Chapter 6 RULES ON STATE RESPONSIBILITY At its heart, the field of state reg; ibility i > sponsibility is concerned with rudimentary rules about when a state is responsible for a teeaekt of international law and the cons juences that. breach. For example, mia aes among themselves. Yet typically states do not address these rudi- mentary rules in their relationships and thus the background rules become relevant when something goes wrong. Rules on state responsibility are not oriented toward any particular substantive field of international law, such as trade, human rights, or the environment (sometimes referred to as ‘pri mary” rules). Nor are the rules oriented toward any particular source of international law, such as treaties, custom, general princi- ples, or otherwise. Rather, of states, the decisions of courts and tribunals, and the writings of Having said that, historically many studies of the rules on state responsibility focused on the treatment of aliens in the territory of a state,' and much of the law in this area has arisen in that context. In 1956, the International Law Commission (ILC) commenced a study of the rules on state responsibility, an effort that encoun- tered considerable divisiveness and significant changes over the course of forty-five years. In August 2001, the ILC finally signet = series of fifty-nine articles that purport to codify and progressively develop the rules in this area.? U.N. Doc, A/56/10 (2001) {hereinafter ILC Articles), : wa. 3 (Dee. Ly of States for Internationally Wrongful 3. See G.A. Res, BSI, pat 5 et Acts, in Report of the ILC on the Work 12, 2001) see also GA. of its Fifty-third Session, 56th Sess, 2, 2004) Chapter 10(B). 2, Draft Articles on Responsibili- 179Ch RESPONSIBILITY __ 180 RULES ON STATE | date, Moreover, some aspects of the articles have hee oe ee Beet tHilers Nevertheless, the ILC articles ane er | ied Gomimentery are en important reference PO Oe tor, this area, and will be referred to as appropriate 19 ees A. The General Principle of Responsibility , The threshold principle underlying the rules on Wi ashe bility is that an internationally wrongful act of a state en! gets international responsibility.! Once an internationally wronely act (or breach) occurs, it triggers a new legal regime of rights and duties, which are set forth in the remaining rules on state responsi- bility. On first glance, this principle seems obvious enough, and has been stated by various international tribunals, such as the Perma- nent Court of International Justice (PCIJ),* the International Court of Justice (ICJ)° and highly regarded arbitral decisions.’ Such wrongful acts may relate to just one other state or several states. The same rule likely applies to the conduct of an international organization," although here the practice is less settled. On second glance, however, When considering wrongfulness, much must be left to the specific treaty, customary rule, or other international norm at issue with respect to the conduct of a state. Indeed, the essence of an internationally wrongful act is the non “conformity of a state's conduct with conduct it was supposed to” ‘adopt in order to comply with a particular legal obligation—typical= ° The general principle does not address importan whether a state must be at fault in order for ean, such as whether there must be actual injury to another stat te cea a state responsibility appears to leave such matters te the reeely treaty or customary rule at issue, even though 0 the particular rules rarely address these matters, igh such “primary’ 4, See ILC Articles, supra note 2, ait ‘i SS pr + Gikovo-Nagymaros Slovig) a Project (Hung/ 5) 5. See, e4., Phosphates in Morocco (italy v. Fr), 1938 P.C.LJ, (ser. A/B) No, 74, at 28 (June 14), 6. See, eg., Corfu Channel (U.K. y, Alb), 1949 1.CJ. 4, 23 (Apr, 9); Military and’ Parami Activities "in and against Nicaragua (Nicar. v. U.S), 1986 L.G4. 14, 146, para, 292 (June 27); Gab. LO. 7, 38, para, 47 (Sept. ss » 68. Rainbo ior (NZ/ 8. , lee Advisory Opi tion for 1a¥i80ry Opinion on Repara- (Apr. 1p ties, 1949 Led, 174. 179 9% See y art.12,°° 1M Articles, supra note 2Sec. B__ ATTRIBUTION OF CONDUCT TO A STATE 181 B. Attribution of Conduct to a State ‘The general principle discussed above requires that the inter- nationally wrongful act be of a state. Yet “states” do not directly” The ILC Articles, which in this regard are generally regarded as codifying state practice, maintain that the following conduct can be attributed to a state: © conduct by the organs of a state, meaning legislative, execu- tive, or judicial bodies at the national level or at a lower level of government; conduct by persons who are not an organ of a state, but who are empowered by the state to exercise elements of governmental authority (e.g., private security firms), with respect to acts undertaken in that capacity;” conduct by the organs of a state placed at the disposal of another state, such as an army; conduct directed or controlled by a state;"* © conduct carried out by persons exercising elements of gov- ernmental authority in the absence of official authority, such as might occur in a failed state; © conduct of an insurrection that then becomes the new government of a state; and © conduct acknowledged and adopted by a state as its own, such as occurred when the government of Iran in 1979-80 condoned the taking of U.S. hostages by Iranian militants.” organs or persons exéeed their authority or instructions." While these standards have the benefit of brevity and provide a framework for legal analysis, their application to situations of fact can be difficult. Hence, i i 10. See id. art. 2. 17. Id. art. 11; United States Diplo- 1. id area matic and Consular Staff in Tehran 12. Tan we, vy, Iran), 1980 1.C.J. 8, 32-33 (May 18, Id, ar le is oe 18. See ILC Articles, supra note 2, Id., art. 8, ier 15. Id, art. 9, yi 16. Id., art. 10.SI] Ch, 182__ RULES ON § STATE RESPONSIBILITY SG i For example, in 1979, a US, f Tran in the wake of national nam neth Yeager sought to leave fi Iran's revolution, At the Tehran eirport, Be W2S sonrg Prd revo. lutionary guards” (or “Komitehs”) who were ae ons 2a and confiscating property. When Yeager filed a ci e Tran-U.S. Claims Tribunal for recovery of his loss, the government of Iran responded that the revolutionary guards were not part of the government of Iran. The Tribunal, however, noted that the guards were performing immigration, customs, and associated fune- tions at the airport that normally would be governmental functions, Even if such functions were not actually authorized by the govern. ment, the guards “at least exercised elements of governmental authority in the absence of official authorities, in operations of which the new Government must have had knowledge and to which it did not specifically object.” Consequently, the Tribunal adopted an approach to attribution consistent with the fifth item noted above, in which attribution is found in conduct carried out by persons exercising elements of governmental authority in the ab- sence of official authority. By contrast, a government can have a significant general of that non-state actor attributed to it. In the early 1980's, the U.S. government provided considerable support to Nicaraguan rebels, referred to as the contras, including general planning, direction, and funding. When Nicaragua brought a case against the United States for various acts committed by both the United States and the contras, the ICJ agreed that the United States was responsible for its general support of the contras, but was not responsible for every specific act committed by the contras, such as a political assassination. The Court found that despite the heavy subsidies and other support provided to them by the United States, there is no clear evidence of the United States having actually exercised such a degree of control in all fields as to justify treating the contras as acting on its be- half. ... All the forms of United States participation mentioned above, and even the general control of the [United States] over a force with a high degree of dependency on it, would not in themselves mean, without further evidence, that the United States directed or enforced the perpetration of the acts co trary to human rights and humanitarian law alleged by [Nica ragua]. Such acts could well be committed by of the Contras without the control of the United Staxe™ ne 19, Yeager y. Tran, 17 Iran-U'S. Cl. 20. Military and Paramilt vie soe pop B2, 104, pare 43 0987. ion in tt and Paramiltary Adi note 6, at 64-65, para. 115.Sec. C CONCEPT OF BREACH 183 Consequently, the Tribunal failed to find attribution as envi- saged in the fourth item noted above, in which attribution arises from conduct directed or controlled by a state. C. Concept of Breach i There are, however, some circumstances where an act by State A that fails to conform with an international obligation will not be regarded as wrongful with respect to State B. The ILC Articles maintain that the following circumstances preclude wrongfulness: ® State B consents to State A’s action, such as consent by State B to the transit through its airspace of an aircraft registered in State A;? State A acts in lawful self-defense, such as an attack by State A on military bases in State B after State B has invaded State A in violation of the U.N. Charter; State A takes “countermeasures” against State B in order to induce State B to comply with its international obli- gations (for a discussion of countermeasures, see section E below); © State A’s action is due to force majeure, meaning “the occurrence of an irresistible force or of an unforeseen event, beyond the control of the State, making it materially impos- sible in the circumstances to perform the obligation”; © State A’s act is taken in a situation of distress for the purpose of saving lives, such as entering State B’s airspace to land a damaged aircraft; this situation differs from the situation of force majeure discussed above, in that the act is taken voluntarily (an alternative action, such as downing the aircraft on the high seas, is possible); and 26. Id., art, 23. This formulation by the ILC is more welcoming to the notion 21 3 te 2, arti, 50 HLC Articles, supra no 22, of force majeure than is the case with 2. 1a, ao se to treaty termination. See Chap- 24. Id. art. 21, la 25. Id, art. 22, 27, Id., art. 24. . Further, the)TY ch, 184 RULES ON STATE RESPC NSBLTY a 0 to safeguard an essential s necessary Thinent peril and does not Mal interest of State B, such as al tanker registered by State B that is leaking oil into State As mets ove this situation differs from the situation of i ce 2y pe the act is not taken to save lives but, rather, to grave © State A’s action i interest against a grave 9 seriously imperil an essen! setting fire to an abandoned danger to State A as a whole.” ee ee Soe “states. The remainder of this chapter discusses these new obli- gations and rights. The discussion focuses on the simple situation of one state injuring another, but it is entirely possible for multiple states to be involved and, in some situations, for nonstate actors to pursue claims and receive reparation D. Duties of a Breaching State ‘When a breach occurs, the breaching state remains bound to the underlying international obligation.” As such, — =. “ances and guarantees of non-repetition,” although state practice on that point is sparse. Moreover, “for its breach. In the Chorzow Factory cas 2 whether a state was obligated to aa enero treaty, even if the treaty did not address the issue of reparation. IN that case, Poland had confiscated the property of German nationals in violation of treaties associated with the end of W na Court famously found: of World War I. It is a principle of international engagement involves an obli adequate form. Reparation nal law that the breach of aM ligation to make reparation in 2° erefore is the indispensable cO™ 28. Id., art. 25; Gabvikovo-Nagyma- ros Project, supra note 6, at 39-45, 80. Id, art. 30 29. See ILC Articles, supra note 2 art. 29. :Sec. D_ DUTIES OF A BREACHING STATE . 185) plement of a failure to apply a convention and there is no necessity for this to be stated in the convention itself.” The Court further found, in a subsequent phase, that reparation must, as far as possible, wipe out all the conse- quences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed. Restitution in kind, or, if this is not possible, payment of a sum corresponding to the value which a restitu- tion in kind would bear; the award, if need be, of damages for loss sustained which would not be covered by restitution in kind or payment in place of it—such are the principles which should serve to determine the amount of compensation due for an act contrary to international law.” Reparation can be made in three principal forms—restitution, compensation, or satisfaction—which might be made singly or in combination.” Each is discussed in turn, Restitution “conduct, to the extent that is possible." If property was wrongfully taken, then it should be returned. If persons were wrongly de- _ tained, then they should be released. However, restitution may not be possible or desirable. For example, goods that were seized may have spoiled, such that their return hardly makes the injured state whole. Further, while the PCIJ in the Chorzéw Factory case seemed to favor restitution over compensation, most international tribunals appear reluctant to order states to take acts of restitution; it is apparently considered less intrusive on sovereign functions to order the payment of compensation. Compensation Compensation is a second form of reparation. © Compensation — i Thus, accord- ing to the official commentary to the ILC Articles, compensation encompasses both damage suffered by the State itself (to its property or personnel or in respect of expenditures reasonably incurred to remedy or mitigate damage flowing from an inter- Articles, supra note 2, 31. Factory at Chorz6w (Ger, v. 93+ See ILC Pol. 1927 PCA. (ger, A) No.9, ab 21 ant. 3M. py 34, Id., art. 95. 82. Factory at Chorzow (Ger. v. Pol), 1928 PCI. (eer. A) No. 17, at 47 85. Id., art. 86. epi. 13),186 RULES ON STATE RESPONSIBILITY ___Chi g nationally wrongful act) as well as damage a be als, whether persons or companies, on whose DeXe | X State ig claiming within the framework of diplomatic P i There is extensive case law and settlement agreements that address issues of compensation. . With respect to personal injury, the official commentary to the ILC Articles states: Compensable personal injury encompasses not only associated material losses, such as loss of earnings and earning capacity, medical expenses and the like, but also non-material damage suffered by the individual (sometimes, though not universally, referred to as “moral damage” in national legal systems). Non- material damage is generally understood to encompass loss of loved ones, pain and suffering as well as the affront to sensibili- ties associated with an intrusion on the person, home or private life.” With respect to the taking of property, the official commentary provides: Compensation reflecting the capital value of property taken or destroyed as the result of an internationally wrongful act is generally assessed on the basis of the “fi o “mined, In such cases, , or are not arket transactions, ‘the it. This may be true, for 's entities in the nature of are not regularly traded.” the subject of frequent or recent example, in respect of certain busine, a going concern, especially if shares 86. Janws Cxawronn, ‘1 Iyrensarion Taw Conssion’s Anricizs ox onc 87. Id. at 223 (footnotes omitted). waren: TNtHODUCTION, Text 4x 88. Id. at 225-96 (footnotes omit “Costsenrrantes 220 (2002), ted),Sec. D DUTIES OF A BREACHING STATE 187 the business, making allowance for goodwill and profitability as appropriate.” Where this is not possible, the alternative valuation method is the determination of net book value (total assets less total liabilities). If the business is not a going concern, the preferred approach is to determine the liquidation or dissolution value, mean- ing what might have been achieved in selling off the individual assets of the business."” Satisfaction A third form of reparation is satisfaction, which is a remedy sometimes employed when an injury cannot be compensated finan- cially." This remedy often arises when State A’s violation of inter- national law has been an affront to State B, such as from an insult to State B’s flag, an encroachment on State B’s territory without permission, or ill treatment of State B’s visiting prime minister. In such circumstances, there may be no injury that can be financially assessed, but there may be a “non-material” injury that interna- tional law seeks to remedy. Satisfaction may be given in various forms. Public acknowledg- ment by State A that it injured State B is a form of satisfaction. Satisfaction also may be given through a public statement of regret or apology. Disciplinary action might be taken against the persons in State A who caused the affront. A payment by State A of symbolic damages also can be a form of satisfaction. Often recognition’ by an’ independent tribunal that one state has affronted the other is deemed to constitute satisfaction. Thus, in the Corfu Channel case, Albania felt affronted by an unlawful mine-sweeping operation by the British Navy in Albania’s territory waters. The ICJ said that to ensure respect for international law, of which it is the organ, the Court must declare that the action of the British Navy constituted a violation of Albanian sovereignty. This declara- tion is in accordance with the request made by Albania through her Counsel, and is in itself appropriate satisfaction.” Interest ‘The breaching state”is also obligated’ to pay interest on the Principal an Sage the date the sum is due until the date it is 89. Id, at 226, Valuation in the BIT Generation, 74 40. 14, at 206-27, On the valuation Brrr. Yass Inr's L116 (2008), of property that is “indirectly” expropri- 41, See ILC Articles, supra note 2, ated ‘ie., the state does not, fo art. 37. iC thay DroPerty Bu 90 dared use 48, Costu Channel, suara note 6, at less), see W. Michael Reisman & Robert 35-36. D. Sloane, Indirect Expropriation and Its“Wimbledon” case awarded six percent interest," while commercial claims before ool Claims Tribunal were typically (but not uniformly) awarded twelve percent interest." Sometimes a tribunal has awarded differing levels of interest in the same claim for different types of losses. International law accords states and tribunals the latitude to award a level of interest deemed appropriate for compensating the injured The PCIJ in the S.S. E. Rights of an Injured State When a breach occurs, new rights arise for the injured state or states. These rights principally concern the right to invoke the breaching state’s responsibility and the right to pursue counter- measures. Invocation of Breaching State’s Responsibility l ‘states), although no injured state may recover co ceeding its damages." . Moreover, the ILC” 48. See SS. “Wimbledon,” 1923 sarrollo de Santa Elena S.A. v. Costa P.C.1J. (ser. A) No. 1, at 82 (Aug. 17), 44. See Guonoe H. Atonicn, Tue Jows. PRUDENCE oF ‘THE Tkan-Uniren Srares Camas Taisunat, 475~76 (1996). 45, See ‘The MIV “‘Saiga”” (No. 2) (St. Vincent v. Guinea), 120 LLR. 143, 200 (int'l Trib. L. of the Sea 1999). 46, Seo Memorial of United States, nica Sicula S.p.A. (ELSI) (US, v. ), 1987 LCJ. Pleadings 114-15 Ge ‘May 15, 1987); Compania des De. Rica, ICSID (W. Bank) Case No. ARB! 96/1, paras, 103-105 (Reb. 17, 2000) F.A. Mann, Compound Interest a8 a” Hem of Damage in International Law, i" Fortier Srupies uy Ivnernarional LAW 877, 383 (1990), 47. See ILC Articles, supra note 2 arts, 42-43, 48. Id., arts, 46-47,HTS OF AN INJURED STATE 189 posit, that'/an “ninjuréd state may-i s responsibility ifthe breach is of an obligation. owed eat to a group of states of which the invoking state is a member g. @ regional human rights treaty) or owed to the international community as a whole." Obligations "6wed= to the “international community as a whole are often referred to as erga omnes obli- gations, and include prohibitions on aggression, genocide, slavery cial discrimination, and the denial of self-determination.” : Espousal of Claims of a National. dnesome situations) thé injury to the state may not be direct, but instead the consequence of an injury to one ‘of its nationals. Thus, if John Doe from State A travels to State B where he is taken prisoner and executed without due process of law, State A is in a position to bring a claim against State B based on State B's failure to accord John Doe the minimum standard of protection due to aliens.*' If State A presents to State B, through diplomatic channels, a claim for injury to John Doe, State A is engaging in “diplomatic protection” of John Doe by “espousing” his claim. Such espousal may be very helpful to an injured person (or his heirs); instead of standing alone, the person has the weight of her government in support of the claim against the breaching state. At the same time, however, the private claim becomes an international claim over which the claimant state enjoys exclusive control. The private claimant, therefore, can no longer pursue or dispose of the claim on her own.™ As the D.C. Circuit Court of Appeals held in Asociacion de Reclamantes, the claims of private parties espoused by the Mexican government were the Mexican government’s to pursue: “the fact that a claim has been espoused provides a complete defense for the defendant sovereign in any action by the private individual.... ’! To the extent that government control of J. Int’ L. 120 (1971) (describing the U.S. waiver of private claims of U.S. nationals against France for spoliation 49. Id., art, 48, 50. See Barcelona Traction, Light & Power Co., Ltd, (Belg. v. Spain), Second Phase, 1970 LCJ. 8, 32, para, 34 (Feb. 5); East Timor (Port. v, Austl.), 1995. 1.C4J. 90, 102, para, 29 (June 30); Appli- cation of the Convention on the Preven tion and Punishment of the Crime of Genocide (Bosnia y, Serbia), Judgment on Preliminary Objections to Juriscdic- tion, 1996 1.C.J, 595, para. 81 (July 11). 51. See Chapter 10(B). 0% The International Lew f genes sion is currently eodifying y diplomatic protection of natural and le- al persons. co See Note, The French Spoliation ‘ases—An Unanswered Question, 12 Va of their vessels in exchange for France dropping certain claims against the United States); see also 2 Restareazyt (Dump) oN tHe FortiGn Retations Law oF rue Unrrep Srares § 713 emt, a (1987) (“The claim derives from injury to an individual, but once espoused it is the state's claim, and can be waived by the state. 54. Asociacion de Reclamantes v. United Mexican States 735 F.2d 1517, 1528 (D.C. Cir. 1984); see Meade v. Unit- ed States, 76 U.S, (9 Wall.) 691, 724 (1869) (finding that regardless of the ‘attitude of the private claimant to the U.S. government's espousal of the claim,190 RULES ON STATE f the injured national, U.g, i" isadvantage of the injured nal, U.S, ee Ee el that recourse for the notional ‘ae her government, not pursuit of the claim against the foreign government on her own.” | its nationals:* or ‘@)-placing the espoused claims before ansintgrnay “tional’claims commission for arbitration. ‘The rupreme saa recognized in the Dames & Moore case that such dispositions have occurred repeatedly throughout U.S. history.” The public purpose served in allowing a state to establish mechanisms for resolving claims is readily apparent if doing so allows two states to eliminate sources of transnational friction. In American Insurance Association v. Garamendi, the U.S. Supreme Court found that the U.S. government could displace private ac- tions under state law by concluding a U.S.-German agreement on compensation to persons for Nazi-era injuries committed by compa- nies and banks: Since claims remaining in the aftermath of hostilities may be “sources of friction” acting as an “impediment to resumption of friendly relations” between the countries involved, [United States v. Pink, 315 U.S. 203, 225 (1942)], there is a “longstand- ing practice” of the national Executive to settle them in discharging its responsibility to maintain the Nation’s relation- ships with other countries, [Dames & Moore v. Regan, 453 U.S. 654, 679 (1981)]. The issue of restitution for Nazi crimes has in fact been addressed in Executive Branch diplomacy and formal- ized in treaties and executive agreements over the last half century, and although resolution of private claims was post- poned by the Cold War, securing private interests is an express object of diplomacy today, just as it was addressed in agree ments soon after the Second World War. Vindicating victims injured by acts and omissions of enemy corporations in Wal time is thus within the traditional subject matter of foreig? the claimant lacked the power to deprive 56. In the U; 4 . e Unit hh dist the government of settlement authority bution i nea ase te be by resorting to a private remedy), partment of Justice Foreign Claims Set 155. See Gray v. United States, 21 Ct, _tlement Commission, C1, 840, 892-93 (1886); Shanghai Power 57. Sco Dames & : . See Dames & Moore v. Regi? Go. v. United States, 4 Cl. Ct. 237, 240-453 U.S. 654, 79 (Lge Chap" “45 (1983). 7),RIGHTS OF AN INJURED STATE 191 policy in which national, not state, interests are overriding, and which the National Government has addressed. Limitations on Espousal. There are certain situations, however, re an injured state may not espouse a person’s claim. First, if the claim is brought on behalf of a person who is not a national of the injured state, the injured state cannot maintain the claim.” States are only entitled to pursue claims of their own nationals, not the nationals of other states. Further, even if the person is a national of the espousing state, the state may not espouse her claim against another state if she was a national of that other state when the alleged injury occurred. In other words, under the “continuous nationality” rule, the foreign nationality of the person must be continuous from the occurrence of the injury until the resolution of the claim. Of course, as stated at the beginning of this chapter, two or more states may always choose to craft alternative rules. For example, under the European human rights convention,” one mem- ber state has standing to make a claim against another for human rights violations, even if the injury is not to the nationals of the first state.” Second, where the'claim is brought on behalf of persons, those persons must first exhaust all reasonably available remedies in the national system of the breaching state.” Thus, under this “local remedies” rule, the injured national of State B must first pursue any judicial or administrative recourse in State A to its highest level before State B may pursue a claim against State A. ‘Third, an injured state may not pursue a claim if it has waived that claim or acquiesced’in the wrongful conduct.” For example, if State B insists for years that State A pay a specific sum in compensation for a capital loss, and State A eventually pays that sum, State B might be regarded as having waived any claim for a further payment of interest.* Acquiescence»may arises ify oversa period of years after the wrongful conduct occurred, State B fails to notify State A of its claim. International law does not specify a time 58. American Ins. Ass'n v. Garamen- di, 539 U.S. 396, 420-21 (2003); accord Deutsch v. Turner Corp., $17 F.3d 1005, 1023-24 (9th Cir, 2003) (finding that the United States “has already exercised its own exclusive authority to resolve the war, including claims arising out of it, It did not choose, however, to incorporate ‘nto that resolution a private right of ction against our wartime enemies or their nationals.”), 59. See ILC Articles, note 2, art, 44(a), jie 1180:, Convention for the Protection of luman Rights and Free- doms art. 88, Nov. 4, 1950, 213 U.N.T.S. 221, as amended by Protocol No. 11, May 11, 1994, 33 LL.M. 960. 61. See, eg, Denmark v. Turkey, App. No. 4382/97, Eur. Ct. H.R. (Apr. 5, 2000). 62, See ILC Articles, supra note 2, art. 44(b). 63, Id., art. 45. 64. See Russian Indemnity Case (Russ. v, Turk), 11 RLAA. 421, 446 (ag12).ba d state Secit have etn Much hether the injure etch conduct and whether the failure a bana a ein prejudiced the breaching state, such as through the loss ntem- poraneous evidence. hero jt example of those rues in operatic een American Free arbitration brought under Chapter 11 of eer Trade Agreement (NAFTA). Chapter 11 allows om ign sa from one of the three NAFTA states (Canada, 1 one the United States) to pursue arbitration directly against the govern- ment of a member state when that state harms the investor. In Loewen, a Canadian company (Loewen) sued the U.S. Government for alleged discrimination, expropriation, and denial of a minimum standard of protection stemming from Loewen’s treatment before a Mississippi trial court. After filing its claim, however, Loewen’s business operations were reorganized as a U.S. corporation, and the NAFTA claim was assigned to a Canadian corporation owned and controlled by that U.S. corporation. Since the real beneficiary of the NAFTA claim was now a U.S. national, the arbitral tribunal found that the “continuous nationality” rule of customary international law was not met, because the rule requires that foreign nationality be maintained from the occurrence of the injury until the issuance of an award (not just until the filing of the claim). The tribunal also found that Loewen had failed to exhaust local remedies in the United States. According to the tribunal, Loewen could have pur- sued an appeal to the Mississippi Supreme Court with a stay of execution of the judgment, although doing so would have required the posting of an enormous bond. Alternatively, Loewen could have pursued an appeal to the U.S. Supreme Court, which might have included asking the Supreme Court to stay execution without the posting of a bond. Filing for bankruptcy also might have stayed execution of the judgment. While Loewen argued that Mississippi's bond requirement was unreasonable, thus forcing Loewen to settle the case, the tribunal found that Loewen failed to present evidence disclosing exactly why it settled the case rath ta available options.” er than pursue it Discretion to Espouse For example, Renatus J. Chytil and Bohumir J. Mati were nationals of Czechoslovakia when their propertice weve confi Ree, 27 1972, respectively. Both men subsequentiy Bee came naturelized U.S, citizens, at which point their ceoh oltizen™ 65. See Certain Phosphate Lands in Nauru (Nauru v. Austl), 1992 10.7 240, 247, para. 13 (June 26) See Loewen Group v, United » Award, paras, 225-38 (NAFTA 7h. 1 Arb. Trib, June 26, 2008), 87. Id, paras, 156-217.RIGHTS OF AN INJURED STATE 193 ship was revoked. When Chytil and Marik sought assistance from the U.S. government in regaining their property, the Department of State declined to espouse their claims on grounds that they were not U.S. nationals at the time the claims arose. In 1999, the two men separately sued the U.S. government in federal court, charging that the failure to espouse the claims constituted a violation of their civil rights" and seeking a declarato- ry judgment that the secretary of state, in deciding whether to espouse, may not discriminate against them on the basis of national origin. The Ninth Cireuit Court of Appeals affirmed the district court’s dismissal of the cases, Espousal seems particularly unsusceptible to resolution in the judicial branch. In making espousal decisions, the Secretary of State undoubtedly takes into account many factors relating to foreign relations, including the relations between the United States and the foreign country against which a person has a claim. The judiciary has no experience in espousal and has no way of considering the many other factors that espousal deci- sions would affect, and there is no basis upon which the judiciary can conclude that national origin is a factor that the Secretary may not consider. We therefore hold that Chytil’s case presents a nonjusticiable political question.” Countermeasures In addition to invoking the breaching state’s responsibility, the injured state may pursue countermeasures against the breaching state. A “countermeasure” is defined as a non-forcible act” that would normally be contrary to the international obligations of a state, but that is deemed permissible when taken in response to the wrongful act of another state and in order to induce cessation of, and reparation for, that act: Chapter 5 discussed the importance of reciprocity in promoting ab initio compliance by states with international obligations, and the significance of “self-help” by states to impose unilateral sanc- tions that coerce compliance with international law, since there is no centralized “international policeman.” At the same time, it should be clear that the free-wheeling use of unilateral sanctions would be detrimental to the stability of the international legal 68. See S.C. §§ 1971, 1982, international armed conflict in response 1988 (2000), ose Hpaasypenie.ackit.epaher sinte, he 69. Chytil v, Powell, 15 Fed. Appx. term “retorsion”” is seocie, 515 (9th Cin 200i: see Manik vy. Powell, responsive action taken by a state pet 18 Fed. Appx. 517 (Oth Cir. 2001), is unfriendly, but that is not contrary 4,7. In international law, the term Teprisal”’ is used to deseribe a forcible ction by one state taken in time ofONSIBILITY _Ch. § i __ RULES ON STATE RESP" system. With that in mind, “om : BANIHE Articles on countermeasures, which have been Ghal lenged by some states and scholars, main| conditions and limitations exist: © An injured state may not impo has first called upon the pe internationally wrongful conduct an I further, the injured state must notify the breaching state of its intent to undertake countermeasures and offer to negoti- tain that the following se countermeasures unless it shing state to desist from its and to make reparation; ate the matter; © An injured state may not impose countermeasures (and must suspend the countermeasures if they have already been imposed) if the breaching state ceases its wrongful conduct and the matter is placed before an international court or tribunal; © An injured state may only take countermeasures against the state responsible for the wrongful act; counte e An injured state may only take countermeasures in order to induce the breaching state into complying with its obli- mi gations, conforming its conduct, and making reparation;* Wi a Ff ‘wae © An injured state must limit its countermeasures, at least ‘ona initially, to the non-performance of its obligations to the breaching state; © An injured state must limit its countermeasures in such a way as to permit the resumption of performance of the obligations in question at some future time: © An injured state may not engage in countermeasures incon sistent with its obligations arising under: (a) the UN. Charter's prohibition on the threat or use of force: (b) fundamental human rights law; (c) prohibitions on bellige™ @né reprisal; (d) peremptory norms of international law Gud cogens); or (©) diplomatic or consular ane eee 41. See ILC Articles, supra note 2, 74 fart, 52(1). Notification is not required sa for countermeasures that must be taken 75. Id, art. 9¢2y such an freezing foreign assets ag termina 70. 1, art aoa, 5202), oa 7B. Id. art. 6213), Chapter L4(A), 73, Id., art. 49(1). 50% ILC Articles, supra note 2% attSec. E_____RIGHTS OF AN INJURED STATE 195 ¢ An injured state must adhere to any dispute settlement procedure existing with the breaching state, and cannot suspend that procedure as part of its countermeasures; An injured state must only pursue countermeasures that are proportionate to the injury suffered: and e An injured state must cease its countermeasures when the breaching state ceases its wrongful conduct and makes reparation. An often-cited example of countermeasures is a 1970’s dispute between the United States and France over air services. A U.S. carrier, Pan Am, had certain rights under a bilateral U.S.-France air services agreement for flights from the United States to Paris. Rather than fly direct to Paris, Pan Am sought to fly first to London where there would be a “change of gauge” (switching to a smaller aireraft) before completing the flight to Paris. France refused to receive such flights, even though they appeared permissi- ble under the air services agreement. The U.S. government de- manded that France honor the agreement and, when France did not, the United States responded by refusing to allow Air France to fly a route from Paris to Los Angeles. The matter was placed before an international arbitral tribunal, which concluded that the U.S. countermeasure was justified and proportionate.” 79. Id., art. 50(2)(a). fe eee 80. id. art. 51 (using the term March 1946 (U.S. v. Fr.), 18 RIAA “commensurate” rather than “propor- 417, 444, para, 83 (1978). tionate”’). 81. id, ariBe