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Full text of "Protecting Powers: International Law
"
See other formats
in UNC NORTH CAROLINA JOURNAL OF
i
———
SCHOOL OF LAW INTERNATIONAL LAW
Volume 33 | Number 3 Article 2
Spring 2008
Foreign Investors, Diplomatic Protection and the International
Court of Justice's Decision on Preliminary Objections in the Diallo
Case
Alberto Alvarez-Jimenez
Follow this and additional works at: https://scholarship.law.unc.edu/ncilj
Recommended Citation
Alberto Alvarez-Jimenez, Foreign Investors, Diplomatic Protection and the International Court of Justice's
Decision on Preliminary Objections in the Diallo Case, 33 N.C. J. INT'L L. 437 (2007).
Available at: htips://scholarship.law.unc.edu/ncilj/vol33/iss3/2
This Article is brought to you for free and open access by Carolina Law Scholarship Repository. It has been
accepted for inclusion in North Carolina Journal of International Law by an authorized editor of Carolina Law
Scholarship Repository. For more information, please contact law_repository@unc.edu.
Foreign Investors, Diplomatic Protection and the International Court of Justice's
Decision on Preliminary Objections in the Diallo Case
Cover Page Footnote
International Law; Commercial Law; Law
This article is available in North Carolina Journal of International Law: https://scholarship.law.unc.edu/ncilj/vol33/
iss3/2
Foreign Investors, Diplomatic Protection and the
International Court of Justice’s Decision on
Preliminary Objections in the Diallo Case
Alberto Alvarez-Jiménez'
I. TREPOGUC ION sf ances nsceaasaraestyeeaco eet ees 437
Il. The Concept of Diplomatic Protection.............cccceeeeeees 438
Ill. The Facts of the Diallo Dispute......0...0cccccceessseeseseeeeeeee 439
IV. The ICJ’s Decision on Preliminary Objections in Diallo..442
A. The Use of Specific Domestic Legislation by the
ICJ to Decide on Claims of Diplomatic Protection
of Corporations and Shareholders................ccccssceceeeees 442
B. Diallo and the Exhaustion of Local Remedies Rule ...444
C. Diplomatic Protection of Corporations.............:0c00 450
Mi “ACONGIMSION ac ainsisnrernaadl iene tea RHE 453
I. Introduction
Important issues of interest for foreign investors are involved
in the ongoing Case Concerning Ahmadou Sadio Diallo (Republic
of Guinea v. Democratic Republic of the Congo) before the
International Court of Justice (ICJ). The decision on the
Preliminary Objections' has already introduced changes to the
Court’s prior jurisprudence that have had mixed impacts on
foreign investors, host States, and even on the cost of the Court
when conducting proceedings of this nature. In general, this
decision clarifies the municipal law applicable to claims of
diplomatic protection of corporations and shareholders; introduces
changes to the burden of proof regarding the exhaustion of local
remedies, both for the benefit of foreign investors and the Court
itself; and restricts which States may be able to seek diplomatic
{+ PhD. University of Ottawa. Lecturer, Department of Law. Carleton University.
E-mail address: aalva076@uottawa.ca.
1 Case Concerning Ahmadou Sadio Diallo. (Rep. of Guinea v. Dem. Rep. Congo)
(Preliminary Objections) (Judgment of May 24, 2007), available at http://www. icj-
cij.org/docket/files/103/13856.pdf (last visited Jan. 29, 2008).
438 N.C. J. INT’L L. & CoM. REG. [Vol. XXXII
protection of corporations, thereby benefiting host States.
This paper is divided into four parts. The first part briefly
introduces the concept of diplomatic protection in public
international law. The second part presents the facts of the Diallo
dispute between the Democratic Republic of the Congo (DRC)
and the Republic of Guinea. The third part analyzes the ICJ
Diallo decision on Provisional Objections, highlighting its most
important innovations for the future of diplomatic protection in
international law. Finally, the fourth part presents the conclusions
of the paper.
II. The Concept of Diplomatic Protection
Diplomatic protection is a principle of customary international
law,’ first defined by Emmerich de Vattel in 1758 when he stated
that “whoever ill-treats a citizen indirectly injures the State, which
must protect that citizen.”? A contemporary notion is provided in
Article 1 of the Draft Articles on Diplomatic Protection of the
International Law Commission.* The article defines diplomatic
protection as an alien’s home state seeking to intervene to protect
his rights when infringed upon by the “internationally wrongful
act” of another state.” This may be accomplished through the
exercise of “diplomatic action or other means of peaceful
settlement.’””
While diplomatic protection is a concept of customary
international law, the violation of aliens’ rights does not impose a
duty on their home States to seek the diplomatic protection of their
injured nationals. Instead, the State has the discretion to use this
tool as the ICJ held in Case Concerning the Barcelona Traction
Light and Power Company Limited (Belgium v. Spain), Second
2 See id. para. 39.
3 EMMERICH DE VATTEL, THE LAW OF NATIONS OR THE PRINCIPLES OF NATURAL
LAW APPLIED TO THE CONDUCT AND TO THE AFFAIRS OF NATIONS AND SOVEREIGNS, VOL
III, at 136 (James Brown Scott ed., Charles Fenwick trans., Carnegie Institution of
Washington 1916).
4 International Law Commission, Draft Articles on Diplomatic Protection with
Commentaries 24 (2006), available at http://untreaty.un.org/ilc/texts/instruments/
english/commentaries/9_8_2006.pdf (last visited Jan. 29, 2008) [hereinafter JLC
Commentaries].
5 Id.
6 Id.
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 439
Phase.’ This point is reiterated by the International Law
Commission in Articles 2 and 19 of its recent Draft Articles on
Diplomatic Protection, adopted in 2006.8
Diplomatic protection was the first instrument aimed at
protecting foreign investors affected by decisions of their host
States,’ and it may still be considered a useful tool for this
purpose.'® The relevance of the ICJ decisions in this case is that
they will play a significant role in how diplomatic protection is
deployed by States in future judicial proceedings and non-judicial
scenarios.
III. The Facts of the Diallo Dispute
The facts of the Diallo dispute before the ICJ can be
summarized as follows. Ahmadou Sadio Diallo is a Guinean
businessman who lived in the DRC, formerly known as Zaire, for
32 years.'' Ten years after settling in the DRC in 1964, Diallo
became the founder and manager of a company called Africom-
Zaire." In 1979 Africom-Zaire (Africom), along with two
partners, created Africontainers-Zaire (Africontainers). However,
in 1980 the two partners withdrew from the company, leaving its
capital owned 60% by Africom and 40% by Mr. Diallo, who also
became A fricontainers’s manager.
Both Africom and Africontainers confronted problems with
7 Barcelona Traction, Light & Power Co., Ltd. (Belg. v. Spain), 1970 1.C.J. 3 (Feb.
5). The Court said: “The State must be viewed as the sole judge to decide whether its
protection will be granted, to what extent it is granted, and when it will cease. It retains
in this respect a discretionary power the exercise of which may be determined by
considerations of a political or other nature, unrelated to the particular case. ...” /d. para.
79.
8 ILC Commentaries, supra note 4, at 29, 95.
9 See generally RICHARD B. LILLICH, INTERNATIONAL CLAIMS: POSTWAR BRITISH
PRACTICE (Syracuse University Press 1967); BURNS H. WESTON, INTERNATIONAL
CLAIMS: POSTWAR FRENCH PRACTICE (Syracuse University Press 1971); INTERNATIONAL
LAW OF STATE RESPONSIBILITY FOR INJURIES TO ALIENS (Richard B. Lillich ed.,
University Press of Virginia 1983).
10 Certainly, today, protection of foreign investors is guaranteed through bilateral
investment treaties (BITs), but these instruments add to and do not necessarily replace
diplomatic protection as a readily available instrument at the disposal of foreign
investors to solve disputes with their host States.
1) Diallo, supra note 1, at para. 1.
12 Jd. para. 14.
440 N.C. J. INT’L L. & CoM. REG. [Vol. XXXII
major Congolese public institutions and private companies in the
1980s. Africom has debts recognized by the DRC for contracts
celebrated and performed between 1983 and 1986" and another
dispute with a private company called Plantation Lever au Zaire.“
Africontainers, for its part, accumulated disputes with Zaire Shell,
Zaire Mobil Oil and with the Congolese Office National des
Transport and Générale des Carriéres et des Mines.'* Both
Africom and Africontainers started judicial proceedings to resolve
their disputes, which remain unresolved to date.'® Both companies
are claiming damages that amount to $36 billion against
Congolese public entities, an amount that is three times the DRC’s
foreign debt.'’ In one of these disputes, a DRC court ruled in
favour of Africontainers and against Zaire Shell; however, the
DRC Minister of Justice stayed proceedings for the enforcement
of the ruling. The stay was later lifted and Zaire Shell’s property
was attached, but the attachments were revoked upon instructions
from the Minister.’®
Relations between Mr. Diallo and the above-mentioned private
Companies continued to deteriorate, and in 1995 the companies
asked the Congolese government to intervene “to warn the courts
and tribunals about Mr. Amadou Sadio Diallo’s conduct in his
campaign to destabilize commercial companies.”!”
On October 31, 1995, the Prime Minister of Zaire, today the
DRC, ordered the expulsion of Mr. Diallo on the grounds that his
“presence and conduct have breached public order in Zaire,
especially in the economic, financial and monetary areas, and
continue to do so.” The order was mistakenly labeled as a
“refusal to entry” rather than as a formal expulsion, and according
13 Id.
14 Id.
15 Td,
16 Id.
17 Diallo, supra note 1, at para. 19.
18 Jd. para. 18. The DRC recognized the stay, but it is considered as a normal
proceeding in some African countries, under their understanding of the separation of
powers. /d. para. 20.
19 Jd. para.18.
20 Id. para.15.
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 44]
to Congolese legislation, the order had no appeal.?' Prior to his
expulsion, Mr. Diallo had been arrested and imprisoned.”
In the case before the ICJ, Guinea argued that Mr. Diallo’s
detention and expulsion violated the Vienna Convention on
Consular Relations’ and sought to exercise its diplomatic
protection on behalf of Mr. Diallo as an individual and as associé’
of Africom and Africontainers and, specifically, his rights to
oversee, control, and manage the companies. Guinea also asked to
exercise its right to diplomatic protection, by substitution, of both
companies in order to recover the debts owed to them.”
According to Guinea, the DRC violated the Vienna Convention on
Consular Relations,”® the Universal Declaration of Human Rights
of 10 December 1948, and the International Covenant on Civil and
Political Rights of 19 December 1966. Finally, Guinea claimed
that the DRC failed to grant Mr. Diallo treatment according to “a
minimum standard of civilization.””’
In response to these claims, the DRC presented two
preliminary objections: first, that Mr. Diallo had not exhausted the
local remedies available to him, and second, that Guinea lacked
standing to seek the diplomatic protection of Africom and
21 Id. para. 36, 7.
22 Jd. para. 18. There are discrepancies between the parties’ versions regarding Mr.
Diallo’s detention before his expulsion. Guinea argues that he was imprisoned for 75
days (/d. para.17), while the DRC claims that the imprisonment lasted only eight days
(Cd. para.19).
23 See id. para. 29. This claim surely refers to Article 36.1(b) of the Vienna
Convention on Consular Relations which provides: “if he so requests, the competent
authorities of the receiving State shall, without delay, inform the consular post of the
sending State if, within its consular district, a national of that State is arrested or
committed to prison or to custody pending trial or is detained in any other manner. Any
communication addressed to the consular post by the person arrested, in prison, custody
or detention shall be forwarded by the said authorities without delay. The said
authorities shall inform the person concerned without delay of his rights under this
subparagraph.” Vienna Convention on Consular Relations art 36.1(b), Apr. 24, 1963,
596 U.N.T.S. 261. This precept has been the subject of a series of ICJ judgments in the
recent years, paramount among them the LaGrand case. LaGrand Case (Germany v.
US.), Judgment of 27 June 2001, [2001] I-C.J. Rep. 466.
24 The term associé is used by the Court in its decision. Diallo, supra note 1, at
para. 25.
25 Id. paras. 27 — 29.
26 Id. para. 29.
27 Jd. para. 28.
442 N.C. J. INT’L L. & CoM. REG. [Vol. XXXIII
Africontainers, since these companies were not incorporated under
its laws.’ The ICJ rejected the first objection” and upheld the
second.”
IV. The ICJ’s Decision on Preliminary Objections in Diallo
The ICJ’s decision on preliminary objections in Diallo ratified
its previous judgment in Barcelona Traction on a number of issues
and put in place new features regarding diplomatic protection that
will provide a clearer framework for the use and application of this
legal institution by States, foreign investors, and the ICJ itself.
A. The Use of Specific Domestic Legislation by the ICJ to
Decide on Claims of Diplomatic Protection of
Corporations and Shareholders
The use of domestic legislation by the ICJ is important to
ascertain who can exert diplomatic protection of rights on behalf
of corporations and shareholders or associés and the scope of these
rights. In Barcelona Traction, the Court recognized the need to
consider municipal legislation when adjudicating disputes
involving diplomatic protection of corporations and shareholders,”!
but a passage in the judgment left doubts regarding what
municipal law should be assessed in the identification and scope of
the rights the claiming State was seeking to protect. In effect, the
28 Jd. para. 32.
29 Id. para. 48.
30 Diallo, supra note 1, at para. 94. For practical purposes the DRC virtually won
the case in economic terms. The Court will not deal with the diplomatic protection of
Africom and Africontainers, and therefore, it will neither decide on nor award damages
regarding the contractual claims that these companies have against Congolese public
entities and private companies.
31 The Court pointed out in Barcelona Traction:
“In this field international law is called upon to recognize institutions of municipal law
that have an important and extensive role in the international field. This does not
necessarily imply drawing any analogy between its own institutions and those of
municipal law, nor does it amount to making rules of international law dependent upon
categories of municipal law. All it means is that international law has had to recognize
the corporate entity as an institution created by States in a domain essentially within their
domestic jurisdiction. This in turn requires that, whenever legal issues arise concerning
the rights of States with regard to the treatment of companies and shareholders, as to
which rights international law has not established its own rules, it has to refer to the
relevant rules of municipal law.” Barcelona Traction, supra note 7, at para. 38.
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 443
Court stated rather confusingly:
(T]hus the Court has, as indicated, not only to take cognizance
of municipal law but also to refer to it. It is to rules generally
accepted by municipal legal systems which recognize the limited
company whose capital is represented by shares, and not to the
municipal law of a particular State, that international law
refers.**
The Court seems to be suggesting that it would assess
corporate municipal laws and infer from them general principles
of law applicable to the international realm of diplomatic
protection. Determining whether there are general principles of
law regarding corporations, and if it appears that there are,
defining their content with sufficient precision to make them
workable for foreign investors, States, and adjudicators is a
daunting task, full of practical obstacles and uncertainty. A much
clearer method was required, and the ICJ rectified its approach in
Diallo by considerably simplifying the use of municipal law. The
Court can refer to the municipal law of a specified State and does
not need to seek out general principles. In effect, the Court said
that it was necessary to determine whether the laws of the State of
incorporation give companies “a legal personality independent of
their members.”*’ If a corporation has an “independent corporate
personality,” the implication is that the corporation has property
rights that it can alone protect.** To determine if an independent
corporate personality exists, the Court established _ that
international law must defer to “the rules of the relevant domestic
law.”’? By applying this standard the ICJ found that under the
relevant law, that of the DRC, corporations do have a separate
legal personality.”
But the most important progress made by the ICJ in Diallo
deals with the use of municipal law for the determination of the
shareholders’ rights whose integrity is pursued through the
exercise of diplomatic protection. The Court determined that such
rights and their content are determined by the municipal law of the
32 Jd. para. 50. :
33 Diallo, supra note 1, at paras. 61, 2.
34 Td.
35 Id.
36 Id. para. 61.
444 N.C. J. INT’L L. & COM. REG. [Vol. XXXII]
respondent State only. The ICJ manifested, “what amounts to the
internationally wrongful act, in the case of associés or
shareholders, is the violation by the respondent State of their direct
rights in relation to a legal person, direct rights that are defined by
the domestic law of the State, as accepted by both parties.”*”
To resort to the law of the State of incorporation of legal
persons and to the law of the injuring host State to determine the
extent of shareholders’ rights protection is clearly a more
predictable, efficient, and easy-to-administer criterion in the realm
of diplomatic protection than to search for general principles of
law in the domain of corporations. The Court deserves credit for
such progress.
B. Diallo and the Exhaustion of Local Remedies Rule
Under customary international law, diplomatic protection is
available only once an alien has exhausted the local remedies
available to her or him. This customary law provision is reflected
in Article 14 of the International Law Commission (ILC) Draft
Articles on Diplomatic Protection, which indicates:
A State may not present an international claim in respect of an
injury to a national or other person referred to in draft article 8
before the injured person has, subject to draft article 15,
exhausted all local remedies.
‘Local remedies’ means legal remedies which are open to an
injured person before the judicial or administrative courts or
bodies, whether ordinary or special, of the State alleged to be
responsible for causing the injury.”*®
The ILC makes clear that the exhaustion of remedies rule
requires a foreign national to “exhaust all the available judicial
remedies provided for in the municipal law of the respondent
State,” even to the extent of appealing to the highest court
available.” The ILC further notes that the “highest court
available” may be either an ordinary or special court since ‘“‘the
crucial question is not the ordinary or extraordinary character of a
legal remedy but whether it gives the possibility of an effective
37 Id. para. 64.
38 ILC Commentaries, supra note 6, at 70.
39 International Law Commission, Report of the Fifty-Fifth Session (2003),
A/58/10 at 87, available at http://untreaty.un.org/ilc/reports/2003/2003report.htm.
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 445
and sufficient means of redress”? Furthermore in addition to
judicial remedies, aliens must exhaust any administrative remedies
available which would have a binding effect on the parties
involved.*' The ILC explicitly states that a foreign national is “not
required to approach the executive for relief in the exercise of its
discretionary powers” in order to fulfill the requirement of having
exhausted all local remedies.”
The arbitral tribunal in Ambatielos clearly set out the scope of
the rule: “It is the whole system of legal protection, as provided by
municipal law, which must have been put to the test.’*? The
reason for the existence of this rule, as the Court stated in
Interhandel (Switzerland v. United States of America), is to ensure
that “the State where the violation occurred... ha[s] an opportunity
to redress it by its own means, within the framework of its own
domestic legal system.”
In Diallo the Court had the opportunity to assess two issues
related to the exhaustion of the local remedies rule. The first was
whether remedies that give the injuring State total discretion to
respond to investors must be exhausted by them. The second issue
dealt with the practical application of the rule allocating the
burden of proof in cases where exhaustion of local remedies is at
issue.
The first issue arose from the DRC argument that Mr. Diallo
had not exhausted local remedies, since he had not requested the
Prime Minister to reconsider, as a matter of grace, his decision
refusing Mr. Diallo entry into the DRC.*° The Court held that
although all local legal remedies must be attempted before
international remedies are sought, only remedies “aimed at
40 Td.
41 Td. at 88.
42 Id.
43 ILC Commentaries, supra note 4, at 72 n.177 (quoting Ambietalos Claim of 6
Mar. 1956, 12 UNRIAA 83, 120).
44 Diallo, supra note 1, at para. 42 (quoting Interhandel (Switz. v. U.S.), 1959 1.C.J.
27).
45 Diallo, supra note 1, at para. 37. The expulsion of Mr. Diallo was mistakenly
made by means of a refusal to entry order, which, as was mentioned, lacked any appeal
under Congolese law. The DRC argued that, when some foreigners had asked for
reconsideration as a matter of grace, the decisions affecting them had been resolved
favourably. See id. paras. 36, 37.
446 N.C. J. INT’L L. & CoM. REG. [Vol. XXXII
vindicating a right and not at obtaining a favour” should be
considered, unless requesting a favour “constitute[s] an essential
prerequisite for the admissibility of subsequent contentious
proceedings” within local jurisdiction.** Thus Mr. Diallo’s failure
to ask the Prime Minister to reconsider, when such reconsideration
was not a recognized legal avenue of appeal, did not amount to a
failure to exhaust all local remedies.‘ There has been wide
consensus regarding this finding, which contains a ratification of
established international law.*
The second dimension of the Diallo decision on preliminary
objections regarding the exhaustion of local remedies dealt with
who bears the burden of proof of such exhaustion. In a general
statement, the Court allocated this burden first on the claimant and
then on respondent States by declaring:
In matters of diplomatic protection, it is incumbent on the
applicant to prove that local remedies were indeed exhausted or
to establish that exceptional circumstances relieved the allegedly
injures person whom the applicant seeks to protect of the
obligation to exhaust available local remedies... It is for the
respondent to convince the Court that there were effective
remedies in its domestic legal system that were not exhausted.”
Despite this statement of the rule, it is not the rule that was
applied by the Court. According to the formulation of this
allocation of burden of proof, the claiming State must demonstrate
that its nationals exhausted all the local remedies available in order
for its claim to be admissible. Once this is done, if the respondent
State is to prevail in its objection, it must demonstrate that the
aliens had at their disposal a remedy that they did not exhaust.
However, the experience of the Court in Barcelona Traction and
in the Case Concerning Elettronica Sicula S.P.A. (ELSI) (United
States of America v. Italy), in which all the complexities of the
application of this rule were made evident,” apparently compelled
46 Id. para. 47
47 Id.
48 This is not to say that this finding is unimportant; it saves foreign investors’ time
and money in not having to pursue such remedies.
49 Diallo, supra note 1, at para. 44.
50 See Barcelona Traction, supra note 7, pt. VII; Elettronica Sicula S.P.A. (ELSI
(US v. Italy), 1989 I.C.J. 15, at paras. 55 — 63 [hereinafter ELSI].
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 447
the Court to design a more efficient way to verify the fulfillment
of this requirement. The Court will not verify on its own whether
the claimant effectively exhausted all the remedies. Instead, the
respondent State must raise the issue of the alien’s failure to
exhaust remedies available and prove this objection. The
respondent’s silence is understood, for practical purposes, to mean
that the alien effectively exhausted the remedies. The Court
stated:
[A]s the Court has already noted . . . the DRC has for its part
endeavoured... to show that remedies to challenge the decision
to remove Mr. Diallo from Zaire are institutionally provided for
in its domestic legal system. By contrast, the DRC did not
address the issue of exhaustion of local remedies in respect of
Mr. Diallo’s arrest, his detention or the alleged violations of his
other rights, as an individual, said to have resulted from those
measures and from his expulsion or to have accompanied them.
In view of the above, the Court will address the question of local
remedies solely in respect of Mr. Diallo’s expulsion.”
This is a very efficient way of applying the rule. After all, the
Court cannot be required to be an expert in the domestic law of the
respondent State and be able to verify on its own whether the alien
had exhausted all the local remedies available, thus making the
claim of diplomatic protection admissible.” It is more efficient
and less costly for the Court to leave the burden of demonstrating
that not all the available remedies were tried in the hands of the
respondent, which as a matter of course knows its own domestic
legal system well.*? The respondent State’s silence may then be
properly understood to mean that the alien exhausted such
remedies.”
5! Diallo, supra note 1, at para. 45.
52 The Court implicitly recognized such difficulty in its judgment in ELS/ where it
said: “It is never easy to decide, in a case where there has in fact been much resort to the
municipal courts, whether local remedies have truly been ‘exhausted’. ELSI, supra note
50, at para. 63.
53 This is certainly not to say that the ICJ would not be in a position to arrive at a
conclusion in this regard, since, among other tools, it has the possibility of requiring the
assistance of legal experts, pursuant to Article 50 of the Statute, to produce an analysis
independent of that offered by the parties. But the use of these tools and the assessment
of the report rendered by the experts imply costs that the Court avoids with the
presumption.
54 This also means that if the respondent State does not raise the preliminary
448 N.C. J. INT’L L. & COM. REG. [Vol. XXXIII
The Court took this method of applying the allocation of
burden of proof to its limits regarding the exhaustion of local
remedies in relation to Mr. Diallo’s rights as a shareholder.
Guinea did not adduce evidence regarding any remedy that Mr.
Diallo used to protect his rights as a shareholder, nor did the DRC
adduce evidence showing that he had remedies available that he
did not exhaust. Instead, both parties concentrated on a general
discussion of the effectiveness of any remedy he could have had at
his disposal. The Court declared, however, that the DRC had not
proved its objection, despite the fact that Guinea had not proved
the requirement as to this sort of right. The ICJ stated:
The Court... observes that at no time has the DRC argued that
remedies distinct from those in respect of Mr. Diallo’s expulsion
existed in the Congolese legal system against the alleged
violations of his direct rights as associé and that he should have
exhausted them. The Parties have indeed devoted discussion to
the question of the effectiveness of local remedies in the DRC. .
. without considering any which may have open to Mr. Diallo as
associé in the companies. Inasmuch as it has not been argued
that there were remedies that Mr. Diallo should have exhausted
in respect of his direct rights as associé, the question of the
effectiveness of those remedies does not in any case arise.
The Court concludes from the foregoing that the objection as
to inadmissibility raised by the DRC on the ground of the failure
to exhaust the local remedies against the alleged violations of Mr.
Diallo’s direct rights as associé of the two companies Africom-
Zaire and Africontainers-Zaire cannot be upheld.”
objection of lack of exhaustion of local remedies, the ICJ will not assess whether the
claiming State has met any standard of proof regarding the exhaustion of these remedies
by its national. Absent such objection, the Court assumes on its face that the remedies
were exhausted by the alien. For evaluation of the standard of proof regarding the
exhaustion of local remedies in other areas of international law, see Bernard Robertson,
Exhaustion of Local Remedies in Human Rights Litigation. The Burden of Proof
Reconsidered, 39 INTERNATIONAL AND COMPARATIVE LAW QUARTERLY 1991 (1990).
55 Diallo, supra note 1, at paras. 74, 75. This is not to say that Mr. Diallo had local
remedies available to protect his rights as associé against the DRC’s decision to expel
him, which was affecting those rights. As was said before, the order that materialized
such determination did not have any appeal; therefore, there was no remedy to exhaust to
protect Mr. Diallo’s rights. Oddly, Guinea framed the issue not with the lack of remedy
to exhaust but with the ineffectiveness of any remedy he could have had at his disposal,
and so did the DRC, as the ICJ stated in the quoted passage. (For Guinea’s arguments,
see id. paras. 73, 3. For DRC’s arguments, see id. paras. 69 — 71).
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 449
This is certainly not an example of the well-established rule
recognized by the Court according to which “[I]t is the litigant
seeking to establish a fact who bears the burden of proving it.”*°
In practical terms, what the Court is applying is a presumption of
exhaustion of local remedies by aliens or foreign investors, which
the respondent State has to refute in order to prevail in its
objection to admissibility.
The Diallo decision thus contains an important development in
this regard for the benefit of aliens and foreign investors, which is
also useful and economically rational for the Court. Obviously,
the fact that the Court presumes for practical purposes that the
local remedies were exhausted does not mean that that this
requirement has disappeared. Aliens still have to exhaust local
remedies to prevent States from prevailing in their objection later
in judicial proceedings by demonstrating that there were some
remedies that the former did not utilize.
The one important area that the Court is subject to criticism is
that this presumption does not exactly correspond to the allocation
of burden of proof of the exhaustion of local remedies previously
articulated. If it is going to apply this presumption, the Court
should state it clearly for the benefit of host States, which
otherwise may be caught by surprise. For example, if the claimant
State does not adduce proof of the exhaustion of local remedies
and, due to this silence, the respondent State assumes that the
Court will declare the claim inadmissible and so fails to raise the
objection, the Court’s application of the presumption would result
in a ruling against the respondent for not having refuted it.
In sum, the foregoing presumption is an adequate way of
dealing with the exhaustion of local remedies requirement, but it is
regrettable that the Court decided to allocate the burden of proof in
one way and then apply it in another. The oft-quoted saying,
according to which one has to look at what judges do instead of at
what they say, suggests that respondent States should be aware
that the safest course of action in any diplomatic protection dispute
is to always attempt to refute the presumption by alleging and
proving that the alien had local remedies that he or she did not
exhaust.
56 Military and Paramilitary Activities. (Nicar. v. U.S.), Decision on Jurisdiction of
the Court, 1986 I.C.J. 392, 437.
450 N.C. J. INTL L. & Com. REG. [Vol. XXXII
C. Diplomatic Protection of Corporations
In Diallo, the ICJ ratified and further strengthened the rule set
in Barcelona Traction, holding that the State in which a company
is incorporated is the only one that can seek its diplomatic
protection.’ After this judgment, however, debate arose regarding
State practice. The central issue was whether, in addition to this
State, the State of the siége social or of that of the nationality of
the majority shareholders of corporations could also exercise
diplomatic protection on behalf of corporations.’ In Diallo, the
ICJ ratified its approach in Barcelona Traction, but it departed to a
certain extent regarding exceptions to the aforementioned rule. In
Barcelona Traction, the ICJ, in dictum, stated that for equity
reasons, the State of the nationality of the shareholders could
invoke the diplomatic protection of the company. It said in this
judgment:
[T]he Court considers that, in the field of diplomatic protection
as in all others fields of international law, it is necessary that the
law be applied reasonably. It has been suggested that if in a
given case it is not possible to apply the general rule that the
right of diplomatic protection of a company belongs to its
national State, considerations of equity might call for the
possibility of protection of the shareholders in question by their
own national State.”
Guinea invoked Barcelona Traction and relied on bilateral
agreements for the promotion of foreign investments and on
arbitral awards rendered upon them to demonstrate that the States
of nationality of shareholders could also seek the diplomatic
57 See Diallo, supra note 1, at paras. 88-89. The Court held in Barcelona Traction,
“The traditional rule attributes the right of diplomatic protection of a corporate entity to
the State under the laws of which it is incorporated and in whose territory it has its
registered office. ...” Barcelona Traction, supra note 7, at para. 70. One of the policy
reasons for this decision was to prevent the Court from receiving multiple claims from
different States, since this would open the door for States of nationality of any
shareholder to potentially exercise the diplomatic protection of the corporations in which
they have invested. See ILC Commentaries, supra note 4, at 59.
58 United States and European practice supported this debate. For an analysis of
this practice, see D. Cristopher Ollis, A Functional Analysis of Claimant Elegibility, in
INTERNATIONAL LAW OF STATE RESPONSIBILITY FOR INJURIES TO ALIENS, supra note 9, at
281, 294-99,
59 Barcelona Traction, supra note 7, at para. 93.
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 451
protection of their corporations.” The Court sought to establish
whether there was an exception to the general rule that would
allow the States of the shareholders to exercise diplomatic
protection on behalf of their companies on the basis of equity, and
concluded that it did not:
The fact invoked by Guinea that various international
agreements, such as agreements for the promotion and
protection of foreign investments and the Washington
Convention, have established special legal regimes governing
investment protection, or that provisions in this regard are
commonly included in contracts entered into directly between
States and foreign investors, is not sufficient to show that there
has been a change in customary rules of diplomatic protection; it
could equally show the contrary. The arbitrations relied on by
Guinea are also special cases, whether based on specific
international agreements between two or more States, including
the one responsible for the allegedly unlawful acts regarding the
companies concerned... or based on agreements concluded
directly between a company and the State allegedly responsible
for the prejudice to it...©'
Thus Guinea’s suggested argument of diplomatic protection by
substitution was rejected. The Court considered State practice and
international court decisions dealing with diplomatic protection of
shareholders and concluded that there does not currently exist an
exception that would allow shareholders’ States to exercise
diplomatic protection.” In consequence, the equitable exception
provided in Barcelona Traction, which favored foreign investors,
disappeared in Diallo. Once again, in the field of diplomatic
protection, the trend of the Court seems to be to put in place
criteria whose application by the Court is considerably easier than
those existing before.
But the Court did not stop there in its efforts to definitely set
the rule that only the State of incorporation of an entity can seek
its diplomatic protection. The Court established a high threshold
for the application of an exception contemplated by the ILC in its
draft Articles on Diplomatic Protection. According to ILC draft
60 Diallo, supra note 1, at para. 54.
61 Jd. para. 90.
62 Jd. para. 89.
452 N.C. J. INT’L L. & CoM. REG. [Vol. XXXII
Article 11(b):
A State of nationality of shareholders in a corporation shall not
be entitled to exercise diplomatic protection in respect of such
shareholders in the case of an injury to the corporation unless:...
(b) The corporation had, at the time of injury, the nationality of
the State alleged to be responsible for causing injury and
incorporation in that State was required by it as a precondition
for doing business there.©
The Court found that, given that Mr. Diallo had not been
compelled by Congolese legislation to constitute Africom and
Africontainers, the exception was not applicable.“ But in its
apparent quest for not allowing the existence of exceptions to the
basic rule, the Court subjected the ILC exception to such a high
threshold that it is very unlikely that this exception will ever be
applied. In effect, the Court established that such application
required the demonstration that the Article 11(b) exception had
become customary international law.® In its Commentaries to the
draft Articles, the ILC based this exception on very limited State
practice, a few arbitral awards and doctrine,” and it is unlikely that
such sources support the customary character of this exception.®’
63 ILC Commentaries, supra note 4, at 58.
64 See Diallo, supra note 1, at paras. 91 — 93.
65 See id. para. 93. The Court said: “The Court concludes on the fact before it that
the companies, Africom-Zaire and Africontainers-Zaire, were not incorporated in such a
ways that they would fall within the scope of protection by substitution in the sense of
Article 11, paragraph (6), of the ILC draft Articles on Diplomatic Protection referred to
by Guinea. Therefore, the question of whether or not this paragraph of Article 11
reflects customary international law does not arise in this case.” Id.
66 ILC Commentaries, supra note 4, at 62-65.
67 The ILC’s analysis is similar to the one carried out by Belgium in the Case
Concerning the Arrest Warrant of 11 April 2000 in an attempt to demonstrate the that
there was an exception provided for by customary international law to the rule of
criminal immunity of Ministers for Foreign Affairs. The ICJ declared that such analysis
was insufficient to prove the existence of international customs:
“The Court has carefully examined State practice, including national legislation and
those few decision of national higher courts, such as the House of Lords or the French
Court of Cassation. It has been unable to deduce from this practice that there exists
under customary international law any form of exception to the rule according immunity
from criminal jurisdiction and inviolability to incumbent Ministers for Foreign Affairs,
where they are suspected of having committed war crimes or crimes against humanity.”
Case Arrest Warrant of 11 April 2000 (Dem. Rep.Congo v. Belg.), Judgment, 2002 I.C.J.
3, 24 (Feb. 14).
2008] PRELIMINARY OBJECTIONS IN THE DIALLO CASE 453
In addition to offering a clearer rule of diplomatic protection of
legal entities, the ICJ decision in Diallo has narrowed the scope of
this protection of entities by reducing the number of States that are
allowed to invoke it. Under the criteria set by Barcelona Traction,
the State of incorporation, under the basic rule, and the State of
shareholders, under the equity exception, could exercise
diplomatic protection on behalf of corporations. Under the new
rule, only the former can do it.®
In sum, the Court in Diallo ratified the rule according to which
only the State of incorporation of a legal person can invoke its
diplomatic protection and strengthened this rule by suppressing the
previous exception, on the basis of equity, of Barcelona Traction
and set such a high threshold for the application of the other
proposed by the ILC in Article 11(b) that, for practical purposes,
this exception is simply a recommendation.
Vv. Conclusion
As has been shown, the ICJ decision on preliminary objections
in the Diallo case has important implications for foreign investors,
States and the Court itself. Investors are favored by the ICJ
decision to define shareholders’ rights according to the law of the
host State. This finding is not only logical, but it also makes it
easier for foreign investors and their States to raise claims of
diplomatic protection, when it is required, because this definition
determines with clarity the legal framework applicable.
Additionally, the de facto rule of presumption of local remedies
also may also benefit investors by allowing the claim of
diplomatic protection to continue, whether or not all the local
remedies were exhausted, should the respondent host State fail to
raise the objection.
On the other hand, the ICJ decision is unfavourable to foreign
68 Jt is important not to ignore the fact that State practice still can seek to protect
corporations due to their nationals’ involvement as shareholders. See, e.g., ILC
Commentaries, supra note 4, at 65 n.160 (noting that the UK 1985 Rules Applying to
International Claims state, “where a United Kingdom national has an interest, as a
shareholder or otherwise, in a company incorporated in another State and of which it is
therefore a national, and that State injures the company, Her Majesty’s Government may
intervene to protect the interest of the United Kingdom national.”). However, such
States will not be able to seize the ICJ to solve the dispute in the event of the given host
State’s refusal to end the dispute, provided that the Court has jurisdiction on the dispute.
454 N.C. J. INT’L L. & CoM. REG. [Vol. XXXII
investors by having lowered the number of States that can protect
the legal persons in which such investors have invested. In fact,
this lowering has favoured host States’ interests. No doubt, States,
other than those of incorporation, raising claims of diplomatic
protection of legal persons must rely on their power of persuasion
(or on the persuasion of their power), but may not rely on the law
as it has been declared by the Court in Diallo. For their part, host
States are forced, by the presumption of exhaustion of local
remedies, to be active in adducing proofs to refute the presumption
in order to avoid a claim that they did not have the full opportunity
to address from going straight to the decision by the Court on the
merits of the case.
From the Court’s viewpoint, its decision in Diallo sets clear
applicable criteria for who can exercise diplomatic protection on
behalf of legal persons and under which concrete legal regimes
shareholders’ rights will be protected. Finally, the de facto
presumption of exhaustion of local remedies by aliens, while
preserving the requirement, saves the Court’s costs of monitoring
compliance with the requisite by transferring them mainly to
respondent host States. From the Court’s perspective, “pragmatic”
could be an appropriate label for the Diallo decision on
preliminary objections.