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Full text of "Protecting Powers: International Law
"
See other formats
CHANGING APPROACHES TO THE NATIONALITY OF CLAIMS
IN THE CONTEXT OF DIPLOMATIC PROTECTION AND INTERNATIONAL
DISPUTE SETTLEMENT
Francisco Orrego Vicufa (*)
The well disserved series of colloquiums and_ studies
organized to honor Doctor Ibrahim Shihata with occasion of his retirement
as Vice President and Legal Counsel of the World Bank, have provided an
important opportunity to examine the trends that international law has
been following in the transition from the twentieth to the twenty-first
century.
This contribution examines how the law relating to the
nationality of claims has evolved in the context of diplomatic protection
and to what extent it is today possible to suggest new principles or
approaches in this respect. The salient issues of the matter, the rules
prevailing under traditional international law and the changes that are
intervening so as to establish trends will be examined to this end and,
where appropriate, new answers will be suggested. These thoughts are in
part based on the work undertaken by the author for the Committee on
Diplomatic Protection of the International Law Association. '
1.- Whose rights are asserted in international claims ?
The starting point of the discussion on the rules of nationality
does not refer so much to nationality as such but to a more fundamental
issue, namely the question of whose rights are asserted when bringing an
international claim. Traditional rules on diplomatic protection undertaken
by the State are confronted in this context with the increasing access
of the individual to dispute settlement mechanisms.
The classic rule on the matter was well established in the
Mavrommatis concessions case, where the Permanent Court of
International Justice ruled that "[b]y taking up the case of one of its
subjects and by resorting to diplomatic action or international judicial
proceedings on his behalf, a State is in reality asserting its own rights - its
right to ensure, in the person of its subjects, respect for the rules of
international law".? As rightly explained by Bennouna, this conceptual
approach led to a "transformation" of the claim, which passed from the
individual to the spousing State of nationality, but in so doing the role of
the State became paramount and eclipsed that of the individual which
was at its origin.?
A number of consequences followed from this legal fiction
which responded to the time when the State was the single and most
important subject of international law. Discretionary spousal of claims,
disposition of the compensation by the State, introduction of a type of
damage different from that suffered by the individual, and the influence
of political power are some of those consequences.*
A number of legal contradictions accompanied this approach
since its outset. First, in cases where a direct injury to the State could be
established international law provided for different rules of protection,
such as measures of self-protection.*® This included situations in which the
affected individual was a high officer of the State.© The requirement of
the continuity of nationality of the affected individual also involved a
contradiction since "[i]t is also illogical to consider the State as the sole
holder of the international claim, yet at the same time to prevent the
State from pursuing this claim because the ‘nationality’ of the underlying
individual claim has changed".’ More importantly, while diplomatic
protection was understood as the "procedural corollary to the legal
responsibility of international law subjects"®, in many instances it does not
appear to have followed the evolution that the law of state responsibility
itself has experienced, particularly in respect of the operation of
international mechanisms established to make states answerable to
international wrongs.?
Besides the legal issues involved in this approach, there was a
clear political connotation in the use of diplomatic protection as an
instrument of power by States in international relations.'° Reactions such
as the "Calvo Clause", aimed at the elimination of the role of diplomatic
protection, were the inevitable consequence of the abuse of this form of
protection in the early part of the twentieth century.
Legal and political issues, however, were not enough to
prevent the consolidation of the classic rules on the matter,'' nor did
considerations of equity and logic have much influence on State practice
for a long period of time.'* But this discussion also reveals that various
issues appear not to have met the required standards of support by state
practice and opinio juris so as to become a rule of customary international
law. One thing was the European and United States practice on diplomatic
protection, but quite another was the view taken by many other countries
that did not share the same legal understandings in this respect.
It would be the very structure of international law that
prompted fundamental changes in the role of diplomatic protection. As
the State lost its position of exclusivity in the international legal order,
and both international organizations and individuals acquired specific,
albeit still limited roles of their own, new alternatives emerged for the
assertion of international claims. The law of human rights, on the one
hand, and that relating to the protection of foreign investments, on the
other hand, have opened up a clear path for the direct access of the
individual to international mechanisms for the assertion of claims,
following a number of specific precedents established along the twentieth
century.'* This trend is also present in a number of other developments
taking place under contemporary international law in respect of the
settlement of disputes.'* In this new context, many times it is the right of
the individual affected and no longer that of the State of nationality which
is asserted. To that same extent, diplomatic protection is no longer
required to intervene and, furthermore, as in ICSID, it is expressly
excluded to the extent that arbitration is resorted to and complied with.
The direct standing of the individual under international law
will continue to expand for a variety of purposes, particularly in terms of
access to dispute settlement mechanisms.'° It can therefore be expected
that claims will be increasingly handled aside from the operation of
diplomatic protection. This does not mean that the role of the State has
lost its significance. It will still be necessary to spouse claims in the many
areas where direct standing is not available, to enter into treaties and
arrangements to ensure such direct access, to establish the legal
framework under which individuals will operate and to make available its
own judicial and administrative remedies for nationals and foreigners alike.
4
The essence of the evolution points towards the fact that
in both the scenario of diplomatic protection and in that of direct
standing of the individual, it is increasingly the right of the individual that
is asserted in its own merits and no longer that of the sponsoring State.
The State may still act as a conduit, an agent or on behalf of the
individual, but no longer in substitution of his rights. This is not to say
that the State may not consider that a wrong done to one of its nationals
affects its own interest, but the latter will be the consequence of the
rights of the individual and not the State's own right. While the transition
from a legal fiction to a different reality takes place, the interesting
thought that a claim may actually have a "dual nature" and represent the
interest of both the individual and the state has been advanced.'®
Because the protection of human rights has advanced
significantly under contemporary international law, the argument that
this area of the law is different from that relating to diplomatic protection
has also been suggested.'’ In this context diplomatic protection would
rather be kept for the safeguard of the economic interests of the
individual. While historically diplomatic protection has encompassed both
the economic interests and the treatment of individuals abroad, it is quite
true that the law of human rights has evolved beyond the framework of
traditional diplomatic protection, following more liberal rules and allowing
even for claims against the State of nationality. But it is also true that the
same path is being followed by other areas of the law typically relating to
economic interests, such as the case of investments, thereby evidencing
that the evolution is not so much related to the nature of the rights but
to the institution of diplomatic protection as a whole. Furthermore,
economic rights are also considered today to be a part of human rights,
thus also justifying liberal mechanisms of protection. This does not
exclude of course that different areas of the law might follow different
rules and requirements as to their protection, which are essentially
embodied in new treaty regimes, but the underlying premise is always the
same, that is the assertion of the rights of the individual in their own
merit. The fundamental changes taking place in this field have profound
implications for the specific questions of nationality and the role of the
State in the handling of claims.
2.- Alternatives to traditional diplomatic protection.
While the historic legal fiction underlying diplomatic
protection might no longer always be necessary or justified, the key
question, as has been aptly put by Lady Fox, seems to be which is the
alternative solution to the traditional requirements of diplomatic
protection.'® The existing system has the advantage of an orderly
administration of claims by the State of nationality, including the handling
of multiple claims, the availability of diplomatic channels for negotiations
and settlement, and the intervention of that State in the implementation
of legal rules.'? The disadvantages noted are also quite evident,
particularly in terms of the political elements intervening in the
governmental decision to spouse or not to spouse a claim, and the full
discretionary nature that this decision has.
The option of abolishing diplomatic protection as a
mechanism under international law, while justified in the context of
specific treaty regimes, does not seem to be generally a reasonable one
at present since it would leave many individuals unprotected or left to
their own action.
A residuary role for diplomatic protection seems more
adequate to the extent that this mechanism might only intervene when
there are no international procedures directly available to the affected
individual.2° It should be noted, however, that if direct access is available
diplomatic protection would be excluded altogether, except perhaps in
order to ensure the enforcement of an award or secure compliance with a
decision favoring that individual; in particular there would be no question
of diplomatic protection after the individual has resorted to international
procedures or in lieu thereof.
There is still the possibility of a parallel operation in which a
State may spouse a claim at the same time that the individual pursues
direct remedies,*! but this alternative would result in various kinds of
interference with the orderly conduct of the procedures and eventually
the outcome of the decision.
One other aspect that needs to be considered in the context
of alternative options is how to ensure that the element of discretion in
the governmental decision to spouse a claim is to some extent subject to
a legal scrutiny. On many occasions a government will simply refuse to
accept the individual's request to have a claim spoused and no remedies
will be available to this effect. An interesting historical solution to this
problem is found in the Chilean legislation of the nineteenth century,
where the request for diplomatic protection would be sent by the Ministry
of Foreign Affairs to the Advocate General (Fiscal) of the Supreme Court
for a legal opinion that was binding on the government.** Might a solution
of this sort be adopted as an obligation under international law in the
context of due process??°
3.- An effective link of nationality.
The requirement that claims may be brought by a State on
condition that the affected person possesses its nationality, has been well
established under international law.** Moreover, the rule laid down by the
International Court of Justice in the Nottebohm_ case*> as to the
requirements of a genuine and effective link of nationality with the
sponsoring State has kept its importance in present international law. A
number of efforts have been undertaken in order to strengthen the
effectiveness of nationality, as is evident, for example, in respect of the
nationality of ships and, more recently, of fishing vessels.2°
Notwithstanding the significance of this link, the very needs
of the evolving legal order have led to changes in the rule to the extent
that not always a link of nationality is today required to spouse an
international claim. Departures from the rule agreed by treaty had allowed
in a number of cases to sponsor claims of persons who did not have the
nationality of the claimant State.*’ It has been also noted that since the
claiming State had discretion as to the distribution of compensation, it
could make payments to persons who did not meet the requirement of
nationality.2® A declaration of intention to acquire the nationality of the
claiming State has also been considered enough to spouse the claim.
Claims on behalf of non-nationals have not been unknown in the practice
of international law.29 Citizens of the European Unity are entitled to
diplomatic and consular protection by the authorities of any member
State in the territory of a third country in which the State of his
nationality is not represented, although this type of protection is
related more to consular or diplomatic assistance in situ than to the
possibility of presenting an international claim.*°
Two other situations need to be considered in this context.
The first is the case of claims made on behalf of nationals of the
defendant state. The early precedent set in this respect by the /'m Alone
,»' has been recently expanded in the agreement between Chile and the
United States in respect of the dispute concerning responsibility for the
deaths of Letelier and Moffitt ,7* where "[t]he Chilean nationality or dual
nationality of some of the persons protected by the United States
Government was not raised as a bar to the disposition of the
corresponding claims...what in actual fact means that the humanitarian
concerns have prevailed over the traditional requirements[of diplomatic
protection]".*> One of the Chilean nationals on whose behalf the United
States claimed was even a sitting member of the Chilean Congress. This
last case also evidenced that the United States did not substitute its
interest for that of the families protected, acting only on their behalf;*
consequently, it was the right of the individuals and not that of the
claiming State that was enforced, the latter having been deprived of its
discretionality as to the handling of compensation and of its surrogate
capacity.*> While this case might be quite unique in contemporary
practice,*° it nonetheless evidences some of the key new features of
diplomatic protection in practice.
Under the rules of the United Nations Compensation
Commission, a government may submit claims on behalf of its nationals
and "at its discretion, of other persons resident in its territory".°” The
latter are evidently not its nationals but only its residents, and may
have the nationality of other State.*® Trusteeship arrangements are also
used to extend protection to persons who are not in a position to have
their claims submitted by a Government; under the United Nations
Compensation Commission rules a person, authority or body may be
appointed to this effect by the Governing Council.%9
The second situation that must be considered is that not
always the spousal of the State of nationality is required to submit a
claim. Also under the Rules of the UNCC, a corporation whose State of
incorporation has failed to submit a claim on its behalf, may itself make a
claim to the Commission, explaining why such claim was not submitted by
a government.*° A foreign national is also many times allowed to claim
before the courts of the defendant State or even in respect of claims
against third States,*! a policy that has been encouraged on non-
discriminatory terms under the OECD.** In such cases the State of
nationality would probably not be allowed to sue in domestic courts on
behalf of the individual, as it could not sue on its behalf in regional courts
such as that of the European Union when direct access has been
recognized.
Special forms of protection have also been recognized in the
case of stateless persons,*? and special rules have also been provided
under the Convention on the Nationality of Women** for situations of
change of nationality because of marriage as in respect of military service
in cases of double nationality*> and other special situations.*®
The situations examined evidence that the link of nationality
has lost to an extent its rigor in the context of international claims.
10
Moreover, to the extent that the intervention of the State is reduced or
eliminated as a requirement for submission of international claims, the link
of nationality will loose somewhat its relevance. This is particularly so in
the field of human rights and related humanitarian concerns, where as
noted direct access by the individual to international procedures is not
only increasingly available but can also be exercised against his own State
of nationality. While these trends cannot be taken to mean that the
traditional requirements have been overturned, they certainly point
towards a situation of greater flexibility and adaptation to changing
needs.
4.- Continuance of nationality.
A second well established rule in respect of diplomatic
protection is that of continuance of nationality. As proposed by Garcia
Amador, the individual may be protected on condition that it possesses
the nationality of the spousing State "at the time of sustaining the injury
and conserves that nationality until the claim is adjudicated".*’ The
continuance of nationality until the presentation of the claim has also
been considered to meet the requirement of this rule,*® an approach that
seems to be favored by State practice.*?
It was pointed out above that in the light of the State
substituting its rights for those of the individual under the traditional
approach to diplomatic protection, the requirement of continuance of
nationality lacked legal logic. If the rights of the individual were no longer
upheld after suffering the injury, and only those of the State prevailed
thereafter, there was an inherent contradiction in requiring that the
individual's nationality should continue. While it is true that the traditional
11
rule provided criteria that was useful for the allocation of claims among
various possible spousing States and helped to avoid conflicts of
interest,°° thereby eliminating the uncertainties that otherwise could
affect the practice of international claims,°?' these elements do not mean
that a revision of the traditional rule should necessarily result in a
situation of instability or uncertainty as to the handling of claims.
The important point to ask is whether the rule is justified in
the context of the new approach to diplomatic protection, where it is
increasingly the right of the individual and not that of the State acting on
its behalf the one that is upheld and enforced. While in the view of some
scholars there are strong reasons to favor the continuance of
nationality,°* the opposite conclusion may be justified. In fact, if the right
of the individual is affected the relevant critical date is that of the wrong,
and the situation should not change simply because there has been a
change of nationality intervening thereafter; the wrong follows in this
perspective the affected individual.
As commented by Lowe, if the date of the injury is the
critical date for questions of nationality there is a good reason for this
also to be so in respect of questions of jurisdiction of the tribunal.°? Lowe
also points out that the prevalence of the traditional rule might be
explained by the view of States that dispute settlement procedures are as
much about present engagements as about past wrongs, therefore
regarding the date at which the tribunal is seized as the critical date.°* In
this light there is also the possibility that the nationality be required at
the time of injury and at the time the tribunal is seized, irrespectively of
what happens in between,°° but this alternative might introduce more
TZ
instability and encourage transfers of nationality for the sole purpose of
securing diplomatic protection.
The need for stability and certainty might be ensured if the
affected individual is given a choice that it could be either the State of
nationality at the time of the critical date or that of a later nationality
that could spouse his claim, since in both cases the State will be acting on
behalf of the individual. It has also been suggested that only the "new"
home State should be able to bring a claim but not the previous one.°°
Furthermore, it is quite evident that the new State of nationality should
not be able to claim against the former State of nationality for wrongs
that the individual might have suffered under the latter's jurisdiction. If
the individual has a direct access to international mechanisms for making
a Claim, the need for State intervention might no longer be needed.
These alternatives were already hinted at by the Sohn and
Baxter Draft Convention of 1961 when stating that "[a] State shall not
be precluded from presenting a claim on behalf of a person by reason of
the fact that that person became a national of that State subsequent to
that injury".°’ Also a project prepared by the American Institute of
International Law in 1925 had recognized the right of a State to accord
diplomatic protection "to its native or naturalized citizens", being possible
that the latter might have been injured before their naturalization.°® A
practical application of this solution is found in the He/ms-Burton Act of
1996, which not only allows claims by United States nationals deprived of
property in Cuba but also by such nationals who at the time of the
expropriations were Cuban citizens.°? Not only there is here an exception
to the rule of continuance of nationality but the availability of claims
13
procedures to former nationals of the wrongdoing State, although the
claims are directed in this context against governments, companies or
individuals engaged in business relating to the confiscated properties.
The strict retention of the rule of continuance of nationality
does not seem to find any longer justification in the light of the changing
role of nationality as a requirement of diplomatic protection. There is here
a need to revise or at any rate to adjust the operation of the rule to this
new reality, a situation that becomes still more evident in the context of
the transfer of rights and claims that will be discussed next.
5.- Transferability of claims.
As a consequence of the rule set out above, also the
continuance of nationality has been generally required in respect of the
transferability or assignability of claims. To this end, transfer of claims
could only be done between persons having the same nationality of the
spousing State. This has been the approach to questions such as
succession on death, assignment, insurance subrogation and other.®°
However, again here the question of whether this rule is
always justified in the light of a new approach to diplomatic protection
and the enforcement of claims must be asked. If the right of the individual
prevails, it would seem enough that the right to a claim be established at
a critical date and changes of nationality intervening thereafter in the
context of transfers or assignment should not be a bar to bringing a claim
at some point in time.
To some extent this situation was recognized in claims to
property beneficially owned by one person, the nominal title to which is
vested in another person of a different nationality; it was usually the
14
nationality of the former that prevailed for the purposes of claims.®' The
question is still more relevant in the insurance business, where the rights
of the insured may pass to the insurer by way of subrogation.®? The
continuance of nationality is probably not any longer justified in the light
of a global market of insurance, in which insured and insurer will often
have different nationalities. Investment insurance, such as that available
under OPIC or MIGA, is also based on subrogation of rights.°?
Although the traditional rule on this point is still regarded as
accepted, there are solid grounds justifying departure from it in given
matters, or in any event for introducing the necessary flexibility. The
globalization of financial and service markets will probably require such a
departure. In fact, the application of the traditional rule in the context of
globally structured financial markets where shares, bonds and other
instruments change hands, and consequently nationality, constantly and
speedily, can only be regarded as an anachronism that could amount in
given instances to deprive legitimate owners and investors of protection
on the part of States of nationality. In a recent ICSID case the question of
international transfer of promissory notes was considered and the rules
protecting a foreign investor as the transferee were upheld by the
Tribunal in the light of the nature of global markets.
To the extent that the requirement of continuance of
nationality might be moderated in this context, it might be appropriate to
ensure that transfer of claims be made bona fide so as to prevent that a
claim be transferred to a national of a stronger State in order to
strengthen diplomatic protection, a concern that has been often
expressed.°®
LS
6.- Questions relating to double nationality.
The traditional rules relating to double nationality have been
well explained in Articles 4 and 5 of the 1930 Hague Convention on
Certain Questions Relating to the Conflict of Nationality Laws.°* These
various situations have been aptly summarized in the following manner: (i)
a State should not be allowed to present a claim on behalf of a national
when such person is also a national of the respondent state and with
which it is more closely connected; (ii) this claim should not be presented
even where the national in question is more closely connected with the
claimant State; (iii) if the national of the claimant State is also a national
of a third State -not being the respondent- and is more closely connected
with that State, the claim should not be allowed either; and (iv) if in this
last situation the national is more closely connected with the claimant
State than with the third State in question, then the claim could be
brought against the respondent.°®’
Although it has been suggested that these rules probably
reflect customary international law,®* the situation does not appear today
to be quite consolidated.® In fact, it has been shown above that in a
number of cases diplomatic protection has been exercised in respect of
nationals of the defendant State or in respect of other non-nationals. The
possibility that a State might accept by treaty the obligation to provide
to all persons within its jurisdiction, regardless of nationality, a standard
of protection required by that treaty has also been envisaged, a situation
in which the issues of nationality will again loose significance, as happens
often in treaties of economic integration or trade liberalization.”° To the
extent that these situations might reflect a trend, then the case explained
16
in (i) above will also be opened to a greater degree of flexibility. The
same holds true of the situation considered in (ii) above since here the
closer connection is given with the claimant State, having this departure
from the rule been accepted in international decisions.”'
In (iii) and (iv) the issue concerns a dual nationality involving
a third State. Here again the rules explained rely on the effectiveness of
the nationality link, based on which criteria they point to different
answers. However, if flexibility of the rule or departure from it is allowed
in cases involving the dual nationality of the respondent State, with every
more reason this should the case of dual nationality involving third States.
Also when the person has direct access to international claims the
situation has been compared to that of a claim involving a dual nationality
with a third State, so that the Tribunal may take into account the
principle of "effective nationality".’”* The practice of the Iran-United
States Claims Tribunal, and the dissenting views expressed in that
context, offer interesting insights into the new issues and problems
relating to the rules on dual nationality.’”? The joint action by two States
of nationality in respect of a third State has also been suggested as an
alternative when both are willing to extend their diplomatic protection to
the affected individual.’*
Two trends seem to emerge from the above discussion. The
first is that the traditional rules of the 1930 Convention are being applied
with a greater degree of flexibility, which will become particularly marked
in connection with the approach to diplomatic protection relying on the
rights of the individual as the prevailing element. The second trend is that
in this context, like in other matters pertaining to _ nationality,
17
effectiveness offers an important guiding tool, particularly for decisions
of tribunals. Criteria to evaluate effectiveness will depend on the
circumstances of each case, where residence, family ties, property,
taxation and many other elements will determine the "stronger social
bond of attachment".’°
7.- Revising the rules on nationality of corporations.
Besides the obvious situation of a corporation incorporated
under the laws of the claimant State and being the majority of its
shareholders nationals of that State, in which case the entitlement to its
diplomatic protection will not be questioned,’® in every other conceivable
situation there will probably be _ difficulties with the _ traditional
requirements of nationality. Precisely because of this, nationality of
corporations has been assimilated to that of individuals only in a limited
way under international law and, in addition to incorporation, a number of
other criteria have been used for the purpose of diplomatic protection,
with particular reference to domicile, siége social or principal place of
management and control.’’
These additional criteria have been rightly described not as
conferring nationality, but as creating an equivalent connection’® which on
occasions is considered to provide enough ground for the exercise of
diplomatic protection.’? Questions of effectiveness of the connection will
also arise in this context, particularly when a corporation having the
nationality of the State of incorporation is owned by non-nationals of that
State.
One of the most problematic aspects of the matter was that
submitted to the International Court of Justice in the Barcelona Traction
18
case,®° as to the right of a State to protect shareholders of its
nationality in a foreign corporation affected by measures of a third State.
While the dictum of the Court was in the negative and the right to
diplomatic protection was recognized only in respect of the State of
incorporation, criticism of this decision and subsequent practice evidence
that the question was not really settled at the time.®' A number of earlier
precedents were also invoked but were considered by the Court to be
rather exceptions to the rule upheld.®* Some of this criticism has been
based on the fact that the Court applied a too rigid standard "owing to an
exaggerated fear of competing claims, thus neglecting the economic
realities and leaving the real losers without protection".®°
As to the practice, it should be noted first that the Court
itself recognized that a State may protect its shareholders in a foreign
corporation when they have their rights as such directly infringed,
independently from damage inflicted upon the company.®* Also the Court
considered cases in which shareholders may be protected by their State
of nationality if the foreign company has ceased to exist or when the
State of incorporation lacks the capacity to take action on its behalf, but
did not find such situations applicable in the light of the facts of the
case.®° The protection of shareholders because of having suffered damage
through damage to the company can always be agreed to between
various States.®° It has also been noted that agreements between States
facilitating given forms of jurisdiction should not affect the rights and
interests of a third State,®’ including therein the right to diplomatic
protection of its nationals.
19
Recent practice is still more eloquent in the matter. In the
Elettronica Sicula_ case,®® the United States brought action before the
International Court of Justice against Italy for damage suffered by an
Italian Company owned by two American companies; in this case the
shareholders of a foreign company were protected by their State of
nationality against the State of incorporation.®? It is also interesting to
note that in a number of treaties and claims arrangements provision has
been made for protection of shareholders in affected partnerships or
companies. A 50% interest in the total capital was required to this effect
in British Claims against Mexico, as in United States claims against Peru
and Hungary; a 20% was required in United States claims against
Yugoslavia.°%°
Also the Algiers Declaration on the settlement of Iran-United
States claims®' includes as nationals corporations organized under the
laws of one or other country if citizens of such country directly or
indirectly have an interest in the corporation equivalent to 50% or more
of its capital stock; in respect of other corporations, the Declaration
refers to an interest of such nationals enough to control the
corporation.°* A 49.8% of the shares owned by a United States company
in a corporation organized in Iran, was considered sufficient for this
purpose by the Iran-US Tribunal.°? Proof of the controlling interest has
also been evaluated with flexibility.°* United States practice on diplomatic
protection also relies on the concept of incorporation and of being the
company owned at least in a 50% by United States citizens;°> similarly,
Switzerland grants diplomatic protection when a company is mainly owned
by Swiss citizens.%
20
The control of a company is also reflected in the ICSID
Convention for the purpose of foreign investments dispute settlement. In
terms of its Article 25 (2) (b) a juridical person which has the nationality
of the State Party to the dispute may be a party to the proceedings ff,
because of foreign control, the parties have agreed that the juridical
person should be treated as a national of another Contracting Party.” The
practice under ICSID is, however, broader.%® It has also been noted that
under the Law of the Sea Convention an entity applying for a contract for
seabed mining may be sponsored not only by the State of nationality but
also by the State whose nationals effectively control it.?°
The rules governing the United Nations Compensation
Commission have also included arrangements of interest in respect of
corporate claims. It was noted above that corporations whose claims are
not submitted by the State of incorporation may submit anyhow their
claims directly together with an explanation. Also, if the governments
concerned agree, one government may submit claims in respect of joint
ventures on behalf of the nationals, corporations or other entities of
other governments.!°° Most importantly, it is provided that shareholders
of a corporation which is barred from making a claim because of its
nationality, may claim for the losses with respect to that corporation.'°' In
the case of a partnership which has a separate legal personality and which
because of its nationality is ineligible to claim for its losses, each of the
eligible partners may claim pro rata for his proportionate interest;' a
similar rule is followed for partners in a partnership which has no separate
legal personality. '°?
21
Questions of nationality of corporations are compounded in
their difficulty when the corporation has a multinational character,
allowing eventually for a number of States to act on its behalf, a situation
which is every passing day more common in a globalized economy. The
concept of control and of prevalent nationality is also useful in this
context so as to determine the prevailing national interest in the capital
of the company, what would eventually allow for action by the State
holding the greater interest or establish an order of priority to this effect.
International registration of such companies would also be a helpful
measure to overcome problems of concurrent nationalities, as it is done in
respect of trademarks or has been proposed in respect of a "societas
europaea". '°4
Even if a number of these arrangements are done by treaty
or special agreement, the aggregate of the practice evidences quite
forcefully that the criteria of the Barcelona Traction no longer prevail and
that shareholders are increasingly entitled to protection or action on their
own merit. This trend is also strengthened by the fact noted that
increasingly the right of the affected individual prevails today over that of
the State in the context of diplomatic protection; if the fiction of State
intervention on its own right has been curtailed, similarly the fiction of
corporate personality should not preclude the rights of individual
shareholders as to their protection.
8.- Emerging trends in respect of nationality in the context of diplomatic
protection and international dispute settlement.
22
In the light of the above discussion, the following aspects
may be summarized as reflecting current or prospective international
trends in this matter.
1.- The right of the individual affected by a wrong is
increasingly asserted and enforced by means of diplomatic protection as
the prevalent interest. A parallel right of the claimant State can also be
asserted and enforced in this context but it is not any longer usually
substituted for the individual's own right.
2.- The discretion exercised by a government in refusing to
spouse a claim on behalf of the individual might be appropriately subject
to judicial review in the context of due process.
3.- Direct access by the individual to international claims
settlement arrangements and dispute settlement procedures is
increasingly available as an expression of the assertion of his own rights.
4.- In the context of such arrangements, the submission of
claims by the State of nationality is increasingly dispensed with.
5.- Diplomatic protection can always be exercised in a
residual manner when direct access by the individual to international claim
procedures is not available. The availability of such procedures generally
excludes diplomatic protection, except for the enforcement of decisions.
6.- The rule requiring that the link of nationality to the
claimant State must be genuine and effective is well established.
7.- In exceptional circumstances claims are brought on behalf
of non-nationals, of nationals of the defendant State or under trusteeship
arrangements. Such exceptional circumstances are particularly related to
23
humanitarian concerns or where the individual would have no other
alternative to claim for his rights.
8.- Continuance of nationality may acquire greater flexibility
in the context of global financial and service markets and operations
related thereto or other special circumstances.
9.- Transferability of claims ought to be facilitated so as to
meet the realities of such global markets.
10.- Changes of nationality and transferability of claims
should always be required to be made bona fide.
11.- In cases of dual nationality the effectiveness of the link
appears on occasions to prevail over other considerations, allowing when
justified for claims against the State of which the individual is also a
national.
12.- Shareholders of a foreign company may be protected by
the State of their nationality if their rights have been directly infringed, as
well as in other special circumstances where they would otherwise be
deprived of protection.
13.- Shareholders of a foreign company may also be
protected by the State of their nationality for wrongs affecting such
company if the State of nationality of the company is unable or unwilling
to exercise such protection or is the defendant State.
14.- Control of a foreign company by shareholders of a
different nationality, generally expressed in a 50% ownership of its capital
stock or such other proportion needed to control the company, may
entitle the State of nationality of such shareholders to exercise diplomatic
24
protection on their behalf or otherwise to consider the company as
having its nationality.
15.- If a company or partnership is prevented from claiming
because of its nationality, shareholders or partners not so affected may
claim in proportion to their interest in such company or otherwise be
entitled to diplomatic protection by the State of their nationality.
While some of these aspects are already a part of current
arrangements for dispute settlement, other seem to be emerging as
prospective trends. As international dispute settlement develops in the
years ahead the law and practice relating to the requirements of
nationality is likely to be one of those areas where major changes can be
expected.
25
NOTES
(*) Professor of International Law at the School of Law and the Institute
of International Studies of the University of Chile. Membre de I'Institut de
Droit International. Judge and Vice President of the World Bank
Administrative Tribunal. Member of the Panels of Conciliators and
Arbitrators of ICSID by appointment of the President of the Administrative
Council.
1.- International Law Association: First Report of the Committee on
Diplomatic Protection, London, 2000. Comments on the Preliminary
Report on nationality of claims were made by Richard B. Bilder, David J.
Bederman, Bozo Cerar, Lady Hazel Fox, Juliane Kokott, Vaughan Lowe and
Torsten Stein, to whom the author is grateful for their contributions and
views.
2.- Mavrommatis Palestine Concessions , Permanent Court of
International Justice, Series A. No. 2, 30 August 1924.
3.- International Law Commission: Preliminary Report on Diplomatic
Protection, by Mohammed Bennouna, Special Rapporteur, A/CN. 4/484, 4
February 1998, at 5. See also Georges Scelle: "Droit de la Paix", Recueil
des Cours de |l'Academie de Droit International, Vol. 46, IV, 1933, at 660-
661, as cited by Bennouna, doc cit., at 8, note 18.
4.- Bennouna, doc. cit., supra note 3, at 6-7.
5 .- Wilhelm Karl Geck: "Diplomatic Protection", in Encyclopedia of Public
International Law, 1992, at 1046.
6 .- lbid., at 1046.
7 .- lbid., at 1056.
8 .- lbid., at 1046.
9 .- Institut de Droit International: Resolution on Responsibility and
Liability under International Law for Environmental Damage, 4 September
1997, Annuaire de l'Institut de Droit International, Session de Strasbourg,
Vol. 67-ll, 1998, at 487.
10 .- Encyclopedia cit., supra note 5, at 1048.
11.- Bennouna, doc. cit., supra note 3, at 8-9.
12 .- Encyclopedia cit., supra note 5, at 1056.
13.- Marek St. Korowicz: "The Problem of the International Personality of
Individuals", American Journal of International Law, Vol. 50, 1956, 533-
562.
26
27
14 .- Francisco Orrego Vicuna and Christopher Pinto: "Prospects of
dispute settlement arrangements for the twenty-first century", Report for
the Centennial Commemoration of the First Peace Conference, 1999.
15.- Ibid.
16.- Comments by Kokott, cit. supra note 1.
17 .- Comments by Bilder, cit. supra note 1, and comments by Cerar, cit.
supra note 1.
18 .- Comments by Lady Fox, cit, supra note 1.
19 .- Ibid.
20 .- For a discussion of these options, see Fox, cit. supra note 1.
21 .- Ibid.
22 .- Francisco Orrego Vicufha: Report on "Chile", in Elihu Lauterpacht and
John G. Collier: Individual Rights and the State in Foreign Affairs, 1977,
123-186, at 139-140.
23 .- For a suggestion in this respect see Comments by Lady Fox, cit,
supra note 1.
24.- See the Revised Draft prepared by F. V. Garcia Amador on State
Responsibility for the International Law Commission, 1961, in F. V. Garcia
Amador: The Changing Law of International Claims, 1984, Vol. Il, at 795,
Art. 23; see also the Draft Convention on International Responsibility
prepared by Professors Louis B. Sohn and Richard R. Baxter for the
Harvard Law School, 1961, in Garcia Amador, op. cit., at 858, Art. 22.
25.- International Court of Justice, Reports, 1955, at 23.
26.- United Nations Convention on the Law of the Sea, Art. 91; FAO:
Agreement to Promote Compliance with International Conservation and
Management Measures by Fishing Vessels on the High Seas, November
24, 1993, International Legal Materials, Vol. 33, 1994, at 968, Art. Ill. 3.
27.- Oppenheim's International Law, Vol. 1, 1992, at 513.
28.- lbid., at 513.
29.- Reparation for Injuries Suffered in the Service of the United Nations,
International Court of Justice, Reports, 1949, where the Court stated that
there are "important exceptions to the rule, for there are cases in which
protection may be exercised by a State on behalf of persons not having
its nationality", at 181. For contemporary practice on diplomatic
protection of foreign nationals see Rudolf Dolzer: "Diplomatic Protection
of Foreign Nationals", in Encyclopedia of Public International Law, 1992,
1067-1070.
30 .- Art. 8 c of the European Community Treaty, as cited in comments
by Kokott, cit, supra note 1.
31.- RIAA, iii, at 1609, and comments by Oppenheim's International Law,
cit., supra note 27, at 513, note 8.
32.- Agreement between Chile and the United States of June 11, 1990,
International Legal Materials, Vol. 30, 1991, at 412.
33.- Decision of the Chile-United States Commission with regard to the
dispute concerning responsibility for the deaths of Letelier and Moffitt,
January 11, 1992, Separate Concurrent Opinion of Commissioner
Francisco Orrego Vicuna, International Legal Materials, Vol. 31, 1992, at
17-18.
34.- Separate Opinion cit., supra note 33, at 18.
35.- Ibid., at 18.
36 .- Comments by Stein, cit., supra note 1.
37.- United Nations Compensation Commission, Provisional Rules for
Claims Procedure, 1992, Art. 5, 1. a.
38.- It is also to be noted that United States law directs the President to
afford the same protection to naturalized citizens as to native-born
citizens, 22 USC Sec. 1731, and comment in Restatement of the Law
Third, The Foreign Relations Law of the United States, Vol. 1, at 123.
39.- Provisional Rules cit., supra note 37, Art. 5. 2.
40.- Ibid., Art. 5. 3.
41.- Restatement cit., supra note 38, at 223.
42.- OECD, Recommendation of the Council for the Implementation of a
Regime of Equal Right of Access and Non-discrimination in relation to
Transfrontier Pollution, May 17, 1977, International Legal Materials, Vol.
16, 1977, at 977.
43.- Convention relating to the Status of Stateless Persons, and
comments in Restatement cit., supra note 38, at 218.
44.- Convention on the Nationality of Women, T. S. No. 875 (1934), and
comments in Restatement cit., supra note 38, at 118.
45.- Protocol relating to military obligations in certain cases of Double
Nationality, 1930, T. S. No. 913.
46.- Convention establishing the Status of Naturalized Persons who again
take up residence in the country of their origin, T. S. No. 575 (1908) and
comments in Restatement cit, supra note 38, at 118.
47.- Garcia Amador, Revised Draft cit., supra note 24, Art. 23; Sohn and
Baxter, Draft Convention cit., supra note 24, Art. 23. 7.
48.- Oppenheim's International Law, cit, supra note 27, at 512. See also
the discussion of the rule by G. Schwarzenberger: International Law: |
International Law_as applied by International Courts and Tribunals, 1957,
at 597, and comments by Garcia Amador, op. cit., supra note 24, at 504.
28
29
49 .- Encyclopedia cit., supra note 5, at 1055.
50 .- Comments by Lady Fox, cit., supra note 1.
51 .- Comments by Bederman, cit., supra note 1.
52 .- See supra notes 50, 51.
53 .- Comments by Lowe, cit., supra note 1.
54 .- Ibid.
55 .- Ibid.
56 .- Comments by Stein, cit., supra note 1.
57.- Sohn and Baxter, Draft Convention cit., supra note 24, Art. 23. 6.
58.- Projects on State Responsibility of the American Institute of
International Law, 1925, Art. Il, in Garcia Amador, op. cit., supra note 24,
at 826.
59.- United States House of Representatives, Report No. 104-202, at 31.
60.- Oppenheim's International Law, cit, supra note 27, at 514.
61.- Ibid., at 514.
62.- Ibid., at 514.
63.- Restatement cit., supra note 38, at 227.
64 .- ICSID: Fedax. N. V. v. Republic of Venezuela, July 11, 1997,
International Legal Materials, Vol. 37, 1998, at 1378.
65 .- Encyclopedia cit, supra note 5, at 1056.
66 .- For a discussion of these provisions, see Encyclopedia cit., supra
note 5, at 1050.
67.- Oppenheim's International Law, cit., supra note 27, at 516-517.
68.- Ibid., at 516.
69 .- In the Advisory Opinion on the Reparation for Injuries Suffered in the
Service of the United Nations the International Court of Justice
considered that the practice of a State not to protect a national against
another State which also regards him as a national is "the ordinary
practice", ICJ Reports, 1949, p. 174, at 186, as cited in Encyclopedia,
cit., supra note 5, at 1050.
70 .- Comments by Lady Fox, cit, supra note 1.
71.- See in particular the Mergé Claim , International Law Reports, Vol. 22,
1955, at 443, and discussion of this and other cases in Oppenheim's
International Law, cit., supra note 27, at 516; see also Restatement cit.,
supra note 38, at 218.
72.- Oppenheim's International Law, cit., supra note 27, at 516, with
reference to the decision of the lran-US Claims Tribunal in Esphahanian v.
Bank Tejarat, 1983.
73 .- For a discussion of the issue of effective nationality in the context
of dual nationality in the practice of the lIran-US Claims Tribunal, see
30
George H. Aldrich: The Jurisprudence of the Iran-United States Claims
Tribunal, 1996, 54-79, and Charles N. Brower and Jason D. Brueschke:
The _Iran-United States Claims Tribunal, 1998, 32-42. See also the
Comments by Lowe, cit., supra note 1.
74 .- Comments by Kokott, cit., supra note 1, with reference to C.
Warbrick: "Protection of Nationals Abroad", Current Legal Problems,
International and Comparative Law Quarterly, Vol. 37, 1988, p. 1003,
1006.
75.- See generally the 1965 Resolution of the Institut de Droit
International , Annuaire, Vol. 51-Il, 1965, at 260.
76.- Oppenheim's International Law, cit., supra note 27, at 517-518.
7/.- Garcia Amador, op. cit., supra note 24, at 508-512.
78.- Restatement cit., supra note 38, at 213.
79.- On United States practice, see Restatement cit., supra note 38, at
126.
80.- Barcelona Traction case, International Court of Justice, Reports,
1970, at 4.
81.- For references to the legal literature on the decision see
Oppenheim's International Law, cit., supra note 27, at 518, note 4.
82.- Garcia Amador, op. cit., supra note 24, at 508.
83 .- Encyclopedia cit., supra note 5, at 1053-1054.
84.- Oppenheim's International Law, cit., supra note 27, at 520.
85.- lbid., at 519.
86 .- Encyclopedia cit., supra note 5, at 1054.
87 .- Comments by Lowe, cit., supra note 1.
88.- Elettronica Sicula case, International Court of Justice, Reports,
1989, at 15.
89.- Oppenheim's International Law, cit., supra note 27, at 520; and see
generally Restatement cit., supra note 38, at 127.
90.- See the discussion of the cases and practice in Oppenheim's
International Law, cit., supra note 27, at 521-522.
91.- Algiers Declaration, International Legal Materials, Vol. 20, 1981, at
230.
92.- See the discussion of these rules in the Restatement cit., supra note
38, at 127-128.
93.- Sedco Inc. v. National Iranian Oil Co., \ran-US Claims Tribunal, 1985,
as commented in the Restatement cit., supra note 38, at 128.
94.- Restatement cit., supra note 38, at 127-128.
95 .- Encyclopedia cit., supra note 5, at 1053.
96 .- lbid., at 1053.
97.- Convention on the Settlement of Investment Disputes between
States and Nationals of Other States, March 18, 1965, 575 UNTS 159,
Art. 25. 2. b.
98 .- On the ICSID practice see generally Christoph Schreuer:
"Commentary on the ICSID Convention", ICSID Review-Foreign Investment
Law Journal, Vol. 11, 1996, 316, and following issues.
99.- Restatement cit., supra note 38, at 128.
100.- Provisional Rules cit., supra note 37, Art. 5. 1. b.
101.- United Nations Compensation Commission, Decision of the
Governing Council on Business Losses of Inidividuals, S/AC. 26/1991/4,
23 October 1991, para. f.
102.- Ibid., para. d.
103.- Ibid., para. e.
104.- In respect of the "societas europaea" and its international
registration, see the Restatement cit., supra note 38, at 131.
31