DIPLOMATIC ACADEMY OF VIETNAM

INTERNATIONAL LAW FACULTY

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RESEARCH METHODOLOGY:

PERSONAL ASSIGNMENT
Instructor: Trịnh Hải Yến

Class: LQT44C

Student’s name:

Phạm Hồ Thanh Thảo

Student’s code:
 LQT44C-0831721

PART A. GENERAL PART:

I. RESEARCH TOPICS, QUESTIONS AND PROBLEM:
1. Research topic:
Confusions and Problems Surrounding The Act of State Doctrine
in Investment Dispute Settlement.
2. Questions:
Does the Act of State Doctrine re-create imbalanced absolute
immunity in Investor-State investment dispute settlement?
3. Problem:
The Act of State Doctrine is one of the legal doctrines closely
related to state immunity. However, there are still confusions and
problems, as well as criticism surrounding this doctrine and
regards it as a mean of reintroducing absolute state immunity and
imbalance in investment dispute settlement. This essay is written
with the scope to explore the concept and application of the Act
of State Doctrine concerning investment disputes.
II. SUMMARY OF THE ESSAY:
1. Introduction:
- Act of State is a doctrine developed by the US court to help solve
dispute related to various fields, including investment dispute.
- However, there are still confusions and problems related to this
doctrine.
- There is criticism surrounding this doctrine and regards it as a mean
of reintroducing absolute state immunity.
 - Also, it is claimed that the Act of State doctrine creates an
imbalance in investment dispute.
2. Act of State doctrine and state immunity in investment dispute.
2.1. Main argument: the Act of State doctrine definition and
relevance in investment dispute.
- Act of State doctrine:
 First appearance: “Every sovereign state is bound to
respect the independence of every other sovereign
state, and the courts of one country will not sit in
judgment on the acts of the government of another
done within its own territory.”1
 Application: first used in England and the United
States, not one of the required principles of
International Law but can be referred to as an
applicable doctrine in various cases.
 Exception2:
 The Bernstein Exception
 The Commercial Activity Exception
 The Treaty Exception
 The Fraud Exception
 The United States Property Situs Exception
 The Human Rights Exception
- Sovereign immunity of State:
 Definition: “In international law, state immunity refers
to the legal rules and principles determining the
conditions under which a foreign state may claim
freedom from the jurisdiction (the legislative, judicial
1
Underhill v. Hernandez (November 29, 1897).
2
Michael J. Bazyler, "Abolishing the Act of State Doctrine," University of Pennsylvania Law Review 134,
no. 2 (1986): 325, doi:10.2307/3312072.
 and administrative powers) of another state (often
called the ‘forum state’).”3
 Sovereign immunity is commonly linked to non-
justiciability and Act of State doctrines. “As far as the
Act of State doctrine is concerned in particular in this
context, some disquiet has been expressed by courts
that the application of that principle may in certain
circumstances have the effect of reintroducing the
absolute theory of sovereign immunity.”4
 Governmental acts with regard to which immunity
would be granted are termed acts jure imperii, while
those relating to private or trade activity are termed
acts jure gestionis.
2.2. Evidence:
- Relevance in investment dispute: exemplary case concerning
the Act of State dispute is Banco Nacional de Cuba v.
Sabbatino, 376 U.S. 398. (about Cuba nationalised sugar
industry, resulted in the loss of investment of a number of
foreign investors without any compensation).

3. Confusions and problems surrounding the Act of State doctrine:

the prominent of absolute immunity re-introduction and
imbalanced investment dispute settlement.
3.1. Confusion and problems:
- Disagreement about the meaning and scope of the Doctrine.
 The courts have been unable to determine its scope or
to construct a consistent scheme for its application.
3
Michael Akehurst, A Modern Introduction to International Law(London: Routledge, 1995), 118.
4
Malcolm N. Shaw, International Law, 6th ed. (Cambridge, United Kingdom: Cambridge University Press,
2008), 700.
  The confusion about the Act of State doctrine: basically
any governmental action can be characterized as an Act
of State and the tribunals often find it difficult to
examine the level of required involvement to trigger
the doctrine's application.
 Example: A state can expropriate the land of an
investor’s factory in the claim of state interest to sell it
to a home investor; while still invoke this action as “an
Act of State”.
- Potential protection of State to avoid legal actions from
investors.
 A state can receive state immunity, diplomatic
immunity and Act of State as triple protection against
investors in case of a dispute.
 Create imbalance and foreseeable advantages to State,
making the investors hesitate in taking legal actions
against the state or even investing in other states.
3.2. Evidence:
- In 1976, the Congress of the U.S recognised the restrictive
theory of foreign sovereign immunity by introducing the
Foreign Sovereign Immunities Act.
- “The use of the Act of State doctrine when a foreign sovereign
is one of the litigants negates a number of the FSIA's
important policies. ... Using the Act of State doctrine as a
rationale, however, courts have circumvented this directive
and have continued to examine the purpose of the activity. A
public purpose, which can be found in almost every case
involving a foreign sovereign, precludes adjudication of the
suit under the Act of State doctrine. The public purpose
 analysis, apparently abolished by the FSIA, has thus been
resurrected.”5
4. Does the Act of State doctrine re-create imbalanced absolute
immunity in Investor-State investment dispute settlement?
4.1. Main argument:
- The distinction in nature between Act of State doctrine and
state immunity.
 The Act of State doctrine is mainly about the
substantive aspects of a dispute, meanwhile, State
immunity is strictly speaking of a procedural nature.
 The concepts of the Act of State set firmly on an area
of international activities of states that is out of the
capability of the state tribunal in its assertion of
jurisdiction.
 State immunity permits that, under circumstances, a
tribunal’s jurisdiction can be prevented.
 Thus, immunity from jurisdiction does not mean
exemption from the legal system of the territorial
state in question.
 “The doctrine of sovereign immunity is similar to the
Act of State doctrine in that it also represents the need
to respect the sovereignty of foreign states. The two
doctrines differ, however, in significant respects. The
law of sovereign immunity goes to the jurisdiction of
the court. The Act of State doctrine is not

5
Michael J. Bazyler, "Abolishing the Act of State Doctrine," University of Pennsylvania Law Review 134,
no. 2 (1986): 377, doi:10.2307/3312072.
 jurisdictional. Rather, it is a prudential doctrine
designed to avoid judicial action in sensitive areas.”6
- The application of the Act of State doctrine grants fairness
and justice to the side of State in investment arbitration.
 According to ICSID data in 2015, there have been 470
arbitration cases registered under ICSID Convention 7.
However, ISDS analysed that States only won 36% of
those cases. “As most observers acknowledge, states
never win; they only do not lose. Only investors win
awards of damages; states may at best, receive an
award of costs.”8
 Generally, investor-state investment arbitration or
international are not biased toward states.
 The Act of State doctrine holds the role of an
international law principle that would help the state
claim their sovereignty rights in investment arbitration.
 The Act of State doctrine is not really a part of the
scheme to protect State interest, it holds more value as
a reference. In the United States, the Act of State
doctrine has been “primarily developed with respect to
an act of a government expropriating foreign property
allegedly violating international law”9, more
especially, international investment law.
4.2. Evidence:

6
International Ass'n of Machinists & Aerospace Workers v. Organization of Petroleum Exporting Countries
(United States District Court, C.D. California September 18, 1979).
7
ICSID, The ICSID Caseload – Statistics (Issue 2015-2), PDF, ICSID, June 30, 2015.
https://icsid.worldbank.org/en/Documents/resources/ICSID%20Web%20Stats%202015-2%20(English).pdf
8
Howard Mann, ISDS: Who Wins More, Investors or States? PDF, IISD, June 2015.
https://www.iisd.org/itn/wp-content/uploads/2015/06/itn-breaking-news-june-2015-isds-who-wins-more-
investors-or-state.pdf
9
Michael Akehurst, A Modern Introduction to International Law(London: Routledge, 1995), 123.
 - Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398.
- The Convention on the Settlement of Investment Disputes
Between States and Nationals of Other States - International
Centre for Settlement Of Investment Disputes (also known as
the Washington Convention 1965)
- The foundation of ICSID
5. Conclusion:
- Strictly speaking, there is still a controversial argument
around the Act of State doctrine. Application of Act of State
doctrine should be used restrictively and with support of other
doctrines to minimize the confusions and problems that may
arise.
- However, if it still contributes to the promotion of
investment-related dispute as a valuable reference, it is not
necessarily to abolish this doctrine. The Act of State doctrine
should be here to stay until the day of another advanced
doctrine that could completely replace it without causing
problems.

PART B. ARGUMENT COMPLETION TASK

With all the negative claims against the Act of State doctrine, the
fundamental question arising here is "Does the Act of State doctrine re-
create imbalanced absolute immunity in Investor-State investment
dispute settlement?”. It is hard to pinpoint a concise answer of “yes” or
“no” for this question, rather than we should evaluate this doctrine in
different lights. Initially, the Act of State doctrine is distinctive from
state immunity. The Act of State doctrine is mainly about the
substantive aspects of a dispute, meanwhile, state immunity is strictly
speaking of a procedural nature, therefore, the nature of these two
concepts should not be overlapped in general. Furthermore, the
concepts of the Act of State set firmly on an area of international
 activities of states that is out of the capability of the state tribunal in its
assertion of jurisdiction. For example, when the invested state and
home-state of the investor agreed on the matter of using international
tribunal rather than a national tribunal. Under this circumstances, the
state tribunal does not have the jurisdiction over any dispute arising
from the investment between the two parties, but rather the
international dispute settlement organ will receive this jurisdiction and
further consider if the Act of State doctrine can be applied in the
supposed investment dispute. Meanwhile, state immunity permits that,
under circumstances, a tribunal’s jurisdiction can be prevented, even
both of the parties had previously granted consent to the tribunal. Thus,
immunity from jurisdiction does not mean exemption from the legal
system of the territorial state in question. In the case Int'l Asso. Of
Machinists & Aerospace Workers, (Iam) v. Org. Of Petroleum
Exporting Countries (Opec), it was pointed out that “The doctrine of
sovereign immunity is similar to the Act of State doctrine in that it also
represents the need to respect the sovereignty of foreign states. The two
doctrines differ, however, in significant respects. The law of sovereign
immunity goes to the jurisdiction of the court. The Act of State doctrine
is not jurisdictional. Rather, it is a prudential doctrine designed to
avoid judicial action in sensitive areas.” 10 The reason why these two
concepts are usually confused may due to the lack of analysis in early
cases and researches on them two at first. Gradually, the line between
the Act of State doctrine and state immunity became blurry until
advanced analysis finally brings justice to them. The Act of State
doctrine does seemingly aim at the arbitrability of a dispute, or a
particular aspect of a dispute. Nevertheless, when a state has given its
consent to arbitration, it is hard to consider those particular aspects of
that state’s activities to be non-arbitrable or beyond the tribunal’s
jurisdiction, just simply due to the fact that state is involved, assumed
that the questioned activities are covered by the arbitration clauses.
Another criticism of the Act of State doctrine spring from the fear of
so-called “triple protection”, including state immunity, diplomatic
immunity and the Act of State doctrine, against legal actions taken by
investors in case of disputes. However, it is not the whole face of
investment arbitration. In fact, the application of the Act of State
doctrine may, under circumstances, grant fairness and justice to the side
of State in investment arbitration. According to ICSID data in 2015,
there have been 470 arbitration cases registered under ICSID

10
International Ass'n of Machinists & Aerospace Workers v. Organization of Petroleum Exporting Countries
(United States District Court, C.D. California September 18, 1979).
 Convention, counting to the date of the survey 11. However, ISDS
analysed that States only won 36% of those cases. “As most observers
acknowledge, states never win; they only do not lose. Only investors
win awards of damages; states may at best, receive an award of
costs.”12 The state has never been the beneficiary of investment
disputes, to some extent, investor-state investment arbitration poses a
higher risk to the state. Generally, it can be concluded that investor-
state investment arbitration or international are naturally not biased
toward states as the majority of people believe. Therefore, it is
plausible for states to adopt schemes to protect themselves in
investment arbitration, namely the aforementioned “triple protection”.
In other words, the Act of State doctrine holds the role as a non-
required international law principle for the tribunal to refer, which
would help the state claim their sovereignty rights in investment
arbitration. To totally abolish the Act of State doctrine is to deprive the
rightful fence of the invested state and take away a point of view for the
tribunal to examine in investment dispute settlement. The Act of State
doctrine, moreover, is not really a part of the scheme to protect State
interest, rather it has the value of a reference. In the United States, the
Act of State doctrine has been “primarily developed with respect to an
act of a government expropriating foreign property allegedly violating
international law”13. As mentioned, the criticism against the Act of
State doctrine sprung from mostly the expropriation of the property of
foreign investor in the name of state interest. It is not likely for the
investor side to be unable to adopt a method against the Act of State
doctrine in expropriation, too. Treaties and contracts between the
parties should include a comprehensive stabilisation clause that will
guarantee compensation for the investor from legislative change, or
clauses that include the consent of the state about not invoking the Act
of State doctrine to defence for the dispute arising from the treaties or
contracts. In the end, the Act of State doctrine or state immunity is not
the ultimate bullet-proof defence for the state to avoid legal actions
from the investor. The most striking case related to the Act of State
doctrine is Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398. “In
February and July of 1960 Farr, Whitlock & Co., commodity brokers
of New York City (" Farr, Whitlock "), contracted to purchase a
quantity of Cuban sugar from General Sugar Estates Inc., a wholly-
owned subsidiary of Campania Azuearera Vertientmamaguey de Cuba
11
ICSID, The ICSID Caseload – Statistics (Issue 2015-2), PDF, ICSID, June 30, 2015.
https://icsid.worldbank.org/en/Documents/resources/ICSID%20Web%20Stats%202015-2%20(English).pdf
12
Howard Mann, ISDS: Who Wins More, Investors or States? PDF, IISD, June 2015.
https://www.iisd.org/itn/wp-content/uploads/2015/06/itn-breaking-news-june-2015-isds-who-wins-more-
investors-or-state.pdf
13
Michael Akehurst, A Modern Introduction to International Law(London: Routledge, 1995), 123.
 (" C.A.V."), which was a corporation organised under Cuban law but
with virtually all of Its capital stock owned by U.S. nationals. On July
6, 1960, the U.S. Congress amended the Sugar Act of OGS to permit of
a presidentially directed reduction of the sugar quota for Cuba. On the
day of the Congressional enactment, the Cuban Council of Ministers
adopted Law No. 851 which empowered the President and the Prime
Minister of Cuba to nationalise through forced expropriations the
properties or enterprises owned by physical and corporate persons
who are nationals of the United States of North America, or of the
enterprises in which such physical and corporate persons have an
interest, even though they be organised under the Cuban laws” 14. The
issue of this case focused on the question whether the tribunal has the
authority to examine the validity of a state’s expropriation of the
property of a foreign investor within its own territory even if the
expropriation violated international law. Although initially, the court
had applied the Act of State doctrine in this case and refused to agree
that the expropriation action was a violation of international law and
caused tremendous controversy in the U.S. Congress. However, the
imbalance power of the Act of State doctrine could not remain
unchanged for so long, when in 1965, the Convention on the Settlement
of Investment Disputes Between States and Nationals of Other States -
International Centre for Settlement Of Investment Disputes (also
known as the Washington Convention 1965) was introduced and
followed by the foundation of ICSID as an effort to protect the
investor’s property from unfair expropriation. These changes had
helped to limit the breach of international law against foreign investors
and put the Act of State doctrine to its rightful place – as a non-required
principle of international law that holds mostly reference's value.

PART C. REFERENCE LIST:

1. Simmonds, K. R. "The Sabbatino Case and the Act of State Doctrine." The
International and Comparative Law Quarterly 14, no. 2 (1965): 452-92.
http://www.jstor.org/stable/756965.
2. Zander, Michael. "The Act of State Doctrine." The American Journal of
International Law 53, no. 4 (1959): 826-52. doi:10.2307/2195753.
3. Barker, J. Craig, Colin Warbrick, and Dominic McGoldrick. "State
Immunity, Diplomatic Immunity and Act of State: A Triple Protection against
Legal Action?" The International and Comparative Law Quarterly 47, no. 4
(1998): 950-58. http://www.jstor.org/stable/761555.

14
Simmonds, K. R. "The Sabbatino Case and the Act of State Doctrine." The International and Comparative
Law Quarterly 14, no. 2 (1965): 454-455. http://www.jstor.org/stable/756965.
4. Shaw, M. N. (2008). International Law (6th ed.). Cambridge, United
Kingdom: Cambridge University Press.
5. Peter Malanczuk, M. B. (2002). Akehurst's Modern Introduction to
International Law. Routledge.
6. Bazyler, Michael J. "Abolishing the Act of State Doctrine." University of
Pennsylvania Law Review134, no. 2 (1986): 325. doi:10.2307/3312072.