Clearly the high contracting parties had in view the substance and not the shadow of justice.1
In applying international law, contemporary investment tribunals regularly consider both treaty provisions and general international law. The origins of customary rules dealing with the protection of foreigners can be traced back to the beginnings of modern international law or even before.2 But as to certain matters of particular interest here,3 decisions of ad hoc arbitral tribunals and ‘mixed claims commissions’ of the 19th and first half of the 20th centuries have exerted a distinctive influence. This is not surprising.
After the ‘renaissance’ of international arbitration with the Jay Treaty of 1794,4 the main preoccupation of these tribunals and commissions during the 19th century was the diplomatic protection of nationals for damages suffered in a foreign country.5
Many claims commissions considered issues directly connected to the standing of shareholders, causes of action under national law (including prominently contracts) and international law, and the entitlement to damages. The opinions of these precursors of modern investment tribunals, however, have to be approached with some caution. Mixed claims commissions and arbitral tribunals operated under specific treaty arrangements, which often differed in significant respects from current IIAs that confer jurisdiction to
1 Orinoco Steamship Company (Commissioner Bainbridge), 183.
2 See Paparinskis (2013) 11 (mentioning the discussion on the rules on the treatment of aliens in Giovanni da Legnano’s 1360 treatise). The idea that foreigners may deserve special legal protection is even older.
See Plato, The Laws 193 (‘As to foreigners, one should regard agreements made with them as particularly sacrosanct. Practically all offences committed as between or against foreigners are quicker to attract the vengeance of God than offences as between fellow-citizens.’).
3 See Vivendi I Annulment [98-101] (citing the decision of the 1903 United States-Venezuela Commission in Woodruff for the concept of ‘fundamental basis of the claim’).
4 Georges Pinson, 335; Virally (1987) 82; Hobér (2014) 109. The Jay Treaty is the Treaty of Amity, Commerce and Navigation–the first of its type–concluded on 19 November 1794 between Great Britain and the United States, which sought to maintain peace between the two countries. Ziegler (2013) [1-2].
5 Biens Britanniques, 636.
arbitral tribunals, such as the applicable law.6 Further, some of the understandings on basic background notions–such as the position of the individual in international law7– have evolved significantly since the 19th century.
This chapter discusses findings mainly of the Commissions created between Venezuela and ten other countries in 1903 (‘Venezuelan Commissions’) and of the Commissions constituted by Mexico with France, Germany, Great Britain, Italy, Spain, and the US and that functioned between 1923 and 1934 (‘Mexican Commissions’).8 These two groups of Commissions in particular have influenced modern investment tribunals.9 Decisions of other claims commissions and ad hoc tribunals are incidentally discussed, when necessary to refer to the position preceding the Venezuelan and Mexican Commissions or to consider legal developments contemporaneous to these Commissions.
The focus here is on early antecedents of current ideas on shareholder standing, causes of action, and damages.10 A consideration of these concepts’ original scope contributes to a critical appraisal of their current functions,11 allowing for the (sometimes important) differences in context. This chapter argues that, when applying them, past commissions were more concerned with the fairness of the ultimate outcome than with formal
6 The difference as to the applicable law should not be overstated, however. Regarding the 1923 Mexico-United States Special Claims Convention’s reference that Mexico’s responsibility would not ‘be fixed according to the generally accepted rules and principles of international law’, Feller noted that ‘the Commissions proceeded on the view that “equity” was to be restricted to the decisions of the question of Mexico’s responsibility, and that as to all other questions the rules of international law were to be applied’.
Feller (1935) 223. Those ‘other questions’ included ‘the admissibility of corporate claims’. Ibid. See also Phillips (1933) 228; Percival (1937) 99-100. But see Schwarzenberger (1957) 201.
7 In 1932, Witenberg argued that admissibility grounds could not result from a contract because the only possible source of these grounds was international law. Witenberg (1932) 62. However, this would be different if ‘the individual would acquire international personality’. Ibid. Author’s translation (original French). See also Borchard (1915) 16; Verdross (1931) 328-329.
8 Ibid, vii, 23. Both Mexico and Venezuela were parties to several other treaties constituting claims commissions, in particular during the 19th century. Dolzer (2011) [6-7].
9 Modern references to the Venezuelan Commissions’ decisions include Santa Elena [98], Vivendi II Award [7.5.18], and Micula, fn 13. As to the Mexican Commissions, a well-known example is the influence of the decision in Neer on current debates on the international minimum standard of treatment. See ADF [179];
Gami [95]; Glamis [22]; Azurix (Award) [365-368]; El Paso [347]; Railroad [216-218]; Gold Reserve [567]; Sharpe (2016) 279. See also Saur (Liability) [493]; OI [486] (arguing that the relevant decision on the minimum standard is not Neer but Roberts); Arif [431] (citing the Chattin case); Garibaldi (2015) (for a critical discussion of the current influence of the Mexico-US General Claims Commission’s decision in North American Dredging Company).
10 The thesis does not discuss historical references to admissibility because modern investment tribunals have not relied on the case law/documents of claims commissions or old ad hoc arbitral tribunals in this regard. Further, certain early discussions, such as Witenberg’s monograph, conflated jurisdictional and admissibility objections. Witenberg (1932) 86. Before claims commissions, the terms jurisdiction and admissibility were also often used to refer to the same objections. See e.g. Selwyn, 380.
11 See Miles (2013) 16.
categories. It contends that the decisions, for the most part, tried to avoid certain undesirable consequences such as the potential for double compensation or prejudice to third parties. While the Commissions did not regard these factors as affecting their jurisdiction, they took them into account as an admissibility consideration in deciding whether to accept claims.
Section I discusses basic features of mixed claims commissions in general and of the Venezuelan and Mexican Commissions. Section II considers, first, the Commissions’
reasoning with respect to the relationship between shareholders, on the one hand, and the company and its assets and rights, on the other. The purpose is to distil some general notions on the admissibility of shareholder claims. This section then addresses the relationship between contract claims and claims under international law. It looks at the contract claims/treaty claims distinction in its original context, to reflect on its early functions. Finally, the chapter discusses damages concepts connected to standing and the cause of action and that have a bearing on the admissibility of shareholder claims.
I MIXED CLAIMS COMMISSIONS
Some of the principal ideas discussed in this thesis, including the contract claims/treaty claims distinction and notions related to shareholder standing in international law, started to develop in the decisions of mixed claims commissions. The context and purposes for which they were used, however, differed from their modern application. First, only states had standing before the commissions. International claims were subject to virtually complete government control. Conversely, investment claims nowadays are generally pursued directly by the investor, with home state intervention foreseen only in exceptional circumstances.12 Second, the distinction as to the basis of claims mostly concerned claims under contracts and claims under general international law. Currently, the distinction is between contract claims and claims under IIAs. In this light, is mixed claims commissions’ jurisprudence still relevant in relation to international investment law? Or has the increased protection provided by IIAs to foreign investments, including their jurisdictional innovations, rendered mixed claims commissions’ decisions largely irrelevant, except perhaps for discrete issues such as the minimum standard of treatment?
12 See e.g. ICSID Convention, Art 27(1) (excluding diplomatic protection in respect of an ICSID arbitration, except when a ‘Contracting State shall have failed to abide by and comply with the award’).
The problem the thesis explores is the failure to recognize substantive overlaps between shareholder indirect claims and contract/national law claims and whether this is justified by the new legal landscape created by IIAs. By contrast, mixed claims commissions operated in a world of state-owned claims where, for example, the status of individuals (let alone other private actors) as subjects of international law was doubtful at best.13 Yet, on the one hand, the commissions also drew a distinction between contract and international law claims. On the other hand, they did not fail to recognize the private interest underlying the state claims and the overlaps between these claims and claims available under contracts. The commissions’ jurisdiction, as established by the relevant treaties, was not affected. However, the overlaps and their potential consequences, such as double recovery risks,14 were an important consideration in resolving the claims’
substance. For present purposes, the recognition of overlaps between national and international claims and their potential impact on the decisions of international jurisdictions demonstrates the continued relevance of mixed claims commissions.
A Mixed claims commissions in general
The terms ‘mixed claims commissions’ or ‘mixed commissions’ have been used to refer to a variety of different entities. ‘Mixed commissions’ can refer to commissions of a very varied nature, ranging from ‘diplomatic’ commissions with fact-finding or conciliation roles through commissions of a ‘judicial’ or ‘quasi-judicial’ nature.15 The term ‘mixed claims commissions’ also defies easy definition. Even the institutions to which they are most commonly applied had notable differences among them. Mixed claims commissions also evolved considerably throughout the period in which they were most frequently used, during the 19th and early 20th centuries.16 They were created by treaties with a view to settling a defined category of disputes,17 often within a specific timeframe.18
13 In International Fisheries, Nielsen quoted approvingly Oppenheim’s view that international law was ‘a law for the intercourse of States with one another, not a law for individuals’. International Fisheries (Diss Op Nielsen), 722. See also Anzilotti (1906) 8; Rundstein (1928) 340. But see Oppenheim (9th ed) 16-22.
14 Douglas (2009) 419-420.
15 Boisson de Chazournes and Campanelli (2006) [8-14].
16 Miles (2013) 67.
17 Dolzer (2011) [1].
18 See e.g. Mexico-US Convention of 8 September 1923, Art VI (Commission, in principle, ‘bound to hear, examine and decide, within three years from the date of its first meeting, all the claims filed’). RIAA IV, 13. This term was later extended on three occasions. Ibid, 325-326, 549-550, 751-752.
Although the main interest here is in claims for damages suffered by an individual or company at the hands of a foreign country, mixed claims commissions would sometimes resolve other types of disputes, including between the states parties to the treaty.19 Mixed claims commissions or tribunals20 were generally set up to deal with a high number of claims arising from traumatic events, such as revolutions or national and international armed conflicts. Measures taken in these circumstances by the state in question were often alleged to constitute expropriations of alien property.21 Well-known examples of events leading to the creation of claims commissions include the Venezuelan Civil War of 1898-1902, the Mexican Revolution starting in 1910 and lasting around a decade, and the First World War.22 Losses to foreigners resulting from these events caused significant tensions among states; the creation of ad hoc bodies was seen as an inexpensive and effective way to process the resulting claims.23 Leaving aside the dispute settlement arrangements following the First and Second World Wars, the majority of the claims referred to damages suffered by a national of a more or less powerful state and allegedly attributable to a weaker state, within whose territory the damaging event had taken place.24
B The Venezuelan and Mexican Commissions 1 Overview
The mixed claims commissions ‘between Venezuela and ten of the principal nations of the world’, which sat at Caracas from 1903, were described at the time as ‘the most notable instance of international arbitration in the history of the world’.25 These commissions, whose constitutive instruments were concluded after a blockade of the
19 Dolzer (2011) [1].
20 During the 20th century and in particular following the First World War, some ad hoc processes for the resolution of international disputes were called mixed tribunals. Shaw (2008) 1056.
21 Miles (2013) 67.
22 Boisson de Chazournes and Campanelli (2006) [10]; Dolzer (2011) [6-7].
23 Shaw (2008) 1056.
24 Brownlie-Crawford (2012) 611. The Commissions’ jurisdiction sometimes expressly included only the claims of the more powerful state against the weaker one. See Mexico-United States Special Claims Commission, RIAA IV, 779 (covering only claims of US citizens against Mexico).
25 Kummerow, 392.
Venezuelan ports by Great Britain, Germany, and Italy,26 were formed to deal with claims of nationals of these three countries and of the US, Mexico, Spain, France, Belgium, the Netherlands, and the Kingdom of Sweden and Norway.27 All the commissions had the same structure, with Venezuela appointing one member, the other state party appointing another one, and an umpire appointed by a third state.28 The task of naming the umpire was entrusted to the Queen of the Netherlands (Commissions with the US, Belgium, and France), the President of the US (Commissions with Great Britain, Germany, Italy, and the Netherlands), the King of Spain (Commissions with Mexico and Sweden-Norway), and the President of Mexico (Spain-Venezuela Commission).29
The Mexican Commissions were set up essentially to deal with claims arising from the Mexican revolutionary period of 1910 to 1920,30 between Mexico and France, Germany, Great Britain, Italy, Spain, and the US.31 In the case of the US, aside from the commission dealing with ‘revolutionary claims’–named the ‘Special Claims Commission’–another commission was set up to deal with all other claims of citizens of both Mexico and the US corresponding to the period 1868 to 1927 (‘General Claims Commission’).32 The arrangement on the selection of the members of all these commissions was identical. Mexico and the other state each appointed one member and the third member, who would preside over the commission, was selected by mutual agreement.33 In the absence of agreement, the third member would be designated by an organ of the Permanent Court of Arbitration.34
26 Drago (1907) 692, 703-704. Germany, Great Britain, and Italy enjoyed a privileged position as regards the payment of their claims vis-à-vis the other states with claims against Venezuela. See The Venezuelan Preferential Case.
27 RIAA IX, 103.
28 RIAA IX, 115 (US); RIAA IX, 321 (Belgium); RIAA X, 3 (France); RIAA X, 360 (Germany); RIAA IX, 351 (Great Britain); RIAA X, 480 (Italy); RIAA X, 695 (Mexico); RIAA X, 709 (Netherlands); RIAA X, 737 (Spain); RIAA X, 763 (Sweden and Norway).
29 Ibid.
30 RIAA IV, 3.
31 Feller (1935) 23 (also mentioning a convention of a ‘different character’ concluded with Belgium).
32 Ibid. See also Percival (1937) 98-99.
33 RIAA V, 567 (Germany); RIAA V, 313 (France); RIAA V, 7 (Great Britain); RIAA IV, 12 (US General Claims Commission); RIAA IV, 779 (US Special Claims Commission).
34 Ibid.
The decisions of both the Venezuelan and Mexican Commissions were definitive and binding.35 The Mexican Commissions, however, constitute a more impartial dispute settlement mechanism than the Venezuelan Commissions.36 While in the case of the latter the umpire was always appointed by one of the states that had formed commissions with Venezuela, in the case of the Mexican Commissions, failing agreement, the president was chosen by an authority of an international organization. Further, the umpire model of the Venezuelan Commissions meant that the Umpire decided the case when there was disagreement between the other two members. It had ‘the disadvantage of emphasizing the national character of the national commissioners, often resulting in reducing them to the position of mere advocates for their governments’.37
2 Government claims and underlying private rights
Even in the case of claims derived from a loss suffered by a natural or legal person, before mixed claims commissions it was usually only the state of the nationality of these persons who had standing. In the case of the Venezuelan Commissions, only the governments could appear before the Commissions,38 although provision was sometimes made for the injured person or his/her representatives to attend the hearings.39 Before the Mexican Commissions, it was also exclusively the governments who presented the claims.40 Yet both the Venezuelan and Mexican Commissions referred to the relationship between the claim–presented by the government–and the underlying rights of the injured national.
35 See, e.g., RIAA IX, 115 (US-Venezuela Mixed Claims Commission); RIAA V, 570 (Germany-Mexico Claims Commission). Unlike arbitral tribunals, international commissions not always render binding decisions and are often entrusted to issue non-binding pronouncements. Boisson de Chazournes and Campanelli (2006) [6].
36 This is so even considering only the formal arrangements and leaving aside the extraordinary historical circumstances in which the Venezuelan Commissions were set up. Cf contention of the British agent in De Lemos, 369 (‘This treaty was made under pressure of a blockade. Under such circumstances what is more natural than to find that the blockading power has insisted on its own standard of right?’). See also Miles (2013) 69.
37 Feller (1933) 40.
38 RIAA IX, 116 (US), 321-322 (Belgium), 354 (Great Britain); RIAA X, 3 (France), 361 (Germany), 482 (Italy), 695 (Mexico), 710 (Netherlands), 713 (Spain), 764 (Sweden and Norway).
39 See Rules of the British-Venezuelan Commission, Article XV, RIAA IX, 356; Rules of the Netherlands-Venezuelan Commission, Article XI, RIAA X, 713.
40 RIAA IV, 12, 780-781, (US); RIAA V, 9 (Great Britain), 314-315 (France), 569 (Germany). This was also true of other claims commissions. See e.g. Tripartite Claims Commission US-Austria-Hungary, RIAA VI, 200; General Claims Commission Panama, RIAA VI, 303; Mixed Claims Commission US-Germany, RIAA VII, 14.
In the Orinoco Steamship Company case, the US-Venezuela Commission considered a claim for damages arising from the annulment of a concession contract, certain unpaid debts, and losses sustained during the revolution.41 Venezuela questioned the Commission’s jurisdiction because the loss had been suffered by a British corporation, which only later assigned the claim to a US company.42 The Umpire, who decided the case because the two Commissioners disagreed, rejected the objection essentially based on the language of the treaty.43 He observed, however, that ‘a state is not a claim agent, but only, as the infliction of a wrong upon its citizens in [sic] an injury to the state itself, it may secure redress for the injury done to its citizens, and not for the injury done to the citizens of another state’.44 The US Commissioner stated that a wrong on a state’s citizen injured the state itself.45 In all cases ‘[t]he vital question [was] whether and to what extent citizens of the United States of America [had] suffered loss or injury’.46 He and the Umpire agreed that jurisdiction was present. The latter added, however, that the Commission’s jurisdiction over claims owned by US citizens had to be recognized, without prejudice to its ‘judicial power’ to rule on the merits considering the effect certain issues–in the case, the claim’s assignment–could have on the parties’ rights.47
In the Metzger case of the Germany-Venezuela Commission, the Commissioner for Venezuela argued that the claim for damages could not be accepted inter alia on the grounds that ‘the right of action does not survive and pass to the heirs of Metzger’.48 This was opposed by the German Commissioner, who took the position that the case was not between an individual and Venezuela but involved a claim being put forward by
41 Orinoco Steamship Company, 191-192.
42 Ibid, 182.
43 Ibid, 192-193.
44 Ibid, 192.
45 Ibid, 182.
46 Ibid, 183.
47 Ibid, 193.
48 Metzger, 418.
Germany.49 The Umpire found this latter position untenable.50 The claim before the Commission was ‘not a claim of the German Nation but a claim of an individual’.51
In Parker, the Mexico-US General Claims Commission was confronted with a claim for debts arising from services rendered to the Mexican Government.52 In considering a challenge against the nationality of the claim,53 the Commission held that its 1923 constitutive treaty did not deal with claims owned by the espousing states but by private parties.54 The treaty even provided for the restitution of properties or rights to such parties in certain cases.55 Yet, on the one hand, the Commission found that the state’s control over the claim was ‘complete’ and ‘exclusive’, in that the government was at liberty to pursue it or not.56 On the other hand, however, the Commission affirmed that
‘the private nature of the claim inhere[ed] in it and [was] not lost or destroyed so as to make it the property of the nation’.57
‘the private nature of the claim inhere[ed] in it and [was] not lost or destroyed so as to make it the property of the nation’.57