Developments in international law, prepared by the Editorial Staff of International Legal Materials
The American Society of International Law September 26, 2006
Azurix Corp., a Delaware corporation, filed for arbitration against the Argentine Republic on 19 September 2001. Azurix claimed that Argentina had breached the Bilateral Investment Treaty (the “BIT”) by expropriating its investment by measures tantamount to expropriation without prompt, adequate, and effective compensation under Article IV(1), by failing to accord to it fair and equitable treatment, full protection and security, and treatment required by international law under Article II(2)(a), by taking arbitrary measures that impaired Azurix’s use and enjoyment of its investment under Article II(2)(b), by failing to observe obligations Argentina entered into with regard to Azurix’s investment under Article II(2)(c), and by failing to provide transparency concerning the regulations, administrative practices, and procedures and adjudicatory decisions that affect Azurix’s investment under Article II(7). In addition, Azurix requested orders for the payment of compensation for all damages suffered and the adoption by Argentina of all necessary measures to avoid further damages. On 7 March 2003 Argentina filed a Memorial on Jurisdiction raising two objections: (1) that Azurix had agreed to submit the dispute to the courts of the city of La Plata and other jurisdiction and forum and (2) that Azurix had made a forum selection under Article VII of the BIT. Azurix filed a request for provisional measures recommending that Argentina refrain from incurring by itself or through its political subdivisions any action or omission capable of aggravating or extending the dispute on 15 July 2003. Argentina sought dismissal of the request for provisional measures with costs and sought to have Azurix produce a Decision of the Appeals Chamber of Buenos Aires on 24 July 2003. The Tribunal rejected Azurix request for provisional measures, ordered the parties to refrain from actions that would aggravate or extend the dispute and ultimately held that it had jurisdiction and ordered Azurix to produce the Buenos Aires decision. A hearing on the merits was held on 14 March 2005. On 17 April 2006 the Tribunal declared the proceedings closed pursuant to Arbitration Rule 38. The final Award was issued on 23 June 2006. The Tribunal found that Argentina (1) did not breach Article IV(1) of the BIT, (2) breached Article II(2)(a) by failing to accord fair and equal treatment to Azurix’s investment, (3) failed to accord full protection and security to Azurix’s investment under Article II(2)(a), and (4) breached Article II(2)(b) by taking arbitrary measures that impaired Azurix’s enjoyment and use of its investment. The Tribunal awarded Azurix fair market value on its Compensation in the amount of $165,240,753 including in part the additional investments made by Azurix to fund its subsidiary with interest compounded semi-annually. In addition, the Tribunal held that both parties were responsible for their own costs and counsel fees, but that Argentina was responsible for the fees and costs of the arbitrators and ICSID Secretariat, except for $34,496 to be paid by Azurix.
Members of the Tribunal:
Dr. Andre´s Rigo Sureda, President
The Honorable Marc Lalonde P.C., O.C., Q.C., Arbitrator
The Claimants are the Canadian company Grand River Enterprises Six Nations, Ltd. (“Grand River”) and other individual Claimants, who are members of indigenous peoples or First Nations belonging to the Six Nations of North America. They brought this arbitration under Chapter 11 of the North American Free Trade Agreement (“NAFTA”), contending that various actions taken by states of the United States to implement the 1998 Master Settlement Agreement, concluded to settle litigation by several U.S. states against certain U.S. cigarette manufacturers, violate NAFTA provisions on national treatment, most-favored-nation treatment, fair and equitable treatment, as well the rules on expropriation.
At this stage of the proceedings, the only issue before the Tribunal was “whether certain of the Claimants’ claims must be barred as not timely under NAFTA Articles 1116(2) and 1117(2).” Article 1116(2) provides:
“An investor may not make a claim if more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the investor has incurred loss or damage.” Article 1117(2) mirrors that provision for claims filed on behalf of enterprises.
The individual Claimants have been selling cigarettes manufactured by Grand River or predecessor companies to wholesalers and distributors, who in turn have been selling the cigarettes on for retail sale. To a large extend, the Claimants’ business involves the retail sale of cigarettes to consumers on Indian reservation in the United States or First Nations reserves in Canada, although the Claimants also engage in the manufacture and distribution of cigarettes ultimately sold to consumers in U.S. markets off reservation. In 1998, a group of state attorneys general concluded an agreement with major tobacco producers relating to litigation between a number of US states and the major tobacco producers. This agreement, the Master Settlement Agreement (“MSA”), provided for the Participating Members (“PM”), i.e. the tobacco companies, to make perpetuity cash payments to a central account in respect of each cigarette sold by them. Owing to the increase in costs, the PMs lost a share of the market and the MSA therefore incorporated elements aimed at encouraging more tobacco produces to participate. The ability of non-participating producers to gain market share at the expense of the PMs should be limited. In view of that, 46 US states adopted “escrow legislation” according to which non-participating producers “must place in escrow in a state a sum roughly corresponding to the amount it would have paid in respect of its taxed sales in that state, had it joined the MSA.” Furthermore, “complementary legislation” was enacted, which prohibited cigarettes of non compliant manufactures from receiving tax stamps. The Claimants inter alia contended that the escrow laws resulted in “the complete destruction of Investors’ business and their investments.”
In its analysis, the Tribunal looked at “whether more than three years elapsed from the date on which the Claimants first acquired or should have first acquired knowledge of the alleged breach and knowledge that they had incurred loss or damage.” In that regard the Claimants asserted that they did not learn of the possibility of adhering to the MSA or of the escrow laws and complementary legislation more than three years prior to filing the dispute, i.e. March 12, 2001.
The Tribunal noted that the “distribution and sale of tobacco products in the United States are heavily regulated and taxed activities” a fact of which the Claimants “could not have been unaware.” The Tribunal held that “it is incumbent upon foreign investors entering into significant ventures in a foreign land to take reasonable steps to learn of major features of the legal order that will regulate their activities” and therefore concluded that the Claimants should have known of the alleged breach. It therefore dismissed the claims based on the MSA and the escrow laws insofar as they concerned sales in the United States. Claims relating to on-reservation sales were not affected, however, because these ”are usually exempt from regulation by the states within the United States as a matter of Federal law.”
As to the question of when a loss is incurred, the Tribunal stated “that becoming subject to a clear and precisely quantified statutory obligation to place funds in an unreachable escrow for 25 years, at the risk of serious additional civil penalties and bans on future sales in case of non-compliance, is to incur loss or damage as those terms are ordinarily understood.”
The Tribunal allowed the Claimants to amend their claim in order to include claims relating to US regulations adopted after March 12, 2001.
World Trade Organization (Appellate Body): United States – Final Dumping Determination on Softwood Lumber (Recourse to Article 21.5 of the DSU) (August 15, 2006)
The WTO Appellate Body Report [hereinafter “WTO AB Report”] consists of several parts. The first part summarizes the procedural history in the dispute. The second part provides a summary of the findings of the Article 21.5 Panel’s decision on 3 April 2006 (WT/DS264/RW), which found that the United States Department of Commerce was entitled not to offset the non-dumped transactions against the dumped transactions when calculating the margin of dumping for each respondent foreign producer or exporter. Consequently, the Panel rejected Canada's claim that the Department of Commerce’s use of zeroing in the [transaction-to-transaction] comparison methodology at issue is inconsistent with Article 2.4.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 [hereinafter “Anti-Dumping Agreement”]. In addition, the Panel rejected Canada's claim that the United States has violated the fair comparison obligation provided for in the first sentence of Article 2.4 of the Anti-Dumping Agreement." The third part of the WTO AB Report outlines the arguments of Canada, the United States, and other third parties, following Canada’s appeal of the Panel’s 3 April 2006 decision. The final part provides a summary and explanation of the reasoning and findings of the Appellate Body in reversing the findings in paragraphs 5.66 and 6.1 of the Panel Report, that the Department of Commerce's Section 129 Determination is not inconsistent with Article 2.4.2 of the Anti-Dumping Agreement finding instead, that the use of zeroing by the U.S. is inconsistent with the United States' obligations under Article 2.4.2 of the Anti-Dumping Agreement. The Appellate Body also reverses the finding, in paragraphs 5.78 and 6.1 of the Panel Report that the U.S. Department of Commerce’s Section 129 Determination is not inconsistent with Article 2.4 of the Anti-Dumping Agreement finding, that the use of zeroing is inconsistent with the "fair comparison" requirement in Article 2.4. Consequently, the Appellate Body reverses the conclusion, in paragraph 6.2 of the Panel Report, that "the United States has implemented the recommendations and rulings of the Dispute Settlement Body (DSB) in US – Softwood Lumber V, to bring its measure into conformity with its obligations under the [Anti-Dumping] Agreement". Therefore, the Appellate Body recommends that the DSB request the U.S. to bring its measure into conformity with its obligations under the Anti-Dumping Agreement.
International Criminal Tribunal for Rwanda (ICTR) (Appeals Chamber): Prosecutor v. Edouard Karemera, Mathieu Ngirumpatse, Joseph Nzirorera (Interlocutory Appeal) (June 16, 2006)
The decision is available on the Court’s website.
The Appeals Chamber (the “Court”) upheld the Prosecutor’s interlocutory appeal, in which it sought to take judicial notice of the fact that “[b]etween 6 April 1994 and 17 July 1994, there was a genocide in Rwanda against the Tutsi ethnic group.” The Trial Chamber had rejected this request, holding that whether genocide occurred was not relevant to the case that the Prosecution must prove; and second, that recognizing it would improperly lighten the Prosecution’s burden of proof.
Rule 94(A) of the Rules of Procedure and Evidence states: “A Trial Chamber shall not require proof of facts of common knowledge but shall take judicial notice thereof.” The Appeals Chamber noted that this standard is not a discretionary one, i.e. if a Trial Chamber determines that a fact is “of common knowledge”, it must take judicial notice of it. Citing the Semanza Appeal Judgment, the Court noted:
Rule 94(A) “commands the taking of judicial notice” of material that is “notorious.” The term “common knowledge” encompasses facts that are not reasonably subject to dispute: in other words, commonly accepted or universally known facts, such as general facts of history or geography, or the laws of nature. Such facts are not only widely known but also beyond reasonable dispute.
On appeal, the Prosecution argued “that the occurrence of genocide in Rwanda in 1994 is a universally known fact—as evidenced by, inter alia, United Nations and government reports, books, news accounts, and the Tribunal’s jurisprudence.” It further argued “that taking judicial notice of this fact would not be unfair to the Accused or inconsistent with the Prosecution’s burden of proof.” In that regard, the Chamber held that “[w]hether genocide occurred in Rwanda is of obvious relevance to the Prosecution’s case; it is a necessary, although not sufficient, part of that case. Plainly, in order to convict an individual of genocide a Trial Chamber must collect evidence of that individual’s acts and intent. But the fact of the nationwide campaign is relevant; it provides the context for understanding the individual’s actions.” Agreeing with the Prosecutor’s arguments, the Court noted that “allowing judicial notice of a fact of common knowledge,” even if it is an element of an offence, “does not lessen the Prosecution’s burden of proof or violate the procedural rights of the Accused. Rather, it provides an alternative way that that burden can be satisfied, obviating the necessity to introduce evidence documenting what is already common knowledge.”
International Criminal Tribunal for Rwanda (ICTR) (Appeals Chamber): Sylvestre Gacumbitsi v. The Prosecutor (July 7, 2006)
The decision is available on the Court’s website.
Sylvestre Gacumbitsi was indicted by the ICTR prosecutor with criminal responsibility for certain crimes committed against the Tutsi population of Kibungo Prefecture between 6 and 30 April 1994, which constituted Genocide (Count 1), complicity in genocide (Count 2), extermination and rape as crimes against humanity (Counts Three and Five), and murder as a crime against humanity (Count 4). The defendant was the Bourgmestre of Rusumo Commune and the highest ranking local administrative official. Based on the facts Trial Chamber III found Gacumbitsi guilty of Counts 1, 3 and 5; dismissed Count 2, and acquitted him on Count 4 on 17 June 2004. He was sentenced to a single term of 30 years. Appellant alleged errors in certain interlocutory decisions of the Trial Chamber (Ground 1), and errors relating to his convictions for genocide, extermination as a crime against humanity, and rape as a crime against humanity (Grounds 2, 3 and 4). Ground 5 relates to sentencing. The Prosecution presented six grounds of appeal arguing that the Trial Chamber erred in various aspects of sentencing (Ground 1), in acquitting him of murder as a crime against humanity (Ground 2), in failing to find him guilty of rapes (Ground 3), in its enunciation of the elements of rape (Ground 4), in refusing to consider joint criminal enterprise (Ground 5), and in holding that Gacumbitsi lacked authority to order participants in the attack on Rusumo Commune (Ground 6). Citing previous ICTR and ICTY jurisprudence and the ICTR Statute, the Appeals Chamber dismissed Gacumbitsi’s appeal in its entirety and allowed parts of the Prosecution’s appeals. For example, the Appeals Chamber allowed, in part, the Prosecution’s first ground of appeal and quashed the sentence of 30 years imposing a sentence of life imprisonment, subject to time served under Rule 101 (d) of the Rules. The Appeals Chamber also allowed, in part by majority with two judges dissenting, the Prosecution’s second ground of appeal finding that Gacumbitsi aided and abetted the murder of Tutsi tenants, thus the Appeals Chamber entered a conviction for murder as a crime against humanity under Count 4 of the indictment. The Appeals Chamber also allowed, in part, the Prosecution’s sixth ground of appeal holding Gacumbitsi responsible for ordering the crimes committed by all attackers present at the Nyarubuye Parish and Kigarama. The Appeals Chamber dismissed all other parts of the Prosecution appeal.
European Court of Human Rights (ECHR): Olaechea Cahuas v. Spain (August 10, 2006)
The applicant, a Peruvian national, was arrested in Spain during a routine check. An international warrant had been issued against the applicant on grounds of suspicion of membership in the organization of the “Shining Path” (Sendero Luminoso), a terrorist organization founded in 1970 with the aim of establishing a communist regime by means of armed struggle. Peru requested his extradition on the basis of a terrorist offence.
After the Spanish authorities noted that the Peruvian Government was bound, by virtue of its international commitments such as the American Convention on Human Rights, not to impose the death penalty or to sentence the applicant to life imprisonment, the applicant’s extradition was approved of. The applicant’s appeal against that decision was dismissed. After the applicant lodged his complaint, the Court ordered provisional measures under Rule 39 (interim measures) of the Rules of the Court to the effect that the applicant not be extradited pending a decision of the Court. The following day the applicant was nevertheless extradited to Peru. The applicant alleged a violation of Article 3, (prohibition of torture), Article 5 (right to liberty and security), Article 6 (right to a fair trial), and Article 34 of the Convention, under which the contracting States pledge not to hinder the right to effective exercise of the right to an individual application.
The Court held that there was no violation of Article 5 of the Convention, as the proceedings were entirely covered by the exception of Article 5 (f) of the Convention, which provides that a detention does not violate the Convention, if it is “the lawful arrest or detention… of a person against whom action is being taken with a view to deportation or extradition.” In terms of a violation of Article 6 of the Convention, the Court stated that there was insufficient evidence of a flagrant violation as described in para 113 of the Soering judgment. With respect to a violation of Article 34, the Court reiterated that provisional measures are only ordered when there is a risk of irreparable harm and when that risk is immanent. A State’s non-compliance with provisional measures impedes the Court’s ability to efficiently review an applicant’s claim and also hinders the applicant’s right to bring an application before the Court. The Court noted that one question still remained unanswered: Whether a State’s obligation to observe provisional measures is tied to a subsequent finding of an impediment to the applicant’s right to bring the application. In all previous cases dealing with a violation of provisional measures, there was a subsequent finding of such impediment. In this case, however, the applicant was able to maintain contact to his lawyer during his detention in Peru and was also released after three months of detention. Still, the Court concluded that it was not established that the Spain had fulfilled its obligation not to hinder in any way the effective exercise of the right to bring the application. It held that mere non-compliance with an interim measure is, per se, a serious hindrance of the effective exercise of the right to bring an individual application, even if the risk determined by the Court later turns out not to have existed. Even in these cases the provisional measure still has to be considered binding upon the State and the Court therefore held that Spain had violated Article 34 of the Convention.
United States Court of Appeals for the District of Columbia: Natural Resources Defense Council v. Environmental Protection Agency et al. (August 29, 2006)
The Court of Appeals for the District of Columbia (“the Court”) denied the petition for review filed by the environmental group Natural Resources Defense Council (“NRDC”).
Deplete the Ozone Layer (“the Protocol”), which seeks to reduce and eliminate the use and production of certain substances harmful to the ozone layer. The U.S. Senate ratified the Protocol in 1988, and Congress incorporated its terms into domestic law through the Clean Air Act Amendments of 1990. Article 2 H(5) of the Protocol provided for the signatories to cease production and consumption of methyl bromide by the year 2005. However, the protocol also allowed for a “critical use” exemption, according to which the States signatories can “permit the level of production or consumption that is necessary to satisfy uses agreed by them to be critical uses.” Accordingly, Congress amended the Clean Air Act to require the Environmental Protection Agency (“the EPA”) to “promulgate rules for reductions in, and terminate the production, importation, and consumption of, methyl bromide under a schedule that is in accordance with, but not more stringent than, the phaseout schedule of the Montreal Protocol.” The Parties to the Protocol meet annually in order to decide the level of production to be permitted for critical uses. After the Parties deadlocked over the amount of critical-use exemptions, they called an extraordinary meeting, at which Decision Ex.I/3 was adopted. It noted that “each Party which has an agreed critical use should ensure that the criteria in paragraph 1 of decision IX/6 are applied when. . . authorizing the use of methyl bromide and that such procedures take into account available stocks.” Decision IX/6 provided that exemptions should only be permitted “when all technically and economically feasible steps have been taken to minimize the required use and when methyl bromide is not available from existing stocks.” The EPA then adopted a Final Rule in which it authorized the use of stocks as permitted by Decision Ex. I/3 and permitted non-critical users to draw upon existing stocks.
NRDC alleged that the EPA’s “Final Rule violated Decision IX/6 and Decision Ex.I/3 because EPA failed to disclose the full amount of existing stocks, failed to offset new production and consumption by the full amount of these stocks, and failed to reserve the stocks for critical uses, and because the total amount of methyl bromide critical use the Final Rule authorized is not the technically and economically feasible minimum.”
The Court noted that “side agreements reached after a treaty has been ratified are not the law of the land; they are enforceable not through the federal courts, but through international negotiations.” To that effect the Court also stated that the decisions were “international political commitments rather than judicially enforceable domestic law” and therefore held that even if the Final Rule violated the decisions, it did not violate domestic law.
This report contains recommendations for a global counter-terrorism strategy with specific proposals to strengthen the ability of the U.N. to combat terrorism in six areas. First, is means of dissuading groups from resorting to terrorism or supporting it. The report argues that one of the ways is to focus attention on victims and ensure that their voices are heard. In addition, civil and religious leaders should play a key role. This global campaign must be waged at the international, regional and local level focusing on the plight of victims and stressing other negative impacts of terrorism. The U.N. can assist through the UNESCO “Culture of Peace” initiative. The report states that any comprehensive counter-terrorism strategy must include a long-term component addressing conditions conducive to exploitation by terrorism. Second, the report addresses denying terrorists the means to carry out an attack. For example, Member States should take all necessary steps to eliminate the financing of terrorism, as called for under Security Council resolution 1373 (2001) and fully implement the International Convention for the Suppression of the Financing of Terrorism. Toward this end the U.N.’s financial sanctions system can serve as an important tool. In addition, the report calls for means of denying access to weapons, including weapons of mass destruction in line with resolutions 1373 (2001) and 1617 (2005). Toward this end, Member States should step up implementation of the Programme of Action to Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light Weapons for conventional arms. For nuclear, biological, chemical or radiological weapons, the report recommends use of U.N. organizations such as the IAEA, Organization for the Prohibition of Chemical Weapons, and Member States reinforcing non-proliferation mechanisms. Furthermore, the report recommends denying access to recruits and communication by countering terrorist use of the internet, denying terrorists access to travel, and denying terrorists access to their targets and the desired impact of their attacks. Third, the report recommends means of deterring states from supporting terrorist groups. The report refers to Member States obligation to fulfill decisions adopted by the Security Council as stipulated in Article 25 of the Charter. In addition, the report refers to the adoption of 13 universal instruments related to the prevention and suppression of international terrorism and Security Council resolutions 1267 (1999), 1373 (2001), 1540 (2004), 1566 (2004), and 1624 (2005). Fourth, the report discusses means of developing State capacity to prevent terrorism. Priority areas include (1) promoting the rule of law, respect for human rights, and effective criminal justice systems; (2) promoting quality education and religious and cultural tolerance; (3) countering the financing of terrorism; (4) ensuring transparent security; (5) harnessing the power of the Internet to counter terrorism; (6) improving the protection of soft targets and the response to attacks on them; and (7) strengthening State capacity to prevent terrorists from acquiring nuclear, biological, chemical, or radiological materials. Fifth, the report recommends means to defend human rights in the context of terrorism and counter-terrorism. Only by placing counter-terrorism within the rule of law framework can internationally valued standards that outlaw terrorism be safeguarded and the factors that contribute to terrorism be addressed.
According to this recommendation, “application of the death penalty is a violation of the most fundamental of human rights, the right to life”. As such, the Recommendation states that capital punishment should be abolished. For example, the Recommendation points out that Protocol No. 13 to the European Convention on Human Rights on the abolition of the death penalty in all circumstances (CETS No. 187) has been ratified by 38 of the 46 Council of Europe member states and signed by eight others with only Azerbaijan and Russia having not signed. Russia, however, is the only Council of Europe member state that has not abolished the death penalty. The Parliamentary Assembly therefore calls upon Russia to immediately ratify Protocol No. 6 to the European Convention on Human Rights and separatist territories, such as Abkhazia, South Ossetia and the Dnestr Moldovan Republic to immediately abolish the death penalty and commute any death sentences accordingly. In terms of countries with observer status, the Council of Europe refers to Resolutions 1349 (2003) and 1253 (2001), which call upon Japan and the United States to place an immediate moratorium on executions and take the necessary steps to abolish the death penalty. The Recommendation states that it is “inadmissible that these appeals have gone unheeded and that both Japan and the United States continue to apply the death penalty and violate their fundamental obligation to uphold human rights, pursuant to Statutory Resolution (93) 26.” As such, the Parliamentary Assembly calls upon the Committee of Ministers to urge both Japan and the United States to abolish the death penalty and to put removal of both countries observer status on the agenda by the end of 2006 if no progress has been made by then.
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