CHAPTER 3 TREATIES AND OTHER BILATERAL AGREEMENTS FOR THE PROTECTION OF INTERNATIONAL INVESTMENT
| Jurisdiction | United States |
(Feb 1991)
TREATIES AND OTHER BILATERAL AGREEMENTS FOR THE PROTECTION OF INTERNATIONAL INVESTMENT
U.S. Department of State
Washington, D.C.
An Introduction to Public and Private International Law
The United States mineral law practitioner or business person who wishes to begin foreign operations confronts the world of international or transnational law. The prospect may be daunting. It need not be.
This introduction tries to define some basic concepts of international law. Speakers at this session and other sessions will elaborate on this outline and provide concrete examples of the workings of the international legal system.
We begin with an inclusive definition. International (or transnational) law is all law that involves matters with a significant impact outside the boundaries of a single nation. By that definition many provisions of United States national or state law have international aspects. Examples include laws governing immigration, corporate behavior overseas, and the release of pollutants that may reach beyond the boundaries of the United States.
A more narrow definition would limit international law to matters over which at least two nations have an interest in asserting control. When the interests are asserted by the national governments, we speak of public international law. When claims are asserted by individuals or private corporations, we speak of private international law. Private international law often addresses conflicts of laws issues. For example, does U.S. law or Belgian law govern a sales contract between a Belgian manufacturer and a U.S. wholesaler?
Regardless of whether the parties to a transnational minerals transaction are governments, private corporations, or individuals, they must deal with one or more foreign states. In international law, the nation (state) remains the crucial actor. Over 170 sovereign states exist in the world. They occupy virtually all of the earth's land surface. They assert claims to considerable portions of the oceans and atmosphere. Almost every human being on earth is a national or citizen of at least one state.
The Restatement (3rd) of Foreign Relations, Section 201 defines a state as an "entity that has a defined territory and permanent population, under control of its own government, and that engages in, or has the capacity to engage in, formal relations with other such entities." Recognition of a state gives it distinctive powers. Restatement sec. 206 lists state powers:
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"(a) sovereignty over its territory and general authority over its nationals.
(b) status as a legal person, with capacity to own, acquire, and transfer property, to make contracts and enter into international agreements, to become a member of international organizations, and to pursue, and be subject to legal remedies.
(c) capacity to join with other states to make international law, as customary law or by international agreement."
This Section indicates the sources of law that may govern a transnational venture. First, sovereignty over its territory authorizes the state to control matters in its domestic jurisdiction. Comment b to Restatement Section 206 explains that "sovereignty...implies a state in lawful control over its territory generally to the exclusion of other states, authority to govern in that territory, and authority to apply law there." The United States private business entering a foreign state will face similar assertions of sovereignty to those that a foreign business venture might face upon entering the United States. Domestic law may govern ownership of natural resources by the state, taxation of local business activity, permissible corporate structures, protection of local economies and environments, and employee health, welfare and safety. In these areas, the foreign state is largely free to determine its own laws. A state may chose (or nor chose) to own natural resources, to protect endangered life forms from the consequences of economic development, to tax away "windfall" profits of business enterprises, or to mandate healthful working conditions for employees. The small business wanting to do business in a foreign state will probably have to accept that domestic law as it is. The large venture (or the one particularly desirable to the foreign government) may be able to negotiate with the government for a legal regime tailored to that business.
The Restatement recognizes that two or more states may create binding law. The significant form of such law today is the treaty or international agreement. In rough analogy, the treaty is a contract between states. It may cover matters of interest primarily to governments, for example, the status of diplomats or the reductions of armaments. It may also cover matters of concern primarily to individuals or business enterprises. Familiar examples are treaties to avoid multiple taxation or treaties of friendship, commerce and navigation that grant rights to national citizens present in the other state. Like contract law, treaty law allows wide latitude to the parties in how the agreement is drafted, what rights are granted, and how violations are remedied.
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An alternative source of law is customary law. Customary law is defined in Section 102 of the Restatement as the "general consistent practice of states followed by them from a sense of legal obligations...." The "practice of states" is often found in the actions of their Department of State or Ministry of Foreign Affairs when they are faced with questions about the legality of transnational actions by their own or other governments. As Restatement Section 902 observes, a state may assert a claim (typically for money damages) against another state for a violation of an international obligation "either through diplomatic channels or through any procedure to which the two states have agreed." In the United States "diplomatic channels" mean the Department of State. The claim is often one primarily concerning a private party rather than the United States government. A common example has been the claim that a foreign state has expropriated private property from a U.S. based corporation without providing adequate compensation. Customary international law recognizes that states are limited in their power to take property without adequate compensation.
Again, an analogy to domestic United States law is useful. The treaty or international agreement resembles the statute. Customary international law, with its emphasis on case by case accrual of legal rules, resembles the common law.
Restatement Section 206 recognizes a further source of international law — the international organization. The United Nations, the European Community, and the Organization of Petroleum Exporting Countries are three well-known examples. The international organization typically is created by multi-national treaty. If the treaty creates not only rules of conduct, but an organization to define, implement, and enforce those rules, the organization takes on a life apart from its individual members. Again, a domestic analogy is useful. The basic treaty serves functions of a national constitution that sets basic societal goals and creates organizations (legislatures, executives, courts) to specify and carry out the goals. The United Nations for example places a legislative competence in the General Assembly, Security Council, and certain specialized agencies. The Secretary General and Secretariat perform executive functions. The International Court of Justice handles certain judicial duties. Similar comparisons can be made for other international organizations.
Having identified how international law is made, the question remains how is it enforced. Skeptics about international law often criticize the lack of a firm enforcement power. After all, the Supreme Court of the United States or the highest court of a state can back their judgment with an order of imprisonment or a seizure of property. Can any international body exercise similar powers?
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At the extreme, the critics may be correct. A pronouncement of international law that would make nuclear weapons illegal might only be enforced by military power. In a far larger number of cases, however, international law will be enforced whether because binding enforcement authority (typically a national government) exists or because states or private parties recognize that it is in their long term benefit to comply with decisions that go against their short term interest.
We hope this explains some of the concepts and language of international law. These two days will flesh out this skeleton. The remainder of your professional lifetime in the international arena will build on this introduction.Donald N. ZillmanDean and Edward Godfrey ProfessorUniversity of Maine School of LawPortland, Maine 04102
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Attorneys in private practice, as well as those working directly for corporate and other business enterprises, tend to rely heavily upon their own negotiating and drafting skills in crafting the terms of the transaction which they believe will be most beneficial to their client. Although this practice will often achieve the desired results, and may well be sufficient in connection with domestic transactions, counsel engaged in international transactions must also be aware of the full range of treaties and other international agreements whose terms may affect their interests — either adversely or beneficially.
This paper will describe various resources which the practitioner may find useful in determining whether or not treaties or other international agreements are relevant to their client's contemplated international investment. It will then summarize the salient features of the two principal kinds of treaties which protect investment abroad, focusing on the underlying policy...
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