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Tams, C. J. (2016) State succession to investment treaties: mapping the issues. ICSID
Review: Foreign Investment Law Journal, 31(2), pp. 314-343.
There may be differences between this version and the published version. You are
advised to consult the publisher’s version if you wish to cite from it.
http://eprints.gla.ac.uk/116860/
Deposited on: 26 February 2016
Enlighten – Research publications by members of the University of Glasgow
http://eprints.gla.ac.uk
Electronic copy available at: http://ssrn.com/abstract=2733318
Tams,StateSuccessiontoInvestmentTreaties
STATESUCCESSIONTOINVESTMENTTREATIES:MAPPINGTHEISSUES
ChristianJ.Tams*
1.Introduction
Overthepasttwodecades,asthedisciplinehasmoved intothe legalmainstream,
investment lawyers have engaged with many core aspects of public international
law. Rules on remedies, defences such as necessity, the canons of treaty
interpretation, Vienna Convention rules on denunciation – all these now regularly
featurein investmentjurisprudenceandformthesubjectofengagedcommentary.
Theirincreasingrelevancereflectsthegradualintegrationofinvestmentlawintothe
internationallegaldiscourse.1
Among the core aspects of international law, the legal rules governing State
successionoccupyaspecialplace.Statesuccession–typicallyunderstoodtomean
“thedefinitivereplacementofoneStatebyanotherinrespectofsovereigntyovera
giventerritory”2–isoneofthelesser-likedbranchesofpublicinternationallaw.Itis
widely perceived to be technical, complex and controversial: an area of law
characterisedby“analmosttotaldoctrinalschism”3(notablybetweensupportersof
acontinuityapproach,andthosearguingthatnewStateshouldbeabletostartwith
a ‘clean slate’4), but also by the nitty-gritty detail of bilateral diplomatic practice.
Many international lawyers, including thosewithgeneralist leanings, tend to steer
*TheauthorisProfessorofInternationalLawattheUniversityofGlasgowandanAcademicMemberofMatrix(London)[christian.tams@glasgow.ac.uk].1For academic commentary see e.g. F. Baetens (ed), Investment Law Within International Law:Integrationist Perspectives (2013); R. Hofmann/C.J. Tams (eds), Investment Law and GeneralInternationalLaw:FromClinicalIsolationtoSystemicIntegration?(2011);R.Hofmann/C.J.Tams(eds),InternationalInvestmentLawandItsOthers(2012).2J Crawford, Brownlie’s Principles of Public International Law (8th edn., 2012), 423. A very similardefinition is set out in Article 2(1)(b) of the 1978 Vienna Convention on Succession of States inRespectofTreaties,UnitedNationsTreatySeries,vol.1946,3,and InternationalLegalMaterials17(1978),1488.3M Craven, The Problem of State Succession and the Identity of States under International Law,EuropeanJournalofInternationalLaw9(1998)142,143.4Seefurtherbelow,sections2and4.
Electronic copy available at: http://ssrn.com/abstract=2733318
2
clear of it. Until recently, investment lawyers did not show much interest in it
either.5
In fairness, until recently, State succession to investment treaties may not have
seemed a topic worthy of detailed analysis. The contemporary incarnation of the
investment protection regime, based on bilateral investment treaties and regular
access to international arbitration, is of fairly recent origin after all; it was
establishedsimplytoolatetobeaffectedbythemainwavesofstatesuccessionthat
swepttheinternationalsystembeforethe1970s.Tobesure,themostimportantof
them–thedecolonisationprocessthatresultedinthecreationofdozensofStates
after 1945 – prompted heated debates about the status of alien property post
independence. 6 However, at the time, these debates typically implicated
contractual arrangements and rules of general international law (notably on
expropriation)ratherthaninvestmenttreatiesandtreaty-basedarbitration.7Infact,
eventhenextwaveofsuccession,viz.thebreak-upofStatesinCentralandEastern
Europe during the 1990s, for a while was not considered to raise real issues of
investmenttreatylaw.8
Yetchangeseemsunderway.Twoprominentdecisionsinthependingproceedings
between Sanum and the Lao People's Democratic Republic (‘Laos’) have exposed
sharp divisions in the application of State succession rules: in the course of the
5Inarecentpiece,PatrickDumberry lamented“[t]heabsenceofanyresearchonthe issueofStatesuccessiontoBITs"andcriticisedtribunalsforhaving,withfewexceptions,failedtooffer"reasoningon … basic State succession issues" (which he considered "disappointing"): see An UnchartedQuestion of State Succession: Are New States Automatically Bound by the BITs Concluded byPredecessorStatesBefore Independence?,Journalof InternationalDisputeSettlement6(2015),74,at96.6 Mohammed Bedjaoui’s Second Report to the UN International Law Commission (discussingeconomic and financial acquired rights) gives a flavour of the debates: see Second Report onSuccessionofStatesinRespectofMattersOtherThanTreaties,ILCYearbook1969,vol.II,69.7NewcombeandParadellmakethepointveryclearly:"Theforeigninvestmentdisputesthatensued[following decolonization] focused on two principal issues: the extent to which acquired rights,including natural resource concessions granted by colonial powers,were to be respected; and thestandard of compensation for the expropriation of those acquired rights" (in Law and PracticeofInvestmentTreaties:StandardsofTreatment(2009),at19).8Seebelow,section4,forbriefcomment.
3
proceedings, an UNCITRAL tribunal9and the Singapore High Court10disagreed on
whethertheChina-LaosBITconcludedin1993appliedtoMacao(aterritoryformerly
administered by Portugal, but returned to China in 1999).11Arbitration websites
reporta that“[i]nadramaticholding"of January2016,anUNCITRALtribunalheld
Kazakhstantobeboundby thetermsofaBITconcludedby theSovietUnion,and
speculateaboutfurthercasesturningonissuesofstatesuccession.12Theexistence
of independencemovements inStates fully integrated intothepresent investment
protectionregime(inScotland/theUnitedKingdom,Catalonia/Spain,etc.) suggests
that the issue will remain on the agenda for the foreseeable future. Perhaps
unsurprisingly, recentacademiccommentaryhasbeguntoexploretherelationship
between investment treaties and State succession; however, so far, much of it
remains focused on the issues raised in the Sanum litigation13and the perennial
“doctrinal schism” 14 between adherents of ‘clean slate’ and ‘strict continuity’
approaches.15
9Sanum Investments Limited v Laos, UNCITRAL (PCA Case No 2013-13), Award on Jurisdiction, 13December 2013. A related claim has been registered by the parent company Sanum InvestmentLimited:seeLaoHoldingsNVvLaoPeoplesDemocraticRepublic(ICSIDCaseNoARB(AF)/12/6).10LaoPeople’sRepublicv.SanumInvestmentsLimited,Judgment,[2015]SGHC15.11For brief comment see below, section 5. Kugelmann provides a concise historical account: DKugelmann,Macau,inMaxPlanckEncyclopediaofPublicInternationalLaw(www.mpepil.com).12SeeLEPetersen,Inadramaticholding,UNCITRALtribunalfindsthatKazakhstanisboundbytermsofformerUSSRBITwithCanada,InvestmentArbitrationReporter,28Jan2016(athttp://www.iareporter.com/articles/in-a-dramatic-holding-uncitral-tribunal-finds-that-kazakhstan-is-bound-by-terms-of-former-ussr-bit-with-canada/)andfurtherMDGoldhaber,ArbitrationScorecard2013:TreatyDisputes,TheAmericanLawyer,athttp://www.americanlawyer.com/id=1202607030938/Arbitration-Scorecard-2013-Treaty-Disputes(describingSudapetCompanyLtd.v.RepublicofSouthSudan–thoughperhapsnotquiteaccurately,aswillbecomeclearinthecourseofthisarticle–as"thefirstICSIDdispute[believed]toturnonissuesofstatesuccession").13See e.g. N Hart and S Srikumar, Investor-State Arbitration before the High Court of Singapore:Territoriality,NationalityandArbitrability,CambridgeJournalofInternationalandComparativeLaw4(2015), 191; G Wang, International Investment Law: A Chinese Perspective (2014), at 568-570; MHwangandAChang,CaseComment:GovernmentoftheLaoPeople’sDemocraticRepublicvSanumInvestments Ltd: A Tale of Two Letters, ICSID Review 30 (2015), 506; D Lim, Case Comment:Government of the Lao People's Democratic Republic v Sanum Investments Ltd [2015] SGHC 15,Singapore Law Blog, at http://www.singaporelawblog.sg/blog/article/95; as well as The Virtue ofJudicialRestraint:TwoCommentsonLaosvSanum,GlobalArbitrationReporter,vol.10/2(2015),athttp://globalarbitrationreview.com/journal/article/33620/virtue-judicial-restraint-two-comments-laos-v-sanum.14Craven(n3),143.15SeenotablyDumberry(n5)aswellasid.,StateSuccessiontoBilateralTreaties:AFewObservationsonthe IncoherentandUnjustifiableSolutionAdoptedforSecessionandDissolutionofStatesunder
4
Against this background of long-term neglect and recent (selective) interest, the
present paper presents a bird’s eye account of questions of State succession that
ariseinrelationtoinvestmenttreaties.Theapproachadoptedisdeliberatelybroad:
what is intended is not an in-depthdiscussionofparticularproblems (suchas, for
example, the status of Macao under Chinese BITs). Instead, the subsequent
considerations are in the form of a conspectus of the legal rules applicable to
differenttypesofsuccessionscenarios,offeredtoinformdebateaboutaparticularly
trickyareaofpublicinternationallawnowconfrontinginvestmentlawyers.
2.SuccessiontoTreaties:BasicFeatures
WhenoneStatereplacesanotherasthesovereignofaparticularpartofterritory,a
number of legal problems can arise. Do individuals affected by the change
automatically become nationals of the new State? How are State assets and
liabilities tobedealtwith?What is the fateofclaims lodgedbefore thechangeof
sovereignty?Andwhathappenstotreatiesconcludedintopriortothatdate?These
issues all relate to the transfer of some legal entitlement or obligation from one
State to another; and they are commonly addressed as questions of ‘State
succession’.16Tosetthestagefortheanalysisofproblemsinrelationtoinvestment
treaties,afewintroductorywordsaboutthebasicfeaturesoflegalregimegoverning
Statesuccessionseeminorder.
the 1978 Vienna Convention, Leiden Journal of International Law 28 (2014), 3 (offering a vigorouscritiqueofthe‘strictcontinuity’approach);andfurtherAGenest,SudanBilateralInvestmentTreatiesand South Sudan: Musings on State Succession to Bilateral Treaties in the Wake of Yugoslavia'sBreakup,TransnationalDisputeManagement,vol.11/3(2014);QQerimiandSKrasniqi,TheoriesandPractice of State Succession to Bilateral Treaties: The Recent Experience of Kosovo, German LawJournal14(2013),1359.Goingbeyondcountrystudies,Tai-HengChengprovidesafulleranalysis,buthis approach isbasedona ratherbroadnotionof ‘State succession’,which, contrary tomost legalauthorities, he understands to encompass “state and government succession”: see his StateSuccessionandCommercialObligations(2006),at4;andcf.below,section2.b.,forcomment.16As Crawford notes, "the phrase 'state succession’ is employed to describe an area, a source ofproblems:itdoesnotconnoteanyoverridingprinciple,orevenapresumption,thatatransmissionorsuccessionoflegalrightsanddutiesoccursinagivencase”;inthissense,the“municipalanalogyofcontinuityoflegalpersonalityinanindividual’sgeneralproperty,passingasaninheritance,involvingapartialor‘universalsuccession'”isindeed“misleading”:seeCrawford(n2),423-424;andfurtherMCraven,TheDecolonizationofInternationalLaw:StateSuccessionandtheLawofTreaties(2007),at29-31.
5
a)AFragmentedandDisputedAreaofLaw
Thelegalregimegoverningquestionsofsuccessionisfragmentedand,asageneral
matter,notwellestablished.17Tobeginwith,itsorganisingconcept–thenotionofa
State’s‘replacementinrelationtoterritory’18–isratherdiffuse.Itcoversinstances
as diverse as the separation (secession) of parts of a State from that State; a
dependent territory’s move to independence; the complete dismemberment
(dissolution) of a State; the incorporation of one State into an existing one; the
merger (fusion) of two ormore States into a new State; and cessions of territory
betweenexistingStates.Aswillbeshowninthefollowing,thelegalregimeofState
succession draws distinctions between these different modalities of succession –
thoughwhereandhowthelinespreciselyaredrawnisoftenamatterofdebate.
Thepresent inquirycentresonlegalrelationsbasedontreaties,anditdiscussesto
whatextentthesuccessorStatesucceedstotreatyrightsandobligationscontracted
by its predecessor in the field of investment law.Of the various succession issues
enumeratedabove(successiontodebts,toassets,tonationality,etc.)thisisperhaps
themostprotracted.Fordecades,atleastwhereinstancesofsuccessionhaveledto
the emergence of a new State, commentators have disagreed on the correct
starting-point: should new States be required to adhere to treaty commitments
17According to theGerman Federal Constitutional Court, it “one of among themost disputed andleast secure parts of international law” ("eine[r] der umstrittensten und unsichersten Teile desgesamtenVölkerrechts"):seeCollectionofDecisionsoftheFederalConstitutionalCourt,vol.96,68,at79.ForexcellentoverviewsofthelegalregimeseeCrawford(n2),423-444;GHafnerandGNovak,StateSuccessioninRespectofTreaties,inDBHollis(ed),TheOxfordGuidetoTreaties(2012)396;AZimmermann, State Succession in Treaties, inMax Planck Encyclopedia of Public International Law(www.mpepil.com)(‘Zimmermann,EPIL’);andAZimmermannandJGDevaney,SuccessiontoTreatiesand the Inherent Limits of International Law, in CJ Tams/ A Tzanakopoulos/A Zimmermann (eds),ResearchHandbookontheLawofTreaties(2014),521.ComprehensiveaccountsareprovidedbyAZimmermann, Staatennachfolge in völkerrechtliche Verträge— zugleich ein Beitrag zu denMöglichkeitenundGrenzenvölkerrechtlicherKodifikation (2000) (‘Zimmermann,Staatennachfolge’);BStern,Lasuccessiond’Etats,inReceuildesCours,vol.262(1996),9;AGruber,Ledroitinternationalde la succession d'États (1986); PK Menon, TheSuccession of States in Respect to Treaties, StateProperty, Archives, and Debts (1991); and DP O’Connell, State Succession In Municipal andInternational Law, 2 vols. (1967). Based on work conducted since 1994, the International LawAssociation (‘ILA’) in 2008 adopted Resolution on ‘Aspects of the Law of State Succession’; theresolution and the Committee’s Report are available at http://www.ila-hq.org/en/committees/index.cfm/cid/11 and contained in ILA, Report of the Seventy ThirdConference,RiodeJaneiro(2008).18Cf.Article2(1)(b)ofthe1978ViennaConvention.
6
enteredintobytheirpredecessors,orshouldtheybeabletostart‘life’withaclean
slate?1920th century international practice, prompted e.g. by the great waves of
territorial re-ordering at the end of the two World Wars and the decolonisation
movement, has not provided a clear-cut answer to this question.20From the late
1960sonwards,theUNInternationalLawCommission(‘ILC’)engagedinaconscious
effortof(partial21)legalclarificationanddevelopment,22whicheventuallyledtothe
adoption of the 1978 Vienna Convention on Succession of States in respect of
Treaties (‘the1978ViennaConvention’).23ThatConvention laysdowndefault rules
and provides an important point of reference; but its ratification record is
disappointing,24andanumberof itsnormativepropositionsremaincontroversial.25
Asaconsequence,theConvention’simpactonconcreteinstancesofsuccessionhas
been mixed: in the more recent cases – the dissolution of the Soviet Union, the
CSFR; the break-up of Yugoslavia and the ensuing separation ofMontenegro and
Kosovo; theemergenceofEastTimor,EritreaandSouthSudanasnewStates;and19Craven (n 16) offers a detailed historical account (at 29-92); Zimmermann and Devaney (n 17)presentasuccinctanalysis(at516-518).20Having surveyed practice, the International Law Commission observed in 1974 that "[a] closeexaminationofStatepracticeaffordednoconvincingevidenceofanygeneraldoctrinebyreferencetowhichthevariousproblemsofsuccessioninrespectoftreatiescouldfindtheirappropriatesolution”:seeILCYearbook1972,vol.II/1,226(para.31).21AsBrigitteSternnotes,the1978ViennaConventiondoesnotaimtoregulatesuccessiontotreatiescomprehensively(n17,at125).Notably,itprovidesverylittleguidanceonthequestionofsuccessionto constitutive treaties establishing international organisations: on this see Article 4 of the 1978ViennaConvention;andfurtherbelow,section3.22The problem of state succession had already been included in Hersch Lauterpacht’s ‘Survey ofInternationalLaw inRelationto theWorkofCodificationof the InternationalLawCommission’,UNDoc.A/CN.4/1/Rev.1(1949).EncouragedbytheUNGeneralAssembly’sResolution1686(1961),theILCbegantoconsiderquestionofsuccessiontotreatiesinthe1960s,withSirHumphreyWaldockandSir Francis Vallat acting as special rapporteurs, and in 1974 presented a set of ‘Draft Articles andCommentariesonSuccessionofStatesinrespectofTreaties’(ILCYearbook1974,vol.II/1,at174etseq.). For details and documents see the ILC’s Analytical Guide, athttp://legal.un.org/ilc/guide/3_2.shtml#top.23Seethereference in fn.2. Inparallel, the ILCalsoworkedonotheraspectsof the lawofStatesuccession;thisledtotheadoptionofthe1983ViennaConventiononSuccessionofStatesinrespectofStateProperty,ArchivesandDebts,InternationalLegalMaterials22(1983),306(notyetinforce).24 Nearly forty years after its adoption, the Convention has no more than 22 parties: seehttps://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXIII-2&chapter=23&lang=en.25In its written submissions in the Gabcikovo Nagymaros case before the International Court ofJustice,Hungaryargued that the1978ViennaConventionwas "widely regardedasanunsuccessfulexerciseininternationallaw-making…whichdoesnotcorrespondtosubsequentpractice":seeReplyof Hungary, 20 June 1995 (http://www.icj-cij.org/docket/files/92/10965.pdf), at 173. For furtherdiscussionofoneoftheConvention’smostcontroversialpropositionsseebelow,section4a.
7
the territorial transfers ofMacao, Hong Kong andWalvis Bay, to name themost
prominent – States and other stakeholders have drawn inspiration from it; but
perhaps not much more: pragmatism, rather than adherence to abstract legal
propositions, has been the guiding principle. 26 The result is a legal regime
characterised, more than in other areas of international law, by a practice of
“diplomaticbricolage, thecollectingofbitsandpieces fromnormativematerials…
lyingaroundintreaties,doctrinalwritingsanddiplomaticdiscourse”.27
b)DistinguishingStateSuccessionfromOtherPhenomena
Before assessing thework of the ‘diplomaticbricoleurs’ in the field of investment
law,itisusefultodelimitthescopeofapplicationoftheregimeofStatesuccession.
While the preceding section has emphasised the breadth of the notion of ‘State
replacement’(whichisattheheartoftheStatesuccessionregime),itisimportantto
note that that regime does not apply to other ruptures affecting treaty relations.
Threesuchotherrupturesmeritatleastsomebriefcomment.
ChangesnotaffectingaState’slegalpersonality:First,Statesuccessionneedstobe
distinguishedfromchangesthatdonotaffectthelegalpersonalityoftheState.28In
essence, where a State, notwithstanding changes to its structure or territory,
remainsidentical,thequestionofsuccessiontotreatiesdoesnotarise:asthelegal
personalityoftheStateremainsthesame,sodo itstreatyrightsandobligations.29
26 As noted by Zimmermann, "recent instances of international practice [in the field of Statesuccession] … have not followed any hard and fast legal rules": A Zimmermann, The InternationalCourt of Justice and State Succession to Treaties: Avoiding Principled Answers to Questions ofPrinciple,inCJTams/JSloan(eds),TheDevelopmentofInternationalLawbytheInternationalCourtofJustice(2013),53,at54.27MKoskenniemi,ReportoftheDirectorofStudiesoftheEnglish-SpeakingSectionoftheCentre,inPM Eisemann and M Koskenniemi (eds), State Succession: Codification Tested against the Facts(2000),65,at132.28AsCraven(n3)notes,theproblemisof“classificationortaxonomy“,and"structural"innature(at146).ForsuccinctaccountsseeCrawford(n2),426-427;Zimmermann/Devaney(n17),512-516;forafuller treatment see Stern (n 17), at 39-86;W Czaplinski, La continuité, l’identité et la successiond’Etats, Revuebelgededroit international26 (1993), 375, andKMarek, Identity andContinuity ofStatesinPublicInternationalLaw(1968).29As Zimmermann notes, "[a]s a matter of principle, State continuity and State succession aremutually exclusive concepts": A Zimmermann, Continuity of States, inMax Planck Encyclopedia ofPublicInternationalLaw(www.mpepil.com),atpara.6.
8
All this is clear in theory, but can be highly problematic in practice, as there are
relatively fewagreedcriteria fordeterminingwhenaStatechanges itspersonality:
toillustrate,wastheFederalRepublicofYugoslavia,comprisingtheterritoryofthe
former Yugoslav Republics of Serbia and Montenegro, identical to the Socialist
Federal Republic of Yugoslavia (SFRY), comprised of Serbia, Montenegro, Croatia,
Slovenia,MacedoniaandBosniaHerzegovina?CouldRussiaclaimafter1991claimto
beidenticaltotheSovietUnion?Objectivefactors,suchastheimpactofthechange
on a State’s structure, may be indicative;30but much depends on the subjective
perceptionofthechange,bytheStateitselfandbytheinternationalcommunity31–
which eventually decided to reject the FRY’s claim to continuity, but accepted
Russia’s.32Asisclearfromthesetwoexamples,theproperlegalassessmentoftenis
the result of a lengthy process of claim and contestation, in which historical
narratives,perceptionsoflegitimacyandtheviewsofkeyplayersplayanimportant
role. Yet while indeed “precarious”, 33 the distinction between identity and
successionremainsfundamentalasamatteroflaw.
Regimechange:Second,instancesofStatesuccessionneedtobedistinguishedfrom
changestotheState’sinternalsystemofgovernment.Premisedonachangeinthe
State’slegalpersonality,thelawofStatesuccessionignoresrupturesinthedomestic
organisationoftheState.34Thisdoesnotmeanthatsuchruptureshadnoimpacton
30Sternprovidesathoroughanalysisofinternationalpractice:seen17,at68-82.31ZimmermannandDevaney(n17),at515:“whatoftenmattersmostisnotobjectivefacts,suchasthesizeofterritoryorpopulation,butrathertowhatextenttheclaimtocontinuationofidentitywasgenerally accepted by the inter- national community as a whole, including internationalorganizations”.32For contemporary perspectives see R Mullerson, The Continuity and Succession of States byReferencetotheFormerUSSRandYugoslavia,InternationaladComparativeLawQuarterly42(1993),473;M Shaw, State Succession Revisited, Finnish Yearbook of International Law 5 (1994), 34. It isworth noting that in the case concerning Application of the International Convention on theEliminationofAllFormsofRacialDiscrimination(GeorgiavRussia),theInternationalCourtofJusticereferred to the Respondent as “the State continuing the legal personality of the Union of SovietSocialistRepublics”:ICJReports2008,353,para.105.33Crawford(n2),427.34Historically, claims todiscontinuity advancedbynew, often socialist, regimes (such as the SovietUnion in 1917, or Cuba after theCuban revolution) havemetwith opposition. (Hafner andNowakrefertothisasthe“socialistaberration”ofthecleanslatetheory:n17,at401).IntroducingitsDraftArticlesontheSuccessionofStatesinRespecttoTreaties,theILCstatedthatithad“concludedthatitwasappropriate toexclude fromthescopeof thedraftarticlesproblemsof successionarisingasa
9
the State's external relations: the more drastic changes in fact are likely to have
consequences for the State’s approach to international treaties. However, these
changes will result from re-negotiations of existing treaties or the new regime's
decisiontosuspendorterminateexistingtreaties(whichmaybevalidornot),orto
agreetonewones.Theydonotresult fromtheoperationofrulesgoverningState
succession.
Illegaloccupationofterritory:Finally,theregimeofStatesuccessiontotreatiesdoes
notapplytosituationsofillegaloccupationofterritory.Theseinvolverupturesofa
particular kind, to which international law responds with particular sets of rules,
notablyaimedatprecludingthevalidation,inlaw,ofthesituationcreatedinfact.35
Asageneralprinciple,conductoftheoccupyingStateisgovernedbytheregimeof
belligerentoccupation,aswellashumanrights lawand internationalhumanitarian
law to the extent that these rules apply extraterritorially. The regime of State
successiondoesnotcomeintoplay.36
YetevenwheninstancesofStateidentity,regimechangeandillegaloccupationare
lefttoaside,thelistof'proper'ofStatesuccessionissuesremainsconsiderable.The
subsequent sections group them into three distinct categories, which take up
internal divisions within the applicable legal regime: (i)Section 3 analyses the
resultofchangesofregimebroughtaboutbysocialorotherformsofrevolution”(ILCYearbook1974,vol.II,at170).SeefurtherMarek(n28),24etseq.35Hence annexations procured by force are illegal, andmust not be recognised as lawful by thirdStates:seeGeneralAssemblyResolution2625(XXV)('FriendlyRelationsDeclaration’),principleI("Noterritorialacquisitionresultingfromthethreatoruseofforceshallberecognizedaslegal");GeneralAssemblyResolution3314(XXX)('DefinitionofAggression'),atArticle5(3)("Noterritorialacquisitionorspecialadvantageresultingfromaggressionisorshallberecognizedaslawful");andArticles40,41of the ILC’s Articles on State Responsibility. For details seeRHofmann,Annexation, inMaxPlanckEncyclopedia of Public International Law (www.mpepil.com); and LMälksoo, Illegal Annexation onStateContinuity(2003).36AccordingtoitsArticle6,the1978ViennaConvention"appliesonlytotheeffectsofasuccessionofStatesoccurringinconformitywithinternationallaw";pursuanttoArticle40,istprovisions"shallnotprejudgeanyquestionthatmayariseinregardtoatreatyfromthemilitaryoccupationofaterritory."ForadetaileddiscussionseeMarek(n28),73etseq.Examiningarecent(on-going)conflict,ThomasGrant states that "there is no indication thatUkrainewould accept that a successionof StateshastakenplaceinrespectofCrimea(oranyotherterritoryrecognizedtofallwithintheStatebordersofUkraine)":seehisAggressionAgainstUkraine:Territory,Responsibility,andInternationalLaw(2015),at94.
10
positionofnewStatesvis-à-vis the ICSIDConvention(asthemostrelevantdispute
settlement framework). (ii)Section 4 inquires whether new States are bound by
bilateral investment treaties (‘BITs’) concludedby theirpredecessors. (iii)Section5
looks at the particular problems of territorial cessions and their impact on
investment treaties. Finally, section 6 offers a number of general conclusions and
highlightsopenquestions.
3.NewStatesandICSIDMembership
Asathresholdissue,questionsofsuccessionarisewithrespecttomembershipinthe
ICSID Convention regime. Can a successor State simply automatically follow the
predecessorState’sICSIDmembershipandexercisemembershiprights?Conversely,
caninvestorslodgeclaimsagainstsuccessorStatesiftheirpredecessorhadbeenan
ICSID party? Or do successor States only become bound by the ICSID Convention
oncetheyhavejoinedtheregimeasanewtreatyparty,inlinewiththeprocedures
set out in Articles 67 and 68? The proceedings in the case ofMNSSB.V. et. al. v.
Montenegro, a BIT-based arbitration brought against Montenegro in 2011, 37
illustratesthatthesequestionsarenotofapurelyacademiccharacter:Montenegro
hadnot,atthetimeoftherequestforarbitration,ratifiedtheICSIDConventioninits
own right; but the Socialist FederalRepublicof Yugoslavia (fromwhich Serbia and
Montenegro emerged) had.38So was Montenegro, in 2011, to be treated as a
‘Contracting State’ for the purposes of Article 25 of the ICSID Convention?39The
subsequent sections address this, and related, questions by outlining the general
regimegoverningsuccessiontomembership(a)andapplyingittothespecialcaseof
ICSID(b).
37InformationprovidedontheICSIDwebsiteislimited;butsee‘MontenegrotoFaceSecondKnownInvestmentTreatyClaim,ThisTimeOverBankruptSteelworks’, InvestmentArbitrationReporter,10December 2012, at http://www.iareporter.com/articles/montenegro-to-face-second-known-investment-treaty-claim-this-time-over-bankrupt-steelworks/.38Montenegrosigned the ICSIDConventionon19 July2012andratified iton10April2013. In linewith Article 68 of the Convention, it therefore became bound on 10 May 2013. Details onMontenegro’smembership,and thatofothercontractingparties,are listed inDoc. ICSID/3 ('ListofMember States’), athttps://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/Database-of-Member-States.bak.aspx.39AsSchreuer,Malintoppi,ReinischandSinclairnote,"[p]articipationintheConventionoftheStatepartytoproceedingsisanabsoluterequirement":seeTheICSIDConvention.ACommentary(2ndedn.,2011),at144.
11
a)TheGeneralRegime:BetweenOrthodoxPrincipleandPragmaticApplication
Onthefaceofit,membershipintheICSIDConventioncouldbelookedatasregular
questionofsuccessiontotreaties.However,itconcernsatreatyofaparticularkind,
namelyoneestablishingan internationalorganization,viz. the InternationalCentre
for the Settlement of Investment Disputes (‘Centre’). While the Centre is closely
affiliated with theWorld Bank andwhile its activities, compared to that of other
international organisations, are not themost visible, it possesses an autonomous
legal personality 40 and enjoys privileges and immunities commonly granted to
international organisations.41As for the ‘inner life’ of the Centre, once they have
joined theConvention, contractingpartiesparticipate in theCentre’sdeliberations
anddecisions,notablythroughtheAdministrativeCouncil;42theyaremembersofan
internationalorganizationasmuchaspartiestoamultilateraltreaty.
AllthishasimplicationsfortheapplicablerulesonStatesuccession.43Becauseofthe
higherlevelofintegrationwithininternationalorganizations,theorthodoxapproach
has long treated membership as a special category of treaty participation: a
40SeeArticle18oftheICSIDConvention.TheReportoftheExecutiveDirectorsleavesnodoubtinthisrespect;itstates:“TheConventionestablishestheInternationalCentreforSettlementofInvestmentDisputesasanautonomousinternationalinstitution(Articles18–24)"(inICSIDReports,vol.1,at26).41 Such as: immunity from suit, tax exemptions and the like: see Articles 19-24 of the ICSIDConvention.42See notably Articles 4, 6, 10 and 17 of the ICSID Convention (regulating the composition andfunctionsoftheAdministrativeCouncil);andfurtherArticle7(procedure)andArticle13(designationofpanelists).43For details on succession to membership see K Bühler, State Succession and Membership inInternationalOrganizations:LegalTheoriesVersusPoliticalPragmatism(2001); id.,StateSuccession,Identity/ContinuityandMembershipinTheUnitedNations,inKoskenniemi/Eisemann(n27),187;HGSchermerandNMBlokker, International Institutional Law (4thed.,2003),81-91;and,morebriefly,Crawford(n2),442-443.
From the beginning of its work on questions of succession, the ILC had separated questions ofmembership in international organisations from the other aspects of succession to treaties: seeReportbyManfredLachs, ILCYearbook1963,vol. II,260,at261(para.13).Article4(a)ofthe1978ViennaConventionrecognisesthespecialcharacterofmembershiprights:itclarifiesthat,asregardsthe acquisition of membership in international organisations (which could be seen a question ofsuccessiontotheconstitutivetreaty),the1978ViennaConventionis“withoutprejudicetotherulesconcerning acquisition of membership and without prejudice to any other relevant rules of theorganization”.
12
“personal status” 44 not easily transferred unless explicitly envisaged in the
organization’s constituentdocuments.45Pursuant to this "traditionalaxiomofnon-
succession to membership”, 46 new States have regularly been expected to go
throughtheorganisation’sadmissionsprocessandjoinasnewmembers.47
Theorthodoxapproachhashowevernotbeenfollowedthroughrigorously;"political
pragmatism"has(toadaptthesubtitleofadetailedstudy)tosomeextentmollified
thestricturesof"legaltheories"or“traditionalaxioms”.48Pragmaticconsiderations
havee.g.ledinternationalorganisationstoacceptaclaimtocontinuedmembership,
whereanewStatehadbeenestablishedthroughafusionofpreviousmembers(as
in the case of Yemen, which came into existence in 1990when North and South
Yemen merged), or where a State could credibly claim to revert to a prior
membership status (e.g. Syria and Egypt after the dissolution of their short-lived
mergerintotheUnitedArabRepublic).49Thepracticeofcertainfinancialinstitutions
(includingtheWorldBank)seemsequallytohavebeendrivenbypragmatismrather
than strict application of principle: desirous to preserve assets deposited by
predecessorStates,theIMFandtheWorldBank,duringthe1990s,e.g.treatedthe
CzechandSlovakRepublics,aswellasthevariousStatesemergingduringthebreak-
44Crawford (n 2), 443; K Zemanek, State Succession after Decolonization, Recueil des Cours 161(1965), 182, at 253 (“[m]embership of international organizations is a personal right to which, inprinciple,successionisnotpossible”);CWJenks,StateSuccessioninRespectofLaw-MakingTreaties,BritishYearbookofInternationalLaw29(1952),105,at134.In itsReport(n17)theILAspeaksofa"colorationfortementpersonnelle"(at43).45Only in rare instancesdoconstitutivedocumentsexpresslypermit theacquisitionofmembershipbywayof succession,usually fornewly independentStates thathadpossessedsome formofpriorstatuswithintheorganisation:seee.g.the1953InternationalSugarAgreement(Article66),andthe1960(Second)InternationalTinAgreement(ArticleXXII(6).Arighttosucceedtothe1899and1907Hague Dispute Settlement Conventions was created by a unanimous decision of the PCAAdministrativeCouncilin1959.FordetailsandreferencesseeBühler(n43),26-30.46Bühler(n43),30.47This approachwas followedwithin organisations with a formal process of admission, as well asthose that permitted admission by virtue of a unilateral act: see Bühler (n 43), 31-32;Schermers/Blokker(n43),90.48Cf.thesubtitleofBühler’sdetailedstudy(n43).49See Schermers/Blokker (n XX), 82: "In these cases [Yemen, United Arab Republic, etc], the newstate replaced the old ones as a member of the international organizations in which they hadparticipated.No new admissionwas required, not evenwhere one of the constituent parts of thefederation had not previously been a member of the organization” (footnote omitted). Bühlerprovidesdetails(n43,at50etseq.).
13
up of Yugoslavia, as successors of the CSFR and the SFRY.50Drawing on thismore
recentpractice,commentatorshaveputforwarddistinctionsbasedonthecharacter
oftheorganizationconcerned–excludingsuccessiontomembershipwithinpolitical
organisations emphasising close integration, while admitting it in principle for
'universal-technical organisations’ aimed at wide participation. 51 Yet while that
distinctionmayserveasausefulguidelineflexibility isthedefiningfeatureof legal
regime: largelyunconstrainedby firm rules, internationalorganisationsare free to
determineissuesofmembershipinlightoftheirinstitutionalpreferences.52
b)ICSIDPractice:OrthodoxyAffirmed
Against thisbackground, ICSID’s institutionalpracticemerits attention. It is, ashas
beennoted,“scant"53(as inmany instances, therespectivepredecessorStateshad
notbeenICSIDparties,andhencesuccessionwasnotanoption54).Butcontraryto
views expressed by commentators, 55 the scant practice yields relatively
straightforwardresults.AlthoughICSIDaspirestouniversalmembershipandallows
WorldBankmemberstojoinwithoutundergoinganyadmissionsprocedure,56ithas
50Thiswaswidelyconsideredtobeabreakwiththeorthodoxapproach:seee.g.PRWilliams,StateSuccessionandthe InternationalFinancial Institutions:PoliticalCriteriav.ProtectionofOutstandingFinancialObligations,InternationalandComparativeLawQuarterly43(1994),776,807:"Asaresultof the break-up of Yugoslavia and Czechoslovakia, the IMF andWorld Bank have for the first timedeveloped a conditional succession approach to address the questions posedby the break-upof amember State.” According to Oeter, “State practice in this field seems to differ considerably fromstatepracticeconcerningmembership inotherorganizations -a fact largelydue todifferentvotingproceduresanddifferentstatesofinterestdominatingintheseorganizations”:inILAReport(n17),at43.51Seee.g.BühlerinKoskenniemi/Eisemann(n43),at227-233.52AsnotedbytheILAinits2008Report,thislimitsthepurchaseofgeneralrules:“Toutconflitentreles règlesde la successiond’Etat et toute règle relative à l’acquisitionde laqualitédemembreoutouteautrerèglepertinentede l’organisation -dispositionqui inclut lesrègles issuesde lapratiquedes organisations - se résout en faveur de ces dernières. C’est l’intérêt de l’organisation et sonéquilibre institutionnel qui sont protégés et qui doivent l’emporter sur l’intérêt individuel de l’Etatsuccesseur“(n17,at46)53Schreueretal.(n39),at169(footnote401).54Thise.g.appliestotheSovietUnionandEthiopia(inrelationtoEritrea).Insofarascolonialpowers,pursuanttoArticle70,appliedtheICSIDConventiontooverseasterritoriesforwhoserepresentationtheyboreresponsibility(e.g.theNetherlandsinrespectofSurinameandtheNetherlandsAntilles),noattempthasbeenmadeto'upgrade’thestatusoftheseterritoriestofullmembership.55Contraste.g.JAFratermannSecession,StateSuccessionandInternationalArbitration,availableathttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=2313401(at19).56Article67runsasfollows:"ThisConventionshallbeopenforsignatureonbehalfofStatesmembersof theBank. It shallalsobeopen forsignatureonbehalfofanyotherStatewhich isaparty to the
14
clearly followed the orthodox approach precluding succession to membership.
Invariably,newStates thathave joinedthe ICSIDConventionhavedonesoasnew
members, even though this opened up a time-gap in the application of the ICSID
regime.57ThispracticehasbeenfollowedinrelationtothefollowingnewStates:58
- the Czech and Slovak Republics (which joined as newparties in 1993/1994
ratherthancontinuingtheCSFR’spriormembership),
- the agreed successor States of the SFRY (itself a first-generation ICSID
membersince1967),namelySlovenia(admittedasanewmemberin1994),
Bosnia and Herzegovina (1997), Croatia (1998) and the Former Yugoslav
RepublicofMacedonia(1998);
- Serbia, which joined as a new member in 2006 after the separation of
Montenegroandafter ithadgivenup itsearlierclaimtocontinue the legal
personalityoftheSFRY;subsequentlyby
- Montenegro,which(asnotedabove)joinedin2013,afteritsseparationfrom
Serbia and Montenegro; as well as Kosovo and South Sudan, which
unsurprisinglydidnot seek tocontinue themembership statusofSerbiaor
Sudan,butinsteadjoinedasnewpartiesin2009and2012,respectively.
The brief summary of practicereflects the continued appeal of the ‘traditional
axiom’59: even though membership rights and duties are relatively limited, ICSID
membership is regarded as a personal linkwith theorganization that a newState
needstoestablishinitsownright.Successionhasneitherbeensoughtnorgranted;
infact,newStatesoftenhavejoinedICSIDquicklysotosignaltheirintegrationinto
the international economic community or – particularly in cases of contested
statehood,suchasKosovo’s–theirstatusasamemberofthecommunityofnations.
StatuteoftheInternationalCourtofJusticeandwhichtheAdministrativeCouncil,byavoteoftwo-thirdsofitsmembers,shallhaveinvitedtosigntheConvention."Schreueretal.(n39)notethatinitialdrafts envisaged amore open regime thatwould have opened the Convention for signature by allsovereignStates;thishowever,wasresistedbyrepresentativesofdividedStates(at1267-1268).57AccordingtoArticle68(2),theConventionenters intoforceforthem30daysafterthedepositoftheirinstrumentofratification,accessionorapproval.Untilthatdate,thenewStatethereforeisnota“ContractingState”forthepurposesofArticle25oftheConvention.58The following information is based on information provided by ICSID: see Doc. ICSID/3 (whichcontainsfurtherdetailsonmembership).59Bühler(n43),30.
15
ICSID’shandlingoftheMNSSB.V.et.al.v.Montenegrocaseconfirmsthisapproach,
and illustrates its implications. Having requested arbitration under the ICSID
Convention,theclaimantsrealisedthatMontenegrowasnota‘ContractingState’in
thesenseofArticle25of the ICSIDConventionand, irrespectiveofwhether ithad
consented to arbitration in an applicable BIT, could not be a respondent in ICSID
proceedings. According to the Investment Arbitration Reporter’s account, "[t]he
claimantsthereforerequestedICSID’sapprovaltomakeuseoftheAdditionalFacility
Rules, which was granted on 7 December 2011. After delays of nearly a year, a
formalnoticeofarbitrationwas lodged inNovemberof2012,and it isunderstood
thatICSIDultimatelyregisteredthedisputeundertheAdditionalFacilityRuleson6
December2012.”60
4.NewStatesandBilateralInvestmentTreaties
As isclear fromtheprecedingsection,anewState’sdecisionnot to join the ICSID
regime need not be fatal, as investors can explore other jurisdictional options
(Additional Facility proceedings, UNCITRAL proceedings, etc.). Such proceedings,
however,presupposethatthenewStatehasconsentedtosomeformofinvestment
arbitration. The subsequent considerations focus on the most relevant basis of
consent, namely bilateral investment treaties; they ask whether new States are
boundbyinvestmentagreementsconcludedbytheirpredecessor.Thisquestionhas
arisen,andcontinuestoarise,quitefrequently,asallnewStatesthathaveemerged
sincethe1990shavehadto takeapositiononthe fateofpriorBITs.To illustrate,
based on publicly available information,61at the time of its demise the Czech and
SlovakFederalRepublic(‘CSFR’)waspartyto16BITs;38BITswereinforceforSerbia
andMontenegrowhenMontenegroseparatedfromitin2006;62whileSudan,upon
60 See http://www.iareporter.com/articles/montenegro-to-face-second-known-investment-treaty-claim-this-time-over-bankrupt-steelworks/(December2012).61 See the information on applicable BITs (and dates of their entry into force) provided athttp://investmentpolicyhub.unctad.org/IIA/IiasByCountry#iiaInnerMenu.62SerbiaandMontenegrowasestablishedon27April1992,as the ‘FederalRepublicofYugoslavia’(‘FRY’),proclaimedontheterritoryoftwooftheconstituentpartsoftheterritoryofYugoslavia,i.e.
16
theindependenceofSouthSudan,hadenteredintoatleast6313BITs.Withrespect
toallofthese–andthemanymoreBITsatstakeduringthebreak-upoftheformer
Yugoslavia and the Soviet Union, etc. – it needs to be assessed whether the
respectivesuccessorStates,afterindependence,areboundbytreatiesconcludedby
theirpredecessors.64
The question of succession to treaties has long been, and remains, highly
controversial.Itisherethatthemajordebatebetween‘strictcontinuity’and‘clean
slate’ approaches has historically been played out. The 1978 Vienna Convention’s
attempt toprovidea strongdefault rule favouring continuityhasmetwith limited
success. Rather than endorsing one guiding principle, practice and debates since
1978reflectatrendtowardsprocess(encouragingnegotiatedagreementsontreaty
succession)andflexibility(proposingdifferentiatedsolutionsfordifferentcategories
of treaties). The subsequent sections outline these developments (a) and indicate
howtheyaffectthestatusofnewStateswithrespecttobilateralinvestmenttreaties
enteredintobytheirpredecessors(b).
a) The General Regime: Automatic Succession, Its Discontents, and the Turn to
ProcessandFlexibility
Thegeneral regime isnoteasilysummarised,as it is rather inastateof fluxanda
numberofcorepropositions remainuncertain.This, in turn, isa resultofanover-
ambitious attempt at codification based on overarching principle, and a body of
practice favouring case-by-case solutions. The 1978 Vienna Convention stands for
thefirstapproach.Itsetoutarelativelystraightforwardrule:accordingtoitsArticle
Serbia and Montenegro. In 2003, the name of FRY was amended to ‘State Union of Serbia andMontenegro’. In2006,Monetenegroseparated fromthatUnion to forman independentState.Forreasonsof simplicity, the textuses 'SerbiaandMontenegro’ todescribe theStateexistingbetween1992-2006.63AccordingtoUNCTAD’srecentcountrystudy,thefigureissignificantlyhigher:seeInvestmentPolicyReview: Sudan (http://unctad.org/en/PublicationsLibrary/diaepcb2014d5_en.pdf, at 54), which lists21BITs.64Itisworthnotinginpassingthat,irrespectiveofdebatesaboutthelevelofcustomaryprotection,ininvestment law, it isprotectionby treaty thatmatters, asonly the treatywill typically conferuponclaimantsarighttoraisetreatyviolationsbeforearbitraltribunals,andasthatrightwillberestrictedto treatybreaches.As a consequence, oneof the commonarguments in successiondebates - thatcustomaryinternationallawwouldoffercontinuousprotection-providesnoeasywayout.
17
34,newStates–whethersecedingfromexistingStatesoremerginginprocessesof
dismemberment–areboundbyalltreatiesbindingupontheirpredecessors.65There
are, to be sure, nuances. Importantly, the rule of automatic succession applies by
default.Statescanalwaysagreeotherwise(Article34(2)(a));andnewStatesdonot
automatically succeed if "the application of the [prior] treaty in respect of the
successorStatewouldbeincompatiblewiththeobjectandpurposeofthetreatyor
wouldradicallychangetheconditionsfor itsoperation"(Article34(2)(b)).66What is
more, the Convention adopts a very different approach for newly independent
Statesthathaveobtainedindependencefromcolonialrule:theseremainboundby
localized, territorially-grounded treaties,67 but otherwise can start with a ‘clean
slate’.68
Yet notwithstanding these nuances, the Convention's approach is surprisingly
straightforward. Outside the colonial context, and outside the relatively narrow
exceptionofArticle34(2)(b),newStatesarepresumedtocontinueall treatyrights
and obligations of their predecessors, irrespective of whether these derive from
multilateralorbilateralagreements.Thisnodoubthastheappealofsimplicity,but
inretrospect, itseemsclearthat, foratreatyseekingtoattractwideparticipation,
the 1978 Vienna Conventionmay have adopted too straightforward an approach.
EversincedraftprovisionsforeshadowingArticle34appearedduringthe1970s,the65ThecrucialprovisionisArticle34(1)(a),whichprovides:"WhenapartorpartsoftheterritoryofaStateseparatetoformoneormoreStates,whetherornotthepredecessorStatecontinuestoexist:(a)anytreatyinforceatthedateofthesuccessionofStatesinrespectoftheentireterritoryofthepredecessor State continues in force in respect of each successor State so formed…".According toZimmermann, the question addressed by Article 34 "may be considered the most controversialquestionwithinthelawofstatesuccessiontotreaties":Zimmermann,inTams/Sloan(n26),59.66Article34(2)(b).67Articles11and12;andseeCrawford(n2),439-440.TheICJaffirmedthecustomarystatusofArticle12intheGabcikovoNagymaroscase:seeICJReports1997,7,atpara.123.68SeeArticle16,whichrunsasfollows:"AnewlyindependentStateisnotboundtomaintaininforce,ortobecomeapartyto,anytreatybyreasononlyofthefactthatatthedateofthesuccessionofStates the treatywas in force in respectof the territory towhich the successionofStates relates."According to Article 24, bilateral treaties are "considered as being in force between a newlyindependentStateand theotherStatepartywhen: (a) theyexpressly soagree;or (b)by reasonoftheirconducttheyaretobeconsideredashavingsoagreed".ForcommentseeHafner/Novak(n17),409-410;andZimmermann/Devaney(n17),at518(arguingthat,duringthedecolonizationprocess,"the universal succession to obligations of previous colonial powers was seen as completelyirreconcilable …. [this] ultimately resulted in the inclusion of the special regime for newlyindependentStatesintheVCSST").
18
automaticityprinciplehasbeenwidelycriticisedasoverlybroad(failingtoreflectthe
diversepracticeofStates)andasunjust(based,asit is,onacategoricaldistinction
betweennewly-independentandothersuccessorStates).69Resistancetoautomatic
successioninfactissaidtobearelevantfactorexplainingthelowacceptancerateof
the1978ViennaConventionasatreaty.70
Given these concerns, it comes as no surprise that Article 34 has had a limited
impact on international practice. In fact, there is widespread agreement that
international practice since 1978 does not bear out a general rule of automatic
successionforalltreaties.71Ratherthanrelyingontheoperationofoneoverarching
principle, States have sought actively to shape the fate of ‘their’ treaty rights and
obligations post independence. The various State successions of the 1990s in
particularresultedinrichbodyoftreatypractice,includingunilateraldeclarationsby
successorStates,agreementswiththeirtreatypartners,anddepositarystatements,
which provide guidance on the fate of specific treaties.72This practice has usually
accommodatedageneraldesiretoavoidruptures;asaconsequence,inthemajority
ofinstances,theStatesinvolvedinnegotiationshavesoughttoensurethestability
of treaty relations.73But thisoverarchinggoalhasbeen reached indifferentways,
andpursuedwithdifferentdegreesofvigour.
69Seee.g.Crawford (n2),438-439;Hafner/Novak (n17),413-414;AAust,ModernTreaty LawandPractice(2rdedn.,2007),368-369;DVagts,StateSuccession:TheCodifiers’View,VirginiaJournalofInternationalLaw33(1993),275,at283;Dumberry(nXX),78("bothincoherentandunjustifiable“).O’Connell’s criticism of the Conventionwas particualrly trenchant; to him, "this particular essay inrefashioningthe lawwasmarredfromits inceptionbyapreoccupationwiththespecialproblemofdecolonisation,aroundwhichmythandemotionhaveaccumulated likemists in themarsh, so thatthe whole context became intellectually distorted": see DP O’Connell, Reflections on the StateSuccessionConvention,ZeitschriftfürausländischesöffentlichesRechtduVölkerrecht39(1979),725,at726.70Vagts(n69),287-288.71Seee.g.Crawford(n2),438;JKlabbers,CatonaHotTinRoof:TheWorldCourt,StateSuccession,andtheGabcikovo-NagvmarosCase,LeidenJournalofInternationalLaw11(1998),345,at348-349.72In its Report, the ILA made the point very clearly, when noting that negotiations are the mostcommonmeansofaddressingsucccessionissues(n17,at27):"lapratiquedelanégociationprévautconcernantlasuccessionenmatièredetraités".73AccordingtotheILA,negotiationsproceedfroma‘presumptionoftreatycontinuity’:seeILAReport(n17,at27):"laprésomptiondelacontinuitéestlaprémissefondamentaleenmatièredesuccessiond'Etats-afindesauvegarderlastabilitédesrelationsinternationales".
19
A case-by-case handling of succession issues,which has been aptly described as a
turn from ‘substance’ (or substantive legal principle) to ‘procedure’ (or process),74
cannodoubtclarifythestatusofparticulartreaties.However,ithasleftthegeneral
regime in a state of flux: outside party agreement on the continuity (or dis-
continuity)ofagiventreaty,thereisaratherlargegreyzoneofuncertainty.Atthe
sametime,themorerecentdebatereflectsadesireforgreaterdifferentiationand
flexibility: while terms such as ‘strict continuity’ and ‘clean slate’ remain popular,
practice has sought to explore "more nuanced solutions".75For present purposes,
twosuch“nuancedsolutions”–bothofwhichpoint toamoreflexiblehandlingof
successionissues–areofparticularrelevance.
Afirstapproachproceedsfromadistinctionbetweendifferentcategoriesoftreaties.
Whileageneralruleofautomaticsuccessionforalltreaties(asenvisagedbyArticle
34ofthe1978ViennaConvention)seemsoverlyambitious,practicemightsupporta
more restrictive rule requiring new States to succeed to major multilateral
conventionsformulating‘goldstandards’ofinternationalrelations,inwhichthereis
a clear community interest in automatic succession.76For universal human rights
agreements in particular, it has been argued that, as "[t]he rights enshrined in
[humanrightsagreements]belong to thepeople ...,once thepeopleareaccorded
theprotectionoftherights...,suchprotectiondevolveswithterritoryandcontinues
to belong to them, notwithstanding... State succession".77By contrast, this first
approach has tended to view bilateral treaties as mere inter-party bargains,
dominated by the personal element and of an “essentially voluntary character".78
74Koskenniemi(n27),69.75Zimmermann,EPIL(n17),para.5.SeealsoZimmermann/Devaney(n17,at516):"falsedichotomy”.76Thedifferentviewson thismatterare reflected inMTKamminga,StateSuccession inRespectofHuman Rights Treaties, European Journal of International Law 7 (1996), 469; A Rasulov, RevisitingState Succession to Humanitarian Treaties: Is There a Case for Automaticity?, European Journal ofInternationalLaw14(2003),141;Zimmermann/Devaney(n17),at533-536;andAust(n69),at371-372.77HumanRightsCommittee,GeneralCommentNo.26 (61),UNDoc.CCPR/C/21/Rev.1/Add.8/Rev.1(1997), at para. 4. While enjoying considerable support, practice regarding major multilateralconventions is not unequivocal, and the ICJ, in the various Genocide cases submitted to it, hasrefrainedfromendorsingaruleoflimitedautomaticity:seeZimmermann,inTams/Sloan(n26,at61-63)foradetailedassessment.78Asnotedby the ILC in itscommentary to theDraftArticlesonSuccessionofStates inRespectof
20
According tomost commentators,whatever the general rule, bilateral treaties are
notsubjecttoaruleofautomaticsuccession;79accordingtotheILA,"the[ir]fate...is
generally decided throughnegotiation between the successor State and the other
party".80
Asecondapproachseeksdifferentiatedsolutionsonthebasisofafullerappreciation
of the parties’ intentions. Of course, in an ideal case, those intentions will be
expressedinformalagreementsordeclarationsofsuccession(which,asmentioned
above,havebecomeapopularmeansofclarifyingwhichtreatiesapply).Butevenin
theabsenceofsuchexplicitguidance,practiceseemstohaveacceptedsomedegree
of flexibility. Notably, domestic courts have on occasion continued to apply prior
treatiesonthebasisofpresumed(tacit)consent,where“continuity [was] inevery
State’sinterest”.81Wherethiswasthecase(ase.g.inrelationtoextraditionorFCN
treaties), domestic courts have not infrequently relied on informal statements or
conduct to establish consent; 82 and "[s]ometimes simple intertia [has been]
upgradedascontinuity".83Similarly,intheCroatianGenocidecase,theInternational
CourtofJusticereadafairlygeneralpolicystatementadoptedbyanun-authorised
assembly of parliamentarians as amounting to a valid declaration of succession.84
Needless to say, suchattempts to infer consent fromstatementsor conduct faces
“inherent difficulties"; 85 however, given the uncertainty of the applicable legal
Treaties:ILCYearbook1974,vol.II/1,at239.79Stern(n17),315-316;Dumberry(n5),78-82;Shaw(n32),67;aswellasJKlabbers,MKoskenniemiandORibbelink andA Zimmermann (eds),State Practice Regarding State Succession and Issues ofRecognition(1999),116.80ILA2008Resolution(n17),para.8.81Koskenniemi(n27),89.AccordingtoO’Connell(n69,at736),“[t]heclearlypersonaltreaties,suchascommercialorextraditiontreaties,havegivenrisetonoproblems".82See e.g. R. Director of Public Prosecution, ex parte Schwartz (Jamaica), 73 ILR, 45-48 (1987)(continuedapplicationofaUS-UKextraditiontreaty);Mv.FederalDepartmentofJusticeandPolice(Switzerland)(continuedapplicationofaUK-SwisstreatyinregardtoSouthAfrica),75 ILR, 109-113(1987);ReBottali (Italy) (continuedapplicationofanextraditiontreatybetweenItalyand India),78ILR111(1988);andfurtherGruber(n17),206-216.83Koskenniemi(n27),89.84Namely in theCroatian-SerbianGenocidecase, ICJReports2008,412,atpara.108.ForcommentseeZimmermanninTams/Sloan(n26),at67-68.85Genest(n15),22.
21
standards, theattractionof"pragmaticarguments fromtacitconsent"86isobvious.
Andoverall, itmayperhapsbesaidthatthemoreflexibleapproachesjustoutlined
facilitate the search forequitable solutions reflecting the intentionsof theparties,
andatleastofferguidelinesfortheapplicationofafairlyunsettledlegalframework.
b)SuccessiontoBITs:WidespreadTreatyPractice,andtheNeedtoLookBeyondIt
Asnotedabove,therehassofarbeennocomprehensiveefforttoapplythegeneral
rulesonStatesuccessiontobilateralinvestmenttreaties.Arbitralpracticehasyetto
engagefullywiththeissues;wheresuccessionquestionshavearisen,tribunalshave
generally preferred to tread softly. Commentators have only recently begun to
explore arguments about succession to BITs; and while there is now a body of
commentary,87it remains focusedon thegrandnormativedebate - donewStates
automaticallysucceedtopriorBITs?Thisquestionnodoubtisrelevant;butinlight
oftheprecedingconsiderations,itneednotalwaysarise.Infact,thetrendstowards
processandflexibilityhighlightedabovemeanthatquiteoften,itcanbeavoided.To
illustrate this point, and seeking topresent abalancedaccountofpotential issues
arising in investment treaty disputes, the subsequent sections provide an
(admittedlyselective)overviewofrecenttreatypracticeregardingsuccessiontoBITs
(aa),andhighlightfactorsthat,intheabsenceofexpressagreement,couldindicate
that the parties implicitly agreed to the continued application of a prior BIT (bb).
Following these considerations, section (cc) briefly revisits the debate about
automaticsuccessiontoBITs.
aa)ExplicitPartyAgreements
The firstpoint isbasedona rather triteproposition:before rehearsingarguments
aboutautomaticsuccessiontotreaties,itisusefultoanalysewhether“thefateof[a
BIT has been] decided through negotiation between the successor State and the
otherparty..."88. This in facthappens rather frequently: successor Statesand their
treatypartners regularlyprovideexplicit answers toquestionsof State succession.
86Cf.Koskenniemi(n27),89.87Seee.g.Dumberry(n5),id.(n15);Genest(n15).88Cf.ILAResolution(n17),para.8.
22
Thefullextentofthispracticeisdifficulttoassess,ifonlybecauseinformationisnot
alwaysreadilyavailable.89Yetanillustrativereviewoftwoofthebetter-documented
instancesofStatesuccessionsuggeststhatpracticeissignificant.
SerbiaandMontenegro:ThepracticeofSerbiaandMontenegro(whichwaswidely
considered a successor to the Socialist Federal Republic of Yugoslavia [‘SFRY’ or
‘formerYugoslavia’],andwhicheventuallygaveup itsclaimtohavecontinued the
former Yugoslavia’s legal personality90) provides a first example in point. By late
1991,theSFRYhadenteredintosevenBITs.91Withrespecttothreeoftheseseven
priortreaties,SerbiaandMontenegroanditsrespectivetreatypartneragreedthat
the old treaty would continue to apply: this is true with respect to France, the
Netherlands and Germany.92 In two further instances, Serbia and Montenegro,
during the 2000s, entered into a new BIT with the treaty partners of the former
SFRY:thisappliestoEgyptandAustria.93(SerbiaandMontenegroalsoconcludeda
newBITwiththeNetherlands,withwhichithadinitiallyagreedtocontinuetheold
SFRY BIT.94) Importantly, according to their express terms, the new BITs entered
89Thedecisioninfavourofcontinuityistypicallyembodiedinabilateralagreement,whichinturnisoftenpart of awiderdecisionabout the futureof treaty relationsbetween theparties. Yetnot allsuchagreementsaremadepublic;comprehensivefindingswoulddependonadetailedexaminationofdiplomaticpractice.Suchadetailedexaminationisbeyondthescopeofthepresentinquiry,whichdrawsoninformationmadeavailableviagovernmentwebsites,dedicatedinvestmentlawdatabases,andpublishedcollectionsoftreatypractice.90Seesupra,section2.b.91NamelywithCanada(1973),theNetherlands(1976)),France(1974),Egypt(1977),Sweden(1978),Germany (1989), Austria (1989). The five latter treaties are available athttp://investmentpolicyhub.unctad.org; the Canadian and Dutch treaties are at http://www.treaty-accord.gc.ca/text-texte.aspx?id=101508 and(https://verdragenbank.overheid.nl/en/Verdrag/Details/011240respectively.92 See the bilateral agreeements recorded inhttp://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA20030037 (France),https://zoek.officielebekendmakingen.nl/trb-2002-181.HTML (Netherlands), and Federal Gazette(Bundesgesetzblatt)1997,vol.II,961(Germany).
Followingitsindependencein2006,MontenegroagreedwithGermanyandFrancethattheoldSFRYBITwould continue to apply: seeFederalGazette (Bundesgesetzblatt) 2011, vol. II, 746 (Germany);http://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA00000468 (France). FollowingKosovo’s declaration of independence, the parties agreed that the old SFRY BITs would apply toKosovo: see http://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA00000940 (France)andFederalGazette(Bundesgesetzblatt)2011,vol.II,748(Germany).93SeeAustria-Serbia/MontenegroBIT(2001);Egypt-Serbia/MontenegroBIT(2005).94SeeNetherlands-Serbia/MontenegroBIT(2002).
23
between Serbia and Montenegro on the one hand, and Egypt, Austria and the
Netherlands on the other, terminated (and thus replaced) the prior SFRY
agreements.95Whilesuchaterminationprovisionmayhavebeenincludedtoclarify
thesituation, itsexistencesuggeststhatthenewtreatypartiesdidnotconsiderto
havestartedfromacleanslate.
In short, of the seven BITs entered into by the SFRY, five were either expressly
continuedorreplacedbynewBITs.Inthetworemainingcases,thesituationismore
equivocal.Basedonreadilyavailableinformationinthepublicdomain,Swedenand
SerbiaandMontenegroseemnottohavereachedanexplicitagreementtocontinue
the old SFRY-Sweden BIT (nor concluded a new BIT); yet the old BIT was clearly
treatedasapplicableinproceedingsbetweentheEuropeanCommissionandSweden
beforetheEuropeanCourtofJustice.96CanadadidenterintoanewBITwithSerbia
in2014 (i.e.after theseparationofMontenegro),but this treaty remainssilenton
the fate of the SFRY-CanadaBIT.97As is clear from these latter two examples, the
practiceoftreatypartiespostsuccessiondoesnotaddressallthe issues.However,
an analysis of Serbian-Montenegrin practice suggests that diplomatic exchanges
betweentheStatesconcernedsignificantlyreducetheareasofuncertainty.
Czech Republic: The treatment of BITs entered into by Czech and Slovak Federal
Republic(‘CSFR’or‘formerCzechoslovakia’)yieldsevenclearerfindings.Atthetime
of itsdissolution,16BITswere in force for theCSFR.During thedissolutionof the
CSFR, the Czech Republic (as well as the Slovak Republic) indicated that it would
consider itself bound by multilateral and bilateral treaties entered into by the
95See Austria-Serbia/Montenegro BIT (2001), Article 12(4); Egypt-Serbia/Montenegro BIT (2005),Article 13; Netherlands-Serbia/Montenegro BIT (2002), Article 14(5). The ‘replacement clauses’ ofthese treaties are not identical, but relatively similar. By way of illustration, Article 12(4) of theAustria-Serbia/Montenegro BIT (2001) provides that "[t]he entry into force of this Agreementbetween the Government of the Republic of Austria and the Federal Government of the FederalRepublic of Yugoslavia shall terminate the provisions of the Agreement on the Promotion andProtectionof Investmentsbetween theRepublicofAustriaand theSocialist FederativeRepublicofYugoslavia,signedinBelgradeon25October1989.”96SeeEuropeanCourtof Justice,Commissionof theEuropeanCommunities v. Kingdomof Sweden,CaseC-249/06.97Seehttp://investmentpolicyhub.unctad.org/Download/TreatyFile/3152,
24
CSFR.98Followingindependence,theCzechRepublicanditstreatypartnersclarified
thefutureapplicationofbilateraltreatiesconcludedwiththeCSFR.In14ofthe16
cases,theCzechRepublicanditsrespectivetreatypartnerexplicitlyagreedthatthe
priorCSFRBITwouldcontinuetoapply, typicallyby includingtheprior treatyona
list of treaties that would “remain in force”: agreements along the lines were
reached with the Netherlands,99Austria,100 Switzerland,101Germany,102France,103
the United Kingdom,104the United States,105as well as Denmark, Finland, Spain,
Sweden,Greece,Norway,theUnitedStatesandtheBelgium-LuxembourgEconomic
Union.106In the two remaining instances (the CSFR-China and CSFR-Canada BITs),
newBITswere concluded. Both of these newBITs expressly terminated (and thus
replaced) the treaties agreedwith theCSFR107- again suggesting that the old BITs
hadnot simply ceased toapply. In fact, theCzech-CanadianBITaccepted that the
prior CSFR-Canada would “continue to apply to any dispute between either
Contracting Party and an investor of the other Contracting Party that has been
98 See e.g. ‘Proclamation to all Parliaments and Nations of the World’ of 17 December 1992,reproducedinKlabberset.al.(n79),at402;seealsoArticle5(2)ofConstitutionalActNo.4/1993(athttp://www.usoud.cz/fileadmin/user_upload/ustavni_soud_www/Pravni_uprava/AJ/4_1993_EN.pdf).ItisworthnotingtheformerCzechoslovakiahadbeenapartytothe1978ViennaConvention.99See Tractatenblad 1995, Nr. 27, at 3, 5: see https://zoek.officielebekendmakingen.nl/trb-1995-27.HTML100 Seehttp://www.bmwfw.gv.at/Aussenwirtschaft/investitionspolitik/Documents/Bilaterale%20Investitionsschutzabkommen/Tschechien2.pdf.101Seewww.admin.ch/opc/de/classified-compilation/19900247/index.html#fn1.102FederalGazette(Bundesgesetzblatt)1993,vol.II,762.103Seehttp://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA19950270.104SeeUKTreatySeries1996,ThirdSupplementaryList,96.105According to Williams, on 24 April 1993, the Czech Ministry of Foreign Affairs notified the USDepartment of State of a number of prior bilateral agreements (incl. the CSFR-US BIT) that itconsidered to remain in force: PRWilliams, The Treaty Obligations of the Successor States of theFormerSovietUnion,Yugoslavia,andCzechoslovakia:DoTheyContinueinForce?,DenverJournalofInternationalLawandPolicy23(1994-1995),1,at40-41.AccordingtoinformationprovidedbytheUSTradeRepresentative“[a]fterthebreakupofCzechoslovakiain1993,[theCSFR-USBIT]continuedineffect for the successor states, the Czech Republic and Slovakia” (athttp://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_002809.asp). See alsoDumberry(n5),85(hisfn.72).106SeethereferencesinKlabberset.al.(n79),at442,444,454,458,460.107Czech-ChineseBIT,Article13(4);Czech-CanadianBIT,ArticleXV(7).
25
submitted to arbitration pursuant to that Agreement by the investor prior to the
datethatthisAgreemententersintoforce.”108
Thebriefsummarysuggeststhat,whenaddressingthefateofpriorBITs,theCzech
Republic and its treaty partners opted for a near-absolute continuity. Against that
background, it should perhaps not come as a huge surprise that arbitral tribunals
addressingtherathermanyBIT-basedclaimsagainsttheCzechRepublichaveseen
littlereasontoprovidedetailedreasoning.AsDumberrynotes,mostoftherelevant
awards"barelymentioned…therelevantsuccessionissues";109indeedoften110they
nomorethanrecord,inasinglephrase,that"theCzechRepublicsucceededtothe
rightsandobligationsoftheCzechandSlovakFederalRepublicundertheTreaty".111
And while brief statements like this one may indeed not do full justice to the
intricaciesof the lawofState succession, the tribunals’ telegraphic “reasoning”no
doubtgiveseffecttotheintentionofthetreatyparties. Inthevariousproceedings
against the Czech Republic, it simply (as noted by another tribunal) was "not in
disputethattheRespondentsucceededtotherightsandobligationsundertheΒΙΤ
asoriginallyenteredintobytheCzechandSlovakFederalRepublic”.112
***
108Czech-Canadian BIT, Article XV(7). The provision also refers to “the Agreement between theGovernment of Canada and the Government of the Czech and Slovak Federal Republic for thePromotionandProtectionofInvestments,doneatPragueon15November1990,insofarasitisnowanAgreementbetweenCanadaandtheCzechRepublic”(emphasisadded).109Dumberry(n5),96.Seeibid.,84-89,forafullerreviewofarbitraljurisprudenceincasesinvolvingtheCzechandSlovakRepublics.110Similarlybriefisthe'discussion’inthefollowingawards:Binderv.CzechRepublic,UNCITRAL,FinalAward, 15 June 2007, para. 385; European Media Ventures SA v. The Czech Republic, UNCITRAL,PartialAwardonLiability,8July2009,para.1;Invesmartv.CzechRepublic,UNCITRAL,Award,26June2009,para.8;EasternSugarBV(Netherlands)vTheCzechRepublic (SCCCaseNo088/2004),PartialAward,27March2007,para.5.111SeeCME Czech Republic BV v Czech Republic, UNCITRAL, Partial Award, 13 September 2001, atpara.3.112 ECE Projektmanagement & Kommanditgesellschaft PANTA AchtundsechzigsteGrundstücksgesellschaftmbH&Co.v.TheCzechRepublic,UNCITRAL,PCACaseNo.2010-5,Award,19September2013,para.3.139.
26
This summary review of Czech and Serbian-Montenegrin practice illustrates the
importanceofexplicitpartyagreementsdeterminingthefateofpriortreaties.Such
agreements may be difficult to trace and often are reached some time after the
succession,leavingthelawuncertainduringtheinterim(‘twilight’)period.However,
thetwocasestudiessuggestthatexplicitagreementsarenumerousand,inalarge
numberof instances,clarifywhetheranewState isboundbytreatiesenteredinto
by its predecessor. As to the outcome of such agreements, Czech and Serbian-
Montenegrinpractice is also indicative:whendiscussing the fateof a prior treaty,
the Czech Republic, Serbia and Montenegro and their respective treaty partners
havealmostinevitablyoptedforsomeformofcontinuity–typicallybyagreeingthat
anoldBITshouldcontinuetoapply,alternativelybyreplacingitwithanewone.This
practice reflects the considerable appeal of stability in investment treaty relations
and it bears out Cheng’s more general observation that “[i]n most instances of
succession,acceptingtheoverallcontinuityofcommercialarrangementsistheonly
realisticoption."113
bb)InferringConsent
While treaty parties are numerous, they donot cover all BITs, andof course they
maytaketimetobereached.EvenStatesthatarekeentoclarifythestateoftheir
treatyrightsandobligationspostindependencemayneedtimetoreachagreement
withtheirtreatypartners. Inother instances,newStates,foranumberofreasons,
may struggle to identify the manifold bilateral treaties raising issues of State
succession. To illustrate, the position of South Sudan vis-à-vis prior BITs remains
largely uncertain. At the time of writing and based on the publicly available
information,ofthe(atleast114)13BITsenteredintobySudan,onlyonehasbeenthe
subjectofanexplicitagreement,andeveninrespectofthatonetreaty,information
is incomplete.115As regards the fate of the twelve other treaties that applied
113Cheng(n15),404.114Seesupra,informationinfn.63.115TheGermangovernmentwebsitestatesthattheGermany-SudanBITapplies inrelationtoSouthSudan: seehttp://www.bmwi.de/DE/Themen/Aussenwirtschaft/Investitionsschutz/investitionsschutzvertraege.html.Itdoesnotrefertoaformalagreementtothiseffect,though.
27
between Sudan and its respective treaty partners, publicly available information
providesnoclearguidance.
The question is how to deal with this uncertainty. According to one approach,
"diplomaticclarificationsorexpressstatements…representtheonlywaytoliftthe
cloudofuncertainty”116–whichseemstosuggestthatallotherinstanceswouldbe
covered by the general rule governing succession to bilateral treaties. Such an
approach is straightforward, but too categorical; it ignores the trend towards
flexibility that characterises the general regime of State succession.117As noted
above,thecrucialquestioniswhetherthenewStateandtheotherpartytotheprior
treaty intended to apply the treaty post independence. Especially in the bilateral
context,wheretheparties’ intentiontobeboundbyatreatydoesnotneedtobe
expressedinaformalmanner,118thereiscertainlyroomforabroaderanalysisthat
looksbeyondexplicitpartyagreements.119Whilstdefinitivefindingswilldependon
anoverallassessmentoftheavailableevidence,thefollowingelementscouldguide
theanalysis:
-UnilateralstatementsbythesuccessorState:Intheabsenceofanexplicitbilateral
agreementbetweenthetreatyparties,successorStatesmayhaveunilaterallytaken
a view on the application of prior bilateral treaties. Such unilateral statements
cannotbindputativetreatypartners,120buttheymayhelp identifytheviewofone
party.Wheretheviewofthatparty isnotopposed, itcanprovidethebasis foran
116 Discussing putative obligations of South Sudan post independence, Genest e.g. notes that"diplomatic clarifications or express statements … represent the only way to lift the cloud ofuncertaintyhoveringovertheSudanBITsinrespectofSouthSudan"(n15,at22).117Seesupra,section4.a.118Contrast e.g. the more formalised process governing expressions to be bound by multilateraltreaties; theseoftenprescribe specificmodesof becomingbound (accession, ratification, etc.) andtypicallydesignateadepositarytoensurequestionsofconsent,partystatus,arehandledimpartially.119See Aust (n 69), 369: "In the case of abilateral treaty,much depends onwhat can be agreed,expressly or tacitly, between the successor state and the third state“ (italics in the original).Moregenerally, see also J Brunnée, Consent, in Max Planck Encyclopedia of Public International Law(www.mpepil.com),atpara.20:"IndividualStates’explicitconsentremainscentral,inboththeinitialadoptionandsubsequentdevelopmentoftreaties.Inthelattercontext,attenuatedformsofconsent,suchasconsentthatispresumedsubjecttoopt-out,areincreasinglycommon."120SeeArticle9ofthe1978ViennaConvention,whichclarifiesthat, inandofthemselves,unilateralstatementscannotcreaterightsandobligationsforthirdStates.
28
argumentbasedontacitpartyconsent.Bywayofillustration,itisindicativethatina
number of disputes against the Czech and Slovak Republic, investment tribunals
relied on unilateral statements as evidence of the new States’ willingness to
continue prior treaty obligations.121In the recent UNCITRAL award inWorldWide
Minerals v. Kazakhstan (which, as noted above, has not been released so far), the
Claimants are equally said to have “adduced a series of specific statements and
representationsbyKazakhstanthatwereallegedtosignalthatcountry’sintenttobe
boundbythisparticularU.S.S.R.BIT”.122
-Unilateralstatementsbytheputativetreatypartner:Conversely,statementsbythe
putativetreatypartnermayprovideguidance.Bywayofillustration,treatypartners
of the predecessor State may have formulated expectations about the successor
State’s approach to prior treaties, e.g. before extending recognition.123While such
expectationsmaynoteasilybeenforceablepost recognition, theycanprovide the
basisofatacitagreementifthesuccessorStateacceptsthem.
-Statementscontainedindevolutionorrelatedagreements:Devolutionagreements
betweentheStatesinvolvedinanegotiatedprocessofseparationordissolution,just
as further arrangements, provide another "rich source of data on the law on
succession".124LikeunilateralstatementsbythesuccessorState,theydonotassuch
121Seee.g.SalukaInvestmentsBVvCzechRepublic(UNCITRAL),JurisdictionovertheCounterclaim,7May 2004: "The Czech Republic confirmed to the Kingdom of The Netherlands that, upon theseparationoftheCzechandSlovakFederalRepublicintotwoseparaterepublics,theTreatyremainedin force between the Czech Republic and the Kingdomof TheNetherlands" (at para. 2). The keyquestion iswhether the other party can be taken to have consented: this depends on the regularoperation of principles governing consent inferred from silence or passivity; the specificity andauthorityoftheunilateralstatementarerelevantinthisrespect.122InvestmentArbitrationReporter,InDramaticHolding...(n12).123For example,Williams refers to letters sent byUSPresidentBush to thePrimeMinisters of theCzech and Slovak Republics on 1 December, proposing "that the United States and the respectivestates'conductfulldiplomaticrelations'basedontheaffirmationoftheRepublicstofulfillanumberofcommitments, includingthe'commitmenttofulfillthetreatyandotherobligationsoftheformerCzechoslovakia’“. While Williams criticises "the deficiencyof the U.S.approach to securingcontinuationofbilateralbilateraltreaties",arbitralpracticehasacceptedthecontinuedapplicationofthepriortreaties.SeePRWilliams(n105),at30and32;andcf.supra,section4.b.aa.forasummaryofarbitralpractice.124Cheng(n15),262.
29
bind third parties;125but they can help identify a new State’s approach to prior
treatyobligations.In1991,themembersofthenewly-establishedCommonwelathof
Independent States (‘CIS’) e.g., in a general manner, affirmed their desire to
"discharge the international obligations incumbent on them under treaties and
agreements entered into by the former Union of Soviet Socialist Republics”.126As
regards South Sudan, a bilateral cooperation agreement of 2012 recorded the
intention of Sudan and South Sudan to abide by obligations arising out of their
membership in global and regional trade organisations and "other similar
institutions".127As the other types of evidence mentioned, none of this need be
conclusive:broadstatementssuchasthosemadebytheCISmemberStatesmaytoo
generaltoprovideevidenceofawillingnesstocontinuespecifictreaties;128whilethe
more specific Sudan-South Sudan Agreement may not cover obligations under
BITs.129However,thereislittlereasontoignoretheagreementsaltogether.
-Conductduringproceedings:Inadditiontoearlierstatements,thesuccessorState’s
conductduringarbitralproceedingsmayberelevant.WhiletheapplicabilityofaBIT
isamatterforobjectivedeterminationbythetribunal,therespondentState’sviews
intheproceedingsmaybeindicative.130Insomeoftheproceedingsbroughtagainst
the Czech and Slovak Republics, arbitral tribunals e.g. seemed willing to treat
questions of succession en passant because the Claimant and Respondent were
125SeeArticle8ofthe1978ViennaConvention.126Minsk Agreement (establishing the Commonweath of Independent States), International LegalMaterials31(1992),147,atArticle12;andfurthertheDeclarationofAlmaty,ibid.,at148.127 Agreement on Trade and Trade-Related Issues, Article 2 (athttp://sudanwatch.blogspot.de/2013/03/full-text-nine-agreements-between-sudan.html).128But see the reference, in fn.84, to the ICJ’s judgment in theCroatian-SerbianGenocide case, inwhichageneraldeclarationwastreatedasavaliddeclarationofsuccession.129See Genest (n 15), at 5: "Articles 2(1) and 2(2) [of the Agreement on Trade and Trade-RelatedIssues] raise twounansweredquestionswith likelynegativeanswers: first,whether theSudanBITsconstitute abodyof rules arisingoutof themembership to an institution similar to theWTO, andsecondwhethertheyconstitute‘otherrelevanttradeprinciples’."130Supportforthegeneralproposition(thatconductduringtheproceedings isrelevant)cane.g.befound inthecaseofUSv.Bowe, inwhichthePrivyCouncil foundthat"thetwoGovernmentshaveshownbytheirconduct, includingtheirconduct inthepresentproceedings,thattheybothintendedtheirextraditionarrangementstoremaininforce"(InternationalLawReports,vol.85,144;emphasisadded).
30
agreedonthematter.131
The list is illustrative rather than exhaustive: clearly, in seeking to establish the
intentionoftheparties,tribunalsorotherdecision-makersarenotboundtoastrict
canonofadmissible sources. It alsobears re-iterating that,whateverevidencehas
been brought forward, will need to be evaluated in the light of all factual
circumstances.However,with these caveats, thepreceding considerations suggest
that, such intention can be deduced from other statements, or inferred from
conduct. In this respect, the absence of an explicit party agreement on (dis-
)continuitydoesnotconcludematters;itmeansthatthematterneedstobestudied
morefully.
cc)AutomaticSuccessiontoBITs?
In the light of the preceding considerations, the question of automatic succession
mayperhapsnotarisefrequently; inmanydisputes,thetreatyparties,explicitlyor
implicitly, have expressed a view. Nevertheless, it remains relevant, both
conceptually and in relation to cases in which the parties’ intention cannot be
established.
On the basis of the general regime of State succession (controversial as it is), the
argument for automatic succession to bilateral treaties meets with considerable
obstacles. Of course, new States would automatically be bound by prior BITs if
Article34ofthe1978ViennaConventionapplied(whichithardlyeverdoes).Yet,as
noted above, 132 the better view is that Article 34 does not reflect customary
internationallaw–andthatitcertainlydoesnotreflectcustomaryinternationallaw
asfarasbilateraltreatiesareconcerned:aslongastheseareseenasonecategory,
andviewedasinter-partybargainsofan“essentiallyvoluntary”character,thecase
131See e.g.HICEE BV v Slovak Republic, UNCITRAL (PCA Case No 2009-11), Partial Award, 23May2011,atpara.3fn.2:"Itisnotindisputethat,afterthedissolutionoftheCzechandSlovakFederalRepublicon31December1992,theSlovakRepublicsucceededtothe[CSFR-NetherlandsBIT]."132Seesupra,section4.a.
31
forautomaticsuccessionisweak.133Thefactthat,whendeterminingthefateofBITs
through explicit agreements, new States and their treaty partners have almost
inevitablyopted for treaty stability,doesnotnecessarilyaffect thisunderstanding.
As inotherareasof international law, the impactofexplicit treatyagreementson
theunderlyingcustomarynormisambivalent:whileexplicitagreementsreflectthe
appeal of continuity (and thus the ratio of Article 34), the fondness of States for
negotiated outcomes can equally be said to undermine the case for automatic
succession.134On thebasisof thesearguments, recent studies reject theview that
newStateswereautomaticallyboundbypriorBITs;unlessthepartieshaveagreed
otherwise,thenewStatepositionstartswithaclean‘BITslate’.135
There is force to such an approach, but perhaps it does not do full justice to
arguments in favour of automatic succession to BITs. If that caseweremade,136it
wouldneedtobebasedonanalysis that looksbeyondthenumberofparties,and
that takes issue with the characterisation of BITs as “essentially voluntary” inter-
Statearrangements.137Anargumentforautomaticitycouldinsteademphasisethat,
133SeeILCYearbook1974,vol.II/1,at239;andcf.supra,section4.a.134SeeDumberry(n5),82:"theveryfactthatsuchnegotiationtookplaceinmostcasessuggeststhatthirdStateshavegenerallynotacceptedtheprincipleofautomaticsuccession."135SeeGenest(n15),9(arguingthat"cleanslateandmutualconsentshouldprevailforallsecedingstatesinrespectofbilateraltreaties");Dumberry(n15),27("thetabularasaprincipleshouldapplytoallnewstates");Dumberry(n5),81("thereisnoautomaticcontinuityofbilateraltreatiesbecauseoftheparticularnatureofthesetreaties.
Anytreatycontinuationisultimatelytheresultoftheexpress
(ortacit)agreementofbothStates"[footnotesomitted]).136Sofar,totheauthor’sknowledge,thecaseforautomaticityhasnotsofarbeensetoutindetail.For a clear exposition of its likely starting point – in the context of a separate State successionquestion–seethetheaffidavitofSirDanielBethlehemsubmittedintheSanumproceedingsbeforethe SingaporeHighCourt: At para. 42, SirDaniel notes: "While it is a treaty between the PRC andLaos,bindingonthetwoStatesasparties,[theChina-LaosBIT]alsoestablishesalegalframeworkthatis expressly intended for the benefit of private persons who qualify as ‘investors’, both naturalpersonsandeconomicentities (PRC/LaosBIT,Article1(2)).Morespecifically,Articles2–6oftheBITcreate rights for qualified investors that are actionable in their own name under the disputesettlementprovisionsofArticle8oftheBIT.So,althoughtheBITisaninstrumentconcludedbythePRCandLaos,andbindinguponthem,italsocreatesactionablerightsfornaturalandlegalpersonshaving the nationality, or which are established under the laws, of the Contracting States. As theArticle 12(4) legal framework stability clause makes clear, such persons have acquired rights andlegitimateexpectationsinthearrangementsestablishedbytheBIT":seeSanumInvestmentsLimitedv. Lao People’s Democratic Republic, Affidavit of Sir Daniel Bethlehem KCMG QC, athttp://www.italaw.com/cases/documents/3696.FormoreontheSanumcaseseebelow,section5.137IntheSanumcase,thearbitralrecognisedthatnotallbilateraltreatiescouldbetreatedalike:“theTribunal considers that it would be excessive to say that all bilateral treaties are so personal, sorelated to intuitupersonaequestions that theycannot surviveaState’s succession. Inotherwords,
32
whileconcludedbetweenStates,BITsestablishsubstantiverightsofinvestors,which
are directly enforceable in arbitral proceedings. While formally bilateral, it does
indeedseemoverlyrestrictivetoviewBITsmerelyasinter-Statebargains.Yetonce
the focus is broadened to include the interests of foreign investors, two related
argumentsinfavourofautomaticitycouldbeadvanced.First,treaty-basedinvestor
rightscouldbelikenedto‘vested’or‘acquired’rights,whichoccupiedaprominent
place in traditional debates about State succession – and which were claimed by
manytosurviveinstancesofStatesuccession.138Appliedtothepresentcontext,one
couldperhapsarguethatforeigninvestorsmakinganinvestmentwhenaBITapplies
shouldacquiretherighttohavethatinvestmentprotectedbytheBITaftertheState
successionhastakenplace.139
Second,pressingthepointinlightofrecentargumentsaboutautomaticsuccession
to particular categories of treaties, there might be room for a ‘human rights
analogy’: adapting a prominent dictum by the UN Human Rights Committee, one
could indeedarguethat,asrightsunderBITs"belong[toforeign investors]...,once
[foreigninvestors]areaccordedtheprotectionoftherightsunderthe[treaty],such
protectiondevolveswithterritoryandcontinuestobelongtothem,notwithstanding
...Statesuccession".140
theTribunalconsidersthatit isnecessarytoconsidertheapplicationofthegeneralruletobilateraltreatiesonacase-by-casebasis"(n9,atpara.281).138See notably O’Connell (n 17), vol. 1, 304 et seq. For details see Ko Swan Sik, The Concept ofAcquiredRights in International Law: a Survey, inHMeijers andBVierdag, Essayson InternationalLawandRelations inHonourofA.J.P.Tammes(1977),120;andMITorresCazorla,RightsofPrivatePersonsonStateSuccession:anApproachtotheMostRecentCases,inEisemann/Koskenniemi(n27),663.139Seee.g.Vagts (n69),281: "States in their relationswitheachotherareentitled to relyoneachother'scommitments.…Inothercases,theindividualcitizensdotherelying–theymakeinvestmentsintheterritoryoftheotherstatebecauseoftheassurance(oftencontainedinatreatyoffriendship,commerce and navigation or bilateral investment treaty) that they have a right to establishthemselvesandthattheirinvestmentwillnotbetakenfromthemexceptuponprompt,adequateandeffective compensation." It is worth noting that, in order for such an argument to open the waytowardstreaty-basedarbitration,onewouldneedtoarguethatrightsacquiredunderanapplicableBITareopposabletothesuccessorStateasamatteroftreatylaw.140HumanRightsCommittee,GeneralCommentNo.26(61),UNDoc.CCPR/C/21/Rev.1/Add.8/Rev.1(1997),atpara.4.
33
Thesepointsarepurposivelyputtentatively,asthedebateisatanearlystage–and
as quite often, the parties have determined the fate of their BITs explicitly or
implicitly.Itmustberecognisedthatthecaseargumentforautomaticsuccessionto
BITs is anything but straightforward. It depends on a particularly investor-friendly
reading of those treaties, which – given recent backlashes against investment
arbitration–mayhavelostsomeofitsappeal.However,thebriefsketchofpotential
argumentssuggeststhatthematterisatleastopentoargument.
***
Of the various succession issues addressed in the present inquiry, the question of
successiontopriorBITsisthemostrelevant.Astheprecedingdiscussionsuggests,it
eschews a clear-cut answer. The general regime governing succession to treaties
offers relatively limited guidance; as a consequence, States are well advised to
determinethefateofBITsthroughexplicitagreements.Wheresuchagreementsare
concluded,theyclearlybearouttheimmenseappealoftreatycontinuity.
Absentexplicitagreements,tribunalsandotherdecision-makersarelikely,infuture
disputes,toestablishtheparties’ intentionsfrom‘circumstantialevidence’,suchas
unilateralstatementsorconduct.Thisapproachnowdoubtisfraughtwith“inherent
difficulties",141but, if undertaken properly, can facilitate the search for equitable
solutions. Finally, future disputes may witness a return to the ‘big debate’ about
automatic succession to treaties, which so far has hardly begun: as noted in the
preceding paragraphs,with respect to BITs creating investor rights, that debate is
perhapsmoreopenthantheliteratureonsuccessiontobilateraltreatiessuggests.
5.Cession,IncorporationandTheirImpactonInvestmentTreaties
Questionsof treaty successionarenot restricted to theemergenceofnewStates.
ThebroaddefinitionsetoutinArticle2(1)(b)ofthe1978ViennaConventionbrings
141Genest(n15),22.
34
within the scope of succession instances in which an existing State "replace[s] …
anotherintheresponsibilityfortheinternationalrelationsofterritory”.Cessionsof
territory(i.e.theagreedtransferofapieceofterritoryfromoneStatetoanother142)
and incorporation (i.e. the voluntary integration of one State into another143) are
casesinpoint.AstheydonotinvolvetheemergenceofanewState,theseinstances
ofsuccessiongiverisetoparticularissuesandaresubjecttoaparticularregime.At
leastwithrespecttocessions,thisparticularregimeisenshrinedinArticle15ofthe
1978 Vienna Convention, which declares that following the transfer of territory,
“(a)treatiesofthepredecessorStateceasetobeinforceinrespectoftheterritory
towhichthesuccessionofStatesrelates"while“(b)treatiesofthesuccessorState
areinforceinrespectoftheterritorytowhichthesuccessionofStatesrelates.”This
provisioniswidelyheldtoreflectgeneralinternationallaw;144unlikewithrespectto
other questions of State succession, debates therefore proceed from an agreed
starting-point.
Thatsaid, therecentSanum litigationhasthrown intostarkrelief theconsiderable
uncertainties in the application of the law. As noted in the Introduction, in early
2015,theSingaporeHighCourtheldthatthe1993China-LaosBITdidnotapplytoan
investorincorporatedunderthelawsofMacao;thisdirectlycontradictedanearlier
findingbyanUNCITRALtribunal.145Thesubsequentdiscussionseekstoidentifythe
sourceofthisdisputeandsituateitwithinthelegalregimegoverningtreatiesduring
instances of cession or incorporation; beyond that, it also shows that,
notwithstanding the prominence of the conflicting decisions in the Sanum
142ODörr,Cession,inMaxPlanckEncyclopediaofPublicInternationalLaw(www.mpepil.com),para.1;Hafner/Novak(n17),404;Zimmermann,Staatennachfolge(n17),17.143Dörr(n142),para.2;Hafner/Novak(n17),405;Zimmermann,Staatennachfolge(n17),19.144See e.g. In its commentary to draft article 14 (which became Article 15 of the 1978 ViennaConvention),theILCmadeclearthattheprovisioncodifiedanexistingcustomaryruleYearbookILC1974, vol. II/1, 208-209. Hafner/Novak note succinctly that "State practice before 1978 ... hasconfirmedthevalidityofthisrule[Article15]aspartofcustomaryinternationallaw“(n15,at411).ForfurthersupportseeZimmermann,EPIL(n17),para.8;KOdendahl,CommentarytoArticle29,inODörr/KSchmalenbach(eds),TheViennaConventionontheLawofTreaties(2012),500.IntheSanumcase,thearbitraltribunalnotedthattherewas"unanimityor‘quasi-unanimity’amongthedoctrinetoconsiderthatArticle15…representscustomaryinternationallaw"(n9,atpara.221).145Seereferencesinfn.8and9.
35
proceedings, the rulesapplicable to this typeofStatesuccessionare in fact rather
settled.
a)TheGeneralRegime:MovingTreatyFrontiers
The general regimehas beendevelopedby reference to instances of cession. It is
premisedontheunderstandingthat,whileapartofterritoryistransferred,thelegal
personalityofthetransferringandreceivingStatesremainsintact.146Inthisscenario,
the widely accepted default rule leaves the treaty status of the two States
untouchedandmerelyextends thegeographical scopeof treatiesbymoving their
‘frontiers’. The result is relatively straightforward: as noted by Zimmermann,
“treaties of the predecessor cease to be in force in respect of the ceded territory
while treatiesof the successorgenerallyextend ipso facto to this territory.”147The
twoparagraphsofArticle15ofthe1978Conventionprovideforthissubstitution;in
so doing, they ensure that, for each State, treaties are "binding in respect of its
entireterritory".148
As with other rules (and as the use of the term ‘generally’ in Zimmermann’s
formulation suggests), themoving treaty frontiers rule does not apply absolutely.
Thelawleavesroomforagreementtothecontrary;andwhereatreatyspecifically
relatestothecededterritory,acontraryapproachmayindeedbecalledfor.Article
15ofthe1978ViennaConventiongiveseffecttotheseconsiderationsbyadmitting
for exceptions to the moving frontier principle if its application “would be
incompatiblewiththeobjectandpurposeofthetreatyorwouldradicallychangethe
146AstheILCnotedinitscommentary,instancesofcession"doinvolvea'successionofStates'inthesense that this concept isused in thepresentdraft articles,namelya replacementofoneStatebyanotherintheresponsibilityfortheinternationalrelationsofterritory"(ILCYearbook1974,vol.II/1,208).147Zimmermann,EPIL(n17),para8.Waldock’smorecomplicatedformulationdistinguishesbetweenapositiveaspect(“thetreatiesofthesuccessorStatebeginautomaticallytoapply inrespectofthe[ceded] territory as from the date of the succession”) and a negative aspect (“the treaties of thepredecessorState…ceaseautomaticallytoapplyinrespectoftheterritory”);butinessence,theruleremainsoneof“asimplesubstitutionofonetreatyregimeforanother”:HWaldock,SecondReportonSuccessioninRespectofTreaties,ILCYearbook1969,vol.II,at52.148AsindicatedbyArticle29ofthe1969ViennaConventionontheLawofTreaties.
36
conditions for its operation“;149further exceptions flow from the application of
Articles 11 and 12 of the 1978 Vienna Convention, pursuant to which successor
States are bound to observe boundary and other localised treaties. 150 But
notwithstanding theseexceptions, as aprinciple, the ‘moving treaty frontiers rule’
hasregularlybeenapplied,andwaswellestablishedbythetimeoftheadoptionof
the1978ViennaConvention.151
Statepracticesince1978isrelativelysparse.Ofthefewinstancesofcessionand/or
incorporation that have taken place, some would seem to affirm the approach
adoptedinArticle15ofthe1978ViennaConvention,whileintwoparticularcases,
Stateshaveoptedforanuancedapproach.Asforconfirmatorypractice,thetransfer
ofWalvisBayfromSouthAfricatoNamibia illustratestheoperationofthemoving
treaty frontiers rule.152 After 1994, and subject to some special arrangements,
“treatiesofthepredecessor[SouthAfrica]cease[d]tobe inforce inrespectofthe
ceded territorywhile treatiesof the successor [Namibia] generallyextend[ed] ipso
factoto[WalvisBay].”153Byandlarge,themovingfrontiersprinciplehasalsoshaped
practice during the process of German unification, generally treated as a case of
incorporation, to which the rules governing cessions were applied by analogy:154
149SimilarexceptionsareincludedinArticle29VCLT,pursuanttowhichtreatiesgenerallyapplytotheentiretyofaState’sterritory:thispresumptiondoesnotapplyif"adifferentintentionappearsfromthetreatyorisotherwiseestablished“.IntheSanumcase,thearbitraltribunalheld"theexceptionstoArticle15oftheVCST[tobe]encompassedintheexceptionstoArticle29oftheVCLT"(nXX,atpara.229).150Seesupra,section4.a.151Seethereferencesinfn.141.152SeetheTreatybetweentheGovernmentoftheRepublicofSouthAfricaandtheGovernmentofthe Republic of Namibiawith Respect toWalvis Bay and theOff-Shore Islands, International LegalMaterials 33 (1994), 1526; and further Zimmermann, Staatennachfolge (n 17), 447-449. Forbackground information see AJ Hoffmann, Walvis Bay, in Max Planck Encyclopedia of PublicInternationalLaw(www.mpepil.com).153Cf.Zimmermann,EPIL(n17)para8.Specialarrangementsweree.g.reachedtoaccommodatetherightsofSouthAfricanresidentsinWalvisBayandtheeffectofpublicactsrenderedduringtheSouthAfricanrule:seeHoffmann(n152),paras.15-17.154See Hafner/Novak (n 17), 411-412; Zimmermann, Staatennachfolge (n 17), 245-282 (withmanydetails).Thisanaloguousapplication initiallyofthemovingtreatyfrontiersruletotheunificationofGermanymetwithsomeresistance,asthe1978ViennaConventiondoesnotlaydownspecialrulesforanincorporationofaState,but instead, inArticle31,formulatedaparticularrulegoverningtheunitingofStates. InthecaseofGermany,Article31clearlywasnotapplied.ForaclearanalysisseeStern(n17),237-242.
37
according to Article 11 of the Unification Treaty,155agreements concluded by the
Federal Republic ofGermany (‘FRG’), as a rule,would apply to the entireGerman
territory;whereastheFRGwouldmerelyenterintoconsultationsregardingthefate
oftheGermanDemocraticRepublic’sformertreatiesaccordingtoArticle12.156
Thetwomostprominentterritorialtransfersthathavetakenplacesince1978–viz.
the return to China, of Hong Kong andMacao157– however have followed a very
different (perhaps indeed “unique”158) logic. As Macao and Hong Kong were to
retainaspecialstatuswithinthePRC,themovingfrontierprinciplewasnotapplied
in an unqualified manner. In addition to ensuring the transfer, the arrangements
betweenChinaontheonehand,andtheUnitedKingdomandPortugalontheother,
soughttopreservepre-existingtreatiesirrespectiveofwhetherthesehadappliedto
Chinabeforethetransfer.Tothateffect, intheirbilateralDeclarationsof1984and
1987,thetreatypartiesdidnotautomaticallyextendChinesetreatiestoHongKong
andMacao.159Moreimportantly,theyenvisagedthat(asnotedinthe1984UK-China
Declaration)“[i]nternationalagreementstowhichthePeople’sRepublicofChina is
notaparty,butwhichareimplementedinHongKong,mayremainimplementedin
the[HongKongSpecialAdministrativeRegion]”.160AsregardsHongKong,theJoint
LiaisonGroupestablishedunderthe1984Declarationwastomakeampleuseofthe
latter option (continued implementation) as far as multilateral treaties are
155TreatyontheUnificationofGermany,InternationalLegalMaterials30(1991),457.156As Aust notes (n 69, 374), while not bound by the Unification Treaty, other states generallyacceptedtheapproachadoptedinArticles11and12.ForfurtherdetailseeDPapenfuß,TheFateoftheInternationalTreatiesoftheGDRwithintheFrameworkofGermanUnification,AmericanJournalofInternationalLaw92(1998)469;andthereferencesinfn.154.157 Whether these instances are properly characterised as 'State succession' is a matter ofcontroversy:accordingtothePRC’sview,itwasamere"resumption"ofsovereigntyoverterritoriesthat had never been ceded. However, even on that basis, both instances would involve the “thereplacementofoneStatebyanotherintheresponsibilityfortheinternationalrelationsofterritory”(asperArticle2(1)(b)ofthe1978ViennaConvention).ForcommentseetheSanumaward,atpara.237;butcf.Wang(n13),569-570.158Aust(n69),386.159See International LegalMaterials 1984, 1366 (JointUK-ChinaDeclaration) andUNTreaty Series,vol.1498,228(JointChina-PortugalDeclaration).ForafulleranalysisseeRMushkat,HongKongandSuccessionof Treaties, International andComparative LawQuarterly 46 (1997), 181; Zimmermann,Staatennachfolge(n17),432-337;andCheng(n15),209-236.160SeeAnnexI,SectionXIofthe1984JointUK-ChinaDeclaration(n159).
38
concerned; with the result that, “with few exceptions, multilateral treaties which
had applied to Hong Kong before handover continued to apply thereafter in all
essential respects”.161Forbilateral treaties, thepartieswerealsokeen topreserve
someautonomyforMacaoandHongKong,butadoptedadifferentapproach:inthe
wordsofonecommentator (speakingto thesituation inHongKong),“noneof the
then existing bilateral treaties with third States would apply to the HKSAR after
handover.”162Rather, Hong Kong and Macao were entrusted directly to conclude
bilateralagreementsintheirownright,whichwouldthenremaininforce.
Theseconsiderationshighlight the flexibilityof thegeneral framework,whichdoes
notprecludeStatesfromagreeingonspecialsolutionsforparticularproblems–and
which in thecaseofHongKongandMacao,allowed theparties to implement the
‘one country, two systems’ approach that informed the eventual arrangements.
Lookingatdevelopmentssince1978,perhapsitcouldbesaidthatpracticehasnot
onlybeensparse,butalsodominatedbyunusualcases;andthatthearrangements
reached with respect to Hong Kong and Macao (and to some extent Germany)
reflectthatfact.
b) Investment Treaty Practice: Agreement on Principle, but Difficulties with
‘Unique’Cases
Investmenttreatypracticelargelymirrorsthegeneraldevelopmentsoutlinedinthe
preceding section. Given the recent focus on the Sanum litigation with its
contradictory outcomes, it is worth underlining that there is a large measure of
agreement on the applicable regime, and on the presumptive relevance of the
movingfrontiersprincipleinparticular.
Read properly, the decisions rendered in the Sanum litigation reflect different
interpretations of the peculiar status of Macao under Chinese BITs entered into
beforeMacao’s return. Thesedifferent interpretationsmighthave implications for
161Aust(n69),390.162Aust(n69),390.
39
thestatusofHongKong(inrelationtowhichsimilarquestionsmightarise),butare
unlikelytobeofmoregeneralrelevance. Infact, intheirapproachtothestatusof
Macao,theUNCITRALarbitraltribunalandtheSingaporeHighCourtmaynothave
beenthatfarapart.ProceedingfromtherulesetoutinArticle15ofthe1978Vienna
Convention,theybothagreedthattreatiespresumptivelyappliedtotheentiretyofa
State’s territory (and thus ‘moved’with the treaty party’s frontiers), but that this
presumptioncouldberebutted.Themainquestiondividingthemwaswhetherthe
applicableBITbetweenChinaandLaoscamewithinthescopeoftheexceptionsto
the principle. Their disagreement on this point can however to some extent be
explainedbytheavailabilityofevidence:whilethearbitraltribunalhadtodecidein
theabsenceofinstructiveinformation,163theSingaporeHighCourtcouldrelyonan
exchange of letters, between China and Laos, suggesting that the BIT should not
apply to Macao.164This party agreement (once accepted and admitted into the
proceedings165) clearly strengthened the case for an exception. Conversely, the
relianceplacedon it limits the impact of theSanumdecisionon future cases; the
statusofMacao(andHongKong)inrelationtootherChineseBITsnotablyremains
opentodebate.166UnlessthepartiestothesetreatiesfollowtheleadofChinaand
Laosandprovideexplicit clarification,167thematter is likely tobeargued in future
disputes implicatingHongKongorMacao (orHongKong/Macao-based claimants):
on thebasisof theconsiderationsadvancedabove,168thebetterviewwouldbeto
acceptthatfortheunusualcasesofcessionssuchasHongKongandMacao(which
163Seepara.232of theSanumUNCITRALaward (n9), referring to the"paucityof factualelementspresentedbytheParties“.164AccordingtotheSingaporeHighCourt,thiswasa"keyplank“oftheevidence:seeSingaporeHighCourt(n10),para.38.165Whether the letters should be admitted at the review stage (even though theywere producedafterthearbitraltribunalhadrendereditsaward)wasacrucialquestion:seeparas.43-56oftheHighCourtjudgment(n10);andHwang/Chang(n13),517-519,forcomment.166SeeHart/Srikumar (n13),198:“the lettersexchanged in relation to theChina-LaosBITwillhavelittlesaliencefortheinterpretationofotherBITsinfuturedisputes.”167ItisworthnotingthatsomeofChina’sBITsexpresslyaddressthematter:seee.g.the2006China-RussiaBITandProtocol(stipulatingthat"[u]nlessotherwiseagreedbybothContractingParties,theAgreementdoesnotapplytotheHongKongSpecialAdministrativeRegionofthePeople'sRepublicofChinaandtheMacaoSpecialAdministrativeRegionofPeople'sRepublicofChina").168Seeabove,section5.a.
40
purposefully avoid the full integration of the ceded territory), the moving treaty
frontiersruleneedstobequalified.169
Whatever position is taken on the geographical scope of Chinese BITs, it isworth
notingthatoutsidetheparticulararrangementsobtaininginMacaoandHongKong,
cessionsandincorporationsraisefewproblems.Thelimitedpracticeavailablesofar
in fact suggests that they are dealt with routinely, by a simple application of the
moving frontiers rule. In line with that rule, German BITs concluded before
unification were routinely applied to the GDR after 1990.170As for institutional
arrangements, Germany’s ICSIDmembershipwas automatically extended to cover
theunitedGermanyinitsentirety.171AsregardsWalvisBay,theavailableevidenceis
limited; however, it seems the one investment treaty concluded by South Africa
priorto1994(a1974BITwithPortugal)didnotapplytoWalvisBayafteritsreturn
to Namibia. 172 Lastly, it is worth noting that, at least in respect of the ICSID
Convention,thearbitraltribunalinTzaYapShumv.Peruappliedthemovingtreaty
frontiersprincipleeveninrelationtoChina/HongKong:assessingtheproprietyofa
claimbyaHongKong-based investor, the tribunalwas content tonote thatChina
hadnotexcludedtheapplicationoftheICSIDConventiontoHongKongpursuantto
its Article 70; under those circumstances, it was sufficient for the investor to
establish that it was a Chinese national (irrespective of the place of its
169Asaseparatematter,itisworthconsideringwhether,inrelationtoMacao-(orHongKong-)basedclaimantsinvokingprovisionsofChineseBITs,theplaceof incorporationisdeterminative:accordingtoHart/Srikumar,"whethertheMacanesecompanyenjoyedtheBIT'sprotectionshouldhaveturnedonthecompany'snationality",nottheplaceofitsincorporation:seeHart/Srikumar(n13),195-197.OntherespectiverolesofnationalityandgeographicalscopeofapplicationseefurthertheawardinTza Yap Shum v Republic of Peru (Decision on Jurisdiction and Competence) (ICSID Case NoARB/07/06),atparas.67-77,andbelow,textatfn.173.170ThisfollowedfromArticle11oftheUnificationTreaty(n155).TheGermangovernmentnotifieditstreatypartnersoftheapproachadoptedunderthattreaty;itsdiplomaticnotesmetwithlittle,ifany,resistance:seeZimmermann,Staatennachfolge(n17),246-251withreferences.171Giventhedistinctlegalregimesaddressedinsections3and4above,itbearsunderlyingthatthemoving treaty frontiers rule covers institutional treaties aswell. In linewith this, Article 11 of theUnification Treaty (n 155) expressly mentioned treaties involving membership in internationalorganisations.172ForbriefinformationseeLPoulsen,BoundedRationalityandEconomicDiplomacy(2015),168(fn.28).
41
incorporation).173Allthissuggeststhatinstancesofcessionandincorporationdonot
giverisetoanyconceptualproblems.
6.ConcludingObservations
The preceding sections have revisited some of the more relevant issues facing
investment lawyers as they seek to apply rules of State succession to investment
treatylaw.NotwithstandingthepopularperceptionofStatesuccessionasahotbed
of legalcontroversy, it isworthnotingthat therearerelevantareasofagreement,
where the law is settled. The treatment of membership rights (not generally
susceptible to be 'inherited' by succession) is one such area; the impact of the
moving treaty frontiers principle on cessions of territory (resulting, under normal
circumstances, in the extensionof treaties of the 'receiving State') another.When
these issues have arisen, arbitral investment treaty practice seems to follow
the general regime: hence new States join ICSID as newmembers, and debates
aboutcessionsofterritoryproceedfromthemovingtreatyfrontiersprinciple,which
providesthewidely-agreedstartingpointandappliespresumptively.
Needless to say that not everything is settled; the preceding sections have also
highlighted areas of contestation and uncertainty. The proper application of the
moving treaty frontiers principle to unusual cessions of territory - such as those
involving Macao and Hong Kong - counts among these. Notwithstanding two
decisionsbyanUNCITRALarbitraltribunalandtheSingaporeHighCourt,thestatus
ofthetwoterritorieswithrespecttoChineseBITssofarremainsuncertain:asnoted
above,thebetterviewwouldbetotreatMacaoandHongKongasspecialinstances
ofcessionnotpresumptivelygovernedbythemovingtreatyfrontierprinciple.
While raising important legal issues, the status of Macao and Hong Kong under
ChineseBITs isaspecificproblemthat implicatesrelativelymarginalaspectsofthe
regime of succession. By contrast, the status of new States in relation to BITs173TzaYapShumv.Peru(n169),atparas.68-70.WhetherthesameargumentshouldapplytoaBITisamatterofdebate:seesupra,fn.169.
42
concludedbytheirpredecessorsraisesstructuralquestionsofgeneralrelevance:this
is a major area of uncertainty. As the above analysis demonstrates, investment
tribunalshaveso faravoideda fullengagementwith the long-standingconceptual
debatebetween'strictcontinuity'and'cleanslate'approaches.Tosomeextent,they
could do so as (in line with general developments), State parties to investment
treaties have frequently determined the fate of prior BITs through explicit
agreements - which almost inevitably ensure continuity in investment treaty
relations.Giventherenewedpopularity, inrecentscholarship,ofthelong-standing
conceptual debate, it is worth underlining that, where no explicit agreement has
beenreached, there is roomtoengagewithargumentsbasedon implied,or tacit,
consent: suchargumentsnodoubtneed tobemadecarefully,but inprincipleare
available.The key task throughout is to identify the intention of the (putative)
partiestothetreaty,whichdoesnothavetobeexpressedinaparticularform.Only
if neither explicit nor implied consent can be established does the question of
automatic succession to BITs arise. As noted above, the argument in favour of
automaticity is a difficult one, as bilateral treaties have traditionally been seen as
mere inter-State exchanges of benefits. However, claims for automatic treaty
continuity should not be dismissed out of hand. They can e.g. be supported by
reference to the particular nature of BITs,which after all establish rights of third-
partybeneficiaries;thesecouldbesaidtodevolvewiththeterritory.
Steppingbackfromthedebatesaboutparticularities,itisinterestingtonotethatso
far,theapplicationofStatesuccessionrulestoinvestmenttreatieshassofarrarely
becomeamajor issue(thoughcasessuchasSanumandWorldWideMineralsmay
signal a change). To the extent that it is settled, investment lawyers seem
comfortable inapplying thegeneral regimeofState succession:byand large, they
acceptthegeneralrulesandgiveeffecttothemwithinthefieldofinvestmentlaw.
Where thegeneral regime isuncertain (as itnotably iswith respect tonewStates
andpriorBITs), investmenttribunalshavesoughtto'muddlethrough' insearchfor
pragmatic and equitable solutions; they have (to adapt LordWright’s description)
"proceed[ed] fromcase to case, like the ancientMediterraneanmariners, hugging
thecoast frompoint topointandavoiding thedangersof theopenseaof system
43
andscience".174Suchanapproachisunderstandable,asthegeneralregimeofState
succession can indeed very much feel like an ‘open sea’ and – unlike other core
aspectsofpublicinternationallaw–needstobeapproachedwithoutthebenefitof
detailed charts and compasses. But conversely, having ‘hugged the coast’,
investment tribunals have so far done relatively little to clarify the law of State
succession:theyhavetendedtobereceiversofgeneralrules,notshapedthem.This
inturnhasmeantthatanareaoflawratherinneedofclarificationremainsinmany
waysobscure: thepotentialof arbitral awards to consolidateanddevelop the law
hassofarnotbeenrealised.
Afinalthought:iftheapplicationofStatesuccessionruleshassofarrarelybecomea
major issue in investment arbitration, this would also seem to suggest that
investment treaties are not viewed as particular controversial commitments. As
notedabove,inmanyinstances,successorStatesarequitehappytocontinuethem.
This preference for stability in investment treaty relations is in line with general
trends in recent succession practice – and yet, it deserves to bementioned, as it
stands in marked contrast to debates during decolonisation, when arrangements
benefiting foreign investors (then typically contract-based) prompted major
controversy. Seen in this light, the pragmatic handling of State succession issues
maybe taken to reflectagradualacceptanceof the investmentprotection regime
overthepastdecades.
174SeeRA(Lord)Wright,TheStudyoftheLaw,LawQuarterlyReview54(1938),185,at186.
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