State Responsibility (Responsibility of States for Internationally Wrongful Acts 2001)

Responsibility arises from the breach by a State of an international obligation.

Art. 1: Every internationally wrongful act of a State entails the international responsibility of
that State.
- E.g: Failure to honour a treaty; violates the territorial sovereignty of another State;
damages the territory or property of another State
Art. 2: There is an internationally wrongful act of a State when such conduct
- Is attributable to the State under international law, AND
- Constitutes a breach of an international obligation of the State
Thus, in order for the principle of state responsibility to be invoked, it must first be
determined whether there was an internationally wrongful act (must fulfil both elements).
Attribution of conduct to the State is dependent on the entity committing such conduct:
Conduct of State organs or officials:
Art. 4(1): The conduct of any State organ is considered an act of that State under international
law.
- The ICJ in Immunity from Legal Process: It is a rule of customary character for the
conduct of any organ of a State to be regarded as an act of that State.
- Art. 4(2): An organ includes any person or entity which has that status in accordance
with the internal law of the State.

- Executive organ: The government, ministries, government officials, police, armed

forces, secret agents
- Rainbow Warrior incident: Rainbow Warrior, a Greenpeace vessel, was blown
up in Auckland Harbour by French Government secret service agents as it was
leaving to protest against French nuclear tests in the Pacific. The French
Government admitted its responsibility for the destruction of the vessel. New
Zealand sought and received an apology and compensation for the violation of
its territorial sovereignty.
- Judicial organ: National courts
- Legislative organ: Legislative acts of the Parliament
- Superior and subordinate officials: Conduct carried out by lower level officials
provided that they are acting in their official capacity
- Massey case: A US national was murdered in Mexico. The murderer was
arrested, but escaped from prison when the assistant warder allowed him to
leave. The Mexican Government argued that it was not liable as the
misconduct was that of a minor official. Held: There is no distinction between
the acts of a superior official and an official of a lower level. Thus, Mexico was
responsible and had to pay damages to the US.
 - Conduct must be done in official capacity:
- The State will only be responsible for the conduct of a person or entity having
the status of a State organ, if that person or entity acts in an official capacity.
- If that person or entity acts in a private capacity: The act has no connection
with the official function and is only the act of a private individual, thus failing
to render the State responsible.
Ultra vires acts of State organs:
Art. 7: The conduct of an organ of a State or of a person or entity empowered to exercise
elements of the governmental authority shall be considered an act of the State under
international law if the organ, person or entity acts in that capacity, even if it exceeds its
authority or contravenes instructions.
- Caire claim: A State may be responsible for ultra vires acts of their officials committed
within their apparent authority or general scope of authority, regardless of whether
the official or organ has acted within the limits of his competency or has exceeded
those limits.
- Differs as compared to an official acting in a private capacity.
- Henriquez claim: What matters is the amount of control which ought to have been
exercised in the particular circumstances, not the amount of actual control in
preventing the breach.

- Youmans claim: A mob gathered around a house in Mexico within which were three
American nationals. The local mayor ordered a lieutenant to proceed with troops to
quell the riot and put an end to the attack upon the Americans. The troops, upon
arriving, instead of dispersing the mob, opened fire on the house which resulted in the
death of the Americans. Held: The participation of the soldiers in the murder could
not be regarded as acts of soldiers in their private capacity when it was clear that at
the time of the commission of the acts, the men were on duty under the immediate
supervision and in the presence of a commanding officer. Thus, Mexico was held
responsible.
Conduct of persons directed or controlled by a State:
Art. 8: The conduct of a person or group of persons shall be considered an act of a State under
international law if the person or group of persons is in fact acting on the instruction of, or
under the direction or control of that State in carrying out the conduct.
- Acting on the instruction of the State: When State organs supplement their own action
by recruiting private persons or groups to commit an act.
- Zafiro case: The US was held responsible for looting by the civilian crew of a
merchant vessel, employed as a supply vessel by American Naval forces during
the US war with Spain under the command of a merchant captain, who in turn
was under the orders of an American Naval officer.
 - Acting under the direction or control of the State: Where the State gave instructions
or provided the direction pursuant to which the perpetrators of the wrongful act acted
or where it exercised “effective control” over the action during which the wrong was
committed.
- Nicaragua case: In determining whether the breaches of international
humanitarian law by the Contras were attributable to the US, the ICJ stated
that it was not sufficient to establish that the US Government financed,
organised, trained, supplied and equipped the Contras, and provided logistical
assistance in planning their operations.
- Despite the heavy subsidies and other forms of support provided to them by
the US, there is no clear evidence that the US had actually exercised such a
degree of control as to justify treating the Contras as acting on its behalf. For
such conduct to give rise to legal responsibility of the US, it would have to be
proven that the State had “effective control” of the military and paramilitary
operations in the course of which the alleged violations were committed. Thus,
the acts of the Contras were not attributable to the US.
Conduct acknowledged and adopted by a State as its own:
Art. 11: Conduct not attributable to the State under the preceding articles shall nevertheless
be considered an act of that State under international law if and to the extent that the State
acknowledges and adopts the conduct in question as its own.
- Purely private conduct cannot as such be attributed to a State. But the conduct is to
be considered as an act of a State once it is acknowledged and adopted, which must
be distinguished from the mere giving of support or endorsement.

- United States Diplomatic and Consular Staff in Tehran case: Several hundred student-
demonstrators (militants) occupied the US Embassy in Tehran by force and held the
embassy staff as hostages. The court divided the event into two stages:
- In the first stage, the attack was carried out by militants who in no way could be
regarded as “agents” or “organs” of the Iranian state. Thus, their conduct in mounting
the attack and seizing the inmates as hostages was not attributable to the State.
- The second stage commenced after the completion of the occupation of the embassy.
At this stage, the Iranian government was legally bound to bring to an end the unlawful
occupation and pay reparation. Instead, it approved and endorsed the occupation
and even issued a decree stating that the American embassy was a centre of
espionage and the staff did not enjoy diplomatic immunity. The decree also declared
that the embassy and the hostages would remain as they were until the US had
handed over the former Shah for trial.
- Held: The approval given to the acts of the militants and the decision to perpetuate
them translated continuing occupation of the embassy and detention of the hostages
into acts of that State. The militants had now become agents of the Iranian state for
whose acts the State itself was internationally responsible.
Conduct of an insurrectional movement
Art. 10(1): The conduct of an insurrectional movement which becomes the new government
of a State shall be considered an act of that State under international law.
- The State is responsible not only for the wrongful acts of that movement, but also for
the wrongful acts committed by the former government (during the struggle for
power by the apparatus of the insurrectional movement)
- Short v Iran: A US national was forced to leave Iran after threats from private persons
during the Iranian revolution. He claimed against Iran for wrongful expulsion. The
Tribunal, while accepting that the revolutionary government was liable for acts
committed during the revolution, held that Iran was not responsible for acts of private
persons who had no status within the revolutionary movement. The claimant would
have been able to recover had he been compelled to leave by revolutionary officials.
Conduct of private persons or entities
Conduct of private persons or entities which are not State organs or not exercising elements
of governmental authority or not acting as agents of the State is not attributable to the State.
- Violence against foreigners or destruction of foreign property by private individuals or
by insurgents, secessionists, terrorists, rioters, militants, is not attributable to the
State.
However, the State is responsible for the act of private individuals accompanied by an
omission on the part of the State (by its own organs: police, security forces, courts)
- Failure to exercise due diligence in preventing private persons from attacking foreign
nationals or destroying foreign property.
- Asian Agricultural Products Ltd v Sri Lanka: A farm owned by a British company
was in an area largely under the control of Tamil Tiger rebels. The farm
management offered to dismiss farm staff suspected of being part of the
secessionist movement. However, the Sri Lankan government forces neglected
the offer and instead, launched a vast counter-insurgency operation in that
area, resulting in the destruction of the farm and the death of company
workers. Held: Sri Lanka was responsible in its own right for failure to exercise
due diligence in protecting the company’s property.

- Denial of justice: Failure to punish responsible individuals or provide injured foreign

nationals the opportunity of obtaining compensation in the national courts.
- Janes claim: An American citizen was murdered at a mine in Mexico. The
murderer was well known in the community where the killing occurred and
evidence proved that a Magistrate was informed of the shooting five minutes
after it took place. However, even after 8 years had elapsed, the murderer had
not been apprehended and punished by the Mexican authorities. Held: Mexico
was responsible for the denial of justice.
Breach of an international obligation:
The conduct attributed to the State must constitute a breach of an international obligation
by the State.
Art. 12: There is a breach of an international obligation by a state when an act of that state is
not in conformity with what is required of it by that obligation, regardless of its origin or
character.
- Rainbow Warrior arbitration: “Regardless of its origin” under Art. 12 means “any
violation by any state of any international obligation, of whatever origin, gives rise to
state responsibility and consequently, to the duty of reparation.”
- Thus, international obligations may exist through a customary rule of international
law, by a treaty, by a judgment given by the ICJ or any other international tribunal, or
by a decision of an international organization competent in the matter.
Art. 13: An act of a State does not constitute a breach of an international obligation unless
the State is bound by the obligation in question at the time the act occurs.

Defences (Circumstances precluding wrongfulness)

Consent (Art. 20): Valid consent by a State to the commission of a given act by another State
precludes the wrongfulness of that act in relation to the former State to the extent that the
act remains within the limits of that consent.

Self-defence (Art. 21): As to obligations under international humanitarian law and in relation
to non-derogable human rights provisions, self-defence does not preclude the wrongfulness
of the conduct.

Countermeasures (Art. 22): Non-forcible measures taken by an injured State in response to a

breach of international law in order to secure the end of the breach.
- Countermeasures are not wrongful acts, but are recognised as valid means of self-help
as long as certain conditions are respected.

Force majeure (Art. 23): The wrongfulness of an act of a State not in conformity with an
international obligation of that State is precluded if the act is due to force majeure that is the
occurrence of an irresistible force or of an unforeseen event, beyond the control of the
State, making it materially impossible in the circumstances to perform the obligation.
- Differs from a situation of distress or necessity because the conduct of the State is
involuntary or at least involves no element of free choice.
 - Circumstances which renders absolute and material impossibility due to a natural or
physical event, to human intervention, or to some combination of the two
- Force majeure does not include:
- Circumstances in which performance of an obligation has become more
difficult, e.g: due to some political or economic crisis.
- Situations brought about by the neglect or default of the State concerned,
even if the resulting injury itself was accidental and unintended.

Distress (Art. 24): The wrongfulness of an act of a State not in conformity with an international
obligation of that State is precluded if the author of the act in question has no other
reasonable way, in a situation of distress, of saving the author’s life or the lives of other
persons entrusted to the author’s care.
- The State acts voluntarily.
- The interest concerned is the immediate one of saving people’s lives, irrespective of
their nationality.
- Rainbow Warrior arbitration: France’s conduct in removing the two officers from the
island of Hao could not rely on distress as a defence as a broader view of the
circumstances justifying a plea of distress (e.g: serious health risk) was required than
merely a circumstance of “extreme urgency involving humanitarian considerations
affecting the acting organs of the State.”

Necessity (Art. 25): The plea of necessity does not depend on the prior conduct of the injured
State, and is a voluntary action.
- Necessity may be invoked where there was grave danger either to the essential
interests of the State or of the international community as a whole.
- Where necessity cannot be relied on:
- Where the international obligation in question explicitly or implicitly excludes
reliance on necessity
- If the responsible State has contributed to the situation of necessity
- It is subject to strict limitations and can only be accepted on an exceptional basis
(Gabcikovo-Nagymaros Project case):
- It is only when it is threatened by a grave and imminent peril that this condition
is satisfied.
- The peril has to be objectively established and not merely apprehended
as possible.
- The peril has to be imminent in the sense of proximate.
- The course of action taken must be the “only way” available to safeguard that
interest.
- The plea is excluded if there are other means available, even if they
may be more costly or less convenient.
Reparation
Art. 31: The responsible State is under an obligation to make full reparation for the injury
caused by the internationally wrongful act.
Chorzow Factory case: The responsible State must endeavour to wipe out all the
consequences of the illegal act and re-establish the situation which would, in all probability,
have existed if that act had not been committed.
Rainbow Warrior arbitration: There is no general requirement of material harm or damage
for a State to be entitled to seek some form of reparation.
- Therefore, reparation is available for those acts affecting the honour, dignity, or
prestige of a State, even if those acts have not resulted in pecuniary or material loss.
In seeking reparation, causation and remoteness must be proven: A sufficient causal link
which is not too remote.
Gabcikovo-Nagymaros Project case: A failure to mitigate by the injured party may preclude
recovery to that extent.
Art. 34: Reparation shall take the form of restitution, compensation and satisfaction.
Restitution (Art. 35)
Two prerequisites:
- Restitution must not be materially impossible (Art. 35(a))
- Forests of Central Rhodope case: Material impossibility is not limited to cases
where the object in question has been destroyed, in some situation, third
party’s interest will be taken into consideration.
- Restitution must not involve a burden out of all proportion to the benefit deriving
from restitution instead of compensation (Art. 35(b))
- Restitution is based on considerations of equity and reasonableness. If there is
a grave disproportionality between the burden which restitution would
impose on the responsible State and the benefit which would be gained,
restitution will not be available.

- Restitution may take the form of material restoration:

- E.g: Handing over to a State of an individual arrested in its territory; release of
detained individuals; restitution of ships.
- Temple of Preah Vihear case: Thailand was ordered to return to Cambodia
religious objects it had taken illegally from a temple in Cambodia.
Compensation (Art. 36)
An injured State must be compensated for the damage that is not made good by restitution.
- Restitution, sometimes, may not be available, or may not be sufficient to ensure full
reparation.
Damage under Art. 31(2) includes both, material damage and non-material damage.
- Material losses: Loss of earnings and earning capacity, medical expenses, etc.
- Non-material losses: Moral damage, such as loss of loved ones, pain and suffering.
I’m Alone case: The Commissioners recommended the payment by the US of $25,000 as a
material amend in respect of the wrong committed by the US in sinking the I’m Alone.
Satisfaction (Art. 37)
It is only in cases where restitution and compensation have not provided full reparation that
satisfaction may be required.
- Rainbow Warrior arbitration: Satisfaction is the remedy for injuries not financially
assessable, which amount to an affront to the State.
- E.g: Situations of insults to the symbols of the State; violations of sovereignty or
territorial integrity; ill treatment of or deliberate attacks on heads of State or
Government or diplomatic or consular representative or other protected persons.
The forms of satisfaction are non-exhaustive: It may consist of an acknowledgement of the
breach, an expression of regret, a formal apology or any another appropriate modality.
- It is dependent on the circumstances of the case.
- Expressions of regret or apologies were required in the I’m Alone case, Rainbow
Warrior arbitration, and were offered in the Vienna Convention on Consular Relations
case and LaGrand cases.
- Borchgrave case: A Belgian national working at the Belgian embassy in Madrid was
found dead on the roadside in Spain. Belgium demanded as reparation “punishment
of the guilty”.
- Satisfaction may take the form of disciplinary or penal action against
individuals whose conduct caused the internationally wrongful act.
Satisfaction shall not be out of proportion to the injury and may not take a form humiliating
to the responsible State.

Difference between Compensation and Satisfaction: Monetary payments may be called for
by way of satisfaction under Art. 37, but they are different.
- Monetary compensation is intended to offset, as far as may be, the damage suffered
by the injured State as a result of the breach.
- Satisfaction is concerned with non-material injury, specifically non-material injury to
the State on which a monetary value can be put only in a highly approximate and
notional way.
- If it is predominantly that of seeking a token of regret and acknowledgement of
wrongdoing then it is a matter of satisfaction.
Treatment of Foreign Nationals
A State has no general obligation to admit foreigners or foreign companies to its territory.
However, once they are present in its territory, the State is under an international obligation
not to ill-treat them. If the State violates this obligation in any way, it may incur international
responsibility to the State of whom the person or the company is a national.
International minimum standard of treatment:
Neer Claim: The proprietary of governmental acts should be put to the test of international
standards, and that 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 recognise its insufficiency.
- Duty not to harm – A State and its organs are legally obligated to refrain from harming
foreign nationals (Youmans claim)
- Not to mistreat in lawful custody – Roberts claim: The Mexico-US General Claims
Commission found that although Roberts had been lawfully detained according to
local Mexican law, his treatment in prison and the length of detention before facing
trial were unreasonable and below the ordinary standards of civilisation.
- Denial of justice – Foreign nationals are entitled to full access to the courts and to a
basic standard of fair treatment. They are deemed deprived of this where there is a
denial, unwarranted delay or obstruction of access to courts, gross deficiency in the
judicial or remedial process, an unjust judgment, failure to provide guarantees which
are considered indispensable to the proper administration of justice (Janes claim).
National standard of treatment:
- Foreign nationals cannot claim higher standards than that available in their countries.
- A State is not responsible if it accords foreign nationals a standard of treatment not
less than its own nationals.
- A State is only responsible for damage caused by private persons to the persons or
property of foreigners if it has manifestly failed to take such preventive or punitive
measures as in the circumstances might reasonably be expected of it had the persons
injured been its own nationals.
Expropriation of foreign property
Expropriation is the deprivation by the State of foreign rights to property or its enjoyment.
- Direct expropriation: Confiscation or nationalisation
- Indirect expropriation: Forced sales of property, exercising management control over
investments, or exorbitant taxation.
- However, a State is not liable for economic injury which is a consequence of bona fide
“regulation”. Therefore, economic measures such as non-confiscatory taxation,
exchange control regulation and currency revaluation do not normally result in
expropriation.
International minimum standard on expropriation:
The expropriation must be for a public purpose
- The PCIJ in Certain German Interests in Polish Upper Silesia: Expropriation for reasons
of public utility, judicial liquidation and similar measures is permissible in international
law.
- British Petroleum v Libya case: The Libyan nationalisation of British Petroleum took
place in the context of a specific anti-British policy. The nationalisation was, therefore,
unlawful because it “was made for purely extraneous political reasons and was
arbitrary and discriminatory in character” rather than as part of a policy of public
utility.
- Amoco case: It is sufficient for the expropriating State to prove the taking is done in
pursuant of some public purpose.
- Where it is not for public purpose:
- Expropriation is to avoid contractual obligations of the State or of an entity
controlled by it
- The only purpose of the expropriation is for financial purposes
Non-discrimination based on nationality
- Aminoil v Kuwait: Kuwait was pursuing a general policy of nationalisation but was
doing so in stages. At the time of the nationalisation of Aminoil, a Japanese company
also operating in the same region was left not nationalised. Aminoil alleged
discrimination, but the tribunal rejected the claim on the grounds that there were
legitimate reasons for the nationalisation not having included the Japanese company.
Thus, in order to establish an unlawful discrimination, a company, in such a case,
would have to show that it had been singled out on the basis of its nationality.
Expropriation must be adequately compensated
- The international minimum standard for compensation is founded on the Hull formula
of “adequate, effective and prompt compensation”. According to this formula, the
compensation is to be the “full value” of the property at the time of the taking.
- The same was pleaded by the United Kingdom in Anglo-Iranian Oil Co. case before
the ICJ: “…it is clear that the nationalisation of the property of foreigners, even if not
unlawful on any other ground, becomes an unlawful confiscation unless provision is
made for compensation which is adequate, prompt and effective... By adequate
compensation is meant ‘the value of the undertaking at the moment of dispossession
plus interest to the day of judgment.’”
- Exceptions to compensation: Where a treaty provides otherwise; confiscation as a
penalty for crime or in the course of legitimate exercise of police power; confiscation
as a measure of defence; seizing of property by way of taxation.
Chorzow Factory case: Where it is established that there has been an unlawful expropriation
of foreign property, an obligation of reparation (restitution) for all the loss or damage
sustained by the owner of expropriated property arises.
Invocation of Responsibility by an injured State – Diplomatic Protection
Art. 42: A State is entitled as an injured State to invoke the responsibility of another State if
the obligation breached is owed to that State individually, or a group of States including that
State or the international community as a whole.
Diplomatic protection consists of the invocation by a State, through diplomatic action, of the
responsibility of another State for an injury caused by an internationally wrongful act to a
natural or legal person that is a national of the former State with a view to the implementation
of such responsibility.
- The right of diplomatic protection of nationals abroad: The national State has the right
under international law to extend diplomatic protection over its nationals or
corporations present in a foreign country.
- The ICJ in Mavromattis Palestine Concessions case: A State is entitled to protect its
subjects, when injured by acts contrary to international law committed by another
State, from whom they have been unable to obtain satisfaction through the ordinary
channels. By resorting to diplomatic action, a State is in reality asserting its right to
ensure, in the person of its subjects, respect for the rules of international law.
Art. 44: The invocation of State responsibility (in the context of diplomatic protection)
requires the establishment of two elements in order for the claim to be admissible:
- The nationality of claims, AND
- Exhaustion of local remedies
Nationality of claims: A claim against another State will fail unless it can be proven that the
injured individual is a national of the claimant State.
For individuals, two situations can be distinguished in cases of dual or multiple nationality:
Where the individual is a national of the claimant State and a third State not involved in the
dispute:
- Any State which he is a national of may exercise diplomatic protection without the
need to establish any ‘genuine link’ between the claimant State and the individual.
Where the individual is both a national of the claimant State and the respondent State:
- Nottebohm case: Mr Nottebohm was born in Germany and had German nationality.
In 1905 he went to Guatemala where he resided and conducted his business activities.
In 1939, he visited Liechtenstein to apply for naturalisation. After acquiring
Liechtenstein nationality, he went back to Guatemala. Guatemala then expelled, and
seized the property of, Nottebohm. Liechtenstein instituted proceedings against
Guatemala. Guatemala argued that Liechtenstein could not extend diplomatic
protection to Nottebohm in a claim against Guatemala.
- Held: The ICJ observed that nationality was a legal bond between the person and the
State granting nationality and the recognition that the person was more closely
connected with that State than with any other. The court found that Nottebohm had
 been settled in Guatemala where his main seat of business was for 34 years and with
that country he had a genuine connection of existence and strong sentimental
attachment. Where the court did not find any close connection between Nottebohm
and Liechtenstein, it was held that Liechtenstein was not entitled to extend its
protection to Nottebohm as against Guatemala, thus, making the claim inadmissible.
However, in such circumstances, the ILC in its Draft Articles on Diplomatic Protection 2006
does NOT require the establishment of a genuine link as a requirement of nationality.
- Art. 4: For the purposes of the diplomatic protection of a natural person, a State of
nationality means a State whose nationality that person has acquired in accordance
with the law of that state, by birth, descent, naturalisation, succession of state or in
any other manner, not inconsistent with international law.
- Art. 5: The nationality of the natural person must be continuous in that it must exist
at the date of the injury and should continue until at least the date of the official
presentation of the claim.

- In cases of dual or multiple nationality, where one State of nationality (claimant State)
makes a claim against another State of nationality (respondent State), the State with
which the natural person has the more predominant connection has the right to
exercise diplomatic protection.
- Art. 7: A State of nationality may not exercise diplomatic protection in respect of a
person against a State of which that person is also a national unless the nationality of
the former State is predominant, both, at the date of the injury and at the date of the
official presentation of the claim.
- In determining the predominant nationality, the strengths of competing
nationalities must be weighed and put into consideration.
- Mergé claim: In such cases, a person’s habitual residence can be one of the
criteria of evaluation, but not the only one. The conduct of the individual in his
economic, social, political, civic and family life, as well as the closer and more
effective bond with one of the two States must also be considered.

- Thus, the test in determining whether a claimant State can exercise diplomatic
protection against a respondent State is that of ‘dominant nationality’ of an injured
person.
For corporations (legal persons):
- Barcelona Traction, Light and Power Co. case: The company was established in Canada
under Canadian law to develop electricity supplies in Spain. In 1948, it was declared
bankrupt by a Spanish court. Belgium brought this claim in respect of injury to its
nationals who were shareholders, resulting from injury to the company. Spain
objected that since the injury was to the company and not the shareholders, Belgium
had no right to bring the claim. Held: The court rejected the Belgian claim on the
ground that it did not have a legal interest in the matter, as it was only the rights of
the company that had been infringed, and not the shareholders. If the direct right of
 the shareholders were affected, e.g: dividends, then they would have an independent
right of action.
- Art. 11, Draft Articles on Diplomatic Protection 2006: A State of nationality of
shareholders are not entitled to exercise diplomatic protection in the case of an injury
to the corporation, unless:
- a) the corporation has ceased to exist
- b) the corporation had at the date of injury, nationality of the respondent State
(incorporation in that State was required) and the State itself caused injury to
the company.
- Art. 9: The State of nationality means the State where the company was incorporated.
However, when the company is controlled by nationals of another State and has no
substantial business activities in the State of incorporation, and the seat of
management and the financial control of the company are both located in another
State, that State shall be regarded as the State of nationality.
Exhaustion of local remedies: An injured natural person must exhaust remedies in the
respondent State before its national State (claimant State) can bring an international claim
on its behalf.
- Art. 14: 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.
- If the law of the State permits an appeal in the circumstances of the case to the highest
court, an appeal must be brought in order to secure a final decision in the matter.
- However, the injured person is only required to exhaust remedies which may result in
a binding decision.

- Failure to exhaust local remedies in the Ambatielos arbitration: Ambatielos, a Greek

ship-owner, contracted to buy some ships from the British Government and later
accused it of a breach of contract. In the litigation before the English High Court,
Ambatielos failed to call an important witness and lost. His appeal was therefore
dismissed by the Court of Appeal. When Greece subsequently made a claim on his
behalf, the Commission of Arbitration held: Ambatielos failed to exhaust local
remedies due to his failure to call a vital witness and to appeal from the Court of
Appeal to the House of Lords.

- Failure to appeal in the Barcelona Traction case against the Spanish Institute of
Foreign Exchange’s refusal to sanction proposal to deal with the company’s overseas
bond payments. The court pointed out that a complaint should have been made to
the Minister of Commerce.
- Provided that the administrative remedy is based upon an established
procedure, it will constitute a local remedy.
Exceptions to the exhaustion of local remedies (Art. 15):
- There is no reasonably available local remedies to provide effective redress OR the
local remedies provide no reasonable possibility of such redress
- Robert E Brown case: The tribunal held that the local remedies rule did not
apply because it found that “all three branches of the government of the South
African Republic conspired to ruin the claimant’s enterprise… The judiciary, at
first recalcitrant, was at length reduced to submission and brought into line
with a determined policy of the executive (lack of independent judiciary).”
- Local remedies, despite it being “available and effective” need not be
exhausted when it is clear from the outset that the local courts will not
provide redress for the injured individual
- Finnish Ship-owners arbitration: Finland’s failure to appeal to the Court of
Appeal in the UK did not mean that it had failed to exhaust local remedies. Its
appeal would have been obviously futile as the Court of Appeal could not have
reversed the Admiralty Arbitration Board’s finding of fact, and could only
consider the questions of law.
- There is undue delay in the remedial process attributable to the respondent State
- There was no relevant connection between the injured person and the respondent
State
- The injured person is manifestly precluded from pursuing local remedies
- The respondent State has waived the required for local remedies to be exhausted
Burden of proof: It is for the State claiming that local remedies have not been exhausted
(respondent State) to demonstrate that such remedies do exist to which the opposing State
(claimant State) must then prove that they were exhausted or inadequate.