diplomatic protection

Admissibility of Claims Dispute Settlement Mechanisms

Sigmar Stadlmeier

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Admissibility 

Capacity to bring a claim

 Element of international personality

  see Advisory Opinion Reparation for Injuries (1949)  Individuals (Persons, Companies)  diplomatic protection  Disadvantages / alternatives?

Sigmar Stadlmeier

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Right to Diplomatic Protection 

Legal consequence of nationality

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Sovereign right, vested in the protecting State, not in the protected person

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 exercise is at the discretion of the protecting State

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 no „right― or „entitlement― of persons seeking protection, but...

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 ... no „waiver― either (you cannot waive what you are not entitled to!)

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 See Calvo Clause

Sigmar Stadlmeier

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Calvo-Clause (1926) The contractor and all persons who, as employees or in any other capacity, may be engaged in the execution of the work under this contract either directily or indirectly, shall be considered as Mexicans in all matters, within the Republic of Mexico concerning the execution of such work and the fulfilment of this contract. They shall not claim, nor shall they have, with regard to the interests and the business connected with this contract, any other rights or means to enforce the same than those granted by the laws of the Republic to Mexicans, nor shall they enjoy any other rights than those established in favour of Mexicans. They are consequently deprived of any rights as aliens, and under no conditions shall the

intervention of foreign diplomatic agents be permitted, in any matter related to this contract. Sigmar Stadlmeier

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Prerequisites of diplomatic protection (1)  „nationality of claims – rule―  = continuous nationality — From the point in time at which the infringement occurred which triggered protection — To the point in time at which a settlement is made/reached

 Ships: State of Flag may also protect foreign nationals among crew  EU: Subsidiary diplomatic protection by other Member States

Sigmar Stadlmeier

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Nationality issues 

Natural persons — Nottebohm — (conflicting) dual nationalities

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Legal persons — Barcelona Traction case — Proper link between State and Company — Transnational Corporations (TNC‘s)

Sigmar Stadlmeier

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Prerequisites of diplomatic protection (2)  (exhaustion of) local remedies – rule  Why?  Infringement / violation can be corrected by higher Court ot

Authority (likewise attributable to State  no violation anymore)  Unless — Impossible

— Too burdensome — Ineffective / without any prospect of success

Sigmar Stadlmeier

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Peaceful Settlement of Disputes Art 33 sect 1 UN-Charter  Negotiations  Fact-Finding  Mediation  Conciliation  Arbitration  Judicial Settlement  Resort to Regional Organisations

 Other peaceful means of the parties‘ own choice

Sigmar Stadlmeier

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„Diplomatic― Procedures (1) 

Negotiations: between Parties, on an equal level, confidential; (may precede judicial settlement)

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Fact Finding: Investigation into relevant facts by an independent (or joint) commission; frequently used to prepare ground for judicial settlement

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Good offices: providing favourable „atmosphere― and channels for communication and negotiations (either neutral venue or neutral personnel shuttling back and forth between parties)  facilitation of, but not normally influence on negotiations

Sigmar Stadlmeier

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Diplomatic Procedures (2)  Mediation: (in addition to good offices) providing guidance for

debate and suggestions for solutions / compromises  Conciliation: formal procedure, requiring compromise in advance on powers and competences of conciliator (usually a commission)  result not binding; parties may reject

Sigmar Stadlmeier

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Arbitration (1)  Depends on consensus (compromise) of Parties  requires previous binding agreement on arbitration in case of a dispute (compromissary clauses)

 Awards are binding (unlike the results of mediation or conciliation); Parties no longer are „Masters of their Dispute―

Sigmar Stadlmeier

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Arbitration (2)  Influence of Parties on the Composition of the Arbitration

Tribunal (through compromissary clause); typically:  Appointment of an equal number of arbitrators, who in turn must agree on a chairman  Subsidiary powers of appointment, if parties fail to comply or arbitrators fail to agree (e.g. for President of the ICJ)

Sigmar Stadlmeier

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Arbitration (3) 

Influence of Parties on applicable law (both substantive and procedural) through compromissary clause

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 see Texaco Overseas Petroleum Co. And California Oil Co. vs Libya: Internationalisation of concession agreement by referring to — General principles of Law — Disputes to be settled by arbitration

Sigmar Stadlmeier

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Arbitration (4) 

Shorter duration of proceedings: Tribunal is „tailored― for one dispute and will only exist until the dispute has been settled

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Permanent Court of Arbitration established by the I. Peace Conference 1899 in The Hague („permanent― = secretariat, list of arbitrators)

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Standardised Rules of Procedure for specific disputes — ICSID = International Centre for the Settlement of Investment Disputes — ICC = International Chamber of Commerce — DSU = Dispute Settlement Understanding (part of WTO agreement)

Sigmar Stadlmeier

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See it at work: International Investment Law  Public International Law elements: — „foreign― investor — Investment state regulating foreign direct investment — „Forum― of dispute (domestic / international)

 Negative approach: „damage control“  Positive approach: encouraging (foreign direct) investment

Sigmar Stadlmeier

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Sources  GA Res 1803 (natural resources)  GV Res 3281 (Charter of economic rights and duties)  MAI 1998 (failed)  GATS (rules on establishment)  TRIMS (investment aspects of trade in goods only)

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Content  Definition of „investment―  Market access  Principles (NT, MFN, local content rules)  Minimum standards / fair & equitable treatment  Transfer of capital and revenues  transparency  Expropriation / Nationalisation  Settlement of disputes (state-state oder investor-state) Sigmar Stadlmeier

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GATS and foreign direct investment  Mode 3: Commercial presence — Control vested in persons of a Member State

— Engaged in substantive business

 MFN and Transparency: eo ipso — Exceptions possible („negative list―)

 NT and Market access: subject to specific commitments  Payments and Transfers  Dispute settlement  DSU of WTO Sigmar Stadlmeier

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Damage control  Nationalisations permitted?  Nature and extent of compensation due  Dispute settlement  Diplomatic Protection or „Investor-State-Proceedings“?  Joint Ventures: A Way Out?

Sigmar Stadlmeier

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Nationalisation  Public Interest („on grounds or reasons of public utility, security or the national interest which are recognised as overriding purely individual or private interests“)  Non-discrimatory („both domestic and foreign“)  Case law: ambigous, not coherent

Sigmar Stadlmeier

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Nature of compensation  „adequate, effective and prompt“ (Hull Formula)  Lawful expropriation: damnum emergens = (hypothetical) market value  Unlawful expropriation: lucrum cessans = damnum emergens plus lost revenue (until final decision in dispute)

Sigmar Stadlmeier

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Dispute settlement methods  Diplomatic protection  Lump Sum Agreements  Mixed Claims Commissions  Investor-State-Proceedings  ICSID-Mechanisms  DSU of WTO

Sigmar Stadlmeier

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Diplomatic Protection  Nationality-of-claims rule  „Proper― nationality of transnational corporations  See Barcelona Traction-case  Uncertainty for enterprises  Uncertainty for investment State  Calvo-Clause

Sigmar Stadlmeier

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Lump Sum Agreement  Global agreement between expropriating State and home State of expropriated entities (persons or companies)  Based on diplomatic protection  Compromise between States (!), distribution = domestic affair   Individuals will not normally be fully compensated

Sigmar Stadlmeier

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Mixed Claims Commission  Arbitration Tribunal  Arbitrators jointly appointed by expropriating State and home State of expropriated entities  Based on diplomatic protection  Decision on underlying legal issue plus...  ... individual decisions on compensation by Tribunal

  usually results in proper compensation

Sigmar Stadlmeier

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Investor-State-Proceedings  Proceedings between expropriating State and expropriated entities   partial subjects of public international law (!)  Usually through „internationalisation― of a contract (Texaco)  State and transnational corporation at the same level  Truly...? (e.g. Bangladesh vs Microsoft?)  Choice-of-Law? (investment State / home State of Investor)

  Codes of Conduct for TNC‘s

Sigmar Stadlmeier

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ICSID  International Center for the Settlement of Investment Disputes  Arbitration infrastructure  List of Arbitrators (by subject matter)  Model arbitration procedures („ICSID rules―)  Neutral forum for Investor-State-Proceedings

Sigmar Stadlmeier

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MIGA  Multilateral Investment Guarantee Agency  Quasi-insurance system against non-commercial risks (expropriation, riot, armed conflict etc.)  Nationality of beneficiary  Consent of investment State

Sigmar Stadlmeier

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