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Issues of jurisdiction and appropriate law in trans-national disputes

A general tendency exists that while making an analysis of world events, the reviewers try to analyse the emerging issues in the local perspective. Such a treatment of trans-national issues is a big mistake; by doing so we blur the reality. Where issues are trans-national, the same are to be resolved in terms of trans-national regulations as the disputes against sovereign states give rise to issues of jurisdiction and that of application of appropriate law.

International law is not a law in the sense the domestic law is understood. It is much different. The sources of international law differ from sources of domestic law. The sources of international law include treaties/conventions which are mutually agreed and accepted, customary international law which consists of state practices and the opinions of international law jurists.

In order to effectively enforce a rule of international law its acceptance as a domestic law is necessary. For example, where an international tribunal takes cognisance of a dispute between contesting parties including a sovereign state, it is necessary that the instrument conferring powers to such tribunal must be part of domestic law otherwise the enforceability of the tribunal’s decision will be in jeopardy. For example, International Centre for Settlement of Investment Disputes (ICSID), is an institution that facilitates and provides a procedural framework for the arbitration of disputes between investors and sovereign states. Where its convention conferring power to arbitrate disputes against sovereign states is not recognised by the sovereign state, an arbitral award against the state party cannot be enforced by the domestic courts obviously for the lack of jurisdiction.

In the recent past state liability has been a moot point before different international tribunals, the issues generally related to foreign investors complaining about non-fulfilment of promises made by a state to a foreign investor or disputes arising between two states. The disputes also raise the question whether or not promissory estoppels act against the state as the issue directly challenge the core issue of state sovereignty about which the states are very touchy. However, the recent trend in dispute resolution indicates a change, and now quite often states are ceding jurisdiction to International Tribunals or Courts.

No doubt, Tribunals or International Courts respect the state sovereignty and where a litigant fails to establish a recognisable right, the tribunals at the outset refuse to take cognisance; however, scholars in this regard have identified the following new trends:

I. States are more often agreeing to give up their choice of whether or not to be subject to the court’s jurisdiction.

II. International tribunals are becoming more independent of the states that create them. International tribunals are operating as third party decision makers.

International Tribunals or Courts are becoming more diverse. Different institutions have jurisdiction powers over different areas of law, and there is no one court maintaining control over all the other international tribunals.

The growth in the power of international Tribunal is associated with a loss of sovereignty of states. If a state submits to the compulsory jurisdiction of an international court, then it gives up some degree of control over how a dispute should be handled. A state would like to control the outcome of a dispute. Giving the ability to determine the outcome to a court means that the state loses the ability to determine the outcome.

Why would a state agree to give up some degree of control or sovereignty? Or, ask another way, what benefits could a state get from an international tribunal? Potential benefits of having International Tribunals now stand identified:

For example, two states may have a treaty to cover a situation, however, circumstances can change. It may not be clear how the treaty might apply in the new situation.

Treaties obviously cannot be written to cover all possible circumstances and events. Despite that each state wants that the treaty may apply to the new situation in a way that benefits their own interests. So, the treaty is interpreted in different ways.

Thus an international tribunal may help the contesting parties how to understand the treaty under the new situation, and exhibiting that the tribunal is independent of the interests of either state, it has no vested interest in showing a bias in the interpretation of the treaty one way or another. The courts decide the meaning based on sound legal interpretations.

Sometimes states may agree on the meaning of the treaty, but disagree about what the facts of the case are. For instance, the US and Mexico did agree that the border between the countries should follow the Rio Grande and the Colorado rivers. However, in 1864, the Rio Grande flooded and the course of the river changed. The countries had previously agreed that the border between the countries could change if the river changed course because of normal avulsion (where the banks of the river changes due to normal erosion). Because the Rio Grande’s flood was not a matter of normal erosion, the treaty specified that boundary between the US and Mexico should remain tied to the original course of the river.

Both countries agreed that the border should follow the river’s original course, but the problem was that there were no accurate records of where the original course of the river was. In other words, the countries agreed on the meaning of the treaty, but could not agree on the facts. That is why that through arbitration, the US and Mexico were able to settle the dispute.

A neutral third party can very ably decide a case based on a wider range of information. For instance, the US or Mexico could withhold information about the previous course of the river. However, a neutral third party could gather information from both sides and make a ruling based on a broader range of facts. Disputes between states may also arise where there is no formal treaty. In this case international law is generally defined as “customary.” The problem is customary law can be very ambiguous. What counts as a customary practice? How does a particular customary practice apply (or not) to the given dispute?

Again, as with relationships governed by treaties, a neutral third party can help the disputing countries interpret the law as well as identify the relevant facts. For instance, in the early 20th century the US and the Netherlands both claimed ownership of the Island of Palmas. The US claimed that since Spain had owned the island previously, and the US had acquired the island through a treaty with Spain in acquiring the Philippines, then the island belonged to the US. The Dutch, however, argued that Spain did not, in fact, ever control the island and so it wasn’t theirs to give away. The Dutch and not the Spanish had exerted control over the island.

The arbitrator in this case first had to decide whether the customary law of “continuous control” applied in this situation, and then, whether, in fact, Spain had exercised continuous control. The arbitrator decided that the ownership of the island should go to the Netherlands since it was not the American-Spanish treaty that applied, but the principle of continuous control, and Spain had not exercised this control. In short, the arbitrator decided, first, which principle applied, and second, what the facts of the case were.

A neutral third party tribunal can help states clarify the meaning of treaties or decide what the appropriate conventional law is. The tribunal or arbitrator can also bring information to bear in the dispute that sheds light on the appropriate facts. But, still, why would states want to do this? After all, it would make sense for states to apply doctrines and construe facts that best serve their interests. Why allow these things to be decided by a third party?

The alternative to dispute resolution could potentially be conflict (for instance, economic sanctions or war). Both of these alternatives may be more costly than the chance of coming out the loser in a dispute. That is why states accept resolution of disputes through International Courts and Tribunals.

Zafar Azeem, "Issues of jurisdiction and appropriate law in trans-national disputes," Business Recorder. 2016-06-23.
Keywords: Political science , Local government , International law , Vested rights , Social institutions , Peace treaties , US , ICSID