The International Minimum Standard: Persons and Property

(p. 607) 28  The International Minimum Standard: Persons and Property

1.  State and Individual: the Search for Standards

The legal consequences of belonging to a political community with a territorial base have not changed a great deal since the seventeenth century, despite changes in the various theories used to describe or explain the relation. Ties of allegiance, citizenship, and nationality have provided the basis for the community of the state, whether regarded primarily as an organic unity expressed in terms of ‘personal’ sovereignty or as a territorial domain. Modern practice tends toward the latter view, but has not wholly abandoned the doctrine of Vattel who, in a much-quoted passage, wrote: ‘[w]hoever uses a citizen ill, indirectly offends the state, which is bound to protect this citizen’.1 This is often described as a fiction, but the legal relation between a ‘corporate’ legal person and its members cannot be simply dismissed in this way. Vattel was not contending that any harm to an alien was as such an injury to the alien’s state: the link was indirect. In effect the relation of nationality provided a basis for principles of responsibility and protection.2 In particular, the state has a legal interest represented by its citizens, and anyone harming its citizens may have to account to that state in its protective capacity. If nationals are subjected to injury or loss by another state, then, whether the harm occurs in the territory of a state, or on the high seas or in outer space, the state of nationality may present a claim on the international plane. The conditions on which it may do so were set out in the ILC’s Articles on Diplomatic Protection (2006), some aspects of which reflect general international law:3 the ILC did not however deal with the substantive standards of protection.4

(p. 608) The law which has developed under the rubric of diplomatic protection is now being affected by the jurisprudence of tribunals sitting under bilateral and multilateral investment treaties. To a considerable extent the standards involved are those of the particular treaty: the International Court refused to draw any more general inferences from the large number of similarly-worded treaties in Barcelona Traction5 and again, four decades later, in Diallo.6 Nonetheless, some investment treaties articulate a standard of general international law, notably the international minimum standard of treatment. This is embodied, for example, in North American Free Trade Agreement (NAFTA) Article 11057 as interpreted by the member states.8

Thus there are now two discrete streams of authority—one based on the practice and jurisprudence of diplomatic protection, the other based on the generic standards in over 2,500 BITs, as applied in some 300 reported or unreported tribunal decisions.9 For the purposes of exposition the two streams will be presented together, but this is without prejudice to the need for analysis of the specific context and the basis of claim in every case.

2.  Admission, Expulsion, and Liabilities of Aliens

Problems of responsibility arise most frequently when aliens and their assets are stationed on host state territory, and by way of preliminary, something must be said of the entry of aliens within the state. In principle this is a matter of domestic jurisdiction: a state may choose not to admit aliens or may impose conditions on their admission.10

(p. 609) Internal economic policies and aspects of foreign policy may result in restrictions on the economic activity of aliens. National policy may require prohibition or regulation of the purchase of immovables, ships, aircraft and the like, and the practice of certain professions by aliens. Provisions for the admission of aliens in treaties of friendship, commerce, and navigation are qualified by references to ‘public order, morals, health or safety’.11 BITs normally provide expressly that the question of admission is one for the law of the host state.12

In principle expulsion of aliens is also within the discretion of the state,13 but this discretion is not unlimited.14 In particular, the power of expulsion must be exercised in good faith and not for an ulterior motive.15 While the expelling state has a margin of appreciation in applying the concept of ‘ordre public’, this concept is to be measured against human rights standards.16 The latter are applicable also to the manner of expulsion.17 In certain conditions expulsion may infringe the principle of nondiscrimination (racial or religious) which is part of customary international law.18 Expulsion which causes specific loss to the national state forced to receive large groups without adequate notice could ground a claim for indemnity. Finally, the expulsion of persons who by long residence and exercise of civil rights have acquired prima facie the effective nationality of the host state is not a matter of discretion, since the issue of nationality places the right to expel in question.

The International Court considered the issue of expulsion in Diallo. It concluded that under the ICCPR and the relevant regional human rights treaty (the African Charter):

the expulsion of an alien lawfully in the territory of a State which is a party to these instruments can only be compatible with the international obligations of that State if it is decided(p. 610) in accordance with ‘the law’, in other words the domestic law applicable in that respect. Compliance with international law is to some extent dependent here on compliance with internal law. However…[this] is not a sufficient condition. First, the applicable domestic law must itself be compatible with the other requirements of the Covenant and the African Charter; second, an expulsion must not be arbitrary in nature, since protection against arbitrary treatment lies at the heart of the rights guaranteed.19

The Court further underlined the obligation to provide grounds for expulsion, the prohibition of mistreatment of aliens subject to expulsion, the obligation to inform without delay the consular authorities of the state of origin of the aliens pending expulsion, and the obligation to respect the property rights of those being expelled.20

The liabilities of alien visitors under their own and under the local law can lead to overlapping and conflicting claims of the state of origin and the host state in various areas of jurisdiction, including antitrust, labour, and welfare standards, monetary regulation, and taxation. The principles on which conflicts of jurisdiction may be approached have been considered in chapter 21. The point here is to examine the limits of the competence of the host state in placing liabilities on aliens of a special kind, for example, duties to serve in the armed forces, militia, or police and to submit to requisitions in time of emergency.21 The legal position is not in all respects clear. Thus there is authority to support the rule that an alien cannot be required to serve in the regular armed forces of the host state.22 However, in American and Australian practice an alien admitted with a view to permanent residence or who has participated in the local political franchise may be conscripted to serve in local militia and also in forces for external defence.23 The basis for obligations of this kind is the reciprocity between residence and local protection, on the one hand, and the responsibilities of a ‘functional’ citizenship. In some cases long residence and local connections may create a new, effective nationality opposable to the state of origin (see chapter 23).

3.  Requirements for and Standards of Diplomatic Protection

(A)  Overview

The exercise of diplomatic protection of nationals visiting or resident in foreign countries has subsisted, with changes of terminology and concept, since the Middle Ages.(p. 611) Modern practice emerged in the late eighteenth century, when the grant of letters of reprisal, an indiscriminate right of private war, to citizens harmed by aliens disap-peared.24 It was the nineteenth century which produced political and economic conditions in which the status of aliens abroad became a problem of wide dimensions. The history has been primarily concerned with the conflicts of interest between foreign investors (represented by their national state) and the more-or-less exploited hosts to foreign capital. In the century after 1840 some 60 mixed claims commissions were set up to deal with such disputes.25 Literature on protection of aliens from the point of view of investor states grew particularly aft er 1890; influential contributions were made by Anzilotti and the Americans, Moore, Borchard, and Eagleton.26

This area of law has always been controversial. In the period 1945–80, concepts of economic independence and political and economic principles favouring nationalization and the public sector made headway. The legal reasoning offered on precise issues stems from a small number of general principles and the relations between them. Presumptively the ordering of persons and assets is an aspect of the domestic jurisdiction of a state and an incident of its territorial sovereignty.27 Exceptions may be created by treaty, and in the past immunity for aliens was sometimes coupled with the privilege of the sending state to maintain a special system of courts for nationals on the territory of the receiving state (capitulations).28

In principle, however, the territorial competence of the state subsists, and the alien is admitted, at discretion, as a visitor with a duty to submit to local law and jurisdiction. However, residence abroad does not deprive an individual of the protection of the state of nationality. Diplomatic protection is best seen as a function of the relation of nationality in the absence of any better means of security. Where the state authorities cause injury to the alien visitor, for example in the form of brutality by police officials, the legal position is clear. The host state is responsible, but, as a condition for(p. 612) the presentation of the claim by the national state, the alien must exhaust any remedies available in the local courts.29 The reasons for this condition of admissibility are practical: claims by individuals are handled better in municipal courts, governments dislike the multiplication of claims for diplomatic intervention, and it is reasonable for the resident alien to submit to the local system of justice. The ILC’s Articles on Diplomatic Protection reaffirm that ‘diplomatic protection…is the procedure employed by the State of nationality of the injured person to secure protection of that person and to obtain reparation for the internationally wrongful act inflicted.’30 Article 14 purports to codify the customary rule of exhaustion of local remedies ‘as a prerequisite for the exercise of diplomatic protection’.31 Article 15 sets out exceptions to the rule, including where local courts offer no prospect of redress, where circumstances make it unfair or unreasonable to exhaust the local remedies and where the respondent state has waived the requirement.32

More difficult are the cases where the alien is harmed by acts or omissions which are on their face a normal exercise of the competence of organs of the host state. These situations include the malfunction of judicial organs dealing with acts which are breaches of the local law affecting the interests of the alien (‘denial of justice’), and also general legislative measures, not directed at aliens as such, affecting the ownership or enjoyment of foreign-owned assets. There has always been a current of opinion to the effect that the alien, having submitted to the local law, can only expect treatment on a basis of equality with nationals of the host state. It is also said that the status of the alien is not the subject of a privilege, but is simply that of an individual within the territorial sovereignty and jurisdiction of the host state.33

(B)  The National Treatment Standard34

An initial point of agreement is that certain forms of inequality are admissible. Thus aliens are not entitled to political rights in the host state. Moreover, the alien must accept local law in regard to regulation of the economy, including restrictions on employment(p. 613) of aliens in particular types of employment. Access to the courts must be maintained, but rules in ancillary matters may be modified: thus an alien need not have access to legal aid and may have to give security for costs.35 Exceptions may of course be created by treaty, most notably BITs. Standards of treatment commonly employed in treaties include national, most-favoured-nation, and fair and equitable treatment.

The national treatment standard was supported by jurists both in Europe and Latin America prior to 1940,36 by a small number of arbitral awards,37 and by 17 states at the Hague Codification Conference in 1930.38 At the conference 21 states opposed the standard, although some had relied on it in presenting claims to international tribunals.39

(C)  The International Minimum Standard40

Since the beginning of the twentieth century the preponderant doctrine has supported an ‘international minimum standard’.41 A majority of the states represented at the Hague Codification Conference endorsed that standard, and it was affirmed in the Declaration on Permanent Sovereignty over Natural Resources in 1962.42The standard is articulated in BITs, and has been applied by many tribunals and claims commissions. Thus in the Neer Claim the General Claims Commission set up by the US and Mexico expressed the position as follows:

[T]he propriety of governmental acts should be put to the test of international standards…the treatment of an alien, in order to constitute an international delinquency should amount to an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.43

(p. 614) This passage has become a focus for debate. On the one hand the NAFTA Tribunal in Mondev said:

A reasonable evolutionary interpretation of Article 1105(1) is consistent both with the travaux, with normal principles of interpretation and with the fact that, as the Respondent accepted in argument, the terms ‘fair and equitable treatment’ and ‘full protection and security’ had their origin in bilateral treaties in the post-war period. In these circumstances the content of the minimum standard today cannot be limited to the content of customary international law as recognised in arbitral decisions in the 1920s.44

On the other hand, another NAFTA Tribunal in Glamis Gold said:

Although situations may be more varied and complicated today than in the 1920s, the level of scrutiny is the same. The fundamentals of the Neer standard thus still apply today: to violate the customary international law minimum standard of treatment codified in Article 1105 of the NAFTA, an act must be sufficiently egregious and shocking—a gross denial of justice, manifest arbitrariness, blatant unfairness, a complete lack of due process, evident discrimination, or a manifest lack of reasons—so as to fall below accepted international standards and constitute a breach of Article 1105(1).45

(D)  The Two Standards in Perspective

The controversy concerning the national and international standards has not been finally resolved, and this is not surprising as the two viewpoints reflect conflicting economic and political interests. Those supporting the national treatment standard are not committed to the view that municipal law has supremacy over international law: their position is that, as a matter of international law, the standard of treatment is to be defined in terms of equality under the local law. Protagonists of national treatment point to the role the law associated with the international standard has played in maintaining a privileged status for aliens and supporting alien control of large areas of the national economy. The experience of the Latin American states and others suggests caution in handling the international standard, but it is necessary to distinguish between, on the one hand, the content of the standard and its application in particular cases and, on the other hand, the core principle, which is simply that the territorial sovereign cannot avoid responsibility by pleading that aliens and nationals had received equally bad treatment. Conversely, the rules of international law authorize at least a measure of discrimination, for example in matters of taxation.

A source of difficulty has been the tendency of some writers and tribunals to give the international standard too ambitious a content. For example in Tecmed the tribunal said:

The foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign investor…The foreign investor also(p. 615) expects the host state to act consistently, i.e. without arbitrarily revoking any pre-existing decisions or permits issued by the state that were relied upon by the investor to assume its commitments as well as to plan and launch its commercial and business activities.46

This is an attempt to rewrite the fair and equitable treatment standard by reference to the hypothetical expectations of one class of participant, as distinct from using the specific expectations generated through the parties’ actual course of dealings as relevant to the application of the standard. Indeed many governments would fail to meet this utopian standard much of the time.47

Another cause of difficulty has been the extension of delictual responsibility to the malfunction of administrative and judicial organs, as in the field of denial of justice. This aspect involves the imposition of the law of delict where a better analogy would be the use of administrative law remedies to ensure the proper exercise of legal powers. In regard to non-exercise or malfunction of legal powers national treatment has some significance, at least as creating a presumption of absence of malice.48

In short there is no universally applicable standard. Circumstances, for example, the outbreak of war, may create exceptions to the international treatment standard, even where this applies in principle. Where a reasonable care or due diligence standard is applicable,49 it would represent a more sophisticated version of national treatment. It would allow for variations in wealth and educational standards between the various states of the world and yet would not be a mechanical matter, tied to equality.

Successive attempts have been made to synthesize the concept of human rights and the principles governing the treatment of aliens. Early on, García Amador, first ILC Special Rapporteur on state responsibility, proposed the following formulation:

  1. 1.  The State is under a duty to ensure to aliens the enjoyment of the same civil rights, and to make available to them the same individual guarantees as are enjoyed by its own nationals. These rights and guarantees shall not however, in any case be less than the ‘fundamental human rights’ recognized and defined in contemporary international instruments.

  2. 2.  In consequence, in case of violation of civil rights, or disregard of individual guarantees, with respect to aliens, international responsibility will be involved only if internationally recognized ‘fundamental human rights’ are affected.50

This particular synthesis involves codifying the ‘international minimum standard’, raising that standard, extending it to new subject-matter, and relating internal affairs and local law to international responsibility to a degree which most states would find(p. 616) intolerable.51 It is true that since 1945 a new content for the international standard based upon those human rights principles which have become a part of customary international law has arguably emerged. Yet the world is not governed by tribunals and a careful synthesis of human rights standards and the modern ‘treatment of aliens’ standards is required.52 Notably, the concept of discrimination calls for more sophisticated treatment in order to identify unreasonable discrimination as distinct from the different treatment of non-comparable situations.53

It was precisely such difficulties that led to Ago’s reformulation of state responsibility as concerned with ‘secondary rules’: the ILC Articles of 2001 are without prejudice to the substantive content of the international obligations of states.54

(E)  Forms of Delictual Responsibility

The general principles of state responsibility were examined in chapter 25. They apply to cases where aliens are injured, whether within or outside the territory of the respondent state. Thus one might expect to rely upon a rule that a state is liable for failure to show due diligence in matters of administration, for example by failing to take steps to apprehend the murderer of an alien. However, the position is more complex. International law is not a system replete with nominate torts or delicts, but the rules are specialized in certain respects.

(i)  Breach of the fair and equitable treatment standard55

The fair and equitable treatment standard (FET) is an autonomous standard of investment protection set out in the vast majority of BITs,56 though in varying formulations.(p. 617) There are four main approaches: (a) a self-standing standard without additional reference to international law or other criteria;57 (b) FET defined in ‘accordance with international law’;58 (c) FET linked to the customary standard of minimum treatment of aliens;59 and (d) FET with express reference to substantive obligations, for example prohibiting denial of justice or unreasonable or discriminatory measures.60 Thus the application of the standard depends on the particular treaty invoked, although there are common generic questions.

The FET standard has become a focus of interpretation in investment treaty arbitration, invoked in most of the cases brought. Host state measures challenged for breach of FET vary widely, including revocation or non-renewal of licences,61 imposition of new regulatory requirements by the legislative and executive organs affecting the economic operation of the investment,62 tax and tariff measures,63 termination, modification and breach of investment contracts,64 abusive treatment of investors,65 and denial of justice by both the executive and the judiciary.66 In ascertaining the meaning and scope of the FET standard, tribunals have often considered it in its relation to the international minimum standard of treatment, particularly in the context of NAFTA arbitration.67 In the substantive protections afforded by the FET standard,(p. 618) tribunals have included protection of investors’ legitimate expectations,68 non-abusive treatment,69non-arbitrary and non-discriminatory exercise of public powers,70 and its adherence to due process requirements.71

One influential formulation of the FET standard in the context of NAFTA, that is, with reference to the minimum standard of treatment under customary international law, was given by the tribunal in Waste Management (No 2)v Mexico:

The minimum standard of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety—as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candour in an administrative process.72

In a BIT context, the tribunal in Saluka v Czech Republic was called upon to assess what constituted permissible regulatory action by the Czech National Bank in the course of the reorganization of the banking sector. It observed that:

The ‘fair and equitable treatment’ standard in Article 3.1 of the Treaty is an autonomous Treaty standard and must be interpreted, in light of the object and purpose of the Treaty, so as to avoid conduct of the Czech Republic that clearly provides disincentives to foreign investors. The Czech Republic, without undermining its legitimate right to take measures for the protection of the public interest, has therefore assumed an obligation to treat a foreign investor’s investment in a way that does not frustrate the investor’s underlying legitimate and reasonable expectations. A foreign investor whose interests are protected under the Treaty is entitled to expect that the Czech Republic will not act in a way that is manifestly(p. 619) inconsistent, non-transparent, unreasonable (i.e. unrelated to some rational policy), or dis criminatory (i.e. based on unjustifiable distinctions).73

Irregularities in the investor’s conduct have sometimes influenced the determination of whether a breach of FET has occurred.74 The standard required for a breach of FET to be found varies depending on the circumstances (and the decisions are notably inconsistent), but the holding in SD Myers v Canada is indicative in underlying that ‘determination must be made in light of the high measure of deference that international law generally extends to the right of domestic authorities to regulate matters within their own borders’.75

(ii)  Denial of Justice76

The term ‘denial of justice’ has sometimes been used to cover the general notion of state responsibility for harm to aliens,77 but it is better confined to a particular category of deficiencies on the part of the host state, principally concerning the administration of justice.78 A helpful definition was offered by the NAFTA Tribunal in Azinian v United Mexican States:

A denial of justice could be pleaded if the relevant courts refuse to entertain a suit, if they subject it to undue delay, or if they administer justice in a seriously inadequate way…There is a fourth type of denial of justice, namely the clear and malicious misapplication of the law. This type of wrong doubtless overlaps with the notion of ‘pretence of form’ to mask a violation of international law. In the present case…the evidence [is] sufficient to dispel any shadow over the bona fides of the Mexican judgments. Their findings cannot possibly be said to have been arbitrary, let alone malicious.79

This approach was approved in Mondev v US.80

The most controverted issue is the extent to which erroneous decisions may constitute a denial of justice. There is authority for the view that an error of law accompanied(p. 620) by a discriminatory intention is a breach of the international standard.81 However, it is well established that the decision of a lower court open to challenge does not constitute a denial of justice and that the claimant must pursue remedies available higher in the judicial system as a matter of substance.82

As in other contexts the international standard has been applied ambitiously by tribunals and writers and difficulties have arisen. First, the application of the standard may involve decisions upon fine points of national law and the quality of national remedial machinery.83 In regard to the work of the courts a distinction is sought to be made between error and ‘manifest injustice’.84 Secondly, the application of the standard in this field seems to contradict the principle that the alien, within some limits at least, accepts the local law and jurisdiction. Thirdly, the concept of denial of justice embraces many instances where the harm to the alien is a breach of local law only and the ‘denial’ is a failure to reach a non-local standard of competence in dealing with the wrong. Thus the concept of the foreign state wronged in the person of its nationals is extended to cases where the primary wrong is a breach of municipal law alone. This is an eccentric application of the principles of responsibility;85 and it would be better if such claims were regarded as resting on an equitable basis only. The existence of the rule of admissibility that the alien should first exhaust local remedies is a reflection of the special character of denial of justice claims.86

(iii)  Expropriation of foreign property87

A state may place conditions on the entry of an alien on its territory and may restrict acquisition of certain kinds of property by aliens. Apart from such restrictions, an alien individual, or a corporation controlled by aliens, may acquire title to property within a state under local law. The subject-matter may be shares in enterprises, items such as (p. 621) estates or factories, or, on a monopoly basis, major areas of activities such as railways and mining. In a number of countries foreign ownership has extended to proportions of between 50 per cent and 100 per cent of all major industries, resources and services such as insurance and banking.88 Even in laissez-faire economies, the taking of private property for certain public purposes and the establishment of state monopolies have long been familiar. After the Soviet revolution and the extension of the public sector in many economies, socialist and non-socialist, the conflict of interest between foreign investors and their governments and the hosts to foreign capital, seeking to regain control over their economies, became more acute. The terminology of the subject is by no means settled, and in any case form should not take precedence over substance. The essence of the matter is the deprivation by state organs of a right of property either as such, or by permanent transfer of the power of management and control.89 The deprivation may be followed by transfer to the territorial state or to third parties, as in systems of land distribution as a means of agrarian reform. The process is commonly described as expropriation. If compensation is not provided, or the taking is regarded as unlawful, the taking is sometimes described as confiscation. Expropriation of one or more major national resources as part of a general programme of social and economic reform is generally referred to as nationalization.

State measures, prima facie lawful, may affect foreign interests considerably without amounting to expropriation. Thus foreign assets and their use may be subjected to taxation, trade restrictions such as quotas,90 revocation of licences for breach of regulations, or measures of devaluation.91 While special facts may alter cases, in principle such measures are not unlawful and do not constitute expropriation. If the state gives a public enterprise special advantages, for example by directing that it charge nominal rates of freight, the resulting de facto or quasi-monopoly is not an expropriation of the competitors driven out of business:92 but it might be otherwise if this were the object of a monopoly regime. Taxation which has the precise object and effect of confiscation is unlawful but high rates of tax, levied on a non-discriminatory basis, are not.93 In general there is no expectation that tax rates will not change: a foreign investor must obtain a clear commitment to that effect, for example, in a stabilization agreement.

(p. 622) A constant difficulty is to establish the line between lawful regulatory measures and forms of indirect or creeping expropriation.94 In Pope and Talbot v Canada, the investor argued that a statutory regime of export control involved a form of expropria-tion.95 The tribunal held:

The…question is whether the Export Control Regime has caused an expropriation of the Investor’s investment, creeping or otherwise. Using the ordinary meaning of those terms under international law, the answer must be negative.…The sole ‘taking’ that the Investor has identified is interference with the Investment’s ability to carry on its business of exporting softwood lumber to the US. While this interference has…resulted in reduced profits for the Investment, it continues to export substantial quantities of softwood lumber to the US and to earn substantial profits…[T]he degree of interference with the Investment’s operations due to the Export Control Regime does not rise to an expropriation (creeping or otherwise) within the meaning of Article 1110.96

In Metalclad, another NAFTA case concerning a refusal to grant a construction permit and a change of the regime of land to a national area of protection, the tribunal found that indirect expropriation had taken place, stating in a much quoted paragraph:

Thus, expropriation under NAFTA includes not only open, deliberate and acknowledged takings of property, such as outright seizure or formal or obligatory transfer of title in favour of the host State, but also covert or incidental interference with the use of property which has the effect of depriving the owner, in whole or in significant part, of the use or reasonably-to-be-expected economic benefit of property even if not necessarily to the obvious benefit of the host State.97

This language has been criticized for its breadth and lack of correspondence to the facts of the case.98

(iv)  The compensation rule

The rule supported by all leading ‘Western’ governments and many jurists in Europe and North America is as follows: the expropriation of alien property is only lawful if ‘prompt, adequate, and effective compensation’99 is provided for. In principle, therefore,(p. 623) expropriation, as an exercise of territorial competence, is lawful, but the compensation rule (in this version) makes the legality conditional. The justifications for the rule are based on the assumptions prevalent in a liberal regime of private property and in the principle that foreign owners are to be given the protection accorded to private rights of nationals, provided that this protection involves the provision of compensation for any taking. These assumptions are used to support the compensation principle as yet another aspect of the international minimum standard governing the treatment of aliens. The emphasis is on respect for property rights both as ‘acquired rights’100 and as an aspect of human rights.101 The principle of acquired rights is unfortunately vague, and the difficulty is to relate it to other principles of law: in short this and other general principles beg too many questions.

Whatever the justifications offered for the compensation rule, it has received considerable support from state practice and international tribunals.102 Agreements involving provision for some sort of compensation in the form of the ‘lump sum settlement’ are numerous, but jurists disagree as to their evidential value: many agreements rest on a bargain and on special circumstances.103 Although some awards were in substance diplomatic compromises,104 a good number of international tribunals have supported the compensation rule and the principle of acquired rights.105 Dicta in a number of decisions of the Permanent Court involving treaty interpretation and the effects of state succession on various categories of property, may be regarded as supporting the compensation principle.106

(p. 624) There are a number of exceptions to the compensation rule.107 The most widely accepted are as follows: under treaty provisions; as a legitimate exercise of police power, including measures of defence against external threats; confiscation as a penalty for crimes;108 seizure by way of enforcement of unpaid taxation or other fiscal measures; loss caused indirectly by health and planning legislation and concomitant restrictions on the use of property; the destruction of property of neutrals as a consequence of military operations; and the taking of enemy property as agreed war reparation.109

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