Elettronica Sicula S.p.A. (ELSI) (United States of America v.

Italy)
FACTS: On 6 February 1987, the United States instituted proceedings against Italy in respect of a dispute
arising out of the requisition by the Government of Italy of the plant and related assets of Raytheon-Elsi
S.p.A., an Italian company producing electronic components and previously known as Elettronica Sicula
S.p.A. (ELSI), which was stated to have been 100 per cent owned by two United States corporations.

The Court, by an Order dated 2 March 1987, formed a Chamber of five judges to deal with the case, as
requested by the Parties. Italy, in its Counter-Memorial, raised an objection to the admissibility of the
Application on the grounds of a failure to exhaust local remedies, and the Parties agreed that that
objection should “be heard and determined within the framework of the merits”.

On 20 July 1989, the Chamber delivered a Judgment in which it rejected the objection raised by Italy and
said that the latter had not committed any of the breaches alleged by the United States of the bilateral
Treaty of Friendship, Commerce and Navigation of 1948, or of the Agreement Supplementing that Treaty.

The United States principally reproached the Respondent (a) with having effected an unlawful requisition
of the ELSI plant, thus depriving the shareholders of their direct right to proceed to the liquidation of the
company’s assets under normal conditions ; (b) with having been incapable of preventing the occupation
of the plant by the employees ; (c) with having failed to reach any decision as to the legality of the
requisition during a period of sixteen months ; and (d) with having intervened in the bankruptcy
proceedings, with the result that it had purchased ELSI at a price well below its true market value. After a
detailed consideration of the facts alleged and the relevant conventional provisions, the Chamber found
that the Respondent had not breached the 1948 Treaty and the Agreement supplementing that Treaty in
the manner claimed by the Applicant, and rejected the claim for reparation made by the United States.

Issue: Whether or not the chamber had jurisdiction to the case

Ruling: Yes. The jurisdiction is thus confined to questions of "the interpretation or the application" of
the FCN Treaty and Protocols and of the Agreement Supplementing the Treaty between the United
States of America and the Italian Republic, of 26 September 1951 (which Agreement is hereinafter called
"the Supplementary Agreement"), Article IX of which provides that it is to "constitute an integral part" of
the FCN Treaty. This same jurisdiction may accordingly be exercised by this Chamber, created by the
Court to deal with this case by virtue of Article 26, paragraph 2, of its Statute, and Articles 17 and 18 of its
Rules, at the request of and after consultation with the Parties.

While the jurisdiction of the Chamber is not in doubt, an objection to the admissibility of the present case
was entered by Italy in its Counter Memorial, on the ground of an alleged failure of the two United States
corporations, Raytheon and Machlett, on whose behalf the United States claim is brought, to exhaust the
local remedies available to them in Italy. This objection, which the Parties agreed should be heard and
determined in the framework of the merits, must, therefore, be considered at the outset.

The United States questioned whether the rule of the exhaustion of local remedies could apply at al1 to
a case brought under Article XXVI of the FCN Treaty. That Article, it was pointed out, is categorical in its
terms, and unqualified by any reference to the local remedies rule; and it seemed right, therefore, to
conclude that the parties to the FCN Treaty, had they intended the jurisdiction conferred upon the Court
to be qualified by the local remedies rule in cases of diplomatic protection, would have used express
words to that effect; as was done in an Economic Co-operation Agreement between Italy and the United
States of America also concluded in 1948. The Chamber has no doubt that the parties to a treaty can
therein either agree that the local remedies rule shall not apply to claims based on alleged breaches of
that treaty ; or confirm that it shall apply. Yet the Chamber finds itself unable to accept that an important
principle of customary international law should be held to have been tacitly dispensed with, in the absence
of any words making clear an intention to do so. This part of the United States response to the Italian
objection must therefore be rejected.