I.

Concept of State Responsibility

International liability by a state in international law refers to that arising from the
breach of any obligation owed under international law (Coquia & Santiago 2005).
ne of these liabilities is the res!onsibility for harm or in"ury to alien or foreign
business.
# state causing in"ury to a foreign national may become res!onsible to the nationals
state (but not to the national) for the harm done based on the general res!onsibility
by one state to another for in"uries that it may cause (#ugust 200$).
#s %nited States Secretary of State &lihu 'oot said in ()0)*
+&ach country is bound to gi,e the nationals of another in its territory the benefit
of the same laws- the same administration- the same protection, the same redress for
injury which it gives to its own citizens, and neither more or less; provided the
protection which the country gives to its own citizens conforms to the established
standards of civilization. !"mphasis supplied.#
+.here is a standard of "ustice- ,ery sim!le- ,ery fundamental and of such general
acce!tance by all ci,ili/ed countries as to form !art of the international law of the
world. .he condition u!on which any country is entitled to measure the "ustice
done from it to an alien by the "ustice it accords to its own citi/ens is that its system
of law and administration does not conform to that standard- although the !eo!le
of the country may be content or com!elled to li,e under it- no other country can
be com!elled to acce!t it as furnishing a satisfactory measure of treatment to its
citi/ens.0
$iplomatic %rotection
#s a consequence of this doctrine of state res!onsibility- the home state of a
national can e1tend +di!lomatic !rotection0 to its national who may be in another
state (host state).
Individuals or &atural %ersons
2ecause of the traditional conce!t in international law that indi,iduals are
considered as +ob"ects0 and not sub"ects of international law- there ha,e arisen
doctrines regarding the !rotection and res!onsibility of states for in"uries inflicted
on indi,iduals (2ernas 2002). .oday- the &uro!ean Court of 3uman 'ights as well
as the !tional 4rotocol to the International Co,enant on Ci,il and 4olitical 'ights
allows access to &uro!ean Court by indi,iduals (Coquia & Santiago 2005).
3owe,er- since international law is still dominated by states and su!ranational
bodies- state !rotection for indi,iduals has not yet become obsolete.
Corporations
# cor!oration being a "uridical being- some of the rules in international law
!ertaining to indi,iduals may a!!ly to cor!orations- thus*
+5any rules that affect an indi,idual in a literal manner- such as those for
e1clusion or de!ortation- rele,ant to cor!orations in a meta!horical sense. .hey
+enter0 countries only in the sense that !ersons within the country- whether
national or aliens act for them in their names.0 (6elte, 7ags ())8)
Some rules howe,er cannot- thus*
+ther questions are howe,er critical and a!!licable only to natural !ersons*
ca!acity to sue- !rotection against arbitrary de!ri,ation of rights- the right to own
!ro!erty or to engage in economic acti,ity within its territory.0
ne transnational !roblem of a cor!oration is with regard to the right to sue. .he
court in the case of 'an( of )ugusta v. "arle !*+ ,.S. !-* %et.# .-/, 0*1, 1 2. "d.
03/, 0./ !-+-/## stated* +as a cor!oration is a mere creature of law and of the state-
it can ha,e no e1istence beyond the limits in which it o!erates.0 In !ractice
howe,er the right to sue is allowed in many "urisdictions li9e the %nited States and
the 4hili!!ines- without the need for registration for +isolated transactions.0
4ultinational Corporations or "nterprises !4&"s#
5:&s !lay a 9ey role in the global economy. Consider this*
; .he world<s (-000 largest industrial firms- most of which are 5:&s- account for
roughly eighty !ercent of the global industrial out!ut.
; In a Conference 2oard sur,ey of (-250 !ublicly listed large firms- 5:&s
re!resented only thirteen !ercent of the sam!le by had fifty=three !ercent of total
sales.
; 'oughly forty to fifty !ercent of world trade is conducted between 5:&s and
their affiliates. ne=third of trade in the %nited States consists of transfers between
units of the same 5:&. Interestingly- while the %nited States as a whole has a large
trade deficit- 5:&s in the %nited States e1!ort more to their foreign affiliates that
they im!ort from them.
; .he annual sale of each of the ten larges industrial 5:&s e1ceed the ta1 re,enues
of #ustralia. In Ireland- foreign firms accounted for two=thirds of national out!ut
and almost fifty !ercent of em!loyment (Shen9ar & >ou 2005).
#n 5:& may generally be characteri/ed as follows*
; ?irst- it is a creature of national and not international law. #lthough there are
!ro!osals for internationali/ing the 5:&- there is no basis yet in the e1isting law
for such.
; Second- the 5:& is a creature of !ri,ate cor!oration law @ that is- it is a !ri,ately
(shareholder) owned com!any organi/ed for !rofit. .hus- a sim!le analogy cannot
be drawn between the 5:& and a +go,ernment0 or a +!olitical system.0 &conomic
rather than broad !olitical goals s!ur 5:&s. 3owe,er its economic goals will gi,e
an 5:& interest in the !olitical and economic !olicies and strategies of its home
and host states.
; .hird- an 5:& is not a single entity- but rather a structure made u! of many
cor!orations each incor!orated under the laws of their res!ecti,e countries and
tied together by stoc9 ownershi! or other contractual arrangements. >ess formally
but more significantly- the units tend to res!ond to a common strategy directed
from one center (7agts ())8).
State Responsibility over 4&"s
5:&s en"oy certain rights and !ri,ileges in host states- which may be enforced by
its home states (thru di!lomatic !rotection). In the case of 'arcelona 5raction,
2ight and %ower company, 2td. !'elgium v. Spain# !-/67 I.C.8. p. *#, the court ruled
that* +Ahen a state admits to its territory foreign in,estment or foreign nationals-
whether natural or "uridical !ersons- it is bound to e1tent to them the !rotection of
the law and assumes obligations concerning the treatment to be afforded to
themB0
# state is entitled to re!resent and afford di!lomatic !rotection to cor!orations
ha,ing its nationality. 3owe,er- a host state may re"ect re!resentation by the state
of incor!oration where the latter was chosen solely for legal con,enience- for
e1am!le- as a ta1 ha,en- and the cor!oration has no substantial lin9 with that state-
such as !ro!erty- an office- or a commercial or industrial establishment- substantial
business acti,ity- or residence of controlling stoc9holders ('estatement of the >aw
Crd- ?oreign 'elations >aw of the %nited States). .hus- the cor!orate ,eil may be
!ierced in determining nationality (Coquia & Santiago 2005)- thus*
+In case of cor!orations- it is e,en more com!le1. .he basic test is where the entity
was incor!orated and had its registered office- but there are some tests that +!ierce
the cor!orate ,eil.0 .he tests include determining the ma"ority of the shareholders-
determining the nationality of the board of directors- the state in which the
cor!oration is !hysically located- and the state in which the cor!oration conducts
its business.0 (Coquia & Santaigo 2005)
State Responsibility for International 9rongful )cts
Source
.he International >aw Commission (2002) !assed on second reading the draft
article on State 'es!onsibility for Internationally Arongful #cts. Ahile not yet
final- the !rinci!les are widely acce!ted (2ernas 2002)- thus*
; &,ery internationally wrongful act of a State entails international res!onsibility of
that state (#rticle ().
; .here is an internationally wrongful act of a State when conduct consisting of an
act or omission*
(() Is attributable to the State under international lawD and
(2) Constitutes a breach of an international obligation of the State (#rticle 2).
; .he characteri/ation of an act of a State as an internationally wrongful act is
go,erned by international law. Such characteri/ation is not affected by the
characteri/ation of the same act as lawful by internal law (#rticle C).
; .here is breach of an international obligation when an act of that State is not in
conformity with what is required of it by that obligation- regardless or origin or
character (#rticle (2).
$octrine of Imputability
# state is only res!onsible for actions that are im!utable or attributable to it or acts
by its officials within their a!!arent authority- including acts within the sco!e of an
official<s authority as well as acts outside the sco!e of his authority if the state
!ro,ided the means or facilities to accom!lish the same (#ugust 200$).
)cts of State :rgans and its )gents
.he conduct of any State organ acting in that ca!acity shall be considered as an act
of the State under international law- whether the organ e1ercises legislati,e-
"udicial or other functions- whate,er !osition it holds in the organi/ation of the
State- and whate,er its character as an organ of the central go,ernment or of a
territorial unit of that State (#rticle $- !aragra!h (- 6raft #rticle on 'es!onsibility
of States for Internationally Arongful #cts 200().
#n organ includes any !erson or body that has that status in accordance with the
internal law of the State (#rticle $- !aragra!h 2). .he conduct of an entity which is
not an organ of the State but which is em!owered by the law of that State to
e1ercise elements of the go,ernmental authority shall be considered as an act of
that State under international law !ro,ided that the entity was acting in that
ca!acity in the case in question (#rticle 5).
;ault or Causation is Immaterial
2ecause of the difficulty of !ro,ing lac9 of !ro!er care by a state- courts instead
loo9 for causation. In the lighthouse arbitration case between ?rance and Ereece-
the question arose there was a cause and effect relation between Ereece<s e,iction
of a ?rench firm from its offices in Salono9a and the loss of merchandise by fire at
the firm<s new tem!orary location. .he 4ermanent Court of #rbitration held that
there was no causal relation between the transfer and the occurring fire.
.he court in the ,nion 'ridge Company Claim !-/31# held that a state is
res!onsible for mista9en actions. .he facts of the case state that after the outbrea9
of the war between the range ?ree State and Ereat 2ritain in (8))- a 2ritish
colonial go,ernment railway store9ee!er was told to confiscate all bridge material
destined for the range ?ree Country State. 2y mista9e- he confiscated material
belonging to a neutral alien that was intended for road construction. .he
arbitrators held that Ereat 2ritain liable. .he "udgment stated that liability will
not be affected either by the fact that the store9ee!er did so under mista9e as to the
character and ownershi! of the material or that it was a time of !ressure and
confusion as caused by the war- or by the fact- which on e,idence must be admitted
that there was no intention on the !art of the 2ritish authority to a!!ro!riate the
material in question. (%nited :ations 'e!ort on #rbitral #wards)
# state is res!onsible for ultra ,ires acts by its officials under the co,er of their
official character resulting in breach of a contractual obligation. .he facts in the
case of Sandline International, Inc. v. %apua &ew <uinea !%&<# !International 2aw
Report, vol. --6, p. ..3 !3777## show that 4:E entered into a contract with
Sandline- a com!any incor!orated in the Commonwealth of the 2ahamas and
carrying on business in the %nited Fingdom for the !ro,ision by Sandlin of
military and security ser,ices of an o!erational and su!!ort nature !articularly in
relation to an internal conflict in :E. .he !arties engaged in the !erformance of
their agreement until 5arch (G- ())H when insurrection and mutiny by the
members of the 4:E defense force too9 !lace. Sandline !ersonnel were arrested-
ci,ilians "oined the u!rising and sei/ed the !arliament- while the 4rime 5inister
sus!ended and called for a "udicial inquiry of the agreement with Sandline. .he
arbitration court ruled in the case that 4:E could not rely on its internal law as
basis for its !lea that the contract is illegal. It is an established !rinci!le in
international law that acts of the state will be binding on the state e,en if they are
ultra ,ires or unlawful under the internal law of the state. 4acta sunt ser,anda
(!acts must be res!ected).
>i9ewise- in the Caire Claim !;rance v. 4e=ico# !-/3/ RI)) v. .-0#, the ?rench
5e1ican Claims Commission ruled that 5e1ico is liable for the 9illing of Caire- a
?rench national- by 5e1ican soldiers after demanding money from him- under the
doctrine of +ob"ecti,e res!onsibility0 of states- that is- states< res!onsibility for acts
of its officials or organs which may de,ol,e u!on it e,en in the absence of fault of
its own. In order to be able to admit this so=called res!onsibility- the officials or
organs must ha,e at least all a!!earance as such or they must ha,e used !owers or
methods to a!!ro!riate official ca!acity.
)cts of >uasi?State :rgans
.he conduct of a !erson or grou!s of !ersons shall be considered as an act of the
State under international law if the !erson or grou! of !ersons was in fact
e1ercising elements of the go,ernmental authority in the absence or default of the
official authorities and in circumstances such as to call for the e1ercise of those
elements of authority (#rticle H- 6raft #rticles on 'es!onsibility of States for
Internationally Arongful #cts 200().
.he conduct of an organ !laced at the dis!osal of a State by another shall be
considered an act of the former State under international law if the organ was
acting in the e1ercise of elements of the go,ernmental authority of the State at
whose dis!osal it had been !laced (#rticle 8- 6raft #rticles on 'es!onsibility of
States for Internationally Arongful #cts 200().
In the case of the ,nited States v. Iran !-/+7 IC8 Rep.# !ertaining to the Iran
3ostage Crisis in ()H) consisting of armed attac9 against the %nited States<
embassy in Iran by 5uslim students- the court !ointed out that the conduct of the
militants could be directly attributed to the Iranian state only if it can be
established that they were in fact actions ta9en on its behalf since the information
submitted to the court did not establish the same with certainty. 3owe,er- the
Iranian state was considered to be at least under obligation to ta9e a!!ro!riate
ste!s to !rotect the %nited States< embassy.
&onimputable )cts
States are res!onsible for actions ta9en by their officials- but not for acts of !ri,ate
!ersons- officials of other states- international organi/ations or insurrectionaries
(#gust 200$)
Conduct of an insurrectional or other mo,ement that becomes the new go,ernment
of a State shall be considered as act of that State under international law. .he
conduct of a mo,ement- insurrectional or otherwise- which succeeds in establishing
a new State in !art of the territory of a !re=e1isting State or in a territory under its
administrations shall li9ewise be considered as an act of the new State under
international law. .he foregoing is without !re"udice to the attribution to a State of
any conduct- howe,er related to that of the mo,ement concerned- which is to be
considered as an act of that State. (#rticle (0- 6raft #rticles of 'es!onsibility of
States for Internationally Arongful #cts 200()
In the case of the @ome 4issionary Society Claim !,nited States v. <reat 'ritain#
!-/37 RI)) vi. 13#, Ereat 2ritain was not held liable for the serious and wides!read
re,olt that resulted to attac9s on %nited States< missions as a result of the
im!osition of the +hut ta10. .he court held that it is an established !rinci!le in
international law that no go,ernment can be held res!onsible for the act of
rebellious bodies of men committed in ,iolation of its authority where it is not
guilty of breach of good faith.
.he facts in the case of Short v. Iran !,nited States v. Iran -/+6# shows that Short
em!loyed by >oc9heed- an #merican com!any in Iran- sought com!ensation for
salary and other losses arising from his being e,acuated on ?ebruary 8- ()H) before
the Islamic 'e,olutionary Eo,ernment too9 office. .he Iran=%S Claims .ribunal
obser,ed that if the re,olutionary go,ernment succeeds and ta9es o,er the reigns of
go,ernment- the state would be liable for the acts of the re,olutionaries e,en !rior
to their assum!tion of !ower. 3owe,er- the claimant failed to !ro,e that his
de!arture from Iran can be im!uted to Iran<s wrongful conduct.
II. International Standard of Care
.here are now two criteria in case law* the national standard and the international
standard (or the international minimum standard) (#ugust 200$). 'oman law has
!rogressed from jus civile, that is- state !rotection a!!lies only to citi/ens- to jus
gentium, meaning that state !rotection a!!lies to both citi/ens and aliens (2ernas
2002). :ational treatment would be adequate if the host country treats its citi/ens
well. therwise- it would be well to qualify "us gentium with the !ro,iso that &lihu
'oot enunciated @ +!ro,ided the !rotection which the country gi,es to its own
citi/ens conforms to the established standards of ci,ili/ation.0
.he international standard states that although a state has no obligation to admit
aliens- once it does so- the states are bound to treat the aliens in a ci,ili/ed manner.
In the &eer Claim !,nited &ations Report of )rbitral )wards -/37# concerning the
9illing of 5r. :eer by armed men- the arbitral court ruled that mistreatment of an
alien constitutes a ,iolation of international standard if it +should amount to an
outrage- to bad faith- to willful neglect of duty or to an insufficiency of
go,ernmental action so far short of international standards that e,ery reasonable
or im!artial man would readily recogni/e its insufficiency.0 (#ugust 200$)