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Concession Agreements and Nationalization

Published online by Cambridge University Press:  06 June 2017

Kenneth S. Carlston
Kenneth S. Carlston*
Affiliation:
University of Illinois College of Law
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Extract

It is the purpose of this article to investigate the status of concession agreements in the light of the rules of international law bearing on the power of a state to nationalize property. It is a continuation of an earlier article which explored the nature and function of the concession agreement in the national and international economies. The first article rested on the assumption that legal rules could not be fully understood or evaluated without a fairly clear understanding of the social facts which they were designed to regulate.

Type
Research Article
Information
American Journal of International Law , Volume 52 , Issue 2 , April 1958 , pp. 260 - 279
Copyright
Copyright © American Society of International Law 1958

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References

1 Carlston, K. S., ‘’ International Bole of Concession Agreements,'’ 52 Northwestern TJ. Law Rev. 618 (1957).Google Scholar

2 Suggested in Hyde, J. N., ‘’ Permanent Sovereignty over Natural Wealth and Resources,” 50 A.J.I.L. 854, 862 (1956).Google Scholar

3 See Huang, T. T. F., ‘’ Some International and Legal Aspects of the Suez Canal Question,” 51 A.J.I.L. 277, 289-296 (1957);Google Scholar K. S. Carlston, note 1 supra.

4 D. P. O'Connell, The Law of State Succession 107 (1956). While others would emphasize the factor of discretionary grant (Huang, note 3 supra, at 292; P. Develle, La Concession en Droit International Public 56 (1936); Germany v. Reparations Commission, Award of M. Beichmann of Sept. 3, 1924, 1 Rep. Int. Arb. Awards 429, 478-479 (1948)), it would seem that such quality is merely a necessary condition for elaborating and defining the system of rights and duties comprised in the agreement.

5 Cedroni (Italy) v. Guatemala, Award of Oct. 12, 1898. H. La Fontaine, Pasicrisie Internationale 606 (1902).

6 International Fisheries Co. (IT. S.) v. Mexico, , General Claims Commission, TJ. S.Mexico, 1931, 4 Rep. Int. Arb. Awards 691, 700 (1951).Google Scholar

7 Delagoa Bay and East African Railway Company (TJ. S.) v. Portugal, H. La Fontaine, Pasicrisie Internationale 398 (1902); 3 Whiteman, Damages in International Law 1694-1703 (1943).

8 La Fontaine H., op. cit. supra, at 402; 3 Whiteman, op. cit. supra, at 1698.

9 Company General of the Orinoco (France) v. Venezuela, Opinion of Umpire Plumley, July 31, 1905, Ralston's Report, French-Venezuelan Mixed Claims Commission of 1902, pp. 244 at 322, 360, 365, 367 (1906).

10 Robert H. May (U. S.) v. Guatemala, Award of Nov. 16, 1900, 1900 Papers Relating to the Foreign Relations of the United States 659, 672.

11 El Triunfo Company (U. S.) v. Salvador, Award of May 8, 1902, 1902 ibid. 859, 862 at 871.

12 International Fisheries Co. (U. S.) v. Mexico, General Claims Commission, V. S.Mexico, 4 Rep. Int. Arb. Awards 691, 700, 714-714 (1951).

13 P. W. Shufeldt (TT. S.) v. Guatemala, Award of July 24, 1930, Department of State, Arb. Ser. No. 3, pp. 849, 876-877 (1932); 24 A.J.I.L. 799 (1930).

14 Judgment of July 22, 1952, [1952] I.C.J. Rep. 93; 46 A.J.I.L. 737 (1952).

15 [1952] I.C.J. Rep. 151 at 162, 166.

16 H. Milligan (U. S.) v. Peru, U. S.-Peruvian Claims Commission under Convention of December 4, 1868, 2 Moore, International Arbitrations 1643-1644 (1898) (ex gratia); North and South American Construction Co. (V. S.) v. Chile, 3 ibid. 2318; George L. Hammeken (U. S.) v. Mexico, Mexican Claims Commission under Convention of July 4, 1868, 4 ibid. 3470-3472 (injury to rights and immunities of concessionaire by governmental authorities); Central and South American Telegraph Co. v. Chile, U. S.-Chilean Claims Commission under Convention of August 7, 1892, 3 Whiteman, op. cit. note 7 supra, at 1679 (interference by government authorities); Dr. Marion A. Cheek (U. S.) v. Siam, Award of March 21, 1898, 5 Moore, op. cit. 5069 at 5071; Punchard, McTaggart, Lowther and Company (Great Britain) v. Colombia, Award of Oct. 17, 1899, H. La Fontaine, op cit. note 7 supra, at 544; Martini & Co. (Italy) v. Venezuela, Ralston's Report, Venezuelan Arbitrations of 1903, Sen. Doc. No. 316, 58th Cong., 2d Sess. 819 (1904); Rudloff (V. S.) v. Venezuela,, U. S.-Venezuelan Claims Commission, ibid. 182; Aboilard (France) v. Haiti, Award of July 26, 1905, 12 Rev. Gen. de Droit Int. Public, Documents 12-17 (1905); Landreau (U. S.) v. Peru, Award of Oct. 26, 1922, 1 Rep. Int. Arb. Awards 352, 356 (1948), 17 A.J.I.L. 157 (1923); The Mavromattis Jerusalem Concessions, P.C.I.J., Judgment of March 26, 1925, Pub. Ser. A, No. 5 (governmental action interfering with exclusivity of a concession; admission by respondent government of lack of power under treaty to effect expropriation). Diplomatic settlement: Henry W. Thurston (IT. S.) v. Dominican Republic, Award of May 20, 1898 (limited to determination of value of property of concession), 1898 Papers Relating to the Foreign Relations of the United States 274-291; George D. Emery Co. (U. S.) v. Nicaragua, 1909 ibid. 460, 463, 3 Whiteman, op. cit. note 7 supra, at 1643-1645; United States and Venezuela Co. (U. S.) 1). Venezuela, 1909 Papers Relating to the Foreign Relations of the United States 624; TurnbuU Manoa Company (Limited) and Orinoco Company (Limited) (U. S.) v. Venezuela, ibid. 626-628, see Ralston's Report, op. cit. at 200; Charles J. Harrah (U. S.) v. Cuba (1903), 3 Whiteman, op. cit. at 1718-1720.

17 Lena Goldfields, Ltd. v. U.S.S.R., Award of Sept. 3, 1930, 36 Cornell Law Q. 42, 50 (1950).

18 A. Nussbaum, “The Arbitration between the Lena Goldfields, Ltd. and the Soviet Government,” ibid. 30, 38-39 (1950); see also Czechoslovakia v. Radio Corporation of America, Award of April 1, 1932, 30 A.J.I.L. 523, 531 (1936) (rule pacta sunt servanda applies to public law agreements).

19 D. P. O'Connell, The Law of State Succession 129, 131-132 (1956).

20 23 A.J.I.L. Spec. Supp. 171 (1929); see also C. Eagleton, The Responsibility of States in International Law 165 (1928); 2 Hyde, International Law Chiefly as Interpreted and Applied by the United States 990-991 (2d rev. ed., 1945); E. M. Borchard, The Diplomatic Protection of Citizens Abroad 292-294, 336 (1915); C. Rousseau, Droit International Public 370-371 (1953) (state becomes responsible upon enactment of legislation violating its international obligations).

21 J. B. Scott, The Hague Conventions and Declarations of 1899 and 1907, p. 489 (1915).

22 North and South American Construction Co. (U. S.) v. Chile, 3 Moore, International Arbitrations 2318 (1898); see also Rudloff (IT. S.) v. Venezuela, U. S.-Venezuelan Claims Commission, Ralston's Report, op. cit. note 16 supra, at 182. C. De Visscher states that responsibility for the cancellation of a concession contract arises if there is a failure to arbitrate the issues in question pursuant to an arbitration clause in the contract. Theory and Reality in Public International Law 194 (1957).

23 Czechoslovakia v. Radio Corporation of America, Award of April 1, 1932, 30 A.J.I.L. 523, 534 (1936).

24 See the brilliant comparative law study of J. P. Dawson, Unjust Enrichment, A Comparative Analysis (1951).

25 Landreau (U. S.) v. Peru, Award of Oct. 26, 1922, 1 Rep. Int. Arb. Awards 352, 364.

26 D. P. O'Connell, op. cit. note 19 supra, at 131-132 (1956).

27 Jablonsky v. German Reich, June 24, 1936, 1935-1937 Annual Digest and Reports of Public International Law Cases, Cas. No. 42, p. 140 (1941).

28 Case concerning Certain German Interests in Polish Upper Silesia (The Merits), May 25, 1926, P.C.I.J., Pub. Ser. A, No. 7, p. 42, see also p. 22; Case Concerning the Factory of Chorzow, July 26, 1927, Hid. No. 9, p. 27.

29 Marguerite de Joly de Sabla (TJ. S.) v. Panama, TJ. S.-Panama General Claims Commission, Award of June 20, 1933, Report of Bert L. Hunt, Department of State, Arb. Ser. No. 6, 1934, p. 432 (1934), 28 A.J.I.L. 602 (1934); Walter Fletcher Smith (U. S.) v. Cuba, Award of May 2, 1929, 24 A.J.I.L. 384 (1930).

30 1 Rep. Int. Arb. Awards 309, 338 (1948); 17 A.J.I.L. 362 (1923).

31 E.g., note 20 supra.

32 1 Guggenheim, Traité de Droit International Public 336 (1953).

33 1 Sibert, Traité de Droit International Public 515 (1951) ; 1 Hyde, International Law Chiefly as Interpreted and Applied by the United States 710-711 (2d rev. ed., 1945); C. Eousseau, Droit International Public 372 (1953); 2 Scelle, Précis de Droit des Gens 113 (1934); Herz, J. H., “Expropriation of Foreign Property,” 35 A.J.I.L. 243 (1941);Google Scholar Hyde, C. C., “Confiscatory Expropriation,” 32 A.J.I.L. 758, 760-761 (1938),Google Scholar and “Compensation for Expropriations,” 33 ibid. 108, 112 (1939) (questions legality of power to expropriate if adequate compensation cannot be given aliens).

34 Hague Conventions of 1899 (II) and 1907 (IV) Respecting the Laws and Customs of War on Land, Regulations, Art. 46. J. B. Scott, op. cit. note 21 supra, at 123, 129, 131 (1915).

35 Lauterpacht, H., “Codification and Development of International Law,” 49 A.J.I.L. 17, 19 (1955).’Google Scholar

36 J. Donnedieu de Vabres, L ‘Evolution de la Jurisprudence Française en Matiére de Conflit de Lois 553-561, quotation at 561 (1938) (translation). In the memorial of Switzerland in the Losinger & Co. case, it was contended: “ In a wide sense, the notion of international obligations, or engagements, covers not only those existing directly between States, but also those existing between States and private individduals protected by their governments, when such engagements produce international repercussions and when, by their origin or their effects, they extend in reality to several countries.” P.C.I.J., Pub. Ser. C, No. 78, p. 128.

37 4 Niboyet, Traité de Droit International Privé 630-633, quotation at 632-633 (1947) (translation). “There is no reason why a municipal court which may thus consider international law incidentally, should not also apply it directly so as to secure the submission of a single and indivisible instrument under a single legal system.” Mann, F. A., “The Law Governing State Contracts,” 21 British Year Book of International Law 11, 22 (1944).Google Scholar

38 H. Lauterpacht, Recognition in International Law 420 (1947); 1 Oppenheim (ed. H. Lauterpacht), International Law 270 (8th ed., 1955); F. Morgenstern, “Recognition and Enforcement of Foreign Legislative, Administrative and Judicial Acts which are Contrary to International Law,” 4 Int. Law Q. 326, 329 (1951); B. A. Wortley, “Expropriation in International Law,” 33 Grotius Society Transactions 25, 30, 31 (1947); Wolff v. Oxholm, [1817] 6 M & S 92; In re Fried Krupp A/G, [1917] 2 Ch. 188; Confiscation of Property of Sudeten Germans Case, Dec. 7, 1948, 1948 Annual Digest and Reports of Public International Law Cases, Cas. No. 12, pp. 24-25 (1953); Anglo-Czechoslovak and Prague Creditbank v. Janssen, [1943] V.L.R. 185; N. V. de Bataafsche Petroleum Maatschappij & Ors. v. The War Damage Commission, Singapore Court of Appeal, April 13, 1956, 22 Malayan L. J. 155 (1956); 51 A.J.I.L. 802 (1957).

39 1 Oppenheim, op. cit., at 269, note.

40 O'Connell, D. P., “A Critique of Iranian Oil Litigation,” 4 Int. & Comp. Law Q. 267 (1955);Google Scholar see, however, Delson, B., “Nationalization of the Suez Canal Company: Issues of Public and Private International Law,” 57 Columbia Law Bev. 755, 776-778 (1957).CrossRefGoogle Scholar

41 Anglo-Iranian Oil Co. Ltd. v. Jaffrate, [1953] 1 Weekly L. B. 246, 259; 47 A.J.I.L. 325 (1953); 1953 Int. Law Bep. 316 (Lauterpacht). In a later decision commenting on the Rose Mary case, the court stated that it did not ‘ ‘ challenge the correctness of the decision … upon the facts'’ but that it did not wish to go so far as to say that ‘ ‘ confiscation without adequate compensation is per se a ground for refusing recognition to foreign legislation.” In re Claim by Helbert Wagg & Co. Ltd., [1956] 2 Weekly L. B. 183, 195-197, [1956] 1 Ch. 323, 346-349; 50 A.J.I.L. 683 (1956).

42 J Anglo-Iranian Co. v. Societa Unione Petrolifera Orientale di Roma, 67 II Gazzetino, No. 61, p. 4, abstracted in O'Connell, D. P., note 40 supra , at 283-284; and 47 A.J.I.L. 509 (1953)Google Scholar.

43 Anglo-Iranian Co. Ltd. v. Idemitsu Kosan Co. (TO) 2, 942 (1953), 1953 Int. Law Rep. 305; abstracted in O'Connell, loc. cit. at 280-283.

44 Rosenberg v. Fischer, 6 Annuaire Suisse de Droit International 139 (1949), quoted in D. P. O'Connell, note 40 supra, at 292, note 65.

45 E. Sarraute and P. Tager, “Hier et aujourd'hui. Les effects en France des nationalisations éitrangéres,” 79 Journal du Droit International (Clunet) 1138, 1148 (1952).

46 Q. A. van Hecke, ‘’ Confiscation, Expropriation and the Conflict of Laws,'’ 4 Int. Law Q. 345 (1951) (reviewing English, French, Italian, United States, Netherlands, Austrian and Belgian cases); J.E.S. Fawcett, “Some Foreign Effects of Nationalization of Property,” 27 British Year Book of International Law 356-358 (1950); Seidl- Hohenveldern, “Extraterritorial Effects of Confiscations and Expropriations,” 49 Michigan Law Bev. 851 (1951); id., “Probleme des internationalen Konfiskations- und Enteignungsrechtes,” 83 Journal du Droit International (Clunet) 380 (1956), answering W. Lewald, “Das Internationale Enteignungsrecht in Lichte neuen Schrifttums,” 21 Babel's Zeitschrift fuer auslaendisches und Internationales Privatrecht 119 (1956).

47 Beitzke, “Nochmals zur Konfiskation von Mitgliedschaftsrechten,” 11 Juristen Zeitung 673, 674 (Tuebingen, Germany, 1956) (translation, italics supplied).

48 44 Annuaire de 1'Institut de Droit International (II) 279 et seq. (1952).

49 Ibid. 283, translation; see also J.E.S. Fawcett, note 46 supra, at 355-356.

50 See bibliographies in S. Friedman Expropriation in International Law (1953) ; Domke, M., “American Protection against Foreign Expropriation in the Light of the Suez Canal Crisis,” 105 U. Pa. Law Rev. 1033, 1041, note 51 (1957).CrossRefGoogle Scholar For other studies of the problem of nationalization, see G. Yiénot, Nationalisations Etrangéres et Intéréts Français (1953); Rousseau, C., Droit International Public 370 et seq. (1953);Google Scholar Olmstead, C. J., “Nationalization of Foreign Property Interests, Particularly Those Subject to Agreements with the State,” 32 N.Y.TJ. Law Q. Rev. 1122 (1956);Google Scholar Doman, N. R., “Postwar Nationalization of Foreign Property in Europe,” 48 Columbia Law Rev. 1125 (1948);CrossRefGoogle Scholar Drucker, A., “Compensation for Nationalized Property: The British Practice,” 49 A.J.I.L. 477 (1955);Google Scholar Re, E. D., “Nationalization of Foreign Owned Property,” 36 Minn. Law Rev. 323 (1952);Google Scholar Rubin, S. J., “Nationalization and Compensation: A Comparative Approach,” 17 U. Chicago Law Rev. 458 (1950).Google Scholar

51 See discussion, notes 27-34 supra.

52 Kunz, J. L., “The Mexican Expropriations,” 17 N.Y.TJ. Law Q. Rev. 327 (1940).Google Scholar

53 9 Dept. of State Bulletin 230 (1943).

54 Exchange of notes of Nov. 19, 1941, 55 Stat. 1554 (1941-1942) ; Convention of Nov. 19, 1941, 56 Stat. 1347 (1942); L. II. Woolsey, , “The United States-Mexican Settlement,” 36 A.J.I.L. 117 (1942);Google Scholar II. Briggs, W., “The Settlement of Mexican Claims Act of 1942,” 37 ibid. 222 (1943).Google Scholar

55 C. Rousseau, Droit International Public 372 (1953).

56 A. W. Ford, The Anglo-Iranian Oil Dispute of 1951-1952, p. 268 (1954); I.C.J., Anglo-Iranian Oil Co. Case, Pleadings, Oral Arguments, Documents, p. 30.

57 T A. W. Ford, op. cit. at 233; I. C. J., op. cit. supra at 20.

58 Note 14 supra.

59 Hearings before the Antitrust Subcommittee (Subcommittee No. 5) of the Committee on the Judiciary, House of Representatives, 84th Cong., 1st Sess., Pt. II, May 23-June 6, 1953, Serial No. 3, pp. 1563, 1644.

60 N. Y. Times, Oct. 30, 1954, p. 6. col. 3.

61 A brief history and analysis of some of the legal issues involved in the dispute will be found in K. S. Carlston, The Process of International Arbitration 116-126, 176-184 (1946); see F. Deák, The Hungarian-Rumanian Land Dispute (1928); Some Opinions, Articles and Reports Bearing upon the Treaty of Trianon and the Claims of the Hungarian Nationals with regard to their Lands in Transylvania (2 vols., 1929).

62 See K. S. Carlston, op. cit. supra, at 181.

63 Note 28 supra.

64 Agreements Concluded at the Hague Conference, January, 1930, p. 373 (1930); see Pajzs, Czáky, Esterhazy Case, Judgment of Dec. 16, 1936, P.C.I.J., Ser. A/B, No. 68.

65 Notes 38, 50 supra.

66 See selection of a minority of writers noted in J. L. Kunz, note 52 supra, at 337.

67 1 Oppenheim (ed. H. Lauterpacht), International Law 352 (8th ed., 1955); Draft Resolutions on the International Effects of Nationalization, Art. 11, 43 Annuaire de 1'Institut de Droit International (I) 69 (1950); A. Verdross, Voelkerrecht 291 (3d ed., 1955) (emphasizing confiscations in East European states and requirement, in any event, of full compensation for expropriation of “special assets“).

68 League of Nations, Conference for the Codification of International Law, Bases of Discussion, Vol. 3, C. 75. M. 69.1929. V. at pp. 30, 33. has said that:

69 Individual opinion in Case of Certain Norwegian Loans, Judgment of July 6th, 1957, [1957] I. C. J. Rep. 9, 37.

70 P. Reuter, ‘’ Quelques remarques sur la situation juridique des particuliers en Droit international public,” 2 La Technique et les Principes du Droit International Public, Etudes en l'Honneur de Georges Scelle 535, 543 (1950); see note 20 supra.

71 Case of the Free Zones of Upper Savoy and the District of Gex (Second Phase), Order of Dec. 6th, 1930, P.C.I.J., Pub. Ser. A, No. 24, p. 12: Treatment of Polish Nationals in Danzig, Advisory Opinion of Feb. 4, 1932, ibid., Ser. A/B, No. 44, p. 24.

72 Pennsylvania Coal Co. v. Mahon, 260 U. S. 393, 416 (1922).

73 Cheng, B., “Expropriation in International Law,” 21 The Solicitor 98, 100 (1954).Google Scholar

74 Note 14 supra, at 162.

75 Colombian-Peruvian Asylum Case, Judgment of Nov. 20, 1950, [1950] I. C. J. Rep. 266, 277; 45 A.J.I.L. 179 (1951).

76 G. Viénot, op. cit. note 50 supra, at 273.

77 Friedman, op. cit. note 50 supra, at 220-21, 157; with respect to confiscatory breach, see note 20 supra.

78 43 Annuaire de l'Institut de Droit International (I) 67 (1950). No final decision was taken by the Institute on this matter, action being postponed to a later date. 44 ibid. (II) 324 (1952); cf. the more restrictive view of Dr. F. V. Garcia Amador in his Second Report on International Responsibility of States to the International Law Commission, Art. 7, U. N. Doc. A/CN. 4/106, Feb. 15, 1957.

79 Declaration of August 2, 1956, Department of State, The Suez Canal Problem, July 26-September 22, 1956, p. 34 (1956). Secretary Dulles said: “We also took the position that the action taken by Egypt in terminating the concession … prior to the agreed date, was an improper act.” Press Release, Jan. 16, 1958, 38 Dept. of State Bulletin 165-166 (1958). See discussions in Proceedings of the American Society of International Law, 1957.

80 A third article by the author on this topic is expected to be published, under the title “Nationalism, Nationalization and International Law,” in the Revue de Droit International pour le Moyen-Orient (1958).