreigner as
such and upon whether the injured person had adopted a pi:ovocative attitude." (Basia
19.)
Annex 404
"RESPONSIBILITY OF ST.ATES," AT THE HA.GUE CONFERENCE 523
brought in a report, accepted by the Conference, which recommended that
everything after the first sentence in Basis 29 be struck out. The deleted
matter included a provision for possible reparation in the form of an apology
(deemed by the sub-committee political in character), for the punishment of
,guilty off enders ( deemed covered by Basis 18), 8 for damages for mental suffering
( deemed inappropriate, as but a slight contribution to the measure of
damages), for a limitation of the damages to the direct consequences of the
breach of the obligation (deemed adequately covered by sentence one of
Basis 29 and to invite unwelcome dispute with respect to the question as to
what are the damages caused to an individual by a failure to punish an
-0:ffender, as in the Janes case ), ~ for responsibility of a guaranteeing state for
the obligation contracted by the guaranteed state (deemed more appropriate
to Basis 23),1° and a statement that in principle "the damages due are to be
placed at the disposal of the injured state," which the sub-committee deemed
inherent in the very term uinternational responsibility."
"Responsibility involves for the state concerned an obligation to make good the damage
8Uftered in eo far aa it result8 from failure to comply with the international obligation. It
may also, according to the circumstances, a.nd when this con.sequence follows from the general
principles of interna.tional law, involve the obligation to a.fford satisfaction to the state which
bas been injured in the person of its n&tional, in the shape of an apology (given with the
appropriate solemnity) and (in proper cases) the punishment of the guilty persons.
"Reparation me.y, if there is occasion, include an indemnity to the injured persons in
respect of moral suffering caused to them.
"Where the state's responsibility arises solely from failure to take proper measures after
the act causing the damage has occurred, it is only bound to make good the damage due to its
having failed, totally or partislly, to take such measures.
"A state which is responsible for the action of other states is bound to see that they execute
the measures which responsibility entails, so far as it rests with them to do so; if it ia unable
to do so, it is bound to furnish an equivalent compensation.
"In principle, any indemnity to be accorded is to be put at the disposa.l of the injured
state." (Ba.sis 29.)
The sub-committee, whose report was approved by the Commission, recommended the
suppression of Basis 19, partly because it was considered merely supplementary to Basis 18,
partly because it dealt with the measure of damages, which it was deemed best to omit from
the convention, partly because it suggested too vague a measure in that it "depends upon all
the circumstances," partly because the subjective attitude of the wrongdoer with respect to
the foreigner or the foreigner's "provocative attitude" presented questions of fact, the effect
of which had better be left to the court to determine rather than to a code.
8 See infra, note 21.
11 Janes (U. S.) v. Mexico, Opinions of Commissioners, General Claims Commission,
United States and Mexico, p. 108, printed in this Joumu.L, Vol. 21, p. 362, discU88ed in this
JOURNAL, Vol. 21, p. 516; Vol. 22, p. 140.
1~ "Where a state is entrusted with the conduct of the foreign relations of another political
unit, the responsibility for damage BUfi'ered by foreigners on the territory of the latter belongs
to 8Uch state.
"Where one government is entrusted with the conduct of the foreign relations of several
states, the responsibility for damage suffered by foreigners on the territories of such states
belongs to such common or central government." (Basis 23.)
Annex 404
524 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
M. Politis of the Greek delegation proposed an amendment to the first
sentence above mentioned, reading:
Responsibility imports for the state concerned the obligation to make
reparation for the damage sustained in the exact measure that the damage
arises from the incidents constituting the failure to comply with the
international obligation.
The reporter of the sub-committee expressed an objection to the last clause
indicating the measure of damages, because it was believed that it conflicted
with the proposal of the sub-committee to omit all reference to the
measure of damages, a subject whose development it was thought should be
left to international tribunals. Besides, as already observed, it raised the
great question, somewhat insisted upon by the Mexican delegate and others,
whether there was any damage caused to an injured foreigner or his next of
kin, if he were killed, because the state fails to punish the guilty offender.
Such a conclusion might have condemned numerous awards of international
tribunals which have assessed damages upon a state for a failure to punish a
guilty offender, though it may be admitted that the tribunals have not adequately
taken into account the differences involved in the failure to punish,
which may sometimes involve complete indifference to the crime and, therefore,
may properly lead to an inference of ratification or complicity or con.donation
of the offense, and a merely trifling negligence which may permit an
offender to escape apprehension or conviction without indicating either
indifference, or complicity, or condonation. M. Politis thereupon consented
to withdraw the second clause of his amendment, the first clause of which
was then in practical agreement with the first clause of the proposal of the
sub-committee. Nevertheless, the question was raised again in connection
with Basis 18 (Article 10 of the tentative convention), and doubtless helped
to produce the large minority vote which proved so fateful to any ultimate
convention.
An amendment was then proposed to stop the draft of Basis 29 with the
words '' Responsibility imports for the state concerned the obligation to make
reparation for the damage sustained/' which would probably have sufficed
for the purposes of the convention, because the second clause "in so far as,"
etc., in one sense either practically repeated Article 1 or in another sense
raised again the question as to the measure of damages. The vote on the
omission of the second clause stood seventeen to seventeen. The two
clauses were then voted upon separately, the first being unanimously voted
by thirty-five votes, and the second by twenty-nine to four. Thereupon,
the whole paragraph, which became Article 3, was adopted by a unanimous
vote of thirty-two states.11
In the proposals submitted by the minority to the majority after the
impasse had been reached April 4, the sense of the Politis amendment was
11 Twelfth Meeting, April 1, 1930.
Annex 404
"RESPONSIBILITY OF ST.A.TES," AT THE HAGUE CONFERENCE 525
again introduced in the words "direct and immediate" in the following
draft:
The international responsibility of the state entails the duty to repair
damage suffered in so far as it is the direct and immediate consequence of
~he failure to comply with the international obligation.
Article 4 of the tentative convention read as follows:
(1) A state's international responsibility may not be invoked as regards
reparation for damage sustained by a foreigner until after exhaustion
of the remedies available to the injured person under the
municipal law of the state.
(2) This rule does not apply in the cases mentioned in Paragraph 2
of Article 9.
This local remedy rule came originally from Basis of Discussion No. 27 .12
It was there stated, however, in a somewhat ambiguous form, namely, that,
"where the foreigner has a legal remedy open to him in the courts of the
state (which term includes ll.dministrative courts), the state may require that
any question of international responsibility shall remain in suspense until its
courts have given their final decision."
There was much objection to the ambiguity involved in the expression
"any question of international responsibility shall remain in suspense." It
was contended by numerous delegations, including particularly the representatives
of Spain, Denmark, Portugal, Egypt, Norway, Chile, Mexico,
Rumania, and Salvador, that international responsibility cannot even arise
until local remedies, if available, have been exhausted. The first proposal
of the United States in amendment of Basis of Discussion No. 27 read:
Where the foreigner has a remedy open to him in the courts of the
state (which term includes administrative courts) international responsibility
does not ordinarily arise until the local remedies have been exhausted
and a denial of justice or other breach of international law established.
The representatives of Switzerland and the Netherlands questioned this
view by suggesting cases in which Ambassadors had been injured, or in
which there was an insult to the national flag, or in which the alien had been
injured because he was a citizen of a particular state.13 In these cases, it
was alleged, international responsibility to the injured state might immediately
arise, though the injmed alien might have to pursue his local remedies.
12 "Where the foreigner has a legal remedy open to him in the courts of the state (which
term includes administrative courts), the state may require that any question of inte:rna,.
tional responsibility shall remain in suspense until its courts have given their final decision.
This rule does not exclude application of the provisions set out in Bases of Discussion Nos.
5 and 6." (Basis 27.)
u The Dutch delegate also spoke of "distinguished" citizens being injured, but the Mexican
delegate answered that he could find no distinction between "distinguished" a.nd other
citizens, both having to exhaust local remedies, ii available. Sixth Meeting, March 22,
1930.
Annex 404
526 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
They thus contemplated two claims arising out of the same facts. The
German and the British delegations, possibly because of the confusion created
by the injection of Ambassadors' injuries and national insults, contended
that, in some cases, either position might be true. The amendment which
finally became the basis of discussion was that of Belgium, which read, in the
first English translation:
This responsibility may, in principle, arise only after the parties
concerned have exhausted the remedies allowed them under the internal
law.
It was pointed out, however, that the French "mis en jeu" was really
properly translatable as "invoked," whereupon several of the delegations,
including that of the United States, suggested that the matter of theory
might be left aside undetermined, and that all states could agree on the
principle that responsibility may not be invoked until after exhaustion of
local remedies. This seemed to satisfy all the states and the rule was
adopted practically unanimously.14
Some doubt was injected by an amendatory clause introduced by the
Swiss delegate, and ultimately adopted, reading: "as regards reparation for
damage sustained by a foreigner." This clause was defended on the ground
that it clarified the fact that international responsibility or the claim for
pecuniary reparation could not be invoked until after exhaustion of local
remedies, but that the political claim of the state arising out of a direct
offense to its flag or prestige might in certain cases be advanced without
awaiting the exhaustion of local remedies. A motion of Dr. Guerrero, of
Salvador, to strike out the clause was lost, eighteen to sixteen.
It was pointed out that the Commission was considering a pecuniary claims
1' The Commission thus avoided the awkward conclusion, which the Swiss and Dutch view
entailed, that international responsibility might arise before it could be invoked. Tho
suggestion that rights can exist without remedies is not a particularly happy one, from a
legal point of view. It is sterile. That is why it Beemed best to many delegations to combine
in one article the substantive existence of international responsibility and the duty to
make reparation, both concepts being essential to and inherent in responsibility. Before
there was a duty to make international reparation there could be no international responsibility;
and ordinarily before there was an exhaustion of available local remedies, there could
beno duty to make such international reparation, i.e., international responsibility. That, by
definition, was the view of the Harvard Research, Art. 61 "A state is not ordinarily responsibfe
(under a duty to make reparation to another state) until the local remedies avail•
able to the injured a.lien have been exhausted." Dr. Maurtua., the distinguished Peruvinn
scholar, in suggesting that international responsibility can a.rise before it can be invoked
(Victor M. Maurtua. and James Brown Scott, Responsibility of states for damage caused
in their territory to the person or property of foreigners, New York, Oxford Press, 1930,
p. 53) and in criticizing the Harvard Research "formula," Art. 6, apparently overlooks the
precise definition of intema.tional responsibility adopted in Article 6 juat mentioned and
differs from all the Latin-American and the overwhelming majority of all other delegates at
the Conference. See further on this question the article in Bruns' Zmwchrift, supra, note 6,
pp. 233-242. After the impasse of April 4, the seventeen minority delegates again BUAAested
the restoration of the word "arise" instead of "be invoked."
Annex 404
"RESPONSIBILITY OF ST.A.TES," AT THE HAGUE CONFERENCE 527
convention, embodying the circumstances under which formal claims arising
out of injuries to aliens could be advanced diplomatically, and that the exhaustion
of local remedies was ordinarily a condition of such formal international
complaint. Naturally the convention in no way purported to
limit or qualify the right of protest, inquiry and good offices to see that
an alien obtained his rights, matters quite independent of formal claims
for reparation.
As originally proposed, the article contained the words "in principle,"
indicating that there were certain exceptional cases in which local remedies
need not be exhausted. This idea was expressed by the word "ordinarily"
in the proposal of the United States. There was considerable objection
in the sub-committee to this supposedly limiting word, some delegations
contending that the use of the term "in principle" actually destroyed the
principle. Inasmuch as the Preparatory Committee of Experts in Basis of
Discussion 27 had introduced a sentence to the effect that the rule was inapplicable
in cases of denial of justice, the sub-committee reverted to this
form by adding a sentence in substitution of the words "in principle" reading
that the "rule does not apply in the cases mentioned" in Article 9
(Denial of Justice).
The original Belgian proposal was advanced as an amendment to Basis of
Discussion No. 7, dealing with acts of the executive power. It was pointed
out, however, that local relief was possible against legislation and judicial
determinations in many countries, especially a.s the word "legislation" in
this convention might be deemed to cover also legislation of minor political
bodies, such as states, counties, municipalities, and districts. In view of the
fa.ct that local remedies might be available against any form of state action,
the Commission approved a proposal of the drafting committee to make the
article a general one, to be placed near the beginning of the convention and
applying to every form of state action described in the convention.
Article 5 of the tentative convention read:
A state cannot avoid international responsibility by invoking its
municipal law.
The Preparatory Committee had framed this Basis of Discussion (No. 1)
as follows:
A state cannot escape its responsibility under international law by
invoking the provisions of its municipal law.
Objection was raised to the word "escape," and the word "disclaim" and
then "avoid" substituted. In the discussion it was suggested that there are
cases in which a state can deny any international responsibility by showing
that the foreigner had been given every right and form of redress accorded to
the national-for example, in many instances, an action against the officer
who injured him. This, however, it was pointed out, is not the type of case
intended, for in such a case there is, in fact, as a rule, no international re-
Annex 404
528 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
sponsibility in the absence of a denial of justice. It was remarked that,
when international responsibility actually does attach, the state cannot disclaim
or avoid it by pointing to a statute or judicial decision or other provision
of its municipal law contrary to international law. This thought was
expressed in the proposals of the United States by a suggested article reading:
A state cannot justify its failure to comply with an international
obligation or escape responsibility incurred under international law or
treaty by invoking the provisions of its municipal law incompatible
therewith.
A motion to suppress Article 5 altogether was lost by a vote of nineteen to
thirteen.15
Article 6 of the tentative convention read as follows:
International responsibility is incurred by a state if damage is sustained
by a foreigner as a result either of the enactment of legislation
incompatible with its international obligations or of the non~enactment
of legislation necessary for carrying out those obligations.
This article is merely an application of Article 1, which posited responsibility
for the acts of "organs" of the state, by specifying the legislature as
such an organ. It was argued that to mention the legislature specially in
connection with the omission of legislation was unnecessary because with respect
to foreign countries the state is a unit, regardless of the constitutional
organs which may violate its international obligations. These obligations
might be performed by executive decree or in any way other than legislation
and still satisfy the international obligation. The particular organ through
which the state acts, it was argued, was a matter of internal concern only, and
not of international concern. It was replied, however, that in certain cases
states might specifically undertake to enact legislation carrying out a treaty
or other international obligation, in which event the failure to enact the legislation,
if causing damage to a foreigner, would entail international responsibility.
The article carried by twenty-nine votes, with several abstentions.
Article 7 of the tentative convention read as follows:
International responsibility is incurred by a state if damage is sustained
by a foreigner as a result of an act or omission on the part of the
executive power incompatible with the international obligations of the
state.
This was practically an adoption of Basis of Discussion No. 7 and gave
rise to no particular discussion. On the suggestion that local remedies might
exist in some cases even against actS of the executive power, it was pointed
out that if there were local remedies there would probably be no international
obligation until such remedies had been exhausted, and that the
Belgian amendment covering the local remedy rule, originally designed as a
1s The subject-matter of Article 6 was entirely omitted from the proposals submitted by
the minority of seventeen delegates after the impasse of April 4.
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 529
part of this article, would, when given an independent place at the head of
the convention, be clearly applicable to every expression of state action,
including that of the legislature, or executive, or minor officials. The article
was adopte4 unanimously.
Article 8, as reported by the drafting committee, read as follows:
1. International responsibility is incurred by a state if damage is
sustained by a foreigner as a result of acts or omissions of its officiate.,,
acting within the limits of their authority, when such acts or omissions
contravene the international obligations of the state.
2. International responsibility is likewise incurred by a state if damage
is sustained by a foreigner as a result of unauthorized acts of its
officials performed under cover of their official character if the acts
contravene the international obligations of the state.
International responsibility is, however, not incurred by a state if
the official's lack of authority was so apparent that the foreigner should
have been aware of it and could in consequence have avoided the
damage.
This article was an outgrowth of Bases of Discussion Nos. 12 and 13.16
The United States had proposed a combination of Bases 12 and 13 in one
article, to read as follows:
A state is responsible for damage suffered by a foreigner as the
result of wrongful acts or omissions of its officials within the scope of
their office or function when such acts or omissions are incompatible
with the international obligations of the state.
Several delegations, particularly those of Latin America, contended
vigorously that paragraph (2) of the article adopted, dealing with the acts of
officials outside their authority but within the general scope of their employment
or "under cover of their official character," did not entail international
responsibility, because the officers were acting illegally and contrary
to their orders and were, therefore, not agents of the state. This, indeed, is
a rule of municipal law in many countries, as, for example, in the United
States and in England, and in many continental countries that have not yet
advanced to the stage of France and Germany, in which it is admitted that
the st.ate must assume responsibility in municipal law for the wrongful acts
of its officers acting within the scope of their employment even though
directly contrary to their orders and outside their authority. Nevertheless,
in international law, claims commissions have on frequent occasions applied
18 "A state is responsible for damage suffered by a. foreigner as the result of acts or omissions
of its officials, acting within the limits of their authority, when such acts or omissions
contravene the international obligations of the state." (Basis 12.)
"A state is responsible for damage suffered by a foreigner as the result of acts of its officials,
even if they were not authorised to perform them, if the officials purported to act within
the scope of their authority and their acts contravened the international obligations of the
state." (Basis 13.)
Annex 404
530 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
the rule embodied in the article,17 which was adopted by a majority of twenty
to six, with numerous abstentions. It may be worthy of note, therefore,
that in international law the doctrine of respondeat superior is admitted,
whereas in municipal law it is, to a considerable extent, still denied.
The suggestion may be made that this would imply a duty on the pa,rt of a
state whose official had wrongfully injured a foreigner to pay damages to the
foreigner under circumstances where the national would not receive compensation.
If this were true, it would place the foreigner in a position of advantage
over the national. The answer to this suggestion would be that the
article states that the act of the official would have to "contravene" the
"international obligations" of the state, and that if in a particular state, as
in the United States, an action against the officer was the only remedy
available either to a national or to a foreigner, the making available
of such a remedy would be a full compliance with the international obligation
of the state; and under such a system no international responsibility
could arise, unless there was a denial of justice in the pursuit of the local
remedy against the officer. Not as much attention as it deserved was
called to the fact that the vast majority of cases arise through the wrongful
acts of officials in contravention of municipal law, and that in such cases international
responsibility does not arise at all until there has been a denial of
justice or other breach of international law by the state. It is probable that
many of the delegates conceived the original act of the official injuring the
foreigner, regardless of whether it contravened municipal law or international
law, to be the act contemplated by the article. The debate was not as
clear as it might have been in drawing the distinction between municipal responsibility
of the state, which might or might not be assumed under a local
system for violation of municipal law by an officer, and the international
responsibility of the state, which in most cases would be involved only in the
event of a denial of justice. The denial of justice or violation of a treaty
must be attributable, of course, to an official of the state.
Sharp di:ff erences developed in the Commission with respect to this paragraph
governing unauthorized acts of officials. It will be recalled that in
~he original Guerrero Report of 1926 and in the Fourth Conclusion of the
Sub-Committee of Experts, liability for unauthorized acts had been admitted
within the narrowest limits only, namely, where the government,
J) knowing that the act is about to be committed fails to prevent it, or, if
mmmitted, fails to discipline or punish the officer; or (2) permits no legal
~ecourse against him by the injured alien.18 This view found marked ex?
ression in the Hague Conference, and twenty states only voted for the
11 See e.g., Metzger (Germany) v. Venezuela, Feb. 13, 1903, Ralston, Venezuelan Arbirations,
p. 578; The Jessie et al. (Gt. Brit.) v. United St.ates, Aug. 18, 1910, Nielsen's Report,
;79, 480; Panther case (Brazil) v. Germany, 1905, 13 Rev. Gen. D. I. P. (1906) 200; Panama
~tar and Herald (U.S.) v. Colombia, 1886, Moore's Digest, VI, 642, 775.
18 See this JOURNAL, Vol. 20, p. 743; Bruns' Zcilschrift, sv.11ra, 228 et seq.
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 531
broader liability. Indeed, it was rumored that some of the outvoted states
contemplated withdrawing from the Conference at this point, and when the
deadlock was subsequently reached, the proposals for a compromise submitted
by the minority omit all reference to responsibility for unauthorized
acts of officers. Some delegates conceived that this omission left the issue
open and unsettled; but far from this being true, as was argued by others, an
affirmance of liability for authorized acts impliedly concedes a rule of non•
liability for unauthorized acts.
Partly to appease the objections which had been raised to the imposition
of liability for acts of officials outside their authority but within the scope of
their employment, the last paragraph was inserted, under which a case was
contemplated in which the official's lack of authority was so manifest that
the foreigner could not have regarded him as an agent of the state and could
have avoided the damage he sustained. The paragraph, therefore, contemplates
two operative facts-the manifest ultra vires of the officer, and the
power of the foreigner to have escaped injury.
The original Basis 13 had undertaken to impose liability "if the officials
purported to act within the scope of their official capacity." Several delegations
objected to the term "purported," because an officer might wrongfully
assume powers not vested in him in his actual official capacity, and
should, therefore, not bind the state; and, on the other hand, in certain cases,
the state ought to be liable for acts within the scope of the officer's employment,
even if he did not purport to act in his official capacity. The Preparatory
Committee probably intended to convey by the word "purport" the
idea included in the words "under cover of their official character"-the
term finally adopted in the convention.
Several delegations had suggested the combination of Bases 2 (legislative)
and 7 (executive) organs, and of 12 and 13 (officers, authorized and unauthorized).
The delegation of India advanced an ingenious suggestion for
the combination in one article of all agents of the state, including Basis 1
(Article 5), as follows:
A state is liable for the damage suffered by a foreigner within its
territory by the act or omission of any of its organs ( executive, legislative,
or judicial) in contravention of the state's international
obligations, any provision of the municipal law to the contrary
notwithstanding.
The suggestion was not acted upon, although numerous delegations were
of the opinion that the foundation articles should be disposed of as quickly as
possible, in order that progress might be made on the definition of what constituted
the international obligations, breach of which created international
responsibilitv. To that objective, only a few articles, including 9 and 10,
were devoted.
Article 9 of the tentative convention read as follows:
Annex 404
532 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
International responsibility is incurred by a State if damage is sustained
by a foreigner as a result of the fact.
(1) that a judicial decision, which is not subject to appeal, is clearly
incompatible with the international obligations of the state;
(2) that, in a manner incompatible with the said obligations, the
foreigner has been hindered by the judicial authorities in the exercise
of his right to pursue judicial remedies or has encountered in the proceedings
unjustifiable obstacles or delays implying a refusal to do
justice.
The claim against the state must be lodged not later than two years
after the judicial decision has been given, unless it is proved that special
reasons exist which justify extension of this period.
The first paragraph of this article is practically the second paragraph of
original Basis of Discussion 5.19 In the original Basis 27, dealing with the
local remedy ntle, "courts" were said to include administrative tribunals.
This parenthetical inclusion is not contained in Article 9, dealing with the
courts, as now drafted, or is it referred to in Article 4. It may be assumed to
be understood, however.
The phrase "which is not subject to appeal" was objected to by the Swiss
delegate on the allegation that it decides the question as to when responsibility
arises, a decision which, he contended, was intentionally left open by
the local remedy rule in Article 4. He claimed that the phrase in question
indicates that responsibility does not arise until after all local appeals have
been exhausted, and he seemed to entertain the belief that the court decision
in first instance if alleged to be ·contrary to an international obligation entails
international responsibility.
His objection probably indicates that hls theory as to the time of the
conclusiveness of state action and initiation of international responsibility is
questionable, but in an effort to induce a withdrawal of the objection, the
Belgian delegate ingeniously suggested that judicial action is a single action
from beginning to end, and that it cannot be said that the state has spoken
finally until all appeals have been exhausted; whereas, when a minor official
acts in alleged contravention of a treaty or international law, an action which
is then subject to review by a judicial tribunal, two distinct organs of the
state are in question, and that it might be said that the administrative or
executive action of the official is state action which might in certain circum-
19 "A state is responsible for damage suffered by a foreigner as the result of the fact that:
(1) He is refused access to the courts to defend his rights;
(2) A judicial decision which is final and without appeal is incompatible with the
treaty obligations or other international obligations of the state;
(3) There has been unconscionable delay on the part of the courts;
(4) The substance of a judicial decision has manifestly been prompted by ill-will
toward foreigners as such or as subjects of a. particular state." (Basis 5.)
"A state is respoDSible for damage sufiered by a foreigner as the result of the courts following
a. procedure and rendering a judgment vitiated by faults so gross as to indicate that
they did not offer the guarantees indispensable for the proper administration of justice/'
(Basis 6.)
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 533
stances entail international responsibility subject to its discharge by judicial
correction. The explanation of the supposed distinction might rather
indicate its essential unsoundness, for it would infer that the action of a minor
official is more conclusive on the state than the decision of a court, no matter
how high, which is still subject to appeal. It is believed that the issue raised
indicates the conclusion that, until the state has spoken finally, that is, until
local relief has been exhausted, international responsibility cannot properly
be created or invoked. It cannot be determined whether there is any international
responsibility until it is known what the final state action will be, a
fact which cannot be known until available appeals and local opportunities
for correction of the error or wrongful act, if any, have been exhausted.
Possibly a suggestion of Dr. Latifi, the Indian delegate, may be helpful:
He suggested that, when breach of treaty or rule of international (not municipal)
law is alleged, international responsibility is inchoate, becoming complete
or ripe only when the state has spoken finally, and if the breach is then
uncorrected, the wrong dates back to the original injury. This is but another
way of saying that no formal claim can be made until the state has
spoken finally, in ordinary cases, for the question whether there is an international
claim (responsibility) depends on the nature of that decision-but
the measure of damages might look back to the date of original injury. To
such a legal proposition, there can be no objection.
A question was raised with respect to the word "clearly" in the first
paragraph before the word "incompatible." The argument was made that,
if a decision is incompatible with a treaty or international law, there is no
necessity for inserting the word "clearly" or "manifestly" (manifestement).
The delegate from Danzig, Dr. Crusen, from whose draft this word was
taken, explained that it was inserted in order to prevent too frequent and illconsidered
a resort to the Permanent Court of International Justice from
decisions of national courts alleged to infringe international law. He expressed
his willingness to accept any other word which would indicate this
thought. Inasmuch, however, as it could not be known whether a decision
was manifestly incompatible with an international obligation until this had
been determined by an international tribunal, the thought was deemed difficult
to express in any language. The objection was finally abandoned on
the ground that the matter probably would not prove important.
Paragraph (1) of the article deals with final judicial decisions incompatible
with international obligations, a fact which may not necessarily involve a
denial of justice. The second paragraph, however, is designed to cover denial
of justice.
It. was proposed by the Austrian delegation, supported by the Italian,
British, United States, and other delegations, that the best term for the
conception in question was "denial of justice." It was suggested in the subcommittee
dealing with this question that it was impossible and indeed undesirable
to attempt to define a term which fixes only a standard of conduct
Annex 404
534 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
and is subject to application to particular cases. The representatives of
Rumania, Mexico, Salvador, and other Latin-American countries objected
so vigorously to the term "denial of justice," which they contended had been
misconstrued by many international tribunals, that it was decided to endeavor
to find a definition sufficiently broad to cover the conception of denial
of justice without using the term. Bases of Discussion Nos. 5 and 6 had
included several examples of denial of justice, namely, refusal of access to
the courts, unconscionable delay, decisions directed against foreigners as
such, and a broad residuary clause (Basis No. 6) reading:
A state is responsible for damage suffered by a foreigner as the result
of the courts following a procedure and rendering a judgment vitiated
by faults so gross as to indicate that they did not off er the guarantees
indispensable for the proper administration of justice.
The United States had accepted this Basis, merely suggesting a change
of the word "and" after "procedure" to "or." Objections to this Basis,
however, were so many that the sub-committee voted to drop it and were
then driven to the necessity of finding a substitute. This appeared for a
time almost impossible. Indeed, the nearest approach to agreement seemed
to be centered upon a proposal of the German delegate to the effect that
state responsibility is incurred by a state for the action of its judicial authorities
incompatible with the state's international obligations. This seemed to
many, however, to be too broad a generalization. The Italian delegate, Dr.
Giannini, then suggested a way out by proposing a combination of a Polish
proposal and a French proposal for paragraph (2). The Polish proposal had
read that responsibility was incurred if the foreigner was hindered by the
courts in the exercise of his rights, which the Polish delegation intended to
mean rights under local law. This they defined in parentheses as "denial of
justice." The addition of the words "in a manner incompatible with the
international obligations of the state" would give this phrase a broader
connotation, for which reason it was accepted by those states interested in
having a broad definition of "denial of justice."
The second sentence reading "or has encountered in the proceedings unjustifiable
obstacles or delays implying a refusal to do justice" originally
ended, in the French proposal, with the words "implying a refusal to decide
the case." This was objected to as inadequate, for the courts often did not
refuse to decide cases, but were corrupt, biased, influenced by the executive,
or in other ways were lacking in that impartiality implicit in the proper administration
of justice. Cases were cited pointing out the inadequacy of the
definition. On this protest the phrase was changed to read "implying a
refusal to do justice," which is considerably broader and may be deemed to
cover difficulties in the procedure prior to judgment which would justify an
allegation of denial of justice.
In its original form the words "deliberate or" were inserted before the
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 535
word "unjustifiable," but it was thought by the drafting committee that
"unjustifiable" was broad enough to cover the adjective "deliberate."
The German delegate had pointed out that justice may be denied by the
executive or legislature in refusing open access to the courts or in influencing
the courts, and that this was not covered by Article 9. It was suggested,
however, that such breaches of international obligations would be covered by
the articles dealing with wrongful acts or omissions of the legislative or executive
authorities, so that in a sense all instances of denial of justice would not
be covered by Article 9.
In the Commission, the Uruguayan delegate contended that the term
"exercise of the rights which belong to the alien," as the sub-committee's
draft originally read, was too broad and uncertain, although pref erred by
many of the delegates. He suggested the substitution of the words "ester en
ju.slice" (to pursue judicial remedies), an amendment which was accepted by
the Commission. It may be hoped that Article 9, however unsatisfactory,
would, had a convention been adopted, have been broad enough to warrant
the belief that the term "denial of justice" had not been unduly limited, and
that scope had been given to the judicial development of the concept embraced
in the term.
The third paragraph of Article 9, indicating that a claim must be lodged
within two years of a final judicial decision of a national court, was originally
a Danish amendment, limited to one year. It was argued in support that
judicial decisions and their reasons spoke for themselves, that a country
ought not to be subject to claims because of such decisions for an indefinite
period, and that if international claim is to be made, it should be made within
a reasonable time. The 4elegations of the United States, Great Britain,
and others objected to the clause as new legislation and as limiting the
privilege of international recourse, which might often require a longer period
for investigation to determine whether or not a claim should be made. This
is especially true in connection with large groups of claims arising, for example,
out of war or insurrection, in which it might be difficult to examine the
facts in many cases within a short period. The amendment was, however,
adopted by a majority of sixteen to :fifteen, with a qualifying clause that
special reasons, presumably to be passed upon by a tribunal, might justify an
extension of the period. The whole article was then adopted unanimously,
but with two abstentions.
Article 10 of the tentative convention read as follows:
As regards damage caused to a foreigner or his property by private
persons, the state is only responsible where the damage sustained by the
foreigner results from the fact that the state has failed to take such
measures as in the circumstances should normally have been taken to
prevent, redress or inflict punishment for the acts causing the damage.
This article, which hardly came before the drafting committee for revision,
was adopted on the afternoon of April 4, the 15th meeting of the Commission,
Annex 404
536 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
by a very slight majority-twenty-one to seventeen. The article was an
amendment of a text proposed by the second sub-committee,20 in substitution
of Bases 10, 17, 18.21 One might suppose that so well-established a
legal proposition would receive unanimous support, for it merely enacts the
due diligence rule which claims commissions have applied on innumerable
occasions. The article, however, met two objections-one relevant, the
other believed to be somewhat less so. The first objection was that of the
Mexican delegate, shared by others, that the failure to inflict punishment
does not increase the damage suffered by the foreigner as the result of a
private tort. This was but the reiteration of a position already advanced in
connection with other articles and, while noted, was not put to a vote. The
second objection, which, it is believed, had little relation to the subjectmatter
of the article, reiterated the well-known view that the maximum
measure of an alien's protection was that enjoyed by the national; that is to
say, equality of diligence, and not "due" diligence, is the correct criterion.
It is believed that the objection was not well founded, because "equality" of
treatment and "due diligence" are not comparable terms; but the "due diligence"
article was availed of as a springboard from which to launch an attack,
in entire good faith, upon those rules of international law which have
measured the alien's rights quite independently of any reference to what
nationals might enjoy or suffer.
The debate was limited because of the pressure for time on the afternoon
20 "A state is responsible for damage caused by a private person to the person or property
of a foreigner if it has failed to take such preventive or punitive measures as in tho circum~
stances might properly be expected of it."
"Commentary of the su"b-committee:
"It was recognised that a. state is in principle not internationally responsible for da.mngo
ca.used by a private person to the person or property of a foreigner. In such a case the
state can only become responsible through its own act.
"This is the case where the State has failed to take such preventive or punitive measures
as in the circumstances might properly be expected of it.
"The text submitted to the Committee is the result of reciprocal concessions between
different points of view. It has been intentionally drafted in very wide terms so as to leave
to international tribunals the full freedom of judgment which they must have in order to
take account of the varying circumstances of particular cases."
ll "A state is responsible for damage suffered by a foreigner as the result of failure on the
part of the executive power to show such diligence in the protection of foreigners as, having
regard to the circumstances and to the status of the persons concerned, could be e:1.-pcctcd
from a. civilised state. The fa.ct that a. foreigner is invested with a recognised public status
imposes upon the state a. special duty of vigilance." (Basis 10.)
"A state is responsible for damage ca.used by a private individual to the person or property
of a foreigner if it ha.s failed to show in the protection of such foreigner's person or property
such diligence as, having regard to the circumstances and to any special status possessed by
him, could be expected from a civilised state." (Ba.sis 17.)
"A state is responsible for damage ca.used by a private individual to the person or property
of a foreigner if it has failed to show such diligence in detecting and punishing the author of
the damage as, having regard to the circumstances, could be e:i,qrncted from n. civilised state."
(Basig 18.)
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 537
the article was considered. Haste was possibly a mistake. After the introduction
of the sub-committee's draft, the opposition was led by Dr. C. C.
Wu, the Chinese delegate, who addressed himself to the following alternative
proposal of China:
A state is only responsible for damage caused by private persons to
the person or property of foreigners if it has manifestly failed to take
such preventive or punitive measures as in the circumstances might
reasonably be expected of it had the persons injured been its own
nationals.
It is hard to say what difference in legal result the adoption of this draft
would have had, but the argument made in support of it probably prevented
its adoption by the majority. That argument was, in effect, that a foreigner
must take into account the administrative organization of a country to which
he goes as much as he takes into account its climate, and that he cannot
claim greater privileges or protection than nationals. Dr. Wu also added
that such words as "normally," "reasonably," or "properly"-all of which
were suggested as alternatives in the sub-committee's draft-were not a
satisfactory test of the standard of protection to be accorded, because of
their uncertainty, whereas the standard of "national treatment" seemed to
the speaker a satisfactory test. The Chinese delegate failed to state that
such terms as "due/' "reasonably," "normally"--one of which was used in
his own draft-inevitably took into account the conditions of time and circumstance,
and constituting standards merely, would necessarily be applied
to particular facts, ordinarily after the exhaustion of local remedies, by
diplomatic contentions or by an international tribunal which would determine
whether the measures taken ·by the government were such as might
normally, reasonably, or properly have been expected under the circumstances.
The Chinese delegate, it is believed, was in the main correct in asserting as a
principle that, in first instance, the foreigner's rights are governed by the
local law, and that, if the foreigner receives the same treatment as a national,
he or his country would ordinarily have no legitimate ground for
complaint. The flaw in the argument was that the proposition was made
too absolute, for international law has probably established the rule that
certain exceptional types of injury transgressing the requirements of civilized
justice or 9 drninist~ation would justify an international claim, even
though nationals might for lack of a remedy have to tolerate them. The
principle that equality of treatment between nationals and aliens suffices to
release a state from pecuniary liability for injuries to aliens is conditioned
upon the assumption that its administration of law and order satisfies the
requirements of civilized justice-and the possibility of proving the contrary
would be exceptional only.22 Yet their insistence upon a. categorical rule
21 See Borchard, Diplomatic Protection of Citizens Abroad (1915), §44 and authorities
there cited.
Annex 404
538 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
that equality of treatment with nationals was, presumably, the maximum
that an alien could demand, moved seventeen nations to vote against the due
diligence rule as framed, and ultimately served to prevent that two-thirds
vote without which a convention could not be concluded. In the proposals
submitted after the deadlock by the minority, as representing their views of
what the convention should provide, it is stated in the first article, defining
international obligations, that "this provision does not affect the question
of the equality of treatment for foreigners and nationals in so far as the
protection of their persons and that of their property is concerned." It is
somewhat singular that the proposed Convention of Paris, November, 1929,
to govern the rights of foreigners, and the proposed Hague Convention on
the international responsibility of states arising out of injuries to foreigners
both broke down on the issue of equality-the former because, it is understood,
it would not concede equality to foreigners in municipal law, the
latter because equality under all circumstances was not deemed by the majority
sufficient.
Finally, reference may be made to an amendment to the sub-committee's
draft, proposed by the Hungarian delegate, adding to it at the end the phrase
"provided local remedies have been exhausted without redress." Strictly
speaking, this addition is necessary in order to make the definition of international
responsibility for the acts of private individuals complete and legally
correct. It was pointed out, however, that the local remedy rule contained
in Article 4 applied to every article of the convention dealing with state
action, and that it would also necessarily apply to this article. In the belief
that it was unnecessary to mention the local remedy rule specifically in this
article as distinguished from others, the amendment was voted down.
As already observed, the minority of seventeen, having on April 4 reached
the conclusion that the tentative convention arrived at was unsatisfactory to
them, laid before the majority certain conditions upon their adherence to
any convention. In the caucuses which were held by majority and minority,
the United States took no part. The minority suggested, without justification,
it is believed, that only such Bases had been considered as imposed
responsibility, and they therefore asked that Bases denying responsibility,
such as Basis 22, dealing with damage by mob violence, etc.,23 and Basis 24,
23 "A state is, in principle, not responsible for damage ca.used to the person or property of a
foreigner by persons taking part in an insulTection or riot or by mob violence.11 (Basia 22.)
"Nevertheless, a state is responsible for damage caused to the person or property of a
foreigner by persons ta.king part in an insurrection or riot or by mob violence if it failed to use
such diligence as was due in the circumstances in preventing the damage and punishing its
authors." (Basia 22 (a).)
"A state must accord to foreigners to whom damage has been caused by persona taldng
part in a.n insurrection or riot or by mob violence the same indemnities as it accords to its
own nationals in similar circumstances." (Basis 22 (b).)
"A state is responsible for damage caused to foreigners by an insurrectionist party which
has been successful and has become the government to the same degree as it is responsible
Annex 404
"RESPONSIBILITY OF STATES," AT THE HAGUE CONFERENCE 539
dealing with self-defense of the state as a ground for disclaiming responsibility/
1 should also be considered. This, the majority willingly conceded.
The minority also proposed an article denying state liability for a "political"
crime against a foreign public official unless the state has neglected its duty
of special vigilance to prevent the crime or punish the guilty.25 Probably
this article would not have given rise to difficulty. The minority also
proposed an article dealing with the nationality of claims, adopting the usual
rule that the injured person must have been a national of the claiming state
at the time the injury arose and at the time of presentation of the claim. 26
Probably this article also would not have given rise to objection.
Consideration of these articles by the full Commission became abortive,
however, because of the modifications suggested by the minority in the articles
already tentatively agreed upon, particularly, as already observed, the
suggested elimination of the paragraph imposing liability for the unauthorized
acts of officials, the suppression of the due diligence rule, and the insistence
upon absolute equality as the maximum of alien privilege.
Among the subjects not considered by the conference were: 1. Liability
for the wrongful acts or omissions of political subdivisions of a state or of
political units whose foreign relations it conducts (Bases 16 and 23); 2.
Concessions or contracts and public debts (Bases 3, 8, 4, and 9); 3. Liability
for the deprivation of liberty (Basis 11); 4. Liability for withdrawing a
private right of recourse (Bases 15 and 20); 5. Damages resulting from insurrections;
riots, or other disturbances (Bases 21 and 22, with its subdivisions);
6. The measure of damages (Bases 19 and 29); 7. Certain grounds for disclaiming
responsibility, such as self-defense (Basis 24), reprisals (Basis 25),
and the Calvo Clause (Basis 26); and 8. The national character of claims
(Basis 28). The jurisdictional clause (Basis 30) was considered, but not
for damage caused by acts of the government de jure or its officials or troops." (Basis 22
(c).)
"A state is responsible for damage caused to the person or property of a foreigner by
persons taking part in a riot or by mob violence if the movement was directed against
foreigners as such, or against persons of a. particular nationality, unless the government
proves that there was no negligence on its part or on the part of its officials." (Basia 22 (d).)
2' "A state is not responsible for damage caused to a foreigner if it proves that its act was
occasioned by the immediate necesmty of self-defense against a danger with which the
foreigner threatened the state or other persons.
"Should the circumstances not fully justify the acts which caused the damage, the state
may be responsible to an extent to be determined." (Basis 24.)
~ "The international responsibility of a state, for a political crime committed against the
person of a foreigner that assumes a. public character, is not involved unless the state has
neglected its duty of special vigilance in regard to the appropriat(: measures with a view to
preventing the crime or with a view to the pursuit, arrest and trial of the guilty person.''
,s "A state cannot claim pecuniary indemnity, by reason of damages suffered by a private
person on the territory of a foreign state, unless the injured person was, at the moment when
the damages were caused, and remained up to the decision to intervene, a national of the
claimant state."
Annex 404
540 THE AMERICAN JOURNAL OF INTERNATIONAL LAW
voted upon, because the general drafting committee of the conference had
proposed a uniform article for the judicial settlement of differences which
was to be incorporated in all of the conventions concluded.
It should be added that many of the proposals advanced by the different
delegations and which, it is hoped, may be printed in the final report of the
conference, constitute contributions whose ultimate effect on international
law may be considerable. In this connection, mention may be made of the
proposals of the British Government dealing with the nationality of claims,
and of the proposals of other governments dealing with other topics of the
proposed convention. The official documents thus placed before the conference
by the participating governments, together with the official replies
printed by the League of Nations, constitute source material of considerable
value, which, as occasion permits, is likely to be drawn upon by international
tribunals. In spite of the fact, therefore, that no convention was arrived at
-and the conclusion seems inescapable that the subject of international responsibility
of states for injuries to aliens is not ripe for codification-the
amount of thought which was concentrated upon the subject, and which has
res]Jlted in so many official and scientific expressions of opinion, is likely to
exert considerable influence upon the further development of international
law.
Annex 404
ANNEX405

State Responsibility
The General Part
James Crawford
CAMBRIDGE
UNIVERSITY PRESS
Annex 405
CAMBRIDGE
UNIVERSITY PRESS
University Printing House, Cambridge CB2 8BS, United Kingdom
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education, learning and research at the highest international levels of excellence.
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© James Crawford 2013
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 2013
3rd printing 2014
First paperback edition 2014
Printed in the United Kingdom by CPI Group Ltd, Croydon CR0 4YY
A catalogue record for this publication is \available from the British Library
Library of Congress Cataloguing-in-Publication data
Crawford, James, 1948-
State responsibility : the general part / James Crawford SC, FBA, BA, LLB (Adel), DPhil
(Oxon), LLD (Cantab), Whewell Professor of International Law, University of Cambridge,
Former Member of the International.Law Commission.
pages cm. - (Cambridge studies in international and comparative law: 100)
ISBN 978-0-521-82266-4 (Hardback)
1. International obligations. 2. Government liability (lnternationaUaw) I. Title.
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341.26-dc23 ·
2012049381
ISBN 978-0-521-82266-4 Hardback
ISBN 978-1-107-4 7778-0 Paperback
Additional resources for this publication at www.cambridge.org/crawford
Cambridge University Press has no responsibility for the persistence or accuracy of
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and does not guarantee that any content on such websites is, or will remain,
accurate or appropriate.
Annex 405
HISTORICAL DEVELOPMENT 35
In an interdependent world the well-being of many countries rests upon an
influx of foreign and managerial skills, the owners of which must be given
effective protection against unjust persecution or discrimination.177
Compared with the 1929 Draft, the 1961 Draft Convention on the
International Responsibility of States for Injuries to Aliens 178 represents
a far more ambitious undertaking.179 Section A (general principles and
scope) contained two provisions on the basic principles of state responsibility
(Draft Article 1) and the primacy of international law (Draft
Article 2). Beyond this, the Draft reflected the concern with investor
protection. Section B (Draft Articles 3-13) was a catalogue of investor
rights, concerning areas such as arrest and detention, due process,
expropriation, preservation of means of livelihood and the concept of
denial of justice. This was further reflected in the provisions dealing with
compensation, which were stated not as general principles, but in terms.
of exactly which investo; protection had · been breached - thus, Draft
Article 5 on arrest and detention corresponded to Draft Article 28 on
damages for personal injury and the deprivation of liberty.180
The 1961 (and to a lesser extent, the 1929) Draft had a certain influence
on the work of the ILC.181 In particular, their continued conceptualization
of state responsibility as a facet of investor protection defined
Garcfa-Amador's approach to the subject. But this proved unacceptable,
a road not taken:182 under Roberto Ago (Italy) (1963-80), the focus
shifted to developing a comprehensive set of secondary rules that would
underpin international law as a whole, leaving questions of investor
protection to be developed in other ways.183
1.4 The work of the International Law Commission
1.4.1 The first reading: 1949-1996
Following the establishment of the ILC in 1947, state responsibility was
identified as deserving of early attention. But the issues associated with
177 Ibid., 545. 178 Ibid., 548.
179 Crawford and Grant, in Grant and Barker (2007), 93. 18° Further: ibid., 92-3.
181 Ibid., 94-100.
182 See, most evocatively, the criticism of El-Kouri (United Arab Republic), who saw the
approach as 'reminiscent of the capitulations system applied in the territories of the
Ottoman Empire in the nineteenth century, where aliens were almost a privileged class
when compared to nationals': ILC Ybk 1959/1, 141. Further: ibid., 149 (Tunkin); ibid.
(Erim): ibid., 150 (Bartos).
183 Crawford and Grant, in Grant and Barker (2007), 102-8.
Annex405
36 THE FRAMEWORK OF RESPONSIBILITY
responsibility - indeed, the very definition of the field - were to prove
intractable.
Work began in 1956 under Garcia-Amador as Special Rapporteur.184 At
this time, the ILC (influenced heavily by the work of the Harvard
Research) was particularly focused on state responsibility for injury to
aliens and their property, that is to say the content of the substantive
rules of law in that sub-field. Six reports were submitted between 1956
and 1961, but the ILC barely considered them, ostensibly due to the
demands of other topics including diplomatic immunities, the law of
the sea and the law of treaties. It was felt that the disagreement and
division that this conception of the field of responsibility attracted would
stunt progress, and the topic was set aside. Indeed, Garcfa-Arn.ador's
reports prompted substantial criticism on matters of both substance
and overall approach.185 ,
This false start was reversed in 1962, when an intercessional subcommittee
of the ILC, chaired by Ago, recommended a focus not on injuries
to aliens in particular, but rather on 'the definition of the general rules
governing the international responsibility of the state'. In so doing,
there would be no question of neglecting the experience and material gathered in
certain special sectors, specially that of responsibility for injuries to the person or
property of aliens; and, secondly, that careful attention should be paid to the
possible repercussions which new developments in international law may have
had on responsibility.186
. Ago was appointed Special Rapporteur in 1963, and produced eight
reports between 1969 and 1980, including a further substantial adden- ·
dum to his final report on the subject after his election to the International
Court. During his tenure, the ILC provisionally adopted thirtyfive
articles, together comprising Part One (Origin of state responsibility)
of the Draft Articles on State Responsibility.187
In 1979, William Riphagen (Netherlands) was appointed Special Rapporteur,
presenting seven reports between 1980 and 1986. Ago's achievements
were reinforced, with Riphagen presenting a com:elete set of Draft
184 On the work of Garcia-Amador, see further Muller, in Crawford, Pellet and Olleson
(eds.), The Law of International Responsibility (2010) 69. For his proposals see Appendix 4.
185 Notably, Garcfa-Amador's champi9ning of the individual as a subject of international
law was the cause of substantial criticism: First Report, ILC Ybk 1956/11, 197ff. Further:
Crawford and Grant, in Grant and Barker (2007), 89-90; Muller (2010), 72-4.
186 ILC Ybk 1963/11, 228. .
187 Ago's contribution to the law of state responsibility was prodigious: see Pellet, in
Crawford, Pellet and Olleson (2010) 75, 76-83.
Annex405
HISTORICAL DEVELOPMENT 37
Articles on Parts Two (Content, forms and degrees of international
responsibility) and Three (Settlement of disputes). However, again owing
to the priority given to other topics, only five articles from Part Two were
adopted by the ILC during this period.
On Riphagen's retirement from the ILC in 1987, Gaetano Arangio-Ruiz
(Italy) was appointed Special Rapporteur, presenting eight reports from
1988 to 1996. During this time, the Drafting Committee was able to deal
with the remainder of Parts Two and Three. In 1996 Arangio-Ruiz
resigned as Special Rapporteur under curious circumstances,188 but this
did not prevent the ILC from adopting a full set of Draft Articles on first
reading (hereafter 'the Draft Articles').189
The Draft Articles were a significant statement, already much cited
by the courts and discussed in the literature. A number of the features
of the text could be considered as established, forming basic assumptions
for the second reading. The first concerned the general coverage of the
text. Part One of the Draft Articles concerned questions of responsibility
arising from the breach of any international obligation. No attempt was
made to limit the scope of the Draft Articles to obligations owed by states
to other states. The Draft Articles did not distinguish between treaty and
non-treaty obligations, excluding the notion that international law
draws any distinction between responsibility ex delicto and ex contractu.190
Nor did they distinguish between obligations of a bilateral or multilateral
character. This general approach was affirmed in Draft Article 19(1),
which provided that 'An act of a State which constitutes a breach of an
international obligation is an internationally wrongful act, regardless of
the subject matter ofthe,obligation breached.' Lat~r paragraphs of Draft
Article 19 drew a highly controversial distinction between international
'crimes' of states and other delicts, but !his carried no consequences -
beyond the stigma of a state being labelled as 'criminal' -within the text
of Part One itself.
Another basal presumption laid down in 1996 concerned the principle
of 'objective responsibility', in the sense that the law as codified in the
Draft Articles contained no requirement of mens rea on the part of a
188 ILC Ybk 1996/1, 30-1, 46-7. See Arangio-Ruiz, (1998) 81 RDI 110.
189 ILC Ybk 1996/11(2), 58ff. For the text see Appendix 5.
190 See e.g. Draft Articles, Arts.16, 17, the latter proclaiming the irrelevance of 'the origin,
whether customary, convention or other' of the obligation breached. Cf. Draft Articles,
Art. 40(2)(f), which drew a barely defensible (and wholly inconsistent) distinction
between treaties and other rules of international law established for the protection ofcollective
interests. Further: Rainbow Warrior (New Zealand/France), (1990) 82 ILR 500, 550.
Annex405
38 THE FRAMEWORK OF RESPONSIBILITY
delinquent state: an act incurring state responsibility could occur even
where a state did not undertake the act intentionally or through a failure
of due diligence. 191 This superficially formal move in fact addressed a
number of problems which, left unresolved, could have caused great
doctrinal controversy. It was again consistent with the universal
approach to the field, freeing state responsibility from particular categories
of rules such as those concerning diplomatic protection and
injury to aliens. But too much should not be read into this position. 192
As a set of secondary rules, the silence of the Draft Articles did not
indicate an outright prohibition of the attachment of subjective fault
to breaches of state responsibility: the position taken was neutral, and
while no mens rea was ordinarily required on the part of the state, the
primary rule could introduce such a requirement in a given context.
This raises the third presumption of the 1996 acquis, the distinction
between primary and secondary rules.193 The rules of state responsibility
are considered to be secondary rules, governing the application of the
primary rules, being those international legal obligations incumbent on
states by way of custom or treaty. The necessity of such a distinction was
evident from Garcfa-Amador's final proposals.194 Without it, the project
was in constant danger of trying to do too much, in effect telling states
what obligations they could and could not have.
The Draft Articles, however, contained a number of unresolved difficulties,
chief among which was the criminalization of international law
contained in Draft Article 19. Reservations as to the terminology of
'crimes' and the implications of Draft Article 19 more generally led to
vocal opposition from various states, with the United Kingdom's position
being illustrative:
There is no basis in customary international law for the concept of international
crimes. Nor is there a clear need for it. Indeed it is entirely possible that the concept
would impede, rather than facilitate, the condemnation of egregious breaches of
the law. The proposed draft articles are likely to make it more difficult for the
international community to frame the terms of the condemnation so as to match
precisely the particular circumstances of each case of wrongdoing. By establishing
191 See e.g. Draft Articles, Arts. 1, 3, 40. 192 Gattini, (1999) 10 EJIL 397.
193 See further David, in Crawford, Pellet and Olleson (2010) 27.
194 See e.g. ILC Ybk 1961/11, 46. Garcfa-Amador's proposals tended towards the hubristic,
and included, inter alia, a truncated code of human rights, a parallel statement of the
rights of aliens and their property and of the relationship between international
responsibility and contractual liability, and a rule about the relations of foreign parent
companies and local subsidiaries.
Annex405
HISTORICAL DEVELOPMENT 39
the category of international crimes, the danger of polarizing moral and political
judgments into a crude choice between crimes and delicts is increased. There is a
real possibility of dissipating international concern with the causes and consequences
of wrongful acts by focusing debates on the question whether or not those
acts should be classified as international crimes, rather than on the substance of
the wrong. There is also a serious risk that the category will become devalued, as
cases of greater and lesser wrongs are put together in the same category, or as
some wrongs are criminalized while others of equal gravity are not.195
Other states continued to support the broad notion behind Draft
Article 19, but without being wedded to the terminology.196 Indeed,
the ILC footnoted that it was not wedded to it itself. 197
Further problems which arose out of the Draft Articles included a
certain excess of prescription and refinement in Part One, Chapter III,
which sought to establish a typology of obligations in international law.
In addition, structural problems existed within the provisions of Part
Two, including in particular
(a) the identification of states entitled to invokeresponsibility,
either as an 'injured State' or as a state with a more general
legal interest in the breach of the obligations;
(b) the implementation of responsibility by injured states and states
with a legal interest in the breach (e.g. such issues as the invocation
of responsibility and cases involving a plurality of states); and
(c) the legal consequences flowing from the commission of an
'international crime' as defined in Draft Article 19.
Thus, at the close of its forty-eighth session in 1996, the ILC had been
presented with a complete set of draft provisions on the law of state
responsibility for the first time since the project was slated for codification
in 1947. However, the articles so presented exposed a number of
controversial issues such that their adoption was, as they stood, impossible.
Substantial effort and compromise by the Commission would be
required during the second reading.
1.4.2 The second reading: 1'998-2001
In 1997 the ILC appointed the author as Special Rapporteur and committed
to completing the second reading of the Draft Articles by 2001.198
i9s ILC Ybk 1998/11(1), 120.
196 See e.g. ibid., 113 (Austria), 114 (Czech Republic), 115 (Denmark, on behalf of the Nordic
countries), 115-16 (France), 116-18 (Ireland).
197 ILC Ybk 1996/11(2), 63. 198 On the process see further Pellet (2010), 83-7.
Annex 405
40 THE FRAMEWORK OF RESPONSIBILITY
Three major issues were identified as requiring reconsideration: international
crimes of states, the regime of countermeasures and settlement
of disputes.199
Unsurprisingly, a great deal of discussion took place within the Commission
on the vexed question of Draft Article 19 and the concept of
international crimes of states. Initially put to one side to enable consensus
to be reached on other issues, the provision was ultimately deleted
outright. However, the idea of a hierarchy of international legal norms
did not disappear entirely from the project. Within the framework of
Part Two of the Draft Articles, provision was made for special consequences
applicable to 'serious breaches of obligations owed to the international
community as a whole': these included the possibility of
aggravated damages as well as certain obligations on the part of third
states not to recognize a breach of such norms or a state of a.ff airs arising
therefrom as lawful. All states were also under an obligation to
co-operate in order to suppress such situations.200 But this formulation
proved too broad and had to be narrowed further still to secure adoption:
the concept of aggravated damages was abandoned outright and the
duties of non-recognition and of co-operative suppression were limited
to circumstances in which the breach complained of was of a peremptory
or ius cogens norm. 201 Finally, it was recognized that every state had the
capacity to invoke state responsibility for breaches of obligations
owed to the international community as a ·whole, irrespective of their
ser10usness.
Another suite of issues addressed by the ILC during the second reading
concerned Part Three, Chapter I, and the invocation of responsibility.
The first such problem was Draft Arti~le 40, which considered the
invocation of responsibility by 'non-injured' states where an erga omnes
norm was breached. Concerned that the provision of standing to all
states in such cases would lead to a tsunami of international litigation,
the ILC created two entirely new provisions. The first, which when
finallyadopted became Article 42, defined in narrower and more precise
terms the concept of the injured state, drawing on the analogy of Article
60(2) of the Vienna Convention on the Law of Treaties.202 The second,
finally adopted as Article 48, dealt with the invocation of responsibility
in the collective interest - particularly in relation to obligations erga
199 ILC Ybk 1997/11(2), 11, 58.
200 See Draft Arts. 41, 42 provisionally adopted in 2000: Crawford, Third Report, 106-9.
201 Crawford, Fourth Report, 12--4. 202 22 May 1969, 1155 UNTS 331.
Annex 405
HISTORICAL DEVELOPMENT 41
omnes - thus giving effect to the dictum of the International Court in
the Barcelona Traction case.203 Of additional concern was whether reparation
was available to injured and non-injured states alike in the
case of a breach of multilateral or communitarian norms. The ILC
decided that the position of the broader class of states interested in
the breach of a collective or community obligation was subsidiary to
that of a state which had suffered actual damage: thus, although 'noninjured'
states possessed standing with respect to the breach of a
communitarian norm, their remedies were limited under the terms
of what would become Article 49 to the right to call for cessation of
the act in question and to seek assurances of non-repetition: The
right of such states to reparation was limited to doing so only in the
name of the injured state - that is, the state most interested in
the outcome of the dispute.
The second reading also saw substantial amendments to the Draft
Articles' consideration of countermeasures: with the relevant provisions
moved from Part Two, Chapter III, to a new Part Three dealing with the
implementation of responsibility. There, they .· were refined and
developed further to stress the instrumental function of countermeasures
in ensuring compliance204 to prohibit certain categories of countermeasures205
and to clarify the procedural conditions for their
exercise. 206 These amendments would prove to be the most controversial
aspect ofthe provisional text adopted by the lLC in 2000.
On 31 May 2001, the ILC adopted the Articles on the Responsibility
of States for Internationally Wrongful Acts (ARSIW A), a set of fiftynine
provisions and associated commentary.207 On 12 December 2001,
the United Nations General Assembly (UNGA) took note of the Articles,
annexed the text to GA Resolution 56/83 and recommended it to all
governments without prejudice to their future adoption or other
appropriate action. 208 This was in line with the ILC's recommendation
that the ARSIW A be annexed to a resolution of the General Assembly
pursuant to Article 23(b) of the ILC Statute,209 and that the Assembly
203 Barcelona Traction, Light & Power Company, Limited {Spain v. Belgiu!"-), Second Phase, ICJ Rep.
1970 p. 3, at 32.
204 A position endorsed by the International Court in Gabakovo-Nagymaros Project (Hungary/
Slovakia), ICJ Rep. 1997 p. 7, at 56-7.
205 Ultimately adopted as ARSIW A, Art. 50 (Obligations not affected by countermeasures).
206 Ultimately adopted as ARSIW A, Art. 52 (Conditions relating to resort to
countermeasures).
207 ILC Ybk 2001/11(2), 26ff. 208 GA Res. 56/83, 12 December 2001, §§3-4.
209 GA Res. 174(11), 21 November 1947.
Annex 405
42 THE FRAMEWORK OF RESPONSIBILITY
then consider 'at a later stage, and in light of the importance of the
topic, the possibility of convening an international conference of
plenipotentiaries to examine the draft articles . . . with a view to
concluding a convention on the topic' .210 The ILC's recommendation
was a compromise between those members of the Commission who
believed that the ARSIW A would serve the international legal order
best as simply evidence of international law,211 and those who
thought that the potential of the Articles could only be realized via
their adoption as an international convention - that is, a source of law
in its own right.212
1.4.3 Responses to the 2001 Articles
The General Assembly in 2004 adjourned its decision as to the final form
of the Articles,213 deferring again in 2007214 and in 2010.215 On each
occasion, the General Assembly requested that the Secretary-General
solicit comments from members as to how the matter was to proceed.
Those few states that were minded to comment (usually Western) were
generally opposed to the idea of subjecting the ARSIW A to a full diplomatic
convention, which would have the potential to introduce disagreement
and compromise additional to that which had already delayed by
some forty years the codification of state responsibility.216 The opinion
of the United Kingdom is illustrative:
It is difficult to see what would be gained by the adoption of a convention ... The
draft articles are already proving their worth and are entering the· fabric of
international law through State practice, decisions of courts and tribunals and
writings. They are referred to consistently in the work of foreign ministries and
other Government departments. The impact of the draft articles on international
law will only increase with time, as is demonstrated by the growing number of
references to the draft articles in recent years.
This achievement should not be put at risk lightly ... [T]here is a real risk that
in moving towards the adoption of a convention based on the draft articles old
210 ILC Ybk 2001/11(2), 25.
211 That is: not a source oflaw proper within the meaning of the Statute of the International
Court of Justice, 26 June 1945, 2187 UNTS 3, Art. 38(1)(a)-(c), but a 'subsidiary means for
the determination of rules oflaw' within the meaning of Art. 38(1)(d).
212 See further Pellet (2010), 86-7. 213 GA Res. 59/35, 16 December 2004.
214 GA Res. 62/61, 6 December 2007.
215 GA Res. 65/19, 6 December 2010. The subject is due for reconsideration at the 68th
session of the GA (2013).
216 See e.g. UN Doc. A/62/63; UN Doc. A/62/63 Add.1.
Annex 405
HISTORICAL DEVELOPMENT 43
issues may be reopened. This would result in a series of fruitless debates that may
unravel the text of the draft articles and weaken the current consensus. It may
well be that the international community is left with nothing .. . Even were a text
to be agreed, it is unlikely that the text would enjoy the wide support currently
accorded to the draft articles ... If few States were to ratify a convention, that
instrument would have less legal force than the draft articles as they now stand,
and may stifle·the development of the law in an area traditionally characterized
by State practice and case law. In fact, there is a significant risk that a convention
with a small number of participants may have a de-codifying effect, may serve to
undermine the current status of the draft articles and may be a 'limping'
convention, with little or no practical effect. 217
Accompanying the various state views in 2007 on the Articles was a
document containing no less than 129 cases before international or
domestic courts and tribunals where the ARSIW A or the Draft Articles
on first reading were referred to with approval.218 The Articles are an
active and useful part of the process of international law. They are
considered by courts and commentators to be in whole or in large part
an accurate codification of the customary international law .of state
responsibility,219 as demonstrated, for example by the International
Court in the Bosnian Genocide case:
The rules for attributing alleged internationally wrongful conduct to a State do
not vary with the nature of the wrongful act in question in the absence of a
clearly expressed lex specialis. Genocide will be considered as attributable to a
State if and to the extent that the physical acts constitutive of genocide that have
been committed by organs or persons other than the State's own agents were
carried out, wholly or in part, on the instructions or directions of the State, or
under its effective control. This is the state of customary international law, as
reflected in the ILC Articles on State Responsibility.220
217 UN Doc. A/62/63, 6. See also the comments of the Nordic countries per Norway (ibid., 4)
and the US (UN Doc. A/62/63 Add.1, 2).
218 These were collected by the Secretary-General in applying the terms of GA Res. 59/35, 2
December 2004: UN Doc. A/62/62; UN Doc. A/62/62 Add.1.
219 See e.g. Hober, in Muchlinski, Ortino and Schreuer (eds.), The Oxford Handbook of
International Investment Law (2008) 549, 553 ('there is a general consensus the [ARSIW A]
accurately reflect customary international law on state responsibility').
220 Application of the Convention on the Prevention and Punishment of the Crime of Genocide
(Bosnia and Herzegovina v. Serbia and Montenegro), ICJ Rep. 2007 p. 43, 209. Application
of the ARSIW A as reflective of custom has been particularly prevalent in the field of
investor-state arbitration: see e.g. Noble Ventures Inc. v. Romania, ICSID Case No. ARB/
01/1-1, 12 October 2005, §69 ('While [the ARSIWA] are not binding, they are widely
regarded as a codification of customary international law.'); EDF {Services) Ltd v.
Romania, ICSID Case No. ARB/05/13, 8 October 2009, §187 n. 7 ('The [ARSIWA] have
Annex405
44 THE FRAMEWORK OF RESPONSIBILITY
Until such time as the General Assembly reaches a definite position as
to the final form of the ARSIW A, they will continue to contribute to
international law, and be further consolidated and refined through their
application by courts and tribunals.
been frequently applied by courts and arbitral tribunals as declaratory of customary
international law'). On the question of a Convention on State Responsibility see
further Chapter 2.
Annex405

ANNEX406

TCiOINCi
LEGRAM
ICATE [ J COllECT
C~ARCC TO
DECLASSIFIED
Authority bltJ07h QDS-n
Department of State
~
CONFIDENTIAL__
Cla111J1cat1011
CONTROL
SENT TO: Amembassy ADDIS ABABA 7 b
Amity and ECON REL Treaty. EMBTELS 90 AUG 23; 93 AUG 24•
may, at its discretion, proceed as suggested closing PARAS EMBTEL 93 .
In conjunction or as alternative tactic, AMB may wish arrange interview
FONMIN purpose making most firm and earnest representations ..
against charges US proposals contain invidious implicat i ons or rerlect
unfavorably upon ETHIO. Stress FOL μ PTS. Every provision
binds US as well as ETHIO, and US has been obli gat ed by s imilar
m
treaties since early independenc e. If invidious RE ETHIO, equalbY
0
so RE US and host other na tions , including recent signatories: ';;3- •
0 .....
ITAL, URUG , IRELAND, COLOM, GR , Israel. Except note on ADMIN § CJ1
justice, no US pr oposals drafted wi th particular REF
,.. ~
ETHIO situa; ,
I-' a,
tion, but prepared GEN use NEGOTS many countries.
treaty to E'l'BIO, DEPT bad no motive other than make
In proposing ~ t
I-' I\)
a, agreement ba•e~
c.n
squarely upon equality and reciprocity. It assumed ETHIO, on PT -
a.-eawtnc •••·i:118 increased responsibility and enhanced stature INTERNATL
arrairs, prepared negotiate modern treaty incorporating enlightet d
principles and adapted present world conditions. While DEPT re-~
p,
mains disposed seriously seek agreement every substantive proble&>.,
J
1 t taela f:. _J
~
lo-,
V. G. Setser 7}-lj/
5/S-~R
COIFIDD'l'IAL ' r, n II REPRODUCTION FROM 111S AUG i 8 " r. m tOPY, IF CWSIFIED, as
PIOHIIITED.
Clasr i fication ~
Annex406
DECLASSIFIED
Authorltv t,,lt,l Q 7b ooS::o
UUN.l''..u>l::NT IAL
C ldr;1/1calt,,.,,,
f it feela there can be little utility in constantl y revising proposals 7
meet what appear be largely captious objections .
ART V, PARA 3. Communication right important one den1.ed certain
parts world. Far from implying ETHIO violation, DEPT seeks ETHIO COOP
in pr omoting objective universal inviolabi lit y.
ART VI , PARA 2. DEPT holds l ittle justifi cation subjecting aliens
special requirement s RE security costs and judgment. Treaties wi th
Ireland, COLOM, GR , Israel specifically include SUBJ within NATL treatment
r ule. In acceding El'HIO request exception permitting discrimination,
DEPT considered some standard necessary prevent abus e s , cases of
which reported cert ain countries.
ART VI I , PARA 2. QTE Most constant prot ect ion and security UNQTE
time -honored t reaty language. As s t ated DEPTEL 55 AUG 7, clause to be
g i ven reasonable not str i ctest i nterpretation. In DEPT'S view, provision
declaratory of I NTERNATL law, not more severe rule than INTERNATL
law, as ETHIO contends. RE liability, DEPT'S view is that party obligated
exercise QTE due diligence UNQTE make assurance effective, and that
liability arises in case failure exercise due diligence. If provision
unacceptable, DEPT suggests adoption language ART II existing treaty
(1914). Accordingly ART V, PARA 2, first sentence may be amended as
follows; QTE Each HCP shall assure, throughout the extent of its territories,
the security of the nationals of the other HCP UNQTE. ART VII,
PARA 2, may be similarly amended.
For _J
CONFIDENTIAL --- Clani/ication
Annex406
DECLASSIFIED
Authority h.ltJC7b QOhl
CONFIDENTIAL
(la 11f1cal1an
For URINFO, certain of Ministry's proposals appear acceptable, ani:i7
-,,J.t
explanations a.ho remove basis any real concern in certain others, but
apparently necessary take action discourage continuation unreasoned
objections .
ACHESOI
CONFIDENTIAL
CldJsifict1lion
_j
Annex406
I

ANNEX407

DECLASSIFIED
1.ttthority ,¥5 Z L 3 / _
i, DUI,
t O!i.sl,~d
(Olil..,,
Q,ilyJ
/ i¢le- 'IV one._. SU\lstit.'\lt!bon ' rl .
., f
ded ~~.- zJ:. r~q .
: I L , , t I , l
CJ3.t&:ful. reg~~ in accord g¢ner~1
• p e· of ,\reEfty'' :tar 1e.g~±~ a.
effect' proviS:on Ori.gina}. ela
te~s f or~ign' .inv:-es'tors w°i tam1:t ±nwrtireace eomi;trf1 f;' l'j.gJlt~ .P· "
.. - .... I' ~ . ,t?
_ gulatit.>n. FropQSed .sub~t1t1+ti0a ~ge:sts ipte;tt apPly" ~4son'i~ ~ , t:f _ . ~
'i:: ~ /. • ,.!,. I , • • ,:
me·asqres.. Clause not 'Vital_x ut &nbassy 3ho~4 try ·~b-t~~c:Ceptant;e~ <.r·:,;i:\
~ ..
1 A.rtiale IV two. This parl;tg:raph one o-t most ilnppri.ali~.i.n -~~ati, ·and
.: '
,. ·~·
accept:atie(3 any substanti,a.J. cha.nge very d.if.t'i~t.. Iz,_p ~e.a-'t.y ·~Si®
~- • l '
iess i::mA-Oi.fic e'Y'it"aTit en withdrawals and not h•seci in .more ~.ecent>u.s. tr
-r- --~ 1 r - :.
. Intere~ts in property oovered in Pr~oool (tv.en) l:ris}\1t 1aty,._ Co~ __·
.irulirect in-teresta e,sEre.nt..ial and in u-~' e 1 · tereat ai.c.ee '..; ,...,.:ortaiit I J .W-l-'t<'
' -
eneoura.g~ foreign investment through irart · ation Irlill~~ corpora~ ens~ aa,:
I I • .
well as directly. u.s. investment tnrGng count.rr CP?'pl!ltr~~on . .
eontrioutes Iran• a ectmpmi-c develdpllV!nt,. emt B. ILeglec
'
interest:s q .s. investors ilhe'Uher iave$ · · -ct or ;indirec!h,.
I f j • •
~ exc~e not~s w,ru1JJ.l ~ ~.an• :S ac · :eas1~r ,·" ~:t. 1'μ'.l c
. - . 'f
Final ~ ~~ ;.f$loti be:· ar:a~.: ; * • . · out· me~ n j · ·
"' '
, t)Eq'.VSStFICATIOW;O :..U.:t:4~--- ~ :.
Pm-£/cA~ ~-"-t--~ • , - •.· .
~ ~ t-
. C . . •·tJWt,.~~~'ill: ..
DECLASSIFIED
~uthority __fa,_._✓-Z.-2~. /9-'3/
QFi'IQTAI, -MS ONLY
Classification
.I,
SENT TO: ~, i'EHR.4N / d /~
l
Treaty htiele VIll. PrJ:>iiosed exceii> barteP and ·e ear
I
agreemen-t not aeceptab~e fer ine:l.usion --
Would untlermine ~ pollo,- proro.ote \ a.Ult~
, I ,
tdiy· ~t J.:~ ~ge -~~fee
I l I _. '
· · - · ' ' · an-dis~ibasis.
f .. ' . - ' . . . .
FYI agree112~:ts lik,e., ~th France pGfS!;,!;-Y in viq;J.ation 19 4,3 Tr~de n ~ ,_
,. ,. ~-- r , . ...
Agreemen'tc. Depa,rtment has .uo intent:~mu \)"raise queatien such _:.i ~
viol.at.ions/ buii my be difficult malie str"!'lt o.se' &Jl.ainst J'.r11n pr; ~ _-~ ~,. ; - • ; ;, . , - ".' • :-. . : ---Cle '
nthout question applleablltt,; l'ra,d,e ~ein.'ent-arising•..: U~e _di~ r.ition., · ' • ~
' - t ' . • ,.,. - ,. '· ()l•.!!;:
~ discussina .matter with Ir.anians~ .~ ,~be dange~ ·ser-ioua ~ontroversv . ·rn~ . ~ .... "b • - - • i. l . . . .., ,.-u,r ~
over trade matters/ Departi.a_~t ' ""';1' ~~h ft"il!lea' ~ Arbic:J:e. 'Vipl:: , it,l' · ·
an~ obr protisions · llelating sol~~ e,c
I e !'"~ tt ~ @a~ • \ : :~1
Article m existing Trade ~JIJ.8.nt.- . ·· i.1 · · · -~- ,..., . : -,...,.,x, ·
- J f • ..,, <Oct
Prmoipal purpose pal'agraph 6◄ to } s · -aga!ns :~la!:(as under ~ · - t ~ · .
clause based upon free entry .into n.s. o " take . f.•S• vessels on
. .. ~
th'3n . . . porial w{iters
• > i· ~ .
; ·. ~ . ,
ANNEX408

Treaty Series
Treaties and international agreements
registered
or filed and recorded
with the Secretariat of the United Nations
VOLUME 1728
.Recueil des Traites
Traites et accords internationaux
enregistres
ou classes et inscrits au repertoire
au Secretariat de /'Organisation des Nations Unies
United Nations• Nations Unies
New York, 2000
Annex 408
No. 30174
FRANCE
and
ARGENTINA
Agreement on the reciprocal promotion and protection of
investments (with related letter). Signed at Paris on
3 July 1991
Authentic texts: French and Spanish.
Registered by France on 3 August 1993.
FRANCE
et
ARGENTINE
Accord sur l'encouragement et la protection reciproques des
investissements ( avec lettre connexe ). Signe a Paris le
3 j uillet 1991
Textes authentiques : fran<;ais et espagnol.
Enregistre par la France le 3 aout 1993.
Vol. 1728, I-30174
Annex 408
298 United Nations - Treaty Series • Nations Unies - Recueil des Traites 1993
[ThANSLA TION - ThADUCTION]
AGREEMENT1 BETWEEN THE GOVERNMENT OF THE FRENCH
REPUBLIC AND THE GOVERNMENT OF THE ARGENTINE
REPUBLIC ON THE RECIPROCAL PROMOTION AND PROTECTION
OF INVESTMENTS
The Government of the French Republic and the Government of the Argentine
Republic, hereinafter referred to as "the Contracting Parties",
Desiring to develop economic cooperation between the two States and to create
favourable conditions for French investments in Argentina and Argentine investments
in France,
Convinced that the promotion and protection of such investments are likely to
stimulate transfers of capital and technology between the two countries in the interest
of their economic development,
Have agreed on the following provisions:
Article 1
For the purposes of this Agreement:
1. The term "investment" shall apply to assets such as property, rights and
interests of any category, and particularly but not exclusively, to:
(a) Movable and immovable property and all other real rights such as mortgages,
preferences, usufructs, sureties and similar rights;
(h) Shares, issue premiums and other forms of participation, albeit minority or
indirect, in companies constituted in the territory of either Contracting Party;
( c) Bonds, claims and rights to any benefit having an economic value;
(d) Copyrights, industrial property rights (such as patents for inventions,
licences, registered trade marks, industrial models and designs), technical processes,
registered trade names and goodwill;
(e) Concessions accorded by law or by virtue of a contract, including concessions
to prospect for, cultivate, mine or develop natural resources, including those
situated in the maritime zones of the Contracting Parties;
it being understood that the said assets shall be or shall have been invested and,
in accordance with the provisions of this Agreement, the related provisions laid
down in conformity with the legislation of the Contracting Party in whose territory
or maritime zone the investment is made, before or after the entry into force of this
Agreement.
Any change in the form in which assets arc invested shall not affect their status
as an investment, provided that the change is not contrary to the legislation of the
Contracting Party in whose territory or maritime zone the investment is made.
1 Came into force on 3 March 1993, i.e., one month after the date of receipt of the last of the notifications by which
lhe Parlies had informed each olher of lhe cornplelion of lhe rec.i uired inlernal procedures, in accordance wil11 arlicle 13.
Vol. 1728, I-30174
Annex 408
Treaty Series
Treaties and international agreements
registered
or filed and recorded
with the Secretariat of the United Nations
VOLUME1699
Recueil des Traites
Traites et accords internationaux
enregistres
ou classes et inscrits au repertoire
au Secretariat de /'Organisation des Nations Unies
United Nations• Nations Unies
New York. 2001
Annex 408
202 United Nations - Treaty Series • Nations Unies - Recueil des Traites 1992
[TRANSLATION -ThADUCTION]
AGREEMENT1 BETWEEN THE ARGENTINE REPUBLIC AND THE
KINGDOM OF SPAIN ON THE RECIPROCAL PROMOTION AND
PROTECTION OF INVESTMENTS
The Argentine Republic and the Kingdom of Spain, hereinafter referred to as
"the Parties",
Desiring to intensify economic cooperation for the economic benefit of both
countries,
Intending to create favourable conditions for investments made by investors of
either State in the territory of the other State,
Recognizing that the promotion and protection of investments in accordance
with this Agreement will encourage initiatives in this field,
Have agreed as follows:
Article I
DEFINITIONS
l. For the purposes of this Agreement, the term "investors" shall mean:
(a) Individuals having their domicile in either Party and the nationality of that
Party, in accordance with the agreements in force on this matter between the two
countries;
(b) Legal entities, including companies, groups of companies, trading companies
and other organizations constituted in accordance with the legislation of that
Party and having their main office in the territory of that Party.
2. The term ''investments" shall mean any kind of assets, such as property
and rights of every kind, acquired or effected in accordance with the legislation of
the country receiving the investment and in particular, but not exclusively, the following:
- Shares and other forms of participation in companies;
- Rights derived from any kind of contribution made with the intention of creating
economic value, including loans directly linked with a specific investment,
whether capitalized or not;
- Movable and immovable property and real rights such as mortgages, privileges,
sureties, usufructs and similar rights;
- Any kind of rights in the field of intellectual property, including patents, trade
marks, manufacturing licenses and know-how;
- Concessions granted by law or by virtue of a contract for engaging in economic
and commercial activity, in particular those related to the prospection, cultivation,
mining or development of natural resources.
1 Came into force on 28 September 1992, the date on which the Parties notified each other (on 9 July and
28 September l 992) of the completion of the required constitutional procedures, in accordance with article XI ( I).
Vol. 1699. 1-29403
Annex 408
1992 United Nations - Treaty Series • Nations Unies - Recueil des Traites 203
The content and scope of the rights corresponding to the various categories of
assets shall be determined by the laws and regulations of the Party in whose territory
the investment is situated.
No modification in the legal forum in which assets and capital have been
invested or reinvested shall affect their status as investments in accordance with this
Agreement.
3. The terms "investment income or earnings" shall mean returns from an
investment in accordance with the definition contained in the preceding paragraph
and shall expressly include profits, dividends and interest.
4. The term "territory" shall mean the land territory of each Party, as well as
the exclusive economic zone and the continental shelf beyond the limits of the
territorial sea of each Party over which it has or may have, in accordance with
international law, jurisdiction and sovereign rights for the purposes of prospection,
exploration and conservation of natural resources.
Article II
PROMOTION AND ACCEPTANCE
1. Each Party shall, to the extent possible, promote investments made in
its territory by investors of the other Party and shall accept those investments in
accordance with its legislation.
2. This Agreement shall also apply to capital investments made before its
entry into force by investors of one Party in the territory of the other Party in
accordance with the legislation of the latter Party. This Agreement shall not, however,
apply to disputes or claims arising before its entry into force.
Article Ill
PROTECTION
1. Each Party shall protect within its territory investments made in accordance
with its legislation by investors of the other Party and shall not obstruct, by
unjustified or discriminatory measures, the management, maintenance, use, enjoyment,
extension, sale and, where appropriate, liquidation of such investments.
2. Each Party shall endeavour to grant the necessary permits in connection
with such investments and, within the framework of its legislation, shall permit the
execution of manufacturing licensing contracts and of technical, commercial, financial
or administrative assistance and shall grant the requisite permits in connection
with the activities of consultants or experts engaged by investors of the other Party.
Article IV
TREATMENT
1. Each Party shall guarantee in its territory fair and equitable treatment of
investments made by investors of the other Party.
Vol 1699, 1-29403
Annex 408
Treaty Series
Treaties and international agreements
registered
or filed and recorded
with the Secretariat of the United Nations
VOLUME 1765
Recueil des Traites
Traites et accords internationaux
enregistres
ou classes et inscrits au repertoire
au Secretariat de /'Organisation des Nations Unies
United Nations • Nations Unies
New York. 2000
Annex 408
No. 30682
UNITED KINGDOM OF GREAT BRITAIN
AND NORTHERN IRELAND
and
ARGENTINA
Agreement for the promotion and protection of investments.
Signed at London on 11 December 1990
Authentic texts: English and Spanish.
Registered by the United Kingdom of Great Britain and Northern Ireland
on 18 February 1994.
ROYAUME-UNI DE GRANDE-BRETAGNE
ET D'IRLANDE DU NORD
et
ARGENTINE
Accord relatif a I' encouragement et a la protection des investissements.
Signe a Londres le 11 decembre 1990
Textes authentiques : anglais et espagnol.
Enregistre par le Royaume-Uni de Grande-Bretagne et d'Irlande du Nord
le 18 f evrie r 1994.
Vol. 1765, I-30682
Annex 408
34 United Nations - Treaty Series • Nations Unies - H.ecueil des Traitcs 1994
AGREEMENT1 BETWEEN THE GOVERNMENT OF THE UNITED
KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND
AND THE GOVERNMENT OF THE REPUBLIC OF ARGENTINA
FOR THE PROMOTION AND PROTECTION OF INVESTMENTS
The Government of the United Kingdom of Great Britain and Northern Ireland and
the Government of the Republic of Argentina;
Desiring to create favourable conditions for greater investment by investors of one
State in the territory of the other State;
Recognising that the encouragement and reciprocal protection under international
agreement of such investments will be conducive to the stimulation of individual business
initiative and will increase prosperity in both States;
Have agreed as follows:
ARTICLE 1
Definitions
For the purposes of this Agreement:
(a) "investment" means every kind of asset defined in accordance with the laws and
regulations of the Contracting Party in whose territory the investment is made and
admitted in accordance with this Agreement and in particular, though not exclusively,
includes:
(i) movable and immovable property and any other property rights such as
mortgages, liens or pledges;
(ii) shares in and stock and debentures of a company and any other form of participation
in a company, established in the territory of either of the Contracting Parties;
(iii) claims to money which are directly related to a specific investment or to any
performance under contract having a financial value;
(iv) intellectual property rights, goodwill, technical processes and know-how;
(v) business concessions conferred by law or under contract, including concessions to
search for, cultivate, extract or exploit natural resources.
A change in the form in which assets are invested does not affect their character as
investments. The term "investment" includes all investments, whether made before or
after the date of entry into force of this Agreement, but the provisions of this Agreement
shall not apply to any dispute concerning an investment which arose, or any claim
concerning an investment which was settled, before its entry into force;
(b) "returns" means the amounts yielded by an investment and in particular, though not
exclusively, includes profit, interest, capital gains, dividends, royalties and fees;
I Came into force on 19 February 1993, the date of the last of the notifications by which lhe Conlracling Patties
informed each other of the completion of the required conslilulional fonnalitles, in accordance with article 13.
Vol. 1765, 1-30682
Annex408
Treaty Series
Treaties and international agreements
registered
or filed and recorded
with the Secretariat of the United Nations
VOLUME 2242
Recueil des Traites
Traites et accords internationaux
enregistres
ou classes et inscrits au repertoire
au Secretariat de /'Organisation des Nations Unies
United Nations• Nations Unies
New York, 2004
Annex 408
Volume 2242, 1-39914
[ ENGLISH TEXT - TEXTE ANGLAIS ]
AGREEMENT ON ENCOURAGEMENT AND RECIPROCAL PROTECTION
OF INVESTMENTS BETWEEN THE KINGDOM OF THE NETHERLANDS
AND THE CZECH AND SLOVAK FEDERAL REPUBLIC
The Government of the Kingdom of the Netherlands and the Government of the Czech
and Slovak Federal Republic, hereinafter referred to as the Contracting Parties,
Desiring to extend and intensify the economic relations between them particularly with
respect to in vestments by the investors of one Contracting Party in the territory of the other
Contracting Party,
Recognizing that agreement upon the treatment to be accorded to such investments
will stimulate the flow of capital and technology and the economic development of the
Contracting Parties and that fair and equitable treatment is desirable,
Taking note of the Final Act of the Conference on Security and Cooperation in Europe,
signed on August, 1st 1975 in Helsinki,
Have agreed as follows:
Article l
For the purposes of the present Agreement:
a) the term "investments" shall comprise every kind of asset invested either directly or
through an investor of a third State and more particularly, though not exclusively:
(i) movable and immovable property and all related property rights:
(ii) shares, bonds and other kinds of interests in companies and joint ventures, as
well as rights derived therefrom;
(iii) title to money and other assets and to any performance having an economic
value;
(iv) rights in the field of intellectual property, also including technical processes,
goodwill and know-how;
( v) concessions conferred by law or under contract, including concessions to prospect,
explore, extract and win natural resources.
b) the term"investors"shall comprise:
(i) natural persons having the nationality of one of the Contracting Parties in accordance
with its law:
(ii) legal persons constituted under the law of one of the Contracting Parties.
c) the term "territory" also includes the maritime areas adjacent to the coast of the State
concerned, to the extent to which that State may exercise sovereign rights or jurisdiction in
those areas according to international law.
224
Annex 408

ANNEX409

2004 Model BIT
TREATY BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND THE GOVERNMENT OF [Country]
CONCERNING THE ENCOURAGEMENT
AND RECIPROCAL PROTECTION OF INVESTMENT
The Government of the United States of America and the Government of [Country]
(hereinafter the "Parties");
Desiring to promote greater economic cooperation between them with respect to
investment by nationals and enterprises of one Party in the territory of the other Party;
Recognizing that agreement on the treatment to be accorded such investment will
stimulate the flow of private capital and the economic development of the Parties;
Agreeing that a stable framework for investment will maximize effective utilization of
economic resources and improve living standards;
Recognizing the importance of providing effective means of asserting claims and
enforcing rights with respect to investment under national law as well as through international
arbitration;
Desiring to achieve these objectives in a manner consistent with the protection of
health, safety, and the environment, and the promotion of internationally recognized labor rights;
Having resolved to conclude a Treaty concerning the encouragement and reciprocal
protection of investment;
Have agreed as follows:
Annex 409
2. Each Party shall accord to covered investments treatment no less favorable than that it
accords, in like circumstances, to investments in its territory of its own investors with respect to
the establishment, acquisition, expansion, management, conduct, operation, and sale or other
disposition of investments.
3. The treatment to be accorded by a Party under paragraphs 1 and 2 means, with respect to a
regional level of government, treatment no less favorable than the treatment accorded, in like
circumstances, by that regional level of government to natural persons resident in and enterprises
constituted under the laws of other regional levels of government of the Party of which it forms a
part, and to their respective investments.
Article 4: Most-Favored-Nation Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable than that it
accords, in like circumstances, to investors of any non-Party with respect to the establishment,
acquisition, expansion, management, conduct, operation, and sale or other disposition of
investments in its territory.
2. Each Party shall accord to covered investments treatment no less favorable than that it
accords, in like circumstances, to investments in its territory of investors of any non-Party with
respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or
other disposition of investments.
Article 5: Minimum Standard of Treatment8
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.
8 Article 5 [Minimum Standard of Treatment] shall be interpreted in accordance with Annex A.
- 7 -
Annex 409
3. A determination that there has been a breach of another provision of this Treaty, or of a
separate international agreement, does not establish that there has been a breach of this Article.
4. Notwithstanding Article 14 [Non-Conforming Measures](5)(b) [subsidies and grants], each
Party shall accord to investors of the other Party, and to covered investments, non-discriminatory
treatment with respect to measures it adopts or maintains relating to losses suffered by
investments in its territory owing to armed conflict or civil strife.
5. Notwithstanding paragraph 4, if an investor of a Party, in the situations referred to in
paragraph 4, suffers a loss in the territory of the other Party resulting from:
(a) requisitioning of its covered investment or part thereof by the latter's forces or
authorities; or
(b) destruction of its covered investment or part thereof by the latter's forces or
authorities, which was not required by the necessity of the situation,
the latter Party shall provide the investor restitution, compensation, or both, as appropriate, for
such loss. Any compensation shall be prompt, adequate, and effective in accordance with Article
6 [Expropriation and Compensation](2) through (4), mutatis mutandis.
6. Paragraph 4 does not apply to existing measures relating to subsidies or grants that would be
inconsistent with Article 3 [National Treatment] but for Article 14 [Non-Conforming
Measures](5)(b) [subsidies and grants].
Article 6: Expropriation and Compensation9
1. Neither Party may expropriate or nationalize a covered investment either directly or indirectly
through measures equivalent to expropriation or nationalization ("expropriation"), except:
(a) for a public purpose;
(b) in a non-discriminatory manner;
( c) on payment of prompt, adequate, and effective compensation; and
( d) in accordance with due process of law and Article 5 [Minimum Standard of
Treatment](!) through (3).
9 Article 6 [Expropriation] shall be interpreted in accordance with Annexes A and B.
- 8 -
Annex 409
AnnexB
Expropriation
The Parties confirm their shared understanding that:
1. Article 6 [Expropriation and Compensation](!) is intended to reflect customary international
law concerning the obligation of States with respect to expropriation.
2. An action or a series of actions by a Party cannot constitute an expropriation unless it
interferes with a tangible or intangible property right or property interest in an investment.
3. Article 6 [Expropriation and Compensation](!) addresses two situations. The first is direct
expropriation, where an investment is nationalized or otherwise directly expropriated through
formal transfer of title or outright seizure.
4. The second situation addressed by Article 6 [Expropriation and Compensation](!) is indirect
expropriation, where an action or series of actions by a Party has an effect equivalent to direct
expropriation without formal transfer of title or outright seizure.
(a) The determination of whether an action or series of actions by a Party, in a
specific fact situation, constitutes an indirect expropriation, requires a case-bycase,
fact-based inquiry that considers, among other factors:
(i) the economic impact of the government action, although the fact that an
action or series of actions by a Party has an adverse effect on the economic
value of an investment, standing alone, does not establish that an indirect
expropriation has occurred;
(ii) the extent to which the government action interferes with distinct,
reasonable investment-backed expectations; and
(iii) the character of the government action.
(b) Except in rare circumstances, non-discriminatory regulatory actions by a Party
that are designed and applied to protect legitimate public welfare objectives, such
as public health, safety, and the environment, do not constitute indirect
expropriations.
- 38 -
Annex 409
ANNEX410

2012 U.S. Model Bilateral Investment Treaty
TREATY BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND THE GOVERNMENT OF [Country]
CONCERNING THE ENCOURAGEMENT
AND RECIPROCAL PROTECTION OF INVESTMENT
The Government of the United States of America and the Government of [Country]
(hereinafter the "Parties");
Desiring to promote greater economic cooperation between them with respect to
investment by nationals and enterprises of one Party in the territory of the other Party;
Recognizing that agreement on the treatment to be accorded such investment will
stimulate the flow of private capital and the economic development of the Parties;
Agreeing that a stable framework for investment will maximize effective utilization of
economic resources and improve living standards;
Recognizing the importance of providing effective means of asserting claims and
enforcing rights with respect to investment under national law as well as through international
arbitration;
Desiring to achieve these objectives in a manner consistent with the protection of
health, safety, and the environment, and the promotion of internationally recognized labor rights;
Having resolved to conclude a Treaty concerning the encouragement and reciprocal
protection of investment;
Have agreed as follows:
Annex 410
Article 3: National Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable than that it
accords, in like circumstances, to its own investors with respect to the establishment, acquisition,
expansion, management, conduct, operation, and sale or other disposition of investments in its
territory.
2. Each Party shall accord to covered investments treatment no less favorable than that it
accords, in like circumstances, to investments in its territory of its own investors with respect to
the establishment, acquisition, expansion, management, conduct, operation, and sale or other
disposition of investments.
3. The treatment to be accorded by a Party under paragraphs 1 and 2 means, with respect to a
regional level of government, treatment no less favorable than the treatment accorded, in like
circumstances, by that regional level of government to natural persons resident in and enterprises
constituted under the laws of other regional levels of government of the Party of which it forms a
part, and to their respective investments.
Article 4: Most-Favored-Nation Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable than that it
accords, in like circumstances, to investors of any non-Party with respect to the establishment,
acquisition, expansion, management, conduct, operation, and sale or other disposition of
investments in its territory.
2. Each Party shall accord to covered investments treatment no less favorable than that it
accords, in like circumstances, to investments in its territory of investors of any non-Party with
respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or
other disposition of investments.
Article 5: Minimum Standard of Treatment9
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:
9 Article 5 [Minimum Standard of Treatment] shall be interpreted in accordance with Annex A.
- 7 -
Annex 410
(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.
3. A determination that there has been a breach of another provision of this Treaty, or of a
separate international agreement, does not establish that there has been a breach of this Article.
4. Notwithstanding Article 14 [Non-Conforming Measures](5)(b) [subsidies and grants], each
Party shall accord to investors of the other Party, and to covered investments, non-discriminatory
treatment with respect to measures it adopts or maintains relating to losses suffered by
investments in its territory owing to armed conflict or civil strife.
5. Notwithstanding paragraph 4, if an investor of a Party, in the situations referred to in
paragraph 4, suffers a loss in the territory of the other Party resulting from:
(a) requisitioning of its covered investment or part thereof by the latter's forces or
authorities; or
(b) destruction of its covered investment or part thereof by the latter's forces or
authorities, which was not required by the necessity of the situation,
the latter Party shall provide the investor restitution, compensation, or both, as appropriate, for
such loss. Any compensation shall be prompt, adequate, and effective in accordance with Article
6 [Expropriation and Compensation](2) through (4), mutatis mutandis.
6. Paragraph 4 does not apply to existing measures relating to subsidies or grants that would be
inconsistent with Article 3 [National Treatment] but for Article 14 [Non-Conforming
Measures](5)(b) [subsidies and grants].
Article 6: Expropriation and Compensation10
1. Neither Party may expropriate or nationalize a covered investment either directly or indirectly
through measures equivalent to expropriation or nationalization ("expropriation"), except:
(a) for a public purpose;
(b) in a non-discriminatory manner;
( c) on payment of prompt, adequate, and effective compensation; and
10 Article 6 [Expropriation] shall be interpreted in accordance with Annexes A and B.
- 8 -
Annex 410
AnnexB
Expropriation
The Parties confirm their shared understanding that:
1. Article 6 [Expropriation and Compensation](!) is intended to reflect customary international
law concerning the obligation of States with respect to expropriation.
2. An action or a series of actions by a Party cannot constitute an expropriation unless it
interferes with a tangible or intangible property right or property interest in an investment.
3. Article 6 [Expropriation and Compensation](!) addresses two situations. The first is direct
expropriation, where an investment is nationalized or otherwise directly expropriated through
formal transfer of title or outright seizure.
4. The second situation addressed by Article 6 [Expropriation and Compensation](!) is indirect
expropriation, where an action or series of actions by a Party has an effect equivalent to direct
expropriation without formal transfer of title or outright seizure.
(a) The determination of whether an action or series of actions by a Party, in a
specific fact situation, constitutes an indirect expropriation, requires a case-bycase,
fact-based inquiry that considers, among other factors:
(i) the economic impact of the government action, although the fact that an
action or series of actions by a Party has an adverse effect on the economic
value of an investment, standing alone, does not establish that an indirect
expropriation has occurred;
(ii) the extent to which the government action interferes with distinct,
reasonable investment-backed expectations; and
(iii) the character of the government action.
(b) Except in rare circumstances, non-discriminatory regulatory actions by a Party
that are designed and applied to protect legitimate public welfare objectives, such
as public health, safety, and the environment, do not constitute indirect
expropriations.
- 41 -
Annex 410
ANNEX 411

Article 14.1: Definitions
For the purposes of this Chapter:
CHAPTER14
INVESTMENT
covered investment means, with respect to a Party, an investment in its territory of an investor of
another Party in existence as of the date of entry into force of this Agreement or established,
acquired, or expanded thereafter;
enterprise means an enterprise as defined in Article 1.5 (General Definitions), and a branch of an
enterprise;
enterprise of a Party means an enterprise constituted or organized under the law of a Party, or a
branch located in the territory of a Party and carrying out business activities there;
freely usable currency means "freely usable currency" as determined by the International
Monetary Fund under its Articles of Agreement;
investment means every asset that an investor owns or controls, directly or indirectly, that has the
characteristics of an investment, including such characteristics as the commitment of capital or
other resources, the expectation of gain or profit, or the assumption of risk. An investment may
include:
(a) an enterprise;
(b) shares, stock and other forms of equity participation in an enterprise;
( c) bonds, debentures, other debt instruments, and loans; 1
( d) futures, options, and other derivatives;
( e) turnkey, construction, management, production, concession, revenue-sharing, and
other similar contracts;
( f) intellectual property rights;
1 Some forms of debt, such as bonds, debentures, and long-term notes or loans, are more likely to have the
characteristics of an investment, while other forms of debt, such as claims to payment that are immediately due, are
less likely to have these characteristics.
Annex 411
ANNEX 14-B
EXPROPRIATION
The Parties confirm their shared understanding that:
1. An action or a series of actions by a Party cannot constitute an expropriation unless it
interferes with a tangible or intangible property right18 or property interest in an investment.
2. Article 14.8.1 (Expropriation and Compensation) addresses two situations. The first is
direct expropriation, in which an investment is nationalized or otherwise directly expropriated
through formal transfer of title or outright seizure.
3. The second situation addressed by Article 14.8.1 (Expropriation and Compensation) is
indirect expropriation, in which an action or series of actions by a Party has an effect equivalent
to direct expropriation without formal transfer of title or outright seizure.
(a) The determination of whether an action or series of actions by a Party, in a specific
fact situation, constitutes an indirect expropriation, requires a case-by-case, factbased
inquiry that considers, among other factors:
(i) the economic impact of the government action, although the fact that an
action or series of actions by a Party has an adverse effect on the economic
value of an investment, standing alone, does not establish that an indirect
expropriation has occurred,
(ii) the extent to which the government action interferes with distinct,
reasonable investment-backed expectations, 19 and
(iii) the character of the government action, including its object, context, and
intent.
(b) Non-discriminatory regulatory actions by a Party that are designed and applied to
protect legitimate public welfare objectives, such as health, safety and the
environment, do not constitute indirect expropriations, except in rare
circumstances.
18 For greater certainty, the existence of a property right is determined with reference to a Party's law.
19 For greater certainty, whether an investor's investment-backed expectations are reasonable depends, to the extent
relevant, on factors such as whether the government provided the investor with binding written assurances and the
nature and extent of governmental regulation or the potential for government regulation in the relevant sector.
Annex 411
ANNEX412

Council of the
European Union
lnterinstitutional File:
2016/0206 {NLE)
Brussels, 14 September 2016
{OR. en)
10973/16
ADD3
WTO 195
SERVICES 20
FDI 16
CDN12
LEGISLATIVE ACTS AND OTHER INSTRUMENTS
Subject: Comprehensive Economic and Trade Agreement between Canada, of the
one part, and the European Union and its Member States, of the other part
Annex412
ANNEX8-A
EXPROPRIATION
The Parties confirm their shared understanding that:
1. Expropriation may be direct or indirect:
(a) direct expropriation occurs when an investment is nationalised or otherwise directly
expropriated through formal transfer of title or outright seizure; and
(b) indirect expropriation occurs if a measure or series of measures of a Party has an effect
equivalent to direct expropriation, in that it substantially deprives the investor of the
fundamental attributes of property in its investment, including the right to use, enjoy
and dispose of its investment, without formal transfer of title or outright seizure.
2. The determination of whether a measure or series of measures of a Party, in a specific fact
situation, constitutes an indirect expropriation requires a case-by-case, fact-based inquiry that
takes into consideration, among other factors:
(a) the economic impact of the measure or series of measures, although the sole fact that a
measure or series of measures of a Party has an adverse effect on the economic value of
an investment does not establish that an indirect expropriation has occurred;
Annex412
(b) the duration of the measure or series of measures of a Party;
( c) the extent to which the measure or series of measures interferes with distinct, reasonable
investment-backed expectations; and
(d) the character of the measure or series of measures, notably their object, context and
intent.
3. For greater certainty, except in the rare circumstance when the impact of a measure or series
of measures is so severe in light of its purpose that it appears manifestly excessive,
non-discriminatory measures of a Party that are designed and applied to protect legitimate
public welfare objectives, such as health, safety and the environment, do not constitute
indirect expropriations.
Annex412

ANNEX413

EN
EUROPEAN
COMMISSION
ANNEX
to the
Brussels, 18.4.2018
COM(2018) 194 final
ANNEX2
Proposal for a Council Decision
on the conclusion of the Investment Protection Agreement between the European Union
and its Member States of the one part, and the Republic of Singapore, of the other part
Annex 413
EN
ANNEXl
EXPROPRIATION
The Parties confirm their shared understanding that:
1. Article 2.6 (Expropriation) addresses two situations. The first is direct expropriation where a
covered investment is nationalised or otherwise directly expropriated through formal transfer
of title or outright seizure. The second is indirect expropriation where a measure or series of
measures by a Party has an effect equivalent to direct expropriation in that it substantially
deprives the covered investor of the fundamental attributes of property in its covered
investment, including the right to use, enjoy and dispose of its covered investment, without
formal transfer of title or outright seizure.
2. The determination of whether a measure or series of measures by a Party, in a specific
situation, constitutes an indirect expropriation requires a case-by-case, fact-based inquiry that
considers, among other factors:
(a) the economic impact of the measure or series of measures and its duration, although the
fact that a measure or a series of measures by a Party has an adverse effect on the
economic value of an investment, standing alone, does not establish that an indirect
expropriation has occurred;
xxxx/en 1
Annex 413
(b) the extent to which the measure or series of measures interferes with the possibility to
use, enjoy or dispose of the property; and
(c) the character of the measure or series of measures, notably its object, context and intent.
For greater certainty, except in the rare circumstance where the impact of a measure or series
of measures is so severe in light of its purpose that it appears manifestly excessive, nondiscriminatory
measure or series of measures by a Party that are designed and applied to
protect legitimate public policy objectives such as public health, safety and the environment,
do not constitute indirect expropriation.
xxxx/en 2
Annex 413

ANNEX414

Modernisation of the Trade part of the EU-Mexico Global Agreement
Without Prejudice
Disclaimer: In view of the Commission's transparency policy, the Commission is publishing
the texts of the Trade Part of the Agreement following the agreement in principle announced
on 21 April 2018.
The texts are published for information purposes only and may undergo further
modifications including as a result of the process of legal revision. The texts are still under
negotiations and not finalised. However, in view of the growing public interest in the
negotiations, the texts are published at this stage of the negotiations for information
purposes. These texts are without prejudice to the final outcome of the agreement between
the EU and Mexico.
The texts will be final upon signature. The agreement will become binding on the Parties
under international law only after completion by each Party of its internal legal procedures
necessary for the entry into force of the Agreement (or its provisional application).
CHAPTER XX
INVESTMENT
Section A
GENERAL PROVISIONS
Article 1 Right to regulate
The Parties affirm the right to regulate within their territories to achieve legitimate policy
objectives, such as the protection of public health, social services, public education, safety,
environment or public morals, social or consumer protection, privacy and data protection, the
promotion and protection of cultural diversity, or competition.
Article 2 Scope
This Chapter applies to measures adopted or maintained by1:
(a) the central, regional, or local governments and authorities of that Party; and
(b) any person, including a state enterprise or any other non-governmental body in the
exercise of powers delegated by central, regional, or local governments or
authorities.
Article 3 Definitions
For the purpose of this Chapter:
1 For greater certainty, this Chapter covers measures by entities listed under paragraph (a) and (b ), which are
adopted or maintained either directly, or indirectly by instructing, directing or controlling other entities with
regard to those measures.
1 of23
Annex414
Modernisation of the Trade part of the EU-Mexico Global Agreement
Without Prejudice
ANNEX ON EXPROPRIATION
The Parties confirm their shared understanding that:
1. A measure or series of measures by a Party cannot constitute an expropriation unless it
interferes with a tangible or intangible property right or property interest in an
investment.
2. Article 12(1) (Expropriation and Compensation) addresses two situations. The first is
direct expropriation, which occurs when an investment is nationalised or otherwise
directly expropriated through formal transfer of title or outright seizure.
3. The second situation addressed by Article 12( 1) (Expropriation and Compensation) is
indirect expropriation, which occurs when a measure or series of measures by a Party
has an effect equivalent to direct expropriation, in that it substantially deprives the
investor of the fundamental attributes of property in its investment, including the right
to use, enjoy and dispose of its investment, without formal transfer of title or outright
seizure.
4. The determination of whether a measure or series of measures by a Party, in a specific
situation, constitutes an indirect expropriation requires a case-by-case, fact-based
inquiry that considers, among other factors:
(i) the economic impact of the measure or series of measures, although the fact that a
measure or series of measures by a Party has an adverse effect on the economic
value of an investment, standing alone, does not establish that an indirect
expropriation has occurred;
(ii) the duration of the measure or series of measures by a Party;
(iii) the extent to which the government measure interferes with the distinct and
reasonable expectations of the investor arising out of the investment; and
(iv) the character of the the measure or series of measures, notably their object and
context.
3. For greater certainty, non-discriminatory measures by a Party that are designed and
applied to protect legitimate policy objectives, such as the protection of public health,
social services, public education, safety, and the environment, or public morals, social
or consumer protection, privacy and data protection, or the promotion and protection
of cultural diversity do not constitute indirect expropriations, except in the rare
circumstance when the impact of a measure or series of measures is manifestly
excessive in light of its purpose.
19 of23
Annex414
ANNEX415

l ♦ I Government
of Canada
Gouvernement
du Canada
Home > Global Affairs Canada > Trade > Trade and investment agreements > Colombia
> Canada-Colombia Free Trade Agreement - Investment
Canada-Colombia Free Trade Agreement
Chapter Eight - Investment
Section A - Investment
Article 801: Scope and Coverage
1. This Chapter shall apply to measures adopted or maintained by a Party relating to:
(a) investors of the other Party;
(b) covered investments; and
(c) with respect to Articles 807, 815 and 816, all investments in the territory of the Party.
2. For greater certainty, the provisions of this Chapter do not bind a Party in relation to any act or
fact that took place or any situation that ceased to exist before the date of entry into force of this
Agreement.
3. Consistent with Articles 1305 (Competition Policy, Monopolies and State Enterprises -
Designated Monopolies) and 1306 (Competition Policy, Monopolies and State Enterprises State
Enterprises) the Parties confirm their understanding that nothing in this Chapter shall be
construed to prevent a Party from designating a monopoly, or from maintaining or establishing a
state enterprise.
TOP- of P-agg
Article 802: Relation to Other Chapters
1. In the event of any inconsistency between this Chapter and another Chapter, the other Chapter
shall prevail to the extent of the inconsistency.
2. A requirement by a Party that a service supplier of the other Party post a bond or other form of
financial security as a condition of the cross-border supply of a service into its territory does not of
itself make this Chapter applicable to measures adopted or maintained by the Party relating to the
cross-border supply of the service. This Chapter applies to measures adopted or maintained by the
Party relating to the posted bond or financial security, to the extent that such bond or financial
security is a covered investment.
3. This Chapter shall not apply to measures adopted or maintained by a Party to the extent that
they are covered by Chapter Eleven (Financial Services).
Annex 415
(a) be temporary and be eliminated as soon as the circumstances leading to their imposition no
longer exist;
(b) be of general application;
(c) be imposed and be applied in good faith;
(d) be consistent with Articles 803 and 804; and
(e) not impose, with respect to deposits of investors of Canada, any terms or conditions that are
more restrictive than those applied at the time such deposits were made.
4. Upon adopting a measure pursuant to paragraph 1 or 2, Colombia shall provide to Canada the
reasons for the adoption of the measure as well as any relevant information.
5. For the purposes of this Annex:
foreign credit means any type of foreign debt financing whatever its nature, form or maturity
period; and
foreign direct investment means an investment of an investor of Canada, other than a foreign
credit, made in order to:
(a) establish a Colombian enterprise or increase the capital of an existing Colombian enterprise; or
(b) acquire equity of an existing Colombian enterprise, but excludes such an investment that is of
a purely financial character and is designed only to gain indirect access to the financial market of
Colombia.
TOP- of P-agg
Annex811
Indirect Expropriation
The Parties confirm their shared understanding that:
1. Paragraph 1 of Article 811 addresses two situations. The first situation is direct expropriation,
where an investment is nationalized or otherwise directly expropriated as provided for under
international law.
2. The second situation is indirect expropriation, which results from a measure or series of
measures of a Party that have an effect equivalent to direct expropriation without formal transfer
of title or outright seizure.
(a) The determination of whether a measure or series of measures of a Party constitute an indirect
expropriation requires a case-by-case, fact-based inquiry that considers, among other factors:
(i) the economic impact of the measure or series of measures, although the sole fact that a
measure or series of measures of a Party has an adverse effect on the economic value of an
investment does not establish that an indirect expropriation has occurred,
(ii) the extent to which the measure or series of measures interfere with distinct, reasonable
investment-backed expectations, and
Annex 415
(iii) the character of the measure or series of measures;
(b) Except in rare circumstances, such as when a measure or series of measures is so severe in the
light of its purpose that it cannot be reasonably viewed as having been adopted in good faith, nondiscriminatory
measures by a Party that are designed and applied to protect legitimate public
welfare objectives, for example health, safety and the protection of the environment, do not
constitute indirect expropriation.
Annex821
Standard Waiver and Consent
In Accordance with Article 821 of this Agreement
In the interest of facilitating the filing of waivers as required by Article 821 of this Agreement, and
to facilitate the orderly conduct of the dispute resolution procedures set out in Section B, the
following standard waiver forms shall be used, depending on the type of claim.
Claims filed under Article 819 must be accompanied by either Form 1, where the investor is a
national of a Party, or Form 2, where the investor is a Party, a state enterprise thereof, or an
enterprise of such Party.
Where the claim is based on loss or damage to an interest in an enterprise of the other Party that
is a juridical person that the investor owns or controls directly or indirectly, either Form 1 or 2 must
be accompanied by Form 3.
Claims made under Article 820 must be accompanied by either Form 1, where the investor is a
national of a Party, or Form 2, where the investor is a Party, a state enterprise thereof, or an
enterprise of such Party, and Form 4.
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Form1
Consent and waiver for an investor bringing a claim under Article 819 or Article 820 (where the investor
is a national of a Party) of the Free Trade Agreementbetween Canada and the Republic of Colombia done
on (date of signature):
I, (Name of investor) , consent to arbitration in accordance with the procedures set out in this
Agreement, and waive my right to initiate or continue before any administrative tribunal or court
under the law of either Party to the Agreement, or other dispute settlement procedures, any
proceedings with respect to the measure of (Name of disputing Party) that is alleged to be a
breach referred to in Article 819, except for proceedings for injunctive, declaratory or other
extraordinary relief, not involving the payment of damages, before an administrative tribunal or
court under the law of (Name of disputing Party).
(To be signed and dated)
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Form2
Consent and waiver for an investor bringing a claim under Article 819 or Article 820 (where the investor
Annex 415

ANNEX416

Krederi Ltd. v. Ukraine (ICSID Case No. ARB/14/17)
Excerpts of the Award of July 2, 2018 made pursuant to Rule 48(4) of the ICSID
Arbitration Rules of 2006
Claimant
Krederi Limited ("Krederi Ltd.", a company incorporated under the laws of England and Wales)
Respondent
Ukraine
Tribunal
August Reinisch (President of the Tribunal, Austrian), appointed by the parties
Markus Wirth (Swiss), appointed by the Claimant
Gavan Griffith (Australian), appointed by the Respondent
Award
July 2, 2018
Instrument relied on for consent to ICSID arbitration
Bilateral Investment Agreement between the Government of the United Kingdom of Great Britain and
Northern Ireland ("UK") and the Government of Ukraine ("Ukraine") for the Promotion and Reciprocal
Protection oflnvestments, dated February 10, 1993 entered into force on the same date
Procedure
Applicable Arbitration Rules: ICSID Arbitration Rules of2006
Place of Proceedings: Paris, France
Procedural Language: English
Full Procedural Details: Available at https://www.worldbank.org/icsid
Factual Background
This dispute relates to three land plots located in Kiev, Ukraine that the Claimant acquired via two Ukrainian
companies. The Claimant alleged that it had plans to develop a multi-functional complex including a luxury
hotel, shopping area, multi-level parking, as well as residential, office, and retail spaces on the land. In the
Claimant's view, the land plots were lost as a result of various measures by Ukraine, in violation of the
BIT, most importantly through four court proceedings allegedly conducted in an irregular fashion falling
short of due process.
***
Annex 416
EXCERPTS
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
Krederi Ltd.
v.
Ukraine
ICSID Case No. ARB/14/17
AWARD
Members of the Tribunal
Prof. Dr. August Reinisch, President
Dr. Markus Wirth, Arbitrator
Dr. Gavan Griffith QC, Arbitrator
Secretary of the Tribunal
Ms. Ella Rosenberg
Date of dispatch to the Parties: 2 July 2018
Annex 416
Krederi Ltd. v. Ukraine
Excerpts of the A ward
705. This understanding of the requirement of due process is also reflected in the reasoning of
the tribunal in ADC v. Hungary398 upon which Claimant relies. 399
Some basic legal mechanisms, such as reasonable advance notice, a fair
hearing and an unbiased and impartial adjudicator to assess the actions in
dispute, are expected to be readily available and accessible to the investor to
make such legal procedure meaningful. In general, the legal procedure must
be of a nature to grant an affected investor a reasonable chance within a
reasonable time to claim its legitimate rights and have its claims heard. If no
legal procedure of such nature exists at all, the argument that "the actions are
taken under due process of law" rings hollow.400
706. Thus, in the Tribunal's view, the requirement that an expropriation be not only
accompanied by compensation, but also carried out for a public purpose and in accordance
with due process of law is already inherent in Article 6( I) of the Treaty. Therefore, there
is no need to invoke any third-party BIT with an express due process requirement in its
expropriation clause via the MFN clause of the Treaty.
b. Judicial Expropriation
707. As a general matter, this Tribunal takes the view that it is not excluded that judicial action
may, in certain situations, amount to expropriation. This was recognized by the tribunal in
Saipem v. Bangladesh401 which found that the host State's judiciary expropriated the
investor's immaterial rights under an ICC arbitral award. In its jurisdictional decision the
tribunal held that "[ ... ] there is no reason why a judicial act could not result in an
expropriation.',4oz And in its award,403 the same tribunal found that the annulment of an
398 ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, ICSID Case No.
ARB/03/16, Award, 2 October 2006, CLA-51.
399 Claimant Post-Hearing Brief, ,r 84.
400 ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, ICSID Case No.
ARB/03/16, Award, 2 October 2006, CLA-51, ,r 435.
401 Saipem Sp.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on jurisdiction and
recommendation on provisional measures, 21 March 2007, CLA-31; Award, 30 June 2009, CLA-32.
402 Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on jurisdiction and
recommendation on provisional measures, 21 March 2007, CLA-31, ,r 132.
403 Saipem Sp.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/7, Award, 30 June 2009, CLA-
32.
113
Annex 416
Krederi Ltd. v. Ukraine
Excerpts of the A ward
ICC award, in which "Saipem's residual contractual rights under the investment [were]
crystallised",404 amounted to an expropriation of such rights.
708. Also, the fact that in disputes over ownership ultimate outcomes will usually not benefit
the State, but a third party, does not, as a matter of principle, exclude the possibility that a
judicial determination may amount to expropriation. This was acknowledged by the
tribunal in Rumeli v. Kazakhstan,405 which found a creeping expropriation, although the
judiciary's action did not benefit the State, but a third party.406
709. While it is possible that judicial action amounts to expropriation, it is the exception rather
than the norm. In any kind of private law dispute over ownership of movable or immovable
property, courts will make a decision which of the disputing parties claiming ownership
rights prevails. This will result in a finding that one party will be entitled to ownership
whereas the other ( or others) will not. Such judicial determinations do not constitute
expropriation. Similarly, where property transfers are held to be invalid, the resulting
transfers of ownership do not amount to expropriation.
710. In this regard the Tribunal concurs with the view expressed by the Saipem v. Bangladesh
tribunal407 which found that, in the specific circumstances, the host State's judicial actions
annulling an ICC award amounted to indirect expropriation,4°8 but held that in the peculiar
case of a judicial expropriation the "substantial deprivation" of ownership rights in itself
404 Ibid., 1128 ("[ ... ] Saipem's residual contractual rights under the investment as crystallised in the ICC Award.").
405 Rumeli Telekom A.S. and Telsim Mobil Telekomikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case
No. ARB/05/16, Award, 29 July 2008, CLA-12.
406 Ibid., 1704 ("It is a characteristic of judicial expropriation that it is usually instigated by a private party for his own
benefit, and not that of the State. This is no doubt a relevant consideration, although not in itself decisive, as has
already been observed. The Tribunal considers however, and Respondent indeed accepted in paragraph 259 of its
Rejoinder, that a transfer to a third party may amount to an expropriation attributable to the State if the judicial process
was instigated by the State.").
407 Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/07, Award, 30 June 2009, CLA-
32.
408 Ibid., 1- 129 ("In respect of the taking, the actions of the Bangladeshi courts do not constitute an instance of direct
expropriation, but rather of "measures having similar effects" within the meaning of Article 5(2) of the BIT. Such
actions resulted in substantially depriving Saipem of the benefit of the ICC Award. This is plain in light of the decision
of the Bangladeshi Supreme Court that the ICC Award is "a nullity". Such a ruling is tantamount to a taking of the
residual contractual rights arising from the investments as crystallised in the ICC Award. As such, it amounts to an
expropriation within the meaning of Article 5 of the BIT.").
114
Annex 416
Krederi Ltd. v. Ukraine
Excerpts of the A ward
was not sufficient for a finding of expropriation because otherwise "any setting aside of an
award could then found a claim for expropriation, even if the setting aside was ordered by
the competent state court upon legitimate grounds.''4°9 Rather, an additional element of
illegality was required in order to tum a judicial decision into an indirect expropriation of
the intangible rights under an arbitral award. In this case, the tribunal found that the
"Bangladeshi courts abused their supervisory jurisdiction over the arbitration process"410
and interfered with the arbitral process contrary to the New York Convention.411
711. This approach was explicitly endorsed in Swiss/ion v. Macedonia,412 in which an ICSID
tribunal held "[ ... ] that a predicate for alleging a judicial expropriation is unlawful activity
by the court itself."413 Since there was no such illegality the Swiss/ion v. Macedonia
tribunal rejected the expropriation claim and argued that otherwise any lawful termination
of contractual rights might easily be qualified as expropriatory.414
712. This approach was equally shared by the tribunal in Garanti Koza v. Turkmenistan,415
which held:
A seizure of property by a court as the result of normal domestic legal
process does not amount to an expropriation under international law unless
there was an element of serious and fundamental impropriety about the
legal process. Actions by state courts to enforce contract rights, including
409 Ibid.,~ 133 ("That said, given the very peculiar circumstances of the present interference, the Tribunal agrees with
the parties that the substantial deprivation of Saipem's ability to enjoy the benefits of the ICC Award is not sufficient
to conclude that the Bangladeshi courts' intervention is tantamount to an expropriation. If this were true, any setting
aside of an award could then found a claim for expropriation, even if the setting aside was ordered by the competent
state court upon legitimate grounds.").
410 Ibid.,~ 159.
411 Ibid.,~~ 163-169.
412 Swisslion DOO Skopje v. The Former Yugoslav Republic of Macedonia, ICSID Case No. ARB/09/16, Award, 6
July 2012, RLA-53.
413 Ibid., ~ 313.
414 Ibid., ~ 314 ("[ ... ] the courts' determination of breach of the Share Sale Agreement and its consequential
termination did not breach the Treaty and therefore was not unlawful. The internationally lawful termination of a
contract between a State entity and an investor cannot be equated to an expropriation of contractual rights simply
because the investor's rights have been terminated; otherwise, a State could not exercise the ordinary right of a
contractual party to allege that its counterparty breached the contract without the State's being found to be in breach
of its international obligations. Since there was no illegality on the part of the courts, the first element of the Claimant's
expropriation claim is not established.").
415 Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20, Award, 19 December 2016, RLA-121.
115
Annex 416
Krederi Ltd. v. Ukraine
Excerpts of the A ward
rights to terminate a contract, have generally not been held by investment
arbitration tribunals to amount to expropriation, regardless of whether the
state or an instrument of the state is the contract party enforcing its
rights.416
713. The Tribunal recognizes that Claimant also understands that for judicial action to amount
to expropriation a due process violation is required.4 17 In order to avoid a situation whereby
any title annulment would constitute indirect expropriation or a measure tantamount to
expropriation it is therefore necessary to ascertain whether an additional element of
procedural illegality or denial of justice was present. Only then may a judicial decision be
qualified as a measure constituting or amounting to expropriation.
714. Thus, for this Tribunal, it was necessary to ascertain whether the judicial action which led
to the withdrawal of Claimant's property rights in the contested land plots was tainted by
breaches of due process.
715. Since the Tribunal has come to the conclusion in its assessment of the fair and equitable
treatment claim that the challenged judicial proceedings do not rise to the level of a breach
of due process41 8 the Tribunal finds that the judicial proceedings do not constitute indirect
expropriation.
716. Therefore, Claimant's claim for expropriation is dismissed.
717. The Tribunal has carefully considered the Parties' submissions, including the expert
reports, on damages. However, given its rulings on liability, the Tribunal does not think
that it is necessary to address the Parties' damages submissions here.
E. CONCLUSIONS ON LIABILITY
718. For the reasons stated above, the Tribunal dismisses all claims. The Tribunal nonetheless
notes what it considers an unsatisfactory outcome of this case: In the result the investor has
lost the properties it purchased without being recouped the original sale price paid to, and
416 Ibid., ,i 365.
417 Claimant Post-Hearing Brief, ,i 9 [ ... ]
418 See above ,i 631.
116
Annex 416
ANNEX417

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
WASHINGTON, D.C.
In the arbitration proceeding between
GARANTI KOZA LLP
(CLAIMANT)
AND
TURKMENISTAN
(R:ENPONDENT)
ICSID CASE No. ARB/11/20
AWARD
Rendered by an Arbitral Tribunal composed of
John M. Townsend, President
George Constantine Lambrou, Arbitrator
Laurence Boisson de Chaz.ournes, Arbitrator
Secretary of the Tribunal:
Marco Tulio Montafies-Rumayor
Date of dispatch to the Parties: December 19, 2016
Annex 417
1v. Fomth, because Turkmenistan's insistence on the use of Smeta in the
progress payment invoices had delayed submission of those invoices.
e. Garanti Koza eventually stopped work and abandoned the project because TAY
stopped paying Garanti Koza's progress payment invoices.
f TAY stopped paying the progress payment invoices because the bank guarantee
had expired.
362. With this chain of causation in mind, we look first at the claim of direct expropriation and
then at the claim of indirect expropriation.
1. The direct expropriation claim
363. Garanti Koza focuses its claim of direct expropriation on two acts. First, it alleges that, on
February 4, 2010:
[A] committee compnsmg representatives of Turkmen Highways, the Ministry of
Construction, the Ministry of Internal Affairs, the Turkmen intelligence Agency, a
prosecutor/district attorney, as well as other Government personnel, seiz.ed Garanti Koza's
factory and all the equipment, machinery and material it contained. This committee
expelled Garanti Koza's remaining employees from the factory site.525
Second, it alleges that, by letter of February 22, 2010, TAY ''unilaterally and wrongfully
terminated the Contract."526
364. The evidence submitted to the Tnbunal does not support a claim for direct expropriation.
The evidence does indeed show that Garanti Koza's factory and eqtripment remaining in
Turkmenistan after it abandoned its work on TAY's project in mid-2009 were seized by the
Turkmen courts in 2010, but the evidence also supports the Respondent's argmnent that the actions
525
526
Mem 1151.
Mem 1151.
142
Annex 417
of those cmnts followed as a matter of nonnal legal process lillder Turkmen law from Garanti
Koza's default lillder the Contract. 527
365. A seizure of property by a court as the result of nonnal domestic legal process does not
amolillt to an expropriation lillder international law llllless there was an element of serious and
fundamental impropriety about the legal process. Actions by state courts to enforce contract rights,
including rights to terminate a contract, have generally not been held by investment arbitration
tribmals to amolillt to expropriation, regardless of whether the state or an instrument of the state
is the contract party enforcing its rights. The Impregilo tribmal observed that, when a state entity
terminates a contract, the decisive factor is ''whether the reasons given for the termination
constituted a legally valid grolilld for termination according to the provisions of the [ ... ]
Contract."528 Or as the tribmal in Middle East Cement put it, ''nonnally a seizure and auction
ordered by the national courts do not qualify as a taking'' llllless ''they are not taken 'lillder due
process of law. "'529
366. The series of events that led to the proceedings in the Turkmen courts and the attachment
and seizure of Garanti Koza's property followed the causal sequence outlined in paragraph 361
above. In the view of the Tribmai the termination of the Contract and the subsequent actions by
the Turkmen courts were largely either the result of choices made by Garanti Koza, including the
decision not to seek an extension or renewal of the bank guarantee, or were caused by
circumstances within its control The actions of the Turkmen courts in enforcing TA Y's rights
527 See C-Mem ,r,r 375-378.
528 lmpregilo S.p.A. v. ArgentineRepublic,ICSJD Case No. ARB/07/17, Award, June 21, 2011, ,r 278.
529 Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No.
ARB/99/6, Award, April 12, 2002, ,r 139.
143
Annex 417
lillder the contract thus appear to the Tnbooal to have met the test articulated in Impregilo, which
appears to this Tribooal to be the correct test.
367. To the extent that the insistence by agencies of Turkmenistan on the use of Smeta
contnbuted to the delays that afflicted the bridge project and to the uhimate :failure of Garanti Koza
to complete the project and the consequent tennination of the Contract, those actions have already
been folilld by the Tribooal to have breached Turkmenistan's obligations lillder Article 2 of the
BIT. The Tribooal concludes that those actions were too remote from the takings alleged to have
amolillted to a direct expropriation to consider them breaches of Article 5 of the BIT. Even if they
were considered to have contributed to a breach of Article 5, any compensation for such a breach
would merely duplicate the compensation due for the breach of Article 2.
368. The Claimant alleges that the process followed by the Turkmen authorities was harassing
and lillfuir, pointing to the following sequence of events:
530
531
a. In December 2009, the Turkmen tax administration conducted a tax inspection of
Garanti Koza and annolillced on December 21, 2009, that it was imposing a fine of
approximately USD 1 million for tax violations related to VAT. Garanti Koza
states that it does not lillderstand the reasons for this assessment and suspects that
it was a use by Turkmenistan of "its tax and court apparatus to harass foreign
investors. "530
b. On December 31, 2009, TAY asked Garanti Koza to return the ooapplied balance
of the Advance Payment, USD 14,132,121.22. 531
Mem ~ 91; Buyuksandalyaci WS-1, ~~ 71-72.
Mem ~ 92; C-90.
144
Annex 417
532
533
534
535
536
537
538
539
c. In early February 2010, Garanti Koza says that representatives of TAY, the
Ministry of Construction, the Supreme Supervision Agency, accompanied by
police and military forces, came to Garanti Koza's factory in Mary, conducted an
inventory, and instructed Garanti Koza's employees to leave the office. 532 Given
that ''Garanti Koza arranged for its Turkish employees to fly back to Turkey the
next day,"533 and the allegation that, as a resuh of this visit, the factory and its
contents have been held by Turkmenistan since February 4, 2010, 534 the TribID1al
finds it difficult toID1derstand why Garanti Koza claims to have ''little information"
about this event. 535 In any event, little information about it was provided to the
Tribunal
d. On February 8, 2010, the Turkmenistan tax administration issued a notice of fines
and penalties on Garanti Koza. 536
e. On February 9, 2010, TAY asserted a claim against Garanti Koza for USD 3 million
for the delay in the completion of the works, based on the original completion
deadline of October 2008. 537
f On February 20, 2010, TAY wrote to the Chief Prosecutor to ask that he bring suit
against Garanti Koza to tenninate the Contract. 538
g. On February 22, 2010, TAY unilaterally tenninated the Contract. 539
Mem '1]94.
Mem ,i 94; Buyuksandalyaci WS-1, ,i 73.
Mem '1]94.
Mem '1]94.
Mem ,i 98; C-115.
Mem ,i 99; C-91.
Mem ,i 101; C-92.
Mem ,i 102; C-117.
145
Annex 417
h. The same day, the Chief Prosecutor filed an application with the "Arbitration court
of the Supreme Court of Turkmenistan" to obtain termination of the Contract. That
court summoned Garanti Koza on February 23 to appear before it on February 26,
2010. Garanti Koza states that it did not appear on that date, because it would have
been ''futile - and dangerous."540
369. Garanti Koza does not allege that it has actually paid any of the tax or delay assessments
referred to in the preceding paragraphs. Rather, the assessments appear to be put forward in an
attempt to show that the conduct of the Turkmen authorities was improper and that it deprived
Garanti Koza of procedural fairness. Garanti Koza does not allege, and in any event has not
introduced evidence to demonstrate, that the proceedings described represented a departure from
normal legal process in Turkmenistan. Whether or not these measures were wrongful thus seems
to turn on which party was or was not in breach of the Contract, which has already been addressed
in connection with Article 2 of the BIT.
2. The indirect expropriation claim
370. Garanti Koza's claim of creeping expropriation is basically the same claim as the direct
expropriation claim and fails for the same reason. While the direct expropriation claim focuses on
the seizure of Garanti Koza's assets after TAY's imposition of the delay penalty and the
termination of the Contract, the indirect expropriation claim is described as a "series of acts and
omissions starting in the spring of 2008 which made it increasingly difficult for Garanti Koza to
continue work on the Project, uhimately depriving Garanti Koza of its entire investment."541
540
541
Mem 11102-104.
Mem 1132.
146
Annex 417
371. The "series of acts and omissions" alleged by the Claimant to support its claim of indirect
expropriation are the same acts and omissions alleged to support its claim of direct expropriation.
With the exception of the insistence by Turkmenistan on the use of Smeta (which the Tribunal has
already addressed), those acts and omissions were either acts of Garanti Koz.a itse1f or followed as
a consequence of actions taken or choices made by Garanti Koz.a. None of them, in the view of
the TnbunaL amounted to a breach of Article 5 of the BIT.
3. The Claimant's attempt to import the expropriation clause of other
treaties via the MFN clause
372. In addition to relying on Article 5 of the BIT, Garanti Koz.a seeks to rely on Article 5 of
the France-Turkmenistan BIT and Article 6 of the United Arab Emirates-Turkmenistan BIT, both
of which it seeks to import through the most-favored-nation (''MFN'') clause contained in Article
3 of the United Kingdom-Turkmenistan BIT. Article 3(1) of the BIT provides that neither
Contracting Party shalL in its territory, subject investments of nationals and companies of the other
Contracting Party to treatment less favorable than that which it affords to investments of nationals
or companies of any third state. Article 3(2) provides the same protection to nationals and
companies of each Contracting Party as regards their management, maintenance, use, ertjoyment,
or disposal of their investments.
373. According to Garanti Koz.a, Article 5 of the France-Turkmenistan BIT contains one
additional condition not found in Article 5 of the BIT that would make a direct or an indirect
expropriation unlawful: Under the France-Turkmenistan BIT, an expropriation must not be
contrary to a specific commitment of the host state. 542
542 Mem '1] 126.
147
Annex 417

ANNEX418

Wolters Kluwer
Document information
Publication
International Investment
Arbitration: Substantive
Principles (Second Edition)
Bibliographic
reference
'8. Expropriation', in
Campbell Mclachlan,
Laurence Shore, et al.,
International Investment
Arbitration: Substantive
Principles (Second Edition),
Oxford International
Arbitration Series,
(© Campbell Mclachlan,
Laurence Shore, and
Matthew Weiniger 2017;
Oxford University Press
2017) pp. 359 - 412
Kluwe rArbitration
8. Expropriation
A. Introduction-The Classical Claim and its Modern Elasticity
8.01 At the heart of foreign investors' claims against States prior to the 1950s was the
claim of nationalisation or expropriation. The classical situation was a State's blatant
seizure of the investor's assets while the State implemented a general programme of
economic reform, (1) or the State's highly visible acts in depriving the investor of its
assets, without compensation. A small minority of investors might have had a concession
contract with the host State, governed by international law, which incorporated its own
contractual protections against expropriation, and allowed for international arbitration.
P 360 (2) Otherwise, the investor in search • of compensation or redress was usually left with
the options of(a) seeking to persuade its home State to intervene through diplomatic
protection (perhaps leading to international arbitration), or (b) pursuing remedies in the
municipal courts of the State that had seized the assets. Neither option was particularly
attractive to the aggrieved investor.
8.02 With the proliferation of investment treaties providing for direct access to
international arbitral tribunals by foreign investors, and the more sophisticated efforts at
domestic regulatory control undertaken by States in recent years, the classical claim has
expanded. The treaty framers may have thought that they were codifying customary
international law, but treaty claims on expropriation-and arbitral tribunals'
interpretation of treaty provisions-have arguably overtaken customary international law
and have become the focal point of the development of the international law of
expropriation. Moreover, an indirect deprivation of a foreign investor's asset (which itself
might take a variety of forms), possibly through a series of actions over time, rather than
a militia storming a factory, has come to characterise modern expropriation claims.
International law has thus recognised an elasticity in the nature and range of
expropriatory acts, and assessing this elasticity-for example, how far does it extend? (3)
-has become a central issue in international investment arbitration.
B. Towards More Precise Definitions of Expropriation
8.03 The core concept of expropriation is reasonably clear: it is a governmental taking of
property for which compensation is required. Actions 'short of direct possession of the
assets may also fall within the category' of expropriation. (4) Expropriation is therefore
lawful, but the compensation requirement 'makes the legality conditional'. (5) However,
it is difficult to define with precision the situations covered by the concept. The
definitions of expropriation appearing in investment treaties are of such a generality that
they provide little guidance to parties or arbitral tribunals confronted by concrete cases.
(6) It should be noted, as discussed further below, that modern treaties are defining
expropriation with ever greater precision (though still often at a level of generality that
makes it hard to determine, in specific cases, what is and is not expropriation). In the
absence of firm guidance, arbitral tribunals have fashioned a variety of tests for assessing
whether States are liable for expropriation, which can create both opportunities and
uncertainties for parties in circumstances where expropriation arguably has occurred. As
P 361 argued in the conclusion, the tests developed to determine expropriation by • arbitral
tribunals have become increasingly detailed and specific. International law should not
necessarily be viewed as less certain or variable than national law, which has had the
advantage of a lengthy period of development within a narrower jurisprudential
framework. As Higgins observed in the early 1980s, the 'reality is that most municipal law
systems have themselves developed doctrines on the taking of property that are at best
incoherent'. (7)
8.04 For example, in analysing three decades of US Supreme Court judgments in
expropriation cases, a scholar referred to the 'crazy-quilt pattern of Supreme Court
doctrine' on expropriation. (8) It has further been noted that although the 'process of
describing general criteria to guide resolution of regulatory taking claims, begun in Penn
Central, (9) has reduced to some extent the ad hoc character of takings law', it is
'nonetheless true that not all cases fit neatly into the categories delimited to date, and
that still other cases that might be so categorised are explained in different terms by the
Court'. (10) If the US position on certain significant aspects of domestic expropriation,
especially as regards the issue of regulatory or 'indirect' takings, has not crystallised into
a clear formulation, it is not surprising that arbitral tribunals comprising members from
many different legal backgrounds and interpreting international law have not developed
a coherent doctrine of expropriation, especially as regards indirect expropriation.
8.05 Analysis of the tests fashioned by arbitral tribunals as a whole, and their application
in specific cases to date, would not necessarily lead to the conclusion, at this stage of the
development of the international law of expropriation, that arbitral tribunals have
favoured investors at the expense of States. However, international law has undoubtedly
1 Annex 418
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
nationalization or expropriation' in Article 1110 broadens the ordinary concept
of expropriation under international law to require compensation for
measures affecting property interests without regard to the magnitude or
severity of that effect ... 'Tantamount' means nothing more than equivalent.
Something that is equivalent to something else cannot logically encompass
more. (126)
8.82 This conclusion was approved in a later case:
The primary meaning of the word 'tantamount' given by the Oxford English
Dictionary is 'equivalent'. Both words require a Tribunal to look at the
substance of what has occurred and not only at form. A Tribunal ... must look at
the real interests involved and the purpose and effect of the government
measure ... The Tribunal agrees with the conclusion in the Interim Award of the
Pope & Talbot Arbitral Tribunal that something that is 'equivalent' to
something else cannot logically encompass more. In common with the Pope &
Talbot Tribunal, this Tribunal considers that the drafters of the NAFTA
intended the word 'tantamount' to embrace the concept of so-called 'creeping
expropriation', rather than to expand the internationally accepted scope of
the term expropriation. (127)
8.83 Actions of State courts The actions of State courts in unjustifiably preventing the
enforcement of a valid award may constitute measures 'tantamount to' or 'equivalent to'
expropriation. For example, the tribunal in Saipem SpA v Bangladesh held that a
contractual right to arbitrate was an asset having economic value and hence constituted
an investment. (128) Thus, a court's failure to enforce a valid award could constitute
expropriation. Specifically, the Tribunal held that, 'the right to arbitrate and the rights
determined by [an] Award are capable in theory of being expropriated.' (129) In this case,
the Tribunal considered that 'the alleged expropriated property is [the investor's]
residual contract rights under the investment as crystallized in the ICC Award.' (130)
8.84 The Tribunal held that the actions of the Bangladeshi courts in preventing the
enforcement of a valid ICC Award won by the investor against a Bangladeshi State entity
P 386 constituted an expropriation. The Tribunal stated:•
In respect of the taking, the actions of the Bangladeshi courts do not
constitute an instance of direct expropriation, but rather of 'measures having
similar effects' within the meaning of Article 5(2) of the BIT. Such actions
resulted in substantially depriving [the investor] of the benefit of the ICC
Award. This is plain in light of the decision of the Bangladeshi Supreme Court
that the ICC Award is 'a nullity.' Such a ruling is tantamount to a taking of the
residual contractual rights arising from the investments as crystallized in the
ICC Award. As such, it amounts to an expropriation within the meaning of
Article 5 of the BIT.' (131)
8.85 Yet not all actions by State courts unfavourable to investor-claimants are
expropriatory. In order to constitute expropriation, the actions of the State courts must
be illegal. In Swisslion, the Tribunal cited Saipem in recognising that a 'predicate for
alleging a judicial expropriation is unlawful activity by the court itself. (132) In Swisslion,
there was no expropriation in the national courts' finding that the host State's actions
were legitimate responses to the investor's contractual breaches. The Tribunal stated:
(133)
In the Tribunal's view, the courts' determination of breach of the Share Sale
Agreement and its consequential termination did not breach the Treaty and
therefore was not unlawful. The internationally lawful termination ofa
contract between a State entity and an investor cannot be equated to an
expropriation of contractual rights simply because the investor's rights have
been terminated; otherwise, a State could not exercise the ordinary right of a
contractual party to allege that its counterparty breached the contract
without the State's being found to be in breach of its international obligations.
Since there was no illegality on the part of the courts, the first element of the
Claimant's expropriation claim is not established.
8.86 Another case where the claimant unsuccessfully challenged the actions of State
courts isArifv Moldova. (134) There, the Moldovan judiciary (including the Supreme Court)
declared the agreements in question invalid. The claimant alleged that the Moldovan
judiciary had misapplied Moldovan law and that such misapplication constituted
expropriation. (135) The Tribunal rejected this argument for two reasons. First, there was
no evidence to suggest that the Moldovan judiciary had not applied Moldovan law
legitimately and in good faith. (136) Certainly there was no evidence of 'collusion
between the courts and the investor's competitors in the Moldovan courts over the ...
agreements or that the Moldovan courts have acted in denial of justice in any way'. (137)
Secondly, the Tribunal held that the claimant had a fair opportunity to defend its
position before the Moldovan courts. (138) The Tribunal was not to be treated as 'a court
of appeal oflast resort.' Further, there was 'no compelling reason that would justify a new
legal analysis by this Tribunal regarding the validity of these agreements which ha[d]
15 Annex 418
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
already been repeatedly, consistently and irrevocably denied by the whole of the
Moldovan judicial system.' (139) Thus, the Tribunal • held that no wrongful taking arose
P 387 from the Moldovan courts' legitimate application of Moldovan law. (140)
8.87 The many forms of indirect expropriation Thus, forms of indirect expropriation are
numerous and cannot readily be differentiated. Some tribunals do not even seek to
differentiate these expressions, noting that their scope should be regarded as
'functionally equivalent': (141)
The essence of any claim of expropriation is that there has been a taking of
property without prompt and adequate compensation. However, many
investment protection treaties and the Treaty which is the basis for the
present arbitration extend the notion ofa taking to include what has often
been referred to as 'creeping' or 'indirect' expropriation by the State through
measures which so substantially interfere with the investor's business
activities that they are considered to be 'tantamount' to an expropriation.
(142)
When measures are taken by a State the effect of which is to deprive the
investor of the use and benefit of his investment even though he may retain
nominal ownership of the respective rights being the investment, the
measures are often referred to as a 'creeping' or 'indirect' expropriation or, as
in the BIT, as measures 'the effect of which is tantamount to expropriation'.
(143)
Such measures are sometimes referred to as 'indirect', 'creeping' or 'de facto'
expropriation and are frequently assimilated to formal expropriation as
regards their legal consequences. (144)
8.88 For some tribunals, as indicated above, 'the form of the measures of control or
interference is less important than the reality of their impact' (145) on the owner of the
investment. Along the same lines, it has been decided that a positive act of the State
may not even be necessary: 'it makes no difference whether the deprivation was caused
by actions or by inactions'. (146) However, the 'sole effect doctrine' (ie that the effect on
the investor is the only relevant criterion) remains a highly controversial approach to
indirect expropriation. (147)
A significant interference
8.89 Although the 'sole effect doctrine' is controversial, it is clear that an indirect
expropriation will at least in part be assessed on the basis of the effect of the measure in
dispute on the investor: 'De facto expropriations or indirect expropriations measures that
do not involve an overt taking but that effectively neutralize the benefit of the property
P 388 of the foreign owner, are subject to expropriation claims.' (148) •
8.90 Although there is not a traditional 'taking' of the investment, if the State authorities
interfere to a significant degree with the enjoyment of its use or its benefit, an indirect
expropriation may be found. The definition of expropriation given in the Metalclad v
Mexico case is particularly pertinent on this point:
Thus, expropriation under NAFTA includes not only open, deliberate and
acknowledged takings of property, such as outright seizure or formal or
obligatory transfer of title in favour of the host State, but also covert or
incidental interference with the use of property which has the effect of
depriving the owner, in whole or in significant part, of the use or reasonablyto-
be-expected economic benefit of property even if not necessarily to the
obvious benefit of the host State. (149)
8.91 Discussion of the concept of significant interference can also be found, for example,
in Feldman v Mexico: 'indirect expropriations and measures "tantamount" to
expropriation ... potentially encompass a variety of government regulatory activity that
may significantly interfere with an investor's property rights.' (150)
8.92 Since it is the effect of the alleged expropriatory acts upon the investor's use or
enjoyment of its property that is a key consideration, it is not necessary that the investor
has been divested of legal title to his property. Expropriation can have occurred in cases
where, although legal title to the investment may remain with the original owner, the
rights that go with that title have been rendered useless:
... it is recognised in international law that measures taken by a State can
interfere with property rights to such an extent that these rights are rendered
so useless that they must be deemed to have been expropriated, even though
the State does not purport to have expropriated them and the legal title to
the property formally remains with the original owner. (151)
A deprivation or taking of property may occur under international law through
interference by a state in the use of that property or with the enjoyment of its
benefits, even where legal title to the property is not affected. (152)
The Tribunal agrees with the Claimant in that expropriation need not involve
16 Annex 418
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

ANNEX419

BLOOMBERG EXTRACTS - BANK MARKAZI SECURITY ENTITLEMENTS
ISIN Issuer Country Page
US45905UCG76 International Bank for Reconstruction and Supranational I
Development
US298785CW 43 European Investment Bank Supranational 2
US465410BH09* Republic ofltaly Italy 3
US65562QAC96 Nordic Investment Bank Supranational 4
US45950KAM27 International Finance Corporation Supranational 5
US459056QS92 International Bank for Reconstruction and Supranational 6
Development
US65562QAD79* Nordic Investment Bank Supranational 7
US45950KAN00* International Finance Corporation Supranational 8
US465410BP25 Republic of Italy Supranational 9
US500769BG84 KfW Germany 10
US298785DP82 European Investment Bank Supranational 11
US676167AR05 Oesterreichische Kontrollbank AG (OeKB) Austria 12
US48245RAX26 KfW Germany 13
US500769BL79 KfW Germany 14
US045167BL65 Asian Development Bank Supranational 15
US298785EC60 European Investment Bank Supranational 16
US298785EE27 European Investment Bank Supranational 17
US45950KAQ31 International Finance Corporation Supranational 18
US500769CF92 European Investment Bank Supranational 19
* Iran's list includes multiple purchases of these securities. Iran's Reply, CJ[ 3.25.
Annex 419
ISIN: US45905UCG76
IBRD 4 1/8 08/12/09 Cc Settings • Actions •
25l Bond Description 26) Issuer Description
Pages
11) Bond Info
12) Addtl Info
13) Reg/Tax
16) Bond Ratings
17) Identifiers
18) Exchanges
19) Inv Par·t ies
20) Fees. Restrict
22) Coupons
Quick Links
32) ALLQ Pricing
33) QRD Qt Recap
34) TDH Trade Hist
31) CACS Corp Action
36) CF Prospectus
37) CN Sec News
38) HDS Holders
66) Send Bond
I ssuer Information
Name
Industry
Security Information
Mkt Iss
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Rank
Coupon
Cpn Freq
Day Cnt
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Annex 419
ISIN: US298785CW43
EIB 3 06/16/08 Cor Settings • Actions •
25) Bond Description 26) Issuer Description
Pages
ID Bond Info
12) Addtl Info
1J) Reg /Tax
16) Bond Rat ings
17) Ident ifiers
18') Exchanges
19) Inv Parties
20) Fees. Restrict
UJ Coupons
Quick Links
32) ALLQ Pricing
]]) QRD Qt Recap
34) TOH Trade Hi st
35) CACS Corp Action
36) CF Prospectus
37) CN Sec News
38') HOS Holders
66) Send Bond
Issuer Information
Name
Industry
Security Information
Mkt Iss
Country
Rank
Coupon
Cpn Freq
Day Cnt
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Annex 419
ISIN: US465410BH09
ITALY 2 1/2 07 /15/08 C< Settings • Actions • Page 1/12 Security Description: Bond
94) \;!]No Notes 95) Buy 96) Sell
25) Bond Description 26) Issuer Description
=========------~---------------·-··-··--·-----------
Pages
1D Bond Info
IZI .Addtl Info
13) Reg/Tax
14) Covenants
16) Bond Ratings
17) Identifie rs
Ill) Exchanges
19) Inv Parties
20) Fees. Restrict
2ZI Coupons
Quick Links
JZI ALLQ Pricing
]]) QRD Qt Recap
34) TDH Tr-ade Hist
35) CACS Corp Action
CF Prospectus
]7) CN Sec News
JI!) HDS Holders
66) Send Bond
Issuer Information
Name
Industry
Security Information
Mkt Iss
Country
Rank
Coupon
Cpn Freq
Day Cnt
Maturity
Iss Sprd
Cale Type
Pricing Date
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1st Coupon Date
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Type
Iss Price
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3
Identifiers
ID Number·
CUSIP
ISIN
Bond Ratings
Issuance & Trading
Amt Issued/Outstanding
Min Piece/Increment
Par Amount
Book Runner
Exchange
Annex 419
ISIN: US65562QAC96
~ Settings• Actions •
25) Bond Description 26) Issuer Description
Pages
ID Bond Info
IZI .Addtl Info
I] Reg/Tax
16) Bond Ratings
17) Identifiers
18) Exchanges
JIJJ Inv Parties
20) Fees, Restrict
2ZI Coupons
Quick Links
3ZI ALLQ Pricing
33) QRD Qt Recap
34) TDH Trade Hist
35) CACS Corp Action
36) CF Prospectus
37) CN Sec News
38) HDS Holders
66) Send Bond
Issuer Information
Name
Industry
Security Information
Mkt lss
Country
Rank
Coupon
Cpn FreQ
Day Cnt
Maturity
Iss Sprd
Cale Type
Pricing Date
Interest Accrual Date
1st Settle Date
1st Coupon Date
Currency
Series
Type
Iss Price
Reoffer
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Amt Issued/Outstanding
Min Piece/Innement
Par Amount
Book Runner
Exchange
Annex 419
ISIN: US45950KAM27
IFC 3 3/4 06/30/09 Cor Settings • Actions •
251 Bond Description 26) Issuer Description
Pages
ID Bond Info
12) Addtl Info
13) Reg/Tax
14) Covenants
16) Bond Ratings
17) Identifiers
18) Exchanges
19) Inv Parti es
20) Fees. Restrict
22) Coupons
Quick Llnks
32) AL LQ Pricing
33) QRD Qt Recap
34) TDH Trade Hist
35) CACS Corp Action
36) CF Prospectus
37) CN Sec News
38) HDS Holders
66) Send Bond
Issuer Information
Name
Industry
Security Information
Mkt Iss · I
Country
Rank
Coupon
Cpn Freq
Day Cnt
Maturity
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Cale Type
Pricing Date
Interest Accrual Date
1st Settle Date
1st Coupon Date
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Par Amount
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Annex 419
ISIN: US459056QS92
6
Annex 419
ISIN: US65562QAD79
7
Annex 419
ISIN: US45950KAN00
8
Annex 419
ISIN: US465410BP25
9
Annex 419
ISIN: US500769BG84
Annex 419
ISIN: US298785DP82
EIB 4 1/8 09/15/10 Car Settings • Actions •
2S) Bond Description 26) Issuer Description
Pages
ID Bond Info
I!) Addt\ Info
1J) Reg/Tax
14) Covenants
16) Bond Ratings
in Identifiers
18) Exchanges
1 \l) Inv Parties
20) Fees. Restrict
22) Coupons
Quick Links
32) ALLQ Pricing
33) QRD Qt Recap
34) TDH Trade Hist
35) CACS Corp Action
36) CF Prospectus
37) CN Sec News
38) HDS Holders
66) Send Bond
Issuer I nformation
Na Ille
Industry
Security Information
fvlkt Iss
Country
Rank
coupon
Cpn Freq
Day Cnt
Maturity
Iss Sprcl
Cale Type
Pricing Date
Interest Accrual Date
1st Settle Date
1st Coupon Date
Currency
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Type
Iss Price
Reoffer
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ISIN
Bond Ratings
Fitch
Issuance & Trading
Alllt Issued/Outstanding
Min Piece/Increlllent
Par AlllOUllt
Book Runner
Exchanqe
Annex 419
ISIN: US676167 AR05
0KB 4 1/4 10/06/10 Cor Settings • Actions •
2Sl Bond Description . 26) Issuer Description
Issuer Information
Name
Pages
ID Bond Info
12) Addtl Info
13) Reg/Tax
14) Covenants
JS) Guarantors
16) Bond Ratings
17) Identifiers
18) Exchanges
19) Inv Parties
20) Fees. Restrict
22) Coupons
Quick Links
32) ALLQ Pricing
JJ) QRD Qt Recap
34) TDH Trade Hist
JS) CACS Corp Action
]6) CF Prospectus
37) CN Sec News
38) HDS Holders
66) Send Bond
Inclustry
Security Information
Mkt Iss
Country
Rank
coupon
Cpn Freq
Day Cnt
Maturity
Iss Sprcl
Cale Type
Pricin~J Date
Interest Accrual Date
1st Settle Date
1st Coupon Date
Currency
Series
Type
Iss Price
Reoffer
12
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Identifiers
ID Number
CUSIP
ISIN
Bond Ratings
S&P
Issuance & Trading
Amt Issuecl/Outstanclin~J
Min Piece/Increment
Par Amount
Book Runner
Exchanqe
Annex 419
ISIN: US48245RAX26
13
Annex 419
ISIN: US500769BL79
KFW 4 5/8 01/20/11 Cor Settings • Actions •
25) Bond Description 26) Issuer Description
Issuer Information
Name
Pages
1D Bond I nfo
12) Addtl Info
13) Reg/Tax
Ill Guarantors
]6) Bond Ratings
in Identifiers
18) Exchanges
19) Inv Parties
20) Fees. Restrict
22) Coupons
Quick Links
32) ALLQ Pricing
J 3) QRD Qt Recap
34) TDH Trade Hist
JS) CACS Corp Action
]6) CF Prospectus
J 7) CN Sec News
JS) HDS Holders
66) Send Bond
Industry
Security Information
Mkt Iss I
Country
Rank
coupon
Cpn rreq
Day Cnt
Maturity
Iss Sprd
Cale Type
Pricing Date
Interest Accrual Date
1st Settle Date
1st Coupon Date
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Type
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!SIN
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f-itch
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Exchanqe
Annex 419
ISIN: US045167BL65
ASIA 4 1/8 09/15/10 Co Settings • Actions •
2S) Bond Description 26) Issuer Description
Pages
JU Bond Info
I!) Addtl Info
1l) Reg/Tax
14) Covenants
16) Bond Ratings
17) Identifiers
18) Exchanges
19) Inv Parties
200 Fees. Restrict
r!J Coupons
Quick Links
32) ALLQ Pricing
JJ) QRD Qt Recap
34) TDH Trade Hist
35) CACS Corp Action
36) CF Prospectus
J7) CN Sec News
38) HDS Holders
66) Send Bond
---------------- - ---------------- --- -----
Issuer Information
Name
Industry
Security I nformation
Mkt Iss
Country
Rank
coupon
Cpn Freq
Day Cnt
Maturity
Iss Sprd
Cale Type
Pricing Date
Interest Accrual Date
1st Settle Date
1st Coupon Date
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Par Amount
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Exchanqe
Annex 419
ISIN: US298785EC60
16
Annex 419
ISIN: US298785EE27
EIB 4 5/8 03/21/12 Car Settings • Actions •
25) Bond Descri tion Z6) Issuer Description
I ssuer Information
Nclilll'
Pages
l lJ Bond Info
Ill ,,clcltl I11to
13) Reg/fax
14) Covenants
16) Hond Ratinqs
17) Idce11titie"
JS) I xrh;inges
19) !11v fJa, ties
!O) cees. Rest, ill
2"/J C 011rions
Quick Links
J"!J ALLQ Priciriq
11) QRD Qt Re<.aμ
34) TOH Trad<' Hist
JS) CACS Corp Action
]6) CF Prospectus
37) CN Se<. News
JS) HOS tiolders
66) Send 8011d
I 11d11st I y
Security Information
t-tkt Iss
Cuu11t1 y
R,lllk
C:011pon
Cpn I r0ci
l\iy Crit
t·ldllll ity
Iss Spr cl
Celle TypP
Pr iciriq D;-itp
Intorost /\ccrual Dato
1st SPttlP DdlP
1st CcH1prn1 DrllP
Cur I c11cy
SP! iPS
lyp0
is'; Pr ice
Rl'offl'r
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Identifiers
ID NllillUl'I
CIJSJP
JSJN
Bond Ratings
Issuance & Trading
/\rnt Issuccl/Uutst,mclim1
Mill Pi PC P/]11U Pll1Pl1t
Par /\lllOUllt
Gook RllllllPI
I xchancw
Annex 419
ISIN: US45950KAQ31
18
Annex 419
ISIN: US500769CF92
KFW 5 06/01/10 Cor Settings • Actions •
2Sl Bond Descri tion 26) Issuer Description
Pages Issuer I nformation
I U Bond Info
17) ,,ddtl I11to
13) Reg/T~x
14) Covenants
I I) liudr ,mtor s
Nd llll'
Ir1dustry
Security Information
Hkt lss
16) flomJ Rdtinqs Cour1tI y Cur I cI1cy
17) I dt'11I if it'r,
181 1xch,1n~rs
J(/) Inv Panies
/(I) fees. Restr rct
2"!) Coupons
Quick Links
]}) ALLQ Pr icinq
33) QRD Qt Re< ap
34) TOH Tr ;ide Hist
JI) CACS Corp Action
Rc111k Series
Cot1por1 TypP
Cpr1 rr Pq
[),1y C11t Iss Price
Hdtllr ity RPoffpr
Jss Spr <l
lc1\c I ypc
Pricill(J llc1t0
J6JCF Prospectus IIIterc'sl /\cutr;il ll,llr•
l/l CN Sec News 1st Settle lldll'
181 HOS Holders 1st CoupoI1 Llcilc
66) Send Bond
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!SIN
Bond Ratings
St/.P
f itch
CoI11positc
I ssuance & Trading
Arnt Isst1Pd/Outstr11Hli11q
Mill i>i0c0/ I ncr0rn0nt
l\11 /\I11rnrrIt
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fxd1c1rHJP
Annex 419
ANNEX420

OE CD publishing
))OECD
Please cite this paper as:
OECD (2004 ), "Most-Favoured-Nation Treatment in
International Investment Law", OECD Working Papers on
International Investment, 2004/02, OECD Publishing.
http://dx.doi.org/10.1787/518757021651
OECD Working Papers on International
Investment 2004/02
Most-Favoured-Nation
Treatment in International
Investment Law
OECD
Annex 420
OECD ((
DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS
WORKING PAPERS ON INTERNATIONAL INVESTMENT
Number 2004/2
MOST-FAVOURED-NATION TREATMENT IN INTERNATIONAL
INVESTMENT LAW
September 2004
This document, derestricted under the OECD Secretary General's responsibility, has been
developed as an input to the Investment Committee's work aimed at enhancing understanding
of investment protection provisions in international investment agreements.
This document benefited from discussions and a variety of perspectives in the Committee. The
document as a factual survey, however, does not necessarily reflect the views of the OECD or
those of its Member governments. It cannot be construed as prejudging ongoing or future
negotiations or disputes pertaining to international investment agreements.
This document was prepared by Marie-France Houde, Senior Economist, Investment Division,
Directorate for Financial and Enterprise Affairs and Fabrizio Pagani, Legal Directorate.
Organisation for Economic Co-operation and Development
Annex 420
2004
MOST-FAVOURED-NATION TREATMENT IN INTERNATIONAL INVESTMENT LAW
1. Introduction
Bilateral and regional investment agreements have proliferated in the last decade and new ones
are still being negotiated. Most-Favoured-Nation (MFN) clauses link investment agreements by
ensuring that the parties to one treaty provide treatment no less favourable than the treatment they
provide under other treaties in areas covered by the clause. MFN clauses have thus become a
significant instrument of economic liberalisation in the investment area. Moreover, by giving the
investors of all the parties benefiting from a country's MFN clause the right, in similar circumstances,
to treatment no less favourable than a country's closest or most influential partners can negotiate on
the matters the clause covers, MFN avoids economic distortions that would occur through more
selective country-by-country liberalisation. Such a treatment may result from the implementation of
treaties, legislative or administrative acts of the country and also by mere practice.
The present article provides a factual survey of jurisprudence and related literature on MFN treaty
clauses in investment agreements with a view to contributing a better understanding of the MFN
interfaces between such agreements.
Section II defines the MFN clause, traces back its origins and provides some examples of
such provisions in the two major types of model investment agreements in existence (the
"North American model" and the "European model").
Section III summarises the relevant aspects of the extensive work carried out by the
International Law Commission (ILC) between 1968 and 1978 on MFN clauses.
Section IV describes recent arbitral awards on the scope of application of MFN treatment
clauses resulting from disputes under investment treaties.
Section V provides a summing up.
2.. Definition, origins and examples of MFN clauses
2.1. Definition
To provide MFN treatment under investment agreements is generally understood to mean that an
investor from a party to an agreement, or its investment, would be treated by the other party "no less
favourably" with respect to a given subject-matter than an investor from any third country, or its
investment. 1 MFN treatment clauses are found in most international investment agreements. Although
the text of the MFN clause, its context and the object and purpose of the treaty containing it need to be
considered whenever that clause is being interpreted, it is the "multilateralisation" instrument par
excellence of the benefits accorded to foreign investors and their investments.
While MFN is a standard of treatment which has been linked by some to the principle of the
equality of States,2 the prevailing view is that a MFN obligation exists only when a treaty clause
creates it.3 In the absence of a treaty obligation (or for that matter, an MFN obligation under national
law), nations retain the possibility of discriminating between foreign nations in their economic affairs.
2
Annex 420
2.2. Origins4
MFN treatment has been a central pillar of trade policy for centuries. It can be traced back to the
twelfth century, although the phrase seems to have first appeared in the seventeenth century. MFN
treaty clauses spread with the growth of commerce in the fifteenth and sixteenth centuries. The United
States included an MFN clause in its first treaty, a 1778 treaty with France.5 In the 1800s and 1900s
the MFN clause was included frequently in various treaties, particularly in the Friendship, Commerce,
and Navigation treaties. MFN treatment was made one of the core obligations of commercial policy
under the Havana Charter where Members were to undertake the obligation "to give due regard to the
desirability of avoiding discrimination as between foreign investors".6 The inclusion of MFN clauses
became a general practice in the numerous bilateral, regional and multilateral investment-related
agreements which were concluded after the Charter failed to come into force in 1950.
Its importance for international economic relations is underscored by the fact that the MFN
treatment provisions of the GATT (Article I General Most-Favoured-Nation Treatment) and the
GATS7 (Article II Most-Favoured-Nation Treatment) provide that this obligation shall be accorded
"immediately and unconditionally" ( although in the case of the OATS, a member may maintain a
measure inconsistent with this obligation provided that such measure is listed in, and meets the
conditions of, the Annex on Article II Exemptions).
2.3. Examples of MFN Clauses in Investment Agreements
A stock taking of MFN clauses in investment treaties will not yield a uniform picture. In fact the
universe of MFN clauses in investment treaties is quite diverse. Some MFN clauses are narrow, others
are more general. Moreover, the context of the clauses varies, as does the object and the purpose of the
treaties which contain them. Following is a representative sample of these clauses.
Germany has concluded the largest number of BITs. Article 3 (1) and (2) of the German 1998
Model Treaty combines the MFN obligation with the national treatment obligation by providing that:
"(l) Neither Contracting State shall subject investments in its territory owned or controlled
by investors of the other Contracting State to treatment less favourable than it accords to
investments of its own investors or to investments of investors of any third State.
(2) Neither Contracting State shall subject investors of the other Contracting State, as
regards their activity in connection with investments in its territory, to treatment less
favourable than it accords to its own investors or to investors of any third State. "
This general MFN provision is not restricted in its scope to any particular part of the treaty
containing it. It may also be noted that the 1998 German model BIT contains another MFN provision
which only relates to full protection and security and to expropriation which are the matters dealt with
by Article 4. Article 4(4) specifically provides that:
"Investors of either Contracting State shall enjoy most-favoured-nation treatment in the
territory of the other Contracting State in respect of the matters provided for in this Article. "
The same approach is followed by the Netherlands Model BIT which in addition combines in its
Article 3 the MFN obligation with other standards of treatment, i.e. national treatment (whichever of
these two treatments is more favourable), fair and equitable treatment and full protection and security.
The non-discriminatory treatment is formulated in Article 3(1) and 3(2) as follows:
3
Annex 420
"(1) Each Contracting Party shall ensure fair and equitable treatment of the investments of
nationals of the other Contracting Party and shall not impair, by unreasonable or
discriminatory measures, the operation, management, maintenance, use, enjoyment or
disposal thereof by those nationals. Each Contracting Party shall accord to such investments
full physical security and protection.
(2) More particularly, each Contracting Party shall accord to such investments treatment
which in any case shall not be less favourable than that accorded either to investments of its
own nationals or to investments of nationals of any third State, whichever is more favourable
to the national concerned. "
Article 3 of the 1996 Albania/United Kingdom BIT provides that:
"National Treatment and Most-Favoured-Nation Provisions
(I) Neither Contracting Party shall in its territory subject investments or returns of
nationals or companies of the other Contracting Party to treatment less favourable than that
which it accords to investments or returns of its own nationals or companies or to
investments or returns of nationals or companies of any third State.
(2) Neither Contracting Party shall in its territory subject nationals or companies of the
other Contracting Party, as regards the management, maintenance, use, enjoyment or
disposal of their investments, to treatment less favourable than that which it accords to its
own nationals or companies or to nationals or companies of any third State.
(3) For the avoidance of doubt it is confirmed that the treatment provided for in paragraphs
(I) and (2) above shall apply to the provisions of Articles 1 to 11 of this Agreement."
Articles 1 to 11 cover all the provisions of the Agreement, except the final clauses.
The typical formulation of an MFN clause in the US and Canadian BITs covers both the
establishment and post establishment phases. It also lists the various operations covered8 and is
explicit in stating that the right only applies "in like circumstances", unlike other BITs (particularly the
"European model BIT") which make no reference to the comparative context against which treatment
is to be assessed. Recent examples are to be found in the investment chapter of US-Chile Free Trade
Agreement9and the US-Singapore Free Trade Agreement10 concluded in 2003, and the 1997 CanadaChile
Free Trade Agreement, which are based on NAFTA language. In the US-Chile FTA, Article
10.3: Most Favoured Nation Treatment reads:
"(1) Each Party shall accord to investors of the other Party treatment no less favourable
than that it accords, in like circumstances, to investors of any non-Party with respect to the
establishment, acquisition, expansion, management, conduct, operation, and sale or other
disposition of investment in its territory.
(2) Each Party shall accord to covered investments treatment no less favourable than that it
accords, in like circumstances, to investments in its territory of investors of any non-Party
with respect to the establishment, acquisition, expansion, management, conduct, operation
and sale or other disposition of investments. "
4
Annex 420
In the US-Singapore FT A, National Treatment and MFN treatment are part of a same article:
"Article 15.4: National Treatment and Most-Favoured Nation Treatment
(3) Each Party shall accord to investors of the other Party treatment no less favourable than
it accords, in like circumstances, to investors of any non-Party with respect to the
establishment, acquisition, expansion, management, conduct, operation and sale or other
disposition of investments in its territory. Each Party shall accord to covered investments
treatment no less favourable than that it accords, in like circumstances, to investments in its
territory of investors of any non-Party with respect to the establishment, acquisition,
expansion, management, conduct, operation, and sale or other disposition of investments.
The treatment each Party shall accord under this paragraph is "most-favoured-nation
treatment".
(4) Each Party shall accord to investors of the other Party and to their covered investments
the better of national treatment or most-favoured-nation treatment. "
In the Canada-Chile FTA, Article G-03: Most Favoured Nation Treatment reads:
"(l) Each Party shall accord to investors of the other Party treatment no less favourable
than that it accords, in like circumstances, to investors of any non-Party with respect to the
establishment, acquisition, expansion, management, conduct, operation, and sale or other
disposition of investments.
(2) Each Party shall accord to investments of investors of the other Party treatment no less
favourable than that it accords, in like circumstances, to investments of investors of any nonParty
with respect to the establishment, acquisition, expansion, management, conduct,
operation, and sale or other disposition of investments. "
The texts of these agreements are alike in that they make clear that the intent to use the likeness
of the circumstances in which the treatment is granted as the basis for comparison. Jurisprudence from
MFN clauses with a different basis for comparison, and which focuses on categorizing industries
affected by treatment, or categorizing the types of treaties that require the treatment, may be of little
relevance to the analysis required by these agreements.
2.4. Restrictions and Exceptions
Many MFN clauses in investment treaties contain specific restrictions and exceptions, which
exclude certain areas from their application. Such areas may include inter alia regional economic
integration, matters of taxation, subsidies or government procurement and country exceptions.
Depending on the way these exceptions are drafted, the fact that these limitations are specifically
mentioned could be a factor in deciding whether certain other matters are within the scope of an MFN
clause. Consider the following examples.
The 1998 German Model BIT provides in its Article 3, points (3) and (4) that:
"(3) Such treatment shall not relate to privileges which either Contracting State accords to
investors of third States on account of its membership of, or association with, a customs or
economic union, a common market or a free trade area.
5
Annex 420
ANNEX421

I
((9
Unclassified
Organisation for Economic Co-operation and Development
Organisation de Cooperation et de Developpement Economiques
DAFFE/MAI(98)8/REV1
22 April 1998
Negotiating Group on the Multilateral Agreement on Investment (MAI)
THE MULTILATERAL AGREEMENT ON INVESTMENT
COMMENTARY TO THE CONSOLIDATED TEXT
This document was issued during the MAI negotiations which took place between 1995 and 1998.
All available documentation can be found on the OECD website: www.oecd.org/daf/investment
Annex 421
(Note by the Secretariat)
This document contains the commentary to text of the agreement considered in the course of the MAI negotiations so
far. The text reproduced here results mainly from the work of expert groups and has not yet been adopted by the
Negotiating Group. The Negotiating Text itself, which is presented with footnotes and proposals that are still under
consideration, is available separately as DAFFE/MAI(98)7 /REV1.
2
Annex 421
III. TREATMENT OF INVESTORS AND INVESTMENTS
GENERAL
It was understood that the drafting of articles 1 and 2 was without prejudice to other aspects of
the Agreement, including definitions, exceptions, standstill and rollback, and the role of the Parties Group.
NATIONAL TREATMENT AND MOST FAVOURED NATION TREATMENT
1. While some delegations would have preferred separate articles on pre- and post-establishment,
the majority of delegations felt that a single text would better capture the intended coverage of the
agreement and avoid the difficult task of defining the boundary between pre- and post establishment. It
was agreed, as a starting point, to work on the basis of a single text. Some delegations pointed to the links
between a single text covering treatment of investors both pre- and post-establishment and the issues of
definitions and the scope of the Agreement. Two delegations reserved their position pending the outcome
of the discussion on these issues. DG3 also felt that the scope of the commitments by individual countries
could be identified by using precise language in any agreed reservations to National Treatment/MFN and
perhaps by including references to relevant laws or regulations. The Group agreed that all diversification
activities are covered by the references to "establishment, acquisition and expansion".
2. Including the words "in its territory" in Articles 1.1 and 1.2 was suggested for two reasons: i) to
define the scope of application of national treatment and MFN; and ii) to provide an appropriate
benchmark for assessing national treatment and MFN. Adding these words would make it clear that the
Contracting Parties do not have obligations with regard to investors of another Contracting Party in a third
country. One delegation suggested that a third reason for including "in its territory" would be to underline
the need to avoid conflicting requirements on multinational enterprises. At the same time, however, it was
important not to unduly limit the scope of the agreement, for example by excluding the international
activities of established foreign investors and their investments. The place of this term in these paragraphs
is still to be determined. It was also suggested that a solution might be found, as in NAFT A, in the article
dealing with the scope of the Agreement. Whatever should be decided on this matter, it should be treated
consistently throughout the Agreement.
3. Some delegations proposed the "same" or "comparable" treatment as the appropriate standard
rather than "no less favourable" treatment. The purpose would be to prevent unlimited competition for
international investment funds with consequential costs and distortions to investment flows. However,
most delegations considered that this would unacceptably weaken the standard of treatment from the
investor's viewpoint.
10
Annex 421
4. Different views were expressed on the value of a "closed" or "open" list of investment activities
to be covered by the National Treatment and MFN provisions, before and/or after establishment. A closed
list had the advantage of certainty, but risked omitting elements that could be important to the investor. An
open list would cover all possible investment activities, including new activities. But it could also create
uncertainties as to the scope of the Agreement and might have adverse effects on the operation of existing
bilateral and other investment agreements using a closed list. Several Delegations believed that the list
"establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or
other disposition of investments" should be considered a comprehensive one whose terms were intended
to cover all activities of investors and their investments for both the pre- and post-establishment phases. In
their view, this was the preferable approach. It was also suggested that the term "sale or other disposition"
should replace "disposal" in Article 1.2 of the draft articles on selected topics on Investment Protection.
5. National treatment and MFN treatment are comparative terms. Some delegations believed that
the terms for national treatment and MFN treatment implicitly provide the comparative context for
determining whether a measure discriminates against foreign investors and their investments; they
considered that the words "in like circumstances" were unnecessary and open to abuse. Other delegations
believed that the comparative context should be spelled out and thus inclusion of the phrase "in like
circumstances". Examples of the inclusion of a specific reference are found in the NTI, some BITs and
NAFTA. Examples of no specific reference are found in some other BITS and the ECT (although two
delegations made a Declaration concerning the term "in like circumstances").
6. DG3 considered two options: "In like circumstances" deleted ( option A) and: "In like circumstances"
included ( option B).
Regarding Option A. National treatment and MFN treatment are comparative terms. They permit
fair and equitable difference in treatment justified by relevant differences of circumstances. In
this context, nationality is not relevant. Some delegations may wish to modify this text in the
light of the Commentary on Option B below which was not discussed.
Regarding Option B. One delegation provided the following commentary:
"National treatment and most favoured nation treatment are relative standards requiring a
comparison between treatment of a foreign investor and on investment and treatment of domestic
or third country investors and investments. The goal of both standards is to prevent
discrimination in fact or in law compared with domestic investors or investments or those of a
third country. At the same time, however, governments may have legitimate policy reasons to
accord differential treatment to different types of investments.
"In like circumstances" ensures that comparisons are made between investors and investments
on the basis of characteristics that are relevant for the purposes of the comparison. The
objective is to permit the consideration of all relevant circumstances, including those relating to
a foreign investor and its investment, in deciding to which domestic or third country investors
and investments they should appropriately be compared, while excluding from consideration
those characteristics that are not germane to such a comparison. "
11
Annex 421
7. The question was asked whether the treatment accorded to foreign investors by a sub-federal
state or province would meet the national treatment test only if it were no less favourable than the
treatment accorded to the investors of the same state or province, or whether it would be sufficient to
accord treatment no less favourable than that accorded to the investors from any other state or province.
The question will need to be answered by the Negotiating Group in due course.
8. As indicated by the Negotiating Group, Article 1 is intended to address any problem of de facto
as well as de iure discrimination.
9. Some delegations expressed the view that Article 1.3 was not strictly necessary since it does not
add any substantive obligation to Articles 1.1 and 1.2. Article 1.3 underlines, however, that, taken
together, the purpose of Articles 1.1 and 1.2 is to give the investors and their investments the better of
National Treatment and MFN.
12
Annex 421

ANNEX422

Document:-
A/33/10
Report of the International Law Commission on the work of its Thirtieth session, 8 May -
28 July 1978, Official Records of the General Assembly, Thirty-third session, Supplement
No.10
Topic:
<multiple topics>
Extract from the Yearbook of the International Law Commission:-
1978, vol. 11(2)
Downloaded from the web site of the International Law Commission
(http ://www.un.org/law/ilc/index. htm)
Copyright© United Nations
Annex 422
Report of the International Law Commission on Its thirtieth session 27
clause. The extent of the favours to which the beneficiary
of that clause may lay claim will be determined by the
actual favours extended by the granting State to the third
State.
(8) The parties stipulating the clause, i.e. the granting
State and the beneficiary State, can, however, restrict in
the treaty or agreement itself the extent of the favours
that can be claimed by the beneficiary State. For example,
the restriction can consist in the imposition of a condition,
a matter that is dealt with below.11"' If the clause contains
a restriction, the beneficiary State cannot claim any
favours beyond the limits set by the clause, even if this
extent does not reach the level of the favours extended by
the granting State to a third State. In other words. the
treatment granted to the third State by the granting State
is applicable only within the framework set by the clause.
This is the reason for the wording of paragraph 2 of
article 8, which expressly states that the most-favourednation
treatment to which the beneficiary State- for
itself or for the benefit of the persons or things in a
determined relationship with it-is entitled under a clause
referred to in paragraph 1, is determined by the treatment
extended by the granting State to a third State or to
persons or things in the same relationship with that third
State. Paragraph 2 reflects in general the ejusdem generis
rule, whose substance is developed in articles 9 and 10
that follow.
Article 9. Scope of rights under
a most-favoured-nation clause
1. Under a most-favoured-nation clause the beneficiary
State acquires, for itself or for the benefit of persons or
things in a determined relationship with it, only those rights
which fall within the limits of the subject-matter of the
clause.
2. The beneficiary State acquires the rights under
paragraph 1 only in respect of persons or things which are
specified in the clause or implied from its subject-matter.
Article 10. Acquisition of rights under
a most-favoured-nation clause
1. Under a most-favoured-nation clause the beneficiary
State acquires the right to most-favoured-nation treatment
only if the granting State extends to a third State treatment
within the limits of the subject-matter of the clause,
2. The beneficiary State acquires rights under paragraph
1 in respect of persons or things in a determined
relationship with it only if they:
(a) belong to the same category of persoos or things
as those in a determined relationship with a third State
which benefit from the treatment extended to them by the
granting State and
(h) have the same relationship with the beneficiary
State as the persons and things referred to in subparagraph
(a) have with that third State.
m See articles 11, J 2 and J 3 below, and the commentary thereto.
Commentary to articles 9 and JO
Scope of the most-favoured-nation clause regarding its
subject-matter
(1) The rule which is sometimes referred to as the
ejusdem generis rule is generally recognized and affirmed
by the jurisprudence of international tribunals and
national courts and by diplomatic practice. The essence
of the rule has been explained in the following graphic
way:
Suppose that a most-favoured-nation clause in a commercial
treaty between State A and State B entitled State A to claim from
State B the treatment which State B gives to any other State, that
would not entitle State A to claim from State B the extradition of
an alleged criminal on the ground that State B has agreed to
extradite alleged criminals of the same kind to State C, or voluntarily
does so. The reason, which seems to rest on the common
intention of the parties, is that the clause can only operate in
regard to the subject-matter which the two States had in mind
when they inserted the clause in their treaty .116
Although the meaning of the rule is clear, its application
is not always simple. From the abundant practice the
following selection of cases may illustrate the difficulties
and solutions.
(2) In the Anglo-Iranian Oil Company case (1952), the
International Court of Justice stated:
The United Kingdom also put forward, in a quite different
form, an argument concerning the most-favoured-nation clause. If
Denmark, it is argued, can bring before the Court questions as to
the application of her 1934 Treaty with Iran, and if the United
Kingdom cannot bring before the Court questions as to the application
of the same Treaty to the benefit of which she is entitled
under the most-favoured-nation clause, then the United Kingdom
would not be in the position of the most-favoured-nation. The
Court needs only observe that the most-favoured-nation clause in
the Treaties of 1857 and 1903 between Iran and the United Kingdom
has no relation whatever to jurisdictional matters between the two
Governments.• If Denmark is entitled under Article 36, paragraph
2, of the Statute, to bring before the Court any dispute as to the
application of its Treaty with Iran, it is because that Treaty is
subsequeni to the ratification of the Iranian Declaration. This
cannot give rise to any question relating to most-favoured-nation
treatment.116
(3) In the Ambatielos case,U7 the Commission of Arbitration,
in its award of 6 March 1956, held the following
views on article X (most-favoured-nation clause) of the
Anglo-Greek Treaty of Commerce and Navigation of
1886:
The Commission [of Arbitration] does not deem it necessary to
express a view on the general question as to whether the mostfavoured-
nation clause can never have the effect of assuring to
its beneficiaries treatment in acco~dance with the general rules of
international law, because in the present case the eff'eet of the
clause is expressly limited to "any privilege, favour or immunity
which either Contracting Party has actually granted or may
hereafter grant to the subjeets or citizens of any other State",
116 McNair, op. cit., p. 287.
118 Anglo-Iranian Oil Co. case (Preliminary objection), Judgment
of 22 July 1952, I.C.J. Reports 1952, p. 110. For the facts and
other aspects of the case, see Yearbook ... 1970, vol. II, pp. 202
and 205, doc. A/CN.4/228 and Add.I, paras. J0,30.
117 The Ambatielos case (merits : obligation to arbitrate), Judgment
of 19 May 1953, I.C.J. Reports 1953, p. 10.
Annex 422
28 Yearbook of the Intern•tional Law Commission, 1978, vol. D, Part Two
which would obviously not be the case if the sole object of those
provisions were to guarantee to them treatment in accordance
with the general rules of international law.
On the other hand, the Commission [of Arbitration] holds that
the most-favoured-nation clause can only attract matters belonging
to the same category of subject as that to which the clause
itself relates•.
The Commission [of Arbitration] is, however, of the opinion
that in the present case the application of this rule can lead to
conclusions different from those put forward by the United
Kingdom Government.
In the Treaty of 1886 the field of application of the mostfavoured-
nation clause is defined as including "all matters relating
to commerce and navigation", It would seem that this expression
has not, in itself, a strictly defined meaning. The variety of
provisions contained in Treaties of commerce and navigation
proves that, in practice, the meaning given to it is fairly flexible.
For example, it should be noted that most of these Treaties contain
provisions concerning the administration of justice. That is the
case, in particular, in the Treaty of 1886 itself, Article XV, paragraph
3, of which guarantees to the subjects of the two Contracting
Parties "free access to the Courts of Justice for the prosecution
and defence of their rights". That is also the case as regards
the other Treaties referred to by the Greek Government in connexion
with the application of the most-favoured-nation clause.
It is true that "the administration of justice", when viewed in
isolation, is a subject-matter other than "commerce and navigation",
but this is not necessarily so when it is viewed in connexion
with the protection of the rights of traders, Protection of
the rights of traders naturally finds a place among the matters
dealt with by Treaties of commerce and navigation,
Therefore it cannot be said that the administration of justice,
in so far as it is concerned with the protection of these rights,
must necessarily be excluded from the field of application of the
most-favoured-nation clause, when the latter includes "all matters
relating to commerce and navigation". The question can only
be determined in accordance with the intention of the Contracting
Parties as deduced from a reasonable interpretation of the
Treaty.118
In summing up its views with respect to the interpretation
of article X of the Treaty of 1886, the Commission of
Arbitration stated that it was of the opinion:
(I) that the Treaty concluded on 1st August 1911 by the
United Kingdom with Bolivia cannot have the effect of incorporating
in the Anglo-Greek Treaty of 1886 the "principles of
international law", by the application of the most-favourednation
clause;
(2) that the effects of the most-favoured-nation clause contained
in Article X of the said Treaty of 1886 can be extended to
the system of the administration of justice in so far as concerns
the protection by the courts of the rights of persons engaged in
trade and navigation;
(3) that none of the provisions concerning the administration
of justice which are contained in the Treaties relied upon by the
Greek Government can be interpreted as assuring to the beneficiaries
of the most-favoured-nation clause a system of "justice",
"right", and "equity" different from that for which the municipal
law of the State concerned provides;
(4) that the object of these provisions corresponds with that
of Article XV of the Anglo-Greek Treaty of 1886, and that the
only question which arises is, accordingly, whether they include
118 United Nations, Reports of International Arbitral Awards,
vol. XII (United Nations publication, Sales No. 63.V.3), pp. 106
and 107.
more extensive "privileges", "favours" and "immunities" than
those resulting from the said Article XV;
(5) that it follows from the decision summarized in (3) above
that Article X of the Treaty does not give to its beneficiaries any
remedy based on "unjust enrichment" different from that for
which the municipal law of the State provides.
. .. the Commission [of Arbitration} is of the opinion that
"free access to the Courts", which is vouchsafed to Greek nationals
in the United Kingdom by Article XV of the Treaty of 1886,
includes the right to use the Courts fully and to avail themselves
of any procedural remedies of guarantees provided by the law
of the land in order that justice may be administered on a footing
of equality with nationals of the country.
The Commission [of Arbitration] is therefore of the opinion
that the provisions contained in other Treaties relied upon by the
Greek Government do not provide for any "privileges, favours or
immunities" more extensive than those resulting from the said
Article XV, and that accordingly the most-favoured-nation
clause contained in Article X has no bearing on the present
dispute ... 119
( 4) Decisions of national courts also testify to the general
recognition of the rule. In an early French case (1913),
the French Court of Cassation had to decide whether
certain procedural requirements for bringing suit, as
provided in a French-Swiss Convention on jurisdiction
and execution of judgement, applied also to German
nationals as a result of a most-favoured-nation clause in
a Franco-German commercial treaty concluded at Frankfurt
on 10 May 1871. The Franco-German treaty guaranteed
most-favoured-nation treatment in their commercial
relations, including the "admission and treatment of
subjects of the two nations". The decision of the Court
was based in part on the following propositions: that
these provisions pertain exclusively to the commercial relations
between France and Germany, considered from the viewpoint
of the rights under international law, but they do not concern,
either expressly or implicitly, the rights under civil law, particularly,
the rules governing jurisdiction and procedure that are
applicable to any disputes that develop in commercial relations
between the subjects of the two States,
and that
the most-favoured-nation clause may be invoked only if the subject
of the treaty stipulating it is the same as that of the particularly
favourable treaty the benefit of which is claimed.120
(5) In Lloyds Bank v. de Ricqles and de Gaillard before
the Commercial Tribunal of the Seine, Lloyds Bank,
which as plaintiff had been ordered to give security for
costs (cautio judicatum so/vi), invoked article I of an
Anglo-French Convention of 28 February 1882.121 That
Convention intended, according to its preamble, "to
regulate the commercial maritime relations between the
119 Ibid., pp. 109 and 110.
120 M. Whiteman, Digest of International Law, Washington,
D. C., U. S. Government Printing Office, 1970, vol. 14, pp. 755
and 756, quoting the decision of the French Court of Cassation,
22 December 1913, in the case of Braiinkohlen Briket Verkaufsverein
Gesellschaft c. Goffart, es qualites. The decision is also
quoted by P. Level, "Clause de la nation la plus favorisee",
Encyclopedie Dal/oz - Droll International, Paris, Dalloz, 1968,
vol. I, p. 338, para. 38, and by H. Batiffol, Droll i11ternational
prive, 4th ed. Paris, Librairie generale de droit et de jurisprudence,
1967, p. 216, No. 189.
lH British and Foreign Stale Papers, ]881-1882 (London,
Ridgway, 18_89), vol. 73, p. 22.
Annex 422
Report of the Interuatioaal Law Commission on Its thirtieth session 29
two countries, as well as the status of their subjects'', and
article I provided, with an exception not relevant here,
that:
... each of the High Contracting Parties engages to give the other
immediately and unconditionally the benefit of every favour,
immunity or privilege in matters of commerce or industry which
have been or may be conceded by one of the High Contracting
Parties to any third nation whatsoever, whether within or beyond
Europe.122
On the basis of that article, Lloyds Bank claimed the
benefit of the provisions of a Franco-Swiss Treaty of
15 June 1889, which gave Swiss nationals the right to
sue in France without being required to give security
for costs. The court rejected that claim, holding that a
party to a convention of a general character such as the
Anglo-French Convention regulating the commercial and
maritime relations of the two countries could not claim
under the most-favoured-nation clause the benefits of a
special convention such as the Franco-Swiss Convention,
which dealt with one particular subject, namely, freedom
from the obligation to give security for costs.123
(6) Drafters of a most-favoured-nation clause are always
confronted with the dilemma either of drafting the clause
in too general terms, risking thereby the loss of its effectiveness
through a rigid interpretation of the ejusdem
generis rule, or of drafting it too explicitly, enumerating
its specific domains, in which case the risk consists in
the possible incompleteness of the enumeration.
(7) The rule is observed also in the extra-judicial practice
of States, as shown by the case concerning the Commercial
Agreement of 25 May 1935 between the United
States of America and Sweden, article I of which provided
as follows:
Sweden and the United States of America will grant each other
unconditional and unrestricted most-favored-nation treatment in
all matters concerning the customs duties and subsidiary charges
of every kind and in the method of levying duties, and, further,
in all matters concerning the rules, formalities and charges imposed
in connexion with the clearing of goods through the customs, and
with respect to all laws or regulations affecting the sale or use of
imported goods within the country."'
A request was submitted in 1949 to the Department of
State that it inform the New York State Liquor Authority
that a liquor licence to sell imported Swedish beer in
New York should be issued to a certain firm of importers.
The Office of the Legal Adviser, Department of State,
interpreted the treaty provisions as follows:
Since the most-favored-nation provision in the Reciprocal
Trade Agreement between the United States and Sweden signed
in 1935 is designed only to prevent discrimination between imports
m ibid., pp. 23-24.
123 H. Lauterpacht, ed., Annual Digest of Public International
Law Cases, 1929-30, London, vol. 5, 1935, Case No. 252, p. 404;
Jour110l du droit international, Paris, 58th year, 1931, p. 1018,
digested by McNair, op. cit., p. 287. Other cases before French
courts based on the ejusdemgeneris rule are cited by A.-Ch. Kiss,
•• La convention europeenne d'etablissement et la cause de la
nation la plus favorisee ", Annuaire fran~ais de droit international,
1957, Paris, vol. III, p. 478, and for cases before American courts,
by G. H. Hackworth, Digest of Inter110lw110I Law, Washington,
D. C., U. S. Government Printing Office, vol. V, 1943, pp. 292
and 293.
1st League of Nations, Treaty Series, vol. CLXI, p. 111.
from and exports to Sweden as compared with imports from and
exports to other countries, I regret that this Department would be
unable to send to the New York Liquor Authority a letter such
as you suggest to the effect that the Agreement accords to Swedish
110tio110!s the same treatment as is accorded to the nationals of
other countries.
All of the countries listed in the enclosure to your letter (countries,
nationals of which are held by the New York State Liquor
Authority to be entitled to liquor licences) have treaties with the
United States which grant either national or most-favored-nation
rights as to engaging in trade to nationals of those countries,
Thus existence of the trade agreements to which you refer in
addition to these treaties is irrelevant ... m
(8) In the following examples, the question of the application
of the rule arose under extraordinary circumstances.
In the case of Nyugat-Swiss Corporation Societe Anonyme
Maritime et Commercia/e v. State (Kingdom of the
Netherlands), the facts were as follows. On 13 April 1941,
the steamship Nyugat was sailing outside territorial waters
of the former Dutch East Indies. It sailed under the
Hungarian flag. The Netherlands destroyer Kortenaer
stopped it, searched it and took it into Surabaya, where
it was sunk in 1942. The plaintiffs claimed that the action
taken with regard to the Nyugat was illegal. The vessel
was Swiss property. It had formerly belonged to a Hungarian
company, but the Swiss corporation became the
ship's owner in 1941, when it already held all shares in
the Hungarian company. The Hungarian flag was a neutral
flag. Defendant relied upon the fact that on 9 April
1941 diplomatic relations between the Netherlands and
Hungary were severed, that on 11 April 1941 Hungary,
as an ally of Germany, attacked Yugoslavia, and that
consequently on the basis of certain relevant Dutch
decrees the capture of the ship was legal. Plaintiffs contended
that those decrees were in conflict with the Treaty
of Friendship, Establishment and Commerce concluded
with Switzerland at Berne on 19 August 1875 126 and with
the Treaty of Commerce concluded with Hungary on
9 December 1924,m and notably with the most-favourednation
clause contained in those treaties. Plaintiffs referred
to the Treaty of Friendship, Navigation and Commerce
signed on 1 May 1829 with the Republic of Colombia,
providing that, "if at any time unfortunately a rupture
of the ties of friendship should take place", the subjects
of the one party residing in the territory of the other
party "will enjoy the privilege of residing there and of
continuing their business ... as long as they behave peacefully
and do not violate the laws; their property ... will
not be subject to seizure and attachment".128 The Court
held:
The invoking of this provision fails, since it is unacceptable
that a rupture of friendly relations, as understood in the year 1829,
can be assimilated to a severance of diplomatic relations as it
occurred during the Second World War; in the present case the
determination of the flag was also based upon the assumption by
135 Legal Adviser Fisher, Department of State, 3 November
1949, MS. Department of State, quoted by Whiteman, op. cit.,
p. 760.
111 Netherlands, Staatsb/ad van het Koninkrijk der Ntderlanden,
No. 137, 1878, Decree of 19 September 1878.
117 Ibid., No. 36, 1926, Decree of 3 March 1926.
128 British and Foreign State Papers, 1829-1830, London
Ridgway, 1832, p. 902.
Annex 422
30 Yearbook of the International Law CommJssloo, 1978, vol. ll, Part Two
Hungary of an attitude contrary to the interests of the Kingdom
by collaborating in the German attack against Yugoslavia. This
case surely doe!! not fit in with the provisions of the 1829 Treaty.
From the preceding it follows that the shipowners are wrong in
their opinion that the Court should not apply the Decree as being
contrary to international provisions.121
(9) According to one source, "some authority exists"
for the view that rights and privileges obtained in the
course of a territorial and political arrangement or a
peace treaty
cannot be claimed under a most-favoured-nation clause... The
reason presumably is that such concessions are not commercial,
while most-favoured-nation clauses are usually concerned with
trade and commerce.130
The author quotes an opinion of a law officer given in
1851, which denied to Portugal and Portuguese subjects
the right "to dry on the coast of Newfoundland the
codfish caught by them on the banks adjoining thereto".
The claim was based on a most-favoured-nation clause
in a treaty of 1842 between Great Britain and Portugal
designed to secure the same privileges as were granted by
Britain to France and to the United States of America
by the treaties of 1783. Those treaties formed part of a
general arrangement made at the termination of a war.
The law officer stated:
... I am of opinion that the stipulation of the 4th Article of the
Treaty of 1842 cannot justly be considered as applicable to the
permission which he (the Portuguese Charge d'Affaires] claims on
behalf of Portuguese subjects.
I consider that these privileges were conceded to France and the
United States of America as part of a territorial and political
arrangement extorted from Great Britain at the termination of a
war which had been successfully carried on against her by those
nations.131
(10) No writer would deny the validity of the ejusdem
generis rule which, for the purposes of the most-favourednation
clause, derives from its very nature. It is generally
admitted that a clause conferring most-favoured-nation
rights in respect of a certain matter, or class of matter,
can attract the rights conferred by other treaties (or unilateral
acts) onJy in regard to the same matter or class of
matter.132
(ll) The effect of the most-favoured-nation process is,
by means of the provisions of one treaty. to attract those
of another. Unless this process is strictly confined to cases
where there is a substantial identity between the subjectmatter
of the two sets of clauses concerned, the result in a
number of cases may be to impose upon the granting State
obligations it never contemplated.133 Thus the rule follows
clearly from the general principles of treaty interpretation.
States cannot be regarded as being bound beyond the
obligations they have undertaken.
iu Judgment of 6 March 1959 by the Supreme Court of the
Netherlands (Neder/andse Jurisprudentie 1962, No. 2, pp. 18 and
19).
130 McNair, op. cit., p. 302.
131 Ibid., p. 303.
1•• See Yearbook .• . 1970, vol. II, p. 210, doc. A/CN.4/228
and Add.I, para. 68.
m Ibid., p. 211, doc. A/CN.4/228 and Add.1, para. 72.
(12) The essence of the rule is that the beneficiary of a
most-favoured-nation clause cannot claim from the
granting State advantages of a kind other than that
stipulated in the clause. For instance, if the most-favourednation
clause promises most-favoured-nation treatment
solely for fish, such treatment cannot be claimed under the
same clause for meat.184 The granting State cannot evade
its obligations, unless an express reservation so provides,135
on the ground that the relations between itself and the
third country are friendlier than or .. not similar" to those
existing between it and the beneficiary. It is only the
subject-matter of the clause that must belong to the same
category, the idem genus, and not the relation between the
granting State and the third State on the one hand and
the relation between the granting State and the beneficiary
State on the other. It is also not proper to say that the
treaty or agreement including the clause must be of the
same category (ejusdem generz's) as that of the benefits
that are claimed under the clause.136 To hold otherwise
would seriously diminish the value of a most-favourednation
clause.
Scope of the most-favoured-nation clause regarding persons
or things
(13) In respect of the subject-matter, the right of the
beneficiary State is restricted in two ways: first, by the
clause itself, which always refers to a certain matter,137
and secondly by the right conferred by the granting State
on the third State.
(14) The situation is similar, although not identical. in
respect of the subjects in the interest of which the beneficiary
State is entitled to claim most-favoured-nation
treatment. The clause itself may indicate those persons,
ships, products, etc., to which it applies, but it may not
necessarily do so. The clause may simply state that the
beneficiary State is accorded most-favoured-nation treatment
in respect of customs duties, or in the sphere of
commerce, shipping, establishment, etc., without specifying
the persons or the things that will be given mostfavoured-
nation treatment. In such cases the indication
of the sphere of operation for the clause implicitly denotes
the class of persons or things in whose interest the beneficiary
State may exercise its rights.
134 ln connexion with the problem of "like products", see the
relevant passage in the excerpts from the conclusions of the Economic
Committee of the League of Nations in regard to the most•
favoured-nation clause annexed to the Special Rapporteur's first
report (Yearbook ..• 1969, vol. II, p. 178, doc. A/CN.4/213,
annex 1), and articles I, II and XIII of the General Agreement on
Tariffs and Trade (GA IT, Basic Instruments and Selected Documents,
vol. IV, op. cit., pp. 2-5 and 21-23). Notable efforts are
being made to facilitate the identification and comparison of
products by setting up uniform standards for the purpose; these
efforts incfude the Brussels Convention of 15 December 1950
establishing a Customs Co-operation Council (United Nations,
Treaty Series, vol. 157, p. 129) and the Convention on the Nomenclature
for the Classification of Goods in Customs Tariffs of
15 December 1950(ibid., vol. 347, p. 127).
135 See article 29 below, and commentary thereto.
138 Vignes, foe. cit., p. 282.
137 With very rare exceptions, there is no clause in modern
times that would not be restricted to a certain sphere of relations,
e.g. commerce, establishment and shipping. See article 4 above,
paras. (14) and (15) of the commentary.
Annex 422
Report of the Internatioqal Law Comm!S!lon on Ill thirtieth session 31
(15) The beneficiary State may claim most-favourednation
treatment only for the category of persons or
things (merchants, commercial travellers, persons taken
into custody, companies, vessels, distressed or wrecked
vessels, products, goods, textiles, wheat, sugar, etc.) that
receives or is entitled to receive certain treatment, certain
favours, under the right of a third State. And, further, the
persons or things in respect of which most-favourednation
treatment is claimed must be in the same relationship
with the beneficiary State as are the comparable
persons or things with the third State (nationals, residents
in the country, companies having their seat in the country,
companies established under the law of the country,
companies controlled by nationals, imported goods, goods
manufactured in the country, products originating in the
country, etc.).138
(16) The following French case may serve as an illustration
of the proposed rule. Alexander Serebriakoff, a
Russian subject, brought an action against Mme. d'Oldenbourg,
also a Russian subject, alleging the nullity of a
will under which she was a beneficiary. The defendant,
after having obtained French citizenship by naturalization,
obtained an ex parte decision from the Court of Appeal
of Paris ordering Serebriakoff to furnish 100,000 francs
security. Serebriakoff appealed, against that ex parte
decision, claiming inter alia that he was exempt from
furnishing security by the terms of the Franco-Soviet
agreement of 11 January 1934. The Court held that the
appeal must be dismissed. The Court stated:
Whereas the Decree of 23 January 1934 ordering the provisional
application of the trade agreement concluded on 11 January 1934
between France and the USSR ... is not applicable in the current
case; and Alexander Screbriakoff is not entitled to claim the
benefit of that agreement; and, while the agreement does provide,
on the basis of reciprocity, free and unrestricted access by Russian
subjects to French courts, the privilege thus granted to such
subjects is limited strictly to merchants and industrialists; and
this conclusion results inevitably both from the agreement as a
whole and from the separate consideration of each of its provisions ;
and the agreement in question ls entitled "Trade Agreement";
and the various articles of which it ls composed confirm that
description, and its art[cle 9, on which Serebriakoff specifically
relies, in determining the beneficiaries of the provisions in question,
begins with the words: "Save in so far as may be otherwise provided
subsequently, French merchants and manufacturers, being natural
or legal persons under French law, shall not be less favourably
treated ... than nationals of the most-favoured-nation ... " 119
(17) In another case, the Tribunal de Grande Instance
de la Seine held that the most-favoured-nation clause
embodied in the Franco-British Convention of 28 February
1882, as supplemented by an exchange of letters
of interpretation of 21 and 25 May 1929, by which British
subjects were entitled to rely on treaties stipulating the
assimiJation of foreigners to nationals, applied solely to
British subjects who settled in France. The Tribunal
stated:
... [a] British national domiciled in Switzerland may not rely
on a treaty of establishment which grants the benefit of the mostfavoured-
nation clause only to British nationals established in
138 See article S above, para. (4) of the commentary.
138 See Secretariat Digest, Yearbcok ... 1973, vol. Il, p. 132,
doc. A/CN.4/269, para. 40.
France and therefore entitled to carry on a remunerative activity
there on a permanent basis," Ho
(18) Article 10, when referring to the same category of
things, implicitly states the rule regarding the controversial
notion of "like articles" or "like products". It is
not uncommon for commercial treaties to state explicitly
that, in respect to customs duties or other charges, the
products, goods, articles, etc., of the beneficiary State
will be accorded any favours accorded to like products,
etc., of the third State.141 Obviously, even in the
absence of such an explicit statement, the beneficiary State
may claim most-favoured-nation treatment only for the
goods specified in the clause or belonging to the same
category as the goods enjoying most-favoured-nation
treatment by the third State.
(19) The Commission did not wish to delve into all
the intricacies of the notion of "like products". The
following paragraphs supply a brief explanation. As to
exactly what is meant by the expression as it appears in
commercial treaties, it has been said that:
One test in such cases is a comparison of the intrinsic characteristics
of the goods concerned. Such a test would prevent the
classification of articles on the basis of external characteristics.
If products are intrinsically alike, they should be considered to
be like products, and differing rates of duty on them would
contravene the most-favored-nation clause. For example, in the
Swiss Cow case [142), the question arises whether a cow raised at
a certain elevation is "like" a cow raised at a lower level, Applying
the intrinsic characteristics test gives a simple answer to the
question. The cows are intrinsically alike, and a tariff classification
based on such an extraneous consideration as the place
where the cows arc raised is clearly designed to discriminate in
favour of a particular country.
In other situations the application of the intrinsic characteristics
test would show clearly that a classification was not objectionable.
To invent such a case: under the tariff law of the United
States, apples arc dutiable and bananas are free of duty. If Canada
and the United States have a treaty providing that products of
either party will be accorded treatment no less favorable than
that accorded to "like articles" · of any third country, Canada
might argue that apples should be free of duty. Any such claim
would have to be based on the argument that since both bananas
and apples are used for the same purpose, i.e. eating, they are
"like articles". Applying the test of intrinsic characteristics in
this case would promptly settle the question, since apples and
bananas are intrinsically different products,148
(20) With regard to the "Swiss Cow" case, mentioned in
the text quoted in the preceding paragraph, the Special
Rapporteur in his second report had the following to say:
The difficulties inherent in the expression "like product" can
ad oculos be demonstrated in the following manner. In the working
paper on the most-favoured-nation clause in the law of treaties,
submitted by the Special Rapporteur on 19 June 1968, the following
classical example of an unduly specialized tariff was cited
under the heading "Violations of the clause".187 In 1904 Germany
granted a duty reduction to Switzerland on
"' . Yearbook .. . 1968, vol. D, p. 170, doc. A/CN.4/L.127, para. 31,
140 Ibid., pp. 145 and 146, doc. A/CN.4/269, para. 78.
m Sec article I, para. 1, of the General Agreement on Tariffs
and Trade, quoted above (article 4, para. IO) of the commentary.
m See para. (20) below.
m Hawkins, op. cit., pp. 93 and 94.
Annex 422
32 Yearbook or the Joternatfonal Law Commission, 1978, vol. n, Part Two
"large dappled mountain cattle or brown cattle reared at a
spot at least 300 metres above sea level and which have at least
one month's grazing each year at a spot at least 800 metres
above sea level" .188
Sources quoting this e,i;ample generally consider a cow raised at a
certain elevation "like" a cow raised at a lower level, This being
so, they believe-and the working paper followed this beliefthat
a tariff classification based on such an e,i;traneous consideration
as the place where the cows are raised is clearly designed
to discriminate in favour of a particular country, in the case in
question, in favour of Switzerland and against, for example,
Denmark.119 However, the Food and Agriculture Organization of
the United Nations, being an interested agency and having special
expertise in matters of animal trade, in its reply to the circular
letter of the Secretary-General, made the following comment on
the example given in the working paper:
"In view of the background situation relating to the case
cited in the example, it would seem that the specialized tariff
may have been technically justified because of the genetic
improvement programme which was carried out in Southern
Germany at that time. At present, this specialized tariff would
presumably have been worded in a different way, but in 1904
terms like Simmental or Brown Swiss were probably not
recognized as legally valid characteristics [ ... ]. Apart from this,
it must be recognized that unduly specialized tariffs and other
technical or sanitary specifications have been-and continue
to be-used occasionally for reasons that may be regarded as
discriminatory."
111 League or Nations., Economic and Financial Section. Memorandum 01'
Discriminatory Classifications (S.,r. L.o.N.P. 1927.ll.27). p.l
111 H. C. Hawkins, Commerdal Tr~aliu and Agreemen1s; Principles and
Practice (New York, Rinehart, 1951 , pp. 93•94; J. E. S. l'awcen, "Trade and
Finance in International Law'\ ... RecMeil de5 cour& . .. 1968 (Leyden. Sijthoff.
1969), vol. 123, p. 263,1"
(21) That the difficulties caused by the interpretation of
the phrase "like products" are not insurmountable
between parties acting in good faith is shown by an
exchange of views made in the Preparatory Committee of
the International Conference on Trade and Employment:
... the United States said:
"This phrase had been used in the most-favored-nation clause
of several treaties. There was no precise definition, but the
Economic Committee of the League of Nations bad put out a
report that 'like product' meant 'practically identical with another
product'."
This lack of definition, however, in the view of the British delegate,
"has not prevented commercial treaties from functioning, and
I think it would not prevent our Charter from functioning until
such time as the ITO is able to go into this matter and make a
proper study of it. I do not think we could suspend other action
pending that study ... "
and Australia further noted:
"All who have had any familiarity with customs administration
know how this question of 'like products' tends to sort
itself out. It is really adjusted through a system of tariff classification,
and from time to time disputes do arise as to whether
the classification that is placed on a thing is really a correct
classification. I think while you have provision for complaints
m Yearbook ... 1970, vol. II, pp. 221-222, doc, A/CN.4/228
and Add.l, para. 148.
procedure through the Organization you would find that this
issue would be self-solving." 145
(22) The Commission is aware that in certain cases the
application of the rule contained in article 9 and 10 can
cause considerable difficulties. It has stated already that
the expression "same relationship" has to be used with
caution because, for example, the relationship between
State A and its nationals is not necessarily the "same" as
the relationship between State B and its nationals.
Nationality laws of States are so diverse that the sum
total of the rights and obligations arising from one State's
nationality laws might be quite different from that arising
from another State's nationality laws.146 Similar difficulties
can be encountered when treaties refer to internal
law in other instances; for example, where the right of
establishment of legal persons in concerned. The case of
legal persons can raise a particularly difficult problem
because they are defined by internal law. When, for
example, a treaty expressly grants to a third State favourable
treatment for a category of legal persons specified
according to the internal law of the third State, e.g. a
particular kind of German limited Jiability company
("Gesellschaft mit beschrankter Haftung") that is unknown
to the Anglo-Saxon countries, could the United
Kingdom invoke the most-favoured-nation clause to
claim the same advantages for the British type of company
that most closely resembles the German type of company
referred to in the treaty, or would it be debarred from
doing so? Similarly, if a treaty grants some advantage to
French companies of the type known as "association en
participation", which corresponds to the "joint venture"
of the common law countries, would an Anglo-Saxon
country be able to invoke the most-favoured-nation clause
to claim the same advantages for those of its companies
which are of the "joint venture'' type?
(23) A similar prob]em may arise in connexion with the
nationality of companies, which is not determined by
international law. For when, under a treaty of establishment,
a State grants to another advantages for its national
companies, it is the law of that State that determines the
nationality of those companies. That being so, could the
State that claims the benefit of the most-favoured-nation
clause claim it for all the companies defined as national
under its own law? Under that law a company might be
regarded as national merely if it had its registered offices
or principal place of business in the territory of the State
in question, or if that State controlled a substantial part
of the registered capital. Might not then the granting State
be able to object that the national companies of a third
State to which it had extended advantages were defined
much more restrictively under the law of that third
State? Hence, the granting State might refuse to accord
the benefit of the clause, arguing that it had extended to
the third State a specific kind of advantage which, if it
in J. H. Jackson, World Trade and the Law of GAIT (A Legal
Ar,alysis of the General Agreement on Tariffs and Trade), Indianapolis,
l3obbs-Merrill, 1969, pp. 260 and 261. facerpts from
the reports of the Economic Committee of the League of' Nations
are annexed to the Special Rapporteur's first report (see Yearbook
... 1969, vol. II, p. 175, doc. A/CN.4/213, annex O.
ue See article 5 above, para. (4) of the commentary.
Annex 422
Report of the International Law Commission on Its thirtieth session 33
were transposed into the law of another State, would
become more extensive.
(24) Some of the cases quoted above testify to the difficulties
that are encountered when it comes to the question
whether a particular right falls within the limits of the
subject-matter of the clause or is outside it. All these
difficulties are inherent in the application of a mostfavoured-
nation clause and do not detract from the usefulness
of articles 9 and 10 which, as a general rule, state
and elucidate the mechanism of the most-favoured-nation
clause.
(25) On the basis of the foregoing, article 9, entitled
"Scope of rights under a most-favoured-nation clause",
indicates indeed the potential scope of the clause. Its
paragraph 1 provides that the beneficiary State acquires
only those rights which fall within the limits of the
subject-matter of the clause, and paragraph 2 gives a
further precision to the rule in stating that the beneficiary
State acquires the rights falling within the limits of the
subject-matter of the clause only in respect of those
persons or things which are specified in the clause or
implied from the subject-matter of. that clause. If the
clause refers simply, e.g. to shipping orto consular matters
or to commerce in general, then these general references
imply in a more or less precise fashion the persons or
things in respect of which the beneficiary State acquires
the rights under a most-favoured-nation clause.
(26) Article 10, which appears under the heading "Acquisition
of rights under a most-favoured-nation clause",
indicates the actual scope of the clause. The general rule
concerning the acquisition by the beneficiary State of
most-favoured-nation treatment is stated in paragraph 1,
whereas paragraph 2 provides the further specification
of that rule regarding such acquisition in respect of persons
or things in a determined relationship with that beneficiary
State. Paragraph 1 provides that, even if the beneficiary
State wishes to claim rights falling within the limits
of the subject-matter of the clause, it will acquire those
rights only if a condition is fulfilled, namely, that the granting
State extends to a third State treatment which falls
within the same limits of the subject-matter. Paragraph 2
of the article provides that, if the beneficiary State makes
claim to rights in respect of persons or things, it will
acquire the rights under paragraph I only if the persons
or things in question: (a) fall into the same category of
persons or things as those in a determined relationship
with a third State which benefit from the treatment
extended to them by the granting State, and (b) have the
same relationship with the beneficiary State as those
persons or things have with that third State.
Article 11. Effect of a most-favoured-nation clause
not made subject to compensation
H a most-favoured-nation clause is not made subject to
a condition of compensation, the beneficiary State acquires
the right to most-favoured-nation treatment without the
obligation to accord any compensation to the granting
State.
Article 12. Effect of a most-favoured-nation clause
made subject to compensation
H a most-favoured-nation clause is made subject to a
condition of compensation, the beneficiary State acquires
the right to most-favoured-nation treatment only upon
according the agreed compensation to the granting State.
Article 13. Effect of a most-favoured-nation clause
made subject to reciprocal treatment
H a most-favoured-nation clause is made subject to a
condition of reciprocal treatment, the beneficiary State
acquires the right to most-favoured-nation treatment only
upon according the agreed reciprocal treatment to the
granting State.
Commentary to articles 11, 12 and 13
The conditional form and the conditional interpretation
(1) For the explanation of the necessity of the provisions
of articles 11, 12 and 13 reference has to be made to the
development of the most-favoured-nation clauses historically
known as "conditional" and to the "conditional"
interpretation of clauses which in their terms made no
reference to conditions.
(2) It was in the eighteenth century that the "conditional"
form made its first appearance, in the treaty
of amity and commerce concluded between France and
the United States of America on 6 February 1778.
Article II of that treaty read as follows:
The Most Christian King and the United States engage mutually
not to grant any particular favour to other nations, in respect of
commerce and navigation, which shall not immediately become
common to the other Party, who shall enjoy the same favour,
freely, if the concession was freely made, or on allowing the same
compensation, if the concession was conditional,U7
It has been held that the "conditional" clause was inserted
in the treaty of 1778 at French insistence. Even if it were
true that the idea was of French origin, the "conditional"
form of the clause seemed peculiarly suited to the political
and economic interests of the United States for a long
period.us
(3) The phrase "freely, if the concession was freely
made, or on allowing the same compensation [or the
equivalent], if the concession was conditional" was the
model for practically all commercial treaties of the United
States until 1923. Prior to that year, the commercial
treaties of the United States contained (with only three
exceptions) conditional rather than unconditional pledges
on the part of that country.149
1n W. M. Malloy, Treaties, Conventions, International Acts,
Protocols and Agreements between the United States of America
and other Powers, 1776-1909, Washington, D. C., United States
Government Printing Office, 1910, vol. I, p. 468.
us V. G. Setser, "Did Americans originate the conditional
most-favored-nation clause?", The Journal of Modern History,
Chicago, vol. V (September 1933), pp. 319-323.
1° C. C. Hyde, International Law, Chiefly as Interpreted and
Applied by the United States, 2nd rev. ed., Boston, Little, Brown,
1947, vol. II, p. J 504.
Annex 422
ANNEX423

UNITED NATIONS CONFERENCE ON TRADE AND
DEVELOPMENT
MOST-FAVOUREDNATION
TREATMENT
UNCTAD Series on Issues in International Investment
Agreements II
. , ~ ' ' ~ ii? --?~
UNITED NATIONS
New York and Geneva, 2010
Annex 423
EXECUTIVE SUMMARY
The inclusion of most-favoured-nation (MFN) treatment
provisions in international investment agreements (IIAs) followed
its use in the context of international trade and was meant to address
commitments made by States in free trade agreements (FTA) to
grant preferential treatment to goods and services regarding market
access. However, in the context of international investment that
takes place behind borders, MFN clauses work differently. In early
BITs, as national treatment (NT) was not granted systematically, the
inclusion of MFN treatment clauses was generalized in order to
ensure that the host States, while not granting NT, would accord a
covered foreign investor a treatment that is no less favourable than
that it accords to a third foreign investor and would benefit from NT
as soon as the country would grant it. Nowadays the overwhelming
majority of IIAs have a MFN provision that goes alongside NT,
mostly in a single provision.
The MFN treatment provision has the following main legal
features:
• It is a treaty-based obligation that must be contained in a
specific treaty.
• It requires a comparison between the treatment afforded to two
foreign investors in like circumstances. It is therefore, a relative
standard and must be applied to similar objective situations.
• An MFN clause is governed by the ejusdem generis principle,
in that it may only apply to issues belonging to the same subject
matter or the same category of subjects to which the clause
relates.
• The MFN treatment operates without prejudice to the freedom
of contract and thus, States have no obligation under the MFN
treatment clause to grant special privileges or incentives granted
Annex 423
xiv MOST-FAVOURED-NATION TREATMENT: A SEQUEL
through a contract to an individual investor to other foreign
investors.
• In order to establish a violation of MFN treatment, a less
favourable treatment must be found, based on or originating
from the nationality of the foreign investor.
In practice, violation or breaches of the MFN treatment per se
have not been controversial. However, an unexpected application of
MFN treatment in investment treaties gave raise to a debate that has
so far not found an end and that has generated different and
sometimes inconsistent decisions by arbitral tribunals. The issue at
stake is the application of the MFN treatment provision to import
investor-State dispute settlement (ISDS) provisions from third
treaties considered more favourable to solve issues relating to
admissibility and jurisdiction over a claim, such as the elimination
of a preliminary requirement to arbitration or the extension of the
scope of jurisdiction.
In this context, and in order to provide negotiators and policy
makers with informed options, this paper takes stock of the
evolution of MFN treatment clauses in IIAs. It also reviews arbitral
awards against the background of the cases that have followed the
Maffezini v. Spain case of 2000 that was the first to apply the MFN
treatment provision in this unexpected way.
Section I of the paper contains an explanation of MFN treatment
and some of the key issues that arise in its negotiation, particularly
the scope and application of MFN treatment to the liberalization and
protection of foreign investors in recent treaty practice. MFN
treatment provisions are used in different phases or stages of
investment and can apply to either pre-and/or post establishment
phases of investment, MFN treatment can apply to investors and/or
to their investments and treaties usually contain exceptions, either
systemic (regional economic integration organization (REIO) or
UNCTAD Series on International Investment Agreement II
Annex 423
EXECUTIVE SUMMARY xv
taxation) or country-specific exceptions to pre-establishment
commitments.
Subsequently, the paper analyses whether and under what
conditions the application of the MFN treatment clauses contained
in IIAs can be used by arbitral tribunals to modify the substantive
protection and conditions of the rights granted to investors under
IIAs to enter and operate in a host State. With some notable
exceptions, arbitral tribunals have generally been cautious in
importing substantive provisions from other treaties, particularly
when absent from the basic treaty or when altering the specifically
negotiated scope of application of the treaty.
When it comes to importing procedural provisions, mainly ISDS
provisions from other treaties, arbitral tribunals have gone into
divergent directions. A series of cases have accepted to follow the
argument raised by the claimant that an MFN clause can be used to
override a procedural requirement that constitutes a condition to
bring a claim to arbitration. On a slightly different issue, namely
jurisdictional requirements, a number of cases have however
decided that jurisdiction can not be formed simply by incorporating
provisions from another treaty by means of an MFN provision.
The paper finally provides policy options as regards the
traditional application of MFN treatment to pre and/or postestablishment,
to investors and/or investments. It identifies the
systemic exceptions relating to REIO and taxation agreements or
issues that have been used in IIAs to avoid extending commitments
made under other arrangements. In recent treaty practice, States may
choose to continue to extend MFN treatment to all phases of an
investment or limit its application to post-establishment activities of
investors.
UNCT AD Series on International Investment Agreement II
Annex 423
xvi MOST-FAVOURED-NATION TREATMENT: A SEQUEL
The paper also identifies reactions by States to the unexpected
broad use of MFN treatment, and provides several drafting options,
such as specifying the scope of application of MFN treatment to
certain types of activities, clarifying the nature of "treatment" under
the IIA, clarifying the comparison that an arbitral tribunal needs to
undertake as well as a qualification of the comparison "in like
circumstances". Options are also given to States wishing to
expressly allow or prohibit the use of MFN treatment to import
substantive or procedural provisions from other treaties. The last
option is to avoid the granting of MFN treatment given the open
ended and uncertain application that can be made in the case of
disputes.
While identifying options for a new generation of IIAs, the
paper also addresses how to deal with MFN treatment provisions of
existing treaties that are based on several different models. Possible
options consist of clarifying either bilaterally or even unilaterally
through interpretative statements, the scope and application of MFN
treatment in IIAs.
UNCTAD Series on International Investment Agreement II
Annex 423
26 MOST-FAVOURED-NATION TREATMENT: A SEQUEL
related to the covered person/beneficiary or the asset enterprise as
listed in the investment definition.
4. It requires a legitimate basis of comparison
In order to compare subject matters that are reasonably and
objectively comparable, an MFN treatment provision must be
applied to similar objective situations. Providing MFN treatment
does not require that all foreign investors have to be treated equally
irrespective of their concrete business activities or circumstances.
Different treatment is justified amongst investors who are not
legitimate comparators, e.g. do not operate in the same economic
sector or do not have the same corporate structure. The MFN
treatment clause requires that the host State does not discriminate -
de Jure or defacto12 - on the basis of nationality. For instance, MFN
treatment does not impede host countries from according different
treatment to different sectors of the economic activity, or to
differentiate between enterprises of different size, or businesses with
or without local partners.
During the MAI negotiations13 some delegations indicated that
they understood both MFN treatment and NT to implicitly require a
comparative context to be applied. Other delegations considered it
necessary to specifically include the formula "in like
circumstances". Currently, as we shall see in Section II, some IIAs
explicitly include a reference to "like circumstances", "like
situations" or similar wordings, while others remain silent.
Irrespective of the precise wording, the proper interpretation of a
relative standard requires that the treatment afforded by a host State
to foreign investors can only be appropriately compared if they are
in objectively similar situations. However, it is important to note
that by not making a specific reference to "like circumstances" or
any other criteria for comparison, the Contracting Parties do not
intend to dispense with the comparative context, as it would distort
the entire sense and nature of the MFN treatment clause.
UNCTAD Series on International Investment Agreement II
Annex 423
I. EXPLANATION OF THE ISSUE 27
There are not many arbitration cases dealing with the actual
comparison between the treatment two foreign investors receive
from the host State in given circumstances. There is therefore little
guidance to be found in arbitral awards on how the comparison
should be made. However, assessing a possible violation of MFN
treatment may be done by borrowing from findings of violation of
NT. Indeed, both treatment provisions share the same comparison
requirement (the only difference being that under NT the applicable
comparator of the foreign investor/investment is a national
investor/investment). In this connection several awards rendered
under NAFTA (1992) have consistently established that an
assessment of an alleged breach of NT requires an identification of
the comparators and a consideration of the treatment each of them
receives. Tribunals have used a variety of criteria for comparison
depending on the specific facts and the applicable law of each case.
They include: same business or economic sector, 14 same economic
sector and activity, 15 less like but available comparators16 and direct
competitors.17 Flexibility has prevailed, with the aim of comparing
what is reasonably comparable and considering all the relevant
factors.
5. It relates to discrimination on grounds of nationality
Both MFN treatment and NT are designed to prevent
discrimination for reasons of or on the grounds of nationality. In
order to establish a violation ofMFN treatment, the difference in the
treatment must be based on or caused by the nationality of the
foreign investor. After a reasonable comparison has been made
amongst appropriate comparators, there are factors that may justify
differential treatment on the part of the State among foreign
investors, such as legitimate measures that do not distinguish,
(neither de Jure nor de facto) between nationals and foreigners. 18 In
Parkerings v. Lithuania, the tribunal established that, to constitute a
violation of international law, discrimination had to be unreasonable
UNCT AD Series on International Investment Agreement II
Annex 423
II. STOCKTAKING AND ANALYSIS 53
publications, or printed or electronic newspapers and music scores
(see box 19).
Box 19. China-Peru FTA (2009)
Article 131 Most-Favoured-Nation Treatment
1. Each Party shall accord to investors of the other Party treatment
no less favourable than that it accords, in like circumstances, to
investors of any third State with respect to the establishment,
acquisition, expansion, management, conduct, operation, and sale
or other disposition of investments in its territory.
[ ... ]
3. Notwithstanding paragraphs 1 and 2, the Parties reserve the right
to adopt or maintain any measure that accords differential
treatment:
(a) to socially or economically disadvantaged minorities and
ethnic groups; or
b) involving cultural industries related to the production of
books, magazines, periodical publications, or printed or electronic
newspapers and music scores.
4. Conditions and qualifications
(i) "Like circumstances" or "like situations"
As outlined above, the MFN treatment obligation does not mean
that foreign investors have to be treated equally irrespective of their
concrete activity or circumstance. Different treatment is justified if
the would-be comparators are in different objective situations. This
requires comparing what is reasonably comparable. Some treaties
UNCT AD Series on International Investment Agreement II
Annex 423
54 MOST-FAVOURED-NATION TREATMENT: A SEQUEL
refer to "like circumstances", "like situations" or similar wording.
This is the case with the NAFTA (1992), the United States model
BIT (2004), the Canadian model BIT (2004), BITs concluded by
Mexico and many recent FT As/EPAs. Many classical BITs do not
include any such comparison formula. However, the absence thereof
does not mean that the contracting parties to such treaties intended
that the standard be applied without a proper comparison. This
comparison formula has to be seen as an implicit component of
MFN treatment, although for purposes of greater certainty and
according to the legal tradition of some countries, it may be
preferable to make it explicit.
(ii) Specific investment related activities covered by the
MFN treatment clause
MFN treatment applies to the treatment afforded by the host
State, as applicable, to investors and/or their investment, during the
post-establishment or pre/post-establishment phases. As mentioned
above, this treatment covers the life-cycle of the investment as
regulated by the host State's laws and regulations. However, some
MFN clauses are more precise than others.
Some MFN clauses, specifically those applying to preestablishment,
link the treatment to a closed set of activities
(sometimes for both investors/investments or only for investments)
(see box 20).
This list of investment activities includes pre- or postestablishment
activities. Hence, special attention must be paid in
order to reach the intended effect. Pre-establishment activities
typically include the "establishment, acquisition and expansion" of
investments, whereas post-establishment activities include the
"management, maintenance, conduct, operation, use, enjoyment,
sell, disposal or disposition" of investments. Expansion of
investment that is subject to prior approval or other authorization
may be considered part of the post-establishment activities by some
countries.
UNCTAD Series on International Investment Agreement II
Annex 423

ANNEX424

BILATERAL
INVESTMENT·
TREATIES
Annex 424
BILATERAL
INVESTMENT
TREATIES
H ISTO RY , POL I CY, AND
I NTERPRETATI O N
K ENNETH J. VANDEVELDE
OXFORD
UNIVERSITY PRESS
Annex 424
OXFORD
UNIVERSITY PRESS
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Copyright© 2010 by Oxford University Press, Inc. and Kenneth J. Vandevelde
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Vandevelde, Kenneth J.
Bilateral investment treaties : history, policy, and interpretation I Kenneth J. Vandevelde.
p.cm.
Includes t,:bliographical references and index.
ISBN 978-0-19-537136-9 (hardback : alk. paper)
I. Investments, Foreign-Law and legislation. 2. Treaties. I. Title.
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Annex 424
7.2 MOST FAVORED NATION AND NATIONAL TREATMENT
7.2. l Structure and Policy
The great majority of BITs include guarantees of national and most favored nation
(MFN) treatment for covered investments or investors. 1 National treatm~nt provisions
appear somewhat less frequently than MFN treatment provisions. National and MFN
treatment provisions have par_allel structures and thus they will be discussed together
to the extent possible.
The national and MFN treatment provisions always comprise at least three components:
a beneficiary, a comparator, and an obligation of equivalency. Some provisions
include a fourth component defining their scope of application. Most such provisions
also contain a fifth component identifying special exceptions to which one or both
obligations are subject.
The beneficiary is the person or asset entitled to national or MFN treatment. In
BITs, the beneficiary of the MFN and national treatment provisions is usually the
investment,2 but in some provisions it is the investor. 3 The definitions of investment
· and investor thus are critical to determining which persons or assets are protected.
Clearly, a BIT that guarantees nondiscrimination to both the investor and the investment
provides a more favorable investment climate. ,
Where a BIT guarantees a right of establishment, ideally the investor should be
named as a beneficiary. Although an entity that qualifies asan investment may seek to
.establish an investment, often the entity establishing an investment falls within the
definition of a covered investor but not of a covered investment. If the investor is not
a beneficiary of the standard, then· any commitment of MFN ( or national) treatment
with respect to establishment may be lost as a practical matter. If only an investment is
a beneficiary and the host state denies permission to establish the investment, no entity
entitled to claim the protection of the national ofMFN treatment provision comes into
existence. Other situations also may exist where the host state's conduct is directed at
the investor rather than the investment and thus naming the investor as a beneficiary
could expand the scope of treaty protection.4
On National Treatmentgenerally,see Andrea K. Bjorklund, "National Treatment," in Standards
of Investment Protection (August Reinisch, 2008). On MFN treatment generally, see Andreas
P. Ziegler, "Most-Favoured-Nation (MFN) Treatment," in id. and Pia Acconci, "MostFavoured-
Nation Treatment," in The Oxford Handbook of International Investment Law (Peter
Muchlinski, Frederico Ortino, and Christoph Schreuer, eds. 2008).
2 See, e.g., United Kingdom-Bosnia-Herzegovina BIT, Art. 3(1); Netherlands-Ethiopia, Art. 3(2);
Thailand-Argentina BIT, Art. 4(1); Australia-India, Art. 4(1)--{2); Sweden-Kazakhstan BIT,
Art. 3(1); Mexico-Iceland BIT, Art. 3(2); Germany-Timor-Leste, Art. 3(1); Canada-Uruguay
BIT, Art. IV(l); Cambodia-Vietnam BIT, Art. III(2); Egypt-Zambia, Art. 3(1); (MFN only);
Chile-Indonesia BIT, Art. IV(2). . .
3 See, e.g., BLEU-Sudan BIT, Art. 4(1); Austria-Armenia BIT, Art. 3(3); Thailand-Argentina
BIT, Art. 4(2); Australia-India, Art. 4(3) (MFN only); Mexico-Iceland BIT, Art. 3((3);
Germany-Timor-Leste; Art. 3(2); Canada-Uruguay BIT, Art; IV(2); United Kingdom-BosniaHerzegovina
BIT, Art. 3(2); Egypt-Zambia BIT, Art. 3(2) (MFN only).
4 For an example, see the discussion of RoslnvestCo v. Russia in Section 7.2.3.
MOST FAVORED NATION AND NATIONAL TREATMENT 3.,19 Annex 424
The comparator is the person or asset the treatment of which sets the standard that
must be met. Once again, the definitions of the terms "investor" and ''investment" are
critical, but here they are critical for purposes of establishi;ng the content of the standard,
rather than the scope of its application. If an entity is not an investor or an investment,
then the host state's treatment of that entity is not relevant for purposes of
establishing the content of the MFN or national treatment standard. For example, if
the term "investor" includes state enterprises, then the host .state's treatment of its.
own state enterprises define~ the treatment that must be accorded to a covered investor
that is entitled to national treatment. If state enterprises are excluded, however, then the
host state .may discriminate in• favor of its own state enterprises without violating the
national treatment provision.
Two general problems arise with. respect to identifying the comparator. The first
problem is determining whether every potential comparator that falls within the literal
language of the provision should be treated as relevant. Thus, for example, it. must be
determined whether national treatment requires that covered investment be treated as
favorably as any investment of the host state or only certain investment of the host
state. Some BITs explicitly address this question by providing that the appropriate
comparator is one that is "in like situations"5 or "in like circumstances"6 with the
beneficiary. Such language, however, is absent from most BITs.
Yet, It would seem that the concept of MFN and national treatment assumes that the
treatment of covered investment shall be compared only to·the treatment of comparable
investments. The purpose of national treatment, for example, does not require that
covered investment be treated as favorably as every investment in the host state in
every respect. For example, a large automobile manufacturing plant located in a major
urban area and owned by a covered investor might be. required to satisfy various
municipal regulations on matters such as land use that would not be applied to a small
domestically owned· groc~ry store located in a remote rural area. Read literally, the
national treatment standard would seem to be violated in such a case because the covered
investment was treated le~s favorably than a domestic investment. Yet, the different
treatment can be justified by the fact that the covered investment and the domestic
investment are not in the same situation. They are in different sectors of the economy,
they are on different scales, and they are situated in areas of radically different population
densities. Nor is the automobile plant being put at a competitive disadvantage. The
host state can be allowed the different treatment based on the dissimilar circumstances
of the two investments without defeating any of the purposes of the national treatment
provision. To apply the national treatment standard literally and to require that the two
investments be treated the same would impose a senseless restriction on host-state
regulatory discretion. As this example illustrates, the MFN and national treatment
standards not only may, but must, be interpreted to require that the treatment of covered
investment or investors be eval~ated only with respect to the treatment of comparable
investments or investors. Even where a phrase such as "in like situations" or "in like
5 See, e.g., United States-Argentina BIT, Art. 11(1).
6 See, e.g., Mexico-Iceland BIT, Art. 3(2H3); Canada-Uruguay BIT, Art. IV; Japan-Vietnam
BIT, Art. 2.
340 NONDISCRIMINATION
Annex 424
circumstances" does not appear in th~ provision, such a limitation should be treated as
implicit.
The BITs provide little guidance concerning the meaning of the phrase "in like
situations" or "in like circumstances," which should be treated as synonymous.71t has
been argued that, in the case of national treatment, for example, the ideal comparator
is an investment that is identical to the beneficiary in every respect except nationality.
Given that it may not be possible to find such a comparator, this view regards choosing
the comparator that is most like the beneficiary as a second-best solution. In other
words, the phrase "in like circumstances" would be interpreted as if it read "in the most
like circumstances." Obviously, the effect of this interpretation is potentially to weaken
the provision by eliminating a large number of comparators. The covered investment
may have been treated less favorably than a large number of potential comparators, but
if it is treated no less favorably than the closest comparator then no violation of the
standard would be found. Further, where a covered investment is comparable to other
investments in different ways, the question is of which is the most comparable may not
have an obvious solution.
Alternatively, one might treat as a comparator any investment in the same sector of
the economy. The argument in favor of this approach is that. one purpose of the relative
standards is to ensure a level playing field among competitors and this purpose is
served by prohibiting discrimination among competitors. Presumably, an investment's
competitors are other investments in the same sector of the economy. Equating "like
circumstances" with operating in the same sector of the economy, however, presents
some potential difficulties. One is that no other investment in the same sector may
exist. Another is that sectors can be described at different levels of generality, which
allows the test to be manipulated easily.8 In addition, ensuring competitive equality
does not exhaust the purpose of a nondiscrimination provision. For example, a nondiscrimination
provision also promotes a favorable investment climate by prohibiting at
least some forms of arbitrary treatment and it promotes the rule of law by requiring
equal treatment under the law.
A better approach is to consider whether the differences between the beneficiary
and the comparator are relevant to the host state's legitimate regulatory objectives.
A regulatory objective is legitimate only to the extent that it is consistent with BIT
principles. For example, if a covered investment and a comparator were subject to different
environmental regulations, one would consider whether the different treatment
of the investment and the comparator was based on a legitimate regulatory objective.
Environmental preservation would be such an objective, while economic protectionism
would not be. If the different treatment was based on environmental preservation, then
the beneficiary artd the comparator would. be regarded as in unlike circumstances
and the different treatment would not violate the MFN or national treatment standard.
If the different treatment was based on economic protectionist objectives, then the
beneficiary and comparator would be regarded as in like circumstances because the
7 The two appear interchangeable, for example, in U.S. BIT practice. See Kenneth J. Vandevelde,
U.S. International Investment Agreements 252 (2009).
8 See S~ction 7.2.3.
MOST FAVORED NATION AND NATIONAL TREATMENT 341
Annex 424
'•
difference was not related to a legitimate regulatory objective. Treating them differently
would violate the national or MFN treatment provision.
As this suggests, where no obvious comparator exists, the covered investment or
investor should be permitted to show a violation of the national or MFN treatment
provision by demonstrating that its treatment was the result of a discriminatory motive.
For example, if an investment was subjected to adverse treatment because it was a
foreign investment, then it would seem clear that the investment did not receive
national treatment. A discri~inatory motive should be provable by circumstantial evidence,
such as the inability of the host state to articulate a legitimate nondiscriminatory
motive for its treatment of the investment.
The second general problem raised by the identification of the comparator is that the
host state may treat some comparators more favorably than others. For example, a host
state may discriminate among its own investments. Assuming that all are appropriate
comparators, the question arises as to which potential comparator establishes the
required standard of treatment: the one receiving the best treatment, the one receiving
the worst treatment, or some other comparator, such as one receiving the typical
treatment. As a practical matter, this proplem may arise infrequently because many
of the putative comparators might be found not to be in like circumstances with the
beneficiary. Where it does·arise, however, BITs rarely provide any explicit guidance.
The solution may turn on the level of generality at which on~ defines the purpose of
the MFN and national treatment standards. At a very low level of generality, the purpose
of the MFN and national treatment provisions is to preclude discrimination based
on nationality. On that assumption, the most poorly treated comparator would set the
standard. · As long as the beneficiary were treated no less favorably than a national
investment or an investment of the most . favored nation, one could not say that the
beneficiary had been treated unfavorably on the basis of nationality.
At a higher level of generality, the purpose of the MFN and national treatment provisions,
like any nondiscrimination provision, is to establish a level playing field and
thereby promote market-based allocations of capital as well as a rules-based investment
regime. On that assumption, the most poorly treated comparator would not set
the standard because treatment _in accordance with that standard would not level the
playing field between the beneficiary and other potential comparators.
This is an issue with respectto which clarification in the text of the BIT would be
desirable. In fact, a few BITs do provide some clarification with respect to this issue in
one context. The context is that of a federal system in which political subdivisions may
discriminate against investments from other political subdivisions. For example, in the
case of the United States, California might enact a law that provided California corporations
with more favorable treatment than corporations of the other 49 states. The
U.S. BITs have adopted explicit language providing that, in this situation, the appropriate
comparator for purposes of the national treatment provision is investments of the
other political subdivisions.9 Thus, in the example, California would be required to
accord covered investment with treatment no less favorable than that which it accords
9
342
See, e.g., United States-Argentina BIT, Art. 11(8).
NONDISCRIMIJ"~TJON
Annex 4L4

ANNEX425

ICSID Arbitration Case No. ARB/05/8
PARKERINGS-COMPAGNIET AS
Claimant
v.
REPUBLIC OF LITHUANIA
Respondent
AWARD
TRIBUNAL
Dr. Julian Lew Q.C., Arbitrator
The Hon. Marc Lalonde P.C., O.C., Q.C., Arbitrator
Dr. Laurent Levy, President
Secretary of the Tribunal
Ms. Martina Polasek
Date of dispatch to the parties: September 11, 2007
Annex 425
356. The Claimant alleges damages to its materials due to vandalism. However, the
Claimant does not show that such vandalism would have been prevented if the
authorities had acted differently. The Claimant only contends that the police did not
find the authors of this offence. Both parties agree that Lithuanian authorities started
an investigation to find the authors of the vandalism.
357. The Arbitral Tribunal finds that the record does not show in which way the process of
investigation amounted to a violation of the Treaty. In Teemed, the Tribunal underlined
that "the guarantee of full protection and security is not absolute and does not impose
strict liability upon the State that grants it."95
358. The Claimant criticized the alleged failure of the Prime Minister to protect its investment
against the action and omission of the municipality. However, the record does not
show that the Prime Minister did not act in any manner that should be incompatible with
his function and duties. The Claimant failed also to demonstrate a negligence of the
Prime Minister that could amount to a breach of the BIT.
359. The Claimant also criticized the Respondent for its passivity when the City of Vilnius
breached the Agreement. However, the Arbitral Tribunal considers that the investment
Treaty created no duty of due diligence on the part of the Respondent to intervene in
the dispute between the Claimant and the City of Vilnius over the nature of their legal
relationships.
360. The Respondent's duty under the Treaty was, first, to keep its judicial system available
for the Claimant to bring its contractual claims and, second, that the claims would be
properly examined in accordance with domestic and international law by an impartial
and fair court. There is no evidence - not even an allegation - that the Respondent has
violated this obligation.
361. The Claimant had the opportunity to raise the violation of the Agreement and to ask for
reparation before the Lithuanian Courts. The Claimant failed to show that it was
prevented to do so. As a result, the Arbitral Tribunal considers that the Respondent did
not violate its obligation of protection and security under the Article 111 of the BIT.
8.3 CLAIMS FOR VIOLATION OF THE OBLIGATION TO ACCORD TREATMENT NO LESS FAVORABLE
THAN THE TREATMENT ACCORDED TO INVESTMENTS BY INVESTORS OF A THIRD STATE
(ARTICLE IV OF THE TREATY)
362. Article IV of the Treaty provides that
95
1. [i]nvestments made by investors of one contracting party in the territory of the other
contracting party, as a/so the returns therefrom, shall be accorded treatment no
less favourable than that accorded to investments made by investors of any third
state.
See Tecnicas Medioambientales Teemed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2,
Award, May 29, 2003, supra note 80, ,i 177.
76/96
Annex 425
8.3.1 Position of the parties
363. In substance, the Claimant alleges that the Respondent violated Article IV of the Treaty
as follows: 96
(a) the City of Vilnius rejected the project of MSCP proposed by BP on the Gedimino
site for cultural heritage concerns, because the project was situated in the Old
Town of the City of Vilnius. However, the Municipality authorized another company
(Pinus Proprius) to build a MSCP on the same site;
(b) the City of Vilnius refused to sign a Joint Activity Agreement (JM) with BP for the
Gedimino MSCP and for the Pergales MSCP for legal reason, but signed a JM
with the Company Pinus Proprius;
(c) Once the JM signed with the Company Pinus Proprius has been declared
unlawful, the City of Vilnius transformed it into a Cooperation Agreement. However,
the City of Vilnius refused to conclude a similar Cooperation Agreement with BP as
a substitute of the JM.
364. In the Claimant's view, the Companies Pinus Proprius and BP were facing similar
circumstances. The refusal of the City of Vilnius to sign a JAA or a Cooperation
Agreement prevented BP from the construction of any MSCP in Vilnius and thus
deprived it of the opportunity to carry out its investment as it was entitled to do under
the Agreement.
365. The Respondent alleges that the situation of the MSCP built by Pinus Proprius on the
Gedimino site was clearly different from the project proposed by the Claimant on the
Gedimino site and the Pergales site.97
96
97
98
99
(a) The MSCP built by Pinus Proprius on the Gedimino site was smaller than the
MSCP project proposed by the Claimant. The proposed MSCP designed by the
Claimant extended to the Odiminiu Square, which is part of the Old Town area as
defined by the Annex No. 5 of the Agreement, but the one constructed by Pinus
Proprius was not. The Respondent underlines that a construction in the Old Town
needed the approval of the Government's Cultural heritage Commission.
(b) The Joint Activity Agreement could not be signed with BP since the modification of
the Article 9(2) of the Law on Self-Government which prohibited the conclusion of
such agreement with private entities. The Respondent alleges that the Cooperation
Agreement signed with Pinus Proprius was not a JM. However, the conclusion of
a similar Cooperation Agreement with BP was not possible for various reasons:
■ A transfer of land was necessary for the MSCP proposed by BP and not for
the MSCP built by Pinus Proprius, as the latter was already the owner of part
of the land where the MSCP was built. Consequentlr, a Public Auction was
necessary for the transfer of state-owned land to BP9 ;
• Pinus Proprius had the contractual obligation to transfer its own land to the
State when the building would be achieved. Pinus Proprius also agreed to
sell the MSCP to the City. On the contrary, BP could remain the owner of the
MSCP built on the Gedimino site and on Pergales site and would have the
possibility to lease the state-owned land or to buy it99•
See Claimant's memorial, p. 74 and Claimant's Post-Hearing Brief, p. 99.
See Respondent Counter-Memorial, p. 90 and Respondent Post-Hearing Brief, p. 5
See Respondent Counter-Memorial, ,r 248.
See Respondent Post-Hearing Brief, p. 6.
77/96
Annex 425
■ The MSCP built by Pinus Proprius was under state-owned land that was not
delineated by a land plot and, therefore, could never be owned or leased by
Pinus Proprius. On the contrary, the project of MSCP on Pergales site
proposed by BP was situated on a state-owned land delineated as a land
plot and therefore required a Public Auction. 100
366. Article IV of the Treaty is known as the standard of the "Most-favoured-nation
Treatmenf'. Most-favoured-nation (MFN) clauses are by essence very similar to
"National Treatmenf' clauses. They have similar conditions of application and basically
afford indirect advantages to their beneficiaries, namely a treatment no less favourable
than the one granted to third parties. Tribunals' analyses of the National Treatment
standard will therefore also be useful to discuss the alleged violation of the MFN
standard.
367. National treatment and Most-Favoured-Nation treatment are treaty clauses that have
the same substantive effect as the international treatment standard: foreigners should
be afforded treatment no less favourable than the one granted to local citizens. The
international law requirement in fact acts as a minimum requirement as it would be
useless for the States party to a treaty to grant benefits less sweeping than customary
law. In other words, all the requirements, be they national treatment, most favourednation-
treatment or non-discrimination at large, will in effect bar discrimination against
foreign national investing in the country concerned. All investors benefiting from a
treaty will benefit of a treatment identical or better than nationals or third countries
persons. There is, thus, no reason discretely to address the issue of nondiscrimination:
the two aspects, under most-favoured-nation requirements (Article IV of
the Treaty) on the one hand and under international customary law on the other.
368. Discrimination is to be ascertained by looking at the circumstances of the individual
cases. Discrimination involves either issues of law, such as legislation affording
different treatments in function of citizenship, or issues of fact where a State unduly
treats differently investors who are in similar circumstances. Whether discrimination is
objectionable does not in the opinion of this Tribunal depend on subjective
requirements such as the bad faith or the malicious intent of the State: at least, Article
IV of the Treaty does not include such requirements. However, to violate international
law, discrimination must be unreasonable or lacking proportionality, for instance, it
must be inapposite or excessive to achieve an otherwise legitimate objective of the
State. An objective justification may justify differentiated treatments of similar cases. It
would be necessary, in each case, to evaluate the exact circumstances and the
context.
369. The essential condition of the violation of a MFN clause is the existence of a different
treatment accorded to another foreign investor in a similar situation. 101 Therefore, a
100
101
Idem, pp. 5-6.
See Goetz and others v. Burundi, ICSID Case No. ARB/95/3, Award, February 10, 1999, supra note 40, ,i
121.
78/96
Annex 425
comparison is necessary with an investor in like circumstances. The notion of like
circumstances has been broadly analyzed by Tribunals 1°2•
370. For example, in Pope and Talbot Inc. v. Government of Canada, the Tribunal held that:
[i]n evaluating the implication of the legal context, the Tribunal believes that, as a first
step, the treatment accorded a foreign owned investment protected [ ... ] should be
compared with that accorded domestic investment in the same business or economic
sector. 103 [ ••. ]
Once it is established that a foreign and domestic investor are in the same business or
economic sector, "[d]ifference in treatment will presumptively violate [the principle] 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 of NAFTA. [ ... ] A formulation
focusing on the like circumstances [ ... ] will require addressing any difference in treatment,
demanding that it be justified by showing that it bears a reasonable relationship to rational
policies not motivated by preference of domestic over foreign-owned investment. 104
371. In order to determine whether Parkerings was in like circumstances with Pinus
Proprius, and thus whether the MFN standard has been violated, the Arbitral Tribunal
considers that three conditions should be met:
(i) Pinus Proprius must be a foreign investor;
(ii) Pinus Proprius and Parkerings must be in the same economic or business sector;
(iii) The two investors must be treated differently. The difference of treatment must
be due to a measure taken by the State. No policy or purpose behind the said
measure must apply to the investment that justifies the different treatments
accorded. A contrario, a less favourable treatment is acceptable if a State's
legitimate objective justifies such different treatment in relation to the specificity of
the investment.
372. With regard to the first condition (i): The parties are not disputing the fact that the
company Pinus Proprius is an investor in Lithuania. As Pinus Proprius is owned by the
Dutch company Litprop Holding BV, it is a foreign investor within the meaning of the
BIT_1os
373. With regard to the second condition (ii): BP and Pinus Proprius are engaged in similar
activities. Both Pinus Proprius and BP are companies acting in the construction and
management of parking garages. Both are competitors for the same MSCP project in
102
103
104
105
See for instance: Occidental Exploration and Production Company v. Republic of Ecuador, UNICITRAL
Case No. UN 3467, Final Award, July 1, 2004, ffll 173-176; Marvin Roy Feldman Karpa v. United Mexican
States, ICSID Case No. AB(AF)/99/1, Award, December 16, 2002, reprinted in 18 /CS/0 Rev.-FILJ 488
(2003), ffll 170 et seq; S.D. Myers, Inc v. The Government of Canada, NAFTA UNICITRAL Arbitration,
First Partial Award, November 13, 2000, ffll 248-250.
See Pope & Talbot Inc. v. The Government of Canada, NAFTA Case, Award on the merits of phase 2,
April 10, 2001, ,i 78.
Idem, ffll 78-79.
See Exhibit CE 249.
79/96
Annex 425
Gedimino. Thus, the Arbitral Tribunal finds that Pinus Proprius and BP are in a similar
economic and business sector.
374. With regard to the last condition (iii): The Claimant alleges that Pinus Proprius has
been treated differently than BP, because, first, Pinus Proprius has been authorised to
construct its MSCP in Gedimino, but BP's project also situated in Gedimino has been
refused. Second, the Municipality of Vilnius refused to conclude a JAA or a
Cooperation agreement with BP but accepted such a conclusion with Pinus Proprius.
375. However, the situation of the two investors will not be in like circumstances if a
justification of the different treatment is established.
376. The Arbitral Tribunal will discuss separately the two alleged discriminatory measures,
namely whether the Municipality wrongfully granted Pinus and denied BP an
authorisation to build a MSCP under Gedimino Avenue (see below the situation of the
Gedimino MSCP, section 8.3.2.1 ); and whether the Municipality wrongfully refused to
enter into a Cooperation Agreement with BP, whilst it had concluded such a
Cooperation Agreement with Pinus (see below The Situation of the Perga/es MSCP,
section 8.3.2.2).
8.3.1.1 The situation of the Gedimino MSCP
377. In order to determine if the two investors were in like circumstances, or if the measure
taken by the Municipality was justified, the Arbitral Tribunal analyses below the
situation of the two investors.
378. In substance, the Respondent argues that BP's MSCP project in Gedimino was
fundamentally different from the MSCP built by Pinus Proprius. First, the MSCP project
proposed by the Claimant was clearly bigger than the MSCP built by Pinus Proprius.
Second, the proposed MSCP designed by the Claimant extended to the Odiminiu
Square, which is part of the Old Town area as defined by Annex No. 5 of the
Agreement, but the one constructed by Pinus Proprius did not. Finally, BP's project
reached the Vilnius' historic Cathedral Square. The Respondent underlines that a
construction in the Old Town needed the approval of the Government's Cultural
Heritage Commission.
379. The record confirms that Claimant's proposed project on the Gedimino site and the
MSCP built by Pinus Proprius were almost identically located in the sense that they are
both situated in the Old Town. Indeed, the maps produced by the Respondent106 show
that the Pinus Proprius MSCP is partly superimposed with the MSCP project of BP.
380. However, the Claimant's project is considerably bigger than the MSCP constructed by
Pinus Proprius107• All the maps clearly show that BP's MSCP extended under
Gedimino Street as far as the Cathedral Square.108 The Claimant's project involved the
106
107
108
See Exhibits RE 97, RE 102-103.
See Respondent Counter-Memorial, p. 93; Exhibits RE 97 and RE 102-103.
See Exhibits RE 97, RE 102-103.
80/96
Annex 425
430. Under the circumstances, the Arbitral Tribunal concludes that Pinus Proprius' situation
differed from BP's situation. As a result, the decision of the Municipality of Vilnius to
refuse the conclusion of a JAA or a Cooperation Agreement with BP could be justified
by the difference.
8.4 EXPROPRIATION
431. Article VI of the Treaty provides that:
Investments made by investors of one contracting party in the territory of the other
contracting party cannot be expropriated, nationalized or subjected to other measures
having a similar effect (all such measure hereinafter referred to as "expropriation') except
when the following conditions are fulfilled:
(I) The expropriation shall be done for public interest and under domestic legal
procedures;
(II) It shall not be discriminatory;
(Ill) It shall be done only against compensation. [ ... ]
8.4.1 Position of the parties
432. The Claimant alleges that pursuant to Article VI of the Treaty, the investment cannot be
expropriated, nationalized or subjected to measures having a similar effect except for a
public purpose, in a non-discriminatory manner, upon payment of compensation and in
accordance with domestic laws.
433. Claimant argues that by repudiating the Agreement, the Republic of Lithuania
destroyed the value of BP and VPK. Moreover, the Claimant contends that the
"Government's litigious, legislative, and administrative interference with the Agreement
deprived BP of the legal security afforded by the Agreemen.f'152 By preventing the
execution and demanding full performance of the Agreement at the same time, and
then repudiating the Agreement, the Municipality of Vilnius destroyed BP. Thus, by
taking the asset that was the sole purpose of BP's existence, Lithuania indirectly
expropriated Parkering's ownership interest in BP.153 BP became a "company with
assets, but without business." By failing to provide compensation for this expropriation,
Lithuania breached its obligation under Article VI of the Treaty. 154
434. The Claimant contends that whether Lithuania benefited or not from the expropriation is
irrelevant. On the contrary, whether the investor continues to enjoy the benefit of
ownership is decisive.155
435. The Respondent alleges that the termination of a contract only amounts to an
expropriation in limited cumulative circumstances. First, the termination must be
wrongful; second, there must be no remedy under the contract for the wrongful
152
153
154
155
See Claimant's Memorial ,i 237.
Idem, ,i 238
Idem ,i 239 and Claimant's Post-Hearing Brief, p. 123.
ldem,i 235.
91/96
Annex 425

ANNEX426

International Centre for Settlement of Investment
Disputes
BAYINDIR INSAAT TURIZM TICARET VE SANAYI A.$.
CLAIMANT
v.
ISLAMIC REPUBLIC OF PAKISTAN
RESPONDENT
ICSID Case No. ARB/03/29
AWARD
Rendered by an Arbitral Tribunal composed of:
Prof. Gabrielle Kaufmann-Kohler, President
Sir Franklin Berman, Arbitrator
Prof. Karl-Heinz Bockstiegel, Arbitrator
Martina Polasek, Secretary
Date of Dispatch to the Parties: August 27, 2009
Annex 426
384. As to the facts relevant to a finding of discrimination, the Claimant recalls the Tribunal's
Decision on Jurisdiction:
"The fact remains that, taken together, Bayindir's allegations in respect of
the selective tender, and that the expulsion was due to Pakistan's decision to
favour a local contractor, and that the local contractor was awarded longer
completion time-limits, if proven, are clearly capable of founding a MFN
claim."101
2. Pakistan's position
385. Pakistan submits that Bayindir's claim under Article 11(2) requires a showing of intent,
since Bayindir alleges that its expulsion from the Project was designed to benefit a predetermined
group of local contractors, which "design" necessarily comprises intent. In
Pakistan's view, Bayindir's reliance on the decision in SD Myers is therefore irrelevant,
as that case "merely suggests that protectionist intent on its own (i.e. without a practical
effect) is insufficient for a finding of breach of Article 1102 NAFTA" (C.-Mem. M., ,r
4.58).
3. Tribunal's determination
386. It is common ground that Bayindir's claim must be assessed under Article 11(2) of the
Treaty, which reads as follows:
"Each Party shall accord to these investments, once established, treatment no
less favourable than that accorded in similar situations to investments of its
investors or to investments of investors of any third country, whichever is the
most favourable."
387. Article 11(2) thus covers both national treatment and MFN obligations. Its purpose is to
provide a level playing field between foreign and local investors as well as between
foreign investors from different countries. 102
388. As noted in the Decision on Jurisdiction, the Tribunal considers that the scope of the
national treatment and MFN clauses in Article 11(2) is not limited to regulatory
treatment.103 It may also apply to the manner in which a State concludes an
investment contract and/or exercises its rights thereunder. Indeed, the Tribunal
stressed that:
101
102
103
Decision on Jurisdiction, 11223.
Noah Rubins & N. Stephan Kinsella, International Investment, Political Risk and Dispute
Resolution - A Practitioner's Guide (2005), pp. 225-226.
See Decision on Jurisdiction, 1111205-206, 213.
113
Annex 426
"[t]he mere fact that Bayindir had always been subject to exactly the same
legal and regulatory framework as everybody else in Pakistan does not
necessarily mean that it was actually treated in the same way as local (or third
countries) investors."104
389. To decide whether Pakistan has breached Article 11(2), the Tribunal must first assess
whether Bayindir was in a "similar situation" to that of other investors. The inquiry into
the similar situation is fact specific. 105 In line with Occidental v. Ecuador, 106
Methanex, 107 and Thunderbird, 108 the Tribunal considers that the national treatment
clause in Article 11(2) must be interpreted in an autonomous manner independently from
trade law considerations.
390. If the requirement of a similar situation is met, the Tribunal must further inquire whether
Bayindir was granted less favourable treatment than other investors. This raises the
question whether the test is subjective or objective, i.e. whether an intent to
discriminate is required or whether a showing of discrimination of an investor who
happens to be a foreigner is sufficient. The Tribunal considers that the second solution
is the correct one. This arises from the wording of Article 11(2) quoted above. It is also
in line with the rationale of the protection as was emphasized in Feldman v. Mexico, 109
to which the Claimant referred:
104
105
106
107
108
109
"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." [ ... ] However, it is not self-evident
[ ... ] that any departure from national treatment must be 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.
[ ... l
Id., ,r 206.
Pope & Talbot v. Canada, supra footnote 87, ,r 75; see also S.D. Myers v. Canada, supra
footnote 94, ,r 244.
Occidental v. Ecuador, supra footnote 80, ,r,r 17 4-176.
Methanex Corporation v. United States of America, NAFTA Arbitration (UNCITRAL Rules),
Award of 3 August 2005, ,r,r 35, 37.
Thunderbird v. Mexico, supra footnote 59, ,r,r 176-178.
Feldman v. Mexico, supra footnote 98, ,r,r 181 and 183. See also Pope & Talbot v. Canada,
footnote 87, in which the tribunal presumed that discriminatory treatment of foreign investors in
like circumstances would be in violation of Article 1102, "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 NAFT A" (,r 78).
114
Annex 426
[R]equiring 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. [ ... ]. 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."
b. National treatment
391. It is Bayindir's contention that it was expelled for reasons of cost and local favouritism,
as evidenced by the selective tender that followed its expulsion. The Claimant also
asserts that PMC-JV, the local contractors retained, were treated more favourably, in
particular with respect to the construction schedule.
392. In paragraphs 297-300 supra, the Tribunal has already discussed Bayindir's allegation
that the expulsion was due to Pakistan's intent to favour local contractors. In the
present section, the Tribunal will review whether Bayindir was indeed accorded
treatment less favourable than the local contractors in breach of the national treatment
standard.
1. Bayindir's position
393. In Bayindir's submission, "the PMC-JV Contract forms a near perfect comparator
against which to judge Pakistan's treatment of Bayindir" (Tr. M., 26 May 2008, 125, 15-
17). Bayindir further asserts that it is objectively established that the Respondent
accorded more favourable time schedules to PMC-JV and reacted more leniently to
PMC-JV's unsatisfactory performance. Specifically, Bayindir alleges that
"PMC-JV was granted much more time to do the remaining work on the M-1
than Bayindir had been granted for the entire motorway, and when PMC-JV
fell far behind even in this generous schedule, PMC-JV was allowed to
continue on the Project. This is in stark contrast to the treatment Bayindir
received, and in stark contradiction to Pakistan's claims that Bayindir had to
be expelled out of concern for the timely completely [sic] of the M-1 Project."
(Tr. M. 1 26 May 2008, 125-126)
394. In support of its allegation of less favourable treatment, the Claimant refers to the
following facts: PMC-JV was granted 1460 days to complete the remainder of the M-1
Project, whereas Bayindir had been granted only 730 days in 1993 and 1095 days in
1997 to complete the entire motorway; in March 2001, Bayindir had been granted only
115
Annex 426
27 additional days to complete the two Priority Sections, whereas PMC-JV was granted
18 months to complete the remaining portion of the two Priority Sections, now for six
lanes; PMC-JV was permitted seven reviews of its work schedule, yet failed to achieve
the construction targets it proposed, whereas, as of the date of its expulsion from the
Project, Bayindir had completed 90% of the work on the two Priority Sections on the
areas which were free from obstructions; PMC-JV was not expelled for far more
significant delays than Bayindir ever experienced, even though PMC-JV's performance
was worryingly behind schedule, its progress very slow, and several sub-clause 46.1
notices had been issued. Bayindir adds that differences in performance between itself
and PMC-JV must be appraised taking into account that Bayindir had to prepare the
site, while PMC-JV started work on a site already prepared and developed by Bayindir.
395. In its post-hearing brief, Bayindir further referred to a series of acts such as the alleged
expropriation of Bayindir's contractual rights and the attempted encashment of the
Mobilisation Advance Guarantees (see paragraphs 349 and 360-364 supra) as
discriminatory and in breach of the Treaty. However, Bayindir did not specify the
manner in which these series of acts breached the national treatment/MFN clauses.
2. Pakistan's position
396. Pakistan maintains that the expulsion was lawful and later developments therefore
irrelevant. It also denies that Bayindir's residual investment was in a "similar situation"
to the investment of the local contractors (C.-Mem. M., ,r 4.51 ). It adds that there is no
room for a discrimination claim such as the one raised by Bayindir in a purely
contractual context (Tr. M., 26 May 2008, 293-294).
397. To demonstrate that the investments were not in "similar situations," Pakistan points to
differences in the financial terms; 110 the level of experience and expertise;111 the scope
of work;112 and in the commitment of the two entities to progressing with the works after
110
111
112
In particular, Pakistan notes that PMC-JV received no mobilisation advance and did not benefit,
as Bayindir, from having a foreign exchange component of its payments being settled by NHA in
rupees at highly favourable exchange rates.
Unlike Bayindir, PMC-JV was a consortium of diverse local Pakistani contractors with no
equivalent experience on projects of the magnitude of M-1.
In July 2003, shortly after the contract with PMC-JV had been signed, the scope of works was
converted back to a six-lane motorway, and works also involved repair and rectification of works
performed by Bayindir.
116
Annex 426
being issued sub-clause 46.1 notices.113 Pakistan further notes that the position of
NHA had changed as a result of Bayindir's expulsion, because NHA could neither avail
itself of the large Mobilisation Advance given to Bayindir nor collect on the guarantees,
and had to pay over Rs. 1 billion in order to alleviate the problem of Bayindir's subcontractors.
Under such different circumstances, Pakistan argues that NHA was fully
justified in establishing new completion dates and, more generally, that it was justified
in treating the two situations differently (PHB [Pak.] fflJ 5.53-5.99).
398. Pakistan finally insists that it was normal practice that the works be completed by a
group of Bayindir's sub-contractors:
"[t]heir bid was lower, they were already on site, and it is what Bayindir
wanted. These kinds of facts differentiate the present case from past cases of
discrimination. It was also in Bayindir's interest under Clause 63.3 of the
Contract that the cheapest option for a new contractor be chosen."
(PHB [Pak.] ,:r 5.2).
3. Tribunal's determination
399. The Tribunal will first determine whether Bayindir's investment was in a "similar
situation." If so, it will then assess whether Bayindir's investment was accorded less
favourable treatment than PMC-JV and whether the difference in treatment was
justified.
400. In respect of the first requirement, the Tribunal must start by determining whether there
is a relevant comparator to be used for the assessment of NHA's treatment of Bayindir
and PMC-JV. In its Decision on Jurisdiction, the Tribunal did not rule out that the
contracts with PMC-JV and Bayindir may be similar, as they both related to the same
project. 114 The Tribunal must now go further and look at the terms and circumstances
of the contractual relationships between, on the one hand, NHA and Bayindir, and, on
the other hand, NHA and PMC-JV.
401. The Respondent has argued that, after its expulsion, Bayindir retained only residual
rights under sub-clause 63.3 of the Contract and, therefore, Bayindir's contractual
situation was not comparable to that of the local contractors who took over the Project.
113
114
In particular, Pakistan notes that, unlike Bayindir, PMC-JV had no prior history of shutting down
the works when it was faced with sub-clause 46.1 notices.
Decision on Jurisdiction, 11216.
117
Annex 426
The Tribunal is unpersuaded by this argument, which seems to assume that two
situations can only be "similar" if they are contemporaneous.
402. Turning to the terms and circumstances of the two contractual relationships, Pakistan
raises a number of differences especially in the financial terms; the constitution of the
two entities; their level of experience and expertise; the scope of work; and the
commitment of the two entities to progressing with the works after receiving a subclause
46.1 notice. In contrast, Bayindir focuses on the identity of business sector and
project. The Claimant is right that the project and business sectors are the same. This
may be relevant in a trade law context. Under a free-standing test, however, such as
the one applied here, that degree of identity does not suffice to displace the differences
between the two contractual relationships.
403. The Claimant does not seriously dispute the existence of divergences in the financial
terms. The contract between NHA and PMC-JV did not involve a foreign currency
component. This difference must not be underestimated. The history of the dispute
between the Parties over the availability of foreign currency for the continuation of the
Contract illustrates this point. Indeed, as the Claimant emphasizes in its opening
statement at the hearing (Tr. M., 26 May 2008, 16-29), the foreign currency issue was
one of the main reasons why by the end of 1999 "Bayindir had nearly stopped work in
the Project" (Tr. M., 26 May 2008, 27, 6-7). The dispute was then resolved by the
conclusion of Addendum No. 9 in which Bayindir accepted payment in rupees for half
of the Contract price. It is disputed whether Addendum No. 9 was more favourable to
the Claimant or for the Respondent. What is clear is the role played by the foreign
currency component.
404. Not surprisingly, the lack of a foreign currency component in the new contract price
discouraged foreign contractors from participating in the tender, a fact acknowledged
by the Claimant (Reply M., ,r 219). Furthermore, the minutes of an NHA meeting held
on 13 November 2002, regarding inter alia the award of the balance works of the M-1
Project (Exh. [Bay.] CX-99) confirm the importance of the foreign currency issue. In
paragraph 24.1 of this document it is stated indeed that: "keeping in view the past
unpleasant experience in M-1 project as also some other projects, it was made
118
Annex 426
absolutely clear to all the prospective bidders at the pre-qualification stage that no
payment in foreign currency would be allowed" (Exh. [Bay.] CX-99).
405. Another difference in financial terms relates to the mobilization advance. The Claimant
does not seriously contest that, unlike Bayindir, PMC-JV did not benefit from a large
mobilisation advance. Under the terms of the Contract, Bayindir was to benefit from a
Mobilisation Advance of 30% of the value of the Contract price, which was to be paid
half in rupees and half in dollars. By contrast, the mobilisation advance contemplated
in Part II of the conditions of contract between NHA and PMC-JV was far lower and
paid exclusively in rupees (Exh. [Bay.] CX-240A).
406. One might think of explaining the differences in advance payments by reference to the
equipment which Bayindir left on site. That explanation would be ill founded. The
evidence shows that such equipment was not fit for use (Exh. [Pak.] CM-170).
Mr. Nasir Khan, confirmed this point:
"Even though NHA had done an excellent job in preserving the equipment,
machinery and plant left behind by Bayindir (including the dump trucks, motor
graders, asphalt plants and crushing plants), the fact is that a large quantity of
the equipment, machinery and plant was old, in bad condition and in some
cases just not functioning."
(Nasir Khan's WS, ,:J 36)
407. Asked on cross-examination about a presentation made by Colonel Azim in November
2002 to the NHA Executive Board (Exh. [Bay.] CX-224) stating that "the 300 pieces of
Plant and Equipment have been parked in two camps and kept in perfect working
conditions through regular maintenance by NHA's field staff," Mr. Nasir Khan confirmed
his earlier testimony that the maintenance was good, but the plant was bad. He added
that with the plant that was handed over PMC-JV "would not have been able to
complete the project until today."115
115 Quoting the passage in full: "the maintenance and, I mean, the owning of the machine
was in a very professional way, but it cannot change the status of the plant. Like, if - I
mean, just I will give you an example, there was two small plant installed, one was
installed at end of NWFP province, a camp which is called Barabanda - there were two
camps. One was Burhan and one was Barabunda. One was in Punjab and one was in
NWFP. The Punjab plant was definitely - they brought it second-hand. Used. Very used
plant. [ ... ] That plant, when we took over, we never were able to get it - capacity even
10%, so then we installed another small part in replacement of that plant because that
plant was not able to produce the production, the same was with the crushing plant, and
the same was with batching plants, because when we assess the condition, and the
capacity of plant and equipment, which was there, that according to that plant and
119
Annex 426
408. Likewise, the record confirms the existence and relevance of other differences in
particular regarding the scope of work and the contractors' expertise and experience.
409. The scope of works was different to the extent the Contract as amended by Addendum
No. 9 provided for four lanes and the contract with PMC-JV six. Mr. Nasir Khan
explained the change in the following terms:
"this Contract was four-lane motorway and it was converted into six-lane after
the award. Now, what happened was that there was some job done by
Bayindir, and then we immediately start our job and we have done some job.
Once it was converted to six lane, so we have to redo a lot of work. Now, that
redoing a lot of work, it is not taken into consideration that that was a major
factor of affecting our physical progress [ ... ] So, we took considerable time
and definetely method of doing this, because usually we don't do this on
ongoing Project."
(Tr. M., 30 May 2009, 93-94)
410. The expertise and experience of the contractors constitutes another difference.
Bayindir benefited from considerable experience in handling large projects, while PMCJV
did not. This difference which was reflected in the higher rates charged by Bayindir,
played a role in the expectations that NHA formed with respect to each contractor. So
testified General Javed:
"The expectation that I had [from Bayindir], when I understood the Project was, that
there would be a reasonable number of such high-tech equipment and machinery,
because remember, we were paying them the state-of-the-art rates, and one
expected to see a good quality of equipment."
(Tr. M., 29 May 2008, 14-15, 25, 1-5)
411. As a result, the Tribunal comes to the conclusion that the two contractual relationships
are too different for Bayindir and the local contractors to be deemed in "similar
situations." Consequently, the first requirement for a breach of the national treatment
clause embodied in Article 11(2) of the Treaty is not met. It thus makes no sense to
pursue the analysis of the other requirements.
c. MFN
1. Bayindir's position
equipment with you was handed over to us by NHA, we would not have been able to
complete the Project until today, and maybe, maybe a year more, so then we supplement
with new plant and equipment, with additional plant and equipment, and the plant and
equipment was not able to produce efficiently, with just abandoned that plant, and it is still
abandoned today."(Tr. M., 30 May 2008, 63-64).
120
Annex 426

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Threats to American Personnel and Facilities in
Iraq
PRESS STATEMENT
MICHAEL R. POMPEO, SECRETARY OF STATE
SEPTEMBER 28, 2018
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The President and I have no more important priority than the safety and security of American
citizens, including our diplomatic, military and other officials serving abroad.
Threats to our personnel and facilities in Iraq from the Government of Iran, the Islamic
Revolutionary Guard Corps Quds Force, and from militias facilitated by and under the control
and direction of the Quds Force leader Qasem Soleimani have increased over the past several
weeks. There have been repeated incidents of indirect fire from elements of those militias
directed at our Consulate General in Basrah and our Embassy in Baghdad, including within the
past twenty-four hours.
I have advised the Government of Iran that the United States will hold Iran directly responsible
for any harm to Americans or to our diplomatic facilities in Iraq or elsewhere and whether
perpetrated by Iranian forces directly or by associated proxy militias. I have made clear that Iran
should understand that the United States will respond promptly and appropriately to any such
attacks.
Given the increasing and specific threats and incitement to attack our personnel and facilities in
Iraq, I have directed that an appropriate temporary relocation of diplomatic personnel in Iraq
take place. We are working closely with our partners in the Government and Security Forces of
Iraq to address these threats. We look to all international parties interested in peace and stability
in Iraq and the region to reinforce our message to Iran regarding the unacceptability of their
behavior.
TAGS
Iraq Office of the Spokesperson Secretary of State Security
State Department At Work
-2- Annex 427
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Remarks to the Media
REMARKS TO THE PRESS
MICHAEL R. POMPEO, SECRETARY OF STATE
OCTOBER 3, 2018
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-5-
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►
► 0:00 I 14:57
SECRETARY POMPEO: Good morning, everyone. I want to update you on three issues, four if you
want to count the - my upcoming trip to Asia, including North Korea.First, the situation in Iraq;
the second, a statement about the ruling this morning from the International Court of Justice;
and finally, I want to talk about my effort to put America's diplomatic corps back on the field.
To the situation in Iraq, Iran is the origin of the current threat to Americans in Iraq. It is to blame
for the attacks against our mission in Basra and our embassy in Baghdad. Our intelligence in this
regard is solid. We can see the hand of the ayatollah and his henchmen supporting these attacks
on the United States.
On Friday, I ordered the temporary relocation of U.S. Government personnel from our consulate
general in Basra. I also warned the Iranian Government that we will hold it directly responsible
for any harm to Americans or our diplomatic facilities, whether perpetrated by Iranian forces or
by associated proxies or elements of those militias.
These latest destabilizing acts in Iraq are attempts by the Iranian regime to push back on our
efforts to constrain its malign behavior. Clearly, they see our comprehensive pressure campaign
as serious and succeeding, and we must be prepared for them to continue their attempts to hit
back, especially after our full sanctions are re-imposed on the 4th of November.
The United States will continue to stand with the people of Iraq as they chart a future based on
-6- Annex 427
Iraqi interest, not those dictated by Iran. Even with the temporary relocation of our staff, we are
supporting the delivery of clean water to the 750,000 residents in Basra.
Now let me turn to the ICJ ruling from today. I'm announcing that the United States is terminating
the 1955 Treaty of Amity with Iran. This is a decision, frankly, that is 39 years overdue. In July, Iran
brought a meritless case in the International Court of Justice alleging violations of the Treaty of
Amity. Iran seeks to challenge the United States decision to cease participation in the Iran nuclear
deal and to re-impose the sanctions that were lifted as a part of that deal. Iran is attempting to
interfere with the sovereign rights of the United States to take lawful actions necessary to protect
our national security. And Iran is abusing the ICJ for political and propaganda purposes and their
case, as you can see from the decision, lacked merit.
Given Iran's history of terrorism, ballistic missile activity, and other malign behaviors, Iran's claims
under the treaty are absurd. The court's ruling today was a defeat for Iran. It rightly rejected all of
Iran's baseless requests. The court denied Iran's attempt to secure broad measures to interfere
with U.S. sanctions and rightly noted Iran's history of noncompliance with its international
obligations under the Treaty on the Nonproliferation of Nuclear Weapons.
With regard to the aspects of the court's order focusing on potential humanitarian issues, we
have been clear: Existing exceptions, authorizations, and licensing policies for humanitarianrelated
transactions and safety of flight will remain in effect. The United States has been actively
engaged on these issues without regard to any proceeding before the ICJ. We're working closely
with the Department of the Treasury to ensure that certain humanitarian-related transactions
involving Iran can and will continue.
That said, we're disappointed that the court failed to recognize it has no jurisdiction to issue any
order relating to these sanctions measures with the United States, which is doing its work on Iran
to protect its own essential security interests.
In light of how Iran has hypocritically and groundlessly abused the ICJ as a forum for attacking
the United States, I am therefore announcing today that the United States is terminating the
Treaty of Amity with Iran. I hope that Iran's leaders will come to recognize that the only way to
secure a bright future for its country is by ceasing their campaign of terror and destruction
around the world.
-7- Annex 427
The third item, putting the diplomatic team from the United States Department of State back on
the field: I want to talk about the fact that there are 65 nominees now sitting with the United
States Senate. That's over a quarter of all the senior-level confirmable positions that the United
States Department of State is tasked with using to achieve its diplomatic outcomes. And I want
every single American to know that what Senator Menendez and members of the Senate are
doing to hold back American diplomacy rests squarely on their shoulders.
Both Republicans and Democrats agree that a fully staffed State Department is critical to
American national security. Indeed, when I was before the Senate Foreign Relations Committee,
Senator Menendez told me, quote, ''The problem is we have an emaciated State Department
under this administration," end of quote. Well, we've now done our part to fix that. He now needs
to do his, and the Senate needs to do its part.
These candidates are quality candidates. They are not sitting on the Senate floor because of
objections with respect to their quality, their professionalism, or their excellence and their ability
to deliver American foreign policy. Wave after wave of these extremely qualified nominees have
been sent to the United States Senate.
Let me give a few examples: John Richmond. He's been stuck for 85 days while we try to make
necessary progress on combating human trafficking, a priority for this administration and a
shared priority of Senator Menendez. We have Kim Breier, the President's nominee to head up
Western Hemisphere Affairs, stuck for 204 days while the crisis in Venezuela and Central America
continues to rage. David Schenker, the President's nominee to lead the Bureau of Near East
Affairs, is held up while the humanitarian crisis continues and while Iran continues to undermine
peace and stability throughout the Middle East.
Russia is seeking to prey on our elections, but Ellen McCarthy, a 30-year veteran of the
Intelligence Community and the President's choice to head the Bureau of Intelligence and
Research sits on the Senate floor.
As American forces are engaged against terrorists around the world, Clarke Cooper, an
experienced military professional designated to lead the Bureau of Political-Military Affairs waits
for the Foreign Relations Committee to act on his nomination.
-8- Annex 427
You should know that as a former member, I completely appreciate the Senate's advice and
consent role and their duty to conduct oversight. And I understand their need to be fair and
honest brokers. But that's not what is being engaged in. We need these people. What's
happening is unprecedented. We have members of the United States Senate who - for whom
partisanship has now driven delay and obstruction of getting America's diplomatic corps into
every corner of the world.
It will impact our operations, our ability. We don't have a COO, the under secretary for
management now coming on two years with no one filling that position, and enormous, complex
operations keeping our diplomats safe around the world don't have a senior leader to manage
those operations. There are real, direct impacts of not having these people confirmed and I
implore the United States Senate to take these quality, talented people and allow them to do
what it is they have agreed to do on behalf of the United States.
And with that, I'm happy to take a couple questions.
MS NAUERT: (Inaudible). We'll start with Lesley from Reuters.
QUESTION: Thank you very much. Mr. Secretary, does the ruling of the World Court, does that
have any practical impact on what the U.S. is - on U.S. sanctions, number one? And number two,
what other - what assurances can you give that this will not impact any humanitarian aid?
Because the Court actually said that it was not enough, that the U.S. - that the U.S.'s assurances
were not adequate.
SECRETARY POMPEO: The United States has been very clear: We will continue to make sure that
we are providing humanitarian assistance in a way that delivers for the people we have spoken
very clearly about, the Iranian people. We care deeply about them. We will make sure that we
continue to afford the flexibility so that that assistance can be needed.
Having said that, the choices that are being made inside of Iran today- to use money to foment
terror around the world, to launch ballistic missiles into airports throughout the Middle East, to
arm proxy militias in Iraq and in Syria and in Lebanon - those are dollars that the Iranian
leadership is squandering. They could be providing humanitarian assistance to their own people
but have chosen instead a different path, a path of revolutionary effort around the world
-9- Annex 427
showing utter disregard for the humanitarian needs of their own people.
MS NAUERT: Nick Kalman from Fox.
QUESTION: I wanted to ask about North Korea, Mr. Secretary. The North Koreans have a new
commentary saying the end-of-war declaration issue should've been resolved half a century ago
in light of your trip coming up. Will it be resolved this weekend? And if not, what would be the
reasoning against offering this?
SECRETARY POMPEO: So I'm not going to comment on the progress of the negotiations on the
end-of-war declaration or any other items, only to say this: I'm very happy to be going back to get
another chance to continue to advance the commitment that Chairman Kim and President
Trump made back in Singapore in the second week of June. I'm optimistic that we'll come away
from that with better understandings, deeper progress, and a plan forward not only for the
summit between the two leaders, but for us to continue the efforts to build out a pathway for
denuclearization.
MS NAUERT: Next question, Michel from Al Hurra.
QUESTION: Yeah, thank you. Mr. Secretary, Russia has delivered today S-300 systems to Syria.
You said in the past that it's a serious escalation. Are you planning to take any measures in this
regard? And my second question on Iraq. Any comment on the election of Barham Salih as the
president and the designation of Adel Abdul Mahdi as the prime minister?
SECRETARY POMPEO: So I've had a chance to speak with the new speaker of the house and the
new president. I've not had a chance to speak with the new - the president designee as of yet. I
hope to do so. And I am equally hopeful that they will follow through on the commitments that
they made when we spoke. These are people that we know pretty well. They've been around the
Iraqi Government scene for some time, and what we talked about was building out an Iraqi
Government that was an Iraqi Government of national unity that was interested in the welfare
and future good fortunes for the Iraqi people, not controlled by the Islamic Republic of Iran. It's
something that was a shared set of objectives, and I'm very, very hopeful that we can continue to
work with the Iraqi people and the soon-to-be-completed, formed new Iraqi Government to
deliver against that.
Your first question was about the S-300. I'm certainly not going to comment on our intention on
-10- Annex 427
how we will address that, but my comments before were true. Having the Russians deliver the S-
300 into Syria presents greater risk to all of those in the affected areas and to stability in the
Middle East. We consider this a very serious escalation.
QUESTION: Thank you.
MS NAUERT: Last question. Kylie from CBS News.
QUESTION: Hi, Secretary. Question. Can you explain to us a little bit the practical reality of the
U.S. terminating the amity with Iran, and just how we'll see that play out? And then secondly, just
because we're going to North Korea, is there any timeframe for what the U.S. wants to achieve
given that last week we heard President Trump say that they're not - the U.S. is not playing a time
game, but you said that you want rapid denuclearization of North Korea completed by January
2021?
SECRETARY POMPEO: Those are entirely consistent with each other. We want it fast, but we're
not going to play the time game. My comment about 2021 was not mine. I repeated it, but it was
a comment that had been made by the leaders who'd had their inter-Korean summit in
Pyongyang. They'd talked about 2021 when they were gathered there, and so I was simply
reiterating this as a timeline that they were potentially prepared to agree to.
President Trump's comments are exactly right. This is a long-term problem. This has been
outstanding for decades. We've made more progress than has been made in an awfully long
time. And importantly, we've done so in a condition which continues to give us the opportunity to
achieve the final goal, that is the economic sanctions continue to remain in place, the core
proposition; the thing which will give us the capacity to deliver denuclearization isn't changing. If
you heard the comments at the UN Security Council, complete unanimity about the need for
those to stay in place.
The Russians and the Chinese had some ideas about how we might begin to think about a time
when it would be appropriate to reduce them, but to a country, they were supportive of
maintaining the UN Security Council resolutions and the sanctions that underlay them. That is a -
that is a global commitment that I'm not sure there's many issues in the world you can find such
unanimity. And so my efforts this week will be one more step along the way towards achieving
what the UN Security Council has directed the North Koreans to do.
-11- Annex 427
QUESTION: And the practical fallout from pulling out of the treaty?
SECRETARY POMPEO: We'll see what the practical fallout is. The Iranians have been ignoring it
for an awfully long time. We ought to have pulled out of it decades ago. Today marked a useful
point with the decision that was made this morning from the ICJ. This marked a useful point for
us to demonstrate the absolute absurdity of the Treaty of Amity between the United States and
the Islamic Republic of Iran.
MS NAUERT: Thank you, everybody. We have to go now.
SECRETARY POMPEO: Thanks, everyone.
TAGS
International Criminal Court Iran Iraq North Korea Office of the Spokesperson
Sanctions Secretary of State Secretary Trip The Secretary of State
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-12- Annex 427
Secretary Michael R. Pompeo With John Roberts of Fox News
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On U.S. Appearance Before the International
Court of Justice
PRESS STATEMENT
MICHAEL R. POMPEO, SECRETARY OF STATE
OCTOBER 8, 2018
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Today, oral proceedings before the International Court of Justice (ICJ) began in The Hague in a
case brought by Iran against the United States, Certain Iranian Assets. As I have stated previously,
Iran's filings before the ICJ are a misuse of the Court for political and propaganda purposes. Iran
brought this case in 2016 to challenge measures the United States adopted to deter Iran's
support for terrorist attacks against the United States and others, as well as to respond to other
internationally destabilizing actions taken by Iran. These measures include allowing victims of
terrorism to recover damages from Iran and Iranian entities in U.S. courts. The actions at the root
of this case, among many others, involve the Iran-sponsored bombing of the U.S. Marine
Barracks in Beirut, Lebanon in 1983, which killed 241 U.S. peacekeepers.
We owe it to our fallen heroes, their families, and the victims of Iran's terrorist activities to
vigorously defend against the Iranian regime's meritless claims this week in The Hague, where we
will show that Iran's case should be dismissed.
We will continue to fight against the scourge of Iran's terrorist activities in all venues and will
continue to increase the pressure on this outlaw state. These malign activities by Iran are among
the reasons we decided last week to terminate the 1955 U.S.-lran Treaty of Amity. We hope that
Iran's leaders will come to recognize that the only way to ensure a positive future for their
country is by ceasing their campaign of terror and destruction around the world.
TAGS
Iran Office of the Spokesperson Secretary of State The Secretary of State
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-16- Annex 427
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~lJtNtwiJork~imts https:/ /www.nytimes.com/2018/09/28/world/middleeast/iraq-iran-consulate-basra-c…
Blaming Iran, U.S. Evacuates Consulate in Southern Iraq
By Edward Wong
Sept. 28, 2018
WASHINGTON -The State Department announced Friday it had ordered the evacuation of the
American consulate in Basra, Iraq, because of attacks in recent weeks by militias supported by the
Iranian government.
Secretary of State Mike Pompeo said in a written statement that the consulate had come under
"repeated incidents of indirect fire from elements of those militias."
"Iran should understand that the United States will respond promptly and appropriately to any such
attacks:' Mr. Pompeo said in the statement.
He blamed the security threat specifically on Iran, its elite Islamic Revolutionary Guard Quds Force
and militias under the control of Qassem Suleimani, the powerful commander of the Quds Force.
The State Department described the moving of the consulate's employees as a "temporary relocation."
Tim Davis, the consul general in Basra, posted a photograph on Facebook of himself talking to a
crowd of employees. "They put their hearts into this effort and I had to tell them we are done for now,"
he wrote. "I told them that leading them was the great honor of my life."
Most of the estimated 1,000 employees are contractors working in security, food service and other
support jobs; only a minority are diplomats.
The statement did not say whether the consulate would be closed permanently, and State Department
press officers declined to provide further details.
-19- Annex 427
Iran's ambassador to Iraq, Iraj Masjedi, gave a press conference outside the new
building of the Iranian consulate in the southern city of Basra on Sept. 11, days after
the old building was set ablaze by protesters. Haidar Mohammed Ali/ Agence FrancePresse
- Getty Images
The consulate in Basra, Iraq's second largest city, opened in 2011 and is one of three American
missions in the country. The decision to evacuate it comes at the confluence of several separate
events.
First, the Trump administration has begun a new campaign highlighting Iranian military activity in
the region. Second, in Basra in August and September, violent protests by local residents led to the
burning of the Iranian consulate and conspiratorial declarations by some Iraqi politicians that
American officials had incited the protests.
Third, and perhaps most important, the State Department has been internally debating for more than
a year whether to shut down the Basra consulate to save money.
Basra is in Iraq's far south, in a region of rich oil fields near the Persian Gulf. The vast majority of the
people are Shiite Arabs, and Shiite political parties dominate. Some of those parties, as well as some
militias, are supported by Iran, which is majority Shiites.
In August and early September, thousands of residents took to the streets of central Basra to call for
the Iraqi government to deliver crucial services, including power and clean water. Frequent blackouts
take place across the city in the summer months, when the region is sweltering.
This year, many of the protesters also criticized Iran's influence in Basra, and some stormed the
Iranian consulate on Sept. 7, setting it on fire. Protesters also have been killed and injured in clashes
with Iraqi security forces.
-20- Annex 427
The United States consulate is inside the perimeter of the Basra airport and far from the city's center
and protest sites. On Sept. 8, three rockets landed by the airport perimeter, but no one was injured or
killed, according to a Reuters report from Iraq.
Four days later, the White House blamed militias supported by Iran for the attack. That attack and a
similar one this week were typical of strikes that occurred regularly around the United States
Embassy in the Green Zone in Baghdad at the height of the Iraq war. Officials never ordered the
evacuation of the embassy.
Protesters take to the streets in Basra over poor living conditions in Basra, Iraq. Basra
is in Iraq's far south, in a region of rich oil fields near the Persian Gulf. Frequent
blackouts take place across the city in the summer. Murtaja Lateef/European Pressphoto
Agency, via Shutterstock
The Trump administration has sought to highlight Iran's military activities across the Middle East. It
is part of a campaign to contain Iran and justify President Trump's decision in May to withdraw from
the nuclear agreement that the Obama administration forged in 2015 with Iran and world powers.
The European Union, China and Russia have called for sticking with the agreement and say they will
work with Iran to avoid economic sanctions imposed by the United States.
Separately, senior State Department officials have been debating for more than a year whether to
close down the Basra consulate, mainly to save money, according to three former State Department
officials. The consulate costs at least $200 million to operate each year; some estimates put that
number at $350 million.
-21- Annex 427
Before he left office in March, Secretary of State Rex W. Tillerson demanded deep budget cuts from
bureaus across the department. As a result, senior officials at its Bureau of Near Eastern Affairs
began to consider closing the Basra consulate, the former officials said.
The consulate was put under a security review process, which meant that each year officials would
assess the security situation to determine whether it was safe to keep it open.
The State Department said Friday night that it does not comment on internal deliberations.
This spring, a small group of officials in Washington held a vote on whether to keep the bureau open,
and those favoring continuing the operations narrowly won out. In June, John J. Sullivan, the deputy
secretary of state, decided to keep the consulate open for at least this year.
Andrew Miller, a former State Department official, said that before the current Basra unrest, the
debate took place mainly because of budget concerns, though some of the costs were because of the
security requirements of the mission.
The head of the bureau, David M. Satterfield, and Stuart E. Jones, the former ambassador to Iraq,
were in favor of closing the consulate. Thomas A. Shannon Jr., a top department official, and Mr. Davis
were among those arguing to keep it open.
"From a purely informational perspective, closing it would be detrimental to U.S. interests and
maintaining contact with people in the community there;' said Mr. Miller, now deputy director for
policy at the Project on Middle East Democracy.
-22- Annex 427
ANNEX428

FEDERAL RULES
OF
CIVIL PROCEDURE
DECEMBER 1, 2019
Printed for the use
of
THE COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
Annex 428
RULES OF CML PROCEDURE
FOR THE
UNITED STATES DISTRICT COURTS 1
Effective September 16, 1938, as amended to December 1, 2019
TITLE I. SCOPE OF RULES; FORM OF ACTION
Rule 1. Scope and Purpose
These rules govern the procedure in all civil actions and proceedings
in the United States district courts, except as stated in
Rule 81. They should be construed, administered, and employed by
the court and the parties to secure the just, speedy, and inexpensive
determination of every action and proceeding.
(As amended Dec. 29, 1948, eff. Oct. 20, 1949; Feb. 28, 1966, eff. July
1, 1966; Apr. 22, 1993, eff. Dec. 1, 1993; Apr. 30, 2007, eff. Dec. 1, 2007;
Apr. 29, 2015, eff. Dec. 1, 2015.)
Rule 2. One Form of Action
There is one form of action-the civil action.
(As amended Apr. 30, 2007, eff. Dec. 1, 2007.)
TITLE II. COMMENCING AN ACTION; SERVICE OF PROCESS,
PLEADINGS, MOTIONS, AND ORDERS
Rule 3. Commencing an Action
A civil action is commenced by filing a complaint with the
court.
(As amended Apr. 30, 2007, eff. Dec. 1, 2007.)
Rule 4. Summons
(a) CONTENTS; AMENDMENTS.
(1) Contents. A summons must:
(A) name the court and the parties;
(B) be directed to the defendant;
(C) state the name and address of the plaintiff's attorney
or-if unrepresented-of the plaintiff;
(D) state the time within which the defendant must appear
and defend;
(E) notify the defendant that a failure to appear and defend
will result in a default judgment against the defendant
for the relief demanded in the complaint;
(F) be signed by the clerk; and
(G) bear the court's seal.
1 Title amended December 29, 1948, effective October 20, 1949.
(1)
Annex 428
Rule 4 FEDERAL RULES OF CIVIL PROCEDURE 2
(2) Amendments. The court may permit a summons to be
amended.
(b) ISSUANCE. On or after filing the complaint, the plaintiff may
present a summons to the clerk for signature and seal. If the summons
is properly completed, the clerk must sign, seal, and issue
it to the plaintiff for service on the defendant. A summons-or a
copy of a summons that is addressed to multiple defendants-must
be issued for each defendant to be served.
(c) SERVICE.
(1) In General. A summons must be served with a copy of the
complaint. The plaintiff is responsible for having the summons
and complaint served within the time allowed by Rule 4(m)
and must furnish the necessary copies to the person who
makes service.
(2) By Whom. Any person who is at least 18 years old and not
a party may serve a summons and complaint.
(3) By a Marshal or Someone Specially Appointed. At the plaintiff's
request, the court may order that service be made by a
United States marshal or deputy marshal or by a person specially
appointed by the court. The court must so order if the
plaintiff is authorized to proceed in forma pauperis under 28
U.S.C. §1915 or as a seaman under 28 U.S.C. §1916.
(d) WAIVING SERVICE.
(1) Requesting a Waiver. An individual, corporation, or association
that is subject to service under Rule 4(e), (f), or (h) has
a duty to avoid unnecessary expenses of serving the summons.
The plaintiff may notify such a defendant that an action has
been commenced and request that the defendant waive service
of a summons. The notice and request must:
(A) be in writing and be addressed:
(i) to the individual defendant; or
(ii) for a defendant subject to service under Rule 4(h),
to an officer, a managing or general agent, or any
other agent authorized by appointment or by law to receive
service of process;
(B) name the court where the complaint was filed;
(C) be accompanied by a copy of the complaint, 2 copies
of the waiver form appended to this Rule 4, and a prepaid
means for returning the form;
(D) inform the defendant, using the form appended to
this Rule 4, of the consequences of waiving and not waiving
service;
(E) state the date when the request is sent;
(F) give the defendant a reasonable time of at least 30
days after the request was sent-or at least 60 days if sent
to the defendant outside any judicial district of the United
States-to return the waiver; and
(G) be sent by first-class mail or other reliable means.
(2) Failure to Waive. If a defendant located within the United
States fails, without good cause, to sign and return a waiver
requested by a plaintiff located within the United States, the
court must impose on the defendant:
(A) the expenses later incurred in making service; and
(B) the reasonable expenses, including attorney's fees, of
any motion required to collect those service expenses.
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3 FEDERAL RULES OF CIVIL PROCEDURE Rule4
(3) Time to Answer After a Waiver. A defendant who, before
being served with process, timely returns a waiver need not
serve an answer to the complaint until 60 days after the request
was sent-or until 90 days after it was sent to the defendant
outside any judicial district of the United States.
(4) Results of Filing a Waiver. When the plaintiff files a waiver,
proof of service is not required and these rules apply as if
a summons and complaint had been served at the time of filing
the waiver.
(5) Jurisdiction and Venue Not Waived. Waiving service of a
summons does not waive any objection to personal jurisdiction
or to venue.
(e) SERVING AN INDIVIDUAL WITHIN A JUDICIAL DISTRICT OF THE
UNITED STATES. Unless federal law provides otherwise, an individual-
other than a minor, an incompetent person, or a person
whose waiver has been filed-may be served in a judicial district
of the United States by:
(1) following state law for serving a summons in an action
brought in courts of general jurisdiction in the state where the
district court is located or where service is made; or
(2) doing any of the following:
(A) delivering a copy of the summons and of the complaint
to the individual personally;
(B) leaving a copy of each at the individual's dwelling or
usual place of abode with someone of suitable age and discretion
who resides there; or
(C) delivering a copy of each to an agent authorized by
appointment or by law to receive service of process.
(f) SERVING AN INDIVIDUAL IN A FOREIGN COUNTRY. Unless federal
law provides otherwise, an individual-other than a minor, an incompetent
person, or a person whose waiver has been filed-may
be served at a place not within any judicial district of the United
States:
(1) by any internationally agreed means of service that is
reasonably calculated to give notice, such as those authorized
by the Hague Convention on the Service Abroad of Judicial
and Extrajudicial Documents;
(2) if there is no internationally agreed means, or if an international
agreement allows but does not specify other means,
by a method that is reasonably calculated to give notice:
(A) as prescribed by the foreign country's law for service
in that country in an action in its courts of general jurisdiction;
(B) as the foreign authority directs in response to a letter
rogatory or letter of request; or
(C) unless prohibited by the foreign country's law, by:
(i) delivering a copy of the summons and of the complaint
to the individual personally; or
(ii) using any form of mail that the clerk addresses
and sends to the individual and that requires a signed
receipt; or
(3) by other means not prohibited by international agreement,
as the court orders.
(g) SERVING A MINOR OR AN INCOMPETENT PERSON. A minor or an
incompetent person in a judicial district of the United States
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Rule 4 FEDERAL RULES OF CIVIL PROCEDURE 4
must be served by following state law for serving a summons or
like process on such a defendant in an action brought in the
courts of general jurisdiction of the state where service is made.
A minor or an incompetent person who is not within any judicial
district of the United States must be served in the manner prescribed
by Rule 4(f)(2)(A), (f)(2)(B), or (f)(3).
(h) SERVING A CORPORATION, PARTNERSHIP, OR ASSOCIATION. Unless
federal law provides otherwise or the defendant's waiver has
been filed, a domestic or foreign corporation, or a partnership or
other unincorporated association that is subject to suit under a
common name, must be served:
(1) in a judicial district of the United States:
(A) in the manner prescribed by Rule 4(e)(l) for serving
an individual; or
(B) by delivering a copy of the summons and of the complaint
to an officer, a managing or general agent, or any
other agent authorized by appointment or by law to receive
service of process and-if the agent is one authorized
by statute and the statute so requires-by also mailing a
copy of each to the defendant; or
(2) at a place not within any judicial district of the United
States, in any manner prescribed by Rule 4(f) for serving an
individual, except personal delivery under (f)(2)(C)(i).
(i) SERVING THE UNITED STATES AND ITS AGENCIES, CORPORATIONS,
OFFICERS, OR EMPLOYEES.
(1) United States. To serve the United States, a party must:
(A)(i) deliver a copy of the summons and of the complaint
to the United States attorney for the district where
the action is brought-or to an assistant United States attorney
or clerical employee whom the United States attorney
designates in a writing filed with the court clerk-or
(ii) send a copy of each by registered or certified mail to
the civil-process clerk at the United States attorney's office;
(B) send a copy of each by registered or certified mail to
the Attorney General of the United States at Washington,
D.C.; and
(C) if the action challenges an order of a nonparty agency
or officer of the United States, send a copy of each by
registered or certified mail to the agency or officer.
(2) Agency; Corporation; Officer or Employee Sued in an Official
Capacity. To serve a United States agency or corporation, or
a United States officer or employee sued only in an official capacity,
a party must serve the United States and also send a
copy of the summons and of the complaint by registered or
certified mail to the agency, corporation, officer, or employee.
(3) Officer or Employee Sued Individually. To serve a United
States officer or employee sued in an individual capacity for
an act or omission occurring in connection with duties performed
on the United States' behalf (whether or not the officer
or employee is also sued in an official capacity), a party must
serve the United States and also serve the officer or employee
under Rule 4(e), (f), or (g).
(4) Extending Time. The court must allow a party a reasonable
time to cure its failure to:
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5 FEDERAL RULES OF CIVIL PROCEDURE Rule4
(A) serve a person required to be served under Rule
4(i)(2), if the party has served either the United States attorney
or the Attorney General of the United States; or
(B) serve the United States under Rule 4(i)(3), if the
party has served the United States officer or employee.
(j) SERVING A FOREIGN, STATE, OR LOCAL GOVERNMENT.
(1) Foreign State. A foreign state or its political subdivision,
agency, or instrumentality must be served in accordance with
28 u.s.c. §1608.
(2) State or Local Government. A state, a municipal corporation,
or any other state-created governmental organization
that is subject to suit must be served by:
(A) delivering a copy of the summons and of the complaint
to its chief executive officer; or
(B) serving a copy of each in the manner prescribed by
that state's law for serving a summons or like process on
such a defendant.
(k) TERRITORIAL LIMITS OF EFFECTIVE SERVICE.
(1) In General. Serving a summons or filing a waiver of service
establishes personal jurisdiction over a defendant:
(A) who is subject to the jurisdiction of a court of general
jurisdiction in the state where the district court is located;
(B) who is a party joined under Rule 14 or 19 and is
served within a judicial district of the United States and
not more than 100 miles from where the summons was issued;
or
(C) when authorized by a federal statute.
(2) Federal Claim Outside State-Court Jurisdiction. For a claim
that arises under federal law, serving a summons or filing a
waiver of service establishes personal jurisdiction over a defendant
if:
(A) the defendant is not subject to jurisdiction in any
state's courts of general jurisdiction; and
(B) exercising jurisdiction is consistent with the United
States Constitution and laws.
(Z) PROVING SERVICE.
(1) Affidavit Required. Unless service is waived, proof of service
must be made to the court. Except for service by a United
States marshal or deputy marshal, proof must be by the server's
affidavit.
(2) Service Outside the United States. Service not within any
judicial district of the United States must be proved as follows:
(A) if made under Rule 4(f)(l), as provided in the applicable
treaty or convention; or
(B) if made under Rule 4(f)(2) or (f)(3), by a receipt signed
by the addressee, or by other evidence satisfying the court
that the summons and complaint were delivered to the addressee.
(3) Validity of Service; Amending Proof. Failure to prove service
does not affect the validity of service. The court may permit
proof of service to be amended.
(m) TIME LIMIT FOR SERVICE. If a defendant is not served within
90 days after the complaint is filed, the court-on motion or on its
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Rule 4 FEDERAL RULES OF CIVIL PROCEDURE 6
own after notice to the plaintiff-must dismiss the action without
prejudice against that defendant or order that service be made
within a specified time. But if the plaintiff shows good cause for
the failure, the court must extend the time for service for an appropriate
period. This subdivision (m) does not apply to service in
a foreign country under Rule 4(f), 4(h)(2), or 4(j)(l), or to service
of a notice under Rule 71.l(d)(3)(A).
(n) ASSERTING JURISDICTION OVER PROPERTY OR ASSETS.
(1) Federal Law. The court may assert jurisdiction over property
if authorized by a federal statute. Notice to claimants of
the property must be given as provided in the statute or by
serving a summons under this rule.
(2) State Law. On a showing that personal jurisdiction over
a defendant cannot be obtained in the district where the action
is brought by reasonable efforts to serve a summons
under this rule, the court may assert jurisdiction over the defendant's
assets found in the district. Jurisdiction is acquired
by seizing the assets under the circumstances and in the manner
provided by state law in that district.
(As amended Jan. 21, 1963, eff. July 1, 1963; Feb. 28, 1966, eff. July
1, 1966; Apr. 29, 1980, eff. Aug. 1, 1980; Pub. L. 97--462, § 2, Jan. 12,
1983, 96 Stat. 2527, eff. Feb. 26, 1983; Mar. 2, 1987, eff. Aug. 1, 1987;
Apr. 22, 1993, eff. Dec. 1, 1993; Apr. 17, 2000, eff. Dec. 1, 2000; Apr.
30, 2007, eff. Dec. 1, 2007; Apr. 29, 2015, eff. Dec. 1, 2015; Apr. 28, 2016,
eff. Dec. 1, 2016; Apr. 27, 2017, eff. Dec. 1, 2017.)
RULE 4 NOTICE OF A LAWSUIT AND REQUEST TO WAIVE SERVICE OF
SUMMONS.
(Caption)
To (name the defendant or-if the defendant is a corporation, partnership,
or association-name an officer or agent authorized to receive
service):
WHY ARE YOU GETTING THIS?
A lawsuit has been filed against you, or the entity you represent,
in this court under the number shown above. A copy of the
complaint is attached.
This is not a summons, or an official notice from the court. It
is a request that, to avoid expenses, you waive formal service of
a summons by signing and returning the enclosed waiver. To avoid
these expenses, you must return the signed waiver within (give at
least 30 days or at least 60 days if the defendant is outside any judicial
district of the United States) from the date shown below, which is
the date this notice was sent. Two copies of the waiver form are
enclosed, along with a stamped, self-addressed envelope or other
prepaid means for returning one copy. You may keep the other
copy.
WHAT HAPPENS NEXT?
If you return the signed waiver, I will file it with the court. The
action will then proceed as if you had been served on the date the
waiver is filed, but no summons will be served on you and you will
have 60 days from the date this notice is sent (see the date below)
to answer the complaint (or 90 days if this notice is sent to you
outside any judicial district of the United States).
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7 FEDERAL RULES OF CIVIL PROCEDURE Rule4
If you do not return the signed waiver within the time indicated,
I will arrange to have the summons and complaint served
on you. And I will ask the court to require you, or the entity you
represent, to pay the expenses of making service.
Please read the enclosed statement about the duty to avoid unnecessary
expenses.
I certify that this request is being sent to you on the date below.
Date: ---------
(Signature of the attorney
or unrepresented party)
(Printed name)
(Address)
(E-mail address)
(Telephone number)
RULE 4 WAIVER OF THE SERVICE OF SUMMONS.
(Caption)
To (name the plaintiff's attorney or the unrepresented plaintiff):
I have received your request to waive service of a summons in
this action along with a copy of the complaint, two copies of this
waiver form, and a prepaid means of returning one signed copy of
the form to you.
I, or the entity I represent, agree to save the expense of serving
a summons and complaint in this case.
I understand that I, or the entity I represent, will keep all defenses
or objections to the lawsuit, the court's jurisdiction, and
the venue of the action, but that I waive any objections to the absence
of a summons or of service.
I also understand that I, or the entity I represent, must file and
serve an answer or a motion under Rule 12 within 60 days from
__________________ , the date when this request
was sent (or 90 days if it was sent outside the United
States). If I fail to do so, a default judgment will be entered
against me or the entity I represent.
Date: ---------
(Signature of the attorney
or unrepresented party)
(Printed name)
(Address)
(E-mail address)
(Telephone number)
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Rule 4.1 FEDERAL RULES OF CIVIL PROCEDURE
(Attach the following)
DUTY TO A VOID UNNECESSARY EXPENSES
OF SERVING A SUMMONS
8
Rule 4 of the Federal Rules of Civil Procedure requires certain
defendants to cooperate in saving unnecessary expenses of serving
a summons and complaint. A defendant who is located in the
United States and who fails to return a signed waiver of service
requested by a plaintiff located in the United States will be required
to pay the expenses of service, unless the defendant shows
good cause for the failure.
"Good cause" does not include a belief that the lawsuit is
groundless, or that it has been brought in an improper venue, or
that the court has no jurisdiction over this matter or over the defendant
or the defendant's property.
If the waiver is signed and returned, you can still make these
and all other defenses and objections, but you cannot object to the
absence of a summons or of service.
If you waive service, then you must, within the time specified
on the waiver form, serve an answer or a motion under Rule 12 on
the plaintiff and file a copy with the court. By signing and returning
the waiver form, you are allowed more time to respond than
if a summons had been served.
Rule 4.1. Serving Other Process
(a) IN GENERAL. Process-other than a summons under Rule 4 or
a subpoena under Rule 45----must be served by a United States marshal
or deputy marshal or by a person specially appointed for that
purpose. It may be served anywhere within the territorial limits
of the state where the district court is located and, if authorized
by a federal statute, beyond those limits. Proof of service must be
made under Rule 4(Z).
(b) ENFORCING ORDERS: COMMITTING FOR CIVIL CONTEMPT. An
order committing a person for civil contempt of a decree or injunction
issued to enforce federal law may be served and enforced
in any district. Any other order in a civil-contempt proceeding
may be served only in the state where the issuing court is located
or elsewhere in the United States within 100 miles from where the
order was issued.
(As added Apr. 22, 1993, eff. Dec. 1, 1993; amended Apr. 30, 2007, eff.
Dec. 1, 2007.)
Rule 5. Serving and Filing Pleadings and Other Papers
(a) SERVICE: WHEN REQUIRED.
(1) In General. Unless these rules provide otherwise, each of
the following papers must be served on every party:
(A) an order stating that service is required;
(B) a pleading filed after the original complaint, unless
the court orders otherwise under Rule 5(c) because there
are numerous defendants;
(C) a discovery paper required to be served on a party,
unless the court orders otherwise;
(D) a written motion, except one that may be heard ex
parte; and
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15 FEDERAL RULES OF CIVIL PROCEDURE Rule8
(2) promptly file a supplemental statement if any required
information changes.
(As added Apr. 29, 2002, eff. Dec. 1, 2002; amended Apr. 30, 2007, eff.
Dec. 1, 2007.)
Rule 8. General Rules of Pleading
(a) CLAIM FOR RELIEF. A pleading that states a claim for relief
must contain:
(1) a short and plain statement of the grounds for the court's
jurisdiction, unless the court already has jurisdiction and the
claim needs no new jurisdictional support;
(2) a short and plain statement of the claim showing that the
pleader is entitled to relief; and
(3) a demand for the relief sought, which may include relief
in the alternative or different types of relief.
(b) DEFENSES; ADMISSIONS AND DENIALS.
(1) In General. In responding to a pleading, a party must:
(A) state in short and plain terms its defenses to each
claim asserted against it; and
(B) admit or deny the allegations asserted against it by
an opposing party.
(2) Denials-Responding to the Substance. A denial must fairly
respond to the substance of the allegation.
(3) General and Specific Denials. A party that intends in good
faith to deny all the allegations of a pleading-including the
jurisdictional grounds-may do so by a general denial. A party
that does not intend to deny all the allegations must either
specifically deny designated allegations or generally deny all
except those specifically admitted.
(4) Denying Part of an Allegation. A party that intends in
good faith to deny only part of an allegation must admit the
part that is true and deny the rest.
(5) Lacking Knowledge or Information. A party that lacks
knowledge or information sufficient to form a belief about the
truth of an allegation must so state, and the statement has
the effect of a denial.
(6) Effect of Failing to Deny. An allegation-other than one
relating to the amount of damages-is admitted if a responsive
pleading is required and the allegation is not denied. If a responsive
pleading is not required, an allegation is considered
denied or avoided.
(c) AFFIRMATIVE DEFENSES.
(1) In General. In responding to a pleading, a party must affirmatively
state any avoidance or affirmative defense, including:
• accord and satisfaction;
• arbitration and award;
• assumption of risk;
• contributory negligence;
• duress;
• estoppel;
• failure of consideration;
• fraud;
• illegality;
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Rule 9 FEDERAL RULES OF CIVIL PROCEDURE 16
• injury by fellow servant;
• laches;
• license;
• payment;
• release;
• res judicata;
• statute of frauds;
• statute of limitations; and
• waiver.
(2) Mistaken Designation. If a party mistakenly designates a
defense as a counterclaim, or a counterclaim as a defense, the
court must, if justice requires, treat the pleading as though it
were correctly designated, and may impose terms for doing so.
(d) PLEADING TO BE CONCISE AND DIRECT; ALTERNATIVE STATEMENTS;
INCONSISTENCY.
(1) In General. Each allegation must be simple, concise, and
direct. No technical form is required.
(2) Alternative Statements of a Claim or Defense. A party may
set out 2 or more statements of a claim or defense alternatively
or hypothetically, either in a single count or defense
or in separate ones. If a party makes alternative statements,
the pleading is sufficient if any one of them is sufficient.
(3) Inconsistent Claims or Defenses. A party may state as many
separate claims or defenses as it has, regardless of consistency.
(e) CONSTRUING PLEADINGS. Pleadings must be construed so as to
do justice.
(As amended Feb. 28, 1966, eff. July 1, 1966; Mar. 2, 1987, eff. Aug.
1, 1987; Apr. 30, 2007, eff. Dec. 1, 2007; Apr. 28, 2010, eff. Dec. 1, 2010.)
Rule 9. Pleading Special Matters
(a) CAPACITY OR AUTHORITY TO SUE; LEGAL EXISTENCE.
(1) In General. Except when required to show that the court
has jurisdiction, a pleading need not allege:
(A) a party's capacity to sue or be sued;
(B) a party's authority to sue or be sued in a representative
capacity; or
(C) the legal existence of an organized association of persons
that is made a party.
(2) Raising Those Issues. To raise any of those issues, a party
must do so by a specific denial, which must state any supporting
facts that are peculiarly within the party's knowledge.
(b) FRAUD OR MISTAKE; CONDITIONS OF MIND. In alleging fraud or
mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a person's mind may be alleged generally.
(c) CONDITIONS PRECEDENT. In pleading conditions precedent, it
suffices to allege generally that all conditions precedent have occurred
or been performed. But when denying that a condition
precedent has occurred or been performed, a party must do so with
particularity.
(d) OFFICIAL DOCUMENT OR ACT. In pleading an official document
or official act, it suffices to allege that the document was legally
issued or the act legally done.
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79 FEDERAL RULES OF CIVIL PROCEDURE Rule 55
party. But costs against the United States, its officers, and its
agencies may be imposed only to the extent allowed by law.
The clerk may tax costs on 14 days' notice. On motion served
within the next 7 days, the court may review the clerk's action.
(2) Attorney's Fees.
(A) Claim to Be by Motion. A claim for attorney's fees and
related nontaxable expenses must be made by motion unless
the substantive law requires those fees to be proved at
trial as an element of damages.
(B) Timing and Contents of the Motion. Unless a statute or
a court order provides otherwise, the motion must:
(i) be filed no later than 14 days after the entry of
judgment;
(ii) specify the judgment and the statute, rule, or
other grounds entitling the movant to the award;
(iii) state the amount sought or provide a fair estimate
of it; and
(iv) disclose, if the court so orders, the terms of any
agreement about fees for the services for which the
claim is made.
(C) Proceedings. Subject to Rule 23(h), the court must, on
a party's request, give an opportunity for adversary submissions
on the motion in accordance with Rule 43(c) or 78.
The court may decide issues of liability for fees before receiving
submissions on the value of services. The court
must find the facts and state its conclusions of law as provided
in Rule 52(a).
(D) Special Procedures by Local Rule; Reference to a Master
or a Magistrate Judge. By local rule, the court may establish
special procedures to resolve fee-related issues without
extensive evidentiary hearings. Also, the court may
refer issues concerning the value of services to a special
master under Rule 53 without regard to the limitations of
Rule 53(a)(l), and may refer a motion for attorney's fees to
a magistrate judge under Rule 72(b) as if it were a dispositive
pretrial matter.
(E) Exceptions. Subparagraphs (A)-(D) do not apply to
claims for fees and expenses as sanctions for violating
these rules or as sanctions under 28 U.S.C. §1927.
(As amended Dec. 27, 1946, eff. Mar. 19, 1948; Apr. 17, 1961, eff. July
19, 1961; Mar. 2, 1987, eff. Aug. 1, 1987; Apr. 22, 1993, eff. Dec. 1, 1993;
Apr. 29, 2002, eff. Dec. 1, 2002; Mar. 27, 2003, eff. Dec. 1, 2003; Apr.
30, 2007, eff. Dec. 1, 2007; Mar. 26, 2009, eff. Dec. 1, 2009.)
Rule 55. Default; Default Judgment
(a) ENTERING A DEFAULT. 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 clerk must enter the party's default.
(b) ENTERING A DEFAULT JUDGMENT.
(1) By the Clerk. If the plaintiff's claim is for a sum certain
or a sum that can be made certain by computation, the clerkon
the plaintiff's request, with an affidavit showing the
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Rule 56 FEDERAL RULES OF CIVIL PROCEDURE 80
amount due-must enter judgment for that amount and costs
against a defendant who has been defaulted for not appearing
and who is neither a minor nor an incompetent person.
(2) By the Court. In all other cases, the party must apply to
the court for a default judgment. A default judgment may be
entered against a minor or incompetent person only if represented
by a general guardian, conservator, or other like fiduciary
who has appeared. If the party against whom a default
judgment is sought has appeared personally or by a representative,
that party or its representative must be served with
written notice of the application at least 7 days before the
hearing. The court may conduct hearings or make referralspreserving
any federal statutory right to a jury trial-when,
to enter or effectuate judgment, it needs 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.
(c) SETTING ASIDE A DEFAULT OR A DEFAULT JUDGMENT. The
court may set aside an entry of default for good cause, and it may
set aside a final default judgment under Rule 60(b).
(d) JUDGMENT AGAINST THE UNITED STATES. A default judgment
may be entered against the United States, its officers, or its agencies
only if the claimant establishes a claim or right to relief by
evidence that satisfies the court.
(As amended Mar. 2, 1987, eff. Aug. 1, 1987; Apr. 30, 2007, eff. Dec.
1, 2007; Mar. 26, 2009, eff. Dec. 1, 2009; Apr. 29, 2015, eff. Dec. 1, 2015.)
Rule 56. Summary Judgment
(a) MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT.
A party may move for summary judgment, identifying each
claim or defense-or the part of each claim or defense-on which
summary judgment is sought. The court shall grant summary
judgment if the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a
matter of law. The court should state on the record the reasons
for granting or denying the motion.
(b) TIME TO FILE A MOTION. Unless a different time is set by local
rule or the court orders otherwise, a party may file a motion for
summary judgment at any time until 30 days after the close of all
discovery.
(c) PROCEDURES.
(1) Supporting Factual Positions. A party asserting that a fact
cannot be or is genuinely disputed must support the assertion
by:
(A) citing to particular parts of materials in the record,
including depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including
those made for purposes of the motion only), admissions,
interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the
absence or presence of a genuine dispute, or that an adverse
party cannot produce admissible evidence to support
the fact.
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83 FEDERAL RULES OF CIVIL PROCEDURE Rule 60
(As amended Dec. 27, 1946, eff. Mar. 19, 1948; Jan. 21, 1963, eff. July
1, 1963; Apr. 22, 1993, eff. Dec. 1, 1993; Apr. 29, 2002, eff. Dec. 1, 2002;
Apr. 30, 2007, eff. Dec. 1, 2007.)
Rule 59. New Trial; Altering or Amending a Judgment
(a) IN GENERAL.
(1) Grounds for New Trial. The court may, on motion, grant
a new trial on all or some of the issues-and to any party-as
follows:
(A) after a jury trial, for any reason for which a new
trial has heretofore been granted in an action at law in
federal court; or
(B) after a nonjury trial, for any reason for which a rehearing
has heretofore been granted in a suit in equity in
federal court.
(2) Further Action After a Nonjury Trial. After a nonjury trial,
the court may, on motion for a new trial, open the judgment
if one has been entered, take additional testimony, amend
findings of fact and conclusions of law or make new ones, and
direct the entry of a new judgment.
(b) TIME TO FILE A MOTION FOR A NEW TRIAL. A motion for a new
trial must be filed no later than 28 days after the entry of judgment.
(c) TIME TO SERVE AFFIDAVITS. When a motion for a new trial is
based on affidavits, they must be filed with the motion. The opposing
party has 14 days after being served to file opposing affidavits.
The court may permit reply affidavits.
(d) NEW TRIAL ON THE COURT'S INITIATIVE OR FOR REASONS NOT
IN THE MOTION. No later than 28 days after the entry of judgment,
the court, on its own, may order a new trial for any reason that
would justify granting one on a party's motion. After giving the
parties notice and an opportunity to be heard, the court may
grant a timely motion for a new trial for a reason not stated in
the motion. In either event, the court must specify the reasons in
its order.
(e) MOTION TO ALTER OR AMEND A JUDGMENT. A motion to alter
or amend a judgment must be filed no later than 28 days after the
entry of the judgment.
(As amended Dec. 27, 1946, eff. Mar. 19, 1948; Feb. 28, 1966, eff. July
1, 1966; Apr. 27, 1995, eff. Dec. 1, 1995; Apr. 30, 2007, eff. Dec. 1, 2007;
Mar. 26, 2009, eff. Dec. 1, 2009.)
Rule 60. Relief from a Judgment or Order
(a) CORRECTIONS BASED ON CLERICAL MISTAKES; OVERSIGHTS AND
OMISSIONS. The court may correct a clerical mistake or a mistake
arising from oversight or omission whenever one is found in a
judgment, order, or other part of the record. The court may do so
on motion or on its own, with or without notice. But after an appeal
has been docketed in the appellate court and while it is pending,
such a mistake may be corrected only with the appellate
court's leave.
(b) GROUNDS FOR RELIEF FROM A FINAL JUDGMENT, ORDER, OR
PROCEEDING. On motion and just terms, the court may relieve a
party or its legal representative from a final judgment, order, or
proceeding for the following reasons:
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Rule 61 FEDERAL RULES OF CIVIL PROCEDURE 84
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence,
could not have been discovered in time to move for a
new trial under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged;
it is based on an earlier judgment that has been reversed or
vacated; or applying it prospectively is no longer equitable; or
(6) any other reason that justifies relief.
(c) TIMING AND EFFECT OF THE MOTION.
(1) Timing. A motion under Rule 60(b) must be made within
a reasonable time-and for reasons (1), (2), and (3) no more
than a year after the entry of the judgment or order or the
date of the proceeding.
(2) Effect on Finality. The motion does not affect the judgment's
finality or suspend its operation.
(d) OTHER POWERS TO GRANT RELIEF. This rule does not limit a
court's power to:
(1) entertain an independent action to relieve a party from
a judgment, order, or proceeding;
(2) grant relief under 28 U.S.C. § 1655 to a defendant who was
not personally notified of the action; or
(3) set aside a judgment for fraud on the court.
(e) BILLS AND WRITS ABOLISHED. The following are abolished:
bills of review, bills in the nature of bills of review, and writs of
coram no bis, coram vobis, and audita querela.
(As amended Dec. 27, 1946, eff. Mar. 19, 1948; Dec. 29, 1948, eff. Oct.
20, 1949; Mar. 2, 1987, eff. Aug. 1, 1987; Apr. 30, 2007, eff. Dec. 1, 2007.)
Rule 61. Harmless Error
Unless justice requires otherwise, no error in admitting or excluding
evidence-or any other error by the court or a party-is
ground for granting a new trial, for setting aside a verdict, or for
vacating, modifying, or otherwise disturbing a judgment or order.
At every stage of the proceeding, the court must disregard all errors
and defects that do not affect any party's substantial rights.
(As amended Apr. 30, 2007, eff. Dec. 1, 2007.)
Rule 62. Stay of Proceedings to Enforce a Judgment
(a) AUTOMATIC STAY. Except as provided in Rule 62(c) and (d),
execution on a judgment and proceedings to enforce it are stayed
for 30 days after its entry, unless the court orders otherwise.
(b) STAY BY BOND OR OTHER SECURITY. At any time after judgment
is entered, a party may obtain a stay by providing a bond
or other security. The stay takes effect when the court approves
the bond or other security and remains in effect for the time specified
in the bond or other security.
(C) STAY OF AN INJUNCTION, RECEIVERSHIP, OR PATENT ACCOUNTING
ORDER. Unless the court orders otherwise, the following are
not stayed after being entered, even if an appeal is taken:
(1) an interlocutory or final judgment in an action for an injunction
or receivership; or
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Annex 428
FEDERAL RULES
OF
EVIDENCE
DECEMBER 1, 2019
Printed for the use
of
THE COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
Annex 428
Rule 601 FEDERAL RULES OF EVIDENCE 10
(c) DISCLOSURE MADE IN A STATE PROCEEDING. When the disclosure
is made in a state proceeding and is not the subject of a
state-court order concerning waiver, the disclosure does not operate
as a waiver in a federal proceeding if the disclosure:
(1) would not be a waiver under this rule if it had been made
in a federal proceeding; or
(2) is not a waiver under the law of the state where the disclosure
occurred.
(d) CONTROLLING EFFECT OF A COURT ORDER. A federal court may
order that the privilege or protection is not waived by disclosure
connected with the litigation pending before the court-in which
event the disclosure is also not a waiver in any other federal or
state proceeding.
(e) CONTROLLING EFFECT OF A PARTY AGREEMENT. An agreement
on the effect of disclosure in a federal proceeding is binding only
on the parties to the agreement, unless it is incorporated into a
court order.
(f) CONTROLLING EFFECT OF THIS RULE. Notwithstanding Rules
101 and 1101, this rule applies to state proceedings and to federal
court-annexed and federal court-mandated arbitration proceedings,
in the circumstances set out in the rule. And notwithstanding
Rule 501, this rule applies even if state law provides the rule
of decision.
(g) DEFINITIONS. In this rule:
(1) "attorney-client privilege" means the protection that applicable
law provides for confidential attorney-client communications;
and
(2) "work-product protection" means the protection that applicable
law provides for tangible material (or its intangible
equivalent) prepared in anticipation of litigation or for trial.
(As added Pub. L. 110---322, § l(a), Sept. 19, 2008, 122 Stat. 3537;
amended Apr. 26, 2011, eff. Dec. 1, 2011.)
ARTICLE VI. WITNESSES
Rule 601. Competency to Testify in General
Every person is competent to be a witness unless these rules
provide otherwise. But in a civil case, state law governs the
witness's competency regarding a claim or defense for which state
law supplies the rule of decision.
(As amended Apr. 26, 2011, eff. Dec. 1, 2011.)
Rule 602. Need for Personal Knowledge
A witness may testify to a matter only if evidence is introduced
sufficient to support a finding that the witness has personal
knowledge of the matter. Evidence to prove personal knowledge
may consist of the witness's own testimony. This rule does not
apply to a witness's expert testimony under Rule 703.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987; Apr. 25, 1988, eff. Nov.
1, 1988; Apr. 26, 2011, eff. Dec. 1, 2011.)
Rule 603. Oath or Affirmation to Testify Truthfully
Before testifying, a witness must give an oath or affirmation to
testify truthfully. It must be in a form designed to impress that
duty on the witness's conscience.
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15 FEDERAL RULES OF EVIDENCE Rule 704
(d) a person authorized by statute to be present.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987; Apr. 25, 1988, eff. Nov.
1, 1988; Pub. L. 100---690, title VII, § 7075(a), Nov. 18, 1988, 102 Stat.
4405; Apr. 24, 1998, eff. Dec. 1, 1998; Apr. 26, 2011, eff. Dec. 1, 2011.)
ARTICLE VII. OPINIONS AND EXPERT TESTIMONY
Rule 701. Opinion Testimony by Lay Witnesses
If a witness is not testifying as an expert, testimony in the form
of an opinion is limited to one that is:
(a) rationally based on the witness's perception;
(b) helpful to clearly understanding the witness's testimony
or to determining a fact in issue; and
(c) not based on scientific, technical, or other specialized
knowledge within the scope of Rule 702.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987; Apr. 17, 2000, eff. Dec.
1, 2000; Apr. 26, 2011, eff. Dec. 1, 2011.)
Rule 702. Testimony by Expert Witnesses
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an
opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized
knowledge will help the trier of fact to understand the evidence
or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and
methods; and
(d) the expert has reliably applied the principles and methods
to the facts of the case.
(As amended Apr. 17, 2000, eff. Dec. 1, 2000; Apr. 26, 2011, eff. Dec.
1, 2011.)
Rule 703. Bases of an Expert's Opinion Testimony
An expert may base an opinion on facts or data in the case that
the expert has been made aware of or personally observed. If experts
in the particular field would reasonably rely on those kinds
of facts or data in forming an opinion on the subject, they need
not be admissible for the opinion to be admitted. But if the facts
or data would otherwise be inadmissible, the proponent of the
opinion may disclose them to the jury only if their probative
value in helping the jury evaluate the opinion substantially outweighs
their prejudicial effect.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987; Apr. 17, 2000, eff. Dec.
1, 2000; Apr. 26, 2011, eff. Dec. 1, 2011.)
Rule 704. Opinion on an Ultimate Issue
(a) IN GENERAL-NOT AUTOMATICALLY OBJECTIONABLE. An opinion
is not objectionable just because it embraces an ultimate
issue.
(b) EXCEPTION. In a criminal case, an expert witness must not
state an opinion about whether the defendant did or did not have
a mental state or condition that constitutes an element of the
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Rule 705 FEDERAL RULES OF EVIDENCE 16
crime charged or of a defense. Those matters are for the trier of
fact alone.
(As amended Pub. L. 98---473, title II, §406, Oct. 12, 1984, 98 Stat.
2067; Apr. 26, 2011, eff. Dec. 1, 2011.)
Rule 705. Disclosing the Facts or Data Underlying an Expert's
Opinion
Unless the court orders otherwise, an expert may state an opinion-
and give the reasons for it-without first testifying to the
underlying facts or data. But the expert may be required to disclose
those facts or data on cross-examination.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987; Apr. 22, 1993, eff. Dec.
1, 1993; Apr. 26, 2011, eff. Dec. 1, 2011.)
Rule 706. Court-Appointed Expert Witnesses
(a) APPOINTMENT PROCESS. On a party's motion or on its own,
the court may order the parties to show cause why expert witnesses
should not be appointed and may ask the parties to submit
nominations. The court may appoint any expert that the parties
agree on and any of its own choosing. But the court may only appoint
someone who consents to act.
(b) EXPERT'S ROLE. The court must inform the expert of the expert's
duties. The court may do so in writing and have a copy filed
with the clerk or may do so orally at a conference in which the
parties have an opportunity to participate. The expert:
(1) must advise the parties of any findings the expert makes;
(2) may be deposed by any party;
(3) may be called to testify by the court or any party; and
(4) may be cross-examined by any party, including the party
that called the expert.
(c) COMPENSATION. The expert is entitled to a reasonable compensation,
as set by the court. The compensation is payable as follows:
(1) in a criminal case or in a civil case involving just compensation
under the Fifth Amendment, from any funds that
are provided by law; and
(2) in any other civil case, by the parties in the proportion
and at the time that the court directs-and the compensation
is then charged like other costs.
(d) DISCLOSING THE APPOINTMENT TO THE JURY. The court may
authorize disclosure to the jury that the court appointed the expert.
(e) PARTIES' CHOICE OF THEIR OWN EXPERTS. This rule does not
limit a party in calling its own experts.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987; Apr. 26, 2011, eff. Dec.
1, 2011.)
ARTICLE VIII. HEARSAY
Rule 801. Definitions That Apply to This Article; Exclusions from
Hearsay
(a) STATEMENT. "Statement" means a person's oral assertion,
written assertion, or nonverbal conduct, if the person intended it
as an assertion.
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Document Long Title

Volume VIII - Annexes 403-428