738A

IN THE INTERNATIONAL COURT

OF JUSTICE

AT THE PEACE PALACE

THE HAGUE

“THE CASE CONCERNING THE WINDSCALE ISLANDS”

______________________________________________________

THE REPUBLIC OF ASPATRIA

(APPLICANT)

V

THE KINGDOM OF RYDAL

(RESPONDENT)

______________________________________________________

MEMORIAL FOR THE APPLICANT

Author: Kevin Holder

2010 Philip C. Jessup

International Law Moot Court Competition

ii

TABLE OF CONTENTS TABLE OF CONTENTS II INDEX OF AUTHORITIES VIII STATEMENT OF JURISDICTION XVII QUESTIONS PRESENTED XVIII STATEMENT OF FACTS XIX SUMMARY OF PLEADINGS XXIV PLEADINGS 1 I. SOVEREIGNTY OVER THE WINDSCALE ISLANDS BELONGS TO

ASPATRIA…………………………………………………………………...1

A. Plumbland gained title to the Windscale Islands through effective

occupation 1

1. Occupation must be “effective” 1

2. Rydal failed to meet the Clipperton Island threshold, the lowest for

effective occupation 2

3. Upon the extinguishment of Rydal’s inchoate title, Plumbland

gained inchoate and then full title over the Islands 4

4. Plumbland did not subsequently abandon the Islands 4

B. Plumbland, not Rydal, gained title through prescription 5

1. The critical date is on the day that King Piero of Plumbland sent a

letter to Queen Constance of Rydal 6

2. Plumbland satisfied the conditions for prescription 6

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3. In any case, Rydal did not satisfy the conditions to gain title by

prescription 7

C. Aspatria inherited title to the Windscale Islands from Plumbland 8

1. Aspatria lawfully became independent in January 1820 8

2. Aspatria gained independence from Plumbland with the Windscale

Islands as part of its territory 9

D. Plumbland could not transfer title to Rydal in the Treaty of Great Corby

10

II. THE ISLANDERS ARE NOT ENTITLED TO INDEPENDENCE

BASED ON THE PRINCIPLE OF SELF-DETERMINATION 10

A. The question of self-determination is subordinate to the issue of territorial

sovereignty 10

B. The Islanders are not entitled to unilateral or external self-determination

11

1. Self-determination applies to colonial territories 11

2. Outside the colonial context, the right of self-determination equates

to the exercise of democratic rights 12

3. The case of the Windscale Islands falls within the norm, rather

than the exception 13

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III. RYDAL’S REJECTION OF MDR’S BID CONSTITUTED A

VIOLATION OF THE ASPATRIA-RYDAL BIT 14

A. The Aspatria-Rydal BIT extends to the Windscale Islands 14

1. The VCLT indicates that the BIT extends to the Windscale Islands

14

a. The ordinary meaning of “territory” does not limit the

scope of the BIT 14

b. The context of the treaty suggests that the BIT extends to

the Windscale Islands 15

2. The supplementary means of interpretation quashes the notion that

the Aspatria-Rydal BIT excludes the Windscale Islands from its

ambit 16

B. Rydal’s rejection of MDR’s bid constituted violations of the Aspatria-

Rydal BIT 17

1. Regardless of the Islands’ sovereignty, the rejection of MDR’s bid

by the Assembly of the Islands constitutes a breach of Rydal’s

obligations under the Aspatria-Rydal BIT 17

a. Although sovereignty over the Windscale Islands has

continually remained with Aspatria, Rydal’s interference

engaged its responsibility under the Aspatria-Rydal BIT

17

b. If sovereignty over the Islands belongs to Rydal,

arguendo, the acts of the Assembly engage Rydal’s

responsibility 19

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2. Rydal has violated “national treatment” under Article IV of the

BIT 19

3. Rydal has violated the minimum standard of treatment under

Article V of the BIT 20

a. Discrimination 21

b. Transparency 21

c. Legitimate expectations 22

IV. RYDAL DOES NOT HAVE STANDING TO INVOKE THE

ASPATRIA-RYDAL BIT TO PROTECT THE ASSETS OF ALEC, AN

ASPATRIAN COMPANY, AND IN ANY EVENT, ASPATRIA DID NOT

VIOLATE THE ASPATRIA-RYDAL BIT 23

A. Rydal does not possess standing to invoke the BIT 23

1. Only Aspatria has the right to exercise diplomatic protection over

the Aspatrian company ALEC 24

a. ALEC has separate corporate legal personality 24

b. Only the State of nationality, Aspatria, can exercise

diplomatic protection 24

2. Rydal cannot exercise diplomatic protection based on the Aspatria-

Rydal BIT 25

a. The Court lacks jurisdiction to examine the Aspatria-Rydal

BIT 25

b. Arguendo, the Aspatria-Rydal BIT is ambiguous and cannot

provide standing 26

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c. If the Court has jurisdiction and the Windscale Islands

belong to Rydal, arguendo, ALEC is an “Investor” 27

3. Customary international law stipulates that Rydal cannot exercise

diplomatic protection 28

a. Rydal cannot exercise diplomatic protection through the

“closer connection” exception of DADP Article 9 28

b. Rydal cannot exercise diplomatic protection through DADP

Article 11(a) 28

c. Rydal cannot exercise diplomatic protection through DADP

Article 11(b) 29

i. DADP Article 11(b) cannot be used as a ground of

standing in itself 29

ii. ALEC is not a Calvo corporation 30

iii. Furthermore, equitable principles cannot be

invoked to grant Rydal standing 32

B. Aspatria did not violate the Aspatria-Rydal BIT 32

1. The seizure of ALEC’s assets did not amount to expropriation

32

a. Aspatria is allowed a degree of regulatory flexibility in

deciding its legal framework 32

b. ALEC is legitimately being prosecuted under the National

Resources Act 33

i. ALEC’s committed criminal conduct justifies its

assets to be seized 33

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ii. The seizure is a temporary measure 34

iii. ALEC’s trial meets fair trial standards 34

2. If the seizure of ALEC’s assets amounts to expropriation, arguendo,

it is lawful expropriation 35

a. Public purpose 36

b. Non-discrimination 36

c. Prompt, adequate and effective compensation 37

3. In the alternative, even if the seizure of ALEC’s assets amounted to

expropriation, Rydal cannot bring a claim on ALEC’s behalf 38

a. Local remedies have not been exhausted 38

b. Rydal cannot rely on exceptions to the local remedies rule

in DADP Article 15 38

PRAYER FOR RELIEF 40

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INDEX OF AUTHORITIES

Treaties & International Instruments Charter of the Organisation of American States, 1948………………………………..9 Convention Establishing the Multilateral Investment Guarantee Agency [1985] 24 ILM 1605..................................................................................................................... 36 Draft Convention on the Protection of Foreign Property [1968] 7 ILM 124...............36 Harvard Draft Convention on the International Responsibility of States for Injuries to Aliens [1961] 55 AJIL 545.................................................................................... 34, 36 Montevideo Convention on Rights and Duties of States, 1933.....................................8 North American Free Trade Agreement, 1992.............................................................26 Statute of the International Court of Justice, 1945.................................................27, 32 Vienna Convention on the Law of Treaties, 1969......................................14, 15, 16, 30 National Legislation Revised Model Business Corporation Act (USA), 2005..............................................24 Code de Commerce (France) ................................................................................ 24 Law of Limited Liability Companies (Russia), 1998...................................................24 Loi du 10 août 1915 concernant les sociétés commerciales (Luxembourg), 1915......24 International Judicial & Arbitral Decisions Agrotexim and others v Greece [1995] ECHR, Series A no. 330-A............................28 Aguas del Tunari S.A. v. Republic of Bolivia [2005] ICSID ARB/02/3......................27 American International Group Case [1983] 4 Iran-USCTR 96..................................36 Amoco International Finance Corp. v Iran (US v Iran) (Award) [1987] 15 Iran-USCTR 96..............................................................................................................35, 36 Anglo-Iranian Oil Co case (UK v Iran) [1952] ICJ Rep 93.........................................16 Anglo-Norwegian Fisheries [1951] ICJ Rep 116………...............................................7

ix

Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Serbia) (Judgment) [2007] ICJ General List No. 91..................................................................................................................................18 Arbitral Award on the Subject of the Difference Relative to the Sovereignty over Clipperton Island [1931] 26 AJIL 394...................................................................2, 3, 5 Bankovic v Belgium (2001) 11 BHRC 435..................................................................17 Barcelona Traction, Light and Power Co. Case (Belgium v Spain) [1970] ICJ Rep 3 ……………………………………………………………23, 24, 25, 28, 29, 32 Beagle Channel case (Argentina v Chile) [1977] Vol XXI, RIAA 53...........................9 Border and Transborder Armed Actions (Nicaragua v Honduras) (Jurisdiction and Admissibility) [1988] ICJ Rep 69.................................................................................25 Boundary Arbitration (British Guyana v Venezuela) 22 British and Foreign State Papers 1898-99, Vol. XCI 91…………………………………………………………8 BP Case [1974] 53 ILR 297.........................................................................................36 Case Concerning Ahmadou Sadio Diallo (Republic of Guinea v Democratic Republic of Congo) (Preliminary Objections) [2007] ICJ …...............................................30, 32 Case Concerning Elettronica Sicula S.p.A. (ELSI) [1989] ICJ Rep 15...........29, 38, 39 Case Concerning Frontier Dispute (Burkina Faso v Mali) [1986] ICJ Rep 554.....9, 32 Case Concerning Kasikili/Sedudu (Botswana v Namibia) (Judgment) [1999] ICJ Rep 1045........................................................................................................................4, 6, 7 Case Concerning the Administration of the Prince von Pless (Preliminary objections) [1933] PCIJ Series A/B, No. 52...................................................................................35 Case of Unión Alimentaria Sanders S.A. v Spain (Judgment) [1989] 11681/85, Series A. no. 157.....................................................................................................................35 Chorzów Factory Case (Jurisdiction) [1927] PCIJ Series A, No. 9............................25 CMS Gas Transmission Co v The Argentine Republic (Award) [2005] ICSID ARB/01/08...................................................................................................................22 Colombia-Venezuela arbitral award [1922] 1 RIAA 223……………………………..9 Delagoa Bay Rail Company (US v UK) [1888-89] BFSP 691.....................................29 EC Measures Concerning Meat and Meat Products (Hormones) [1998] WTO, WT/DS26/AB/R, WT/DS48/AB/R..............................................................................30

x

El Oro Mining and Railway Company (Limited) (Great Britain v United Mexican States), decision No. 55 of 18 June 1931, UNRIAA, vol. V........................................35 El Triunfo (Award) [1902] UNRIAA, vol. XV............................................................29 Emilio A. Maffezini v. The Kingdom of Spain (Award) [2000] ICSID ARB/97/7, 40 ILM 1148......................................................................................................................18 Eritrea v Yemen [1998] 114 ILR 1.................................................................................1 GAMI Investments, Inc v The Government of the United Mexican States (Award) [2004] UNCITRAL......................................................................................................22 Glamis Gold Ltd v USA (Award) [2009] (UNCITRAL/NAFTA)..........................20, 21 Island of Palmas (Netherlands v US) case [1928] 2 RIAA 829....................... 1, 2, 6, 10 International Pen, Constitutional Rights Project Interights on behalf of Ken Sawo Wiwa and Civil Rights Project v Nigeria, Communications 137/94, 139/94, 154/96 and 161/97, African Commission on Human and Peoples’ Rights, 31 October 1998

………………………………………………………………………………..35 Interhandel Case (Switzerland v United States of America) [1959] ICJ Rep 6...........38 Klockner Industrie-Anlagen GmbH, Klockner Belge, SA and Klochner Handlesmaatschappij BV v Republic of Cameroon and Societe Camerounaise des Engrais SA, ICSID ARB/81/2......................................................................................27 Kuwait v American Independent Oil Co. [1982] 21 ILM 976................................35, 37 Land, Island and Maritime Frontier Dispute [1992] ICJ Rep 92................................15 Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory [2004] ICJ Rep 136.......................................................................................17 Legal Status of Eastern Greenland (Denmark v Norway) (Judgment) [1933] PCIJ Series A./B No.53...........................................................................................................4 Legality of the Use of Force case (Serbia and Montenegro v UK) (Provisional Measures) [1999] ICJ Rep 124....................................................................................26 LG&E Capital Corp. and LG&E International Inc v Argentine Republic (Decision on Liability) [2006] ICSID ARB/02/1..............................................................................22 Liberian Eastern Timber Corporation (LETCO) v The Government of the Republic of Liberia [1994] ICSID Rep Vol 2..................................................................................29 Loewen Group Inc. and Raymond L Loewen v United States of America (Decision on Request for a Supplementary Decision) [2005] 44 ILM 836........................................39

xi

Loizidou v. Turkey (Preliminary Objections) [1995] Series A, no. 310........................9 Lubuto v Zambia [1995] Communication No. 390/1990, U.N. Doc. CCPR/C/55/D/390/1990/Rev.1....................................................................................35 Maritime Boundary in the Area between Greenland and Jan Mayen [1993] ICJ Rep 3....................................................................................................................................15 Maritime Delimitation and Territorial Questions (Qatar v Bahrain) (Merits) [2001] ICJ Rep 40......................................................................................................................4 Maritime Delimitations and Territorial Questions (Qatar v Bahrain) (Jurisdiction No. 2) [1995] ICJ Rep 6......................................................................................................14 Mexican Eagle Co. (UK v Mexico) [1938] Cmd. 5758................................................29 Mihaly International Corporation v Democratic Socialist Republic of Sri Lanka [2002] ICSID ARB/00/2..............................................................................................27 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States of America) (Merits) [1986] ICJ Rep 1986..................................................18, 26 Minquiers and Ecrehos Case [1953] ICJ Rep 47...........................................................1 Mondev International Ltd v USA (Award) [2002] 6 ICSID Rep (NAFTA/ICSID) 181 ………………………………………………………………………………..21 Monnet v France [1993] Series A no. 273-A...............................................................35 Neer Claim (United States v Mexico) [1926] 4 RIAA 60.............................................20 North Sea Continental Shelf Cases (Germany v Denmark and The Netherlands) [1969] ICJ Rep 3, [46]....................................................................................................9 Occidental Exploration and Production Co v The Republic of Ecuador (Award) [2004] LCIA UN3467..................................................................................................22 Oscar Chinn affaire [1934] PCIJ 1934, Ser A/B, Case No. 63..............................33, 36 Pope & Talbot Inc v Government of Canada (Merits, Phase 2) [2001] 13(4) World Trade and Arb. Mat. 61................................................................................................19 Prosecutor v Tadic IT-94-1-R-AR72, (2 October 1995).............................................15 Pulau Ligitan and Pulau Sipidan [2002] ICJ Rep, General List No.102...............4, 5, 7 Romano-Americana case (US v UK) [1925] 5 Hackworth 840...................................29

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Saluka Investment BV (The Netherlands) v Czech Republic (Partial Award) [2006] Permanent Court of Arbitration (UNCITRAL) 210...............................................21, 33 Saudi Arabia v Aramco [1963] 27 ILR 117..................................................................36 SD Myers Inc v Canada [2000] 8 ICSID Rep. 3........................................21, 26, 27, 34 SD Myers Inc v Canada (Separate Opinion of Professor Schwartz) [2000] 8 ICSID Rep 3, 114ff............................................................................................................21, 22 SEDCO Inc. v National Iranian Oil Company and the Republic of Iran (First Interlocutory Award) [1985] 84 ILR 489 ....................................................................29 SEDCO Inc. v National Iranian Oil Company and the Republic of Iran (Second Interlocutory Award) [1986] 10 Iran-USCTR 180......................................................35 Sovereignty Over Pedra Branca/Pulau Batu Puteh, Middle Rocks and South Ledge case (Malaysia v Singapore) (Judgment) (Merits) [2008] ICJ General List No 130 ………………………………………………………………………………5, 6 Técnicas Medioambientales Tecmed SA v The United Mexican States (Award) [2004] 43 ILM 133. ...............................................................................................22, 23, 33, 34 Texaco Overseas Petroleum Co. and California Asiatic Oil Co v Libya [1978] 17 ILM 1....................................................................................................................................35 Tokios Tokelės v Ukraine [2007] ICSID ARB/02/18...................................................27 Tradex v Albania (Award) [1999] ICSID ARB/94/2...................................................18 TSA Spectrum de Argentina S.A. v. Argentina Republic [2008] ICSID ARB/05/5.....27 United States-Import Prohibition of Certain Shrimp and Shrimp Products WT/DS58/AB/R (12 October 1998)............................................................................21 Western Sahara Advisory Opinion [1975] ICJ Rep 12………………………………..1 Municipal Judicial Decisions Expropriation of Eastern Zone Company (Germany) Case, Supreme Court, Germany (1955) ILR 14...............................................................................................................33 Kozicki v Baltycka Spolka Rybna, Supreme Court, Sweden (1951) ILR 37................33 Novello and Co., Ltd. v Hinrichsen Edition, Ltd. (1951) 1 Ch. 595............................33 Regina v Latimer [1998] 1 SCR 217…………………………………………………12

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Salomon v A Salomon & Co. Ltd (1897) AC 22..........................................................24 Regina (Al-Skeini and others) v Secretary of State for Defence (2007) UKHL 26.....17 Van Zyl & Others v Government of the RSA & Others, South African Supreme Court of Appeal, (170/06) [2007] ZASCA 109 TPD Case no 20320/2002...........................30 United Nations Documents Charter of Economic Rights and Duties of States [1974] UN GA Res 3281 (XXIX) of 12 Dec. 1974, 14 ILM 251......................................................................................33, 35 Diplomatic Protection: Comments and observations received from Governments, 2006, Official Records of the General Assembly; 58th Session, A/CN.4/561

………………………………………………………………………………..30 “Diplomatic Protection”, 62nd Sess. of the General Assembly (GA/L/3323)……….29 International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts, 2001..............................................................................................17, 19 International Law Commission Commentary on the Draft Articles on Diplomatic Protection, 2006, Official Records of the General Assembly; 61st Session, Supplement No.10 (A/61/10)...........................................................8, 25, 28, 30, 38, 39 International Law Commission Draft Articles on Diplomatic Protection, 2006

..................................................................................................23, 25, 28, 38, 39 Special Rapporteur Dugard, “Seventh Report on Diplomatic Protection”, 58th Sess., UN Doc A/CN.4/567........................................................................................29, 30, 38 Resolution on Permanent Sovereignty Over Natural Resources [1962] UN GA Res 1803 (XVII), G.A.O.R., 17th Sess., Supp. 17 (UN Doc A/S217)..........................35, 37 UN General Assembly Resolution 1514 (XV), 1960 11 Yearbook of the International Law Commission, II [1966].........................................16 Textbooks, Treatises & Digests CF Amerasinghe, Local Remedies in International Law [2nd ed., CUP, 2004]..........38 Annuaire de l’Institut de Droit International (1936)......................................................9 I Brownlie, Principles of Public International Law [6th ed., OUP, 2003]..............5, 32 Cassese, Self-Determination of Peoples: A Legal Appraisal [CUP, 2008]..................12

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Crawford, “Right of Self-Determination in International Law”, in Alston, People’s Rights [OUP, 2001] 55……………………………………………………………….13 DJ Harris, Cases and Materials on International Law [6th ed., Thomson Sweet & Maxwell, 2004]......................................................................................................14, 37 Higgins, Problems and Process: International Law and How We Use It [Clarendon Press, 1995]................................................................................................10, 11, 12, 32 AF Lowenfeld, International Economic Law [OUP, 2003].........................................34 C McLachlan QC et al, International Investment Arbitration: Substantive Principles [OUP, 2008].........................................................................................15, 19, 21, 33, 39 Baade, in Miller and Stranger (eds.), Essays on Expropriation [1967].......................37 Keller, Lissitzyn and Mann, Creation of Rights of Sovereignty through Symbolic Acts 1400-1800 [1938]...........................................................................................................1 JP Laviec, Protection et promotion des investissements [1985]..................................22 P Malanczuk, Akehurst’s Modern Introduction to International Law [7th ed., Routledge, 1997]............................................................................................................9 DP O’Connell, International Law and Boundary Disputes, 1960 Proceedings, American Society of International Law, 82...................................................................2 Oppenheim, International Law [9th ed., Longman, 2008]........................................2, 4 F Ortino et al (eds.), Investment Treaty Law: Current Issues II [BIICL, 2007].....20, 22 J Paulsson, “Investment Protection Provisions in Treaties” in International Chamber of Commerce Investment Protection: La protection de l’investissement [2000] 19....22 J. Paulsson, Denial of Justice in International Law [CUP, 2005]...............................38 Shaw, Title to Territory in Africa: International Legal Issues [OUP, 1986]………...12 M Sornarajah, The International Law on Foreign Investment [2nd ed., CUP, 2004]

……………………………………………………………………………25, 27 G Van Harten, Investment Treaty Arbitration and Public Law [OUP, 2007]........19, 20 Vattel, The Law of Nations or the Principles of Natural Law…………...................2, 3 Journal Articles Grant, “Defining Statehood: The Montevideo Convention and its Discontents” [1998] 37 Columbia Journal of Transnational Law 404...........................................................8

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GH Hackworth [1942] 3 Digest of International Law 655..........................................36 G Fitzmaurice, “The Law and Procedure of the International Court of Justice: Treaty Interpretation and Certain Other Treaty Points” [1957] 33 BYIL................................15 PG Foy, “Effectiveness of NAFTA’s Chapter Eleven Investor-State Arbitration Procedures” [2003] 18 ICSID Rev 44...........................................................................19 Frowein, “Recognition” [1987] EPIL 10, 341...............................................................9 Koskenniemi, “National Self-Determination Today: Problems of Legal Theory and Practice” [1994] 43 Int’l & Comp L Q 241………………………………………12, 13 FA Mann, “State contracts and international arbitration” [1967] 42 BYBIL 1............39 C McLachlan QC, “Investment Treaties and General International Law” [2008] 57 ICLQ 361-401..............................................................................................................30 Pellonpaa & Fitzmaurice, ‘Taking of Property in the Practice of the Iran-United States Claims Tribunal’ (1988) 19 NYIL 53...........................................................................37 P Sands, “Treaty, Custom and the Cross Fertilization of International Law” [1998] 1 Yale Human Rights and Development Law Journal....................................................30 M Sornarajah, “International Colonialism and Humanitarian Intervention” [1981] Ga J Int'l & Comp L 13 Ruddy, “Res Nullius and Occupation in Roman and International Law” [1968] 36 U. Mo. Kan. City L. Rev. 274............................................................................................1 S Vasciannie, “The Fair and Equitable Treatment Standard in International Investment Law and Practice” [1999] 70 BYIL 99.......................................................22 Friedrich August Freiherr Von Der Heydte, “Discovery, Symbolic Annexation and Virtual Effectiveness in International Law” [1935] 29 AJIL 228……………………..2 Burns Weston, "'Constructive Takings' under International Law: A Modest Foray into the Problem of 'Creeping Expropriation" [1975] 16 VJIL 104....................................32 Miscellaneous Declaration by the Nordic countries………….....…………...………………………31 Interpretation of the NAFTA Free Trade Commission of Certain Chapter 11 provisions ....................................................................................................................20

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La question des Illes d’Aland. Documents diplomatiques publiés par le Ministère des Affaires Étrangères [1920]…………………………………………………………...12 Lushington, “Motion Respecting South America”, HC Deb 11 July 1820 col 2 cc376-93 ……………………………………………………………………………………...9 Parliamentary Debates (Commons), vol 562, col 41, (12 December 1956)…………..8

Rapport de la Commission Internationale de jurists chargée par le Conseil de la Société des Nations de donner un avis consultatif sur certains aspects juridiques de la question des îles d’Aland, in La question des Illes d’Aland. Documents diplomatiques publiés par le Ministère des Affaires Étrangères [1920]…………………………….12

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STATEMENT OF JURISDICTION

The Republic of Aspatria and the Kingdom of Rydal have agreed to submit this

dispute to the International Court of Justice pursuant to Article 40(1) of the Statute of

the International Court of Justice (“Statute”) and in accordance with the Compromis

notified to the Court on 16 September 2009. Pursuant to Article 36(1) of the Statute,

the court has jurisdiction to decide all matters referred to it for decision.

The Republic of Aspatria and the Kingdom of Rydal have agreed to act consistently

with the Court’s decision.

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QUESTIONS PRESENTED

1. Whether Rydal is permitted to take steps giving effect to independence for the

Windscale Islands and must cede administration over the Islands to Aspatria

because sovereignty over the Islands belongs to Aspatria; and

2. Whether Rydal is permitted to take steps giving effect to independence for the

Windscale Islands and must cede administration over the Islands to Aspatria

because the Islanders are not entitled to independence based on the principle of

self-determination.

3. Whether Rydal’s rejection of MDR’s bid constituted a violation of its obligations

under the Aspatria-Rydal BIT.

4. Whether Rydal has standing to invoke the Aspatria-Rydal BIT to protect the assets

of ALEC; and

5. Whether Aspatria’s seizure of ALEC’s assets amounted to its violation of the

Aspatria-Rydal BIT.

Agents for the Applicant 738A

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STATEMENT OF FACTS

The Windscale Islands (“the Islands”) are an archipelago in the Southern Hemisphere.

Their closest neighbour is the Republic of Aspatria (“Aspatria”), a former colony of

the Kingdom of Plumbland (“Plumbland”). The Kingdom of Rydal (“Rydal”) is

located in the Northern Hemisphere, approximately 7,500 miles away.

The Islands were first discovered in 1777 during a voyage of naturalist discovery

commissioned by the King of Rydal. The expedition left behind the Rydalian flag and

a carved stone asserting Rydalian sovereignty over the archipelago on one of the

larger Islands.

In early 1778, Aspatria sent personnel to settle and claim the archipelago on behalf of

Plumbland, establishing a fort and settlement named Salkeld. On 20 December 1799,

internal disturbances in Langdale, Aspatria’s capital, caused the personnel to be

ordered back. They left the flag of Plumbland and a notice asserting Aspatrian

sovereignty over the Islands at Salkeld. Neither Plumbland nor Aspatria returned to

the Islands.

On 6 September 1813, a Rydalian naval ship was wrecked on the archipelago, and the

survivors built a temporary settlement, St. Bees. Admiral Aikton granted refuge to

those on board a Sodorian slave ship, who pledged their allegiance to Rydal.

xx

In June 1817, an Aspatrian ship arrived at the Islands to establish a penal colony.

Following a confrontation with the existing Rydalian settlers and perceiving that they

were outnumbered, the Aspatrians departed.

In mid-1818, Plumbland protested against Rydal’s occupation of the Islands under the

right of first occupation. In response, Rydal asserted their sovereignty over the

archipelago, stemming from their voyage of naturalist discovery. War broke out

between the two States.

An independence movement, led by Commander Diaz on 31 October 1819, overthrew

Plumbland’s garrison in Langdale. While the King of Plumbland ardently refused to

acknowledge the independence of Aspatria, the resulting Aspatrian Constitution

established a federal system of government and provided that all laws applied to the

whole of Aspatria’s territory, which included the Islands.

In mid-1821, Plumbland sued Rydal for peace. In the resulting Treaty of Great Corby,

Plumbland acknowledged Rydalian sovereignty over the Islands. Diaz, the first

President of Aspatria, sent a force to seize the Islands in 1826, but was unsuccessful.

The following year, Aspatria sent an Ambassador to Rydal, where the Queen

recognised the independence of Aspatria and of Diaz’s government. In subsequent

negotiations, the Aspatrian Ambassador noted that Plumbland had been the first to

occupy the Islands, with the title devolving to Aspatria upon its independence.

Furthermore, he asserted the nullity of the Treaty of Corby. These assertions were

rejected by the Rydalian Foreign Minister on the basis of Plumbland’s abandonment

of Salkeld and Rydal’s discovery of the Islands. No resolution was produced. In 1845,

xxi

Aspatria established a permanent diplomatic mission in Rydal, through which the

Aspatrian Ambassador continued to assert Aspatria’s claim to the Islands.

Plumbland recognised the independence of Aspatria in 1839. Plumbland

acknowledged Aspatria’s continued claim to the Islands in a clause inserted in the

subsequent Treaty of Woodside.

A succession of Rydalian governors of the Islands exercised control over the whole

archipelago. In 1903, the King of Rydal ordered that a consultative Assembly, under

the sole authority of the Governor of the Islands, be established. Aspatria’s political

and economic crisis meant that it was unable to assert its claim to the Islands until

1911, once civil government had been restored and the new Aspatrian President had

appointed a new Ambassador to Rydal.

A small and regular trading link was established between the Islands and Aspatria by

the late 1930s, despite Rydalian restrictions limiting foreign commercial activity on

the Islands. In addition to providing investments to aid the Islands’ economy, Rydal

transmitted regular reports to the UN Secretary-General after designating the

archipelago as a non-self-governing territory, and gave the Islands a Constitution.

This assertion of sovereignty was challenged by Aspatria when it joined the United

Nations (“the UN”).

Since 1962, the Prime Minister of Rydal has asserted Rydal’s commitment to

respecting the will of the Islanders before the UN Special Committee: a delegation

from the Islands has routinely expressed its desire that the Islands remain a part of

xxii

Rydal. Meanwhile, states near Aspatria have regularly supported Aspatria’s claim to

the Islands, ten of which are neighbouring states. However, trade steadily increased

between Aspatria and Rydal in the 1970s and 1980s. The Aspatria-Rydal BIT was

concluded in 1985 in order to create favourable conditions for greater economic

cooperation between the two States.

In 1991, Aspatria passed the Natural Resources Act (“NRA”), limiting licences for the

exploitation of energy resources in Aspatria to locally incorporated companies, and

making it a criminal offence for an Aspatrian company to interfere with an exclusive

government licence or patent concerning natural resources. Accordingly, the Rydalian

Oil Company (“ROCO”) channelled its Aspatrian business through the A & L

Exploration Company (“ALEC”), incorporated in Aspatria.

The discovery of oil in the basin around the Islands in 1997 catalysed a growing

independence movement on the Islands, led by the Islanders Longing for Sovereignty

and Autonomy (“ILSA”). Rydal contracted with ROCO to explore and map the oil

reserves. MDR Limited (“MDR”), an Aspatrian corporation, was also granted an

exclusive licence by the Aspatrian Government, endorsed in legislation, to extract the

said oil, but did not exercise its licence over the next several years.

In December 2006, the Assembly of the Islands opened a tender for the rights to

exploit the oil reserves within the exclusive economic zone of the Islands, restricted to

companies incorporated or having a registered office in Rydal. This plan had been

approved by the Rydalian government. The final decision would be made by a

majority vote of the Assembly, subject to the assent of the Governor of the Islands.

xxiii

Both MDR and ROCO submitted a bid. In October 2007, the committee of the

Assembly recommended that MDR’s bid be approved as it was the most economically

attractive. However, the Governor failed to endorse the Assembly’s recommendation

following a week-long consultation with the Rydalian Prime Minister, citing the

Islands’ long-standing affiliation with Rydal as a reason. On 14 November 2007, the

Assembly approved the ROCO bid, though not without reservations on the part of

ILSA.

On 16 November 2007, the Public Prosecutor of Aspatria filed criminal charges

against ALEC under the NRA for materially participating in the ROCO bid. An

administrative petition for the seizure of all of ALEC’s assets within Aspatria,

pursuant to the Aspatrian criminal code, was also granted and effected. The Supreme

Administrative Court denied ALEC’s petition that the order be cancelled, with no

further appeal possible under Aspatrian law. Meanwhile, the underlying criminal case

has not yet reached final decision. MDR’s judicial challenge in the Rydalian courts

against the results of the bidding process was dismissed for lack of standing to sue.

Non-violent protests erupted across the Islands following the Governor’s rejection of

the Assembly’s acceptance of MDR’s bid. The Assembly passed a resolution

declaring the right of the Islanders to determine their own future; the subsequent

plebiscite established that 76% of the Islanders were in favour of independence. The

Aspatrian President condemned the plebiscite as illegal, while Rydal endorsed the

outcome.

In 2009, the parties submitted their dispute to this Court for adjudication.

xxiv

SUMMARY OF PLEADINGS

Declaration A

Rydal’s initial presence gave rise to inchoate title, not full title. Plumbland’s

subsequent presence on the Islands gave rise to full title through the exercise of

effective occupation once Rydal’s inchoate title had expired. Furthermore,

Plumbland’s enduring and peaceful presence gave rise to prescription by the critical

date. Upon Aspatrian independence, the Windscale Islands became part of the newly

formed State of Aspatria, preventing Plumbland from transferring them subsequently.

Declaration B

This Court cannot rule on the issue of self-determination yet because the issue is

being addressed prematurely. The issue of self-determination depends upon the issue

of territorial sovereignty being resolved. As the Windscale Islands are not a colony of

Plumbland, the granting of self-determination would interfere with Aspatria’s

territorial integrity. Therefore, self determination can only be decided nationally.

Lastly, without a serious humanitarian crisis, self-determination cannot be granted.

Declaration C

The rejection by Rydal of MDR’s bid constituted a breach of Rydal’s obligations

under the Aspatria-Rydal BIT. The Vienna Convention rules on treaty interpretation

indicate that the Windscale Islands fall under the ambit of the Aspatria-Rydal BIT.

Regardless as to which party title to sovereignty lies, the acts of the Assembly of

Islands have engaged Rydalian responsibility. Accordingly, Rydal’s actions

xxv

constituted violations of ‘national treatment’ under Article IV of the BIT, as well as

violations of the minimum standard of treatment under Article V of the BIT.

Declaration D

Rydal does not possess standing to invoke the Aspatria-Rydal BIT to protect the

assets of ALEC, a Rydalian enterprise in Aspatria. Only Aspatria has the right to

exercise diplomatic protection over ALEC, an Aspatrian company. The BIT also

precludes Rydal from exercising diplomatic protection over ALEC. Furthermore,

Rydal cannot exercise diplomatic protection over ALEC on the basis of customary

international law.

Declaration E

The seizure of assets by Aspatria did not constitute a violation of the Aspatria-Rydal

BIT. The seizure did not amount to an internationally wrongful act of expropriation.

Even if the seizure is deemed to amount to expropriation, it is a legitimate form of

expropriation as it meets, or will meet, the established standards of public purpose,

discrimination and compensation. Furthermore, Rydal is precluded from bringing a

claim on ALEC’s behalf.

1

PLEADINGS

I. SOVEREIGNTY OVER THE WINDSCALE ISLANDS BELONGS TO

ASPATRIA

A. Plumbland gained title to the Windscale Islands through effective

occupation

As Huber stated in the Island of Palmas case,1 any claim to title must be

assessed in light of the international legal principles at the time of the alleged

acquisition.

1. Occupation must be “effective”

Since the eighteenth century, international law has required more of States to

claim unoccupied land (“terra nullius”) than mere discovery;2 occupation has had to

be effective.3 Writing twenty years before the arrival of the Wansfell,4 Vattel stated

that:

1 Island of Palmas (Netherlands v US) case [1928] 2 RIAA 829, (“Island of Palmas”) 845; see also Eritrea v Yemen [1998] 114 ILR 1, 46, 115. 2 Keller, Lissitzyn and Mann, Creation of Rights of Sovereignty through Symbolic Acts 1400-1800 [1938] 148-9; Ruddy, “Res Nullius and Occupation in Roman and International Law” [1968] 36 U Mo Kan City L Rev 274, 280-282. 3 Island of Palmas, n1; Western Sahara Advisory Opinion [1975] ICJ Rep 12, 43; Minquiers and Ecrehos Case [1953] ICJ Rep 57. 4 Compromis [5]

2

“when navigators have met with desert countries in which those of other nations had, in their transient visits, erected some monument to show their having taken possession of them, they have paid…little regard to that empty ceremony. [The] law of nations will, therefore, not acknowledge the property and sovereignty of a nation over any uninhabited countries, except those of which it has really taken actual possession, in which it has formed settlements, or of which it makes actual use”.5 Although a State has temporary, inchoate title whenever it discovers terra

nullius,6 it must exercise effective occupation within a reasonable period of time7 to

convert this to full title.8 While Rydal gained inchoate title through Captain Parish’s

discovery, this was never subsequently converted to full title due to a lack of effective

occupation.

2. Rydal failed to meet the Clipperton Island threshold, the lowest for effective

occupation

Despite its notional acts, the arbitrator held that France had effective

occupation in the Clipperton Island case9 because of the “notoriety” with which

France demonstrated its discovery. As well as informing the government of Honolulu,

France published a declaration of sovereignty over Clipperton Island in the Honolulu

5 Vattel, The Law of Nations or the Principles of Natural Law, <http://www.lonang.com/exlibris/vattel/vatt-000.htm> as at 12th January 2010, (“Vattel”) 1758. 6 Island of Palmas, n1, 15. 7 Friedrich August Freiherr Von Der Heydte, “Discovery, Symbolic Annexation and Virtual Effectiveness in International Law” [1935] 29 AJIL 228, (“Heydte”) 462; DP O’Connell, International Law and Boundary Disputes, 1960 Proceedings, American Society of International Law, 82. 8 Oppenheim, International Law [9th ed., Longman, 2008], (“Oppenheim”) 688. 9 Arbitral Award on the Subject of the Difference Relative to the Sovereignty over Clipperton Island [1931] 26 AJIL 394 (“Clipperton Island”).

3

journal “The Polynesian”.10 Rydal however did not openly display its discovery to the

international community and did not widely broadcast its findings.11 Thus without

these subsequent acts, Rydal cannot claim to have effectively occupied the Islands.

Furthermore, the arbitrator in Clipperton Island emphasised that the

particularly low threshold for effective occupation was based on the French Navy’s

specific commission to discover and claim land deemed terra nullius. 12 The

proclamation by the French Lieutenant conformed “to the orders which had been

given to him by the Minister of the Marine”.13 As the Wansfell did not set out to claim

land but was instead on a voyage of naturalist discovery,14 a higher, unmet threshold

was required to consider the occupation as effective.

Even by the lowest, contemporary standards, Rydal’s notional acts after

discovering the Windscale Islands (“Islands”) 15 did not amount to effective

occupation.16 As thirty six years passed before Admiral Aikton arrived and a further

five before his actions were adopted,17 Rydal’s initial inchoate title had expired and

could not successfully be converted to full title.

10 Clipperton Island, n9, 394. 11 Compromis [9], [10]. 12 Clipperton Island, n9, 391. 13 Ibid. 14 Compromis, [5]. 15 Compromis, [5]. 16 Vattel, n5. 17 Compromis [10], [15].

4

3. Upon the extinguishment of Rydal’s inchoate title, Plumbland gained

inchoate and then full title over the Islands

Although Rydal’s inchoate title temporarily prevented Plumbland from

exercising effective occupation, this title could not last18 for over twenty two years.19

When Rydal’s inchoate title ran out at some point towards the end of Rydal’s twenty

two year occupation, the Islands necessarily became terra nullius. At this point,

Plumbland gained inchoate title.

By building a fort and a settlement,20 Plumbland’s agents carried out the

necessary administration21 “à titre de souverain”22 with an intention to claim the

land.23 This series of acts sufficiently demonstrated Plumbland’s effective occupation,

transforming its recently acquired inchoate title into full title.24

4. Plumbland did not subsequently abandon the Islands

In Clipperton Island, the arbitrator held that France had not lost her “right by

derilictio, since she never had the animus of abandoning the island, and the fact that

18 Heydte, n7. 19 Compromis [5], [7]. 20 Compromis [5]. 21 Oppenheim, n8, 689. 22 Legal Status of Eastern Greenland (Denmark v Norway) (Judgment) [1933] PCIJ Series A/B No.53. 23 Case Concerning Kasikili/Sedudu (Botswana v Namibia) (Judgment) [1999] ICJ Rep 1045, (“Kasikili”). 24 Maritime Delimitation and Territorial Questions (Qatar v Bahrain) (Merits) [2001] ICJ Rep, 197; Pulau Ligitan and Pulau Sipidan [2002] ICJ Rep, General List No.102, (Pulau Ligitan”).

5

she [had] not exercised her authority there in a positive manner [did] not imply the

forfeiture of an acquisition already definitively perfected”.25 This sentiment has been

further supported by Brownlie, who states that a positive intention to surrender the

territory is required.26 Since Ricoy left the flag of Plumbland and a notice to

specifically retain title,27 Plumbland neither acted nor intended to abandon the Islands.

B. Plumbland, not Rydal, gained title through prescription

The Court held in Pedra Branca28 that:

“In the context of a dispute related to sovereignty over land […], the date upon which the dispute crystallized is of significance. Its significance lies in distinguishing between those acts which should be taken into consideration for the purpose of establishing or ascertaining sovereignty and those acts occurring after such date”.

The critical date is thus an essential tool in demarcating the relevant state acts

predicating territorial claims based on prescription, distinct from actions taken “taken

with a view to improving the legal position of the party concerned”.29

25 Clipperton Island, n9. 26 I Brownlie, Principles of Public International Law [6th ed., OUP, 2003], (“Brownlie”). 27 Compromis [7]. 28 Sovereignty Over Pedra Branca/Pulau Batu Puteh, Middle Rocks and South Ledge case (Malaysia v Singapore) (Judgment) (Merits) [2008] ICJ General List No 130, (“Pedra Branca”). 29 Pulau Ligitan, n24, [135].

6

1. The critical date is on the day that King Piero of Plumbland

sent a letter to Queen Constance of Rydal

In Pedra Branca, it was held that the dispute crystallised when the first

diplomatic note was sent by Singapore in response to a map published by Malaysia

contesting the sovereignty of the rocks. The crystallisation of the dispute on this day

determined the critical date.30 Similarly, the critical date in this case is when King

Piero sent the letter to Queen Constance, protesting the sovereignty of the Islands.

Before the letter from King Piero was read by Queen Constance,31 only the

agents of Plumbland had been informed about Rydal’s competing claim by the private

individuals on the Islands.32 As soon as Queen Constance read the letter, agents from

both States became aware of the disputed sovereignty of the Islands.33 Even if Queen

Constance had not replied, she and King Piero would both nevertheless have been

aware of the dispute, defining that moment necessarily as the moment of

crystallisation.

2. Plumbland satisfied the conditions for prescription

Even if full title has been gained initially by one State, title gained by a

different State through prescription will prevail. 34 The Court held in the

Kasikili/Sedudu Island case35 that prescription occurs on foreign territory if a State’s

30 Pedra Branca, n28, [33]. 31 Compromis [14]. 32 Compromis [14]. 33 Compromis [15]. 34 Island of Palmas, n1, 846. 35 Kasikili, n23, [94].

7

presence is “à titre de souverain, peaceful, uninterrupted, public and endure[s] a

certain length of time”.36

Plumbland’s agents were physically present on the Islands for twenty one

years and their title was not contested by a foreign state agent – Queen Constance -

for a further eighteen years. Even if Rydal initially gained full title, arguendo,

Plumbland’s thirty eight year claim over the Islands was peaceful, uninterrupted,

public, and endured a considerable length of time, overriding Rydal’s initial title.

3. In any case, Rydal did not satisfy the conditions to gain title by

prescription

Using the criteria as listed in Kasikili/Sedudu, Rydal fails on two grounds and

thus did not gain title through prescription. Firstly, acts carried out by private

individuals without governmental authority are disregarded by the Court. 37 By

attempting to adopt their acts retroactively,38 Rydal has implicitly conceded that the

acts of Aikton and his men were carried out in a private capacity. However, since the

retroactive adoption was after the critical date and Aspatria does not agree to its

inclusion within the case, 39 it cannot be taken into account by the Court. 40

36 Kasikili, n23, [94]. 37 Pulau Ligitan, n24, [140]; Anglo-Norwegian Fisheries [1951] ICJ Rep 116, 184. 38 Compromis [15]. 39 Kasikili, n23, [74]. 40 Compromis [15].

8

Furthermore, there is nothing to suggest that, at the time, the law on State

responsibility allowed for acts to be adopted retroactively.41

Secondly, even if Aikton were a state agent, the short period of time is

insufficient to give rise to prescription. Considering that this right is often only

available after thirty years or more,42 a period of four years is manifestly too short.

C. Aspatria inherited title to the Windscale Islands from Plumbland

1. Aspatria lawfully became independent in January 1820

In the late eighteenth century, statehood was based on the loose notion of

effective control over an area which the government of Aspatria certainly possessed.43

However, even if customary international law reflected the stricter conditions of the

Montevideo Convention,44 Aspatria fulfilled all of the criteria laid down in Article 1.45

41 ILC Commentary on the Draft Articles on Diplomatic Protection, 2006, Official Records of the General Assembly; Sixty First Session, Supplement No.10 (A/61/10), (“DADP Commentary”), 52-54. 42 Parliamentary Debates (Commons), vol 562, col 41, (12 December 1956); Boundary Arbitration (British Guyana v. Venezuela) 22 British and Foreign State Papers 1898-99, Vol. XCI 91. 43 Grant, “Defining Statehood: The Montevideo Convention and its Discontents” [1998] 37 Columbia Journal of Transnational Law 404, 420-421. 44 Montevideo Convention on Rights and Duties of States, 1933. 45 Id., Article 1.

9

Aspatria clearly had a permanent population, “a sufficiently identifiable core

of territory”,46 an effective government, and the capacity to enter into relations with

other states. Whilst Rydal did not recognise Aspatria, this is of no importance since it

is merely declaratory,47 especially when considered in its historical context.48

2. Aspatria gained independence from Plumbland with the

Windscale Islands as part of its territory

The doctrine by which states retain their territorial integrity upon secession, uti

possidetis, is not limited to purely territorial integrity. The Court held in Burkina Faso

v. Republic of Mali that in situations where “territorial boundaries might be no more

than delimitations between different administrative divisions or colonies all subject to

the same sovereign [...] uti possidetis [results] in administrative boundaries being

transformed into international frontiers in the full sense of the term” (emphasis

added).49 This principle goes further back than 1810,50 and has been largely supported

since.51 Since its effective occupation, Aspatria has always administered the Islands.

Therefore, the exercise of self-determination grants independence to the whole

46 P Malanczuk, Akehurst’s Modern Introduction to International Law [7th ed., Routledge, 1997], 76; North Sea Continental Shelf Cases (Germany v Denmark and The Netherlands) [1969] ICJ Rep, [46]. 47 Charter of the Organisation of American States, 1948, Article 9; Annuaire de l’Institut de Droit International (1936) 300; Loizidou v. Turkey (Preliminary Objections) [1995] Series A, no. 310, 14. 48 Frowein, “Recognition” [1987] EPIL 10, 341; Lushington, “Motion Respecting South America”, HC Deb 11 July 1820 col 2 cc376-93. 49 Case Concerning Frontier Dispute (Burkina Faso v Mali) [1986] ICJ Rep 554, (“Burkina Faso”), 554. 50 Colombia-Venezuela arbitral award [1922] 1 RIAA 223, 228. 51 For example Beagle Channel case (Argentina v Chile) [1977] Vol XXI, RIAA 53.

10

administrative region comprising Aspatria and the Islands, transforming the previous

administrative border into a territorial one.

D. Plumbland could not transfer title to Rydal in the Treaty of Great Corby

Huber states in Island of Palmas that “it is evident that [a State] could not

transfer more rights than she herself possessed”52 (“nemo potiorem potest transfere

quam ipsem habet”). As the Islands had already gained independence as part of

Aspatria, Plumbland could not transfer them in subsequent treaties.

II. THE ISLANDERS ARE NOT ENTITLED TO INDEPENDENCE

BASED ON THE PRINCIPLE OF SELF-DETERMINATION

A. The question of self-determination is subordinate to the issue of territorial

sovereignty

As explained by Higgins, “[u]ntil it is determined where territorial

sovereignty lies, it is impossible to see if the inhabitants have a right of self-

determination”. 53 In the present case, Rydal is pressing for the right of self-

determination for the Islands, notwithstanding Aspatria’s claim that these islands are

part of its territory. However, the question of whether the inhabitants of the Islands

are entitled to self-determination can only be determined after the Court has decided

the issue of territorial sovereignty. For instance, in the Western Sahara Case, before

52 Island of Palmas, n1, 11. 53 Higgins, Problems and Process: International Law and How We Use It [1995, Clarendon Press], (“Higgins”), 127.

11

determining the issue of self-determination, the Court needed to initially determine

whether the territory belonged to Mauritania or Morocco because if this was so, then

“the peoples of Western Sahara would have had no right to self-determination”.54 The

Court held that neither Mauritania nor Morocco had sovereignty over Western Sahara,

as it was actually a colonial dependency of Spain.55 Thus, due to its status as a

colonial dependency, the peoples of Western Sahara were entitled to the right of self-

determination. Like the Western Sahara Case, the question of self-determination

cannot be determined in the present case until the Court has decided whether the

Islands are a part of Aspatria.

B. The Islanders are not entitled to unilateral or external self-determination

1. Self-determination applies to colonial territories

At its legal inception, self-determination was granted solely to “people

subjected to colonial rule”, and Shaw suggests that “self-determination applies

virtually exclusively within the colonial sphere”.56 As the Islands are part of the

territory of Aspatria and have ceased to be a colony of Plumbland by virtue of the

Aspatrian declaration of independence, they can no longer claim self-determination.

Allowing self-determination in such a situation would threaten the national unity and

territorial integrity of Aspatria, which is against Resolution 1514 and the UN

Charter.57 As Cassese argues: “once a people has exercised its right to external self -

54 Higgins, n53, 127-28. 55 Ibid. 56 Shaw, Title to Territory in Africa: International Legal Issues [OUP, 1986] 90. 57 UN General Assembly Resolution 1514 (XV), 1960, Article 6.

12

determination, the right expires”.58 As affirmed by the Commission of Jurists in

Aaland Islands, self-determination is a political principle and not “une des régles

positives du droit des gens”.59 As such, it may not justify the dismemberment of

clearly established States.60 Only during periods of political transformation, when the

existence of States becomes uncertain, does the right of self-determination become

applicable to reconstituting the political normality of statehood.61

2. Outside the colonial context, the right of self-determination

equates to the exercise of democratic rights

The right of self-determination outside the colonial context was considered in

Regina v. Latimer. The Canadian Supreme Court, addressing the question of scope,

held that this was “normally fulfilled through internal self-determination – a people’s

pursuit of its political, economic, social and cultural development within the

framework of an existing state”.62 Higgins also states that “the evolving norms on

self-determination contained – undeniably and consistently – an anxious refrain

whereby self-determination is to be harnessed to, and not the enemy of territorial

integrity”.63 Respect for territorial sovereignty means that “peoples” is taken to mean

58 Cassese, Self-Determination of Peoples: A Legal Appraisal [CUP, 2008], 73. 59 Rapport de la Commission Internationale de jurists chargée par le Conseil de la Société des Nations de donner un avis consultatif sur certains aspects juridiques de la question des îles d’Aland, in La question des Illes d’Aland. Documents diplomatiques publiés par le Ministère des Affaires Étrangères [1920], (“Rapport”) 68-70. 60 Koskenniemi, “National Self-Determination Today: Problems of Legal Theory and Practice” [1994] 43 Int’l & Comp. L. Q. 241, (“Koskenniemi”), 254. 61 Rapport, n59. 62 Regina v Latimer [1998] 1 SCR 217, 281 [123-4]. 63 Higgins, n53, 121.

13

all the inhabitants of a particular territory, and “minorities as such do not have a right

of self-determination”. 64 This means that the substance of the right of self-

determination becomes about “minority protection rather than secession”.65 Therefore

even if the Islanders are held to be a minority, they are entitled to internal self-

determination, that is, an exercise of their democratic rights rather than independence

which counts as external self-determination.

3. The case of the Windscale Islands falls within the norm,

rather than the exception

In a very limited number of exceptional cases, self-determination by secession

has been justified on grounds of human rights and protection of nationals from the

oppression of post-colonial governments, neither of which is relevant here. 66

Moreover, even in such extreme circumstances, Crawford points out, “it is a fact that

no state has been admitted to the United Nations since 1945 without some accord or

accommodation with the government of the former metropolitan state – not even

Bangladesh”.67 As the saving clause in the 1970 Declaration on Friendly Relations

Between Nations states, when individuals are given equal access to decision making

and are not denied access on grounds of race or creed, the government respects the

principle of self determination. Aspatria specifically gives Islanders democratic rights,

64 Id., 121-22. 65 Koskenniemi, n60. 66 M Sornarajah, “International Colonialism and Humanitarian Intervention” [1981] Ga J Int'l & Comp L, 48-49. 67 Crawford, “Right of Self-Determination in International Law”, in Alston, People’s Rights [OUP, 2001] 55.

14

and treats them with equality. Therefore the Islanders cannot claim self-determination

on the basis of human rights or oppression.

III. RYDAL’S REJECTION OF MDR’S BID CONSTITUTED A VIOLATION

OF THE ASPATRIA-RYDAL BIT

A. The Aspatria-Rydal BIT extends to the Windscale Islands

The Aspatria-Rydal BIT (“the BIT”) must be interpreted with the customary

rules68 of the Vienna Convention on the Law of Treaties (“VCLT”).69

1. The VCLT indicates that the BIT extends to the Windscale Islands

Article 31 emphasises the “ordinary meaning to be given to the terms of the

treaty in their context and in the light of its object and purpose”.70

a. The ordinary meaning of “territory” does not limit the

scope of the BIT

The preamble to bilateral investment treaties (“BITs”) normally enshrines the

contracting States’ desire to increase their economic cooperation through the

68 D.J. Harris, Cases and Materials on International Law [6th ed., Thomson Sweet & Maxwell, 2004], (“Harris”) 836; see also, Maritime Delimitations and Territorial Questions (Qatar v Bahrain) (Jurisdiction No. 2) [1995] ICJ Rep. 6, [18]. 69 Vienna Convention on the Law of Treaties, 1969, (“VCLT”). 70 Id., Article 31.

15

encouragement and protection of investments in each others’ territory.71 As the phrase

“in the territory of the other party”72 is commonly used to highlight the mutuality of

the economic cooperation undertaken,73 it is too general to suggest that the Islands are

not covered by the BIT. Given the importance of the Islands to both States, Aspatria

and Rydal would have specifically indicated the exclusion of the Islands from the

definition of “territory” in the BIT.

b. The context of the BIT suggests that treaty extends to the

Windscale Islands

To correctly interpret a treaty,74 it is necessary to examine the context in which

the treaty was concluded and “any subsequent practice…regarding its

interpretation”.75 Rydal contracted with the Rydalian Oil Company (“ROCO”) to

explore and map the oil reserves in the basin around the Islands in 199776 while

Aspatria granted MDR Limited (“MDR”) an exclusive licence in 2003 to extract oil

from the same basin.77 As the actions of both States have involved the Islands at some

point since the signing of the BIT in 1985, their mutual belief that the archipelago

71 C McLachlan QC et al, International Investment Arbitration: Substantive Principles [OUP, 2008], (“McLachlan”) 28. 72 Compromis, Annex I. 73 See preambles to model State BITs in McLachlan, n71, 379-441. 74 G Fitzmaurice, “The Law and Procedure of the International Court of Justice: Treaty Interpretation and Certain Other Treaty Points” [1957] 33 BYIL, 203; see also Land, Island and Maritime Frontier Dispute [1992] ICJ Rep 92, 351, [586]; Maritime Boundary in the Area between Greenland and Jan Mayen [1993] ICJ Rep 3, 38, [51]; Prosecutor v Tadic IT-94-1-R-AR72, (2 October 1995), (‘Tadic’). 75 VCLT, n69, Article 31(3)(b). 76 Compromis [42]. 77 Compromis [46].

16

forms part of their territory in which economic activity can be exercised indicates that

the BIT is meant to extend to the Islands.

2. The supplementary means of interpretation quashes the notion that

the Aspatria-Rydal BIT excludes the Windscale Islands from its

ambit

VCLT Article 32 supplements Article 31 in the event that the latter leads to a

meaning either “ambiguous or obscure; or ... manifestly absurd or unreasonable”;78

these include the “contemporary circumstances and the historical content in which the

treaty was concluded”.79

In concluding the present BIT, Aspatria and Rydal agreed to set aside their

differences over the Islands in order to concentrate on mutually beneficial economic

matters.80 With both States continuing to maintain their sovereignty over the Islands,

the BIT is clearly intended to extend over the archipelago.

78 VCLT, n69, Article 32(a), (b). 79 Yearbook of the International Law Commission, II [1966] 59; Anglo-Iranian Oil Co case (UK v Iran) [1952] ICJ Rep 93. 80 Compromis [39].

17

B. Rydal’s rejection of MDR’s bid constituted violations of the Aspatria-

Rydal BIT

1. Regardless of the Islands’ sovereignty, the rejection of MDR’s bid by

the Assembly of the Islands constitutes a breach of Rydal’s obligations

under the Aspatria-Rydal BIT

a. Although sovereignty over the Windscale Islands has

continually remained with Aspatria, Rydal’s interference

engaged its responsibility under the Aspatria-Rydal BIT

Jurisprudence establishes that States need not possess territorial sovereignty in

order for their State responsibility to be engaged through their agents.81 Accordingly,

while Aspatria has retained territorial sovereignty over the Islands, Rydal’s

responsibility can be engaged for acts of the Islands’ executive body from a combined

reading of Articles 8 and 9 of the ILC Articles on Responsibility of States for

Internationally Wrongful Acts (“ILCSR”).82

Article 9 establishes that the conduct of private individuals can be regarded as

official acts if there is an absence of governmental authority.83 The physical absence

of Aspatrian authorities on the archipelago has led to the formation of a de facto

government in the form of the Assembly of the Islands (“Assembly”), under the

81 See Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory [2004] ICJ Rep 136; Bankovic v Belgium (2001) 11 BHRC 435; Regina (Al-Skeini and others) v Secretary of State for Defence (2007) UKHL 26. 82 International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts, 2001, (“ILCSR”). 83 ILCSR, n82, Article 9.

18

leadership of Governor Black, which was responsible for recommending the bid to be

taken. In lieu of the Aspatrian authorities, the exercise of such powers by the

Assembly thus constituted official government acts at the time.

Article 8 establishes that the conduct of private groups or persons “shall be

considered an act of a State under international law if [they are] acting on the

instructions of, or under the direction and control of, that State in carrying out the

conduct”.84 This must be more than mere “encouragement”,85 the test being whether

the State directly controlled the individuals.86 Just as the Islands required Rydal’s

approval to receive bids,87 Governor Black rejected MDR’s bid after a week-long

consultation with Prime Minister Abbott of Rydal, despite having the Assembly’s

approval. 88 Thus, when examining Articles 8 and 9 in tandem, 89 Rydalian

responsibility is engaged for actions taken or obligations breached by the Islands’

executive under the control of Rydal.

84 Id., Article 8. 85 Tradex v Albania (Award) [1999] ICSID ARB/94/2, [165], [169-170]. 86 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States of America) (Merits) [1986] ICJ Rep 14, (“Nicaragua”); Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Serbia) (Judgment) [2007] ICJ General List No. 91. 87 Compromis [49]. 88 Compromis [53]. 89 See Emilio A. Maffezini v. The Kingdom of Spain (Award) [2000] ICSID ARB/97/7, 40 ILM 1148.

19

b. If sovereignty over the Islands belongs to Rydal, arguendo,

the acts of the Assembly engage Rydal’s responsibility

ILCSR Article 4(1) highlights that acts committed by “any State organ shall be

considered an act of that State under international law”,90 thereby engaging that

State’s responsibility. If Rydal has territorial sovereignty over the Islands, the

Assembly of the Islands is a Rydalian State organ, capable of engaging Rydalian State

responsibility under the BIT.

2. Rydal has violated “national treatment” under Article IV of the BIT

Article IV of the Aspatria-Rydal BIT requires the host State to treat foreign

investors comparably to the “most directly comparable local investor or investors

within the same business sector”.91 Any differences in treatment in favour of the local

investor(s) are considered against any existing rational government policies and non-

discrimination.92 Furthermore, a broad reading of the standard,93 which examines

national treatment in isolated situations,94 must be applied owing to the importance of

the economic venture undertaken.

90 ILCSR, n82, Article 4(1). 91 McLachlan, n71, 253. 92 Ibid. 93 See Pope & Talbot Inc v Government of Canada (Merits, Phase 2) [2001] 13(4) World Trade and Arb. Mat. 61, [70]-[72]; see also PG Foy, “Effectiveness of NAFTA’s Chapter Eleven Investor-State Arbitration Procedures” [2003] 18 ICSID Rev 44, 49. 94 G Van Harten, Investment Treaty Arbitration and Public Law [OUP, 2007], (“Van Harten”) 85.

20

The Assembly sought a “competitive”95 bid. With the most economically

attractive and thus, competitive bid, ceteris paribus, the Assembly possessed an

obligation to choose MDR’s tender over ROCO’s. Such an approach would indicate

that the Assembly has awarded the bid on the basis of solely economic grounds, as

guaranteed by Article IV. By rejecting MDR’s bid and giving it to ROCO, Rydal has

breached the principle of national treatment.

3. Rydal has violated the minimum standard of treatment under Article V

of the BIT

Minimum standard of treatment clauses require States to afford the “absolute

minimum”96 treatment to foreign investments in accordance with international law.97

This “fair and equitable treatment”98 is linked to other absolute standards of treatment,

such as full protection and security99 and non-discrimination. The BIT expressly

incorporates this customary “Neer” minimum standard,100 later codified in Article

1105 of the NAFTA.101 Although the standard remains the same, events that would

not have reached this standard in the past might potentially do so now.102

95 Compromis [49]. 96 Van Harten, n94, 87. 97 Ibid. 98 F Ortino et al. (eds.), Investment Treaty Law: Current Issues II [BIICL, 2007], (“Ortino”) 119. 99 Ibid. 100 Neer Claim (United States v Mexico) [1926] 4 RIAA 60. 101 Glamis Gold Ltd v USA (Award) [2009] (UNCITRAL/NAFTA), (“Glamis”); 31 July 2001, interpretation of the NAFTA Free Trade Commission of Certain Chapter 11 provisions, <http://www.state.gov/documents/organization/38790.pdf> as at 10th January 2010, [22].

21

Fair and equitable treatment is subdivided into two broad categories,103

whether due process has been afforded to the foreign investor in question being one of

them.104 Factors relevant in establishing a violation of this standard in this case are

discrimination, transparency, and legitimate expectations.

a. Discrimination

Discrimination involves a distinction between nationals and foreigners in host

State law or by regulatory authorities in a discriminatory, unfair or arbitrary

manner.105 The choice of ROCO over MDR was based purely on nationality and

hence constitutes discrimination, contrary to Article V.

b. Transparency

Rydal must adhere to “certain minimum standards for transparency and

procedural fairness”,106 outlined in Tecmed as an obligation to act “in a consistent

manner, free from ambiguity and totally transparently in its relations with the foreign

102 Glamis, n101, [613]; see also Mondev International Ltd v USA (Award) [2002] 6 ICSID Rep (NAFTA/ICSID) 181, [116]. 103 McLachlan, n71, 226. 104 Id., 239. 105 See SD Myers Inc v Canada [2000] 8 ICSID Rep 3, (“SD Myers”), 18, [237]; Saluka Investment BV (The Netherlands) v Czech Republic (Partial Award) [2006] Permanent Court of Arbitration (UNCITRAL), (“Saluka”), 210, [408]-[416]. 106 United States-Import Prohibition of Certain Shrimp and Shrimp Products WT/DS58/AB/R (12 October 1998), 75, [183]; see also SD Myers Inc v Canada (Separate Opinion of Professor Schwartz) [2000] 8 ICSID Rep 3, (“SD Myers: Schwartz”), 114ff; Metalclad Corp v United Mexican States (Award) 5 ICSID Rep 209, (“Metalclad”) 228.

22

investor”.107 Schwartz found in SD Myers108 that Canada’s lack of effort in consulting

Myers, consequently producing a ban specifically intended to minimise the

company’s place in the Canadian marketplace, must mean Canada had breached its

fair and equitable treatment obligations through its failure to act in a transparent

manner. Similarly, Governor Black’s closed-door consultation with the Rydalian

Prime Minister, which led to Rydal’s rejection of MDR’s bid, was conducted with no

regard to transparency, leading to the lack of due process in awarding the bid.

c. Legitimate expectations

The conceptual link between fair and equitable treatment and legitimate

expectations109 establishes that a host State will have violated this standard if it

fundamentally alters the legal or economic framework underpinning the foreign

investment against the investor’s main expectations,110 affecting its stability and

predictability.111 MDR submitted its bid on the reliance that the Assembly would act

consistently with its pre-existing commitment that the bid would be “open, transparent

107 Técnicas Medioambientales Tecmed SA v The United Mexican States (Award) [2004] 43 ILM 133, (“Tecmed”), [154]. 108 SD Myers: Schwartz, n106, 114ff . 109 JP Laviec, Protection et promotion des investissements [1985], 95; J Paulsson, “Investment Protection Provisions in Treaties” in International Chamber of Commerce Investment Protection: La protection de l’investissement [2000] 19, 22 (n.8); S Vasciannie, “The Fair and Equitable Treatment Standard in International Investment Law and Practice” [1999] 70 BYIL 99, 163. 110 Ortino, n98, 131-132. 111 Occidental Exploration and Production Co v The Republic of Ecuador (Award) [2004] LCIA UN3467, [183], [186]; CMS Gas Transmission Co v The Argentine Republic (Award) [2005] ICSID ARB/01/08, [275]-[278]; GAMI Investments, Inc v The Government of the United Mexican States (Award) [2004] UNCITRAL, [91]; LG&E Capital Corp. and LG&E International Inc v Argentine Republic (Decision on Liability) [2006] ICSID ARB/02/1, [131].

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and competitive”,112 with Governor Black endorsing the majority decision of the

Assembly. Following the principle outlined in Tecmed,113 Rydal arbitrarily revoked

this commitment by influencing Governor Black during a closed-door consultation to

withhold her assent to the initial vote of the Assembly. Rydal’s rejection of MDR’s

bid has accordingly frustrated MDR’s legitimate expectations of an open and

competitive bid, leading to a further violation of the fair and equitable standard of

treatment.

IV. RYDAL DOES NOT HAVE STANDING TO INVOKE THE ASPATRIA-

RYDAL BIT TO PROTECT THE ASSETS OF ALEC, AN ASPATRIAN

COMPANY, AND IN ANY EVENT, ASPATRIA DID NOT VIOLATE THE

ASPATRIA-RYDAL BIT

A. Rydal does not possess standing to invoke the BIT

Without direct interference to shareholders’ rights,114 Rydal’s claim is limited to

the alleged damage done to ALEC.

112 Compromis [49]. 113 Tecmed, n107, [154]. 114 International Law Commission Draft Articles on Diplomatic Protection, 2006, (“DADP”), Article 12; Barcelona Traction, Light and Power Co. Case (Belgium v. Spain) [1970] ICJ Rep 3, (“Barcelona Traction”), [46-47].

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1. Only Aspatria has the right to exercise diplomatic protection over the

Aspatrian company ALEC

a. ALEC has separate corporate legal personality

It is a general principle of law that companies possess separate legal

personality.115 As ALEC was incorporated in Aspatria and is owned by shareholders

of various nationalities, ALEC is an Aspatrian company, legally separate from

ROCO.116

b. Only the State of nationality, Aspatria, can exercise diplomatic

protection

In Barcelona Traction,117 this Court held that international law “attributes the

right of diplomatic protection of a corporate entity to the State under the laws of

which it is incorporated and in whose territory it has its registered office”.118 The

shareholders in a company are unable to receive diplomatic protection from their

States of nationality because “although two separate entities may have suffered from

the same wrong, it is only one entity whose rights have been infringed”.119

115 See Salomon v A Salomon & Co. Ltd (1897) AC 22; Section 3(02) of the American Bar Association's Revised Model Business Corporation Act (USA); Article 2, Loi du 10 août 1915 concernant les sociétés commerciales (Luxembourg); Article L251-4, Code de Commerce (France); Article 3, Law of Limited Liability Companies, 8 February 1998 (Russia). 116 Compromis [40]. 117 Barcelona Traction, n114. 118 Id., [70]. 119 Id., [44].

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This customary principle 120 has been codified by the International Law

Commission (“ILC”) in Article 9 of its Draft Articles on Diplomatic Protection

(“DADP”).121 Since the most important criterion122 of incorporation occurred in

Aspatria,123 only Aspatria can exercise diplomatic protection.124

2. Rydal cannot exercise diplomatic protection based on the Aspatria-Rydal

BIT

a. The Court lacks jurisdiction to examine the Aspatria-Rydal BIT

Article XIII provides this Court with jurisdiction to examine “disputes arising

with respect to the rights conferred by this Treaty”.125 To confer the Court with

jurisdiction, the State must prove that “the force of the arguments militating in favour

of jurisdiction is preponderant”,126 that is, it is more likely that there is a dispute

regarding a right from the Aspatria-Rydal BIT.

120 DADP Commentary, n41, 54; M Sornarajah, The International Law on Foreign Investment [2nd ed., CUP, 2004], (“Sornarajah”), 228-229. 121 DADP, n114, Article 9. 122 DADP Commentary, n41, 53. 123 Compromis [40-41]. 124 Barcelona Traction, n114, [78]. 125 Compromis, Annex 1. 126 Border and Transborder Armed Actions (Nicaragua v. Honduras) (Jurisdiction and Admissibility) [1988] ICJ Rep 69, 76, [16]; Chorzów Factory Case (Jurisdiction) [1927] PCIJ Series A, No. 9, 32.

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However, from limited available evidence, 127 the criminal proceedings

initiated by Aspatria fall so far from potential expropriation that it cannot be said that

there is a genuine dispute as to whether the right has been infringed.128 Thus, without

further evidence, there cannot be a dispute regarding the Aspatria-Rydal BIT’s rights,

preventing the Court from examining the treaty.

b. Arguendo, the Aspatria-Rydal BIT is ambiguous and cannot provide

standing

The Aspatria-Rydal BIT, 129 similarly worded to NAFTA, 130 can either

classify companies such as ALEC as “Investments” or as “Investors” in joint

ventures. 131 Depending on which of these interpretations is chosen, diplomatic

protection will either be extended to or withdrawn from different States.

By arguing that it can exercise diplomatic protection, Rydal bears the burden

of proof132 in demonstrating that, out of these interpretations, ALEC is an “Investment”

– not an “Investor” – in a joint venture. Without demonstrating this, Rydal fails to

discharge its burden of proof, and consequently, cannot rely on the ambiguous

provisions on standing in the BIT.

127 Compromis [41], [56], [57], [60]. 128 Legality of the Use of Force case (Serbia and Montenegro v. UK) (Provisional Measures) [1999] ICJ Rep 124, [31]-[36]. 129 Compromis, Annex 1. 130 North American Free Trade Agreement, adopted 17 December 1992, CTS 1994, No 2 [1993] 32 ILM 612, Article 1139. 131 SD Myers, n105, [231-232]. 132 Nicaragua, n86, [101]; Rights of Nationals of the United States of America in Morocco (France v. United States) [1952] ICJ Rep 176.

27

c. If the Court has jurisdiction and the Windscale Islands belong to Rydal,

arguendo, ALEC is an “Investor”

When analysing similar BIT definitions of “Investment” and “Investor”, the

International Centre for Settlement of Investment Disputes (‘ICSID’) has stated that

investment vehicles are not Investments of their parent companies but Investors in

their own rights.133 By participating in an attempted investment in the Islands,134

ALEC became a vehicle for foreign investment.135 Therefore, ALEC is not an

“Investment”136 but an “Investor”.

However, there is nothing in the Court’s Statute137 that would allow the Court

to apply the exception contained within Article 25(2)(b) of the ICSID Convention. If

the company is foreign-controlled, without an exception to pierce the corporate veil,

only the State of nationality of the investor (i.e. Aspatria) is capable of exercising

diplomatic protection in accordance with Article XIII of the BIT.

Furthermore, no one can transfer a better title than what s/he really has.138

ALEC cannot ask Rydal to bring a claim on its behalf directly, and a transfer of title

to ROCO does not perfect this right. Thus, Rydal cannot bring such a claim.

133 See Aguas del Tunari S.A. v. Republic of Bolivia [2005] ICSID ARB/02/3; Tokios Tokelės v. Ukraine [2007] ICSID ARB/02/18; TSA Spectrum de Argentina S.A. v. Argentina Republic [2008] ICSID ARB/05/5. 134 Compromis [41], [50], [56], Annex 1. 135 Sornarajah, n120, 227. 136 SD Myers, n105, [227]-[232]. 137 Statute of the International Court of Justice, (“ICJ Statute”). 138 Mihaly International Corporation v. Democratic Socialist Republic of Sri Lanka [2002] ICSID ARB/00/2, [24]-[26]; see also Klockner Industrie-Anlagen GmbH,

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3. Customary international law stipulates that Rydal cannot exercise

diplomatic protection

a. Rydal cannot exercise diplomatic protection through the “closer

connection” exception of DADP Article 9

To exercise diplomatic protection based on DADP Article 9, there must be no

substantive business activity in the State of incorporation.139 However, ALEC has had

substantive business activity in Aspatria since 1993. 140 Therefore, the closer

connection exception is inapplicable.

b. Rydal cannot exercise diplomatic protection through DADP Article

11(a)

DADP Article 11(a) allows the shareholders’ State of nationality to exercise

diplomatic protection if the company has “seized to exist ... [or] has lost its capacity to

take corporate action”.141 However, this can only be used following the legal demise

of the corporate entity142 with a precarious financial situation unable to entail such a

legal demise.143 Although practically defunct,144 ALEC’s legal existence continues.

Klockner Belge, SA and Klochner Handlesmaatschappij BV v. Republic of Cameroon and Societe Camerounaise des Engrais SA, ICSID ARB/81/2. 139 Barcelona Traction, n114, [70]-[71]; DADP, n114, Article 9; DADP Commentary, n41, 54. 140 Compromis [41]. 141 Barcelona Traction, n114, [66]. 142 Ibid.; see also the Separate Opinions of Judges Nervo, Barcelona Traction, n114, 256; and Ammoun, Barcelona Traction, n114, 319-320; Agrotexim and others v Greece [1995] ECHR, Series A no. 330-A, 25, [68].

29

c. Rydal cannot exercise diplomatic protection through DADP Article

11(b)

Assuming that DADP Article 11 is not simply a progressive advancement,145

the provision must be applied in relation to a BIT and only applies to corporations that

have been forced to incorporate locally to conduct business (“Calvo corporations”).146

As ALEC fails in this precondition, it cannot invoke DADP Article 11(b).

i. DADP Article 11(b) cannot be used as a ground of standing

in itself

Prior147 and subsequent148 decisions to Barcelona Traction have only ever

granted standing to the State of the shareholders’ nationality when interpreting a

143 Barcelona Traction, n114, [66]. 144 Ibid. 145 Statement by Mr. Luís Serradas Tavares, “Diplomatic Protection”, 62nd Sess. of the General Assembly (GA/L/3323), available at <http://www.un.org/News/Press/docs/2007/gal3323.doc.htm> as at 10th January 2010. 146 Special Rapporteur Dugard, “Seventh Report on Diplomatic Protection”, 58th Sess., UN Doc A/CN.4/567, (“Dugard’s Report”), 27. 147 El Triunfo (Award) [1902] UNRIAA, vol. XV, 467; Romano-Americana case (US v. UK) [1925] 5 Hackworth 840, 841; Delagoa Bay Rail Company (US v. UK) [1888-89] BFSP 691; Mexican Eagle Co. (UK v. Mexico) [1938] Cmd. 5758, 9. 148 Case Concerning Elettronica Sicula S.p.A. (ELSI) [1989] ICJ Rep 15, (“ELSI”), 15; SEDCO Inc. v. National Iranian Oil Company and the Republic of Iran (First Interlocutory Award) [1985] 84 ILR 489, 484-496; Liberian Eastern Timber Corporation (LETCO) v The Government of the Republic of Liberia [1994] ICSID Rep Vol 2, (“LETCO”) 346.

30

clause from a particular treaty. During debates regarding DADP Article 11(b),149 the

United States has argued that the exception within DADP Article 11(b) cannot be

used in a stand-alone manner but only as an aid for interpretation150 for ambiguities in

treaties. The DADP Article 11(b) exception151 was recently dismissed in Diallo,152

and recent case law unsurprisingly reiterates the necessity of using a treaty in

conjunction with DADP Article 11(b).153

ii. ALEC is not a Calvo corporation

The ILC clarifies that to qualify as a Calvo corporation, “incorporation in that

State [must be] required by it as a precondition for doing business there” (emphasis

added).154 In Diallo,155 the most important factor in determining if an entity is a Calvo

corporation is whether “their incorporation in that country…would have been required

of their founders to enable the founders to operate in the economic sectors

149 See US submission in Diplomatic Protection: Comments and observations received from Governments, 2006, Official Records of the General Assembly; Fifty Eighth Session, A/CN.4/561; see also LETCO, n148, 34-35. 150VCLT, n69, Article 31(3)(c); see also EC Measures Concerning Meat and Meat Products (Hormones), WTO, 1998 WL25520; C McLachlan QC, “Investment Treaties and General International Law” [2008] 57 ICLQ 361-401, 364; P. Sands, “Treaty, Custom and the Cross Fertilization of International Law” [1998] 1 Yale Human Rights and Development Law Journal, [6]. 151 Dugard’s Report, n146, [64(a)]. 152 Case Concerning Ahmadou Sadio Diallo (Preliminary Objections) (Republic of Guinea v. Democratic Republic of Congo) [2007] ICJ <http://www.icj-cij.org> as at 10th January 2010, (“Diallo”), [90]. 153 Van Zyl & Others v. Government of the RSA & Others, South African Supreme Court of Appeal, (170/06) [2007] ZASCA 109 TPD Case no 20320/2002, [87], [93]. 154 DADP Commentary, n41, 65. 155 Diallo, n152.

31

concerned”.156 The Court concluded that, since the corporations were not forced from

their outset to incorporate in the Democratic Republic of Congo (“DRC”), they did

not qualify as Calvo corporations and could not rely on DADP Article 11(b).157

As proponents of DADP Article 11(b) argue, it is unjust to force a foreign

corporation to locally invest assets but then deny diplomatic protection because of that

very incorporation.158 Its aim is therefore to provide a remedy to instances where

States have coerced businesses to incorporate in order to conduct business locally.

No evidence suggests that the incorporation of ALEC was a precondition to

conduct business in Aspatria, nor that ROCO was forced to do so. The Natural

Resources Act 1991 (“NRA”) imposed a precondition on companies that had not

already been incorporated in Aspatria to incorporate should they wish to apply for a

licence. However, ALEC had already been incorporated prior to the NRA, since

ROCO only needed to channel its Aspatrian business through ALEC by the time the

NRA came into force.159 Therefore, the NRA’s precondition of incorporation did not

affect the prior incorporation of ALEC.

As no other legislation imposes incorporation as a precondition on ALEC to

conduct business in Aspatria, ALEC cannot be considered a Calvo corporation and

cannot rely on DADP Article 11(b).

156 Id., [92]. 157 Id., [89]. 158 See comments of the Nordic countries regarding the DADP, < http://www.regjeringenno/nb/dep/ud/tema/folkerett/alminnelig-folkerett/diplomatic-protectionhtml?id=448271> as at 10th January 2010, 34. 159 Compromis [41].

32

iii. Furthermore, equitable principles cannot be invoked to grant

Rydal standing

As the DRC successfully argued in Diallo,160 the application of equitable

principles161 to DADP Article 11(b) to allow Rydal standing would not be an infra

legem “choice amongst various interpretations of law”,162 but a contra legem setting

aside of legal rules for “extra legal reasons”.163 As the Parties have not asked the court

to use the ex aequo et bono principle of equity164 to decide this case, the Court cannot

set aside the law to grant Rydal standing based on equity.165

B. Aspatria did not violate the Aspatria-Rydal BIT

1. The seizure of ALEC’s assets did not amount to expropriation

a. Aspatria is allowed a degree of regulatory flexibility in deciding its

legal framework

Customary international law allows States to adopt regulatory measures,166

subject to the principle of non-discrimination,167 to ensure that foreign investments are

160 Diallo, n152, [79]. 161 Barcelona Traction, n114, [92]. 162 Higgins, n53, 219. 163 Higgins, n53, 219. 164 ICJ Statute, n137, Article 38(2). 165 Burkina Fasoi, n49, 567, [28]. 166 Brownlie, n26, 508-09; Burns Weston, "'Constructive Takings' under International Law: A Modest Foray into the Problem of 'Creeping Expropriation" [1975] 16 VJIL

33

“in conformity with [their] national objectives and priorities”.168 Host States possess a

“reasonable degree of regulatory flexibility … to respond to changing circumstances

in the public interest”.169 The degree of regulatory flexibility possessed by Aspatria

therefore allowed it to pass the NRA to adapt to changing domestic circumstances.

b. ALEC is legitimately being prosecuted under the National Resources

Act

i. ALEC’s committed criminal conduct justifies its assets to be

seized

As ALEC’s equipment, personnel and assets were offered in support of

ROCO’s bid, ALEC engaged in criminal activity contrary to the provisions of the

NRA. Since the Aspatrian Criminal Code170 permits assets that “might be used to

further, to promote or to conceal criminal conduct”171 to be seized, the seizure of

ALEC’s assets is legitimate.

104, 121; Oscar Chinn affaire [1934] PCIJ Series A/B, Case No. 63, (“Oscar Chinn”); Tecmed, n107, [115]. 167 Novello and Co., Ltd. v Hinrichsen Edition, Ltd. (1951) 1 Ch. 595; Kozicki v Baltycka Spolka Rybna, Supreme Court, Sweden (1951) ILR 37; Expropriation of Eastern Zone Company (Germany) Case, Supreme Court, Germany, (1955) ILR 14. 168 Charter of Economic Rights and Duties of States [1974] UN GA Res 3281 (XXIX) of 12 December 1974, 14 ILM 251, (“CERDS”), Article 2.1(a), (b). 169 McLachlan, n71, 239; Saluka, n105, [305]. 170 Clarifications, n.7. 171 Compromis [57].

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ii. The seizure is a temporary measure

The degree of interference necessary for a measure to amount to indirect

expropriation is one in which “the owner … will not be able to use, enjoy or dispose

of the property”.172 Tribunals have emphasised that such interference requires a

certain degree of permanence173 in order to amount to expropriation; as per SD Myers

v. Canada,174 a temporary or partial deprivation does not constitute appropriation, its

nature merely leading to a delay in opportunity.175 The seizure of ALEC’s assets

simply prevents ROCO from going ahead with its planned exploitation of the Islands’

oil reserves until criminal proceedings against ALEC are settled. Additionally, such a

seizure is of a reversible measure; as the assets have not yet been “used in satisfaction

of any penalty imposed”,176 the current seizure is only temporary.

iii. ALEC’s trial meets fair trial standards

The allegation by Counsel for ALEC that Aspatria’s “slow pace of justice …

[entails that such a] ‘temporary’ seizure is for all practical purposes permanent”177 is

incorrect, as there is a foreseeable end to the criminal proceedings. Furthermore, the

jurisprudence on fair trials highlights the dominance of the particular circumstances of

172 Harvard Draft Convention on the International Responsibility of States for Injuries to Aliens, 1961, (“Harvard Draft Convention”), Article 10(3). 173 Tecmed, n107, [116]. 174 SD Myers, n105, 59. 175 Ibid.; see also A.F. Lowenfeld, International Economic Law [OUP, 2003] 480. 176 Clarifications, n.6. 177 Compromis [59].

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a case178 in determining the reasonableness of the length of judicial proceedings,

stressing criteria such as complexity and the conduct of the involved parties and

authorities,179 national legislation, as well as the dispute’s stake and value. Not only

does the complexity of the case necessitate its duration;180 a swifter trial could amount

to a breach of ALEC’s human rights.181

2. If the seizure of ALEC’s assets amounts to expropriation, arguendo, it is

lawful expropriation

UN General Assembly Resolution (“UNGA Res.”) 1803182 is recognised as a

customary right of states to expropriate property within their territory.183 Accordingly,

178 Case of Unión Alimentaria Sanders S.A. v Spain (Judgment) [1989] 11681/85, Series A. no. 157, (“Sanders”); see also Lubuto v Zambia [1995] Communication No. 390/1990, U.N. Doc. CCPR/C/55/D/390/1990/Rev.1; Monnet v. France [1993] Series A no. 273-A, 11, [27]. 179 Sanders, n178. 180 El Oro Mining and Railway Company (Limited) (Great Britain v United Mexican States), decision No. 55 of 18 June 1931, UNRIAA, vol. V, 19l, 198; see also Case concerning the Administration of the Prince von Pless (Preliminary objections) [1933] PCIJ Series A/B, No. 52, 4. 181 International Pen, Constitutional Rights Project Interights on behalf of Ken Sawo Wiwa and Civil Rights Project v. Nigeria, Communications 137/94, 139/94, 154/96 and 161/97, African Commission on Human and Peoples' Rights, 31 October 1998, <http://www.unhcr.org/refworld/docid/3ae6b6123.html> as at 10th January 2010. 182 Resolution on Permanent Sovereignty Over Natural Resources 1962, GA Res 1803 (XVII), G.A.O.R., 17th Sess., Supp. 17 (UN Doc A/S217), (“UNGA Res 1803”), 15. 183 Texaco Overseas Petroleum Co. and California Asiatic Oil Co v Libya [1978] 17 ILM 1; Kuwait v American Independent Oil Co. [1982] 21 ILM 976, (“Kuwait”); Amoco International Finance Corp. v Iran (US v Iran) (Award) [1987] 15 Iran-USCTR 96, (“Amoco”); SEDCO Inc. v. National Iranian Oil Company and the Republic of Iran (Second Interlocutory Award) [1986] 10 Iran-USCTR 180; CERDS, n167.

36

lawful expropriation can be carried out if three conditions are met: public purpose;

non-discrimination; and prompt, adequate and effective compensation.184

a. Public purpose

The protection of public interests allows a measure to be adopted despite

having negative consequences on property rights.185 Amoco186 recognises the absence

of a precise definition for “public purpose”,187 and that a broad interpretation of this

term is necessary given the “modern acceptance of the right to nationalise”.188

Therefore, Aspatria’s seizure of ALEC’s assets to prevent the continuance of criminal

activity satisfies the public purpose requirement.

b. Non-discrimination

Aramco 189 and other Iran-US Claims Tribunal cases 190 necessitate the

establishment of non-discrimination in deciding if an expropriation is lawful, though

“discrimination that is reasonably related to the public purpose that underlies the

184 GH Hackworth [1942] 3 Digest of International Law 655, 658-659. 185 Draft Convention on the Protection of Foreign Property [1968] 7 ILM 124, Article 3; Harvard Draft Convention, n172, 554, Article 10(5); Convention Establishing the Multilateral Investment Guarantee Agency [1985] 24 ILM 1605, 1611-1612, Article 11(a)(ii); Oscar Chinn, n166. 186 Amoco, n183. 187 Id., [145]. 188 Id., [145]. 189 Saudi Arabia v Aramco [1963] 27 ILR 117, [142]. 190 See American International Group Case [1983] 4 Iran-USCTR 96, BP Case [1974] 53 ILR 297; Liamco Case [1981] 20 ILM 53; Kuwait, n183.

37

expropriation is not illegal”.191 Baade,192 Pellonpaa and Fitzmaurice193 argue that

where the nationalisation of the assets of a single investor within an industry occurs, a

strong presumption operates in favour of State economic sovereignty, which does not

render an otherwise legal taking illegal merely because of its discriminatory nature.

ALEC’s assets were not seized on discriminatory grounds, but due to its material

participation in the ROCO bid. Similar seizures would have taken place if Aspatrian

companies with Aspatrian shareholders had participated in similar criminal activities.

c. Prompt, adequate and effective compensation

Whilst Aspatria has not yet paid compensation for the seizure of ALEC’s

assets, UNGA Res. 1803 emphasises that “in any case where the question of

compensation gives rise to a controversy, the national jurisdiction of the State taking

such measures shall be exhausted”,194 the issue of whether compensation has been

paid cannot be considered until the criminal case Prosecutor v. ALEC has reached a

final decision.195

191 Harris, n68, 595. 192 Baade, in Miller and Stranger (eds.), Essays on Expropriation [1967] 24. 193 Pellonpaa & Fitzmaurice, 'Taking of Property in the Practice of the Iran-United States Claims Tribunal' [1988] 19 NYIL 53. 194 UNGA Res 1803, n182, 15. 195 Compromis [59].

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3. In the alternative, even if the seizure of ALEC’s assets amounted to

expropriation, Rydal cannot bring a claim on ALEC’s behalf

a. Local remedies have not been exhausted

The exhaustion of local remedies is a customary rule of international law,196

codified in DADP Article 14.197 Accordingly, Rydal cannot bring a claim before this

Court until Prosecutor v. ALEC198 has been resolved.

b. Rydal cannot rely on exceptions to the local remedies rule in

DADP Article 15

Rydal must show: that the Aspatrian courts are unable to offer redress; that it

would be unfair or unreasonable for an injured alien to exhaust local remedies; or that

the respondent State has waived compliance with the local remedies rule.199 However,

none of these grounds are fulfilled.

Firstly, Aspatria is capable of providing effective relief through its fully-

functioning municipal legal system.200 Secondly, there is a “relevant connection”201

between ALEC and Aspatria in terms of the seizure of assets. When deciding to invest,

196 Dugard’s Report, n146; CF Amerasinghe, Local Remedies in International Law [2nd ed., CUP, 2004]; J. Paulsson, Denial of Justice in International Law [CUP, 2005] Chap 5; Interhandel Case (Switzerland v United States of America) [1959] ICJ Rep 6, 27; ELSI, n148, [50]. 197 DADP, n114, Article 14; see also DADP Commentary, n41, 81. 198 Compromis [59]. 199 DADP, n114, Article 15(a), (b). 200 DADP Commentary, n41, 79. 201 DADP, n114, Article 15(c).

39

Rydal voluntarily assumed the risk of subjecting any injuries meted out to ALEC to

adjudication in the Aspatrian courts. Furthermore, Rydal has not been “manifestly

precluded”202 from pursuing local remedies in Aspatria under a narrow construction of

the term203 since Prosecutor v. ALEC is currently being decided and there are no

serious obstacles or difficulties, such as funding.204 Lastly, the parties have not shown

a clear intention to waive local remedies.205 Arbitration agreements do not entail the

abandonment of the obligation to exhaust local remedies.206

Furthermore, the above principle precludes the possibility of parallel

proceedings being pursued in two altogether different spheres (lis pendens). 207

Consequently, the exhaustion of local remedies entails that it is the national court

judgment with respect to the injured national which will form the basis of the

international claim.208

Agents for the Applicant 738A

202 DADP, n114, Article 15(d). 203 DADP Commentary, n41, 83. 204 Loewen Group Inc. and Raymond L Loewen v United States of America (Decision on Request for a Supplementary Decision) [2005] 44 ILM 836, [166]. 205 ELSI, n148, 42, [50]; DADP Commentary, n41, 76-77. 206 FA Mann, “State contracts and international arbitration” [1967] 42 BYBIL 1, 32. 207 McLachlan, n71, 81. 208 Id., 85.

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PRAYER FOR RELIEF

The Applicant requests that the Court adjudge and declare that:

A. Rydal may not lawfully take steps giving effect to independence of the Windscale

Islands and must cede administration over the Islands to Aspatria because

sovereignty over the Islands belongs to Aspatria;

B. Rydal may not lawfully take steps giving effect to independence of the Windscale

Islands and must cede administration over the Islands to Aspatria because the

Islanders are not entitled to independence based on the principle of self-

determination

C. Rydal’s rejection of MDR’s bid constituted a violation of Rydal’s obligations

under the Aspatria-Rydal BIT and;

D. Rydal does not have standing to invoke the Aspatria-Rydal BIT to protect the

assets of ALEC, and in any event, Aspatria’s seizure of such assets did not violate

the Aspatria-Rydal BIT.

Agents for the Applicant 738A