Chapter 2 Cases
Chapter 2
State Responsibility and Environmental Protection
Case 2-1. SANDLINE INTERNATIONAL INC. V. PAPUA NEW GUINEA
International Arbitration under the UNCITRAL Rules (October 1998).
FACTS: A Papua New Guinea (PNG) revolutionary movement cut off power to a mine on Bougainville island, part of PNG. The PNG Defense Force could not retake the mine and looked to a private contractor for help with military helicopters and modern equipment. PNG and Sandline entered into an Agreement signed by PNG’s Deputy Prime Minister, for PNG, with the approval of the Prime Minister, Minister of Defense, and following a resolution of the PNG National Executive Council approving U.S. $36 million for the joint operations with 50% to be paid up front. PNG paid the first part, but did not pay the $18 million balance within 30 days of Sandline’s deployment.
ISSUE: Is PNG liable for its failure to perform the terms of the contract?
HOLDING: Yes.
LAW: “An agreement between a private party and a state is an international, not a domestic, contract,” thus the rules of international law apply. “[A]cts of a state will be regarded as such even if they are ultra vires or unlawful under the internal law of the state.” Under the doctrine of preclusion or ratification, “a party may not deny the validity of a contract entered into on its behalf by another, if, by its conduct, it later consents to the contract.”
EXPLANATION: PNG pled that the contract violated section 200 of the PNG Constitution and that those who entered the contract “on behalf of PNG lacked the capacity to do so.” The Tribunal ignored the first argument as an internal matter for PNG courts. The Tribunal stated that the “agreement was not illegal or unlawful under international law or under any established principle of public policy.” “PNG participated in the performance of the contract” and is thus estopped from “denying the validity of its agreement with Sandline.”
ORDER: Sandline is awarded damages for breach of contract.
Case 2-2. HOME MISSIONARY SOCIETY CASE
(Home Frontier and Foreign Missionary Society of the United Brethren in Christ (United States v. Great Britain) Claim)
American and British Claims Arbitration Tribunal, 1920.
FACTS: In 1898, the British colonial government in Sierra Leone attempted to collect a “hut tax.” This led to a rebellion that resulted in attacks on missions. Several missions were destroyed or damaged, and some American missionaries were killed. This commission was set up to determine whether Britain was liable to the US for the injuries suffered by the latter’s citizens.
ISSUE: Can the conduct of the rebels be imputed to the government?
HOLDING: No.
LAW: It is a well-established principle of international law that no government can be held responsible for the act of rebellious bodies of men committed in violation of its authority, where it is itself guilty of no breach of good faith or of negligence in suppressing insurrection.
EXPLANATION: Britain did nothing improper in imposing a tax. This is a right of every government. Although difficulty might have been foreseen, there was nothing to suggest that the tax would lead to a widespread revolt. The good faith of Britain could not be questioned. Nor was there anything to suggest that Britain had failed in its duty to afford adequate protection for life and property.
ORDER: The claim was dismissed.
Case 2-3. FLATOW v. THE ISLAMIC REPUBLIC OF IRAN
United States District Court for the District of Columbia, 1998
FACTS: Alisa Flatow, a US citizen, was killed in Israel by a suicide bomber. The Shaqaqi faction of the Palestine Islamic Jihad, which is funded by Iran, claimed responsibility for the bombing. Flatow’s heirs sued Iran, its head of state, its intelligence service, and its minister of intelligence seeking compensation for her wrongful death. Iran did not appear before the court and the court required the heirs to provide that they had a claim to relief before it would grant a default judgment.
ISSUES: (1) Does the court have jurisdiction? (2) Is there a cause of action?
HOLDINGS: (1) Yes. (2) Yes.
LAW: The US Antiterrorism and Effective Death Penalty Act of 1996 creates subject matter jurisdiction and a federal cause of action for acts of state sponsored terrorism. The elements of the cause of action are: (1) death due to … extrajudicial killing …, (2) perpetrated by an actor receiving resources or support from a foreign state, (3) the support or resources are provided by an official acting within his or her scope of employment, (4) the state was designated as a sponsor of terrorism by the US government, (5) plaintiff offered state defendant the opportunity to arbitrate if the death occurred within the defendant state’s territory, (6) the plaintiff or victim was a US citizen at the time of the death, and (7) similar conduct by US officials would be actionable.
EXPLANATION: (1) This suicide bombing was an extrajudicial killing as it was not authorized by a court and it was done in support of international terrorism (it was intended to intimidate or coerce a civilian population or a government). (2) Iran’s general support of the bomber’s group was sufficient to establish liability as a foreign state’s support of an actor does not have to be directly linked to the extrajudicial killing. (3) Funds supplied to a group by a government’s head of state, intelligence service, and minister of intelligence is the “provision of material support and resources.” (4) US officials would have been liable in a case such as this.
ORDER: Defendants are jointly and severally liable for Flatow’s death.
Case 2-4. CANTERO HERRERA v. CANEVARO & CO.
Peru, Supreme Court, 1927.
FACTS: Cantero Herrera, a Cuban national living in Peru, and agent for several nonresident Cubans, was unsuccessful in the Peruvian courts in asserting a claim for the partition and distribution of an estate the courts held was owned by the Sociedad Canevaro & Cia. The court decisions were handed down in 1919, 1920, and 1921. In 1927, a Cuban Envoy wrote the Peruvian Foreign Minister impugning these judgments, and called upon Peru to acknowledge that there had been a denial of justice and to make due reparations. Peru’s Executive asked the Supreme Court for an advisory opinion.
ISSUE: Should the Cubans have recourse to a diplomatic solution having failed to obtain a judicial remedy in the Peruvian courts?
HOLDING: No.
LAW: States are bound to give foreigners recourse to their courts on the same footing as nationals. International law also recognizes that no self-respecting country will allow any other country to impeach the force and legality of a judgment rendered regularly by its courts, because such judgments are an emanation of sovereignty. As to a claim of denial of justice, it must be “manifest or notorious,” that is, one that “compromises the responsibility of the state.”
EXPLANATION: Peru’s civil code and constitution hold that “foreigners are, as to their property, in the same condition as Peruvians, and cannot . . . have recourse to diplomatic claims.” In other words, Peru applies the national standard, regarding aliens as having no more rights than nationals. Here, Cantero Herrera had not been denied a hearing, nor denied any rights granted by law, nor was he subjected to any objectionable treatment. All he claims is that he lost. It is not on such a claim “that the portals of justice are thrown open to the public authorities, to foreigners, or to anyone else.”
ORDER: The claim should be denied.
Case 2-5. ACSYNGO v. COMPAGNIE DE SAINT-GOBAIN (France) SA
Belgium, Commercial Court of Namur, 1986.
FACTS: France had nationalized the stock in the French conglomerate Compagnie de Saint-Gobain (CSG) in 1982. CSG in turn owned slightly more than half of the stock of Glaceries de Saint-Roch (GSR), a Belgian company. The shareholders of CSG who had had their shares nationalized formed a syndicate, ACSYNGO, and ACSYNGO then brought suit in Belgium to claim that it (rather than CSG) should be made the owner of the half interest in of GSR. ACSYNGO argued that to do otherwise was to wrongfully give extraterritorial effect to a French nationalization decree.
ISSUES: (1) Was the nationalization decree expropriatory or discriminatory? (2) Is a foreign nationalization decree illegal if it has extraterritorial effects? (3) Does this nationalization decree violate the public policy of Belgium?
HOLDINGS: (1) No. (2) No. (3) No.
LAW: (1) A nationalization decree is not expropriatory if it provides for fair and adequate compensation. It is not discriminatory if it differentiates between different economic sectors. (2) Belgium does not recognize the theory of Spaltgesellschaft (that a splinter company would automatically come into existence when one state nationalizes a company with assets in another state). (3) The appropriation of foreign assets of a private person is lawful if it does not violate the public policy of the state where the assets are located.
EXPLANATION: (1) Fair market price was paid. The only discrimination was between economic sectors. (2) A shareholder who receives adequate compensation would be acting in bad faith to invoke the theory of Spaltgesellschaft. (3) It would violate Belgian public policy to separate GSR from the CSG group as this would decrease its value to the harm of its Belgian shareholders.
ORDER: Case dismissed.
Case 2-6. CASE CONCERNING BARCELONA TRACTION, LIGHT, and POWER CO., LTD. (Second Phase)
(Belgium v. Spain)
International Court of Justice, 1970.
FACTS: Barcelona Traction Co. was incorporated under Canadian Law in 1911 for the purpose of supplying electricity in Spain. In 1938, Spain declared the company bankrupt and took other actions detrimental to it and its shareholders. Because 88 percent of the shareholders were Belgian, Belgium brought suit against Spain seeking reparations. The ICJ’s majority held that when a state admits foreign nationals, “it is bound to extend to them the protection of the law and assumes obligations concerning the treatment to be afforded them.” Judge Padilla Nervo of Mexico took issue with this in a separate opinion.
OPINION OF J. PADILLA NERVO: The history of the rules regarding the responsibility of states is a history of abuses and illegal interference in the domestic jurisdiction of weaker states. The decisions of past claims commissions often reflect the unwilling agreement by weaker states to accept (at the time a commission was set up) responsibility for acts or omissions for which it was neither in fact nor in law really responsible.
One must realize that there are more important concerns than profit making. “Other legitimate interests of a political and moral nature are at stake and should be considered.” Also, “it is not the shareholders in those huge corporations who are in need of diplomatic protection, it is rather the poorer or weaker states . . . who need to be protected.” As the Rosa Gelbtrunk claim held, when an alien “carries on trade within the territory and under the protection of the sovereignty of a nation other than his own, he is to be considered as having cast in his lot with the subjects or citizens of [that] state.”
In sum, “investors who go abroad in search of profits take a risk and go there for better or for worse, not only for better. They should respect the institutions and abide by the national laws of the country where they chose to go.”
Case 2-7. CHATTIN v. UNITED MEXICAN STATES
Mexico-United States General Claims Commission, 1927.
FACTS: Chattin had been an employee of a Mexican railroad company. On July 9, 1910, he was charged with embezzlement (based on the accusation of a brakeman who was arrested for fraudulently selling railroad tickets), was tried in January 1911, convicted on February 6, 1911, and sentenced to 2 years’ imprisonment. He was liberated from the jail in May or June, 1911 as a result of the Madero revolution, and he returned to the US. In this claims commission proceeding, Chattin claimed that his arrest, trial, and sentencing were illegal, and his treatment in jail was inhuman.
ISSUE: Had Chattin been denied justice?
HOLDING: Yes.
LAW: Mexico’s treatment is to be tested by international standards.
EXPLANATION: There was evidence of undue delay in allowing Chattin to respond to the allegations and evidence against him, and in forwarding his appeal to the appellate court. There was evidence that Chattin had not been informed of the charges brought against him or allowed to face his accusers. The manager of the railroad was allowed to submit a series of anonymous written accusations that were only included in the record after the investigations were over and Chattin’s lawyer had filed his briefs. There was evidence that the hearing was only a formality that lasted 5 minutes. This constituted treatment amounting to an outrage, to bad faith, to willful neglect of duty, or to an insufficiency of governmental action that is recognizable by every unbiased man. There was no evidence to support the other allegations (e.g., bias by the judge and ill treatment in the prison).
ORDER: Chattin was awarded $5,000 in damages.
DISSENT: To require that a trial must have the sacred forms of the common law is to forget “that the same goal is reached by many roads.” This claim should have been disallowed.
Case 2-8. THE M/V SAIGA CASE (Merits)
(Saint Vincent and the Grenadines v. Guinea)
International Tribunal for the Law of the Sea, 1999.
FACTS: The M/V Saiga sold “gas oil” to fishing vessels in Guinea’s Exclusive Economic Zone (EEZ). The Guinean navy arrested it and its master and crew the next day outside the EEZ. The master was charged with importing taxable goods without declaring them and it brought criminal charges. The trial court found him guilty, and the Court of Appeals affirmed. He was fined and the ship’s cargo was seized. The Saiga’s master and crew were Ukrainian, the owner was in Cyprus, the manager in Scotland, and the ship itself was provisionally registered in Saint Vincent and the Grenadines (SVG). SVG sued Guinea before the ITLOS demanding that Guinea release the ship, the master and the crew. Guinea agreed to submit to the proceedings, but asked that they be dismissed because there was no genuine link between the ship and SVG, the master had not exhausted all local remedies, and the persons affected were not nationals of SVG.