(p. 693) 31 The Claims Process
1. Jurisdiction and Admissibility Distinguished
A state presenting an international claim, either in diplomatic exchanges or before an international tribunal, has to establish its entitlement to do so, and the continuing viability of the claim itself, before the merits of the claim can be decided. The same is true for any other claimant in international litigation, whether an individual before the European Court of Human Rights or a putative investor before an ICSID tribunal.
In the case where the claim is presented before an international tribunal, preliminary objections may be classified as follows.1 Objections to jurisdiction relate to conditions affecting the parties’ consent to have the tribunal decide the case at all. If successful, jurisdictional objections stop all proceedings in the case, since they deprive the tribunal of the authority to give rulings as to the admissibility or substance of the claim. An objection to the admissibility of a claim invites the tribunal to dismiss (or perhaps postpone) the claim on a ground which, while it does not exclude its authority in principle, affects the possibility or propriety of its deciding the particular case at the particular time. Examples include undue delay in presenting the claim, failure to exhaust local remedies, mootness,2 or failure to join a necessary third party. In normal cases the question of admissibility can only be decided once jurisdiction has been affirmed, and issues of admissibility may be so closely connected with the merits of the case so as to justify joining them to the merits.3
This chapter will deal with the array of preliminary issues, going both to jurisdiction and admissibility, before an international court or tribunal can decide the substance of the claim. The array of available courts and tribunals is discussed in chapter 32.
References(p. 694) 2. Interstate Claims: Prior Negotiations and the Requirement of a Dispute
In Right of Passage over Indian Territory India objected that Portugal had failed ‘to undertake diplomatic negotiations and continue them to the point where it was no longer profitable to pursue them’.4 The Court said that negotiations had been pursued ‘to the extent permitted by the circumstances of the case’.5 The jurisprudence of the Court establishes that active negotiations between the parties are not, in general, a prerequisite to the Court’s exercise of jurisdiction.6 However, the Court’s decision in Georgia v Russia7 has unsettled the position, and further analysis is required.
(A) The Existence of a Dispute
Whether or not a dispute exists is a matter for objective determination.8 In South West Africa9 the Republic of South Africa objected that the conflict or disagreement alleged by Ethiopia and Liberia was not a ‘dispute’ in terms of Article 7 of the Mandate for South West Africa, as it did not involve or affect any material interests of those governments or their nationals.10 The Court held that there was a dispute within the meaning of Article 7.11 Yet irrespective of the existence of a dispute within the meaning of the adjudication clause relevant to the proceedings, there was a prior question—was there a legal dispute in existence at all? The Court held that there was a dispute as defined in Mavrommatis,12 ‘a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons’. The Court also indicated that for a dispute to exist ‘it must be shown that the claim of one party is positively opposed by the other’.13
References(p. 695) (B) ‘Concerning the Interpretation Orapplication of a Treaty’
Conventions frequently include compromissory clauses conferring jurisdiction over disputes concerning the ‘interpretation or application’ of the treaty.14 The inclusion of this language serves to define the scope of the Court’s jurisdiction ratione materiae.15 Given that the function of the Court is to decide ‘such disputes as are submitted to it’,16 the qualifying words in such clauses should be treated as requiring a connection between the subject-matter of the treaty and the subject-matter of the claim, rather than as a means of unduly restricting access to the Court.
In Georgia v Russia, Georgia invoked Article 22 of the International Convention on the Elimination of All Forms of Racial Discrimination (CERD)17 as the basis for the Court’s jurisdiction. Alleging multiple violations of CERD, Georgia requested the Court to order, inter alia, that Russia take measures to ensure the safe return of internally displaced persons and pay compensation ‘for its role in supporting and failing to bring to an end the consequences of the ethnic cleansing that occurred in the 1991–1994 conflicts’.18 The Court rejected Russia’s argument that the term ‘dispute’ in Article 22 had a special, narrower meaning than the general meaning of dispute established in previous jurisprudence.19 In the event, however, its analysis of the evidence reflected a considerably more formalistic approach than the Court had previously taken. Georgia had raised concerns about Russia’s role in the deteriorating situation in South Ossetia and Abkhazia during a period of over 10 years, but it did not expressly refer to CERD in its dealings with Russia until 9 August 2008, three days before submitting its application to the Court. Applying an atomistic analysis of the diplomatic correspondence, the Court held that there was no dispute ‘concerning the interpretation or application’ of CERD until that date.20Despite the Court’s protestations to the contrary, this arguably marks a departure from previous practice by requiring formal notice and rejection of a claim, with express reference to the relevant treaty, before the claimant can seize the Court.21
References(p. 696) (C) Not Settled by Negotiation
Other terminology commonly included in compromissory clauses is that the dispute in question ‘is not’, ‘has not been’ or ‘cannot be’ settled by negotiations. The Court has observed that ‘while the existence of a dispute and the undertaking of negotiations are distinct as a matter of principle, the negotiations may help demonstrate the existence of the dispute and delineate its subject-matter’.22 In Georgia v Russia, Russia argued that the words ‘which is not settled by negotiation or by the procedures expressly provided for in this Convention’ in CERD Article 22 constituted twin preconditions that Georgia must satisfy before resorting to the International Court. The Court noted that the resort to negotiations fulfils three functions: ‘it gives notice to the respondent State that a dispute exists and delimits the scope of the dispute and its subject-matter’; ‘it encourages the Parties to attempt to settle their dispute by mutual agreement, thus avoiding recourse to binding third-party adjudication’; and it ‘performs an important function in indicating the limit of consent given by States’.23
At the provisional measures stage, the Court (by a vote of 8–7) had provisionally concluded that on the plain meaning of the compromissory clause, there was no requirement of formal negotiations or recourse to CERD dispute resolution procedures as preconditions to the jurisdiction of the Court, but that Article 22 did suggest that ‘some attempt should have been made by the claimant party to initiate, with the Respondent Party, discussions on issues that would fall under CERD’.24 At the jurisdiction stage, it reversed course, holding (by a vote of 10–6) that the ‘express choice of two modes of dispute settlement [in Article 22 CERD]…suggests an affirmative duty to resort to them prior to the seisin of the Court’.25 Where negotiations are commenced or attempted, the precondition is only satisfied if they have led to an impasse or otherwise failed.26 Although express reference to the treaty was not required,27 the negotiations must reflect the subject-matter of the dispute, which must concern the substantive obligations contained in the treaty in question.28 Negotiations prior to the existence of a dispute were of no legal relevance.29 The Court was not satisfied there had been genuine negotiations about matters falling under CERD during the relevant period.
Several of the judges criticized the methods of interpretation and resulting inflexibility of the majority’s position.30 The dissenting judges would have given greater weight to the ordinary meaning of the words ‘is not settled by negotiations’, as distinct from the common alternative ‘cannot be settled by negotiations’.
References(p. 697) (D) General Jurisdiction Clauses: Article 36(2)
Article 36(2) of the Court’s Statute, referred to as the ‘optional clause’, provides for advance acceptance of the Court’s compulsory jurisdiction by way of unilateral dec-larations.31 These operate on a reciprocal basis in relation to any other state accepting the same obligation: ‘jurisdiction is conferred on the Court…to the extent to which the [declarations made] coincide in conferring it’.32 Other treaties may contain general jurisdiction clauses: for example UNCLOS Article 287(1)33 provides for states parties to declare their choice of procedure for dispute settlement from among four options. The earlier practice of adding a general jurisdiction clause in an optional additional protocol to a treaty is no longer in use.34
Reliance on the optional clause has been limited,35 with an increasing number of cases brought before the International Court on the basis of compromissory clauses and special agreements instead.36 Of the five permanent members of the Security Council only the UK still recognizes the Court’s jurisdiction under Article 36(2).37
3. Interstate Claims: Grounds of Inadmissibility
(A) Legal Interest
The existence of a legal interest on the part of a claimant is a question distinct from the existence of a dispute. In Northern Cameroons the Court treated the issue of legal interest as a matter of judicial propriety,38 but legally this is best treated as a species of admissibility, as some judges pointed out.39 Judge Wellington Koo even referred to the existence of a legal interest as ‘the indispensable basis of a justiciable dispute’.40
References(p. 698) A legal interest in the outcome of the case is also central to a third state request for permission to intervene pursuant to Article 62 of the Statute.41 It is for the state seeking to intervene to identify its interest, and show that it ‘may’ be affected by the decision in the case.42 Permission is at the Court’s discretion and has only been granted in three cases: to Nicaragua in Land, Island and Maritime Frontier Dispute (El Salvador/ Honduras);43 to Equatorial Guinea in Cameroon v Nigeria;44 and most recently to Greece in Jurisdictional Immunities.45 In the latter case, the Court found Greece had a legal interest in the case because it might need to consider decisions of Greek courts arising from the Distomo massacre in 1944, in light of principles of state immunity, in order to decide aspects of the case between Germany and Italy. The permission for Greece to intervene, as a non-party, was limited to those questions.46
(B) Necessary Third Parties: The Monetary Gold Rule
In some cases, it is not merely that a third state has a legal interest of a tangential kind, but that its legal interest is the very subject-matter of the claim or at least a necessary element in its determination. In such cases the claim is inadmissible unless the necessary third state is joined as a full party to the proceedings. Thus in Monetary Gold, Italy asserted a right to the Albanian gold which was in the hands of the three western allies, basing itself on an unliquidated claim for damages against Albania. The Court could have rejected the Italian argument on the ground that Albania’s proprietary rights in the gold prevailed, for the purposes of return of war booty, over subsequent in personam claims, and it is a pity that the case was not decided on that basis. Instead the Court held that the claim (brought by Italy) could not be decided in the absence of Albania, a necessary third party, and was inadmissible.47 The result was that the gold stayed on deposit until the various issues between Albania, Italy and the western allies were settled.
More recently, Monetary Gold has been both applied and distinguished. It was distinguished in Phosphate Lands in Nauru on the basis that the concurrent responsibility of the UK and New Zealand as (with Australia) the administering authority of the trust territory of Nauru did not prevent Nauru bringing an action for maladministration against Australia alone. Australia’s responsibility for breach of the trusteeship did not depend on any finding against the other two states which were at most inReferences(p. 699) pari delicto.48 It was applied in East Timor, where it was held that the lawfulness or otherwise of Australia’s recognition of Indonesia’s sovereignty over East Timor could not be determined without first deciding that Indonesia’s purported annexation of East Timor was unlawful.49 It is a measure of the uncertainty surrounding the principle that the successful parties (respectively Italy and Australia) in Monetary Gold and East Timor were merely fortuitous beneficiaries.50
The Court may decline to hear the merits of a case if it determines that the application has been rendered without object as a result of events arising aft er it was filed. For example, in Nuclear Tests the Court held that there was no practical purpose to be served by proceeding with the claims because France had declared it would stop atmospheric testing in the Pacific, a declaration the Court guilefully converted into a commitment.51In Lockerbiethe US objected that Libya’s claims were moot, as they had been rendered without object by SC Resolutions 748 (1992) and 883 (1993), and a judgment would serve no practical purpose.52 The Court found the argument in the nature of a defence on the merits, rather than an objection of ‘an exclusively preliminary character’. A decision of inadmissibility would pre-determine the Court’s findings on whether Libya’s obligations under the Montreal Convention were incompatible with its obligations under the SC resolutions, and if so, on whether the resolutions prevailed.53
(D) Extinctive Prescription54
An unreasonable lapse of time in presentation may bar an international claim, but international law lays down no time limit. Special agreements may exclude categories of claim on a temporal basis; otherwise the question is one for the tribunal.55 In Phosphate Lands the International Court rejected a preliminary objection based on delay in submission of the claim. The Court nevertheless recognized that delay might,References(p. 700) in particular circumstances, render a claim inadmissible.56 Conceivably a claim by a state could be denied because of the difficulty the respondent has in establishing the facts, but where there is no irreparable disadvantage to the respondent, tribunals will be reluctant to allow mere lapse of time to bar claims, given the conditions under which interstate relations are conducted. Thus in the Cayuga Indians Claim the respondent was held not to be prejudiced by significant delay on the part of the UK, which claimed on behalf of a protected minority.57
Indeed Article 45 of the ILC Articles on State Responsibility, which refers only to waiver or acquiescence in the loss of a claim, may be read as denying the preclusive effect as delay as such. According to the commentary, Article 45
emphasizes conduct of the State, which could include, where applicable, unreasonable delay, as the determining criterion for the lapse of the claim. Mere lapse of time without a claim being resolved is not, as such, enough to amount to acquiescence, in particular where the injured State does everything it can reasonably do to maintain its claim.58
A number of cases which are cited as instances of prescription are actually based on lapse of time as evidence of acquiescence or waiver.59
Abandonment of claims may occur by unilateral acts of waiver or acquiescence implied from conduct, or by agreement. Given that in cases of diplomatic protection the state is asserting its own rights, it may compromise or release the claim, leaving the individual or corporation concerned without an international remedy.61Conversely the waiver of a claim by a national does not bind the government. Hence the Calvo clause, by which aliens are called on to waive diplomatic protection at the time of entry, is legally ineffective.62 The application of these principles to the field of investment arbitration is an open question.63
References(p. 701) (F) Other Grounds of Inadmissibility
Other grounds exist which deserve brief notice:
(1) Conceivably a failure to comply with the rules of court of the tribunal in making an application may provide a ground for an objection as to admissibility, although tribunals are reluctant to give much significance to matters of form.64
(2) Analogously to the local remedies rule, it may happen that a respondent can establish that adequate remedies have been or ought to be obtained in another tribunal, whether national or international. Whether there is any international equivalent to the national law doctrines of lis alibi pendensand forum non conveniensis controversial.65
(3) There may be a residue of instances in which questions of inadmissibility and ‘substantive’ issues are difficult to distinguish. This is the case with the so-called ‘clean hands’ doctrine, according to which a claimant’s involvement in activity unlawful under either municipal or international law may bar the claim.66
4. Diplomatic Protection
The heads of inadmissibility dealt with above are generally applicable to international claims, whatever their character. By contrast the nationality of claims and exhaustion of local remedies rules were specifically developed in the context of diplomatic protection. In 2006 they were restated by the ILC in a text aspects of which reflect elements of progressive development.67
References(p. 702) (A) Nationality of Claims68
An important function of nationality is to establish the legal interest of a state when nationals, including corporations, suffer injury or loss at the hands of another state. In principle if the claimant state cannot establish the nationality of the claim, the claim is inadmissible because of the absence of any legal interest on its part.69 However, the variety of problems involved necessitates separate treatment.
At the outset certain important exceptions to the principle must be noted.70 A right to protection of non-nationals may arise from treaty or an ad hoc arrangement establishing an agency. The other generally accepted exceptions are alien seamen on ships flying the flag of the protecting state71 and members of the armed forces of a state. If the injured party was in the service of the claimant state the latter may be said to have suffered harm to a legal interest although the victim was an alien.72
(i) Formulation of the nationality rule
As regards individuals, the rule has been stated by the ILC as follows in Article 5 of the Draft Articles on Diplomatic Protection:
1. A State is entitled to exercise diplomatic protection in respect of a person who was a national of that State continuously from the date of injury to the date of the official presentation of the claim. Continuity is presumed if that nationality existed at both these dates.
2. Notwithstanding paragraph 1, a State may exercise diplomatic protection in respect of a person who is its national at the date of the official presentation of the claim but was not a national at the time of the injury, provided that the person had the nationality of a predecessor State or lost his or her previous nationality and acquired, for a reason unrelated to the bringing of the claim, the nationality of the former State in a manner not inconsistent with international law.
3. Diplomatic protection shall not be exercised by the present State of nationality in respect of a person against a former State of nationality of that person for an injury caused when that person was a national of the former State of nationality and not of the present State of nationality.
References(p. 703) 4. A State is no longer entitled to exercise diplomatic protection in respect of a person who acquires the nationality of the State against which the claim is brought after the date of the official presentation of the claim.73
The commentary notes that this provision preserves the traditional rule in that it requires that the injured individual have the nationality of the claimant state at the time of the injury and at the date of the official presentation of the claim, but leaves open the question whether nationality has to be retained between injury and presentation of the claim.74 Draft Article 5 also clarifies the relevant end point as the date of presentation of the claim; this is the date most frequently used in treaties, judicial decisions, and doctrine as the dies ad quem. The term ‘official’ was added to indicate a formal demand as opposed to informal enquiries and contacts on the subject.75
The principle of continuity has been criticized because it permits incidental matters, for example, change of nationality by operation of law, to affect reasonable claims, and also because, if the legal wrong is to the state of origin, then the wrong must have matured at the time of injury and should be unaffected by subsequent changes in the status of the individual. The essence of the rule is probably a desire to prevent the individual choosing a powerful protecting state by a shift of nationality.76 This view does not support the application of the principle in cases of involuntary changes brought about by death or state succession.77 Draft Articles 5 and 10 justifiably except cases of succession; draft Article 5 also excepts other cases where the change in nationality occurs ‘for a reason unrelated to the bringing of the claim’, that is, otherwise than as a result of forum shopping by the individual concerned.78
(ii) Succession on death79
The nationality of an heir must be the same as that of the decedent on whose behalf the claim would have been made: in other words the principle of continuous nationality is applied to the beneficial interest in the property.80 Since the beneficial interest is crucial a claim will be denied if the residuary legatee does not have the requisiteReferences(p. 704) nationality although the executrix has.81 But a claims commission may presume continuity of nationality in the heirs of the deceased creditor.82
(iii) Assignment of claims
If during the critical period a claim is assigned to or by a non-national of the claimant state, the claim must be denied.83 This was the situation in the Loewen case, where a Canadian company, after a flawed trial leading to a jury award of $500 million damages (including $400 million punitive damages), was reorganized as a US company pursuant to Chapter 11 of the United States Bankruptcy Code. Before going out of business the company assigned its right, title, and interest in the NAFTA claim to a newly created Canadian corporation. An unblinking tribunal composed of three domestic appellate judges dismissed the claim: there had been a manifest denial of justice at trial, but the continuity of nationality rule had not been observed; in substance the national character of the claimant had changed, and the Canadian assignee of the NAFTA claim was a ‘naked entity’ which could not ‘qualify as a continuous national for the purposes of the proceeding’.84 Although it is said that assignment does not affect the claim if the principle of continuity is observed, great care is required: BIT claims are essentially claims intuitu personae under international law, and this imposes limits on their assignability.
(iv) Beneficial owners85
It is clear that the national character of a claim must be tested by the nationality of the individual holding a beneficial interest therein rather than by the nationality of the nominal or record holder of the claim. Precedents for the foregoing well-settled proposition are so numerous that it is not deemed necessary to document it with a long list of authorities…86
In that case the claim was denied as the beneficiaries were not nationals of the US although the trustee presenting the claim was. Treaties, and internal legislationReferences(p. 705) regulating the consequences of international settlements for lump sums, may however allow trustees to claim irrespective of the nationality of the beneficiaries.
(v) Insurers and subrogation87
Insurers may claim on the basis of subrogation provided the principle of continuity of nationality is satisfied. Subrogation may be regarded as a form of assignment or a form of representation: in any case it could be supported as a general principle of law.88 There are cogent arguments against allowing the nationality of the insurer to affect the nationality of the claim. In particular, because of the practice of reinsurance, the ultimate bearer of loss is not readily ascertainable. However, if the insurer’s interest is established and the principle of continuity is satisfied there would seem to be no very good reason for denial of a claim. In cases where the state of the insured does not pursue a claim, Meron has argued de lege ferenda that the state of the insurer should have standing with respect to the interests of the insurer, on the basis that the responsible state should not be able to escape liability because the injured party and the insurer do not have the same nationality.89
In principle, as a firm is not a legal person in English law, partners would receive protection as individuals to the extent of their interest in the partnership. However, British claims practice, reflected in settlement agreements and Orders in Council, has in general permitted claims by firms constituted under English law, as such, irrespective of the nationality of the partners.90
In principle it would appear normal for a corporation to be considered as having the nationality of the state under whose law it is constituted, unless a particular treatyReferences(p. 706) imposes a different rule.92 It is after all the state of incorporation which is responsible for ensuring that the requirements of corporate accountability (auditing, reporting, shareholders meetings, etc) are fulfilled.
British and American practice requires the existence of a substantial beneficial interest owned by nationals in the corporation.93 In many instances the beneficial interest exists in connection with a corporation incorporated under the law of the claimant state, but the crucial question is whether, on the basis of the beneficial interest, protection may be exercised in respect of a corporation incorporated in another state, and even in the respondent state.94
Barcelona Traction is still the leading authority on the question of diplomatic protection for corporations and their shareholders.95 The Barcelona Traction Company was incorporated under Canadian law and had its registered office in Canada. In reaching the conclusion that Belgium had no capacity to espouse the claims of the Belgian shareholders in the company, the International Court took the view that Canada was the national state, finding that a ‘close and permanent connection ha[d] been established, fortified by the passage of over half a century’ and that the company had ‘manifold’ connections to Canada.96 But the Court rejected the analogy of the Nottebohm case97 and the ‘genuine connection’ principle as applied to the naturalization of individuals. It held that in the context of corporate entities the analogy could only apply in a limited manner and ‘no absolute test of “the genuine connection” has found general acceptance’.98
This may be true: however, the Nottebohm principle is essentially the assertion that in referring to institutions of municipal law, international law has a reserve power to guard against giving effect to ephemeral, abusive, and simulated creations.99 Moreover, there is at least a presumption of validity in favour of the nationality createdReferences(p. 707) by incorporation and, in the case of multinational corporate bodies, no very exacting test of substantial connection should be applied.
Article 9 of the ILC Articles on Diplomatic Protection provides for place of incorporation as the first criterion for nationality of corporations, but with the state of the seat of management and financial control as a secondary option if there is no sufficient connection with the state of incorporation.100 It may be pointed out that, if a doctrine of substantial connection is employed, some but not all of the difficulties of classification of an entity as a legal person are avoided. If the place of incorporation is not a sufficient criterion, one still has to choose a system which decides whether separate legal personality exists or not, for example in the case of a partnership. Tribunals seem to rely on municipal law in this respect, but by demanding the existence of siège social, control, domicile, and so on, they would seem to require a guarantee that the grant of personality is reasonable and not a device for limiting the proper sphere of protection of other governments.