INTRODUCTION TO PUBLIC INTERNATIONAL LAW

SECTION 1

PROF. DR. ABDUL GHAFUR HAMID @ KHIN MAUNG SEIN

ASSIGNMENT 6 (SUBJECTS OF INTERNATIONAL LAW)

ALIFF ZAQWAN BIN SHAIFULNIZAM 1918023

Question

Atlanta, an under-developed State, enters into an oil concession agreement with Petronas.
The concession allows Petronas to do oil drilling and exploitation for 30 years. Since 2005,
Petronas has invested RM 100 million for the construction of oil-drilling installations in
Atlanta. However, the Government of Atlanta recently declares that it unilaterally terminates
the concession agreement by its newly promulgated Law No.111 on the ground that due to
increasing movements of Atlan-tigers (an ethnic rebel group) in the surrounding areas, the
Government can no longer guarantee the safety of oil-drilling activities in the area. In fact,
the rebel movements are quite far from the area where Petronas is doing business and the real
intention of the Government of Atlanta is to grant the concession to another Oil Company.
Petronas wants to institute proceedings against Atlanta for its financial losses before the
International Court of Justice.

You are a legal counsel in the Attorney General’s Chamber of Malaysia. How will you advise
Petronas?

Would your advice be different if the case were brought before the International Centre for
Settlement of Investment Disputes (ICSID) and both Malaysia and Atlanta were parties to the
Convention on the Settlement of Investment Disputes between States and Nationals of Other
States, 1965?

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Introduction

In the nineteenth century, only States were regarded as subjects of international law.
However, after World War II many international organizations and corporations are also, to
some extent, considered as subjects of international law. Nevertheless, unlike States which
are subjects of international law par excellence, the international personality of corporations
are limited.1

The question above concerns Petronas (Petroliam Nasional Berhad), a multinational

corporation incorporated in Malaysia and the extent of its international personality. The main
legal issues that will be discussed are, firstly, whether Petronas is a subject of international
law. Secondly, whether Petronas can institute proceedings against Atlanta at the ICJ. Finally,
whether Petronas can bring its case to the ICSID. The requirements under each issue will be
discussed thoroughly as sub-issues.

Issue 1: Whether Petronas is a subject of international law

A subject of international law is one who possesses legal personality under international law.
There is no definite definition of international legal personality. However, there are four
generally accepted characteristics of international legal personality which are, having rights
and obligations under international law, capacity to enter into international treaties, capacity
to make international claims and the enjoyment of privileges and immunities from national
jurisdictions.2

Rights and obligations under international law

Many multinational corporations enter into agreements with States thus these corporations
generally have contractual rights and obligations. Usually such contracts are governed by the
municipal laws of the party or parties.3 However, in Texaco Overseas Petroleum Co. v. Libya,

1
Sein, K. M. (2019). The Subjects of International Law. In Public international law: A practical
approach (p. 80). Sweet & Maxwell.
2
Sein, K. M. (2019). The Subjects of International Law. In Public international law: A practical
approach (p. 79). Sweet & Maxwell.
3
Sein, K. M. (2019). The Subjects of International Law. In Public international law: A practical
approach (p. 90). Sweet & Maxwell.

3
an agreement for the extraction of oil might be an internationalized contract subject to
international law.

Thus, Petronas, a multinational company which generally enters into agreements with many
sovereign States, may to some extent, have rights and obligations under international law.

Capacity to enter into treaties

The Vienna Convention on the Law of Treaties 1969 in Article 2 defines a treaty as an
“international agreement concluded between States in a written form and governed by
international law”. Thus, treaties under this definition only include agreements between
States and not corporations. In the Anglo-Iranian Oil Co case,4 Iran entered into a contract
with a British company. The ICJ rejected the argument that a treaty was entered wih Britain
because of the part played by Britain in the negotiations. It is only a concessionary contract
between a government and a company. Thus, it is clear that corporations cannot enter into
treaties.

Since Petronas is merely a corporation, it has no capacity to enter into international treaties.
Thus, Petronas does not fulfill the second characteristic.

Capacity to make international claims

An international claim is a demand of one government upon another through diplomatic

channels or an international tribunal, to redress a breach in international obligation.5 It can be
clearly concluded that corporations have no capacity to make international claims. Also, only
States have access to the International Court of Justice, the principal judicial organ of the
United Nations.

Thus, since Petronas is a corporation, it has no capacity to make international claims thus this
characteristic is not fulfilled.

Enjoyment of privileges and immunities from national jurisdictions

States, which are subjects of international law par excellence, are immune and free from
national laws of other States. This is based on the maxim par in parem non habet imperium
4
(1952) ICJ Rep 93
5
William L. Griffin, International Claims of Nationals of Both the Claimant and Respondent States -
The Case History of a Myth, 1 INT'L L. 400 (1967) https://scholar.smu.edu/til/vol1/iss3/7

4
which means an equal has no power over an equal thus sovereign States are immune from
jurisdictions of other States. In contrast, corporations are subject to laws of the State in which
it is incorporated.

Petronas is a company incorporated under the Malaysian Companies Act 1965. It is subjected
to many Malaysian legislations such as the Companies Act, Petroleum Development Act,
Sales of Goods Act etc. It can be sued and trialed at the Malaysian courts. Thus, it is clear
that Petronas does not enjoy immunities from national jurisdictions and thus does not have
this characteristic.

To conclude the first issue, Petronas only has the first out the four characteristics of
international personality. Thus, Petronas is a subject of international law only to a limited
extent.

Issue 2: Whether Petronas can institute proceedings against Atlanta at the

ICJ

Article 34(1) of the Statute of ICJ states that only States can bring action before the court.
Thus, it is clear that corporations like Petronas have no locus standi to bring action before the
ICJ. Nevertheless, it is possible for the State to which the corporation is a subject to, bring a
case to the ICJ on behalf of the corporation. There are three requirements that must be
fulfilled for this which are there must be an international wrongful act, admissibilty of the
claim and jurisdictional requirement which is consent of the States6. Thus, in order to
determine whether Malaysia can bring an action on behalf of Petronas, each of these
requirements must be discussed.

International Wrongful Act

According to Article 2 of the Articles on Responsibility of States for Internationally

Wrongful Acts 2001, there are two requirements of an international wrongful act. Firstly, the
action or omission is attributable to the State. Secondly, such an act or omission constitutes a
breach of international obligation.

6
Sein, K. M. (2019). The Subjects of International Law. In Public international law: A practical
approach (p. 90). Sweet & Maxwell.

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Attributable to the State

A ‘State’ cannot by itself act, but it can act only through its organs. Article 4 states that “the
conduct of a State organ shall be considered an act of that state under international law,
whether the organ exercises legislative, executive, judicial or any other functions…” Thus,
since the Government of Atlanta is the executive organ of Atlanta, its act of terminating the
concession agreement, is therefore attributable to the State of Atlanta.

Breach of international obligation

Article 12 states that a breach of international obligation is “An act of that State which is not
in conformity with what is required of if by that obligation, regardless of its origin or
character”. An obligation can arise from a treaty. It must be emphasized that the concession
agreement with Petronas is not a treaty as defined under the Vienna Convention. However, in
the Texaco v Libya case7, the arbitrator held that an agreement for the extraction of oil might
be an internationalized contract subject to international law. Therefore, a concession
agreement between Atlanta and Petronas can be subject to international law and Atlanta had
breached an international obligation when it unilaterally terminated the agreement.

Thus, the requirements of an international wrongful act are fulfilled.

Admissibility of international claims

Article 44 of the Articles on Responsibility of States for Internationally Wrongful Acts 2001
states that there are two requirements of admissibility of international claims namely
nationality of claims and exhaustion of local remedies.

Nationality of claims

For a State to bring an action on behalf of its subject at the ICJ, the victim must be linked by
nationality with the State. The question to be asked in Petronas’ situation is, how is the
nationality of a corporation determined? This question has been answered in the Barcelona
Traction case.8 In this case, the company concerned was incorporated in Canada with 75%
Belgian shareholding. It was held that in allocating corporate entities to States for the
purposes of diplomatic protection, the nationality of a company is based on the State where it

7
[1977] 53 ILR 389
8
[1970] ICJ 1

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was incorporated and has a registered office. Thus, since Petronas is a company incorporated
under the Malaysian Companies Act with a registered office in Malaysia it is a national of
Malaysia.

Exhaustion of local remedies

For the State to bring an action on behalf of its subject at the ICJ, it must have exhausted all
the effective local remedies available at the wrongdoer State.9 This is an important
requirement that Petronas must be aware of. Thus, Petronas must first seek remedies from the
highest level of Atlanta’s judiciary, before Malaysia can bring an action on behalf of Petronas
at the ICJ.

Jurisdictional requirement

Article 36 of the Statute of ICJ states that the ICJ can only exercise jurisdictions over States
parties with their consent. Thus, it is clear that Atlanta’s consent to bring the dispute to the
ICJ is required and if Atlanta does not consent, Malaysia cannot proceed to bring the case at
ICJ.

To conclude the second issue, Petronas cannot, on its own name, bring an action against
Atlanta at the ICJ. However, it may ask Malaysia to bring an action on its behalf subject to
fulfilling the aforementioned conditions, most importantly, the exhaustion of local remedies
and obtaining the consent of Atlanta.

Issue 3: Whether Petronas can bring athe case at ICSID

ICSID is established by the Convention on the Settlement of Investment Disputes between

States and Nationals of Other States (ICSID Convention). Article 18 of the Convention states
that ICSID has full international legal personality including the capacity to institute legal

9
Sein, K. M. (2019). The Subjects of International Law. In Public international law: A practical
approach (p. 90). Sweet & Maxwell.

7
proceedings. Article 25(1) of the Convention provides three requirements for the dispute to
fall under the jurisdiction of ICSID.

Legal dispute arising out of an investment

Article 25(1) requires that the dispute must be a “legal dispute arising directly out of an
investment.” The expression “legal dispute” indicates that mere conflicts of interest do not
fall within the jurisdiction of the Centre but the dispute must concern the existence of a legal
right or obligation. In the current case, the dispute between Petronas and Atlanta is a
contractual dispute thus it is a legal dispute.

The meaning of investment is not defined in the convention. Nevertheless, clearly, a

concession agreement, which is an agreement which permits foreign business to invest in a
country falls under the definition.

Thus, the dispute between Petronas with Atlanta on the oil concession agreement fulfills this
requirement.

Between a Contracting State and a national of another Contracting State

Article 25(2) of the Convention defines a national of another Contracting State which
includes any juridical person which had the nationality of a Contracting State. Again, the rule
on nationality of a corporation is applied in this issue. Since Petronas is a national of
Malaysia which is a Contracting State and Atlanta is a Contracting State as stated in the
question, this requirement is fulfilled.

Consent in writing

The Convention in its Preamble states that “ No Contracting State shall by the mere fact of its
ratification, acceptance or approval of this Convention and without its consent be deemed to
be under any obligation to submit any particular dispute to conciliation or arbitration”. Thus,
the fact that Atlanta is a Member ICSID does not mean consent is given. There must be a
consent in writing to bring the dispute to ICSID. Consent may be given in a clause included
in an investment agreement, providing for the submission to the Centre of future disputes
arising out of that agreement.10 This means that if the oil concession agreement between

10
Article 24, Report of the Executive Directors of the World Bank on the Convention

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Petronas and Atlanta states that disputes must be submitted to the Centre, then consent has
been given by both parties.

It is important to note that Article 27 of the Convention states that once the Contracting States
have consented to settle the dispute at the ICSID, no international claim can be brought. In
the current case, if the parties have consented to resolve the dispute at ICSID, they cannot
bring the dispute to the ICJ.

To conclude the third issue, since Malaysia and Atlanta are members of ICSID, Petronas and
Atlanta can bring the dispute to ICSID subject to the requirements.

Conclusion & Suggestions

Petronas cannot bring the claim to ICJ on its own name. However, Petronas can persuade
Malaysia to bring the case on behalf of Petronas to ICJ. It is undeniable that Malaysia should
assist Petronas as Petronas is a company wholly owned by the government which has
significantly contributed to Malaysia’s economy.

Alternatively, Petronas can bring the case to ISCID. However, if the concession agreement
states that the dispute must be settled at ISCID, then the dispute cannot be resorted at ICJ.

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References

Sein, K. M. (2019). Public international law: A practical approach Sweet & Maxwell.

William L. Griffin, International Claims of Nationals of Both the Claimant and Respondent
States - The Case History of a Myth, 1 INT'L L. 400 (1967)
https://scholar.smu.edu/til/vol1/iss3/7

Report of the Executive Directors of the World Bank on the Convention

International Centre for Settlement of Investment Disputes Convention.

Responsibility of States for Internationally Wrongful Acts 2001

Anglo-Iranian Oil Co case 1952) ICJ Rep 93

Barcelona Traction case [1970] ICJ 1

Texaco v Libya [1977] 53 ILR 389

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