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TOPIC 1: Treaty Withdrawal

Notes from Lecture

Lecture by Atty. Romel Bagares, Lead Counsel in the PCICC v. Executive Secretary
This talk laid down 3 of the 5 submissions of the PCICC against the unilateral withdrawal from the Rome Statute
(ICC) by Duterte.

Main Issue: The PH Constitution does not have a provision on the procedure for treaty withdrawal.

First Submission: The PH withdrawal by note verbale from the Rome Statute is Constitutionally invalid because it
did not follow the 2-step procedure that was taken by the government, under Article 7, Section 21 of the 1987
Constitution, to accede to the Rome Statute.
● 2-step procedure: state accedes to a treaty and deposits their instrument of accession to the UN
● By the ​acte contraire principle accession and withdrawal to a treaty are parallel acts which require parallel
procedure. Thus, withdrawal also has to follow the accession procedure.
● Democratic Alliance Case — ​Their Constitution is also silent on the procedure for withdrawal. Mere
deposit of withdrawal is an executive act under IL; however, the system of domestic law determines
who between executive or parliamentary can withdraw validly.
■ This case clarified that dealing with treaties is within the ambit of the executive insofar
as foreign policies are concerned. Parliamentary acts are needed to validate the
executive’s foreign policies.
● Philippine jurisprudence is replete with cases showing that the executive does not have unfettered
treaty making powers.
○ Bayan Muna v. Zamora
■ The Constitution contains two provisions requiring the concurrence of the Senate on
treaties or international agreements.
■ Section 21, Article VII reads: “[n]o treaty or international agreement shall be valid and
effective unless concurred in by at least two-thirds of all the Members of the Senate.”
■ Section 25, Article XVIII, provides:”[a]fter the expiration in 1991 of the Agreement
between the Republic of the Philippines and the United States of America concerning
Military Bases, foreign military bases, troops, or facilities shall not be allowed in the
Philippines except under a treaty duly concurred in by the Senate and, when the
Congress so requires, ratified by a majority of the votes cast by the people in a
national referendum held for that purpose, and recognized as a treaty by the other
contracting State.”
■ Section 21, Article VII deals with treaties or international agreements in general, in
which case, the concurrence of at least two-thirds (2/3) of all the Members of the
Senate is required to make the treaty valid and binding to the Philippines.
■ In contrast, Section 25, Article XVIII is a special provision that applies to treaties which
involve the presence of foreign military bases, troops or facilities in the Philippines.

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Under this provision, the concurrence of the Senate is only one of the requisites to
render compliance with the constitutional requirements and to consider the agreement
binding on the Philippines.
○ Pimentel v. Executive Secretary
■ In treaty-making, the President has the sole authority to negotiate with other states
and enter into treaties but this power is limited by the Constitution with the 2/3 required
vote of all the members of the Senate for the treaty to be valid. (Sec. 21, Art VII).
■ The legislative branch part is essential to provide a check on the executive in the field
of foreign relations, to ensure the nation's pursuit of political maturity and growth.
○ Saguisag v. Ochoa
■ The President may enter into an executive agreement on foreign military bases if the
executive agreement is merely implementing an already existing treaty which garnered
the requisite senate concurrence.

Second Submission: Unilateral withdrawal of the Executive violates the principle of separation of powers.
● The 2-step procedure, if deemed as a requirement for withdrawal, upholds the separation of powers of the
3 branches of government.
● The act of depositing the instrument of ratification or accession is a ministerial act which can be compelled
through mandamus. The requisite ⅔ vote of the Senate is not ministerial.
● To allow the unilateral withdrawal of the Executive creates the false precept that the prior ⅔ consent of the
Senate is of no bearing.
● Case mentioned: Gonzales v. Hechanova — Executive agreements cannot go against a treaty. The
contracts for importation with Vietnam and Burma constitute valid executive agreements with foreign
countries and that when there’s conflict between a statute and treaties, the latter shall prevail under
international law. Executive function is only to enforce laws enacted by Congress. The former may not
interfere in the performance of legislative powers. He cannot indirectly repeal statutes through an
executive agreement.

Third Submission: Executive does not have factual nor legal basis to withdraw from the ICC.
● In any case, the complementarity principle applies, the ICC will only step in if the domestic courts are
unable to try the cases which have to be tried.

Closing Matters:
1. In the PH, we have a domestic law which preceded our ratification of the Rome Statute, it is called the
“Philippine Act on Crimes Against International Humanitarian Law, Genocide, and Other Crimes Against
Humanity.” So even if we withdrew from the ICC, we still have this law to rely on punishing crimes which
do not have a prescriptive period.
2. What happens now in terms of crimes committed prior to withdrawal from the ICC? They will still be
prosecuted.
3. Raised by Ms. Alarios — now that we are not a party anymore, if SC decides that we are still a member,
what is the result?
a. Atty. Evecar says that mode of rejoining can be:
i. Note verbale manifesting our intent to join again.

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ii. Ratify again — but this is such a hassle and it takes time.

Democratic Alliance v Minister of International Relations and Cooperation and Others

http://www.saflii.org/za/cases/ZAGPPHC/2017/53.pdf
Background of the case

The litigation history over the ICC has its genesis in the refusal by the South African government to arrest and
surrender to the ICC, Omar Hassan Ahmad al- Bashir (President al-Bashir) the President of Sudan, when he
visited the country in June 2015 for an African Union (AU) summit. President al-Bashir stands accused of serious
international crimes, and two warrants have been issued by the pre-trials chamber of the ICC for his arrest. They
all are for war crimes, crimes against humanity and genocide, all related to events in the Darfur region of Sudan.

On October 19, 2016, the national executive of South Africa took a decision to withdraw from the Rome Statute.
Pursuant thereto and on the same day, the Minister of International Relations signed a notice of withdrawal to give
effect to that decision and deposited it with the Secretary-General of the United Nations. This triggered the
process for South Africa‘s withdrawal.

The primary question is whether the national executive’s power to conclude international treaties, also includes
the power to give notice of withdrawal from international treaties without parliamentary approval. Related to that is
an ancillary question whether it is constitutionally permissible for the national executive to deliver a notice of
withdrawal from an international treaty without first repealing the domestic law giving effect to such treaty.

Ruling of the Court: The Court held that the national executive’s decision to deliver the notice of withdrawal
without obtaining prior parliamentary approval violated s 231(2) of the Constitution, and breached the separation
of powers doctrine enshrined in that section.

Ratio

The act of signing a treaty and the act of delivering a notice of withdrawal are different in their effect. ​The former
has no direct legal consequences, while by contrast, the delivery of a notice of withdrawal has concrete legal
effects in international law, as it terminates treaty obligations, albeit on a deferred basis in the present case.

Withdrawal from a treaty is a domestic issue in which international law does not and cannot prescribe. It is correct
that in international law, a notice of withdrawal from an international agreement does not require parliamentary
approval. ​However the question of which between the national executive and parliament has to decide on
withdrawal must be settled according to domestic law. Here, s 231 of the Constitution of South Africa requires
prior parliamentary approval. Hence, the necessary inference, on a proper construction of such provision, is that
parliament retains the power to determine whether to remain bound to an international treaty. This is necessary to
give expression to the clear separation of powers between the national executive and the legislature embodied in
the section.

The conclusion is therefore that, on a textual construction of s 231(2), South Africa can withdraw from the Rome
Statute only on approval of parliament and after the repeal of the Implementation Act. This interpretation of the

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section is the most constitutionally compliant, giving effect to the doctrine of separation of powers so clearly
delineated in s 231.

Other perspectives on the issue

The matter was also argued largely on the basis that there is no provision in the Constitution or in any other
legislation for withdrawal from international treaties. This may be considered to be an omission or lacuna.
However, it appears to the Court that there is probably a good reason why the Constitution provides for the power
of the executive to negotiate and conclude international agreements but is silent on the power to terminate them.
The reason is this: As the executing arm of the state, the national executive needs authority to act. That authority
will flow from the Constitution or from an act of parliament. The national executive can exercise only those powers
and perform those functions conferred upon it by the Constitution, or by law which is consistent with the
Constitution. This is a basic requirement of the principle of legality and the rule of law. The absence of a provision
in the Constitution or any other legislation of a power for the executive to terminate international agreements is
therefore confirmation of the fact that such power does not exist unless and until parliament legislates for it.

It also appears that it is a deliberate constitutional scheme that the executive must ordinarily go to parliament (the
representative of the people) to get authority to do that which the executive does not already have authority to do.

Principle of procedural irrationality. T​ he requirement for rationality is that government action must be rationally
connected to a legitimate government purpose. The principle of legality requires that both the process by which
the decision is made and the decision itself must be rational. It was explained that to determine procedural
irrationality, one has to look at the process as a whole and determine whether steps in the process were rationally
related to the end sought to be achieved. If not, whether the absence of a connection between a particular step is
so unrelated to the end as to taint the whole process with irrationality. In the present case, the procedural
irrationality lies in the finding that the national executive did not consult parliament, as it was obliged to, before
delivering the notice of withdrawal.

Remedy of the Court/Disposition of the case: There is nothing patently unconstitutional, at least at this stage,
about the national executive‘s policy decision to withdraw from the Rome Statute, because it is within its powers
and competence to make such a decision. What is unconstitutional and invalid, is the implementation of that
decision (the delivery of the notice of withdrawal) without prior parliamentary approval. As a result, a declaration of
invalidity of the notice of withdrawal, coupled with an order for the withdrawal of such notice, should suffice as an
effective, just and equitable remedy.

No SC action on pleas vs ICC withdrawal days before effectivity- sources

https://news.abs​-​ ​cbn.com/news/03/12/19/no-sc-action-on-pleas-vs-icc-​ withdrawal-days-before-effectivity-sources
The withdrawal of the Philippines from the Rome Statute (ICC) took effect last 17 March 2019 as the Supreme
Court (SC) did not take action on the petitions filed by the persons enumerated below questioning the propriety of
the withdrawal. The SC allegedly did not tackle the petition because the petitioners ​did not ask for a temporary
restraining order or any immediate remedy from the Court. Under the Rome Statute, withdrawal from the ICC
takes effect one year after the deposit of the instrument of withdrawal.

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What is the ICC?

1. The ICC is the world’s permanent war crimes court that tackles cases that local tribunals could not handle,
among them mass killings and other forms of abuses.
2. The court, based in The Hague, has drawn criticism over controversial rulings.
3. ICC Prosecutor announced the tribunal was opening preliminary examination on the drug war in the
Philippines following receipt of reports of EJKs in the course of police anti-drug operations.
4. The PH signed the Rome Statute on 28 December 2000 and ratified it on 23 August 2011.
5. PH deposited its withdrawal on 17 March 2018, this will take effect after a year.

Executive’s Position​:
1. Alleged bias of UN officials and claimed the ICC was being used as a political tool against him as his
bases for withdrawing from the ICC.
2. Treaty did not take effect in the country because it was not published in a newspaper of general
circulation.
3. Principle of Complementarity Applies — the Philippine justice system is working (e.g. when Kian’s
murderers were convicted), so it could not be said that Philippine authorities were unwilling or unable to
genuinely carry out investigations and prosecutions of perpetrators so as to allow the ICC to step in.
4. Solicitor General Calida insisted that the country's withdrawal from the Rome Statute was the prerogative
of the President and a political question that the SC cannot delve into.
5. Senate concurrence is required only in ratifying a treaty, not in withdrawing from it.
6. Withdrawal from the ICC had already become valid and effective through the delivery of a note verbale to
the Secretary General of the UN.

1st Plea: Filed by lawmakers Senate Minority Leader Franklin Drilon and Senators Francis Pangilinan, Bam
Aquino IV, Leila de Lima, Risa Hontiveros, and Antonio Trillanes IV
● Argument: Philippines’ withdrawal of its ratification from the Rome Statute requires the concurrence of at
least 2/3 of the members of the Senate. Thus, the withdrawal is invalied lacking the ⅔ votes.

2nd Plea​: Filed by the Philippine Coalition for the ICC

● Argument: President committed grave abuse of discretion when he decided to withdraw from the ICC
solely based on “capricious, whimsical, ridiculous, misleading or misled, incoherent and/or patently false
grounds, with no basis in fact, law or jurisprudence.”
● Atty. Arpee Santiago said that if the SC fails to act on their petition before the withdrawal takes effect, the
pleas would most likely become “moot and academic,” a ground for dismissing a petition before the SC.

Hannah Woolaver, From Joining to Leaving: Domestic Law’s Role in the International Legal Validity of
Treaty Withdrawal
https://doi.org/10.1093/ejil/chz003
From Joining to Leaving: Domestic Law’s Role in the International Legal Validity of Treaty Withdrawal

I. Introduction

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If a state withdraws from a treaty in a manner that violates its own domestic law – for instance, if the executive fails to
obtain the constitutionally required legislative approval of treaty withdrawal ​will this withdrawal take effect in
international law? However, while international law establishes that a violation of domestic law when a state joins a
treaty may invalidate its treaty consent, it is silent on this question in relation to the state’s treaty withdrawal.

II. Treaty Withdrawal in Domestic Law

“[t]he power to annul, terminate, withdraw from or suspend treaties, no less than the power to conclude treaties, forms
part of the treaty-making power of the state.” (Waldock, Humphrey)
While it is clear that, from the perspective of international law, binding treaty obligations take precedence over domestic
law​, this does not address the question of who can validly consent to, or revoke consent from, such obligations on
behalf of the state.

A. Domestic Law Approaches to Leaving Treaties

While most states have provisions regulating the domestic authority to join treaties, ​most states do not have explicit
rules on the power to withdraw from treaties​.
Acte contraire theory - states simply apply the same rules for leaving a treaty as for joining a treaty; the requirements
for making and unmaking a rule should be identical.

1. UK’s exit from the EU

Miller v. Secretary of State
Facts: After a majority of voters supported ending UK’s membership in the EU, the UK executive announced its
intention in withdrawing from the EU, triggering the application of Art. 50 of the Treaty on EU(TEU).1 This decision was
challenged in the courts, ​in which the applicants argued that legislative approval was necessary to empower the
executive to withdraw.
Ruling:
● SC of the UK held that the executive did not have the unilateral power to withdraw from the TEU. Domestic law
required Parliament to pass legislation authorizing the initiation of the UK’s withdrawal.
● Traditionally, treaty-making capacity has been considered to be part of the executive, though it is limited by the
conventional requirement of parliamentary notice prior to treaty ratification. SC held that treaty withdrawal is
equally part of the prerogative, ​and therefore in principle can be exercised unilaterally by the executive​.
However, ​SC held that this did not include instances where treaty withdrawal would result in a change to the
constitutional framework in the UK, as it would here.
● After the ​UK joined the EU, Parliament had enacted legislation establishing EU law as a source of domestic law
with overriding status. ​Withdrawing from the TEU would remove this source of domestic law. Such a
‘fundamental change in the constitutional arrangements of the UK required parliamentary approval, rather than
enactment through the exercise of the prerogative by the executive alone.
In light of SC’s decision, UK government obtained legislative approval in the EU (Notification of Withdrawal Act 2017)
before triggering its withdrawal from EU via Art. 50.
Notably, SC did not resort to the ​acte contraire theory; the requirement of parliamentary approval of withdrawal did not
turn on the fact that Parliament had ratified the relevant treaties but, rather, on the ​impact that withdrawal would have
on the content of domestic law.
Art. 50 of the TEU indicates that a state’s withdrawal from the EU should be executed in a manner that complies with
the state’s domestic constitutional rules and thus, perhaps, that a failure to obtain parliamentary approval of the UK’s
withdrawal would have been ineffective under the said provision.

1
Article 50(1) of the TEU provides that ‘[a]ny Member State may decide to withdraw from the Union in accordance with its own constitutional
requirements’.

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● However, the IL significance of this provision was not considered by the SC and did not appear to have influenced the
interpretation of the requirement of the parliamentary approval.
● SC’s decision was focused solely on domestic UK law rather than on any international legal requirements for treaty
withdrawal or the effectiveness of the UK’s withdrawal in IL.
Applying the ​Miller​ case
● can apply to withdrawal from treaties though the range of such treaties will likely be narrow, (treaties wherein the withdrawal
from which will result in a ‘fundamental change’ to domestic law or the removal of ‘vested rights’ of individuals). Withdrawal
from such treaties will require parliamentary approval.
● In principle, this is not a sui generis rule concerning only withdrawal from the EU, but its application is likely to be limited
given the high threshold established by SC for the need for parliamentary approval of treaty withdrawal.

2. South Africa’s Failed Withdrawal from the ICC

Facts: South Africa announced its withdrawal from the Rome Statute 2in Oct. 2016. The notification of withdrawal was
sent by the executive without prior approval of the South African Parliament, which had previously both ratified and
domesticated the Rome Statute. The South African High Court determined the domestic constitutional requirements of
the withdrawal.
The applicants argued that the withdrawal would be unconstitutional because it would constitute a retrogressive step in
the protection of human rights, therefore violating the obligation to respect, protect, promote, and fulfill constitutional
rights.
Ruling:
● Court held that the executive did not have the power to withdraw unilaterally from the treaty in question.
● Since Sec. 231(2) of the South African Constitution requires parliamentary approval for treaties subject to
ratification, ​this section also by implication requires the consent of Parliament to withdraw from such treaties.
● Court adopted the ​acte contraire theory to interpret the domestic requirements for treaty withdrawal. It
emphasized that the process for withdrawal ‘is a domestic issue in which international law does not and cannot
prescribe’.
● Court held that the decision to withdraw without prior parliamentary approval was ‘procedurally irrational’ since
the domesticating legislation remained in place and might continue in force after South Africa’s withdrawal from
the international treaty. ​Thus, the executive must wait for Parliament both to approve withdrawal from the ICC
and to successfully repeal the domesticating legislation before valid notice of withdrawal from the Rome Statute
can be given.
● As to the argument of the applicants, the Court said that had such argument been upheld, short of
constitutional amendment, this would effectively bar South Africa from withdrawing from the ICC at any stage,
with or without parliamentary approval, along with prohibiting withdrawal from any other treaty that the courts
determine would have a ‘retrogressive effect’ on the protection of human rights.
● Therefore, the notice of withdrawal was unconstitutional and therefore invalid. As such, the government was
ordered to revoke the notice of withdrawal that had been sent to the UN Secretary- General.
However, in December 2017, at the annual meeting of the ICC, the South African executive announced its renewed
intention to leave the ICC. Legislation authorizing withdrawal from the ICC and repealing the implementing legislation
was tabled in the South African Parliament in May 2018.

3. USA’s Threatened Denunciation of the Paris Agreement

2
Article 127(1) of the Rome Statute provides that upon a state party sending its instrument of withdrawal, a 12-month waiting period is initiated, after
which withdrawal will take effect.

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Facts: In May, 2017, US has announced its intention to withdraw from the Paris Agreement. However, according to the
terms of the treaty, parties are only able to trigger the withdrawal provision from November 2019, initiating a 12-month
withdrawal period. Thus, the US written notification to the treaty depository is only an expression of its future intention
to trigger withdrawal as regulated by the terms of the treaty. US exit from the Paris Agreement would therefore take
effect in November 2020 at the earliest
US laws in relation to treaties/ IL agreements:
● Constitution regulates the power to join treaties but is silent on treaty exit. Treaties should be signed by the executive and
approved by 2/3 of the Senate
● ‘executive agreements’ and ‘congressional-executive agreements’: which are nonetheless treaties under IL but may be
entered by the executive alone or with congressional majority approval, depending on the agreement in question.
● ‘political commitments’: entered into by the Executive only but has no binding force in IL
In the US​, generally, a treaty that was joined by unilateral authority of the Executive (Paris Agreement) can be exited by
the Executive w/out participation of any other branch of government.​ This is supported by academic opinions.
Judicial opinions on withdrawal:
● Goldwater v. Carter​:
○ Facts: members of Congress sought to stop President Carter from unilaterally withdrawing from a treaty w/
​ hey argued that congressional approval is necessary.
Taiwan.​ T
○ District Court: agreed with Congress. Requirements for withdrawal must follow the procedure taken to enter the
treaty.
○ CA: President had unilateral power, regardless of the procedure followed.
○ SC: dismissed the complaint because it was a political question.
● Subsequent lower court decisions have followed the precedent in the ​Goldwater case, dismissing challenges
but declining to define the relative powers of the executive and the legislature due to the political question
doctrine.
In relation to the Paris Agreement, however, it seems likely that unilateral withdrawal would be permitted, given that it
was consented to by the power of the executive alone.

4. Lessons from the Case Studies

The cases above indicate that ​domestic requirements on treaty withdrawal are playing an important part in states’
decisions about their international engagements.
● Domestic courts in the UK and South Africa have asserted a key role for legislative and judicial branches in
treaty withdrawal, limiting the executive’s authority to unilaterally decide despite the fact that in neither
jurisdiction was explicit constitutional provision made empowering the judicial and legislative branches in this
way.
Judicial decisions
● the ​acte contraire​ doctrine is not universally applied.
● requirements even within a single state may vary depending on several factors:
○ nature of the treaty in question
○ effect withdrawal will have on domestic law and
○ procedure followed when joining the treaty
Domestic courts examining the domestic legality of treaty withdrawal do not consider the relationship thereof with the
international law on treaty withdrawal.
● None of the courts indicated that a domestic finding of invalidity might result in the international invalidity of withdrawal.
● The South African court decision, by ordering the executive to revoke the instrument of withdrawal, ​could be interpreted to
mean that domestic invalidity would have no effect on the international legal effectiveness since revocation would not be
necessary if the instrument was simply ineffective in IL.

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III. The Role of Domestic Law in the International Effectiveness of Treaty Acts

What happens if a state withdraws from an international treaty in a manner that complies with the applicable
international legal requirements, but violates its domestic rules on treaty withdrawal? Will such a treaty withdrawal still
take effect in IL?

A. The Role of Domestic Law in Joining Treaties (I think this isn't really important. Just look at the definitions in #1&2.
Read 3&4 to know what Art. 46 is all about then go to letter B.)
1. The Constitutionalists: Brierly and Lauterpacht
● Only domestic law can determine which state representative has the authority to bind the state to international
treaty obligations​; favors the principle of sovereignty
● If an actor other than that empowered by domestic law attempts to undertake international obligations on behalf
of the state, this has no legal effect, as that actor has no authority to represent the state.
● Primary result:
○ international invalidity of a treaty consented to in violation of domestic rules
○ States would be required to investigate the domestic law on treaty consent of each foreign state to be confident
that consent was given in compliance with such rules and that the treaty is binding on that foreign state.
2. Internationalists: Fitzmaurice and Waldock
● international law itself establishes uniform rules determining the state authority that can validly exercise the
state’s consent for the purposes of international law; ​favoring the principle of treaty security.
● If consent to a treaty is expressed by that authority – namely, the state executive – in compliance with the rules
of international law, the state cannot invalidate that consent by pointing to a violation of its domestic law rules.
○ Ex. if IL determines that the head of state can bind the state to a treaty, consent of the head of state is all that is
required, and it is of no consequence if domestic law requires that the head of state receive legislative approval
before joining a treaty
3. The VCLT Compromise
● Waldock’s internationalist position found majority votes in drafting the VCLT, which is now Art. 46 of the VCLT3
● Thus, Article 46 establishes the internationalist approach as the default position in international law, assuming
the validity of treaty consent given by a state representative with ostensible authority to do so.
● States are therefore entitled to rely on consent given by these representatives, regardless of any consideration
of domestic legal requirements, favoring the principle of treaty security. This is subject to the limited exception,
recognizing the importance of constitutionalist concerns, that if the consent was given in ‘manifest violation’ of
an internal rule of fundamental importance concerning the competence to conclude treaties, it was voidable.
● Finally, Article 46(1) makes clear that it is only the state whose domestic law was violated that can invoke this
basis for invalidity.
4. What is a “Manifest Violation of a Rule of Internal Law of Fundamental Importance”?
● To constitute a serious violation 2 basic elements in Art. 46 are considered:
○ Nature of the violation of domestic law
■ The violation must be one that is so obvious as to make it impossible for another state to rely
on the given consent in good faith. It must be ‘manifest’ from the perspective of the other treaty
parties that are relying on the state’s given consent.

3
1. A state may not invoke the fact that its consent to be bound by a treaty has been expressed in violation of a provision of its internal law
regarding competence to conclude treaties as invalidating its consent unless that violation was manifest and concerned a rule of its internal
law of fundamental importance.
2. A violation is manifest if it would be objectively evident to any state conducting itself in the matter in accordance with normal practice and
in good faith.

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○ The character of the violated rule

■ the rule violated must be ‘of fundamental importance’ and concern the capacity to conclude
treaties.
B. The Role of Domestic Law in the International Law of Treaty Withdrawal (here the author will attempt to apply and
explain why Art. 46 should be applied when a party withdraws from a treaty)
1. Established International Law Requirements for Valid Treaty Withdrawal
● Generally governed by Art. 65-68 of the VCLT. Art. 67: an instrument of withdrawal must be in writing and must
be signed by the head of state, head of government, or minister of foreign affairs.
● Unlike in joining treaties, these procedural requirements do not contain an equivalent manifest violation
exception like in Art. 46 nor any other reference to domestic legal allocation of treaty withdrawal authority.
● As noted above in the case studies, court decisions examining the domestic requirements for treaty withdrawal
do not consider whether domestic violations will negate the international legal effect of withdrawal.
● In contrast to IL powers to join treaties (Art. 46), the authority of the executive to withdraw the state from
treaties in Article 67 of the VCLT is, prima facie, absolute in international law, unlimited by any checks that may
exist in domestic law. Such absolute authority would mean that, while a violation by the state’s executive of the
requirement to obtain legislative approval when joining a treaty may invalidate the state’s treaty consent, the
very same violation would be irrelevant in the case of treaty withdrawal.
○ If so, the recent landmark judgments in the UK and South Africa establishing parliamentary control over
the power of treaty withdrawal have no effect on their executives’ treaty withdrawal powers in
international law.
2. Analogical Application of the Manifest Violation Exception Treaty Withdrawal
As international law considers that compliance with domestic legal requirements is relevant to the international validity
of the state’s consent to be bound by a treaty, this should also be the same for the decision to end that consent. ​The
author proposes that Article 46 of the VCLT should be interpreted to apply analogically to state
representatives’ power to withdraw from treaties in international law. Accordingly, a manifest violation of an
internal rule of fundamental importance should potentially invalidate a state’s treaty withdrawal internationally
as well as domestically. (basically she wants to apply art. 46./manifest violation, to the situation of withdrawing
from a treaty. So if the party manifestly violates an internal rule of fundamental importance, it will invalidate a
state’s withdrawal.
(a) Textual Interpretation
● Despite the absence of an explicit requirement in VCLT to comply with domestic law when withdrawing, the
commentary on the final draft articles states that “considered that the rule concerning evidence of a​uthority to
denounce, terminate, etc., should be analogous to that governing “full powers” to express the consent of a state
to be bound by a treaty.”
● As such, limitations on the authority to bind the state to a treaty should, per the ILC’s understanding, apply
analogously to the power to denounce or terminate a treaty, which includes the manifest violation of domestic
law exception in Article 46.
● Art. 7 of the VCLT sets out the requirement of full powers in joining treaties while Art. 67 does so in relation to
withdrawal.
○ “full powers” – a document emanating from competent authority... for expressing consent of the state to
be bound by a treaty, or for accomplishing any other act with respect to a treaty.
○ This clearly includes the acts concerning both the conclusion and termination of treaties.
○ Thus, the restriction of the powers of those authorized to act on behalf of their state by the Article 46
manifest violation exception should apply to the full range of treaty acts that these representatives are
potentially capable of executing

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○ The authority of those empowered by Article 67 to withdraw from a treaty should be limited in the same
manner by the Article 46 manifest violation exception as those empowered by Article 7 to join a treaty.
(basically art. 46 should apply in art. 67, regarding treaty withdrawal)
(b) Normative principles justifying the application of the manifest violation exception to treaty withdrawal
● The VCLT drafters sought to balance 2 key principles underpinning the law on treaty consent: a) respect for state
sovereignty and b) security of treaties
● Joining treaties: advancing the treaty security with exception to ensure for the state’s sovereign allocation
● Treaty withdrawal: treaty security with no counterbalancing to account for sovereign concerns
(b.1) State Sovereignty in Treaty Withdrawal
● It is apparent that the importance of respecting the state’s exercise of its sovereign right to allocate
treaty-making competence applies equally to the acts of joining and leaving treaties. There is no justification for
giving international legal weight to the state’s sovereign allocation of its treaty-making power to limit the
executive’s unilateral authority when a state joins a treaty, but ignoring the very same concerns when the state
leaves the treaty.
● The nearest equivalents to the requirement of ratification in the context of treaty exit are the notice periods
established in certain treaties (TEU, Rome Statute, and the Paris Agreement).
○ Provide a waiting period that is initiated by the notice of withdrawal
○ While these periods have provided opportunities for domestic contestation of the legality of withdrawal, as in the
South Africa’s withdrawal from the ICC, this is not required by the general law of treaties nor by the particular
provisions.
● Given the absence of alternative procedures protecting the state’s constitutional allocation of authority,
analogous extension of the principle established in Article 46 of VCLT to the international authority to withdraw
from a treaty is an appropriate manner for international law to protect these principles of state sovereignty.
(b.2) Security of treaties in treaty withdrawal
● Recognizing a requirement to comply with domestic law when withdrawing from treaties would favor this crucial
aspect of the principle of treaty security since this would provide an additional barrier to withdrawal – the failure
to comply with which would mean that the state’s withdrawal could be invalidated, protecting the security of the
treaty agreement. In the context of joining a treaty, in contrast, a requirement to comply with domestic law
operates as a barrier to the state being bound by the treaty, undermining the internationally binding nature of
the agreement reached between the parties to the treaty.
● Thus, giving unrestricted international legal authority to the executive to withdraw from treaties does not best
serve the principle of treaty security; if anything, appropriate limits on the executive’s international authority to
withdraw uphold the principle.
● Not all violations of domestic law should invalidate treaty withdrawal, just as they do not invalidate the
conclusion of treaties. Instead, international law, as in the case of joining treaties, should restrict the potential
invalidation of a state’s treaty withdrawal to instances when it is reasonable to expect other states parties to
have known that there was a violation of the withdrawing state’s domestic law of fundamental importance.
(c) Application of the manifest violation exception to treaty exit
● The author proposes the application of the manifest violation exception to treaty withdrawals. However, the
author recognizes the difference between joining and withdrawal from treaties.
○ Main difference: application of the requirement that the violation be “objectively evident to any state conducting
itself in the matter in accordance with normal practice and good faith.”
○ In joining treaties: there’s no duty on states to familiarize themselves with the domestic law of other states ​and so
the fundamental rule of internal law has to be the subject of a specific warning to other states or exceptionally well
publicized in order to invoke Art. 46.
○ Treaty withdrawal: circumstances may make it more reasonable to expect a state to inquire into the domestic rules
of treaty partner​s and thus increase the likelihood of a violation of domestic law being objectively evident.

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Depending on the nature of the treaty, all treaty parties may have a significant interest in maintaining the treaty’s
membership.
■ Ex. In the case of UK’s withdrawal from the EU.
○ In light of this difference, ​the author suggests that where the loss of an individual member state would
have a significant impact on the interests of the other treaty parties, as in the case of UK, it would be
reasonable to expect states to examine the domestic legality of the state party’s withdrawal alongside
the applicable international legal requirements.
■ in the context of ​treaty withdrawal, a violation of an internal rule of fundamental importance
may be objectively evident to the other state parties even without an explicit warning
concerning the rule being given by the withdrawing state or exceptional publicity of the rule.
● Other elements of manifest violation exception would continue to apply to the rules on treaty withdrawal.
○ violation would still have to be of a domestic rule of fundamental importance concerning the state’s withdrawal
from treaties, and the content of this rule would still need to be clear at the time of the purported violation
○ violation would make the withdrawal voidable, not void, on the invocation of the state itself.
(c.1) Application to case studies
● All 3 cases would satisfy the requirement of an internal rule of fundamental importance concerning the capacity
to withdraw from treaties.
○ Thus, the possible requirement of Senate, congressional, or parliamentary approval to end treaty membership in
the USA, UK, and South Africa would fall into this category.
● Only in the case of UK is it likely that the manifest violation exception may have been applicable.
○ had the UK executive proceeded to trigger the withdrawal provision of the TEU without parliamentary approval,
despite the UK Supreme Court judgment in the Miller case, it is at least arguable that this would have been a
manifest violation of the domestic law of fundamental importance.
○ The rule in question was well publicized. Thus, an EU member state acting in good faith according to normal
practice would have reasonably been expected to be aware of the violation of UK domestic law.
○ All elements of the manifest violation exception would then be present. If the manifest violation was applied, UK’s
withdrawal would have been voidable under IL at the invocation of UK​.
● In the South African and US cases, it is unlikely that the domestic constitutional rules would be considered to
be sufficiently clear at the time of withdrawal to constitute a manifest violation.
○ Even if we might expect other ICC member states to be aware of the controversy surrounding South Africa’s
withdrawal, the South African requirement of parliamentary approval of withdrawal from ratified treaties was only
clearly established in the Democratic Alliance decision, handed down after withdrawal was initiated. The violation
could not be considered as objectively obvious to other member states. However, if South Africa triggers the
withdrawal provision again in the future, w/out the parliamentary approval, this would be considered a manifest
violation.
○ USA, the requirement of legislative approval of treaty withdrawal remains controversial and is unlikely to be settled
before the executive officially issues its instrument of withdrawal from the Paris Agreement (if this is in fact done).
Again, then, no manifest violation could best established.

IV. Conclusion
The absence of a role for domestic constitutional rules in the international validity of a state’s withdrawal from treaties is
a significant gap in international law that should be filled. There is no justification for the current position that a violation
of domestic law may invalidate the consent given by a state representative when joining a treaty but that such violations
are simply irrelevant in relation to treaty withdrawal.
This can be accomplished through an analogical application of the ‘manifest violation’ exception from the rules on
joining treaties to those on treaty withdrawal, through the interpretation of the relevant provisions of the VCLT. The

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constituent elements of this exception are sufficiently flexible to apply appropriately to both contexts, taking into account
the nature of the treaty, the importance of the violation and the position of other treaty parties.

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TOPIC 2: Intl Human Rights Law ETOs TNCs

Notes from Lecture

International Human Rights Law and Extraterritorial Jurisdiction over Human Rights Violations By Transnational
Corporations
Speaker: Atty. Pocholo Labog

I. Intro
Why do we need to highlight human rights violations of transnational corporations?
● There is a huge gap in both international law and domestic law in addressing human rights violations of TNCs
and other business enterprises
● Prevalent HR violations today are not caused by dictatorial governments but are perpetrated by corporations,
mostly concerning economic, social and cultural rights
○ This is because TNCs wield more financial and political power than many states.
○ Some even make more sales than the GDP of some small countries
● And yet, there is no enforceable legal regime to hold these corporations accountable
○ There is a power imbalance between states and corps
○ Revolving door doctrine: TNCs have access to top level official of governments and they can influence
policy
○ Currently, there are only weak and ineffective non-binding instruments in IL
● There is a failure to implement a system of accountability for human rights violations of TNCs

Salvador Aliende, Former President of Chile, 1972 UN speech

● The speech raised the issue on failure to control multinational corporations and their harmful role
● “States are being impinged on in their most basic decisions, political, economic, military, by global corporations
that do not depend on any State and whose actions are not controlled by any parliament.” TNCs not only go
against legitimate interests of developing countries, they also dominate in the industrialized nations where they
establish themselves.”
● Implies that TNCs have risen to the level of States, or even above the states

Example of TNCs that have operated in the PH: Marcopper case

● There was a mine spill in Marinduque that affected the health, livelihood of local communities.
● 2001 case: PH courts
○ A case for damages was filed in 2001, but until now it has not yet been resolved.
● 2005 case: Nevada courts
○ In 2005, a separate case was filed by Marinduque before Nevada courts against a foreign investor of
Marcopper.
○ However, this was dismissed by Nevada court citing forum non conveniens.
● Nevertheless, this shows the importance of having an international recourse.
○ Given the slow pace of justice in the PH, even when Solid Bank won a case against Marcopper, Solid
Bank was not paid because Marcopper didn’t have any property left. Thus, Marcopper was able to
avoid being held accountable.
○ There has to be recourse internationally and pursue a case against the foreign investor. If not, how can
victims recover damages?

Business and human rights timeline:

● 1960s: Green revolution increased agricultural production worldwide
● 1966: Asian Development Bank was established as a financial institution to foster economic growth and
cooperation in Asia

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● 1972: President Allende’s speech in UN

● 1974: United Nations Center on Transnational Corporations is established in an effort to address national
sovereignty, corporate responsibility and global governance
● 1984: Bhopal Disaster in India, an accident in a pesticide plant, where 15,000 people died and 600,000
exposed to toxic gas due to this major corporate disaster
● 1989: Washington Consensus was developed, which is a set of 10 economic policy prescriptions for developing
countries. This encouraged world-wide implementation of the neo-liberal agenda.
● 1992: First Earth Summit was held in Rio De Janeiro, Brazil. The UNCTC was dismantled. Businesses gained
status as major groups and stakeholders.
● 1993: United Nations Conference on Trade and Development became the UN Body, which centralized data on
trade and investment, including investor state disputes. There is no longer a global center for information on
TNCs and associated human rights violations.
● 2000: UN Global Compact was established, which is the first non-binding corporate responsibility instrument
initiative. It contained no accountability mechanism for TNCs.
● 2003: The norms on the responsibilities of TNCs and other Business Enterprises with regard to HR was
approved by the UN
● 2011: United Nations Guiding Principles on Business and Human Rights were adopted by the UN Human
Rights Council. It focused on ALL businesses rather than TNCs only.
● 2013: The Rana Plaza collapse happened, involving factories that supplied to Benetton, Gap and WalMart.
Killing more than 1,000 women.
● 2013: UN HRC - Ecuador leads a number of governments in issuing a statement in favor of a Legally Binding
Instrument on Transnational Corporations or a UN Treaty
● 2014: Open Ended Intergovernmental Working Group to develop an international legally binding treaty to
regulate TNCs and other businesses with respect to Human Rights.
● 2015: First session of the Working Group happened in Geneva. There was strong civil society presence in the
negotiation of the treaty

II. Scope
● Focus only on obligations of TNCs or home states to regulate the activities of businesses in host states.

Fact pattern:
Home State: represents a developed country
● Where TNC, MNC, Parent Company are located
Host State: represents a developing country, territorial state.
● TNCs operating in host states through subsidiary or affiliates

NOTE: Human rights violations almost always happen in the host state
● It rarely happens in home states because TNCs usually only make their decision making there and mainly
operate in host states

Consider:
● When Human Rights violations occur in the host state, do victims have access to courts in the home state?
○ If yes, the home state becomes the forum state.
● Does the home state have an obligation to answer for the Human Rights violations committed aboard by
affiliates, subsidiaries and contractees?
● Does the TNC/ MNC have an obligation when it comes to Human Rights?

III. Review of Key Concepts

Jurisdiction
Pre-modern view of Jurisdiction: Territory and Sovereignty
● Westphalian view: emphasis is on State’s territory. State’s jurisdiction only covered its territory
● Activities outside its territory are not the State’s concern

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● This depicts a traditional negative international law of state co-existence, ​which contains obligations in
defending the sovereignty of all states.

Modern view of Jurisdiction:

● Because of Globalization and Trans-national relations, a positive dimension of jurisdiction has emerged
reflecting the evolution of IL towards a​ l​ aw of cooperation rather than just coexistence between states.
● States may sometimes be obliged to exercise jurisdiction rather than just being allowed to, especially with
respect to values geared to the international community.
○ This is seen in International Criminal Law treaties and International Human Rights Law.

Forms of Jurisdiction:
1. Prescriptive or Legislative: ​power of the state to make its law applicable to activities, relations, status of
persons, whether by legislation or by executive act or order
2. Enforcement: ​power of the state to enforce or compel compliance or punish non-compliance with its laws or
regulations
3. Adjudicative: ​power of the state to subject persons or things to processes of its courts or administrative
tribunals.
NOTE: In the exercise of jurisdiction, the presumption against extraterritoriality because Congress intends to regulate
domestically

Principles of Jurisdiction
1. Territorial: where the situation is located in all or some of the State’s territory
2. Personal: where the perpetrator (active personality) or the victim (passive personality) has the state’s nationality
3. Protective: where the situation is prejudicial to a fundamental interest of the state
4. Universal: where the matter concerns the defense of universal values, in the absence of classic links
corresponding to the other titles of competence
NOTE: Last 3 principles are varieties of extraterritorial jurisdiction.

Legal Personality
● Determines the Social Actors that the International Legal System takes account of; as distinguished from those
excluded from it.

5 conceptions:
1. States ​only: relations between states exclusive. Only states are international legal persons. Other actors
(individuals and other entities) are only nationals of states and not directly relevant to IL.
2. Recognition: ​primacy of states in IL. Accepts that states may recognize other entities as international persons.
3. Individualistic: ​sees the individual human being as an international person thus has certain International rights
and duties. Status of an individual as a subject of IL does not depend on expression of state will but exists
apriori.
4. Formal​: anyone being addressee of an international norm is an international person.
a. International personality is an a posteriori concept
5. Actor: ​considers ​all entities exercising effective power in the international decision making process as
international persons.
NOTE: International Legal Personality determines the rights and duties/ obligations of the actor concerned.

The issue now is whether or not the TNC has a legal personality such that it has corresponding rights and obligations?

IV. Proposed Mechanisms

● UN Guiding Principles on Business and Human Rights (UNGP)
● Extraterritorial HR Obligations of States
● Legally Binding Instrument on Transnational Corporations (LBI / UN Treaty)

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1. UNGP or the Ruggies Principles: Global standard of practice expected of all states regarding Business and
Human Rights.
a. Three pillars:
i. Obligation of States to Protect: requires states that actions of third parties or non state actors
under its jurisdiction do not adversely affect economic, social and cultural rights. States are
obliged to take legislative and juridical steps to achieve this obligation.
ii. Obligation of Corporates to Respect: Responsibility of Business to avoid human rights
violations
iii. Obligation of State and Corporates to Remedy: ensure victims have access to remedy.
b. Issue: The UNGP is voluntary and non-binding.

2. Extraterritorial Obligations of States

a. UNGP Principle #2: States should set out clearly the expectation that all business enterprises domiciled
in their territory and/ or jurisdiction respect human rights throughout their operations.
i. At present, however, states are not required to regulate the extraterritorial activities of
businesses in their territory or jurisdiction. Nor are they prohibited from doing so, provided there
is jurisdictional basis.
ii. UNGP is not a legal instrument which imposes new obligations. It only intended to provide a
conceptual framework restating existing obligations.
b. Others propose that International Human Rights Law already imposes the following obligations on
states:
i. States’ duty to protect that extends outside the States territory or the exercise of active
personality jurisdiction
1. This is supported by the Advisory Opinion on the Legality of the Threat or Use of
Nuclear Weapons, which provides for the international duty of the States to ensure that
matters within their control (including those of non-state actors) respect the
environment of other states
2. States should have the obligation to govern businesses domiciled within its territory
3. State party is encouraged to strengthen the remedies provided to protect people to
have been victims of activities of business enterprises abroad
a. There is a reasonable relation between the State and the conduct concerned
4. Maastricht Principles: Extraterritorial Obligations of States in the Area of Economic,
Social, Cultural Rights
a. Principle 8
i. Obligations on acts and omissions on state, within or beyond its
territory, that have effects on the enjoyment of human rights outside
the territory
ii. Obligations of global character to take actions through international
cooperation to realize human rights universally
b. Principle 9: Extraterritorial obligations triggered in 3 jurisdictional situations
i. Where States ​exercise authority or effective control
ii. Where State acts or omissions ​bring foreseeable effects on ESC
rights whether in or out of its territory
iii. Where the state ​may influence realization of ESC rights
extraterritorially

3. Legally binding instruments to operationalize extraterritorial obligations on human rights

a. Codification will close the gaps on addressing TNC human rights violations
b. Direct Legal Obligations of TNCs
i. Human rights advocates claim that TNCs bear direct legal obligations in International Human
Rights Law. Human rights obligations should not be limited to States.
ii. Current state of things: States are primary holder of duties and obligations

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1. UNGP 2nd Pillar: TNCs have a responsibility NOT duty or obligation

2. Corporations are non-State actors, not recognized as international persons; hence,
they have no obligation to uphold human rights.

What the speaker wants to prove: TNCs possess legal personality sufficient to give them legal rights and obligations

V. Issues and Proposal

3 Main Issues:
1. Uncertainty over nationality and domicile of TNCs.
a. Challenge: Each municipal law has its own criteria in determining nationality.
2. Separate legal personalities of these corporate entities.
a. Challenge: Imputability of human rights violations to the TNCs and to its affiliates and subsidiaries
3. Untenable proposition that International Human Rights Law imposes duties on TNCs may lack sufficient basis
in International Law

Nationality and Domicile

Two Risks:
1. Delaware Effect. States register companies but neglect the duty to regulate the company.
2. Reverse. State may exceed the boundaries of its legitimate jurisdiction by regulating activities with which it is
only weakly connected

Proposal to overcome:
● Apply Control Test: impose on the parent an obligation to monitor the behavior of subsidiaries which it is in a
position to influence. (Parent-based extraterritorial regulation)
● UN Treaty/ LBI proposal: sets domicile of TNC according to statutory seat, central administration or where the
TNC has substantial business interest.

3 possible situations in imputing liability to TNCs:

1. Direct presence (branch or office): no problem with imputability.
a. Active personality justifies extraterritorial reach of home state.
b. Solution: Indirect liability of parent company for acts of the subsidiary may be established through the
piercing the veil approach, establishing a degree of control of parent company that it can be said that
the latter has no will of its own.
2. TNC sets up a separate legal entity in the host state which it controls.
a. Parent-subsidiary relationship is established.
b. Solution: Integrated enterprise approach may apply which takes into account the close degree of
control of the parent over subsidiary.
3. TNC contracts with a legal entity in the host state.
a. TNC enters into a contractual relationship with an entity in the host state.
b. Solution: Supply chain responsibility to test if a contractual relationship is not only to conceal control
over the other.

Issue on the direct legal obligations of TNCs have not been settled in IL
● Recent developments may lead to a re-interpretation of the International Human Rights framework.
○ African Union: allowed prosecution of corporations for International Crimes.
○ Special Lebanon Tribunal: corporations may be prosecuted for contempt of court
○ Drafting committee of the international law commission: provisionally adopted a text that corporations
may commit crimes against humanity
○ International investment law: rights of investors to trigger international dispute settlement proceedings
against the state suggest legal personality of corporations in the international sphere
● Thus, there is a need to prove that TNCs are subjects of international law.

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VI. Conclusion
There are many skeptics as to imposing extraterritorial obligations on States to regulate activities of TNCs and
imposing direct legal obligations of TNCs. However, there are human rights advocates who are pushing for
mechanisms to hold TNCs accountable in the legal sphere. There is already a legal basis in international law to hold
TNCs accountable and to impose extraterritorial obligations on states over TNCs under their control and influence that
have violated HR abroad. The Principle of International Cooperation to uphold human rights also form this legal
foundation. The very nature of TNCs dictate that they too should bear direct legal obligation to respect, protect, and
fulfill human rights.

United Nations Guiding Principles on Business and Human Rights

https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf

UN Guiding Principles on Business and Human Rights

Summary:
1. The UNGP follows the Protect, Respect, Remedy framework. These are not binding.
2. The UNGP has ​3 core principles ​transformed into its 3 pillars
a. The ​state duty to protect ​against human rights abuses by 3rd persons including business
enterprises
b. The ​corporate responsibility to respect ​human rights
c. The need for greater ​access to remedies ​for victims of business related abuse
3. The Guiding Principles apply to all States and ​to all Business Enterprises​, not just transnationals,
regardless of size, sector, location, ownership and structure.
4. The Guiding Principles ​do not create new rights and obligations​. These are drawn from existing binding
instruments: the UDHR, the ICCPR, the ICESCR and ILO Declarations on the fundamental rights at work,
Core labor rights in the main framework of ILO, Freedom of Association, Eradication of Child Labor and
abolition of slavery.
5. Respecting human rights means ​not infringing​ and s​hould be addressing adverse impacts​ where
corporates are involved, if any.
6. The corporate responsibility to respect includes looking into the ​BE’s own activitie​s and those directly
linked to their operations through ​their business relationships​ (suppliers, suppliers of suppliers, etc).
7. The UNGP provides a blueprint/ benchmark for companies to follow to be able to create a plan to
implement the UNGP. This should include:
a. A policy commitment
b. A human rights due diligence process
c. Processes to enable remediation
8. In identifying and assessing human rights impacts, the process should draw on a ​human rights expert,
and involve ​consultations with relevant stakeholders​.
9. The findings of impact assessments should be ​effectively integrated​ with internal functions and processes,
and ​take appropriate actions.
10. BEs should t​rack the effectiveness of responses​ to addressing human rights impacts.
11. BEs should be ​communicating externally and formally​ on how they address human rights impacts.
12. BEs should ​provide and cooperate in remediation​ through legitimate processes. BE’s may have
operational-level grievance mechanisms.
13. State-based grievance mechanisms​ may be ​judicial​ or ​non-judicial​ (administrative, legislative and others) .
14. Non-state-based grievance mechanisms​ may include those administered by the BE alone or with
stakeholders, by an industry association, or a multi-stakeholder group. These may also include regional

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and international human rights bodies.

15. Effectiveness criteria for non-judicial grievance mechanisms: legitimate, accessible, predictable, equitable,
transparent, rights-compatible, sources of continuous learning, and, for operational-level mechanisms,
based on engagement and dialogue.
16. There are a total of 31 principles (copied below):
a. State Duty to Protect
i. Foundational Principles - 1 and 2
ii. Operational Principles - 3 to 10
b. Corporate Responsibility to Respect
i. Foundational Principles - 11 to 15
ii. Operational Principles - 16 to 24
c. Access to Remedies
i. Foundational Principles - 25
ii. Operational Principles - 26 to 31

I. The State Duty to Protect Human Rights

A. Foundational Principles
1. States must protect against human rights abuse within their territory and/or jurisdiction by third
parties, including business enterprises. This requires taking appropriate steps to prevent,
investigate, punish and redress such abuse through effective policies, legislation, regulations and
adjudication.
2. States should set out clearly the expectation that all business enterprises domiciled in their
territory and/or jurisdiction respect human rights throughout their operations.

B. Operational Principles
General State regulatory and policy functions
3. In meeting their duty to protect, States should:
(a) ​Enforce laws ​that are aimed at, or have the effect of, requiring business enterprises to respect
human rights, and periodically to assess the adequacy of such laws and address any gaps;
(b) ​ Ensure that other laws and policies​ governing the creation and ongoing operation of business
enterprises, such as corporate law, ​do not constrain but enable ​business respect for human
rights;
(c) ​Provide effective guidance​ to business enterprises on how to respect human rights
throughout their operations;
(d) Encourage, and where appropriate require, business enterprises to communicate how they
address their human rights impacts. ​[Sharing of Best Practices]

THE STATE-BUSINESS NEXUS

4. States should take additional steps to protect against human rights abuses by ​business
enterprises that are owned or controlled by the State​, or that receive substantial support and
services from State agencies such as export credit agencies and official investment insurance or
guarantee agencies, including, where appropriate, by requiring human rights due diligence.
5. States should exercise adequate oversight in order to meet their international human rights
obligations when they contract with, or legislate for, business enterprises to provide services that
may impact upon the enjoyment of human rights.
6. States should promote respect for human rights by business enterprises with which they conduct
commercial transactions.

SUPPORTING BUSINESS RESPECT FOR HUMAN RIGHTS IN ​CONFLICT-AFFECTED AREAS

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7. Because the risk of gross human rights abuses is heightened in conflict-affected areas, States
should help ensure that business enterprises operating in those contexts are not involved with
such abuses, including by:
(a) Engaging at the earliest stage possible with business enterprises to help them identify,
prevent and mitigate the human rights-related risks of their activities and business
relationships;
(b) Providing adequate assistance to business enterprises to assess and address the heightened
risks of abuses, paying special attention to both gender-based and sexual violence;
(c) Denying access to public support and services for a business enterprise that is involved with
gross human rights abuses and refuses to cooperate in addressing the situation;
(d) Ensuring that their current policies, legislation, regulations and enforcement measures are
effective in addressing the risk of business involvement in gross human rights abuses.

ENSURING POLICY COHERENCE

8. States should ensure that ​governmental departments, agencies and other State-based institutions
that shape business practices ​are aware of and observe the State’s human rights obligations
when fulfilling their respective mandates, including by providing them with relevant information,
training and support.
9. States should maintain adequate domestic policy space to meet their human rights obligations
when pursuing business-related policy objectives ​with other States or business enterprises​, for
instance through ​investment treaties or contracts.
10. States, when acting ​as members of multilateral institutions​ that deal with business-related issues,
should:
(a) Seek to ensure that those institutions neither restrain the ability of their member States to
meet their duty to protect nor hinder business enterprises from respecting human rights;
(b) Encourage those institutions, within their respective mandates and capacities, to promote
business respect for human rights and, where requested, to help States meet their duty to
protect against human rights abuse by business enterprises, including through technical
assistance, capacity-building and awareness-raising;
(c) Draw on these Guiding Principles to promote shared understanding and advance international
cooperation in the management of business and human rights challenges.

II. The Corporate Responsibility to Respect Human Rights

A. Foundational Principles
11. Business enterprises should respect human rights. This means that they should ​avoid infringing
on the human rights of others and should ​address adverse human rights impacts ​with which they
are involved.
12. The responsibility of business enterprises to respect human rights refers to internationally
recognized human rights – understood, at a minimum, as those expressed in the ​International Bill
of Human Rights​ and the principles concerning fundamental rights set out in the ​International
Labour Organization’s Declaration on Fundamental Principles and Rights at Work.
13. The responsibility to respect human rights requires that business enterprises:
(a) Avoid causing or contributing to adverse human rights impacts through ​their own activities​,
and address such impacts when they occur;
(b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their
operations, products or services ​by their business relationships​, even if they have not
contributed to those impacts. ​[Including suppliers, and suppliers of suppliers, etc]
14. The responsibility of business enterprises to respect human rights applies to​ all enterprises
regardless of their size, sector, operational context, ownership and structure. Nevertheless, the

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scale and complexity of the means through which enterprises meet that responsibility may vary
according to these factors and with the severity of the enterprise’s adverse human rights impacts.
15. In order to meet their responsibility to respect human rights, business enterprises should have in
place policies and processes appropriate to their size and circumstances, including:
(a) ​A policy commitment​ to meet their responsibility to respect human rights;
(b) ​A human rights due diligence process​ to identify, prevent, mitigate and account for how they
address their impacts on human rights;
(c) Processes to enable the ​remediation of any adverse human rights impacts ​they cause or to
which they contribute.

B. Operational Principles
POLICY COMMITMENT
16. As the basis for embedding their responsibility to respect human rights, business enterprises
should express their commitment to meet this responsibility through a ​statement of policy​ that:
(a) Is ​approved at the most senior level​ of the business enterprise;
(b) Is informed by relevant internal and/or external ​expertise​;
(c) Stipulates the enterprise’s human rights ​expectations​ of personnel, business partners and
other parties ​directly linked ​to its operations, products or services;
(d) Is ​publicly available and communicated ​internally and externally to all personnel, business
partners and other relevant parties;
(e) Is ​reflected in operational policies and procedures​ necessary to embed it throughout the
business enterprise.

HUMAN RIGHTS DUE DILIGENCE

17. In order to identify, prevent, mitigate and account for how they address their adverse human rights
impacts, business enterprises should carry out human rights due diligence. The process should
include ​assessing actual and potential human rights impacts​, ​integrating and acting upon the
findings​, ​tracking responses​, and ​communicating how impacts are addressed​. Human rights due
diligence:
(a) Should cover adverse human rights impacts that the business enterprise may cause or
contribute to ​through its own activities​, or which may be directly linked to its operations,
products or services by its ​business relationships​;
(b) Will ​vary in complexity​ with the size of the business enterprise, the risk of severe human
rights impacts, and the nature and context of its operations;
(c) Should be ​ongoing​, recognizing that the human rights risks may change over time as the
business enterprise’s operations and operating context evolve.
18. In order to gauge human rights risks, business enterprises should​ identify and assess any actual
or potential adverse human rights impacts ​with which they may be involved either through their
own activities or as a result of their business relationships. This process should:
(a) Draw on internal and/or independent external ​human rights expertise​;
(b) Involve ​meaningful consultation ​with potentially affected groups and other relevant
stakeholders, as appropriate to the size of the business enterprise and the nature and context
of the operation.
19. In order to prevent and mitigate adverse human rights impacts, business enterprises should
integrate the findings from their impact assessments​ across relevant internal functions and
processes, and take appropriate action.
(a) Effective integration requires that:
(i) Responsibility for addressing such impacts is ​assigned to the appropriate level and
function​ within the business enterprise;

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​Internal decision-making, budget allocations and oversight processes​ enable effective

(ii)
responses to such impacts.
(b) Appropriate action will vary according to:
(i) Whether the business enterprise causes or contributes to an adverse impact, or
whether it is involved solely because the impact is directly linked to its operations,
products or services by a business relationship;
(ii) The extent of its leverage in addressing the adverse impact.

20. In order to verify whether adverse human rights impacts are being addressed, business
enterprises should ​track the effectiveness of their respons​e. Tracking should:
(a) Be based on appropriate qualitative and quantitative indicators;
(b) Draw on feedback from both internal and external sources, including affected stakeholders.
21. In order to account for how they address their human rights impacts, business enterprises should
be ​prepared to communicate this externally​, particularly when concerns are raised by or on behalf
of affected stakeholders. Business enterprises whose operations or operating contexts pose risks
of severe human rights impacts should ​report formally on how they address them​. In all instances,
communications should:
(a) Be of a form and frequency that reflect an enterprise’s human rights impacts and that are
accessible to its intended audiences;
(b) Provide information that is sufficient to evaluate the adequacy of an enterprise’s response to
the particular human rights impact involved;
(c) In turn not pose risks to affected stakeholders, personnel or to legitimate requirements of
commercial confidentiality.

REMEDIATION
22. Where business enterprises identify that they have caused or contributed to adverse impacts, they
should provide for or cooperate in their remediation through legitimate processes.

ISSUES OF CONTEXT
23. In all contexts, business enterprises should:
(a) ​Comply with​ all applicable laws and respect internationally recognized human rights,
wherever they operate;
(b) Seek ways to ​honour the principles​ of internationally recognized human rights when faced
with conflicting requirements;
(c) Treat the risk of causing or contributing to gross human rights abuses as a ​legal compliance
issue ​wherever they operate.
24. Where it is necessary to prioritize actions to address actual and potential adverse human rights
impacts, business enterprises should first seek to prevent and mitigate those that are most severe
or where delayed response would make them irremediable.

III. Access to Remedy

A. Foundational Principles
25. As part of their duty to protect against business-related human rights abuse, States must take
appropriate steps to ensure, through ​judicial, administrative, legislative or other appropriate
means​, that when such abuses occur within their territory and/or jurisdiction those affected have
access to effective remedy

B. Operational Principles
26. States should take appropriate steps to ensure the effectiveness of domestic ​judicial mechanisms

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when addressing business-related human rights abuses, including considering ways to ​reduce
legal, practical and other relevant barriers​ that could lead to a denial of access to remedy.

STATE-BASED NON-JUDICIAL GRIEVANCE MECHANISMS

27. States should provide effective and appropriate ​non-judicial grievance mechanisms​, alongside
judicial mechanisms, as part of a comprehensive State-based system for the remedy of
business-related human rights abuse.

NON-STATE-BASED NON-JUDICIAL GRIEVANCE MECHANISMS

28. States should consider ways to facilitate access to effective ​non-State based grievance
mechanisms​ dealing with business-related human rights harms.
29. To make it possible for grievances to be addressed early and remediated directly, business
enterprises should establish or participate in ​effective operational-level grievance mechanisms​ for
individuals and communities​ who may be adversely impacted.
30. Industry, multi-stakeholder and other collaborative initiatives that are based on respect for human
rights-related standards should ensure that effective grievance mechanisms are available.

EFFECTIVENESS CRITERIA FOR NON-JUDICIAL GRIEVANCE MECHANISMS

31. In order to ensure their effectiveness, non-judicial grievance mechanisms, both State-based and
non-State-based, should be:
(a) ​Legitimate:​ enabling trust from the stakeholder groups for whose use they are intended, and
being accountable for the fair conduct of grievance processes;
(b) ​Accessible:​ being known to all stakeholder groups for whose use they are intended, and
providing adequate assistance for those who may face particular barriers to access;
(c) ​Predictable​: providing a clear and known procedure with an indicative time frame for each
stage, and clarity on the types of process and outcome available and means of monitoring
implementation;
(d) ​Equitable:​ seeking to ensure that aggrieved parties have reasonable access to sources of
information, advice and expertise necessary to engage in a grievance process on fair,
informed and respectful terms;
(e) ​Transparent:​ keeping parties to a grievance informed about its progress, and providing
sufficient information about the mechanism’s performance to build confidence in its
effectiveness and meet any public interest at stake;
(f) ​Rights-compatible:​ ensuring that outcomes and remedies accord with internationally
recognized human rights;
(g) ​ A source of continuous learning:​ drawing on relevant measures to identify lessons for
improving the mechanism and preventing future grievances and harms;

Operational-level mechanisms should also be:

(h) ​Based on engagement and dialogue:​ consulting the stakeholder groups for whose use they
are intended on their design and performance, and focusing on dialogue as the means to
address and resolve grievances.

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Case Concerning Barcelona Traction, Light, and Power Company, Ltd, 1970 ICJ 1
https://www.icj-cij.org/files/case-related/50/050-19700205-JUD-01-00-EN.pdf

Facts: ​The Barcelona Traction, Light, and Power Company, Ltd. (BTLPC) was incorporated in Canada, where it
has its head office. For the purpose of creating and developing an electric power production system in Catalonia,
Spain, it formed several subsidiary companies some in Spain and some in Canada. In 1936, the subsidiary
companies supplied a major part of Catalonia electricity requirements. Belgium insisted that BTLPC’s shares
came to be largely held by Belgian nationals. BTLPC issued several bonds which were serviced out of transfers
to BTLPC, effected by the subsidiary companies operating in Spain. Servicing out these bonds were suspended
during the Spanish civil war. After the war, the Spanish authorities refused to authorize transfers of foreign
currency necessary to continue servicing the bonds. A court declared BTLPC to be bankrupt for failure to pay the
interest on the bonds and ordered the seizure of BTLPC and two of its subsidiaries’ assets. Principal management
personnel of the companies were dismissed and Spanish directors were appointed. New shares of the subsidiary
companies were created and sold by public auction. Belgium brought the case to the International Court of Justice
to seek reparation for the damage alleged by Belgium to have been sustained by Belgian nationals and
shareholders, as a result of the acts committed towards the company by Spain.

Issue: ​W/N Belgium has standing? - NO.

When a State admitted into its territory foreign investments or foreign nationals it was bound to extend to them the
protection of law and assumed obligations concerning the treatment afforded to them. But such obligations are not
absolute. In order to bring a claim in respect of the breach of such an obligation, a state must first establish its
right to do so.

In the field of diplomatic protection, international law was in continuous evolution ​and ​was called upon to
recognize institutions of municipal law. ​In ​municipal law, the concept of the company was founded on a firm
distinction between the rights of the company and those of the shareholder. Only the company, which was
endowed with legal personality, could take action in respect of matters that were of a corpo- rate character. A
wrong done to the company frequently caused prejudice to its shareholders, but this did not imply that both
were entitled to claim compensation. Whenever a shareholder's interests were harmed by a ​ n ​act done to the
company, it was to the latter that he had to​ ​look to institute appropriate action. An act infringing only the
company’s rights did not involve responsibility towards the shareholders, even if their interests were affected.
F​or the situation to be different, the act complained of must be aimed at the direct rights of the shareholders,
which was not the case here since the Belgian Government had itself admitted that it had not based its claim
on an infringement of the direct rights of the shareholders.

An injury to the shareholder’s interest resulting from an injury to the rights of the company is insufficient to
base claim. Where there is a question of an unlawful act committed against a company representing foreign
capital, the general rule of international law authorized the national state of the company alone to exercise
diplomatic protection for the purpose of seeking redress. No rule of international law expressly conferred
such a right on the shareholder’s national state.

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Two special circumstances were considered where the general rule above might not take effect: (1) the
company ceased to exist, and (2) the case of the protecting state of the company lacking capacity to take
action.

As to the first circumstance - the court said that while ​BTLPC had lost all its assets to Spain and was placed in
receivership in Canada, it cannot be contended that the corporate entity of the company had ceased to exist or
that it lost its capacity to take corporate action.

As to the second circumstance - the court said that it is not disputed that BTLPC was incorporated in Canada and
had its registered office in Canada, and that its nationality had received general recognition. Canada had
exercised protection over BTLPC for a number of years. If at a certain point that Canadian government ceased to
act on its behalf, it nonetheless retained its capacity to do so.

A state can make a claim when investments by its nationals abroad, such investments being part of a state’s
national economic resources, were prejudicially affected in violation of the right of the state to have its nationals
enjoy a certain treatment. But such right can only result from a treaty or special agreement. And in this case, there
was no such instrument between Belgium and Spain.

It was also argued that for reasons of equity, a state should be able to take up protection of its nationals,
shareholders in a company which had been a victim of a violation of international law in certain cases. But the ICJ
stated that the adoption of such a theory would create an atmosphere of insecurity in international economic
relations.

Because Belgium did not have standing, there was no need to decide on any other aspect of the case.

Ruling: ​Petition denied.

Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108 (2013)

https://www.supremecourt.gov/opinions/12pdf/10-1491_l6gn.pdf

Facts: ​A group of Nigerian nationals, petitioners in this case, resided in Ogoniland, an area of 250 square miles
located in the Niger delta area of Nigeria and populated by roughly half a million people. Royal Dutch Petroleum
Company and Shell Transport and Trading Company, p.l.c., were holding companies incorporated in the
Netherlands and England, respectively. Their joint subsidiary, Shell Petroleum Development Company of Nigeria,
Ltd. (SPDC), was incorporated in Nigeria, and engaged in oil exploration and production in Ogoniland. According
to the complaint, after concerned residents of Ogoniland began protesting the environmental effects of SPDC’s
practices, the corporations enlisted the Nigerian Government to violently suppress the burgeoning
demonstrations. Throughout the early 1990’s, Nigerian military and police forces were alleged to have attacked
Ogoni villages, beating, raping, killing, and arresting residents and destroying or looting property. The Nigerian
nationals further allege that the companies aided and abetted these atrocities by, among other things, providing
the Nigerian forces with food, transportation, and compensation, as well as by allowing the Nigerian military to use

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corporations’ property as a staging ground for attacks. Following the alleged atrocities, the group moved to the
United States where they were political asylum and reside as legal residents.

The Nigerian nationals filed suit in the United States District Court for the Southern District of New York, alleging
jurisdiction under the Alien Tort Statute and requesting relief under customary international law. The ATS
provides, in full, that “[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only,
committed in violation of the law of nations or a treaty of the United States.” According to the Nigerian nationals,
the corporations violated the law of nations by aiding and abetting the Nigerian Government in committing human
rights violations The District Court dismissed certain claims, reasoning that the facts alleged to support those
claims did not give rise to a violation of the law of nations. The Second Circuit dismissed the entire complaint,
reasoning that the law of nations does not recognize corporate liability.

The corporations contend that the claims under ATS do not reach conduct occurring in the territory of a foreign
sovereign. They rely primarily on a canon of statutory interpretation known as the presumption against
extraterritorial application. That canon provides that “[w]hen a statute gives no clear indication of an extraterritorial
application, it has none.”

Issue: ​W/N the presumption against extraterritoriality applies to claims under the ATS. - YES.

The Alien Torts Statute provides district courts with jurisdiction to hear certain claims, but does not expressly
provide any causes of action. The Court held in ​Sosa v. Alvarez-Machain​ (2004), however, the grant of jurisdiction
is instead “best read as having been enacted on the understanding that the common law would provide a cause of
action for [a] modest number of international law violations.”. It held that federal courts may “recognize private
claims [for such violations] under federal common law.”. The Court in ​Sosa​ rejected the plaintiff’s claim in that
case for “arbitrary arrest and detention,” on the ground that it failed to state a violation of the law of nations with
the requisite “definite content and acceptance among civilized nations.”

The presumption against extraterritorial application serves to protect against unintended clashes between our
laws and those of other nations which could result in international discord. Indeed, the danger of unwarranted
judicial interference in the conduct of foreign policy is magnified in the context of the ATS, because the question is
not what Congress has done but instead what courts may do. This Court repeatedly stressed the need for judicial
caution in considering which claims could be brought under the ATS, in light of foreign policy concerns. As the
Court explained, “the potential [foreign policy] implications ... of recognizing ... causes [under the ATS] should
make courts particularly wary of impinging on the discretion of the Legislative and Executive Branches in
managing foreign affairs.” These concerns, which are implicated in any case arising under the ATS, are all the
more pressing when the question is whether a cause of action under the ATS reaches conduct within the territory
of another sovereign. These concerns are not diminished by the fact that ​Sosa​ limited federal courts to
recognizing causes of action only for alleged violations of international law norms that are “ ‘specific, universal,
and obligatory.’ As demonstrated by Congress’s enactment of the Torture Victim Protection Act of 1991,
identifying such a norm is only the beginning of defining a cause of action. Each of these decisions carries with it
significant foreign policy implications.The principles underlying the presumption against extraterritoriality thus
constrain courts exercising their power under the ATS.

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Indeed, far from avoiding diplomatic strife, providing such a cause of action could have generated it. Moreover,
accepting petitioners’ view would imply that other nations, also applying the law of nations, could hale our citizens
into their courts for alleged violations of the law of nations occurring in the United States, or anywhere else in the
world. The presumption against extraterritoriality guards against our courts triggering such serious foreign policy
consequences, and instead defers such decisions, quite appropriately, to the political branches.

We therefore conclude that the presumption against extraterritoriality applies to claims under the ATS, and that
nothing in the statute rebuts that presumption. “[T]here is no clear indication of extraterritoriality here,” and
petitioners’ case seeking relief for violations of the law of nations occurring outside the United States is barred.

On these facts, all the relevant conduct took place outside the United States. And even where the claims
touch and concern the territory of the United States, they must do so with sufficient force to displace the
presumption against extraterritorial application​. ​Corporations are often present in many countries, and it
would reach too far to say that mere corporate presence suffices. ​If Congress were to determine otherwise, a
statute more specific than the ATS would be required.

● Note: This is different from the February 28, 2012 Kiobel case where the court ruled in favor of the
Nigerian refugees (regarding the issue of W/N corporations can be held liable for human rights abuses) . It
was held that there is no “international-law norm . . . that distinguishes between natural and juridical
persons. Corporations (or agents acting on their behalf) can violate those norms just as natural persons
can.” [...] international law defines the conduct that is prohibited, for example, terrorism or human
trafficking. But international law leaves it to each nation-state to determine how to enforce these
prohibitions. By enacting the ATS, the United States has chosen to enforce these rules through civil tort
liability. And for centuries, U.S. tort law has permitted suits against corporations. Thus, nothing in
international or U.S. law exempts a corporation from liability for grave human rights abuses.

Vedanta Resources Plc and Konkola Copper Mines Plc (Appellants) v Lungowe and Ors.
https://www.supremecourt.uk/cases/docs/uksc-2017-0185-judgment.pdf

FACTS:

1. Residents of the Zambian city of Chingola brought proceedings in the English courts against Vedanta
Resources Plc (Vedanta), a UK incorporated parent company, and Konkola Copper Mines Plc
(KCM), its Zambian subsidiary, claiming that waste discharged from the Nchanga copper mine -
owned and operated by KCM - had polluted the local waterways, causing personal injury to the local
residents, as well as damage to property and loss of income. The claims are founded in negligence,
although the allegations also relate to breaches of applicable Zambian environmental laws.
2. Both Vedanta and KCM challenged jurisdiction.
3. In 2016, the High Court held that the claimants could bring their case in England, despite the fact that
the alleged tort and harm occurred in Zambia, where both the claimants and KCM are domiciled. This
decision was upheld on appeal by the Court of Appeal in October 2017.

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4. This week, the Supreme Court has unanimously dismissed a further appeal by the defendants,
upholding the Court of Appeal’s ruling in all but one respect.

ISSUES:

● Whether there had been an abuse of EU law by the claimants in relying on Article 4 of the Brussels
Regulation Recast to establish jurisdiction over Vedanta as anchor defendant for the purpose of
attracting the English courts’ jurisdiction over the claim against KCM, “the real targets of the claim”;
— NO
● Whether the claimants’ pleaded case and supporting evidence disclosed no real triable issue against
Vedanta;
● Whether England is the proper place in which to bring the claims; and
● Even if Zambia would otherwise be the proper place, whether there was a real risk that the claimants
would not obtain access to substantial justice in Zambia.

RATIO:

No abuse of EU law

1. The majority of the Court of Appeal followed existing authority (​Owusu v Jackson and Others,​
C-281/021) that the court of an EU member state cannot decline jurisdiction where the defendant is a
company domiciled in that member state (in this case, the UK). In delivering the Supreme Court’s
unanimous judgment, Lord Briggs recognised it would be an abuse of this rule2 to allow claimants to
sue an English domiciled “anchor” defendant solely to pursue a foreign co-defendant (a “real” target)
in the English courts but that this exception should be applied strictly. Both the High Court and the
Court of Appeal found on the facts that the claimants had a bona fide claim and a genuine intention to
seek a remedy in damages against Vedanta, even though establishing the English courts’ jurisdiction
over KCM was also a key factor in their decision to litigate in England.
2. This was a sufficient basis for finding that there was no abuse of EU law. The Supreme Court found
no need to refer to the Court of Justice for the European Union. In reaching the conclusion that the
claimants intended to pursue a genuine claim against Vedanta, the lower courts considered on a
summary basis evidence put forward by the claimants that KCM may be unable to pay a judgment
debt. Consistent with its usual practice the Supreme Court declined to revisit these factual findings,
having found no error of law.
3. The Supreme Court then turned to assess whether the lower courts had erred in determining that
there was a real triable issue against Vedanta. Given the substance of the claim, ​the key question
was whether Vedanta had sufficiently intervened in the management of the mine owned by
KCM such that it assumed a duty of care to the claimants and/or to establish statutory liability
under applicable Zambian environmental, mining and health laws.
4. Although it was common ground between the parties that the defendants’ liability would be assessed
under Zambian law, ​the extent of Vedanta’s involvement in the operation of KCM’s mine was a

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factual issue relevant to both the negligence and statutory liability claims​. In this regard, the
lower courts held (on a summary assessment) that it was arguable Vedanta did owe a duty of care to
the claimants given that it had:
● Published a sustainability report which emphasised how the Board of the parent company had
oversight over its subsidiaries.
● Entered into a management and shareholders agreement under which it was obligated to provide
various services to KCM, including employee training.
● Provided health, safety and environmental training across its group companies.
● Provided financial support to KCM.
● Released various public statements emphasising its commitment to address environmental risks and
technical shortcomings in KCM’s mining infrastructure.
● Exercised control over KCM, as evidenced by a former employee.
1. Whilst this case was limited to the issue of jurisdiction, Lord Briggs made a number of interesting
comments on the substantive issue of parent company liability which will be before the court for
determination when this matter eventually goes to trial. Where the parent company might incur a duty
of care to third parties harmed by the activities of a subsidiary would usually fall into two basic types:
(i) where the parent has effectively taken over management of the subsidiary’s actions and (ii) where
the parent has given relevant advice to the subsidiary about how it should manage a risk, Lord Briggs
said that, in his view, “there is no limit to the models of management and control which may be put in
place within a multinational group of companies”. Similarly he rejected the submission that there was
any general limiting principle that a parent company could never incur a duty of care merely by
issuing group-wide policies and guidelines and expecting the subsidiary to comply. These comments
will no doubt be of concern to multinationals wishing to understand in exactly what circumstances a
parent company might attract liability for its subsidiaries’ activities.

England as the proper place

● Specifically, the Court said it would have been open to the claimants to either sue both companies in
Zambia (as Vedanta had agreed to submit to the jurisdiction of the Zambian courts) or to sue
Vedanta in England and KCM in Zambia, recognising that the risk of irreconcilable judgments “mainly
concerns the claimants”.
● In reaching this view, the Court referenced Article 8 of the Brussels Recast Regulation, which gives
claimants in intra-EU disputes the choice (but not the obligation) to consolidate proceedings in order
to avoid the risk of irreconcilable judgments, and concluded that the same principle should apply
where the claimants are domiciled outside the EU (as in this case).

Substantial justice in Zambia

1. The Supreme Court acknowledged that most reasonable observers would conclude that Zambia
would, in the ordinary course, be the proper place for the proceedings, given the location of the

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claimants, the alleged damage, the evidence and KCM’s personnel. The Zambian courts were also
equipped to interpret the Zambian laws which would be applied in the case.
2. However, following the lower courts, the Supreme Court was persuaded by two primary factors in
concluding that claimants would be denied access to justice if they were not permitted to serve
English proceedings on KCM out of jurisdiction.
3. First, the claimants were living in poverty and could not obtain legal aid and would be prohibited from
entering into conditional fee agreements under Zambian law. Secondly, the claimants would be
unable to procure the services of a legal team in Zambia with sufficient experience to effectively
manage litigation of this scale and complexity.
4. This was, in fact, the deciding factor for the Supreme Court in dismissing the defendants’ appeal.
Notwithstanding that it found for the claimants on issues (1), (2) and (4), the Court confirmed that,
were it not for the claimants’ inability to access substantial justice in Zambia, it would have allowed
the appeal.

Third party liability

1. In 2018, two similar cases were heard by the Court of Appeal. Like​ Lungowe​, the cases concerned
the English courts’ jurisdiction for hearing claims brought by non-UK claimants against UK companies
and their non-UK subsidiaries for acts taking place abroad. These cases were ​Okpabi and others v
Royal Dutch Shell Plc and another​ [2018] EWCA Civ 191 and the ​Unilever​ case cited above.
2. In both cases, the Court of Appeal concluded that the English courts did not have jurisdiction to hear
the claims against the defendants (by contrast with ​Lungowe​). We understand that both sets of
claimants have applied for permission to appeal to the Supreme Court but the decision on permission
in both cases was suspended pending the judgment in ​Lungowe.​
3. The trial of the substantive issues in ​Lungowe​ has not yet been listed but will be eagerly awaited. In
the meantime, this Supreme Court judgment highlights the need for multinational companies to be
aware of the possibility that non-UK claimants may be able to bring claims against them in the
English courts where they have an English parent company.

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TOPIC 3: Status of the right to health under International Law; China’s responsibility, if any, for the
COVID-19 pandemic; and the relevance of human rights during a pandemic.

Notes from Lecture

Brief Introduction of How Important is
- China is the first country where the virus first surfaced
- As of april 16, there have been 4 class action suit against China that was filed before US domestic
courts
- One was filed by Property Managers in California, the other was class action suit by residents
of Florida. The third is filed by the state of Missouri. 4th filed by a lawyer.
- Filed under US law
- May 6: 2 proposed class action suits were filed in Federal Court in Miami, California, Nevada, and
Texas.
- State of Missouri is seeking damages, while Mississippi is said also to file a case
- At the domestic level of the United States, suits have also been filed against China.
- At state to state level we are seeing states that are actually pinning the blame on China one way or
the other.
- The Trump administration is allegedly trying into a new trade war against China.
- The US is also pressuring European Union to investigate China.
- Japan is paying companies to leave China.
- There is much of the issues that are in the fore right now is what we call international state
responsibility
- Allegations that China silenced a whistleblower at the beginning of Covid 19
- There are also allegations that China failed to accurately notify the WHO of the real status of
the coronavirus
- With that background the very interesting question that very much at the back of people’s heads right
now is right to health and state responsibility. Whether a state who fail to disclose public health
emergencies or issues...can that state be held liable for any losses or problems because of the failure
of such disclosure?

Flow of the Discussion

- Core right that is involved here is the right to health
- What is the right to health?
- Law of State Responsibility
- Responsibility of China and lack of responsibilities of China

In international law, there are 2 sets of rules:

1. Primary rules of international law

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- These are rules that govern the action of states. What states can and cannot do. What are basically
the norms that states should follow. Basically, what states can do.
2. Secondary Rules of International Law
- These are rules that govern liabilities and responsibilities.
- Very important basic concept that is at the heart of the law on state responsibility: article 2 of the
articles of state responsibility.
- According to Article 2 of the Articles on State Responsibility, there are 2 elements of an
internationally wrongful act of a state:
- (1) Attributability of the act or omission to the state under international law; and
- (2) That the act or omission constitutes a breach of international obligation of the state.

What are the substantive rules involved here? Can we say that China is responsible right away? No,
because we have to comply with the two requirements (as stated above):
1. Attributability
- There should be a nexus between the act or omission and the state; has to be attributable to
the state.
- Article 4: the conduct of any state organ shall be considered an act of the state under
international law, whether the organ exercises: legislative, executive, judicial or any other
functions. An organ includes any person or entity which has that status in accordance with the
internal law of the state.
- Assuming laws are violated in international law, we have to comply with the requirement of
attributability and the conduct should be the organ of the state (that’s the general rule).
- So in this scenario where China is at the hot seat we have to know upon further investigation
of the facts whether there was an action of the state that could be traced to the liability.
- Also when you dig deeper to the rules of state responsibility, there are certain occasions
wherein it might not be the State that acted but private persons or organizations, In
International Law, sometimes the acts of private persons can be attributable as the act of the
State.
2. Breach of an international obligation of the state
- The question of what rules are relevant goes to the second requirement.
- What are the rules that could have been breached by China under international law?
- Article 12 of the Articles of State Responsibility: there is a breach of international obligation of
the state when the act of the state is not in conformity with what is required of it by that
obligation regardless of the origin or character.
- Meaning that the action or omission is in violation of a PRIMARY RULE of
international law to which that state is obligated to follow. It can be a violation of a
treaty, customary rule of international law or a violation of a general principle of
international law.
- Normally, when there is a violation of primary rules of international law and the violation is
attributable to the state, automatically not ipso facto but the state should be held responsible
for the violation.
- One of the most important articles in the articles of state responsibility is Article 31.

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- Article 31 on Reparation: ​The ​responsible State is under an obligation to make FULL

REPARATION for the injury caused by the internationally wrongful act. Injury includes
any damage, whether material or moral, caused by the internationally wrongful act of a
State​.
- In this case, there have been some moves to hold China accountable and to ask for
reparation. Some states in the European Union have expressed desire at this point to
seek reparation or damages but the most tricky question is what primary rules of
international law did China violate.

PART II : What Primary Rules of International Law Did China Violate? Granting that there have been
violations, what could be their legal basis?

Right to Health
- Human right
- In ICESCR; and it essentially says that everyone has the right to the highest attainable standard of
health.
- The UN Committee on Economic, Social and Cultural Rights has said that the right to health has 2
components: 1) physical health and 2) mental health.
- Right to health has 4 determinants:
- Should be available
- Accessible
- Adaptable
- Of Quality
- Right to health is a right that belongs to the people.
- Can China be sued for a violation of right to health of the citizen of another country?
- Remains to be answered
- We must consider whether china can be held liable as a state party to the ICSCR, and if
China is actually a State Party to such document.
- China as a party to the ICESCR has obligations to implement the convention in its territory regardless
of the status of the person. As long as the person is within the territory of China, China is responsible
for the health of that person.
- Does the application of ICESCR have extraterritorial value or can the obligation of china under
ICESCR have territorial effect ?
- In the last decade, there has been a change of the responsibilities of States under HR law
- Now, more or less, it is recognized that the State has responsibilities within its borders, as well as
outside as long as the territory outside is within the effective control of the State concerned.
- Either it has jurisdiction or it has control over the territory (high threshold because in his
opinion china does not have control of what is happening over the territory of US of PH)
- So we have to note the right to determine if the particular patch of territory even if outside the
territory of the concerned State is within the effective control of the State.
- There could be another source (evolving pattern) of possible obligation on the part of China when it
comes to coronavirus.

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- International Regulations of the WHO

- Party is a party to the IHR of 2005
- Art 6 of the IHR provides each state party shall assess events occurring within their
territory by using the decision instrument in Annex 2; each state party shall notify the
WHO by means of effective means available by way of IHR focal point.
- Following a notification, a State party shall continue to notify The WHO available to it
in the world event including case definitions.
- Now, the question is: Was there a timely notification on the part of china?
- We must consider Article 7 of the IHR on Information Sharing —> if a State party has
evidence of an unexpected or unusual public health event in its territory, irrespective of
origin or source which may constitute a public health emergency of international
concern, it shall provide to WHO all relevant public health information. In such a case,
the provisions of Art. 6 shall apply in full.
- So we can see that there is a requirement for TIMELY NOTIFICATION.
- Considering this requirement for timely notification + IL cases on reparation:
Reparation must, as far as possible, wipe out all the consequences of the
illegal act and re-establish the situation which in all probability would have
existed had it not for the act.
- Rainbow warrior case: The tribunal has to consider an order of payment for monetary
compensation.
- Then that could be made with respect of breach of international obligations
involving serious moral or legal damage even though there is no material
damage.
- Speaker: As I’ve said, it still has to be determined if China is in fact at fault; if there
was a delay in the notification; and if the delay in the notification constituted a violation
of the WHO Convention; and applying the principles of the cases discussed, whether
there is damage.

POSSIBLE DEFENSES OF CHINA:

1. China did not violate any legal obligation.
- Art. 1 and 2 of Articles of State Responsibility: Every state is liable for an internationally wrongful act.
- China can say that Chinese authorities and state organs are not involved in the alleged violations of
international obligations;
- Wrongful act are cause by private actors (attributability is concerned)
2. The burden of proof lies not on China but on other states to prove that China committed something wrong,
and those states should prove that any damage incurred - economic or otherwise - is caused by China by
failure to act; or action of China is a violation of an international obligation.
- Trail Smelter case: Page 1131 : with regard to damages the nature of the damage has to be proven
for there to be reparations. Indemnity based on economic damages, the burden of proof lies on the
one that alleges violation.
3. That the damage caused was not something that China could have reasonably prevented.
- The damage to other countries in which china could not reasonably prevented

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- Question of nexus In the case of Bosnian genocide (2007), the Court said that the question of
whether there is a direct nexus between the wrongful act and the breach has to be really be proven;
such a nexus could be considered only if the court is able to conclude from the case as a whole and
with certain degree of certainty that the genocide would have in fact been adverted if the state acted
in compliance with its obligations.
- China could argue that it could not have prevented the novel coronavirus, because it’s something that
resulted from a biological cause that is not within the hands of the State.

The issue here is this: Even if a state such as China could be held liable, we need to find a State that could
sue China, and it is in fact a political move on the part of the suing state.
Now Human Rights law could also be an avenue not before the ICJm but before the committee on ICESCR.
There could be. a complaint or communication filed arguing that China breached its obligations in relation to
the right to health under the ICESCR. The value in this is that the committee can weigh in and comment; can
rule on the extraterritorial obligations, BUT it cannot really enforce payment, because the views of the
committee are NOT ENFORCEABLE in that sense.

Trail Smelter, US v. Canada

https://legal.un.org/riaa/cases/vol_III/1905-1982.pdf

Facts. The Tail Smelter located in British Columbia since 1906, was owned and operated by a Canadian corporation.
The resultant effect of from the sulfur dioxide from Trail Smelter resulted in the damage of the state of Washington
between 1925 and 1937. This led to the United States suit against the Canada with an injunction against further air
pollution by Trail Smelter.

Issue. Is it the responsibility of the State to protect other states against harmful acts by individuals from within its
jurisdiction at all times?

Held. Yes. It is the responsibility of the State to protect other states against harmful act by individuals from within its
jurisdiction at all times. No state has the right to use or permit the use of the territory in a manner as to cause injury by
fumes in or to the territory of another or the properties or persons therein as stipulated under the United States laws
and the principles of international law.

By looking at the facts contained in this case, the arbitration held that Canada is responsible in international law for
the conduct of the Trail Smelter Company. Hence, the onus lies on the Canadian government to see to it that Trail
Smelter’s conduct should be in line with the obligations of Canada as it has been confirmed by International law. The
Trail Smelter Company will therefore be required from causing any damage through fumes as long as the present
conditions of air pollution exist in Washington. So, in pursuant of the Article III of the convention existing between the
two nations, the indemnity for damages should be determined by both governments. Finally, a regime or measure of
control shall be applied to the operations of the smelter since it is probable in the opinion of the tribunal that damage
may occur in the future from the operations of the smelter unless they are curtailed.

Doctrine​. Responsibility for pollution of the sea or the existence of a duty to desist from polluting the sea has never
been laid at the feet of any country by any international tribunal. Although regulation of pollution is just commencing, it
must ensure that there is equilibrium against freedom of the seas guaranteed under general and long established rules
of international law. A State owes at all times a duty to protect other States against injurious acts by individuals from

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within its jurisdiction. The Tribunal holds that Canada is responsible in international law for the conduct of the Trail
Smelter. It is, therefore, the duty of the government of Canada to see to it that this conduct should be in conformity with
the obligation of Canada under international law as herein determined. The Trail Smelter shall be required to refrain
from causing any damage through fumes in the State of Washington. The tribunal then set forth a permanent regime for
monitoring and regulating the pollution from the Trail Smelter.

WHO Constitution
https://www.who.int/governance/eb/who_constitution_en.pdf

*The WHO Constitution primarily sets up the institutional structure of the World Health Organization. The WHO
Constitution does not appear to contain substantive obligations of international health law. Rather, as its name
suggests, it is primarily concerned with establishing a constitutional framework, dealing with matters such as
membership and institutional structure. I just placed the organization structure of WHO plus certain provisions
which could be the basis for holding China accountable.

What is the objective of WHO?

WHO’s objective is "the attainment by all peoples of the highest possible level of health," (Article 1) with health
being very broadly defined as "a state of complete physical, mental and social well-being and not merely the
absence of disease or infirmity” (Preamble).

What are the levels of organization of WHO?

● World Health Assembly (WHA), comprising representatives of every WHO member state.
● The Executive board, which comprises members elected by the WHA.
● The Secretariat comprised of WHO’s Director-General and technical and administrative staff
● Regional Organizations and “committees considered desirable to serve any purpose within the
competence of the organization.”

What is the WHA?

It is the main governing body of WHO. It's made up of delegates from all member nations, currently totaling 192
(Article 10). Each Member shall be represented by not more than three delegates, one
of whom shall be designated by the Member as chief delegate. These delegates should be chosen from among
persons most qualified by their technical competence in the field of health, preferably representing the national
health administration of the Member (Article 11).

When does the WHA meet?

The Health Assembly, at each annual session, shall select the country or region in which the next annual session
shall be held, the Board subsequently fixing the place. The Board shall determine the place where a special
session shall be held (Article 13).

What does the WHA do at this meeting?

At this meeting, it reviews and approves the budget for the coming year, decides where WHO will direct its
attention for that year, and, if necessary, elects the executive board and the director-general. The matters that
come before this central policy-making body are decided by the executive board (Article 18, Article 28).

Can the WHA adopt regulations?

Yes. They can adopt regulations on the following matters:

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(a) sanitary and quarantine requirements and other procedures designed to prevent the international spread of
disease;
(b) nomenclatures with respect to diseases, causes of death and public health practices;
(c) standards with respect to diagnostic procedures for international use;
(d) standards with respect to the safety, purity and potency of biological, pharmaceutical and similar products
moving in international commerce;
(e) advertising and labelling of biological, pharmaceutical and similar products moving in international commerce
(Article 21).

Can they adopt conventions?

Yes. The Health Assembly shall have authority to adopt conventions or agreements with respect to any matter
within the competence of the Organization. A two-thirds vote of the Health Assembly shall be required for the
adoption of such conventions or agreements, which shall come into force for each Member when accepted by it in
accordance with its constitutional processes.
*This is relevant because WHO adopted the International Health Regulations which is the international instrument
which contains State obligations.

What is the executive board?

The Board shall consist of thirty-four persons designated by as many Members. The Health Assembly, taking into
account an equitable geographical distribution, shall elect the Members entitled to designate a person to serve on
the Board, provided that, of such Members, not less than three shall be elected from each of the regional
organizations established pursuant to Article 44. Each of these Members should appoint to the Board a person
technically qualified in the field of health, who may be accompanied by alternates and advisers (Article 24).

When should the executive board meet?

The Board shall meet at least twice a year and shall determine the place of each meeting (Article 26).

What does the executive board do?

The board advises the assembly and facilitates its work; it nominates the director-general and recommends focus
areas. The board and assembly's work is in turn facilitated by the secretariat, which sees to all the day-to-day
tasks that ensure that the decisions of the assembly are acted upon (Article 28).

What is the Secretariat?

The Secretariat shall comprise the Director-General and such technical and administrative staff as the
Organization may require (Article 30).

How is the Director-General appointed?

The Director-General shall be appointed by the Health Assembly on the nomination of the Board on such terms as
the Health Assembly may determine. The Director-General, subject to the authority of the Board, shall be the chief
technical and administrative officer of the Organization (Article 31).

What does the Secretariat do?

They are mainly the ones responsible for carrying out the work of WHO. They work in areas identified by an
executive board and ratified by an assembly.

What are some provisions which China could have violated?

Again, it’s important to remember that the WHO Constitution ​does not really contain substantive obligations​.
Still, here are some provisions which China could have possibly violated.

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● Article 64 of the WHO Constitution, which provides: “Each Member shall provide statistical and
epidemiological reports in a manner to be determined by the Health Assembly.” The Health Assembly has,
expressly under Article 64, determined that statistics must be prepared in accordance with the
Nomenclature Regulations (Nomenclature Regulations, art. 6).

● Article 63, which provides: “Each Member shall communicate promptly to the Organization important laws,
regulations, ​official reports and statistics pertaining to health which have been published in the State
concerned.”

● Article 37, which provides in relevant part: “Each Member of the Organization … undertakes to respect the
exclusively international character of the [WHO] Director-General and the [WHO] staff ​and not to seek to
influence them.”

International Health Regulations Link 1: ​WHO International Health Regulations, 2​nd​ Ed. (2005)
https://apps.who.int/iris/bitstream/handle/10665/43883/9789241580410_eng.pdf;jsessionid=52F24252158605E94
7666BDF7F92391C?sequence=1

Relevant Provisions:

Part I – Definitions, Purpose and Scope, Principles, and Responsible Authorities

Art. 1: Definitions
● public health emergency of international concern - an extraordinary event which is determined, as provided
in these Regulations:
a. to constitute a public health risk to other States through the international spread of disease and
b. to potentially require a coordinated international response
● public health risk - a likelihood of an event that may affect adversely the health of human populations, with an
emphasis on one which may spread internationally or may present a serious and direct danger

Art. 2: Purpose and Scope

● To prevent, protect against, control and provide a public health response to the international spread of disease
in ways that are commensurate with and restricted to public health risks, and which avoid unnecessary
interference with international traffic and trade

Part II – Information and Public Health Response

Art. 5: Surveillance
● WHO shall collect information regarding events through its surveillance activities and assess their ​potential to
cause international disease spread and possible interference with international traffic.

Art. 6: Notification

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● Each State Party shall assess events occurring within its territory by using the decision instrument in Annex 2.
Each State Party shall notify WHO, by the most efficient means of communication available, by way of the
National IHR Focal Point, and within 24 hours of assessment of public health information, of ​all events which
may constitute a public health emergency of international concern within its territory in accordance with the
decision instrument, as well as any health measure implemented in response to those events.
● Following a notification, a State Party shall ​continue to communicate to WHO timely, accurate and sufficiently
detailed public health information available to it on the notified event, where possible including case definitions,
laboratory results, source and type of the risk, number of cases and deaths, conditions affecting the spread of
the disease and the health measures employed; and report, when necessary, the difficulties faced and support
needed in responding to the potential public health emergency of international concern.

Art. 7: Information-sharing during unexpected or unusual public health events

● If a State Party has evidence of an unexpected or unusual public health event within its territory, irrespective of
origin or source, which may constitute a public health emergency of international concern, ​it shall provide to
WHO all relevant public health information​. In such a case, the provisions of Article 6 shall apply in full.

Art. 9: Other reports

● States Parties shall, as far as practicable, ​inform WHO within 24 hours of receipt of evidence of a public health
risk identified outside their territory that may cause international disease spread, ​as manifested by exported or
imported:
a. human cases;
b. vectors which carry infection or contamination; or
c. goods that are contaminated.

Art. 10: Verification

● WHO shall request, in accordance with Article 9, verification from a State Party of reports from sources other
than notifications or consultations of events which may constitute a public health emergency of international
concern allegedly occurring in the State’s territory. In such cases, WHO shall inform the State Party concerned
regarding the reports it is seeking to verify.
● Pursuant to the foregoing paragraph and to Article 9, each State Party, when requested by WHO, shall ​verify
and provide​:
a. within 24 hours,​ an initial reply to, or acknowledgement of, the request from WHO;
b. within 24 hours,​ available public health information on the status of events referred to in WHO's
request; and
c. information to WHO in the context of an assessment under Article 6, including relevant information as
described in that Article.
● When WHO receives information of an event that may constitute a public health emergency of international
concern, it shall offer to ​collaborate with the State Party concerned in assessing the potential for international
disease spread, possible interference with international traffic and the adequacy of control measures.
● If the ​State Party does not accept the offer of collaboration​, WHO may, ​when justified by the magnitude of the
public health risk​, share with other States Parties the information available to it, whilst encouraging the State
Party to accept the offer of collaboration by WHO, taking into account the views of the State Party concerned.

Art. 12: Determination of a public health emergency of international concern

● The ​Director-General shall determine, on the basis of the information received, in particular from the State
Party within whose territory an event is occurring, whether an event constitutes a public health emergency of
international concern in accordance with the criteria and the procedure set out in these Regulations.
● If the Director-General considers, based on an assessment under these Regulations, that a public health
emergency of international concern is occurring, the Director-General shall consult with the State Party in
whose territory the event arises regarding this preliminary determination. If the Director- General and the State
Party are in agreement regarding this determination, the Director-General shall, in accordance with the

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procedure set forth in Article 49, seek the views of the Committee established under Article 48 (hereinafter the
“Emergency Committee”) on appropriate temporary recommendations.
● If, following the consultation in paragraph 2 above, the ​Director-General and the State Party in whose territory
the event arises do not come to a consensus within 48 hours on whether the event constitutes a public health
emergency of international concern​, a determination shall be made in accordance with the procedure set forth
in Article 49 (based on views and recommendations of the Emergency Committee and State Party concerned,
Director-General will make a final determination of whether there is a public health emergency of international
concern.)
● In determining whether an event constitutes a public health emergency of international concern, the
Director-General shall consider​:
a. information provided by the State Party;
b. the decision instrument contained in Annex 2;
c. the advice of the Emergency Committee;
d. scientific principles as well as the available scientific evidence and other relevant information; and
e. an assessment of the risk to human health, of the risk of international spread of disease and of the risk
of interference with international traffic.

Part V – Public Health Measures

Art. 32: Treatment of travelers

● In implementing health measures under these Regulations, States Parties shall treat travellers with ​respect for
their dignity, human rights and fundamental freedoms and minimize any discomfort or distress associated with
such measures,​ including by:
a. treating all travellers with courtesy and respect;
b. taking into consideration the gender, sociocultural, ethnic or religious concerns of travellers; and
c. providing or arranging for adequate food and water, appropriate accommodation and clothing,
protection for baggage and other possessions, appropriate medical treatment, means of necessary
communication if possible in a language that they can understand and other appropriate assistance for
travellers who are quarantined, isolated or subject to medical examinations or other procedures for
public health purposes.

Part VIII – General Provisions

Art. 42: Implementation of health measures

● Health measures taken pursuant to these Regulations shall be initiated and ​completed without delay, and
applied in a transparent and non-discriminatory manner​.

Art. 43: Additional health measures

● These Regulations shall not preclude States Parties from implementing health measures, in accordance with
their relevant national law and obligations under international law, in response to specific public health risks or
public health emergencies of international concern, x x x
Such measures shall not be more restrictive of international traffic and ​not more invasive or intrusive to persons
than reasonably available alternatives that would achieve the appropriate level of health protection.

Art. 44: Collaboration and assistance

● State Parties shall undertake to collaborate​ with each other, to the extent possible, in:
a. the ​detection and assessment of, and response to,​ events as provided under these Regulations;
b. the provision or facilitation of technical cooperation and logistical support, particularly in the
development, strengthening and maintenance of the public health capacities required under these
Regulations;
c. the mobilization of financial resources to facilitate implementation of their obligations under these
Regulations; and

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d. the formulation of proposed laws and other legal and administrative provisions for the implementation
of these Regulations.

Annex 2:

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International Health Regulations Link 2

https://foreignpolicy.com/2020/04/02/china-coronavirus-who-health-soft-power/
HOW WORLD HEALTH ORGANIZATION BECAME CHINA’S CORONA VIRUS ACCOMPLICE
By: Hinnerk Feldwisch-Drentrup

After initial denials and cover-ups, China successfully contained the COVID-19 outbreak — but not before it had
exported many cases to the rest of the world.

BEIJING and WHO:

1. WHO was steered away by Beijing from getting information re: COVID-19
● PRE-VISIT
● International experts of WHO did not get access to the country until Director-General Tedros Adhanom
visited President Xi Jinping at the end of January.
● WHO, without access, was uncritically repeating information from Chinese authorities, ignoring
warnings from Taiwanese doctors (unrepresented in WHO), and reluctant to declare a “public health
emergency of international concern.”
● POST VISIT
● WHO said in a statement that it appreciated China, “especially the commitment from top leadership,
and the transparency they have demonstrated.”
● Only declared a public health emergency of international concern after the meeting.
● WHO declared the coronavirus a pandemic on March 11, even though it had spread globally weeks
before.

2. WHO praised China for COVID measures but neglected the negative externalities
● Neglected: Economic damage, failure to treat many non-coronavirus patients, psychological woes, and human
rights costs

3. WHO accepts and takes numbers reported by Beijing at face value

● China’s official data is often highly dubious
● Countless people are dying at home in Wuhan, and it was alleged that it never go into the statistics
● A considerable percentage of asymptomatic cases has not been reported, which amounts to about 50% more
known infections in China

4. WHO’s justification by saying that “Every country has its own self-reporting processes”
● a WHO spokesperson stated that China reported and isolated ALL individuals with laboratory-confirmed
COVID-19. However, Chinese authorities only in the beginning of April started to make current numbers of
asymptomatic cases with lab-confirmed infections public—which also are included in the WHO case definition
for COVID-19
● WHO reported the numbers of people have been put in quarantine, isolation, or residential restriction from
China’s National Health Commission—which are much smaller than the numbers calculated in third party
statistics — and insisted that China was not hiding anything

5. WHO experts who travelled to China did not include in the screening programs those who did not have a fever
● Unlike the screening program in Germany, where the screening program included those who did not show a
fever, and eventually tested positive.

6. WHO also left many questions open about how exactly public engagement was managed and prevention and control
in general

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● WHO reported that the community has largely accepted the prevention and control measures and is fully
participating in the management of self-isolation and enhancement of public compliance and that Chinese
people have reacted “with courage and conviction”, and have “accepted and adhered to the starkest of
containment measures.”
● While this is probably true for many, others were likely motivated by a statement of the Supreme People’s
Court: People carrying the virus who don’t follow quarantine restrictions “face jail terms ranging from three to 10
years if the consequence is not serious,” it says. Otherwise, they could face a life sentence or death.
● The WHO mission didn’t have the chance to speak with people with opposing views
● The very uniformity of this narrative should have been a wake-up call. During the whole trip of both foreign and
national experts, it seems to have been organized along Potemkin-esque lines for a team where most of its
international members lacked linguistic skills and familiarity with China.

7. WHO allowed China to exert influence in the global health space

● WHO had evolved out of colonial-era international sanitary conferences convened by the European powers and
expansionist U.S. policy, he said. Since WHO was controlled and largely influenced by the national interests of
Western powers before, countries like China have started to have more influence in the global health space.
● Beijing’s say is growing not only at WHO, but also in the health policies of more and more countries.

Effects of the falsehoods it passed on:

1. Delayed global response
2. Ill-advised health policies in other countries
3. The Chinese government is able to make its propaganda campaign to ignore its earlier mistakes appear
credible and to ignore the human, societal, and economic costs of its responses

Other points:
QUARANTINE v. TESTING
● According to Richard Neher, a virologist at the University of Basel, it’s no surprise that China’s containment
strategy was effective as the big lockdown, centralized quarantine, and contact tracing for sure accelerated the
decline.
● Lawrence O. Gostin, director of the WHO Collaborating Center on National and Global Health Law at
Georgetown University, points to “major human rights” concerns with the lockdown techniques pioneered in
China and now adopted in many nations.
● Gostin recommends standard public health measures like testing, treatment, contact tracing, and
isolation or quarantine “as scientifically justified.”

POLITICAL MOVES OF CHINA

1. Belt and Road Initiatives and activities in African countries
2. Countries like Laos, Cambodia, and Thailand cannot escape the influence of China as representatives of China
told them that “must let your borders open—otherwise we would have to rethink our friendship.”
3. Vietnam and Korea also cannot close its borders with China because “it’s the big power of the neighborhood.”
4. China itself temporarily closed its border to Laos almost completely during its COVID-19 outbreak, Stöbe said,
forcing the north of the country into a critical economic crisis.
5. Beijing closed its borders to almost all foreigners—a move that it had criticized other countries for during the
outbreak within its own borders.

International Health Regulations Link 3

https://www.ihrb.org/uploads/reports/Respecting_Human_Rights_in_the_Time_of_the_COVID-19_Pandemic_alter
nate_-_IHRB.pdf

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Respecting Human Rights in the Time of the COVID-19 Pandemic

I: The Virus, its Spread, and its Human Rights Impacts

Right to Health ​- inclusive right extending not only to timely and appropriate health care but also to the underlying
determinants of health, such as access to safe and potable water and adequate sanitation, an adequate supply of
safe food, nutrition and housing, healthy occupational and environmental conditions, and access to health-related
education and information, including on sexual and reproductive health
● As early as 1946, the WHO declared the ​enjoyment of the highest attainable standard of health as a
fundamental right.
● ICESCR, which 170 nations have ratified, includes the right to health as an ​international legal obligation
that should be realised progressively​.

Key Human Right Concerns

1. Quarantines, Lockdowns, and Restrictions

● Human rights law allows states to impose temporary restrictions on certain rights in times of
emergency. These rights can include the right of free expression (to prevent dissemination of
rumours, for example), the right to free assembly (to prevent the spread of the virus), and the right
of free movement (to prevent the dispersion of the virus in unaffected areas).
2. Surveillance Risks
3. Racism and Xenophobia
● People who may have visited impacted areas have been barred entry in some countries. There
have been racist and xenophobic attacks on Asians, including the Chinese, or those judged by
appearance to be from China, in a number of countries over recent months over fears relating to
COVID-19. Individuals
4. Migrant Workers
● Migrant workers typically do not enjoy the same rights as citizens of the host country, which leaves
them in a precarious situation during a crisis such as the one at present.
5. Women
● Women may not find it easy to work from home because in many societies, they are expected to
bear a disproportionately large workload at home.
6. The Poor
● The virus is indiscriminate and affects everyone. Wealth, religion, dietary habits, gender, physical
fitness, or social status offer no immunity to individuals or groups. But it is already clear that
COVID-19 disproportionately impacts the poor, in part ​because they lack the resources to take
adequate precautions.

All Rights are Important

● Human rights are universal, interdependent, inalienable, interrelated and indivisible.

II: The Corporate Responsibility to Respect Human Rights

1. Knowing and Showing
2. Duty of Care

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●Duty of care is a concept from tort law, ​indicating where a party has a legal duty to act
reasonably so as to avoid causing injury to other people who have reasonable expectation
that the party will act responsibly. Failure to adhere to the duty of care may expose the party to
civil or criminal liability. In the current context, companies operating in countries where COVID-19
is virulent have a special duty of care towards their staff and others impacted by their activities.
3. Owning the Cure
● In the present context, it means pharmaceutical companies in the race to develop a COVID-19
vaccine
● must be guided by international standards, and ​make their discoveries publicly available so
that all individuals affected by the crisis can benefit​, and not only a select few, due to their
nationality, ethnicity, religion, wealth, or any other status.

III: Getting the Response Right

General Measures
1. Be Prepared
2. Do No Harm
● Companies should examine their practices to determine if their conduct risks in any way
contributing to the spread of the pandemic.
3. Ensure Non-Discrimination

Specific Measures
1. Improve workplace practices
a. Monitoring premises
i. Preparing employees and visitors by providing clear instructions to ensure they remain
healthy
ii. Monitoring the health of each employee and visitor
iii. Maintaining a record of visitor arrivals and departures
b. Redesigning the Workplace
i. Making essential hygiene products available widely
ii. Routinely and regularly cleaning premises
iii. Disabling recirculation of internal air in air-conditioned offices
iv. Ensuring that no elevator carries more than half its required capacity at a given time
v. Increasing the space and distance between workers
vi. Staggering dining hours so that long queues are not formed
vii. Rethinking the customer interface
c. Reviewing Wider Operations
i. Reduce non-essential travel
ii. Suspending operations where the outbreak is severe
iii. Rethink production practices
2. Protect and Support Workers
● Putting in place where possible and appropriate childcare services and other caring assistance for
staff
● Reassuring employees that they will not be penalised if they report sick

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● Offering flexible working hours

● Rethinking how employees commute to the office
● Taking steps in the event of conditions requiring reductions in staff to furlough employees and not
terminate, so that existing health care benefits are not undermined
● Enabling work from home where feasible
● Protecting workers who do not have the option of working from home
● Prioritising essential workers
○ According to the ILO, ​essential services are “those the interruption of which would
endanger the life, personal safety or health of the whole or part of the population”
● Gig workers
○ Equally vulnerable are the so-called gig workers (workers in the informal services sector
who are self-employed and not recognised as employees by companies). While
companies have taken steps to ensure some income support, including offering leave in
some instances, these efforts are few and far between, and ​it is crucial for companies to
reevaluate how they obtain services from people who perform tasks in the
company’s name.
3. Deal with Sickness
a. Encourage and require sick employees to stay at home
b. Be generous with sick leave
c. Offer psychological support where necessary
4. Communicate clearly
● Be Transparent: ​Companies should give scientifically accurate information in clear language
to their staff and other affected communities.
● Be Consistent: Companies should ensure their communication is consistent with the
best-available professional advice from relevant authorities.
5. Engage Unions
● Vulnerable workers who are not unionized: ​Mass layoffs without social protection are
increasing in frequency. Companies must reinstate workers who have been whistle-blowers
pointing out risks to health and safety and who have attempted to unionise and stop actively
discouraging unionization.
6. Support and Strengthen the Supply Chain
● Companies should know the supply chain and diversify the suppliers.
● They should protect the workers in the supply chain either by continuing to pay their suppliers
or offering support. Eg. Microsoft continues to pay its vendors even if the offices are closed.
● Offer jobs for the newly unemployed. Eg. Amazon and Walmart are hiring more now.
● Build capacity of suppliers to make them more resilient
● ·Lobby host governments to protect workers’ rights: ​Companies relying on local companies for
supplies should utilise their leverage with governments to improve safety and security,
including social security, for the workforce.
● Other ways companies can help suppliers: They may offer loans and grants, etc.
7. Respect and Reassure Customers and Workers

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● Companies should be considerate when customers are not able to make their payments on
time. Products which have become essential, such as internet, should be accessible and at
reasonable cost. Electricity, gas, heating, etc. should still be supplied even though the bills are
not paid.
● Landlords and property owners should not evict those in need.
● Companies such as supermarkets and retailers should offer early access to vulnerable
customers such as senior citizens. Eg. This may be done by limiting online orders or give
immediate delivery for essential supplies.
● Target false claims and price gouging: Overpriced products and retailers who hoard should
stop. Those that offer “spurious” cures should be stopped as well.
● Ensure online accuracy
8. Be Creative with Strengths
● Retool plant or offer resources to address the crisis: Eg. Redesign facilities to make medical
equipment (Unilever is making sanitizer)
● Donate medical supplies and essential services where needed
9. Protect Undocumented People and Prisoners
● ​Ensure equal access to healthcare to those without full rights. Many jails are crowded and it
is a challenge to maintain these. The response of some are to release prisoners.
10. Consult and Work with Authorities
● Maintain consistent dialogue: Companies should take all steps needed to maintain regular
consultation with appropriate authorities. Eg. Amplify public health messages - H&M has been
rebroadcasting WHO’s messages.
● Support local authorities in areas that lack resources.
● Prepare for evacuation, if necessary.

IV. Longer-Term Implications

● International financial institutions (IFIs) have begun setting aside vast amounts of money to rebuild the
global economy.
● Unions also argue that recovery and stimulus measures should include public investments in the care
economy to reduce unpaid work burdens and create quality jobs. They have also called for substantial
debt relief, including debt write-off, and making assistance align with the UN SDGs.
● Economies will have to become more resilient. Companies and governments now have an opportunity to
explore different ways of producing energy, to protect the planet from the climate crisis and undertake
structural and policy changes to move away from business-as-usual or operations-as-usual.

Looking Ahead

● The challenge is to ensure the crisis response leads to positive outcomes, including efforts to address the
climate crisis and reduce carbon emissions while fostering sustainable development.
● The international community must combat negative outcomes linked to the virus outbreak, such as
increased xenophobia and fear of the outsider.

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Appendix 1: Providing Healthcare During an Epidemic

During the outbreak of the Ebola virus in West Africa, Sime Darby, a Malaysian plantation company, monitored
the situation. It sent out its social team to engage with local communities to speak of the dangers of the disease
and take necessary preventive action. The company set up a task force including local managers and a team from
the group headquarters in Malaysia. A special response and contingency plan was developed to enhance the
company’s existing standard operating procedures. Employees were assured that their jobs would remain. The
company’s clinic offered substantial medical assistance to the communities. Sime Darby evacuated its expatriate
staff and Malaysian contractors first to Ghana, and then relocated the majority of them to their home countries. In
developing its response, among the international standards Sime Darby considered were the Universal
Declaration of Human Rights, the UN Convention on the Rights of the Child, Child Rights in Business Principles,
WHO protocols and guidance on Ebola, the laws of Liberia and Ghana, and the company’s own environmental,
safety, and health protocols.

Appendix 2: ​Offering Relief During a Natural Disaster

In 2017, Hurricane Harvey hit Texas. As there were early warnings from meteorological departments, ExxonMobil
began preparations early. It had two refineries in the area. ExxonMobil began shutting down its operations to
prevent any accidental industrial disaster and began to bring fuel from areas not affected to the areas likely to be
affected to assist with recovery efforts. Critical supplies were essential, and the company set up an emergency
toll-free number to help with response for fuel needs. The company established a protocol to report impacts to
authorities and its employees worked with the authorities to help safely shut down operations. The company
monitored the storm’s movement and tracked forecasts, set up an incident command at its facilities, established a
supply response team and an emergency support group. Communications were established which disseminated
information. Some employee homes were flooded by the storm, and the company helped clean up and repair their
homes. The company also helped remediate 85 homes through a local charity, and transported 60,000 pounds of
cargo by helicopter to stranded personnel and community members.

Appendix 3: The Challenge of Safe Evacuation and Repatriation During Crisis

During the civil war in Libya, many companies were affected and these companies employed hundreds of
workers. Many workers were migrants from Bangladesh. Many of these workers had debt in order to secure their
jobs and would have been able to pay it back by working abroad for years. The Bangladesh Government took a
$40 million loan from the World Bank to cover a rehabilitation package for the workers, and each returnee was
getting a cash grant of 50,000 taka. Many workers had complained of not having been paid for months. This has
severe consequences for Bangladesh’s economy – workers’ remittances account for 12% of the gross domestic
product.

Some companies repatriated their own staff, and in some cases, their subcontractors’ staff. The oil company BP
moved its own staff and made its leased plane available to the UK Government, which was not able to bring back
stranded British nationals immediately. The Korean conglomerate Daewoo sent its ships to Libyan ports and took
on board hundreds of Thai workers who worked on Daewoo’s construction projects, and brought them back to
Thailand. Other large companies, too, managed to get their expatriate employees out in the first weeks.

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But some companies closed their factory doors or construction sites and turned migrant workers away without
access to food or water, and in some cases, without paying them back wages.

TOPIC 4: Arbitrability

Notes from Lecture

Public Health Measures within an International Law Framework – State Responses to COVID-19

Scope: Lecture to answer two questions;

1. What is it in International Law that enables or empowers states to enact measures such as the
control measures that you see in many countries such as the Philippines?
2. Are there any restraints to how states act when faced with these types of crisis?

Although these questions are focused on public health, the questions can be situated within a larger tension
that you would often see in IL - being the tension between the right of a state to act because it is a sovereign
entity, but also how states are restrained by IL because they are also subjects of IL and operate within a
system of IL.

So there is a tension by being simultaneously empowered and restrained by IL.

Right of a Sovereign

We are vigorously defending ​our right to implement our own laws as a sovereign country ​in those two
arbitration proceedings… This includes the constitutional role of the Supreme Court as the final arbiter of
the law. It’s decisions must be and will be fully respected and upheld.
Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines, I​ CSID Case No.
ARB/03/25, Award, para. 228 (quoting former President Gloria Macapagal Arroyo).

On the one hand you have the right for the state to enact and protect its own laws but on the other you see
that this was discussed within the context/forum of an international arbitration proceeding. Therefore, you
can see that the state is giving up a part of its sovereignty by participating in the tribunal that will decide
jurisdiction and/or merits.

Here you have the state defending its rights whilst also giving up some of its rights by participating. This
captures that tension which he is speaking about. The IL by being an enabling and a restraining law
simultaneously.

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What is arbitration?

“...arbitration is a process by which parties ​consensually submit a dispute to a non-governmental

decision-maker ​selected by or for the parties​, to render a ​binding decision resolving a despite in
accordance with ​neutral, adjudicatory ​procedures affording each party an opportunity to present its case.”
- Gar B Born, International Arbitration: Law and Practice (2012).

Where do we find the parties’ consent?

Typically, you see consent in commercial contracts, in contractual clauses (i.e. arbitration agreements)
Below is an example of an arbitral clause in an arbitration agreement that shows parties’ consent.

215.c All other Disputes that are not Construction Disputes as dealt with under Section 21.5.b shall be
finally settled under the Rules of Arbitration of the international Chamber of Commerce (the”ICC Rules”) in
effect at the time the request for arbitration is submitted in accordance with the ICC Rules, by such
number of arbitrators ats the parties may agree or, in the absence with the ICC Rules. The legal seat and
venue of the arbitration shall be Singapore The English language shall be used in the arbitral proceedings,
and all documents, exhibits and other evidence shall be in the English language. Any award made under
this Section 21.5.C shall be deemed to a Singapore award made in relation to a dispute arising out of a
commercial relationship for the purpose of the New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards of 1958.

Republic of the Philippines Department of Public Works and Highways Concession Agreement Daang
Hari-SLEX Link Road Project.

Example of an Arbitration Agreement

12. SECTION XII - ARBITRATION

12.1 The government and the Contractor shall consult with each other in good faith and shall exhaust all
available administrative and other similar remedies to settle any and all disputes or disagreements arising
out of or relating to the validity, interpretations and enforceability performance of this Agreement before
resorting to arbitration.

12.2 If any dispute or disagreement referred to in Section 12.2 cannot be resolved by mutual accord, the
dispute or disagreement shall be submitted to arbitration in accordance with the current Rules of Conciliation
and Arbitration of the International Chamber of Commerce by three Arbitrators appointed in accordance with
the said Rules. The English language shall be used throughout the arbitral proceedings. The Parties shall be
entitled to be legally represented at the arbitration proceedings, All notices given by one Party to the other in
connection with the arbitration shall be given in accordance with Section 14.2 of the Agreement.

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Financial or Technical Assistance Agreement, Mining and Geosciences Bureau.

What is investment treaty arbitration?

➔ Extra-contractual​ (beyond the contract) protection via investment treaties
◆ A claim by a foreign investor against a host State (​i.e, i​ nvestor sues State directly in
arbitration under an investment treaty and not under a contract).
◆ A recourse for investors beyond the contract. The recourse is in the treaty.
➔ State’s consent to arbitration found in Bilateral Investment Treaties (BITs) or Multilateral Investment
Treaties (​e.g, ​ASEAN Comprehensive Investment Agreement, North American Free Trade
Agreement).

How does treaty protection work?

- There should be an investment treaty (first requirement)
- An investment treaty between States A and B will extend protection to investors that come from the
countries that have signed the particular treaty

Example Of Direct Protection:​ Philippine Investment in France

Example: Philippines - Netherlands Bilateral Investment Treaty

Dispute Resolution Clause

Article 9
1) The Contracting Party is in the territory of which a national of the other Contracting Party makes or
intends to make an investment shall assent to any request on the part of such national to submit,
for conciliation or arbitration, to the Centre established by the Convention on the Settlement to

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Invest Disputes between States and Nationals of Other States opened for signature at Washington
on 18 March 1965 any dispute that may arise in connection with the investment.

➔ Now you have the consent from the state, where is the consent of the investors? Because
investors are not signatories to the treaties.
● When the investors bring the claim, that is their consent to the treaty. It is an
admission of their consent​.

The Basis for COVID-19 related Measures Under International Law

States have enacted wide-ranging public health measures.

● States have a duty and the sovereign right to protect public health and the economy
● States have adopted various measures:
○ To ​contain and mitigate the spread of the disease;​ but also
○ To ​minimize the economic fallout​ expected to follow.

COVID-19 Measures Enacted by the Philippines

➔ Restrictions on movement under the various stages of community quarantine
◆ Example: prevented shipments where labors are not enabled to go to work. Covid has
prevented from satisfying contractual obligations. When it impacts foreign investors, may
claims arise under investment treaty laws?
➔ Suspension of international and domestic flights
◆ Direct impact on business
➔ Power to direct operation of privately-owned hospitals, medical and health facilities, including
passenger vessels and other establishments (to house health workers, serve as quarantine areas
etc.) as well as public transportation - but subject to provision of appropriate compensation
◆ subject to provision of appropriate compensation. Is this an act of expropriation and whether
this is valid?
➔ Authority to direct lending and financial institutions to implement a minimum of 30-day grace period
for payment of lands within the ECQ period without incurring interest, penalties, fees or other
charges.
◆ Impacts foreign investors. It has a cost. Who bears the cost? Private sector? When the private
sector bears the cost, and they are foreign investors, is there substantive protection in
investment treaties that we need to consider?
COVID-19 Measures - Beyond the Philippines
➔ Shutting down of non-essential businesses
➔ Temporary taking over of property rights (Ex. Italy has forbidden the export of ventilators without
authorization; Spain decreed a state of alarm under the Spanish Constitution empowering the
government to temporarily occupy industries, factories, including those in the pharmaceutical sector;
Peru has suspended fees in privately run toll-roads.
➔ Nationalization of companies to prevent bankruptcies (Ex. Italy’s nationalization of Alitalia).

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➔ Restrictions on the movement of goods (Ex. India’s restriction on the export of 26 pharmaceutical
ingredients).
➔ Restrictions on foreign acquisitions in critical sectors (Ex. Stricter foreign investment screening rules
by Spain, Japan, France and Italy).

What is it in IL that enables the enactment of these types of measures?

Can look at it in two ways:
1. Investment Treaty Law
○ May empower states to enact public health measures by way of general exceptions
2. General International Law

Investment treaty law may empower States to enact public health measures
● General exceptions in treaties providing that the treaty does not prevent a State from enacting
measures to protect human life or public health.
● Assumes that these states have a right to enact these measures. The baseline ability to enact the
measures are not hindered by anything in the treaty that the state is signing.
Example:
Article 17
General Exceptions
1. Subject to the requirement that such measures are not applied in a manner which would constitute
a means of arbitrary or unjustifiable discrimination between Member States or their investors where
like conditions prevail, or a disguised restruction on investors of any other Member State and their
investments, nothin in this Agreement shall be construed to prevent the adoption or enforcement
by any Member State of measures:
a. Necessary to protect public morals or to maintain public order,
b. Necessary to protect human, animal or plant life or health.
Article 12 (1)(b), ASEAN Comprehensive Investment Agreement.

➔ There is nothing in the Treaty that would prevent a state from adopting measures to address public
health issues.
➔ More recent treaties provide for stronger and broader exceptions, explicitly exempting
non-discriminatory measures from claims under the treaty.
◆ i.e. to the extent that the claim arises from a non-discriminatory measure that addresses
public health, then that claim cannot be brought under the treaty.

4. Measures of a Party that are non-discriminatory and for the legitimate public welfare objectives of public
health, safety, the environment, public morals or public order shall not be the subject of a claim under this
Section.
Article 9.11(4) Free Trade Agreement Between the Government of Australia and the
Government of the People’s Republic of China.

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● While these exceptions are carved out in investment treaties, they are ​not unfettered or
unrestricted ​exceptions. There are requirements. They have to be
1. non-discriminatory,
2. reasonable, and
3. have to be legitimate public welfare objectives.
Very few tribunals will argue that public health is an illegitimate public welfare objective.
There are exceptions in Investment Treaties that allow Governments to enact such measures but are
not unfettered​.

General International Law empowers states to enact public health measures

➔ Reasonable, bona fide exercise of sovereign powers in matters such as public health
➔ States are sovereign entities. ​They have sovereign rights and may exercise sovereign powers.
Public health is where sovereign powers may be exercised. This has been affirmed by investment
tribunals in investment treaty context.
EXAMPLE
307. In light of the foregoing, the Tribunal concludes that the Challenges Measures were a valid exercise
by Uranguay of its police powers for the protection of public health. As such, they cannot constitute an
expropriation of the Claimants’ investment. For this reason also, the Claimaints’ claim regarding the
expropriation of their investment must be rejected.

Philip Morris Brands, Såri, Philip Morris Products S.A and Abal Hermanos S.A v Oriental Republic of
Uruguay,​ ICSID Case No. ARB/10.7, Final Award, July 8, 2016

**** In ​Philip Morris​, Claimants challenged tobacco control measures enacted by Uruguay which included
a required increase in the size of graphic health warnings appearing on cigarette packages.

Philip Morris vs Uruguay​. Claimants challenged tobacco measures enacted by the UG government which
included a requirement that the size of graphic health warnings be increased. Claimants challenged this
being expropriation.

Tribunals: in light of the foregoing, challenged measures are a valid exercise of Uruguay government of its
police powers for the protection of public health. As such, they cannot constitute an expropriation of the
claimants investment.
➔ Even without specific treat exceptions, general international law allows States to adopt public health
measures.

306. The Challenged measures were taken by Uruguay with a view to protect public health in fulfilment of
its national and international obligations. For reasons which will be explored in detail in relation to claims
under Article 3(2) of the BIT, in the Tribunal’s view the Challenged Measures were both adopted in good

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faith and were non-discriminatory. They were proportionate to the objective they meant to achieve, quite
apart from their limited adverse impact on Abal’s business. Contrary to the Claimants’ contention, the
Challenged Measures were not “arbitrary and unnecessary” but rather potentially “effective means to
protecting public health,” a conclusion endorsed also by the WHO/PAHO submissions. It is true that it is…

Philip Morris Brands Såri, Philip Morris Products S.A and Abal Hermanos S.A v Oriental Republic of
Uruguay,​ ICSID Case No. ARB/10/7, Final Award, July 8, 2016.

➔ Discussion​: There are general exceptions and specific exceptions which empowers States to
enact public health orders. Flowing from sovereignty states are allowed to enact public health
measures - but that is not unfettered. For example in the above para the tribunal talks about
good faith, the fact that the measures wer​e non-discriminatory and the fact that they were
proportionate to the objective​ that they needed to achieve.
➔ Question: If you have measures that you wanted to enact that were arguably not in good faith,
that were discriminatory and disproportionate then would the Tribunal went the other way?
➔ The fact there is a negative impact on foreign investors and investment does not mean
that a claim under an investment treaty arises. More often than not, there will be a
negative impact - but it doesn’t mean that there is a right legal claim.

Sovereign powers exercised beyond the public health context

➔ Marfin v Cyprus: C ​ yprus enacted measures, including acquisition of majority ownership in a bank, to
deal with recession. Tribunal upheld “​non-discriminatory, proportional measures taken in good faith…
in the pursuit of a legitimate public policy objective - the protection of the health of… the financial
system during a time of profound economic crisis”.
➔ In times of profound international crisis, States are able to enact measures to counteract those
circumstances - but they are not unfettered. There are requirements.

Deference to Public Health Measures - “Margin of Appreciation”

➔ Not only do states have a sovereign right to react to a crisis such as public health, but when tribunals
are faced with these issues, ​tribunals typically defer to these types of measures. ​And this is what
we call the margin of appreciation.
➔ Tribunals accord deference to governmental measures enacted to address public health

399. The Tribunal agrees with the Respondent that the “margin of appreciation” is not limited to the context
of the ECHR but “applies equally to claims arising under BITs”. At least in contexts such as public health.
The responsibility for public health measures rests with the government and investment tribunals should pay
great deference to governmental judgments of national needs in matters such as the protection of public
health. In such cases respect is due to the “discretionary exercise of sovereign power, not made irrationally
and not exercised in bad faith…. Involving many complex factors. As held by another investment tribunal,
“[t]he sole inquiry for the Tribunal…. Is whether or not there was a manifest lack of resources for the
legislation.”

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Philip Morris Brands, Såri, Philip Morris Products S.A and Abal Hermanos S.A v Oriental Republic of
Uruguay,​ ICSID Case No. ARB/10.7, Final Award, July 8, 2016.

Discussion:
1. You have an investment treaty tribunal referring to a principle which has been used in another
context - within the context of human rights. You are seeing something being referred to from an
entirely separate area of the law. Different areas of IL can cross-pollinate and are interdisciplinary. It
is not monolithic -​ it is interdisciplinary.
2. Deference - tribunals do not make assessment regarding what is best, particularly in relation to
matters like public health. They will defer that kind of decision-making to the relevant bodies.
3. Again, while Tribunals would pay great deference, ​there is a baseline or threshold requirements.
It cannot be irrational, in bad faith, used to specific classes of investments. ​The economic crisis
cannot be used as a subterfuge or an excuse for enacting measures that have no rational basis.

Investment Treaty Law as a Check on Sovereign Powers

● There is a power to act, which is not unlimited.
423. The Tribunal cannot accept the Respondent’s position that the actions taken by it against the Claimants
were merely an exercise of its rights under international law to regulate its domestic economic and legal
affairs. It is the Tribunal’s understanding of the basic international law principles that while a sovereign State
possesses the inherent right to regulate its domestic affairs, the exercise of such right is not unlimited and
must have its boundaries. As tightly pointed out by the Claimant, the rule of law, which includes treaty
investment obligations, provides such boundaries. Therefore, when a State enters into a bilateral investment
treaty like the one in this case, it becomes bound by it and the investment-protection obligations it undertook
therein must be honoured rather than ignored by a later argument of the State’s right to regulate.

ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary,​ ICSID Case No.
ARC/03/16, Award, October 2, 2006. 25.46
● The rule of law which includes treaty obligations (and customary international rule) provides such
boundaries. When a state enters into a bilateral investment treaty like the one in this case, it
becomes bound by it and the investment protection obligations it undertook therein must be honored
rather than be ignored by a later argument of the State’s right to regulate.
● See the tension. ​Sovereign right to act, to regulate, to address crisis of profound national
importance. But the right is not unfettered, not unhindered. Has many possible constraints.
● IL as a constraint. ​There are a lot of constraints. Treaty Law or the Vienna Convention on the Law of
Treaties may be a constraint. How a state interprets its treaty obligations. Interpretation is guided by
treaty laws and the customary international rules on interpretation but within the context of IT laws.
Investment treaties can be a restraint on the sovereign right of states to act and within the context of
public health measures and within the specific measures enacted in response to covid. You don't only
look at domestic law, what constraint govts have. Look at applicable investment treaties for anything
there that may constrain a state's response to public health.

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Investment Treaty Law as a Restraint

Many aspects of IL that may serve as a restraint. Investment treaty law as a restraint too.
● Procedural recourse in investment treaties: ​threat of arbitration, including availability of interim or
emergency relief.
○ i.e. the government has taken steps to review mining contracts, all government contracts.
Certain government depts may say that they are aware that we have investment treaties with
substantive and procedural protections included are factors that need to be considered when
the government acts in a certain context.
● Applicable law: ​Contract arbitrations applying Philippine law will be affected by decisions of
philippine courts, especially the Supreme Court. Treaty arbitrations apply international law, and will
be more resistant to adverse Philippine judicial decisions.
● State as a whole: ​A contract arbitration tribunal will only be able to assert jurisdiction over the direct
counterparty (i.e one agency of the government, gov owned corp) (contract tribunals very hesitant to
void governmental acts). However, a treaty arbitration tribunal can evaluate the acts and omissions of
the State as whole, including all instrumentalities of the Executive as well as the Judiciary.
○ i.e. In covid 19 context, if there is a foreign investor that brings a claim against Spain, because
of claims with respect to the take over of certain private facilities, the treaty tribunal will not
only look at there is a contract counterparty involved and its acts, it will look at the Spanish
government, its pronouncements of the DOH, the executive branch, the president, judicial
decision. ​It’s like assessing the entire state apparatus. ​This can serve as a restraint on the
state as a whole and not just the contract counterparty.

Substantive Protections in Investment Treaties

● Substantive protections in investment treaties can serve as restraints on government actions.
● Substantive protections in investment treaties impose ​standards against which state conduct may be
held to account.
● State action which fails to meet these standards can give rise to claims, but t​he fact the measures
have a negative impact on investors does not ​automatically​ give rise to claims.
○ So that substantive protection in investment treaties are not insurance policies against losses
of foregin investors. The fact that you have a loss, it does not give rise to claim. Need to look
at the substantive protections. Need to look at the text of the treaty. To determine if claims
have been violated.
● Examples: Fair and equitable treatment standard, direct and indirect expropriation, full protection and
security, national treatment and most favored nation.

Fair and Equitable Treatment

● One of the most invoked standards; wide latitude for interpretation
● Subject of debate in investment treaty community. Many tribunals have grappled what FET means.
But many people agree that there are ​baseline requirements​ when you talk about FET.
● Techmed​. The arbitral tribunal considers that the provisions of the agreement, in light of the GF
principle established by IL, requires the contracting parties to provide international investments

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treatment that does not affect the basic expectations ​that were taken into account by the foreign
investor to make the investment. [See below quote]

154. The Arbitral Tribunal considers that this provision of the Agreement, in light of the good faith principle
established by international law, requires the Contracting Parties to provide to international investments
treatment that does not affect the basic expectations that were taken into account by the foreign investors to
make the investment, ​The foreign investor expects the Host State to act in a competent manner, free
from ambiguity and totally transparently in its relations with the foreign investor, so that it may know
beforehand any and all rules and regulations that will govern its investments, as well as the goals of
the relevant policies and administrative practices or directives, to be able to plan its investment and
comply with such regulations.​ Any and all State actions conforming to such criteria…

Técnicas Medioambientales Tecmed, S.A v. The United Mexican States, ​ICSID Case No. ARB (AF)/00/2,
Aard, May 29, 2003.

● Is the State acting consistently? Is it transparent? Is it free from ambiguity? Does it protect the
investors’ legitimate expectations?
● Typically, when you see discussions on FET, these will be from the prism of the legitimate
expectations of a foreign investor. One question that tribunals usually ask is whether the enacted
measure violates a legitimate expectation of the foreign investor within the context of public health
measures against covid 19. Is there a legitimate expectation on the part of the foreign investor that
the government will not enact this measure when faced with this kind of public health crisis. This is a
question the tribunal might ask when faced with a claim from the covid crisis.
● Techmed case: ​The foreign investor expects the host State to ​act in a consistent manner, ​free
from ambiguity and ​totally transparent in its relations with the foregin investor so that it may
know beforehand any and all rules and regulations that will govern its investments, as well as the
goals of the relevant policies and administrative practices or directives, to be able to plan its
investment and comply with such regulations. Any and all State actions conforming to such criteria.
● Some questions that need to be asked. Typically, when you see discussions on FET, these will be
from the prism of the legitimate expectations of a foreign investor. One question that tribunals usually
ask is whether the enacted measure violates a legitimate expectation of the foreign investor within
the context of public health measures against covid 19. Is there a legitimate expectation on the part
of the foreign investor that the government will not enact this measure when faced with this kind of
public health crisis. This is a question the tribunal might ask when faced with a claim from the covid
crisis.
● The foreign investor expects the host State to ​act in a consistent manner, ​free from ambiguity and
totally transparent in its relations with the foregin investor so that it may know beforehand any
and all rules and regulations that will govern its investments, as well as the goals of the relevant
policies and administrative practices or directives, to be able to plan its investment and comply with
such regulations. Any and all State actions conforming to such criteria.

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● Some questions that need to be asked, when assessing public health measures, whether these
measures satisfy the FET standard, is the state acting consistently? In the early stages of the crisis,
does the state try to downplay the severity of the crisis. Like, govt ministers saying that, this is not a
real crisis, everything is under control. And, the foreign investor relied on those statements by not
ordering extra supplies or by delaying certain measures such as providing housing or transportation
for its employees. To the extent that foreign investor relied on an inconsistent statement, or
statements that have been contradicted or disowned but the government later on, does it give rise to
a FET claim?
● Is it transparent? Is the government being honest about the regulations it is enacting for the
reasons behind, the science behind the regulations?
● This is an issue you will see where many governments around the world are being criticized that
precisely the governments are being accused with facts. Can this give rise to an FET claim? Is it free
from ambiguity? Does it protect investors legitimate expectations?
● Going back to the previous slides, how sovereignty is not unfettered, but the fact that it is not
unfettered and not unhindered means that there are certain requirements. Need to act in good faith,
non-discriminatory manner, not be arbitrary. To a certain extent, all the requirements speak to the
FET standard. Govts need to be fair, act consistently, you cannot use the covid as an excuse to
enact measures against telecommunication companies. It will be irrational, discriminatory and
arguably in bad faith. Viewed in that light, that the foregin investor is on the receiving end of the
government actions, there may be a violation of the FET standard. In the early stages of the crisis,
does the state try to downplay the severity of the crisis? Like, govt ministers saying that, this is not a
real crisis, everything is under control. And, the foreign investor relied on those statements by not
ordering extra supplies or by delaying certain measures such as providing housing or transportation
for its employees. To the extent that foreign investor relied on an inconsistent statement, or
statements that have been contradicted or disowned but the government later on, does it give rise to
a FET claim?

Expropriation
● Expropriation: may be direct (through outright taking) or indirect (through a series of acts that have
the equivalent effect of effective control or interference with use, value, or benefit of investment);
requires adequate compensation
● Found in both domestic and international law. May be ​direct​, through outright taking/ outright take
over of factories (Spain).
● It could also be ​indirect​, a series of acts, equivalent effect of effective control or interference with the
use, value or benefit of investment. Ex, nationalization of an airline. Take over of MRT lines. Take
over of hospitals. Not just take over but ​directing the operation ​of the communication sector,
transport sector, shipping. Can be acts of expropriation.
● It is not just about the government taking control or engaging in outright taking. Whenever there is
expropriation, there must be ​adequate compensation. Typically, this is a big debate. Number of
questions arise here. What is adequate compensation? When do you need to compensate to the
foregin investor?

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102 NAFTA Article 1110 provides that “‘[t]he party shall directly or indirectly… expropriate an investment...or
take a measure tantamount to...expropriation...except: (a) for a public purpose; (b) on a non-discriminatory
basis; (c) in accordance with the process of law and Article 1105(1); and (d) on payment of
compensation….”.”A measure” is defined in Article 20(1) as including any law, regulation, procedure,
requirement or practice”/

103. Thus, expropriation under NAFTA includes not only open, deliberate and acknowledged takings of
property, such as outright seizure or formal or obligatory transfer of title in favour of the host State, but also
covert or incidental interference with the use of property which has the effect of depriving the owner, in whole
or in significant part, of the use or reasonably-to-be-expected economic benefit of property even if not
necessarily to the obvious benefit of the host State.

Metalclad Corporation v. The United Mexican States,​ ICSID Case no. ARB(AF)/97/1, Award, August 20,
2000.

● i.e. These control measures that have really hampered or put to a stop the operations of many
companies cannot be considered an indirect expropriation. That’s one question you need to think
about when thinking about the concept of expropriation. There are more obvious, outright takings.
There are also the less obvious types of indirect expropriation that you need to watch out for.

Recap
The push and pull in the international law system. Both a system that enables and empowers the state. It is
also a system that seeks to restrain the state from acting in certain ways. The tension that you will find in
many aspects of IL, such as investment treaty context. You see it in areas where the government asserts its
right to regulate and certain many aspects: national security, environment, taxation.

Within the context of today’s discussion, within the context of covid 19. Look at international law as a system
that enables states to address this crisis and also a system that restrains how the states act.

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ICSID Files
http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C1000/DC9012_En.pdf?fbclid=IwAR03O5KnFblX0-
sHG5t-9cNY1ute5n10crXAWQB52dUE9OJqcMPxxYcXGIk

(pp. 1-47)
I. Introduction and Parties
Claimants: Philip Morris (organized under the laws of Switzerland)
Respondent: Oriental Republic of Uruguay

The dispute was submitted to the International Centre for Settlement of Investment Disputes (ICSID) on the basis of the
Agreement between the Swiss Confederation and Oriental Republic of Uruguay on the Reciprocal Promotion and
Protection of Investments (Switzerland-Uruguay BIT/ BIT/ Treaty) and the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States (ICSID Convention).

II. Overview of the Dispute and The Parties’ Request for Relief
Claimants allege that through several tobacco-control measures (Challenged Measures) regulating the tobacco
industry, Respondent violated the BIT in its treatment of the trademarks associated with cigarettes brands in which the
Claimants had invested.
- Government’s (respondent) adoption of a single presentation requirement (SPR) precluding tobacco
manufacturers from marketing more than one variant of cigarette per brand family, and
- the increase in the size of graphic health warnings appearing on cigarette packages (the “80/80
Regulation”)

The Challenged Measures:

1. SPR:
a. Implemented through an Ordinance by the Uruguayan Ministry of Public Health (MPH). Art. 3 of the
SPR requires each cigarette brand to have a “single representation” and prohibits different
packaging or “variants” for cigarettes sold under a given brand. Ex. From Marlboro Red, Marlboro
Gold, Marlboro Blue, and Marlboro Green to only the variant Marlboro Red is being sold because of
this ordinance.
2. 80/80 Regulation
a. Enacted through a Presidential Decree. Imposes an increase in the size of prescribed health
warnings of the surface of the front and back of the cigarette packages from 50% to 80%, leaving
only 20% of the cigarette pack for trademarks, logos and other information.
Argument of Claimant:
- Challenged Measures constitute breaches of the Respondent’s obligations under BIT ​Articles 3(1)
(impairment of use and enjoyment of investments), 3(2) (fair and equitable treatment and denial of justice),
5 (expropriation) and 11 (observance of commitments), ​entitling the Claimants to compensation under the
Treaty and international law.
Argument of Respondent:
- Challenged Measures were adopted in compliance with Uruguay’s international obligations, including the
BIT, for the single purpose of protecting public health. Both regulations were applied in a non-
discriminatory manner to all tobacco companies, and they amounted to a reasonable, good faith exercise of
Uruguay’s sovereign prerogatives.

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- The SPR was adopted to mitigate the ongoing adverse effects of tobacco promotion, including the
Claimants’ false marketing that certain brand variants are safer than others, even after misleading
descriptors such as “light,” “mild,” “ultra-light” were banned.
- The 80/80 Regulation was adopted to increase consumer awareness of the health risks of tobacco
consumption and to encourage people, including younger people, to quit or not to take up smoking, while
still leaving room on packages for brand names and logos. Thus, this case is “about protection of public
health, not interference with foreign investment.”

Governing Law: BIT, supplemented by the rules of international law as may be applicable.

Issue: Whether Uruguay has breached its obligations under the BIT.

(pp. 43 - 85)
CLAIM 1: EXPROPRIATION
LEGAL STANDARD
Claimant (Philip Morris) Respondent (Uruguay)

To assess their expropriation claim under Article 5, the Before determining whether the conditions for a lawful
Tribunal must examine whether the investor was expropriation under Article 5 have been met, the
deprived, wholly or partially, of the use, enjoyment, or Tribunal must determine whether the Challenged
benefit of the investment. Measures were expropriatory in character

For the Claimants, to find a violation of Article 5, the That question depends on the nature of the State’s
Tribunal need not reach the conclusion that the action. Interference with foreign property in the valid
Claimants were deprived entirely of the economic exercise of police power is not considered
benefit of the investment. ​Rather, the threshold is expropriation and does not give rise to compensation.
whether the Challenged Measures have
“​substantially deprived​” the investments of their
value.

The Claimants also contend that the standard outlined The Claimants’ claim is for indirect expropriation, and
above is applicable to both direct and indirect or de such a claim requires showing that the measures have
facto expropriations, and that it serves to protect not had such a severe economic impact on
only tangible property but also intangible assets, the Claimants’ business that it has rendered it virtually
including ​intellectual property,​ from uncompensated without value. A mere negative impact is not sufficient.
expropriation The interference must be “sufficiently restrictive to
support a conclusion that the property has been
‘taken’ from the owner” so as “to render almost
without value the rights remaining with the investor.”

Analysis of the Tribunal:

In order to be considered an indirect expropriation, the government’s measures interference with the investor’s
rights must have a major adverse impact on the Claimants’ investments. The State’s measures should amount
to a “substantial deprivation” of its value, use or enjoyment, “determinative factors” to that effect being “the
intensity and duration of the economic deprivation suffered by the investor as a result of such measures.”

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CLAIM
Claimant (Philip Morris) Respondent (Uruguay)

Uruguay expropriated seven of Abal’s thirteen Even if the Challenged Measures could be considered
variants, including the goodwill and the legal rights expropriatory – something it denies – the effect of the
deriving from the associated intellectual property, SPR and the 80/80 Regulation are not tantamount to
when it enacted the SPR (Single Presentation an expropriation because the “value of the business
Regulation). has not been so reduced as to effectively deprive it of
its character of an investment.

Uruguay’s Regulation destroyed the brand equity of Uruguay points to the factual evidence showing that
the six remaining variants, with two immediate alleged the Claimants’ business retains significant commercial
effects: first, the discontinuance of two other brands value. Referring to Abal’s market share data, Uruguay
from the market (the Galaxy and Premier brands) in notes that Abal retained and retains its commercial
2009, and second, the erosion of the Claimants’ brand value.
equity and pricing power.

Police powers doctrine does not excuse Uruguay It is Uruguay’s submission that preserving and
from liability for expropriating the Claimants’ protecting public health is a quintessential
investment. Under customary international law, the manifestation of police power, which is in turn an
scope of the implicit exception for police powers is essential element of a State’s permanent sovereignty.
limited to State powers related to protection and Uruguay does not suggest that the police powers of
security such as enforcement of the law, maintenance the State are absolute. To the contrary, they are
of the public order, and defense of the State. limited to governmental action that is not
Furthermore, a State cannot remove a measure from discriminatory or taken in bad faith, but is taken in
the scope of the BIT’s expropriation provision by exercise of “the inherent and plenary power of a
invoking its general authority under domestic law to sovereign to make all laws necessary and proper to
adopt regulatory Measures. A State’s regulatory preserve the public security, order, health, morality
measure must be subject to limitations. and justice.”

Philipp Morris considers that the disputed marks Uruguay went through each of the seven variants
maintained “the distinctive characteristic” of the allegedly affected by the SPR and the 80/80
registered trademarks, and were therefore covered by Regulation: Marlboro Gold, Marlboro Blue, Marlboro
the same original registration, even if the two were not Fresh Mint, Fiesta Blue, Fiesta 50 50, Philip Morris
identical in all respects. Blue and Premier. It concludes that in each case, they
were not the same as any of the trademarks originally
registered.

Philipp Morris submits that they had a right to use their Uruguayan intellectual property law does not afford
trademarks in commerce under Uruguayan law for two trademark registrants an affirmative right to use
main reasons. First, Uruguayan trademark law, their marks in commerce. Instead, it confers on them
incorporating international law, protects the right to only the negative right to prevent others from doing
use trademarks. Second, Uruguayan property law so.
applies to intellectual property and protects the right to
use intellectual property.

Analysis of the Tribunal

Whether the Claimants Owned the Banned Trademarks:​ [Did not rule, tribunal just assumed]

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Nevertheless, the Tribunal believes that in light of its other findings regarding the claim of expropriation, it is
not necessary to reach a definitive conclusion on the question of the Claimants’ ownership of the banned
trademarks. It will assume, without deciding, that the trademarks continued to be protected under the Uruguay
Trademark Law.

Whether a Trademark Confers a Right to Use or only a Right to Protect Against Use by Others:​ [Mere exclusive
right to the exclusion of third parties]
The Tribunal concludes that under Uruguayan law or international conventions to which Uruguay is a party the
trademark holder does not enjoy an absolute right of use, free of regulation, but only an exclusive right to
exclude third parties from the market so that only the trademark holder has the possibility to use the trademark
in commerce, subject to the State’s regulatory power.

Whether the Challenged Measures Have Expropriated the Claimants’ Investment ​[No]
In the Tribunal’s view, in respect of a claim based on indirect expropriation, as long as sufficient value remains
after the Challenged Measures are implemented, there is no expropriation. As confirmed by investment treaty
decisions, a partial loss of the profits that the investment would have yielded absent the measure does not
confer an expropriatory character on the measure.

The Tribunal concludes that the Challenged Measures were a valid exercise by Uruguay of its police powers for
the protection of public health. As such, they cannot constitute an expropriation of the Claimants’ investment.
For this reason also, the Claimants’ claim regarding the expropriation of their investment must be rejected.

b. pp. 85 - 127
The police powers doctrine has been applied in several cases to reject claims challenging regulatory measures
designed specifically to protect public health. Except in rare circumstances, non-discriminatory regulatory actions by a
Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the
environment, do not constitute indirect expropriation.

SPR and the 80/80 Regulation have been adopted in fulfilment of Uruguay’s national and international legal obligations
for the protection of public health. It is a duty of the state to protect public health and they have authority to prevent,
limit or condition the commercialization of a product or service, and this will consequently prevent, limit or condition the
use of the trademark that identifies it. The Uruguayan Constitution and the different laws exist for the protection of the
collective health of the inhabitants of the country.

The SPR and the 80/80 Regulation satisfy the conditions that action of the State must be taken bona fide for the
purpose of protecting the public welfare, must be nondiscriminatory and proportionate. Therefore, there is no indirect
expropriation.
The Tribunal concludes that the Challenged Measures were a valid exercise by Uruguay of its police powers for the
protection of public health. As such, they cannot constitute an expropriation of the Claimants’ investment. For this
reason also, the Claimants’ claim regarding the expropriation of their investment must be rejected.

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C. Denial of fair and equitable treatment under 3(2) of the Treaty

Article 3(2) under the rubric “Protection and Treatment of Investments” provides, insofar as relevant:
Each Contracting Party shall ensure fair and equitable treatment within its territory of the investments of the investors of
the other Contracting Party.

Claimant (Philip Morris) Respondent (Uruguay)

Challenged Measures as subjected their investments to unfair SPR and 80/80 Regulation were adopted in good faith, and in a
and inequitable treatment in violation of Article 3(2) of the BIT: non-discriminatory manner to protect public health
i. the regulations are arbitrary because they “fail to serve a
public purpose and yet at the same time they cause substantial
harm to the Claimants
ii. the measures undermine the Claimants’ legitimate
expectations with respect to the use and enjoyment of their
investments, including the Claimants’ expectation that they
would be permitted to use their valuable brand assets
iii. the regulations “destroy the legal stability that Uruguay
pledged in the BIT and on which Abal has relied on when
developing and deploying its brand assets

a. Legal Standard
Despite the parties agreeing on the existence of the minimum standard of the treatment long required by the
international law, there is a disagreement on the content and interpretation of the minimum standard of treatment under
customary international law.

Claimant (Philip Morris) Respondent (Uruguay)

Respondent’s interpretation of the minimum standard is
inapposite:

No basis in the treaty and country to Art 31 of the VCLT FET is a “legal term of art” that refers to the minimum standard
of treatment accorded to aliens under customary international
law. It is not an autonomous standard. Even if the standard
from Neer has evolved, the level of scrutiny is in principle the
same as in Neer, and the burden of proof is on the Claimants.

No basis on the relevant case law. (case law cited by Under the principle of contemporaneity, the phrase “fair and
respondent is not an issue in the arbitration or does not support equitable treatment” was considered at the time of the
the argument that the FET clause provides for the minimum conclusion of the BIT to refer to the minimum standard of
standard of treatment. treatment

The statement of the Swiss Foreign Office of 1979 relied on by

the Respondent confirms that the fair and equitable treatment
standard under the BIT is broader than the minimum standard
of treatment under customary international law

Even if the fair and equitable standard could be equated to the

standard under customary international law, the standard has
continued to evolve today through state practice and the

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jurisprudence of arbitral tribunals.

Tribunal must assess whether Uruguay “ensure[d] that foreign

investors are treated reasonably and objectively and are
permitted to realize a reasonable return on their investments,
free from unfair or unjust interference by the State.

Analysis of the Tribunal

Absence of any reference in Article 3(2) of the BIT to “treatment in accordance with international law” or “to customary
international law or a minimum standard of treatment,” as provided by some other investment treaties with regard to the FET
standard, does not mean that the BIT creates an “autonomous” FET standard, as contended by the Claimants. Absence of any
additional qualifying language, the reference to FET in Article 3(2) cannot be read as “treatment required by the minimum
standard of treatment under international law.

The text of Article 3(2) of the BIT must be interpreted according to the normal canons of treaty interpretation as contained in
Articles 31 and 32 of the VCLT. The scope and content of FET under Article 3(2) must therefore be determined by reference to
the rules of international law, customary international law being part of such rules.

With the evolution of customary international law, the FET standard has evolved since the Near case was decided. The standard
is today broader than it was defined in the Neer case although its precise content is far from being settled.

Whether a particular treatment is fair and equitable depends on the circumstances of the particular case. Based on the investment
tribunals’ decisions, typical fact situations have led a leading commentator to identify the following principles as covered by the
FET standard: transparency and the protection of the investor’s legitimate expectations; freedom from coercion and harassment;
procedural propriety and due process, and good faith

Tribunal agrees that the various aspects of State conduct are indicative of a breach of the FET standard. It will deal with
“legitimate expectations” and “stability of the Uruguay legal system” as components of the FET standard in the context of the
Claimants’ claim in that regard

b. The Claim
(a) Challenged Measures

Claimant (Philip Morris) Respondent (Uruguay)

Challenged Measures are arbitrary The Challenge Measures are Not Arbitrary

It is a measure that inflicts damage on the investor without Arbitrariness is a wilful disregard of due process of law, an act
serving any apparent legitimate purpose, therefore it is which shocks, or at least surprises, a sense of juridical
arbitrary and it violates the standard. propriety

To assess whether a challenged measure is arbitrary, “tribunals Measures undertaken in good faith cannot be considered
have examined the rationality of the measure and of the arbitrary unless there is a manifest lack of rational relationship
decision-making process that led to it, the existence of a between the measure and its objective.
genuine public purpose, and whether there was a reasonable
connection between the objectives pursued by the state and
the utility of the chosen measures.”

An international arbitral tribunal cannot substitute its own policy

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judgments for those of the state

States are not liable to pay compensation to a foreign investor

when, in the normal exercise of their regulatory powers, they
adopt in a non-discriminatory manner bona fide regulations that
are aimed at the general welfare.

Claimants bear the burden of showing that Uruguay acted in an

obviously arbitrary manner when they issued the regulations.

Analysis of the Tribunal

In the ELSI case, “arbitrariness” is defined as “a wilful disregard of due process of law, an act which shocks, or at least surprises,
a sense of juridical propriety.” Based on this definition, the Tribunal concludes that the Challenged Measures are not “arbitrary.”

The connection between the objective pursued by the State and the utility of the two measures is recognized by the WHO and the
PAHO Amicus Briefs, which contain a thorough analysis of the history of tobacco control and the measures adopted to that effect.
The measures in question are effective means of protecting public health

At the time the measures were adopted, evidence was available at the international level regarding in particular consumers’
misperception of the health risks attached to “light” and “lower tar” cigarettes.

For a country with limited technical and economic resources, such as Uruguay, adhesion to the FCTC and involvement in the
process of scientific and technical cooperation and reporting and of exchange of information represented an important if not
indispensable means for acquiring the scientific knowledge and market experience needed for the proper implementation of its
obligations under the FCTC and for ensuring the fulfilment of its tobacco control policy

Uruguay implemented a series of measures including the creation of groups of experts and agencies for the study and prevention
of tobacco effects on human health. Uruguay also started the process of complying with resulting obligations.

In the Tribunal’s view, in these circumstances there was no requirement for Uruguay to perform additional studies or to gather
further evidence in support of the Challenged Measures. Such support was amply offered by the evidence-based FCTC
provisions and guidelines adopted thereunder. As indicated by the WHO, “[t]he ability of Parties to rely on this evidence-based
resource in policy development is important for implementation of the Convention by all Parties, and particularly by Parties in low
resources settings.

The Tribunal agrees with the Respondent that the “margin of appreciation” is not limited to the context of the ECHR but “applies
equally to claims arising under BITs,” at least in contexts such as public health. The responsibility for public health measures rests
with the government and investment tribunals should pay great deference to governmental judgments of national needs in matters
such as the protection of public health.

Tribunal proceeds to assess in concreto whether the treatment afforded to the Claimants’ investment by each of the Challenged
Measures was in conformity with the FET standard, as interpreted by it. In this regard the first point to be made is that both
measures were adopted in an effort to give effect to general obligations under the FCTC. FCTC is a point of reference on the
basis of which to determine the reasonableness of the two measures, and in the end the Claimants did not suggest otherwise.

i. The SPR

Claimant (Philip Morris) Respondent (Uruguay)

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SPR prohibits tobacco manufacturers from marketing more SPR is a responsible, reasonable and targeted regulatory
than one variant of cigarette per brand family. There is no measure adopted to prevent the tobacco industry from
connection between the Respondent’s purported rationale for continuing to perpetuate the false belief, cultivated over
adopting the measure and the actual regulatory measure at decades, that some cigarettes are less harmful than others.
issue.

SPR is adopted without any scientific evidence of its SPR is fully justified: After deceptive descriptions were banned
effectiveness in support of the proposition that the existence of from packages, tobacco companies found other ways to
various variants and different packaging were per se communicate their misleading messages. The marketing
misleading to consumers. strategy had worked and that different colors were associated
with “healthier” cigarettes. Respondent submits that pack
design affects consumers’ perception of risk and this is
“consistent with subsequent peer-reviewed studies that
document the association between packaging and risk
perception in countries other than Uruguay.

It is without due consideration by public officials. No evidence There is an obvious “logical connection” between the SPR and
showing meaningful deliberations by the government the objective of preventing consumers from being misled — it
is, and has always been,
Uruguay’s position that the existence of multiple variants of a
single brand per se creates a risk of deception in the minds of
some consumers

It did not further its stated objective. Relying on the conclusion SPR is part of Uruguay’s comprehensive tobacco control
of their marketing experts, the tobacco consumption did not policies and is in line with WHO Recommendations. SPR draws
decrease in Uruguay as a result of the SPR. upon the scientific evidence of the FCTC and its
implementation guidelines, and constitutes a sound policy that
advances important public health objectives

The Claimants challenge the Respondent’s justification for the WHO, the FCTC Secretariat, and PAHO have (a) confirmed the
SPR—that consumers necessarily perceive one variant of a existence of a real problem that SPR is designed to address
cigarette brand as less harmful than another variant of the and (b) concluded that SPR is an effective and sound measure
same brand, and will begin or continue smoking due to that to address it by expressly endorsing the SPR
misperception— alleging that before the Respondent adopted
the SPR, the vast majority of Uruguayans already believed that
smoking caused cancer and coronary heart disease and knew
that cigarettes are harmful

SPR is at odds with Uruguayan law’s requirement that tobacco SPR was adopted pursuant to the same deliberative process
manufacturers publish in local newspapers the tar and nicotine as other tobacco control measures. The process involved input
levels of each of their cigarette brands. from both external advisors and government regulators

Neither FCTC nor the Guidelines call for parties to consider With regard to the publication of tar and nicotine levels, this
single presentation requirements or 80/80 requirements. Since was a requirement in 1982, but the requirement was
no other country had adopted such regulations, it cannot be superseded by Art. 6 of Law 18,256, which requires a
that they are required by the FCTC. publication in major media of toxic products, but not of the
levels

Cognizant of health risks, smokers may eagerly switch to brand

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variants that they have been led to believe offer a “healthier”

option

Claimants’ threats have stopped other States from adopting a

SPR.

Analysis of the Tribunal

The measure was not discriminatory since it applied to foreign and domestic investors alike.

Promoting ‘light’ and ‘lower tar’ cigarettes as a way for most smokers to reduce their tar intake misrepresented what would
actually happen. Infact, smokers’ need for a given amount of nicotine would be compensated by smoking more intensively,
switching to brands perceived as “safer,” the term “lights” being chosen by producers to convey a message of reduced harm.

The rationale of the SPR in the formulations was to address the false perception, plausibly said to be created by the use of
colours and their association with earlier packaging and labelling, that some brand variants, including those previously advertised
as “low tar,” “light,” “ultra-light,” or “mild,” are healthier than others

The Claimants in effect accepted the validity of this concern, since they themselves had recognized the importance of including
health warnings on packaging, even voluntarily.

Possible over- or under-inclusiveness of the SPR was unsurprising given the relative novelty of this regulation.

The Tribunal’s conclusions on the evidence would be as follows: (1) the SPR was not the subject of detailed prior research
concerning its actual effects, which would in any case have been difficult to conduct since it involved a hypothetical situation; (2)
there was consideration of the proposal by the Tobacco Control Program in consultation with the Advisory Commission of the
MPH, although the paper trail of these meetings was exiguous;(3) the SPR was in the nature of a “bright idea” in the context of a
policy determination to discourage popular beliefs in “safer” cigarettes but, as held by the WHO, “the rationale for this action [was]
supported by the evidence.”

As to the utility of the measure, the marketing evidence on either side is discordant.

It is not necessary to decide whether the SPR actually had the effects that were intended by the State, what matters being rather
whether it was a “reasonable” measure when it was adopted.

SPR was a reasonable measure, not an arbitrary, grossly unfair, unjust, discriminatory or a disproportionate measure, and this is
especially so considering its relatively minor impact on Abal’s business.

ii. The 80/80 Regulation

Claimant (Philip Morris) Respondent (Uruguay)

There is no basis for challenging either the good faith or the There is no basis for challenging either the good faith or the
reasonableness of Uruguay’s 80/80 Regulation. The “logical reasonableness of Uruguay’s 80/80 Regulation. The “logical
connection” between more effectively warning people of the connection” between more effectively warning people of the
harms caused by smoking and the protection of public health is harms caused by smoking and the protection of public health is
in its view incontestable. in its view incontestable.

80/80 Regulation was not introduced to punish Mailhos. The 80/80 Regulation was not introduced to punish Mailhos. The

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process by which it was adopted followed the WHO’s process by which it was adopted followed the WHO’s
recommendation. States Parties to the FCTC unanimously recommendation. States Parties to the FCTC unanimously
adopted the Article 11 Implementation Guidelines for such and adopted the Article 11 Implementation Guidelines for such and
Uruguayan authorities met with and then presented a Uruguayan authorities met with and then presented a
memorandum to President Vázquez recommending additional memorandum to President Vázquez recommending additional
tobacco control measures. tobacco control measures.

Studies show that warning labels larger than 50% are more Studies show that warning labels larger than 50% are more
effective. This is also demonstrated by the current and past effective. This is also demonstrated by the current and past
State practice. More than 20 States have acted to enlarge the State practice. More than 20 States have acted to enlarge the
size of their warnings labels above 50%. Other States have size of their warnings labels above 50%. Other States have
gone as far as or beyond Uruguay’s 80%. gone as far as or beyond Uruguay’s 80%.

Enlargement of warnings, in conjunction with other tobacco Enlargement of warnings, in conjunction with other tobacco
control measures, allowed smokers to learn about the risks control measures, allowed smokers to learn about the risks
other than cancer and heart diseases and better understand other than cancer and heart diseases and better understand
the severity of the risks. the severity of the risks.

Analysis of the Tribunal

Article 11(1)(b)(iv) of the FCTC requires health warnings on cigarette packages which “should be 50% or more of the principal
display areas but shall be no less than 30% of the principal display areas. The principle of large health warnings is internationally
accepted; it is for governments to decide on their size, and they are encouraged to require health warnings of 50% or more.

The 80/80 Regulation was imposed on all cigarettes sold in Uruguay. The evidence presented by the Claimant does not sustain
the assertion that the measure is punitive. There was some increase at the relevant time in the incidence off cigarette smuggling,
but it was not shown how, if at all, this related to the Challenged Measures.

It is on record that the relevant process was initiated by a proposal to increase health warnings made by a member of the
Advisory Commission, Dr. Eduardo Bianco, in a meeting with the President of the Republic, Dr. Tabaré Vázquez. A memorandum
was presented to President Vázquez. Following consultation, the decision was made to fix the requirement at 80% rather than
90% which was also under consideration.

The marketing evidence suggests that the 80/80 Regulation also had some deterrent effect on smokers, the percentage of
smokers who said that health warnings made them think about quitting.

The present case concerns a legislative policy decision taken against the background of a strong scientific consensus as to the
lethal effects of tobacco. Substantial deference is due in that regard to national authorities’ decisions as to the measures which
should be taken to address an acknowledged and major public health problem. The fair and equitable treatment standard is not a
justiciable standard of good government, and the tribunal is not a court of appeal.

The question is whether the 80% limit in fact set was entirely lacking in justification or wholly disproportionate, due account being
taken of the legitimate underlying aim. How a government requires the acknowledged health risks of products, such as tobacco, to
be communicated to the persons at risk, is a matter of public policy, to be left to the appreciation of the regulatory authority.

80/80 Regulation was a reasonable measure adopted in good faith to implement an obligation assumed by the State under the
FCTC. It was not an arbitrary, grossly unfair, unjust, discriminatory or a disproportionate measure, in particular given its relatively
minor impact on Abal’s business.

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(b) Legitimate Expectations

Claimant (Philip Morris) Respondent (Uruguay)

BIT’s fair and equitable treatment standard requires that El Paso Tribunal: Under a FET clause, a foreign investor can
Contracting Parties provide a treatment that does not affect the expect that the rules will not be changed without justification of
“basic expectations” that were taken into account by the foreign an economic, social or other nature. Conversely, it is
investor when making its investment. unthinkable that a State could make a general commitment to
all foreign investors never to change its legislation whatever the
circumstances, and it would be unreasonable for an investor to
rely on such a freeze.

Claimants made substantial investments based on justifiable Even if legitimate expectations were to apply, to be protected,
expectations that the Uruguayan Government would: (a) allow the Claimants must show that their expectations were
the Claimants to continue to deploy and capitalize on their predicated on specific representations or assurances made by
brand assets; (b) refrain from imposing restrictive regulations the host State to the particular investor.
without a well-reasoned, legitimate purpose; (c) respect the
Claimants’ intellectual property rights; and (d) ensure that the
Claimants had access to a just, unbiased, and effective
domestic court system. All these expectations were
“eviscerated”

Their expectation arose out of both general statements and Uruguay made no specific commitments to the Claimants
specific assurances. As to the general statements, the capable of giving rise to legitimate expectations. The sources of
Claimants assert that they are constituted by Articles 1 and 4 of expectations that the claimants cite are unavailing because (a)
Uruguay’s Investment Promotion Law by which Uruguay sought they arise from general municipal legislation; (b) they either
to attract investment. have no connection with the expectations that the Claimants
claim to have; or (c) they post-date the claimants’ investment.

As to the Claimants’ specific expectations, they are said to In the context of the claim for expropriation, the claimants do
have arisen out of the following facts: (a) the Claimants own the not own their trademarks and do not have the right to use them
intellectual property rights, including the trademarks, that form
the core components of the branding on their cigarette
packages; (b) those intellectual property rights are property
rights protected under Uruguayan law; (c) the Claimants have a
right to use their intellectual property rights under Uruguayan
law; (d) the Claimants had used their intellectual property and
brand assets without disruption over many decades, and in the
process have created substantial brand value; (e) the
production and sale of tobacco products have at all times been
legal in Uruguay; and (f) the Respondent encouraged further
investment in Abal’s production and marketing of cigarettes.

The SPR Uruguay thwarted these expectations “by stripping Neither the SPR nor the 80/80 Regulation affected the
the Claimants of the ability to market profitable variants and to Claimants’ specific expectations to capitalize on their
capitalize on the intellectual property and associated goodwill intellectual property rights.
tied to these products. The 80/80 Regulation frustrated this
expectation further, by weakening the value of the Claimants’
residual products and preventing the Claimants from leveraging

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their iconic branding to introduce new products.

Analysis by Tribunal: Check the analysis in (c ) Legal Stability

The 2 additional grounds of the Claimants’ claim of breach of the FET standard will be considered in the same context due to their
interrelation

(c) Uruguay’s Legal Stability

Claimant (Philip Morris) Respondent (Uruguay)

Respondent’s fair and equitable treatment obligations under the After indicating that tobacco is one of the most highly regulated
Treaty require Uruguay to provide a reasonably stable and businesses in the world, Claimants could not reasonably have
predictable legal system expected that Uruguay’s regulatory scheme would never
change.

Respondent’s arbitrary actions altered the business There is no language in the Uruguay-Switzerland BIT that
circumstances in which Claimants’ operated and undermined provides for affirmative legal stability, nor is there a general
decades of legal stability during which time the Claimant had obligation to provide a stable legal environment
developed and used their trademark

Even if a putative obligation existed, past tribunals have stated

that investors should expect legal systems to change over time
without infringing on the State’s inherent right to regulate.

Claimants did not expect the regulatory framework to remain

immutable. Abal itself foresaw some regulatory action, since it
sent a letter to the MPH stating its encouragement for the
adoption of effective tobacco regulations after Uruguay ratified
the FCTC in 2004

Analysis of the Tribunal

The requirements of legitimate expectations and legal stability as manifestations of the FET standard do not affect the State’s
rights to exercise its sovereign authority to legislate and to adapt its legal system to changing circumstances.

Changes to general legislation are not prevented by the fair and equitable treatment standard if they do not exceed the exercise of
the host State’s normal regulatory power in the pursuance of a public interest and do not modify the regulatory framework relied
upon by the investor at the time of its investment “outside of the acceptable margin of change

From the analysis of the FET standard by investment tribunals that legitimate expectations depend on specific undertakings and
representations made by the host State to induce investors to make an investment. Provisions of general legislation applicable to
a plurality of persons or of category of persons, do not create legitimate expectations that there will be no change in the law.

Given the State’s regulatory powers, in order to rely on legitimate expectations the investor should inquire in advance regarding
the prospects of a change in the regulatory framework in light of the then prevailing or reasonably to be expected changes in the
economic and social conditions of the host State.

The present case concerns the formulation of general regulations for the protection of public health. There is no question of any
specific commitment of the State or of any legitimate expectation of the Claimants vis-à-vis Uruguayan tobacco control

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regulations. Manufacturers and distributors of harmful products such as cigarettes can have no expectation that new and more
onerous regulations will not be imposed, and certainly no commitments of any kind were given by Uruguay to the Claimants or (as
far as the record shows) to anyone else.

Article 3(2) does not guarantee that nothing should be done by the host State for the first time.

Uruguayan State enjoys unquestionable and inalienable rights to protect the health of its citizens. State’s duty to legislate on
issues of public health is reflected in Article 44 of the Constitution and in international conventions to which Uruguay is a party,
including the FCTC.

Claimants’ “expectations” have not been “eviscerated” by the Challenged Measures for the reasons detailed in the context of the
Tribunal’s analysis of the alleged “arbitrary” character of such measures. or have the new regulations modified the legal
framework for foreign investments beyond an “acceptable margin of change.

The Challenged Measures the Respondent has not breached Article 3(2) of the BIT regarding “legitimate expectations” and the
“stability of the legal framework.”

The conclusion reached regarding the dismissal of the Claimants’ claim of breach of Article 3(2) means that the Tribunal has no
need to examine the Respondent’s objection that the Claimants are prevented from bringing a FET claim due to their alleged
fraudulent behavior.

(d) Claimants’ Behaviour

Claimant (Philip Morris) Respondent (Uruguay)

The doctrine of Unclean Hands, Raised by Respondent is The Claimants’ Fraudulent Behavior Prevents them from
inapplicable. Bringing an FET Claim

Claimants’ FET claim should be barred under the principle of SPR and 80/80 Regulation “are direct outgrowths of the
ex dolo malo non oritus actio (a right of action cannot be raised Claimants’ history of deceit. They were made necessary and
out of fraud) or the “unclean hands doctrine.” appropriate by the actions of the tobacco industry itself. On the
basis of the maxim ex dolo malo non oritur actio (“an action at
law does not arise from evil deceit”), an investor should not be
permitted to argue that it has been denied FET when it has
itself acted fraudulently or in bad faith, particularly where, as
here, the fraud in question contributed to the adoption of the
measures about which the investor complains.

the doctrine of unclean hands is premised on the assumption This notion, closely related to the common law “unclean hands
that the complaining party engaged in wrongdoing. The doctrine,” is said to be “inherent in the notion of equity,” derives
Claimants have never been convicted of fraud or of any illegal from the principle of good-faith, and has a role in an investor’s
activity in Uruguay claim that it has been treated unfairly

Not a general principle of international investment law or

general international law

Analysis of the Tribunal

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Page 127 -169

Impairment of Use and Enjoyment of the Claimants’ Investments under Article 3(1) of the Treaty which provides: ​ Each
Contracting Party shall protect within its territory investments made in accordance with its legislation by investors of the other
Contracting Party and shall not impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment,
extension, sale and, should it so happen, liquidation of such investments.

Claimant (Philip Morris) Respondent (Uruguay)

Result of Respondent’s “unreasonable” measures, they “have Article 3(1) only prohibits impairment of use and enjoyment of
clearly lost the ‘use,’ ‘enjoyment,’ and ‘extension’ of their an investment if the measure is “unreasonable or
investments in PMI’s portfolio of brands and intellectual discriminatory.” The Respondent underlines that the SPR and
property.” In particular, they consider that establishing a BIT 80/80 Regulation were applied equally and without
violation requires “no more than” showing that “the measures discrimination to all
are, in a general sense, not reasonable. tobacco brands.

“arbitrariness” and “unreasonableness” are interchangeable With regard to “unreasonableness,” the appropriate standard
terms. From this, they conclude that the same facts that was set forth by the tribunals in the Biwater Gauff and Saluka
demonstrate the Respondent’s violation of the fair and cases, where the tribunals found that the affected investors
equitable treatment obligation on grounds of arbitrariness are were intentionally targeted by the States’ measures and went
also sufficient to establish an “unreasonable” impairment of the on to find the measures to be unreasonable
Claimants’ investment

Challenged Measures are not reasonable and constitute a Factual arguments (summarized above) demonstrating that the
violation of Article 3(1) of the BIT measures were not arbitrary also apply to prove that they were
reasonable

Analysis of the Tribunal

No reason regarding the present claim to apply a test different from the one applied to the claim of breach of the FET, considering
that the factual and legal basis of the two claims are the same.

For the same reasons that have been given for dismissing the claim for breach of Article 3(2), the Tribunal concludes that there
was no breach of Article 3(1), dismissing the Claimants’ claim also in this regard

Failure to Observe Commitments as to the Use of Trademarks under Article 11 which provides:​ Either Contracting Party shall
constantly guarantee the observance of the commitments it has entered into with respect to the investments of the investors of the
other Contracting Party
.
a. The Claimants’ Trademark Rights

Claimant (Philip Morris) Respondent (Uruguay)

Respondent “committed to ensuring the Claimants the full Article 11 does not operate as an umbrella clause; (2)
range of rights that trademark holders enjoy in Uruguay, registration of a trademark does not constitute a “commitment”
including the right to use trademarks and the right to exclude for purposes of Article 11; (3) the Claimants’ trademarks were
others from doing so.” Such commitments arose from not registered with Uruguay’s National Directorate of Industrial
Uruguay’s decision to accept the Claimants’ trademark Property (DNPI) to benefit from legal protection so that the
registrations. The Respondent failed to observe that obligation Respondent has no “commitments” in relation to the
by virtue of the SPR and 80/80 Regulation. Failure to honor trademarks at issue in these proceedings because they are not
them constitutes a violation of Uruguay’s obligations under owned by the Claimants; and (4) Uruguayan trademark law
Article 11’s umbrella clause does not grant registrants a positive right to use the trademarks
in commerce, but only a right to exclude others from doing so

Claimants could only use one variant from each of its cigarette

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brands, and the effect of the 80/80 Regulation was that their
ability to use those trademarks was significantly undermined.

All the variants that are the basis of the claim are protected Respondent argues that the marks displayed on the
because they maintain the “distinctive features” of the branded packaging of seven of the thirteen brands variants
trademarks as originally registered and they grant the allegedly affected by the Challenged Measures, were not, in
Claimants a right to use their trademarks in commerce. fact, protected trademarks insofar as the Claimants failed to
register them

Claimants further rebut Uruguay’s allegations that (i) the Uruguayan law recognizes is a right to prevent others from
Claimants did not own the trademarks that were allegedly using the trademark and not a right to use the trademark in
affected by the Challenged Measures and thus it cannot be commerce. This qualified freedom cannot be converted into a
considered to have made any “commitments” in relation to the right to use. Moreover, none of the international Intellectual
Claimants, and (ii) Uruguay’s trademark law only confers upon Property Conventions on which theClaimants rely, and on
trademark registrants the rights to exclude others from using which Uruguay’s Intellectual Properly law was based, recognize
the trademark, but not the right to use the trademarks in a right to use
commerce.

Analysis of the Tribunal

Regarding the Claimants’ ownership of the trademarks at issue in these proceedings the Tribunal, when examining the
expropriation claim, has assumed, without deciding, that said trademarks continued to be protected under the Uruguayan
trademark law. It will proceed, based on the same assumption, to establish whether a trademark is a
“commitment” for the purposes of Article 11 of the BIT.

b. Article 11 as an Umbrella Clause and the Scope of the State’s “Commitments”?

Claimant (Philip Morris) Respondent (Uruguay)

Article 11 is an umbrella clause since it includes “the core Article 11 cannot be equated to umbrella clauses in other BITs
components” of such a clause: (1) a State obligation to observe involving different parties. To support its argument, it points to
(2) commitments entered into with respect to investments, its “unusual” wording of Article 11, which obligates the
which the State has failed to observe Contracting States to the BIT to “constantly guarantee the
observance of the commitments.” This, according to the
Respondent, differs from the “conspicuously different” usual
formulation of umbrella clauses, under which States “shall
observe any obligation” entered into.

A State can assume those “obligations” by enacting generally Even if it did operate as an umbrella clause, Article 11 should
applicable domestic laws and regulations. A failure to meet not be interpreted as covering commitments made under
these general obligations would trigger State responsibility. generally applicable municipal law.Thus, Uruguay’s registration
They further add that “[t]here is nothing unusual about the BIT’s of the Claimants’ trademarks cannot be considered an
umbrella clause. international law obligation on the basis of Article 11

Claimants contend that their trademark registration is within the

scope of “commitments” covered by Article 11 of the BIT
because: [A]a trademark registration is a grant of the rights
specified in Uruguayan law to an individual person or entity.
Claimants’ trademark registration are indeed specific to
Claimants. Claimants alone have rights in their trademarks, no
one else owns the trademarks, and no one else may use the
trademarks without Claimants’ authorization

Letter presented to ICSID in the SGS v. Pakistan arbitration, According to the Respondent, Switzerland’s interpretation in
where Switzerland provided its interpretation of the BIT, is SGS is applicable in the present case. It points out that the
inappropriate in this arbitration. Even if the Tribunal accepts the Claimants themselves rely on the Tribunal’s finding in SGS v.
relevance of the letter, the Claimants’ trademark registration Pakistan and that they cannot now allege its inapplicability.

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still falls under the commitments covered by Article 11. Switzerland’s letter should, in any case, be considered
merely as a “supplementary means of interpretation” under
Article 32 of the VCLT

Analysis of the Tribunal

1. Interpretation of Article11 as an umbrella clause

In SGS v. Pakistan, concerned about the “almost indefinite expansion” of Article 11 of the Swiss-Pakistan BIT, which is identical to
Article 11 of the Uruguay-Swiss BIT, resulted in an interpretation of the word “commitment” that did not include contract claims. In
SGS v. Philippines, the tribunal reached the contrary result on the basis of Article 10(2), which provided: “[e]ach Contracting Party
shall observe any obligation it has assumed with regard to specific investments in its territory by investors of the other Contracting
Party,” justifying its interpretation based partly on the different wording in this provision.

Textual distinction between Article 10 of one BIT and Article 11 of the other BIT was rejected in the SGS v. Paraguay award. The
Paraguay tribunal was concerned with Article 11 of the Paraguay-Swiss BIT, which is also identical to Articles 11 of the
SwissPakistan and Swiss-Uruguay BITs

While the Respondent placed significance on academic commentary emphasizing the textual differences, it must be noted that
much of that commentary has taken its cue from the SGS v. Pakistan case. Moreover, that commentary can be understood in a
context in which there is a drive to defend the coherence of the arbitration system in the face of apparently contradictory awards
involving the same claimant. In this case, the Respondent’s argument would require emphasis to be placed on textual differences
too subtle to bear the weight of such a distinction. The words “constantly guarantee the observance of commitments” require
something more active than merely providing a legal system within which commitments might be enforced, as the Respondent
would have it.Moreover, the Noble Ventures award is not directly applicable; it did not express a final view on the question, finding
in any case that it could hear the contract claim on the basis of the standard umbrella clause before it.

Tribunal concludes that Article 11 operates as an umbrella clause, at least for contract claims.

2. Is a trademark a “commitment” within Article 11?

Claimant (Philip Morris) Respondent (Uruguay)

Trademarks they were granted were “commitments” for the Respondent denies that Article 11 can be used “to elevate
purposes of Article 11: on this basis, they claim a breach of that nominal violations of generally applicable IP law into a treaty
Article since the Respondent failed to observe the obligations it breach.” It relies on a letter from the Swiss government to
had assumed by adopting the Challenged Measures. The effect ICSID following the SGS v. Pakistan and SGS v. Philippines
of the SPR regulation was that the Claimants could only use awards, where Switzerland explained that Article 11 of the
one variant from each of its trademarked cigarette brands, and Switzerland-Pakistan BIT (which is identical to Article 11 of the
the effect of the 80/80 regulation was that its ability to use Switzerland-Uruguay BIT) was intended to cover specific
those trademarks was undermined, thus failing to “constantly commitments related to the investment, such as an investment
guarantee the observance of the commitments” under Article authorisation, but it does not extend to “municipal, legislative or
11. administrative or other unilateral measures.

Analysis of the Tribunal

Trademark is not a unique commitment agreed in order to encourage or permit a specific investment. Unlike the case of an
authorisation or a contract, where the host State may undertake some specific obligations, Uruguay entered into no commitment
“with respect to the investment” by granting a trademark. It did not actively agree to be bound by any obligation or course of
conduct; it simply allowed the investor to access the same domestic IP system available to anyone eligible to register a
trademark. While the trademark is particular to the investment, it stretches the word to call it a “commitment.”

Compared to a contract, where the host State enters into specific, quantifiable obligations in relation to an investment, a
trademark is not a promise by the host State to perform an obligation. It is simply a part of its general intellectual property law
framework. A trademark gives rise to rights, but their extent, being subject to the applicable law, is liable to changes which may
not be excluded by an umbrella clause: if investors want stabilization they have to contract for it.

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Trademarks are not “commitments” falling within the intended scope of Article 11 of the BIT. Claimants’ claim of breach by the
Respondent of Article 11 by the adoption of the Challenged Measures is rejected

Denial of Justice

Claimant (Philip Morris) Respondent (Uruguay)

Final decision of Uruguay’s Supreme Court of Justice (“SCJ”) Divergent decisions from the SCJ and the TCA with regard to
on the constitutionality of Law 18,256 (Article 9) and the TCA’s the interpretation of Law 18,256 are not sufficient to amount to
Decision on the legality and validity of the 80/80 Regulation a denial of justice. The Respondent stresses that the Supreme
were directly contradictory with no way to reconcile that Court and the TCA are co-equal institutions and that each
contradiction without incurring in a denial of justice. acted “within its sphere of competence.”

TCA failed to address Abal’s arguments and evidence and 3 passing references to BAT’s trademarks in the TCA’s
instead considered the challenge against the same regulation decision over Abal’s SPR challenged, are at most an oversight.
brought by one of its competitors, British American Tobacco They do not amount to a “procedural irregularity of such
(“BAT”). severity that it affects the outcome of the case” and thus cannot
be considered a denial of justice under the FET standard
interpreted in accordance with international law.

Claimants failed to exhaust all available and effective remedies.

a. The Legal Standard

Article 3(2) of the BIT provides: Each Contracting Party shall ensure fair and equitable treatment within its
territory of the investments of the investors of the other Contracting Party.

So far as Article 3(2) concerns judicial decisions, it creates a denial of justice standard.
State to incur international responsibility, the underlying denial of justice claim must arise from “fundamentally unfair judicial
proceedings” at the issuance of which the claimant is considered to have exhausted all available local remedies.

Claimant (Philip Morris) Respondent (Uruguay)

Denial of justice may result from, for instance, a “refusal to There must be a “failure of a national system as a whole to
judge” (including a “disguised refusal”), a breach of due satisfy minimum standards” or a demonstration of “systemic
process, arbitrariness, gross incompetence, or a pretense of injustice.” Grave procedural errors must have an impact on the
form. outcome, and that there is a presumption of legality of the
decisions of domestic courts which the Claimants must
Neither bad faith nor malicious intent are required overcome.

Denial of justice would breach both the FET obligation in the When examining a denial of justice claim the Tribunal may not
BIT and the relevant customary international law standard. engage in a re-adjudication of complex questions of municipal
law over which the parties advance plausible interpretations

Respondent who bears the burden of showing that a Denial of justice requires the exhaustion of all reasonably
reasonable and effective remedy was available and was not available and potentially effective local remedies, including
exhausted by the Claimants, to avoid incurring international constitutional and extraordinary remedies. The only exception
responsibility after its courts have denied justice to the is local remedies that are obviously futile.
Claimants
Claimant to bear the burden of demonstrating that it has
exhausted all reasonable remedies or that a local remedy was
not exhausted because it would be futile.

Analysis of the Tribunal

Fair and equitable treatment obligation may be breached if the host State’s judicial system subjects an investor to denial of justice.

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Arif v. Moldova, its basic proposition being that a denial of justice is found “if and when the judiciary breached the standard by
fundamentally unfair proceedings and outrageously wrong, final and binding decisions

A denial of justice Claim may be asserted only after all available means offered by the State’s judiciary to redress the denial of
justice have been exhausted. As held by one decision, “[a] denial of justice implies the failure of a national system as a whole to
satisfy minimum standards.”

High standard required for establishing this claim in international law means that it is not enough to have an erroneous decision or
an incompetent judicial procedure, arbitral tribunals not being courts of appeal. For a denial of justice to exist under international
law there must be “clear evidence of … an outrageous failure of the judicial system” or a demonstration of “systemic injustice” or
that “the impugned decision was clearly improper and discreditable.

“grave procedural errors” may result in a denial of justice depending on the circumstances of each case.It believes that a denial of
justice exists if the conditions outlined above for finding the same are satisfied, whatever impact it may have had on the outcome
of the court proceedings.

As to the burden of proof of the exhaustion of local Remedies, the Tribunal notes that this is a condition that has to be satisfied
prior to asserting a denial of justice claim. It is for the Claimants to show that this condition has been met or that no remedy was
available giving “an effective and sufficient means or redress” or that, if available, it was “obviously futile.”

b. The Apparently Contradictory TCA and SCJ Decisions on the 80/80 Regulation

Claimant (Philip Morris) Respondent (Uruguay)

Delegation of legislative authority would have been Uruguayan law, the TCA and SCJ are co-equal institutions with
impermissible under the Uruguayan Constitution, because only different spheres of competence. The TCA rules on
the legislature is permitted to restrict fundamental property administrative acts, the SCJ determines the constitutionality of
rights, including intellectual property rights laws. Thus, according to Uruguay, the existence of allegedly
divergent decisions is not sufficient to amount to a denial of
justice.

As a result of these allegedly conflicting rulings without the SCJ found the law constitutional. When a law is declared
possibility of any further appeal, the Uruguayan judicial system constitutional, the TCA is not obligated to adopt the SCJ’s legal
deprived Abal of its right to a decision on the legality of the reasoning. Thus, the TCA was not bound to agree with the
80/80 Regulation and inflicted a denial of justice. SCJ’s interpretation that the law only authorized the Ministry to
require warnings covering up to 50% of the pack. Instead, it
was free to decide on the legality of the Decree, based on its
own interpretation of the authority Law 18,256 conferred on the
MPH

TCA’s decision, subsequent to the SCJ ruling, is an example of Whether the TCA is bound by the SCJ on questions of
a “failure of State authorities to give effect to a judicial decision interpretation, is a fine question of Uruguayan public law, but
favorable to the alien’s cause.”TCA violated Uruguayan law what is important is that the TCA decision plainly constitutes a
when it contradicted the Supreme Court’s interpretation of Law “plausible and reasonably tenable interpretation of municipal
18,256. Because Uruguayan law incorporates the principle of law.” Since it is not possible to consider that the TCA’s decision
res judicata,the TCA was bound to follow the Supreme Court’s was NOT of a kind which no competent judge would have
interpretation of Law 18,256 as applied to Abal. The TCA’s made, the TCA’s decision cannot constitute a denial of justice
failure to do so resulted in contradictory and irreconcilable under international law.
decisions

Analysis of the Tribunal

Abal challenged the 80/80 Regulation through two separate actions, one before the SCJ and the other before the TCA, due to the
two courts’ distinct jurisdiction.

It is unusual that the Uruguayan judicial system separates out the mechanisms of review in this way, without any system for
resolving conflicts of reasoning. The Tribunal believes, however, that it would not be appropriate to find a denial of justice because

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of this discrepancy. The Claimants were able to have their day (or days) in court, and there was an available judicial body with
jurisdiction to hear their challenge to the 80/80 Regulation and which gave a properly reasoned decision. The fact that there is no
further recourse from the TCA decision, which did not follow the reasoning of the SCJ, seems to be a quirk of the judicial system.

Under the Uruguayan judicial system, the SCJ can uphold the constitutionality of a law based on an interpretation of the scope of
that law, in application of constitutional principles. That interpretation, however, does not bind the TCAwhen it determines, on the
basis of the principles provided by administrative law, the legality of decrees rendered under that same law. That position does
not seem to be manifestly unjust or improper, either in general or in the context of this case. Here both courts separately upheld
the legality of the measure the Claimants sought to challenge, each under its own jurisdiction and applying its own legal criteria. In
the Tribunal’s view this does not rise to the level of a denial of justice. As previously mentioned, arbitral tribunals should not act as
courts of appeal to find a denial of justice, still less as bodies charged with improving the judicial architecture of the State

Failure of the TCA to follow the Supreme Court’s interpretation of Articles 9 and 24 of Law 18,256 may appear unusual, even
surprising, but it is not shocking and it is not serious enough in itself to constitute a denial of justice. Outright conflicts within
national legal systems may be regrettable but they are not unheard of

In terms of the separation of constitutional from administrative jurisdiction, Uruguayan law derives from the civil law tradition
including the independence and high standing of the TCA.

A parallel can also be drawn, in the context of investment protection, with the recent award in Mamidoil, which found that “a legal
system that is characterized by a division between public and private law as well as civil and administrative procedures” did not
result in an “improper, discreditable or in shocking disregard of Albanian Law,” despite the fact that the claimant took his claim for
overpaid taxes before two different tribunals, both of which refused to hear the merits of his claim. As Professor Paulsson has
stated, “the vagaries of legal culture that enrich the world are to be respected

Res judicata applies under Uruguayan procedural law only upon satisfaction of a “triple identity” test requiring that proceedings (1)
be between the same parties, (2) seek the same relief, and (3) arise from the same cause of action. Even if it is doubtful that the
parties were different, different reliefs were sought (a declaration of unconstitutionality of a law before the SCJ versus the
annulment of a complementing regulation before the TCA) based on different causes of action.

It was only in the reasons of the Supreme Court that there was a potential divergence with the TCA, but, as noted by the
Respondent, under Uruguayan law res judicata would only exceptionally extend beyond the holding of a judgment where the
reasons form an “absolutely inseparable logical precedent of the operative part.” That was not the case here since the Supreme
Court offered alternative reasons to reach its conclusion, including its finding that the MPH “is competent in establishing all the
measures it may deem necessary for ensuring the health of the population,” a finding which would seem to have been applied by
the TCA.

c. The TCA’s Decision on the SPR

Claimant (Philip Morris) Respondent (Uruguay)

TCA rejected the claim as presented and litigated by BAT, not TCA considered and dismissed Claimants’ reserva de la ley
Abal, because the decision: (i) refers to Abal only in the title of claim, as well as other claims in regard to the SPR “as
the decision—throughout the rest of the decision it refers to presented and litigated by BAT, not Abal.” Moreover, the TCA
BAT; (ii) does not discuss Abal’s trademarks; it only lists BAT’s considered the legality of the administrative act generally, thus
trademarks; and (iii) does not discuss Abal’s expert evidence.In its determination does not vary depending on the tobacco
the Claimants’ view, even if the decision did not address all of company challenging the measure. Finally, the Claimants failed
BAT’s claim, nor did it address all of Abal’s, but it did to exhaust all available and effective local remedies against the
specifically refer to BAT, BAT’s trademarks, and evidence from TCA's decision
BAT’s administrative file. The decision decided BAT’s claim,
not Abal’s.

TCA failed to adjudicate Abal’s claims that (i) the SPR “it is not true that the TCA decision ‘refers to Abal only in the
exceeded and was inconsistent with Law 18,256, and (ii) the title of the decision’.” The TCA rejected Abal’s challenge after
MPH did not have the authority to establish the SPR because addressing each of its arguments and the opinion of its experts
Law 18,256 did not expressly grant the MPH the authority to in a well-reasoned decision. Moreover, the TCA’s references to
adopt the regulation. BAT’s trademarks should be understood in the context of the

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TCA’s review of a challenge to a general administrative act.

There is nothing in the TCA’s decision to suggest that it “relied
upon” Dr. Abascal’s statement. Also, the Respondent contends
that the Claimants’ expert opinions met none of the
requirements to be considered evidence, and that the TCA
considered and dismissed the Claimants’ other claims in regard
to the SPR.

Even if the TCA had initially made a mistake in its decision, it It notes that the Claimants could have challenged the
had an opportunity to correct that error, and it knowingly constitutionality of Article 8 of Law 18,256, the provision under
refused to do so. Abal had no further avenue of appeal or no which the SPR was adopted, before Uruguay’s Supreme Court
other remedy it could have pursued to have its challenge to the of Justice. In the Respondent’s opinion, while the success of
SPR decided on the merits. such a potential challenge cannot now be known, there is no
question that it was available and that the Claimants did not
pursue it.

Analysis of the Tribunal

Refusal of courts to address a claim can clearly amount to a denial of justice.However, it is not incumbent on courts to deal with
every argument presented in order to reach a conclusion The question is whether, in substance, the TCA failed to decide material
aspects of Abal’s claim, such that they can be said not to have decided the claim at all. As noted, the Claimants argue that they
put three matters before the TCA and that only the first (regarding the reserva de la ley) was addressed in the decision.

TCA’s decision addressed Abal’s three arguments for challenging Article 3 of Ordinance 514 both in the Findings of Fact
(“Resultando”) and Conclusions of Law (“Considerando”)

It is to be noted that under Uruguayan procedural law, expert opinions on matters of law are not considered “expert evidence.” To
be considered evidence rather than assertions of a party, the expert opinion must relate to a question of fact and not a question of
law and must have been prepared pursuant to an order of the court, neither of these requirements being met in this case.The TCA
may disregard expert legal opinions not meeting these requirements. The Tribunal finds Professor Pereira’s opinion persuasive,
as evidenced also by his cross-examination at the Hearing making reference, inter alia, to the iura novit curia principle as the
basis for disregarding expert legal opinions. There is a reference in the TCA decision to the three legal opinions as “dogmatic
constructions which may be very respectable in themselves” (a reference which does not apply to BAT since it had not filed legal
opinions) and to the State Attorney’s opinion

In general, when considering procedural improprieties arbitral tribunals have adopted a high threshold for a denial of justice. In
International Thunderbird Gaming Corp v. Mexico, the tribunal rejected a claim that administrative proceedings amounted to a
denial of justice, notwithstanding certain procedural irregularities, noting that “even if one views the absence of Lic. Aguilar
Coronadoat the 10 July hearing as an administrative irregularity, it does not attain the minimum level of gravity required under
Article 1105 of the NAFTA under the circumstances.” It concluded that the proceedings “were [not] arbitrary or unfair, let alone so
manifestly arbitrary or unfair as to violate the minimum standard of treatment.

Tribunal in Loewen found a denial of justice arising from a procedural failure in the trial process that was clearly discriminatory
against the foreign investor. The tribunal referred to the Trial Judge’s failure to reign in frequent references to the claimant’s race,
class and foreign nationality by defense counsel, concluding that by any standard the trial “was a disgrace,” the tactics of the
lawyers were “impermissible” and the trial judge failed to afford Loewen due process.The tribunal did not ultimately find that the
standard at international law was breached, but this was because Loewen had not exhausted local remedies, including the
possibility of seeking certiorari before the United States Supreme Court

It is important to be clear about the exact form that Abal’s TCA judgment took. It was not simply a photocopy of the BAT decision,
as the Claimants sometimes came close to alleging. It was entered under Abal’s name and correctly identified the arguments it
was making in the introductory summary. True, the TCA appears to have copied and pasted large chunks of the BAT decision
directly into the Abal decision, without taking care to correct incorrect references to BAT and to BAT’s trademarks, and with
reference on one occasion to the evidence of Dr. Abascal, which was not before the TCA in the Abal proceeding.

A procedural impropriety can occur notwithstanding that the court could (and probably would) still have reached the same result
absent the impropriety. This is the effect of the cases cited by the Claimants where a denial of justice was found notwithstanding
that the criminal defendant subjected to the internationally wrongful behaviour was guilty on the merits. Even apparently weak

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cases or apparently undeserving parties are entitled to minimum standards of due process, and this is true even if what they lost
thereby was a remote chance.

Two issues need to be considered. The first is whether these procedural improprieties were sufficiently grave in themselves as to
rise to the standard of a denial of justice. It is then relevant to consider whether, substantively, Abal’s claim was nonetheless fairly
determined, having regard in particular to Abal’s unsuccessful motion to the TCA for reconsideration of its decision on grounds of
confusion with BAT’s claim.

There were a number of procedural improprieties and a failure of form. But ultimately, the similarities between the two cases and
the claims made in them support the conclusion that there has been no denial of justice. In substance, Abal’s arguments were
addressed.

The subsequent failure of the TCA to amend or clarify its decision did not create a denial of justice. In particular, Abal did not bring
to the TCA’s attention the arguments it now alleges were not dealt with in the judgment. Whether or not the subsequent
proceedings were sufficient in themselves to cure a prior perfected denial of justice, they were at least relevant to the question
whether a sufficiently egregious error occurred

Procedural improprieties were not sufficient in this case to rise to the standard of a denial of justice and decides that there was no
denial of justice also in the SPR proceedings.

No need to address questions of the non-exhaustion of local remedies and of quantum of damages regarding both claims for
denial of justice raised by the Claimants.

COSTS OF THE PROCEEDINGS

According to Article 61(2) of the ICSID Convention and Rule 47(1)(j) of the Arbitration Rules, the Tribunal has to decide, as part of
the Award, the apportionment of the costs incurred by the Parties as well as of the fees and expenses of the members of the
Tribunal and the charges for the use of the facilities and services of the Centre.

The Tribunal notes that under Article 61(2) of the ICSID Convention it has a wide discretion with regard to cost allocation.
Specifically, Article 61(2) states that: [I]n the case of arbitration proceedings the Tribunal shall, except as the parties otherwise
agree, assess the expenses incurred by the parties in connection with the proceedings, and shall decide how and by whom those
expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre shall
be paid. Such decision shall form part of the award

The Tribunal notes that this case has given rise to important and complex legal issues and that both the Claimants and the
Respondent have raised weighty arguments in support of their respective positions. The Tribunal finds that, in the circumstances
of this particular arbitration, the application of the “loser pays” principle is appropriate. It does not consider that either Party’s
procedural conduct in the arbitration has been such that it should be taken into account in apportioning costs

Costs of the proceedings be paid by the Parties as follows: each Party shall bear its own costs but the Claimants shall reimburse
the Respondent for part of the latter’s costs in the amount of US$ 7,000,000.00 and, in addition, pay all fees and expenses of the
Tribunal and ICSID’s administrative fees and expenses.

AWARD
-The Claimants’ claims are dismissed
-The Claimants shall pay to the Respondent an amount of US$7 million on account of its own costs, and shall be responsible for all
the fees and expenses of the Tribunal and ICSID’s administrative fees and expenses, reimbursing to the Respondent all the amounts
paid by it to the Centre on that account​.

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