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Civil wars, international disturbances, and revolutions were frequent in Latin America in the late nineteenth century and early twentieth century. Nationals of States in Europe and of the USA affected by these civil disruptions often suffered injury to person and property. When the host State refused to assume responsibility for such injuries, aliens frequently sought the intervention of their national States, requesting them to claim compensation for the alleged wrong at an international level. That there was abuse of this liberty cannot be denied. Thus, the observation has been made that:
Nationals often felt entitled to complete security of their persons and property, and appealed to their governments on rather flimsy evidence and without any real effort to obtain local redress. The petitioned government, acting on limited, one-sided evidence, and often under domestic political pressure, sponsored claims that frequently were not based upon strict justice. Utilization of armed force to compel the weaker nations to honor these dubious claims was not infrequent, and it sometimes happened that the severity of the measures adopted in seeking compensation for the alleged injuries was far out of proportion to the extent of the initial damages suffered. 1
Moreover, the international tribunals (commissions) established to settle the disputes which arose were regarded by Latin American States as prejudiced in favour of the protecting States.
It was this scenario that led Latin American States to try to weaken, to the extent of eliminating, diplomatic protection by formulating theories which in reality challenged its very foundation. The Drago Doctrine, later codified in the Porter Convention of 1907, declared in the early twentieth century that intervention by the use of force principally to collect public debts was illegal. This doctrine was occasioned by the German, British, and Italian intervention in Venezuela in 1902. Earlier the Calvo Doctrine sought to outlaw all forms of diplomatic protection by invoking two principles: first, the sovereign equality of all States, which prohibited foreign intervention, and second, the equality of nationals and (p. 192) aliens, which deprived aliens of their claim to privileged treatment. 2 On the second principle, Calvo stated that
It is certain that aliens who establish themselves in a country have the same right to protection as nationals, but they ought not to lay claim to a protection more extended …
The responsibility of Governments toward foreigners cannot be greater than that which these Governments have towards their own citizens. 3
On the one hand, attempts to enforce the Calvo Doctrine by treaty were largely unsuccessful. On the other, the Calvo Clause, a clause which came to be inserted in a contract between an alien and the host State in which the alien agreed to forego his right to request diplomatic protection in any dispute arising out of the contract, purported to embody and implement the Calvo Doctrine.
With the object of excluding international claims by other States arising from the breach of contracts entered into with alien contractors, there was inserted in the contractual documents a Calvo Clause, by which basically in effect all but national law remedies of the host State were renounced. The immediate occasion of the earliest formulation of the clause by Calvo in 1868 was the intervention of France and Great Britain in Argentina, Uruguay, and Mexico, and its purpose was to deprive the US and European States of the right to meddle in Latin American politics, on the pretext, genuine or not, of protecting their national creditors. 4 The contractor had the option of entering into the contract on the condition that international intervention and even international law were excluded or of not entering into it at all. The clause generally had two parts: the first provided that all disputes concerning the terms of the contract, its interpretation, or facts relating to its performance or non-performance, should be decided in the courts of the contracting State, whose law was to be the proper law; the second provided for a complete or partial surrender of rights under international law by the contractor and most importantly a waiver of protection by the contractor's own State. 5 That is, the contractor in effect contracted away the right to exercise diplomatic protection of his national State. The fundamental question arises: what powers does an alien have in respect of his national State's right to exercise diplomatic protection?
(p. 193) The Calvo Clause could take several forms. 6 As one author has stated,
Sometimes, it merely consists of a stipulation that the foreign individual concerned will be satisfied with the action of the local courts. In other cases, the Clause embodies a more direct and broader waiver of diplomatic protection, as when it provides that disputes which may arise shall in no circumstances lead to an international claim, or else that the foreign individuals or corporate bodies are to be deemed to be nationals of the country for the purposes of the contract or concession. 7
In principle, however, the Calvo Clause seems to relate to the contractual relationship between alien and host State and could be applicable to disputes concerning the interpretation, application, or performance of the contract. 8 Whether it can go beyond this is in dispute. Particularly, it is unclear whether any exclusion can apply to a denial of justice that may occur in proceedings relating to the contract before a national court. 9
In principle the objects of the clause in its usual form were to confine the alien to local remedies like anyone who was a national of the host State and to exclude the exercise of diplomatic protection by the national State of the alien. The questions remain whether these objectives could be achieved in international law and, if only less could be achieved, what exactly was the effect of a clause with these objectives.
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