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Because the international wrong is construed as have been suffered by the national State of the alien, strictly speaking reparation—particularly compensation—is to benefit the national State. Nevertheless, there is also the alien who is involved at the receiving end of the wrong. Thus, restitution, for example, would primarily benefit the alien.
However, it is an accepted rule that the damage for which reparation must be made is the damage to the alien's national State which is not identical with that which its national has suffered, so that the reparation ordered in a given case need not be simply equivalent to the loss suffered by the alien. 174Yet it is a (p. 320) fact that it is the damage to the alien which constitutes the measure of reparation. It is a mixed bag. The injury suffered by the alien is used as a scale for the calculation of damages. Although the ultimate reparation may involve more than the actual loss to the alien, 175 the damage suffered by the alien is the basis for the award of reparation. Such damages awarded may include both damages for material loss and for moral injury suffered by the alien. Although the economic assets of an individual may, by a fiction, be regarded as part of the wealth of his national State, international law does not really treat such assets as being actually the property of the national State. As regards damage through personal injury including moral suffering, it would be difficult to regard the national State as having suffered such damage even by a legal fiction.
Another feature is that the national State has complete control over the disposition of the proceeds of a claim and is not even obliged to hand them to the individual or individuals whose claims it has espoused. 176 This is because the claim has a public character based on the interests of the national State. It must be stressed that this is the rule, though in reality States do distribute the proceeds of the awards or settlements on the basis that the individual suffering the injury has an interest in reparation.177
There is also a rule that the national State may waive, compromise, or discontinue the presentation of the claim irrespective of the wishes of the alien. 178 This rule reflects the interests of the national State as the beneficiary of reparation.
Such rules reflect the basic principle that the State does not appear as a representative or on behalf of the alien whose claim it espouses, but defends its own rights. However, a particular practice which has developed reveals that both national States and host States (respondents) regard the aliens as the proper claimants in cases where aliens have been injured. From the early nineteenth century to the present States have by agreement established Claims Commissions and Claims Tribunals which adjudicate on claims brought by the aliens themselves against the wrongdoing State. Because the wrongdoing State is a party to the agreements establishing such tribunals, this is an acknowledgment that reparation is due to the alien rather than to his national State. In turn the national State by being a party (p. 321) to such agreements resigns its right to have reparation made to itself and acknowledges that providing full reparation to its national alone is a complete discharge of the wrongdoing State's obligation of providing reparation. It is true that this turn of events is based on specific agreements but it is an inroad into the rule that injury is to the national State.
Claims tribunals which have been established include those between the USA and European States, Latin American States, tribunals such as the Iran-US Claims Tribunal and the ICSID tribunals. One of the consequences of the establishment of such tribunals is that, where the agreement is construed to do so or explicitly does so, as in the case of the ICSID Convention and the agreement setting up the Iran-US Claims Tribunal, certain claims (such as contract claims which have not matured into claims based on international wrongs after the commission of a denial of justice) become subject to the jurisdiction of the tribunals. But this is a matter of interpretation of the agreement establishing the tribunal. Certain nineteenth century Claims Commissions have taken the view that under the instruments creating them contract claims as such were not within their jurisdiction, unless they were based on a violation of international law in addition to there being a simple breach of contract. 179
The ILC in Article 19 of its Articles on Diplomatic Protection of 2006 included a recommendation, though not a rule of law, that any compensation obtained for an injury to a national by a responsible State should be transferred to the injured person, subject to any reasonable deductions. 180 The commentary provided by the ILC on this recommendation which is in Article 19(c) is quoted here at length in order that the reasoning of the ILC, with which it is difficult to disagree, may be seen more clearly.
(5) Subparagraph (c) provides that States should transfer any compensation received from the responsible State in respect of an injury to a national to the injured national. This recommendation is designed to [encourage] discourage the widespread perception that States have an absolute discretion in such matters and are under no obligation to transfer moneys received for a claim based on diplomatic protection to the injured national. This perception has its roots in the Mavrommatis rule and a number of judicial pronouncements. In terms of the Mavrommatis Palestine Concessions dictum a State asserts its own right in exercising diplomatic protection and becomes ‘the sole claimant’. 181 Consequently, logic dictates that no restraints are placed on the State, in the interests of the individual, in the settlement of the claim or the payment of any compensation received. That the State has ‘complete freedom of action’ in its exercise of diplomatic protection is confirmed by the Barcelona Traction case. 182 Despite the fact that the logic of Mavrommatis is (p. 322) undermined by the practice of calculating the amount of damages claimed on the basis of the injury suffered by the individual, 183 which is claimed to be a rule of customary international law, 184 the view persists that the State has an absolute discretion in the disposal of compensation received. This is illustrated by the dictum of Umpire Parker in the US-German Mixed Claims Commission in Administrative Decision V:
In exercising such control [the nation] is governed not only by the interest of the particular claimant but by the larger interests of the whole people of the nation and must exercise an untrammelled discretion in determining when and how the claim will be presented and pressed, or withdrawn or compromised and the private owner will be bound by the action taken. Even if payment is made to the espousing nation in pursuance of the award, it has complete control over the fund so paid to and held by it and may, to prevent fraud, correct a mistake or protect the national honour, at its election return the fund to the nation paying it or otherwise dispose of it. 185
Similar statements are to be found in a number of English judicial decisions, 186 which are seen by some to be an accurate statement of international law. 187
(6) It is by no means clear that State practice accords with the above view. On the one hand, States agree to lump sum settlements in respect of multiple individual claims which in practice result in individual claims receiving considerably less than was claimed. 188 On the other hand, some States have enacted legislation to ensure that compensation awards are fairly distributed to individual claimants. Moreover, there is clear evidence that in practice States do pay moneys received in diplomatic claims to their injured nationals. In Administrative Decision V, Umpire Parker stated:
… But where a demand is made on behalf of a designated national, and an award and payment is made on that specific demand, the fund so paid is not a national fund in the sense that the title vests in the nation receiving it entirely free from any obligation to account to the private claimant, on whose behalf the claim was asserted and paid and who is the real owner thereof. Broad and misleading statements susceptible of this construction are found in cases where lump-sum awards and payments have been made to the demanding nation covering numerous claims put forward by it and where the tribunal making the award did not undertake to adjudicate each claim or to allocate any specified amount to any designated claim. It is not believed that any case can be cited in which an award has been made by an international tribunal in favour of the demanding nation on behalf of its designated national in which the nation receiving payment of such award has, in the absence of fraud or mistake, hesitated to account to the national designated, or those claiming under him, for the full amount of the award (p. 323) received. So far as the United States is concerned it would seem that the Congress has treated funds paid the nation in satisfaction of specific claims as held ‘in trust for citizens of the United States or others’. 189
That this is the practice of States is confirmed by scholars. 190 Further evidence of the erosion of the State's discretion is to be found in the decisions of arbitral tribunals which prescribe how the award is to be divided. 191 Moreover in 1994 the European Court of Human Rights decided in Beaumartin v. France 192 that an international agreement making provision for compensation could give rise to an enforceable right on the part of the injured persons to compensation.
(7) Subparagraph (c) acknowledges that it would not be inappropriate for a State to make reasonable deductions from the compensation transferred to injured persons. The most obvious justification for such deductions would be to recoup the costs of State efforts to obtain compensation for its nationals, or to recover the cost of goods or services provided by the State to them.
(8) Although there is some support for curtailing the absolute right of the State to withhold payment of compensation received to the injured national in national legislation, judicial decisions and doctrine, this probably does not constitute a settled practice. Nor is there any sense of obligation on the part of States to limit their freedom of disposal of compensation awards. On the other hand, public policy, equity and respect for human rights support the curtailment of the States discretion in the disbursement of compensation. It is against this background that draft article 19, subparagraph (c), has been adopted. While it is an exercise in progressive development it is supported by State practice and equity. 193
There are questions, the answers to which are not clear. To whom is the duty owed internationally in regard to the payment of compensation ie apart from any duty under internal law which would be owed to the individual? Who may enforce the obligation at international law? The answers may very well be that the duty is owed to the international community at large, ie erga omnes, and any member of the international community may enforce it. This is, however, a very controversial position.
Satisfaction
The ILC Articles on State Responsibility state in Article 37:
Satisfaction
1. 1. The State responsible for an internationally wrongful act is under an obligation to give satisfaction for the injury caused by that act insofar as it cannot be made good by restitution or compensation.
(p. 324)
2. 2. Satisfaction may consist in an acknowledgement of the breach, an expression of regret, a formal apology or another appropriate modality.
3. 3. Satisfaction shall not be out of proportion to the injury and may not take a form humiliating to the responsible State. 194
Satisfaction is the third form of reparation which the responsible State may have to provide in discharge of its obligation to make full reparation for the injury caused by an internationally wrongful act. It is not a standard form of reparation, in the sense that in many cases the injury caused by an internationally wrongful act of State may be fully repaired by restitution and/or compensation. As Article 37 states, satisfaction is required ‘insofar as [the injury] cannot be made good by restitution or compensation’. It is only in those cases where those two forms have not provided full reparation that satisfaction may be required.
The injury for which a responsible State is obliged to make full reparation covers ‘any damage, whether material or moral, caused by the internationally wrongful act of a State’. Material and moral damage resulting from an internationally wrongful act will normally be financially assessable and hence covered by the remedy of compensation. Satisfaction, on the other hand, is the remedy for those injuries, not financially assessable, which amount to an affront to the State. These injuries are frequently of a symbolic character, arising from the very fact of the breach of the obligation, irrespective of its material consequences for the State concerned.
The availability of the remedy of satisfaction for injury of this kind is well-established in international law. The point was made, for example, by the tribunal in the Rainbow Warrior Case:
There is a long established practice of States and international Courts and Tribunals of using satisfaction as a remedy or form of reparation (in the wide sense) for the breach of an international obligation. This practice relates particularly to the case of moral or legal damage done directly to the State, especially as opposed to the case of damage to persons involving international responsibilities. 195
Satisfaction may consist of an acknowledgement of the breach, an expression of regret, a formal apology, or another appropriate modality. The forms of satisfaction listed in the Article are only examples. The appropriate form of satisfaction will depend on the circumstances of the case.
One of the most common modalities of satisfaction provided in the case of moral or non-material injury to the State is a declaration of the wrongfulness of the act by a competent court or tribunal. The utility of declaratory relief as a form of satisfaction in the case of non-material injury to a State was affirmed by the ICJ in the Corfu Channel Case (Merits) where the court, after finding unlawful (p. 325) a mine-sweeping operation (Operation Retail) carried out by the British Navy after an explosion, said:
to ensure respect for international law, of which it is the organ, the Court must declare that the action of the British Navy constituted a violation of Albanian sovereignty. This declaration is in accordance with the request made by Albania through her Counsel, and is in itself appropriate satisfaction. 196
Another form of satisfaction is an apology, which may be given verbally or in writing by an appropriate official or even the head of State. Expressions of regret or apologies were required or offered in several cases in order to provide for satisfaction. 197
Excessive demands may be made under the guise of ‘satisfaction’. Thus, there is a need to impose a limit on the measures that can be sought by way of satisfaction to prevent abuses, inconsistent with the principle of the equality of States. Satisfaction is not intended to be punitive in character, nor does it include punitive damages. Article 37(3) places limitations on the obligation to give satisfaction by setting out two criteria: first, the proportionality of satisfaction to the injury; second, the requirement that satisfaction should not be humiliating to the responsible State.
The decided cases and past international incidents do not concern diplomatic protection as such, though aliens may have been involved. However, there is no reason why the general principles applicable to satisfaction should not apply to appropriate cases of diplomatic protection. For example, discriminatory harming of aliens, where a particular nationality is targeted, may require satisfaction to the national State of the alien on the basis that there has been an affront to such State. At the same time it must be acknowledged that the injury to the State must be over and above the injury to the individuals involved.
Contribution to the Injury
Article 39 of the ILC's Articles on State Responsibility states:
In the determination of reparation, account shall be taken of the contribution to the injury by wilful or negligent action or omission of the injured State or any person or entity in relation to whom reparation is sought. 198
(p. 326) This principle is applicable in the case of reparation for injuries to aliens. The principle deals with the situation where damage has been caused by an internationally wrongful act of a State, which is accordingly responsible for the damage but where the injured State, or the individual victim of the breach, has materially contributed to the damage by some wilful or negligent act or omission. Its focus is on situations which in national law systems are referred to as ‘contributory negligence’, ‘comparative fault’, ‘faute de la victime’, etc. 199 It recognizes that the conduct of the injured State, or of any person or entity in relation to whom reparation is sought, should be taken into account in assessing the form and extent of reparation. This is consonant with the principle that full reparation is due for the injury—but nothing more—arising in consequence of the internationally wrongful act. It is also consistent with fairness as between the responsible State and the victim of the breach. In the La Grand Case (Merits) the ILC recognised that the conduct of the claimant State could be relevant in determining the form and amount of reparation. There Germany had delayed in asserting that there had been a breach and in instituting proceedings. The court noted ‘that Germany may be criticised for the manner in which these proceedings were filed and for their timing’, and stated that it would have taken this factor, among others, into account ‘had Germany's submission included a claim for indemnification’. 200 This was not a direct case of diplomatic protection but the general principle is illustrated by it. The relevance of the injured State's contribution to the damage in determining the appropriate reparation is widely recognized in the literature 201 and in State practice. 202 While questions of an injured State's contribution to the damage arise most frequently in the context of compensation, the principle is also relevant to other forms of reparation.
Not every action or omission which contributes to the damage suffered is relevant for this purpose. Only those actions or omissions may be taken into account which can be considered as wilful or negligent, ie which manifest a lack of due care on the part of the victim of the breach for his or her own property or rights. While the notion of negligent action or omission is not qualified, eg by a requirement that the negligence should have reached the level of being ‘serious’ or ‘gross’, the relevance of any negligence to reparation will depend upon the degree to which it has contributed to the damage as well as the other circumstances of the case.
(p. 327) The wilful or negligent action or omission which contributes to the damage may be that of the injured State or any person or entity in relation to whom reparation is sought. The situation where a State claims on behalf of one of its nationals in the field of diplomatic protection is clearly covered.
Countermeasures
As already stated, the principles applicable to countermeasures 203 in the law of diplomatic protection of nationals abroad are the same as for the law of State responsibility in general. For that reason, suffice it here to summarize the present law which is also reflected in Articles 49 to 53 of the Articles of the ILC on State Responsibility dealing with countermeasures. 204 There is no reason to consider the matter in greater detail. The commentary on these articles contains a full discussion of the law.
It is to be emphasized that the object of countermeasures taken by the injured State, in the present case the national State of the alien, is to induce the responsible State to comply with its international obligations in regard to the treatment of the former's national and, in the appropriate case, to provide reparation for the wrong. That purpose underlies the system of countermeasures. Moreover, the countermeasures envisaged in connection with the diplomatic protection of a national do not include the use of force and are confined to peaceful means.
On that basis, countermeasures are limited to the non-performance for the time being of international obligations of the State taking the measures towards the responsible State and must, as far as possible, be taken in such a way as to permit the resumption of performance of the obligations relating to the injured alien in question. However, the countermeasures taken do not affect obligations of the national State relating to the protection of fundamental human rights, obligations of a humanitarian character which may not be violated by way of reprisal, and other obligations under peremptory norms of international law. A State taking countermeasures is not relieved from fulfilling its obligations under any dispute settlement procedure applicable between it and the responsible State and to respect the inviolability of diplomatic or consular agents, premises, archives, and documents.
Most importantly, countermeasures must be commensurate with the injury suffered, taking into account the gravity of the internationally wrongful act and the violated rights in question. 205Furthermore, before taking countermeasures, an injured State must call on the responsible State to fulfil its international (p. 328) obligations relating to remedies which have allegedly not been observed and notify the responsible State of any decision to take countermeasures and offer to negotiate with that State. Notwithstanding these limitations however, the injured State may take such urgent countermeasures as are necessary to preserve its rights. Countermeasures may not be taken, and if already taken must be suspended without undue delay, if the internationally wrongful act has ceased and the dispute is pending before a court or tribunal which has the authority to make decisions binding on the parties. But this prohibition does not apply, if the responsible State fails to implement the dispute settlement procedures in good faith. Countermeasures must be terminated as soon as the responsible State has complied with its secondary obligations in relation to the internationally wrongful act. 206
Notes:
(1) 1969 Vienna Convention on the Law of Treaties, Article 60: see 1155 UNTS 331.
(2) Article 29 of the ILC's Articles on State Responsibility (2001): Crawford, The International Law Commission's Articles on State Responsibility (2002) 67, 194–5.
The ILC's Articles on State Responsibility and the commentary thereto, where relevant, have been relied on extensively and generously in this chapter, because the reasoning in them is sensible, and they reflect and clarify the current lex lata, or interpret it, in an acceptable manner.
The work of the UNCC cited in what follows relates to damage to property by an invading State in time of war. It is relevant where it incorporates general principles of law, especially concerning valuation of property, which are applicable in the areas of remedies in the law of (diplomatic) protection of nationals abroad as such.
The reports of two Special Rapporteurs of the ILC, Arangio-Ruiz and Crawford, on remedies in the law of State responsibility, may also be mentioned in particular: see especially Arangio-Ruiz, ‘Preliminary Report on State Responsibility’, 2 YBILC (1988) 11–43 (UN Doc A/CN.4/416 and Add 1), and ‘Second Report on State Responsibility’, 2 YBILC (1989) 3–56 (UN Doc A/CN.4/425 and Add 1); Crawford, ‘Third Report on State Responsibility’, UN Doc A/CN.4/507 (2000) 3 ff. These reports deal with important matters relating to remedies other than countermeasures. Countermeasures are discussed in Arangio-Ruiz, ‘Third Report on State Responsibility’, 2 YBILC (1991) at 11–36 (UN Doc A/CN.4/440 and Add 1), and ‘Fourth Report on State Responsibility’, 2 YBILC (1992) 6–42 (UN Doc A/CN.4/444 and Add 1–3); Crawford, ‘Fourth Report on State Responsibility’, UN Doc A/CN.4/517 (2001) 21–9. Reference may also be made on remedies in particular to the Report of the ILC (1991), Chapter VII; Report of the ILC (1992), Chapter III; Report of the ILC (1993), 54–83; Draft Articles on State Responsibility Adopted by the ILC on First Reading (1996); Crawford, op cit at the beginning of this footnote, Articles 41–50, 358–61, The ILC's Articles on the Responsibility of States for Internationally Wrongful Acts (2002), Crawford, ibid, Articles 28–39, 49–53, with commentary, 192–241, 284–301.
(3) See Article 30(a) of the ILC's Articles on State Responsibility (2001): Crawford, ibid 67, 196 ff.
(4) See Article 30(b) of the ILC's Articles on State Responsibility (2001): Crawford, ibid 67, 196, 198 ff.
(5) The breach of a primary obligation may result in the termination of that obligation, as where the injured State elects to terminate a treaty for material breach.
(6) See discussion in the commentary to Article 29 of the ILC's Articles: ibid 194 ff.
(7) See the Rainbow Warrior (1990), 20 UNRIAA 270, para 113.
(8) Ibid, para 114.
(9) See the Doane incident (1886), Moore, 6 Digest (1906) 345–6.
(10) For cessation and assurances and guarantees in general see the discussion in the commentary to Article 30 of the ILC's Articles on State Responsibility: Crawford (2002) (note 2 above) 196 ff.
(11) See Article 32 of the ILC's Articles on State Responsibility.
(12) (1927), PCIJ Series A, No 9 21.
(13) (1928), PCIJ Series A, No 17 47. The two judgments of the PCIJ in the Chorzòw Factory Case insofar as they deal with reparations as a general principle are the locus classicus for the explanation of the principle of reparation.
(14) See commentary to Article 31 of the ILC's Articles on State Responsibility: Crawford (2002) (note4 above) 202. See also P-M Dupuy, ‘Le fait générateur de la responsibilité internationale des états’, 188 Hague Recueil (1984) 94.
(15) (1990), 20 UNRIAA 267, para 109.
(16) See United States-Germany Mixed Claims Commission, Administrative Decision No II (1923), 7 UNRIAA 30 See also the Dix Case (1902), 9 UNRIAA 121, and the Canadian statement of claim following the disintegration of the Cosmos 954 Soviet nuclear-powered satellite over its territory in 1978: 18 ILM (1979) 907, para 23.
(17) See the Trail Smelter Case (1938, 1941), 3 UNRIAA 1931. See also A Hauriou, ‘Les dommages indirects dans les arbitrages internationaux’, 31 RGDIP (1924) 209 citing the Alabama Arbitration as the most striking application of the rule excluding ‘indirect’ damage.
(18) Security Council Resolution 687 (1991), para 16. This was a Chapter VII resolution, but it is expressed to reflect Iraq's liability ‘under international law … as a result of its unlawful invasion and occupation of Kuwait’. The United Nations Compensation Commission and the Governing Council have provided some guidance on the interpretation of the requirements of directness and causation under para 16. See eg Recommendations Made by the Panel of Commissioners Concerning Individual Claims for Serious Personal Injury or Death (Category “B” Claims), 14 April 1994, S/AC.26/1994/1, reproduced in 109 ILR 127, approved by Governing Council Decision 20, 26 May 1994, S/AC.26/Dec 20, reproduced in 109 ibid 622; Recommendations Made by the Panel of Commissioners Appointed to Review the Well Blowout Control Claim, 15 November 1996, S/AC.26/1996/5/Annex, paras 66–86, reproduced in 109 ibid 506–11, approved by Governing Council Decision 40, 17 December 1996 S/AC.26/Dec.40, reproduced in 109 ibid 669.
(19) As in Security Council Resolution 687 (1991), para 16.
(20) The Naulilaa Case (1928), 2 UNRIAA 1031.
(21) For comparative reviews of issues of causation and remoteness see eg Hart & Honoré, Causation in the Law (2nd edn, 1985); Honoré, ‘Causation and Remoteness of Damage’, in Tunc, (ed), 9 International Encyclopedia of Comparative Law, (1983) Part 1, Chap VII, 156; Zwiegert and Kötz, Introduction to Comparative Law (3rd edn. trans J A Weir, 1998), 601–27 (esp 609 ff); Markesinis, 2 The German Law of Obligations. The Law of Torts: A Comparative Introduction (3rd edn, 1997), 95–108, with many references to the literature.
(22) See eg the decision of the Iran-United States Claims Tribunal in Islamic Republic of Iran v United States of America (Cases A15(IV) and A24) (1996), 32 Iran-US CTR 115.
(23) Crawford (2002) (note 2 above) 204. The footnote numbers in this quotation are not the same numbers that occur in the original text. The content of the footnotes, save the numbers, on the other hand, corresponds to that of the footnotes in the original text.
(24) The Gabcíkovo-Nagymaros Project Case, 1997 ICJ Reports 55.
(25) (1925), 6 UNRIAA 164–5.
(26) See Article 32 of the ILC's Articles on State Responsibility and commentary thereto.
(27) See 213 UNTS 221. Other examples from the law of State responsibility in general are Article 32 of the Revised General Act for the Pacific Settlement of Disputes of 23 April 1949, 72 UNTS 101, and Article 30 of the 1957 European Convention for the Peaceful Settlement of Disputes, 30 UNTS 243.
(28) (1933), PCIJ Series A/B No 61, 249.
(29) Article 34 of the ILC's Articles on State Responsibility. See also the commentary to this Article for what follows.
(30) (1928), PCIJ Series A, No 17, 47.
(31) For example, in the Mélanie Lachenal Case (1954), 13 UNRIAA 130–1, compensation was accepted in lieu of restitution originally decided upon, the Franco-Italian Conciliation Commission having agreed that restitution would require difficult internal procedures.
(32) Crawford (2002) (note 2 above) 68, 213. What is written herein follows closely the commentary to Article 35: ibid 213 ff. Article 35 and the commentary thereto accurately reflect the lex lata.
(33) (1928), PCIJ Series A No. 17, 48.
(34) Ibid.
(35) The British Claims in the Spanish Zone of Morocco Case (1925), 2 UNRIAA 621–5, 651–742; the Religious Property Expropriated by Portugal Case (1920), 1 UNRIAA 7; the Walter Fletcher Smith Case (1929), 2 UNRIAA 918; the Heirs of Lebas de Courmont Case (1957), 13 UNRIAA 764.
(36) (1929), 2 UNRIAA 918. In the Greek Telephone Company Case, the arbitral tribunal, while ordering restitution, asserted that the responsible State could provide compensation instead for ‘important State reasons’: see Wetter and Schwebel, ‘Some Little Known Cases on Concessions’, 40 BYIL (1964) 221.
(37) See the Aminoil Arbitration (1982), 66 ILR 533.
(38) Examples of material restitution involving persons include the Trent (1861) and Florida (1964) incidents, both involving the arrest of individuals on board ships: Moore, 7 Digest (1906) 768, 1090–1; and the Diplomatic and Consular Staff Case in which the ICJ ordered Iran immediately to release every detained US national: 1980 ICJ Reports 44–5.
(39) The Giaffarieh incident (1886) which originated in the capture in the Red Sea by an Egyptian warship of four merchant ships from Massawa under Italian registry: Società Italiana per l'Organizzazione Internazionale Consiglio Nazionale delle Ricerche, 2 La prassi italiana di diritto internazionale (1st series, 1970) 901–2.
(40) See also the Hôtel Métropole Case (1950), 13 UNRIAA 219; the Ottoz Case (1950), 13 ibid 240; the Hénon Case (1951), 13 ibid 249.
(41) In the Buzau-Nehoiasi Railway Case, an arbitral tribunal provided for the restitution to a German company of shares in a Romanian railway company: (1939), 3 UNRIAA 1839.
(42) Eg, the Martini Case (1930), 2 UNRIAA 973.
(43) Thus the PCIJ held that Czechoslovakia was ‘bound to restore to the Royal Hungarian Peter Pázmány University of Budapest the immovable property claimed by it, freed from any measure of transfer, compulsory administration, or sequestration, and in the condition in which it was before the application of the measures in question’: the Peter Pázmány University Case (1933), PCIJ Series A/B, No 61, 249.
(44) In the Legal Status of Eastern Greenland Case, the PCIJ decided ‘that the declaration of occupation promulgated by the Norwegian Government on July 10th, 1931, and any steps taken in this respect by that Government, constitute a violation of the existing legal situation and are accordingly unlawful and invalid’ (1933) PCIJ Series A/B No 53 75. In the Free Zones of Upper Savoy and the District of Gex Case the PCIJ decided that France ‘must withdraw its customs line in accordance with the provisions of the said treaties and instruments; and that this regime must continue in force so long as it has not been modified by agreement between the Parties’: (1932), PCIJ Series A/B No 46, 172. These cases do not deal with diplomatic protection but state principles which are relevant to restitution in cases of diplomatic protection.
(45) (1933), 3 UNRIAA 1432.
(46) For restitution in cases of transnational State contract arbitration see the BP Arbitration (1974), 53 ILR 354; the Texaco Arbitration (1977), 53 ILR 507–8, para 109; the LIAMCO Arbitration (1977), 62 ILR 200.
(47) See for this idea Verzijl, International Law in Historical Perspective, Part VI (1973), 744.
(48) In State responsibility, in general, it may be suggested that the balance will invariably favour the injured State, where the failure to provide restitution would jeopardize its political independence or economic stability.
(49) Thus, Article 36 of the ILC's Articles on State Responsibility states:1. The State responsible for an internationally wrongful act is under an obligation to compensate for the damage caused thereby, insofar as such damage is not made good by restitution.2. The compensation shall cover financially assessable damage including loss of profits insofar as it is established.
(50) 1997 ICJ Reports 81.
(51) (1928), PCIJ Series A No 17, 27. See also the Chorzòw Factory Case (Jurisdiction), (1927), PCIJ Series A No 9, 21, and in general the Nicaragua Case (Merits), 1986 ICJ Reports 142.
(52) See Article 35(a) and (b) of the ILC's Articles on State Responsibility (2001).
(53) The Chorzòw Factory Case (Merits), (1928), PCIJ Series A No 17, 47–8.
(54) Ibid 147. See also the Lusitania Case where it was said: ‘The fundamental concept of “damages” is … reparation for a loss suffered; a judicially ascertained compensation for wrong. The remedy should be commensurate with the loss, so that the injured party may be made whole’ (1923), 7 UNRIAA 39 (emphasis in original).
(55) In the Velásquez Rodríguez (Compensation) Case the Inter-American Court of Human Rights held that international law did not recognize the concept of punitive or exemplary damages: IACHR Series C No 7 (1989) 52. See also Re Letelier and Moffit (1992), 88 ILR 727, concerning the assassination in Washington by Chilean agents of a former Chilean Minister: the compromis excluded any award of punitive damages, despite their availability under United States law. On punitive damages see alsoJorgensen, ‘A Reappraisal of Punitive Damages in International Law’, 68 BYIL (1997) 247; Wittich, ‘Awe of the Gods and Fear of the Priests: Punitive Damages in the Law of State Responsibility’, 3 Austrian Review of International and European Law (1998) 131.
(56) See on this tribunal which has developed a recognizable jurisprudence on the assessment and the valuation of property, eg Aldrich, The Jurisprudence of the Iran-United States Claims Tribunal (1998), Chapters 5, 6, and 12; Brower and Brueschke, The Iran-United States Claims Tribunal (1998), chapters14–18; C F Amerasinghe, ‘Issues of Compensation for the Taking of Alien Property in the Light of Recent Cases and Practice’, 41 ICLQ (1992) 22.
(57) See on the treatment of aliens, eg Aldrich (note 56 above) 242.
(58) ITLOS, Judgment of I July 1999, paras 176–7, <http://www.itlos.org>.
(59) See the payment by Cuba to the Bahamas for the sinking by Cuban aircraft on the high seas of a Bahamian vessel, with loss of life among the crew, 85 RGDIP (1981), 540; the payment of compensation by Israel for an attack in 1967 on the USS Liberty, with loss of life and injury among the crew, 85 ibid(1981) 562; and the payment by Iraq of $27 million for the 37 deaths which occurred in May 1987, when Iraqi aircraft severely damaged the USS Stark, 83 AJIL (1989) 561. The last two cases, albeit involving aliens, related to direct injuries to the State.
(60) The Aerial Incident of 3 July 1988 Case, 1996 ICJ Reports 9 (order of discontinuance following settlement). For the settlement agreement itself, see the General Agreement between Iran and the US on the Settlement of Certain ICJ and Tribunal Cases of 9 February 1996, which was made an Award on Agreed Terms by order of the Iran-US Claims Tribunal, dated 22 February 1996: 32 Iran-US CTR 213.
(61) (1923), 7 UNRIAA 32. Pecuniary compensation has been granted by international tribunals in several cases for moral injury to aliens: eg, the Chevreau Case (1923), 2 UNRIAA 1113; the Gage Case (1903), 10 UNRIAA 226; the Di Caro Case (1903), 10 UNRIAA 597; the Heirs of Jean Maninat Case (1903), 10 UNRIAA 55.
(62) (1923), 7 UNRIAA 40.
(63) (1923), ibid 35.
(64) Eg the Topaze Case (1903), 9 UNRIAA 389; the Faulkner Case (1926), 4 UNRIAA 71.
(65) Eg the William McNeil Case (1931), 5 UNRIAA 168.
(66) Shelton, Remedies in International Human Rights Law (1999), Chapters 8 and 9; Randelzhofer and Tomuschat (eds), State Responsibility and the Individual: Reparation in Instances of Grave Violations of Human Rights (1999), passim.
(67) Eg Velásquez Rodríguez v Honduras (1989), IACHR Series C No 4 26–7, 30–1; Papamichalapoulos v Greece (1995), ECHR Series A No 330-B at para 36.
(68) On these settlements see Lillich and Weston, International Claims: Their Settlement by Lump Sum Agreements (1975), and Weston, Lillich, and Bederman, International Claims: Their Settlement by Lump Sum Agreements, 1975–1995 (1999).
(69) Article 36(2) of the ILC's Articles on State Responsibility (2001) states that lost profits must be included in compensation.
(70) See See C F Amerasinghe, Local Remedies in International Law (2004), Chapter 5.
(71) (1928), PCIJ Series A No 17, 47.
(72) (1987), 15 Iran-US CTR 246. There are transnational arbitrations between aliens and host States as substitutes for local remedies in which damages including lost profits were awarded on the basis of the takings being unlawful: see the LIAMCO Arbitration (1982), 62 ILR 202–3 (Libya being the respondent); the Aminoil Arbitration (1982), 66 ILR 600 (Kuwait being the respondent).
(73) The Phillips Petroleum Co Iran Case (1989), 21 Iran-US CTR 122; the Starrett Housing Corp Case (1987), 16 ibid 201 ff.
(74) (1983), 4 ibid 106.
(75) (1987), 16 ibid 201.
(76) The establishment of full value does not affect the question whether full value is always due for a lawful taking of property as contrasted with an unlawful taking.
(77) (1977), 62 ILR 208–15.
(78) (1982), 66 ILR 518, 611.
(79) Ibid 608, 612–13.
(80) (1987), 15 Iran-US CTR 23.
(81) Ibid 50, para 304.
(82) Ibid 53, para 315.
(83) (1986), 25 ILM (1987) 632, 635.
(84) Ibid 634.
(85) See Westberg, ‘Compensation in Cases of Expropriation and Nationalization: Awards of the Iran-United States Claims Tribunal’, 5 ICSID Law Review (1990) 288–9.
(86) (1987), 14 Iran-US CTR, paras 36–60.
(87) (1986), 10 ibid, paras 275, 302, 304.
(88) (1983), 4 ibid 223–4.
(89) (1984), 5 ibid 227.
(90) (1985), 8 ibid 373.
(91) (1983), 4 ibid 96.
(92) Ibid 106–9.
(93) Ibid 109.
(94) (1989), 21 ibid 79.
(95) Ibid, paras 111–12. A technique was developed in this case to construct, in the absence of actual transactions, hypothetical values representing what a willing buyer and a willing seller might agree.
(96) (1984), 6 ibid 219 and (1987), 15 ibid 23, respectively.
(97) (1984), 6 ibid 226.
(98) (1987), 16 ibid 112.
(99) Ibid, para 277.
(100) (1986), 10 ibid 121.
(101) (1987), 14 ibid 223.
(102) See also Khan, The Iran-United States Claims Tribunal (1990) 244–5.
(103) (1986), 12 Iran-US CTR 3, paras 34–7.
(104) Award No 486–197-2 of 28 June 1990.
(105) (1987), 15 Iran-US CTR 189.
(106) Ibid, para 208.
(107) Ibid, para 219.
(108) Ibid, paras 217–26.
(109) Ibid, paras 227–32.
(110) Ibid paras 264–5. See also on the DCF method of valuation the Ebrahimi (Shahin Shaine) Case (1994), 30 ibid 170. Since 1945, valuation techniques have been developed to factor in different elements of risk and probability. See, for example, the detailed methodology developed by the UNCC for assessing Kuwaiti corporate claims (Report and Recommendations Made by the Panel of Commissioners Concerning the First Instalment of ‘E4’ Claims, 19 March 1999, S/AC.26/1999/4, paras 32–62) and claims filed on behalf of non-Kuwaiti corporations and other business entities, excluding oil sector, construction/engineering and export guarantee claims (Report and Recommendations Made by the Panel of Commissioners Concerning the Third Instalment of ‘E2’ Claims, 9 December 1999, S/AC, 26/1999/22). The discounted cash flow (DCF) method has gained some favour, especially in the context of calculations involving income over a limited duration, as in the case of wasting assets. Although developed as a tool for assessing commercial value, it can also be useful in the context of calculating value for compensation purposes. But difficulties can arise in the application of the DCF method to establish capital value in the compensation context. The method analyses a wide range of inherently speculative elements, some of which have a significant impact upon the outcome (eg discount rates, currency fluctuations, inflation figures, commodity prices, interest rates and other commercial risks). This has led tribunals to adopt a cautious approach to the use of the method. Hence, although income-based methods have been accepted in principle there has been a preference rather for asset-based methods, as have been described earlier in this chapter. In the context of claims for lost profits there is a corresponding preference for claims to be based on past performance rather than forecasts. For example, the UNCC guidelines on valuation of business losses in Decision 9, S/AC.26/1992/9, para 19 states: ‘The method of a valuation should therefore be one that focuses on past performance rather than on forecasts and projections into the future.’ A particular concern is the risk of double-counting which arises from the relationship between the capital value of an enterprise and its contractually based profits (eg the Ebrahimi (Shahin Shaine) Case (1994), 30 Iran-US CTR, para 159). For the above views, see the Commentary to Article 36(1) of the ILC's Articles on State Responsibility, para 26: Crawford (2002) (note 2 above) 227.
(111) In the Banco Nacional de Cuba Case (1981), 658 F 2d, 875 (2d 1981), however, net value was awarded.
(112) (1987), 15 Iran-US CTR 267–8. Net book value (ie the difference between the total assets of the business and total liabilities as shown on its books) as a method of valuation for capital loss had advantages and limitations. Its advantages are that the figures can be determined by reference to market costs, they are normally drawn from a contemporaneous record, and they are based on data generated for some other purpose than supporting the claim. Accordingly, net book value (or some variant of this method) has been employed to assess the value of businesses. The limitations of the method lie in the reliance on historical figures, the use of accounting principles which tend to undervalue assets, especially in periods of inflation, and the fact that the purpose for which the figures were produced does not take account of the compensation context and any rules specific to it. The balance sheet may contain an entry for goodwill, but the reliability of such figures depends on their proximity to the moment of an actual sale. On this see the Commentary on Article 36(1) of the ILC's Articles on State Responsibility, para 26: Crawford (2002) (note 2 above) 226–7.
(113) (1987), 15 Iran-US CTR 269–71.
(114) See Crawford (2002) (note 2 above) 226.
(115) Particularly in the case of lump sum settlements, agreements have been concluded decades after the claims arose. See eg the USSR-UK Agreement of 15 July 1986 concerning claims dating back to 1917 and the China-UK Agreement of 5 June 1987 in respect of claims arising in 1949. In such cases, the choice of valuation method was sometimes determined by availability of evidence.
(116) See Report and Recommendations Made by the Panel of Commissioners concerning Part Two of the First Instalment of Individual Claims for Damages above US$100,000 (Category ‘D’ Claims), 12 March 1998, UN Doc S/AC.26/1998/3, paras 48–9, where the UNCC considered a compensation claim in relation to the taking of the claimant's Islamic art collection by the Iraqi military personnel.
(117) Where share prices provide good evidence of value, they may be utilized, as in the INA Corporation Case (1985), 8 Iran-US CTR 373.
(118) Early claims recognized that even where a taking of property was lawful, compensation for a going concern called for something more than the value of the property elements of the business. The Mexican-American Claims Commission in rejecting a claim for lost profits in the case of a lawful taking stated that payment for property elements would be ‘augmented by the existence of those elements which constitute a going concern’: the Wells Fargo & Company Case (Decision No 22-B), American-Mexican Claims Commission (1926) 153. See also Propositions and Conclusions on Compensation for Business Losses: Types of Damages and their Valuation, Decision 9 of the UNCC Governing Council, 6 March 1992, UN Doc S/AC.26/1992/9, para 16.The footnote numbers in footnotes 115 to 118 are mine reflecting footnotes 584 to 587 in the Commentary on Article 36(1) of the ILC's Articles on State Responsibility.
(119) As pointed out earlier, the valuation of property, as such, and the establishment of value require similar techniques, whether the taking is lawful or unlawful.
Valuation of business enterprises and tangible assets is done on the basis of valuation principles which are accepted in the more sophisticated business world. Such principles are associated with accounting techniques. None of them are as scientific as the formulas for the law of gravity, as in virtually all of them there is a discretionary element involved. Below are given the meanings in general use and in general terms of some of the concepts which have been used in the application of valuation terms, particularly with reference to the discussion which follows in the text:
1. (1.) Fair market value. The price a willing buyer would pay a willing seller in circumstances in which each had good information, each deserved to maximize his financial gain, and neither was under duress or threat, the willing buyer being a reasonable businessman. It is to be noted that there are, nevertheless, questions as to what market is to be used, if, indeed, there is amarket, and whether the willing buyer is always a stereotype who will use a particular standard of valuation.
2. (2.) Going concern value. Value of a business as a functioning enterprise, not about to be liquidated or dissolved.
3. (3.) Net book value. The value on the books of account of the owner's equity in an enterprise, which is the amount that remains after deducting the total liabilities from the total assets of an enterprise (company) in the amounts that these items appear on the company's book of account. There may be some variation depending on accounting principles employed for keeping the books.
4. (4.) Net worth. This term generally has the same meaning as ‘net book value’.
5. (5.) Historic cost. This term is based on the purchase price or starting cost of assets and liabilities after depreciation and improvement have been accounted for and approximates to net book value. It is used especially in connection with tangible assets such as real estate.
6. (6.) Depreciated replacement value. The value of recreating the entire business in terms of its tangible assets, after such assets have been depreciated for years of use. This concept does not take into account intangibles and the earning power of the business. However, it is applied frequently to land, buildings, and tangible assets.
7. (7.) Reproduction cost. A term which is similar to the previous term, while being based on reproduction of the elements of a business.
8. (8.) Liquidation value. Value upon dissolving the operation, selling the assets piecemeal and converting them into cash, the liabilities having been accounted for in the process.
9. (9.) Dissolution value. This term is similar to the previous one.
10. (10.) Good will. This term represents an intangible asset or a collection of such assets, which according to most authorities defies clear definition. It is generally regarded as representing excess earnings but this usage is not uniform. Sometimes it is used to denote simply the ability to make a profit.
11. (11.) Discounted cash flow (DCF) method. This method of valuation briefly involves the following steps:
1. ((a)) making a forecast of the income and cash flow of the enterprise into the future for a given number of years and then calculating for each year the present value of the cash flow by using a discount factor or figure, which takes into account the perceived risks;
2. ((b)) adding up the values of all the assets of the enterprise which are expected to be present at the end of the projected period (the residual assets) and calculating the present value of that figure;
3. ((c)) adding up the present values of the cash flows for each year (see (a) above) and the present value of the assets expected to remain at the end of the whole period (see (b) above) and then deducting any debts or other liabilities expected to remain at the end of the period.
As will readily be realised, there are many discretionary choices which have to be made in using this method.
For more information of a basic nature on valuation concepts and principles reference should be made to such accounting and valuation books as Horn, Business Valuation Manual (1987); Smith, Corporate Valuation: A Business and Professional Guide (1988); and Davidson and Weil, Handbook of Modern Accounting (1983). Some assistance may also be gained from Weigel and Weston, ‘Valuation upon the Deprivation of Foreign Enterprises: A Policy Oriented Approach to the Problem of Compensation Under International Law’ in Lillich (ed), 1 The Valuation of Nationalized Property in International Law (1972) 3 and especially 16–23; Goldman and Paxman, ‘Real Property Valuation in Argentina, Chile and Mexico’ in Lillich (ed), 2 ibid (1973) 129 and especially 146–63.
(120) See Article 36(2) of the ILC's Articles on State Responsibility which recognizes this: Crawford (2002) (note 2 above) 218. This section on lost profits as compensation follows closely the commentary to Article 36(2) of the ILC's Articles on State Responsibility: Crawford, ibid 228 ff.
(121) (1902), 9 UNRIAA 63, where lost profits resulting from the seizure of an American whaler were assessed and awarded.
(122) (1900), Moore, 2 International Arbitrations 1865.
(123) (1863), Moore, 4 ibid 3405.
(124) (1861), de Lapradelle and Politis, 2 RAI 78.1861), de Lapradelle and Politis, 2 RAI 78.
(125) (1963), 35 ILR 187, 189.
(126) (Merits, 1928) PCIJ Series A No 17 47–8, 53.
(127) (1977), 62 ILR 140.
(128) The Amco Asia Corp and Others Case, First Arbitration (1984), Annulment (1986), Resubmitted Case (1990), 1 ICSID Reports 377; the AGIP Spa Case (1999), 1 ibid 306. In the Sedco Inc Case (1987), 15 Iran-US CTR 23, what were lost profits in fact were assessed as damnum emergens.
(129) (1930), 2 UNRIAA 1099.
(130) Resubmitted Case (1990), 1 ICSID Reports 569.
(131) Report and Recommendations Made by the Panel of Commissioners Concerning the First Instalment of ‘E3’ Claims (17 December 1998), UN Doc S/AC.26/1998/13 para 147.
(132) See ibid para 157, and Report and Recommendations Made by the Panel of Commissioners Concerning the Fourth Instalment of ‘E3’ Claims (30 September 1999), UN Doc S/AC.26/1998/14 para 126.
(133) Ibid para 140.
(134) Whiteman, 3 Damages 1837 states: ‘in order to be allowable, prospective profits must not be too speculative, contingent, uncertain and the like. There must be proof that they were reasonably anticipated; and that the profits anticipated were probable and not merely possible. ’
(135) (1934), PCIJ Series A/B No 63.
(136) (1990), 4 ICSID Reports 245.
(137) (1875), Moore, 2 International Arbitrations 1421.
(138) (1794), Moore, 5 International Adjudications 113.
(139) (1928), PCIJ Series A No 17.
(140) (1922), 1 UNRIAA 307.
(141) For the approach of the UNCC in dealing with loss of profits claims associated with the destruction of businesses following the Iraqi invasion of Kuwait, see Report and Recommendations Made by the Panel of Commissioners Concerning the First Instalment of ‘E4’ Claims, 19 March 1999, UN Doc S/AC.26/1999/4, paras 184–7.
(142) First Arbitration (1984), Annulment (1986), Resubmitted Case (1990), 1 ICSID Reports 377.
(143) 19 March 1999, UN Doc S/AC.26/1999/6.
(144) (1900), Whiteman, 3 Damages 1704, 1860.
(145) The Gould Marketing Inc Case (1984), 6 Iran-US CTR 272; the Sylvania Technical Systems Case (1985), 8 Iran-US CTR 298.
(146) (1900), Moore, 2 International Arbitrations 1865.
(147) (1930), 2 UNRIAA 1079.
(148) (1963), 35 ILR 136.
(149) (1977), 62 ILR 140.
(150) First Arbitration (1984), Annulment (1986), Resubmitted Case (1990), 1 ICSID Reports 377.
(151) See the Sylvania Technical Systems Case (1985), 8 Iran-US CTR 298.
(152) On the connection between lost profits and interest see the section below on Interest.
(153) Report and Recommendations on the First Instalment of ‘E2’ Claims, 3 July 1998, UN Doc S/AC.26/1998/7, paras 133, 153, 249, 228, 214, 225, and 183, respectively.
(154) (1991), 26 Iran-US CTR 165–7, 168–9.
(155) See Crawford (2002) (note 2 above) 68 and 235.
(156) Crawford, ibid 235 ff. What follows here borrows from the commentary.
(157) (1926), 4 UNRIAA 134.
(158) (1966), 30 ILR 220.
(159) (1923), 7 UNRIAA 66.
(160) (1923), PCIJ Series A, No 1, 32. The Court recognized the French claim for an interest rate of 6 percent as fair, having regard to the existing financial situation of the world and the conditions prevailing for public loans.
(161) See the Lighthouses Case (1956), 12 UNRIAA 252–3.
(162) Saint Vincent and the Grenadines v Guinea), Judgment of 1 July 1999 para 173, <http://www.itlos.org>.
(163) (1987), 16 Iran-US CTR 289–90.
(164) See the detailed analysis in the McCollough & Co Inc Case (1986), 11 Iran-US CTR 26–31, Chamber Three.
(165) Award of Interest, Decision 16, 4 January 1993, UN Doc S/AC.26/1992/16.
(166) (1984), 7 Iran-US CTR 191–2. The tribunal cited Whiteman, 3 Damages 1997.
(167) The Anaconda-Iran, Inc. Case (1986), 13 Iran-US CTR 235. See also Aldrich (note 56 above) 477–8.
(168) (1924), 2 UNRIAA 650. However, in the Aminoil Arbitration (1982), 66 ILR 613, para 178(5), a transnational arbitration, the interest awarded was compounded for a period without any reason being given. This interest compounded accounted for more than half of the total final award.
(169) Mann, ‘Compound Interest as an Item of Damage in International Law’, in Further Studies in International Law (1990) 383.
(170) The Compañía des Desarrollo de Santa Elena SA Case (2000), 5 ICSID Reports 177 ff, paras 103–5, Award of 1 Feb. 2000.
(171) Using the date of the breach as the starting date for calculation of the interest term is problematic as there may be difficulties in determining that date, and many legal systems require a demand for payment by the claimant before interest will run. The date of formal demand was taken as the relevant date in the Russian Indemnity Case (1921), 11 UNRIAA 242, by analogy with the general position in European legal systems. In any case, failure to make a timely claim for payment is relevant in deciding whether to allow interest.
(172) Islamic Republic of Iran v United States of America (Case No A-19) (1987), 16 Iran-US CTR 290.
(173) Awards of interest have also been envisaged by international human rights courts and tribunals, even though the compensation practice of these bodies is relatively cautious and the claims are almost always unliquidated. Interest is awarded, for example, to protect the value of an award of damages payable by instalments over time: the Velásquez Rodríguez Case (Compensation), IACHR, Series C, No 7 (1990), para 57; and the Papamichalapoulos v Greece (1995), ECHR Series A, No 330-B, para 39, where interest was payable only in respect of the pecuniary damages awarded; see further Shelton (note 66 above) 270–2.
In their more recent practice, it would appear, national compensation commissions and tribunals have also generally allowed for interest in assessing compensation. However in certain cases of partial lump-sum settlements, claims have been expressly limited to the amount of the principal loss, on the basis that with a limited fund to be distributed, claims to principal should take priority. See eg the Foreign Compensation (People's Republic of China) Order 1987 (UK), section 10, giving effect to a Settlement Agreement of 5 June 1987, UKTS No 37 (1989). Some national court decisions have also dealt with issues of interest under international law: McKesson Corporation v Islamic Republic of Iran (2000), 116 F supp 2d 13 (District Court, DC). However, more often questions of interest are dealt with as part of the law of the forum.
(174) The Chorzów Factory Case (Merits, 1928), PCIJ Series A, No 17 28.
(175) The Chorzów Factory Case (Merits), (1928), ibid.
(176) Frelinghuysen v US ex rel Key, 110 US 63 (1884); US ex rel Boynton v Blaine, 139 US 306 (1891); Heirs of Oswald v Swiss Government, 3 AD (1925–6) 244; US v La Abra Silver Mining Co, 175 US 423 (1899); Great Western Insurance Co v US, 19 Ct Cl 206 (1884); Hackworth, 5 Digest 763 ff, and Feller, The Mexican Claims Commissions (1935) 84 and the authorities there cited at note 6.
(177) In Administrative Decision No V (1924), 7 UNRIAA 152, the umpire recognized this rule while stating that in reality States distribute the proceeds of awards on the basis that the interests of individuals are involved. The rule is recognized in international agreements between States covering lump-sum settlements of the claims of aliens: see Bederman, ‘Lump Sum Agreements and Diplomatic Protection’ in ILA, Report of the Seventieth Conference (2002) 237. If there is a duty incumbent upon the alien's national State to transfer the compensation received to the extent of what covers the injury to the alien, the issue would arise, as in the case of a duty to protect, to whom this duty is owed.
(178) Moore, 6 Digest 1012 ff; Borchard, The Diplomatic Protection of Citizens Abroad (1915) 366 ff; and Whiteman, 1 Damages 282.
(179) See C F Amerasinghe (note 70 above) chapter 5, for a discussion of the requirement of a breach of international law in contract claims.
(180) Report of the ILC (2006), UN Doc A/61/10, 2006, 94 (see <http://www.un.org>). The footnotes in the quotation which follow (181–92) are footnotes 277 to 288 in the original and are only renumbered, while their context and form are as they appear in the ILC's Report.
(181) (1924), PCIJ, Series A No 2, 2.
(182) 1970 ICJ Reports 344.
(183) Chorzów Factory Case (Merits), (1928), PCIJ Series A, No 17, 28.
(184) See See Bolleker-Stern, Le Préjudice dans la Théorie de la Responsibilité Internationale (1973).
(185) 7 UNRIAA, 119, 152 (emphasis added).
(186) Civilian War Claimants Association v R [1932] AC 14; Lonrho Exports Ltd v Exports Credit Guarantee Department [1996] 4 All ER, 687.
(187) American Law Institute, Restatement of the Law, Third, Foreign Law of the United States (1987) at § 902, 348–9; Distribution of the Aslop Award, Opinion of J Reuben Clark, Department of State, cited in Hackworth, 5 Digest of International Law, 766, B Bollecker-Stern (note 184 above) 108.
(188) Geck ‘Diplomatic Protection’ in 1 EPIL (1992) 1058; Bederman, ‘Interim Report on Lump Sum Agreements and Diplomatic Protection’, ILA, Report of the Seventieth Conference (2002) 230; Lillich ‘The United States-Hungarian Claims Agreement of 1973’, 69 AJIL (1975) 534; R Lillich and Weston, International Claims: Their Settlement by Lump-Sum Agreements (1975).
(189) 7 UNRIAA, 119, 152.
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