Atribution

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Document information Chapter 1: The State as an International Investment Law

Subject
Publication §1.01 INTRODUCTION
Attribution in International
Investment Law The State, as an organic constituent of international law, has vested interests in fostering
economic prosperity by creating and maintaining favourable conditions for foreign
investments. The promotion and protection of foreign investments is pursued through a
Topics host of legal instruments, including international investment agreements (IIAs). (1) IIAs
came to occupy such a prominent place in the legal landscape that well-advised foreign
Investment Arbitration investors often aim to mitigate political risks and structure their investments in light of
the available international investment law protection.
This chapter introduces the notion of State, as defined in public international law. It then
Bibliographic contains a brief overview of the historical evolution of the protection of foreign
reference investments leading to the emergence of the modern-day IIAs. The chapter ends with a
'Chapter 1: The State as an consideration of key individual elements of the notion of State that inform issues of
International Investment attribution in the context of international investment law.
Law Subject', in Csaba
Kovács , Attribution in §1.02 THE NOTION OF STATE
International Investment
Law, International There is no commonly accepted legal definition of State or statehood. (2) The etymology
P 2 of ‘State’ – the word is derived from the Latin status, i.e., standing or position –
Arbitration Law Library,
Volume 45 (© Kluwer Law suggests that the term evolved from a description of the condition of a community or
International; Kluwer Law polity, which carried connotations of stability or permanence. (3)
International 2018) pp. 1 - Public international law scholars long debated theories as to what legal criteria make a
10 State. (4) The Montevideo Convention on the Rights and Duties of States of 1933 (5) sets
out four criteria for a State to qualify as a person of international law: (1) a permanent
population, (2) a defined territory, (3) government and (4) the capacity to enter into
relations with other States.
However, it is commonly accepted that the aforementioned criteria are neither
exhaustive nor immutable and they provide only a starting point. (6) While other criteria
such as self-determination and recognition may apply, the essential criterion
nevertheless remains effective control over a defined territory. (7) Shaw asserts that
significant international recognition of a new State, including United Nations (UN)
membership, may compensate for a lack of effective control, but effective territorial
control is still required for a foundation of statehood. At the same time, he observes that
statehood does not perish by ‘a comprehensive breakdown in order and the loss of
control by the central authorities in an independent state’. (8)
There have been other notable international efforts to define the notion of State. In 1991,
the European Community convened a Peace Conference on Yugoslavia, which mandated
an Arbitration Committee to give opinions on the question of whether the Republics of
Croatia, Macedonia and Slovenia had satisfied the conditions laid down by the Council of
Ministers of the European Community for the recognition of new states. (9) The Arbitration
Committee, chaired by Robert Badinter, the President of the French Constitutional
Council, opined that ‘state is commonly defined as a community which consists of a
territory and a population subject to an organized political authority; that such a state is
characterized by sovereignty’. (10)
The territorial nexus, a recurring element in the definition of State in the Montevideo
Convention and the Badinter Committee, surfaces in IIAs too. The jurisdictional notion of
‘investment’, a cornerstone for investment protection under IIAs, is linked to the host
State’s territory. In particular, IIAs typically cover an act of investing ‘by investors of one
Contracting Party in the territory of the other Contracting Party’.
The territorial nexus formulated in these terms in the Ukraine-Russia IIA did not prevent
P 3 positive findings of jurisdiction by tribunals seized by Ukrainian investors to
adjudicate claims against Russia relating to their investments in the Crimean peninsula
annexed by Russia. (11) At the time of writing, none of these decisions was publicly
available. Before these arbitral decisions, Happ and Wuschka examined the extent to
which an occupying power’s investment treaties apply to the annexed territory. (12) When
part of the territory of a State passes to another State the moving treaty frontiers rule in
customary international law, as codified by Article 15 of the 1978 Vienna Convention on
the Succession of States in respect of Treaties, (13) means that the successor State’s
treaties become applicable. Happ and Wuschka concluded that the moving treaty
frontiers rule along with the general rule for the territorial scope of treaties under Article
29 of the 1969 Vienna Convention on the Law of Treaties (VCLT) (14) permit an application
of a host State’s investment treaties on a piece of land it has annexed. Reportedly,
tribunals seized with investment disputes concerning the investments of Ukrainian
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investors on the Crimean peninsula considered that the phrase ‘entire territory’ in Article
29 of the VCLT was not limited to territory under a State’s lawful occupation. (15)
The tribunal in Sanum v. Laos (16) examined the moving treaty frontiers rule in relation to
the question whether the IIAs of the People’s Republic of China (PRC) would automatically
extend to Macau special administrative regions (SAR), and, by extension, to Hong Kong
SAR, after the return of these regions under the PRC’s sovereignty. It concluded that the
PRC-Laos IIA extended to Macau SAR.
An analysis of the actual or likely reasoning behind the jurisdictional findings of the
tribunals in the cases involving the Crimean peninsula or Macau SAR is beyond the scope
P 4 of this chapter. However, these cases illustrate that the complex and often dynamic
political and legal realities of our contemporary world are capable of producing
scenarios, which bring into question the notion of State at the intersection of public
international law and international investment law.
The territorial nexus is not the only qualification of the public international law notion of
State that flows over onto international investment law. Government, in its broad
structural sense, and a State’s exercise of its sovereign or governmental powers are other
relevant defining characteristics of the notion of State, which are capable of producing
legal consequences under international investment law. Territory, government and
sovereignty are thus indispensable characteristics of the State, which shape the State’s
participation in cross-border investment relations as an organic subject of international
investment law.
§1.03 THE EVOLUTION OF INTERNATIONAL INVESTMENT LAW

Historically, the protection of foreign investments was the province of customary
international law. (17) In addition, foreign investments were protected under a growing,
yet, at least in comparison to the modern-day IIAs, relatively modest portfolio of treaties
generically called Friendship, Commerce and Navigation treaties (FCNs). (18) The first
such FCN was the Treaty of Amity and Commerce between the United States (US) and
France of 16 July 1782 negotiated, among others, by Benjamin Franklin. (19)
FCNs typically provided for compensation for expropriation and guaranteed most
favoured nation and national treatment to individuals. Following the Second World War,
FCN coverage extended to corporate entities and the standards of protection included
equitable treatment and most constant protection and security. (20)
At the same time, the customary international law concept of diplomatic protection
offered an espousal mechanism whereby an injured national’s State assumed the
national’s claim as its own and presented it against the State that has injured the
national. Espousal was often seen as an unsatisfactory remedy, mainly because it was
dependent upon the home State’s willingness to espouse a claim of its national and thus
risk a potential disruption of its relations with the host State. Moreover, diplomatic
protection under customary international law entailed the exhaustion of local remedies,
which made it into a relatively infrequently used mechanism of last resort.
International investment law developed along with the growth of foreign investments. The
fabric of international investment law contains layers of public international law,
including the notion of State, and international economic law. (21) In addition, distinct
P 5 rules and standards developed with the proliferation of IIAs and the emergence of the
related jurisprudence. Modern international investment law begins in the post-colonial
era, (22) with the advent of bilateral investment treaties (BITs). (23) The groundwork for
these BITs was laid by a notable private initiative led by the Association for the
Promotion and Protection of Private Foreign Investment, an international study group
established in 1958. As part of this group, Dr Abs, the Director of Deutsche Bank, and Lord
Shawcross, a prominent British barrister and politician, drafted a convention that
assembled a number of international investment protection standards. (24) The group’s
work became known as the 1959 Abs-Shawcross Draft Convention. (25)
Building on the Abs-Shawcross Draft Convention, the Organisation for Economic Co-
operation and Development (OECD) embraced the idea of a multilateral treaty on the
protection of foreign property. (26) However, its diplomatic efforts in the early 1960s did
not garner sufficient support amid the then existing conceptual divisions between the
capital-importing countries and the capital-exporting countries.
Nevertheless, the 1959 Abs-Shawcross Draft Convention and the 1962 OECD Draft
Convention served as models for the first generation of BITs. The Federal Republic of
Germany was the first country to conclude such an agreement. In 1959, Germany
concluded two BITs, one with Pakistan (27) and the other with the Dominican Republic.
(28) Other Western European countries quickly followed suit. The BITs overcame the
limitations of the international customary law concept of diplomatic protection and have
replaced the FCN treaties at a time when these gradually lost their raison d’être amid the
post-war trade liberalisation efforts under the auspices of the UN.
Today BITs make up the bulk of the broader class of IIAs. IIAs, in the form of bilateral,
regional or multilateral treaties, offer to qualifying cross-border investors and their
investments substantive standards of protection (29) and means to enforce those
2
standards through an investor-State dispute resolution mechanism. According to United
Nations Conference on Trade and Development (UNCTAD’s) Investment Policy Hub, (30)
there are 2,946 BITs, of which 2,362 are in force, and 379 other treaties with investment
provisions, of which 309 are in force.
P6
Although both the Abs-Shawcross Draft Convention and the OECD Draft Convention
included provisions for an arbitral mechanism, the first BITs did not provide for direct
access to investor-State arbitration. (31) In the early 1960s, the World Bank drove the
efforts to achieve an international consensus on the multilateral protection of foreign
investments. (32) As it became clear that such consensus was not feasible in respect of
substantive rules on investment protection, Aron Broches, the then General Counsel of the
World Bank, focused the institution’s efforts on creating effective procedures for the
impartial settlement of disputes. Broches was the principal architect of the 1965
Convention on the Settlement of Investment Disputes Between States and Nationals of
Other States (ICSID Convention). (33) The ICSID Convention established the International
Centre for the Settlement of Investment Disputes (ICSID) – a distinct international
organisation headquartered in Washington D.C. and affiliated with the World Bank – and
introduced a self-contained investor-State arbitration mechanism, which excluded in
principle the customary international rule of exhaustion of local remedies. Investor-State
arbitration under the ICSID Convention, administered by ICSID, was relatively dormant in
practice until the late 1980s. As an increasing number of IIAs referred to arbitration under
the ICSID Convention, (34) it was only a matter of time until foreign investors brought their
treaty-based investment disputes to ICSID: the first arbitration under an IIA was
registered with ICSID in 1987. (35)
Starting from 1990, progressive market liberalisation and the promotion of foreign
investments led to an exponential increase of IIAs. (36) In the so-called era of
proliferation, namely from 1990 to 2007, 2,663 new IIAs were concluded. (37) Much of this
period was marked by a significant growth in cross-border investment flows. (38) As the
IIAs provide direct access to investor-State arbitration, including in most cases ICSID
arbitration, the conditions were fertile for a significant body of investor-State arbitration
P 7 jurisprudence to emerge. As of 31 December 2017, UNCTAD counted 855 publicly known
arbitrations under IIAs, (39) and ICSID had registered 650 cases under the ICSID
Convention and the Additional Facility Rules, its arbitration mechanism offered outside
the ICSID Convention. (40)
More recent IIAs concluded by the European Union (EU) contemplate the establishment
of a permanent investment court, (41) an idea heralded by the EU, (42) which is being
considered also by a dedicated working group of UNCITRAL in the context of the reform of
the investor-State dispute resolution regime. (43)
§1.04 THE STATE AS AN INTERNATIONAL LAW SUBJECT

IIAs and investor-State dispute resolution would not exist without State consent. The two
main actors of international investment law are, by definition, the host State of the
investment and the foreign investor making the investment in the host State. However,
the substantive and procedural rights of the foreign investor under international
investment law are contingent on the conclusion by investor’s home State of an IIA with
the host State. In this regard, the foreign investor derives its rights, including the right to
make claims against a host State, from the consent of the State as an international law
subject.
International law subjects possess legal personality and have the capacity to operate
upon the international plane. The State is a primary international law subject, while
international organisations are derivative subjects of international law. (44) As
international law subjects, States and international organisations (1) have the capacity to
make claims or respond to claims in respect of breaches of international law, (2) have the
capacity to make treaties and agreements subject to international law and (3) enjoy
privileges and immunities from national jurisdiction. (45)
P8
The notion of attribution, as explained in Chapter 3, brings into question the capacity of
the State, and, where applicable, that of the international organisation to make
international law claims in cross-border investment relationships or respond to such
claims.
The capacity of the State to respond to international law claims arises from its
recognition as a single subject of international law:
In speaking of attribution to the State what is meant is the State as a subject
of international law. Under many legal systems, the State organs consist of
different legal persons (ministries or other legal entities), which are regarded
as having distinct rights and obligations for which they alone can be sued and
are responsible. For the purposes of the international law of State
responsibility the position is different. The State is treated as a unity,
consistent with its recognition as a single legal person in international law.
3
(46)
The principle of the unity of the State is thus the underlying premise for the attribution of
conduct to the State:
The principle of the unity of the State entails that the acts or omissions of all
its organs should be regarded as acts or omissions of the State for the
purposes of international responsibility. (47)
As Professor Hobér observed, ‘when it comes to attribution, as a matter of principle, all
activities of the state, in whatever form it chooses to act, are attributable to the State.
For the purposes of attribution, the State is viewed as a unity’. (48)
The principle of the unity of the State is inherent in any claim made against a State under
an IIA. This is because ‘[a]ll international claims against a state are based on attribution,
whether the conduct in question is that of a central or provincial government or other
subdivision’. (49) As the State is a single subject of international law, when different State
agencies, organs or entities are involved in the impugned acts, the multiplicity of State
actors does not necessarily mean that there is a separate international law dispute with
each State institution or entity.
This principle is illustrated by numerous cases in the investor-State arbitration
jurisprudence. For example, in an investment dispute concerning the suspension by
Argentina of a tariff adjustment formula for gas transportation applicable to a company
in which a US investor had an investment, Argentina raised an objection to the
admissibility of the claim based on the number and different nature of State authorities
P 9 involved. It argued that two different disputes were submitted to the tribunal: the first
in relation to the industry-specific actions of the Argentine Ombudsman and the judiciary
concerning the application of the US Producer Price Index to the tariffs of the gas
industry; and the second related to general economic measures adopted by the
executive and legislative authorities in relation to the major crisis facing Argentina. (50)
The tribunal dismissed Argentina’s objection, noting that the involvement of different
State authorities is irrelevant to defining the dispute in light of the invoked international
law liability of Argentina:
[i]n so far as the international liability of Argentina under the Treaty is
concerned, it also does not matter whether some actions were taken by the
judiciary and others by an administrative agency, the executive or the
legislative branch of the State. […] Unless a specific reservation is made …, the
responsibility of the State can be engaged and the fact that some actions were
taken by the judiciary and others by other state institutions does not
necessarily make them separate disputes. (51) […]
As long as [the measures] affect the investor in violation of its rights and cover
the same subject matter, the fact that they may originate from different
sources or emerge at different times does not necessarily mean that the
disputes are separate and distinct. (52)
Further, the State is a single subject of international law regardless of its internal
constitutional structure. This is illustrated in another investment dispute in the string of
cases concerning the measures adopted by Argentina in the context of its 2000–2001
economic crisis. The impugned actions were taken by the Province of Tucumán, a political
subdivision of the federal states of the Argentine Republic. In confirming its jurisdiction,
the tribunal noted that the internal constitutional structure of Argentina cannot alter the
attributability, under international law, of the actions of the Province of Tucumán to the
central government: ‘a federal state “cannot rely on the federal or decentralized
character of its constitution to limit the scope of its international responsibilities”’. (53)
The international law principle of the unity of the State does not alter the separate legal
personality of State-owned and/or controlled enterprises (State Enterprises). Badia
states that conceptually the separate legal personality of corporations is ‘at odds’ with
the unity of the State: ‘[w]hile the first rule dictates that the corporation is an entity
separate from its shareholders, the second says than [sic] the state is a single indivisible
unity.’ (54) It is unquestionable that the indivisibility of the State, as an international law
subject, does not prevent a State from organising and conducting its activities through
State Enterprises and avoiding the result that such conduct is automatically attributable
to the State under international law. In the words of the International Law Commission
P 10 (ILC), ‘[t]he fact that the State initially establishes a corporate entity, whether by a
special law or otherwise, is not a sufficient basis for the attribution to the State of the
subsequent conduct of that entity.’ (55) Nevertheless, a State cannot hide behind the
separate legal personality of a State Enterprise when the conduct of the State Enterprise
is governmental in nature and the State Enterprise acts as an instrumentality or agent of
that State.
As detailed in Chapter 5, for the purposes of the law of State responsibility, the search for
an act of the State goes beyond a formal or structural test of State participation in
corporate ownership. In particular, State ownership or control is not the decisive
criterion for determining whether an act of a separate corporate entity is an act of the
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State. The ILC notes that ‘the fact that an entity can be classified as public or private
according to the criteria of a given legal system, the existence of a greater or lesser State
participation in its capital, or, more generally, in the ownership of its assets, the fact that
it is not subject to executive control – these are not decisive criteria for the purpose of
attribution of the entity’s conduct to the State’. (56)
In the analysis of the relationship of separate corporate entities with the State, a number
of fact-based or substantive, functional criteria are deployed. The wide array of factual
situations to which these criteria could be applied means that an act of a separate
corporate entity is more likely to cast States as international investment law subjects for
the purposes of the law of State responsibility relative to other areas of international law.
As State Enterprises and other entities separate from the State often conduct economic
activities on behalf of the State, the potential for the responsibility of the State is, in
principle, wider in international investment law than in other areas of international law.
As Professor Hobér observed, States may be ‘surprised when an opposing party invokes
the rules [of attribution] so as to hold the state responsible for a certain conduct’. (57)
The participation of State Enterprises in investment disputes is not a one-way street.
Based on the notion of attribution, State Enterprises may trigger the responsibility of the
host State and its capacity to respond to claims. Conversely, acting as investors, State
Enterprises are typically entitled to make investment claims against another State. In
this sense, by the operation of the IIAs, State Enterprises, just like their private
counterparts, became the subject of direct rights under international investment law. (58)
The State appears in international investment law in its treaty-making capacity as well as
in its capacity to respond to investment claims and make related counterclaims. The
participation of the State in investment relationships is the subject of the next chapter.
P 10
References
1) The author adopts the generic terminology of ‘international investment agreements’
or ‘IIAs’ employed by United Nations Conference on Trade and Development
(UNCTAD), a permanent intergovernmental UN body dealing with investment issues:
http://investmentpolicyhub.unctad.org/IIA (accessed 19 March 2018). The term
encompasses bilateral and multilateral treaties that, as a whole or in one or more
dedicated chapters, deal with the promotion and protection of foreign investments.
2) James Crawford, The Criteria for Statehood in International Law, 48(1) British Yearbook
of International Law 93, 107 (1977).
3) Christopher W. Morris, An Essay on the Modern State, 37 (Cambridge University Press,
2011).
4) Crawford, supran. 2, at 95–107.
5) Article 1 of Montevideo Convention on the Rights and Duties of States, adopted by the
Seventh International Conference of American States at Montevideo on 26 December
1933, League of Nations, Treaty Series 25 (1936).
6) See, for example, Malcolm N. Shaw, International Law, 198 (6th ed., Cambridge
University Press, 2008).
7) Ibid., 201.
8) Ibid.
9) Alain Pellet, The Opinions of the Badinter Arbitration Committee A Second Breath for
the Self-Determination of Peoples, 3 EJIL, 178 (1992).
10) Ibid., Appendix: Opinions of the Arbitration Committee, section 1.b of Opinion No. 1 of
the Arbitration Committee, at 182.
11) See, for example, Everest Estate LLC et al. v. The Russian Federation, PCA Case No.
2015-36, Decision on Jurisdiction (20 March 2017).
12) Richard Happ, Sebastian Wuschka, Horror Vacui: Or Why Investment Treaties Should
Apply to Illegally Annexed Territories, 33(3) Journal of International Arbitration, 245,
268 (2016).
13) As noted in paras 2 and 3 of the Commentary on Art. 14 (which became Art. 15 of the
Convention on the Succession of States in respect of Treaties) of the Draft articles on
Succession of States in respect of Treaties (1974):
the moving treaty-frontiers rule means that, on a territory’s undergoing a
change of sovereignty, it passes automatically out of the treaty régime of
the predecessor sovereign into the treaty régime of the successor
sovereign. […] As to the rationale of the rule, it is sufficient to refer to the
principle embodied in article 29 of the [VCLT] under which, unless a
different intention is established, a treaty is binding upon each party in
respect of its entire territory. This means generally that at any given time
a State is bound by a treaty in respect of any territory of which it is
sovereign, but is equally not bound in respect of territory which it no
longer holds.
5
14) Article 29 of the VCLT provides: ‘Unless a different intention appears from the treaty
or is otherwise established, a treaty is binding upon each party in respect of its
entire territory.’
15) Investment Arbitration Reporter, Investigation: Further Russia investment treaty
decisions uncovered, offering broader window into arbitrators’ approaches to Crimea
controversy, 17 November 2017, https://www.iareporter.com/articles/investigation-
further-russia-investment-treaty-decisions-uncover... (accessed 19 March 2018).
16) Sanum Investments Limited v. The Government of The Lao People’s Democratic
Republic, UNCITRAL, PCA Case No. 2013-13, Decision on Jurisdiction (13 December
2013), paras 219–300.
17) Campbell McLachlan Q.C., Laurence Shore, Matthew Weiniger Q.C., International
Investment Arbitration, Substantive Principles, para. 1.02 (2nd ed., Oxford University
Press, 2017).
18) Albert Badia, Piercing the Veil of State Enterprises in International Arbitration, 20
(Kluwer Law International, 2014).
19) Kenneth J. Vandevelde, A Brief History of International Investment Agreements, 12, 1
U.C. Davis Journal of International Law & Policy, 157, 158, footnote 7 (2005).
20) Ibid., at 157, 159, 163.
21) Rudolf Dolzer, Christoph Schreuer, Principles of International Investment Law, 2–3
(Oxford University Press, 2008).
22) Professor Sornarajah points out that in the eighteenth and nineteenth centuries,
investment was made largely within the same colonial legal system and thus there
was less need for an international law protection of foreign investments; see M.
Sornarajah, The International Law on Foreign Investment, 19 (3rd ed., Cambridge
23) Ibid., at 17–24.
24) Antonio R. Parra, The History of ICSID, 13–15 (Oxford University Press, 2012).
25) Abs, Herman, Hartley Shawcross, Draft Convention on Investments Abroad, in The
proposed convention to protect private foreign investment: a round table, 1 Journal of
Public Law, 115–118 (1960).
26) 1962 Draft Convention on the Protection of Foreign Property, Organisation for
Economic Cooperation and Development,
https://www.oecd.org/investment/internationalinvestmentagreements/39286571.pdf
(accessed 6 September 2017).
27) Treaty between the Federal Republic of Germany and Pakistan for the Promotion and
Protection of Investments, concluded on 25 November 1959.
28) Treaty between the Federal Republic of Germany and the Dominican Republic for the
Promotion and Protection of Investments concluded on 16 December 1959.
29) McLachlan, Shore, Weiniger, supran. 17, paras 1.32–1.49.
30) UNCTAD, International Investment Agreements Navigator,
http://investmentpolicyhub.unctad.org/IIA (accessed 28 April 2018).
31) For example, Art. 11 of the Germany-Pakistan BIT provided for the submission of
disputes to the International Court of Justice or ad hoc inter-State arbitration.
32) Parra, supran. 24, at 21–26.
33) Convention on the Settlement of Investment Disputes between States and Nationals
of Other States, concluded in Washington D.C. on 18 March 1965 and entered into
force on 14 October 1966. The ICSID Convention is ratified by 153 Contracting States,
seehttps://icsid.worldbank.org/en/Pages/icsiddocs/ICSID-Convention.aspx
(accessed on 19 March 2018).
34) The first BIT with a dispute resolution clause providing for State consent to the
jurisdiction of ICSID in respect of disputes with covered investors was concluded in
1969 by Italy with Chad and Côte d’Ivoire.
35) Asian Agricultural Products Ltd (AAPL) v. Sri Lanka, ICSID Case No. ARB/87/3, Final
Award (27 June 1990).
36) According to UNCTAD, the number of BITs rose from 385 at the end of the 1980s to a
total of 1,857 BITs, involving 173 countries, at the end of the 1990s, Bilateral
Investment Treaties 1959-1999, Preface, December 2000,
http://unctad.org/en/Docs/poiteiiad2.en.pdf (accessed 14 October 2017).
37) UNCTAD, World Investment Report 2015, Chapter IV, Reforming the International
Investment Regime: An Action Menu, 121.
38) According to the IMF, ‘[w]ith the integration of international capital markets, world
FDI flows grew strongly in the 1990s at rates well above those of global economic
growth or trade’, IMF, Foreign Direct Investment Trends and Statistics, 4 (28 October
2003), https://www.imf.org/external/np/sta/fdi/eng/2003/102803.pdf (accessed 10
April 2018).
39) UNCTAD, Investment Dispute Settlement Navigator,
http://investmentpolicyhub.unctad.org/ISDS (accessed 19 March 2018).
40) The ICSID Case Load – Statistics (Issue 2018-1), https://icsid.worldbank.org (accessed
19 March 2018).
41) A future multilateral investment court, European Commission – Fact Sheet, 13
December 2016, http://europa.eu/rapid/press-release_MEMO-16-4350_en.htm
(accessed 6 September 2017); see, for example, Arts 3.9–3.10, Chapter 3 (Dispute
Settlement) of the EU-Singapore Investment Protection Agreement, concluded in
April 2018, http://trade.ec.europa.eu/doclib/press/index.cfm?id=961 (accessed 28
April 2018).
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42) Council of the European Union, Negotiating Directives For a Convention Establishing A
Multilateral Court for the Settlement of Investment Disputes, adopted on 20 March
2018, http://www.consilium.europa.eu/en/press/press-
releases/2018/03/20/multilateral-investment-court-coun... (accessed 10 April 2018).
43) UNCITRAL, Working Group III, 2017 to present: Investor-State Dispute Settlement
Reform,
http://www.uncitral.org/uncitral/en/commission/working_groups/3Investor_State.ht
ml (accessed 19 March 2018); see also UNCITRAL, Possible future work in the field of
dispute settlement: Reforms of investor-State dispute settlement (ISDS), Note by the
Secretariat, A/CN.9/917, UNCITRAL 50th session, 3–17 July 2017.
44) Brigitte Stern, The Elements of an Internationally Wrongful Act, in James Crawford,
Alain Pellet, Simon Olleson eds, The Law of International Responsibility, 201 (Oxford
45) James Crawford, Brownlie’s Principles of Public International Law, 115 (8th ed., Oxford
University Press, 2012); Reparation for Injuries Suffered in the Service of the United
Nations, ICJ Reports 1949, 174, 179.
46) Commentary on ILC Art. 2, para. 6. The ILC Articles on Responsibility of States for
Internationally Wrongful Acts (ILC Articles), was adopted by the International Law
Commission (ILC) at its fifty-third session, in 2001. The Report of the International Law
Commission on the work of the fifty-third session includes the commentaries on the
ILC Articles, see Yearbook of the International Law Commission, 2001, vol. II, Part Two,
as corrected.
47) Commentary on ILC Art. 4, para. 5.
48) Kaj Hobér, State Responsibility and Investment Arbitration, 25(5) Journal of
International Arbitration, 545, 568 (2008).
49) Compañía de Aguas del Aconquija S.A. and Vivendi Universal (formerly Compagnie
Générale des Eaux) v. Argentine Republic, ICSID Case No. ARB/97/3 (Vivendi I v.
Argentina), Decision on Annulment (3 July 2002), fn. 17.
50) CMS Gas Transmission Company v. Republic of Argentina, ICSID Case No. ARB/01/8,
Award on Jurisdiction (17 July 2003), para. 101.
51) Ibid., para. 108.
52) Ibid., para. 109.
53) Vivendi I v. Argentina, Award (21 November 2000), para. 49, citing James Crawford, First
Report on State Responsibility 14-15, UNDOC A/CN.4/490 and Add. 5 (1998).
54) Badia, supran. 18, at 24.
57) Hobér, supran. 48, at 546.
58) For a discussion of the competing theories of direct and derivative rights of investors
asserted in IIAs, see McLachlan, Shore, Weiniger, supran. 17, paras 3.114–3.126.
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Document information Chapter 2: States and Foreign Investments
§2.01 INTRODUCTION
Publication This chapter covers the intersection between State activities and foreign investments. It
Investment Law considers the main types of foreign investments and the defining characteristics of the
notion of investment in the context of international investment law. The remaining part of
this chapter briefly addresses the main State activities, which may raise issues of
attribution.
Topics
Investment Arbitration §2.02 FOREIGN INVESTMENTS
At its core, investment entails the use or commitment of capital or other resources to
earn a profit or some other gain. The notion of ‘investment’ can be analysed by focusing
Bibliographic on the act of investing, as a mechanism or process through which the profit or other gain
is pursued, or on the result or product of the act of investing, which views investment as
reference an asset having a determined or determinable financial value. As a macroeconomic
'Chapter 2: States and process, investment can be contrasted with consumption.
Foreign Investments', in
Csaba Kovács , Attribution The word ‘invest’ is rooted in the Latin ‘investire’, formed from ‘in’ (i.e., in) and ‘vestire’
in International Investment (i.e., dress, cloth), which means to clothe in, cover. (59) Based on the word’s etymology,
Law, International Professor Salacuse noted that ‘an “investor” is in effect “clothing” an enterprise with
Arbitration Law Library, capital through the process of investment’. (60) Historically, the first records of what is
Volume 45 (© Kluwer Law now a common meaning of ‘investment’ reportedly appear in letters written in 1613–1616
International; Kluwer Law in connection with the East Indian trade. (61)
International 2018) pp. 11 - Put simply, foreign investments occur when businesses or individuals invest in another
24 P 12 country. Economists distinguish between foreign direct investment (FDI) and portfolio
investment. (62) As discussed below, the distinction carries also legal significance, raising
issues of the EU’s treaty-making competence as well as issues of investment treaty
coverage.
FDI involves an investor setting up or buying a company in another country, or making an
investment associated with its equity relationship, typically for a strategic long-term
holding of that investment and with associated control or influence over the decision-
making process. (63) Globalisation brought along a marked rise of cross-border
investment flows. In 1970, net FDI flows (64) accounted for nearly 0.5% of the worldwide
sum of gross domestic product (GDP). The same measure peaked at 5.25% in 2007 and
following the 2008 global financial crisis, it showed some recovery, the latest available
data in 2016 being 3.10% of GDP. (65) According to the latest annual World Investment
Report of UNCTAD, (66) in 2017, the global FDI flows amounted to USD 1.43 trillion.
In a portfolio or indirect investment, (67) an investor buys freely tradeable equity in, or
debt of, a foreign company without necessarily having a long-term interest in the
company or an influence over its management.
The distinction between direct investment and portfolio investment is relevant in the
P 13 context of investment treaties too. IIAs typically contain an asset-based definition of
‘investment’, which includes a non-exhaustive list of the tangible and intangible products
resulting from the act of investment. (68) International investment law, and particularly
the definition of ‘investment’ in IIAs, may not necessarily capture the whole spectrum of
the economic notion of foreign investment. (69) In the evolution of international law,
generally, the meaning of investment was restricted to FDI. (70) In the absence of a
specific treaty provision excluding the protection of portfolio investments, it may be
logical to assume that the protection available under international investment law is not
per se dependent on the economic distinction between direct and portfolio investments.
(71) Nevertheless, this position is unsettled amid a continuing debate in the
jurisprudence, academia and the wider arbitration community as to whether, in the
absence of clear treaty regulation, international investment law protects portfolio
investments. (72)
The international law protection of portfolio investments is not the only legal controversy
surrounding the scope of protected foreign investments. In international investment law,
the inherent meaning of ‘investment’ is one of the controversial tenets that, in the
absence of a treaty definition, investment treaty tribunals tend to approach with a
notable degree of flexibility. (73)
P 14
While economists and lawyers may approach the meaning of ‘investment’ differently, (74)
on any view, investment presupposes a commitment of resources for an economic
activity. In the investment arbitration jurisprudence, the debate whether it is necessary
to give an inherent meaning to ‘investment’ and, if so, what that meaning should be,
produced additional criteria for what marks an investment. The oft-cited criteria are
known as the Salini criteria (75) and have four characteristics: (1) contribution to the
transaction, (2) certain duration of the transaction, (3) a participation in the risks of the
transaction and (4) contribution to the development of the host State of the investment.
The Salini tribunal observed that these criteria ‘may be interdependent. Thus, the risks of
the transaction may depend on the contributions and the duration of performance of the
8
[transaction]. As a result, these various criteria should be assessed globally’. (76)
Investment treaty tribunals applied the Salini criteria with varying degrees of
consistency, (77) not least because the criteria are relative (78) and lend themselves to
non-investment transactions too. In the jurisprudence and even in some more recent IIAs
the triad concerning the commitment of assets with the assumption of risk over a certain
period is relatively recurrent, while the fourth characteristic, namely the contribution to
the economic development of the host country, gained less traction. (79) As noted by
several tribunals, (80) the contribution to the economic development of the host State
should be viewed as an inherent consequence of a successful investment, rather than a
prerequisite for an inherent meaning of investment.
Foreign investments are made virtually in any economic sector. Nevertheless, in
identifying an investment that qualifies for legal protection under IIAs, the area of
economic activity is of less relevance than the form and nature of the economic activity.
(81)
P 15
The type or area of economic activity or the category of investment may be of more
relevance for testing the economic functionality of an investment. For example, the OECD
described FDI (82) as:
a means for creating direct, stable and long-lasting links between economies.
Under the right policy environment, it can serve as an important vehicle for
local enterprise development, and it may also help improve the competitive
position of both the recipient (‘host’) and the investing (‘home’) economy. In
particular, FDI encourages the transfer of technology and know-how between
economies. It also provides an opportunity for the host economy to promote
its products more widely in international markets. FDI, in addition to its
positive effect on the development of international trade, is an important
source of capital for a range of host and home economies. (83)
Investment treaty tribunals seek to distinguish foreign investments qualifying for
protection from one-off transactions such as sales that typically fall outside the ambit of
protection under international investment law. (84) This distinction is broadly based on
the idea of local enterprise development. For example, it has been held that ‘[a]n
investment, in the economic sense, is linked with a process of creation of value, which
distinguishes it clearly from a sale, which is a process of exchange of values.’ (85) The
value-creating expectation from an investment is apparent also in the definition of
‘investment’ in some IIAs. For example, the Croatia-Austria BIT includes ‘claims to money
that has been given in order to create an economic value’ (86) among the covered
investments.
States as policymakers recognise that foreign investment drives economic growth. In July
2016, the trade ministers from the G20 countries, which account for over two-thirds of the
P 16 FDI outflows, agreed Guiding Principles for Global Investment Policymaking. (87) These
non-binding principles recognise ‘the critical role of investment as an engine of economic
growth in the global economy’. (88)
States have long seen the promotion of foreign investments as a public policy objective.
Capital-importing countries concluded IIAs with the aim to attract foreign investments,
and capital-exporting countries did the same with the goal to obtain protection of
foreign investments. Nowadays we can speak of a truly global network of IIAs: UNCTAD
counts over 180 countries with at least one IIA. (89) Despite the fact that there is no
systematic evidence as to their overall effectiveness in attracting foreign investment, IIAs
have become ‘instruments of globalization, removing barriers to trade and investment’.
(90)
The jurisprudence arising from these IIAs reflects the extent and risk of State
participation in foreign investment relationships. The extent of State participation is
addressed below. The risk of State participation in foreign investment relationship is a
complex issue that can be scrutinised from different vantage points. The notion of
attribution (91) – the subject of this book – is one such vantage point.
§2.03 STATE PARTICIPATION IN FOREIGN INVESTMENT RELATIONSHIPS

States, along with foreign investors, are the key actors of international investment law.
Their wide-ranging and multilayered involvement in foreign investment relationships
means that there is significant scope for potential State interference with the rights of
foreign investors. The growing body of investment arbitration jurisprudence shows that,
while international investment law aims to provide an appropriate balance between the
investment protection goals ingrained in IIAs and the public policy issues within the
sovereign remit, such balance is not always easily or indeed consistently struck in
practice. International investment law offers a neutral means of resolving foreign
investment disputes that typically involve public policy issues or administrative
misconduct. As noted by Professor Wälde, IIAs allow foreign investors to raise ‘a matter
usually involving public policy and administrative misconduct (as measured under a
treaty’s obligations) against the host state. Investment arbitration is in substance a
9
special form of international quasi-judicial review of governmental conduct using as a
default the methods of commercial arbitration’. (92)
Investment arbitration jurisprudence attests that the foreign investment relationships
P 17 protected by IIAs cut across a wide spectrum of State activity and involve a diverse
cast of State actors. There is no distinction as to which State organs may engage the
international law responsibility of the State. As noted in the ILC Commentary, ‘[t]he
diversity of international obligations does not permit any general distinction between
organs which can commit internationally wrongful acts and those which cannot.’ (93)
On a functional level, State conduct subject to international investment law obligations
may occur in the exercise of the State’s regulatory, executive, judicial or other powers, or
in the exercise of the State’s public law duties or delegated private law functions. On a
structural level, conduct potentially interfering with a State’s international law
obligations may be that of a State organ or of a person or entity who is not part of the
State’s formal apparatus but has close links to the State. Due to the principle of the unity
of the State, the territorial competence of the State actor is inconsequential: State
conduct calling into question international investment law obligations may occur at
national, federal or local level. From a sectoral perspective, ICSID caseload statistics (94)
show that most investment disputes administered by ICSID have occurred in the oil, gas
and mining, electric power and other energy, transportation, construction, finance and
information and communications sector. The frequency of investment disputes in these
economic sectors is not a coincidence: these economic sectors ‘record high incidence of
state ownership’, (95) typically through State Enterprises, which in the course of their
commercial activities transact with foreign investors. (96)
The State’s participation in foreign investment relations is examined below through a
look at the State’s public or private law functions.
[A] The Regulatory Function

The State’s power to regulate its domestic economic and legal affairs flows from the idea
of sovereignty. As a starting point, the State, acting through its legislative or executive
branches, is free to exercise such sovereign right in furtherance of legitimate policy
objectives, such as the protection of public health, safety, the environment, social or
consumer protection or the promotion and protection of cultural diversity.
The right to regulate, as an expression of State sovereignty, is embedded in the
customary international law concept of ‘police powers’. The concept of ‘police powers’
denotes:
[t]he power of a state to place restraints on personal freedom and property
rights of persons for the protection of the public safety, health, and morals, or
the promotion of the public convenience and general prosperity. … The police
P 18 power is the exercise of the sovereign right of a government to promote
order, safety, security, health, morals and general welfare within the
constitutional limits and is an essential attribute of government. (97)
As noted by Professor Orrego Vicuña, the State’s right to regulate ‘has not been
questioned nor could it be unless one is aiming at the total dissolution of State functions,
which is not the case and it is not likely to be in the future’. (98) While the existence of the
right to regulate is universally acknowledged, the extent of the lawful exercise of such
right is circumscribed by ‘the framework of legal rights and obligations in which it
operates’. (99)
As an expression of their sovereignty, States enter into IIAs and thus voluntarily set limits
on the exercise of their right to regulate matters concerning foreign investment
relationships. In the realm of international investment law, the sovereign right to regulate
comes under scrutiny within its specific contextual framework: the issue is to what extent
a State may affect the value of an investment by regulation for a legitimate public
purpose without derogating from its commitments under IIAs and thus having to
compensate for this act. (100)
An investment treaty tribunal aptly noted in respect of the relative nature of the right to
regulate:
while a sovereign State possesses the inherent right to regulate its domestic
affairs, the exercise of such right is not unlimited and must have its
boundaries. … [T]he rule of law, which includes treaty obligations, provides
such boundaries. Therefore, when a State enters into a bilateral investment
treaty … this case, it becomes bound by it and the investment-protection
obligations it undertook therein must be honoured rather than be ignored by a
later argument of the State’s right to regulate. (101)
As foreign investors establish and operate their investments within the framework of a
domestic legal framework, they assume an inherent regulatory risk. The assumption of
such risk does not mean that a State’s regulatory conduct can go unchecked under any
circumstances. Often in response to changing economic, political and legal
circumstances, States exercise their regulatory powers in ways that may call into
P 19
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P 19 question the observance of investor rights under IIAs. (102) The regulatory space is
therefore a common testing ground of the State’s conduct under international investment
law. The recognition of public policy interests and the relative ease with which such
policies may clash with investor rights led many recent IIAs (103) to expressly safeguard
or otherwise seek to ensure the exercise of the State’s regulatory powers in matters that
may affect foreign investments.
[B] The Executive Function

The State exercises its executive or administrative decision-making powers within the
broader framework of its legal system. An administrative measure is typically subject to
domestic judicial review under national laws. In addition, the State may be held
internationally liable if the administrative measure is inconsistent with the applicable
rules of international investment law. It has been noted that an investment treaty
arbitration constitutes in effect a means to redress an administrative wrong attributable
to the State, which is thus measured against international standards: ‘the state is
equated to the executive branch in domestic administrative law, and is subjected to
review by an international tribunal’. (104) Nevertheless, tribunals have consistently held
that they do not sit as courts with appellate jurisdiction with respect to ‘the legal
correctness or substantive reasonableness of individual administrative acts or the
judgments of a municipal court reviewing them’. (105) Rather, the role of international
tribunals is to ‘assess whether the decision makers and the courts acted fairly and
consistently with accepted standard of due process, and that their decision making was
not tainted by improper motives’. (106)
As administrative decision-making involves a diverse range of State actors (107)
implementing a wide variety of State regulations and policies, the potential interference
with investor rights is significant. This is even more so since the State, as a single subject
P 20 of international investment law, is under an obligation to act coherently and apply its
policies consistently regardless of the number of agencies interacting with the foreign
investor. (108)
In the exercise of their executive function, States may impose controls on a foreign
investor’s economic activity based on their national interests or other public policy
grounds. (109) Such control typically occurs in regulated industries and most often at the
entry stage. It is exercised through the issuance of administrative licenses and permits or
through some other type of screening mechanism. As the investment arbitration
jurisprudence demonstrates, the refusal to issue a license or permit or the withdrawal of
a license or permit often brings into question a State’s compliance with its international
law obligations. (110)
[C] The Judicial Function

Improper municipal court decisions or a systemic breakdown in the operation of a
national judicial system may call into question the legality of a State’s conduct under
international investment law. In particular, the acts of the judicial organs of the State
may be a source of denial of justice (111) and/or judicial expropriation claims. In the
investment arbitration practice, denial of justice claims succeeded, for example, when
the bankruptcy court failed to convene a composition hearing in bankruptcy proceedings
(112) or a Supreme Court failed to deal with a pending jurisdictional appeal for over five
years. (113) Judicial expropriation claims succeeded, for example, when a court
prevented the enforcement of a valid arbitral award. (114) While denial of justice and
judicial expropriation findings are relatively rare, judicial intervention in the activities of
a foreign investor might also form part of a chain of acts that may be committed by
different State actors and which, taken together, form part of a composite act capable of
justifying a finding of State liability. (115)
P 21
[D] Other State Activities

The principle of separation of powers is not the decisive criterion in a functional analysis
of State participants in foreign investment relationships, because many State organs
exercise some combination of legislative, executive or judicial function (116) or exercise a
specific function, which does not clearly fit in one of the typical division of branches. (117)
This is reflected in Article 4 of the Articles on Responsibility of States for Internationally
Wrongful Acts (ILC Articles) adopted by the ILC, which covers the attribution of the
conduct of organs that exercise ‘legislative, executive, judicial or any other functions’.
The extensive scope of ILC Article 4 was invoked as an alternative basis for attributing to
the State the conduct of the central bank: ‘[l]ike other central banks in the world,
MongolBank assumes part of the executive responsibility of the State; and, if one were to
argue for a more limited definition of the executive power of the State, Mongolbank
would still qualify as an organ of the State under the words “any other functions”
mentioned in Article 4 of the ILC Articles.’ (118)
The State, through a ministry or governmental agency, may participate in market-based
commercial activities, which may entail contracting with foreign investors. While the
public nature of the executive organs of the State does not prevent them from entering
11
into foreign investment relationships as a commercial party, (119) State contracts may
differ from ordinary commercial contracts as they implicate State interests. In respect of
the legal regime of State contracts and the related risks to investors, UNCTAD noted that:
State contracts are often used in politically sensitive investment areas. Thus,
they are usually subject to a special legal regime that gives considerable
discretion to the government in the contractual process. This regime is an
expression of a government’s right to regulate an investment in accordance
with its national policy priorities. In effect, the national legal regime aims to
preserve national policy space … . Given the protection offered to investors
under the legal regime of IIAs, the exercise of certain discretionary powers by
P 22 a host country under the applicable national legal order pertaining to State
contracts may entail interference with an investor’s protection rights
established in the IIA. (120)
While a State may contract with foreign investors through State organs or agencies, it is
often through State Enterprises that the State participates in commercial activities and
controls strategic economic sectors, such as energy and natural resources.
[E] State Enterprises

State Enterprises (121) increasingly participate in foreign investment relationships, (122)
whether as instrumentalities of the host State that deal with foreign investors or as
foreign investors in their own right. An OECD study has found that there is a high incidence
of State ownership in internationally contestable economic sectors such as mining of coal
and lignite and mining support activities, civil engineering, land transport and transport
via pipelines, extraction of crude petroleum and gas, telecommunication and financial
services. (123) In many developing countries, foreign investors may invest in a strategic
economic sector, such as energy or natural resources, only through an association with a
local entity owned, controlled or approved by the State. (124) As Professor Sornarajah
observed, this is ‘a technique which enables the state to have continuous control over the
investment’. (125) While State Enterprises are structurally separate from the State
apparatus, it is generally accepted that States cannot use State Enterprises to avoid
their international investment law obligations. (126) Therefore, the conduct of a State
P 23 Enterprise may be attributable to the State in certain circumstances: (127)
where the operation of a State enterprise is at the core of an international

dispute, it is theoretically possible that the enterprise’s conduct (acts or
omissions) may engage the responsibility of the State either as an organ of the
State; or as a body exercising elements of the governmental authority of the
State; or as a body which is in fact acting on the instructions of the State, or
under its direction or control … . There is in other words a whole gamut of
possibilities, whose application to particular situations depends upon an
amalgam of questions of law and questions of fact which will vary from case to
case according to the circumstances. (128)
The cross-border role of State Enterprises in foreign investment relations is not confined
to dealing with inbound foreign investments. State Enterprises, including sovereign
wealth funds, increasingly become more internationalised as they actively invest abroad.
(129) UNCTAD identified close to 1,500 State-owned multinational enterprises (MNEs), with
more than 86,000 foreign affiliates operating worldwide. (130) As the majority of IIAs offer
State Enterprises the same protection as that available to private investors, (131) State
Enterprises acting in a commercial capacity abroad may bring claims against host States
just as private investors. (132)
In conclusion, the participation of the State in foreign investment relationships is multi-
faceted: it can be viewed from the vantage point of the host country receiving the
P 24 investment and thus becoming subject to international investment law obligations. It
can also be viewed from the perspective of State Enterprises acting as foreign investors
and thus benefiting from the same investment protection as private investors. Each
scenario calls into question different factual and legal issues, which will be examined in
detail in this book.
P 24
References
59) Sol Steinmetz, Semantic Antics, How and Why Words Change Meaning, 115 (Random
House, 2008).
60) Jeswald Salacuse, The Law of Investment Treaties, §2.2 (2nd ed., Oxford University
Press, 2015).
61) Steinmetz, supran. 59, at 115.
12
62) International Monetary Fund (IMF) Balance of Payments and International
Investment Position (IMF Manual), 6th edition, Washington, D.C., 2007, paras 6.1–6.6,
https://www.imf.org/external/pubs/ft/bop/2007/pdf/bpm6.pdf (accessed 14
September 2017) distinguishes five functional categories of investment in the
international accounts: (1) direct investment, (2) portfolio investment, (3) financial
derivatives (other than reserves) and employee stock options, (4) other investment,
and (5) reserve assets. The IMF classification is based on the classification of
financial assets and liabilities.
63) Ibid., para. 6.08, according to IMF, FDI is ‘a category of cross-border investment
associated with a resident in one economy having control or a significant degree of
influence on the management of an enterprise that is resident in another economy’;
see also Opinion of the Court of Justice of the European Union on the EU-Singapore
Free Trade Agreement (16 May 2017), para. 80:
direct investment consists in investments of any kind made by natural or
legal persons which serve to establish or maintain lasting and direct links
between the persons providing the capital and the undertakings to which
that capital is made available in order to carry out an economic activity.
Acquisition of a holding in an undertaking constituted as a company
limited by shares is a direct investment where the shares held by the
shareholder enable him to participate effectively in the management of
that company or in its control.
64) Flows are the recorded value of cross-border transactions during a certain period.
Inward flows are the transactions that increase the net amount of investment foreign
investors have in enterprises within the reporting country’s borders.
65) IMF, International Financial Statistics and Balance of Payments databases, World
Bank, International Debt Statistics, and World Bank and OECD GDP estimates,
https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS (accessed 18 June
2018).
66) UNCTAD, World Investment Report 2018, Investment and New Industrial Policies,
Investment Trends and Prospects, http://worldinvestmentreport.unctad.org/world-
investment-report-2018/ (accessed 18 June 2018).
67) IMF Manual, supran. 62, para. 6.54: ‘Portfolio investment is defined as cross-border
transactions and positions involving debt or equity securities, other than those
included in direct investment or reserve assets.’; see also the Opinion of the Court of
Justice of the European Union on the EU-Singapore FTA, para. 227: ‘the acquisition of
company securities with the intention of making a financial investment without any
intention to influence the management and control of the undertaking’.
68) For example, Article 1 of the Agreement between the Kingdom of Spain and the
State of Kuwait for the Promotion and Reciprocal Protection of Investments,
concluded on 8 September 2005, provides:
The term ‘investment’ means every kind of asset or right in the territory
of one Contracting Party that is owned or controlled directly or indirectly
by an investor of the other Contracting Party, and in particular, though
not exclusively, includes:
a) movable and immovable property and any other property rights
such as mortgages, liens, pledges and similar rights;
b) a company, or shares, stocks, and other forms of equity
participation, and bonds, debentures, and other forms of debt
interest in a company;
c) claims to money or to any performance under contract having
economic value and associated with an investment;
d) intellectual and industrial property rights, including, but not
limited to, copyrights, trademarks, patents, industrial designs and
patterns and technical processes, know-how, trade secrets, trade
names and goodwill;
e) any right conferred by law, contract or by virtue of any licenses or
permits granted pursuant to law, including rights to prospect,
explore, extract, or utilize natural resources, and rights to
undertake other economic or commercial activities or to render
services.
69) Sornarajah, supran. 22, at 9–10.
70) Ibid., at 11.
71) Christoph Schreuer, Investments, International Protection, para. 36 (January 2011),
http://www.univie.ac.at/intlaw/wordpress/pdf/investments_Int_Protection.pdf
(accessed 12 September 2017); for a contrary view see Sornarajah, supran. 22, at 9–10:
‘[t]he better view is that portfolio investment is not protected unless specifically
included in the definition of foreign investment in the relevant treaty.’
13
72) In relation to portfolio investments in the form of shares, see McLachlan, Shore,
Weiniger, supran. 17, para. 6.155; Sornarajah notes that the fact portfolio investments
are held by unascertainable investors, whose identities may continuously and
rapidly change, and the associated risk that a sudden exodus of portfolio capital
may precipitate a financial crises militate against the protection of portfolio
investments by IIAs, supran. 22, at 196.
73) McLachlan, Shore, Weiniger, supran. 17, para. 6.07.
74) Crina Baltag, The Energy Charter Treaty: The Notion of Investor, 166 (Kluwer Law
International, 2012).
75) The criteria were set by the tribunal in Salini Costruttori SpA and Italstrade SpA v.
Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction (23 July 2001),
para. 52.
76) Ibid.
77) Joy Mining Machinery Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/03/11, Award
on Jurisdiction (6 August 2004), para. 54; Malaysian Historical Salvors, SDN, BHD v.
The Government of Malaysia, ICSID Case No. ARB/05/10, Decision on the Application
for Annulment (16 April 2009), para. 57; Philip Morris Brands Sàrl, Philip Morris
Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No.
ARB/10/7, Decision on Jurisdiction (2 July 2013), para. 204.
78) In Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award (15
April 2009), para. 85, the tribunal stated that ‘the contribution of an international
investment to the development of the host State is impossible to ascertain – the
more so as there are highly diverging views on what constitutes “development”. A
less ambitious approach should therefore be adopted, centred on the contribution
of an international investment to the economy of the host State, which is indeed
normally inherent in the mere concept of investment’.
79) Sornarajah, supran. 22, at 313–314.
80) Victor Pey Casado and President Allende Foundation v. Republic of Chile, ICSID Case
No. ARB/98/2, Award (8 May 2008), para. 232; Electrabel S.A. v. Republic of Hungary,
ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability (30
November 2012), para. 5.43; Philip Morris v. Uruguay, Decision on Jurisdiction (2 July
2013), para. 208.
81) McLachlan, Shore, Weiniger, supran. 17, para. 6.07. A notable exception is the Energy
Charter Treaty, which protects only an ‘investment associated with an Economic
Activity in the Energy Sector’, see Art. 1(6) of Energy Charter Treaty.
82) In the OECD Benchmark Definition of Foreign Direct Investment (4th ed., 2008),
Annex 13, Foreign Direct Investment Glossary, FDI is defined as follows:
a category of investment that reflects the objective of establishing a
lasting interest by a resident enterprise in one economy (direct investor)
in an enterprise (direct investment enterprise) that is resident in an
economy other than that of the direct investor. The lasting interest
implies the existence of a long-term relationship between the direct
investor and the direct investment enterprise and a significant degree of
influence on the management of the enterprise. The direct or indirect
ownership of 10% or more of the voting power of an enterprise resident in
one economy by an investor resident in another economy is evidence of
such a relationship.
83) Ibid., sections 1.1 and 2; for a view challenging the classical belief that foreign
investment leads to economic development in the host State, see Sornarajah,
supran. 22, at 52 and 56–59.
84) See, for example, Romak S.A. (Switzerland) v. The Republic of Uzbekistan, UNCITRAL,
PCA Case No. AA280, Award (26 November 2009), paras 187–188.
85) Poštová banka, a.s. and Istrokapital SE v. Hellenic Republic, ICSID Case No. ARB/13/8,
Award (9 April 2015), para. 361; see also MNSS B.V. and Recupero Credito Acciaio N.V.
v. Montenegro, ICSID Case No. ARB(AF)/12/8, Award (4 May 2016), para. 196.
86) Article 1(1)(c) of Agreement between the Republic of Austria and the Republic of
Croatia for the Promotion and Protection of Investments, concluded on 19 February
1997.
87) Annex III to G20 Trade Ministers Meeting Statement, G20 Guiding Principles for
Global Investment Policymaking, 9–10 July 2016, Shanghai,
http://www.oecd.org/daf/inv/investment-policy/G20-Guiding-Principles-for-Global-
Investment-Policymak... (accessed 16 September 2017).
88) Ibid., Principle I.
89) UNCTAD, International Investment Agreements Navigator,
http://investmentpolicyhub.unctad.org/IIA (accessed 16 September 2017).
90) Vandevelde, supran. 19, at 183.
91) See Chapter 3 (The Notion of Attribution in International Investment Law).
92) International Thunderbird Gaming Corporation v. The United Mexican States,
UNCITRAL, Separate Opinion of Thomas Wälde, 1 December 2005, para. 129.
94) The ICSID Caseload Statistics, Issue 2018-1, 12, https://icsid.worldbank.org (accessed
on 19 March 2018).
14
95) Przemyslaw Kowalski, Kateryna Perepechay, International Trade and Investment by
State Enterprises, OECD Trade Policy Papers No. 184, 12 (OECD Publishing, Paris, 2015).
96) As noted in UNCTAD, State Contracts (2004), 1: ‘State contracts have played a major
role in the foreign direct investment process, especially in developing countries
that are dependent upon the exploitation of natural resources for their economic
welfare. Often, operation in a sector, such as petroleum, is open only to a State
entity or through the making of a contract with the relevant State entity.’
97) Black’s Law Dictionary, 6th edition, 1990. According to Howard Mann, ‘this definition
draws on US law in this area, but is consistent with international law’, Howard Mann,
International Investment Agreements, Business and Human Rights: Key Issues and
Opportunities, OECD Global Forum on International Investment VII, fn. 25 (27–28
March 2008).
98) Francisco Orrego Vicuña, Regulatory Authority and Legitimate Expectations:
Balancing the Rights of the State and the Individual under International Law in a
Global Society, 5 International Law Forum du droit international, 188, 192 (2003).
99) Ibid.
100) Aikaterini Titi, The Right to Regulate in International Investment Law, Studies in
International Investment Law, 33, 52 (Nomos Verlagsgesellschaft, 2014); see also
OECD, ‘Indirect Expropriation’ and the ‘Right to Regulate’ in International Investment
Law, Working Papers on International Investment 2004/4, 2.
101) ADC Affiliate Ltd. ADC & ADMC Management Limited v. Hungary, ICSID Case No.
ARB/03/16, Award (2 October 2006), para. 423.
102) See, for example, Sergei Paushok, CJSC Golden East Company and CJSC
Vostokneftegaz Company v. Government of Mongolia, Award on Jurisdiction and
Liability (28 April 2011), para. 298; Parkerings-Compagniet AS v. Republic of Lithuania,
ICSID Case No. ARB/05/8, Award (11 September 2007) paras 332–333; EDF (Services)
Ltd v. Romania, ICSID Case No. ARB/05/13, Award (8 October 2009) para. 217; Marvin
Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award (16
December 2002), para. 103.
103) See, for example, treaties concluded based on Arts 12 and 13 of the 2012 US Model
BIT, which safeguard environmental and labour concerns; Art. 8.9 of Chapter VIII
(Investment) of the Comprehensive and Economic Trade Agreement (CETA) between
the EU and Canada; Art. 4.2(c) of the China-Colombia BIT.
104) Gus Van Harten, Martin Loughlin, Investment Treaty Arbitration as a Species of Global
Administrative Law, 17(1) The European Journal of International Law, 121, 146 (2006).
105) ECE Projektmanagement v. The Czech Republic, UNCITRAL, PCA Case No. 2010-5, Award
(19 September 2013), para. 4.764; see also ADF Group Inc. v. United States of America,
ICSID Case No. ARB (AF)/00/1, Award (9 January 2003), para. 190; Enkev Beheer B.V. v.
Republic of Poland, PCA Case No. 2013-01, First Partial Award (29 April 2014), paras
327–328.
106) ECE Projektmanagement v. The Czech Republic, para. 4.764.
107) Administrative functions can be discharged also outside the apparatus of the State,
for example, when a State Enterprise exercises elements of governmental authority
– see §2.03[E] infra.
108) MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7,
Award (25 May 2004), para. 165.
109) See, for example, the European Commission’s proposed EU Regulation establishing
a framework for screening of foreign direct investments into the European Union, 13
September 2017, 2017/0224 (COD); in the US, the Exon-Florio Act enables the
President to prevent inflows of investment which threaten national security.
110) Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1,
Award (22 September 2014), paras 578–582; Alex Genin, Eastern Credit Limited, Inc.
and A.S. Baltoil v. The Republic of Estonia, ICSID Case No. ARB/99/2, Award (25 June
2001), para. 363; Churchill Mining PLC and Planet Mining Pty Ltd v. Republic of
Indonesia, ICSID Case No. ARB/12/14 and 12/40, Award (6 December 2016), para. 530.
111) In Elettronica Sicula S.p.A. (ELSI), United States of America v. Italy, 1989 ICJ 15, para.
128, the International Court of Justice defined denial of justice as ‘a wilful disregard
of due process of law, an act which shocks, or at least surprises, a sense of juridical
propriety.’
112) Dan Cake S.A. v. Hungary, ICSID Case No. ARB/12/9, Decision on Jurisdiction and
Liability (24 August 2015), para. 150.
113) White Industries Australia Limited v. The Republic of India, Final Award (30 November
2011), paras 11.4.19–11.4.20.
114) Saipem S.p.A. v. The People’s Republic of Bangladesh, ICSID Case No. ARB/05/07,
Award (30 June 2009), para. 181.
115) OAO Tatneft v. Ukraine, UNCITRAL, Award on the Merits (29 July 2014), para. 462.
117) Momtaz notes that ‘[i]n fact, the separation of powers is a principle of internal
political organization of the State; it cannot be relied on vis-à-vis other States on
the international level’, Djamchid Momtaz, Attribution of Conduct to the State: State
Organs and Entities Empowered to Exercise Elements of Governmental Authority, in
Crawford, Pellet, Olleson, supran. 44, at 239.
118) Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v.
Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability (28 April
2011), para. 582.
15
119) Commentary on ILC Art. 4, para. 6 provides: ‘It is irrelevant for the purposes of
attribution that the conduct of a State organ may be classified as “commercial” or
as acta iure gestionis.’; see also §5.03 infra. In respect of defining what may be
considered to amount to ‘commercial character’ Directive 2014/23/EU of the
European Parliament and of the Council of 26 February 2014 on the award of
concession contracts states in recital (21): ‘a body which operates in normal market
conditions, aims to make a profit, and bears the losses resulting from the exercise of
its activity should not be considered to be a ‘body governed by public law’, since
the needs in the general interest, that it has been set up to meet or been given the
task of meeting, can be deemed to have an industrial or commercial character.’
120) UNCTAD, State Contracts, UNCTAD Series on issues in international investment
agreements (2004), 10–11.
121) OECD Working Party on State Ownership and Privatisation Practice defined ‘State
Enterprise’ as ‘any autonomous public entity controlled, directly or via other
government-controlled institutional units, by the central or federal level of
government, involved in commercial activities’, International Trade and Investment
by State-Owned and State-Controlled Enterprises: OECD Database on National
Practices and Regulations with respect to State Enterprises, 1,
https://www.oecd.org/tad/benefitlib/regulatory-database-methodology-
indicators.pdf (accessed 30 September 2017).
122) Kowalski, P., K. Perepechay, International Trade and Investment by State Enterprises,
OECD Trade Policy Papers, No. 184 (OECD Publishing, Paris 2015), 4.
123) Ibid., at 9.
124) For example, in Iran Art. 4 of the 2016 Iran Petroleum Contract By-law requires a
contractor to enter into a joint venture with a local exploration and production
company approved by the National Iranian Oil Company.
125) Sornarajah, supran. 22, at 60.
126) BITs concluded based on the US Model BIT extend the host State’s obligations to ‘a
state enterprise or other person when it exercises any regulatory, administrative, or
other governmental authority delegated to it by that [host State]’, which, according
to the Letter of Transmittal from the President of the United States to the Senate
which accompanies BITs, ‘is designed to ensure that a Party cannot utilize State-
owned or controlled enterprises to circumvent its obligations under the Treaty. To
this end, it requires each Party to observe its treaty obligations even when it
chooses, for administrative or other reasons, to assign some portion of its authority
to a state enterprise, such as the power to expropriate, grant licenses, approve
commercial transactions, or impose quotas, fees or other charges.’ quoted in
relation to the US-Ukraine BIT in Bosh International, Inc and B&P Ltd Foreign
Investments Enterprise v. Ukraine, ICSID Case No. ARB/08/11, Award (25 October 2012)
para. 181; see also Art. 22(3) of the Energy Charter Treaty: ‘Each Contracting Party
shall ensure that if it establishes or maintains an entity and entrusts the entity with
regulatory, administrative or other governmental authority, such entity shall
exercise that authority in a manner consistent with the Contracting Party’s
obligations under this Treaty’; and Arts 1502(3)(a) and 1503(2) of NAFTA as
interpreted in United Parcel Service of America Inc. v. Government of Canada,
UNCITRAL, Award on the Merits (24 May 2007), para. 70.
127) For a detailed analysis, see §5.03[D], 5.04[C] and 5.06[B] infra.
128) F-W Oil Interests, Inc v. The Republic of Trinidad and Tobago, ICSID Case No.
ARB/01/14, Award (3 March 2006), para. 203.
129) A PWC report on State Enterprises notes that ‘the proportion of SOEs among the
Fortune Global 500 has grown from 9% in 2005 to 23% in 2014, driven particularly by
the growth of Chinese SOEs.’, State Owned Enterprises Catalysts for Public Value
Creation (April 2015), 6, https://www.pwc.com/gx/en/psrc/publications/assets/pwc-
state-owned-enterprise-psrc.pdf (accessed 1 October 2017).
130) UNCTAD, World Investment Report 2017, Investment and the Digital Economy, 30. The
report also states that ‘15 of the top 100 non-financial MNEs and 41 of the top 100
MNEs from developing and transition economies are State-owned. More than half of
SO-MNEs are headquartered in developing economies, and the EU is home to
almost one third of them. Some countries, such as China, Malaysia, South Africa and
the Russian Federation, have a particularly large number of SO-MNEs.’
131) Shima, Y., The Policy Landscape for International Investment by Government-
Controlled Investors: A Fact Finding Survey, OECD Working Papers on International
Investment, 2015/01 (OECD Publishing, Paris, 2015), https://www.oecd-
ilibrary.org/finance-and-investment/the-policy-landscape-for-international-
investme... (accessed 1 October 2017).
132) Beijing Urban Construction Group Co. Ltd. v. Republic of Yemen, ICSID Case No.
ARB/14/30, Decision on Jurisdiction (17 May 2017), para. 44.
16
Document information Chapter 3: The Notion of Attribution in International
Investment Law
Investment Law This chapter frames the analysis of attribution in the realm of international investment
law. It sets out a roadmap for navigating the pertinent issues, referring, where necessary,
to an in-depth examination of those issues in other chapters of the book. After revisiting
Topics briefly the reasons why attribution is a necessary and useful concept in international
investment law, this chapter defines the notion and role of attribution. It then introduces
Investment Arbitration the uses of attribution in international investment law, which will be further examined in
other chapters of the book. Finally, the author considers whether a common practice
emerges from the extensive use of attribution in international investment law.
Bibliographic
reference §3.02 THE PREMISE OF ATTRIBUTION
'Chapter 3: The Notion of As discussed in Chapter 1, the State is a single subject of international law. In the
Attribution in International specialised field of international investment law, the unity of the State is revealed both
Investment Law', in Csaba at the conclusion, and during the application of IIAs. This book on attribution is
Kovács , Attribution in concerned with the legal effects of the unity of the State in the application of the IIAs.
International Investment (133)
Law, International
P 26
Volume 45 (© Kluwer Law The State, acting through a broad range of entities, is a necessary participant in cross-
International; Kluwer Law border investment relationships. (134) There are a myriad of State entities associated to
International 2018) pp. 25 - a different degree with any given State. Many of these entities or their representatives
46 interact with cross-border investors protected under IIAs. Some of these entities, as
players in their own right on the global investment arena, (135) rely on the protection
offered by the IIAs, including the right to bring an investment claim before an arbitral
tribunal. Depending on the particular circumstances, the acts of these entities may be
attributable to the host or home State of the investment. Due to the large pool of IIAs and
the State’s extensive involvement in cross-border investment relations, the State’s
participation and role in an investment dispute is often scrutinised under the IIAs and
customary international law. As a result, a specialised investment arbitration
jurisprudence has emerged in relation to the State’s involvement in investment relations.
(136)
The State’s participation in cross-border investment relations requires an analytical tool,
which acknowledges that the State is a collective actor under international law and, as
such, it operates through a multitude of organs and instrumentalities. The concept of
attribution bridges the gap between the two conflicting realities: the unity of the State
and the multitude of its organs and instrumentalities. (137) As the Commentary on ILC
Articles notes, to recognise the unity of the State ‘is not to deny the elementary fact that
the State cannot act of itself. An “act of the State” must involve some action or omission
by a human being or group: “States can act only by and through their agents and
representatives.” The question is which persons should be considered as acting on behalf
of the State, i.e. what constitutes an “act of the State”’. (138)
The premise of attribution is thus twofold: (1) the State participates in cross-border
investment relations as a single collective entity and (2) the State is unable to perform its
extensive role in the promotion and protection of cross-border investments without the
involvement of its organs and instrumentalities.
P 27
§3.03 THE DEFINITION AND ROLE OF ATTRIBUTION

In an international investment law setting, attribution is the analytical means to
determine the extent, if any, of the State’s involvement in investment relations. (139) The
traditional role of attribution manifests itself in the law of State responsibility, as
developed in customary international law and codified by the ILC Articles. The ILC
Articles use the term ‘attribution’ ‘to denote the operation of attaching a given action or
omission to a State’. (140) In its traditional connotation, attribution is a necessary
condition of the responsibility of a State for an internationally wrongful act. (141)
In simple terms, attribution is a normative operation, which establishes whether there is
an act of the State (142) through the examination of legal and factual factors connecting
the actor, the act or both to the State. (143)
Professor Crawford labelled attribution an international law doctrine. (144) Absent a
specific regulation in an IIA, other scholars noted that international law recognises rather
than regulates the question of attribution. (145) Nevertheless, the operation of attribution
produces legal effects regardless of the purpose for which it is applied. Therefore, the
role of the attribution is inherently normative. (146) As demonstrated by the investment
arbitration jurisprudence, the normative role of attribution does not exclude a certain
degree of malleability. (147) The normative framework of attribution is introduced in
Chapter 4 of this book.
17
The normative role means that the rules of attribution are capable of evolution through
P 28 judicial or arbitral application to a myriad of practical scenarios and through special
regulations, for present purposes, in IIAs. (148) In the process of its application, a
substantially shared understanding of the rules of attribution emerges from the
investment arbitration jurisprudence. Chapters 5–8 of this book provide a tour d’horizon
of the relevant jurisprudence, highlighting the common substantive and procedural
principles.
The normative role of attribution justifies a proactive approach by the tribunals. This
occurred in at least two known investment cases in which the tribunal invited
submissions by the parties on the question of attribution for the purposes of State
responsibility. (149)
Although the rules of attribution are capable of producing international legal effects,
they do not set substantive obligations and, as such, are incapable of being violated
under international law. Indeed, analytically, attribution and legality are distinct. (150)
However, at least in the traditional area of State responsibility, there may be a close link
between the process of attribution and the legality of an act. (151) In particular, the rules
of attribution may help to articulate the precise basis of the claim that the putatively
attributable act brings into question. (152) States may be responsible under international
law not only for a positive act but also for an omission, which breaches a substantive
international law obligation. (153) For example, riots, occupation and other violent acts,
which are rarely, if ever, attributable to the State, may prejudice investments. IIAs or
customary international law imposes on a State an obligation to exercise its police
powers and protect the investments or the investors against such potentially harmful
acts. (154) In these situations, the relevant attributable conduct is the State’s failure to
protect the investor or the investment. This intersection of the rules of attribution with
the substantive rules of conduct is further discussed in §3.04[B][3] infra.
In international investment law, the scope of attribution goes beyond the traditional
realm of State responsibility under international law. (155) As discussed below, the
concept of attribution lends itself to a number of uses specific to the content of IIAs,
including the procedural framework of investor-State arbitration.
P 29
§3.04 THE USES OF ATTRIBUTION IN INTERNATIONAL INVESTMENT LAW

[A] The Attribution of Internationally Wrongful Conduct
Whenever a question arises whether a host State has complied with its obligations under
an IIA, it falls to be determined if the alleged unlawful conduct is attributable, in light of
the circumstances of the particular case, to that State, as a subject of international law.
(156) As noted by the ILC, in the context of State responsibility, the rules of attribution
aim ‘to establish that there is an act of the State for the purposes of responsibility’. (157)
Attribution fulfils its preeminent role in international investment law in the area of State
responsibility. This predominant function arises because, under the law of State
responsibility, (158) the existence of a conduct attributable to the State under
international law is one of the two necessary conditions to establish an internationally
wrongful conduct. The second requirement is that the attributable conduct breaches an
international obligation of the State.
As noted above, the determination of conduct attributable to a State is an entirely
different exercise from the characterisation of such conduct as internationally wrongful.
(159) In the words of the ILC, ‘[t]o show that conduct is attributable to the State says
nothing, as such, about the legality or otherwise of that conduct, and rules of attribution
should not be formulated in terms which imply otherwise.’ (160) In fact, the ILC achieved
an early consensus on the draft general rules on attribution (161) only after it shifted its
efforts from focusing on the substantive protection of foreign investments to laying down
the secondary rules of State responsibility. The rules are deemed secondary as they lay
out ‘the general conditions under international law for the State to be considered
responsible for wrongful actions or omissions, and the legal consequences which flow
therefrom’. (162) ILC’s early efforts to focus on setting out the content of the primary rules
of protection of foreign investments failed due to an ideological divide prevailing
between the developed and the newly independent States in the 1950s and early 1960s.
(163)
The distinction between the rules of attribution of conduct to a State and the
characterisation of State conduct as internationally wrongful is particularly relevant to
the acts of a corrupt official or person. This is of significance because, under the general
P 30 rules of attribution, a corrupt act of a State organ or official remains attributable to
the State if it is performed under the cloak of the authority of the State, (164) while under
the primary rules, a transaction or investment procured in a corrupt way is, in principle,
void and, thus, unenforceable. (165)
In the context of State responsibility under international investment law, the rules of
attribution aim to identify the circumstances in which it is justified to attribute to the
host State party to the IIA a conduct, which is allegedly in breach of that State’s
18
obligations under the IIA. The rules of attribution also limit a host State’s responsibility
by defining the categories of persons or entities the conduct of whom, subject to certain
conditions, is capable of engaging the State’s responsibility for a breach under an IIA.
(166)
In principle, the rules of attribution demarcate the public and private dimensions of
cross-border investment relations through an analysis of the categories of subjects
involved, their connection to the State and the capacity in which they performed the act
in question. Only where a person acts in an official capacity, or under color of authority,
will the conduct in question be attributable to the State. As noted by the ILC, it is a
corollary of the general rule of attribution that ‘the conduct of private persons is not as
such attributable to the State’. (167) However, as it will be seen, in the law of State
responsibility, the public dimension is not necessarily defined by the nature of the
conduct, i.e., the question whether that conduct is governmental or commercial is
relevant only in relation to some of the general rules of attribution.
Moreover, the strategic importance of an entity to a State’s public sector is not a
determinative factor for attributing the conduct of that entity to the State. This is aptly
illustrated by Jan de Nul v. Egypt. (168) In 1992, the Suez Canal Authority (SCA) of Egypt
awarded a project to dredge the Suez Canal to allow for the passage of larger vessels to
Jan de Nul N.V. and Dredging International N.V., two Belgian companies. (169) The two
P 31 companies entered into a contract with the SCA. In the course of their dredging works,
they discovered that the volume and distribution of the materials to be dredged and the
proportion of rocks differed significantly from their expectations. When the SCA refused
to pay additional compensation, the contractors filed actions in court claiming that the
SCA misrepresented the size of the work and therefore the contract was invalid. After
proceedings of ten years, the competent courts of Egypt essentially dismissed the
actions. In 2003, the two Belgian companies initiated an investment treaty arbitration
against Egypt on the grounds of the alleged misrepresentation and alleging that the
protracted proceedings in the Egyptian courts amounted to denial of justice. (170) In
rejecting the first claim based on the alleged misrepresentation committed by the SCA,
the tribunal determined that the SCA’s actions were not attributable to Egypt. (171) In
relation to the relevant rules of attribution under the ILC Articles, the tribunal stated:
In order for an act to be attributed to a State, it must have a close link to the
State. Such a link can result from the fact that the person performing the act is
part of the State’s organic structure (Article 4 of the ILC Articles), or exercises
governmental powers specific to the State in relation with this act, even if it is
a separate entity (Article 5 of the ILC Articles), or if it acts under the direct
control (on the instructions of, or under the direction or control) of the State,
even if being a private party (Article 8 of the ILC Articles). (172)
The nature of investment disputes and the State-related actors involved in it often
dictate that the rules of attribution be deployed to test whether the impugned conduct
of a State Enterprise amounts to an act of the State. (173) From the perspective of State
responsibility, the point of departure is that the separate corporate personality of a
State Enterprise, in principle, shields the State from international law claims. As the ILC
Commentary notes, the conduct of State Enterprises is only exceptionally attributable to
the State:
international law acknowledges the general separateness of corporate entities
at the national level, except in those cases where the ‘corporate veil’ is a mere
device or a vehicle for fraud or evasion.[…] Since corporate entities, although
owned by and in that sense subject to the control of the State, are considered
to be separate, prima facie their conduct in carrying out their activities is not
attributable to the State unless they are exercising elements of governmental
authority within the meaning of article 5. (174)
In many cases involving the question of attributing a State Enterprise’s conduct to the
State, the cause of action was a breach of an umbrella clause in an IIA, whereby the host
State committed to honour obligations it has entered into with investors. The principle of
privity of contract dictates that only a State that has entered into a contractual
P 32 undertaking is bound to honour it. A prior question thus arises as to the operation of
attribution in investment treaty cases involving contracts entered into by State
Enterprises. If the State is not a proper party to the contract, the impugned conduct
attributable to the State cannot be the breach per se, but a State intervention in the
alleged unlawful performance of the contract. Such an intervention may provide a cause
of action under other substantive standards of protection commonly found in IIAs, such as
the fair and equitable treatment or expropriation. (175)
While there is an inherent link between the existence and the performance of the
contractual obligation, the attribution of contractual undertakings – i.e., the question
whether the State is bound by the contractual obligation – is analytically different from
the attribution of internationally wrongful conduct, i.e., the question whether the State
has breached a contractual undertaking protected by an international law obligation.
The rationale and the content of the applicable rules differ in the two situations. The
attribution of contract breaches amounting to internationally wrongful conduct is
19
discussed in the context of State responsibility in Chapter 5 and the preliminary issue of
attribution of contractual undertakings to the State is discussed in Chapter 6 in the
context of the attribution of lawful acts to the State.
The question of attribution of conduct for the purposes of a State’s international law
responsibility is, by definition, an international law issue. However, as international law
does not define what a State organ is and does not prescribe how a State should
structure its activities, internal laws provide a point of departure in determining an act of
a State for the purposes of State responsibility. However, an internal law designation
given by a State is not per se dispositive on the issue of attribution. As Sasson observed,
‘[i]f it is shown that the entity is a de facto instrumentality of the State, it is appropriate
to look beyond the municipal law legal status and consider the factual reality’. (176) This
much is mandated also by the ILC Articles. The Commentary on ILC Article 4 states that ‘a
State cannot avoid responsibility for the conduct of a body which does in truth act as one
of its organs merely by denying it that status under its own law’. (177)
The discussion of attribution does not always resume to the traditional dichotomy
between internal law and international law. Since the EU entered the realm of
international investment law as a contracting party, jointly with the Member States, to
trade and investment agreements with investor-State dispute resolution mechanisms,
the analysis of attribution necessarily extends to the responsibility of the EU in
investment disputes under its own normative framework. The specific issues of
attribution under the EU IIAs merit a separate examination. Chapter 9 discusses the
attribution of conduct and responsibility to the EU or the Member States in the context of
the EU IIAs.
P 33
[B] Specific Uses of Attribution in International Investment Law

Beyond asserting State responsibility, the test whether an act is attributable to the State
may serve a number of specific purposes. (178) International investment law offers a
fertile ground for the application of the principles of attribution in different legal
settings. Thus, attribution, under different guises and subject to various norms and
standards, (179) lends itself to a number of specific uses in investment disputes.
In a jurisdictional context, the process of attribution can help to determine if the State is
the proper party to the dispute whether as respondent or claimant. (180) Based on
different rules or principles, attribution may serve also to ascertain whether (1) factual
knowledge is opposable to the State, (181) (2) the host State made promises or
representations on which the qualifying investor is legitimately entitled to rely, (182) or
(3) the State is party to an undertaking the observance of which is protected by the IIA.
(183) Depending on the applicable substantive standards of protection, a State’s failure
to protect the investor or its property against wrongful conduct may constitute an
omission attributable to the State. (184) These specific purposes are explored in further
detail below.
[1] The Attribution of Claims
States often raise jurisdictional objections in investment disputes arguing that the
impugned conduct is that of a separate entity or contesting the State’s effective capacity
to stand as a disputing party. In a jurisdictional context, attribution is relevant to
ascertain if a State is involved in a given dispute as the claimant investor or the
respondent host State. (185)
The scope of dispute resolution provisions in IIAs is typically limited to claims against a
contracting State. If the investor has a claim against a State entity and the host State
itself is not involved in that dispute the Tribunal may lack jurisdiction ratione personae.
(186) As explored in further detail in the context of the procedural treatment of
P 34 attribution in Chapter 8, the rules of attribution may be applied, in the context of
establishing the tribunal’s jurisdiction, to determine, on a prima facie basis, the
existence of a relationship between a State entity and the State. If it is manifestly
evident that the host State is not involved in the dispute brought against a State entity,
arbitral jurisprudence supports a conclusion that the question of attribution should be
adjudicated already at the jurisdictional stage. (187)
Conversely, if a State is the real party involved behind a claim brought by a State
Enterprise acting in a governmental capacity in a given dispute, the tribunal may lack
jurisdiction under Article 25 of the ICSID Convention. Pursuant to Article 25 of the ICSID
Convention an ICSID tribunal’s jurisdiction is limited ratione personae to disputes
between (1) ‘Contracting States’ or one of their designated or approved constituent
subdivision or agency and (2) ‘nationals’ of other contracting States. ICSID is not a state-
to-state dispute resolution mechanism. The ICSID Convention does not define
‘Contracting States’. Further, the provision on the locus standi of constituent subdivisions
or agencies of a Contracting State is reliant on designations on general terms or in
relation to a specific investment project (188) communicated by a Contracting State to
ICSID. (189) If the cause of action is grounded in an IIA, bringing a treaty claim against the
designated subdivision or entity only, while sufficient for jurisdictional purposes under
the ICSID Convention, will not suffice for the purposes of the tribunal’s jurisdiction ratione
20
personae under the IIA and the attribution of conduct that gave rise to such treaty claims.
In such situation, in order to fall within the scope of the IIA, the host State must appear as
a named respondent and the usual rules of attribution of conduct for the purposes of
State responsibility will apply.
In large part, the ICSID Convention was aimed at stimulating private international
investment by creating an institution that would facilitate the settlement of investor-
P 35 State disputes. (190) Therefore, with the increasing participation of State Enterprises in
investments on the global arena, ICSID tribunals (191) grappled with the issue whether the
relationship of the State Enterprises with their home State prevents them from standing
as claimants in an investment dispute before ICSID.
The Civil Aviation and Meteorology Authority of Yemen (CAMA) contracted Beijing Urban
Construction Group Co. Ltd. (BUCG), a wholly State-owned Chinese company, to build a
terminal at Sana’a International Airport. BUCG alleged that Yemen’s military forces and
security apparatus assaulted and detained its employees and forcibly denied access to
the project site, following which CAMA gave notice to terminate the contract based on
BUCG’s failure to return to the site. BUCG brought claims against Yemen, (192) who
objected to the jurisdiction of the tribunal, among others, on the basis that BUCG was not
a national of a Contracting State under the ICSID Convention. It argued that BUCG, as a
State-owned entity, was both an agent of the Chinese Government and discharged
governmental functions, which disqualified it from standing as claimant under the ICSID
Convention.
As discussed in detail in the context of the attribution of claims in Chapter 7, ICSID
tribunals apply the so-called Broches test in these situations, named so after Aron
Broches, the main architect of the ICSID Convention. The test mirrors in part a general
rule of attribution enshrined in the ILC Articles. In this jurisdictional context, attribution
helps to determine the actual status of the claimant investor.
Finally, the issues of attribution in the EU investment agreements merit a separate
examination. The question of determining whether the EU is the proper party to
investment claims made under EU IIAs is examined in Chapter 9.
[2] The Attribution of Lawful Acts
As noted above, attribution establishes if there is an act of the State. If the act is unlawful
under international law, it may engage the international law responsibility of the State. If
the act is lawful, attribution may still play its part. In the context of international
investment law, attribution may serve also to identify if a lawful act or omission is that of
the State.
A host State’s lawful conduct, ascertained by means of attribution, is capable of
producing various procedural or substantive legal effects in an investment dispute.
For example, the applicable legal framework may grant a certain procedural right to a
disputing party, which the party may be deemed to have waived if the right is not
exercised in a timely manner. In this regard, ICSID Rule 41(1) reads as follows:
Any objection that the dispute or any ancillary claim is not within the
jurisdiction of the Centre or, for other reasons, is not within the competence of
the Tribunal shall be made as early as possible. A party shall file the objection
P 36 with the Secretary-General no later than the expiration of the time limit
fixed for the filing of the counter-memorial, or, if the objection relates to an
ancillary claim, for the filing of the rejoinder – unless the facts on which the
objection is based are unknown to the party at that time (emphases added).
Similarly, Article 51 of the ICSID Convention provides that either party may request the
revision of an award on the ground of discovery of a fact that was, at the time of the
award, ‘unknown to the Tribunal and to the applicant and that the applicant’s ignorance
of the fact was not due to negligence’.
As discussed in Chapter 6, arbitral practice (193) shows that the knowledge of a non-
wrongful act may be attributable to the State as a relevant fact capable of producing
legal effects in an investment dispute.
The question of attribution may arise also in the context of ascertaining the existence or
scope of a lawful act on which the State’s wrongful act is predicated. (194) For example,
the lawful act may consist of a State’s representations, which may create legitimate
expectations on the part of an investor that the State will not change its laws in a manner
adverse to the investor. If the investor relies on such lawful act in making or maintaining
its investment and the State violates the investor’s legitimate expectations concerning
the regulatory framework, the State’s conduct may be a violation of the fair and
equitable standard under the applicable BIT. In determining that liability, it may be
necessary to ascertain as a preliminary issue whether the representation made by a
particular organ or entity is attributable to the State. (195) A caveat is in order: this
exercise may also raise issues of authority, which the customary international law rules of
attribution are not designed to address.
Due to the concept of the unity of the State, the State organ or entity creating an
21
investor’s legitimate expectations does not necessarily have to be the same as the State
organ or entity that violates those legitimate expectations.
A Malaysian investor, through its local subsidiary in Chile, invested in the development of
a satellite city in the Chilean municipality of Pirque. The investor secured land, which
had originally been earmarked for agricultural use and needed to be rezoned for the
purposes of the project. The Chilean Government had previously assured the investor that
the rezoning of the land would be achieved promptly. The Foreign Investment
Commission (FIC) of Chile signed a contract with the investor and granted a general
approval to invest in Chile. Having invested USD 17 million in the project, the investor
learned that the Chilean governmental agency responsible for rezoning would not rezone
the land because such measure would be inconsistent with the urban development and
environmental policies of Chile.
P 37
The award in the ensuing investment dispute confirmed that inconsistent State conduct
could breach the fair and equitable treatment standard. (196) In other words, a lawful
conduct of a State organ or entity may form the premise of the State’s liability on the
basis on which the conduct of another State organ or entity may engage the State’s
international liability so long as both the lawful and the inconsistent, and consequently
unlawful, conduct is attributable to the State.
In investment relations, States often delegate contracting roles to their own
instrumentalities, who in turn enter into and perform contracts with foreign investors
protected under IIAs. If the IIA contains an umbrella clause, the question arises whether a
contractual undertaking entered into by a separate State instrumentality binds the State
into the umbrella clause. The answer to this question is critical because only a State
bound by the contract is able to breach it, thereby engaging the responsibility of the
State based on an umbrella clause. (197) A typical umbrella clause is found in Article 10.1
of the Energy Charter Treaty (ECT), which provides:
Each Contracting Party shall observe any obligations it has entered into with
an Investor or an Investment of an Investor of any other Contracting Party.
(emphasis added).
In considering the issue of breach of an umbrella clause, the preliminary question is
whether the word ‘it’ in the umbrella clause refers only to the State itself or whether it
encompasses also State-owned entities whose conduct is attributable to the State under
the applicable rules of attribution. This question of privity of contract is described as the
‘it’ problem in legal writing. (198)
Further, for jurisdictional purposes, the investor will need to establish prima facie that
the host State (and not the State-owned entity) is a proper party to the dispute. (199) The
scope of the dispute resolution provisions in the IIA is typically limited to ‘disputes
arising between a Contracting Party and the investors of the other’.
The Pakistan Water and Power Development Authority (WAPDA) entered into two contracts
with a consortium led by Impregilo S.p.a. in relation to the construction of hydroelectric
power facilities in Pakistan. (200) The performance of the work was delayed, according to
Impregilo, due to obstacles created by Pakistan and to unforeseen conditions discovered
during the performance of the contract. WAPDA denied the consortium’s requests for
adequate time extensions and reimbursement of costs, which led to a series of disputes.
Impregilo brought claims under the Italy-Pakistan BIT alleging that Pakistan failed to
P 38 honour its commitments under the contracts. In asserting Pakistan’s responsibility,
Impregilo argued that WAPDA was an instrumentality of the Government of Pakistan and
exercised governmental authority in relation to the contracts. (201) For its part, Pakistan
argued that the dispute was in substance a contractual dispute and, as such, it was to be
resolved pursuant to the arbitration clause in the contracts. Pakistan challenged the
jurisdiction ratione materiae of the tribunal with respect to the contract claims, stating
that WAPDA, and not Pakistan, was party to the contracts and that, under the law of
Pakistan, WAPDA possessed a legal personality distinct from the State of Pakistan. It
argued that the tribunal could not exercise jurisdiction over Pakistan for breaches of a
contract to which it was not a party. (202) Impregilo argued that the dispute resolution
provision – ‘any dispute arising between a Contracting Party and the investors of the
other’ – was broad enough to capture a contractual dispute between the Government of
Pakistan and Impregilo. In addition, Impregilo argued that the breach of the umbrella
clause in a third-party BIT, which it sought to import by virtue of the most favoured
nation clause, provided the relevant cause of action for contract breaches.
Noting that the consortium concluded the contracts with WAPDA, and not Pakistan, the
tribunal considered that its jurisdiction under the dispute resolution provision of the BIT
was dependent on the precise status of WAPDA and the legal consequences to be drawn
from such status. (203) The status of WAPDA was determined under the law of Pakistan, as
the law applicable to status and capacity of WAPDA. The tribunal concluded that WAPDA
was ‘properly characterised as an autonomous corporate body, legally and financially
distinct from Pakistan’. (204) In respect of the applicability of the attribution rules, the
tribunal distinguished between treaty claims, to which the international rules of
attribution applied, and contract claims, which were governed by internal law:
22
Much of Impregilo’s argument on this issue rested upon international law
principles of state responsibility and attribution. However, a clear distinction
exists between the responsibility of a State for the conduct of an entity that
violates international law (e.g., a breach of Treaty), and the responsibility of a
State for the conduct of an entity that breaches a municipal law contract (i.e.,
Impregilo’s Contract Claims). (205)
Having determined that it was WAPDA, as a separate entity, and not Pakistan, who
contracted with Impregilo, the tribunal found that ‘the jurisdiction offer in [the
applicable] BIT [did] not extend to breaches of a contract to which an entity other than
the State [was] a named Party’. (206) Impregilo’s attempt to found jurisdiction based on
an umbrella clause in a third-party BIT also failed. The tribunal held that, even assuming
that it might be imported into the applicable BIT by the operation of the most favoured
P 39 nation clause, such umbrella clause would not take the matter further. In rejecting
Impregilo’s attempt to rely on the umbrella clause, the tribunal reiterated its finding that
the contracts were concluded by Impregilo with WAPDA, and not with Pakistan, which
meant that Pakistan’s treaty obligation under the umbrella clause did not cover the
contractual undertakings of WAPDA.
As seen in Impregilo, the issue of privity, and in effect the attribution of contractual
undertakings to the State, lends itself for resolution in the jurisdictional stage to the
extent that it can be examined without the examination of the merits whether the host
State is a proper respondent in the dispute.
The question of what rules of attribution under what system of law should apply to the
determination of the issue whether the State is a proper party to the contract generated
a fragmented investment arbitration jurisprudence (207) and a similarly divided
scholarly writing. (208) The debate on the attribution of contractual undertakings to the
State seems to originate from two apparently conflicting realities. First, absent a
provision to the contrary, a contract is an internal law instrument, typically subject to its
chosen law. That contract law determines also the question of who is a contracting party
and if there is a breach of its provisions. Second, an umbrella clause binds the host State
into an international law obligation, the breach of which, to the extent attributable to the
State, engages the State’s responsibility under international law.
Much of the debate revolves around the applicability of the general rules of attribution in
the ILC Articles to the attribution of contractual undertakings to the State. (209) The
Commentary on ILC Articles states that its rules of attribution were formulated for the
particular purpose of State responsibility ‘and not for other purposes for which it may be
necessary to define the State or its Government’. (210) However, this disclaimer cannot
provide the end of the matter. As Professor Caron noted, the primary underlying rationale
of the rules of attribution in the ILC Articles is ‘the search for agency. That is, who can be
said to be in control of the actor, who provided the actor authority, or can the actor be
said to be acting on behalf of the State’. (211) This search for agency is reflected in the ILC
Articles, be it with the proviso that the search is conducted for the purpose of State
responsibility:
An ‘act of the State’ must involve some action or omission by a human being or
group: ‘States can act only by and through their agents and representatives.’
P 40 The question is which persons should be considered as acting on behalf of
the State, i.e. what constitutes an ‘act of the State’ for the purposes of State
Therefore, while the rules of attribution were formulated for the purpose of State
responsibility, such responsibility entails identifying the involvement of the State in the
examined conduct. The fact that the conduct so identified through the process of
attribution is subsequently determined to be unlawful does not affect the
characterisation of the concerned conduct as an act of a State. As noted above, the
hallmarks of attribution, as an operation identifying the involvement of the State, are
distinguishable regardless of the legality of the underlying conduct.
The prevailing view is that it is not for the ILC Articles to settle the issue whether a State
is a party to a contract for the purposes of an umbrella clause. (213) The author supports
this view. The umbrella clause does not change the governing law or the parties to the
contract. In the words of the Annulment Committee in CMS Gas Transmission Co. v.
Argentina:
The effect of the umbrella clause is not to transform the obligation which is
relied on into something else; the content of the obligation is unaffected, as is
its proper law. If this is so, it would appear that the parties to the obligation
(i.e. the persons bound by it and entitled to rely on it) are likewise not
changed by reason of the umbrella clause. (214)
A breach of an umbrella clause is predicated on a breach of contract, which remains to
be determined according to the law applicable to that contract and, ordinarily, by the
contractually chosen forum. (215) The governing law of the contract will settle also the
issue whether the contractual undertaking, which is purportedly breached, is an act of
the State.
23
The above conclusion does not detract from the need to identify if a contractual
undertaking is attributable to the State for the purposes of an umbrella clause. The
attribution of contractual undertakings is carried out by a tribunal in the realm of
international investment law, but, on the prevailing view, the underlying rules of
attribution are not international law rules. Chapter 6 discusses the various approaches
adopted in the investment arbitration jurisprudence in relation to the attribution of
contractual undertakings to the State.
[3] The Attribution of Omissions
In the wake of the Arab Spring Revolution, armed militant groups took advantage of the
ensuing unstable political and security situation and perpetrated attacks on the Trans-
P 41 Sinai pipeline built to export natural gas from Egypt to Israel. The investors ultimately
affected by the interruption of gas supply, which occurred due to the repeated attacks,
brought claims against Egypt alleging that it failed to take reasonable preventive or
reactive steps to protect their investment from damage caused by third parties in breach
of the full protection and security standard under the applicable BIT. (216) The full
protection and security standard is an international law standard customarily embodied
in IIAs. It requires that a State, in the exercise of its police powers, exerts due diligence in
order to protect the investor’s investment in the particular circumstances. (217)
The breach of the full protection and security standard engages the direct responsibility
of the State for its own omission. (218) In the words of the tribunal called on to resolve the
investment dispute stemming from the attacks on the Trans-Sinai pipeline:
The duty imposed by the international standard is one that rests upon the
State. However, since it concerns an obligation of diligence, the Tribunal is of
the view that the operation of the standard does not depend upon whether
the acts that give rise to the damage to the Claimants’ investment are
committed by agents of State (which are thus directly attributable to the
State) or by third parties. Rather the focus is on the acts or omissions of the
State in addressing the unrest that gives rise to the damage. (219)
The rules of attribution of internationally wrongful conduct to the State are secondary
rules, which means that their application is independent of the primary obligations of
the State. (220) However, when third parties, including private parties, are involved, the
rules of attribution help to identify a conduct, typically an omission, consisting of the
State’s failure to protect the investment, in other words a breach of a primary obligation,
which is then attributable to the State under international law. (221) The corollary of the
rules of attribution is that the conduct of private persons is not attributable to the State.
P 42 (222) However, as noted in the Commentary on the ILC Articles:
a State may be responsible for the effects of the conduct of private parties, if
it failed to take necessary measures to prevent those effects. … In this respect
there is often a close link between the basis of attribution and the particular
obligation said to have been breached, even though the two elements are
analytically distinct. (223)
When different entities or persons, whether private or public, engage in illegal conduct
that may be harmful to investors or investments protected by IIAs, the rules of attribution
may be used to determine which illegal conduct is actionable. For example, in the event
of an illegal occupation of an investor’s property, the question is whether the actionable
conduct is the occupation itself, assuming that the occupation is attributable to the
State, or the State’s omission to protect the property against the illegal occupation.
The rules of attribution can be used to identify if there is an actionable unlawful conduct
also when no private party is involved in the unlawful conduct on which the State’s duty
to act is predicated. If State entities are involved in both types of unlawful conduct,
different rules of attribution may apply to each conduct.
Employees of the Egyptian Hotel Company (EHC), a public sector company wholly owned
by the Egyptian government, forcibly seized two hotels operated in Egypt by Wena Hotels
Limited, a British investor. The investor brought claims against Egypt alleging a violation
of the fair and equitable treatment and full protection and security standards under the
applicable BIT and alleging that the resulting deprivation of its contractual rights
amounted to an expropriation. (224) The tribunal examined the links between EHC and
Egypt and ultimately held Egypt liable not for the actions of EHC, but for allowing EHC
forcibly to seize the hotels. (225) In other words, the actionable conduct attributable to
Egypt was not EHC’s seizure of the hotels, but Egypt’s failure to prevent the illegal seizure
and to restore the investor’s rights.
In another case, a group of villagers occupied land owned by a Greek investor through its
joint venture with a State-owned company in Albania. The investor brought an
expropriation claim against Albania. The tribunal held that the investor ‘has neither
provided any evidence that any state authorities permitted the occupation, nor at least,
that after being called by the Joint Venture or Tradex for protection, refused to grant
protection’ (226) and concluded that it could not consider the incident as an
expropriation ‘due to lack of attributability to the Republic of Albania’. (227) In effect, the
24
tribunal noted that there was no actionable omission, which would be attributable to
Albania.
Finally, in a recently concluded investment dispute, striking union members repeatedly
occupied the administrative building of a steel plant in Nikšić, Montenegro, majority
owned by Dutch investors, and evicted the management of the plant. The police did not
offer any protection and did not dislodge the occupiers admittedly on the basis that this
P 43 was labour unrest on a private property. The investors brought claims against
Montenegro alleging a breach of the most constant protection standard under the
applicable treaty. Following an examination of the factual background, the tribunal
stated that ‘[i]t is surprising that the police would not ensure the physical integrity of
buildings and persons irrespective of their location or ownership’. (228) The tribunal held
that Montenegro breached the standard of ‘most constant protection and security’, which
‘requires the Government to have a more pro-active attitude to ensure the protection of
persons and property’. (229) In this case, the tribunal identified an actionable omission,
which was attributable to the State.
In the context of the State’s duty to physically protect persons or property, attribution, as
a necessary condition for the State’s international responsibility, intersects with the
primary rules of international law liability. In effect, as Petrochilos noted, ‘attribution to
the State permits the cause of action to take shape’. (230) Badia, on the other hand, is of
the view that the State’s lack of diligence in such a scenario ‘is not apposite to the
attribution rule because it deals with the duty of states to protect substantive rights
against interference by private parties’. (231) It is fair to say that attribution is ingrained
in this scenario too and serves the purpose of identifying whether an omission is an act of
the State for which its international law responsibility can be engaged.
In the majority of the IIAs host States agreed to offer proactive physical protection of
investors and investments against illegal acts. Therefore, arbitral tribunals frequently
grapple with the attribution of omissions. In this regard, Chapter 5 discusses further the
investment arbitration jurisprudence on the attribution of omissions in the context of the
State’s responsibility for its failure to exercise its police powers.
§3.05 COMMON PRACTICE OF ATTRIBUTION IN INTERNATIONAL INVESTMENT

LAW
The pool of over 2,500 IIAs in force and the related jurisprudence from the hundreds of
investor-State arbitration cases yielded a body of international investment law, aptly
described as ‘a common law of investment protection, with a substantially shared
understanding of its general tenets’. (232)
As States are necessary actors in international investment law, their participation in
investor relations is invariably a question to be examined at some length in any given
investment dispute. As seen above, the process of attribution links lawful or unlawful acts
to the State for a variety of purposes. The normative role of attribution and the frequent
deployment of attribution in the practice of international investment law over the past
three decades have led to a substantially shared understanding on the application of the
general rules of attribution in investment disputes.
P 44
Such common practice emerged largely based on the interpretation of the customary law
of attribution as developed and codified by the ILC Articles. Being an integral part of the
ILC Articles, the general rules of attribution were deliberately formulated at a high level
of abstraction. (233) As Judge Tomka noted ‘[s]ome members of the [ILC], including the
Special Rapporteur (Professor Crawford), wished to have the ILC Articles tested by State
practice and the practice of international courts and arbitral tribunals.’ (234) The wide
use of the ILC Articles, including its rules of attribution, in the practice of international
courts and tribunals (235) confirm that the ILC Articles achieved an unquestionably
authoritative status in the international community. In the absence of lex specialis, the
general rules in the ILC Articles remain the primary source of international law on the
question of attribution at least in the area of State responsibility. (236) Professor
Crawford, the Special Rapporteur to the ILC, pointed out that the arbitral tribunals made
a ‘justifiable use’ of the general rules of attribution in the ILC Articles (237) and, in doing
so, they made a ‘real contribution’ (238) to the field of attribution.
Due to the lack of attribution rules in most IIAs and as the ILC Articles were not adopted
for particular use in investment disputes, there is no iterative process akin to the one
that, along with the investment arbitration jurisprudence, produced ‘a common set of
general international principles about the meaning of the common substantive clauses’.
(239) However, the present study of the general and specific sources of attribution, as
tested in the investment arbitration practice, shows that it is not only possible, but also
useful to extract international principles of attribution that can aid the ‘larger operation
of the system of investment arbitration’ just as the principles about the meaning of the
common substantive clauses do. (240)
The examination of the common practice of attribution in international investment law is
also timely. The ILC has long been considering the need and/or possibility of converting
the ILC Articles into a treaty with binding force. At the time of writing, UN Resolution
25
71/133 adopted by the UN General Assembly on 13 December 2016 (241) mandated a
working group of the Sixth Committee to update its prior reports on the use of the ILC
Articles in practice with a view for the General Assembly to take a decision, in its 74th
P 45 session commencing in September 2019, on the question of a convention on
responsibility of States for internationally wrongful acts or other appropriate action on
the basis of the ILC Articles.
The ever-growing common practice of attribution in international investment law
provides an abundant resource for an eventual binding regulation of attribution in a
future legal instrument. In this regard, Chapter 10 looks at the possible future evolution of
the notion of attribution in international investment law
P 45
References
133) The rules of attribution may differ depending on the purpose for which they are
applied. For example, the rules of attribution in the law of treaties are set out in the
VCLT (see Arts 7–8, 46–47 and 50–51). The scope of this monograph is confined to the
rules of attribution in the application (rather than conclusion) of the IIAs. Further,
this book does not deal with the question of attribution of losses to the State, which
is a causation issue; see, for example, Marco Gavazzi and Stefano Gavazzi v. Romania,
ICSID Case No. ARB/12/25, Award (18 April 2017), para. 269.
134) See Chapter 2 (States and Foreign Investments).
135) UNCTAD, Investment and the Digital Economy, World Investment Report 2017,
http://unctad.org/en/PublicationsLibrary/wir2017_en.pdf (accessed 19 June 2017),
page xi, states:
UNCTAD’s new database on State-owned MNEs shows their growing role in
the global economy. About 1,500 State-owned [multinational enterprises
(MNEs)] (1.5 per cent of all MNEs) own more than 86,000 foreign affiliates,
or close to 10 per cent of all foreign affiliates. They announced greenfield
investments accounting for 11 per cent of the global total in 2016, up from
8 per cent in 2010. Their headquarters are widely dispersed, with more
than half in developing economies and almost a third in the European
Union. China is the largest home economy.
136) Andrew Newcombe, Lluís Paradell, Law and Practice of Investment Treaties:
Standards of Treatment, §1.46, 59–60 (Kluwer Law International, 2009).
137) Simon Olleson, Attribution in Investment Treaty Arbitration, 31(2) ICSID Review, 457,
458 (2016).
139) Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24,
Award (18 June 2010), para. 143: ‘The question of “attribution” does not, itself, dictate
whether there has been a violation of international law. Rather, it is only a means to
ascertain whether the State is involved’.
141) ILC Art. 2.
142) Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award (12 October 2005),
para. 84; see Luigi Condorelli, Clause Kress, The Rules of Attribution: General
Considerations, in Crawford, Pellet, Olleson, supran. 44, at 221 (Oxford University
Press, 2010), defining attribution as: ‘a body of criteria of connection and the
conditions which have to be fulfilled, according to the relevant principles of
international law, in order to conclude that it is a State … which has acted in a
particular case’; for a definition tailored to State responsibility, see also Georgios
Petrochilos, Attribution, in Katia Yannaca-Small ed., Arbitration under International
Investment Agreements, A Guide to the Key Issues, 287 (Oxford University Press, 2009):
‘Attribution is the legal operation by which the allegedly wrongful deed is
connected to the State as the doer’.
143) Petrochilos, ibid., at 287.
144) James Crawford S.C., Investment Arbitration and the ILC Articles on State
Responsibility, 25(1) ICSID Review, 127, 134 (2010).
145) Condorelli, Kress, supran. 44, at 233.
146) Peter Tomka defines attribution as: ‘a normative operation, the purpose of which is
to identify the author of the act in question and to ascertain the association of the
author of the act with a State in the performance of that act.’, Peter Tomka, Are
States Liable for the Conduct of Their Instrumentalities? – Introductory Remarks, in E.
Gaillard, J. Younan eds, State Entities in International Arbitration, IAI Series on
International Arbitration No. 4, 11 (Juris Publishing, 2008). For a discussion of a
‘factual’ approach questioning that attribution is a normative process and a
criticism of the ‘factual’ approach, see Condorelli, Kress,supran. 44, at 226.
147) Ibid., Pierre Marie Dupuy, Concluding Remarks, at 69.
148) Condorelli, Kress, supran. 44, at 226–227.
26
149) Eureko B.V. v. Republic of Poland, Partial Award (19 August 2005), paras 121–122; UAB E
energija (Lithuania) v. Republic of Latvia, ICSID Case No. ARB/12/33, Award (22
150) James Crawford, First Report on State Responsibility, Vol II(1), ILC Yearbook 1998, 1,
33–34, para. 154(e).
151) The ILC Articles use the term ‘internationally wrongful act’ broadly, to include an
omission and to extend to conduct consisting of several actions or omissions which
together amount to an internationally wrongful act; see ILC Articles, General
Commentary, fn. 33.
152) Ibid.; Petrochilos, supran. 142, at 288.
155) Condorelli, Kress note that ‘in principle, the question of attribution can be raised in
relation to any conduct of the State in relation to which a norm of international law
attaches any legal significance’, supran. 44, at 222.
156) Commentary on ILC Articles, General Commentary, para. 3(b).
157) Ibid., Chapter II, para. 4.
158) ILC Art. 2 states: ‘There is an internationally wrongful act of a State when conduct
consisting of an action or omission: (a) is attributable to the State under
international law; and (b) constitutes a breach of an international obligation of the
State.’
159) Kaj Hobér, State Responsibility and Attribution, in Peter Muchlinski, Federico Ortino,
Christoph Schreuer eds, The Oxford Handbook of International Investment Law, 552
(Oxford University Press, 2008).
160) Commentary on ILC Articles, Chapter II, para. 4.
161) David Caron, The ILC Articles on State Responsibility: The Paradoxical Relationship
Between Form and Authority, 96 American Journal of International Law, 857, 861
(2002).
162) Commentary on ILC Articles, General Commentary, para. 1.
163) Caron, supran. 161, at 870; Crawford, supran. 144, at 127.
164) ILC Art. 7; see also para. 7 of the Commentary on ILC Art. 7: ‘Cases where officials
acted in their capacity as such, albeit unlawfully or contrary to instructions, must be
distinguished from cases where the conduct is so removed from the scope of their
official functions that it should be assimilated to that of private individuals, not
attributable to the State’; James Crawford, Paul Mertenskötter, The Use of the ILC’s
Attribution Rules in Investment Arbitration, in Meg N. Kinnear, Geraldine R. Fischer et
al. eds, Building International Investment Law: The First 50 Years of ICSID, 41 (Kluwer
Law International, 2015).
165) Crawford, Mertenskötter, ibid., at 37.
166) Olleson, supran. 137, at 460; see David D. Caron, The Basis of Responsibility Attribution
and Other Trans-Substantive Rules, in Richard B. Lillich, Daniel B. Magraw eds, The
Iran-United States Claims Tribunal: Its Contribution To The Law Of State Responsibility
(American Society of International Law Transnational Publishers, 1998), at 126,
stating that the operation of the rules of attribution leads to ‘a position, which
establishes a cleavage between public and private acts in our conception of
society’; see also Commentary on ILC Articles, Chapter II, para. 9: ‘[t]hese rules are
cumulative but they are also limitative. In the absence of a specific undertaking or
guarantee (which would be a lex specialis), a State is not responsible for the conduct
of persons or entities in circumstances not covered by this chapter.’
168) Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case
No. ARB/04/13, Award (6 November 2008), para. 170.
169) Ibid., para. 70.
170) Ibid., para. 43.
171) The tribunal’s reasons are examined in the analysis of the substantive treatment of
attribution in Chapter 5.
172) Ibid., para. 157.
173) Hobér,supran. 48, at 545: ‘Investment arbitration by definition concerns activities by
the Host State and/or its organs. This automatically raises questions of State
responsibility.’
175) Crawford, Mertenskötter, supran. 164, at 35.
176) Monique Sasson, Substantive Law in Investment Treaty Arbitration: The Unsettled
Relationship Between International Law and Municipal Law, 18 (Kluwer Law
International, 2010); Petrochilos, supran. 142, at 293; Hobér, supran. 48, at 556.
178) Olleson, supran. 137, at 459: ‘attempts to describe and define the concept of
“attribution” are not dependent upon, nor do they in any way seek to specify or
limit, the specific purpose for which conduct is attributed to the State.’
179) See Chapter 4 infra.
180) Petrochilos, supran. 142, at 288.
181) Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No.
ARB/05/15, Award (1 June 2009), para. 195.
27
182) Ioan Micula, Viorel Micula, SC European Food SA SC Starmill SRL and SC Multipack SRL
v. Romania, ICSID Case No. ARB/05/20, Award (11 December 2013), para. 669.
183) Bosh International, Inc. and B&P, LTD Foreign Investments Enterprise v. Ukraine, ICSID
Case No. ARB/08/11, Award (25 October 2012), para. 246.
184) Bernhard von Pezold and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15,
Award (28 July 2015), para. 445.
185) Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case
No. ARB/11/28, Award (10 March 2014), para. 276.
186) Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24,
Award (18 June 2010), para. 91.
187) Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v.
Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction (21 December
2012), para. 271; Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID Case No.
ARB/05/07, Decision on Jurisdiction and Recommendation on Provisional Measures
(21 March 2007), para. 144; Noble Energy Inc. and MachalaPower Cía. Ltd. v. Republic
of Ecuador and Consejo Nacional de Electricidad, ICSID Case No. ARB/05/12, Decision
on Jurisdiction (5 March 2008), para. 166.
188) Christoph H. Schreuer, Loretta Malintoppi, August Reinisch, Anthony Sinclair, The
ICSID Convention: A Commentary, 255 (2nd ed., Cambridge University Press, 2009).
189) ICSID maintains a register of such designations, published as ICSID/8-C at
https://icsid.worldbank.org/en/Pages/icsiddocs/Designations-by-Contracting-
States-of-Constituent-Sub... (accessed 24 June 2017).
190) The Preamble of the ICSID Convention states in part:
Considering … the role of private international investment …;
Bearing in mind the possibility that from time to time disputes may arise
in connection with such investment between Contracting States and
nationals of other Contracting States … .
Section III, para. 9 of the Report of the Executive Directors of the ICSID Convention
states:
The creation of an institution designed to facilitate the settlement of
disputes between States and foreign investors can be a major step
toward promoting an atmosphere of mutual confidence and thus
stimulating a larger flow of private international capital into those
countries which wish to attract it.
191) See, for example, Československa Obchodní Banka A.S. v. the Slovak Republic, ICSID
Case No. ARB/97/4, Decision on Objections to Jurisdiction (24 May 1999); Hrvatska
Elekroprivreda DD v. Republic of Slovenia, ICSID Case No. ARB/05/24, Decision on the
Treaty Interpretation Issue (12 June 2009).
192) Beijing Urban Construction Group Co. Ltd. V. Republic of Yemen, ICSID Case No.
ARB/14/30, Decision on Jurisdiction (31 May 2017).
193) Waguih Elie George Siag & Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No.
195) Micula v. Romania, para. 669.
196) MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7,
Award (25 May 2004); see also Rudolf Dolzer, Fair and Equitable Treatment: Today’s
Contours, 12 Santa Clara Journal of International Law, 7, 20 (2014) quoting MTD v.
Chile, Decision on Annulment, para. 163.
197) Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision
on Liability (14 December 2012), para. 233: ‘the protection granted under the
umbrella clause requires privity between the investor and the host State’.
199) See attribution of claims at §3.04[B][1] supra.
200) Impregilo S.p.a. v. Islamic Republic of Pakistan, ICSID Case No. 03/3, Decision on
Jurisdiction (22 April 2005), para. 13.
201) Ibid., para. 80.
202) Ibid., para. 66.
203) Ibid., para. 198.
204) Ibid., para. 209.
205) Ibid., para. 210.
206) Ibid., para. 214.
207) See, for example, SGS Société Générale de Surveillance S.A. v. Islamic Republic of
Pakistan v. Pakistan, ICSID Case No. ARB/01/3, Decision of the Tribunal on Objections
to Jurisdiction (6 August 2003); El Paso Energy International Co v. Argentina, ICSID
Case No. ARB/03/15, Decision on Jurisdiction (27 April 2006); Noble Ventures Inc. v.
Romania, ICSID Case No. ARB/01/11, Award (12 October 2005); SGS Société Générale
de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision
of the Tribunal on Objections to Jurisdiction (29 January 2004).
208) Petrochilos, supran. 142, at 293; Crawford, Mertenskötter, supran. 164, at 35.
28
209) Dr Michael Feit, Attribution and the Umbrella Clause – is there a Way out of the
Deadlock, 21 Minnesota Journal of International Law, 24 (2012); Crawford,
Mertenskötter, supran. 164, at 29.
211) Caron, supran. 166, at 128.
213) Crawford, Mertenskötter, supran. 164, at 33; McLachlan, Shore, Weiniger, supran. 17,
paras 4.168 and 4.225.
214) CMS Gas Transmission Co. v. Argentina, ICSID Case No. ARB/01/8, Decision of the Ad
Hoc Committee on the Application for Annulment of the Argentine Republic, 25
September 2007, para. 95.
216) Ampal-American Israel Corp., EGI-Fund (08-10) Investors LLC, EGI Series Investments
LLC, and BSS-EMG Investors LLC v. Arab Republic of Egypt, ICSID Case No. ARB/12/11,
Decision on Liability and Heads of Loss, paras 235–236.
217) McLachlan, Shore, Weiniger, supran. 17, para. 7.363, Ampal v. Egypt, para. 241.
218) For a contrary view, see von Pezold v. Zimbabwe, para. 445, describing the State’s
liability for ‘the failure to stop someone doing something that violated an
obligation’ as ‘indirect liability for the acts of others’.
219) Ampal v. Egypt, para. 245.
220) See Commentary on ILC Articles, General Commentary, para. 1:
The emphasis is on the secondary rules of State responsibility: that is to
say, the general conditions under international law for the State to be
considered responsible for wrongful actions or omissions, and the legal
consequences which flow therefrom. The articles do not attempt to
define the content of the international obligations, the breach of which
gives rise to responsibility. This is the function of the primary rules,
whose codification would involve restating most of substantive
customary and conventional international law.
223) Ibid., para. 4.
224) Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award (8
225) Ibid., paras 95 and 101.
226) Ibid., para. 169.
227) Ibid., para. 170.
228) MNSS B.V. and Recupero Credito Acciaio N.V. v. Montenegro, ICSID Case No.
ARB(AF)/12/8, Award (4 May 2015), para. 355.
229) Ibid., para. 356.
234) Tomka, supran. 146, at 18.
235) According to four consecutive reports of the Secretary-General (A/62/62, 1 February
2007; A65/76, 30 April 2010; A/68/72, 30 April 2013; and A/71/80, 21 April 2016,
Responsibility of States for internationally wrongful acts, Compilation of decisions of
international courts, tribunals and other bodies) in the period up to 31 January 2016
the ILC Articles, including their earlier draft formulations, were referred to in a total
of 282 cases resolved by international courts or arbitral tribunals.
236) Condorelli, Kress, supran. 44, at 225: it is useful to recognise the existence of general
rules of attribution codified by the ILC ‘because the existence of a special rule of
attribution ratione materiae constitutes very much the exception, such that
normally it is necessary to rely on the general (secondary) rules of attribution.’
237) Crawford, supran. 144, at 127, 132.
238) Ibid., at 135.
240) Ibid.
241) General Assembly Resolution 71/133, Responsibility of States for internationally
wrongful acts, 19 December 2016.
29
Document information Chapter 4: The Sources of Attribution in International
Investment Law
Investment Law As discussed in Chapter 3, attribution serves a variety of purposes in international
investment law. The content and rationale of the attribution rules differ depending on
the purpose for which the State’s involvement is analysed. This chapter outlines the
Topics normative sources of attribution in the context of the State’s international law
responsibility as well as in the context of the lawful conduct of the State.
Investment Arbitration
§4.02 THE ATTRIBUTION OF INTERNATIONALLY WRONGFUL CONDUCT
Bibliographic [A] The General Attribution Rules in International Law
reference International law scholars made early forays into codifying the general rules of
'Chapter 4: The Sources of attribution for the purposes of State responsibility already during the preparatory work
Attribution in International for the 1930 Hague Codification Conference. (242) A report prepared by a subcommittee
Investment Law', in Csaba of experts in 1926 stated:
Kovács , Attribution in
International Investment When we speak of an international act committed by the State, we mean an
Law, International act done by organs through which the State performs its functions and which
Arbitration Law Library, enable it to fulfil its international duties … Every one of these organs, whether
Volume 45 (© Kluwer Law it be legislative, administrative [i.e. executive] or judicial can commit an
International; Kluwer Law P 48 illegal act … imputable to the State to which the organs belong, and
International 2018) pp. 47 - consequently involving that State’s responsibility. (243)
54
The preparatory committee for the 1930 Hague Codification Conference could not
complete its study of the question, and no final agreement could be reached on issues of
State responsibility. (244) The ILC began its work on the issue of State responsibility in
1956 under Special Rapporteur García-Amador. ILC’s focus shifted from defining the
substantive rules of protection to studying the general rules governing the international
responsibility of the State. Special Rapporteur Ago was appointed in 1963 to lead the
ILC’s work, and his reports between 1969 and 1980 laid the foundations for the general
attribution rules in the draft ILC Articles, which were adopted on first reading in 1996.
After further work under the lead of Special Rapporteur Crawford, on 31 May 2001, on
second reading the ILC adopted the final ILC Articles and the accompanying commentary.
On 12 December 2001, by General Assembly Resolution 56/83, the UN General Assembly
took note of the ILC Articles and recommended it to all governments without prejudice to
their future adoption or other appropriate action. (245) Since 2001, a number of UN
resolutions were issued, the most recent one on 19 December 2016, (246) to further
consider the question of a convention on the responsibility of States for internationally
wrongful acts or other appropriate action on the basis of the ILC Articles. A decision as to
the final form of the ILC Articles was adjourned each time due to the opposition of certain
States to the idea of converting the ILC Articles into a binding international convention.
(247)
While the ILC Articles, including their attribution rules, do not have the binding force of
treaty provisions, they are widely viewed as an authoritative codification of customary
international law. (248) By design, the ILC’s attribution rules are international law rules,
as attribution is an essential condition for the international responsibility of a State. This
does not, however, mean that the internal law of the host State is irrelevant in an
attribution analysis. As observed by Sasson, the internal law is ‘the first step in the
proper application of international law’. (249) In particular, the internal law is a point of
departure in assessing the status of an entity as a State organ for the purposes of ILC
Article 4 and an essential condition in determining the existence of delegated
governmental authority for the purposes of ILC Article 5. (250)
P 49
The general rules of attribution contained in the ILC Articles 4–11 are mutually exclusive.
Accordingly, if a conduct qualifies as an act of State under one of the rules, the inquiry
ends there. The general rules on attribution in the ILC Articles are also deliberately
abstract, being ‘predicated upon a process of integration into practice, which is
inherently uncertain’. (251) The rules are silent on how they apply to different specific
contexts, including as to what standard of proof is required for their operation. Given the
abstract wording of the general rules of attribution, it is not surprising that, as Professor
Crawford noted, certain investment treaty tribunals tended to anchor their reasoning in
the ILC Articles ‘a bit like a drowning man might grab a stick at sea in the hope of having
certainty’. (252)
Until the General Assembly adopts a conclusive position as to their final form, the ILC
Articles remain the main normative source for general rules of attribution of conduct for
the purposes of State responsibility.
[B] The General Attribution Rules in the Investor-State Context
30
Although the ILC Articles address the question of attribution for purposes of asserting the
responsibility of a State towards another State, tribunals did not find much difficulty in
applying the general rules of attribution in the ILC Articles by analogy to investor-State
relations. (253) For example, the tribunal in Jan de Nul v. Egypt acknowledged that the ILC
Articles represent ‘a statement of customary international law on the question of
attribution for purposes of asserting the responsibility of a S[t]ate towards another State,
which is applicable by analogy to the responsibility of States towards private parties’.
(254)
The general rules of attribution relevant to investor-State relations are embodied in the
ILC Articles introduced below and discussed in further detail in Chapter 5.
[1] ILC Article 4: Conduct of Organs of a State
ILC Article 4 states the basic rule that conduct of any State organ is attributable to the
State under international law. (255) As the ILC Commentary notes, the test whether the
person or entity involved in the impugned conduct has the status of a State organ is a
‘point of departure’ (256) in the analysis of attribution. The rule is extensive in that its
application is not limited by internal law labels concerning the autonomy of State organs
or internal law assignations of public functions to such State organs. The rule is clear that
P 50 a State is responsible for the conduct of its own organs, so long as such organs act in an
official capacity. (257) If the entity or person concerned acts in a purely private capacity
that will be the end of the inquiry. However, purely private conduct should not be
confused with an ultra vires or internally unlawful conduct of an organ, which will still be
attributable to the State based on ILC Article 7. (258)
If the person or entity concerned acts in an official – i.e., non-private – capacity, but
institutionally its raison d’être is detached from the State apparatus, the next question is
whether the person or entity has been empowered to exercise elements of governmental
authority so as to continue the attribution analysis under ILC Article 5. (259)
[2] ILC Articles 5: Conduct of Persons or Entities Exercising Elements of Governmental
Authority
ILC Article 5 deals with the conduct of persons or entities exercising elements of
governmental authority. (260) Hence, the test is reliant on the notion of ‘governmental
authority’, which, in the absence of a definition, (261) has been described as ‘elusive
when pursued’ (262) in practice. As detailed in Chapter 5, the rule entails two separate
steps: (1) identifying that the person or entity concerned was empowered to exercise of
elements of governmental authority and (2) establishing that it acted in that capacity in
the particular instance. Absent a clear provision in the internal law authorising the
exercise of elements of governmental authority, the ‘elements of governmental authority’
are established based on the particular circumstances of the case. In the words of an
investment treaty tribunal:
the notion is intended to be a flexible one, not amenable to general definition
in advance; and the elements that would go in its definition in particular cases
would be a mixture of fact, law and practice. Moreover – and the point is of
some importance – it is not the case that the same answer would necessarily
emerge on every occasion; in some of its activities a State enterprise might
fall on one side of the line, in others on the other. (263)
As it will be seen in Chapter 5, investment tribunals often grappled with the
determination of the delegation and exercise of governmental authority in the operation
of State Enterprises. Therefore, certain practical commonalities can be drawn from the
relevant jurisprudence.
P 51
[3] ILC Article 7: Excess of Authority or Contravention of Instructions

ILC Article 7 deals with the attribution of the conduct of a State organ or a person or
entity exercising governmental authority, which acted in excess of authority or contrary
to instructions. (264) The rule captures ultra vires or unauthorised conduct performed in
an official capacity. The rule is a corollary of the basic principle that a State cannot rely
on its internal law in order to argue that conduct, in fact carried out by its organs, was not
attributable to it. (265)
[4] ILC Article 8: Conduct Directed or Controlled by a State
ILC Article 8 addresses the attribution of conduct directed or controlled by the State.
(266) As discussed in Chapter 5, the rule deals with two alternative circumstances – i.e.,
State instruction or direction/control – where the conduct of private persons or entities is
attributable to the State due to a specific factual relationship between the person or
entity engaging in the conduct and the State. When the conduct is in fact authorised by
the State, it does not matter whether that conduct involves governmental activity.
The rule premised on the existence of State instructions did not raise difficulties in
practice. However, absent a definition of ‘control’, the operation of the rule on ‘control’
raised similar difficulties as the attempts to define ‘governmental authority’ for the
31
purposes of ILC Article 5.
[5] ILC Article 11: Conduct Acknowledged and Adopted by a State as Its Own
ILC Article 11 addresses the attribution of conduct subsequently adopted by the State,
expressly or by conduct, as its own. (267) In contrast to the other general rules of
attribution, ILC Article 11 focuses on conduct that was not or may not have been
attributable to the State at the time of commission, but which the State subsequently
acknowledged and adopted as its own.
[C] Lex Specialis

The general rules of attribution, as embodied in the ILC Articles, apply only to the extent
an IIA or another special law does not displace them. As noted in Special Rapporteur
Crawford’s First Report to the ILC, ‘[t]he principles of attribution under international law
are not … overriding. States can by agreement establish different principles to govern
P 52 their mutual relations, and the principle of lex specialis accordingly applies to [the
attribution rules in the ILC Articles].’ (268) This principle is embodied in ILC Article 55,
which states that the ILC Articles ‘do not apply where and to the extent that the
conditions for the existence of an internationally wrongful act or the content or
implementation of the international responsibility of a State are governed by special
rules of international law’.
The lex specialis principle is consistently applied in the arbitral jurisprudence:
contracting parties to a treaty may, by specific provision (lex specialis), limit
the circumstances under which the acts of an entity will be attributed to the
State. To the extent that the parties have elected to do so, any broader
principles of State responsibility under customary international law or as
represented in the ILC Articles cannot be directly relevant. (269)
Condorelli and Kress distinguished between special rules of attribution ratione personae
and ratione materiae. (270) While both prevail over a general rule of attribution, the latter
category would ‘co-exist with a particular primary rule or a collection of specific primary
rules’. (271) Such classification has merit. In international investment law, there are IIAs
containing primary rules establishing an obligation of State vigilance over State
Enterprises or other entities. These special rules, while not directly dealing with the issue
of the attribution of the conduct to the State, can be said to achieve the same result by
holding the State responsible for the conduct of such entities. For example, Article 1(7) of
the France-Uganda BIT provides:
the Contracting Parties are responsible for the actions or omission of their
sub-sovereign entities, including though not exclusively their federal states,
regions, local governments or any other entity over which the Contracting Party
exercise[s] the control, the representation or the responsibility of its
international affairs, or its sovereignty. (272)
Further, many US BITs contain a special rule requiring the State to ensure that its State
Enterprises comply with the IIA obligations. For example, Article 2(b) of the US-Estonia
BIT provides:
Each Party shall ensure that any state enterprise that it maintains or
establishes acts in a manner that is not inconsistent with the Party’s
obligations under this Treaty wherever such enterprise exercises any
regulatory, administrative or other governmental authority that the Party has
delegated to it, such as the power to expropriate, grant licenses, approve
commercial transactions or impose quotas, fees or other charges. (273)
P 53
In order to confirm the existence of lex specialis on attribution, it should be considered
not only whether the same subject matter is dealt with by two provisions, but also
whether there is some inconsistency between the general and special rules, ‘or else a
discernible intention that one provision is to exclude the other’. (274) The extent to which
the general attribution rules are displaced by lex specialis depends on the interpretation
of the scope and meaning of the special rule. (275)
Most IIAs do not contain special rules on the question of attribution. In part, this may be
due to the fact that the relevant provisions of the ILC Articles are widely considered to
represent an authoritative statement of the general rules of attribution. Therefore,
arbitral tribunals resort to the general rules of attribution in the ILC Articles in linking the
impugned conduct to the host State. In effect, as Professor Hobér noted, investment
arbitration is a ‘testing ground’ for the rules of attribution of the ILC Articles. (276)
Chapter 5 discusses the application and interpretation of the general attribution criteria
in the ILC Articles and, where applicable, of the special attribution rules in the IIAs.
§4.03 THE ATTRIBUTION OF LAWFUL CONDUCT

The question of whether lawful conduct is attributable to the State is governed by the law
32
applicable to the lawful conduct in question. Typically, this is an internal law. For
example, the issue whether a State itself is party to a contract, which is subject to an
umbrella clause in an IIA, is governed by the law of the contract in question. (277)
Similarly, the law applicable to the State organ in question governs the attribution of
such organ’s unilateral representations, which may give rise to legitimate expectations
on the part of an investor.
Issues of attribution may intersect with issues of authority, when the representations
attributable to the State were ultra vires or unauthorised under the internal law of the
host State. Such questions of authority are to be resolved under international law to the
extent that the conduct alleged to engage the State’s international responsibility is
predicated on the State’s unauthorised conduct and is thus assessed under the
international law doctrine of legitimate expectations. (278)
§4.04 THE ATTRIBUTION OF CLAIMS BY STATE ENTERPRISES

As discussed in Chapter 3, attribution may also serve to determine if a State is the real
party involved behind an investment treaty claim brought by a State Enterprise. The
question arises in the context of the tribunal’s jurisdiction under Article 25 of the ICSID
Convention. As a jurisdictional issue, and particularly one arising under the ICSID
P 54 Convention, it is governed by international law, including the provisions of the ICSID
Convention and the preparatory work of the ICSID Convention, as a supplementary means
of interpretation. (279)
Tribunals dealing with the question of attribution of claims by State Enterprises applied
the so-called Broches test to determine if a State Enterprise acted in a governmental
capacity in relation to the investment in question and, thus, if the home State was the
real party to the dispute. (280)
§4.05 CONCLUSION
The purpose for which attribution is deployed in a given context of international
investment law also sheds light on the relevant sources of law. When attribution serves to
determine a State’s international responsibility or a tribunal’s jurisdiction ratione
personae under an IIA or the ICSID Convention, international law rules apply. The law
applicable to a lawful conduct, to which legal consequences may attach in an investor-
State context, determines the question whether a State is involved in that conduct.
P 54
References
242) James Crawford, State Responsibility: The General Part, 28–29 (Cambridge University
Press, 2013).
243) Ibid., at 29, quoting from League of Nations Doc. C. 44.M.21.1926.V, reproduced in
twenty American Journal of International Law Special Supplement 17, 184 (1926).
244) Ibid., at 31–32.
245) General Assembly Resolution 56/83 (12 December 2001), para. 3.
246) General Assembly Resolution 71/133 (19 December 2016); see also General Assembly
Resolution 59/35 (2 December 2004), General Assembly Resolution 62/61 (6
December 2007), General Assembly Resolution 65/19 (6 December 2010), General
Assembly Resolution 68/104 (16 December 2013).
247) Crawford, supran. 242, at 42.
248) Kaj Hobér, State Responsibility and Investment Arbitration, 25 Journal of International
Arbitration, 547 (2008); Jan de Nul v. Egypt, para. 156; Mohammad Ammar Al-Bahloul
v. Republic of Tajikistan, SCC Case No. V064/2008, Partial Award on Jurisdiction and
Liability (2 September 2009), para. 165; Tulip v. Turkey, ICSID Case No. ARB/11/28,
Award (10 March 2014), para. 281, and Decision on Annulment (30 December 2015),
para. 184.
249) Sasson, supran. 176, at 25–26.
250) See §5.03[B][1] and §5.04[B][2] infra for further details.
252) Ibid.
253) William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and
Bilcon Delaware Inc. v. Government of Canada, PCA Case No. 2009-04, Award on
Jurisdiction and Liability (17 March 2015), para. 307.
254) Jan de Nul v. Egypt, para. 156.
255) See §5.03 infra for a detailed analysis.
258) Ibid.
33
261) The Commentary on ILC Art. 5 states that ‘[b]eyond a certain limit, what is regarded
as “governmental” depends on the particular society, its history and traditions’, see
para. 6.
262) Caron, supran. 161, at 861.
263) F-W Oil Interests, Inc. v. The Republic of Trinidad and Tobago, ICSID Case No.
ARB/01/14, Award (3 March 2006) para. 203.
268) First Report on State Responsibility, supran. 150, para. 154.
269) Adel A Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/11/33, Award (3
November 2015), para. 321.
270) Condorelli, Kress, supran. 44, at 227.
271) Ibid.
272) Article 1(7) of the Agreement between the Government of the Republic of France and
the Government of the Republic of Uganda on the Reciprocal Promotion and
Protection of Investments, signed on 3 January 2003.
273) Article 2(b) of the Treaty between the Government of the United States of America
and the Government of the Republic of Estonia for the Encouragement and
Reciprocal Protection of Investment, signed on 19 April 1994.
276) Hobér, supran. 48, p. 567.
277) See §3.04[B][2] supra.
278) See §6.02[B][2] infra.
279) See Arts 31 and 32 of the VCLT.
280) See §7.02 infra.
34
Document information Chapter 5: The Attribution of Internationally Wrongful
Conduct
Investment Law This chapter deals with the core purpose of attribution, namely the identification of an
act of the State for the purposes of establishing the State’s international law
responsibility. Following a brief look at the conditions for the establishment of an
Topics internationally wrongful act of the State, the author examines the grounds of attribution
of internationally wrongful conduct for the purposes of State responsibility in
Investment Arbitration international investment law.
§5.02 ATTRIBUTION AS A CONDITION OF STATE RESPONSIBILITY

Bibliographic The concept of attribution finds its foundation in the law of State responsibility. As a
reference normative operation, attribution’s primary role is establishing that there is an act of the
'Chapter 5: The Attribution State for the purposes of its international law responsibility. This import is by design as
of Internationally Wrongful attribution is one of the two constituent elements of State responsibility. As provided in
Conduct', in Csaba Kovács , ILC Article 2 and its Commentary, (281) in order to establish the existence of an
Attribution in International internationally wrongful act of the State, the conduct in question must be attributable to
Investment Law, the State under international law and must constitute a breach of an international legal
International Arbitration obligation in force for that State at that time.
Law Library, Volume 45
P 56
(© Kluwer Law
International; Kluwer Law The Commentary on the ILC Articles is clear that the phrase ‘internationally wrongful act
International 2018) pp. 55 - of the State’ extends to wrongful omission. (282) This position is upheld also in the
234 investment arbitration jurisprudence. (283)
Attribution concerns the issue of which persons or entities are acting on behalf of the
State for the purposes of engaging the international law responsibility of the State. In
other words, the question is whether the relationship between the person or entity whose
conduct is examined and the State leads to a conclusion that the conduct of that person
or entity is an act of the State, which if wrongful, engages the international law
responsibility of the State. Although the attribution of conduct to the State is ‘necessarily
a normative operation’ performed within the framework of international law, there is a
factual connection between a given event and the conduct attributable to the State:
‘[w]hat is crucial is that a given event is sufficiently connected to conduct (whether an act
or omission) which is attributable to the State under one or other of the rules [of
attribution].’ (284)
In investment disputes, claimants typically rely on one or more of the following four
grounds of attribution for the purposes of establishing the international law
responsibility of the State: (1) the unlawful conduct was committed by a State organ (ILC
Article 4), (2) the implicated entity exercised governmental authority in its role vis-à-vis
the investment (ILC Article 5), (3) the implicated person or entity was acting under the
instructions or control of the State when it committed the impugned acts (ILC Article 8),
and/or (4) the State acknowledged or adopted the impugned act as its own (ILC Article
11). These common grounds of attribution are examined in detail below. (285)
The second necessary condition for establishing State responsibility is the breach of an
international obligation of the State, a notion which covers both treaty and non-treaty
obligations. (286) The attribution and the existence of a breach of an international
obligation are sufficient to establish the responsibility of the State. (287)
This book on attribution does not address directly the question of breach of an
international obligation. In international investment law, an act of the State is
internationally wrongful if it breaches an obligation enshrined in an IIA or otherwise
derived from an applicable customary international law standard.
P 57
§5.03 STATE ORGANS

[A] The Notion of State Organ
There is no international law definition of what constitutes a State organ. The lack of a
common definition is not an anomaly, because the State, as a corollary of its sovereignty,
is free to organise its activities and determine the functions of its organs as well as their
interrelationship. This position is underlined also in the Commentary on the ILC Articles:
‘the structure of the State and the functions of its organs are not, in general, governed by
international law. It is a matter for each State to decide how its administration is to be
structured and which functions are to be assumed by government’. (288)
Indeed, for the purposes of attributing internationally unlawful conduct of State organs to
a State, internal law concepts serve as points of departure. An internal law determination
cannot, however, be necessarily dispositive in an international law analysis of what
makes a State organ. (289) This position is unambiguously reflected by ILC Article 4(2),
35
which contains a renvoi to internal laws, while making it clear that such reference is not
exhaustive: ‘[a]n organ includes any person or entity which has that status in accordance
with the internal law of the State.’
The Commentary on the ILC Articles makes it clear that the term ‘person or entity’ has a
broad meaning. (290) It covers ‘any natural or legal person, including an individual office
holder, a department, commission or other body exercising public authority’. (291) In the
P 58 same vein, the ILC Articles use the term ‘State organ’ in a broad sense, covering ‘all the
individual or collective entities which make up the organization of the State and act on
its behalf’, (292) while cautioning in the Commentary that ‘the term “organ” used in
internal law may have a special meaning, and not the very broad meaning it has under
article 4’. (293)
The basic rule of attribution in ILC Article 4 is ultimately concerned with the reality of any
given situation alleged to involve internationally wrongful State conduct. (294) Therefore,
even if a person or entity does not have the formal status of a State organ under internal
law, (295) the actual degree of dependence of that person or entity on the State or an
overall assessment of the legal framework governing the relationship with the State may
still lead to a classification of State organ under international law. In simple terms, it is
the triumph of substance over form.
In the words of the Commentary on the ILC Articles: ‘[t]he internal law of a State may not
classify, exhaustively or at all, which entities have the status of “organs”. In such cases,
while the powers of an entity and its relation to other bodies under internal law will be
relevant to its classification as an “organ”, internal law will not itself perform the task of
classification.’ (296) Schicho observed that international law fulfils ‘a supplementary role
where domestic law does not provide a conclusive answer’. (297) As the below survey of
the jurisprudence illustrates, the task of establishing when the internal law provides a
conclusive answer is not always a straightforward one, from which consistent lessons can
be drawn across the board. (298)
A word of caution is opportune at this stage. The reality check of international law does
not transform the process of attribution into an empirical analysis solely based on facts.
As discussed in Chapter 3, attribution is a normative process, but, as any normative
P 59 process, it is sensitive to the facts of the individual case. (299) Due to this fact-based,
yet normative, approach, ‘State organ’ has a wider international law meaning than under
internal law. (300)
ILC Article 4(1) conveys this expansive international law position by defining an act of the
State as:
the conduct of any State organ … whether the organ exercises legislative,
executive, judicial or any other functions, whatever position it holds in the
organization of the State, and whatever its character as an organ of the central
government or of a territorial unit of the State.
As the phrase ‘whatever position it holds in the organization of the state’ in ILC Article 4(1)
conveys, it is also irrelevant whether the concerned acts emanate from high-ranking or
subordinate officials. (301)
While the conduct of any State organ is capable of engaging the international law
responsibility of a State, as the reference to the exercise of ‘functions’ implies and as
further clarified in the Commentary on the ILC Articles, the impugned conduct must be
committed in an official capacity in order to be attributable to a State. (302) The ILC
Articles go even further recognising that ‘[w]here [a person who is a State organ] acts in an
apparently official capacity, or under colour of authority, the actions in question will be
attributable to the State.’ (303)
Professor Crawford commented that so long as the act is performed in an official
capacity, State responsibility for the act of a State organ is unlimited. (304) In this regard,
Professor Greenwood added that ‘once it is established that an entity is an organ of the
State, the presumption is that all of its acts are attributable to the State unless the
contrary is proven’. (305) Indeed, the Commentary on the ILC Articles makes it clear that
the classification of State organ does not rest on the distinction between ‘commercial’
acts or ‘acta jure gestionis’ and ‘sovereign’ acts or ‘acta jure imperii’. (306) Therefore, a
State cannot argue that the commercial conduct of a State organ is not attributable to it.
The task of identifying a State organ can be approached either from a structural
perspective, which focuses on the position or status of the person or entity in the formal
State apparatus, or from a functional perspective, which looks at the functions or role of
the person or entity in the formal State apparatus. (307)
Typically, tribunals consider first the position or status of the relevant person or entity in
the structure or organisation of the State under internal law. In this regard, the key
question to answer is whether the person or entity is integrated into the State’s organic
P 60 structure. If a State entity does not have separate legal personality under internal law,
it is normally acting on behalf of the State as a State organ. (308) However, in the
converse scenario, the existence of a separate legal personality establishes only a
rebuttable presumption that the separate entity is not a State organ. As discussed below,
(309) internal law provisions concerning the legal function or role of the entity may
36
overturn a presumption that a separate legal entity is not a State organ. Moreover, if a
structural or functional examination does not lead to a conclusion that the person or
entity is part of the formal State apparatus, tribunals may go on to consider if there are
other evidentiary factors pointing to a subordinate relationship between a formally
separate entity and the State.
Based on their internal law position, State organs may be classified de jure or de facto
organs. De jure organs are expressly designated as State organs in internal law whether
by the use of the term ‘organ’ or a similar denominator, which would strongly indicate
that the entity is an integral part of the State apparatus and thus acts on behalf of the
State. It may seem apposite that, whenever an inference is drawn from internal law that
an entity is a State organ, a de jure adjective is befitting such entity. Consequently, a de
facto entity would be an entity identified based on purely factual circumstances, such as
an affirmative statement or representation by a Government official. Another
classification approach would include in the de facto category all the scenarios where
the internal law does not expressly describe a person or entity as a State organ, and the
State organ status is implied by the legal functions of the entity. In practice, the
distinction between de facto and de jure State organs is arguably moot as internal laws
are merely facts from an international law perspective (310) and the State is equally
responsible in the eyes of international law for the conduct of all its organs, regardless of
whether they are characterised de jure or de facto organs.
[B] The Connecting Factors for a State Organ

There are a number of connectors anchored in the regulatory framework applicable to
the person or entity in question or in the factual background of a dispute evidencing an
actual integration into the organic structure of the State. Due to the multitude of options
that States may have at their disposal to design their structure and organise their
activities, it would be unwise to attempt to draw up an exhaustive list of legal and factual
connectors. For this reason, the ILC Articles do not provide such guidance. In fact, the
Commentary on the ILC Articles clarifies that ‘the reference to a State organ in article 4 is
intended in the most general sense’. (311)
As noted above, from a legal perspective, the question of identifying a State organ may
be approached from a structural and/or functional perspective. The structural test for
P 61 identifying a State organ departs from the internal laws applicable to the person or
entity in question. However, the express structural designation is not always the end of
the matter. In these cases, the functional test, also grounded in the internal law of the
State, assesses the legal function and role of the person or entity in order to determine if
it acts as a State organ.
Based on the general tenet that a State cannot avoid responsibility under international
law by relying on its internal law, (312) the status or function of a State entity deriving
from internal law is not necessarily the end of the matter. As it will be seen below,
tribunals are entitled to rely and in practice have relied upon various other connectors in
examining whether a particular person or entity acts as a de facto organ of the State.
[1] The Structural Test: Legal Establishment and Status
The internal laws governing the establishment and organisation of a State entity are the
starting point in testing whether that entity is sufficiently linked to the host State to
warrant a characterisation of State organ. The Commentary on ILC Article 4 makes it clear
when the search for a State organ may find an answer in the relevant internal laws:
Where the law of a State characterizes an entity as an organ, no difficulty will
arise. On the other hand, it is not sufficient to refer to internal law for the
status of State organs. In some systems the status and functions of various
entities are determined not only by law but also by practice, and reference
exclusively to internal law would be misleading. The internal law of a State
may not classify, exhaustively or at all, which entities have the status of
‘organs’. In such cases, while the powers of an entity and its relation to other
bodies under internal law will be relevant to its classification as an ‘organ’,
internal law will not itself perform the task of classification. (313)
In most cases, as discussed below, (314) the structural test raises no difficulty when
applied to a person or entity exercising some public power of legislative or judicial
character. By law, legislatures, courts and other judicial authorities are naturally
integrated into the formal State apparatus. The same degree of integration applies to the
executive function when it is clear from the legal status of the relevant person or entity –
such as the absence of separate legal personality – that it acts on behalf of the State. On
the other hand, as the jurisprudence shows, the application of the structural test to a
separate entity exercising some executive or public administration function may not
necessarily be the end of the matter when it comes to attribution. Tribunals may apply
also a functional test or may consider factual connectors. These connectors are
introduced below.
P 62
37
[2] The Functional Test: Legal Function and Role
The internal laws governing the establishment and organisation of a State entity define
also the legal function and role of that entity. Schicho comments that the legal functions
and powers of an entity implicitly define the status of that entity, which integrates it into
the machinery of the State. (315) Indeed, the functions and powers of an entity effectively
define the relationship of that entity with the State and as such assist in identifying the
extent of the entity’s integration in the formal State apparatus.
Dolzer and Schreuer note that ILC Article 4 (Conduct of organs of a State) refers to the
structural test and ILC Article 5 (Conduct of persons or entities exercising elements of
governmental authority) to the functional test. (316) While there is reference to such test-
based distinction in the investment arbitration jurisprudence, (317) as considered below,
there are also cases, which effectively use the functional test to probe the internal law
status of a de jure State organ under ILC Article 4.
Indeed, the recourse to the internal law functions of an entity is mandated under ILC
Article 4. As Professor Crawford noted in his First Report to the ILC, ‘the powers of an
entity and its relation to other bodies under internal law will be relevant to its
classification as an “organ”’. (318)
In practice, tribunals often use the functional test in conjunction with the structural test,
as part of their overall assessment of the legal framework applicable to the entity in
question.
[3] Other Factual Connectors
The broad test under ILC Article 4 enables an examination of whether an entity in fact
acts as a State organ regardless of its internal law status, function or role. The
Commentary on ILC Article 4 makes it clear that ‘a State cannot avoid responsibility for
the conduct of a body which does in truth act as one of its organs merely by denying it
that status under its own law’. (319) The ILC Articles thus recognise that the international
law doctrine of attribution of conduct for the purposes of State responsibility is
concerned with the reality of the relationship between the State and the author of the
act.
In the Bosnian Genocide case the International Court of Justice (ICJ) considered whether
the acts of genocide in Srebrenica were committed by persons or entities having the
status of organ of the Federal Republic of Yugoslavia. In that case, the ICJ described the
P 63 de facto attribution principle in the following terms:
persons, groups of persons or entities may, for purposes of international

responsibility, be equated with State organs even if that status does not follow
from internal law, provided that in fact the persons, groups or entities act in
‘complete dependence’ on the State, of which they are ultimately merely the
instrument. In such a case, it is appropriate to look beyond legal status alone,
in order to grasp the reality of the relationship between the person taking
action, and the State to which he is so closely attached as to appear to be
nothing more than its agent: any other solution would allow States to escape
their international responsibility by choosing to act through persons or
entities whose supposed independence would be purely fictitious. (320)
The ICJ also noted that the factual threshold of ‘complete dependence’ is an exceptional
one: ‘to equate persons or entities with State organs when they do not have that status
under internal law must be exceptional, for it requires proof of a particularly great
degree of State control over them’. (321) The decisions of the ICJ, forming part of the
customary international law, are generally considered authoritative in international
investment law. Therefore, in investment disputes, the parties and tribunals have relied
on the ‘complete dependence’ test articulated by the ICJ.
Nevertheless, as discussed below, the concept of de facto State organs is relatively
modestly aired in the investment arbitration jurisprudence, at least compared to its
more predictable family member, i.e., the de jure organs.
As further discussed below, the tribunal in Almas v. Poland (322) described the de facto
test by pointing out that the internal law status of a State entity will not be
determinative to the extent that it is inconsistent with other factors relevant under
international law. The tribunal stated that ‘internal status does not necessarily imply that
an entity is not a State organ if other factors, such as the performance of core
governmental functions, direct day-to-day subordination to central government, or lack
of all operational autonomy, point the other way’. (323)
Once an entity is deemed a de facto State organ, all its acts in the exercise of State
authority are attributable to the State. This distinguishes the analytical category of de
facto organ from the category of persons, captured by ILC Article 8, who do not have the
status of organs, but acted on the instructions or under direction or control of a State
organ. (324) A State incurs international responsibility through the attribution of the
direct conduct of a de facto organ under ILC Article 4. In the situation covered by ILC
Article 8, the State incurs international responsibility owing to the attribution of the
conduct of its own de jure organs, which gave the instructions or exercised the control
38
resulting in the commission of acts in breach of its international obligations. (325) Finally,
P 64 the attribution test for de facto organs under ILC Article 4 is not necessarily premised
on the existence of control, direction or instruction, as is in the narrow case of ILC Article
8. As noted below, (326) entities were treated as de facto State organs based also on
other considerations, such as the role actually performed by them within the structure of
the State.
[C] De Jure State Organs

In the attribution of conduct of State organs, the internal law status of the person or
entity is the starting point. In practice, the functional test complements this structural
test when the express legal designation is inconclusive. The functional test has been
applied also to reinforce the conclusion reached based on the structural test. The
application of the structural and functional tests in the investment arbitration
jurisprudence is discussed below.
[1] The Legislature
As the multitude of cases originating from an intervening change in the legislation of the
host State shows, it is generally accepted, and therefore in most cases implied, that the
exercise of the regulatory function by the national legislature or other regulatory body
results in acts attributable to the State. (327) As regulatory activity is an inherently
sovereign activity, (328) it is only natural that the attribution of such activity to the State
is undisputed and thus rarely discussed in investment arbitrations.
In Paushok v. Mongolia the claimants contended that the imposition of a windfall profit
tax by the Parliament (State Great Khural) impaired their investments in a gold mining
company to an extent that the subsidiary had to sell its gold at a loss. (329) The tribunal
found that the legislative changes did violate the applicable treaty. Upon embarking on
its analysis, the tribunal remarked that legislative action is attributable to a State under
international investment law: ‘[a]ctions by legislative assemblies are not beyond the
P 65 reach of bilateral investment treaties. A State is not immune from claims by foreign
investors in connection with legislation passed by its legislative body, unless a specific
exemption is included in the relevant treaty.’ (330)
In Electrabel v. Hungary the dispute originated from Hungary’s implementation of the
methodology imposed by the EU Commission in regard to compensation made by an EU
Member State for an electricity undertaking’s so-called stranded costs incurred prior to
the electricity sector’s deregulation in Hungary. (331) Under legislation adopted by the
Hungarian Parliament, Hungary terminated the power purchase agreement (PPA)
concluded with the claimant’s local subsidiary. The tribunal noted that ‘[t]here is no
question that the acts of the Hungarian Parliament are attributable to the Hungarian
State.’ (332) The Energy Sub-Committee of the Economic Committee of Hungarian
Parliament expressed the view that the privately owned power plants had been making
excessive profits at the expense of the State-owned electricity company. The tribunal
distinguished the activities of this parliamentary subcommittee from the legislative
activities of the Parliament. It stated that ‘an investigation by a Parliamentary sub-
committee investigating the way in which the PPAs worked and setting a general policy
framework for dealing with the evolution of PPAs cannot be equated with an “instruction”
given by Parliament to [the State owned electricity supply company]’. (333)
There is no question that a legislature, as a collective body, is a State organ. In principle,
a person exercising a public function on behalf of the Parliament, such as the speaker of
the Parliament, may also act as a State organ. However, individual members of the
Parliament acting in such capacity cannot be deemed to act on behalf of the State, as
they do not have legislative or other public powers of their own. (334) Indeed, members
of the Parliament represent their constituencies, rather than the State as a whole. (335)
Nevertheless, the actions or statements of individual members of Parliament may inform
the merits of the case, as illustrated by Burlington Resources v. Ecuador. (336) The dispute
arose in the context of the enactment of a tax law affecting the claimant’s investments
under production sharing contracts concluded in relation to the exploration and
exploitation of hydrocarbons. In its merits analysis, the tribunal relied on statements
made by members of the Parliament in congressional debates in the process leading to
the adoption of the law in question. The tribunal, however, emphasised that ‘[b]y calling
attention to this congressional debate, the Tribunal does not intend to attribute
responsibility to Ecuador for the statements of individual congressmen. However, in the
P 66 overall assessment of the facts and the evidence on record, these statements shed
light on the manner in which at least some members of Congress understood the context
leading to the enactment of Law 42.’
In Vivendi II v. Argentina (337) individual opposition party members’ statements similarly
informed the tribunal’s analysis of the merits of the case. In particular, the tribunal relied
on statements by opposition party members in the provincial election campaign in the
Tucumán province of Argentina that the water tariff charged by Compañía de Aguas del
Aconquija S.A. (CAA) was too high and, if elected, the opposition party would fix it. (338)
The tribunal noted that the Concession Agreement of CAA ‘had become something of a
political flashpoint in the provincial election’ (339) and the long-standing opposition of
39
the Fuerza Republicana opposition party was ‘key to an understanding of the events’
(340) that occurred following the election.
The respondent argued ‘that individual legislators are not in a position themselves to
exercise any authority. They can only channel their electors’ views in hope that those who
do exercise authority will take them into account’. (341) The respondent cited Tradex v.
Albania, where the tribunal found that the speech of a politician ‘was neither a legislative
nor an executive act’ and accordingly could not contribute to an analysis of State
responsibility for an alleged expropriation. (342)
In the end, the tribunal did not need to decide whether the acts of individual legislators,
particularly opposition politicians, were attributable to the Argentine Republic, because
it concluded that, among others, the acts of the legislature violated the fair and
equitable treatment standard. (343) However, as noted above, the statements and
conduct of the opposition party members in the election campaign informed the
tribunal’s finding that the post-election manifestations of the legislature concerning the
Concession Agreement of CAA were in breach of the treaty.
In conclusion, the act of a legislative assembly, acting as a collective body, is an act of
the State. The conduct of individual members of Parliament, acting on their own or on
behalf of their constituencies, does not engage the responsibility of the State.
[2] The Public Administration
The public administration deals with the executive acts of the State at a centralised or
decentralised level. There are no difficulties in attributing the acts of the central or local
P 67 government to the State. As discussed below, the attribution of conduct by an entity
alleged to belong to a State’s public administration poses some difficulties under the de
jure State organ test when the State entity in question has separate legal personality.
[a] The Government
It is generally accepted that the Government, the ministries, the members of the
Government and the Government and Ministry officials acting in such capacity are State
organs and their acts and omissions are therefore attributable to the State. (344) Indeed,
in the majority of cases concerning the State’s administrative decision-making by an act
of the Government or its constituents, the attribution of the relevant acts or omissions to
the State is implied by their identity.
A notable exception involved the State Treasury in Eureko v. Poland. (345) The dispute
concerned a Share Purchase Agreement and its amendments concluded in relation to the
privatisation of Powszechny Zaklad Ubezpieczen S.A. (PZU), a wholly State-owned Polish
insurance company, and actions taken by the State Treasury Minister amid what the
claimant called ‘a political quagmire’. (346) In particular, the dispute revolved around a
second round of sale of a further stake in PZU through an initial public offering. The
agreements described the seller of the PZU shares as ‘the State Treasury of the Polish
Republic represented by the State Treasury Minister of the Polish Republic’. (347) Under
the Polish Civil Code, the State Treasury had legal personality and, in civil law
relationships, was the subject of rights and duties that pertain to State property. (348)
The tribunal examined the question of attribution to the Polish Government of acts of the
State Treasury Minister.
The respondent argued that the acts of the State Treasury Minister were not attributable
to the State, because ‘[t]he Minister of the State Treasury has the dual role of exercising
state authority in its executive functions but also of acting as a private commercial actor
in certain transactional matters (where the Minister of the State Treasury is treated in the
same manner as any other private party).’ (349) The respondent submitted that the
P 68 Minister of the State Treasury did not act in the exercise of governmental executive
functions in relation to the agreements with the claimant investor.
The tribunal was divided on the issue of attribution. The majority noted that the
respondent’s submission ‘flies in the face of well recognized rules and principles of
international law’. (350) It also found that there was no doubt that the Minister of the
State Treasury acted as a contracting party ‘pursuant to clear authority conferred on him
by decision of the Council of Ministers of the Government of Poland in conformity with the
officially approved privatization policy of that Government’ (351) and, as such, engaged
the responsibility of the Republic of Poland. In support of its conclusion, the majority
cited the Commentary on the ILC Articles indicating that an entity’s separate legal
personality under internal laws is not a determinative factor for attributing the conduct
of State organs, instrumentalities or officials to the State. (352)
In addition, the majority quoted with approval a Polish scholar cited by the claimant,
who opined that ‘[i]n the prevailing view, the State Treasury is not a legal entity separate
from the State. The State Treasury is the State. However, in accordance with the
established tradition, we use the term “State” if we deal with the taking of sovereign
actions (imperium), while we apply the term “State Treasury” if we refer to the State’s
exercise of its ownership rights (dominium).’ (353)
Ultimately, the majority referred to the cumulative principles of attribution under the ILC
Articles and skirted around the issue of the internal law status of the Minister of the State
40
Treasury. It held that ‘whatever may be the status of the State Treasury in Polish law, in
the perspective of international law, which this Tribunal is bound to apply, the Republic
of Poland is responsible to Eureko for the actions of the State Treasury’. (354) As the
majority did not clearly classify the State Treasury or the Minister of the State Treasury as
a State organ and referred to an alternative basis of attribution under the ILC Articles,
(355) the extent to which the Eureko majority decision is good authority for a proposition
that a separate entity can be deemed a State organ remains doubtful. (356)
In his dissenting opinion, Professor Rajski, the co-arbitrator appointed by the Republic of
Poland, commented that the Polish Civil Code provisions conferred separate legal
personality to the State Treasury and granted it an exclusive liability for its obligations.
He noted that these provisions supported his view that the State Treasury had an
autonomous status, was legally separated from the organisation of the State and, as such,
P 69 was not an organ of the State ‘even in the widest possible meaning of the word’. (357)
Professor Rajski viewed the internal law status of the State Treasury as sufficient for the
characterisation of a separate entity under ILC Article 4, which remains an isolated view,
unsupported by the Commentary on the ILC Articles. (358)
[b] The Public Sector Entities
General Observations
The investment arbitration jurisprudence is somewhat more unsettled in relation to the
attribution of the conduct of centralised governmental bodies established as separate
legal entities and authorised by law to perform an executive public function. Public
sector entities interact frequently with foreign investors or their local subsidiaries. When
an investment treaty dispute arises, investors seek to attribute the conduct of these
entities to the State arguing that they act on behalf of the State as State organs. In
response, host States typically argue that the separate legal personality of such entities
excludes a State organ qualification.
The internal laws applicable to the entity in question are often the sole reference for
tribunals considering the status or position of governmental or public agencies within the
State apparatus. In particular, a number of tribunals concluded that the separate legal
personality of a State entity was incompatible with a possible classification of State
organ under ILC Article 4. (359) In those cases, the attribution test typically continued
with ILC Article 5, which deals with the conduct of entities that are not State organs but
are empowered to exercise the governmental authority of a State.
Nevertheless, other tribunals did not see an inherent incompatibility between the
entity’s separate legal personality and its State organ classification for the purposes of
attribution of responsibility under international law. (360) These tribunals found that
other factors anchored in the internal law framework were compelling enough to
conclude that the entity acted as a de jure State organ, regardless of its separate legal
personality.
Whether a separate entity is a State organ under ILC Article 4 or an entity empowered to
exercise the governmental authority of a State under ILC Article 5 is of crucial importance
in an attribution analysis. On the one hand, this is because ‘there is no common
P 70 understanding in international law of what constitutes a governmental or public act’,
(361) the existence of which is a requirement under ILC Article 5. On the other hand, a
separate entity’s commercial conduct may engage the State’s international law
responsibility only if that entity is classified as a State organ under the broad test
mandated by ILC Article 4. (362) Since organs ‘participate in the structural setting of the
State, all their acts are attributed to the State, whether commercial or not’. (363)
Privatisation of State Property
A number of tribunals considered whether privatisation agencies are State organs for the
purposes of the attribution of their acts to the State. While it is generally accepted that
privatisation, just like nationalisation, is an inherently sovereign process, tribunals were
divided in characterising a privatisation agency as a de jure State organ under ILC Article
4 or an entity to which the State delegated governmental authority, as described in ILC
Article 5.
In Noble Ventures v. Romania (364) the tribunal considered whether the State Ownership
Fund (SOF), later reorganised into the Authority for Privatization and Management of the
State (APAPS), was a State organ. The dispute arose out of a privatisation agreement
between Noble Ventures and SOF concerning the acquisition, management, operation
and disposition of a steel mill, Combinatul Siderurgic ReşiŢa (CSR), located in ReşiŢa,
Romania. SOF was a Romanian ‘institution of public interest’ with legal personality,
established by law and subordinated to the Government, and mandated to privatize
Romanian State-owned enterprises. (365)
The claimant argued that SOF/APAPS breached the privatisation agreement and a
related settlement agreement (366) and such breaches were attributable to Romania
because SOF/APAPS acted as State organ. (367) In particular, the claimant submitted that
SOF/APAPS was ‘a State agency subordinated directly to the Prime Minister and tasked
with the critical public function of transforming Romania’s economy’. (368)
41
In turn, the respondent argued that SOF/APAPS was a separate legal body under
Romanian law and the Privatisation Agreement was a private law instrument governed by
civil law. (369) In the alternative, the respondent argued that even if by law SOF/APAPS
P 71 was entrusted with a governmental function, the Privatisation Agreement was a
commercial contract and, therefore, the conduct allegedly breaching that agreement was
commercial conduct not attributable to Romania. (370)
The tribunal noted that the applicable rule of attribution is ILC Article 4, which ‘concerns
attribution of acts of so-called de jure organs which have been expressly entitled to act
for the State within the limits of their competence. Since SOF and APAPS were legal
entities separate from the respondent, it is not possible to regard them as de jure organs’.
(371)
Having concluded that SOF/APAPS was structurally not part of the State, the tribunal
turned to the functional test. (372) It reviewed the applicable legal framework for
privatisations and noted that, by law, privatisation fell under the competence of the
Government, the Romanian Development Agency and the empowered public institutions,
including SOF/APAPS. (373) Crucially, it noted that by law, ‘[t]he Government provides the
implementation of the privatization policy, coordinates and controls the activity of
ministries and public institutions that have competencies and powers in the carrying out
of privatization, takes mandatory measures to expedite and complete privatization and
is answerable before Parliament for the fulfilment of such obligations.’ (374) Having then
examined the provisions concerning the establishment and organisation of SOF, the
tribunal noted that SOF/APAPS was competent ‘as a governmental agency, to manage the
whole legal relationship with [the investors], including all acts concerned with the
implementation of a specific investment’ and concluded that ‘no relevant legal
distinction [was] to be drawn between SOF/APAPS, on the one hand, and a government
ministry, on the other hand, when the one or the other acted as the empowered public
institution under the Privatization Law’. (375)
The tribunal concluded that SOF and APAPS ‘were entitled by law to represent the
respondent and did so in all of their actions as well as omissions’ (376) and, therefore,
their acts were attributable to the respondent. The tribunal’s award did not expressly
ground the outcome of the attribution analysis in ILC Article 4 or 5.
It would appear that the tribunal equated SOF/APAPS with a government ministry, which
implies that SOF/APAPS acted as a de facto organ in the implementation of the legal
framework on privatisations. However, the tribunal’s reasoning – namely, that in
managing the relationship with the investors, SOF/APAPS were empowered to act as a
governmental agency and in fact acted so (377) – suggests that the tribunal applied the
functional test under ILC Article 5. As noted above, an ILC Article 4 attribution analysis
does not entail a distinction between commercial and governmental conduct. Therefore,
the tribunal’s finding that SOF/APAPS, acting as governmental agencies, were entitled by
P 72 law to represent the respondent and did so in all of their actions and omissions
suggests that the tribunal anchored its attribution analysis in ILC Article 5. Nevertheless,
the way the tribunal dealt with the respondent’s argument that SOF/APAPS’ conduct was
commercial raises some questions. This is because, once the attribution analysis is
grounded in ILC Article 5, the distinction between governmental and commercial conduct
becomes relevant. The Commentary on the ILC Articles provides that, in order to
determine if an entity and its conduct fall within the scope of ILC Article 5, the test is
whether ‘the entity is empowered by the law of the State to exercise functions of a public
character normally exercised by State organs, and the conduct of the entity relates to the
exercise of the governmental authority concerned’. (378) By definition, the ILC Article 5
test excludes commercial conduct. Nevertheless, the tribunal’s reasoning appears to
question the relevance of the distinction between governmental and commercial
conduct: (379)
With regard to the argument of the Respondent that a distinction has to be
drawn between attribution of governmental and commercial conduct, the
latter not being attributable, the following has to be said. The distinction
plays an important role in the field of sovereign immunity when one comes to
the question of whether a State can claim immunity before the courts of
another State. However, in the context of responsibility, it is difficult to see
why commercial acts, so called acta iure gestionis, should by definition not be
attributable while governmental acts, so called acta iure imperii, should be
attributable. The ILC-Draft does not maintain or support such a distinction.
Apart from the fact that there is no reason why one should not regard
commercial acts as being in principle also attributable, it is difficult to define
whether a particular act is governmental. There is a widespread consensus in
international law, as in particular expressed in the discussions in the ILC
regarding attribution, that there is no common understanding in international
law of what constitutes a governmental or public act. Otherwise there would
not be a need for specified rules such as those enunciated by the ILC in its
Draft Articles, according to which, in principle, a certain factual link between
the State and the actor is required in order to attribute to the State acts of
that actor. (380)
42
The Noble Ventures tribunal’s elusive approach to the grounds of attribution does not
advance the consistent application of the rules of attribution in international investment
disputes, (381) because it is unclear if SOF/APAPS was considered a de facto State organ
or an entity exercising governmental authority.
The tribunal in Awdi v. Romania examined the conduct of the successor of APAPS, namely
the Authority for State Assets Recovery (AVAS), established by law through the merger of
APAPS and the State Property Fund. According to Romanian law, AVAS was a ‘specialised
institution of the public central administration, having legal personality and being
subordinated to the Government’. (382) The case involved a post-privatisation dispute
P 73 concerning in part Rodipet, a press distribution company. The agreement for the
privatisation of Rodipet provided for AVAS’ obligation to procure from the State a long-
term concession over land housing press distribution points. The dispute involving
Rodipet arose when Romania revoked the law granting the land concession to Rodipet
and, relying on the buyer’s alleged non-compliance with its post-privatisation
obligations, AVAS took control of claimants’ indirect shareholding in Rodipet. (383) In
contrast with the Noble Ventures tribunal, the Awdi tribunal concluded that Romania’s
privatisation agency was a de jure organ and its conduct was therefore attributable to
Romania under ILC Article 4. The tribunal’s attribution analysis did not discuss the
separate legal personality of AVAS or the broader structural test focusing on the internal
law status of the entity. Instead, the tribunal applied directly the functional test, noting
that AVAS’ conclusion and implementation of the privatisation agreement was in
pursuance of public interest ‘in the frame of the State’s privatization policy by a state
organ’. (384)
Another tribunal applied the functional test in relation to Lithuania’s privatisation
agency in Luigiterzo Bosca v. Lithuania, (385) albeit by express reference to ILC Article 5.
The dispute arose from the Lithuanian State Property Fund (SPF)’s annulment of the
tender awarded to the claimant for the privatization of one of Lithuania’s leading
beverage producers, AB Alita. (386) The respondent argued that SPF acted as an ordinary
commercial party conducting commercial negotiations and the privatisation of State-
owned property was a civil transaction under the Lithuanian Civil Code. (387) The
claimant submitted that (1) privatisation is an inherently sovereign act, (2) the SPF was a
government agency engaged in sovereign acts, (3) the privatisation of Alita was a
sovereign act and (4) in any event, the distinction between acta jure gestionis and acta
jure imperii is not relevant to all treaty claims. (388)
The tribunal noted that by law the SPF was a State Enterprise, with separate legal
personality, mandated to privatize State property. Based on this brief functional
analysis, the tribunal concluded that the SPF was an entity empowered to exercise
governmental authority, as described in ILC Article 5. (389) Having placed the conduct of
SPF under ILC Article 5, the tribunal had to decide then whether the impugned conduct of
SPF was in the exercise of governmental authority. In that regard, the tribunal held that
the privatization process was a highly regulated governmental process, ‘culminating in a
multi-step State-approval process’. (390) The tribunal added that the applicability of the
Civil Code to certain aspects of the SPF’s work did not negate the governmental nature of
the acts adopted in the process of privatization. (391)
P 74
In Bogdanov v. Moldova (392) the tribunal looked at the attribution of the conduct of the
Department of Privatisation of the Republic of Moldova to the State of Moldova in the
context of its jurisdiction ratione personae. (393) The dispute revolved around a
compensation for assets transferred in a local company under a privatisation agreement.
The compensation procedure was authorised by a specific governmental regulation. (394)
This was sufficient for the tribunal to conclude that the Department of Privatisation was a
central governmental body of the Republic of Moldova, ‘delegated by Governmental
regulations to carry out state functions and the effects of its conduct may be attributed
to the State’. (395)
Administration of State Property
Outside the privatisation or post-privatisation context, the structural or functional tests
led to varying results in the attribution of the conduct of public sector entities.
In Almas v. Poland the claimants’ subsidiary, Pol Farm Sp. zoo (Pol Farm) leased
approximately 4,200 hectares of land in Świdwin Commune, Poland, pursuant to a long-
term lease agreement with the Polish Agricultural Property Agency (Agencja
Nieruchomości Rolnych or ANR). (396) The tribunal noted that ANR was a Polish institution
under the supervision of the Ministry of Agriculture and Rural Development, responsible
for administering, leasing and selling Polish State-owned land. ANR was the successor
body to the Agricultural Property Agency of the State Treasury, which was originally
created to supervise Poland’s transition from State-owned agriculture to a market-based
economy. (397)
The investment dispute arose from ANR’s termination of the lease agreement with Pol
Farm amid Pol Farm’s financial difficulties. The respondent argued that the Republic of
Poland was not responsible for the conduct of ANR, because ANR was a legal entity
separate from the Republic of Poland and its conduct amounted to that of an ordinary
43
commercial party. (398) In support of its submission that ANR was not a State organ, the
respondent noted that, under Polish law, ANR had independent legal personality, acted
separately from the respondent, and performed obligations under contracts with third
parties in its own name. (399)
The claimant submitted that ANR was an entity with competence to exercise public
powers and to enter into contracts with private operators, and possessed an ‘institutional
structure and composition’ indicative of State control or influence. (400) The claimant
argued that the following connectors were ‘strongly indicative of ANR’s status as an
P 75 extension of the Respondent itself’: (1) Polish law defined ANR as a State entity
supervised by the Minister for rural development, (2) Polish law further described ANR as
a State entity entrusted with ‘important economic tasks that should be supported from
the state budget’, and (3) ANR’s official website, at a governmental address, described it
as ‘a state institution … a trust organization authorized by the state treasury’. (401) The
claimant added that the website provided also that ANR acted pursuant to federal
legislation, enjoyed rights of pre-emption and buyout for purchasing agricultural land on
the free market, and exercised ownership rights over companies considered by the
Ministry of Agriculture and Rural Development ‘as particularly important for [the]
national economy’. (402)
The tribunal noted that in light of the Polish law provisions concerning the separate legal
personality of ANR and its power ‘to perform on its own behalf the rights and obligations’
related to State agricultural property, ANR cannot be considered a de jure State organ
under internal law. (403)
The question of whether the conduct of a specialised State entity involved in the
administration and management of State property was attributable to the State came up
also in InterTrade v. Czech Republic. (404) The case concerned the conduct of Lesy Česke
Republiky (LCR), a special purpose public entity responsible for the day-to-day
management of State forests. The dispute arose from the conduct of procurement
proceedings by LCR, ‘the purpose of which was to transform the Czech forestry sector from
a cartel-like structure to a competitive market’. (405) The investor, whose local subsidiary
had contracts with LCR that were being retendered, alleged that LCR manipulated the
tender proceedings to benefit certain parties.
LCR was established in 1991 by the Czech Ministry of Agriculture, the entity responsible for
managing and administering State forests. (406) As noted in the award, ‘LCR became
responsible for the day-to-day management of State forests, while the Ministry of
Agriculture retained ultimate responsibility for the deforesting and regeneration plan in
respect of State forests.’ (407) When CE Wood, the investor’s subsidiary, sought
information from the Ministry of Agriculture concerning the composition of the evaluation
committees for the LCR tenders, the Ministry of Agriculture explained that it had ‘limited
powers of control’ over LCR as a State Enterprise, and it could not intervene in the tender
process ‘because the exercise of commercial activities concerning state-owned assets by
LCR was not subordinate to the Ministry of Agriculture’. (408)
The claimant acknowledged that LCR was not a State organ under Czech law. It argued,
however, that the Ministry of Agriculture controlled at all times LCR (409) and the Czech
P 76 Republic incurred responsibility under ILC Article 4(2) with regard to the Ministry of
Agriculture, as a State organ. (410) In respect of the legal relationship between the
Ministry of Agriculture and LCR, the claimant relied on the Forestry Act, which stipulated
that the Ministry of Agriculture is the ‘central body of State forest administration’
entrusted to manage ‘the exercise of State forest administration’ and supervise
‘compliance by State administration bodies, individuals and legal entities’ with the
provisions of the Forestry Act. (411) The claimant further relied on the fact that LCR was
established as a special purpose public entity to meet the ‘societal, strategic or publicly
beneficial interests’ of the State. (412) It also contended that any commercial contract
concluded by LCR had to be approved by the Ministry of Agriculture, which meant, in its
view, that LCR’s commercial relationships ‘warrant[ed] the State’s interests’. (413)
The respondent argued that, while the Ministry of Agriculture was the founder of LCR, the
LCR and the State were two separate entities. (414) It submitted that, pursuant to the Act
on State Enterprises, a State Enterprise, such as LCR, managed assets without the direct
interference of the State and the State had no power to influence in any way the
selection of contractual partners in the LCR tender. (415) The respondent also relied on
the fact that the LCR’s finances were not tied to the State budget.
With respect to the Czech law status of LCR, the tribunal noted that pursuant to its
establishing protocol, the Ministry of Agriculture founded LCR as a State Enterprise to
meet the ‘social, strategic or publicly beneficial interests’ of the Czech State. (416)
In respect of the powers of the Ministry of Agriculture over LCR, the tribunal accepted the
opinion of the respondent’s Czech law expert that a State Enterprise was ‘an independent
entity detached from the state’, which carried out ‘its business activities with state
property on its own behalf’. (417) The respondent’s expert also opined that ‘the law
doesn’t grant to the founder any legal tools to directly influence regular commercial
activity of the state enterprise’. (418) The tribunal also noted that the respondent’s
expert categorically affirmed that the Czech State had no authority to intervene in the
selection of LCR’s contractual partner or to determine the terms and conditions of
44
entering into a specific contract. (419)
While acknowledging that the Ministry of Agriculture was a State organ, the majority found
that the Ministry could not be held responsible for LCR’s management and conduct of the
P 77 tenders. (420) The tribunal held that:
[o]n the one hand, the Claimant failed to adduce any evidence of specific acts
of the Ministry in the conduct of the tender which engaged its responsibility.
On the other hand, the Ministry’s alleged failure to supervise how LCR actually
conducted the tender demonstrates precisely that the ‘founder’ of LCR
respected the independence of the State enterprise in the management of its
regular business activity. The ‘founder’ bears no responsibility for LCR’s
management of the tender process. If the Claimant’s analysis were be
accepted, i.e. that a State is automatically responsible for all the acts of its
separate public entities, this would completely blur the distinction between
Article 4 and 5, and the provision of two distinct bases of responsibility. (421)
InterTrade v. Czech Republic shows that the claimant investor cannot bypass the structural
or functional tests in relation to the attribution of the conduct of a separate entity by
arguing that a founding or supervising State organ failed to supervise that entity. As the
tribunal noted, such an argument would still require the claimant to adduce evidence of
specific acts of the State organ concerning the alleged conduct of the separate entity,
which engaged its responsibility. In order to engage the responsibility of the State, such
specific acts would not only need to be attributable to the State but would also need to
be in violation of an international law obligation. (422) As a State’s failure to enforce its
laws may rise to the level of a breach of its international law obligations, (423) in
principle a State organ’s failure to perform an internal law duty of supervision may
indeed constitute internationally wrongful conduct. On the other hand, as discussed
below, there are also cases where a State organ interfered with a contract concluded by a
separate entity. (424) However, in those cases the attributable conduct was the State
organ’s interference with contracts concluded by a separate entity, rather than the
conduct of the separate entity. (425)
The outcome of the structural or functional tests in Almas v. Poland and InterTrade v.
Czech Republic differs from the line of cases involving privatisation agencies, but the
difference is justifiable based on the nature of the rights transacted. While all these cases
involved State entities dealing with State property, the inescapable conclusion from a
comparison between the two lines of cases is that internal laws tend to confer a more
independent role to State entities managing and/or administering State property than to
privatisation agencies disposing of State property. The Almas tribunal even emphasised
P 78 that the fact that a lease concerns State-owned land does not mean that the State
entity transacting that land is exercising a governmental function. (426) On the other
hand, seemingly in light of the nature of the transaction and its effect on State patrimony,
the transfer of State ownership remains a governmental function in many countries. (427)
State assets are increasingly managed and invested by public pension funds and
sovereign wealth funds. (428) Since these funds typically invest in foreign assets (429) and
thus do not interact in their country of establishment with foreign investors, (430)
tribunals have yet to grapple with the attribution of their conduct to the host State for
the purposes of the State’s international law responsibility. To the extent that these
investment funds are integrated into the central governmental administration, there
should be no difficulty in attributing their conduct to the State as State organs. If
established as separate legal entities, in light of their commercial objective, these funds
would not normally pass a functional test. (431)
The Strategic Importance of an Asset or Activity
In light of the importance of a certain asset or activity to the national economy, a
separate entity may be entrusted with the administration of that asset or activity, as a
governmental function. However, the competence to exercise governmental authority
and the importance of an entity to the national economy are not per se determinative for
the attribution of the conduct of that entity to the State as a State organ.
In Jan de Nul v. Egypt the tribunal examined whether the SCA, the public agency in charge
of the management, maintenance and development of the Suez Canal, acted as a State
organ of Egypt under international law. Following a tender process, SCA awarded a
contract for the deepening and widening of certain southern stretches of the Suez Canal
to an unincorporated joint venture between two leading dredging companies
incorporated in the Netherlands. In the performance of the dredging works, the
contractors encountered site conditions that differed significantly from the estimates
P 79 received in the tender stage. The contractors sought additional compensation, which
the SCA refused. The contractors filed actions in the courts of Egypt in accordance with
the contractual dispute resolution clause. After protracted proceedings, the claimants
initiated investment treaty arbitration.
The claimants submitted a legal opinion of Professor Sacerdoti, who opined that the SCA
was a de jure organ of Egypt since it was a public authority that exercised a public
function and was part of the structure of the State according to municipal law. (432) In
addition, the claimant argued that according to the laws of Egypt: (1) SCA’s management
45
was appointed by means of decrees of the President of the Republic (who also decided
on the management’s salaries, their removal and their bonuses), (2) SCA reported to the
Prime Minister, who approved all the decisions of its Board of Directors, (3) the charges
collected by SCA were included in the Public Treasury Balance Sheet and SCA’s accounts
and balance sheets were supervised by the Central Auditing Department, the State organ
exercising financial control over the administration of public funds, (4) all SCA’s
employees had the status of public officials, (5) SCA was subject to the rules on public
procurement which apply to ministries and State authorities and (6) SCA’s acts were
subject to the judicial review of the administrative courts, whose jurisdiction was limited
to disputes with the government and government entities. (433)
The respondent argued that SCA was not a State organ, because it had independent legal
personality under the laws of Egypt. (434)
In its award on the merits, the tribunal held that the relevant act must have a ‘close link
to the State’ and in the case of a State organ ‘[s]uch a link can result from the fact that
the person performing the act is part of the State’s organic structure’. (435)
The tribunal looked to internal law to determine whether the SCA was a State organ. (436)
It noted that the provisions of Law No. 30/1975 on the organization of the SCA did not
warrant a conclusion that the SCA was a State organ. That law described the SCA as a
public authority that ‘enjoys an independent juristic personality’. (437) While it
acknowledged that Egypt did not contest that the SCA can be said to generally carry out
public activities, the tribunal found that the SCA was not part of the State of Egypt and
therefore was not a State organ.
The tribunal based its finding on three provisions of Law No. 30/1975, which underscored
the independent commercial nature of SCA’s activities. In particular, Article 4 of Law No.
30/1975 provided that ‘[t]he SCA shall follow the appropriate methods of management
and exploitation in accordance with what is being followed in the business enterprises
without any commitment by the governmental systems and conditions.’ Further, Articles 5
and 10 stated that ‘[t]he SCA shall have an independent budget that shall be in
P 80 accordance with the rules adopted in the business enterprises without prejudice to the
supervisory of the Central auditing Department on the final account of the SCA’ and ‘[t]he
SCA’s funds are considered private funds.’ (438)
These Egyptian law provisions appear to have decoupled the SCA from the State
apparatus. It is debatable to what extent these provisions accord with the SCA’s express
designation as public authority in the same law. Arguably, this internal law designation
would have warranted also a functional test to assess if the SCA performed a
governmental function even though admittedly it operated on private law principles.
Nevertheless, the provisions pointing to the management of SCA on commercial
principles were sufficient for the tribunal to find that the links to Egypt did not warrant a
State organ classification.
The Internal Law Status
Internal laws governing the establishment and organisation of a State agency often confer
separate legal personality upon that entity. This raises a presumption that the entity is
not a State organ for the purposes of the State’s international law responsibility. As noted
in Almas v. Poland, ‘tribunals have determined that an entity is not a State organ
according to the terms of a State’s legal order when it has independent personality in
that order’. (439)
However, the internal law status of an entity is not necessarily the end of the matter for
attribution under international law. The ILC Commentary points out that ‘a State cannot
avoid responsibility for the conduct of a body which does in truth act as one of its organs
merely by denying it that status under its own law’. (440)
In Fireman’s Fund v. Mexico the tribunal considered the attribution of the conduct of an
Interagency Working Group which did not have a formal State organ status under the laws
of Mexico. The Working Group was established ‘to coordinate the search for solutions for
financial institutions caught in the Mexican financial crisis’. (441) It was made up of the
representatives of the principal agencies of government with responsibilities in the
financial sector – the Banco de México, the Ministry of Finance, the National Banking and
Securities Commission and the Fund for Protection of Bank Savings, later replaced by the
Institute for the Protection of Bank Savings. (442)
The claimant submitted that the Government of Mexico expropriated its investment in
Grupo Financiero BanCrecer, S.A. in violation of NAFTA. It argued that the expropriation
occurred, among others, through the rejection of a Recapitalization Program of BanCrecer
by the so-called Working Group. (443)
The claimant argued that the Working Group was a State organ under international law.
(444) The respondent submitted that the recommendations of the Working Group could
P 81 not create acquired rights (445) and contended that ‘no legal claims could be based on
its activities, because under Mexican law the Working Group was not a governmental
organization with decision-making authority or power to bind the State’. (446)
In response, the claimant submitted that ‘regardless of its internal administrative law,
Mexico could not, under international law, avoid responsibility for the conduct of a body
46
that acts on its behalf vis-à-vis third parties’. (447)
The tribunal accepted the principle put forward by the claimant. However, it held that,
on the facts of the case, there was no commitment made on behalf of Mexico by the
Working Group and subsequently repudiated by the State. (448) The tribunal found that
the claimant placed more reliance on the informal recommendations of the Working
Group than it was justified by the role and function of the Working Group and the
relations of the Working Group with claimant did not give rise to liability on the part of
the Government of Mexico under the NAFTA. (449)
Fireman’s Insurance did not raise the issue of the attribution of the conduct of an entity
with a separate legal personality. In most cases, it is this separate legal personality of the
State entity, which tribunals rely on in their attribution analyses.
In EDF v. Romania (450) the tribunal analysed whether C.N. Bucharest Aeroport Otopeni
(AIBO), an airport holding company, and Compania de Transporturi Aeriene Romane
Tarom S.A. (Tarom), Romania’s national airline company, could be considered State
organs. The Ministry of Transportation was the sole shareholder of AIBO and the majority
shareholder of Tarom. Prior to their withdrawal, AIBO and Tarom were co-venturers with
EDF in a joint venture licensed to operate duty-free businesses within airports in
Romania, respectively provide in-flight duty-free services on Tarom flights.
The dispute arose from the revocation of the former joint venture’s duty-free licences,
which led to the closure of duty-free operations at Constanta and Timisoara airports, the
discontinuance of the company’s duty-free operation at the Bucharest Otopeni Airport
and the termination of the Tarom duty-free services agreement. The duty-free licences
were then granted to AIBO and Tarom.
The claimant alleged that the conduct of Tarom and AIBO was ‘part of an orchestrated
action to take the investor’s investment in retaliation for his refusal to pay bribes’. (451)
The impugned conduct concerned breaches of the lease and services agreements and
misconduct in the organisation of the auction for new licenses. It involved the refusal of
AIBO to conclude rental contracts with the former joint venture and the refusal of Tarom
to grant to the former joint venture access to its aircraft.
In respect of attribution, the claimant argued that ‘[t]he structural, functional and control
aspects of AIBO and TAROM determine that both entities were acting as agents of the
Romanian State in their relationship with EDF.’ (452)
P 82
The respondent submitted that ‘[n]either AIBO nor TAROM was organized structurally as a
Romanian State organ nor did they perform such functions as the State or on the State’s
behalf.’ (453) The respondent submitted that AIBO owned assets to the benefit of its
shareholders and performed public services, such as those relating to aircraft and flight
operations, using public property as a concessionaire. The respondent further argued
that the Ministry of Transportation, as a governmental authority, exercised control over
AIBO only in connection with public services provided by AIBO, whereas in respect of
AIBO’s commercial dealings, which included the dealings with EDF, it acted as a
shareholder. (454)
In respect of Tarom, the respondent argued that it was ‘a commercial entity governed
entirely by private law and conduct[ed] commercial operations under the same
regulatory structure that applie[d] to all air carriers conducting operations in Romania’.
(455)
Without much analysis of Romanian law and simply citing the claimant’s Romanian law
expert, the tribunal found that, in light of their separate legal personality under
Romanian law, neither AIBO nor TAROM could be considered as a State organ. (456)
In Tulip v. Turkey the investor complained of the conduct of Emlak Konut Gayrimenkul
Yatirim Ortakligi A.S. (Emlak), a Turkish real estate investment trust controlled by TOKI,
Turkey’s Housing Development Organisation, which was a State organ responsible for
Turkey’s public housing and operating under the auspices of the Prime Ministry of Turkey.
The dispute concerned the execution, administration and termination of the Ispartakule
III project, a mixed-use residential and commercial real estate development project in
Istanbul awarded to a joint venture in which the claimant acquired a majority interest.
The claimant alleged that the respondent, acting through various alleged State actors
and/or entities operating under State control, interfered with the construction of
Ispartakule III in breach of the applicable BIT and ultimately wrongfully terminated the
project agreement and deprived the claimant of the entire value of their real estate
development projects throughout Turkey. (457)
The claimant contended that the acts of Emlak were attributable to TOKI and therefore to
the State of Turkey. (458) The claimant initially argued that Emlak was a State organ for
the purposes of ILC Article 4 because it was an arm of the Turkish government and it was
majority-owned by TOKI. It argued that the State ownership gave rise to the presumption
of statehood. (459) However, the claimant changed its argument in the course of the
proceedings, contending that TOKI was the relevant entity to consider for the purposes of
P 83 determining whether the project agreement was administered by a State organ within
47
the meaning of ILC Article 4. (460) In particular, the claimant argued that the decision to
terminate the contract was made by Emlak ‘under the control of TOKI for non-commercial
purposes and in the exercise of State power’. (461)
The respondent submitted that Emlak was, effectively, a private company subject to the
provisions of the Turkish Commercial Code, and, as a real investment trust, it was
regulated, as other commercial entities, by the Turkish Capital Markets Board. (462)
Contrary to public entities, it did not enjoy immunity against enforcement against its
assets, and, contrary to TOKI employees, Emlak’s employees were not civil servants. (463)
It also invoked the fact that Emlak has not been created by a specific Turkish law. (464)
Further, it argued that the fact that TOKI held the majority stake in Emlak did not
establish a rebuttable presumption of statehood, nor rendered it a State entity. (465)
The tribunal first assessed whether Emlak was a State organ under the laws of Turkey. It
noted that the structure of Emlak, as established by its Articles of Association, indicated
that Emlak was a private entity. The Articles of Association provided that (1) Emlak was an
open joint stock company, pursuing commercial activities under the Commercial Code
and Capital Markets legislation and (2) the Board members had to be independent and
meet the requirement of the Turkish Commercial Code. (466)
The tribunal concluded that, in light of its separate legal personality and private law
qualification, Emlak was not treated as a State organ under Turkish law and this ‘plain
legal position’ was not displaced by the fact that certain State entities, such as the
Ministry for Public Works, referred to it as a ‘public institution’. (467) The tribunal quoted
with approval the Turkish Supreme Court of Appeal, which stated:
Public Economic Enterprises, since they set up and operate commercial
undertakings, are merchants. The fact that their capital belongs to the state
and there is a particular way in which appointments are made to certain of
their managerial organs does not imbue these entities with public law
establishment capacity and these bodies are civil law judicial persons and the
provisions of private law apply to them. (468)
The tribunal further reasoned that there was no international law basis to disregard the
internal law position of Emlak: ‘there is no basis under international law to conclude that
ownership of a corporate entity by the State triggers the presumption of statehood. …
whilst state ownership may, in certain circumstances, be a factor relevant to the question
of attribution, it does not convert a separate corporate entity into an “organ” of the
State’. (469)
P 84
The tribunal concluded that Emlak was not a State organ because it was (1) an entity
separate from the State, (2) not part of the governmental structure, (3) subject to the
Commercial Code, the Capital Markets Law and other private law instruments and (4)
separate from rather than an emanation of the State. (470)
There is consistent jurisprudence that State ownership or control of shareholding does
not suffice to disregard the separate legal personality of an entity and hold that the
entity in question is a State organ. In Waste Management II v. Mexico the tribunal
considered, among others, the conduct of Banco Nacional de Obras y Servicios Publicos,
S.N.C. (Banobras), a development bank established by the federal government of Mexico
Banobras and majority-owned by the State. The tribunal held that ‘[t]he mere fact that a
separate entity is majority-owned or substantially controlled by the state does not make
it ipso facto an organ of the state.’ (471)
A survey of the investment arbitration jurisprudence demonstrates that the separate
legal personality of a State entity, whether by itself or in combination with other internal
law factors, is in most cases conclusive in determining whether a State entity is a State
organ. However, as noted above, tribunals are entitled to disregard the internal law
status of a State entity in the international law test of attribution when an overall
assessment of the entity’s relationship with the State leads to a different conclusion.
In MCI Power v. Ecuador the separate legal personality of Instituto Ecuatoriano de
Electrificación (INECEL) did not preclude a finding that INECEL was a State organ.
Relevant details concerning the internal law functions of INECEL were set out in the Duke
Energy v. Ecuador (472) award in another investment dispute involving INECEL. The
Government of Ecuador established INECEL as a State-owned entity under the Ministry of
Natural Resources and Energy, to carry out the functions of power generation,
transmission, and distribution. INECEL was the only entity authorized to produce and
provide electricity. It was authorised to purchase electricity from private power
generators. When the power sector was liberalised, the Parliament enacted a law to
liquidate INECEL.
The investment dispute in MCI Power arose from contracts signed by INECEL with the
investor’s subsidiary whose branch in Ecuador operated two electrical power generation
plants in Ecuador, which sold energy to INECEL.
The claimant argued that, despite of its separate legal personality, INECEL was a State
organ, directed and controlled by Ecuador through its government officials. It maintained
48
that the object and functions of INECEL included those reserved generally to State
regulatory bodies. The claimant also pointed out that, upon liquidating INECEL, the
Attorney General (Procurador General) became, by law, the State’s representative with
respect to all its rights and obligations. (473)
P 85
The respondent submitted that INECEL was ‘an autonomous entity that [was] legally
independent of the State’. (474) The respondent admitted that official representatives or
delegates constituted a majority of the INECEL board and that INECEL was empowered to
exercise certain public powers. Nevertheless, it argued that, ‘because it had a separate
legal personality, its own capital, and autonomous management, INECEL must not be
confused with the State’. (475)
The tribunal found that, ‘in light of its institutional structure and composition as well as
its functions’, (476) INECEL ‘should be considered, in accordance with international law,
as an organ of the Ecuadorian State’. (477)
The position of other entities with separate legal personality in Ecuador’s public sector in
the field of electricity was considered in Ulysseas, Inc. v. The Republic of Ecuador. (478)
The National Electricity Council (El Consejo Nacional de Electricidad or CONELEC)
concluded concession contracts with the claimant in relation to power generation
activities on two power barges that the claimant imported and installed in Ecuador.
CONELEC was a legal entity entrusted with regulating and controlling electric power
activity, issuing generally binding rules, imposing legal, regulatory and contractual
penalties for violations in the electric power matters, exercising the functions of granting
authority in the name of the State, taking decisions with respect to taking over,
termination, extension of concessions, licenses and permits. (479)
The prices of the spot power market were regulated by the National Energy Control
Center (El Centro Nacional de Control de Energía or CENACE). According to the law, CENACE
was also tasked to call upon the generators to dispatch electricity until demand was met,
in an ascending order of the variable cost declared by each generator. The Power Sector
Regime Law described CENACE as a ‘non-profit corporation subject to the civil code’,
which ‘perform[ed] tasks related to the exercise of the State’s regulatory power with
respect to the wholesale electricity market’. (480) The tribunal noted that CENACE’s
conduct had limited impact on the claimant’s activity, because the claimant did not
operate on the wholesale market. (481)
The Corporation for the Temporary Administration of Electric Power of Guayaquil
(Corporación para la Administración Temporal Eléctrica de Guayaquil or CATEG) was a
distribution company wholly under the control of CONELEC, which declined to conclude a
PPA on the terms offered by the claimant despite a minister’s indications that it would do
so. According to the establishing executive decree, CATEG was ‘a private non-profit
organization, which perform[ed] activities relating to the distribution and marketing of
electric power in the city of Guayaquil.’ (482)
P 86
Pétroleos del Ecuador (Petroecuador) was allowed to sell fuel to private generators on
credit, which could later be settled by way of sale of electricity to State-owned
transmission companies or end users. (483) According to its establishing statute,
Petroecuador was a State-owned company, ‘with legal personality and its own assets,
perform[ing] activities that are directly related to the exercise of the State powers in the
petroleum sector’. (484) Petrocomercial, was an affiliate of Petroecuador, ‘which
provided also for the creation of first-tier subsidiaries for marketing and transportation
activities in the petroleum sector’. (485)
The dispute concerned a temporary eviction of the claimant from one of its power barges
and the termination of the contract related to the same barge. The claimant argued that
CONELEC, CENACE, CATEG, Petroecuador and Petrocomercial were ‘agencies of the State,
this being understood as part of the organization or set of agencies that make up the
Public Administration and the State’. (486)
In respect of CONELEC, the claimant submitted that it was a State organ because (1) the
Ecuadorian Constitution described it as an entity ‘created by the Constitution or the Law
for exercising governmental authority in order to provide public services or to develop
activities assumed by the Government’, (2) it was an entity controlled by the State solely
to discharge the State’s electricity regulatory function and (3) it was forbidden to engage
in commercial activities. (487)
The claimant argued that CENACE was an ‘institution of the State’ under the Ecuadorian
Constitution and that it was specifically empowered to discharge the State’s functions
under the Power Sector Regime Law.
In respect of Petrocomercial and Petroecuador, the claimant argued that, under the
applicable BIT, State-owned entities were liable on the part of the respondent when such
entities exercised ‘any regulatory, administrative or other governmental authority that
Respondent has delegated to [them]’. (488) The claimant submitted that Petrocomercial
and Petroecuador acted as State instrumentalities and therefore their conduct was
attributable to the respondent, if not as State organs, then under ILC Article 5 due to the
49
exercise of governmental authority. (489)
The tribunal noted that the State entities invoked by the claimant enjoyed separate legal
personality, and had their own assets and resources to meet their liabilities. It then
found that their integration into the Ecuadorian public sector and the fact that they were
‘subject to a system of controls by the State in view of the public interests involved in
their activity’ did not make them organs of Ecuador. (490) It is notable that for the
Ulysseas tribunal the ‘system of controls by the State’ was insufficient to displace the
presumption of independence deriving from the separate legal personality of the State
entities in question.
P 87
The Ulysseas award forms part of the series of arbitral decisions (491) underlining that the
importance of a State entity to the State’s economy or public administration is not per se
a sufficient consideration for qualifying such entity as a State organ under international
law.
Nevertheless, as the tribunal’s decision in Ampal v. Egypt (492) illustrates, the importance
of a State entity to the national economy, when reflected in the internal laws and
corroborated with other factors, can weigh in favour of a finding that such entity is a State
organ.
Ampal v. Egypt involved, among others, the conduct of the Egyptian General Petroleum
Corporation (EGPC) and, its wholly owned subsidiary, the Egyptian Natural Gas Holding
Company (EGAS). The claimants were shareholders of East Mediterranean Gas Company
S.A.E. (EMG), a free-zone company created to purchase natural gas from Egypt and export
it to Israel through a pipeline crossing the North Sinai in Egypt. EMG entered into a long-
term upstream supply contract with the EGPC and EGAS. Following the Arab Spring, the
Egyptian pipeline system used to deliver gas to the EMG pipeline suffered a series of
sabotage attacks, which the claimants argued that the respondent failed to prevent and
remedy within a reasonable time. The claimants also argued that EGPC/EGAS did not
supply the contractual quantities of gas. Eventually, EGPC/EGAS terminated the gas
supply contract for alleged non-performance by EMG.
The claimants brought investment treaty claims arguing, among others, that the gas
supply failures of EGPC and EGAS were attributable to Egypt as a matter of international
law. (493) The claimants submitted that EGPC and EGAS were State organs under ILC
Article 4. (494)
In respect of EGPC, the claimants submitted that EGPC was a de jure State organ because
Egyptian law described it as a ‘public authority … undertak[ing] the management of a
utility rendering a benefit or public service’. (495) The claimants relied also upon minutes
of a meeting of the Board of Directors of EGPC confirming the termination of the gas
supply agreement. They contended that the minutes illustrated that the ministers
controlled EGPC’s Board and therefore EGPC, as the Board was its highest authority. The
Minister of Petroleum was the designated Chairman with plenary authority to approve,
amend or annul all Board decisions. (496)
The respondent submitted that EGPC and EGAS were not State organs, because they were
entities with separate legal personality under Egyptian law. The respondent argued that
an entity could not be considered a State organ simply by virtue of carrying out ‘some
public services’. (497)
P 88
The tribunal found that EGPC was a State organ based on the following Egyptian law
factors: (1) the status and function of EGPC, (2) the supervision and budget of EGPC and (3)
the management of EGPC and its supervision by the Minister of Petroleum. (498)
In respect of the Egyptian law status and function of EGPC, the tribunal noted that EGPC
was a ‘Public Authority endowed with an independent juristic personality, engaged in
developing and properly utilizing the petroleum wealth and in supplying the country’s
requirements of the various petroleum products’. (499) The description of EGPC’s function
alludes to the importance of EGPC for the country’s oil and gas sector. Indeed, the
tribunal recalled that EMG originally approached EGPC in light of the fact that the
Egyptian government maintained control of the country’s hydrocarbon resources. (500)
In respect of EGPC’s relationship with the State, the tribunal observed that, according to
Egyptian law, the Minister of Petroleum supervised EGPC and the State allocated funds to
it. The Chairman of the Board was appointed by decree of the President of Egypt and the
members were appointed by decree of the Prime Minister of Egypt on the
recommendation of the Minister of Petroleum. The tribunal further noted that, according
to Egyptian law, the resolutions of EGPC’s Board of Directors were forwarded to the
Minister of Petroleum for ratification, who was empowered to amend or cancel such
resolutions. Finally, the tribunal relied upon a presidential decree providing that:
[t]he Board of Directors of [EGPC] shall be composed under the chairmanship
of the Minister of Petroleum and with the membership of: the Minister of
Finance; the Minister of Electricity and Energy; the Minister of Investment; the
Minister of Trade and Industry; the Minister of State for Local Development;
50
the Head of the Cabinet Advisors’ Panel; the Chief Executive Officer of the
Egyptian General Petroleum Corporation; and three employees from the
Ministry of Petroleum and the entities affiliated thereto with experience in the
main activities of the Corporation. They shall be appointed by virtue of a
resolution of the Board of Directors upon a recommendation by the Minister of
Petroleum. (501)
The aforementioned internal law factors led the tribunal to conclude that, despite its
separate legal personality, EGPC was a corporate entity ‘within the overall structure of
the Ministry of Petroleum’. (502)
The tribunal reached a similar conclusion in respect of EGAS on the basis that (1) the
Minister of Petroleum chaired its general assembly and recommends the appointment of
all assembly and board members, (2) EGAS held funds as public property and distributed
its profits to the Ministry of Finance and (3) EGAS’ chairman was a secondee from EGPC.
(503)
P 89
The Ampal decision illustrates when the separate legal personality of a State entity
would not be considered conclusive for the international law test of attribution of
conduct of State organs to the State. The tribunal relied upon Egyptian law factors,
including governmental control of hydrocarbon resources, which evidenced a high degree
of integration in the overall structure of the State and thus overturned the presumption
conferred by the separate legal personality of EGPC and EGAS.
The Existence of Close Links
In Bayindir v. Pakistan (504) the tribunal considered whether the conduct of the National
Highway Authority of Pakistan (NHA) was attributable to the State as the conduct of a
State organ. According to its establishing law, the NHA was a public corporation
responsible for the planning, development, operation and maintenance of Pakistan’s
national highways and strategic roads. While controlled by the Government of Pakistan,
NHA had the right to sue and to be sued in its own name. (505)
The dispute arose from a contract concluded between the NHA and the claimant, acting
as contractor, in relation to the construction of a six-lane motorway and ancillary works
known as the Islamabad-Peshawar Motorway (M-1 motorway). Following the delays
incurred in the completion of the project, NHA served a notice of termination, called the
bank guarantees and evicted the claimant’s personnel from the project site.
The claimant commenced an investment treaty arbitration contending that ‘[the]
Respondent, acting at the highest levels of the Government of Pakistan, exercised its
sovereign prerogative to change government policy about the M-1 motorway’ on the basis
that ‘it could no longer afford a “Mercedes” motorway’. (506) The claimant submitted that
its expulsion, NHA’s failure to perform a number of actions under the contract, NHA’s
claim for approximately USD 1 billion in the Pakistani contract-based arbitration and
NHA’s actions taken in connection with the encashment of the bank guarantees were in
breach of Pakistan’s treaty obligations. (507) The claimant argued that NHA, acting as a
contracting party, merely implemented the decision taken by the Government of
Pakistan, including General Musharraf himself, in relation to the project and therefore the
impugned conduct was sovereign rather than commercial. (508)
The respondent submitted that, while there was some government involvement, the
contested decisions were taken ‘in the exercise of NHA’s contractual rights as opposed to
the exercise of sovereign prerogatives’. (509)
In relation to the internal law status of NHA, the claimant argued that the NHA was not
structurally or functionally distinct from the Government of Pakistan because (1) NHA’s
constituting statute placed the Prime Minister, Minister of Finance and Minister of
Communications in control of NHA, (2) the purposes and duties of NHA were clearly
P 90 national in scope; (3) NHA was described in the contracts as ‘National Highway Authority,
Government of Pakistan’ and (4) extensions of time were negotiated with, and recorded
by, the Government of Pakistan and it was the Pakistani Ministry of Communications
which explained on behalf of the Pakistan Government that it was to the benefit of the
Government and local contractors that Bayindir was removed from the project. (510)
The respondent argued that NHA had distinct legal personality, being described in the
establishing statute as a ‘body corporate having perpetual succession and a common
seal with power to acquire, hold and dispose of property, and may in its own name sue
and be sued’. (511)
The tribunal shared the respondent’s view that under the laws of Pakistan NHA could not
be conflated with the Government despite the links between the two State entities:
The fact that there may be links between NHA and some sections of the
Government of Pakistan does not mean that the two are not distinct. State
entities and agencies do not operate in an institutional or regulatory vacuum.
They normally have links with other authorities as well as with the government.
Because of its separate legal status, the Tribunal discards the possibility of
treating NHA as a State organ under [ILC] Article 4. (512)
51
The tribunal further noted that NHA, as a separate legal entity, acted as a party to the
contract. It appears that the claimant’s argument that NHA merely executed the decision
of the Government failed as the tribunal was not persuaded that the impugned acts
involved the Government.
The decision of the Bayindir tribunal illustrates that the mere existence of links between
a separate State entity and the Government is insufficient to find that the entity is acting
in truth as a State organ. Indeed, as illustrated by the tribunal’s analysis in Hamester v.
Ghana, (513) it is not the existence of the relationship with the State, which is typically a
given for any State entity, but the nature and extent or intensity of that relationship,
which determines if a State entity is integrated into the overall organisational structure
of the State.
Hamester v. Ghana implicated the conduct of the Ghana Cocoa Board (Cocobod).
According to its establishing law, the primary function of Cocobod was to purchase cocoa
beans from Ghanaian cocoa farmers and to market and export them. (514) The dispute
related to a cocoa beans processing and trading joint venture between a German investor
and Cocobod, and concerned both contract and treaty claims. The dispute arose from
pricing and other trade-related issues, which led the investor to seek to abandon its joint
venture with Cocobod.
P 91
The investor initially attempted to bring its claims against the Republic of Ghana,
represented by Cocobod, under the arbitration clause in the joint venture agreement
(JVA), which referred the parties’ dispute to ICSID arbitration. However, in its screening
process, ICSID declined to register the request for arbitration because Cocobod was not a
designated constituent subdivision or agency of Ghana under Article 25(1) of the ICSID
Convention. (515) While the act of designation is made for the purposes of jurisdiction
ratione personae under the ICSID Convention, which is undoubtedly a different matter
from the test of attribution, Contracting States designate only State entities with close
links to the State. Therefore, in the absence of any countervailing factors, the act of
designation can be viewed as an indicator of the nature of the designated entity’s
relationship with the State for the purposes of an attribution analysis.
Following its unsuccessful attempt to commence the arbitration under the JVA against the
Republic of Ghana, represented by Cocobod, the investor filed a claim against the
Republic of Ghana under a BIT. The claimant asserted that the treaty and contract
breaches were attributable to the Republic of Ghana through the conduct of Cocobod,
acting as its State organ. In support of its position on attribution, the claimant argued
that Cocobod, being ‘a monopolistic statutory public body with administrative
responsibility for controlling and regulating the cocoa industry in Ghana’ must be
completely assimilated to the Government of Ghana. (516) In particular, the claimant
relied on a provision of the statute establishing Cocobod, which described in effect the
relationship between the Minister of Trade and Cocobod in the following terms:
The Minister [responsible for Trade] may, after consultation with the directors
or the management give to the Board in writing directions of a general
character which are not inconsistent with this Act or with the contractual or
any other legal obligations of the Board relating to the performance of its
functions and the Board shall give effect to those directions. (517)
The respondent denied that Cocobod was a State organ, arguing instead that it was a
‘commercial trading corporation, although [with] certain monopoly rights and regulatory
powers’. (518) Relying on Jan de Nul v. Egypt, the respondent submitted that the internal
law position of Cocobod was ‘essentially identical to that of the SCA under Egyptian law’.
(519)
The tribunal noted that the establishing statute did not classify Cocobod as a State
organ, providing instead that it was a ‘corporate body,’ which could be ‘sued in its
corporate name’. It then recalled that the same statute provided that it was the Board’s
duty ‘to conduct its affairs on sound commercial lines and in such a manner as to ensure
P 92 a reasonable return on its capital’. (520) Finally, it stated that the establishing statute
authorised Cocobod, as a public entity, to hold assets and open bank accounts. (521)
Based on these internal law factors, the tribunal concluded that Cocobod could not be
considered a de jure organ. (522)
The existence of close links will not necessarily lead to a conclusion that the separate
entity is a State organ when there are countervailing factors reinforcing the separate
legal personality of the entity. In AMTO v. Ukraine the tribunal considered the conduct of
National Nuclear Power Generating Company ‘Energoatom’ (Energoatom), a separate
legal entity wholly owned by the respondent. The claimant investor, a Latvian company,
acquired shares in EYUM-10, a Ukrainian company supplying services to Zaporozhskaya
AES (ZAES), the largest nuclear power plant in Ukraine. ZAES operated as a separate
division of Energoatom. As the largest debtor of ZAES/Energoatom, EYUM-10 entered into
an agreement with Energoatom in relation to the payment of such debt.
In the investment arbitration, the claimant argued that ‘Energoatom pursued a campaign
of hostility and intimidation towards AMTO and continually refused to pay the
52
undisputed claims owed to EYUM-10.’ (523) It further submitted that the Government of
Ukraine has interfered with protective measures in the ongoing bankruptcy cases of
Energoatom. The Government of Ukraine issued an ad hoc Resolution characterising
Energoatom as a ‘highly hazardous enterprise’ and the respondent enacted a law
providing Energoatom with enhanced protection against bankruptcy and put Energoatom
on the list of energy companies to which the newly introduced special procedure for
payment of debts applied. (524)
The claimant argued that Energoatom ‘belong[ed] to the governmental structure of
Ukraine, through its participation in the highly centralised and totally state controlled
Wholesale Energy Market’. (525) It submitted that ‘Energoatom’s legal independence was
purely formal as even its commercial activities were controlled by the State, with prices,
retailers, and forms of payment established by law and ultimately fixed and controlled
by a state organ called the National Energy Regulatory Commission of Ukraine.’ (526)
The tribunal acknowledged that Energoatom had close links with the State, as
demonstrated by the provisions of its establishing law, which entrusted the appointment
and dismissal of its management to the Cabinet of Ministers of Ukraine or the Ministry of
Fuel and Energy. (527) However, based on the provisions of Energoatom’s charter and the
Ukrainian Civil Code regarding the obligations of State-owned entities, the tribunal gave
decisive weight to the separate legal personality of Energoatom. In respect of the latter,
the charter provided that Energoatom had no responsibility for the obligations of the
P 93 State, while the Civil Code provided that, unless otherwise provided by the law, the
State was not responsible for the obligations of juridical persons it created.
While it recognised that Energoatom was ‘a strategically significant state entity, in close
communication with the State’, the tribunal found that Energoatom was ‘a separate legal
entity and not an organ of the Ukraine state’. (528)
Identifying the Decisive Conduct
As mentioned above, (529) a given event must be sufficiently connected to conduct
attributable to the State under one of the rules of attribution. When multiple State
entities and bodies play a part in the factual matrix of the dispute, identifying the
decisive conduct may be essential for the attribution of that conduct to the State.
In Alpha Projektholding GmbH v. Ukraine the dispute involved Hotel Dnipro, a State-
owned hotel in Kiev, Ukraine, and the State Administration of Affairs (SAA), a
governmental body ‘subordinated to the President of Ukraine and tasked with servicing
the needs of the President, the Parliament, the Cabinet and other State bodies’. (530)
The dispute concerned a series of commercial arrangements involving the claimant,
Hotel Dnipro, and other parties regarding the reconstruction and renovation of several
floors of the Hotel Dnipro. The claimant alleged that the actions taken by the Hotel and
other actors effectively abrogated its contractual rights and that Ukraine was responsible
for those actions. The claimant relied primarily on two events, including the cessation of
payments under the contract, which it argued had occurred upon the order of the State.
The tribunal found that the State ‘primarily though not exclusively through the SAA in
possible coordination with the State Property Fund, instructed the Hotel to discontinue
payments to Alpha … and [was] responsible for the continuing failure of the Hotel to
meets its contractual obligations’. (531) Having found the State responsible for the
cessation of payment, Ukraine’s responsibility under international law became ‘greatly
simplified’ (532) in the tribunal’s view as SAA was a State organ.
While the contractual breach was committed by a State Enterprise, which was clearly not
a State organ, the conduct that caused Hotel Dnipro to breach the contract was
committed by a State organ. The conduct of the State organ was ultimately found to be
the decisive conduct for State responsibility. As the tribunal put it, ‘[i]t was the Hotel, not
the State, that entered into the contracts, and the Hotel, not the State, that breached the
contracts. However, it was Ukraine’s conduct that interfered with the contracts and
caused the Hotel to breach the contracts outside proper channels, and it is that conduct
that is unquestionably State conduct and that implicates Ukraine’s international
responsibility.’ (533)
P 94
Concluding Remarks
A survey of the investment arbitration jurisprudence reveals that separate legal
personality of a public sector entity establishes a strong presumption that the entity is
not a State organ as a matter of international law. Tribunals applied different internal
law factors to reinforce or overturn the presumption conferred by separate legal
personality. In this regard, the autonomous management of the entity, whether on private
law principles or otherwise, and the express legal separation of the entities’ assets and
liabilities or obligations from those of the State were applied in practice to corroborate
the separate legal status of a State entity as a matter of international law. To overturn
the same presumption, tribunals have relied on internal law provisions concerning the
function or role performed by the entity, including the character or the objectives of the
functions performed, or relating to the entity’s institutional dependence on the State.
53
The jurisprudence also illustrates that none of the internal law factors, including separate
legal personality, should be considered in isolation in practice. An approach reduced to
a single criterion can be inconclusive also because, as part of their overall assessment of
the internal law status of an entity, tribunals have placed different weight on the same
internal law factor, such as the appointment or dismissal of the management. (534) It is
also clear from the jurisprudence that State ownership or the existence of other
corporate links to the State is insufficient, on its own, to lead to a State organ
qualification as a matter of international law. Equally inapposite is the strategic
importance of the State entity for the national economy without the translation of that
economic significance into legal provisions concerning the structural or functional design
of that entity.
Most tribunals correctly apply ILC Article 4 by disregarding the commercial or
administrative nature of the relevant contract or act and focusing instead on the nature
of the entity in question.
The multitude and diversity of public sector entities and related internal law regulations
and the broad test of ILC Article 4 mean that there will be inevitably a myriad of paths to
take in determining whether a particular public sector entity is de jure part of a State’s
organic structure.
[c] Central Banks
Due to their independence from the other institutions of the State, central banks are
typically established as separate legal entities entrusted with executive functions such
as the implementation of a State’s monetary authority. This sui generis role of central
banks has led to some debate in the jurisprudence as to whether central banks are State
organs under ILC Article 4 or State entities exercising elements of governmental authority
under ILC Article 5.
P 95
In Paushok v. Mongolia the tribunal cautioned against turning directly to ILC Article 5
merely on the basis of the existence of separate legal personality and the exercise of
governmental powers: ‘[i]f this were the case, one would be left with a very narrow
definition of organs of the State since most of the executive and judiciary functions of the
State are fulfilled by legal entities established by the State and adopting and/or
implementing public policy.’ (535)
Indeed, the ILC Articles themselves establish an incremental attribution process, which
starts with the broadest test: the attribution of the conduct of State organs under ILC
Article 4. Moving on to an ILC Article 5 analysis is expressly warranted solely on the
premise that the examined entity ‘is not an organ of the State under article 4’. Therefore,
tribunals are to examine first if a central bank is a State organ under Article 4.
As stressed also by the Paushok tribunal, (536) the practical significance of the specific
legal ground of attribution becomes apparent when the examined conduct involves
commercial activities. Although central banks turned towards a predominantly public
policy focus in the early twentieth century, (537) occasionally they may enter into
commercial transactions, if the law permits, (538) in which case the distinction between
ILC Articles 4 and 5 becomes of practical significance.
In Paushok v. Mongolia the role of the National Bank of Mongolia (MongolBank) came
under scrutiny due to its so-called Safe Custody/Sale and Purchase of Precious Metal
Agreement (SCSA) with a gold mining company owned by the claimants. MongolBank
refined and exported the gold deposited by the claimants’ subsidiary, which they argued
was contrary to the terms of the SCSA (539) and violated the terms of the applicable BIT.
(540)
The tribunal considered whether the disputed actions of MongolBank in the
implementation of the SCSA were actions attributable to Mongolia. In reviewing the
internal law status of MongolBank, (541) the tribunal noted that, pursuant to its
establishing law, MongolBank was a legal entity established by the State, described as
‘the competent organization authorized to implement State monetary policy’. Its main
objective was ‘[to] promote balanced and sustained development of the national
economy, through maintaining the stability of money, financial markets and the banking
system.’ The Parliament (State Great Khural) appointed the president of MongolBank, who
then reported to the State Great Khural. However, by law, the State Great Khural could
P 96 not interfere with the activities relating to the implementation of State monetary
policy by MongolBank. Further, the establishing law provided specifically that
MongolBank would be independent from the Government.
The tribunal noted that it ‘has long debated whether MongolBank is an organ of the State
of Mongolia’ (542) and then discussed two alternative views: one grounded in ILC Article 4
and one dismissing the notion of State organ, but grounding attribution in ILC Article 5.
Ultimately, the tribunal found that it did not need to decide the question whether
MongolBank was a State organ, because ‘even if it were merely an entity exercising
governmental authority, at least some of the disputed actions in connection with [the
gold mine company’s] gold were in any event actions de jure imperii’. (543)
54
Nevertheless, the tribunal considered the interpretation that MongolBank was a State
organ. It noted that:
the fact that the Mongolian Parliament has created it as an institution
independent of the Government does not per se make it lose its status as an
organ of the State. In fact, it fulfills a major State function and the list of its
responsibilities clearly demonstrates that it fulfills a role that only a State can
fulfill: exclusive right to issue currency, formulation and implementation of
monetary policy, acting as the Government’s financial intermediary;
supervising activities of other banks; holding and managing the State’s
reserves of foreign currencies. […] Like other central banks in the world,
MongolBank assumes part of the executive responsibility of the State; and, if
one were to argue for a more limited definition of the executive power of the
State, Mongolbank would still qualify as an organ of the State under the words
‘any other functions’ mentioned in Article 4 of the ILC Articles. (544)
The tribunal reviewed some of the investment arbitration decisions holding that a
separate State entity does not qualify as a State organ. It recalled the principle that the
separate legal personality of an institution does not automatically mean that that
institution is not an organ of the State and stressed that ‘in order to reach such a
conclusion, a tribunal has to engage in a broader analysis which includes the functions
assigned to that entity’. (545) The tribunal then sought to distinguish the situation of
MongolBank from the entities in the invoked cases stating that ‘[t]here is a huge
difference to be found between public authorities established to operate and maintain a
navigational canal or to construct and maintain highways and a central bank charged
with the issuance of the currency and running the State’s monetary policy.’ (546) The
tribunal did not elaborate as to what the basis of such difference would be. The extent of
the State’s involvement in such sectors appears to be the key differentiating factor. In
particular, a State has monopoly over its currency and the related monetary policies
while a State is typically not a monopolistic actor in other sectors or activities, such as
the management of its transport infrastructure.
P 97
The conduct of the Central Bank of Montenegro was considered in MNSS B.V. and Recupero
Credito Acciaio N.V. v. Montenegro (547) in the context of its control and supervision of
Prva Banka, a private bank, whose conduct would have been thus attributable to the
respondent if the bank acted on the instruction, or under the direction or control of, the
State, as provided in ILC Article 8. The Commentary on the ILC Articles makes it clear that
‘under article 8 conduct which is authorized by the State, so as to be attributable to it,
must have been authorized by an organ of the State, either directly or indirectly’. (548)
Accordingly, an ILC Article 8 assessment entails the involvement of a State organ in the
impugned conduct. By considering the conduct of Prva Banka under ILC Article 8, the
tribunal implicitly recognised that the Central Bank was a State organ under ILC Article 4.
Specifically, the tribunal found that ‘although Prva Banka was under the Central Bank’s
supervision, it was not under the Central Bank’s control for the purposes of [ILC Article 8],
other than for a short period during which Prva Banka made transfers to the Claimants’.
(549)
In Invesmart v. The Czech Republic (550) the tribunal considered the alleged
representations made by the Czech National Bank (CNB) to the investor in relation to the
provision of State aid to Union Banka in the context of the regulatory approval of the
acquisition of a controlling interest in that bank. The CNB initially refused the application
on the basis that the investor did not provide evidence regarding the provenance of its
funds that it intended to use for the acquisition. A spokeswoman for CNB made public
statements about the application, which the investor contended precipitated a run on
the target bank. (551)
The tribunal noted that the conduct of CNB was attributable to the Czech Republic
without indicating the legal basis of attribution: ‘[t]he statements in question, having
been made publicly by the CNB spokeswoman, [were] imputable to the CNB; the conduct
of a State entity such as the CNB being attributable to the Czech Republic.’ (552)
The legal status of the Estonia’s central bank came under scrutiny in Genin v. Estonia. (553)
The Bank of Estonia cancelled an operating license held by a financial institution
incorporated in Estonia in which the claimants were shareholders. Article II(2)(b) of the
applicable US-Estonia BIT contained the following lex specialis provision in respect of the
conduct of State Enterprises:
Each Party shall ensure that any state enterprise that it maintains or
regulatory, administrative or other governmental authority that the Party has
delegated to it, such as the power to expropriate, grant licenses.
P 98
The tribunal found that Central Bank of Estonia was an agency of a Contracting State and
thus falling under the scope of Article II(2)(b) of the BIT. As noted by Sasson, (554) this
55
conclusion grounded in lex specialis does not appear to differ from the situation covered
by ILC Article 5. Genin v. Estonia was the first investment treaty case dealing with the
conduct of a central bank. As noted above, the subsequent cases discussed, implied or
simply avoided the issue of the attribution of the conduct of the Central Bank acting as a
State organ.
As confirmed also by the aforementioned arbitral decisions, central banks may form part
of the organic structure of the State and as such constitute State organs for the purposes
of the attribution of their conduct to the State under international law. Alternatively,
central banks may be deemed to exercise elements of governmental authority that are
normally entrusted to State organs, in which case they would fall within the scope of ILC
Article 5. In this regard, the Special Rapporteur to the ILC noted in the discussions
concerning the draft ILC Articles:
There could not be a general rule for central banks. Some such banks enjoyed
so much independence that they would fall within the scope of article 7,
paragraph 2 [the current ILC Article 5], while others were so closely connected
to and controlled by the State that they would come under article 5 [the
current ILC Article 4]. But it must be made clear that the fact that a State
declared that its central bank was independent, when it was not, could not be
decisive for the purposes of article 5. (555)
Petrochilos posits that the independence of financial services regulators should not
disqualify such bodes from organ status under international law. He submits that
‘[i]ndependence is part of the institutional characteristics of those entities, but it is not
given in order for those entities to pursue purposes separate from those of government.’
(556) In such cases, independence from an executive or any other branch of the State is
part of the institutional fabric of a State body and is conferred upon it in order to ensure
that it serves its public mission without any political interference. Therefore, there seems
to be no reason to disentangle such independent body from the State apparatus based
alone on its independent status.
In any event, whether central banks are State organs under ILC Article 4 or State
instrumentalities under ILC Article 5, their core function, akin to that of privatisation
agencies, is inherently sovereign. The distinction between the bases of attribution
appears to be of little practical significance in this instance, as central banks do not
typically engage in commercial conduct, which would fall outside the scope of ILC Article
5 but would be covered by ILC Article 4. (557)
P 99
[d] The Armed Forces and Police

It is axiomatic that, regardless of their internal law status, the armed forces (558) and the
police are State organs. The Commentary on ILC Article 4 addresses expressly only the
conduct of the police stating that in some States ‘the police have a special status,
independent of the executive; this cannot mean that for international law purposes they
are not organs of the State’. (559)
Due to their core protective and security function, the conduct of the armed forces
and/or the police is typically examined in the context of an allegation that the State
failed to protect the investment or the investor against the harmful acts of non-State
actors. Hence, in effect, the attribution of the conduct of armed forces and police is the
attribution of an omission.
The first modern investment treaty arbitration, AAPL v. Sri Lanka (560) concerned a
shrimp farm operated by a joint venture, including the claimant, which was destroyed
during a military operation conducted by the security forces of Sri Lanka against
installations reported to be used by local insurgents known as the Tamil Tigers. In the
arbitration, Sri Lanka argued that ‘the destruction was not attributable to the
governmental security forces but caused by the rebels’. (561)
The tribunal distinguished between situations (1) where the destruction of the property
was unnecessarily caused by the governmental security forces acting out of combat,
which would have amounted to wrongful action directly attributable to State organs and
compensable under Article 4(2) of the BIT (562) and (2) where the destruction was not
attributable to the governmental security forces, which excluded the application of
Article 4(2) of the BIT, but could still have triggered other international law standards.
(563)
The tribunal found that there was no convincing evidence that the firing causing the
property destruction came from the governmental troops. (564) Therefore, it considered
whether the respondent was responsible pursuant to other international law standards.
In this regard, it recalled that, under international law ‘[a] State on whose territory an
P 100 insurrection occurs is not responsible for loss or damage sustained by foreign investors
unless it can be shown that the Government of that state failed to provide the standard of
protection required, either by treaty, or under general customary law, as the case may
be’. (565) It noted that the State’s international responsibility is triggered ‘regardless of
whether the damages occurred during an insurgents’ offensive act or resulting from
56
governmental counter-insurgency activities. (566)
Applying the BIT standard of full protection and security to the evidentiary record, the
tribunal found that the respondent breached its due diligence obligation by failing to
take measures that could have prevented the eventual occurrence of killings and
property destructions. (567) In particular, the tribunal noted that Sri Lanka failed to take
precautionary measures, such as the removal of employees from the farm, before
launching its offensive on the local rebels. (568)
As another case, AMCO v. Indonesia, (569) illustrates, the armed forces and the police, as
State organs, may engage the State’s responsibility also due to their active participation
in internationally wrongful acts. In the arbitration, AMCO complained, among others, of
the forced takeover by PT Wisma, with the assistance of the army and the police, of an
Indonesian company operating, under the guidance of the Indonesian government, a
hotel pursuant to a long-term Lease and Management Agreement. The first tribunal found
that the acts of the army and the police were illegal and led to the claimant’s loss of its
right to operate the hotel. (570)
Another case involving a physical seizure of hotels was Wena v. Egypt. (571) In that case,
the tribunal agreed with the respondent that the claimant did not demonstrate that the
police physically participated in the seizure of the hotels. Nevertheless, the tribunal
found Egypt liable for ‘failing to prevent or immediately reverse [the Egyptian Hotels
Company]’s physical acts’ in violation of the applicable BIT’s full protection and security
standard’. (572)
The host State’s failure to protect the investment from damage caused by third parties in
breach of the full protection and security standard under the applicable BIT was
addressed also in Ampal v. Egypt. The claimants claimed that Egypt failed to protect the
gas pipeline from sabotage attacks in the North Sinai. The tribunal noted that this was ‘a
claim of direct responsibility on the part of the Respondent State’. (573) It then added
that, since the relevant full protection and security standard concerned an obligation of
diligence, ‘the operation of the standard does not depend upon whether the acts that
P 101 give rise to the damage to the Claimants’ investment are committed by agents of State
(which are thus directly attributable to the State) or by third parties. Rather the focus is
on the acts or omissions of the State in addressing the unrest that gives rise to the
damage’. (574)
The tribunal then found that the State security forces in the Northern Sinai failed to take
any steps to stop saboteurs from damaging the lifeline of the claimants’ investment. This
omission was evidenced by various EGPC/EGAS technical reports, including one prepared
following a first series of attacks. The issue of attribution is implicit in the finding of
liability as Egypt was found responsible for the failure of its security forces to prevent or
react to the attacks.
Contrary to the Ampal tribunal’s finding that the failure to protect an investment engages
the direct responsibility of the State, an earlier award in von Pezold v. Zimbabwe (575)
held that the failure to prevent a wrongful act is a form of indirect liability for the acts of
others. In von Pezold v. Zimbabwe, the claimants claimed that the host State was liable
under ILC Article 4, among others, for the conduct of its defence forces, the Central
Intelligence Organisation and the police. (576) The claimant claimed that their lands and
other properties were expropriated, among others, with the involvement or support of
these organs. The respondent did not dispute that these entities were State organs and
the tribunal acknowledged that they were indeed State organs. (577)
The tribunal found that police inaction in the face of the private invasions of the
claimant’s properties was attributable to the State under ILC Article 4 and was in breach
of the full protection and security standard. (578)
As noted above, (579) the State’s liability in these situations is a direct liability, based on
its own omission to protect the investment in violation of a positive international law
obligation under an applicable treaty or customary international law. As such, in these
circumstances, the attribution of conduct concerns State organs such as police that had a
positive legal duty to protect against physical harm. The existence of the police’s duty to
protect private property against physical harm by non-State or other actors is generally
accepted. As the tribunal noted in MNSS v. Montenegro, ‘[i]t is surprising that the police
would not ensure the physical integrity of buildings and persons irrespective of their
location or ownership.’ (580)
The responsibility of the State for the conduct of the police as an organ of the State was
considered also in Hamester v. Ghana. The claimant complained that the respondent
launched a police investigation against the managing director of the joint ventures as
part of a general scheme to expropriate the claimant’s investment. The tribunal noted
that the police force was ‘clearly a State organ and the acts performed during a police
investigation are therefore attributable to the State’. (581)
P 102
As the surveyed jurisprudence illustrates, the attribution of internationally wrongful
conduct to the armed forces or the police does not present any particular difficulties, the
discussions being centred instead on the compliance of these security forces with their
57
duty to protect.
[3] The Judiciary
It is generally accepted that the act of a State court is attributable, under international
law, to the State. However, the attribution of the conduct of other participants in the
judicial process, such as the prosecution, court bailiffs and other auxiliary personnel is
less straightforward. This section examines which actors in the judicial process engage
the State’s international law responsibility.
[a] Courts
Investment arbitration tribunals often consider the conduct of the host State’s judiciary
in light of the customary international law concept of denial of justice, which is expressed
or generally deemed to form part of the fair and equitable treatment standard found in
BITs. (582) As a denial of justice claim implies the failure of the host country’s national
judicial system as a whole, (583) these claims rarely succeed in practice. While the
threshold for denial of justice is high and requires a detailed examination of the judicial
process, including an examination of whether local remedies have been exhausted, the
attribution test for this predominantly procedural standard is uncontroversial: a national
court is part of a State’s organic structure and, as such, is a State organ. (584) This is the
case irrespective of the jurisdiction of the internal court and the nature of the
proceedings.
Equally uncontroversial is the attribution of the conduct of the court to the State in cases
involving a judicial expropriation. As the tribunal in Arif v. Moldova observed, ‘as a matter
of principle, in accordance with [ILC Article 4], court decisions can engage a State’s
responsibility, including for unlawful expropriation, without there being any requirement
to exhaust local remedies (unless claims for denial of justice have been made)’. (585)
The independence of the court does not affect its characterisation as a State organ. As
P 103 Jiménez de Aréchaga, a former ICJ President, put it: ‘[a]lthough independent of the
Government, the judiciary is not independent of the State: the judgment given by a
judicial authority emanates from an organ of the State in just the same way as a law
promulgated by the legislature or a decision taken by the executive.’ (586)
National courts often review the conduct of an administrative body under domestic law
when seized by an investor or its subsidiary seeking to exercise its local remedies against
a contested act of that State body. When the alleged administrative misconduct is
validated by the national courts, the investor either may demonstrate that the local
court decisions have no bearing on its international law claims or may otherwise seek to
challenge the conduct of the judiciary under the concept of denial of justice. If the
contested act is subject to internal law and local remedies were available, the investor
may be denied a full an international law review if it does not challenge the conduct of
the local judiciary before an investment arbitration tribunal. While the mere compliance
of the contested act with internal laws, does not, in principle, relieve the State’s
international law responsibility for the conduct of its administrative body, international
tribunals have repeatedly stated that they do not sit as tribunals of appellate
jurisdiction. (587)
In Azinian v. Mexico (588) the tribunal considered claims involving the contractual
conduct of the City of Naucalpan. The dispute arose from the allegedly wrongful
termination by the City of Naucalpan of a concession contract for commercial and
industrial waste collection, which had been awarded to a company owned by the
claimants. The municipality relied on a host of alleged irregularities in the conclusion
and performance of the contract, and the local courts confirmed a number of those
irregularities. The tribunal noted that, in light of the local judiciary’s decisions, the
conduct of the City of Naucalpan could be examined only through the prism of a denial of
justice claim:
A governmental authority surely cannot be faulted for acting in a manner
validated by its courts unless the courts themselves are disavowed at the
international level. As the Mexican courts found that the [City]’s decision to
nullify the Concession Contract was consistent with the Mexican law governing
the validity of public service concessions, the question is whether the Mexican
court decisions themselves breached Mexico’s obligations under [NAFTA]. (589)
The tribunal explained that while ‘an international tribunal called upon to rule on a
Government’s compliance with an international treaty is not paralysed by the fact that
P 104 the national courts have approved the relevant conduct of public officials,’ (590) such
an action in the given circumstances can only succeed if the investor seeks to hold the
State responsible for the conduct of its judiciary.
When a State judicial body places one of its judicial bodies at the disposal of another
State, in the absence of a lex specialis, the attribution of the conduct of that body is
governed by the special rule of attribution set out in ILC Article 6. (591) An example of
such a judicial body is the Judicial Committee of the Privy Council, which acts as the final
Court of Appeal for a number of independent States within the Commonwealth. Pursuant
to the attribution rule in ILC Article 6, the decisions of the Privy Council on appeal from
58
an independent Commonwealth State are attributable to that State and not to the
United Kingdom (UK). (592)
[b] Prosecution
It is not uncommon for investors to complain of the conduct of criminal investigation
bodies. For example, in Rompetrol v. Romania the claimant complained that the criminal
investigations of the National Anti-Corruption Office of Romania (PNA) and the General
Prosecutor’s Office (GPO) in relation to the privatisation of the Petromidia refinery and
Rompetrol Rafinare S.A. were oppressive and in breach of the treatment to which the
claimant was entitled under the applicable BIT and the ECT. (593)
The respondent argued that the claims were in fact denial of justice claims and therefore
subject to the requirement to exhaust local remedies. (594) The tribunal noted that it did
not see valid grounds for distinguishing between the courts and the prosecutors under
international law:
on the basis that the courts enjoy judicial independence whereas prosecutors
are in a more direct sense the agents of the executive power, since (on the one
hand) international law makes no distinction between executive, legislative or
judicial organs for the purpose of attributing State responsibility, and (on the
other hand) it is common ground … that the Romanian prosecutors are
required to carry out their functions in a manner that preserves their
independence from executive or political interference. (595)
The respondent did not contest the attributability of the conduct of the prosecution to
the State. In fact, its denial of justice argument was premised on the argument that
prosecutors should be equated with the courts for the purposes of the admissibility of
international law claims. The tribunal expressly acknowledged that the prosecutorial
authorities, PNA and GPO, were State organs. (596)
P 105
[c] Enforcement Agents

The status of enforcement agents differs around the world. In some states they have a
public or a private status and in others a mixed status, meaning that public and private
agents coexist. In most European countries, in civil cases, enforcement agents have a
public status. (597)
Where the enforcement agents have a public status, as a matter of principle, investors
should be able to attribute the acts or omissions of enforcement agents to the State as
State organs exercising a judicial enforcement function. There are just a few known
investment arbitration cases involving the conduct of court bailiffs in the process of the
enforcement of court decisions in which bailiffs were effectively treated as State organs.
In Rumeli Telekom v. Kazakhstan, (598) in a dispute arising from the eviction of the
claimants from their mobile telecommunications joint venture in Kazakhstan, the
claimants complained of the conduct of court bailiffs who enforced two injunctions,
including an ex parte injunction, granted by the local courts. In the enforcement of the
injunctions, the court bailiffs seized the premises of the joint venture without notice to
the claimants and evicted its executive management and the claimants’ representatives.
The claimants argued that the court bailiffs were ‘State officials, a real organ of the
State’. (599) However, in the end the claimants did not advance claims based on the
conduct of the court bailiffs and, therefore, the tribunal did not address the attribution of
their conduct to the State.
In OAO Tatneft v. Ukraine (600) the claimant investor complained, among others, of the
actions of a bailiff employed by the State Executive Office within the Ministry of Justice.
In particular, the claimant alleged that the Ukrtatnafta refinery in which it had an
interest was taken over forcibly by a corporate raider with the assistance of Ukrainian
government officials, including the bailiff. (601) The claimant further argued that the
bailiff enforced in an unlawful manner the court decisions concerning the reinstatement
of the Chairman of Ukrtatnafta’s Management Board. (602) The respondent denied the
claimant’s allegations but did not appear to have taken an issue with the attribution of
the bailiff’s conduct to the State. (603) The tribunal did not question the attribution of
the bailiff’s conduct either. It simply noted that ‘the role of the bailiff was not as simple
as providing for and verifying the enforcement in question’. (604)
P 106
[d] Other Persons or Entities Involved in a Judicial Process

Investment arbitration tribunals considered the role of other court-appointed and/or
court-supervised professionals in bankruptcy, liquidation, administration or other similar
processes supervised by the judiciary.
Bankruptcy Trustees
In Plama v. Bulgaria (605) the dispute raised attribution issues around the conduct of
bankruptcy trustees (syndics) appointed to manage Nova Plama AD, a Bulgarian company
59
owning an oil refinery, while it was in bankruptcy. The claimant argued that the syndics
failed to fulfil their obligations and took unlawful actions, such as the improper
acceptance of inexistent debts and the misappropriation of Nova Plama’s funds, which,
in the claimant’s view, amounted to violations of the respondent’s obligations under the
ECT. (606) In addition, the claimant complained that the Bulgarian Government and the
bankruptcy courts failed properly to control the syndics in violation of the respondent’s
obligations under the ECT. (607)
The respondent contended that, under Bulgarian law, a syndic is not a State organ and
does not perform governmental functions; therefore, his or her actions are not
attributable to the State. (608) It argued that, although a syndic is appointed by a court
upon nomination by the creditors, it does not perform governmental functions or operate
under the direction or control of the State and therefore does not act as an agent of the
State or of the court. (609)
The tribunal noted that ‘the crucial questions … are whether the State is legally
responsible for the actions of syndics, whether syndics are instruments of the State and
perform State functions and whether the Bulgarian courts failed to control or supervise
the syndics in a way which gives rise to State responsibility’. (610) In respect of the role of
the syndics, the tribunal did not include in its reasoning an analysis of attribution under
ILC Article 4. Instead, it cited ILC Article 8 and concluded that syndics in bankruptcy
proceedings are not instruments or organs of the State for whose acts the State is
responsible. (611) The tribunal also noted that, as indicated by the claimant’s Bulgarian
law expert, the Bulgarian Commercial Law defined the syndic as an ‘organ of the estate of
insolvency’. (612) The tribunal noted that its conclusion that the syndic was not a State
organ ‘accord[ed] with the experience of the members of the Tribunal in other civil law
countries’. (613)
P 107
As for the alleged failure of the Bulgarian courts to supervise the syndics, the tribunal
acknowledged that the courts, as organs of the State, had a role in supervising the work of
the syndics, but it agreed with the respondent’s Bulgarian law expert that such
supervisory role was ‘relatively limited’. (614) It noted that the claimant and/or Nova
Plama exercised their right to complain to the Bulgarian court of actions of the syndics
with which they disagreed, but there was ‘no evidence that such access to the courts was
in any way obstructed or that the courts decided the issues presented to them in
anything other than a fair way’. (615)
The next investment treaty tribunal to consider the attribution of the conduct of
bankruptcy trustees was the tribunal in Frontier Petroleum Services v. The Czech Republic.
(616) The dispute concerned, among others, the bankruptcy proceedings of several
companies: Moravan-Aeroplanes a.s. (MA), a Czech joint venture to manufacture aircraft in
which the claimant had invested; its parent company Moravan; Letecké Závody a.s. (LZ), a
company formed for the purpose of the joint venture project; and LET a.s., a State-owned
Czech aircraft manufacturing company, whose assets MA, financed by the claimant, was to
acquire and transfer to LZ. (617) The claimant argued that its investment in the Czech
Republic was mistreated as a result of ‘malfeasance by Czech bankruptcy trustees’. (618)
In particular, the claimant challenged the bankruptcy trustee’s refusal to admit as a class
one receivable a claim arising from an arbitral award made in Stockholm against the
bankruptcy estate. Further, the claimants submitted that the bankruptcy judges for MA
and LZ ‘jointly partook in a fundamentally flawed decision-making process that both
deprived the Investor of any chance of rescuing LZ and the LET Assets and its right to
benefit from its position as a secured creditor in both bankruptcies’. (619)
In respect of the attribution of the conduct of the bankruptcy trustees to the State, the
claimant argued that the bankruptcy trustees (1) ‘possessed the delegated legislative
authority necessary to act as “de facto gatekeepers for Respondent’s bankruptcy regime”
in that they make initial decisions about whether a creditor’s claim is valid on its face or
should be excluded’ (620) and (2) were controlled by the bankruptcy court, a judicial
organ of the Czech State. (621) These tests match the situations envisaged under ILC
Article 5 and ILC Article 8.
The respondent submitted that, under Czech law, the Czech Republic was not liable for
P 108 acts of the bankruptcy trustees. (622) It asserted that, under the Bankruptcy Act, (1) the
bankruptcy trustee was an independent procedural entity and not a court proxy, (2) once
appointed by the court, the bankruptcy trustee was obliged to fulfil its obligations
autonomously, with professional care and under personal liability for damage caused by
its acts, (3) the remuneration and expenses of the bankruptcy trustee were borne by the
creditors as they were paid out from the proceeds of the sale of the bankruptcy assets
and (4) the bankruptcy trustee did not possess the authority to decide on the existence
or priority of a claim in bankruptcy. (623)
The respondent also argued that the Bankruptcy Law prohibited the recognition of
security interests over the debtor’s property after the commencement of bankruptcy
proceedings and the bankruptcy courts were simply giving effect to such mandatory law
provisions as Czech public policy by declining to admit the claimant’s receivables
against the bankruptcy estate based on the foreign arbitral award. (624)
60
The tribunal found that the refusal of the Czech courts to admit the arbitral award in the
bankruptcy was consistent with Czech law. (625) Further, the tribunal considered that the
losses claimed arose primarily from claimant’s conduct from the outset of its dealings
with MA, when the claimant was on notice concerning the bankruptcy of the parent of MA
and therefore could have been expected to have taken measures to protect its
investment. (626) In light of its findings concerning the claimant’s conduct and Czech
courts’ actions, the tribunal did not consider it necessary to determine whether the
actions of the bankruptcy trustees were attributable to the State. (627)
The conduct of the bankruptcy proceedings was at issue also in Oostergetel v. Slovak
Republic. (628) The claimants argued that there were irregularities in the judiciary’s
conduct of the bankruptcy of the company in which they jointly held a majority stake.
(629) They also argued that the State was responsible for the actions of the provisional
trustee and bankruptcy trustee appointed by the court, who they said abused their role
and favoured the interests of one of the bankruptcy petitioners. (630)
The respondent denied that the actions of the provisional trustee or bankruptcy trustee
are attributable to the State as a State organ, ‘while he is part of a business company
who does not exercise State authority’. (631)
Recalling Plama v. Bulgaria, the tribunal noted that it was satisfied that, under Slovak
law, provisional and bankruptcy trustees were not State organs for whose acts the State
was responsible according to ILC Article 4. (632)
P 109
The alleged irregularities in the bankruptcy proceedings were at issue also in MNSS v.
Montenegro. The respondent denied that the acts of the bankruptcy administrator were
attributable to the State. (633)
The tribunal noted that ‘[u]sually a bankruptcy administrator is a representative of the
debtor and not of the State’ and that this was the position in Montenegrin law too (634)
and under most European civil law systems. (635) The tribunal’s reference to most
European civil law systems may have originated from the respondent’s pleading in the
Yukos case. (636) In that case, the tribunal simply stated that the actions of the
bankruptcy administrator were not attributable to the State. (637)
In Dan Cake v. Hungary (638) the claimant complained of ‘shocking omissions and
decisions’ by the bankruptcy court and the court-appointed liquidator that led to the
eventual liquidation of its subsidiary, Danesita, a biscuit and cookies supplier. The
claimant argued that the decision of the bankruptcy court not to convene a composition
hearing to enable the creditors of the insolvent company to vote on the issue of the
restructuring of the company and the consequential sale in liquidation were contrary to
Hungary’s obligations under the BIT with Portugal. Consequently, the tribunal considered
whether the actions of the bankruptcy court and the liquidator were attributable to
Hungary. The claimant argued that the liquidator’s conduct was attributable to the State
under ILC Article 5, because the liquidator was empowered by the law of the State to
exercise elements of governmental authority. (639) The respondent submitted that the
liquidator was a private actor. (640)
The tribunal found that the bankruptcy court’s decision was in violation of the applicable
BIT and was attributable to Hungary as the court was indisputably an organ of the State.
(641)
In respect of the liquidator’s sale of the debtor’s assets, the tribunal noted that the
liquidator’s act ‘is not an act which any private person, even representing creditors,
could accomplish; it rests on a power specifically conferred by the law to the liquidator,
and it is an act which deprives, under constraint, the debtor of the ownership of its
assets. It certainly involves an element of public authority’. (642) However, as it found
that the consequential forced sale of the assets of the company by the liquidator was not
in violation of the BIT, the tribunal did not consider it necessary to resolve the issue of
the attribution of the liquidator’s sale to the State. (643) The tribunal skirted the
attribution of the liquidator’s acts by confirming the legality of those acts. However, its
P 110 analysis suggests that it may have been prepared to accept an argument that the
liquidator’s powers involved elements of governmental authority on the basis that the
liquidator is vested with statutory coercive powers.
It seems well-settled in the investment arbitration jurisprudence that the conduct of
court-appointed professionals in bankruptcy or liquidation proceedings are not
attributable to the State as State organs at least in the civil law systems where such
professionals are normally an organ of the estate. (644) In those – mainly common law –
systems, where such professionals are regarded officers of the court, they may, in
principle, qualify as State organs. (645) Arguably, in those cases, much would also depend
on the role and functions of the bankruptcy trustee and their degree of autonomy or
supervision by the court.
Arbitral Institutions
As arbitration is a judicial procedure supervised by the State judiciary, (646) the question
arose whether an arbitration institution is a State organ. In Waste Management II v.
Mexico (647) the claimant submitted that the respondent was responsible for the actions
61
of various State organs concerning the claimant’s investment in an enterprise to provide
waste management services to the City of Acapulco in the State of Guerrero. (648)
The dispute arose from a concession agreement for the provision of waste disposal
services concluded between the local municipality and Acaverde, the claimant’s local
subsidiary. Disputes under the concession agreement were to be submitted to arbitration
in Acapulco under the rules of Conciliation and Arbitration of the National Chamber of
Commerce of Mexico City (CANACO). A dispute arose over the performance of the
concession agreement, which Acaverde submitted to CANACO arbitration. In an attempt
to block the arbitration, the City commenced court proceedings in Mexico arguing that
the concession agreement was an administrative act subject to the jurisdiction of the
administrative courts. (649) The arbitration was subsequently discontinued due to the
non-payment of a substantial advance requested by CANACO ‘[i]n the light of the City’s
resistance to the arbitration’. (650)
The tribunal considered to what extent the decisions of the federal courts or of CANACO
either compounded the situation resulting from the alleged non-payment of contractual
debts or constituted a distinct denial of justice. (651)
P 111
The tribunal held that CANACO was not a State organ. In a hint to the test of attribution
under ILC Article 8 and recognising that the City of Acapulco was a State organ, the
tribunal noted that:
[e]vidence of collusion between CANACO and the City with respect to the
conduct of the arbitration or of discrimination against Acaverde on account of
its foreign ownership would have been very material, but there is no such
evidence before the Tribunal. Although the deposit sought was very large by
local standards, the claim was large and the case threatened to be complex.
On the evidence presented to the Tribunal, CANACO apparently behaved in a
proper and impartial way. (652)
The tribunal found that the claimant’s withdrawal from the arbitration based on financial
grounds did not implicate the respondent in any internationally wrongful act.
Judicial Review and Other Ad Hoc Bodies
In Clayton v. Canada (653) the tribunal considered the attributability of the conduct of a
Joint Review Panel (JRP), an environmental assessment panel that issued
recommendations to the authorities against the claimants’ mining project. A JRP was an
ad hoc body constituted in relation to a particular project, and its members were
appointed by the Minister of the Environment for Canada.
The respondent argued that the mere fact that an entity was subject to judicial review in
Canada did not mean that it was a State organ. (654) It further argued that, although JRPs
are created by government, they take no instruction from government, and operate
completely independently. (655)
The claimants argued that the JRP was an ‘integral part of the government apparatus of
Canada’, an instrument of the Canadian Environmental Assessment Agency (CEAA)
mandated by law to contribute ‘an essential step in the environmental assessment
process’. (656) The claimants further relied on a Canadian court decision, which
confirmed that a JRP ‘comes within the meaning of a “federal board, commission or other
tribunal” under the Federal Courts Act of Canada’. (657)
The tribunal noted that ‘[a] body that exercises impartial judgment, however, can well be
an organ of the state’ and found that the functions of the JRP were of governmental
nature. (658) It recalled that JRP had a statutory responsibility to assess the
environmental effects of the project and ‘[t]o carry out this statutory responsibility, the
CEAA cloaks a Review Panel with the powers of a court with respect to summoning
witnesses to testify and produce documents. The members of a Review Panel are vested
P 112 with immunity from “any action or other proceeding” against them during the course of
or for the purposes of the assessment.’ (659) Further, the tribunal noted that the report of
the JRP, while not determinative, was ‘an integral part of the process of decision-making
by government’. (660)
The tribunal concluded that ‘the JRP was de jure an organ of Canada, equipped with a
clear statutory role that included making formal and public recommendations to state
authorities which the latter were obliged by law to consider – and indeed ended up
accepting’. (661)
[D] De Facto Organs: The Actual Degree of Autonomy

As the degree of integration of an entity in the formal State apparatus is a key
consideration in the identification of a State organ, the separate legal personality of a
State entity may be a strong indicator that such entity is not a State organ. Nevertheless,
there may be countervailing factors. The Commentary on the ILC Articles points out that
the separate legal personality of an entity is not determinative for a State organ: ‘[t]he
State as a subject of international law is held responsible for the conduct of all the
62
organs, instrumentalities and officials which form part of its organization and act in that
capacity, whether or not they have separate legal personality under its internal law.’
(662)
International law plays a residual role in identifying connectors that may lead to a
conclusion that a particular entity is a de facto State organ, regardless of its internal law
status. (663) While the formal test is concerned with the internal law regulation of the
status of an entity, the substantive test focuses on the overall legal framework and its
actual implementation by the State. Further, as the Commentary on the ILC Articles
notes, ‘[i]n some systems the status and functions of various entities are determined not
only by law but also by practice, and reference exclusively to internal law would be
misleading.’ (664)
In other words, international law tests whether in reality the separate entity enjoys the
autonomy that its distinct legal personality entails. The Commentary on the ILC Articles
recognises that an autonomous status conferred by internal laws is not necessarily
determinative under international law: ‘the conduct of certain institutions performing
public functions and exercising public powers (e.g., the police) is attributed to the State
even if those institutions are regarded in internal law as autonomous and independent of
the executive government’. (665)
The legal establishment and status of the entity reflect the institutional position of that
entity within the formal State apparatus, while the substantive test focuses on the
internal structure of the entity. The substantive test often resorts to the criteria of State
P 113 ownership and control, which may be consequential on the position of that entity
within the State’s organic setting.
It must be noted at the outset that State ownership of a separate entity is not a sufficient
connector to attribute the conduct of that entity to the State. As Professor Crawford notes,
‘[m]ere ownership of an entity by a state … will not automatically convert that entity into
an organ of the state.’ (666)
Nevertheless, combined with other criteria, (667) State ownership and control may
evidence that the State uses a separate entity merely as a vehicle in the exercise of its
functions and, as such, that entity remains a constituent part of the State regardless of its
separate legal personality.
This is illustrated by Nykomb v. Latvia, (668) a case involving a price dispute with
Latvenergo, a joint stock company wholly owned by the Republic of Latvia. Latvian law
described Latvenergo as ‘a national economy object of the State economy’. (669) The
company was actively involved in the production, purchase and distribution of electric
power in Latvia. Latvenergo and Windau, a wholly owned subsidiary of the claimant
investor, entered into a contract whereby Windau undertook to build a cogeneration
plant, which was to produce electric power and heat on the basis of natural gas.
Latvenergo agreed to purchase the electric power from Windau at a price composed of
two elements: the general tariff for average sales prices per kWh set by regulatory
authorities and a multiplier set by Latvian laws or regulations.
The claimant argued that its subsidiary was granted for the first eight years of operation a
multiplier of two (the ‘double tariff’), while Latvenergo considered the correct multiplier
to be 0.75 of the tariff. The latter multiplier was set through a legislative amendment
following the conclusion of the contract and before the completion of the plant. The
claimant submitted that Latvenergo’s non-payment of the double tariff was in breach of
the ECT. It claimed losses incurred as a result of undelivered heat and electricity during a
deadlock period and as a result of the refusal of Latvenergo to pay the double tariff in
the first eight years of production at the plant. The claimant contended that Latvenergo
was a State organ. It noted that there was no negotiation concerning the price, but
Latvenergo, in light of its monopolistic public service provider position, had to deal with
Nykomb and others under conditions established by law only. (670)
After noting the legal status of Latvenergo and its ownership of the State, the tribunal
examined the position of Latvenergo on the domestic electricity market. The tribunal
concluded that Latvenergo’s non-payment of the double tariff was attributable to Latvia
in light of the company’s dominant position on the electricity market and the State’s
P 114 control of the price of the electricity. The tribunal noted:
Latvenergo held a dominant position as a major domestic producer of electric

power and as sole distributor of electricity over the national grid. It was
clearly an instrument of the State in a highly regulated electricity market. In
the market segment where Windau operated, Latvenergo had no commercial
freedom. It had no freedom to negotiate electricity prices but was bound, and
considered itself to be bound, by the legislation and the regulatory bodies’
determination of the purchase prices to be paid for electric power produced
by cogeneration plants. Latvenergo cannot be considered to be, or to have
been, an independent commercial enterprise, but clearly a constituent part of
the Republic’s organization of the electricity market and a vehicle to
implement the Republic’s decisions concerning the price setting for electric
power. (671)
63
Although the tribunal did not specify which rule of attribution applied to Latvenergo, the
language used to describe it – ‘constituent part’ and ‘vehicle to implement the [State’s]
decision’ – suggests that the tribunal treated it effectively as a State organ.
States may organise and conduct their activities through different corporate and non-
corporate forms without necessarily relegating the exercise of a State function on behalf
of the State.
The tribunal in Deutsche Bank v. Sri Lanka had to determine whether Ceylon Petroleum
Corporation (CPC), Sri Lanka’s national oil company, was an organ of the State and as such
whether its acts were attributable to the State under ILC Article 4. The tribunal noted that
the distinct legal personality of a State Enterprise does not necessarily imply it cannot
be considered a State organ: ‘[w]hile it may be unusual for a state enterprise to be
considered an organ of the State, this is only the case where the state enterprise is
genuinely independent – the fact that it takes the form of a separate legal entity is not
decisive.’ (672)
The case concerned a Hedging Agreement concluded between Deutsche Bank and CPC in
order to protect Sri Lanka against the impact of rising oil prices. (673) The dispute arose
against the backdrop of a sudden fall of oil prices, and the Sri Lanka Supreme Court cases
and Central Bank investigations challenging the oil derivative transactions of CPC and
Deutsche Bank’s disclosure of the downside risks associated with hedging contracts. Due
to CPC’s failure to enter into the ISDA Master Agreement, Deutsche Bank terminated the
Hedging Agreement and claimed a closeout payment. Deutsche Bank commenced an
investment treaty arbitration against Sri Lanka (674) arguing, among others, that Sri
Lanka was responsible for the actions of CPC under ILC Article 4. (675) In particular, the
claimant submitted that CPC lacked any real autonomy, because it was (1) wholly owned
by the State, (2) established by statute and (3) ‘subject to all pervading Government
direction and control’. (676) In support of its ‘direction and control’ argument, the
P 115 claimant submitted that (1) the board of CPC was appointed by the Ministry of
Petroleum, (2) CPC had immunity for any act which in good faith was done or purported to
be done under the CPC Act, (3) CPC’s income and its expenditure were Government-
controlled and (4) CPC’s exchange dealings were subject to instructions from the Treasury
and the Central Bank.
The claimant illustrated the complete dependence of CPC on the Government by arguing
that CPC ‘even acts against its own interests when it is directed to do so by the
Government, for example granting discounts to the Ceylon Electricity Board and refusing
to charge any interest on the very substantial overdue amounts from the same’. (677)
Finally, the claimant relied upon a Sri Lanka Supreme Court decision in respect of the
status of CPC, which stated that CPC was ‘a legal hybrid bred by the Government to
enable it to engage in commercial business-tailor made to suit its style of business. It is a
Government creation clothed with juristic personality so as to give it an aura of
independence, but in reality it is just a business house doing only the State’s business for
and on behalf of the State’. (678)
The respondent argued that CPC’s acts were not attributable to the State, because CPC
was a separate entity with distinct legal personality, which meant that the State’s control
of its activities was irrelevant. (679) The respondent also denied that CPC was a de facto
State organ in the sense envisaged in the Bosnian Genocide judgment of the ICJ. (680) In
relation to a Supreme Court’s ruling on CPC’s status, the respondent argued that the
effect of the ruling was limited to certain domestic law issues and, as such, it could not
be extended to the State’s international law liability. (681)
The tribunal accepted that the finding of Sri Lanka’s Supreme Court that CPC’s business
was ‘mainly, if not wholly, controlled by the State’ was ‘compelling’. (682) It found that
State control of CPC was evidenced by the following factors: (1) State ownership, (2) its
enjoyment of immunity from suit, (3) appointment and removal of directors by the
Minister of Petroleum, (4) establishment by statute for the purpose of conducting Sri
Lanka’s oil policy in the national interest and (5) Government control over CPC’s
personnel, finances and decision-making. (683) Moreover, the tribunal relied upon the
fact that the act establishing CPC required the company to follow any written directions
of the Minister of Petroleum regardless of whether those directions were in the best
interests of CPC. (684)
The tribunal went further noting that the State’s control of CPC was evident also in the
conclusion and performance of the Hedging Agreement: (1) CPC was required to start the
P 116 hedging programme in furtherance of a Government directive and (2) CPC refused to
pay the amounts owing following termination of the Hedging Agreement as a direct result
of orders CPC received from the Supreme Court and the Central Bank. (685)
Based on these points, the tribunal concluded that CPC’s actions were attributable to the
State, either because CPC was an organ of the State under ILC Article 4 or because CPC
lacked separate legal existence, and/or acted under the instruction of the State. (686)
Nykomb and Deutsche Bank both involve situations when the relevant separate entity –
an electricity monopoly and a national oil company – lacked autonomy, despite their
distinct legal personality, and in fact acted as mere vehicles through which the State
exercised its public functions. Such use of corporate vehicles is increasingly common. As
64
the Salini v. Morocco tribunal noted, ‘the fact that a State may act through the medium of
a company having its own legal personality is no longer unusual if one considers the
extraordinary expansion of public authority activity’. (687)
In that case, the claimant argued that Société Nationale des Autoroutes du Maroc (ADM),
a majority State-owned limited liability company, was assimilated to the State. (688) The
Ministry of Infrastructure and Professional & Executive Training of Morocco entrusted
ADM, by way of a concession agreement, with the construction, maintenance and
operation of highways and other roadworks. The dispute concerned a motorway
construction contract entered into by two Italian companies with ADM. The claimant did
not expressly frame its argument around a de jure State organ characterisation of ADM in
the internal laws of Morocco. Instead, it relied on factual connectors, found mainly in the
articles of association of ADM that, in its view, evidenced a high degree of State control of
ADM and generally the State’s active participation in ADM.
The tribunal noted that Morocco, through the medium of the Treasury and various public
entities, held at least 89% of ADM. (689) It then relied on the fact that the State’s majority
stake translated into a de facto control of the Board and the majority of the Board of
Directors of ADM was made up of representatives of the Moroccan State, including the
Minister of Infrastructure (who was also the President of the company), the Secretary
General of the Ministry of Infrastructure, the Director of Highways and Road Traffic, the
Head of the Moroccan Port Authorities, the President of the Board of the National Bank for
Economic Development, and the Director of the Budget, all of whom depended upon the
Ministry of Economy and Finance. (690)
The tribunal noted also that the Board minutes indicated that the post of President of the
Board of Directors should be held by the individual holding the title of Minister of
Infrastructure and it was ADM’s practice to forward a copy of its Board minutes to the
Prime Minister of the Kingdom of Morocco, as well as to the Secretariat of the
P 117 Government. Turning to the contract in issue, the tribunal recalled that it was the
Minister of Infrastructure and Professional & Executive Training who, in his capacity as
ADM’s President, put out the invitation to tender for the contract. (691)
The tribunal also considered the business purpose of ADM, which it noted comprised
tasks under State control, namely the ‘building, managing and operating of assets falling
under the province of the public utilities responding to the structural needs of the
Kingdom of Morocco with regard to infrastructure and efficient communication networks’.
(692)
The tribunal concluded that ADM was ‘a State company, acting in the name of the
Kingdom of Morocco’, (693) because it was ‘distinguishable from the State solely on
account of its legal personality’.
The relevance of the Salini tribunal’s qualification of ADM as a de facto State organ was
later questioned by the tribunal in Almas v. Poland on the basis that the tribunal arrived
at this conclusion as part of its consideration of an objection to the tribunal’s jurisdiction
ratione personae, which it upheld in relation to breach of contract claims. The tribunal
did not specifically address the attribution of ADM’s conduct to the State for the
purposes of any treaty claims. It was also noted that the indeterminate ‘State company’
qualification was not specific enough for future reference. (694)
As noted above, Almas v. Poland was one of a handful of investment treaty cases in which
the test of de facto organ was expressly considered, albeit to no avail for the claimants.
The respondent admitted that ILC Article 4(2) and international investment law allow an
examination of whether an entity acts as a de facto organ, where that entity is not a State
organ under the applicable municipal law. (695) The respondent considered that two
connectors were relevant in assessing whether an entity qualifies as a de facto organ: (1)
the level of State involvement in the entity and (2) the level of control ‘actually
exercised’ by the State over the entity. (696) It then submitted that neither connector
justified a qualification of de facto organ in the case of ANR. In particular, it noted that
ANR enjoyed appreciable autonomy and received only directions ‘of a general nature’
from the government. (697) The respondent further argued that Polish law conferred a
wide degree of autonomy on ANR, mandating it to control its own budget and select
nominees for its governing board through a public appointments committee. (698)
Having acknowledged that the provisions of internal law are not per se determinative if
there are other factors pointing the other way, the tribunal then considered if ANR met
‘the criteria usually applied to determine whether an entity is a de facto State organ’.
(699)
P 118
The tribunal noted that the ILC’s commentary suggests that an inference may be drawn
regarding the attributability of the conduct of certain institutions performing public
functions and exercising public powers ‘even if those institutions are regarded in internal
law as autonomous and independent of the executive government’. (700) Crucially, the
tribunal noted that ‘where an entity engages on its own account in commercial
transactions, even if these are important to the national economy, this inference will not
be drawn’. (701) In this regard, the tribunal did not accept the claimant’s argument that
ANR performed an executive government function, noting that ‘an agricultural lease is a
65
commercial transaction, even if entered into with a State entity and even if it involves
State-owned land’. (702) The tribunal further pointed to the Polish law provisions
pursuant to which ANR had its own bank account and held property in its own name and
concluded that ‘[i]n light of its autonomous management and financial status, ANR is not
a de facto organ of the Polish State.’ (703)
In Flemingo Duty Free v. Poland (704) the de facto organ analysis, including the functional
test invoked by the claimant in Almas, led to the attribution of the conduct of Polish
Airports State Enterprise (PPL) to the Republic of Poland. The dispute concerned an
airport modernisation project, which led to the eventual termination by PPL of the lease
agreements concluded with the claimant’s subsidiary in relation to retail stores in
Warsaw Chopin Airport. (705)
PPL was established by law in order to develop and operate airports in Poland, including
Chopin Airport. As a legal entity, PPL was owned by the Polish State Treasury.
The claimant did not attempt to argue that PPL was a de jure State organ under Polish
law. It contended instead that the legal status of PPL under domestic Polish law was not
determinative for attribution. Relying on the substantive test posited in the Commentary
on ILC Article 4, (706) the claimant put forward two related arguments to attribute the
acts of PPL to the respondent: (1) PPL was a de facto State organ and (2) PPL ‘operat[ed]
under the control and supervision of the Ministry of Transport, including during the
implementation of the modernisation of Chopin Airport’. (707)
While it did not rely on Polish legal status of PPL, the claimant submitted that the
regulatory framework applicable to PPL placed it within the structure of the Ministry of
Transport, qualifying it as a de facto State organ under ILC Article 4 on the following
bases: (1) the Ministry of Transport had the power to appoint, suspend, and dismiss the
management of PPL, and to audit and assess the General Director’s performance, (2) the
P 119 Ministry of Transport had the power to direct PPL to perform certain tasks, such as the
ones necessary to comply with international obligations, and to limit its performance, (3)
Polish law delegated to the Ministry of Transport the duty to audit and assess PPL’s
operations and establish a structure to exercise control over PPL’s activities, including
over PPL’s finances and staff salaries, (4) PPL’s General Director was required to provide a
regular report to the Minister of Transport concerning its activities and (5) PPL was
assigned a role in effecting various Polish State policies and conducting State policies in
the Polish interest, particularly in civil aviation and defence. (708)
The claimant submitted evidence that the Secretary of State in the Ministry of Transport
has expressly acknowledged the level of State control over PPL by stating in the Polish
Parliament that: ‘[PPL] is an enterprise which is functioning within the structure of the
Ministry of [Transport]’ and ‘[w]hen it comes to questions on investments … the
supervision over PPL’s action is exercised by the minister responsible for transport and in
a way we are also responsible for all issues connected with the functioning of the
enterprise [PPL] – at the Chopin Airport in Warsaw.’ (709)
The claimant submitted also that PPL’s lack of autonomy was illustrated by the fact that
the lease agreements at the heart of the dispute and a temporary rent reduction
regarding one of the stores had to be approved by the State Treasury. (710)
For its part, the respondent submitted that PPL conducted its business activities
‘independently of the Polish authorities and on the same principles as any other business
entity’ and that, by law, it traded on its own account, being responsible for its liabilities
and not being responsible for the liabilities of the State Treasury or other legal persons.
(711) As a State Enterprise, PPL was defined by law as an ‘independent, self-governing and
self-financing entrepreneur with legal personality’. (712) The respondent conceded that
the Ministry of Transport supervised PPL, but it argued that it did not influence its
commercial policies or relationship with its business partners. (713) In respect of the
invoked statements of the Secretary of the State, the respondent argued that these were
‘public statements made in a political context’ and, as such, they were not a source of
law in Poland. (714)
The tribunal considered that the question of PPL’s qualification for the purposes of ILC
Article 4 required a detailed analysis of its status, structure and operations. (715) It then
noted that the question whether an entity is an organ of the State is a question of fact
and law to be determined under the applicable principles of international law. (716)
The tribunal found that PPL was a State-owned and controlled entity operating under the
auspices of the Ministry of Transport. (717) With regard to the latter’s supervision and
P 120 control of PPL, the tribunal noted that these were ‘structural’ and ‘very substantial’.
(718) The tribunal concluded that, ‘compared to the many restrictions and forms of
government control and interference’, the ‘expressions of quasi-independence and
quasi-autonomy’ invoked by the respondent did not tip the balance. (719)
In respect of the Polish law status of PPL, the tribunal noted that ‘although under Article
4(2), an entity is a State organ when it has such status attributed to it under domestic law,
the circumstance that an entity is not considered a State organ under domestic law does
not prevent that entity from being considered as such under international law for State
responsibility purposes.’ (720)
66
In its assessment of the status of PPL, the tribunal attached ‘much importance’ to the
statements of the Secretary of State, noting that the fact ‘[t]hat the Secretary of State is
not a legislator does not alter the fact that the highest Polish authorities confirmed
before the Polish Parliament that PPL functioned within the structure of the Ministry of
Transport, which itself – through PPL – was participating in the modernisation of the
Chopin Airport.’ (721)
The tribunal thus concluded that PPL was a de facto State organ by having regard to
internal law elements and factual evidence.
In Ampal v. Egypt (722) the claimant pleaded, in the alternative, a de facto State organ
attribution argument seemingly in consideration of the fact that both EGPC and EGAS had
separate legal personality. However, the Egyptian law criteria it used in support of its
alternative argument did not differ materially from those used in support of its de jure
State organ attribution argument. The tribunal determined that EGPC and EGAS were
‘corporate entities within the overall structure of the Ministry of Petroleum’, (723) without
qualifying them expressly as de facto State organs.
Similarly, in Jan de Nul v. Egypt, (724) the claimant argued in the alternative, based on the
opinion of Professor Sacerdoti, that SCA was a de facto State organ because ‘it [was]
empowered by law to exercise elements of governmental nature’. (725) However, for the
tribunal SCA was structurally not part of the State based on Egyptian law provisions that
reflected the commercial nature of the SCA activities and prescribed its autonomous
budget. (726)
In Hamester v. Ghana the claimant pleaded in the alternative that Cocobod was a de
facto State organ. Relying on the ICJ decisions in the Nicaragua Case and the Bosnian
Genocide Case, the claimant argued that Cocobod was ‘in complete dependence on, or at
least unable to function independently from, the Government.’ (727) In support of its
position, the claimant argued, among others, that the constitutive law of Cocobod
P 121 provided that:
[the Provisional National Defence Council] Co-ordinating Secretary may, after

consultation with the Board of Directors or the Management, give the Board in
writing directions of a general character not being inconsistent with the
provisions of this Law or with the contractual or other legal obligations of the
Board relating to the exercise of the Board of its functions under this Law and
the Board shall give effect to such directions. (728)
The tribunal noted that, under this provision, the Government can only give ‘directions of
a general character’ and not specific instructions to Cocobod, and such general policy
directions can only be made ‘after consultation with the Board of Directors or the
Management’ of Cocobod.
Finally, the tribunal found that the limitation that the Government’s directions of a
general character could not be ‘inconsistent with the contractual and other obligations’
of Cocobod meant that the contractual commitments of Cocobod prevailed over the
Government’s directions. (729) The tribunal considered that these internal law limitations
preserved the independence of Cocobod from the Government, as established by its
attribution analysis based on the de jure status of Cocobod. (730)
Based on the relatively limited jurisprudence on this issue, the de facto organ attribution
route is available to claimants as a residual argument when the internal law status of the
entity appears to detach the entity from the State. The investors may then consider other
internal law criteria or even factual evidence, such as the contemporaneous statements
of a high-ranking official, point to a lack of autonomy and thus rebut the presumption
created by the internal law status of the entity. Such incremental analysis implies a
degree of internal inconsistency in the regulatory framework applicable to the State
entity.
While each case is of course to be decided on its facts, it is unlikely that we will witness
many more cases leading to a de facto organ qualification, as internal law
inconsistencies are rare. Moreover, tribunals are not easily persuaded to exercise their
power to disregard the internal law status of a State entity in favour of other
countervailing factors.
As will be seen in §5.04, it is likely that when a State entity is not a de jure State organ, its
conduct is still attributable to the State as an entity that exercises elements of
governmental authority within the meaning of ILC Article 5.
[E] Political or Administrative Subdivisions

ILC Article 4 makes it clear that the conduct of an organ is attributable to the State
‘whatever its character as an organ of the central Government or of a territorial unit of the
State.’
P 122
The principle of the unity of the State entails that all State organs, regardless whether
they are part of a centralised or decentralised structure, engage the responsibility of the
67
State for internationally wrongful act. Federal States structures vary and so does the
division of power between the central and decentralised structures.
The Commentary on the ILC Articles further clarifies that the attribution test applies
irrespective of ‘whether the territorial unit in question is a component unit of a federal
State or a specific autonomous area’ and irrespective of ‘whether the internal law of the
State in question gives the federal parliament power to compel the component unit to
abide by the State’s international obligations.’ (731)
Nevertheless, constitutional and treaty arrangements may limit recourse to an
investment treaty. For example, when under a constitutional framework a constituent
unit or dependency may enter into international agreements on its own account, (732)
recourse may be limited to the constituent unit or dependency in the event of a breach.
(733) The provisions concerning territorial scope of the relevant BIT should also be
consulted for any express exclusions, limitations or extensions concerning constituent
units or dependencies, particularly in the case of countries with overseas territories.
It may come as a surprise to some central governments that the conduct of a local
province is capable of engaging the international law responsibility of the State.
At the other end of the spectrum of awareness, States may negotiate treaties, which
expressly cover the responsibility of local governments. For example, the ASEAN-India
Investment Agreement of 2014 defines ‘measure’ as including ‘measures taken by central,
regional, or local governments and authorities’. (734) The Canada-Serbia BIT of 2014
provides that ‘[e]ach Party shall ensure that it takes all necessary measures to give effect
to the provisions of this Agreement, including their observance, except as otherwise
provided in this Agreement, by its sub-national governments.’ (735) Further, the same BIT
P 123 defines ‘sub-national government’ as meaning ‘for Canada, a provincial, territorial or
local government; and for the Republic of Serbia, autonomous provinces and local self-
governments as defined by the Constitution of the Republic of Serbia’. (736)
The US-Ukraine BIT of 1996 specifies that the treaty ‘shall apply to the political
subdivisions of the Parties.’ (737) The claimant in Generation Ukraine v. Ukraine, (738) a
dispute concerning a construction project for an office building, relied on this provision.
The claimant alleged that the Kyiv City State Administration blocked the completion of
the project and took actions that ultimately led to its expropriation by the respondent.
The respondent argued that the dispute was between the claimant and Kyiv City State
Administration in response to which the claimant submitted that ‘Kyiv City State
Administration was a “political subdivision” of Ukraine and thus identified with the
State.’ (739) The respondent conceded that the BIT applied to political subdivisions, but
argued that the provision did not confer standing upon such a political subdivision in a
dispute under the ICSID Convention since Ukraine did not designate the Kyiv City State
Administration as a constituent unit for the purposes of Article 25 of the ICSID Convention.
In particular, it argued that ‘[b]eing the embodiment of the state executive power at the
local level, the [Kyiv City State Administration] does not act on behalf of Ukraine as a
State at the international arena.’ (740)
The tribunal held that, by invoking the substantive provisions of the BIT, the claimant
relied on the international responsibility of Ukraine on the basis that various acts or
omissions of officials of the Kyiv City State Administration were attributable to Ukraine in
accordance with the rules of international law. (741) It went on to state that ‘[t]here is no
doubt that the conduct of a municipal authority such as the Kyiv City State
Administration, which is listed as an organ of State power by the Ukrainian Constitution,
is capable of being recognised as an act of the State of Ukraine under international law.’
(742)
The tribunal then noted that Article 25(1) and (3) of the ICSID Convention concerning the
designation of a ‘constituent subdivision or agency’ is of relevance to a cause of action
based on an alleged breach of a contract between the claimant and the Kyiv City State
Administration, which the claimant had not advanced. (743)
The tribunal concluded that ‘[t]here is no difficulty in applying the international rules of
attribution in this case. The proper focus is instead on whether the Claimant can
P 124 establish that the conduct of the Kyiv City State Administration, or other relevant
Ukrainian State organs, amounts to a breach of an international obligation set out in the
BIT.’ (744)
The contract versus treaty claim distinction was articulated by the Annulment Committee
in Vivendi I v. Argentina, (745) a dispute arising from a concession contract concluded with
Tucumán, a province of Argentina.
In that case, the claimant argued that the Argentine Republic failed to prevent the
Province of Tucumán from taking certain action with respect to the concession contract,
which, in the claimant’s view, was in violation of the applicable BIT. (746)
The respondent submitted that the impugned actions of the provincial authorities in
response to the alleged breaches of the concession agreement ‘were not directed,
encouraged or condoned by the Argentine Republic.’ (747) The Argentine Republic relied
on its federal system under its 1994 Constitution in arguing that the acts of officials of the
Province of Tucumán were not attributable to the federal government and submitted that
68
there was no international law basis of attribution of responsibility to the Argentine
Republic. (748)
The tribunal held in an award issued before the adoption of the ILC Articles that ‘it is well
established that actions of a political subdivision of federal state, such as the Province of
Tucumán in the federal state of the Argentine Republic, are attributable to the central
government’ and noted that ‘the internal constitutional structure of a country can not
alter these obligations’. (749)
An ad hoc ICSID Annulment Committee annulled the award on the basis that the tribunal
failed to distinguish between internal law and international law matters in its
jurisdictional finding. (750) The Annulment Committee, however, upheld the principle of
the attribution of internationally wrongful acts of the Province of Tucumán to the
Argentine Republic. In what became an oft-quoted passage in investment disputes, it
held:
In accordance with this general principle (which is undoubtedly declaratory of
general international law), whether there has been a breach of the BIT and
whether there has been a breach of contract are different questions. Each of
these claims will be determined by reference to its own proper or applicable
law – in the case of the BIT, by international law; in the case of the Concession
Contract, by the proper law of the contract, in other words, the law of
Tucumán. For example, in the case of a claim based on a treaty, international
law rules of attribution apply, with the result that the state of Argentina is
internationally responsible for the acts of its provincial authorities. By
contrast, the state of Argentina is not liable for the performance of contracts
entered into by Tucumán, which possesses separate legal personality under its
own law and is responsible for the performance of its own contracts. (751)
P 125
In Parkerings v. Lithuania, (752) a dispute arising from the alleged wrongful termination of
an agreement for the construction and development of a public parking system
concluded between the Vilnius Municipality and a consortium including the claimant’s
local subsidiary, the tribunal considered whether the conduct of the municipality was
attributable to the State.
The respondent argued that ‘[t]he conduct of State organs including municipalities is not
attributable to the State, unless such conduct had legal effects on an international level.’
(753) Notably, the respondent accepted that the municipality was a State organ, but in
effect argued that its conduct must be internationally wrongful in order to be
As noted above, (754) the legality of the impugned conduct is a constitutive element of
State responsibility independent of the issue of the attribution of the impugned conduct.
Indeed, the tribunal distinguished between the two necessary elements of State
responsibility noting that ‘[i]t is undisputed that States are responsible on an
international level for acts of municipalities (and other State constituent subdivisions)
that are contrary to international law and that States are not liable internationally for
acts of their agencies that are wrongful under domestic law.’ (755)
In upholding its jurisdiction, the tribunal noted that the claimant brought claims against
the Republic of Lithuania, and not against the City of Vilnius, as its claims concerned
violations of the respondent’s BIT obligations ‘by virtue of the attribution to the State of
the acts of the Municipality’. (756) It was therefore irrelevant that the respondent was not
a party to the agreement.
In UAB Energija v. Latvia, a dispute concerning the termination of a long-term heating
supply contract between the claimant’s local subsidiary and the Municipality of Rēzekne,
the respondent conceded that the conduct of the Municipality, represented by the
Rēzekne City Council, was attributable to Latvia. (757)
In conclusion, an entity is a State organ regardless of whether it is part of the centralised
or decentralised structure of the State. The conduct of decentralised entities such as
federated States, provinces and municipalities is attributable to the State in the same
way as the conduct of the bodies pertaining to the centralised governmental structure.
[F] Acting in Official Capacity

The requirement of ILC Article 4 that the person act in an official capacity is intended to
P 126 exclude purely private conduct. (758) The requirement effectively means that the
conduct in question must be committed by individuals representing State organs or the
State itself. (759)
Private conduct should not be conflated with a situation where a State organ is acting in
an official capacity, but in excess of its competence, which is covered by ILC Article 7.
(760) Moreover, acting in official capacity should not be confused with the concept of acta
jure gestionis. As noted in the context of the ILC’s discussions on the immunity of State
officials from foreign criminal jurisdiction, ‘an act performed in a private capacity was
not necessary identical with acta jure gestionis, nor was an act performed in an official
69
capacity coterminous with acta jure imperii.’ (761)
The Commentary on ILC Article 4 specifies that the test does not entail an inquiry into the
reasons or legality of the behaviour: ‘[i]t is irrelevant for this purpose that the person
concerned may have had ulterior or improper motives or may be abusing public power.’
(762)
In Teinver v. Argentina, (763) a dispute concerning the renationalization of Aerolíneas
Argentinas S.A. and Austral-Cielos del Sur S.A., the claimants complained, inter alia, of the
conduct of Mr Cirielli, the Undersecretary of Air Transportation who had formerly served
as the head of one of the largest air transportation unions in Argentina. (764)
The claimant alleged that the respondent, through Mr Cirielli, executed a strategy that
led to the renationalization of the two airlines. (765) In particular, the claimant argued
that Mr Cirielli (1) advised President Kirchner to transfer the airlines to Argentine
investors, (2) called for strikes, (3) opposed the airlines’ request for a fare increase and (4)
instigated the Government’s challenge of one of the airlines’ financial statements. (766)
The claimant argued that Mr Cirielli carried out the above actions in his capacity as
Undersecretary of Air Transportation. (767)
Prior to his appointment to the Government, as head of the union, Mr Cirielli opposed the
investments that were the subject matter of the dispute. (768) The claimant argued that
Mr Cirielli’s public statements as head of the union, while not attributable to the
respondent, showed his public animosity towards the claimants. (769)
The Undersecretary was responsible for overseeing and regulating all matters pertaining
to the air transport industry and reported directly to the Secretary of Transportation.
P 127 (770) During his tenure as Undersecretary, Mr Cirielli remained on an unpaid leave of
absence from the union, and he returned there at the end of his term in office. (771)
The respondent submitted that only acts actually performed by Mr Cirielli during the
period of his tenure as a government official were attributable to the State. (772) The
tribunal accepted this argument and found that there was no evidence showing that ‘Mr.
Cirielli’s apparently negative view of the Spanish ownership of the Airlines affected the
treatment of the Airlines and Claimants’ rights in respect of them.’ (773)
The Teinver tribunal’s attribution analysis illustrates that the attributable acts of State
officials must be committed in their official capacity during their tenure or otherwise
must be connected to their official conduct. The latter connection would be difficult to
establish as it entails showing that the improper official conduct was subjectively
influenced by the act committed in a private capacity.
In Invesmart v. the Czech Republic (774) the contested acts included a public statement by
the spokeswoman of the CNB. Invesmart contracted to acquire the majority shareholding
in Union Banka. (775) In the course of the CNB’s regulatory approval process for the
acquisition of the claimant’s shareholding, the spokeswoman for the CNB explained in a
press statement that the CNB refused to approve the acquisition as the investor failed to
provide documents concerning the financing of the acquisition. She added that
Invesmart may file a new application for approval. (776) The CNB eventually approved the
claimant’s acquisition of a majority shareholding in Union Banka. The claimant alleged
that the press statement of CNB generated a run on Union Banka, which exacerbated the
bank’s worsening liquidity situation. The Minister of Finance refused any State aid, the
CNB revoked the banking licence of Union Banka and the bank was liquidated. The
claimant submitted that, among others, the respondent acted inconsistently by
‘[a]pproving Invesmart’s acquisition of Union Banka and then simultaneously causing a
run on Union Banka by making irresponsible comments to the Czech media’. (777) The
respondent submitted that the run on the bank was caused by the ‘public’s loss of
confidence in Union Banka’s capacity to resolve its long-standing difficulties’. (778)
The tribunal found that, while the public statements had a destabilising impact, they
were not inaccurate or in breach of the applicable BIT. (779) It noted that the statements
in question ‘having been made publicly by the CNB spokeswoman, are imputable to the
CNB; the conduct of a State entity such as the CNB being attributable to the Czech
Republic. The Respondent cannot escape criticism in view of the recognised sensitivity of
public announcements in the banking sector.’ (780)
P 128
Invesmart v. the Czech Republic is a straightforward example of a person – a
spokeswoman of the Central Bank – acting in her official capacity – making media
statements – on behalf of a State organ.
An examination of official capacity involves a consideration of both the status of the
author of the act and the context in which the act is committed. By way of example,
public statements made by a politician were held not to be attributable to the State in
Tradex v. Albania. (781)
As noted above, an act committed in official capacity remains attributable under ILC
Article 7 even if the act in question was unauthorised or ultra vires. (782) Therefore, the
official duties of the person are not a decisive consideration in determining the existence
of official capacity.
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[G] Conclusion
For the purposes of attribution of State responsibility under international law, a State
organ is a constituent part of the State, because it is established and controlled or
supervised by the State and it is assigned to perform the State’s own functions.
The attribution of conduct to State organs is a broad test, cutting across the whole
spectrum of State bodies without any functional and sub-national limitations.
Accordingly, a State organ acting in its official capacity engages the responsibility of the
State, regardless whether it exercises a governmental or commercial function and
regardless whether it is a centralised or decentralised entity within the overall structure
of the State.
While the internal law status of the State organ provides the foundation on which the
attribution analysis is to be conducted, international law gives effect to the reality of the
situation. Accordingly, under international law, an entity may be classified a State organ
based on a functional test or based on a de facto assessment, even if the internal law
status of the entity appears to exclude a qualification of State organ.
In light of the many ways in which States organise themselves, the international law
criteria for identifying State organs cannot be exhaustive or mechanical. Nevertheless,
the following connecting factors serve as general criteria that can be applied to the
varied circumstances of each case: (1) establishment by law, (2) lack of separate legal
personality under internal law, (3) lack of institutional or operational independence, (3)
performance of core governmental functions, (4) lack of separate patrimony, (5) lack of
financial autonomy, and/or (6) operation on public law principles, subject to judicial
review and/or governmental oversight.
The separate legal personality of an entity establishes only a rebuttable presumption
that the entity is not a State organ. As the separate legal personality of an entity is an
internal law matter, in the presence of other countervailing factors evidencing the
integration of that entity in the State’s internal apparatus, the internal law status may be
overridden in an international law analysis.
P 129
If a person or entity is not a State organ, its conduct may still be attributable to the State
under one of the other rules of attribution. In these cases, the attribution analysis
normally proceeds with an assessment to determine if the entity is a State
instrumentality.
§5.04 STATE INSTRUMENTALITIES

[A] The Notion of State Instrumentalities
International law recognizes that a State may act through persons or entities that are not
part of the State’s organic structure. The conduct of such separate persons or entities is
considered an act of the State when undertaken in the exercise of governmental powers
granted under the internal law. In this regard, ILC Article 5 provides:
Conduct of persons or entities exercising elements of governmental authority
The conduct of a person or entity which is not an organ of the State under
article 4 but which is empowered by the law of that State to exercise elements
of the governmental authority shall be considered an act of the State under
international law, provided the person or entity is acting in that capacity in
the particular instance.
The Commentary on the ILC Articles uses the term ‘parastatal’ to qualify the entities
covered by ILC Article 5. (783) Professor Crawford observed that ‘[i]t is tempting,
especially for a common lawyer, to use the municipal law term of “agency”
compendiously’ to cover acts committed by entities acting in a governmental capacity.
(784) The investment arbitration jurisprudence uses both ‘parastatal entities’ and ‘State
instrumentalities’ to describe the entities covered by ILC Article 5. (785) For a more
descriptive taxonomy, the author adopts the term ‘State instrumentalities’ for persons or
entities falling within ILC Article 5.
It is befitting to describe these subjects as State instrumentalities. The term implies that
the person or entity is an externality vis-à-vis the State’s organisational structure, i.e., the
person or entity exists outside the State’s internal organisation. Further, it implies that
any such entity is organised and operates as a separate legal entity. The notion of State
instrumentality also conveys the idea that, although separate from the State, the person
or entity in question is utilised by the State, based on its internal law, as a means or
vehicle to exercise governmental authority.
P 130
The term also reflects the drafters’ intention behind ILC Article 5, which was to ‘take
account of the increasingly common phenomenon of parastatal entities, which exercise
elements of governmental authority in place of State organs, as well as situations where
71
former State corporations have been privatized but retain certain public or regulatory
functions.’ (786) The Commentary on ILC Article 5 further clarifies that ‘[t]he generic term
“entity” reflects the wide variety of bodies which, though not organs, may be empowered
by the law of a State to exercise elements of governmental authority. They may include
public corporations, semipublic entities, public agencies of various kinds and even, in
special cases, private companies’, (787) provided in each case that the entity is
empowered, and actually exercises, some elements of governmental authority.
The category of State instrumentalities essentially encompasses two categories of
separate entities: State Enterprises with a varying degree of State participation and
State agencies with a varying degree of independence from the State. (788) The
Commentary on ILC Article 5 gives as examples private companies managing prisons and
private or State-owned airlines with delegated powers as to immigration control or
quarantine. (789) As discussed in the below analysis of the investment arbitration
jurisprudence, in a foreign investment context ILC Article 5 tends to be invoked in most
cases in relation to the attribution of the conduct of State Enterprises managing a
specific segment of the host State’s national resources or infrastructure.
The narrow test of State instrumentalities under ILC Article 5 is a world apart from the
broad, basic rule of attribution of the conduct of State organs under ILC Article 4. The
internal law status of the entity or the structural test prevalent under ILC Article 4 has no
role to play under ILC Article 5. The latter embodies essentially a functional test, (790)
which focuses on the delegation and exercise of a governmental function. In some
respects, to the extent that the nature or purpose of the relevant conduct and the legal
function of the entity weigh also in the finding of a State organ, (791) State
instrumentalities share common connectors with State organs. The analytical overlap is
not fortuitous. In the words of the ILC, these persons and entities are not de jure or de
facto State organs, but they are ‘empowered by the law of the State to exercise functions
of a public character normally exercised by State organs.’ (792) The exercise of the
P 131 governmental authority is only part of the overall activity or objective of the entity.
Otherwise, if the entity performs only functions normally reserved to a State, it should be
qualified as a State organ. (793)
It is therefore unsurprising that in many cases claimants rely on the attribution test under
ILC Article 5, as a subsidiary test to that of State organs under ILC Article 4. Further, some
tribunals have undertaken an analysis of ILC Article 5 to complement their primary
analysis under ILC Article 4, noting that even assuming that the conduct of an entity is not
attributable to the State as a State organ, the same conduct would still be attributable
to the State under ILC Article 5. (794)
Indeed, the cumulative and limitative nature of the ILC rules of attribution (795) justifies
an incremental approach, starting from ILC Article 4. This much is apparent also from the
wording of ILC Article 5, which spells out that the conduct examined is the conduct of
persons or entities that are not State organs in the sense of ILC Article 4. However, when it
is clear that the entity in question is not a State organ, the analysis may be limited to, or
may start with, ILC Article 5. In this regard, as noted above, the separate legal personality
of a State entity creates a rebuttable presumption that the entity is not a State organ.
However, State ownership or general control deriving from such ownership is in itself
insufficient to attribute the conduct of a separate corporate entity to the State. As the
Commentary on ILC Article 8 put it:
international law acknowledges the general separateness of corporate entities
at the national level, except in those cases where the ‘corporate veil’ is a mere
device or a vehicle for fraud or evasion. … Since corporate entities, although
owned by and in that sense subject to the control of the State, are considered
to be separate, prima facie their conduct in carrying out their activities is not
attributable to the State unless they are exercising elements of governmental
authority within the meaning of article 5. (796)
The rule on the attribution of the conduct of State instrumentalities establishes an
exception from the principle that State entities are separate and their acts are not
attributable to the State. (797) In that sense, as noted by Badia, attribution and the
doctrine of piercing the corporate veil ‘converge in that they both disregard the
individuality of the body corporate’. (798)
With the proliferation of State Enterprises, the delegation and exercise of governmental
authority are frequently considered in investment disputes. In most cases, the
phenomenon of State Enterprises is indeed rooted in the idea of delegating some
governmental or public functions or activities in a particular economic sector to a
separate corporate entity for a variety of reasons. Special Rapporteur Ago described this
P 132 connection as follows:
Public corporations were characterized by their specific, rather than general,

sphere of competence. Their proliferation was characteristic of the
contemporary phenomenon of decentralization of certain public functions
ratione materiae. The diversity of the tasks of common interest which the
community itself had to perform in a modern society, the ever increasing
72
number of services which only the community was able to provide, the gradual
extension of those services to the most widely different sectors of economic,
social and cultural life, the fact that they were often of a technical nature and
thus required both autonomy of decision and action and the possession of
special qualifications, the need to make procedures more flexible and
simplify controls in the interests of efficient service – those, in short, were the
main causes of the phenomenon. (799)
The same governmental function may be performed in some States directly by State
organs and in other States may be delegated to State instrumentalities. In part, ILC
Article 5 grew out of the necessity to ensure that, while the States’ internal organisational
freedom and diversity are acknowledged, the international law responsibility of States is
determined consistently when the act involves the exercise of a governmental function.
As Special Rapporteur Ago noted:
[i]t was necessary to guard against extending the responsibility of the State
too far, and also against not treating all States alike. If the same public
function were performed in one State by organs of the State proper and in
another by para-State institutions, it would indeed be absurd if the
international responsibility of the State were engaged in one case and not in
the other. (800)
The classification of State instrumentality under ILC Article 5 rests on several legal and
factual criteria informing the concept of government authority. From a legal perspective,
the source, nature and extent of the authority of the person or entity in question inform
the application of this rule of attribution. From a factual perspective, the effective use of
the governmental authority in the particular instance is essential. These criteria derive
from the two express requirements of ILC Article 5, namely that (1) the person or entity is
‘empowered by the law of [the] State to exercise elements of the governmental authority’
and (2) the requirement that the person or entity ‘act[s] in that capacity in the particular
instance.’
[B] The Scope of Governmental Authority

The ILC did not attempt to define what criteria apply in determining what is regarded as
‘governmental authority’. (801) This was a conscious decision based on the States’
sovereign right to organise their activities, including in the governmental sector. As
Special Rapporteur Crawford notes, ‘[p]ublic power was not defined only in terms of
content but also in terms of its treatment in internal law. Furthermore, it was not for
international law to prescribe a priori what conduct should be regarded as public.’ (802)
P 133 As noted by an investment treaty tribunal, ‘the notion [of governmental authority] is
intended to be a flexible one, not amenable to general definition in advance; and the
elements that would go in its definition in particular cases would be a mixture of fact, law
and practice.’ (803)
The Commentary on the ILC Articles leaves no doubt that the requirement of exercising
governmental authority necessarily excludes private or commercial activity:
The justification for attributing to the State under international law the
conduct of ‘parastatal’ entities lies in the fact that the internal law of the
State has conferred on the entity in question the exercise of certain elements
of the governmental authority. If it is to be regarded as an act of the State for
purposes of international responsibility, the conduct of an entity must
accordingly concern governmental activity and not other private or
commercial activity in which the entity may engage. (804)
Further, the scope of governmental authority may be influenced also by ‘the particular
society, its history and traditions.’ (805) While international law and practice do not
prescribe what governmental activity is, they offer a set of connecting factors. Although
there is no consensus as to what determines governmental activity, based on the
guidance offered by the Commentary on ILC Article 5 and the application of ILC Article 5
in the investment arbitration jurisprudence, it is possible to discern common connecting
factors. These connecting factors, examined below, normally constitute reliable indicia
that the separate entity is entrusted with the exercise of a governmental activity.
[1] The Connecting Factors
The Commentary on ILC Article 5 offers guidance on what internal law factors should be
considered in the designation of ‘governmental authority’: ‘[o]f particular importance will
be not just the content of the powers, but the way they are conferred on an entity, the
purposes for which they are to be exercised and the extent to which the entity is
accountable to government for their exercise.’ (806)
When the rules on attribution are contained in lex specialis, the relevant connecting
factors should be drawn from those rules. For example, Article 1503(2) of NAFTA provides
for the obligation of the State parties to ensure, ‘through regulatory control,
administrative supervision or the application of other measures’, that its State
Enterprises act in a manner consistent with the State’s obligations under Chapter 11
P 134
73
P 134 (Investment) ‘wherever such enterprise exercises any regulatory, administrative or
other governmental authority that the Party has delegated to it, such as the power to
expropriate, grant licenses, approve commercial transactions or impose quotas, fees or
other charges.’
Lex specialis may also exclude State responsibility for specific governmental acts. For
example, the ASEAN-India Investment Agreement excludes from its scope of application
‘services supplied in the exercise of governmental authority’ and defines the phrase as
‘any service which is supplied neither on a commercial basis nor in competition with one
or more service suppliers.’ (807)
Whether the criteria for determining governmental authority derives from the application
of ILC Article 5 or a lex specialis, a number of connecting factors are invariably
discernible. Typically, these connecting factors should be examined in conjunction and
without compromising the necessary flexibility demanded by the varied circumstances
to which they may be applied.
As a starting point, the internal law status of the entity should reveal close links with the
State, which do not however justify a State organ status. Within the internal law
framework, the relevant conduct must be sovereign or public in nature. The pursuit of a
public interest or purpose is a relevant, yet not decisive, consideration. Finally, the
accountability of the entity to the State for the exercise of its conduct in question may
corroborate a finding that the entity was delegated governmental powers.
The connecting factors indicate that the concept of governmental authority necessarily
implies a focus on the conduct in question. The internal law status of the entity is
relevant only to the extent that it provides the legal framework within which the entity is
empowered to exercise governmental authority.
[a] The Internal Law Status of the Entity
The internal law status of the entity is a starting point, rather than a connecting factor, in
determining that the entity is a State instrumentality. As noted above, ILC Article 5
applies to entities that are not State organs but are delegated governmental authority
typically exercised by State organs. Hence, in dealing with the question of whether the
impugned conduct is attributable to the State, a tribunal works on the premise that the
entity in question is not a de jure or de facto State organ. In most cases, such a conclusion
is reached after an express analysis under ILC Article 4, which necessarily involves a
consideration of the internal law status of the entity. However, when it is clear that the
entity in question is detached from the State’s organic structure, the attribution may
start directly with ILC Article 5 or another rule of attribution.
P 135
Beyond this starting point, the internal law classification of an entity is not relevant for
attribution under ILC Article 5. (808) Consequently, it does not matter whether the entity
is a public or private entity with a particular level of State participation in the form of
share capital or supervisory control. (809)
[b] The Nature of the Function
The conduct of an entity must concern a governmental activity for it to be regarded as an
act of the State for purposes of international responsibility. (810) The relevant question is
whether the powers delegated by law are, by their nature or intrinsically, governmental
powers outsourced to a State instrumentality in the country in question. (811)
The criterion focusing on the content of the powers thus looks at the nature of the
function, asking whether the activity in question ordinarily falls within the purview of the
State. As Professor Crawford put it, in most cases, ‘if a private person can perform the
function without the government’s permission, it is not to be considered governmental.’
(812)
In the realm of international investment law, a generally valid description of
governmental powers is particularly hazardous. In fields of economic activity, there are
considerable differences between States with respect to the extent of their public sector,
the governmental policies with respect to such public sector and generally the regulation
of public sector activities. (813) As noted in the First Report of the Special Rapporteur:
Many activities carried out by Governments could be entrusted to the private
sector, and the line between public and private varies continually over time
within and between different countries. Without a fixed prescription for State
authority, international law has to accept, by and large, the actual systems
adopted by States, and the notion of attribution thus consists primarily of a
renvoi to the public institutions or organs in place in the different States. (814)
The well-known concepts of acta jure gestionis and acta jure imperii, used in the law of
State immunity, (815) are the traditional tools through which this criterion is applied in
P 136 the law of State responsibility. As revealed by the below analysis, the international
investment law jurisprudence has embraced this distinction between acta jure gestionis
and acta jure imperii as the key connecting factor in most cases. According to Professor
74
Crawford, ‘[t]he application of these concepts to attribution under [ILC Article 5] is useful,
and achieves consistency between these different areas of international law.’ (816)
In the investment arbitration jurisprudence there is a marked reliance on the internal
administrative law concept of sovereign or public powers (i.e., prérogatives de puissance
publique). The concept of puissance publique delineates the conduct of public and private
sphere actors by reference to ‘the use by the State of its public prerogatives or imperium
… in the actions complained of.’ (817) In an investment law context, the concept implies a
hierarchical or vertical relationship between the State and the investor, with the former
exercising its coercive or enforcement powers over the latter. (818)
In a NAFTA context, the tribunal in UPS v. Canada noted in obiter that there is a strong
argument that the phrase ‘exercises any regulatory, administrative or other governmental
authority that the Party has delegated to it’ refers to coercive authority, meaning ‘that
the exercise of the power has a binding effect simply through its exercise.’ (819)
Beyond the core functions of the government, such as the exercise of regulatory and
judicial powers, considerable potential State activity occurs in economic sectors that
host foreign investments. In this area the traditional division between public and private
functions may become blurred.
The public-private dichotomy has long concerned scholars (820) Schicho posits that,
beyond the core examples of governmental authority, the public-private dimension is
demarcated depending on the existence of a functioning open market: if the examined
activities are ‘performed in an open, competitive market, they can be assumed to be of
commercial nature.’ (821) As discussed below, the investment arbitration jurisprudence
largely supports such a proposition.
The distinction between the public and private sphere has received considerable
attention from international judicial bodies outside the investment treaty context. (822)
P 137 The WTO Appellate Body grappled with the interpretation of the term ‘public body’ in
the context of a complaint by China with respect to definitive anti-dumping duties and
countervailing duties imposed by the US. The Appellate Body noted that ‘despite certain
differences between the attribution rules of the ILC Articles and those of the [WTO
Agreement on Subsidies and Countervailing Measures], [its] interpretation of the term
“public body” coincides with the essence of [ILC] Article 5’. (823)
Being influenced by ILC Article 5, the WTO Appellate Body held that the question whether
the conduct is that of a public body requires ‘a proper evaluation of the core features of
the entity concerned, and its relationship with government in the narrow sense.’ (824)
This approach of the WTO Appellate Body appears to shift the focus from the conduct to
the entity. A focus on the entity is not an entirely alien approach to the application of ILC
Article 5 in investment disputes. For example, in Tulip v. Turkey, the tribunal concluded
that Emlak did not exercise any governmental authority per se and noted that this meant
that ‘it cannot be the case that it exercised specific governmental authority with respect
to the acts that the Claimant asserted constituted violations of the BIT.’ (825)
P 138
As discussed below, internal law often bestows governmental powers on an entity without
prohibiting it from engaging in commercial activities. Alternatively, it may expressly
allow an entity to conduct commercial activities as a complement to its governmental
powers. State instrumentalities may trade and invest on commercial principles on the
open market. Therefore, the attribution test under ILC Article 5 pinpoints the conduct in
question and is not concerned with the wider role or function of the entity engaged in
that conduct. It is crucial to determine if the act complained of is commercial or
governmental in nature, because a State instrumentality may engage in a mix of
activities. (826)
[c] The Method of Conferral
The manner in which the governmental authority is vested in a person or entity refers to
the legal instrument chosen by the State to delegate public powers. As discussed below,
governmental authority is delegated in most cases by statute or executive decree.
According to Professor Crawford, if public functions are conferred lawfully by a public
contract, it is the enabling law, rather than the contract, which would qualify for the
purposes of the internal law authorisation under ILC Article 5. (827)
[d] The Purpose of the Function
A functional test should go beyond verifying the nature and content of the delegated
powers. As indicated in the Commentary on ILC Article 5, (828) a teleological approach
should be used to check if the relevant conduct was undertaken in the pursuit of a
governmental function or in the pursuit of the entity’s own private goals.
In light of the importance of an economic area, a State may delegate governmental
functions to a State instrumentality that deals with investors. However, as discussed
below, for the purposes of the overall attribution test, it does not matter if the entity was
generally entrusted with a mission of public interest (829) or if in the context of its overall
relations with the investor it acted in its governmental capacity. (830)
75
The subject matter and generally the public law nature of the contract from which the
investment dispute arises are also irrelevant. (831) As the Jan de Nul v. Egypt tribunal
noted, ‘[w]hat matters is not the “service public” element, but the use of “prérogatives de
puissance publique” or governmental authority.’ (832)
Therefore, while the purposive approach might indicate that the entity was empowered
with governmental authority in order to fulfil its governmental function, it is important to
P 139 pinpoint the actual conduct to determine if the delegated function was in fact
exercised. In most cases, the purpose of a conduct reflects the nature of the conduct. In
other words, if a conduct is governmental in nature, it is likely that it serves a legitimate
public or governmental function. However, as the investment arbitration jurisprudence
shows, in their sui generis coercive capacity, States may act beyond the public interest
for self-serving political or other non-governmental purposes. In those circumstances,
their acts remain attributable as being governmental in nature without fulfilling a public
or governmental function. (833)
[e] The Extent of Accountability
The extent to which an entity is accountable to the government for the conduct in
question may indicate if an entity acted in the exercise of governmental authority. In
view of the public interests involved in their activity, State instrumentalities may be
subject to a system of State control. (834) Further, States may subject State
instrumentalities to scrutiny and monitoring with respect to some or all of their conduct.
The accountability of an entity to the government is normally a corollary of its
empowerment to exercise governmental powers. However, the notion of accountability
does not necessarily imply that the relevant conduct was carried out under State control.
As the Commentary on ILC Article 5 notes, ‘[f]or the purposes of article 5, an entity is
covered even if its exercise of authority involves an independent discretion or power to
act.’ (835)
The extent of the entity’s accountability may corroborate a finding that the entity is a
State organ under ILC Article 4 or otherwise an entity empowered to exercise
governmental authority in the sense of ILC Article 5. (836)
[2] The Delegation of Governmental Authority
The governmental authority of the State instrumentalities must derive from the internal
law of the State. According to Professor Crawford, ‘it is not necessary that the empowering
law should define the roles and responsibilities of the entity exhaustively.’ (837) It
appears also that there is no need for an express statutory delegation. In other words, the
delegation of governmental powers may also be inferred from internal law. However, the
relevant conduct must be specifically authorised. In the words of the Commentary on ILC
Article 5, ‘[t]he internal law in question must specifically authorize the conduct as
involving the exercise of public authority; it is not enough that it permits activity as part
of the general regulation of the affairs of the community.’ (838)
In the absence of any limitations, it appears that internal law may vest governmental
P 140 authority upon a person or entity by way of any legal instrument, such as a specific
legal provision in a statute or an individual legal act issued or contracted by a State
organ. (839) In this regard, Note 45 to NAFTA, provides that ‘a “delegation” includes a
legislative grant, and a government order, directive or other act transferring to the
monopoly, or authorizing the exercise by the monopoly of, governmental authority’.
Similarly, the 2012 US Model BIT specifies that ‘government authority that has been
delegated includes a legislative grant, and a government order, directive or other action
transferring to the state enterprise or other person, or authorizing the exercise by the
state enterprise or other person of, governmental authority’. (840)
It is thus clear that the transfer of governmental powers must originate from a legal
instrument governed by internal law. However, this does not cover the situation when the
source of the alleged governmental power is a contract between the parties. As the
tribunal in Duke Energy v. Ecuador noted, ‘[p]rivate contract parties can agree to
empower one of them to impose sanctions on the other for unlawful performance of the
contract. Such mutually agreed delegation of power derives from the parties’ autonomy
under the law of contracts. It must be distinguished from the power of the State to
impose sanctions in the exercise of its sovereign power.’ (841)
ILC Article 5 does not address the situation in which a person or entity is in fact entrusted
by the State to exercise elements of governmental authority. (842) One may argue that
this situation is not satisfactory as a State may avoid responsibility by a de facto
delegation of governmental functions to State instrumentalities. The special ground of
attribution in ILC Article 9 may address some of these situations, where an entity or group
seizes power in the absence of State organs. (843) Further, ILC Article 8 captures de facto
agency situations involving governmental activity, provided that the de facto agent ‘is in
fact acting on the instructions of, or under the direction or control of, the State in carrying
out the conduct.’
Schicho observes that the de facto situations omitted from the empowerment condition
under ILC Article 5 would ‘usually involve toleration or even encouragement of the
exercise of elements of governmental authority not delegated by domestic law’. (844) It
76
is difficult to see how a State organ’s passive toleration of the relevant conduct could
amount to a de facto delegation. As for the active encouragement of the relevant
conduct, the solution may indeed be, as Schicho suggests, an analysis of the act of the
State organ to see whether the said encouragement itself amounts to conduct for which
the State organ, rather than the entity purportedly exercising de facto governmental
powers, should be held responsible under international law. (845)
In practice, State organs would rarely delegate governmental powers to a separate entity
P 141 without the requisite legal instruments, as a delegation outside theapplicable
internal law framework would normally breach the rules on their own organisational
structure and conduct of State functions.
[3] The Exercise of Governmental Authority
As State instrumentalities are not part of the State’s organic structure, their conduct is
attributable to the State under ILC Article 5 only when they act in a governmental
capacity, using their delegated governmental powers.
A State instrumentality would normally be authorised to engage also in commercial or
other private law activities. Therefore, it has to be examined if the allegedly attributable
conduct concerns the delegated governmental activity. In this regard, the Commentary
on ILC Article 5 uses the following example: ‘the conduct of a railway company to which
certain police powers have been granted will be regarded as an act of the State under
international law if it concerns the exercise of those powers, but not if it concerns other
activities (e.g. the sale of tickets or the purchase of rolling stock)’. (846)
Hence, even if the entity is empowered to exercise elements of governmental authority,
without the actual use of such authority in the particular instance, the conduct of that
entity will not be attributable to the State. Attribution rules contained in lex specialis
may require a similar two-prong test establishing the existence of governmental
authority and its exercise. (847) Put simply, the two-prong test ensures the application of
the legal criteria to the actual circumstances of the case.
The distinction between the legal empowerment and the actual use of such powers is
clear also in the investment arbitration jurisprudence, which generated a number of
examples where an entity was found to have been empowered to exercise elements of
governmental authority, but the act in question was not an exercise of such governmental
authority. (848)
[C] State Agencies and State Enterprises

State agencies are separate entities empowered by internal law to carry out specific
regulatory or administrative functions, often alongside commercial activities, on behalf
of the State. When integrated into the State’s organic structure, State agencies act as
State organs under international law regardless of their separate legal personality. (849)
When State agencies are not organs of the State, they constitute a category of State
instrumentalities, whose acts undertaken in a governmental capacity are attributable to
the State under ILC Article 5.
State Enterprises are separate corporate entities, owned and/or controlled by the State,
P 142 empowered by internal law to carry out commercial activities on behalf of the State.
(850) While the primary purpose of State Enterprises is commercial, they may also be
empowered to act in a governmental capacity, particularly when their activity concerns
the management of property or resources belonging to the State.
In the fulfilment of their purpose and object of activity, State agencies and State
Enterprises often interact with foreign investors and/or their local subsidiaries. Thus,
there is considerable investment arbitration jurisprudence on the attribution of their
conduct to the State.
[1] The Practical Foundation of the Functional Test
In Maffezini v. Spain (851) the tribunal addressed the question whether Sociedad para el
Desarrollo Industrial de Galicia (SODIGA), a Spanish regional development agency tasked
to attract and support foreign investment, acted on behalf of the State. SODIGA was
owned and controlled by various State entities, including the Ministry of Industry and the
National Institute for Industry. Its core function was to promote the industrialization of
Galicia. (852)
The dispute arose from a failed construction project. Together with SODIGA, Mr Maffezini
set up Emilio A. Maffezini S.A. (EAMSA), a chemicals production company. EAMSA began to
experience financial difficulties during the process of the construction of its chemical
production plant. The claimant argued that (1) it received mistaken advice from SODIGA
regarding the cost of the project, (2) EAMSA incurred unnecessary costs with the
environmental impact assessment and (3) in the context of EAMSA’s financial difficulties,
an official of SODIGA made an unauthorised transfer of 30 million Spanish Pesetas from
the claimant’s personal account to EAMSA.
The claimant argued that these actions and omissions affecting his investment were
attributable to SODIGA, ‘an entity owned and operated by the Kingdom of Spain’, being
77
‘under the control of the State and operated as an arm of the State for the purposes of
the economic development of the region of Galicia’. (853)
The respondent denied that the acts and omissions of SODIGA were attributable to the
State. It submitted that SODIGA was established as a commercial corporation under the
commercial laws of Spain and its activities were those of a private entity. The respondent
argued that ‘[o]wnership of part of the shares of SODIGA by State entities … does not alter
the private commercial character of the corporation nor does it transform SODIGA into a
State agency.’ (854)
In its decision on jurisdiction, rendered at a time when the ILC Articles were still in draft
P 143 form, the tribunal found that the claimant had made out a prima facie case that
SODIGA was a State entity acting on behalf of the Kingdom of Spain. The tribunal
considered that, under customary international law rules, the test to decide if a
particular entity is a State body looks to ‘various factors, such as ownership, control, the
nature, purposes and objectives of the entity whose actions are under scrutiny, and to the
character of the actions taken’. (855)
The tribunal framed its analysis around a structural test (856) and a functional test:
The question whether or not SODIGA is a State entity must be examined first
from a formal or structural point of view. Here a finding that the entity is
owned by the State, directly or indirectly, gives rise to a rebuttable
presumption that it is a State entity. The same result will obtain if an entity is
controlled by the State, directly or indirectly. A similar presumption arises if
an entity’s purpose or objectives is the carrying out of functions which are
governmental in nature or which are otherwise normally reserved to the State,
or which by their nature are not usually carried out by private businesses or
individuals. (857)
Relying on the draft version of ILC Article 5, the tribunal noted that Spain was not
shielded by the separate legal personality of SODIGA: ‘a State will not necessarily escape
responsibility for wrongful acts or omissions by hiding behind a private corporate veil’.
(858)
The tribunal then observed that ‘[b]ecause of the many forms that State enterprises may
take and thus shape the manners of State action, the structural test by itself may not
always be a conclusive determination of whether an entity is an organ of the State or
whether its acts may be attributed to the State. Therefore, an additional test has been
developed, a functional test, which looks to the functions of or role to be performed by
the entity.’ (859) The tribunal concluded that SODIGA was not a State organ, since ‘the
intent of the State to create still another corporate entity, particularly one which [was]
intended to operate in the private sector, even if State owned, [was] not sufficient to
raise the presumption of an entity being an organ of the State’. (860)
Turning to the functional test, the tribunal found that it was clear from the participation
of various governmental bodies in the establishment of SODIGA that the government
intended to create an entity to carry out governmental functions in the field of regional
development. (861) The tribunal noted that the objective of SODIGA, as set out in the
P 144 constitutive decree issued by the Ministry of Industry, namely the promotion of
regional industrial development of the Autonomous Region of Galicia, reflected ‘the
intent of the Government of Spain to utilize SODIGA as an instrument of State action’.
(862) It went on to state that the objectives and functions of SODIGA were ‘by their very
nature typically governmental tasks, not usually carried out by private entities, and,
therefore, cannot normally be considered to have a commercial nature’. (863) To
corroborate its finding concerning the governmental nature of SODIGA’s activities, the
tribunal referred also to similar regional development agencies created around the
world, including with the technical assistance of the World Bank’s Foreign Investment
Advisory Service (FIAS). (864)
In its attribution analysis in the award on the merits, the tribunal resumed its analysis of
SODIGA’s functions. (865) It noted that such functions evolved over time and when the
joint venture was established SODIGA was in the process of transforming itself from a
State-oriented to a market-oriented entity, (866) with the result that some of its functions
were essentially governmental and others essentially commercial in nature. In light of the
mixed function of SODIGA at the relevant time, the tribunal went on to characterise the
various acts or omissions giving rise to the dispute.
In relation to allegedly mistaken investment advice, the tribunal found that SODIGA was
not performing any public function and, therefore, Spain could not be held responsible
for SODIGA’s conduct. The tribunal noted that one of SODIGA’s functions was to provide
information to investors in order to promote the industrialization of Galicia and in the
course of SODIGA’s dealings with EAMSA the viability and prospects of the project were
explored. However, the tribunal found that ‘[t]his type of activity does not ordinarily go
beyond the commercial assistance that many financial and commercial entities provide
to their prospective customers.’ (867)
The tribunal rejected also the claimant’s contention that SODIGA was responsible for the
additional costs resulting from the environmental impact assessment noting that Spain,
78
including its local authorities and SODIGA, simply were performing their statutory
obligations under Spanish and European Community law. (868)
In relation to the irregular transfer of funds, the claimant complained that SODIGA’s
representative effected the transfer without his authorisation and there were a number of
irregularities attributable to the private banks that managed his accounts, and that these
acts engaged the responsibility of Spain’s Central Bank. The claimant accepted that he
authorised the transfer of the funds, but argued that he did so on the assumption that it
would be preceded by a contract. As EAMSA had not negotiated and concluded a loan
agreement, the transfer from his personal account to EAMSA’s account remained
unauthorised.
P 145
The tribunal found SODIGA’s representative made the unauthorised transfer in his official
capacity and SODIGA discharged public functions in relation to such transfer and,
therefore, engaged the responsibility of the State:
[b]ecause SODIGA was an entity charged with the implementation of
governmental policies relating to industrial promotion, it performed a number
of functions not normally open to ordinary commercial companies. Handling
the accounts of EAMSA as a participating company, managing its payments
and finances and generally intervening on its behalf before the Spanish
authorities without being paid for these services, are all elements that
responded to SODIGA’s public nature and responsibility. Moreover, the
manner in which the private banks conducted themselves in this case with
regard to the loan, can be explained in large measure only because of their
recognition that SODIGA’s orders and instructions were entitled to be honored
because of the public functions it performed in Galicia. (869)
In relation to the supervisory role of the Central Bank, the tribunal accepted the
respondent’s argument that the alleged irregularities were not attributable to the State
or the Central bank, because ‘the Central Bank only has supervising authority over
general financial and monetary operation of private banks and not over their relations
with clients’. (870)
The tribunal’s decision confirms that the empowerment of the entity to exercise
governmental powers may originate from an individual legal act, namely in this case the
constitute decree of SODIGA, and that the scope of governmental authority is to be
determined by taking into account the nature and purpose of the conduct in question.
The attribution analysis of the Maffezini is generally considered to have laid the
foundations of the functional test for the purposes of the application of ILC Article 5 and
is frequently quoted in the investment arbitration jurisprudence.
[2] The Strategic Importance of the Project
The functional test developed by the Maffezini tribunal was also applied in LESI v. Algeria,
(871) a case concerning a failed project for the construction of a hydraulic dam in Algeria.
The contract with a consortium of investors was concluded by Agence Nationale des
Barrages (ANB, the National Dam Agency). Its performance was severely impeded by the
ongoing civil war. After years of delay, ANB terminated the contract in order to put out to
tender a new contract. The claimants brought investment treaty claims against Algeria
arguing that actions of ANB were attributable to the State. (872)
ANB was a public institution of an administrative nature entrusted with the prerogatives
and responsibilities of a project owner in the field of public works, including works of
mobilization and transfer of water resources. (873)
P 146
The claimant argued that the ANB had and exercised governmental powers as the only
Algerian institution authorized to manage large projects involving water resources. (874)
It noted that several State bodies were involved in the termination of the contract, which
the respondent justified in the light of public interest. (875)
The respondent argued that the prerogatives of public power should not be confused with
the public service function and the law did not confer on ANB any public power. (876)
Having found that ANB was not a State organ, the tribunal considered whether ANB was
nevertheless empowered to exercise elements of governmental authority. Adopting a
rather unusual and questionable approach, it addressed the internal law status of ANB
first, applying the structural test and within it legal criteria that is typically considered in
the jurisprudence in relation to alleged State organs. Based on such atypical analysis, it
concluded that ANB can be assimilated to the Algerian State (877) and was empowered to
exercise governmental authority. (878)
Turning to the functional test, the tribunal considered whether the relevant conduct of
ANB involved the exercise of governmental authority. Evidence of State involvement was
found in the conclusion and termination of the contract. For example, the notice of
cessation of work and the notice of termination were on a letterhead mentioning the
Republic of Algeria, the Ministry of Water Resources and ANB, and the meeting in which
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an amicable termination was attempted was attended also by representatives of the
Ministry of Water Resources. (879) Therefore, the tribunal concluded that the contract was
terminated in the exercise of governmental authority. It noted that this conclusion was
reinforced by the fact that had the dam construction contract been commercial in
nature, ANB would have terminated it well before its actual date of termination in order
to avoid financial losses. The delayed termination furthered the objective to carry out a
major water resource project for the city of Algiers and showed that governmental general
interest prevailed over commercial concerns. (880)
The tribunal’s decision illustrates that the importance of a project may lead to
government involvement even when the relevant contract is concluded by a separate
State entity. However, as the next case shows, the strategic importance of the project
does not ipso facto mean that the contract is concluded, or the related actions are
committed, in the exercise of governmental authority.
In Jan de Nul v. Egypt (881) the tribunal applied the functional test under ILC Article 5 in
relation to the SCA. The claimant argued, in the alternative, that the SCA was an entity
P 147 that exercised governmental authority within the meaning of ILC Article 5. (882) It
argued that SCA performed typical governmental powers, namely being the responsible
entity for the management and operation of the Suez Canal, which was ‘an essential asset
of the Egyptian economy’. (883) The claimant further argued that the SCA carried out its
public functions ‘by issuing decrees and by imposing and collecting charges, which are
the most characteristic manifestations of “puissance publique”’. (884) It submitted that
the SCA acted in its governmental capacities in the context of its relations with the
claimants. (885)
The respondent accepted that the SCA was empowered to exercise governmental
authority, but it contended that it did not act in that capacity in the particular instance.
(886) It argued that the relevant conduct, namely tender of the dredging contract, did not
imply the exercise of any governmental authority and the fact that the contract was an
administrative contract was irrelevant. (887)
The tribunal observed that, for the purposes of the attribution of an act to the State, the
act must have a close link to the State and such link can result from the fact that the
person performing the act exercises governmental powers specific to the State in relation
with this act, even if it is a separate entity. (888)
Having concluded that SCA was not a State organ, the tribunal noted that it must decide
(1) if the SCA was empowered to exercise elements of governmental authority under
Egyptian law and, if so, (2) if it has exercised such authority with respect to the claimants
at the time of the tender and the performance of the dredging contract. (889)
In relation to the first step, the tribunal noted that it was uncontested that the SCA was
empowered to exercise governmental authority and, indeed, such authority was
stemming from statutory authorisation to issue decrees in relation to the navigation in
the Suez Canal and to impose and collect charges for the navigation and passage through
the canal. The tribunal, therefore, found that the SCA was a State instrumentality. (890)
Turning to the second step, the tribunal noted that the decisive test is whether the
specific acts and omissions were governmental or commercial in nature. Therefore, it
held that ‘the fact that the subject matter of the Contract related to the core functions of
the SCA, i.e., the maintenance and improvement of the Suez Canal, is irrelevant’. (891) It
found that the SCA did not act as a State entity when dealing with the claimants during
the tender process or in the performance of the contract. In relation to the alleged fraud
during the tender process, the tribunal noted that ‘the SCA acted like any contractor
trying to achieve the best price for the services it was seeking’. (892)
The tribunal acknowledged that the contract was awarded through a bidding process
P 148 pursuant to the laws on public procurement. It noted, however, that this was not ‘a
sufficient element … to establish that governmental authority was exercised in the SCA’s
relation to the Claimants and more particularly in relation to the acts and omissions
complained of’. (893) The tribunal noted that the public service element of the contract
was irrelevant, when any private contract partner could have acted in a manner similar
to the acts and omissions in question. (894) Therefore, the tribunal concluded that, while
it was empowered to exercise elements of governmental authority, the SCA did not in fact
exercise such governmental authority in relation to the conduct in question. (895)
The Jan de Nul tribunal’s decision illustrates that even a State instrumentality of strategic
importance may engage in commercial conduct with private investors with the result that
such conduct falls outside the area of responsibility of the State. As we shall see later, the
tribunal’s reasoning concerning the irrelevance of the public service element of the
contract is not universally accepted in the jurisprudence.
In Bayindir v. Pakistan (896) the tribunal considered the attribution of the conduct of a
State instrumentality in another transport infrastructure sector: the national highways. It
was undisputed that the NHA, the contracting party of the claimant, was generally
empowered to exercise elements of governmental authority. (897) The tribunal pointed in
particular to the provisions of the NHA Act that involved coercive powers, i.e., the power
to levy and collect or cause to be collected tolls on national highways and the power to
eject unauthorized occupants and enter upon lands and premises to make inspections.
80
(898)
The tribunal found, however, that the acts and omissions in dispute were not undertaken
by the NHA in a governmental capacity. (899) In relation to the NHA’s conduct leading to
the expulsion of Bayindir from the project, the claimant argued that the NHA terminated
the contract for reasons unrelated to the performance of the contract. The tribunal
accepted that there was a degree of governmental involvement in ‘the assessment and
follow up of the Project’, (900) but it ruled out that the decision to terminate the contract
was taken by the government. (901) It held that the NHA resorted to the contractual
mechanism to terminate the contract. (902) The tribunal noted that governmental
interest ‘appears unsurprising if not normal for a project of major economic importance
for the development of the country. It is certainly not an indication of a conspiracy to put
an end to the Contract without justification’. (903)
In respect of the eviction of the claimant from the site, the tribunal found that there was
P 149 no evidence showing that the claimant was harassed or coerced by conduct of the NHA
attributable to the respondent, or that the NHA or the respondent failed to act when it
appeared necessary to prevent harm to the claimant’s personnel. (904)
In relation to the NHA’s alleged failure to proceed to the evaluation of the completed
work following the expulsion of the claimant, the tribunal found that the evidence did not
support a treaty breach that would have been attributable to the respondent. (905)
Finally, in relation to the attempted encashment of the so-called mobilisation advance
guarantees, the tribunal noted that this conduct was, in principle, attributable to the
respondent. (906) However, it went on observing that ‘the attempt to call on the
guarantees appears as the act of an ordinary contract partner which was carried out on
foreign territory, i.e. in Turkey, in accordance with Turkish legal procedures’. (907)
In dismissing the claimant’s expropriation claim, the tribunal noted that there was no
evidence of sovereign acts in the expulsion of the claimant: ‘even if the expulsion
violated the Contract and deprived Bayindir of the economic substance of its contract
rights, a finding of expropriation would only be founded if the acts at issue were
sovereign acts’. (908) The tribunal observed that ‘the expulsion must be seen in the
framework of the contractual relationship, not as an exercise of sovereign power. (909)
This conclusion is not contradicted by the close involvement of the Pakistani government
in the M-1 Project. … governmental involvement is not necessarily equivalent to the
exercise of sovereign power when it is grounded on legitimate contractual
considerations’. (910)
The Bayindir tribunal’s decision illustrates that governmental involvement, particularly in
projects of national importance, does not necessarily attribute the contractual conduct
of a State instrumentality to the State.
[3] Acting in Governmental Capacity
The existence of a contractual relationship does not per se rule out the ability of a State
instrumentality to act in a governmental capacity. The impugned acts and omissions of a
State instrumentality involved in a contractual relationship must have been committed
P 150 in the exercise of governmental authority in order for them to be attributed to the
State. In Biwater Gauff v. Tanzania (911) the tribunal considered the capacity in which the
Dar es Salaam Water and Sewerage Authority (DAWASA) acted in the context of its
contractual relationship with the investor’s local subsidiary. DAWASA was a Tanzanian
public corporation established by law. Prior to the handover of operations to the
claimant’s local subsidiary, DAWASA was responsible for the provision of water and
sewerage services to the residents of Dar es Salaam and the surrounding area. (912)
The dispute concerned a water and sewerage infrastructure project in relation to which
DAWASA contracted City Water Services Limited, the local operating company of the
claimant, as private operator to manage and operate the water and sewerage system and
carry out some of the works associated with the project. (913) Under the project contracts,
City Water was tasked with operating the water production, transmission and distribution
systems, operating and maintaining the sewerage system, and building and collecting
revenue from the customers receiving these services. (914) In a Lease Contract, City Water
agreed to provide water and sewerage services on behalf of DAWASA for a ten-year period
using certain defined assets leased from DAWASA. (915) The State party in that contract
was described as the Republic of Tanzania, as represented by DAWASA, while in the
remaining two projects contracts DAWASA appeared as the contractor. (916)
In the context of difficulties in the operation of the project, the Minister of Water and
Livestock Development purported to terminate the Lease Contract and the performance
bond posted by City Water was called. In addition, the tax authority unilaterally withdrew
a VAT exemption granted to City Water.
The minister responsible for the water sector declared to the press that ‘the Government,
after giving due consideration to the way things were and the request from DAWASA, has
agreed that the contract be terminated and has directed DAWASA to initiate the process
of terminating the said contract forthwith’. (917) The senior management of City Water was
detained and deported by the Tanzanian authorities. Simultaneously, the company
facilities were occupied with the assistance of the police in order to take control of the
81
company’s assets and instal new management comprised of the representatives of a
newly formed government entity. (918)
In the claimant’s view, the purported termination and the related measures were
unlawful under Tanzanian and international law. The claimant brought investment treaty
claims alleging that Tanzania was responsible under international law principles of
P 151 attribution for the wrongful conduct of its organs, agencies, controlled entities and
individuals. (919) It argued that the dispute did not concern questions of contractual
performance, but abuses of governmental power. (920)
The tribunal distinguished between situations in which a State acts merely as a
contractual partner, and cases in which it acts jure imperii, exercising elements of its
governmental authority. As to the latter category, it noted that ‘[t]hese are often termed
“actes de puissance publique”, where the use by the State of its public prerogatives or
imperium is involved in the actions complained of.’ (921) As the State was a shareholder of
DAWASA, the tribunal described ‘puissance publique’ acts as acts ‘which exceed the
normal course of conduct of a State shareholder’. (922)
In respect of the repudiation of the Lease Contract, the tribunal found that the decision
to terminate was in fact taken by DAWASA, albeit shortly thereafter approved by the
Government. It noted that the decision to terminate and the related call of the
performance bond were not the exercise of any governmental authority, but ‘the ordinary
behaviour of a contractual counterparty, and the fact that the Republic itself was
involved can be no surprise, given its ownership of DAWASA, and its expected
involvement in the Project’. (923)
The tribunal found that the minister’s press declaration concerning the termination of the
contract was ‘outside of the ordinary activity of a contracting counterparty. It was an
exercise of executive authority, which effectively, and publicly, inflamed the dispute,
thereby undermining City Water in the general public’s eye, and disabling it from
progressing the contractual process in an ordinary fashion’. (924) The tribunal reached a
similar conclusion concerning the governmental nature of the withdrawal of the VAT
exemption. However, in the tribunal’s view, the most obvious display of puissance
publique was the occupation of the company facilities, the deportation of the senior
management and the usurpation of management control. (925)
Although the Biwater tribunal did not attribute the conduct of DAWASA to the State, the
decision is still relevant in an attribution context because it illustrates that a State could
act in a governmental capacity even when it also fulfils private law roles, as contracting
party or shareholder, in its relations with the investor. The tribunal held that conduct
without a legitimate foundation in a private law framework, namely conduct driven by
political or other governmental considerations, fell within the notion of puissance
publique.
The nature of the government’s relationship in the context of a contractual framework
involving a State instrumentality was under scrutiny also in Hamester v. Ghana. (926) The
P 152 claimant submitted, in the alternative, that the actions and omissions of Cocobod
complained of in the arbitration were attributable to the State as Cocobod was a State
entity carrying out governmental functions. (927)
The respondent accepted that Cocobod could be considered a public entity under ILC
Article 5, because it had some governmental powers under the law, such as the power to
issue regulations concerning the form of statutory licences or permits. It argued, however,
that the acts in dispute were not performed in the exercise of such governmental
authority. (928)
The tribunal noted that attribution under ILC Article 5 had two cumulative conditions: (1)
an entity must be empowered with governmental authority and (2) there must be an act
performed through the exercise of governmental authority. (929) It further stated this
attribution rule covers ‘acts of public or private entities or persons exercising
governmental authority, if executed in the exercise of such authority – which by
definition cannot include acts de jure gestionis’. (930)
The tribunal agreed that Cocobod was a State instrumentality covered by ILC Article 5 as
by law it was mandated to perform a combination of objects and functions that were
either essentially governmental or essentially commercial in nature. The tribunal noted,
that ‘[a]mong others, it has the mission to regulate the marketing and export of cocoa,
coffee and sheanuts; to encourage the development of all aspects of cocoa production
and transformation; and to fight diseases of cocoa beans. In order to fulfil these
functions, Cocobod was granted governmental powers.’ (931) Further, the tribunal noted
that Cocobod was entrusted with regulatory and enforcement powers. The tribunal
concluded that ‘[a]ll these entitlements make it clear that, besides its economic and
commercial objects, Cocobod was endowed with elements of “puissance publique.”’ (932)
The tribunal agreed with the respondent’s position that the fact that Cocobod had some
governmental powers ‘does not, and cannot, lead to the conclusion that all of its conduct,
including purely commercial business decisions in relation to a joint venture for
processing agricultural commodities, are governmental in nature’. (933)
The tribunal then observed that it was not sufficient that Cocobod was empowered with
82
some governmental authority. In addition, it was required that ‘the precise act in
question was an exercise of such governmental authority and not merely an act that
could be performed by a commercial entity’. (934)
Turning to the nature of the acts complained of, the tribunal noted that:
[i]n considering the application of Article 5 of the ILC Articles, the Tribunal has
carefully assessed whether, in its dealings with Hamester in relation to the
[joint venture agreement], Cocobod acted like any contractor/shareholder, or
rather as a State entity enforcing regulatory powers. It must be observed that
P 153 this analysis has necessarily concentrated on the utilisation of
governmental power. It is not enough for an act of a public entity to have been
performed in the general fulfilment of some general interest, mission or
purpose to qualify as an attributable act. (935)
The tribunal concluded that none of the claimant’s claims concerned acts in the exercise
of governmental authority. (936) The claimant contended that the government imposed a
new price on the joint venture in violation of the JVA under the threat of discontinuing its
supply of cocoa beans. (937) The tribunal found that the price negotiations show that ‘the
Government was not using its puissance publique to modify the [joint venture agreement]
and disregard alleged rights of the investor, but rather that two commercial actors were
engaged in “arms-length” negotiations in order to take into account a general policy of
Ghana’. (938) The tribunal noted that the claimant tried to involve the Government in the
negotiations, but the Government did not interfere with the negotiations, requesting
instead to be informed of their outcome. (939) With respect to the alleged failure to
deliver a sufficient quantity of cocoa beans to allow the plant to operate at full capacity,
the tribunal considered that Cocobod acted de jure gestionis. (940) As to the alleged
deprivation of the claimant’s management rights, the tribunal noted that conduct of
Cocobod’s representative on the board of the joint venture reflected ‘a general corporate
battle, between the shareholders of [the joint venture]’. (941)
The Hamester tribunal’s decision illustrates that the conduct of State instrumentalities is
attributable to the State only if the relevant conduct involves the exercise of their
governmental authority. In other words, if State instrumentalities act pursuant to a
commercial contract, in a manner akin to any private party to that contract, their
conduct is not attributable to the State. This conclusion is not altered by the fact that the
State instrumentality is empowered by law to carry out those commercial activities. (942)
[4] The Underlying Motivation
The underlying motivation in a State entity’s decision to terminate an agreement for the
lease of farmland was scrutinised in Almas v. Poland. (943) The tribunal noted that the
P 154 claim raised ‘an obvious issue of attribution, since the Agricultural Property Agency
(ANR) is a separate legal entity from Poland and it purported to exercise contractual
powers in terminating the Lease Agreement’. (944)
The claimants contended that the termination of the Lease Agreement had an underlying
policy motivation, namely the redistribution of State land to small Polish farmers. They
submitted that even if the termination was purportedly an act done in the exercise of
contractual powers, the alleged policy motivation effectively converted it into an act in
the exercise of governmental authority. (945)
The respondent accepted that ANR entered into the Lease Agreement in the exercise of
statutory powers to manage State agricultural property, but argued that the termination
was not an exercise of public power but of a purported contractual right. (946) On that
basis, it submitted that the alleged conduct of ANR was not in the exercise of any
governmental authority and therefore was not attributable to the State under ILC Article
5. (947)
The tribunal found that ANR’s termination of the Lease Agreement was in the exercise of
its contractual powers and therefore it was not attributable to the State under ILC Article
5. (948) It considered then if this conclusion was affected by the claimant’s argument that
ANR’s decision was in fact taken in a sovereign capacity, being in reality driven by public
policy considerations or, in the language of Vigotop Limited v. Hungary, a ‘hidden political
agenda’, (949) which decisively influenced the termination of the contract. Although the
case was distinguishable on its facts from Vigotop Limited v. Hungary – in that case, the
contract was concluded by the State itself – the tribunal addressed the claimants’
argument on its merits. It concluded that there was no evidence showing that the
decision to terminate the Lease Agreement was made for extraneous reasons unrelated
to the conduct of the Lease Agreement. (950) Further, it noted that ‘ANR had valid grounds
for concern’ (951) that led to termination of the agreement. Finally, the tribunal noted
that in the event that the respondent had both policy and contractual grounds to
terminate, the Vigotop test concluded with an inquiry into whether termination rights
were exercised in good faith. (952) It found that there was no evidence of bad faith on the
part of ANR. (953) It is notable that the Almas tribunal applied the Vigotop test without
considering whether it was properly articulated in relation to an entity separate from the
State. (954)
The Almas tribunal’s decision shows that the mere fact that a separate entity purportedly
83
exercises a contractual right does not per se exclude the possibility that the contractual
right of termination is used as a device to exercise a governmental authority. This
P 155 approach appears to give effect to the general prohibition of abuse of rights, which
itself is a manifestation of the principle of good faith. The analysis whether a State entity
exceeded or abused its contractual right of termination for governmental purposes is a
substantive one, engaging the issue of the legality of the conduct and thus going beyond
the scope of a standard attribution analysis.
[5] Regulated Commercial Activities
A State entity carrying out regulated commercial activities was involved also in AMTO v.
Ukraine. (955) The claimant argued that Ukraine has failed to ensure that Energoatom, a
State Enterprise, was conducting its activities in a manner consistent with Ukraine’s
obligations under the ECT. (956) It submitted that the respondent failed to provide
adequate funding to Energoatom and was therefore responsible for its failure to pay its
debts to EYUM-10. (957)
In respect of the attribution of the conduct of Energoatom to the State, the claimant
submitted that, in light of Energoatom’s strategic importance, the State controlled even
its commercial activities. In particular, its prices, retailers and forms of payment were
established by law and ultimately fixed and controlled by the National Energy
Regulatory Commission of Ukraine. (958)
Having found that Energoatom was not a State organ, the tribunal considered if
Energoatom was a State instrumentality exercising governmental authority. The tribunal
found that the decisions not to pay EYUM-10 and to resist enforcement in bankruptcy
proceedings were taken by Energoatom without State interference. (959) It held that:
[t]he payment or non-payment by a state entity of contractual debts owed to a
service provider involves no exercise of sovereign authority or puissance
publique, and cannot be attributed to the Ukraine. The Claimant has sought to
elevate contractual non-payment into a structural or funding problem in the
Ukrainian energy sector, so as to condemn these decisions as unfair or
discriminatory to its Investment and therefore involving responsibility
pursuant to Article 10(1) ECT. (960)
In F-W Oil Interests v. Trinidad and Tobago (961) the dispute concerned failed negotiations
regarding the granting of offshore oil rights in Soldado Fields to the claimant. Following a
structural disaster on one of the oil and gas extraction platforms in the Soldado Fields,
Trinmar, a subsidiary of Petrotrin, the national oil company of Trinidad and Tobago,
conducted a bid to award a contract granting an exploitation licence or other proprietary
interest in either the field or the minerals extracted from it. Following the award of the
contract, at the insistence of Petrotrin, Trinmar changed the nature of the contract from a
P 156 proprietary licence to a service contract. The claimant then requested that Trinmar
provide a guarantee and assurances of compensation for work done in anticipation of an
agreement to carry out the project. Trinmar declined these requests and withdrew from
the negotiations. (962) The claimant brought investment treaty claims alleging that the
State was responsible for the conduct of Trinmar, and the abortion of the negotiations
following the successful tender was in violation of the claimant’s investment treaty rights.
Petrotrin was a State Enterprise, subordinated to the Minister of Finance. The Investment
Division of the Ministry of Finance carried out the corporate function and the actual
monitoring of the performance of Petrotrin on behalf of the Minister. The Minister of
Energy provided the specialized technical analyses and statutory approvals for
operations while ensuring adherence to the Government’s sectoral policy guidelines.
(963) As with all State Enterprises in the energy sector, the Board of Petrotrin and Trinmar
was accountable to the Minister of Energy. (964)
Relying on the distinction between acta jure imperii and acta jure gestionis, the
respondent denied that the activities of Trinmar and Petrotrin in relation to the claimant
engaged the international law responsibility of the State. (965)
The tribunal found that, in light of its strategic importance and the involvement of
various Government officials in the bidding process, the project did not involve a mere
commercial deal:
[t]hat the project was not a ‘mere’ commercial deal is amply evidenced by the
nature of the resource in question, and by the important place that
production from the Soldado Fields obviously held in the minds of the
Government of Trinidad and Tobago as a significant element in the national
economy. Similarly, it appears to the Tribunal to be inconceivable that in any
ordinary commercial deal, between ordinary commercial parties, the
Government, in the shape of the responsible Minister, would or could have
intervened as regularly – and, it may be added, as decisively – as happened in
this case. (966)
The US-Trinidad and Tobago BIT contained a provision, which the tribunal found to be ‘to
all intents and purposes indistinguishable from the position under general international
law, as exemplified by Article 5 of the ILC’s draft Articles’, (967) extending the State’s
84
treaty obligations ‘to a state enterprise in the exercise of any regulatory, administrative
or other governmental authority delegated to it by that [State]’. (968)
Although the tribunal declined jurisdiction on the basis that there was no investment, it
addressed the issue of the attribution of the conduct on Trinmar to the State ‘for
completeness’ sake’. (969)
P 157
In relation to the attributability of the conduct of Trinmar and Petrotrin to the State, the
tribunal noted that it could not exclude the possibility that either of the two companies
acted in the exercise of governmental authority:
for some of their individual activity at least, either of those two bodies might,
in the particular circumstances established in evidence in this arbitration,
have been acting sufficiently within the overall aegis of public authority as to
engage the responsibility of the State for international law purposes. The
possibility is given particular meaning by the general nature of the activity in
question in this arbitration, namely the winning of a sovereign natural
resource of undeniably major significance to the entire economy of the
country. (970)
The tribunal relied on the fact that the relevant conduct involved Trinmar, Petrotrin and
the Government, in their interrelationship as well as in their direct relations with the
claimant. (971) It noted that when the relevant conduct involves an interference by the
State with the operation of a private contract it is capable of engaging the international
responsibility of the State for conduct amounting to breaches of treaty standards. (972)
The F-W Oil Interests tribunal’s attribution approach suggests that what matters is not so
much the analytical distinction between governmental and commercial acts – which it
held to belong to the law of State immunity rather than to the law of State responsibility
– but whether the relevant conduct, in light of its general nature, can be placed under the
overall aegis of public authority. This approach acknowledges that the subject matter
and the purpose of a transaction involving a State instrumentality may blur the
traditional distinction between governmental and commercial activity. In particular, if
the transaction involves an asset or activity reserved by law to the State, the State
instrumentality’s dealing with that asset or its undertaking of that activity is likely to
involve some exercise of public powers in an otherwise commercial context.
As Schicho observes, ‘[c]ertain surroundings and circumstances may turn conduct of
usually commercially, non-official nature into an exercise of elements of governmental
authority.’ (973) In any event, even in these situations the conduct in question must
involve some manifestation of a function of a public character. Otherwise, there would be
no material difference between the conduct of State organs, under ILC Article 4, and the
conduct of State instrumentalities, under ILC Article 5.
In EnCana v. Ecuador (974) the tribunal addressed the attributability of the conduct of
Petroecuador, the national oil company of Ecuador, to the State. The dispute arose from
the tax authorities’ denial of VAT refunds in the performance of four Participation
Contracts entered into by the State, through Petroecuador, in relation to the exploration
and exploitation of oil and gas reserves in Ecuador. (975) There was a related issue
whether the VAT payments affected the participation factor in the contracts and whether
there was a possibility to renegotiate the contracts with Petroecuador.
P 158
The tribunal noted that the respondent ‘did not deny that in entering into Participation
Contracts with foreign companies to exploit the natural resources of Ecuador, the conduct
of Petroecuador as a State-owned and State-controlled instrumentality is attributable to
Ecuador for the purposes of the BIT’. (976)
It then observed that, pursuant to the law, the Attorney General had and exercised
authority to supervise the performance of the Participation Contracts, including as to
their potential renegotiation, and to propose or adopt the judicial actions necessary for
the defence of the national assets and public interest. (977) The tribunal concluded that
‘the conduct of Petroecuador in entering into, performing and renegotiating the
participation contracts (or declining to do so) was attributable to Ecuador’. (978)
Although the tribunal also grounded its analysis on the fact that Petroecuador was
subject to instructions from the President and others and referred to both ILC Article 5
and ILC Article 8 as grounds of attribution, the relevant part linking the conduct to ILC
Article 5 appears to be the statutory supervision of Petroecuador’s commercial activities
by the State. The decision appears to suggest that attribution under ILC Article 5 may be
available not only when the State interferes with a commercial contract concluded by a
State instrumentality but also when the State instrumentality engages in commercial
conduct under the direct statutory supervision of the State. The tribunal stated that it
did not matter whether this attribution result flowed from ILC Article 5 or ILC Article 8
because the result was the same. (979) This approach leaves a lingering ambiguity as to
whether in similar circumstances the focus should be on the statutory regulation of
commercial conduct, the supervision of the State instrumentality or both. The ambiguity
85
also fuels the debate whether the exercise of a statutory function, be it in a commercial
context, is sufficient to prove the exercise of governmental authority for the purposes of
ILC Article 5. (980)
[6] The Implementation of State Policy
In WNC Factoring Limited v. the Czech Republic (981) the claimant argued that the
implementation of State policy by the Czech Export Bank, a.s. (CEB) and Export
Guarantee and Insurance Corporation (EGAP) qualified as the exercise of governmental
policy. (982) The respondent replied that ‘[t]he fact that commercial activities further
State policy goals does not change their fundamentally private character.’ (983)
CEB and EGAP were State-owned entities empowered by law to perform activities of
P 159 export financing and insurance of export risks respectively. The respondent asserted
that CEB operated as a bank subject to standard banking rules and the State supported
its activities in the form of conditional subsidies in the event that its commercial income
was insufficient to cover expenses incurred in connection with the provision of export
financing and in the form of guarantee of its financial obligations. (984) EGAP’s funds for
export credit risk were subsidized from the State budget. (985)
The dispute concerned the privatisation of Škoda Export, a.s. (Skoda Export) a Czech
State-owned supplier of turnkey capital equipment in the energy sector. The claimant’s
subsidiary acquired the company and, in its post-acquisition audit, it discovered that the
acquired projects presented significantly worse economic results than disclosed during
the due diligence. (986) It decided to request financing from CEB, who already held a
number of Skoda Export’s current accounts and had issued Skoda Export with export
financing guarantees in respect of the key projects insured by EGAP. (987) The claimant
alleged that CEB and EGAP failed to respond appropriately to the financing requests.
(988) Further, the claimant submitted that the accounts of Skoda Export with CEB were
unjustly frozen as a result of CEB’s anti-money laundering reporting. The buyer rescinded
the privatisation agreement on the basis of the alleged deficiencies in the Czech
Republic’s disclosure of financial information concerning the projects of Skoda Export in
the due diligence process. Skoda Export was declared bankrupt and its assets were sold.
The claimant commenced investment treaty proceedings against the Czech Republic. It
argued that the Czech Republic, acting through CEB and EGAP, unlawfully expropriated its
investments, because (1) CEB and EGAP failed to provide critically needed financing for
Skoda Export’s projects, (2) CEB and EGAP attempted to divert Skoda Export’s projects to
a third-party contractor and (3) CEB acted to freeze Skoda Export’s bank accounts on
false and unsubstantiated charges. (989)
The claimant submitted that the implementation of the State’s foreign trade policy
qualified as governmental authority for the purposes of the attribution test under ILC
Article 5. (990)
The claimant submitted that the Czech Republic was responsible for the conduct of CEB
and EGAP under ILC Article 5, because they were ‘instruments of the state charged with
performing governmental functions’. (991) It argued that the governmental functions of
CEB and EGAP were evidenced by the fact that they were subject to the scrutiny of the
State Audit Office. (992) In relation to CEB, the claimant argued that it was designated as
an instrumentality in charge of implementing the State’s export strategy by the official
P 160 export policy of the Czech Republic. (993) Finally, the claimant argued that the
impugned conduct of CEB and EGAP fell within the scope of their governmental authority.
(994)
The respondent denied that CEB and EGAP were delegated governmental authority,
because:
[n]either CEB nor EGAP regulates the financing of export, provides their clients
with any special prerogatives, licenses or permits, or imposes penalties
except for contractual penalties. The activities of export financing and the
insurance of export risks are business activities which may be performed by
commercial entities. The only public element of CEB and EGAP is their
entitlement to receive state support in connection with the provision of their
financial and insurance services. (995)
In relation to the impugned conduct, the respondent argued that ‘[a]ny bank would have
been in a position to take such actions in such a situation’. (996) It further noted that
‘[n]either CEB nor EGAP holds any special authority to provide export financing or
insurance that is unavailable to any other commercial bank or insurer.’ (997) It also
argued that the State’s financial support, subject to accountability through audits, was
insufficient to show that the State has conferred governmental authority to an entity that
otherwise carries out purely commercial activities. (998) It noted that the State audited
all other commercial companies in which the Czech Republic owned an interest and did
not direct the activities of CEB or EGAP. (999) Finally, the respondent noted that all the
impugned acts and omissions were ordinary commercial actions within the finance and
insurance sectors. (1000)
The tribunal decided that had jurisdiction to hear only the expropriation claim under the
86
applicable BIT. In the end, the tribunal did not consider the attribution issue (1001) as it
found that the conduct of CEB or EGA was not capable of breaching the expropriation
standard in the BIT. However, it noted that ‘there are serious issues which arise in
attributing the conduct of CEB and EGAP to the Respondent under Article 5 of the ILC
Articles’. (1002)
Although the tribunal did not elaborate on what those ‘serious issues’ would be its strong
wording suggests that it is likely that neither of the two prongs of ILC Article 5 would have
been met in the case. In other words, the statutory mission of CEB and EGAP to carry out
commercial activities in the area of foreign trade would not have qualified as
governmental authority. Consequently, the impugned conduct would not have involved
an exercise of governmental authority.
P 161
[7] Contractual and Sovereign Powers

In Toto Costruzioni v. Lebanon (1003) the tribunal considered the attribution of the
conduct of Conseil Executif des Grands Projets (CEGP) to the State in the context of a
dispute arising from a contract between the Lebanese Republic – CEGP and the claimant
for the construction of a portion of the Arab Highway linking, inter alia, Beirut to
Damascus. (1004) As the Council for Development and Reconstruction (CDR) succeeded
CEGP, the tribunal considered also the conduct of CDR.
The claimant argued that the Lebanese Government, CEGP and CDR, acting on behalf of
the government, created numerous problems for the claimant and/or refused to adopt
adequate corrective measures, which caused material damage to the project and
jeopardized the claimant’s investment in Lebanon. (1005) It submitted that the
respondent breached the Italy-Lebanon BIT by changing the regulatory framework,
delaying or failing to carry out the necessary expropriations, failing to deliver sites,
failing to protect the claimant’s legal possession, giving erroneous design information
and instructions and failing to deliver a timely judgment in the domestic proceedings.
(1006)
The tribunal noted that the contract from which the dispute originated was concluded by
CEGP, which was later succeeded by CDR, and the claims flow from acts and omissions of
CEGP and CDR. (1007) It then turned to the issue of the attribution of such acts and
omissions to the State.
The claimant argued that CEGP was a State organ as (1) it was fully controlled by the
Government of Lebanon through the Ministry of Public Works and Transport, (2) it
undertook only public works projects entrusted to it by the Council of Ministers of the
Lebanese Government, (3) its President and Board of Directors were appointed by decree
of the Council of Ministers and (4) its funding came mainly from the State budget. (1008)
In relation to CDR, it argued that it was a State organ because (1) it replaced the Ministry
of Planning and became the successor of the CEGP in all its rights and obligations,
including the Contract in the matter at hand, (2) it was tasked to ensure the study and
implementation of the public works entrusted to it by the Council of Ministers, (3) its
President and Board of Directors were designated by the Council of Ministers and (4) its
projects were funded by the State budget and were awarded in line with the public
adjudication process. (1009)
The claimant submitted that CEGP and CDR acted on behalf of the Republic of Lebanon to
carry out public works projects decided by the Council of Ministers. (1010)
P 162
The respondent argued that CEGP and CDR were two independent entities with financial
and administrative autonomy and that the State did not take part in the implementation
of the projects carried out by CEGP and CDR. (1011)
In respect of CEGP, the tribunal noted that its constitutive law put it in charge of studying
and implementing the projects entrusted to it by the Council of Ministers. Further, the
tribunal noted that although attached to, and operating under the control of, the Ministry
of Public Works and Transport, CEGP had a distinct legal personality and enjoyed
administrative and financial autonomy. CEGP was also subject to the authority of the
Council of Ministers and the disciplinary authority of the Central Inspectorate. The State
budget allocated funds to the projects that were to be performed by the CEGP. (1012)
Based on the foregoing reasons, the tribunal concluded that CEGP was a public entity
created and mandated by Lebanon to exercise elements of governmental authority.
(1013) The tribunal then noted that CEGP’s conduct had to be considered that of the State
under ILC Article 5, because CEGP exercised Lebanese governmental authority when it
entered into the contract with the claimant. (1014)
In respect of CDR, the tribunal noted that it exercised governmental authority as a legal
successor of CEGP. (1015) The tribunal nevertheless went on discussing the institutional
status of CDR, noting that it mainly acted as the agent and implementing authority of the
Lebanese Government. (1016) By law, it was in charge of studying and implementing
development and reconstruction projects, elaborating and implementing the projects
assigned to it by the Council of Ministers. (1017)
87
In relation to the alleged late site expropriations, the tribunal observed that a
contractual obligation may overlap with a core governmental function:
when the State acts as an administrative authority, holder of the ‘puissance
publique,’ while performing obligations arising from the Contract, such State
must be viewed both as a party to the contract and as a sovereign. The
authority to expropriate is a typical example of a prerogative that can only be
exercised by the State (or by its emanation) as holder of the ‘puissance
publique’. Thus, clearly, in the matter at hand, expropriation by Lebanon
through the CDR is a prerogative that does not pertain to the simple
performance of ordinary contractual duties. It falls within the scope of the
‘puissance publique’ that must be used to allow performance of the contract by
Toto and enters within the scope of [the relevant BIT standard]. (1018)
Further, in the merits phase, the tribunal noted that the expropriations of parcels, which
were allegedly delayed, ‘had to be carried out by Lebanon in its capacity of “autorité
publique”’. (1019)
P 163
In relation to the claimant’s claim that the respondent, on various occasions, has been
late in submitting or approving the necessary designs and plans under the contract, the
tribunal noted this claim concerned ‘the standard duties in a construction contract, i.e.,
an alleged failure by an employer to comply with his obligations towards the contractor.
It [did] not involve the use of sovereign authority or “puissance publique”’. (1020)
The Toto tribunal’s attribution analysis illustrates that State instrumentalities may
exercise governmental authority also in a contractual context. The exercise of public
power may be an essential ingredient of a contract concluded by a State instrumentality.
However, this does not entail that all acts and omissions of the State instrumentality are
in exercise of such public power. Ordinary contractual acts remain outside the remit of
governmental authority. The tribunal took into account first the purpose and function of
the State instrumentalities and their accountability to the State for the implementation
of the projects entrusted to them by the State and then looked at the nature of the
conduct in question.
State instrumentalities often perform commercial activities as an auxiliary activity,
which serves the implementation of the main, governmental function. Whether or not
such auxiliary activities are regulated by law, it seems that the degree of connection
between the primary governmental activities and the auxiliary commercial activities of
the State instrumentality is normally insufficient to attribute the latter to the State.
In EDF v. Romania (1021) the tribunal considered whether the duty-free commercial
activities at airports operated by AIBO in Romania or on board flights operated by
TAROM could be considered to involve elements of governmental authority. Having
decided that neither AIBO nor TAROM was structurally part of the State and as such were
not State organs, the tribunal looked at the possibility of AIBO or TAROM performing
delegated governmental authority within the meaning of ILC Article 5.
The tribunal noted that the activities concerning aircraft and flight operations were
public services performed by AIBO using public property as a concessionaire. (1022) In
respect of the lease of airport spaces for commercial services, AIBO acted as a
commercial enterprise. (1023) The tribunal found that the Ministry of Transport exercised
governmental control over AIBO only in connection with its public services, whereas in
relation to AIBO’s commercial dealings, the Ministry acted as a shareholder. (1024)
In relation to TAROM, the tribunal noted that there was no Romanian law obligation
binding TAROM not to compete with the claimant’s joint venture in relation to on-board
duty-free services. In other words, TAROM, as a State Enterprise, shared private law rights
and powers with other service providers, being entitled to undertake commercial
activities in competition with other businesses on the relevant market. (1025)
P 164
The tribunal concluded that the impugned conduct did not fall within the scope of a
delegated governmental authority over transportation infrastructure, such as the
administration of public airports and airlines. (1026)
[8] The Context of the Impugned Conduct
The context of the relevant conduct might lead to a conclusion that a seemingly
commercial act serves a governmental purpose. The termination of agreements for the
provision of airport duty-free services was at issue in Flemingo Duty Free v. Poland. (1027)
The claimant argued that the PPL exercised governmental authority in terminating those
agreements in the context of the modernisation of Chopin Airport. (1028) The respondent
argued that the lease of retail space was a commercial act and not a function reserved
for the State and therefore could not be included among the tasks performed by PPL, as
airport operator, for and on behalf of the State Treasury. (1029)
The tribunal observed ‘the operation and management of an international airport is an
activity which is not usually carried out by private business, although a State may
88
delegate, through well-defined concessions, part of this management and operation to
private business. In the case at hand, however, the management and operation was not
delegated to private business but to a State-owned entity, PPL’. (1030) It then found that
PPL was operating under the control of the Ministry of Transportation, (1031) and, unlike in
EDF v. Romania, such close control extended also over the commercial operations at
Chopin airport. In particular, PPL and the Ministry of Transport concluded a Performance
Agreement to modernise Chopin airport and PPL terminated the lease agreements in the
context of that modernisation project.
The tribunal found that PPL functioned within the structure of the Ministry of Transport,
which through PPL participated in the modernisation of Chopin Airport. (1032) Based on
the evidence available, (1033) the tribunal found that PPL was a State organ. In light of its
finding, the tribunal considered ex abundantia if PPL was in any event exercising
governmental authority. (1034)
The tribunal focused its analysis on whether PPL’s conduct was attributable to the State
under ILC Article 5 in the context in which PPL terminated the commercial lease
agreements: the modernisation of Chopin airport.
It noted that, apart from the typical governmental functions, such as public defence
obligations, PPL carried out also the operation and modernisation of Chopin Airport in
P 165 the exercise of governmental authority. The tribunal relied on the fact that the
modernisation of the airport was a statutory function of PPL and the Secretary of State of
the Ministry of Transport had confirmed that the modernisation was a governmental
matter in which his Ministry was involved through PPL. (1035)
The tribunal concluded that PPL was a State instrumentality, because ‘[t]he Ministry of
Transport, by statutory provisions, delegated to PPL the task of modernising and
operating Polish airports, controlled PPL, and held it accountable for the exercise of its
powers.’ (1036) The tribunal’s conclusion that the modernisation of the airport was a
governmental function was influenced by its view that airports fulfilled a public function,
including in the domain of public defence, as well as ‘a crucial role for international
communications and connections of the airport from the Polish capital’. (1037) The
tribunal’s purposive approach to defining governmental authority echoes the Jan de Nul
tribunal’s finding concerning the public function of SCA.
The tribunal then considered whether the impugned conduct, namely the termination of
the lease agreements, related to the exercise of governmental authority. It found that PPL
acted under governmental authority in respect of the conclusion, performance and
termination of the lease agreements. (1038) In this regard, it noted that the conclusion of
the lease agreements and their amendments as well as a temporary rent reduction had
to be approved by the State Treasury. Further, the tribunal noted that:
the PPL Act included the construction, extension and maintenance of airport
terminals in PPL’s scope of activities, and that the Performance Agreement
concluded between PPL and the Minister of Transport in 2010 to modernise
Chopin Airport subjected the modernisation of Terminal 1 to control by the
Ministry. In addition, the Secretary of State of the Ministry of Transport
specifically acknowledged in Parliament responsibility for the modernisation
of Terminal 1 of the Chopin Airport. (1039)
The tribunal thus found that there was a close connection between the modernisation of
the airport, which was a governmental activity, and the termination of the lease
agreements. In light of such connection, it found that the disputed termination of the
lease agreements should be considered an act of the State under international law under
[9] The Relevance of an Open Market
In UPS v. Canada (1041) the tribunal contrasted a State instrumentality’s activities
P 166 exclusively reserved to the State with its commercial activities. The claimant
complained of unequal and unfair treatment accorded to it and its Canadian subsidiary
by Canada through the conduct of Canada Post Corporation (Canada Post).
Canada Post was a Crown corporation established by law as an ‘agent of Her Majesty in
right of Canada’ and an ‘institution of the Government of Canada’. By law, it held a
monopoly in collecting, transmitting and delivering first-class mail letters to addressees
within Canada, subject to certain exceptions. (1042) Canada Post also operated, in
competition with UPS Canada, in the non-monopoly postal services market in Canada
providing courier services, special delivery services and expedited and regular parcel
services. In addition, it owned the majority shareholding in Purolator Courier Ltd
(Purolator), Canada’s largest courier company. (1043) Canada Post was entitled to make
regulations to define the scope of its letter mail monopoly, including by setting the price.
(1044)
The claimant argued that, in violation of NAFTA, it has been denied access to the
monopoly infrastructure and network, unlike Purolator and other divisions of Canada
Post, which competed in the non-monopoly market. (1045)
The tribunal accepted the respondent’s arguments that NAFTA contained rules on
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attribution, which prevailed as lex specialis over the ILC Articles. (1046) In particular,
Articles 1502(3)(a) and 1503(2) (1047) in Chapter 15 of NAFTA provide a lex specialis regime
in relation to the attribution of acts of monopolies and State Enterprises, which
precludes the application of the rules of attribution in the ILC Articles. Under these rules,
the claimant must establish that the monopoly or State Enterprise in question is
exercising a ‘regulatory, administrative or other governmental authority that the Party
has delegated to it’. (1048)
P 167
Having found that the actions of Canada Post could not be directly attributed to Canada
under Chapter 11 (Investment) of NAFTA and for the purposes of Articles 1502(3)(a) and
1503(2), the tribunal considered whether Canada breached its obligations to ensure that
Canada Post complies with Chapter 11. (1049) In that regard, the claimant submitted that
Canada has failed to supervise or exercise control over Canada Post in relation to (1) its
discriminatory leveraging of its monopoly infrastructure so as to provide competitive
advantages to Purolator and to its own courier services, (2) its failure to perform customs
duties and collect duties and taxes and (3) its unfair denial of the bid of one of UPS’ local
subsidiaries. (1050)
The respondent accepted that Canada Post’s actions in respect of the collection of
customs duties fell within ‘delegated governmental authority’ in terms of Articles 1502(3)
(a) and 1503(2), but it disputed that the other claims fell within the same category.
The tribunal noted in its attribution analysis that Canada Post ‘may be seen as part of the
Canadian government system, broadly conceived’, having ‘an essential role in the
economic, social and cultural life of Canada’. (1051)
In respect of the scope of the attribution test in Articles 1502(3)(a) and 1503(2), the
tribunal stated that:
[n]ot all actions of all monopolies and of all State enterprises which are
claimed to be inconsistent with the obligations of the Parties under [NAFTA] as
a whole (in terms of article 1502(3)(a)) or under chapter 11 or chapter 14 (in
terms of article 1503(2)) are caught. The provisions operate only where the
monopoly or enterprise exercises the defined authority and not where it
exercises other rights or powers. They have a restricted operation. (1052)
The tribunal interpreted the requirement to exercise governmental authority by contrast
to ‘the use by a monopoly or State enterprise of those rights and powers which it shares
with other businesses competing in the relevant market and undertaking commercial
activities’. (1053) It went on stating that such commercial rights and powers include ‘the
rights to enter into contracts for purchase or sale and to arrange and manage their own
commercial activities’, (1054) which were just the rights challenged by the claimant.
Noting that the general attribution rule under ILC Article 5 would not have led to a
different result, the tribunal agreed with the respondent that:
the decisions which Canada Post makes in the course of the establishment,
expansion, management, conduct and operation of its overall business, about
its own use of its infrastructure for its non monopoly services and about the
use by Purolator of the infrastructure are commercial decisions without the
governmental character required by article 1502(3)(a) and article 1503(2).
(1055)
P 168
The tribunal therefore concluded that the decisions of Canada Post relating to the use of
its infrastructure by Purolator and by its own competitive services were to be seen as
commercial activities outside the scope of the special attribution rules of Articles 1502(3)
(a) and 1503(2) or the general rule in ILC Article 5. (1056)
Although rendered in a NAFTA context in which the general attribution rules of the ILC
Articles do not apply, the UPS tribunal’s approach is useful for identifying governmental
conduct by reference to the relevant market or economic sector. The test looks at nature
and extent of the tools that the entity has at its disposal, in comparison with a private,
commercial entity, to achieve its objectives. Applying this test, to the extent that such
tools –namely, rights and powers – are shared with private businesses undertaking
commercial activities on the same market, the relevant conduct is not an exercise of
governmental authority.
[10] The Institutional Relationship
NAFTA’s attribution rules were considered also in Windstream Energy v. Canada. (1057) The
dispute concerned an offshore wind electricity generation project in Ontario that was
part of a Feed-in-Tariff (FIT) Program for the development of renewable energy projects.
The FIT Program established a twenty year fixed premium price to be paid by the Ontario
Power Authority (OPA) for energy generated from renewable sources, including onshore
and offshore wind. The claimant and OPA entered into a FIT Contract, which required the
claimant to bring the project into commercial operation by a specified date and
90
required OPA to purchase all electricity generated by the project. (1058)
OPA was established by law as ‘an independent non-share capital corporation
responsible for medium and long-term system planning, conservation, demand
management and procurement of new generation through long-term power purchase
agreements (PPAs)’. (1059) It was entitled to enter into electricity procurement contracts.
The Minister of Energy could direct the OPA to undertake specific actions regarding its
electricity procurement programs, but the Electricity Act specified that the OPA was ‘not
an agent of the Crown’. (1060)
The claimant alleged that the Government of Ontario delayed the relevant permits and
authorizations, including those allowing access to Crown land, and eventually imposed a
moratorium on the development of offshore wind that frustrated the claimant’s attempts
to develop the project. (1061) The respondent invoked scientific reasons for the deferral
P 169 of offshore wind projects, while the claimant alleged that the decision was in fact
motivated by political concerns and rising costs of renewable energy. (1062)
Following the moratorium, to protect its position, the claimant proposed various
amendments to the FIT Contract, including the extension of force majeure for the
duration of the moratorium.
The claimant argued that the Ministry of Energy and Infrastructure (MEI), which in its view
controlled OPA, failed to cause the OPA to agree to amend the FIT Contract to insulate the
claimant from the effects of the moratorium. Alternatively, it argued that OPA failed to
agree to the post-moratorium amendment of the FIT Contract. (1063) The claimant
submitted that OPA was a State Enterprise and its conduct was attributable to Canada
under Article 1503(2) of NAFTA. (1064)
The respondent argued that OPA did not exercise any delegated governmental authority
in its negotiations with the claimant and ‘commercial negotiations and contracts entered
into in that context [did] not qualify as “an exercise of governmental authority” even if
they were made in furtherance of a public policy objective’. (1065)
The claimant argued that OPA’s administration of the FIT Program was a sovereign act, as
it implemented Canada’s objective of increasing procurement of electricity from
renewable energy sources and the FIT Contract administered by OPA was the key
component of that objective. (1066) It submitted that, due to its public purpose, the FIT
Program could not be regarded as commercial in nature. (1067)
In the tribunal’s view, the issue whether OPA’s conduct was attributable to Canada was
governed by Article 1503(2) of NAFTA, which, in its view, was consistent with ILC Article 5.
(1068) The tribunal found that OPA was empowered to exercise governmental authority,
as by law the MEI had authority to issue directions to OPA. The tribunal noted that ‘to the
extent that OPA acted on the basis of such directions, its conduct could be considered
attributable to Canada, depending on whether the direction in question involved a
delegation of exercise of governmental authority to the OPA’. (1069)
The tribunal accepted that the moratorium was imposed at least in part for genuine
policy reasons, but it found that ‘the Government did little to address the legal and
contractual limbo in which Windstream found itself after the imposition of the
moratorium’. (1070) The tribunal observed that ‘[t]he Government let the OPA conduct the
negotiations with Windstream even if the decision on the moratorium had been taken by
the Government and not by the OPA, and without providing any direction to the OPA for
the negotiations although it had the authority to do so’ and consequently the
negotiations failed and the project was no longer financeable. (1071)
P 170
As it found that the regulatory and contractual limbo regarding the claimant’s investment
following the imposition of the moratorium was a result of acts and omissions of the
Government of Ontario, and as such was attributable to the Respondent, the tribunal did
not consider whether the conduct of OPA must also be considered attributable to the
Respondent. (1072)
The Windstream tribunal’s award is notable for grounding the existence of OPA’s
governmental authority on the power of the MEI to issue directions. This resonates with
the ILC’s guidance on the application of ILC Article 5, namely that the way the powers are
conferred on the entity and the extent of the entity’s accountability to the government
are relevant questions to consider in identifying governmental authority.
The tribunal in Mesa Power v. Canada (1073) in an award made just months before the
Windstream Award addressed the issue of the exercise of governmental authority by OPA
in the context of the FIT Program. The claimant argued that OPA’s ‘manipulation’ of the
FIT Program prevented it from obtaining FIT Contracts and thus caused losses to its
operations in Canada. (1074) In particular, the claimant argued that the measures of OPA
relating to the administration of the FIT Program, such as the alleged failure to follow the
FIT Rules with respect to the ranking and evaluation of applications, the alleged better
treatment of other FIT applicants and the award of the FIT Contracts, breached the
investment protection standards of NAFTA. (1075)
The tribunal found that Article 1503(2) of NAFTA, as lex specialis, displaced ILC Article 5.
91
(1076) It noted in this regard that ‘Article 1503(2) thus addresses situations in which the
acts of a State Enterprise are impugned. It provides that a NAFTA Party is responsible for
the acts of a State Enterprise in respect of Chapter 11 (and 14) only in cases where that
State Enterprise exercises regulatory, administrative or other governmental authority
delegated to it by that NAFTA Party.’ (1077)
The tribunal noted that, in relation to the FIT Program, OPA was acting under the
directions of the Minister of Energy. The Minister’s direction required OPA to develop
rules for applicants and establish appropriate policies and procedures with respect to
the administration of the FIT Program. The tribunal therefore found that ‘by preparing the
FIT Rules and setting out the ranking and evaluation criteria for the applications to the
FIT Program, the OPA was acting in the exercise of delegated governmental authority.
Thus, the OPA’s acts in ranking and evaluating the FIT Applications are attributable to
Canada’. (1078) With respect to the other measures of OPA, the tribunal observed that
although OPA was authorised to enter into electricity supply and capacity contracts in
the renewable energy sector, the award of FIT Contracts ‘resulted from a combination of
the OPA’s evaluation and ranking process and the reduction of capacity because of [a
governmental long term energy plan and a green energy investment agreement
P 171 concluded by the government with a Korean consortium]’. (1079) Therefore, the tribunal
found that the remaining impugned measures of OPA were also carried out in the exercise
of delegated governmental authority. (1080)
The Mesa Power tribunal’s award illustrates that the impugned conduct, in this case the
failure to award FIT contracts, may be the culmination of a succession of governmental
acts, in which case the nature of the whole process informs also the nature of the
component acts.
It is worth recalling at this stage that in Jan de Nul v. Egypt the contracting authority’s
refusal to grant an extension of time at the time of the tender was not considered an
exercise of governmental authority on the basis that ‘[a]ny private contract partner could
have acted in a similar manner’. (1081) In Mesa Power the impugned act concerned the
decision-making process itself and on that basis it can be said that the two analyses are
not inconsistent.
[11] Statutory Public Functions
When there is no commercial State-owned intermediary involved in the dealings
between the investor or its local business and the authorities exercising regulatory,
administrative or governmental authority, the issue of attribution is uncontroversial.
In Genin v. Estonia (1082) the crux of the matter was the revocation of a banking license by
the Bank of Estonia. The license of the Estonian Innovation Bank (EIB), majority-owned by
the claimants, was revoked, among others, on the basis of EIB’s failure to provide
information concerning its shareholders and their shareholders, and to submit
documentation for a qualified holding permit required under Estonian banking law.
(1083)
The claimant argued that Bank of Estonia’s revocation of the license of the EIB was a
mere pretext designed to enable the Bank of Estonia to avoid its liability to EIB for its
involvement in a controversial affair concerning the sale of an insolvent bank’s branch to
EIB. (1084)
The tribunal applied the applicable treaty’s provision on State Enterprises to the Bank of
Estonia in order to attribute its conduct to the State:
The Estonian central bank is a ‘state agency’, as defined by the BIT, which
stipulates in Article II 2(b) that ‘Each Party shall ensure that any state
enterprise that it maintains or establishes acts in a manner that is not
inconsistent with the Party’s obligations under this Treaty wherever such
enterprise exercises any regulatory, administrative or other governmental
authority that the Party has delegated to it, such as the power to expropriate,
P 172 grant licenses …’. The Republic of Estonia is therefore the appropriate
Respondent to a complaint relating to the conduct of the Bank of Estonia.
(1085)
The tribunal then found that the demands for information of the Bank of Estonia that
preceded the revocation of the banking license were validly based on the Credit
Institutions Act and ‘constituted entirely legitimate and fully proper exercises of the
central bank’s regulatory and supervisory responsibilities’. (1086) In light of its statutory
public function, it was undisputed that the Bank of Estonia acted in a non-governmental
capacity. As for the alleged misuse of its governmental powers, the tribunal concluded
that the conduct of the Bank of Estonia, although not entirely unobjectionable, was within
its statutory discretion in revoking EIB’s banking license. (1087)
The capacity in which the Central Bank of Mongolia entered into and acted in relation to
a SCSA concluded with the claimant’s company was at issue in Paushok v. Mongolia.
(1088) The respondent submitted that the SCSA was a commercial transaction and as
such could not give rise to State responsibility. (1089)
The tribunal noted that, ‘[w]hile claiming that the SCSA is a purely commercial
92
transaction, Respondent also argues that MongolBank entered into the SCSA within the
exercise of its functions related to the management of Mongolia’s foreign reserves.’ (1090)
It further observed that the export and refining of the deposited gold and the deposit of
the gold or its value in an unallocated account were made in order to increase the
country’s currency reserve purchases and thus in the exercise of specific powers
conferred on it by the law. (1091) The tribunal concluded that ‘MongolBank acted de jure
imperii, if not in entering into the SCSA, at least when it exported GEM’s gold for refining
and deposited it or its value in an unallocated account in England “with the purposes of
increasing the country’s reserves.” Those actions were de jure imperii and went beyond a
mere contractual relationship.’ (1092)
As the Paushok tribunal’s analysis illustrates, the purpose of the relevant conduct may
lead to a conclusion that the entity undertaking that conduct was exercising
governmental authority even in the context of a contractual relationship.
[12] The Nature and Purpose of the Transaction
The tribunal’s attribution analysis in Bosh v. Ukraine (1093) shows that the governmental
nature of an activity does not necessarily mean that all powers pertaining to that activity
are exercised for governmental purposes.
P 173
The dispute concerned a contract concluded between B&P Ltd Foreign Investments
Enterprise (B&P) and the Taras Shevchenko National University of Kiev (University) in
relation to joint activities to redevelop and operate a facility comprising a hotel, a
research training centre with conference and meeting rooms and other facilities intended
to accommodate, among others, academic symposia, seminars and conferences. (1094) It
is notable that the parties agreed that the envisaged joint activities would concern also
non-educational activities, including economic activities. (1095) The joint venture was
created because the University did not have the funds to finance the redevelopment and
B&P was able to contribute capital and other resources to the redevelopment project in
return for a 50% interest in the project for twenty-five years. (1096)
An internal audit carried out by the University and an audit conducted by the General
Control and Revision Office (CRO) of Ukraine revealed several irregularities concerning
the use of the property. CRO was a financial control authority within the Ministry of
Finance of Ukraine mandated to audit the use and accounting of State funds and the use
of State property. CRO determined that B&P failed to open a separate joint activity
account and failed to carry out joint activities in a number of areas. (1097) CRO directed
the University to ‘[c]onsider the question of termination of joint activities with B&P’ on
the basis that such activities were ‘inconsistent with the University status being a [State]
budget-maintained institution’. (1098) The University terminated the contract and
evicted B&P from the complex.
The claimants argued that the conduct of the University was attributable to the State on
two alternative grounds: (1) under ILC Article 5 or (2) under Article II(2)(b) of the US-
Ukraine BIT (1099) applicable in that case.
In support of their case under ILC Article 5, the claimants submitted that the University
was State-funded, was delegated powers to manage State property for its campuses, was
empowered by a ‘State charter’ and that the Rector of the University exercised statutory
authority. (1100) Further, the claimants argued that the power to appoint the Rector was
vested initially with the Office of the President, and subsequently with the Government.
(1101) Finally, the claimants noted that the University, being a public institution using
P 174 State funds and property, was subject to the control of the CRO. (1102) The claimants
also argued that the commercial nature of the joint activity invoked by the respondent
did not prevent the attribution of its conduct to the State. (1103)
In support of its alternative case under Article II(2)(b) of the US-Ukraine BIT, the
claimants submitted that under Ukrainian law the State ‘implement[ed] State policy in
the area of higher education’ and that State policy was determined by the Parliament.
(1104)
The respondent did not contest the claimants’ attribution position under the BIT. It
argued, however, that the first limb of ILC Article 5 was not met, because the University
was not empowered under Ukrainian law to exercise elements of governmental authority.
In that regard, the respondent submitted that ‘the provision of education and the
management of State property [did] not require the exercise of any public power’ and
the University was not empowered to enter into commercial agreements on behalf of the
State. (1105) In relation to the second limb of ILC Article 5, the respondent argued that,
even if the University was empowered to exercise governmental authority, the
termination of the contract was not carried out in the exercise of such authority: ‘it was
simply the termination of a commercial agreement, rather than the carrying out of any
sovereign act’. (1106)
In respect of ILC Article 5, the tribunal noted that the University, as a self-governing
higher educational institution, was empowered, among others, ‘to engage in joint activity
with other education institutions, organisations and enterprises’. (1107) Its Charter also
confirmed that it was entitled to pursue business activities. Both the law and the Charter
93
authorised it to make use of State property for its activities. (1108)
The tribunal noted that the autonomous nature of the University did not exclude it from
the scope of ILC Article 5. It found that the University was an entity empowered by the law
of Ukraine to exercise elements of governmental authority. (1109) The tribunal considered
that the provision by the University of higher education services and the management of
State-owned property were ‘forms of governmental authority that the University is
empowered by the law of Ukraine to exercise’. (1110) As noted by Petrochilos, (1111) higher
education is an area of activity, which aptly illustrates the ILC’s view that ‘what is
regarded as “governmental” depends on the particular society, its history and traditions’.
(1112) As noted in the Bosh award, in Ukraine, the State was empowered by law to
implement State policy in the area of higher education. (1113) The tribunal’s conclusion
P 175 as to the existence of governmental activity might have differed if the case would have
concerned a country where higher education is not controlled by the State. (1114)
Turning to the second limb of ILC Article 5, the tribunal noted that the question was
‘whether the University’s conduct in entering into and terminating the [contract] with B&P
can be understood or characterised as a form of ‘governmental activity’, or as a form of
‘commercial activity’. (1115)
The tribunal noted that Ukrainian law empowered the University to engage in joint
activity with enterprises as an autonomous higher education institution. It further noted
that the University was entitled under its Charter to contract with B&P ‘in its own right,
and without the need for any particular authorisation by Ukraine’. (1116)
The tribunal concluded that the University’s conduct was not attributable to the State
under ILC Article 5, because ‘the University’s decision to enter into and subsequently
terminate the …[c]ontract with B&P did not relate to the exercise of the University’s
governmental authority, but by reference to the nature and purpose of the …[c]ontract …
was a private or commercial activity which was aimed to secure commercial benefits for
both parties’. (1117)
In determining if the relevant conduct involved an exercise of governmental authority,
the tribunal thus focused on the nature and purpose of the transaction, rather than on the
nature and purpose of the powers exercised in entering into, or terminating, that
transaction. This approach appears to be correct, because, as Petrochilos observes, ‘[t]he
test is not whether the act or omission in question was, in itself, one that requires a
special grant of governmental authority, but rather whether the act or omission relates to
the governmental authority granted to the entity.’ (1118)
However, the tribunal had already determined that the provision of higher educational
services and the management of State property were governmental activities and the
contract indeed related, at least in part, to those activities. As noted also by Petrochilos,
(1119) one would have expected the tribunal to elaborate on the lack of connection
between (1) the provision of higher educational services and the management of State
property, which in the tribunal’s view were governmental activities and (2) the
termination of a contract that at least in part related to those activities.
In any event, the implication in the Bosh tribunal’s analysis under ILC Article 5 appears to
be that a State instrumentality does not necessarily ‘exercise’ governmental authority,
whenever it acts within the framework of its governmental authority. In other words, if a
State entity empowered to exercise governmental authority enters into a commercial
contract within the framework of those governmental powers, the termination of that
contract does not necessarily involve an exercise of the same governmental powers.
P 176
In relation to the claimants’ alternative attribution case under Article II(2)(b) of the US-
Ukraine BIT, the tribunal noted that the invoked treaty provision did not render the
conduct of the University attributable to Ukraine. The tribunal construed that provision
as merely imposing:
a positive obligation on Ukraine to ensure that any ‘State enterprise’ that
exercises governmental authority acts in a manner that is consistent with
Ukraine’s obligations under the BIT. Thus, if a protected investor in Ukraine
were to consider that Ukraine had not ensured, consistently with its obligation
in Article II(2)(b), that any State enterprise had acted in conformity with
Ukraine’s obligations under the BIT, that would give rise to a claim for breach
of the BIT against Ukraine. (1120)
The tribunal’s reasoning departs from the interpretation of an identically worded
provision in Genin v. Estonia, where the conduct of the Bank of Estonia was effectively
attributed to the State based on the same wording. (1121) Admittedly, Article II(2)(b), just
as its counterparts in a number of other treaties, does not directly deal with the issue of
the attribution of the conduct of State Enterprises to the State. (1122) Based on its plain
wording, it is intended to establish an obligation of vigilance of the State over its State
Enterprises. (1123) Nevertheless, that obligation subsists in the context of the close
relationship between the State and the State Enterprises. To that extent, there seems to
be no reason why the provision should not be used to attribute the conduct of State
Enterprises to the State. (1124)
94
In any event, it is unlikely that the application of such lex specialis rule would have led to
a different result than the tribunal’s analysis under ILC Article 5.
The management of State property was the relevant governmental activity also in
InterTrade v. Czech Republic. (1125) The tribunal found that LCR, a public entity
empowered to manage the State forests, was not a State organ. It therefore went on to
consider if the conduct of LCR, namely the allegedly unlawful conduct of a tender, was
attributable to the State under ILC Article 5.
The tribunal stated that there was ‘no doubt that LCR was empowered to exercise
elements of governmental authority’. (1126) It then dismissed the claimant’s argument
P 177 that LCR’s conduct in relation to the tender in question must be viewed in the context
of LCR’s ‘purpose of benefitting the wider public interest’. (1127) The tribunal noted that
‘State entities are always deemed to act in the public interest, but this, in and by itself, is
not sufficient under Article 5 to attribute all their acts to the State.’ (1128)
The tribunal found that in conducting the tender in question LCR engaged in commercial
activities on its own behalf and with the aim of seeking profit ‘in the very same way as
private owners of forested land who, concurrently, were also performing tenders for
forestry activities’. (1129) It further noted that the fact that the delegation by the Ministry
of Agriculture, which had the overall statutory responsibility for the administration of the
forests, of the silvicultural contracts to LCR, did not render the State responsible for all
the acts of LCR. (1130)
In a separate opinion, arbitrator Alvarez stated that, in his view, ‘the Ministry of
Agriculture remained responsible for the administration of the forests under the Forestry
Act even though it delegated the overseeing of contracts to [LCR]’ (1131) and, in any event,
the purpose of the tender went beyond a commercial activity: ‘applying the label
“tender” to the acts complained of and saying that it is therefore commercial overly
simplifies the necessary functional analysis and does not properly perform the functional
test required to determine whether [LCR] was exercising governmental authority through
the tender process. Although a tender process may appear to be connected only to
commercial activities; it is necessary to analyse the purpose of the tender in question.’
(1132) Arbitrator Alvarez then concluded that ‘the determination of who will be granted
the right to perform complete forest services, including not only logging activities but
also silvicultural activities to protect, preserve and ameliorate the forests, is central to
the management of the forests’ and the management of State-owned forests was a
governmental activity. Therefore, he opined that the tender in question was in the
exercise of governmental authority for the purposes of ILC Article 5. (1133)
Referring to the majority’s reliance on the Jan de Nul tribunal’s award, Arbitrator Alvarez
contested that it is irrelevant that the subject matter of the contract refers to a core
governmental function. He noted in that regard that:
[w]hile States should not be held responsible at international law for acts that
are purely commercial, they should not be able to avoid responsibility by
exercising governmental authority through contractual or commercial means.
If, through the tender process, [LCR] was managing the State-owned forests,
then it was exercising governmental authority. The fact that the subject matter
of the tender process relates to the core function of [LCR] is of fundamental
importance. (1134)
The InterTrade majority’s stance on the exercise of governmental authority appears to
P 178 have been influenced by the fact that LCR managed only approximately 50%–60% of
all forested land. (1135) On the other hand, arbitrator Alvarez grounded the exercise of
governmental authority in the connection between what he regarded as governmental
activity, namely the management of State-owned forests, and the means through which
that governmental activity manifested itself, namely the conduct of a public tender. In
that regard, arbitrator Alvarez distinguished between pure commercial acts and the
exercise of governmental authority through contractual or commercial means.
Distinguishing between the means and the purpose of the conduct per se does not
appear to contravene the attribution test of ILC Article 5. Nevertheless, the Commentary
to ILC Article 5 makes it clear that it is intended to deal with ‘parastatal entities, which
exercise elements of governmental authority in place of State organs, as well as
situations where former State corporations have been privatized but retain certain
public or regulatory functions’. (1136) With respect to the first situation, namely when
these entities act as State organs, there has to be a distinction between ILC Article 4,
which covers the attribution of the conduct of State organs, and ILC Article 5, which deals
with State instrumentalities. It has been repeatedly held (1137) that the distinction lies in
the exclusion of acta jure gestionis or commercial acts from the scope of ILC Article 5. The
second situation refers to entities in a transitional process from State ownership to
private ownership, which retain public or regulatory functions. Hence, there does not
appear to be a basis to include in the scope of application of ILC Article 5 contractual or
commercial acts of State entities even when they serve a governmental purpose. ILC
Article 5 appears to be designed to deal with the ‘exercise of functions of a public
character normally exercised by State organs’. (1138) Nevertheless, there is force in the
argument that a State should not be allowed to avoid international law responsibility by
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choosing to exercise governmental authority through contractual or commercial means. A
governmental policy may be implemented through public law or private law means,
through governmental action or commercial action. It is not clear what policy
consideration underlies the exclusion of private law or commercial acts when those acts
further a governmental purpose. (1139) One may say that such an exclusion is justified by
the fact that the State instrumentality, unlike a State organ, is not part of the State.
Indeed, Special Rapporteur Crawford made it clear during the discussions of ILC Articles
P 179 4 and 5 that ‘the attribution of the conduct to the State was the rule in the case of organs
of the State but the exception in the case of entities which were not part of the formal
structure of the State’. (1140) On that basis, a narrow application of ILC Article 5 seems
justified.
In light of the investment arbitration jurisprudence, the treatment of commercial or
contractual conduct that serves a governmental or public purpose (1141) is an issue that
deserves attention by the Sixth Committee of the UN in its consideration of a potential
draft convention on State responsibility for internationally wrongful acts or other
appropriate action that it would decide to take on the basis of the ILC Articles. (1142)
[13] The Relevance of the Contractual Framework
As Al Tamimi v. Oman illustrates, the contract itself may reflect the parties’
understanding as to the issue of governmental authority. (1143) The dispute involved the
conduct of Oman Mining Company LLC, an Omani State-owned company (OMCO), which
concluded two lease agreements with Emrock Aggregate & Mining LLC (Emrock) and SFOH
Limited (SFOH), owned and/or controlled by the claimant, in relation to the development
and operation of a limestone quarry in the Jebel Wasa mountain range in Oman. Each
lease agreement provided that OMCO would use its best endeavours to obtain the
requisite environmental and operating permits for the quarry and the lease agreement
would enter into force upon obtaining all permits, licenses and access to the quarry site.
(1144)
P 180
OMCO was owned almost entirely by the Omani Ministry of Oil and Minerals. It was
established by law to facilitate the discovery, excavation, manufacturing and marketing
of minerals in Oman. (1145)
Having received the initial environmental permit from the Ministry of Environment and
Climate Affairs (MECA) and the relevant permit from the Ministry of Commerce and
Industry (MOCI), OMCO informed the claimant that his companies could begin quarrying
operations. (1146) MECA and MOCI issued a number of complaints, warnings and fines due
to the claimant’s alleged unauthorised use of equipment, excavation of material from the
dry riverbed, operating outside of the boundary of the permit, and blasting outside of the
concession area. (1147) As the relationship between OMCO and the claimant deteriorated,
OMCO terminated the lease agreement with Emrock on grounds of failure to comply with
payment obligations. Further, OMCO refused to recognise the validity of the SFOH lease
agreement. (1148)
The claimant brought treaty claims against Oman under the US-Oman FTA, which contains
a special provision on State Enterprises. Article 10.1.2 in the Investment chapter extends
the State’s investment protection obligations to ‘a state enterprise or other person when
it exercises any regulatory, administrative, or other governmental authority delegated to
it by that [State]’. The claimant argued that OMCO exercised delegated governmental
authority. (1149)
The respondent argued that OMCO’s termination of the Emrock lease agreement could
not be attributed to Oman because OMCO did not exercise any regulatory, administrative
or other governmental authority on the part of Oman. (1150)
The claimant argued that OMCO terminated the agreement with Emrock as a result of
governmental pressure and that the invoked basis for termination, namely the non-
reimbursement of minimal fines, was just a pretext concealing a politically motivated
decision. (1151)
The tribunal accepted that Article 10.1(2) of the US-Oman FTA provided for a special rule
of attribution, (1152) but it noted that ILC Article 5 ‘nevertheless provides a useful guide
as to the dividing line between sovereign and commercial acts’. (1153)
The tribunal did not find any evidence of delegated regulatory, administrative or
governmental authority in relation to OMCO. In response to the claimant’s argument that
OMCO’s board of directors comprised ministers from various governmental departments,
the tribunal noted that the dual capacity of OMCO’s board members ‘does not by itself
demonstrate that OMCO exercised regulatory, administrative or governmental powers, or
that the ministers sitting on OMCO’s board exercised any such powers when sitting in
their capacity as directors of OMCO’. (1154)
P 181
The tribunal then observed that the claimant could not point to any relevant law that
specifically delegated any regulatory, administrative or governmental authority or
powers to OMCO. (1155) It found that Omani ministries, rather than OMCO, exercised
96
regulatory and administrative powers over the claimant’s investment. (1156) It further
noted that the lease agreements reflected the parties’ understanding that OMCO itself
exercised no regulatory authority to grant licenses, permits or approvals. Such powers
resided with the relevant authorities of the Omani government and the evidence showed
that these authorities exercised some of these powers, such as the issuance of regulatory
warnings and the imposition of fines, including in relation to OMCO. (1157)
In respect of the impugned conduct, the tribunal found that the termination of the lease
agreement was a commercial response to the lessee’s alleged breaches of contract. (1158)
The tribunal concluded that OMCO’s conduct was not attributable to the State, because
OMCO did not act in the exercise of any regulatory, administrative or governmental
authority delegated to it by the Omani State. The tribunal’s analysis turned in part on the
terms of the lease agreement:
The parties acknowledged in that agreement that OMCO would use its ‘best
endeavors’ to obtain the necessary permits from the authorities. It was those
same relevant governmental authorities which responded when concerns
arose regarding Emrock’s compliance with the regulatory approval Emrock
had been granted. OMCO’s role was, at most, to act as a commercial
intermediary between Emrock and the Omani authorities exercising relevant
governmental authority. The termination of the OMCO–Emrock Lease
Agreement is entirely consistent with this understanding of OMCO’s role. (1159)
The tribunal dismissed also the claimant’s alternative attribution argument that OMCO
was influenced or pressured by MECA to terminate the OMCO–Emrock Lease Agreement. It
noted that this basis of attribution did not fit into the narrow rule of attribution provided
in Article 10.1(2) of the US-Oman FTA. (1160) The tribunal found that, in any event, there
was no evidence that the termination of the lease agreement would have been part of a
broader political scheme. MECA issued environmental citations against OMCO in order to
ensure the regulatory compliance of Emrock’s quarrying operations, rather than to seek
to compel OMCO to terminate the lease. (1161)
The tribunal recognised that if MECA’s alleged conduct were proven, it might have
supported a case for indirect expropriation of the OMCO-Emrock Lease Agreement based
on MECA’s own conduct as an organ of the State. (1162)
The Al Tamimi award shows that the legitimate exercise of regulatory, administrative and
P 182 other governmental authority over a contract to which a State Enterprise is a party
does not turn the latter party’s otherwise commercial conduct into governmental activity
attributable to the State under international law. The tribunal’s attribution analysis also
emphasises that, for the purposes of a State instrumentality qualification, it is essential
to identify the existence of delegated governmental powers in the internal law system.
Finally, the award is a reminder that political interference into a commercial contract
may, in principle, lead to a finding of a breach of a treaty standard, but the relevant
conduct, and therefore the attribution test, in that case will be that of the interfering
party, rather than that of the State-owned contracting party.
The core function of the Government was a corroborating factor in attributing the
contractual conduct of State Concern Turkmenavtoyollary (TAY) to the State in Garanti
Koza v. Turkmenistan. (1163) The dispute concerned a contract entered into between the
claimant and TAY for the planning and construction of highway bridges in Turkmenistan.
The award of the contract to Garanti Koza LLP was approved by Presidential Decree,
(1164) which provided, inter alia, that TAY ‘must deliver the bridges to Turkmenistan’s
Ministry of Water Resources … after completion of the construction of the bridges’. (1165)
The Contract identified TAY as ‘Owner’, which was further defined in the Contract as ‘State
Concern “Turkmenavtoyollary” acting on behalf of Turkmenistan Government’. (1166)
TAY was established by Presidential Decree and was tasked with the design, renovation,
and construction of the highways connecting the major administrative cities of
Turkmenistan. In addition to TAY, the Presidential Decree authorised nine State organs to
take steps to implement the Contract and the Decree. (1167) The implementation of the
Presidential Decree was to be supervised by the Vice Chairman of the Cabinet of
Ministers. (1168)
Following the partial performance of the Contract and in the context of contractual
disputes over the claimant’s performance, the representatives of TAY, the Ministry of
Construction and Turkmenistan’s Supreme Supervision Agency, accompanied by police
and military, evicted the claimant’s employees and took over its plant (1169) and shortly
thereafter TAY terminated the Contract (1170) and commenced domestic court
proceedings against the claimant in relation to alleged contractual debt.
In the ICSID arbitration, the respondent argued that the conduct of TAY was purely
commercial. (1171) It submitted that ‘[i]n order to attribute responsibility to
Turkmenistan, … Garanti Koza must establish that the conduct of TAY was unjustified
under the terms of the Contract and applicable law, that such conduct was attributable
to the Respondent State, and that the State’s conduct violated its obligations under the
BIT or constituted internationally wrongful acts under international law.’ (1172)
P 183
97
The tribunal noted that the Contract itself established the connection between TAY and
the State and, in any event, the subject matter of the Contract concerned a core
governmental function:
[t]he connection between the Contract and the Government of Turkmenistan
appears on the face of the Contract. TAY is identified in the Contract as
‘Owner’. ‘Owner’ is in turn defined as ‘State Concern “Turkmenavtoyollary”
acting on behalf of Turkmenistan Government.’ The Contract also provides that
it ‘is concluded on the basis of Decree of the President of Turkmenistan No.
9429,’ and that it comes into effect after its registration with the Turkmen
Ministry of Economy and Development. These provisions of the Contract
confirm that the acts of TAY in furtherance of the Contract were attributable to
Turkmenistan. Road and bridge construction is in any event a core function of
government. An entity empowered by a State to exercise elements of
governmental authority is for that purpose acting as an organ of the State.
(1173)
The tribunal’s reliance on the subject matter of the contract raises the same issue as the
separate opinion of arbitrator Alvarez in InterTrade: if the contract serves as a means to
exercise a core governmental function, are the State entity’s acts performed in the course
of that contract ‘exercise of governmental authority’? As noted above, ILC Article 5, as
annotated in its Commentary, and the majority of the investment treaty jurisprudence
does not appear to answer that question in the affirmative.
As Ulysseas v. Ecuador (1174) illustrates, and as the Toto tribunal also indicated, a State
instrumentality may act vis-à-vis an investor in a governmental capacity in relation to
some acts and in a commercial capacity in relation to other. In Ulysseas v. Ecuador, the
tribunal held that the National Electricity Council (CONELEC) acted in governmental
capacity when it granted an electricity license to the claimant. (1175) However, it also
held that once CONELEC entered into a Licence Contract with the claimant, its conduct in
the contractual performance had to be evaluated on the basis of the contractual
provisions. (1176) The tribunal noted that ‘the circumstance that the Licence Contract is
not a private law contract but rather an administrative contract’ does not change the
conclusion that only measures taken in the exercise of governmental authority are
relevant for the purposes of attribution. (1177)
Had CONELEC used governmental authority in its dealings with the claimant, its acts
would have been attributable to the State. However, the tribunal noted that none of the
contested acts of CONELEC – namely, its seizure and temporary administration of the
power barge, the imposition of contractually agreed fines and the refusal to permit sail
away – were performed outside the scope of the Licence Contract, namely in the exercise
of its regulatory powers, (1178) and as such they were not attributable to the State under
ILC Article 5 or Article II(2)(b) of the BIT.
P 184
[14] The Attribution of the Conduct of Private Entities

While in principle ILC Article 5 may also cover the conduct of a private entity, which
exercises elements of governmental authority, the investment arbitration jurisprudence
did not generate a positive finding of attribution of the conduct of a private entity based
on ILC Article 5. In Duke Energy v. Ecuador (1179) the tribunal considered whether the
conduct of a local arbitral tribunal was attributable to the State. The dispute concerned
PPAs entered into by INECEL, subrogated later by the Ministry of Energy and Mines, and
Electroquil, a company in which Duke Energy acquired a majority stake. Disputes
concerning contractual fines and performance obligations under the PPAs were
submitted to the Arbitration and Mediation Center of the Guayaquil Chamber of
Commerce in Ecuador. (1180) The local tribunal initially denied the Attorney General’s
objections to jurisdiction of the tribunal, but subsequently revised its decision and
declined its jurisdiction. The claimants argued in the ICSID arbitration that the failure to
entertain the claims of Electroquil made in the local arbitration constituted denial of
justice attributable to the State.
The respondent noted that ‘the local arbitral tribunal conducted the proceedings under
the auspices of the Guayaquil Chamber of Commerce, a private entity which has no
connection with the State’. (1181)
The tribunal observed that it was uncontested that ‘the local arbitral tribunal was a
private body acting under the aegis of the Guayaquil Chamber of Commerce, which is a
private entity as well’ and found no evidence indicating that the conduct of the local
tribunal may be attributed to the State. (1182)
In Saint-Gobain v. Venezuela (1183) the tribunal considered whether a private labour
union’s physical takeover of a proppants production plant of Norpro Venezuela in Puerto
Ordaz was attributable to the State.
The claimant submitted that the plant’s physical takeover by the SINPROTRAC union
following President Chávez’s public announcement on television and the subsequent
active management of the plant by the State-owned Petróleos de Venezuela, S.A. (PDVSA)
98
amounted to expropriation carried out in breach of the France-Venezuela BIT. (1184) As
part of his public announcement, President Chávez instructed PDVSA to manage the
transfer of Norpro Venezuela to the State. (1185)
The respondent argued that the actions of the labour union were not attributable to the
State. (1186) In a hint to ILC Article 5, the tribunal stated that ‘President Chávez did not
P 185 empower the unions to take over the businesses concerned with governmental
authority by virtue of his announcements.’ (1187) The tribunal found that President
Chávez’s public statement did not delegate governmental authority, but rather ‘implied
a promise to the people that the State would nationalize the businesses referred to in
the statement’. (1188) The tribunal further considered the conduct of the labour union
under ILC Article 8. (1189)
In relation to the conduct of PDVSA prior to the publication of the expropriation decree,
the respondent submitted that PDVSA acted as a caretaker in order to ensure the safety
and stability of the plant taken over by the union. (1190)
The tribunal found that PDVSA, the national oil company of Venezuela, was vested with
governmental authority ‘[b]oth in its alleged function as a “caretaker” and in its capacity
as supervisor and promoter of the nationalization of the plant.’ (1191) In respect of
PDVSA’s exercise of governmental authority, the tribunal noted that:
in light of PDVSA’s undisputed mandate from the President of Venezuela to
carry out the nationalization of Norpro Venezuela, there should [not] and
cannot be a distinction between PDVSA’s conduct aimed at carrying out its
mandate and conduct that was possibly aimed at ensuring the safety of
workers and maintenance of the equipment at the plant in the meantime.
Rather, all of PDVSA’s actions with regard to the plant can and have to be
attributed to Respondent. (1192)
Having found PDVSA’s conduct was attributable to the State, the tribunal then found that
PDVSA adopted the union’s conduct as its own in the meaning of attribution test in ILC
Article 11. (1193)
As the above cases indicate, although ILC Article 5 does not exclude the attribution of the
conduct of private entities, in practice, situations involving private entities tend to be
examined under ILC Article 8 or 11. One may posit that this suggests that States do not
delegate governmental authority to private entities that interact with foreign investors.
[D] Conclusion
The attribution of the conduct of State instrumentalities is an exception from the rule
that the conduct of non-State actors is not attributable to the State. State
instrumentalities are entities empowered to exercise the governmental authority of a
State. If they exercise such governmental authority in the particular instance, their
conduct is attributable to the State under ILC Article 5 or a lex specialis rule. There is no
consensus as to the scope of governmental authority and, in light of the many ways that
States can organise their governmental activities, the ILC did not attempt to identify the
scope of the notion of governmental authority. Nevertheless, the ILC provided a number
P 186 of common connecting factors, which were embraced to varying degrees by investment
treaty tribunals.
The most often used criterion focuses on the content or nature of the powers, which in
practice is done by distinguishing between activities or powers of sovereign and
commercial nature. The pursuit of a governmental purpose is another relevant criterion.
However, the investment arbitration jurisprudence is divided between a majority view
that the public service element of a commercial transaction or contract is irrelevant, and
a minority view that the strategic importance of a commercial transaction or contract to
the State or its governmental purpose is indicative of governmental authority. Other
criteria involve examining the manner in which the functions are conferred on the entity
and the extent of the entity’s accountability to the State.
The investment arbitration jurisprudence appears to converge on denying the relevance
of the public or administrative law nature of the contract. There seems to be consensus
also on accepting some degree of legitimate governmental involvement or interest in a
contract of strategic importance concluded by a State instrumentality without attributing
the separate contractual conduct of the State instrumentality to the State. In contracts
concluded by State instrumentalities, the exercise of normal contractual powers is not
ordinarily attributable to the State. Similarly, tribunals do not equate the normal course
of conduct by the State as a shareholder with governmental activity. However, State
interference with the normal operation of a commercial contract concluded by a State
instrumentality may engage State responsibility, but the attributable conduct will be
that of the author of that interference.
As a State instrumentality typically combines governmental authority with non-
governmental functions, the attribution test under ILC Article 5 and its lex specialis
equivalents is necessarily focused on the alleged wrongful conduct of the entity.
While the attribution test concerning State instrumentalities is focused on a de jure
extension of the State authority to non-State actors, the de facto extension of State
99
activity is governed by ILC Article 8. As ILC Articles 4 and 5 entail an examination of the
institutional relationship of the person and entity with the State, there is a requirement
that the attributable conduct of such entities is carried out in an official capacity. As
discussed below, the ultra vires or internally unlawful conduct of such persons or entities
remains attributable to the State under international law.
§5.05 STATE ORGANS AND INSTRUMENTALITIES ACTING ULTRA VIRES OR IN

BREACH OF THEIR RULES
[A] The Scope of the Attribution Rule
International law is not concerned with the legality or propriety of conduct under the
State’s internal law. (1194) Moreover, in order to maintain the precedence of international
P 187 law over internal law, States cannot rely on their own internal law to argue that a
conduct, in fact carried out by a State organ or State instrumentality, was not
attributable to it due to excess of authority or violation of internal rules of operation.
(1195)
The need to preserve the primacy of international law over internal law and to maintain
‘clarity and security in international relations’ (1196) led early on to an international
convergence towards a rule of attribution of unauthorised conduct by State organs and
State instrumentalities to the State.
The 1930 Hague Conference for the Codification of International Law formulated this rule
as follows:
International responsibility is … incurred by a State if damage is sustained by
a foreigner as a result of unauthorised acts of its officials performed under
cover of their official character, if the acts contravene the international
obligations of the State. (1197)
Further, in the course of its early work in the area of the law of State responsibility, the
ILC noted:
In international law, the State must recognize that it acts whenever persons or
groups of persons whom it has instructed to act in its name in a given area of
activity appear to be acting effectively in its name. Even when in so doing
those persons or groups exceed the formal limits of their competence
according to municipal law or contravene the provisions of that law or of
administrative ordinances or internal instructions issued by their superiors,
they are nevertheless acting, even though improperly, within the scope of the
discharge of their functions. The State cannot take refuge behind the notion
that, according to the provisions of its legal system, those actions or omissions
ought not to have occurred or ought to have taken a different form. (1198)
In that regard, the ILC adopted the following final wording as ILC Article 7:
Excess of authority or contravention of instructions
The conduct of an organ of a State or of a person or entity empowered to
exercise elements of the governmental authority shall be considered an act of
the State under international law if the organ, person or entity acts in that
capacity, even if it exceeds its authority or contravenes instructions.
P 188
The attribution rule applies to persons and entities covered by ILC Articles 4, 5 and 6.
(1199) The Commentary on ILC Article 7 clarifies that the rule is broad, extending to cases
‘where the organ or entity in question has overtly committed unlawful acts under the
cover of its official status or has manifestly exceeded its competence’ and even to cases
where ‘other organs of the State have disowned the conduct in question’. (1200) If the
unauthorised conduct is endorsed ex post facto by the State, its attribution is to be
considered under ILC Article 11. (1201)
The ILC recognised that it is not always easy to distinguish between a person acting in
official capacity and a person acting in a purely private capacity. In this regard, the
Commentary on ILC Article 7 refers to the concept of apparent authority and, citing the
Iran-US Claims Tribunal, states that ‘the question is whether the conduct has been
“carried out by persons cloaked with governmental authority”’. (1202) Further, the
Commentary on ILC Article 4 notes that ‘[w]here such a person acts in an apparently
official capacity, or under colour of authority, the actions in question will be attributable
to the State.’ (1203)
If the allegedly unauthorised conduct complained of is systematic or recurrent, the
difficulties may be avoided as it is arguable that the State knew or ought to have known
of it and should have taken steps to prevent it. However, the distinction between official
and private capacity is still of significance in other cases, ‘for example when considering
isolated instances of outrageous conduct on the part of persons who are officials’. (1204)
Hence, ILC Article 7 expressly requires that the attributable conduct be committed by the
100
State organ or instrumentality in that capacity. In the words of the Commentary, ‘[t]his
indicates that the conduct referred to comprises only the actions and omissions of organs
purportedly or apparently carrying out their official functions, and not the private actions
or omissions of individuals who happen to be organs or agents of the State.’ (1205)
The issue of the attribution of unauthorised conduct should not be conflated with the
legality of that conduct under internal or international law. (1206) In that regard, the
conduct of corrupt officials is attributable to the State if the conduct satisfies the
requirements of the attribution rule. (1207) The substantive validity and enforceability of
such conduct is a different issue subject to its own normative framework.
P 189
[B] The Application of the Rule in the Investment Arbitration Jurisprudence

The application of ILC Article 7 in the investment arbitration jurisprudence did not raise
any notable difficulty.
In Deutsche Bank v. Sri Lanka the respondent argued that the Hedging Agreement was a
speculative derivative transaction outside the statutory authority of CPC and therefore
void and unenforceable. (1208) The claimant argued that CPC, as State organ or entity
exercising governmental authority, acted in its official capacity when it carried out the
hedging programme and therefore the respondent was responsible for CPC’s conduct
under it even if it exceeded its authority or contravened instructions. (1209) The
respondent submitted that the hedging transactions were ‘far removed from CPC’s
petroleum business. They [were] not necessary for the attainment of its objects’. (1210)
The tribunal found that, upon entering into the hedging arrangement, ‘the CPC Board
formed the bona fide view that the Hedging Agreement was capable of falling within the
objects of the company, that it was incidental and conducive to CPC’s business’. (1211) The
tribunal also concluded that the Hedging Agreement was a valid hedging transaction and
CPC had capacity to enter into it. (1212) Having decided that CPC’s actions were within its
powers, the tribunal noted that there was no ultra vires attributable conduct. (1213)
In Kardassopoulos v. Georgia, (1214) a dispute concerning a JVA and a Deed of Concession
in relation to the development and exploitation of oil and gas resources in Georgia, the
tribunal considered the allegedly unauthorised entry into these agreements by two State
Enterprises, SakNavtobi and Transneft. The two separate State entities were later
incorporated into an oil department of the Ministry of Fuel and Energy. The long-term
concession of the pipelines to the joint venture was signed by Transneft, witnessed by
SakNavtobi and ratified by the Minister of Fuel and Energy. A dispute arose following the
statutory cancellation of the concession. (1215)
The respondent challenged the tribunal’s jurisdiction on the basis there was no protected
investment because the agreements were void ab initio under Georgian law because
neither SakNavtobi nor Transneft was authorized to grant the rights purportedly
conferred under these agreements, or to even enter into these agreements. (1216) The
respondent argued that the JVA exceeded the scope of a Government resolution
P 190 authorising the formation of the joint venture (1217) and the Deed of Concession was
lacking the requisite authorisation by the Ministry of State Property Management. (1218)
Under the disputed agreements, SakNavtobi and Transneft represented due
authorisation and compliance with laws, but the respondent argued that these
representations were not relevant and, in any event, could not be attributed to it. (1219)
The tribunal held that ‘a host State cannot avoid jurisdiction under the BIT by invoking its
own failure to comply with its domestic law’. (1220) In respect of the attributability of the
allegedly unauthorised conduct of SakNavtobi and Transneft, the tribunal noted that:
[i]t is also immaterial whether or not SakNavtobi and Transneft were
authorized to grant the rights contemplated by the JVA and the Concession or
whether or not they otherwise acted beyond their authority under Georgian
law. [ILC] Article 7 provides that even in cases where an entity empowered to
exercise governmental authority acts ultra vires of it, the conduct in question
is nevertheless attributable to the State. (1221)
Citing Southern Pacific Properties (Middle East) Limited v. Egypt, the tribunal found that,
regardless of their effect under Georgian law, the agreements were ‘cloaked with the
mantle of Governmental authority’, (1222) because (1) the Government endorsed the
assurances to the claimant regarding the validity of the agreements, (2) some of the most
senior Government officials were closely involved in their negotiation and (3) the
Concession was signed and ‘ratified’ by the Ministry of Fuel and Energy, an organ of the
Republic of Georgia. (1223)
§5.06 CONDUCT DIRECTED OR CONTROLLED BY A STATE

[1] The Normative Framework
101
The principle of effectiveness in international law calls for a normative solution to
attribute to the State the conduct in fact carried out on the instructions of a State organ
or under its direction or control. (1224) This principle is enunciated in ILC Article 8 as
follows:
Conduct directed or controlled by a State
The conduct of a person or group of persons shall be considered an act of a
State under international law if the person or group of persons is in fact acting
on the instructions of, or under the direction or control of, that State in
carrying out the conduct.
P 191
The rule deals with two circumstances joined by a common feature: there exists ‘a
specific factual relationship’, ‘a real link’ between the person, entity or group engaging in
the conduct and the State machinery. (1225) The first scenario covers conduct in fact
authorised by the State and the second involves conduct carried out under the direction
or control of the State.
The text of ILC Article 8 evolved in the drafting process. In 1974, Special Rapporteur Ago
introduced the initial draft to the ILC as raising ‘the situation of “de facto officials” – in
other words, persons who in principle were not State officials at all, but who in special
circumstances, were called upon to perform State functions in fact’. (1226) The initial
version of the draft adopted by the ILC referred only to the first scenario in the current
version of ILC Article 8, albeit in a different formulation, namely it was to cover the
conduct of a person or group of persons ‘in fact acting on behalf of [the] State’. (1227)
Special Rapporteur Crawford replaced ‘on behalf of’ with the phrase ‘on the instructions
of’ in order to ‘restore the true scope of article 8 in the light of the statements in which
[the author of the initial draft, Special Rapporteur Ago] restricted the scope of the term
“on behalf of” exclusively to cases in which express instructions had been given’. (1228)
Further, acknowledging the difficulties in establishing the existence of express
instructions, Special Rapporteur Crawford proposed the extension of the rule also to
situations where a person or group of persons was acting ‘under the direction or control’
of a State. (1229)
Like ILC Article 5, the attribution rule in ILC Article 8 focuses on the conduct of the person
or entity rather than on the person or entity itself. Therefore, it is not the nature of the
person or entity or the form or extent of its relationship with the State that provides the
basis for the attribution, but the actual link between the State’s instruction, direction or
control and the specific conduct carried out under that instruction, direction or control.
This emphasis also helps to distinguish between a de facto State organ under ILC Article
4, which typically entails an assessment of the overall relationship between the State
and the entity, and a de facto controlled entity under ILC Article 8, which looks at the
specific operation and impugned conduct.
The actors engaged in the relevant conduct may be private individuals, legal entities or
groups of persons lacking legal personality but acting on a de facto basis. (1230) The
relevant attributable conduct may be any type of activity, including sovereign as well as
commercial acts. (1231) However, it is notable that the Commentary on ILC Article 8 refers
to the irrelevance of the distinction between sovereign and commercial acts in the
context of its discussion of the first limb of ILC Article 8, namely conduct in fact
authorised by the State. (1232) In the context of the second limb, namely conduct carried
out under the direction or control of the State, the Commentary reinstates the
P 192 significance of the distinction between governmental and commercial acts with respect
to the conduct of State Enterprises requiring the exercise of elements of governmental
authority within the meaning of ILC Article 5. (1233)
A special rule governing the attribution of the conduct of non-State actors to the State
displaces the customary international law rule embodied in ILC Article 8. In Al Tamimi v.
Oman the tribunal accepted the respondent’s submission that the US-Oman FTA’s special
rule on attribution was ‘significantly narrower than the several grounds of attribution
provided under the [ILC Articles], which also include situations where, for instance, the
relevant entity merely acts under the control or direction of the State’. (1234) It noted
that ‘the contracting parties to a treaty may, by specific provision (lex specialis), limit the
circumstances under which the acts of an entity will be attributed to the State. To the
extent that the parties have elected to do so, any broader principles of State
responsibility under customary international law or as represented in the ILC Articles
cannot be directly relevant’. (1235)
The tribunal held that the test of effective control in ILC Article 8 did not apply to Oman
Mining Company, a State Enterprise, because Article 10.1.2 of the FTA (1236) covered the
attribution of the conduct of State Enterprises. The exclusion of ILC Article 8 due to a lex
specialis that mirrored the principle of attribution in ILC Article 5 is questionable. As the
Commentary to ILC Article 55 notes, ‘[f]or the lex specialis principle to apply it is not
enough that the same subject matter is dealt with by two provisions; there must be some
actual inconsistency between them, or else a discernible intention that one provision is
to exclude the other.’ (1237) The Al Tamimi tribunal did not elaborate on whether ILC
Article 8 was excluded on the basis of a normative conflict with the lex specialis rule in
102
Article 10.1.2 of the FTA or otherwise on the basis of a discernible intention of the
contracting parties to exclude its application. The tribunal formulated questions to be
addressed by the US in its submissions as a non-disputing party, but those questions did
not refer to the intention of the parties with respect to impact of the aforementioned lex
specialis rule.
[2] The Notion of State Instruction
The ILC Commentary explains that the scenario of acting de facto on State instructions
would come into play most commonly ‘where State organs supplement their own action
by recruiting or instigating private persons or groups who act as “auxiliaries” while
remaining outside the official structure of the State’. (1238)
As noted above, the drafters intended to cover only express instructions. According to
P 193 Professor Crawford, a general instruction leaving open the means of fulfilling the
directive suffices for the purposes of ILC Article 8. He observes in this regard that ‘where
ambiguous or open-ended instructions are given, acts which are considered incidental to
the task in question or conceivably within its expressed ambit may be considered
attributable to the state’. (1239) This substantive approach concerning the scope of the
relevant instruction is reflected also in the ILC Commentary, which provides that, when
the question arises if the actions go beyond the scope of the instruction, the test is
‘whether the unlawful or unauthorized conduct was really incidental to the mission or
clearly went beyond it’. (1240)
ILC Article 8 does not cater for the attribution of ultra vires conduct. As the Commentary
puts it, ‘[i]n general a State, in giving lawful instructions to persons who are not its organs,
does not assume the risk that the instructions will be carried out in an internationally
unlawful way.’ (1241)
As it will be seen below, the scenario of de facto authorisation arises only in limited
circumstances in the context of investment relations.
If it cannot be established that the conduct was in fact authorised or if the particular
instructions were ignored, the same conduct may still be attributable if it is carried out
under the effective control of a State organ. (1242) In fact, Special Rapporteur Crawford
proposed to include the scenario of acting under the direction or control of a State as the
second limb of ILC Article 8 in light of the difficulty to demonstrate the existence of an
express instruction in many operations, ‘in particular those which would obviously be
unlawful if attributable to the State’. (1243)
[3] The Notion of State Control
The second scenario captured by ILC Article 8 involves a single standard expressed, in
disjunctive terms, by the synonyms of ‘direction’ and ‘control’. The notion of State control
of separate private entities has received considerable attention in the jurisprudence of
the ICJ and the International Tribunal for the Former Yugoslavia (ICTY). The former
approached the degree of State control restrictively as encompassing only ‘effective
control’, while the latter came up with a less narrow concept of ‘overall control’. (1244)
The ICJ formulated the test of ‘effective control’ in the Nicaragua Case (1245) in examining
whether the conduct of the contras was attributable to the US for the purposes of its
P 194 responsibility under international humanitarian law. The contras were a paramilitary
group supported by the US secret services, but operating autonomously. The Court held
that:
[D]espite the heavy subsidies and other support provided to them by the
United States, there is no clear evidence of the United States having actually
exercised such a degree of control in all fields as to justify treating the contras
as acting on its behalf.…
All the forms of United States participation mentioned above, and even the
general control by the respondent State over a force with a high degree of
dependency on it, would not in themselves mean, without further evidence,
that the United States directed or enforced the perpetration of the acts
contrary to human rights and humanitarian law alleged by the applicant State.
Such acts could well be committed by members of the contras without the
control of the United States. For this conduct to give rise to legal
responsibility of the United States, it would in principle have to be proved
that that State had effective control of the military or paramilitary operations
in the course of which the alleged violations were committed. (1246)
Recalling the ICTY approach, the Commentary on ILC Article 8 appears to caution against
importing into the law of State responsibility standards applied in the context of
individual criminal responsibility and international humanitarian law. (1247) It adds that
‘it is a matter for appreciation in each case whether particular conduct was or was not
carried out under the control of a State, to such an extent that the conduct controlled
should be attributed to it’. (1248)
The final text of ILC Article 8 and its annotations in the Commentary make it clear that
the ILC adopted the restrictive approach in relation to the degree of State control. As the
103
ILC Commentary put it, ‘conduct will be attributable to the State only if it directed or
controlled the specific operation and the conduct complained of was an integral part of
that operation. The principle does not extend to conduct which was only incidentally or
peripherally associated with an operation and which escaped from the State’s direction
or control’. (1249)
In line with the test of ‘effective control’ developed by the ICJ, a general situation of
dependence and support is insufficient to justify attribution of conduct to the State.
(1250) What matters is the State’s effective control of the specific operation and not the
State’s exercise of overall control over the entity. The latter broader test informs the
nature of the entity and may thus weigh in a finding that the entity is a de facto State
organ under ILC Article 4.
In the Bosnian Genocide Case decided following the adoption of the ILC Articles, the ICJ
affirmed the effective control test (1251) noting that the particular characteristics of
genocide do not justify a departure from the rule of attribution: ‘the rules for attributing
P 195 alleged internationally wrongful conduct to a State do not vary with the nature of the
wrongful act in question in the absence of a clearly expressed lex specialis’. (1252) As
Olleson comments, the ICJ’s statement should be viewed as ‘a statement of principle of
general application’, including also in investment treaty arbitrations. (1253)
A survey of the investment arbitration jurisprudence shows that investment arbitration
tribunals adopted the test of effective control for the purposes of attribution under ILC
Article 8.
A notable exception is Bayindir v. Pakistan, where the tribunal seems to have questioned
the suitability of the test of effective control for determining the degree of State control
in investment disputes. It noted that the approach developed in the areas of
international criminal responsibility and international humanitarian law ‘is not always
adapted to the realities of international economic law and that they should not prevent a
finding of attribution if the specific facts of an investment dispute so warrant’. (1254)
However, as discussed below, in the event the tribunal correctly applied the attribution
rule in ILC Article 8. In any event, the rule accommodates a degree of flexibility in
practice. (1255)
Accordingly, the extent of State control over the particular conduct is determinative for
attributing that conduct to the State. State control may be implemented through public
or corporate law means and, in principle, the means of control is irrelevant.
The Commentary on ILC Article 8 cautions with respect to the attribution of the conduct of
State Enterprises to the State: ‘[s]ince corporate entities, although owned by and in that
sense subject to the control of the State, are considered to be separate, prima facie their
conduct in carrying out their activities is not attributable to the State unless they are
exercising elements of governmental authority within the meaning of article 5.’ (1256)
In other words, the exercise by the State of shareholder control based on its corporate
ownership of a State Enterprise does not constitute ipso facto a sufficient basis for the
attribution of the conduct of the State Enterprise to the State. The added requirement is
the exercise of public powers by the State Enterprise or the State’s use of its ownership
interest or control of a State Enterprise ‘specifically in order to achieve a particular
result’. (1257) In other words, a degree of executive control is necessary, which goes
beyond ordinary shareholder control aimed at furthering the company’s own interests.
(1258)
The extent of executive control may reveal a lack of operational autonomy in making
commercial decisions in which case the controlled entity is likely to qualify as a de facto
P 196 State organ. However, when a State Enterprise is deprived of its autonomous decision-
making powers only in respect of the specific commercial act carried out under the
direction or control of State, and complained of in the particular instance, the conduct of
the State Enterprise in that circumstance is likely to be attributable to the State based
on ILC Article 8.
[B] The Application of the Rule in the Investment Arbitration Jurisprudence

[1] Binding State Instructions
In EDF v. Romania (1259) the claimant argued that the termination of its agreements with
AIBO and TAROM and AIBO’s organisation of a new tender for the lease of commercial
spaces at Otopeni airport were attributable to the State, inter alia, based on the control
test in ILC Article 8. (1260) It submitted that TAROM and AIBO adopted major corporate
decisions according to instructions received from their shareholder, the Ministry of
Transportation ‘by means of mandates directing them to take concrete decisions’. (1261)
Having concluded that neither the auctions organised by AIBO nor the exercise by AIBO
and TAROM of their contractual and shareholder rights were exercise of delegated
governmental authority, (1262) the tribunal considered the attribution of the conduct of
AIBO and TAROM under ILC Article 8.
The respondent submitted that the Ministry of Transportation did not exercise control
over AIBO beyond its role as shareholder and the Ministry’s written mandates in respect
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of certain actions regarding AIBO’s participation in the joint venture with the claimant
were consistent with its role as representative of AIBO. (1263) It argued that, in carrying
out the impugned corporate acts, neither AIBO nor TAROM acted under the direction of
the State. (1264)
The tribunal noted that the attribution of conduct controlled by a State in the meaning of
ILC Article 8 was ‘exceptional’ and referred to the Commentary stating that, in relation to
a State Enterprise, the test involved the use of State ownership interest or control
specifically in order to achieve a particular result. (1265) It then noted that the Ministry of
Transportation issued instructions and directions to AIBO and TAROM regarding the
conduct they should adopt in the exercise of their shareholder rights in relation to acts
that were allegedly wrongful under the BIT. It also found that there was evidence of
instructions or directions given to AIBO by the State, through the Ministry of
Transportation, regarding the auctioning of AIBO’s commercial spaces at the Otopeni
Airport. It therefore concluded that the State was using its ownership interest in, or
control of, AIBO and TAROM specifically ‘in order to achieve a particular result’ within the
P 197 meaning of the ILC Commentary and that particular result was ‘bringing to an end, or
not extending, the contractual arrangements with EDF and [the joint venture] and
instituting a system of auctions’. (1266)
The respondent contested the binding nature of the Ministry’s mandates. (1267) The
tribunal referred to the applicable regulation, which provided that the mandate was
granted to the corporate bodies of companies falling under the Ministry’s authority ‘to
support the standpoint of the Ministry of Public Works, Transportation and Housing in the
General Meetings of Shareholders, Boards of Directors, respectively managing
committees’. (1268) It noted that:
this is not the kind of language that leads to an understanding that the
corporate bodies of companies under the authority of the Ministry of
Transportation had the initiative to originate, in full independence, proposals
to the Ministry concerning the kind of decisions to be taken, much less that
such bodies were free to decide other than as provided by the mandates. The
fact that directions are given by the mandates to the members of the board of
directors, a body that should decide in full autonomy in the company’s
interest, is indicative of the compelling nature of the Ministry’s mandate
system. (1269)
Although it had already concluded that the Ministry’s mandates were binding in law, the
tribunal also considered whether they could be understood to be binding in fact. In that
regard, it noted that the Board of Directors of AIBO agreed to extend the duration of the
joint venture between AIBO and the claimant, but AIBO’s General Assembly had to wait
for a mandate from the Ministry of Transportation. (1270) Following elections and the
swearing in of a new Government, the expected ministerial mandate was not issued due
to a change of policy. The tribunal also relied on the fact that the shareholder meeting
minutes recorded in categorical terms a notification that the Ministry of Transport
decided to extend the duration of the joint venture by three months during which period
tenders were to be conducted. (1271)
Therefore, the tribunal concluded that the impugned conduct was carried under the
direction and control of the State within the meaning of ILC Article 8 ‘in order to achieve
the particular result of bringing to an end the contractual arrangements with EDF and
ASRO and to institute instead a system of auctions for commercial spaces at the Otopeni
Airport’. (1272)
Finally, the tribunal addressed the respondent’s argument that the phrase ‘in order to
achieve a particular result’ in the Commentary on ILC Article 8 meant an action ‘plainly
outside of the company’s interests’. (1273) The implication in the respondent’s argument
was that, if any shareholder would have given the same directions in those
circumstances, then the directions should not be considered for the attribution of the
conduct carried out as a result of those directions.
P 198
In the tribunal’s view, the fact that the management of AIBO and TAROM supported the
continued operation of the joint venture, which was later reversed due to a change in the
Government’s policy, evidenced that AIBO and TAROM acted in their perceived business
interests. (1274) The tribunal emphasised that a test concerning the ‘particular result’ in
the formulation of the Commentary on ILC Article 8 is necessarily subjective, because a
tribunal is generally not in a position to make a judgment as to what is objectively in the
best interests of a company for the purposes of State attribution. (1275) The tribunal
found that the termination of the contracts was unrelated to the perceived business
interests of AIBO and TAROM and was instead a result of a shift in Government policy.
(1276)
The tribunal’s analysis of both de jure and de facto effects of the instructions is pertinent
because a particular result pursued by the State may be achieved not only through the
issuance of legally binding instructions, but also through political or institutional
pressure. In light of the general influence of the State over a State Enterprise’s decision-
making bodies, a de facto line of communication may effectively cause a State Enterprise
105
to carry out a particular act. (1277)
[2] Governmental Clearance of Conduct
In Bayindir v. Pakistan (1278) the tribunal considered whether the National Highways
Authority (NHA), the contractual partner of the claimant, acted under the direction or
control of the State in terminating the Contract for the Construction of the Islamabad-
Peshawar Motorway. As part of its analysis under ILC Article 5, the tribunal has already
found that the NHA was not acting in the exercise of elements of the governmental
authority in relation to the alleged expulsion of the claimant and the alleged failure to
perform a number of actions under the contract. (1279)
The tribunal found that the decision of the NHA to terminate the Contract, from which
each alleged wrongful act derived, ‘received express clearance from the Pakistani
Government’ and, on that basis, NHA’s conduct was attributable to the State under ILC
Article 8. (1280)
P 199
The claimant argued that the decision to terminate the Contract was taken by the
Government of Pakistan and was subsequently implemented by NHA through contractual
means. (1281) It submitted that ‘decisions on the M-1 Project were referred to senior
government officials and agencies above NHA, and ultimately to General Musharraf
himself’. (1282)
In finding that the NHA acted under the control of the State, the tribunal referred also to
the respondent’s acknowledgements concerning the involvement of the Government. The
respondent stated that ‘[t]he Government of Pakistan was closely interested in this
Contract, as any responsible Government being asked to stump up hundreds of millions
of Dollars, is going to be. But there is another reason why the Government of Pakistan was
involved, and that is that the Claimant kept asking it to get involved.’ (1283) Further, the
respondent submitted that ‘the decision to expel was made by NHA, acting on its own …
albeit with the high level approval that – so far as concerns the general diplomatic
fallout – it could act in accordance with the terms of the Contract’. (1284)
The tribunal noted that there was evidence that at a meeting ‘General Musharraf gave
clearance to the Chairman of NHA, General Javed, to resort to the available contract
remedies, including termination. … Similarly, General Qazi, Minister of Communications,
confirmed that the decision to terminate the Contract could not have been taken without
some guidance from higher levels of the Pakistani government.’ (1285)
In an apparent attempt to avoid a suggestion that by its attribution analysis it prejudged
the merits of the case, (1286) the tribunal was careful to distinguish between the issue of
attribution under ILC Article 8 and the qualification of the acts as sovereign or
commercial. It noted that, for the purposes of ILC Article 8, ‘it does not matter that the
acts are commercial, jure gestionis, or contractual’ and ‘a finding of attribution [under ILC
Article 8] does not necessarily entail that the acts under review qualify as sovereign acts’.
(1287)
The tribunal further addressed the Government’s involvement in the termination of the
Contract as part of its analysis of the merits of the claims. It noted that ‘there is no direct
evidence on record demonstrating that it was General Musharraf who took the decision to
terminate the Contract. … To the contrary, General Qazi testified plausibly that General’s
Musharraf’s involvement was limited to the potential diplomatic repercussions of
significant actions involving the M-1 Project’. (1288)
The Bayindir tribunal’s attribution analysis shows that often, and, in particular, in projects
of strategic importance, Governmental clearance may be a de facto sine qua non
P 200 condition for the conduct of a State entity and, in those cases, such clearance may
suffice for attribution purposes under ILC Article 8. By holding that the actual decision to
terminate was made by NHA, albeit with the clearance of the State, the tribunal
demarcated the attributable conduct of NHA from the stand-alone conduct of the
Government. The decision also shows that Governmental clearance of a contractual
remedy does not necessarily amount to illegitimate political interference in an
investment contract to which the host State itself is not a party. The Bayindir award
illustrates that a general instruction leaving open the means of fulfilling the directive
suffices for the purposes of ILC Article 8.
[3] Effective Control
In Jan de Nul v. Egypt (1289) the tribunal briefly considered whether the conduct of the
SCA, namely the tender of a dredging contract, was carried out on the instructions or
under the direction or control of the State.
The tribunal noted that the ICJ’s effective control test is ‘very demanding … as it requires
both a general control of the State over the person or entity and a specific control of the
State over the act the attribution of which is at stake’. (1290) It then held that the alleged
conduct of SCA was not attributable to the State under ILC Article 8, because ‘there was
no evidence on record of any instructions that the State would have given to the SCA in
regard to the very specific acts and omissions of the SCA’. (1291) The tribunal did not
discuss the links between the State and the SCA in relation to what it stated to be the
106
‘general control’ requirement, but, as noted below, such discussions would not have been
in any event necessary for the purposes of ILC Article 8.
The tribunal’s conclusion is consistent with its findings under ILC Articles 4 and 5 where it
held that the SCA’s activities had an independent commercial nature and in the tender
process ‘the SCA acted like any contractor trying to achieve the best price for the services
it was seeking’. (1292) The tribunal’s indication that the SCA acted in its perceived best
commercial interest implies that the State did not use its public law influence over SCA
in order to achieve a particular result with respect to the tender in question.
Similarly, in Hamester v. Ghana (1293) the tribunal noted that effective control is ‘a very
demanding threshold in attributing the act of a private entity to a State, as it requires
both general control of the State over the entity, and specific control of the State over
the particular act in question’. (1294) The tribunal acknowledged that ILC Article 8 can
encompass both acts de jure gestionis and acts de jure imperii. (1295)
As part of its discussion of the status of Cocobod under ILC Article 4, the tribunal had
P 201 already addressed the internal law provisions concerning the relationship between the
Government and Cocobod. In particular, the tribunal noted that, by law, the Government
could give only ‘directions of a general character’ ‘after consultation with the Board of
Directors or the Management’ of Cocobod and only to the extent those directions were
not ‘inconsistent with the contractual and other obligations’ of Cocobod. (1296)
The tribunal found that there was no evidence on record concerning the State control of
Cocobod, as required by ILC Article 8. (1297) It noted that the fact that the claimant tried
unsuccessfully to involve the Government in the last phase of its dispute with Cocobod
did not mean that Cocobod acted under the effective control of the Government. (1298)
With respect to the imposition of new contractual prices on cocoa beans, the tribunal
noted that it has seen no evidence of any directive or instruction of the Government to
Cocobod to impose a price upon the joint venture with the claimant. The tribunal
observed that the fact that the commercial negotiations spanned over several years
demonstrated that the Government did not control Cocobod. (1299) Similarly, in relation
to the alleged shortfall in the delivery of cocoa beans, the tribunal found that, ‘although
there was a general policy of equitable distribution of the cocoa beans’, there was no
evidence on record showing that the Government instructed or directed Cocobod to
deprive the joint venture of the required beans. (1300) Finally, the tribunal found that the
letters from the Cocobod representative to the management of the joint venture, which
the claimant alleged deprived it of its management rights, evidenced a shareholder
dispute and the related conduct of Cocobod was not attributable to the respondent
under ILC Article 8. (1301)
The Hamester tribunal’s attribution analysis with respect to each individual claim
underscores the requirement to establish effective State control in relation to each
particular act.
While both the Jan de Nul and the Hamester tribunal applied the effective control test
correctly to the facts, their reading of the Nicaragua Case, as requiring the establishment
of general control by the State in addition to a specific control, appears to be incorrect.
In the cited paragraph, the ICJ found that the establishment of general control was
insufficient, rather than necessary. (1302) Indeed, the test of general control or lack of
operational autonomy is a relevant factor only in relation to a State organ qualification
under ILC Article 4. The effective control test articulated by the ICJ only requires the
establishment of specific control by the State, which is not necessarily dependant on the
establishment of general control over the entity. Further, the existence of general control
over the entity does not dispense with the need to establish specific control in relation to
the conduct in question.
P 202
The tribunal in UAB E Energija v. Latvia employed this approach to attribution under ILC
Article 8. In that case, the claimant contended that the conduct of two State Enterprises,
Rēzeknes Siltumtīkli and Rēzekne Enerģija, was attributable to the respondent by virtue
of ILC Article 8. (1303) The dispute concerned the termination of a long-term contract to
supply centralised heating to the inhabitants of the city of Rēzekne in Eastern Latvia.
Further to an authorization by the City Council of Rēzekne, Latgales Enerģija, a local
company majority-owned by the investor, and Rēzekne Siltumtīkli, a municipality-owned
district heating operator, concluded a long-term lease agreement pursuant to which
Latgales Enerģija took over the infrastructure and operation of the district heating system
and assumed the debts of Rēzeknes Siltumtīkli. (1304) Upon the expiry of the thirty year
lease, Latgales Enerģija was to return the heating infrastructure to Rēzeknes Siltumtīkli.
(1305) Further, the Rēzekne municipality and Latgales Enerģija entered into a contract to
provide centralized heating supply services in the city of Rēzekne. (1306) A regulatory
body, which also issued the requisite licenses, was charged with setting the tariffs for the
supplied heating. (1307) Faced with rising gas prices, Latgales Enerģija made several
applications for tariff increase. The regulator refused to approve Latgales Enerģija’s
requests, mainly on the basis that the city of Rēzekne had not adopted the required
investment programme. (1308) Latgales Enerģija stopped paying the full price to the
State-owned gas supplier, which prompted a cut in gas supply. (1309) Rēzeknes
107
Siltumtīkli initiated litigation in relation to a dispute around the lease payments
allegedly owed by Latgales Enerģija and obtained an order freezing Latgales Enerģija’s
funds. (1310) The municipality then declared a state of energy crisis and incorporated a
new, wholly owned operator, Rēzeknes Enerģija. (1311) The regulator took over the service
area of Latgales Enerģija and the Rēzekne City Council appointed Rēzeknes Enerģija to
provide heating services in that area. (1312) Further, Rēzeknes Enerģija brought an action
against Latgales Enerģija seeking payment for deliveries of natural gas made to, and
accepted by, Latgales Enerģija. (1313) Eventually, the regulator cancelled Latgales
Enerģija’s licences, Rēzeknes Siltumtīkli terminated the long-term lease and the
municipality appointed its two companies, Rēzeknes Siltumtīkli and Rēzeknes Enerģija,
to take over Latgales Enerģija’s activities. (1314) The administrative and other Latvian
court challenges of Latgales Enerģija failed and the claimant commenced investment
treaty proceedings against Latvia.
The claimant contended that Latvia was responsible for the actions of Rēzeknes
P 203 Siltumtīkli and Rēzeknes Enerģija, because the Municipality, as the sole shareholder in
such companies, instructed, directed and controlled all of their operations at all relevant
times. It submitted that they ‘were therefore no more than an extension of the
Municipality’. (1315) According to the claimant, the Municipality authorised all actions of
Rēzeknes Siltumtīkli, who, by controlling the provision of district heating services,
exercised a public function. It submitted that the Municipality used its control over
Rēzeknes Siltumtīkli to achieve a particular result. (1316) The claimant alleged that
litigations initiated by Rēzeknes Siltumtīkli ‘were orchestrated by the Municipality to
further its aim of removing Latgales Enerģija from the supply of heating to Rēzekne’. (1317)
The respondent denied that Rēzeknes Siltumtīkli was an extension of the Municipality,
arguing that it was a State Enterprise ‘acting in a commercial setting, through commercial
means and on at an arm’s length basis’. (1318)
The tribunal noted that the relevant question for the purposes of ILC Article 8 was
‘whether the Respondent instructed, directed or controlled Rēzeknes Siltumtīkli’s or
Rēzeknes Enerģija’s bringing of the litigation which resulted in Latgales Enerģija’s bank
accounts being frozen’. (1319) It went on to state that the Municipality’s general control of
Rēzeknes Siltumtīkli by virtue of its sole ownership is relevant only as a ‘significant
background factor’. (1320) The tribunal inferred from a body of circumstantial evidence,
including the sequence of the events, an intention on the Municipality’s part to use
Rēzeknes Enerģija as an instrument in connection with Latgales Enerģija’s removal, which
culminated in Rēzeknes Enerģija’s bringing its claim for a freezing order against Latgales
Enerģija. (1321) Notably, the tribunal relied on an interview of the Mayor alluding to the
termination of the relationship with Latgales Enerģija, shortly after Rēzeknes Siltumtīkli
applied to freeze the assets of Latgales Enerģija. (1322) The tribunal concluded that the
facts, corroborated with the respondent’s failure to adduce witness evidence on this
point, established that the respondent directed Rēzeknes Siltumtīkli and Rēzeknes
Enerģija to bring their respective claims against Latgales Enerģija. (1323)
The tribunal in White Industries v. India followed the Jan de Nul and Hamester tribunal’s
interpretation that the effective control test involves the claimant showing both general
control over the non-State entity and specific control over the particular acts in question.
(1324) The White Industries tribunal’s restatement of the general control limb of the
P 204 effective control test is curious because at the same time the tribunal acknowledged
that the matters informing the general practical or historical regular exercise of State
control over the entity were ‘largely irrelevant’. (1325)
The dispute concerned in part the conduct of Coal India, a public sector undertaking that
entered into a contract with the claimant for the supply of equipment to, and
development of a coal mine at Piparwar, India. Coal India discharged purely commercial
functions, but its capital expenditures above a certain limit were subject to the approval
of the Government of India. (1326)
The claimant complained that, in the context of its contractual dispute with Coal India
and the ensuing International Chamber of Commerce (ICC) award resolving that dispute,
Coal India had improperly taken and retained a bank guarantee and that the respondent
has failed to exercise proper supervision of Coal India to correct the allegedly wrongful
conduct and to require that Coal India pay the damages awarded by the ICC tribunal.
(1327) Coal India did not voluntarily comply with the ICC award and the Indian courts
failed to deal with enforcement of the award for over nine years.
The claimant contended that the conduct of Coal India was attributable to the
respondent under ILC Article 8, because India ‘was in a position to (and did in fact),
control and direct Coal India’s actions’. (1328) The claimant pointed to (1) the State’s
appointment of the management of Coal India, (2) the State ownership of Coal India and
(3) the link between the official governmental position of two board members and their
board membership. It argued that these circumstances showed that ‘India was at all
times able to control and direct Coal India’ and that ‘the factual history shows that India
did, in fact, regularly exercise its control over Coal India to direct its day-to-day
operations.’ (1329)
The respondent argued that the alleged practical and historical close relationship of Coal
India with the State was irrelevant because ‘the test under Article 8 is not concerned with
108
the organisational structure of the State agency, the manner of appointment of directors,
and the frequency of consultation on issues such as pricing’. Relying on the Nicaragua
Case, it submitted that the relevant test entails proving that the respondent had
‘effective control’ of operations in the course of which the alleged violations were
committed. (1330)
The tribunal noted that the applicable test under ILC Article 8 involved ‘a high threshold’.
(1331) As indicated above, the tribunal dismissed the relevance of the alleged practical
and historical close relationship between the State and Coal India. (1332) It quoted the
Commentary on ILC Article 8 to the effect that attribution requires demonstration that
the State directed or controlled the specific operation and the conduct complained of
P 205 was an integral part of that operation. (1333) It noted that the applicable test did not
involve the consideration of ‘matters of organisational structure and “consultation” on
operational or policy matters’. (1334)
Having laid out the scope of the applicable test, the tribunal noted that the evidence on
the record did not indicate that Coal India required or obtained State approval to call
the bank guarantee. (1335) It also noted that the Government was not involved, either
directly or indirectly, in the negotiation and implementation of the project by Coal India.
(1336) The tribunal accepted the evidence that the role of the Government was limited to
facilitating the project by its approval, which was required because of the use of public
funds over a certain limit. (1337) The tribunal thus concluded that the impugned conduct
of Coal India was not attributable to India. (1338)
In Teinver v. Argentina (1339) the tribunal considered the attribution of the conduct of two
trade unions to the State. The two airlines owned by the claimants suffered a series of
strikes in which, according to the claimants, the Undersecretary of Air Transportation was
involved as a former head of one of the unions in question. (1340)
The claimants argued that ‘[b]y appointing Mr. Cirielli as Undersecretary of Air
Transportation while allowing him to simultaneously retain a position as union leader,
Respondent created the situation of control over the union. Respondent also, at least
implicitly, supported strikes organized by [the unions] … which caused the Argentine
Airlines significant harm.’ (1341)
The parties agreed that ILC Article 8 applied to the unions’ activities, (1342) but they
disagreed over the scope of ‘control’ as used in that article. The respondent submitted
that the rigorous standard of ‘effective control’ used in the Nicaragua Case, affirmed in
the Bosnian Genocide Case and described in paragraph four of the Commentary on ILC
Article 8 was the appropriate legal standard. The claimants argued that the less rigorous
standard of ‘overall control’ used in the Tadic Case was the proper standard for the
attribution of the conduct of the unions. (1343)
The respondent argued that the claimants did not present any convincing evidence that
either the Government of Argentina generally, or Undersecretary Cirielli specifically,
controlled the unions or induced them to strike. (1344) It noted that the Ministry of
Labour presided over numerous conciliation proceedings between the airlines and the
unions and that the unions filed a complaint with the International Labour Organization
against the Government regarding its role as an intermediary in the labour conflicts
alleging that the Government had undermined their rights of association. (1345)
P 206
The tribunal held that the relevant test was ‘effective control’ and found that the
evidence on the record did not indicate that the strikes were carried out on the
instructions of, or under the directions or control of the respondent. (1346) Nevertheless,
the tribunal considered also the lower ‘overall control’ test advocated by the claimants.
It noted that ‘[w]hile [the Undersecretary] may have been sympathetic to the unions,
there is no reliable indication that he was involved in organizing, coordinating or
planning the unions’ activities, nor that he financed, organized or provided operating
support while he was the Undersecretary of Air Transportation.’ (1347)
In von Pezold v. Zimbabwe, a dispute concerning the expropriation of farmers in the
context of the country’s land reform, the tribunal considered whether an active
encouragement by the Government of the acts of land invaders amounted to State
control for the purposes of attribution under ILC Article 8. (1348) The claimants
acknowledged that ‘they must show that “effective control” was exercised over the
persons who performed the acts which are alleged to give rise to wrongful conduct, or
that the State’s instructions were given in respect of each operation’. (1349) The claimants
then relied on evidence purporting to show the Government’s material support of the
land occupations and settlements prior to the enactment of the land reform. (1350)
The tribunal held that the State’s active encouragement of, or involvement in, the
conduct in question is insufficient to attribute the conduct of non-State organs to the
State under ILC Article 8. However, it noted that such State activity could inform an
analysis of the State’s own conduct in the context of its international law obligations to
protect investments. As the tribunal put it:
While there is ample evidence of Government involvement and
encouragement, the Tribunal is not persuaded that the acts of the invaders
109
were based on a direct order or under the direct control of the Government
when they initially invaded the Claimants’ properties. Rather, the Government
appears to have encouraged (and endorsed) the action once it had begun.
Encouragement would not meet the test set out in Article 8. However, the
Tribunal agrees with the Claimants that the State action of encouragement
and facilitation, etc. should be considered separately when it comes to treaty
violations (this includes the inaction of the police). The actions of the invaders
themselves need not be considered.
In respect of the State’s own conduct, the tribunal noted that Zimbabwean courts also
recorded that ‘the police took little or no action in respect of the acts of the invaders,
despite multiple court orders declaring the Invasions to be unlawful and directing the
police to ensure that the invaders vacated the farms’. (1351) It also noted that officials of
the Zimbabwe African National Union – Patriotic Front, a political party, public servants,
the secret service and the army ‘were found to have actively supported, encouraged,
P 207 transported and financed the [persons settling on privately owned commercial land]’.
(1352) Further, the tribunal found that there was evidence concerning ‘the active
involvement of government officials and agents in supporting and providing resources for
invaders on the [claimants’] Estates’. (1353) In its merits analysis, the tribunal found that
there was evidence also that the Government was assisting and encouraging the settlers
after the land invasions and President Mugabe ‘declared himself in favour of these land
invasions’. (1354) The tribunal considered that there has been ‘a total failure on the part
of the Respondent to divorce the politics of the situation from the underlying necessary
duty of the State to protect its citizenry’. (1355)
The von Pezold award underscores the importance of identifying the relevant attributable
conduct. If private conduct is not carried out under the effective control of the State, the
State may still be directly responsible under ILC Article 4 for ‘the effects of the conduct of
private parties, if it failed to take necessary measures to prevent those effects’. (1356)
In Tulip v. Turkey (1357) the test of ‘effective control’ was considered in relation to the
administration and termination of a contract concluded with Emlak in relation to a real
estate development project. It should be recalled that Emlak was a State Enterprise
majority-owned by TOKI, a State organ operating under the auspices of the Prime Ministry
of Turkey. Emlak terminated the contract with the claimant’s joint venture due to lack of
progress in the performance of the works and other alleged contractual violations and
called the performance bond. (1358) The claimant claimed that the acts of Emlak were
attributable to TOKI and therefore to the respondent. (1359) It claimed that the criteria of
ILC Article 8 were satisfied because TOKI exercised ‘an extraordinary level of control over
every aspect of Emlak’s operations’. (1360)
In respect of the close relationship between Emlak and TOKI, the claimant pointed to (1)
the controlling interest of TOKI in Emlak, (2) the appointment of the majority of Emlak’s
Board members, who were also TOKI employees and (3) the common employment of
certain individuals by Emlak and TOKI, including the head of Emlak who was also the
Chairman of TOKI. (1361)
Further, the claimant argued that all key decisions with respect to the Contract were
taken ‘in the offices of TOKI, rather than Emlak’. (1362) The claimant submitted that the
decision to terminate the Contract was not driven by bona fide commercial
considerations concerning the slow progress of works, because (1) Emlak’s Construction
P 208 Control Department had recommended an extension of 418 days, (2) it would have
been more advantageous for Emlak to maintain the Contract rather than retender it to
another company and (3) Emlak could have received its share of the development by
accepting the offer to buy land outright. (1363) The claimant also relied upon a press
article in which the head of Emlak, who was also the Chairman of TOKI, was quoted saying
‘[w]e cannot help any more. We have to protect the public interest’. (1364)
The respondent argued that a close link between a State entity and a private company
did not, in itself, justify the attribution of the private company’s acts to the State. (1365) It
contended that the relevant test, namely the State’s exercise of effective control over
Emlak and, in particular, over the allegedly attributable conduct, was not satisfied
because the State did not exercise control over Emlak with respect to its acts in
performing and terminating the Contract. (1366) It submitted that the exercise of TOKI’s
shareholder voting rights during the relevant period, the alleged control of the Emlak
Board by TOKI and the existence of some commonality of employment between Emlak
and TOKI did not amount to effective control. (1367) The respondent further argued that
TOKI had no power over the management of Emlak and had no role in the decision of the
termination of the Contract. (1368) Finally, the respondent argued that:
even if the Tribunal finds that Emlak acted under the direction or control of
TOKI, the question of attribution to the Respondent would turn on what Emlak
perceived to be in its best interest with respect to the issues raised by the
Claimant, and whether TOKI went beyond the legitimate exercise of the rights
of a majority shareholder to manage the company’s affairs in furtherance of
those perceived interests. The question is whether the decision was
commercially motivated and viable. (1369)
110
The tribunal noted that the relevant question was ‘whether TOKI exercised effective
control over Emlak and thereby enforced public policy in the administration and
termination of the Contract or whether any aspect of the administration and termination
of the Contract was performed under the instructions or direction of TOKI in an exercise of
sovereign power’. (1370)
According to the tribunal, TOKI’s majority ownership of Emlak, control of the majority of
its Board and the commonality of management positions in TOKI and Emlak showed that
‘from an ordinary company law perspective, Emlak was subject to the control of TOKI and,
therefore, the Turkish State’. (1371) The tribunal considered that, from a company law
perspective, ‘TOKI was capable of exercising a degree of control over Emlak to implement
P 209 elements of a particular State purpose. To the extent that TOKI exercised such
governmental control in particular instances in order to achieve a particular result, the
conduct of Emlak would have been attributable to the State.’ (1372)
The tribunal stated that the relevant inquiry for the purposes of ILC Article 8 tests
‘sovereign direction, instruction or control rather than the ordinary control exercised by a
majority shareholder acting in the company’s perceived commercial best interests’.
(1373)
The tribunal then noted that the press statement of the head of TOKI in relation to the
termination of the Contract, and in particular his words ‘[w]e have to protect the public
interest’, supported the claimant’s contention that the decision to terminate was
connected to TOKI’s exercise of public power. (1374) Nevertheless, it considered that:
the weight of the evidence is strongly to the contrary, to establish that the
decision to terminate the Contract with Tulip JV was made by the Board of
Emlak independently, in the pursuit of Emlak’s commercial interests and not
as a result of the exercise of sovereign power by TOKI. An analysis of the
content and nature of key decisions taken by Emlak’s Board with respect to
the Contract, including minutes and agenda papers, does not lead to the
conclusion that Emlak acted under the governmental control, direction or
instructions of TOKI with a view to achieving a certain State purpose. Rather,
the evidence confirms that Emlak acted in each relevant instance to pursue
what it perceived to be its best commercial interest within the framework of
the Contract. (1375)
The tribunal noted that, in terminating the Contract, the Board took legal advice, relied
on substantial delays in performance and invoked alleged violations of the Contract.
(1376) It further noted that the record established that Emlak acted as a commercial
party on the basis of its perceived contractual rights and there was no evidence that
‘Emlak invoked alleged contractual breaches as a pretext, in fact acting under the control
of TOKI to promote or achieve an ulterior purpose of interest to the State.’ (1377) The
tribunal considered that the project’s severe funding problems, the internal joint venture
conflicts and the delay in the construction were commercially viable grounds for Emlak
to invoke its perceived contractual rights to terminate the Contract. (1378) The tribunal
found that the evidence did not support a conclusion that the termination of the Contract
‘amounted to any kind of improper usurpation of the Claimant’s rights by the “invisible”
hand of the State’. (1379)
The tribunal concluded that TOKI did not use its corporate and managerial control ‘as a
vehicle directed towards achieving a particular result in its sovereign interests’. (1380)
Therefore, Emlak’s conduct with respect to the termination of the Contract was not
attributable to the State under ILC Article 8.
P 210
As the claimant’s claims referred also to the conduct of other various State actors, the
tribunal considered the merits of the case despite its finding of non-attribution with
respect to the conduct of Emlak. In doing so, it reviewed also the nature of the claimant’s
claims concerning Emlak, (1381) and the majority of the tribunal considered that the
merits issue of whether the impugned conduct involved the exercise of sovereign power
was ‘inexorably intertwined with the question of attribution’. (1382) As noted below,
arbitrator Jaffe considered that the matter of the nature of the State action, sovereign or
otherwise, should be left for the merits stage.
The arbitrator appointed by the claimant issued a dissenting opinion holding that Emlak
terminated the Contract under the control of TOKI. (1383) Arbitrator Jaffe opined that the
fact that the head of Emlak was also the Chairman of TOKI and that he declared to the
press that the termination was in the public interest evidence that, as a practical matter,
there was no separation between TOKI and Emlak in respect of the decision to terminate
the Contract. (1384) Arbitrator Jaffe considered that the testimonial evidence of the head
of Emlak further blurred the distinction between Emlak and TOKI. (1385) He noted that
the consideration of the real motivation behind the conduct in question, namely a
potential sovereign interference, is a matter for the merits of the case, rather than for the
attribution of the conduct. (1386) Ultimately, Jaffe joined his colleagues in holding that
the evidence was insufficient to support a finding of violation of the applicable BIT by
what he deemed to be State conduct. (1387)
111
The tribunal’s detailed attribution analysis illustrates the utility of reviewing the general
control of the State Enterprise by the entity: it reveals the ability of the State to exercise
specific control in the particular instance. However, as noted above, general control is
not a necessary prerequisite for effective control as the latter can be deployed also in
the absence of a general ability anchored in a company law or other internal law
framework. The Tulip majority’s application of the effective control test under ILC Article
8, including its distinction between the commercial interests of Emlak and the State’s
sovereign interests, was upheld by an ad hoc Annulment Committee. (1388)
The Tulip tribunal consistently determined that Emlak was not an instrument in the
State’s hands, whether under ILC Article 5 or ILC Article 8.
P 211
[4] Governmental Authority and Effective Control

When the impugned conduct concerns a State Enterprise engaged in a contractual
relationship with an investor or its subsidiary, the distinction between the alleged
exercise of governmental authority under ILC Article 5 and the alleged use of effective
control under ILC Article 8 may seem blurred. This is particularly the case if effective
control is grounded in an internal law empowerment. However, on a closer look there are
discernible differences. ILC Article 8 is broader in scope as it also encompasses de facto
situations where it is difficult to pinpoint a precise legal relationship. At the same time,
the effective control test is also stricter as it requires showing that the State direction or
control was decisive in committing the act in question. In other words, it requires showing
that but for the State’s effective control of the impugned conduct, the non-State actor
would not have engaged in that conduct. Nevertheless, as the cases discussed below
demonstrate, a conclusion under ILC Article 5 that the State instrumentality exercised its
contractual rights, rather than sovereign powers, often also foretells the outcome of the
test under ILC Article 8.
In EnCana v. Ecuador (1389) the tribunal decided that Petroecuador, the national oil
company of Ecuador, was subject to instructions from the President and others and that
the Attorney General had, and exercised, authority to supervise the performance of its
participation contracts. It concluded that ‘the conduct of Petroecuador in entering into,
performing and renegotiating the participation contracts (or declining to do so) is
attributable to Ecuador’ and noted that it did not matter ‘whether this result flows from
the principle stated in [ILC Article 5] or that stated in [ILC] Article 8. The result is the
same’. (1390)
In Almas v. Poland (1391) the tribunal had concluded in relation to ILC Article 5 that the
Polish Agricultural Property Agency (ANR) terminated the lease contract with the
claimants in the exercise of its contractual, rather than governmental, powers. (1392) It
then considered whether the same alleged internationally wrongful act, namely the
termination of the lease contract, was carried out on the instructions of, or under the
direction or control of, the State within the meaning of ILC Article 8. (1393)
The claimants did not appear to have made submissions with respect to ILC Article 8, but
the respondent contended that ‘ANR’s decision to terminate the Lease Agreement … was
an autonomous decision based on lawful or at least arguable grounds of contractual
breach.’ (1394)
The tribunal stated, by reference to Jan de Nul v. Egypt and White Industries v. India, that
the effective control test involved a showing of both general control over the entity and
specific control over the act in question. (1395) However, it then examined only the issue
P 212 of specific control. In that regard, it concluded that there was no evidence that ANR
acted under Poland’s instructions, direction or control in terminating the Lease
Agreement. (1396) To a large extent, the tribunal’s conclusion in relation to ILC Article 8
was foreshadowed by its finding, under ILC Article 5, that ANR exercised its legitimate
contractual rights. The testimonial evidence confirmed that ANR’s decision to terminate
was not in fact made under the instructions of anyone with authority over ANR’s director.
(1397)
[5] General Control and Specific Control
The existence of pervasive State control over an entity may indicate not only that the
State is equipped with sufficient means to use its control in a specific operation but it
may also establish that the entity in question is a State organ acting in complete
dependence on the State. In the latter scenario, its conduct is attributable under ILC
Article 4 and it is no longer necessary to conduct an analysis under ILC Article 8.
In Deutsche Bank v. Sri Lanka (1398) the tribunal considered whether CPC, the national oil
company, acted under the direction or control of the State in refusing to honour payment
obligations under the Hedging Agreement. The Supreme Court of Sri Lanka ordered CPC to
suspend its payments to Deutsche Bank pending the official investigations into the
derivative transactions under the Hedging Agreement. (1399) Further, the Monetary Board
of the Central Bank issued a stop-payment order directing the banks, including the
claimant, not to proceed with, or give effect to, the derivative transactions. (1400)
The claimant argued that CPC was the instrument of the State in conducting its oil policy
112
in the national interest and that the Government appointed its Board members. (1401) It
contended that:
the Government exercised its control of CPC to achieve a particular result: to
alleviate the burden on Sri Lanka’s foreign exchange and reduce the impact of
oil price volatility on the macro-economy and vulnerable members of society.
It was a directive from the Cabinet and the Minister that obliged CPC to start
the hedging program. … CPC did not have any choice as to whether or not to
hedge. (1402)
The claimant argued that, for the purposes of ILC Article 8, the specific operation
controlled by the State was the hedging programme and the Hedging Agreement was an
integral part of that operation: ‘the only way in which CPC could carry out this hedging
program as instructed was by entering into hedging agreements, including the Hedging
Agreement’. (1403)
P 213
The respondent contended that the State directions to enter into hedging arrangements
was in general terms: ‘there was no direction to enter into complex transactions, with
limited potential gains of the type constituted by the Hedging Agreement’. (1404) The
respondent submitted that a general direction did not meet the ‘effective control test’
and there was no evidence that Sri Lanka exercised a specific ‘effective’ over CPC in it
entering into any of the derivative transactions, including the Hedging Agreement, which,
in its view, was the relevant specific operation. (1405)
The tribunal acknowledged that a decision of the Supreme Court of Sri Lanka stated that
CPC was under ‘deep and pervasive State control’. (1406) It noted that, ‘[w]hile it may be
unusual for a state enterprise to be considered an organ of the State’, the fact that the
State Enterprise is a separate legal entity is not decisive for disqualifying it as a State
organ. (1407)
The tribunal found that State ownership, CPC’s protection of immunity from suit, the
appointment and removal of CPC directors by the Minister of Petroleum and the statutory
purpose of CPC evidenced general State control. It noted that there was ‘considerable
evidence as to the significant control exercised by the Government over CPC’s personnel,
finances and decision making’. (1408) In particular, by law, CPC was required to follow any
written directions of the Minister of Petroleum, regardless of whether those directions
were in the best interests of CPC. (1409)
In relation to specific control of CPC’s impugned conduct, the tribunal found that the
evidence on record demonstrated that CPC acted under the direct instruction of Sri
Lanka in refusing to pay the amounts owing following the claimant’s termination of the
Hedging Agreement as a direct result of orders CPC received from the Supreme Court and
the Central Bank. (1410)
Having found both general control over CPC and specific control over its impugned
conduct, the tribunal concluded that: (1411)
CPC’s actions would be attributable to the State, either because CPC is an
organ of the State under ILC Article 4 or because CPC lacked separate legal
existence, and/or acted under the instruction of the State. It is unlikely,
however, that CPC’s actions would be attributable to Sri Lanka under ILC
Article 5 as the specific wrongdoing in the present case (failure to pay the
amounts owing under the Hedging Agreement) could not be considered an act
of government or sovereign authority.
As it was satisfied that the actions of the Supreme Court and the Central Bank of Sri
P 214 Lanka, as State organs, constituted violations of the BIT, the tribunal did not consider
it necessary to come to a firm conclusion with respect to the attribution of CPC’s conduct
under the control of those State organs. (1412)
As the tribunal considered that CPC’s impugned conduct, namely the failure to pay
amounts owed under the Hedging Agreement, was not a sovereign activity, it is
questionable to what extent such commercial conduct by a State Enterprise would have
been attributable to the State under the effective control test of ILC Article 8. Given the
pervasive influence of the State over CPC, it is more likely that a de facto State organ
qualification would have been given to CPC and, as such, its commercial conduct would
have been attributable to the State.
In Ampal v. Egypt (1413) the tribunal determined that EGAS and EGPC, two State
Enterprises that signed a long-term gas supply agreement with the claimants’ company
were State organs, being ‘corporate entities within the overall structure of the Ministry of
Petroleum’. (1414) The attributable conduct in question concerned the termination of the
agreement with EGAS/EGPC.
In a questionable combined application of ILC Article 4 and ILC Article 8, the tribunal
used the evidence supporting its State organ qualification of EGPC and EGAS in order to
attribute their conduct to the State, ‘because they both acted at all times under State
direction and control in the sense of ILC Article 8’. (1415) The critical evidence for this
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overarching finding appears to have been the fact that, by law, all Board minutes of EGPC
had to be ratified by the Minister of Petroleum, who was also the Chairman of the Board,
and the termination decision in question was so ratified.
In respect of ILC Article 8, the claimants argued that governmental ownership or control
of an entity, government participation on its board of directors, or the submission of the
company’s minutes of meetings to approval by the Minister of Petroleum were factors
that led to a finding of attribution. (1416) They submitted that EGPC and EGAS entered
into the supply agreement pursuant to the instruction and under the control of the
Egyptian State and the Egyptian government officials continued to exercise decisive
influence over EGPC and EGAS during the implementation of the agreement. (1417) Finally,
the claimants contended that the minutes of a Board meeting of EGPC, chaired by the
Minister of Petroleum, in which the Board confirmed the termination of the agreement
showed that the purported termination of the agreement was an act of the State, because
the Board was controlled by the State. (1418)
The respondent denied that the termination of the contract was done pursuant to the
instructions or under the direction or control of the State or that EGPC’s Board could be
equated with the State. (1419)
P 215
The tribunal found that the same conduct of EGPC and EGAS was attributable to the State
under ILC Articles 4, 8 and 11. (1420) The tribunal appeared to have used the evidence
based on which it concluded that EGPC and EGAS was under the general control of the
Ministry of Petroleum for the purposes of ILC Article 4 in order to support its finding that
the State used its general control in confirming the termination of the agreement. The
tribunal relied on two minutes of the Board of EGPC, chaired by the Minister of Petroleum
and attended by other ministers and the Chairman of EGAS, in which the termination of
the agreement was confirmed and ratified, respectively. (1421) The tribunal agreed thus
that EGPC’s Board, which was controlled by the State, confirmed the termination of the
agreement.
According to the tribunal, there was ‘overwhelming evidence that the decisions of EGPC
and EGAS to conclude and terminate the GSPA were all taken with the blessing of the
highest levels of the Egyptian Government’. (1422) Therefore, the termination of the GSPA
was attributable to the respondent under ILC Article 8.
The Ampal tribunal’s attribution analysis illustrates the interaction of general and
specific control test within the overall normative framework of the attribution under the
ILC Articles. Due to the incremental nature of the attribution rules, it would have been
sufficient for the tribunal to conclude that the acts of EGPC and EGAS, as entities
integrated into the Ministry of Petroleum, were attributable to the State as State organs.
By its combined finding under ILC Articles 4 and 8, the tribunal effectively said that, for
the purposes of ILC Article 8, EGPC and EGAS controlled itself, which, of course, is not what
the attribution rule says. Instead, ILC Article 8 is concerned with two separate conducts
by two separate entities: the instructing or controlling act of the State and the conduct of
the public or private entity acting on such instruction or under such control.
[6] Specific Factual Relationship
As noted above, the ILC Commentary states that attribution under ILC Article 8 rests on
the premise of ‘a specific factual relationship between the person or entity engaging in
the conduct and the State’.
In Saint-Gobain v. Venezuela, (1423) this condition was applied to the alleged link
between the television announcement of President Chávez and the takeover of the
claimant’s plant by union members and sympathizers. It should be recalled that
President Chávez announced the prospective expropriation of Norpro Venezuela, the
claimant’s subsidiary, in a broadcasted speech, following which labour union members
accompanied by politicians from the ruling party occupied the plant. (1424)
P 216
The claimant contended that President Chávez practically ‘commanded the take-over of
the Plant by union members and sympathizers’, who thus ‘acted on behalf of the State
and pursuant to the instructions of the President’. (1425)
The respondent argued that it was the labour union and not the State, which occupied
the claimant’s plant. (1426)
The tribunal noted that the attribution of the conduct of private persons or entities is
exceptionally attributable to the State under ILC Article 8. (1427) It then addressed the
link between the presidential announcement and the takeover of the plant in the
following terms:
The Tribunal considers it plausible that there was a certain causal link
between President Chávez’ TV announcement on 15 May 2010 and the plant
takeover. … the Tribunal is of the view that the union members and
sympathizers would most probably not have taken over the plant on 15 May
2010 if President Chávez had not stated on this very day that the plant would
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eventually be handed over to PDVSA. The President’s announcement of this
prospect therefore appears to have been conditio sine qua non of (and
therefore a causal factor in relation to) the plant takeover. (1428)
The tribunal then noted the aforementioned causal link does not necessarily lead to the
specific factual relationship contemplated by the Commentary to ILC Article 8:
Plain causality, however, does not establish State responsibility under
international law. Conduct of private persons can be attributed to the State
only if there exists ‘a specific factual relationship between the person or entity
engaging in the conduct and the State’. The Tribunal is of the view that there
was no such specific factual relationship between President Chávez’
announcement and the takeover of the plant carried out by union members
and sympathizers. (1429)
The tribunal’s distinction between (1) what it termed an apparent conditio sine qua non
and (2) the specific factual relationship between the State and the conduct appears
difficult to follow on its face. The tribunal noted that the presidential announcement,
when considered against the relevant context, was not ‘an invitation, or even a command,
addressed to all listeners, including the members of the union and sympathizers, to take
over the plant’. (1430) In particular, the statement read out and approved by President
Chávez on television was just one of the recommendations prepared by the Plan Guayana
Socialista working groups, an association of unions in the Guayana region, and according
to the tribunal, its wording, reproduced below, ‘was meant to express and emphasize his
general approval and affirmation of the working groups’ proposals’. (1431) The statement
P 217 in question read as follows:
Discuss with PDVSA the purchase of the Proppants produced and

commercialized by the company Norpro Venezuela, a product produced with
Bauxite, Cornstarch and water, used for mud and drilling. It is suggested here
[in the document] that should it become necessary, this company should
become state-controlled and transferred to the hands of PDVSA. Let the
company Norpro Venezuela become state controlled and transfer it to the
hands of Petróleos de Venezuela. (1432)
The tribunal found that the statement ‘implied a promise to the people that the State
would nationalize the businesses referred to in the statement in the future; the President
did not, however, actually give specific orders or instructions for an immediate physical
takeover of the plant’. (1433) It concluded that:
President Chávez did not empower the unions to take over the businesses
concerned with governmental authority by virtue of his announcements.
Moreover, even though members of the SINPROTRAC union may have actually
taken President Chávez ‘at his word,’ the Tribunal considers that they did not
act ‘on the instructions of, or under the direction or control of’ President Chávez
within the meaning of Article 8 of the ILC Draft Articles. (1434)
By interpreting the President’s statement as an encouragement or an endorsement
signalling a prospective act of expropriation, the tribunal effectively found that, in terms
of causation, the plant takeover was an unintended side effect of that statement.
However, as the Commentary on ILC Article 2 notes, ‘[i]n the absence of any specific
requirement of a mental element in terms of the primary obligation, it is only the act of a
State that matters, independently of any intention.’ (1435) Therefore, it can be inferred
that the relevant question was whether the State has in fact authorised the takeover of
the plant and not whether the statement of President Chávez caused the private persons
to take over the plant. In the words of the ILC Commentary, the specific factual
relationship between the person engaging in the conduct and the State implies that ‘the
instructions, direction or control must relate to the conduct which is said to have
amounted to an internationally wrongful act’. As the Saint-Gobain tribunal correctly
noted, there was no instruction from President Chávez in relation to the takeover of the
plant.
In Electrabel v. Hungary (1436) the tribunal addressed the necessary correlation between
the alleged governmental control and the conduct of Magyar Villamos Művek Zrt. (MVM),
the State-owned electricity supply company. One of the claims concerned a commercial
pricing dispute related to a long-term PPA concluded between Dunamenti Erőmű Rt
(Dunamenti), which became a subsidiary of the claimant, and MVM. At the time of the
conclusion of the PPA, MVM was a State monopoly operating with regulated pricing
established by Hungary. (1437) In the context of Hungary’s liberalisation of the domestic
P 218 electricity market, the prices were deregulated for a few years, until Hungary
reintroduced regulated prices. (1438) The attributable conduct of MVM concerned the
partial payment of invoices by MVM in the period in which the prices were liberalised
and were thus subject to annual commercial negotiations with Dunamenti leading to the
so-called Yearly Commercial Agreements (YCAs).
The price under the PPA had two components: (1) a capacity fee paid in consideration of
the availability of certain capacities contracted under the PPA and (2) an energy fee
115
relating to the production cost of the electricity actually generated and sold to MVM.
(1439)
The claimant submitted that the instructions of Hungary, acting through its Hungarian
Energy Office (HEO) and the Minister of Economy and Transport, to MVM to reduce
Dunamenti’s capacity fee were in breach of the ECT and that, overall, MVM was acting
under instructions from HEO to reduce PPA prices. (1440)
In respect of attribution under ILC Article 8, the claimant argued that MVM acted on the
instructions of HEO, because Hungary, through its ownership of MVM, had the ability to
exercise control over the decisions of MVM and its management and such control was
evidenced by the close links between MVM’s senior management and the Government,
with many CEOs and chairmen of MVM having formerly held positions within the
Government. (1441)
It further contended that the Minister of Economy and Transport and the HEO had
repeatedly requested MVM to initiate discussions on the decrease of the PPA price. In
particular, MVM wrote to Dunamenti that the forthcoming price renegotiations were to be
conducted ‘in accordance with the expectations of the HEO and the Minister’. (1442)
The respondent submitted that under ILC Article 8 it is irrelevant that ‘instruction by the
State is “almost perfunctory”’. It contended that in reality ILC Article 8 ‘requires
affirmative proof of “specific control of the State over the act the attribution of which is
at stake”’. (1443) It denied that MVM acted under the specific control of the State arguing
that:
the relationship between MVM and the HEO was that of a regulated company
with its regulator. The regulated company’s actions are conducted
independently with its own commercial interests. For MVM and MVM Trade
(MVM’s subsidiary), it was in the ordinary course of their commercial business
to negotiate price reductions with its co-contractors. Therefore, … MVM and
MVM Trade were acting in their own independent commercial interests. (1444)
The respondent argued that the HEO merely requested negotiations to try to reach an
agreement on new terms to reduce prices and did not issue any direction to MVM to
reduce prices unilaterally. (1445) In respect of the allegedly attributable conduct, it
P 219 submitted that the PPA granted to MVM the right to withhold payment of the disputed
portion of Dunamenti’s invoices and provided a dispute resolution mechanism for the
settlement of such contractual dispute. (1446)
Having laid out the applicable attribution test, the tribunal noted that ‘[a]lthough the
conduct of private persons or entities is not attributable to the State under international
law as a general principle, factual circumstances could establish a special relationship
between the person engaging in the conduct and the State.’ (1447)
The tribunal found that there was no evidence on record showing any instruction from the
Hungarian Parliament or the Ministers to MVM concerning the price to be fixed in the YCA,
which would make the acts of MVM attributable to Hungary under international law.
(1448) In particular, the tribunal noted that ‘an investigation by a Parliamentary sub-
committee investigating the way in which the PPAs worked and setting a general policy
framework for dealing with the evolution of PPAs cannot be equated with an “instruction”
given by Parliament to MVM’. (1449) Further, it found that the renegotiation meetings
convened by the Minister of Economy and Transport were focused on the PPA’s
renegotiation. It also noted that, in any event, the evidence showed that ministerial
attendees adopted a passive attitude in those meetings, which contradicted the
claimant’s contention that MVM acted under the direction or control of the Ministry or the
HEO or acted on their instructions. (1450)
In relation to the HEO’s alleged written instruction to MVM, the tribunal noted that the
letter in question ‘was intended to encourage MVM and the Generators to conduct their
renegotiations more effectively than before’. (1451) The HEO letter to MVM ended with an
indication that ‘should the negotiations continue to fail to bring results, the Office (HEO)
will use all means provided under the law in order to ensure that the PPA renegotiations
succeed’. (1452) The tribunal noted that this wording conveyed ‘the clear threat of legal
sanctions if the parties failed to agree on the price reduction sought by HEO’, (1453)
which, in the event, meant the reintroduction of regulated pricing.
The tribunal found that the parties’ failure to reach an agreement on pricing for the 2008
YCA was not linked to the impugned HEO letter. Therefore, in relation to the 2008 YCA,
MVM did not act on the instruction of the State in refusing to pay the full amount of
Dunamenti’s invoices after the failure of their negotiations for a new 2008 YCA. (1454)
As for an earlier contested YCA, the tribunal considered that the HEO letter could not be
considered as an instruction, because ‘(i) it was a letter in a form addressed to all
Generators and MVM; (ii) its purpose was to encourage Dunamenti and MVM to negotiate
in the direction favoured by HEO, as opposed to instructing them to do so; and (iii) it
P 220 dealt with the renegotiation of the long term PPA, rather than the YCA’. (1455) The
tribunal noted that, even assuming that the letter referred to the YCA, its wording
indicated that ‘[i]t could at most be conceived as strong advice to both parties to the PPA
that they should adapt their contractual relationship to new conditions of economic
116
liberalisation. This letter is clearly meant to encourage both parties to the PPA to
negotiate in the direction favoured by governmental authorities’. (1456)
The tribunal noted that an invitation to negotiate, or more generally the Government’s
influence over MVM, could not be assimilated to an instruction. (1457) Significantly, the
tribunal also considered ‘whether MVM understood the letter as an instruction from the
HEO and thus applied such an instruction in its negotiation of the YCA with Dunamenti’.
(1458) In that regard, the tribunal concluded that MVM’s conduct in its YCA negotiation
meetings with Dunamenti did not reveal that it acted upon State instructions. The
renegotiation of the YVA was a commercial bilateral negotiation between Dunamenti and
MVM, without the involvement of official representatives from the Hungarian Government.
In fact, MVM understood the negotiations for the YCA to be a different exercise from the
general renegotiation of the PPA. (1459)
The tribunal noted that the commercial circumstances supported the autonomous
decision-making of MVM:
[i]ndependently of any alleged instruction by any governmental authorities,
MVM had its own important commercial motives to conduct itself exactly in
the way in which it did, as an economic actor taking its own interests fully into
account. It is not disputed that MVM was at the time losing money as it had to
buy electricity at a higher price than the price it was entitled to sell to
consumers: it needed and wanted for itself significant pricing reductions in
the 2006 YCA. (1460)
The tribunal thus concluded that the factual elements relied upon by the claimant
related to the renegotiation of the PPA, rather than the impugned conduct, namely the
invoice and pricing dispute under the YCA. Further, the tribunal noted that ‘[a]s regards
the roles of the Ministry, the Parliament, HEO and MVM, … the way in which events
unfolded … does not establish the necessary correlation between the content of the HEO
November 2005 Letter and related governmental conduct, on the one hand, and the
conduct adopted by MVM, on the other.’ (1461) In the absence of such correlation, the
tribunal decided that MVM did not act upon the instruction of Hungary, namely Hungary
did not use ‘its ownership interest in or control of a corporation specifically in order to
achieve a particular result’ in the sense contemplated in the ILC Commentary. (1462)
The Electrabel tribunal’s attribution analysis is notable for its sharp focus on the
necessary correlation between the alleged State instruction and the impugned conduct.
P 221 It is also helpful in distinguishing between a mere invitation or encouragement and an
instruction to adopt a certain act. The tribunal determined the inexistence of the
instructions not just by reference to the objective meaning of the content of the alleged
instructions, but also by reference to what MVM may have in fact understood from those
alleged instructions. The tribunal’s analysis illustrates that ILC Article 8 cannot be used to
attribute an act to the State in the absence of a necessary correlation between the two
alleged conducts, namely that of the State and that of the author of the allegedly
attributable conduct.
In MNSS v. Montenegro the tribunal considered if the exercise of regulatory control by the
Central Bank of Montenegro over Prva Banka, a private bank largely owned by the family
of the Prime Minister, amounted to State control for the purposes of ILC Article 8. (1463)
The claimants argued that the Central Bank and the Government failed to assist MNSS by
ordering Prva Banka to execute the payment orders of MNSS and that the conduct of Prva
Banka was attributable to the Central Bank, when Prva Banka was under the direct
control of the Central Bank. (1464)
The respondent submitted that a private company’s acts are attributable to the State
only if the State uses it as a vehicle to commit acts in breach of international law. (1465)
It contended that the Central Bank never exercised control of Prva Bank that would justify
the attribution of Prva Banka’s acts to the respondent. It submitted that the Central Bank,
in the exercise of its regulatory function, took measures to improve Prva Banka’s liquidity
and denied that it ordered Prva Banka to delay or refuse MNSS’ payment orders. (1466)
The tribunal found that ‘although Prva Banka was under the Central Bank’s supervision, it
was not under the Central Bank’s control for the purposes of Article 8 of the ILC Articles,
other than for a short period during which Prva Banka made transfers to the Claimants’.
(1467) It noted that, in any event, the Central Bank did not exercise ‘the type of control
needed under [ILC] Article 8 of in order to attribute the acts of the “controlled” entity to
the State’. (1468) Rather, the Central Bank’s control or supervision was ‘part of the
monitoring function of the Central Bank and not a compulsory control over the activities
of Prva Banka in general or specifically over the delays in payment complained by MNSS’.
(1469)
The MNSS tribunal’s attribution analysis shows that the exercise of regulatory control
does not ordinarily amount to State control for the purposes of ILC Article 8. The tribunal
also decided that there was no factual relationship between the alleged State control
and the impugned conduct.
P 222
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[7] The Pursuit of State Interests
In Yukos v. Russia (1470) the tribunal considered whether the actions of Rosneft and
Yuganskneftegaz (YNG) in the acquisition of YNG, and in precipitating and participating in
the bankruptcy proceedings of OAO Yukos Oil Company (Yukos), were attributable to the
State. YNG was Yukos’ core production subsidiary. The respondent sold YNG in an auction
in order to satisfy the tax claims against Yukos. (1471) YNG was sold to Baikal Finance
Group, a previously unknown company, who sold it on just four days later to Rosneft, a
State Enterprise. (1472) YNG, then owned by Rosneft, filed a bankruptcy petition against
Yukos and the majority of the remaining assets of Yukos were acquired by Rosneft and
Gazprom, another State Enterprise. (1473)
In the UNCITRAL arbitrations commenced under the ECT, the claimants primarily
complained of the actions of the executive organs of the State in the alleged destruction
of Yukos. In addition, it contended that Russia acted through Rosneft, when it did not act
through its executive organs or courts. (1474) In particular, the claimants sought to
attribute to the State: (1) Rosneft’s action in acquiring YNG through a special vehicle used
to conceal its involvement in the auction, (2) Rosneft’s entering into an agreement with a
consortium of banks in order to initiate the bankruptcy and precipitate the liquidation of
Yukos and (3) the votes of Rosneft, in the bankruptcy creditors’ meeting, against the
rehabilitation plan, against the admission of any Yukos-related creditor and for the
liquidation of Yukos. (1475)
The claimants argued that the above actions of Rosneft were attributable to the State,
because Rosneft was owned and controlled by the State. They submitted that the holding
of parallel positions on the Rosneft Board and the Russian executive and the
appointment of the President of Rosneft by the Russian Executive evidenced State
control. They also relied on a statement made by Rosneft in the context of its IPO
acknowledging that ‘the Russian Government … controls Rosneft and may cause Rosneft
to engage in business practices that do not maximize shareholder value’. (1476) Finally,
the claimants cited a statement made by President Putin at a press conference around
the time of the auction of YNG and a decision rendered by the Amsterdam Court of
Appeal in proceedings between Yukos Capital and Rosneft. (1477)
The respondent submitted that State ownership alone is insufficient to satisfy the
attribution test and the claimants must establish that the State directed or controlled
P 223 the specific operation and the impugned conduct in the exercise of governmental
authority. (1478)
The tribunal noted that the State ownership in Rosneft and the appointment by the State
of its officers, many of which concurrently occupied positions in the Board and the
Government, some close to President Putin, did not suffice to attribute to the State
Rosneft’s impugned actions. (1479) The tribunal went on to state that ‘it would be difficult,
if not impossible, to prove that Rosneft [acted] at the instructions or direction, or under
the control of the Russian State—but for one remarkable fortuity that bears on the
auction of the shares of YNG and their acquisition by Rosneft’. (1480) Following Rosneft’s
acquisition of YNG, President Putin conducted a press conference in which he stated:
Now regarding the acquisition by Rosneft of the well-known asset of the
company – I do not remember its exact name – is it Baikal Investment
Company? Essentially, Rosneft, a 100% state owned company, has bought the
well-known asset Yuganskneftgaz. That is the story. In my view, everything was
done according to the best market rules … a state owned company or, rather,
companies with 100% state capital, just as any other market players, have the
right to do so and, as it emerged, exercised it. … Today, the state, resorting to
absolutely legal market mechanisms, is looking after its own interests. I
consider this to be quite logical. (1481)
The tribunal noted that it was critical that President Putin ‘did not say that Rosneft was
looking after its own interests, but that the purchase [of YNG] signified that the Russian
State was looking after “its own interests”’. (1482) In the tribunal’s view, President Putin
publically accepted that Rosneft’s purchase of the YNG shares was an action in the
State’s interest, ‘the inference being that the State, then 100% shareholder of Rosneft, the
most senior officers of which were members of President Putin’s entourage, directed that
purchase in the interest of the State’. (1483) Therefore, it found that the purchase of the
YNG shares and the underlying auction were attributable to the Russian State. (1484)
The tribunal found that it did not necessarily follow that the subsequent actions of
Rosneft, namely, its contracting with bank creditors of Yukos and its bidding in the
bankruptcy auction of Yukos itself, were attributable to Russia. Nevertheless, it went on
to state that:
it may well be that in taking those actions, Rosneft did so at the sub rosa
[secret] direction of the Russian State, at the direction of senior officers of
President Putin’s entourage who concurrently ran Rosneft. In the view of the
Tribunal, it may reasonably be concluded that Rosneft was so directed. Or, if
not, that it was not because it did not need to be; Rosneft was such a creature
of President Putin’s entourage that it reflexively implemented his policies. But
P 224
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P 224
proving that admittedly is elusive, in the absence of an inculpatory
admission on behalf of the Russian State such as that of President Putin in
respect of the acquisition of YNG. (1485)
The tribunal concluded that the State, ‘speaking through its President’ accepted
responsibility for Rosneft’s acquisition of YNG and the underlying auction. In respect of
the subsequent impugned actions, the tribunal concluded that ‘while proof of specific
State direction is lacking, it may reasonably be held that the highest officers of Rosneft
who at the same time served as officials of the Russian Federation in close association
with President Putin acted in implementation of the policy of the Russian Federation’.
(1486)
The Yukos case shows that a State may exert decisive political influence over a State
Enterprise in order to pursue the State’s own interests. Such political influence is
extremely difficult to establish. In the Yukos case, the tribunal considered that President
Putin’s ‘inculpatory admission’ was sufficient to disregard the separate corporate
personality of Rosneft. One may ask, in respect of the subsequent impugned actions to
which President Putin’s statement could not have related, if in the absence of such
presidential statement, the tribunal would have attributed those actions to the State as
it did, merely on the basis that senior officials associated with President Putin
implemented State policy through their acts. It appears that, in the absence of proof of
State direction concerning those actions, the tribunal’s decision was influenced by its
finding concerning the earlier impugned conduct, namely that Rosneft was a mere de
facto instrument in furthering the State’s own interests. Ordinarily, such cross-pollination
between different allegedly wrongful acts would be questionable. However, in this case,
the tribunal reached a conclusion that ‘the primary objective of the Russian Federation
was not to collect taxes but rather to bankrupt Yukos and appropriate its valuable assets’
(1487) Accordingly, the tribunal seems to have viewed those individual acts as integral
components of a course of action in the furtherance of a single State objective. In the
circumstances, the attribution analysis concerning the acts of Rosneft is an example of a
State using its control of a State Enterprise specifically in order to achieve a particular
result within the meaning of ILC Article 8. (1488)
[8] No Inference
Although the Yukos tribunal drew an inference in relation to the attributability of part of
the impugned conduct, as noted above, the circumstances of that case, including the
evidence on the record, supported such inference. As a rule, the burden of establishing
the requirements for the attribution of the conduct to the State rests on the claimant and
tribunals do not draw inferences in respect of such requirements.
In Lao Holdings v. Laos the claimant alleged that the respondent, in breach of a
settlement agreement that ended a prior investment arbitration and in breach of the
claimant’s exclusive contractual rights, approved a project to build and operate a rival
P 225 casino to be located near the Friendship Bridge on the Mekong River between Laos and
Thailand. (1489)
As the tribunal noted, the claimant offered no direct evidence of the Government’s
approval of the contested project: ‘[i]nstead it has produced a variety of items of
circumstantial evidence, including media reports, blogs, the continuing operation of a
rival slot club or clubs in the Claimant’s territory and activities of private individuals and
entities (not the Government) from all of which, the Claimant argues, Government
approval can be inferred.’ (1490)
The tribunal stated that ‘a Tribunal must be careful not to shift the onus of proof from the
Claimant to the Respondent Government or to bend over backwards to read in inferences
against “the sovereign state” that are simply not justified in the context of the whole
case’.
The tribunal considered whether the acts of various private entities, which promoted the
rival project, including a corporation in which the Government held a minority interest,
were attributable to the Government under ILC Article 8. (1491)
The Government established a Special Economic Zone (SEZ) next to one of the claimant’s
casinos. The SEZ was managed by a State entity that entered into an agreement for the
development of a portion of the SEZ, which involved the formation of a new operating
company, Savan City. (1492) Savan City was majority-owned by private investors, who
were responsible for raising the funds and developing the project allegedly involving a
rival casino. The minority interests were owned by the Government. (1493)
The tribunal found that the private developers promoted the idea of a rival casino
without the Government’s approval. (1494) It held that the activities of Savan City and its
private promoters were not attributable to the Government, because (1) mere ownership
of a minority interest cannot confer control by the State, (2) the Savan City board was not
convened to authorise the project agreement and (3) there was no evidence that the
private developers approached the Government for the approval of a casino. (1495)
The claimant argued in the alternative that, even if there was no express Government
approval, ‘the political culture in Laos is such that powerful people and those under their
protection may operate businesses under tacit or “unofficial” permission’ and ‘an
119
inference of permission should be drawn against the Government based on the
informality of local practice’. (1496)
The tribunal noted that ‘the ability of powerful political interests to “get their way”’ did
P 226 not dispense with the requirement of formal approval and grant of a casino license.
(1497) It stated that a major foreign investor would not embark on a multi-billion dollar
project without complying with the formal licensing requirements. The tribunal
concluded that there was no evidence that the Government, through Savan City or its
competent authority, was implicated in the development of the alleged rival casino.
(1498)
The tribunal’s attribution analysis shows that State control in the sense of ILC Article 8
cannot usually be inferred from circumstantial evidence. (1499) The onus is on the
claimant to establish that the State actually authorised or controlled the impugned
conduct.
[C] Conclusion
The investment arbitration jurisprudence confirms that the attribution of conduct carried
out under State instruction, direction or control involves a high threshold. The relevant
test is embodied in ILC Article 8, which applies to two scenarios of State intervention: the
issuance of express binding instructions by the State to the non-State actors and the
exercise of effective control over non-State actors’ conduct. In both cases, there must be
a necessary correlation between the impugned conduct and the State’s intervention.
The existence of express instructions by the State is notoriously difficult to demonstrate.
The strict interpretation of what constitutes express instruction is modulated by the
acceptance of general directions by the State as acts capable of triggering State
responsibility under this otherwise narrow limb of the attribution standard under ILC
Article 8. It is immaterial, for the purposes of attribution, if the conduct in fact authorised
by the State concerns governmental activity. However, ultra vires conduct, namely the
non-State actor clearly acting beyond the scope of the State’s instructions, is not
Effective control is more frequently considered in practice. The question to be asked is
whether the non-State actor would have committed the impugned acts without the
specific controlling intervention of the State. In this regard, general or overall control
over the entity is not conclusive and incidental or peripheral acts fall outside the State’s
control and are thus not attributable. Likewise, ordinary exercise of shareholder control
is insufficient. Corporate control must be used by the State as a device to achieve a
particular result in order to be attributable to it. In practice, it is considered if the
particular result is beyond what may be in the perceived best interest of a State
Enterprise. Therefore, the test does not concern ordinary commercial activities
conducted by the State Enterprise. It concerns the use of corporate or public law control
by the State to enforce public policy or exercise sovereign powers.
P 227
The investment arbitration jurisprudence also shows that active encouragement,
recommendation, advice or other non-commanding involvement by the State relating to
the impugned conduct does not rise to the level of State intervention required by ILC
Article 8. Finally, the fulfilment of the requirements of ILC Article 8 cannot be inferred
from general control, local practice or other non-specific conduct.
Effective State control or direction of a non-State actor under ILC Article 8 should not be
conflated with the State’s direct involvement in the conduct in question, whether through
a pervasive, general control of the State entity in question or through its own action or
inaction, which should trigger an attribution analysis under ILC Article 4.
While ILC Article 8 concerns acts, which are attributable to the State at the time of
commission, as discussed in the next section, the subsequent adoption by the State of
acts may also confer the necessary link between the State and the adopted act for
attribution purposes.
§5.07 SUBSEQUENT ADOPTION OF CONDUCT BY A STATE

Conduct not attributable to the State at the time of its occurrence may become
attributable to the State under ILC Article 11 if the State adopts such conduct as its own.
ILC Article 11 reads:
Article 11. Conduct acknowledged and adopted by a State as its own
Conduct which is not attributable to a State under the preceding articles shall
nevertheless be considered an act of that State under international law if and
to the extent that the State acknowledges and adopts the conduct in question
as its own.
Special Rapporteur Crawford introduced this article in his First Report on the draft ILC
120
Articles noting: ‘[a] State might subsequently adopt or ratify conduct not otherwise
attributable to it; if so, there is no reason why it should not be treated as responsible for
the conduct. Adoption or ratification might be expressed or might be inferred from the
conduct of the State in question.’ (1500)
The scope of the rule is relatively limited. The Commentary on ILC Article 11 makes it
clear that ‘[t]he phrase “acknowledges and adopts the conduct in question as its own” is
intended to distinguish cases of acknowledgement and adoption from cases of mere
support or endorsement.’ (1501) It elaborates that a mere acknowledgement of the
factual existence of the conduct or its express verbal approval will generally not make
the conduct attributable to the State. (1502)
P 228
The essential requirement under this after the event attribution standard is that ‘the
State identifies the conduct in question and makes it its own’. (1503) Whether express or
implied from conduct, the State’s adoption of the consumed act as its own must be
unequivocal and unqualified in order to justify its retroactive effect. (1504) As the State’s
acknowledgement and adoption come after the event, ILC Article 11 may cover even cases
where a State did not ab initio approve the impugned conduct or had sought to prevent
it. (1505) The principle embodied in ILC Article 8 is thus analogous to the concept of
ratification of unauthorised acts of an agent in the internal laws of agency. (1506)
If the State acknowledges and adopts part of the conduct in question, the principle of
attribution applies only to the acknowledged and adopted extent of that conduct. (1507)
The ILC Commentary clarifies also that the standard does not serve as an indemnification
by the State for the wrongful act of another and it requires, as with all bases of
attribution, a separate analysis of the legality of the State’s conduct under international
law. (1508)
ILC Article 11 does not cover the State’s silent ‘approval’ of wrongful private conduct.
(1509) The subsequent adoption of conduct by the State is a basis of attribution not to be
conflated with the substantive issue of a State’s direct responsibility for its failure to
prevent, or protect against, internationally wrongful conduct. The attribution standard
requires an active and decisive a posteriori act or conduct by the State, whereas the
direct responsibility of the State for its failure to protect implies a contemporaneous
breach of an international law obligation of the State acting through its organs.
[B] The Application of ILC Article 11 in the Investment Arbitration Jurisprudence

[1] No Independent Investigation or Analysis
In Clayton v. Canada (1510) the claimants submitted that the Government of Canada
adopted the environmental report of the JRP as its own. (1511) The JRP was an ad hoc body
whose members were appointed by the Minister of the Environment for Canada. Its
environmental report recommended against the claimants’ mining project. (1512)
P 229
The respondent argued that the Government ‘accepted’ and ‘supported’ the
recommendation of the JRP without adopting the JRP’s conduct as its own. (1513)
The tribunal found that the report of the JRP, while not binding on the Government, was a
statutory mandated part of the environmental deliberation process. (1514) It concluded
that the JRP was a de jure organ of Canada, but it added that ‘[e]ven if the JRP were not,
by its nature, a part of the apparatus of the Government of Canada, the fact would remain
that federal Canada and Nova Scotia both adopted its essential findings in arriving at the
conclusion that the project should be denied approval under their environmental laws.’
(1515) It noted that ‘the reasonable inference is that the Government of Canada agreed
with both the recommendation and the “community core values” approach that was at
[the JRP report’s] foundation’. (1516) The tribunal reached this conclusion on the basis
that the Government accepted ‘the essential reasoning and conclusions of the JRP’
without engaging in its own independent fact-finding investigation or legal analysis. (1517)
[2] Statutory Ratification
In Ampal v. Egypt (1518) the claimants contended that the Egyptian government’s
statement that they are willing to negotiate a new contract indicated that the
termination of the existing contract was an act of the State. (1519) The claimants also
relied on the statutory ratification of the EGPC’s Board resolutions by the Minister of
Petroleum, who was also the chairperson of EGPC’s Board. (1520)
The respondent submitted that there was no ‘clear and unequivocal’ adoption by the
State of the termination of the contract by EGPC. (1521)
As noted above, (1522) the tribunal found that the termination of the contract was
attributable to the State on other bases of attribution. Nevertheless, the tribunal found
that, in any event, the respondent subsequently ratified the termination of the contract
and thus acknowledged and adopted the conduct in question as its own within the terms
of ILC Article 11. (1523) Although the tribunal did not discuss the reasons for its attribution
conclusions separately in respect of each basis of attribution, it appears that its
121
conclusion with respect to ILC Article 11 was founded on the statutory ratification of the
Board minutes of EGPC in respect of the termination of the contract. (1524) The Minister of
P 230 Petroleum was empowered to cancel or amend the Board resolution and the fact that,
instead of exercising such powers, he ratified the Board resolution was sufficient to
evidence the State’s adoption of the impugned conduct as its own.
[3] Integral Part of State Strategy
In Saint-Gobain v. Venezuela (1525) the tribunal addressed the attribution of the conduct
of the labour union, namely the physical takeover of the claimant’s plant, to the State.
President Chávez mandated PDVSA, the national oil company, to implement the
nationalisation process of Norpro Venezuela, the claimant’s subsidiary. (1526) Following
his public announcement, the labour union evicted the management and took over the
plant. Shortly thereafter, PDVSA officials visited the plant and PDVSA prepared a number
of internal reports regarding the nationalisation process and later installed its own
management. (1527)
The tribunal found that PDVSA was vested with governmental authority within the
meaning of ILC Article 5 and exercised such governmental authority both in its alleged
function as a ‘caretaker’ of Norpro Venezuela and in its capacity as supervisor and
promoter of the nationalization of the plant. (1528) It also found that PDVSA, as a State
instrumentality, acknowledged and adopted the plant takeover carried out by union
members as its own. (1529)
The tribunal relied on internal PDVSA notes and reports that, in its view, showed that ‘the
union’s plant takeover was not only in line with Respondent’s intentions with regard to
the expropriation of the plant, but was subsequently made an integral part of the process
of nationalizing Norpro Venezuela’. (1530)
The tribunal’s brief attribution analysis under ILC Article 11 shows that a State may
acknowledge and adopt private conduct not only through its organs, but also through its
State instrumentalities. Further, the analysis shows that the acknowledgement and
adoption of the conduct in question may be a necessary part of a wider State strategy.
[4] Encouragement and Endorsement
In von Pezold v. Zimbabwe (1531) the claimants contended in the alternative that the State
acknowledged and adopted the acts of the land settlers as its own. (1532) The respondent
submitted that the popular uprisings were the ‘doings of the “masses”’ and, as such, they
were not attributable to the State. (1533)
P 231
The tribunal found that there was ‘ample evidence of Government involvement and
encouragement’ in relation to the land occupations, but the State’s action did not go
beyond encouragement, endorsement or facilitation of the impugned private conduct
and thus ILC Article 11 was inapplicable. (1534)
[5] No Inference from Espousal of Contract
In Kardassopoulos v. Georgia (1535) the tribunal examined the attribution of the acts and
omissions of SakNavtobi and Transneft, two State entities that contracted with the
claimants and were later incorporated into the State apparatus, in the context of the
statutory cancellation of the claimants’ contract rights. As the respondent contested the
internal law validity of the claimants’ JVA and Deed of Concession, the tribunal
determined that ‘Georgian government officials espoused the terms of the JVA and the
Deed of Concession’, noting that ‘the JVA was supported at the highest levels of
government’ and ‘the Deed of Concession was ratified by the Minister of Energy.’ (1536)
It appears that the tribunal used ILC Article 11 to attribute a contractual undertaking to
the State and then draw an inference from such attribution in relation to subsequent acts
and omissions by the State in relation to such contractual undertakings. As discussed in
Chapter 6, the ILC Articles are not intended to be used to attribute lawful conduct,
including the entering into a contract, to a State. Further, it is also questionable to what
extent an inference can be drawn from the State’s ratification of a contract in relation to
subsequent alleged wrongful acts concerning the same contract. State espousal of a
contract does not automatically mean State espousal, and even less so adoption, of
alleged wrongful conduct relating to the same contract.
[6] Mere Acknowledgement
In InterTrade v. Czech Republic (1537) the claimant argued that the improper tender by
Lesy Česke Republiky (LCR), a public entity responsible for the day-to-day management of
State forests, was attributable to the State, among others, on the basis of ILC Article 11. In
this regard, the claimant relied on the following statement by the new the Czech Minister
of Agriculture as allegedly adopting the conduct of LCR on behalf of the State: ‘[t]he
blame for the unfortunate state of affairs after the illegal tender proceedings is borne
fully by my predecessors who reached a number of incorrect decisions. … The company is
fully entitled to make such a claim.’ (1538)
P 232
122
The tribunal disagreed that the cited statement, which it described as ‘apologizing for
the acts of the former government’, constituted acknowledgement and adoption under
§5.08 OTHER GROUNDS OF ATTRIBUTION

The ILC Articles provide for additional special bases of attribution, which have virtually
received no consideration in the field of international investment law. Accordingly, these
merit just a brief consideration in a book dedicated to international investment law.
ILC Article 6 deals with the special case where an organ of a State is placed at the
disposal of another State and empowered to exercise the governmental authority of that
State. The conduct of such an organ is regarded under international law as an act of the
receiving State. The rule essentially establishes a ‘functional link between the organ in
question and the structure or authority of the receiving State’. (1540)
In Electrabel v. Hungary (1541) the tribunal noted that Hungary was not legally responsible
for the acts of the European Commission under international law. (1542) It then
mentioned ILC Article 6 to suggest, by analogy, that the conduct of Hungary, as a Member
State executing a decision of an organ of the EU could not give rise to liability for
Hungary under international law. (1543) In particular, the tribunal, by analogy, suggested
that Hungary could be regarded as the organ placed the disposal of another State, as if
the EU were a State, in which case the conduct of Hungary would be attributable to the
EU. (1544)
ILC Article 9 deals with conduct involving elements of governmental authority carried out
in the absence or default of the official authorities. The rule is intended to cover
situations where there is a partial collapse of the State machinery. (1545) According to
the official commentary, three conditions must be established for conduct to be
attributable to the State under ILC Article 9: (1) the conduct must relate to the de facto
exercise of elements of governmental authority, (2) the conduct must have been carried
out in the absence or default of the official authorities and (3) the circumstances must
have called for the exercise of those elements of authority. (1546) The commentary
further clarifies that the situations covered by ILC Article 9 ‘presuppose the existence of a
Government in office and of State machinery whose place is taken by irregulars or whose
action is supplemented in certain cases. This may happen on part of the territory of a
P 233 State which is for the time being out of control, or in other specific circumstances’.
(1547) There are no known investment arbitration decisions dealing with this article.
Finally, ILC Article 10 deals with the conduct of an insurrectional or other movement,
which becomes the new Government of a State or succeeds in establishing a new State in
part of the territory of a pre-existing State or in a territory under its administration. There
are no known investment arbitration cases dealing with this article.
P 233
References
281) ILC Art. 2 provides:
‘There is an internationally wrongful act of a State when conduct
consisting of an action or omission:
(a) is attributable to the State under international law; and
(b) constitutes a breach of an international obligation of the State.’;
Commentary on ILC Article 2, para. 1.
282) Commentary on ILC Articles, fn. 33, commentary on ILC Art. 1, para. 1 and
commentary on ILC Art. 2, para. 4.
283) See §3.4[B](3). The tribunal in Fireman’s Fund Insurance Company v. United States of
Mexico, ICSID Case No. ARB(AF)/02/01, Final Award (11 July 2007), fn. 155, observed:
‘A failure to act (an “omission”) by a host State may also constitute a State measure
tantamount to expropriation under particular circumstances, although those cases
will be rare and seldom concern the omission alone.’
285) In ILC Arts 6, 9 and 10 there are additional grounds of attribution, which, due to
their exceptional or special nature, are virtually unused in international
investment law, for an overview see Commentary on the ILC Articles, Chapter II,
para. 8.
286) Id., para. 7; ILC Art. 12 and Commentary on ILC Art. 12.
287) As noted in para. 9 of the Commentary on ILC Art. 2, the existence of damage is not
a necessary element of State responsibility. As the tribunal in Total S.A. v.
Argentine Republic, ICSID Case No. ARB/04/01, Decision on Objections to
Jurisdiction (25 August 2006), fn. 51, noted: ‘Having caused damage is not an
additional requirement, except if the content of the primary obligation breached
has an object or implies an obligation not to cause damages.’
123
288) Commentary on the ILC Articles, Chapter II, para. 6.
289) Schicho notes that municipal law is ‘relevant to establish whether an entity
actually constitutes a State organ, but not to determine what the legal
consequences of that status are. These legal consequences are exclusively subject
to rules of international law.’ See Luca Schicho, State Entities in International
Investment Law, 103 (Nomos, 2012); see also First Report on State responsibility,
supran. 150, para. 154(b): ‘Without a fixed prescription for State authority,
international law has to accept, by and large, the actual systems adopted by
States, and the notion of attribution thus consists primarily of a renvoi to the
public institutions or organs in place in the different States’.
290) The term ‘person’ appeared during the second reading of the draft ILC Articles.
Special Rapporteur Crawford preferred this term in lieu of the term ‘agent’, which
was suggested by Special Rapporteur Ago in the first reading. As noted in the
Commentary on the draft ILC Articles adopted after the first reading, it was thought
that ‘[t]he term “agent” would seem to denote, especially in English, a person
acting on behalf of the State rather than a person having the actual status of an
organ.’, see Yearbook of the International Law Commission 1973, vol. II, at 193, para.
13 of the commentary on Art. 5 (which became Art. 4 in the final version). The
drafting committee of the ILC Articles eventually settled for ‘persons or entity’
noting that this formulation conforms with the language of the draft articles on
jurisdictional immunities of States and their property, adopted in 1991, see
Statement of the Chairman of the Drafting Committee, Mr Peter Tomka, 29 May
2001, at 7. The Commentary on ILC Art. 4 also notes at para. 12 that ‘[t]he term
“entity” is used in a similar sense in the draft articles on jurisdictional immunities
of States and their property, adopted in 1991.’ Article 10(3) of the 1991 Draft Articles
on Jurisdictional Immunities of States and Their Property attached to the term
‘entity’ the following attributes: (1) an independent legal personality and (2)
capacity of (a) suing or being sued; and (b) acquiring, owning or possessing and
disposing of property, including property which the State has authorised it to
operate or manage.
291) Id., ILC Art. 4, para. 12.
292) Id., para. 1.
293) Id., para. 11.
294) This position is consistent with the role of effectiveness in international law, see
Paolo Palchetti, De Facto Organs of a State, in R. Wolfrum ed., The Max Planck
Encyclopedia of Public International Law, volume II, 1048 (Oxford University Press,
2012).
295) One may say that even the reference to internal laws is concerned with the fact-
based reality of the situation, as from the standpoint of international law
municipal laws are facts. As noted by the Permanent Court of International Justice
in Certain German Interests in Polish Upper Silesia, 1926 PCIJ Series A, No. 7, pp. 4, 19:
‘[f]rom the standpoint of International Law and of the Court which is its organ,
municipal laws are merely facts which express the will and constitute the activities
of States, in the same manner as do legal decisions or administrative measures.’
297) Schicho, supran. 289, at 88.
298) Divergencies may indeed arise as internal law does not always eliminate the need
for interpretation. Sasson commented that ‘[i]nterpretive problems may arise
when the relevant municipal law is unclear on the status of the organ or does not
specify that the body acts on the State’s behalf’, supran. 176, at 9.
299) Crawford, supran. 242, at 114; Condorelli, Kress, supran. 44, at 226: ‘the organization
of the State results from a multitude of “facts”. However, acceptance of the factual
character of the structures of the States from the viewpoint of international law
does not prevent recognition of the possibility, or even of the necessity, that
international legal criteria must take account of the factual elements which form
part of those structures and which play a role for the purposes of the application of
international rules.’
300) Momtaz, supran. 44, at 239.
303) Ibid.; see also §5.05 infra in respect of State organs acting ultra vires or in breach of
the rules governing their operation.
305) Professor Greenwood’s Opinion of 10 March 2008, quoted with approval in EDF
(Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award (8 October 2009),
para. 188.
308) For an exception involving an informal inter-agency working group, see Fireman’s
Fund v. Mexico discussed in the section dedicated to public sector entities in
§5.03[C][2].
309) See §5.03[C].
310) Certain German Interests in Polish Upper Silesia, supran. 295; Commentary on ILC Art.
3, para. 7.
124
313) Commentary on ILC Art. 4, para. 11; see §5.03[D] infra in relation to de facto organs.
314) See §5.03[C] infra.
316) Dolzer, Schreuer, supran. 21, at 200; for a different understanding of the structural
test, see LESI, S.p.A. and Astaldi, S.p.A. v. People’s Democratic Republic of Algeria,
ICSID Case No. ARB/05/3, Award (12 November 2008), paras 106 et seq.
317) EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award (8 October
2009), para. 189.
318) First Report on State Responsibility, supran. 150, para. 163.
320) Application of the Convention on the Prevention and Punishment of the Crime of
Genocide (Bosnia and Herzegovina v. Serbia and Montenegro), Judgment (26
February 2007), I.C.J. Reports 2007, 43, para. 392 (the ‘Bosnian Genocide case’).
321) Ibid., para. 393.
322) Mr Kristian Almås and Mr Geir Almås v. The Republic of Poland, PCA Case No. 2015-13,
Award (27 June 2016).
323) Ibid., para. 207.
324) See §5.05 infra.
325) Bosnian Genocide case, para. 397.
326) See §5.03[D] infra.
327) See the Argentine cases arising from the dismantling of the public utility tariff
regime: for example, Enron Corporation and Ponderosa Assets, L.P. v. Argentine
Republic, ICSID Case No. ARB/01/3, Award (22 May 2007), para. 268; Total S.A. v.
Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability (27 December
2010), para. 140; Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas
Servicios Integrales del Agua S.A. v. Argentine Republic, ICSID Case No. ARB/03/17,
Decision on Liability (30 July 2010), para. 207; the cases involving Spain, Italy or the
Czech Republic concerning the legislative changes affecting the renewable energy
sector: for example, Eiser Infrastructure Limited and Energía Solar Luxembourg S.à
r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award (4 May 2017) para. 409.
328) Professor Crawford notes that the concept of parliamentary sovereignty does not
diminish the force of the conclusion that, in the eyes of international law,
municipal laws are facts and a State cannot rely on its municipal law in order to
justify an internationally wrongful act. See Crawford, supran. 242, at 120–121.
329) Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. The
Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability (28 April
2011), paras 103–105.
330) Ibid., para. 205.
331) Electrabel S.A. v. Hungary, ICSID Case No. ARB/07/19, Award of the Tribunal (25
332) Ibid., Decision on Jurisdiction, Applicable Law and Liability (30 November 2012),
para. 7.89.
333) Ibid., para. 7.90.
334) In this regard, in AES Corporation and Tau Power B.V. v. Republic of Kazakhstan,
ICSID Case No. ARB/10/16, Award, 1 November 2013, para. 196, the respondent
submitted that the actions of individual members of the legislature were
attributable to the State only to the extent that they constituted an exercise of
governmental authority. In light of its other findings, the tribunal did not consider
this argument.
335) Olleson, supran. 137, at 474.
336) Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision
on Liability, 14 December 2012, para. 305.
337) Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine
Republic, ICSID Case No. ARB/97/3 (formerly Compañía de Aguas del Aconquija, S.A.
and Compagnie Générale des Eaux v. Argentine Republic) (Vivendi II v. Argentina),
Award (20 August 2007), para. 7.4.42.
338) Ibid., para. 4.8.2: In the campaign, General Bussi, who went on to be elected the
Governor of the Province of Tucumán, and his party proclaimed their ‘most solid
opposition to transferring the patrimonies of the Province’.
339) Ibid., para. 4.8.1.
340) Ibid.
341) Ibid., para. 6.8.4.
342) Ibid.
343) Ibid., para. 7.4.44.
125
344) In relation to Government, see, for example, Gavazzi v. Romania, para. 178; Eastern
Sugar B.V. v. Czech Republic, SCC Case No. 088/2004, Partial Award (27 March 2007),
para. 200; in relation to ministries, see, for example, Mohammad Ammar Al-Bahloul
v. Republic of Tajikistan, SCC Case No. V064/2008, Partial Award on Jurisdiction and
Liability (2 September 2009), para. 169; Al Tamimi v. Oman, para. 344; in relation to
Prime Minister and ministers, see, for example, Jan Oostergetel and Theodora
Laurentius v. Slovak Republic, UNCITRAL, Final Award (23 April 2012), para. 152;
Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No.
ARB/07/24, Award (18 June 2010), para. 293; Joseph C. Lemire v. Ukraine, ICSID Case
No. ARB/06/18, Decision on Jurisdiction and Liability (21 January 2010), para. 37; in
relation to tax authorities, see, for example, Oostergetel v. Slovak Republic, para.
152; Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA
Case No. AA 227, Final Award (18 July 2014) paras 1478–1479.
345) Eureko B.V. v. Republic of Poland, UNCITRAL, Partial Award and Dissenting Opinion
(19 August 2005).
346) Ibid., para. 43.
347) Ibid., para. 118.
348) Ibid., para. 119.
349) Ibid., para. 123.
350) Ibid., para. 125.
351) Ibid., para. 129.
352) Ibid., para. 131.
353) Ibid., para. 133.
354) Ibid., para. 134.
355) ILC Art. 5 applicable to entities, which are not State organs, but which are
empowered by the law of the host State to exercise elements of governmental
authority; see §5.04 infra.
356) The tribunal in Hamester v. Ghana, para. 186, noted that the majority decision in
Eureko v. Poland cannot be relied upon in support of an argument that a separate
entity was a de facto State organ as ‘the [Eureko] tribunal did not actually decide
that the State Treasury was a State organ.’
357) Dissenting Opinion of Jerzy Rajski (19 August 2005).
358) McLachlan, Shore, Weiniger, supran. 17, at 8.127.
359) Luigiterzo Bosca v. Lithuania, UNCITRAL, Award (17 May 2013), para. 127; Almas v.
Poland, para. 209; Limited Liability Company AMTO v. Ukraine, SCC Case No.
080/2005, Final Award (26 March 2008), para. 101.
360) Mr Hassan Awdi, Enterprise Business Consultants, Inc. and Alfa El Corporation v.
Romania, ICSID Case No. ARB/10/13, Award (2 March 2015), para. 323; M.C.I. Power
Group L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6,
Award (31 July 2007), para. 221; Sergei Paushok, CJSC Golden East Company and CJSC
Vostokneftegaz Company v. Government of Mongolia, UNCITRAL, Award on
Jurisdiction and Liability (28 April 2011), para. 581.
361) Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award (12 October 2005),
para. 82.
362) See, for example, Jan de Nul v. Egypt, para. 155: ‘The distinction [between ILC Article
4 and 5] is of importance. Indeed, should the SCA be a State organ, any of its acts
would be attributable to the Respondent. Should it be an entity pursuant to Article
5, Egypt’s liability will depend on whether the SCA did exercise elements of
governmental authority vis à vis the Claimants at the relevant time.’
363) Hamester v. Ghana, para. 193.
364) Noble Ventures v. Romania, para. 82.
366) Ibid., para. 38.
367) Ibid., para. 63.
368) Ibid., para. 64.
369) Ibid., para. 66.
370) Ibid., para. 67.
371) Id., para. 69. The reference to the organ acting within the limits of its competence
appears to be misplaced, because a State organ’s conduct remains attributable to
the State even if the organ acted ultra vires, see §5.05 infra.
372) Id., para. 70.
373) Id., para. 73.
374) Id., para. 74.
375) Id., para. 79.
376) Id., para. 80.
377) Id., paras 79–80.
379) The tribunal in Hamester v. Ghana described this reasoning as an isolated position;
see Hamester v. Ghana, at fn. 169.
126
382) Article 1(2) of Emergency Ordinance No. 23/2004 concerning certain measures for
the reorganisation of the Authority for the Recovery of the Banking Assets through
the merger by absorption with the Authority for Privatisation and Administration of
State Participations.
383) Awdi v. Romania, para. 4.
384) Ibid., paras 322–323.
385) Luigiterzo Bosca v. Lithuania, UNCITRAL, Award (17 May 2013).
386) Ibid., paras 5–6.
387) Ibid., para. 123.
388) Ibid., paras 125–126.
389) Ibid., para. 127.
390) Ibid.
391) Ibid.
392) Yuri Bogdanov and Yulia Bogdanova v. Republic of Moldova, SCC Case No. V091/2012,
Final Award (16 April 2013).
393) See Chapter 8 in relation to the procedural treatment of attribution.
394) Bogdanov v. Moldova, para. 2.2.2.
395) Ibid.
396) Almas v. Poland, para. 4.
397) Ibid., para. 37.
398) Ibid., para. 90.
399) Ibid., para. 94.
400) Ibid., para. 106.
401) Ibid., para. 107.
402) Ibid.
403) Ibid., para. 209.
404) InterTrade Holding GmbH v. Czech Republic, PCA Case No. 2009-12, Final Award (29
May 2012).
406) Ibid., para. 41.
407) Ibid.
408) Ibid., para. 59.
409) It appears that the claimant did not argue that LCR in fact carried out the tender
under the control of the Ministry of Agriculture, which would have been a situation
covered by ILC Art. 8.
410) Ibid., para. 142.
411) Ibid., para. 141.
412) Ibid.
413) Ibid., para. 149.
414) Ibid., para. 155.
415) Ibid., para. 159.
416) Ibid., para. 169.
417) Ibid., para. 171.
418) Ibid.
419) Ibid., para. 172.
420) Ibid., para. 175; Arbitrator Henri Alvarez issued a dissenting opinion stating in para.
11:
the Ministry of Agriculture, as the State organ designated by the State to
manage the forests is responsible for how that management occurs. The
Ministry of Agriculture remained responsible for the administration of
the forests under the Forestry Act even though it delegated the
overseeing of contracts to [LCR]. The Respondent is responsible for the
acts and omissions of the Ministry of Agriculture.
421) Ibid., para. 177.
422) ILC Art. 2.
423) Awdi v. Romania, paras 289 and 319; Peter A. Allard v. Government of Barbados,
UNCITRAL, Award (27 June 2016), para. 251.
424) See, for example, Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16,
Award (8 November 2010), para. 406.
425) The distinction can be made only when the host State itself is not a contracting
party. If the host State is a contracting party, it cannot be said to ‘interfere’ with a
contract; it ‘performs’ it, see Consortium RFCC v. Royaume du Maroc, ICSID Case No.
ARB/00/6, Award (22 December 2003), para. 65, Impregilo S.p.A. v. Islamic Republic
of Pakistan, ICSID Case No. ARB/03/3, Decision on Jurisdiction (22 April 2005), para.
278.
427) Privatisation in the 21st Century: Recent Experiences of OECD Countries, Report on
Good Practices (January 2009), section 3.1 (Administrative responsibility),
http://www.oecd.org/corporate/ca/corporategovernanceofstate-
ownedenterprises/48476423.pdf (accessed 14 April 2018).
127
428) Bernardo Bortolotti, Veljko Fotak, William L. Megginson, The Rise of Sovereign
Wealth Funds: Definition, Organization, and Governance, December 2014, Baffi
Center Research Paper No. 2014-163, https://ssrn.com/abstract=2538977 (accessed
14 April 2018).
429) For example, Norway’s Government Pension Fund Global has investments in
seventy-two countries, seehttps://www.nbim.no/en/the-fund/ (accessed 14 April
2018); the majority of the Qatar Investment Authority’s investments are abroad,
seehttp://www.qia.qa/Investments/InvestmentsApproach.aspx (accessed 14 April
2018).
430) A notable exception is Fonds Stratégique d’Investissement or the Strategic
Investment Fund of France, created in 2008, in order to invest in companies
deemed strategic to the French economy. Also, Central Huijin Investment Ltd., the
wholly-owned subsidiary of China Investment Corporation makes investments in
‘the major state-owned financial institutions according to the government’s need
to reform China’s financial system’, see Abstract from Articles of Association of
China Investment Corporation, www.china-inv.cn (accessed 14 April 2018).
433) Ibid., para. 146.
434) Ibid., para. 153.
435) Ibid, para. 157.
436) Ibid., para. 160.
437) Ibid.
438) Ibid., para. 161.
441) Fireman’s Fund v. Mexico, para. 151.
442) Ibid.
443) Ibid., para. 149.
444) Ibid., para. 112.
445) Ibid., para. 131.
446) Ibid., para. 149.
447) Ibid.
448) Ibid., para. 150.
449) Ibid., paras 154–155.
450) EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award (8 October
2009).
451) Ibid., para. 102.
452) Ibid.
453) Ibid., para. 164.
454) Ibid., para. 166.
455) Ibid., para. 168.
456) Ibid., para. 190.
457) Tulip v. Turkey, para. 60.
458) Ibid., para. 232.
459) Ibid., para. 235.
460) Ibid., para. 236.
461) Ibid., para. 249.
462) Ibid., para. 259.
463) Ibid.
464) Ibid., para. 260.
465) Ibid., para. 262.
466) Ibid., para. 287.
467) Ibid., para. 288.
468) No. 2004/13-66K, No. 2004/719, Republic of Turkey Supreme Court of Appeal,
General Committee Basis, quoted at para. 288.
470) Ibid., paras 290–291.
471) Waste Management Inc. v. United Mexican States [II], ICSID Case No. ARB(AF)/00/3,
Final Award (30 April 2004), para. 75.
472) Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case
No. ARB/04/19, Award (18 August 2008), paras 10–15.
473) MCI Power v. Ecuador, paras 219–220.
474) Ibid., para. 222.
475) Ibid., para. 224.
476) Ibid., para. 225.
477) Ibid., the tribunal wrongly quoted ILC Art. 5 (instead of ILC Art. 4) as the legal basis
of its conclusion.
478) Ulysseas, Inc. v. The Republic of Ecuador, UNCITRAL, Interim Award (28 September
2010), para. 154, and Final Award (12 June 2012), paras 124–135.
479) Ibid., para. 129.
480) Ibid., para. 130.
481) Ibid., para. 140.
482) Ibid., para. 131.
128
483) Ibid., para. 88.
484) Ibid., para. 132.
485) Ibid., para. 133.
486) Ibid., para. 112.
487) Ibid., para. 113.
488) Article II(2)(b) of the US-Ecuador BIT.
489) Ulysseas v. Ecuador, para. 117.
490) Ibid., para. 135.
491) Almas v. Poland, para. 210; Jan de Nul v. Egypt, paras 147, 161; AMTO v. Ukraine, para.
101.
492) Ampal-American Israel Corporation and others v. Arab Republic of Egypt, ICSID Case
No. ARB/12/11, Decision on Liability and Heads of Loss (21 February 2017).
493) Ibid., para. 72.
494) Ibid., para. 96.
495) Ibid., para. 97; for the discussion of the claimants’ arguments that EGPC and EGAS
were de facto State organs, see §5.03[D] infra.
496) Ibid., para. 112.
497) Ibid., para. 119.
498) Ibid. para. 138.
499) Ibid.
500) Ibid., para. 32.
501) Ibid., para. 138.
502) Ibid., para. 137.
503) Ibid., para. 139.
504) Bayindir Insaat Turizm Ticaret ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID
ARB/03/29, Award (27 August 2009).
506) Ibid., para. 96.
507) Ibid., para. 112.
508) Ibid., para. 114.
509) Ibid., para. 116.
510) Ibid., para. 118.
511) Ibid., para. 119.
512) Ibid.
513) Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID ARB/07/24, Award
(18 June 2010).
514) Ibid., para. 22.
515) Ibid., para. 27. Article 25(1) of the ICSID Convention gives jurisdiction with respect to
disputes between an investor and a Contracting State or ‘any constituent
subdivision or agency of a Contracting State designated to the Centre by that
State’.
516) Ibid., paras 148–150.
517) Section 32 of the 1984 Law creating Cocobod cited at para. 152.
519) Ibid., para. 166.
520) Ibid., para. 184.
521) Ibid., para. 185.
522) Ibid., para. 188. For the tribunal’s analysis regarding Cocobod potential position as
a de facto organ, see §5.03[D].
523) AMTO v. Ukraine, para. 27.
524) Ibid., para. 29.
525) Ibid., para. 31.
526) Ibid., para. 101.
527) Ibid.
528) Ibid.
529) See §5.02 supra.
530) Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16, Award (8
531) Ibid., para. 397.
532) Ibid., para. 399.
533) Ibid., para. 403.
534) In Jan de Nul v. Egypt the appointment and dismissal of the management by
presidential decree did not tilt the balance towards a State organ qualification,
whereas in Ampal v. Egypt it did.
535) Paushok v. Mongolia, para. 581.
536) Ibid., para. 580.
537) David Archer, Roles and objectives of modern central banks, in Issues in the
Governance of Central Banks, Bank for International Settlements, May 2009, at 20,
https://www.bis.org/publ/othp04.htm (accessed 30 November 2017).
538) Ibid., at 50: ‘the National Bank of Poland in 1997 briefly entered the market for term
deposits to compete head to head with banks, but the motivation was to achieve a
change in term interest rates rather than to extract profits from intermediation.’
540) Ibid., para. 502.
541) Ibid., para. 575.
129
542) Ibid., para. 581.
543) Ibid., para. 586.
544) Ibid., para. 582.
545) Ibid., para. 583.
546) Ibid.
547) MNSS B.V. and Recupero Credito Acciaio N.V. v. Montenegro, ICSID Case No.
ARB(AF)/12/8, Award (4 May 2016), paras 289, 297.
548) Commentary to ILC Art. 4, para. 2.
549) MNSS v. Montenegro, para. 299.
550) Invesmart v. Czech Republic, UNCITRAL, Award (26 June 2009).
551) Ibid., para. 359.
552) Ibid., para. 363.
553) Alex Genin, Eastern Credit Limited, INC. and A.S. Baltoil v. Republic of Estonia, ICSID
Case No. ARB/99/2, Award (25 June 2001).
554) Sasson, supran. 176, at 19.
555) State responsibility, First report of the Special Rapporteur, ILC Yearbook 1998,
Volume I, at 243,
http://legal.un.org/ilc/publications/yearbooks/english/ilc_1998_v1.pdf (accessed
22 March 2018).
557) For an example of commercial conduct ascertained by a national court, see
Trendtex v. Central Bank of Nigeria, 13 January 1977, ILR, vol. 64, p. 122; [1977] 1 QB
529 (English Court of Appeal), cited in Hamester v. Ghana, para. 195, where a
distinction was made between the activities performed by the Central Bank of
Nigeria as a monetary authority, and the act of buying cement for the construction
of offices, which were not attributable to the State.
558) The conduct of armed forces is attributable under ILC Art. 4. Under ILC Art. 10 the
conduct of an insurrectional or other movement, which subsequently becomes the
new Government of the State or succeeds in establishing a new State, is also
attributable to the State as a special case of attribution.
560) Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No.
ARB/87/3, Final Award (27 June 1990).
561) Ibid., para. 34.
562) Pursuant to Art. 4(2)(b) of the UK-Sri Lanka BIT, investors of one Contracting Party
who, owing to armed conflict or insurrection in the territory of the other
Contracting Party, suffer losses resulting from destruction of their property by its
forces or authorities, which was not caused in combat action or was not required
by the necessity of the situation, shall be accorded restitution or adequate
compensation.
563) AAPL v. Sri Lanka, para. 44.
564) Ibid., para. 59.
565) Ibid., para. 72.
566) Ibid.
567) Ibid., para. 85.
568) Ibid.
569) AMCO Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1,
Award (20 November 1984), partially annulled by Ad hoc Committee Decision on
the Application for Annulment (16 May 1986), but the first tribunal’s findings on the
role of the army and the police were found to be res judicata in the Award of the
second tribunal in the resubmitted proceedings (31 May 1990), para. 41.
570) AMCO v. Indonesia, first Award, para. 257.
571) Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award (8
December 2000), paras 84, 88–89 and 110.
572) Ibid., 110.
574) Ibid., para. 245.
575) Bernhard von Pezold and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15,
Award (28 July 2015), para. 445.
576) Ibid., para. 431.
577) Ibid., para. 443.
578) Ibid., paras 445 and 598–599.
579) See §3.04[B][3] supra.
583) See, for example, Oostergetel v. Slovak Republic, para. 273.
130
584) See, for example, Eastern Sugar B.V. v. Czech Republic, SCC Case No. 088/2004,
Partial Award (27 March 2007), paras 200, 310; Sistem Muhendislik Insaat Sanayi ve
Ticaret A.S. v. Kyrgyz Republic, ICSID Case No. ARB(AF)/06/1, Award (9 September
2009), paras 117–118; RosInvestCo UK Ltd. v. Russian Federation, SCC Case No.
V079/2005, Final Award (12 September 2010), para. 603; Swisslion DOO Skopje v. The
Former Yugoslav Republic of Macedonia, ICSID Case No. ARB/09/16, Award (6 July
2012), para. 261; Dan Cake (Portugal) S.A. v. Hungary, ICSID Case No. ARB/12/9,
Decision on Jurisdiction and Liability (24 August 2015), para. 143.
585) Mr Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award (8
April 2013), para. 347.
586) Eduardo Jiménez de Aréchaga, International Law in the Past Third of a Century, 159-1
Recueil des cours (General Course in Public International Law, The Hague, 1978),
quoted in Robert Azinian, Kenneth Davitian & Ellen Baca v. United Mexican States,
ICSID Case No. ARB(AF)/97/2, Award (1 November 1999), para. 98.
587) See, for example, RosInvestCo UK Ltd. v. Russian Federation, SCC Case No.
V079/2005, Final Award (12 September 2010), para. 75.
588) Robert Azinian, Kenneth Davitian & Ellen Baca v. United Mexican States, ICSID Case
No. ARB(AF)/97/2, Award (1 November 1999).
589) Ibid., para. 97.
590) Ibid., para. 98.
591) ILC Article 6 provides: ‘The conduct of an organ placed at the disposal of a State by
another State shall be considered an act of the former State under international
law if the organ is acting in the exercise of elements of the governmental authority
of the State at whose disposal it is placed.’
593) The Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/06/3, Award (6 May 2013),
paras 38–39.
594) Ibid., para. 86.
595) Ibid., para. 164.
596) Ibid., para. 173.
597) European Commission for the Efficiency of Justice (CEPEJ), Enforcement of Court
Decisions in Europe, 22,
http://www.uihj.com/en/ressources/21628/70/cepej_study_on_enforcement.pdf
(accessed 7 December 2017).
598) Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic
of Kazakhstan, ICSID Case No. ARB/05/16, Award (29 July 2008).
599) Ibid., para. 398.
600) OAO Tatneft v. Ukraine, UNCITRAL, Award on the Merits (29 July 2014).
601) Ibid., para. 99.
602) Ibid., para. 108.
603) Ibid., para. 111.
604) Ibid., para. 162.
605) Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award
(27 August 2008).
606) Ibid., paras 229, 232 and 235.
607) Ibid., para. 229.
608) Ibid., para. 240.
609) Ibid.
610) Ibid., para. 251.
611) Ibid., paras 252–253.
612) Ibid., para. 253.
613) Ibid.; the reference to civil law systems seems apposite, as in some common law
jurisdictions, such as England and Canada, the bankruptcy trustee is regarded an
‘officer of the court’, see Jacques Auger, Albert Bohémier, The Status of the Trustee
in Bankruptcy, (2002) 37 Revue juridique Thémis, 57, 77. In principle, depending also
on the role and functions of the bankruptcy trustee and its supervision by the
court, an internal law classification of ‘officer of the court’ may lead to a State
organ classification under ILC Art. 4; see Petrochilos supran. 142, at 304.
614) Plama v. Bulgaria, para. 254.
615) Ibid.
616) Frontier Petroleum Services Ltd. v. The Czech Republic, UNCITRAL, Final Award (12
November 2010).
617) Ibid., para. 26.
618) Ibid., para. 28.
619) Ibid., para. 302.
620) Ibid., paras 350–351.
621) Ibid., para. 350.
622) Ibid., para. 359 and fn. 463.
623) Ibid., para. 359.
624) Ibid., para. 488.
625) Ibid., para. 413.
626) Ibid., para. 415.
627) Ibid., para. 416.
131
628) Jan Oostergetel and Theodora Laurentius v. Slovak Republic, UNCITRAL, Final Award
(23 April 2012).
629) Ibid., para. 94.
630) Ibid.
631) Ibid., para. 154.
632) Ibid., para. 155.
634) Ibid., para. 313.
635) Ibid., para. 314.
636) Hulley Enterprises Limited (Cyprus) v. Russian Federation, PCA Case No. AA 226, Final
Award (18 July 2014), para. 1476.
637) Ibid., para. 1480.
638) Dan Cake (Portugal) S.A. v. Hungary, ICSID Case No. ARB/12/9, Decision on
Jurisdiction and Liability (24 August 2015), para. 60.
639) Ibid., para. 89.
640) Ibid.
641) Ibid., paras 143, 145 and 157.
642) Ibid., para. 159.
643) Ibid., para. 160.
644) Olleson, supran. 137, at 477–478.
646) Arbitration ‘is a judicial procedure and a failure by a tribunal to act judicially may
be sanctioned by annulment or non-enforcement of that tribunal’s award’, Nigel
Blackaby, Constantine Partasides, et al., Redfern and Hunter on International
Arbitration, para. 1.82 (6th ed., Oxford University Press, 2015).
647) Waste Management Inc. v. United Mexican States [II], ICSID Case No. ARB(AF)/00/3,
Final Award (30 April 2004).
649) Ibid., paras 120–121.
650) Ibid., paras 70–71, 120 and 122.
651) Ibid., para. 118.
652) Ibid., para. 123.
653) William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and
Bilcon Delaware Inc. v. Government of Canada, PCA Case No. 2009-04, Award on
Jurisdiction and Liability (17 March 2015).
654) Ibid., para. 287.
655) Ibid., para. 288.
656) Ibid., para. 297.
657) Ibid., para. 298.
658) Ibid., para. 308.
659) Ibid., para. 309.
660) Ibid., paras 310, 312 and 318.
661) Ibid., para. 319.
663) State Responsibility, First Report of the Special Rapporteur, ILC Yearbook 1998,
Volume I, at 233.
666) Crawford, supran. 242, at 118; see also Waste Management II v. Mexico, para. 75.
667) Crawford, Mertenskötter note that ‘the entity’s powers and relation to other bodies
under internal law will be relevant’ where the municipal law status is inconclusive;
supran. 164, at 28.
668) Nykomb Synergetics Technology Holding AB v. Republic of Latvia, SCC Arbitral Award
(16 December 2003).
669) Ibid., at 1.
670) Ibid., at 5.
671) Ibid., at 31.
672) Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No.
ARB/09/2, Award (31 October 2012), para. 405.
673) Ibid., para. 14.
674) Ibid., paras 43–44.
675) Ibid., paras 351–356.
676) Ibid., para. 352.
677) Ibid.
678) Ibid., para. 356.
679) Ibid., para. 379.
680) Ibid., para. 380.
681) Ibid., para. 382.
682) Ibid., para. 405.
683) Ibid.
684) Ibid.
685) Ibid.
686) Ibid.
687) Salini v.Morocco, para. 35.
132
688) Ibid., para. 29.
689) Ibid., para. 32.
690) Ibid.
691) Ibid.
692) Ibid., para. 33.
693) Ibid., para. 35.
695) Ibid., para. 95.
696) Ibid.
697) Ibid., para. 96.
698) Ibid.
699) Ibid., para. 210.
700) Ibid., citing Commentary on ILC Articles, Chapter 2, para. 6.
701) Ibid.
702) Ibid., para. 212.
703) Ibid., para. 213.
704) Flemingo DutyFree Shop Private Limited v. Republic of Poland, UNCITRAL, Award (12
August 2016).
705) Id., para. 6.
706) ‘[A] State cannot avoid responsibility for the conduct of a body which does in truth
act as one of its organs merely by denying it that status under its own law’, see
Commentary on ILC Art. 4, para. 11.
707) Ibid., para. 352.
708) Ibid., para. 356.
711) Ibid., para. 54.
712) Ibid., para. 55.
713) Ibid., para. 365.
714) Ibid., para. 374.
715) Ibid., para. 425.
716) Flemingo v. Poland, para. 426.
717) Ibid., paras 427–430.
718) Ibid.
719) Ibid., para. 432.
720) Ibid., para. 433.
721) Ibid., para. 434.
722) For the attribution analysis of the tribunal, see §5.03[C][2].
724) For the attribution analysis of the tribunal, see §5.03[C][2].
726) For a brief discussion of the tribunal’s reasoning in the context of de facto organs,
see Crawford, Mertenskötter, supran. 164, at 29.
728) Ibid., para. 187.
729) Ibid.
730) See §5.03[C][2].
732) See, for example, Art. 151 of the Basic Law of the Hong Kong Special Administrative
Region (SAR) of the People’s Republic of China, which provides that the Hong Kong
SAR, using the name ‘Hong Kong, China’ may maintain and develop relations and
conclude and implement agreements on its own, with foreign states and regions
and international organisations, in such matters as economic affairs, trade, finance
and monetary affairs, shipping, communications, tourism, culture and sports,
http://www.basiclaw.gov.hk/en/basiclawtext/chapter_7.html; see also Framework
for Developing the International Identity of Jersey, 1 May 2007,
https://www.gov.je/Government/Pages/StatesReports.aspx?ReportID=329
(accessed 13 December 2017).
734) Article 2(i) of Agreement on Investment under the Framework Agreement on
Comprehensive Economic Cooperation between the Association of Southeast Asian
Nations and the Republic of India, concluded on 12 November 2014.
735) Article 40 of Agreement between Canada and the Republic of Serbia for the
Promotion and Protection of Investments (2014). Similarly, Art. 105 of NAFTA
provides: ‘The Parties shall ensure that all necessary measures are taken in order
to give effect to the provisions of this Agreement, including their observance,
except as otherwise provided in this Agreement, by state and provincial
governments.’
736) Article 1 of the Agreement between Canada and the Republic of Serbia for the
Promotion and Protection of Investments, concluded on 1 September 2014.
737) Article XI of Treaty between the United States of America and Ukraine concerning
the Encouragement and Reciprocal Protection of Investment, concluded on 4
March 1994.
738) Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award (16 September
2003), para. 6.7(c).
133
739) Ibid.
740) Ibid., para. 6.10.
741) Ibid., para. 10.2.
742) Ibid., para. 10.3.
743) Ibid., para. 10.5.
744) Ibid., para. 10.7.
745) Vivendi I v. Argentina, Award (21 November 2000) and Decision on Annulment (3 July
2002).
746) Ibid., Decision on Annulment, para. 43.
747) Ibid., para. 32.
749) Ibid., para. 49.
750) See Chapter 6 in relation to the attribution of contractual undertakings.
751) Vivendi I v. Argentina, Decision on Annulment, para. 96.
752) Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award
(11 September 2007).
753) Ibid., para. 243.
754) See §5.01 supra.
755) Parkerings v. Lithuania, para. 258.
756) Ibid., para. 259.
757) UAB E Energija v. Latvia, ICSID Case No. ARB/12/33, Award (22 December 2017), paras
750 and 796.
760) See §5.05 infra.
761) Report of the International Law Commission, 67th session, Supplement No. 10,
A/70/10, 24 August 2015, para. 204.
763) Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The
Argentine Republic, ICSID Case No. ARB/09/1, Award (21 July 2017).
765) Ibid., para. 693.
766) Ibid., para. 695.
767) Ibid., para. 700.
768) Ibid., para. 392.
769) Ibid., para. 702.
770) Ibid., para. 392.
771) Ibid., para. 694.
772) Ibid., para. 701.
773) Ibid., para. 711.
774) Invesmart v. Czech Republic, UNCITRAL, Award (26 June 2009).
775) Ibid., para. 82.
776) Ibid., para. 100.
777) Ibid., para. 353.
778) Ibid., para. 355.
779) Ibid., paras 359 et seq.
780) Ibid., para. 363.
781) Tradex Hellas S.A. v. Republic of Albania, ICSID Case No. ARB/94/2, Award (29 April
1999), paras 155–157.
782) Crawford, Mertenskötter, supran. 164, at 35 et seq.
783) Commentary on ILC Art. 5, paras 1, 4 and 5. The Commentary on the ILC Articles
refers to instrumentalities in discussing the actors that engage State responsibility,
see the introductory part to the rules on attribution, Chapter II, para. 7: ‘The State
as a subject of international law is held responsible for the conduct of all the
organs, instrumentalities and officials which form part of its organization and act in
that capacity, whether or not they have separate legal personality under its
internal law.’
785) For ‘parastatal’ entity, see F-W Oil Interests, Inc. v. The Republic of Trinidad and
Tobago, ICSID Case No. ARB/01/14, Award (3 March 2006), para. 206; for ‘State
instrumentality’, see H&H Enterprises Investments, Inc. v. Arab Republic of Egypt,
ICSID Case No. ARB 09/15, Award (6 May 2014), para. 367 and Bayindir v. Pakistan,
para. 120.
786) Commentary on ILC Art. 5, para. 1. Nevertheless, it is to be noted that the drafters
did not expressly label the persons and entities falling within ILC Art. 5
instrumentalities and this term is used in the Commentary and the jurisprudence
with respect to State organs too, see, for example, Commentary to the ILC Articles,
Chapter II, para. 7. As noted above, the Commentary on ILC Art. 5 uses the term
‘parastatal’ entity, see paras 1, 4 and 5.
789) Ibid.
790) Hobér, supran. 48, at 550; see also Almas v. Poland, para. 99; Flemingo Duty Free v.
Poland, para. 391; EDF v. Romania, paras 189 and 198.
791) See §5.03[B] supra.
134
794) Flemingo Duty Free v. Poland, paras 436–437.
795) Commentary on the ILC Articles, Chapter II, para. 9.
797) Dolzer, Schreuer, supran. 21, at 219; Sasson, supran. 176, at 25.
799) ILC 1251st meeting, ILC Yearbook 1974-1, para. 16 (Ago).
800) Ibid., para. 17.
802) ILC Yearbook 1998, Volume I, at 229; First Report of the Special Rapporteur, supran.
150, para. 190. See also id., para. 154: ‘Many activities carried out by Governments
could be entrusted to the private sector, and the line between public and private
varies continually over time within and between different countries. Without a
fixed prescription for State authority, international law has to accept, by and large,
the actual systems adopted by States, and the notion of attribution thus consists
primarily of a renvoi to the public institutions or organs in place in the different
States.’
803) F&W Oil Interests v. Trinidad and Tobago, para. 203.
806) Ibid.
807) Article 1(2)(c) of the Agreement on Investment under the Framework Agreement on
Comprehensive Economic Cooperation between the Association of Southeast Asian
Nations and the Republic of India (2014). The definition of ‘a service supplied in
the exercise of governmental authority’ is borrowed from Art. 1(3)(c) of the WTO
General Agreement on Trade in Services, which entered into force in January 1995.
810) Commentary on ILC Article, para. 5.
811) Petrochilos, supran. 142, at 302–303, observes that there is no ‘universal guide’ for
what is to be regarded as ‘inherently governmental’ and ILC Art. 5 extends to both
core functions, i.e., ‘functions that are generally regarded as being governmental’
and non-core governmental functions.
813) As the WTO Appellate Body stated in United States – Definitive Anti-Dumping and
Countervailing Duties on Certain Products from China – AB-2010-3 – Report of the
Appellate Body, WT/DS379/AB/R (11 March 2011): ‘just as no two governments are
exactly alike, the precise contours and characteristics of a public body are bound
to differ from entity to entity, State to State and case to case.’
815) UN Convention on Jurisdictional Immunities of States and Their Property, UN Doc
A/RES/59/38 (2004), Article 2(1)(b)(ii)-(iii).
816) First Report of the Special Rapporteur, supran. 150, para. 154.
817) Biwater Gauff v. Tanzania, para. 458.
818) Andreas Kulick; Stephan W. Schill (ed.), International Investment Law and
Comparative Public Law, 22(3) European Journal of International Law, 917 (1 August
2011); Petrochilos, supran. 142, at 305, argues that governmental power is not
necessarily restricted to regulatory or administrative power: ‘exactly what powers
a State sees fit specifically to grant to the entity for the accomplishment of its
governmental functions is a matter for that State alone.’ Petrochilos also questions
the idea that governmental authority encompasses only acts that are ‘self-
executing or enforceable by administrative coercion’, ibid.
819) UPS v. Canada, para. 79.
820) Chinkin notes that ‘[c]oncepts of the public and private are complex, and shifting,
and reflect political preferences with respect to the level and quality of
governmental intrusion’, see Christine Chinkin, A Critique of the Public/Private
Dimension, 10(2) European Journal of International Law, 387, 389 (1999).
822) Hyatt International Corporation v. The Government of the Islamic Republic of Iran,
Iran-U.S. Claims Tribunal Reports, vol. 9, p. 72, at pp. 88–94 (1985); United States –
Definitive Anti-Dumping and Countervailing Duties on Certain Products from China,
World Trade Organization, AB-2010-3 Report of the Appellate Body (11 March 2011),
para. 317.
823) United States – Definitive Anti-Dumping and Countervailing Duties on Certain
Products from China, para. 310.
135
824) Ibid., para. 317. The WTO Appellate Body stated in para. 318:
In some cases, such as when a statute or other legal instrument
expressly vests authority in the entity concerned, determining that such
entity is a public body may be a straightforward exercise. In others, the
picture may be more mixed, and the challenge more complex. The
same entity may possess certain features suggesting it is a public body,
and others that suggest that it is a private body. We do not, for example,
consider that the absence of an express statutory delegation of
authority necessarily precludes a determination that a particular entity
is a public body. What matters is whether an entity is vested with
authority to exercise governmental functions, rather than how that is
achieved. There are many different ways in which government in the
narrow sense could provide entities with authority. Accordingly,
different types of evidence may be relevant to showing that such
authority has been bestowed on a particular entity. Evidence that an
entity is, in fact, exercising governmental functions may serve as
evidence that it possesses or has been vested with governmental
authority, particularly where such evidence points to a sustained and
systematic practice. It follows, in our view, that evidence that a
government exercises meaningful control over an entity and its conduct
may serve, in certain circumstances, as evidence that the relevant
entity possesses governmental authority and exercises such authority in
the performance of governmental functions. We stress, however, that,
apart from an express delegation of authority in a legal instrument, the
existence of mere formal links between an entity and government in the
narrow sense is unlikely to suffice to establish the necessary possession
of governmental authority. Thus, for example, the mere fact that a
government is the majority shareholder of an entity does not
demonstrate that the government exercises meaningful control over the
conduct of that entity, much less that the government has bestowed it
with governmental authority. In some instances, however, where the
evidence shows that the formal indicia of government control are
manifold, and there is also evidence that such control has been
exercised in a meaningful way, then such evidence may permit an
inference that the entity concerned is exercising governmental
authority.
826) F&W Oil Interests v. Trinidad and Tobago, para. 203.
831) Ibid., para. 169; Ulysseas v. Ecuador, para. 139.
833) See §5.05 infra.
836) See, for example, the PPL in Flemingo Duty Free v. Poland, para. 439. In that case,
the tribunal found that the conduct of PPL was attributable to the State as a de
facto State organ and examined the test of governmental authority only ex
abundantia, see para. 436.
840) Note 8 to Art. 2(2)(a) in the 2012 US Model BIT.
No. ARB/04/19, Award (18 August 2008), para. 354.
842) Palchetti, supran. 294, at 1051.
843) See §5.07 infra.
845) Ibid.
847) See Art. II(2)(b) of the US-Ecuador BIT as applied in Ulysseas v. Ecuador, para. 135.
848) For example, the Suez Canal Authority in Jan de Nul v. Egypt, paras 166 and 171;
Cocobod in Hamester v. Ghana, paras 190, 248, 255, 284; AIBO in EDF v. Romania,
paras 195–196; NHA in Bayindir v. Pakistan, paras 121 and 123.
849) See §5.03[C] supra.
850) Badia defines State Enterprises as ‘any enterprise owned, controlled or specially
designated by any level of government to pursue financial objectives by
commercial means’, supran. 18, at 1.
851) Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of
the Tribunal on Objections to Jurisdiction (25 January 2000) and Emilio Agustín
Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award (13 November 2000).
136
852) Maffezini v. Spain (Merits), para. 53.
853) Maffezini v. Spain (Jurisdiction), para. 72.
854) Ibid., para. 73.
855) Ibid., para. 76.
856) The tribunal’s analysis under the structural test appears to underline only that
SODIGA was a State entity, rather than a State organ. This analysis is, however, of
limited significance for an entity exercising governmental authority, as it is
irrelevant under that test if the entity in question is a public or private entity. In
fact, the Maffezini tribunal seems to recognise this in para. 87: ‘[w]hile it is possible
that the Spanish State could have out-sourced such development activities to a
private, non-governmental, corporate entity, this was not the case here. But … even
if it had been the case, under the functional test this would not have necessarily
delinked the Spanish State from the entity as its functions would have been
delegated by the State and they could still be government functions in the light of
international law.’
857) Ibid., para. 77.
858) Ibid., para. 78.
859) Ibid., para. 79.
860) Ibid., para. 84.
861) Ibid., para. 85.
862) Ibid., para. 86.
863) Ibid.
864) Ibid., para. 88.
865) For a discussion of the procedural treatment of the issue of attribution, see Chapter
8.
866) Maffezini v. Spain (merits), para. 57.
867) Ibid., para. 62.
868) Ibid., para. 71.
869) Ibid., para. 78.
870) Ibid., para. 81.
871) LESI, S.p.A. and Astaldi, S.p.A. v. People’s Democratic Republic of Algeria, ICSID Case
No. ARB/05/3, Award (12 November 2008).
872) Ibid., paras 96–97.
873) Ibid., para. 113.
874) Ibid., para. 97.
875) Ibid., para. 98.
876) Ibid., para. 100.
877) Ibid., para. 108.
878) Ibid., para. 110.
879) Ibid.
880) Ibid., para. 114.
881) See §5.03[C][2] supra in relation to the background of Jan de Nul v. Egypt.
883) Ibid., para. 147.
884) Ibid., para. 149.
885) Ibid., para. 150.
886) Ibid., para. 154.
887) Ibid.
888) Ibid., para. 157.
889) Ibid., para. 164.
890) Ibid., para. 166.
891) Ibid., para. 169.
892) Ibid.
893) Ibid., para. 170.
894) Ibid.
895) Ibid., para. 171.
896) See §5.03[C][2] supra in relation to the background of Bayindir v. Pakistan.
897) Bayindir v. Pakistan, para. 121.
898) Ibid.
899) Ibid., para. 123.
900) Ibid., para. 237.
901) Ibid., paras 258, 314.
902) Ibid., para. 346.
903) Ibid., para. 258.
904) Ibid., para. 336.
905) Ibid., para. 359.
906) Ibid., para. 367.
907) Ibid., para. 377.
908) Ibid., para. 461.
137
909) From an analytical perspective, the finding that the termination of the contract
was not expropriatory because it did not involve the exercise of sovereign power is
not an attribution issue. It is a question pertaining to the merits of the case,
informing the matter whether there has been a breach of an international law
obligation. Nevertheless, the issue of the capacity in which the impugned act is
committed is relevant also for the attribution test under ILC Art. 5. See Chapter 8
(The Procedural Treatment of Attribution) for the order in which tribunals address
issues of attribution and legality.
911) Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No.
ARB/05/22, Award (24 July 2008).
913) Ibid., paras 3–6.
915) Ibid., para. 123.
917) Ibid., para. 207.
918) Ibid., paras 223–224.
919) Ibid., para. 285.
920) Ibid., para. 417.
921) Ibid., para. 458.
922) Ibid., para. 460.
924) Ibid., para. 498.
926) See §5.03[C][2] supra in relation to the background of Hamester v. Ghana.
927) Hamester v. Ghana, paras 150 and 156.
928) Ibid., para. 167.
929) Ibid., para. 176.
930) Ibid., para. 180.
931) Ibid., para. 190.
932) Ibid.
933) Ibid., para. 191.
934) Ibid., para. 193.
935) Ibid., para. 202.
936) Ibid., paras 250, 255, 266 and 284.
937) Ibid., paras 205–207.
938) Ibid., para. 248.
939) Ibid., para. 249.
940) Ibid., para. 266.
941) Ibid., para. 283.
942) For a contrary view, see Petrochilos, supran. 142, at 308, who, relying on Noble
Ventures v. Romania, argues that when the performance of commercial acts is part
of the entity’s statutory function, they may be attributable to the State. As noted at
§5.03[C][2] supra, the Noble Ventures v. Romania tribunal did not expressly ground
its reasoning in ILC Art. 5. To the extent that the tribunal’s reasoning related to ILC
Art. 5, the position that the acta jure gestionis and acta jure imperii is irrelevant for
the purposes of ILC Art. 5 remains isolated in the jurisprudence. See Olleson,
supran. 137, at n. 73 and Hamester v. Ghana, fn. 169.
943) See §5.03[C][2] supra in relation to the background of Almas v. Poland.
945) Ibid., para. 220.
946) Ibid., para. 219.
947) Ibid.
948) Ibid., para. 251.
949) Vigotop Limited v. Hungary, ICSID Case No. ARB/11/22, Award (1 October 2014), para.
332.
951) Ibid., para. 262.
952) Ibid., para. 263.
953) Ibid., paras 264, 266.
954) Ibid., para. 267.
955) See §5.03[C][2] supra in relation to the background of AMTO v. Ukraine.
956) AMTO v. Ukraine, ¶31.
957) Ibid., para. 100.
958) Ibid., para. 101.
959) Ibid., para. 108.
960) Ibid., para. 107.
961) F-W Oil Interests, Inc. v. The Republic of Trinidad and Tobago, ICSID Case No.
ARB/01/14, Award (3 March 2006).
962) Ibid., paras 8–10.
963) Ibid., para. 190.
964) Ibid., para. 191.
965) Ibid., para. 186.
966) Ibid., para. 194.
138
967) Ibid., para. 203.
968) Article XV(2) of the Treaty between the Government of the United States of America
and the Government of the Republic of Trinidad and Tobago concerning the
Encouragement and Reciprocal Protection of Investment.
969) F-W Oil Interests v. Trinidad and Tobago, para. 197.
970) Ibid., para. 204.
971) Ibid., para. 205.
972) Ibid., para. 206.
974) EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN 3481, Award, 3
February 2006.
975) Ibid., para. 23.
976) Ibid., para. 154.
977) Ibid.
978) Ibid.
979) Ibid.
980) Petrochilos, supran. 142, at 308–309.
981) WNC Factoring Limited v. The Czech Republic, PCA Case No. 2014-34, Award (22
February 2017).
982) Ibid., para. 234.
983) Ibid., para. 251.
984) Ibid., para. 245.
985) Ibid., para. 233.
986) Ibid., para. 44.
987) Ibid., para. 129.
988) Ibid., paras 138–139.
989) Ibid., para. 226.
990) Ibid., para. 234.
991) Ibid., para. 230.
992) Ibid., paras 232–233.
993) Ibid., para. 232.
994) Ibid., para. 235.
995) Ibid., para. 248.
996) Ibid., para. 249.
997) Ibid., para. 250.
998) Ibid., para. 252.
999) Ibid.
1000) Ibid., para. 253.
1001) See Chapter 8 (The Procedural Treatment of Attribution).
1002) Ibid., para. 376.
1003) Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon, ICSID Case No.
ARB/07/12, Decision on Jurisdiction (11 September 2009).
1004) Ibid., para. 16.
1005) Ibid., para. 17.
1006) Ibid., para. 25.
1007) Ibid., para. 43.
1008) Ibid., para. 48.
1009) Ibid., para. 49.
1010) Ibid.
1011) Ibid., para. 50.
1012) Ibid., para. 51.
1013) Ibid., para. 52.
1014) Ibid., para. 53.
1015) Ibid., para. 54.
1016) Ibid., para. 58.
1017) Ibid.
1018) Ibid., paras 106–108.
1019) Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon, ICSID Case No.
1020) Toto v. Lebanon (Jurisdiction), para. 121.
1021) See §5.03[C][2] supra in relation to the background of EDF v. Romania.
1022) EDF v. Romania, para. 166.
1023) Ibid.
1024) Ibid., paras 166 and 171.
1025) Ibid., para. 168.
1026) Ibid., para. 169.
1027) See §5.03[C][2] supra in relation to the background of Flemingo Duty Free v. Poland.
1028) Flemingo Duty Free v. Poland, paras 379 and 384.
1029) Ibid., paras 373 and 396.
1030) Ibid., para. 428.
1031) Ibid., para. 430.
1032) Ibid., para. 434.
1033) See §5.03[C][2] supra in relation to the tribunal’s analysis leading to a conclusion
that PPL was a de facto organ.
139
1034) Ibid., para. 436.
1035) Ibid.
1036) Ibid., para. 439.
1037) Ibid., para. 442.
1038) Ibid., paras 445–446.
1039) Ibid., para. 445.
1040) Ibid., para. 447.
1041) United Parcel Service of America Inc. v. Government of Canada, UNCITRAL, Award on
the Merits (24 May 2007).
1042) Ibid., para. 9.
1043) Ibid., para. 10.
1044) Ibid., para. 50.
1045) Ibid., para. 45.
1046) Ibid., paras 56, 59 and 63.
1047) Article 1502, NAFTA: Monopolies and State Enterprises:
3. Each Party shall ensure, through regulatory control, administrative
supervision or the application of other measures, that any
privately-owned monopoly that it designates and any government
monopoly that it maintains or designates:
(a) acts in a manner that is not inconsistent with the Party’s
obligations under this Agreement wherever such a monopoly
exercises any regulatory, administrative or other
governmental authority that the Party has delegated to it in
connection with the monopoly good or service, such as the
power to grant import or export licenses, approve
commercial transactions or impose quotas, fees or other
charges;
Article 1503, NAFTA: State Enterprises:
2. Each Party shall ensure, through regulatory control, administrative
supervision or the application of other measures, that any state
enterprise that it maintains or establishes acts in a manner that is
not inconsistent with the Party’s obligations under Chapters
Eleven (Investment) and Fourteen (Financial Services) wherever
such enterprise exercises any regulatory, administrative or other
governmental authority that the Party has delegated to it, such as
the power to expropriate, grant licenses, approve commercial
transactions or impose quotas, fees or other charges.
1048) UPS v. Canada, para. 68.

1049) Ibid., para. 64.
1050) Ibid., para. 66.
1051) Ibid., para. 57.
1052) Ibid., para. 72.
1053) Ibid., para. 74.
1054) Ibid.
1055) Ibid., para. 77.
1056) Ibid., para. 78.
1057) Windstream Energy LLC v. Government of Canada, PCA Case No. 2013-22, Award (27
September 2016).
1058) Ibid., para. 137.
1059) Ibid., para. 87.
1060) Ibid.
1063) Ibid., para. 221.
1064) Ibid., para. 6.
1065) Ibid., para. 225.
1066) Ibid., para. 231.
1067) Ibid.
1068) Ibid., para. 233.
1069) Ibid., para. 234.
1070) Ibid., paras 376 and 379.
1071) Ibid., para. 379.
1072) Ibid., para. 381.
1073) Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA Case No. 2012-17,
Award (24 March 2016).
1074) Ibid., para. 207.
1075) Ibid., paras 254 and 368.
1076) Ibid., para. 362.
1077) Ibid., para. 360.
1078) Ibid., paras 370–371.
1079) Ibid., para. 374.
140
1080) Ibid., para. 375.
1082) See also §5.03[C][2] supra in relation to the discussion of this decision in the
context of the attribution of the conduct of central banks.
1083) Genin v. Estonia, para. 298.
1084) Ibid, paras 89–90.
1085) Ibid., para. 327.
1086) Ibid., para. 353.
1087) Ibid., paras 363–365.
1088) See also §5.03[C][2] supra in relation to the background of Paushok v. Mongolia.
1090) Ibid., para. 587.
1091) Ibid.
1092) Ibid., para. 592.
1093) Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine, ICSID
Case No. ARB/08/11, Award (25 October 2012).
1094) Ibid., para. 33.
1095) Ibid., paras 40–41.
1096) Ibid., para. 37.
1097) Ibid., para. 74.
1098) Ibid., para. 75.
1099) Article II(2)(b) of the Treaty between the United States of America and Ukraine
concerning the Encouragement and Reciprocal Protection of Investment reads:
Each Party shall ensure that any State enterprise that it maintains or
regulatory, administrative or other governmental authority that the
Party has delegated to it, such as the power to expropriate, grant
licenses, approve commercial transactions, or impose quotas, fees or
other charges.
1100) Ibid., para. 154.
1101) Ibid.
1102) Ibid.
1103) Ibid.
1104) Ibid., para. 157.
1105) Ibid., para. 161.
1106) Ibid., para. 162.
1107) Ibid., para. 168.
1108) Ibid., paras 168 and 171.
1109) Ibid., para. 173.
1110) Ibid.
1111) Georgios Petrochilos, Case Comment, Bosh International, Inc and B&P Ltd Foreign
Investments Enterprise v. Ukraine, When is Conduct by a University Attributable to the
State?, 28(2) ICSID Review, 262, 267 (2013).
1113) Bosh v. Ukraine, para. 157.
1115) Bosh v. Ukraine, para. 176.
1116) Ibid., para. 177.
1117) Ibid., paras 177–178.
1119) Ibid., at 269.
1120) Bosh v. Ukriane, para. 183.
1121) The tribunal’s analysis as to the effect of the provision is, however, supported, in
relation to a similarly worded Art. 22(3) of the Energy Charter Treaty, by AMTO v.
Ukraine, para. 112 and Al-Bahloul v. Tajikistan, para. 172. For a contrary view, in
relation to Art. 1502(3)(a) and 1503(2) of NAFTA, see UPC v. Canada, para. 62,
Windstream Energy v. Canada, para. 233, Mesa Power v. Canada, para. 362.
1122) Newcombe, Paradell, supran. 136, §9.14.
1123) Ibid.; see also Petrochilos, supran. 1111, at 269–270.
1124) The alternative wording on State Enterprises contained in Art. 2(2) of the 2012 US
Model BIT reads in the relevant part: ‘A Party’s obligations under Section a shall
apply: (a) to a state enterprise or other person when it exercises any regulatory,
administrative, or other governmental authority delegated to it by that Party.’ Lee
M. Caplan and Jeremy K. Sharpe comment that this provisions ‘addresses the scope
of attribution to a Party under a US BIT.’, see Chester Brown (ed.), Commentary on
the 2012 US Model BIT: Article-by-Article Analysis in Commentaries on Selected Model
Investment Treaties, 773 (Oxford University Press, 2013).
1125) See also §5.03[C][2] supra in relation to the background of InterTrade v. Czech
Republic.
1126) InterTrade v. Czech Republic, para. 181.
1127) Ibid., para. 182.
1128) Ibid.
141
1129) Ibid., para. 185.
1130) Ibid., para. 188.
1131) InterTrade v. Czech Republic, Separate Opinion of Henri Alvarez, 29 May 2012, para.
11.
1132) Ibid., para. 14.
1133) Ibid., para. 15.
1134) Ibid., para. 17.
1137) InterTrade v. Czech Republic, para. 177; Yukos v. Russia, para. 1479; Paushok v.
Mongolia, para. 580; Al Tamimi v. Oman, para. 323; Jan de Nul v. Egypt, para. 155.
1139) In the context of claims made by State Enterprises, see Chapter 7, in
Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No.
ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction (24 May 1999), para.
20, the tribunal noted that in determining whether CSOB, the foreign trade bank of
the former Czechoslovakia, exercised governmental functions, ‘the focus must be
on the nature of these activities and not their purpose. While it cannot be doubted
that in performing [its] activities, CSOB was promoting the governmental policies
or purposes of the State, the activities themselves were essentially commercial
rather than governmental in nature.’
1140) ILC Yearbook 1998/I, at 245–246.
1141) The question of whether the purpose of the impugned act should be taken into
account in distinguishing between commercial and sovereign acts was one of the
most disputed issues also in the drafting of the UN Convention on Jurisdictional
Immunities of States and Their Property, adopted by General Assembly Resolution
59/38 of 2 December 2004. Ultimately, the following compromise solution was
adopted in Art. 2(2) of the Convention:
In determining whether a contract or transaction is a ‘commercial
transaction’ under paragraph 1 (c), reference should be made primarily
to the nature of the contract or transaction, but its purpose should also
be taken into account if the parties to the contract or transaction have
so agreed, or if, in the practice of the State of the forum, that purpose is
relevant to determining the non-commercial character of the contract
or transaction.
Accordingly, Art. 2(2) admits two exceptions: first, the parties to a contract may
agree that the ‘purpose’ test should be employed in addition to the ‘nature’ test;
second, the ‘purpose’ test may be applied in addition to the ‘nature’ test if the
courts of a State rely in practice on the contract or transaction’s purpose when
distinguishing between commercial and sovereign acts. Stephan Wittich
commented that the practice of Italian, French, Japanese and Austrian court is
illustrative in this regard and ‘in at least certain cases, the purpose or motivation
behind the contract or transaction is difficult to exclude altogether from the
characterization calculus.’ See Stephan Wittich, Commentary on Art. 2(1)(c) and (2)
and (3) in Roger O’Keefe, Christian J. Tams, The United Nations Convention on
Jurisdictional Immunities of States and Their Property, A Commentary, 71 (Oxford
1142) UN Resolution A/RES/71/133, Responsibility of States for internationally wrongful
acts, adopted on 16 December 2016.
1143) Al Tamimi v. Oman, para. 334.
1144) Ibid., para. 55.
1145) Ibid., para. 52.
1146) Ibid., para. 62.
1147) Ibid., para. 64.
1148) Ibid., para. 63.
1149) Ibid., para. 159.
1150) Ibid., paras 122 and 161–163.
1151) Ibid., paras 157 and 315.
1152) Ibid., paras 321–322.
1153) Ibid., para. 324.
1154) Ibid., para. 325.
1155) Ibid., para. 326.
1156) Ibid., para. 329.
1157) Ibid., para. 330.
1158) Ibid., para. 333.
1159) Ibid., para. 334.
1160) Ibid., para. 337.
1161) Ibid., para. 340.
1162) Ibid., para. 337.
1163) Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20, Award (19 December
2016).
1164) Ibid., para. 53.
142
1165) Ibid.
1166) Ibid., para. 57.
1167) Ibid., para. 334.
1168) Ibid., para. 46.
1169) Ibid., para. 139.
1170) Ibid., para. 141.
1171) Ibid., para. 283.
1172) Ibid., para. 286.
1173) Ibid., para. 335.
1174) See also §5.03[C][2] supra in relation to the background of Ulysseas v. Ecuador.
1176) Ibid.
1177) Ibid., paras 138–139.
1178) Ibid., paras 139, 174, 178, 185 and 199.
No. ARB/04/19, Award (18 August 2008).
1181) Ibid., para. 295.
1182) Ibid., para. 300.
1183) Saint-Gobain Performance Plastics Europe v. Bolivarian Republic of Venezuela, ICSID
Case No. ARB/12/13, Decision on Liability and the Principles of Quantum (30
December 2016), paras 447 et seq.
1184) Ibid., para. 274.
1185) Ibid., para. 216.
1186) Ibid., para. 314.
1187) Ibid., para. 453.
1188) Ibid., para. 452.
1189) See §5.7 infra.
1190) Saint-Gobain v. Venezuela, paras 316 and 436.
1191) Ibid., para. 458.
1192) Ibid., para. 460.
1193) See §5.06[B][6].
1195) See ILC Art. 3; as the commentary on the draft version of ILC Art. 10 (which became
ILC Art. 7) notes, ‘[t]he characterization of certain conduct of organs as acts of the
State for the purpose of determining its international responsibility is completely
independent of the characterization of the same conduct as acts of the State liable
to incur administrative responsibility under internal law.’ see Report of the
Commission to the General Assembly, A/10010/REV.1, Report of the International
Law Commission on the work of its twenty-seventh session, 5 May–25 July 1975,
Commentary on draft Art. 10, para. 3.
1196) Commentary on ILC Art. 7, paras 2–3.
1197) League of Nations, Acts of the Conference for the Codification of International Law,
held at The Hague from 13 March to 12 April 1930, vol. IV, Minutes of the Third
Committee (document C.351(c)M.145(c).1930.V), p. 238, cited in Yearbook … 1975, vol.
II, document A/10010/Rev.1, para. 9 of the commentary on draft Art. 10.
1198) Report of the Commission to the General Assembly, A/10010/REV.1, Report of the
International Law Commission on the work of its twenty-seventh session, 5 May–25
July 1975, Commentary on draft Art. 10, para. 17.
1200) Ibid., para. 2.
1201) Commentary on draft Art. 10 (1975), para. 4; see §5.06 (Other Grounds of Attribution)
infra.
1202) Commentary on ILC Art. 7, para. 7; Crawford, Mertenskötter, supran. 164, at 41,
comment that ‘the question is not whether the actor can cloak herself with
authority, but whether it is reasonable to assume that the principal has cloaked
the actor with the necessary authority.’
1205) Ibid.
1206) Ibid., para. 10.
1207) Ibid., fn. 150.
1208) Deutsche Bank v. Sri Lanka, para. 259.
1209) Ibid., para. 369.
1210) Ibid., para. 259.
1211) Ibid., para. 321.
1212) Ibid., para. 344.
1213) Ibid., para. 407.
1214) Ioannis Kardassopoulos v. The Republic of Georgia, ICSID Case No. ARB/05/18,
Decision on Jurisdiction (6 July 2007).
1215) Ibid., para. 157.
1216) Ibid., para. 50.
1217) Ibid., para. 52.
1218) Ibid., para. 54.
143
1219) Ibid., para. 189.
1220) Ibid., para. 182.
1221) Ibid., para. 190.
1222) Ibid., para. 194.
1223) Ibid., paras 191–194.
1225) Ibid.
1226) ILC Yearbook 1974 (I), para. 3, at 32.
1227) ILC Yearbook 1974 (II), Part One, at 293; see ILC, Draft Articles on Responsibility of
States for Internationally Wrongful Acts adopted on first reading, ILC Yearbook 1996
(II), Part Two, at 59.
1228) ILC Yearbook 1998 (I), para. 36, at 246.
1229) Ibid., para. 79, at 289.
1230) Commentary on ILC Art. 8, paras 2 and 9.
1231) Ibid., para. 2.
1232) The different role of the State was noted also in practice; see Electrabel v. Hungary,
para. 7.66.
1233) Ibid., para. 6.
1234) Al Tamimi v. Oman, fn. 675.
1235) Ibid., para. 321.
1236) See §5.04[C][13] supra.
1238) Ibid.
1241) Ibid.
1243) First report on State responsibility, by Mr James Crawford, Special Rapporteur,
Document A/CN.4/490 and Add. 1–7, para. 212, at 43.
1244) Prosecutor v. Duško Tadic (the Tadic Case), International Tribunal for the Former
Yugoslavia, Case IT-94-1-A (1999), ILM, vol. 38, No. 6 (November 1999), p. 1518, at
1541, para. 117 and p. 1546, para. 145; in relation to a discussion of the relevant ICJ
and ICTY jurisprudence, see Schicho, supran. 289, at 160–188; see also Commentary
to ILC Art. 8, paras 4–5.
1245) Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United
States of America), Merits, Judgment, I.C.J. Reports 1986.
1246) Ibid., paras 109 and 115.
1248) Ibid.
1249) Ibid., para. 3.
1250) Ibid., para. 4.
1251) At para. 400 of its judgment in the Bosnian Genocide Case, the ICJ restated the
‘effective control’ test as follows: ‘[I]t has to be proved that [the persons or groups]
acted in accordance with that State’s instructions or under its “effective control”. It
must however be shown that this “effective control” was exercised, or that the
State’s instructions were given, in respect of each operation in which the alleged
violations occurred, not generally in respect of the overall actions taken by the
persons or groups of persons having committed the violations.’
1252) Bosnian Genocide Case, para. 401.
1255) Commentary on ILC Art. 8, para. 5; Olleson, supran. 137, at 482.
1257) Ibid.
1259) See §5.03[C][2] supra in relation to the background of EDF v. Romania.
1260) EDF v. Romania, paras 102 and 185.
1261) Ibid., para. 202.
1262) See §5.04[C] regarding the tribunal’s analysis under ILC Art. 5.
1264) Ibid., para. 172.
1265) Ibid., para. 200.
1266) Ibid., para. 201.
1267) Ibid., para. 203.
1268) Ibid., para. 204.
1269) Ibid., para. 205.
1270) Ibid., para. 206.
1271) Ibid., para. 207.
1272) Ibid., para. 209.
1273) Ibid., para. 210.
1274) Ibid., paras 211–212.
1275) Ibid., para. 210.
1276) Ibid., para. 212.
144
1277) See, for example, Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18,
Decision on Jurisdiction and Liability (14 January 2010), paras 333–334, 356, in which
the written ‘instructions’ of the President of Ukraine to the National Council for
Television and Radio Broadcasting in relation to the tenders for radio frequencies
were considered by the tribunal to amount to interference with the independent
and impartial decision of the National Council. Nevertheless, the tribunal
considered the impact of the ‘instructions’ as part of the merits of the case and did
not address the attribution of the conduct of the National Council to the State.
1278) See §5.03[C][2] supra in relation to the background of Bayindir v. Pakistan.
1279) Bayindir v. Pakistan, para. 123, see §5.04[C] regarding the tribunal’s analysis under
ILC Art. 5.
1280) Ibid., para. 125.
1281) Ibid., para. 114.
1282) Ibid.
1283) Ibid., para. 126.
1284) Ibid., para. 127.
1285) Ibid., para. 128.
1286) The impugned conduct involved contractual acts and the tribunal signalled in
para. 180 that ‘the Claimant must establish a breach different in nature from a
simple contract violation, in other words one which the State commits in the
exercise of its sovereign power.’
1287) Ibid., para. 129.
1288) Ibid., para. 238.
1289) See §5.03[C][2] supra in relation to the background of Jan de Nul v. Egypt.
1291) Ibid.
1292) Ibid., para. 169; see also §5.03[C][2] regarding the tribunal’s analysis under ILC Art. 4
and §5.04[C] regarding the tribunal’s analysis under ILC Art. 5.
1293) See §5.03[C][2] supra in relation to the background of Hamester v. Ghana.
1295) Ibid., para. 180.
1296) Ibid., para. 187.
1297) Ibid., para. 199.
1298) Ibid., paras 199 and 249.
1299) Ibid., para. 256.
1300) Ibid., para. 267.
1301) Ibid., para. 285.
1302) Nicaragua Case, para. 115; see also Commentary on ILC Art. 8, para. 4.
1303) UAB E Energija v. Latvia, paras 3 and 630–634.
1305) Ibid., paras 84–85.
1306) Ibid., paras 100–101.
1307) Ibid., paras 58–59 and 129–130.
1308) Ibid., paras 150, 182–194, 215, 230, 233, 802 and 904–905.
1309) Ibid., paras 193–195 and 245–250.
1310) Ibid., paras 253, 255–256 and 301 et seq.
1311) Ibid., paras 258, 264.
1312) Ibid., paras 274–275.
1314) Ibid., paras 337, 340 et seq., 356 and 996.
1315) Ibid., para. 631.
1316) Ibid., para. 633.
1317) Ibid., para. 812.
1318) Ibid., para. 759.
1319) Ibid., para. 825.
1320) Ibid., para. 828.
1321) Ibid., paras 828–829.
1322) Ibid., para. 828.
1323) Ibid., para. 830.
1324) White Industries Australia Limited v. The Republic of India, UNCITRAL, Final Award (30
November 2011), para. 8.1.18.
1325) Ibid., para. 8.1.6.
1326) Ibid., para. 3.2.2.
1327) Ibid., paras 4.3.24–4.3.25 and 8.1.9.
1328) Ibid., para. 4.2.1.
1329) Ibid., para. 4.2.4.
1330) Ibid., paras 5.1.24–5.1.25.
1331) Ibid., para. 8.1.10.
1332) Ibid., para. 8.1.6.
1333) Ibid., para. 8.1.7.
1334) Ibid., para. 8.1.8.
1335) Ibid., para. 8.1.19.
1336) Ibid., paras 8.1.19–8.1.20.
1337) Ibid., para. 8.1.19.
1338) Ibid., para. 8.1.21.
145
1339) See §5.03[F] in relation to the background of Teinver v. Argentina.
1340) Teinver v. Argentina, fn. 346.
1341) Ibid., para. 268.
1342) Ibid., para. 721.
1343) Ibid., fn. 373 and paras 721–722.
1344) Ibid., para. 720.
1345) Ibid.
1346) Ibid., paras 722–723.
1347) Ibid., para. 724.
1348) Von Pezold v. Zimbabwe, para. 448.
1349) Ibid., para. 433.
1350) Ibid., para. 434.
1351) Ibid., para. 113.
1352) Ibid.
1353) Ibid., para. 114.
1354) Ibid., para. 645.
1355) Ibid.
1356) Commentary on the ILC Articles, Chapter II, para. 4; see also Wena Hotels v. Egypt,
ICSID Case No. ARB/98/4, Award (8 December 2000), para. 84; Tradex Hellas S.A. v.
Albania, ICSID Case No. ARB/94/2, Award (29 April 1999), para. 147.
1357) See §5.03[C] in relation to the background of Tulip v. Turkey.
1358) Tulip v. Turkey, paras 154–156.
1359) Ibid., para. 232.
1360) Ibid., para. 243.
1361) Ibid., paras 243–245.
1362) Ibid., para. 246.
1363) Ibid., para. 248.
1364) Ibid., para. 249.
1365) Ibid., para. 258.
1366) Ibid., paras 268–270.
1367) Ibid., paras 271–272.
1368) Ibid., para. 272.
1369) Ibid., para. 274.
1370) Ibid., para. 305.
1371) Ibid., para. 307.
1372) Ibid., para. 308.
1373) Ibid., para. 309.
1374) Ibid., para. 310.
1375) Ibid., para. 311.
1376) Ibid., para. 316.
1377) Ibid., paras 317–318.
1378) Ibid., paras 320–321.
1379) Ibid., para. 321.
1380) Ibid., para. 326.
1381) The ad-hoc Annulment Committee noted: ‘Although economy in drafting would
have justified the Tribunal to disregard these claims when it considered the claims
on their merit, the Tribunal was under no duty to proceed in such manner. It
proceeded to consider these claims on the assumption that Emlak’s conduct was
attributable to Turkey. This approach allowed the Tribunal to “double-check” its
conclusion resulting in the unanimous dismissal of Tulip’s claims.’, see Tulip v.
Turkey, Decision on Annulment (30 December 2015), ¶201.
1382) Ibid., para. 358.
1383) Tulip v. Turkey, Separate Opinion of Michael Evan Jaffe on the Question of
Attribution under Art 8, ILC Articles (7 March 2014).
1384) Ibid., paras 3–4.
1385) Ibid., para. 6.
1386) Ibid., para. 10.
1387) Ibid., para. 11.
1388) Tulip v. Turkey, Decision on Annulment, paras 189–190.
1389) See §5.04[C] in relation to the background of EnCana v. Ecuador.
1390) EnCana v. Ecuador, para. 154.
1391) See §5.03[C] in relation to the background of Almas v. Poland.
1394) Ibid., para. 102.
1395) Ibid., para. 269.
1396) Ibid., para. 272.
1397) Ibid., para. 271.
1398) See §5.03[D] in relation to the background of Deutsche Bank v. Sri Lanka and the
tribunal’s analysis under ILC Art. 4.
1399) Deutsche Bank v. Sri Lanka, paras 45 et seq.
1400) Ibid., para. 57.
1401) Ibid., para. 364.
1402) Ibid., para. 366.
146
1403) Ibid., para. 368.
1404) Ibid., para. 388.
1405) Ibid., paras 389 and 391.
1406) Ibid., para. 405.
1407) Ibid.
1408) Ibid.
1409) Ibid.
1410) Ibid.
1411) Ibid., para. 405.
1412) Ibid., paras 402, 404 and 406.
1413) See §5.03[C] in relation to the background of Ampal v. Egypt and the tribunal’s
analysis under ILC Art. 4.
1414) Ampal v. Egypt, paras 137–139.
1415) Ibid., para. 140.
1416) Ibid., para. 89.
1417) Ibid., para. 102.
1418) Ibid., para. 114.
1419) Ibid., para. 124.
1420) Ibid., paras 137–140; for a discussion of ILC Art. 11, see §5.06 infra.
1421) Ibid., paras 144–145.
1422) Ibid., para. 146.
1423) See §5.04[C] in relation to the background of Saint-Gobain v. Venezuela.
1424) Saint-Gobain v. Venezuela, paras 216 et seq.
1425) Ibid., para. 429.
1426) Ibid., para. 433.
1427) Ibid., para. 448.
1428) Ibid., para. 449.
1429) Ibid., para. 450.
1430) Ibid., para. 452.
1431) Ibid.
1432) Ibid., para. 451.
1433) Ibid., para. 452.
1434) Ibid., para. 453.
1436) Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on
Jurisdiction, Applicable Law and Liability (30 November 2012).
1437) Ibid., para. 6.2.
1438) Ibid., para. 7.9.
1439) Ibid., paras 7.2 and 7.16.
1440) Ibid., paras 7.4 and 7.12–7.13.
1441) Ibid., para. 7.17.
1442) Ibid., paras 7.18–17.19.
1443) Ibid., para. 7.43.
1444) Ibid., para. 7.44.
1445) Ibid., para. 7.45.
1446) Ibid., para. 7.51.
1447) Ibid., para. 7.71.
1448) Ibid., para. 7.94.
1449) Ibid., para. 7.90.
1450) Ibid., paras 7.91–7.93.
1451) Ibid., para. 7.98.
1452) Ibid., para. 7.102.
1453) Ibid.
1454) Ibid., paras 7.104–7.106.
1455) Ibid., para. 7.107.
1456) Ibid., para. 7.109.
1457) Ibid., paras 7.111–7.113.
1458) Ibid., para. 7.114.
1459) Ibid., para. 7.118.
1460) Ibid., para. 7.136.
1461) Ibid. para. 7.137.
1462) Ibid.
1464) Ibid., para. 289.
1465) Ibid., para. 262.
1466) Ibid.
1467) Ibid., paras 299, 335.
1468) Ibid., paras 333–334.
1469) Ibid., para. 334.
1470) Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case
No. AA 227, Hulley Enterprises Limited (Cyprus) v. The Russian Federation, UNCITRAL,
PCA Case No. AA 226, Veteran Petroleum Limited (Cyprus) v. The Russian Federation,
UNCITRAL, PCA Case No. AA 228, referred to as Yukos v. Russia, Final Award (18 July
2014), paras 1465 et seq.
1471) Ibid., para. 98.
147
1473) Ibid., paras 101–102.
1474) Ibid., paras 1451–1452.
1475) Ibid., para. 1454.
1476) Ibid., para. 1455.
1477) Ibid.
1478) Ibid., paras 1459–1462.
1479) Ibid., para. 1468.
1480) Ibid., para. 1469.
1481) Ibid., para. 1470.
1482) Ibid., para. 1472.
1483) Ibid.
1484) Ibid.
1485) Ibid., para. 1479.
1486) Ibid., para. 1480.
1487) Ibid., para. 756.
1489) Lao Holdings N.V. v. Lao People’s Democratic Republic, ICSID Case No. ARB(AF)/16/2,
Decision on the Merits (10 June 2015), paras 1 and 4–5.
1490) Ibid., para. 6.
1491) Ibid., para. 7.
1492) Ibid., paras 36–38.
1493) Ibid., para. 39.
1494) Ibid., paras 64–65.
1495) Ibid., paras 66–84.
1496) Ibid., para. 86.
1497) Ibid., para. 92.
1498) Ibid., paras 79–80.
1499) For another exceptional inference, see UAB E Energija v. Latvia, para. 827: ‘there is,
however, a body of circumstantial evidence which, taken as a whole, permits the
inference that the Municipality (as an organ of the Respondent) must have
instructed Rēzeknes Siltumtīkli and Rēzeknes Enerģija to bring the claims against
Latgales Enerģija and must have instructed Rēzeknes Siltumtīkli not to comply with
the October 2007 Agreement.’
1500) First Report on State Responsibility, supran. 150, para. 278; Professor Crawford later
added that ‘the adoption required by [ILC Article 11] is not to be lightly inferred’,
supran. 242, at 188.
1502) Ibid.
1503) Ibid.
1505) Ibid., para 6.
1508) Ibid., para. 7.
1509) Schicho, supran. 289, at 224–226.
1510) See §5.03[C] in relation to the background of Clayton v. Canada and a discussion of
the tribunal’s analysis under ILC Art. 4.
1511) Clayton v. Canada, para. 303.
1512) Ibid, paras 308 and 14.
1513) Ibid., para. 296.
1514) Ibid., para. 312.
1515) Ibid., para. 321.
1516) Ibid., para. 323.
1517) Ibid., paras 322–324.
1518) See §5.03[D] in relation to the background of Ampal v. Egypt.
1520) Ibid., paras 106–111 and 116.
1521) Ibid., para. 125.
1522) See §5.05[B][5] supra.
1523) Ibid., para. 146.
1524) Ibid., paras 145 and 138.
1525) See §5.04[C][14] in relation to the background of Saint-Gobain v. Venezuela.
1526) Saint-Gobain v. Venezuela, para. 216.
1527) Ibid., paras 221–222 and 465.
1528) Ibid., paras 457–458.
1529) Ibid., para. 462.
1530) Ibid.
1531) See §5.05[B][3] in relation to the background of von Pezold v. Zimbabwe.
1532) Von Pezold v. Zimbabwe, para. 435.
1533) Ibid., para. 441.
1534) Ibid., paras 448–449.
1535) See §5.05[B] in relation to the background of Kardassopoulos v. Georgia.
1536) Kardassopoulos v. Georgia, para. 278.
1537) See §5.03[C] in relation to the background of InterTrade v. Czech Republic.
148
1539) Ibid., para. 201.
1541) See §5.03[C][1] in relation to the background of Electrabel v. Hungary.
1542) Electrabel v. Hungary, para. 6.71.
1543) Ibid., paras 6.71–6.76; see also Chapter 9 (Attribution Issues in EU Investment
Agreements).
1544) Ibid., para. 6.74.
1547) Ibid., para. 4.
149
Document information Chapter 6: The Attribution of Internationally Lawful Acts
§6.01 INTRODUCTION
Publication As a normative operation assessing the extent of the State’s involvement in international
Investment Law relations, attribution has a number of specific roles in international investment law
beyond its traditional function in the area of State responsibility. (1548) It also serves to
identify the host or home State’s involvement in specific contexts of investor-State
disputes in which legal implications attach to lawful State conduct.
Topics The lawful acts of the State may give rise to, or may otherwise inform, the State’s
Investment Arbitration international law obligations. In this regard, attribution may be used to examine if the
State has manifested its will to enter into binding unilateral or contractual commitments
vis-à-vis the investors, the disavowal or violation of which may engage the State’s
Bibliographic international law responsibility. In the context of investor-State relations, one may speak
of the attribution of the State’s representations or contractual undertakings falling within
reference the realm of international investment law.
'Chapter 6: The Attribution
of Internationally Lawful Further, the legality of the State’s conduct under international law may be predicated on
Acts', in Csaba Kovács , the State’s actual knowledge and awareness of a situation, which would demand the
Attribution in International State’s active exercise of its coercive enforcement powers over private parties. In this
Investment Law, context, attribution attaches legal consequences to factual circumstances relevant and
International Arbitration material to the assessment of the State’s international law obligations.
Law Library, Volume 45 This chapter discusses the use of attribution in the framework of the protection of the
(© Kluwer Law investors’ legitimate expectations grounded in a State’s prior representations and in the
International; Kluwer Law context of the investors’ contractual relations with a State entity. It then provides
International 2018) pp. 235 specific examples of factual circumstances attributed to the State and producing legal
- 266 effects in the State’s international law relationship with the investors.
P 236
§6.02 ATTRIBUTION AND THE CONCEPT OF LEGITIMATE EXPECTATIONS

[A] The Concept of Legitimate Expectations
The concept of ‘legitimate expectations’ is a component of the fair and equitable
treatment treaty standard. (1549) It concerns ‘a situation where a [host State’s] conduct
creates reasonable and justifiable expectations on the part of an investor (or an
investment) to act in reliance on such conduct, such that a failure by [that State] to honor
those expectations could cause the investor (or the investment) to suffer damages’. (1550)
A host State’s representation to the investors is a commonly invoked premise of the
concept of legitimate expectations. (1551) Attribution may serve to identify whether there
is a representation by the host State, as a necessary part of the concept of legitimate
expectations. As Petrochilos observed, the attributed representation ‘is not in itself
wrongful but nonetheless part of the predicate of the wrongful act’. (1552) Attribution is
not concerned with the legality of the act of the State. The question of whether the lawful
conduct attributed to the State entitles the investor to rely on it is a matter for the merits
of the case. (1553)
To the extent that it protects an investor’s expectation that the State acts in a consistent
manner, (1554) the concept of legitimate expectations is comparable to the doctrine of
estoppel in international law. As the tribunal in Oko Pankki v. Estonia stated, ‘where on
the basis of an unequivocal representation made by the state, the investor makes or
maintains its investment, or otherwise acts to its detriment, there may be a loss to the
investor where the state acts inconsistently’. (1555)
The investors’ legitimate expectations do not override the applicable contractual and
treaty arrangements. As noted by an ad hoc Annulment Committee, ‘the obligations of the
host State towards foreign investors derive from the terms of the applicable investment
treaty and not from any set of expectations investors may have or claim to have’. (1556)
P 237
[B] The Attribution of Representations in the Investment Arbitration Jurisprudence

[1] The Author of the Representation
In Micula v. Romania (1557) the tribunal considered whether the State made a promise or
gave an assurance in respect of regulatory stability on which the investors have
reasonably relied. It held that:
[t]here must be a promise, assurance or representation attributable to a
competent organ or representative of the state, which may be explicit or
implicit. The crucial point is whether the state, through statements or conduct,
has contributed to the creation of a reasonable expectation, in this case, a
representation of regulatory stability. It is irrelevant whether the state in fact
wished to commit itself; it is sufficient that it acted in a manner that would
150
reasonably be understood to create such an appearance. (1558)
The tribunal found that Romania’s legislation concerning certain economic incentives for
the development of disfavoured regions created only a general entitlement to regulatory
stability. It stated that such general entitlement later ‘crystallized with respect to
qualifying investors through the granting of the [Permanent Investor Certificate],
becoming from that moment on a specified entitlement with respect to specified
investors’. (1559) The referenced investor certificates were issued by a regional
development agency. The tribunal did not expressly discuss the attribution of the lawful
conduct of this State agency to the State. It held, however, that Romania made a
representation that gave rise to the investor certificate holders’ legitimate expectation
that during the statutory tax holiday ‘they would receive substantially the same benefits
they were offered when they committed their investments’. (1560) Such lawful
representation formed the premise against which the tribunal analysed the alleged
wrongfulness of the subsequent revocation of the incentives by the State.
[2] Issues of Authority
As noted above, the legitimacy of the investors’ expectations is a merits issue subject to
international law. As with ILC Article 7 in the context of State responsibility, excess of
authority by State officials under that State’s own internal law is not necessarily a valid
ground for a retroactive denial of the State’s involvement in the conduct in question.
Thus, in the eyes of international law, the validity of the State’s representation under its
own laws does not necessarily affect the operation of the concept of legitimate
expectations. Nevertheless, the principle embodied in ILC Article 7 is designed to
P 238 operate in the context of the State’s international law responsibility, which cannot be
avoided based on the host State’s internal law. The same rule should not be applied
mutatis mutandis to the attribution of representations made by State officials to the
extent that such representations do not themselves constitute the wrongful conduct or a
necessary part of it.
In the absence of a specific normative framework, a set of criteria developed in the
jurisprudence. These criteria appear to point to the position of the State officials
involved in making the representation that allegedly induced the investor to act in a
certain way and the content and nature of such representation. (1561)
Thus, the tribunal in SPP v. Egypt (1562) considered whether allegedly invalid statutory
representations were attributable to the State. The dispute concerned the development
of tourist resorts, among others, in the Pyramids area near Cairo. (1563) The investor
entered into agreements with different Egyptian State entities in relation to the project
and the President of Egypt issued a decree assigning the land on the plateau of pyramids
for touristic utilisation. (1564) Amid growing political opposition to the project, after the
construction began at the site, the presidential decree and the related project were
cancelled. (1565)
In the ensuing ICSID arbitration, the respondent argued that the revoked presidential
decree, on the basis of which the investor made its investments, was null and void under
the laws of Egypt, because it encroached upon a previous ministerial designation of
inalienable public domain, which was aimed at the preservation of antiquities. (1566)
The tribunal held that representations ‘cloaked with the mantle of Governmental
authority and communicated as such to foreign investors who relied on them in making
their investments’, (1567) whether valid or not under the internal laws of Egypt, were acts
of the State that ‘created expectations protected by established principles of
international law’. (1568) It acknowledged that ‘[i]t is possible that under Egyptian law
certain acts of Egyptian officials, including even [the revoked presidential decree], may
be considered legally nonexistent [sic] or null and void or susceptible to invalidation’.
(1569) However, it held that such internal law position did not affect the attribution of
representations to the State for the purposes of the operation of the concept of
legitimate expectations.
The tribunal relied upon the international law principle establishing State responsibility
for unauthorised or ultra vires acts of State officials performed under the cover of their
official character. (1570) It noted that ‘[i]f such unauthorized or ultra vires acts could not
be ascribed to the State, all State responsibility would be rendered illusory.’ (1571) The
P 239 tribunal’s decision, issued some years before the adoption of the ILC Articles, did not
expressly refer to the draft ILC Article dealing with unauthorised or ultra vires acts.
Nevertheless, it can be inferred from its analysis that the tribunal applied the principle
embodied in what later became ILC Article 7.
The SPP v. Egypt tribunal’s position on the attribution of unauthorised acts was cited with
approval in Kardassopoulos v. Georgia (1572) in relation to the attribution of two
agreements to the State. (1573)
Arguably, in the context of the concept of the investors’ legitimate expectations, the
question whether an ultra vires or unauthorised representation is attributable to the
State as an act of the State is not only an attribution issue. It is also a matter informing
the legitimacy of the investors’ entitlement to rely on that representation in the specific
circumstances of the case. (1574)
151
[3] Representations and Frustration of Representations
The attribution of a representation to the State is not the same as the attribution of the
revocation of the same representation, which would typically be the alleged wrongful
conduct. The two attribution exercises are separated also in time. It is true that the latter
would not be possible without the a priori attribution of the representation itself, but the
two analytical exercises, albeit related, should not be automatically conflated. This is
particularly the case if one adheres to what appears to be the now settled view that the
ILC rules of attribution should not be applied to issues falling outside the law of State
responsibility. (1575) As discussed below, the analytical distinction between the
attribution of the State’s lawful initial conduct in manifesting its will to enter into a
contract and its related wrongful conduct becomes even more cogent in a contractual
context.
In Duke Energy v. Peru (1576) the tribunal emphasised that the ILC Articles should not be
used to attribute representations which may engender legitimate expectations akin to
P 240 those protected under the doctrine of estoppel. (1577) The question was whether the
allegedly wrongful conduct of the Peruvian tax authority could be examined against the
prior representations of various State organs and entities. (1578) The tribunal noted that
‘there is an important and material distinction between, on the one hand, estoppel vis-à-
vis the State created by acts or statements of its organs and, on the other hand, State
responsibility for internationally wrongful acts of its organs’. (1579) The tribunal went on
to explain that, under international customary law on State responsibility, conduct is
attributable to the State irrespective of whether the person or entity vested with public
authority acted within the scope of its competence, or ‘whether it induced reliance by
the victim of the act based on the capacity in which it was acting’. (1580) On the other
hand, under the doctrine of estoppel, ‘[t]he decisive element … is the reasonable
appearance that the representation binds the State. In this regard, the competence, or
rather, the manifest lack of competence, of a State organ is relevant, given that no one can
reasonably have confidence in representations or statements coming from an organ
which manifestly lacks the competence to make them.’ (1581)
In light of the notable differences in State conduct examined against the doctrine of
estoppel and the law of State responsibility, the tribunal noted that the ILC Articles on
State attribution are not helpful in attributing a representation to the State. It held that
instead of the ILC Articles inspiration can be drawn, by analogy, from the international
law test used to determine whether a treaty is binding when signed in violation of a
State’s internal law. (1582) The relevant test is set out in Article 46 of the VCLT. (1583) The
tribunal stated that this test ‘is helpful in understanding the test that should apply to
determine whether a representation should be binding on the State, even though it has
been made in violation of the country’s internal law’. (1584) It noted that, unlike in the
regime of State responsibility, the competence of the State entity or official is significant
in the context of the attribution of representations to the State:
It is logical that [the competence of the State entity or official] is irrelevant
within the regime of State responsibility, because what is essential there is
the wrongful act (the breach of international law) committed by an organ or
person acting under the aegis of the State. By contrast, it is difficult for an
P 241 organ or official who manifestly lacks competence to be able to induce
reasonable reliance in a third party, such as the foreign investor. (1585)
The tribunal concluded that ultimately ‘everything depends on the particular
circumstances surrounding the actions or statements at the heart of the estoppel
allegations’. (1586)
Arbitrator Nikken dissented from the majority view that the State agents’ conduct
created a situation of estoppel. (1587) In relation to the majority’s import of attribution
rules from the law of treaties, he noted that ‘[t]he relationship between a State and an
investor … is not identical to the relationship between two States. An investor must know
the legal order of the State within whose jurisdiction he has invested, at least in respect
of the fundamental issues connected with his economic activity. The tax law is one of
them.’ (1588)
A wholesale import of the representation rules in the law of treaties into an investor-
State relationship for the purposes of the attribution of the unilateral or contractual
undertakings by the State appears to be unwarranted, because the international law
representation of a State may differ from the internal law representation of a State.
(1589)
On the other hand, there is support in the Commentary on the ILC Articles for the
tribunal’s decision not to apply the ILC rules on attribution in the context of estoppel.
The Commentary expressly sets out that the ILC rules concerning attribution were
formulated for the particular purpose of State responsibility and ‘not for other purposes
for which it may be necessary to define the State or its Government’. (1590) Further, the
Commentary explains that ‘[t]he question of attribution of conduct to the State for the
purposes of responsibility is to be distinguished from other international law processes
by which particular organs are authorized to enter into commitments on behalf of the
State.’ (1591)
152
Martha raised the question of whether there are ‘two sets of rules for the attribution of
conduct; one for the purposes of the operation of the law of secondary obligations and
one for the creation of primary obligations’. (1592) As it will be seen below, the source of
the obligation, irrespective of the primary or secondary nature of the obligation,
determines the applicable normative framework, including in relation to the relevant
rules of attribution.
P 242
[C] Conclusion
In international investment law, the attribution of representations to the State for the
purposes of the operation of the concept of legitimate expectations does not typically
present difficulties. Questions may arise if the State representations were ultra vires or
unauthorised under the internal law of the host State. In practice, such questions were
resolved either by applying the customary international law attribution principles
embodied in ILC Article 7 or by borrowing representation rules from the international law
of treaties. The ILC Articles were not designed to attribute conduct that is not
internationally wrongful. On the other hand, any import of international law principles
from the law of treaties should be tailored to the specific circumstances of the case and
the economic context of international investment law, bearing in mind also the risk
mitigation strategies available to investors at the time of making their investment
decisions based on the representations attributed to the State.
§6.03 ATTRIBUTION OF CONTRACTUAL UNDERTAKINGS

[A] Jurisdictional Issues
[1] The Standing of the Host State
Investor-State disputes often involve allegations of breach of contract or otherwise
concern an alleged State interference into a contract concluded by a State entity. These
disputes raise the question if the State itself is involved in the impugned conduct and,
therefore, if the State is the proper respondent party to the dispute. To answer this
question, one needs to interpret the scope of the agreement to arbitrate rather than
analyse the conduct of the State through the prism of attribution. (1593) Nevertheless,
when the aforementioned question of interpretation requires an examination of the
involvement of the State in the conclusion of the contract to which the impugned conduct
relates, attribution issues may arise. As noted in Chapter 3, attribution is a normative
operation that can be deployed for a variety of purposes under different rules.
As a jurisdictional issue, the scope of an arbitration agreement in a treaty-based dispute
is governed by international law. (1594) Nevertheless, tribunals may take into account
provisions of internal law as facts in applying the relevant international law rule to the
particular circumstances of a dispute. (1595)
P 243
The tribunal’s jurisdiction ratione personae under the relevant IIA and, in cases submitted
to ICSID, under Article 25 of the ICSID Convention, requires a prima facie determination
that the State is involved in the particular dispute.
Under Article 25(1) of the ICSID Convention, the dispute must involve a Contracting State
or one of its subdivisions or agencies specifically designated to ICSID:
The jurisdiction of the Centre shall extend to any legal dispute arising directly
out of an investment, between a Contracting State (or any constituent
subdivision or agency of a Contracting State designated to the Centre by that
State) and a national of another Contracting State, which the parties to the
dispute consent in writing to submit to the Centre.
Further, Article 25(3) of the ICSID Convention provides that:
Consent by a constituent subdivision or agency of a Contracting State shall
require the approval of that State unless that State notifies the Centre that no
such approval is required.
Accordingly, in an ICSID arbitration involving a contract, if the claim is not brought by a
designated subdivision or agency, the tribunal must ascertain that the contract is with a
Contracting State, namely a signatory of the ICSID Convention in relation to which the
ICSID Convention has entered into force. In the course of the early discussions concerning
a draft international convention, Broches, the main architect of the ICSID Convention,
explained that ‘the term “contracting states” should be limited to sovereign states. To go
further, would cause enormous difficulties, constitutional and otherwise. He recognized
that this conclusion would imply a more limited scope for the convention, but it was not
intended to confer a sweeping jurisdiction’. (1596) Thus, if an investment dispute concerns
a contract, the contract must be with a Contracting State or a designated subdivision or
agency of the Contracting State.
153
From a jurisdictional perspective, claims deriving from an investment agreement may be
heard in an investment treaty arbitration through two different mechanisms: (1) a broad
dispute resolution provision submitting any investment dispute to arbitration, which is
then interpreted as covering claims grounded on alleged treaty, internal law or contract
breaches or (2) a dispute resolution provision in an investment treaty submitting
disputes under an investment agreement to arbitration. (1597)
The majority of the IIAs contain a broad dispute resolution provision submitting any
dispute between an investor of the home State and the host State to arbitration. (1598) If
P 244 the claimant alleges that the host State’s contractual conduct breached a treaty
standard, the tribunal must verify whether the host State is a party to the contract in
question. In other words, the tribunal’s jurisdiction ratione personae under an IIA rests on
the premise that the host State is involved in the particular dispute as a contracting
party.
In these jurisdictional contexts, attribution serves to identify whether the host State has
standing in the arbitration by virtue of the manifestation of its will to be bound by the
contract with the investor to which the impugned conduct relates. As discussed below,
while the question of the applicable attribution rules has been approached differently in
practice and scholarly writings, the majority view is that the governing law of the contract
determines the issue of whether the host State is a party to the contract. (1599)
The ILC Commentary also distinguishes between the normative framework of a contract
and that of an international law obligation:
the breach by a State of a contract does not as such entail a breach of
international law. … But the entry into or breach of a contract by a State organ
is nonetheless an act of the State for the purposes of article 4, and it might in
certain circumstances amount to an internationally wrongful act. (1600)
While a breach of contract may amount in certain circumstances to a breach of an IIA,
(1601) the ILC Articles say nothing about the attribution of a contract to the State. As
Professor Crawford observed, ‘the mere fact that acts of separate entities may be
attributable to the state in particular cases does not mean that the contracts of such
entities are state contracts’. (1602)
In investment disputes involving putative contractual conduct affecting an investor’s
rights under an IIA, the question of attribution of contractual acts may arise analytically
at two points in time: first, the lawful act of entering into the contract and, subsequently,
the alleged breach, must be attributable to the State. (1603) It has been said that ‘[t]he
act breaching the obligation is meaningless if the obligation is not that of the state.’
(1604) The two analyses are necessarily linked in that only a contracting party may
breach a contract. In that sense, as Feit observed, ‘[i]f the state’s participation in the
conclusion of the agreement leads to the result that the state has become a party to the
contract and assumed the obligations subsequently breached, attribution is no longer
required and thus there is no need to engage in the discussion of whether the ILC Articles
can be used to attribute legal undertakings.’ (1605)
P 245
In practice, some tribunals examined the attribution of the entering into, performance
and alleged breach of the contract to the State based on the same rules. For example, in
EnCana v. Ecuador, the tribunal noted that ‘the conduct of Petroecuador in entering into,
performing and renegotiating the participation contracts (or declining to do so) is
attributable to Ecuador’ based on ILC Article 5 or ILC Article 8. (1606) Such broad
application of the ILC attribution rules to the lawful acts of entering into and
performance of the contract is questionable as the parties to the contract and the
creation and performance of the contractual obligations fall to be determined by the
applicable contract law. (1607) Moreover, as noted above, the ILC Articles were designed
to define the State only for the purposes of State responsibility. (1608)
[2] The Standing of the Host State in the Investment Arbitration Jurisprudence
[a] The Scope of State Consent to Arbitration
Investors often contract with a State organ or an instrumentality of the host State. Thus,
the jurisdictional question whether contractual conduct complained of in an investment
dispute involves the host State arises frequently in practice.
In Flemingo Duty Free v. Poland, (1609) a dispute involving Lease Agreements concluded
by PPL, the tribunal noted that the question whether the acts and omissions complained
of by the claimant were imputable to Poland was relevant to the jurisdiction of the
tribunal, because under the dispute resolution provision of the applicable BIT the
tribunal only had jurisdiction to settle disputes between ‘an investor of one Contracting
Party and the other Contracting Party’. (1610) Therefore, it noted that it had to verify
whether the dispute involved Poland. (1611) The tribunal considered that the jurisdiction
and merits aspects of attribution could be analysed together. (1612) In the end, the
tribunal did not expressly address its jurisdiction ratione personae over Poland, but it
found that acts and omissions with regard to the modernisation of the airport terminal
154
and the termination of the Lease Agreements were attributable to Poland. (1613)
In Hamester v. Ghana (1614) the tribunal considered whether the respondent’s objection
concerning the non-attribution of the impugned acts to the State was a jurisdictional
question. (1615) It noted that attribution, as ‘a means to ascertain whether the State is
involved’ appeared to raise questions of a jurisdictional nature. It characterised the
P 246 respondent’s objection that the impugned acts concerned Cocobod rather than the
State as an objection based on the lack of jurisdiction ratione personae. (1616) It added,
however, that ‘[attribution] is usually best dealt with at the merits stage, in order to allow
for an in-depth analysis of all the parameters of the complex relationship between
certain acts and the State.’ (1617) The tribunal noted that, for jurisdictional purposes, it
suffices to ascertain based on a limited enquiry that the State is involved in the dispute,
while the extent of that State involvement, for the purposes of the attribution of the
impugned acts to the State, remains to be determined at the merits stage. (1618)
The tribunal in Saipem v. Bangladesh (1619) applied a similar approach in relation to the
impugned acts of the Bangladesh Oil Gas and Mineral Corporation (Petrobangla), the
national oil and gas company of Bangladesh that contracted with the claimant for the
construction of a condensate and gas pipeline. It noted that ‘it [was] not for the Tribunal
at the jurisdictional stage to examine whether the acts complained of give rise to the
State’s responsibility, except if it were manifest that the entity involved had no link
whatsoever with the State’. (1620)
In Impregilo v. Pakistan the tribunal declined to apply the ILC rules of attribution to the
issue whether the respondent extended its jurisdiction offer in the applicable BIT to
breaches of contracts to which the State was not a named party. (1621) In doing so, the
tribunal relied on the analytical distinction between contract and treaty claims and the
different normative framework of such claims, as articulated by the ad hoc Annulment
Committee in Vivendi I. (1622)
The tribunal observed that, under the law of Pakistan, which governed the contracts in
question and the status and capacity of the Pakistan WAPDA for the purposes of the
contracts, WAPDA was a legal entity separate from the State. (1623) It noted that the
scope of the dispute resolution provision in the BIT was limited to disputes between a
State and an investor of the other State and did not extend to a separate State entity
that contracted with the investor. (1624) Accordingly, the tribunal declined its jurisdiction
over pure contract claims. It retained, however, its jurisdiction over treaty claims against
Pakistan, which ‘at the same time could constitute breaches of the Contracts’. (1625)
Tribunals may examine contractual terms and contractual conduct as part of the relevant
factual background without necessarily assuming jurisdiction over claims relating to that
contract. As the Vivendi I Annulment Committee put it, ‘[i]t is one thing to exercise
P 247 contractual jurisdiction … and another to take into account the terms of a contract in
determining whether there has been a breach of a distinct standard of international law.’
(1626)
In Khan v. Mongolia (1627) the tribunal agreed that the question whether Mongolia was
party to the invoked contract concerned its jurisdiction ratione personae. The claimants
brought claims against Mongolia under a contract, Mongolian investment law and the ECT.
The contractual claims were brought based on an UNCITRAL arbitration clause in a
contract governed by Mongolian law. In relation to those claims, the tribunal noted that
its jurisdiction ratione personae required an examination of the relationship between a
State and its alleged representative, which, in its view, was to be done under the law of
the host State and in light of the factual background of that relationship. (1628) Although
the dispute raising the issue of the attribution of contractual undertakings to the State
involved claims concerning an alleged breach of contract, which was not governed by
international law, the case is still noteworthy for the tribunal’s analysis of the
relationship between the State and a State Enterprise engaged in governmental activity.
The claimants contended that, through the invalidation of two mining and mineral
exploration licences, Mongolia attempted to expel Khan, a Canadian mining company,
from its joint venture with a Mongolian State Enterprise and a Russian State Enterprise in
order to allow for a strictly Mongolian-Russian joint venture to develop Mongolia’s
uranium projects in the Dornod region. (1629)
Priargunsky Production Mining and Chemical Enterprise (Priargunsky), a Russian State
Enterprise, Mongol-Erdene (Erdene), a Mongolian State Enterprise, and WM Mining Inc.
(WM Mining), a US company, signed the Agreement on Development of Mineral Deposits in
Eastern Aimak of Mongolia (Minerals Agreement), in which they provided for the
establishment of a joint venture, through the conclusion of a Founding Agreement, for the
purpose of developing a uranium extraction project in Dornod, Mongolia. (1630) The
Minerals Agreement was also signed by an authorised representative of the Mongolian
Ministry of Energy, Geology, and Mining. (1631) The Founding Agreement, signed by
Priargunsky, Erdene and WM Mining, established Central Asian Uranium Company of
Mongolia (CAUC). The Founding Agreement prohibited expropriation and contained an
UNCITRAL arbitration clause. The tribunal noted that the Minerals Agreement and the
Founding Agreement ‘complete[d] one another in portraying the relationship between the
parties involved in the Dornod Project’. (1632)
155
Erdene’s share in CAUC was successively transferred to the Mineral Resources Authority of
Mongolia (MRAM), the State Property Committee of Mongolia (SPC), and MonAtom LLC, a
P 248 Mongolian company wholly owned and controlled by the SPC (MonAtom). (1633) Further,
WM Mining transferred its shared to a company, later renamed CAUC Holding, acquired by
Khan Canada through its subsidiary Khan Resources Bermuda Ltd. (1634) Khan Canada
established a local subsidiary in Mongolia, Khan Resources LLC (Khan Mongolia), to
coordinate its activities in Mongolia. CAUC and Khan Mongolia obtained mining
exploration licences, which were subsequently invalidated by the Mongolian Nuclear
Energy Agency (NEA). (1635) Khan Canada and CAUC Holding brought contract claims
against Mongolia and MonAtom under the UNCITRAL arbitration clause in the Founding
Agreement. (1636)
The respondents submitted that the tribunal lacked jurisdiction ratione personae over
claims brought against Mongolia under the Founding Agreement, as MonAtom was the
only respondent entity who succeeded Erdene, the original Mongolian signatory of the
Founding Agreement, and that Mongolia and MonAtom, while wholly owned by Mongolia,
were separate entities. (1637) The respondents argued that ‘[a]n arbitration agreement
signed by an independent state-owned entity does not bind the state.’ (1638) In support
of the independent existence of MonAtom, the respondent relied on the Mongolian
Company Law and MonAtom’s charter. The latter provided that MonAtom was ‘a profit
seeking legal entity with independent balance sheet, … empowered to enjoy rights and
obligations on its own behalf, and [having] its own distinct assets’. (1639)
The respondents also argued that the provisions of the Minerals Agreement were
irrelevant for the issue of MonAtom’s status as no claims were brought under it. (1640)
They added that, in any event, the Minerals Agreement stated that it was ‘contingent on
approval by the Government of Mongolia’, which showed that Erdene, MonAtom’s
predecessor under the agreement, was not a representative of the Government. (1641)
Finally, the respondent submitted that the attribution rules of ILC Articles did not apply,
seemingly in light of the fact that the dispute concerned contract claims governed by
internal law. (1642)
The claimants argued that MonAtom was Mongolia’s representative in the Founding
Agreement and, as an entity holding State property, acted at the behest of Mongolia
under the Law on State and Local Government Property (LSLP). (1643) They argued that,
although no claims were made under the Minerals Agreement and the Charter of CAUC,
these documents provided the context for understanding Mongolia’s role in the joint
venture. (1644) The claimants noted that the Minerals Agreement provided for the
P 249 undertaking by the ‘Mongolian Party’ to provide the joint venture with the ‘right to
utilize mineral deposits’ and contained obligations concerning licensing, taxation,
customs, royalties, and environmental liabilities that could only have been assumed by a
sovereign. (1645) The Minerals Agreement also provided that Erdene acted on behalf of
the Ministry of Energy, Geology and Mining Industry of Mongolia. (1646) The claimants also
argued that (i) successive Mongolian representatives to the joint venture consistently
held themselves out as representing the Government, (ii) government agencies directly
participated as shareholders in the joint venture, (iii) CAUC understood Mongolia to be a
shareholder in the joint venture and (iv) Mongolia understood that it was a shareholder of
the joint venture. (1647)
The claimants further submitted that MonAtom carried out governmental activities under
the control and direction of the Government. (1648) They argued that, under the LSLP,
MonAtom’s shareholding in the joint venture was State property and the SPC, as the sole
shareholder of MonAtom, had powers to dispose of such State property and was entitled
to supervise MonAtom’s activity and to appoint and dismiss its board of directors as well
as to dismiss its executive director. (1649) Finally, the claimants submitted that MonAtom
was established in order to implement State policy. (1650)
In the tribunal’s view, a complete understanding of the relationship between the
disputing parties demanded a consideration of the provisions of the Minerals Agreement
regardless of the fact that claims did not concern that agreement: (1651)
[w]hile a Tribunal may only give effect to an agreement on which its
jurisdiction is based, it may, however, take into consideration another
agreement (in this case the Minerals Agreement) involving all or some of the
same parties for the purpose of interpretation of the first agreement (i.e., the
Founding Agreement). The fact that it does not have jurisdiction over all
parties to the Minerals Agreement matters not. (1652)
The tribunal accepted that, under Mongolian law, Erdene and MonAtom acted as
representatives of Mongolia. (1653) It noted that this conclusion was supported also by
the parties’ understanding throughout the life of the Founding Agreement. The SPC and
MRAM, as contractual predecessors of MonAtom, were Mongolian State agencies with no
legal existence separate from the Government. (1654) By contrast, Erdene and MonAtom,
were limited liability companies. Nevertheless, the tribunal held that, under both the
Founding Agreement and the Minerals Agreement, Erdene, the original Mongolian
contracting party, undertook obligations that only a sovereign State could fulfil. (1655) In
particular, the Founding Agreement provided that the contribution of Erdene to the joint
P 250
156
P 250
venture was satisfied by a ‘reduction of fees to be paid by [CAUC] for the utilization of
natural resources’ and the Minerals Agreement similarly provided that the contribution of
Erdene consisted of the right to utilize mineral deposits. (1656)
The tribunal disagreed with the respondents that the provisions in the Minerals
Agreement concerning the undertakings of the Ministry of Energy, Geology and Mining of
Mongolia or the Government of Mongolia, in relation to the issuance of licences and the
granting of tax exemptions, underlined the separate existence of Erdene and Mongolia. In
the tribunal’s view, such provisions, in light of their express language and read in the
context of the entire agreement, provided the necessary detail to implement Erdene’s
contribution to the joint venture. (1657) The tribunal stated that ‘[g]iven that Erdene is
wholly owned by Mongolia, and that no private party could fulfil Erdene’s undertakings
under either the Founding Agreement or the Minerals Agreement, it is reasonable to
conclude that these undertakings were made on behalf of the Government.’ (1658) The
tribunal further relied on the fact that the Minerals Agreement referred to Erdene and
Mongolia interchangeably and notices addressed to Erdene were to be directed to the
address of the Mongolian Ministry of Energy, Geology, and Mining. (1659)
The tribunal thus concluded that it had jurisdiction over Mongolia under the Founding
Agreement, because the text of the Founding Agreement and the Minerals Agreement and
the conduct of Mongolia, Erdene, the SPC, the MRAM and MonAtom, demonstrated the
understanding of the parties that all the Mongolian entities were acting on behalf of the
State.
The tribunal’s analysis illustrates that, based on the interpretation of the contract in
question and the role played by the parties in the contract’s negotiation and
performance, a State may be held to be the real party to a contract with an investor and,
as such, responsible for alleged breaches of that contract. Tribunals may seek to achieve
a complete understanding of the relationship between the investor and the State by
looking beyond the four corners of the contract in question.
In Generation Ukraine v. Ukraine (1660) the claimant, who contracted with the Kyiv City
State Administration in relation to the construction of an office building, brought claims
against Ukraine based on Ukrainian tort law, Ukrainian constitutional and administrative
law and the US-Ukraine BIT. (1661)
The respondent argued that the claimant had not demonstrated that the dispute
satisfied the requirements of the invoked dispute resolution provision in the BIT, namely
the dispute did not involve Ukraine, but the Kyiv City State Administration, ‘as a local
body of executive power’. (1662)
Article XI of the BIT expressly extended the scope of the BIT to the political subdivisions
P 251 of the parties. The claimant argued that the Kyiv City State Administration was a
‘political subdivision’ of Ukraine and thus identified with the State for the purposes of
the dispute resolution provision. (1663)
The respondent conceded that the BIT applied to political subdivisions and that the Kyiv
City State Administration was one such political subdivision. (1664) It submitted,
however, that Ukraine did not designate the Kyiv City State Administration to ICSID as a
‘constituent subdivision or agency of a Contracting State’ for the purposes of the
tribunal’s jurisdiction under Article 25(1) of the ICSID Convention. (1665)
The claimant replied that Article XI of the BIT constituted a waiver of any right the
respondent might have had to exclude ‘constituent subdivisions’ under Article 25 of the
ICSID Convention. (1666)
The respondent denied that Article XI of the BIT conferred standing on political
subdivisions for the purposes of the ICSID Convention, noting that ‘[t]he ratification by
Ukraine of the BIT does not constitute the designation or approval of consent of a
political subdivision required by Article 25 of the ICSID Convention.’ (1667)
The tribunal noted that the question whether the claims were properly directed against
Ukraine related to its jurisdiction ratione personae. (1668)
The applicable dispute resolution provision covered an investment dispute arising out of
or relating to (1) an investment agreement between Ukraine and the claimant; (2) an
investment authorisation granted by Ukraine’s foreign investment authority to the
claimant; or (3) an alleged breach of any right conferred or created by the BIT with
respect to an investment made by the claimant.
The tribunal noted that the claimant did not bring any specific claims based on alleged
breaches of the contracts with the Kyiv City State Administration. (1669) The tribunal then
distinguished between internal law claims and international law claims noting that ‘it
[was] not endowed with general jurisdiction to hear claims based on any source of law
arising at any point in time against any potential defendant.’ (1670)
It held that internal law claims could conceivably fall within claims arising out of or
relating to (1) an investment agreement between the investor and one of the two State
Parties to the BIT or (2) an investment authorisation granted by the host State’s foreign
investment authority. However, on the facts of the case none of these situations applied.
The claimant did not contract directly with Ukraine, as a ‘Party’ to the BIT. Regarding the
157
State’s involvement through the Kyiv City State Administration, the contracting party with
the claimant, the tribunal stated:
the acts of the Kyiv City State Administration may be imputable to Ukraine as
a sovereign state for the purposes of the international law of state
responsibility. For this reason, the Claimant is entitled to bring a cause of
P 252 action based on alleged expropriation of its investment by acts performed
by Ukrainian municipal authorities. It is an international claim and
international rules of attribution apply. But such rules do not operate to join
the central government of Ukraine to contractual relationships entered into by
municipal authorities. (1671)
The tribunal concluded that it did not have jurisdiction ratione personae in relation to
internal law claims, because the proper respondent to such claims was the Kyiv City State
Administration, not Ukraine: ‘the international rules of attribution obviously do not apply
to causes of action grounded in domestic law, so that any such claim cannot be directed
against Ukraine vicariously’. (1672)
The tribunal noted that the same conclusion would have applied also if it were seized of
a cause of action based on an alleged breach of a contract between the claimant and the
Kyiv City State Administration. (1673) It added that in that situation Article 25(3) of the
ICSID Convention, relating to the consent of the respondent State to the participation of a
designated ‘constituent subdivision or agency’ of that State in an ICSID arbitration, would
have had a role to play. (1674) Where the investor alleged a breach of a contractual
obligation owed by the ‘constituent subdivision or agency’ in its own capacity, the
designation of that subdivision or agency to ICSID is a jurisdictional requirement for
investment disputes to be settled under the ICSID Convention.
Where a dispute involved State agencies or subdivisions designated by the host States to
ICSID, the standing of the designated agency was not disputed and the tribunal
confirmed its jurisdiction ratione personae. In Noble Energy v. Ecuador (1675) the
claimants brought claims before ICSID against Ecuador and Consejo Nacional de
Electricidad (CONECEL), the regulator of the Ecuadorian Electricity Sector. The dispute
concerned, among others, a concession contract for the construction, installation and
operation of an electric power generation plant concluded between one of the claimants
and the Ecuadorian Government, represented by CONELEC. The tribunal noted that
Ecuador designated CONELEC to ICSID for purposes of Article 25 of the ICSID Convention
and CONELEC was thus to be considered as an agency of the Republic of Ecuador. (1676)
By contrast, in Cable Television v. St. Kitts and Nevis, a dispute concerning an investment
agreement with the Nevis Island Administration (NIA), a subdivision of the Federation of
St. Kitts and Nevis, the tribunal declined its jurisdiction over NIA despite the inclusion of
P 253 an ICSID arbitration clause in the agreement in question. (1677) The tribunal noted that,
under Article 25 of the ICSID Convention, it had no jurisdiction in matters brought by or
against an entity other than a contracting State unless the entity had been designated to
ICSID by the contracting State as a constituent subdivision or agency of the contracting
State. (1678) It observed that the latter designation to ICSID by a contracting State
‘applies to an entity over which the contracting state has some measure of control,
including but not limited to a colony or partially autonomous government forming part of
or belonging to the state, a government statutory corporation or a company incorporated
under national/local legislation in which the Government has some interest or
shareholding’. (1679) The tribunal found that the Federation had not designated or
approved NIA as a proper party to an ICSID arbitration and, therefore, it lacked
jurisdiction ratione personae under the ICSID Convention. (1680)
[b] The Scope of Waiver of Claims
In Nagel v. the Czech Republic (1681) the tribunal considered if a Settlement Agreement
between the claimant and České Radiokomunikace a.s. (ČRa), including a waiver of future
claims, was binding on the respondent. The claimant and another private party entered
into a Cooperation Agreement with Sprava Radiokomunikaci Praha (SRa), a State
Enterprise, providing for the establishment of a consortium to seek to obtain a GSM
licence. As part of the Czech Government’s privatisation policy, ČRa became the legal
successor of SRa. The Czech Government adopted a resolution laying down the
‘Fundamental Principles of the Czech Republic’s Telecommunications Policy’, including
the issuance of two licenses to operate a GSM mobile telephone network. The second
licence was to be awarded to a joint venture consisting of ČRa and a party selected
through a public tender. This meant that the consortium envisaged under the
Cooperation Agreement was not able to obtain a licence through direct negotiation. In
the event, the claimant did not participate in the public tender. After ČRa terminated the
Cooperation Agreement, the claimant brought an action against it in a Czech court, which
was withdrawn following the conclusion of a Settlement Agreement between the claimant
and ČRa. Under the Settlement Agreement, the claimant released and discharged ČRa
from all claims resulting from or connected to the Cooperation Agreement. The waiver in
question expressly extended to ČRa’s stockholders, parent corporation and affiliates.
(1682)
The claimant argued that the Czech Government deprived him of the rights he had
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obtained through the Cooperation Agreement and therefore he was entitled to
compensation under international investment law. (1683)
P 254
The respondent submitted that the Cooperation Agreement was not binding on the Czech
Republic, because the State itself was not a party to it and SRa, as a State Enterprise
engaged in commercial activities, lacked the legal authority to bind the Czech State.
(1684) It also contended that through the Settlement Agreement Mr Nagel had released
and discharged all claims against the Czech Republic arising out of the Cooperation
Agreement. (1685)
The claimant replied that the evidence confirmed that ‘it was not the intention of either
ČRa or Mr Nagel that the settlement would release the Government. Under the
interpretative principles applied by Czech law, which interpret contracts in light of the
parties’ intentions, this forecloses the Government’s claim’. In any event, the claimant
contended that the impugned conduct concerned the exercise of the Government’s
public and legislative powers and not ČRa’s acts or omissions. (1686) In relation to the
extended scope of the waiver clause, the claimant argued that the impugned conduct did
not involve the exercise of any shareholder rights, (1687) the Government was not a direct
shareholder of ČRa and, in any event, was not a ‘parent corporation’ or an affiliate of ČRa.
(1688) It further argued that the compensation received under the Settlement Agreement
was for ČRa’s breach of the Cooperation Agreement and not for the respondent’s alleged
breaches of the applicable BIT. (1689)
The tribunal noted that the Settlement Agreement was concluded in the context of the
domestic court proceedings brought by Mr Nagel against ČRa in relation to the
termination of the Cooperation Agreement. (1690) The tribunal agreed that those court
proceedings had an ‘entirely different legal basis’. (1691) It then interpreted and applied
the language of the waiver clause relied upon by the respondent. It noted that at no time
was the Czech Republic a direct stockholder in ČRa, (1692) in normal language the parties
do not refer to a State as a ‘parent corporation’ (1693) and the systematic interpretation
of the Cooperation Agreement did not support the respondent’s argument on the use of
the term ‘affiliates’. (1694) The tribunal concluded, that, based on these circumstances,
the Settlement Agreement did not affect the rights that Mr Nagel might have against the
Czech Republic under the BIT. (1695) The tribunal dealt with the effect of the Settlement
Agreement as a threshold issue, which called into question the State’s involvement in the
conduct of a State Enterprise.
P 255
[B] Merits Issues

[1] Treaty Standards and Breaches of Contract
Contract rights are typically protected investments under IIAs. (1696) Nevertheless,
international investment law is not a substitute for contract law remedies. (1697) As an
expression of the pacta sunt servanda principle, the so-called umbrella clauses (1698)
protect the sanctity of investor-State contracts and thus bridge the protections offered
under contract law with those offered under international investment law.
Umbrella clauses raise the question of privity, namely whether the host State is bound by
the contractual undertaking, the breach of which is alleged to constitute a breach of the
umbrella clause. In other words, it is necessary to determine if the State is a party to the
contract alleged to be protected under the umbrella cause. This involves a similar
attribution exercise as the determination of the involvement of the State for the
purposes of the tribunal’s jurisdiction ratione personae. Nevertheless, the umbrella
clause itself, as an international law provision, does not join the State to a contract to
which it is not otherwise a party.
The issue of the applicable law to the determination of the subjects covered by the
umbrella clause has been subject to considerable debate in the literature. (1699) The
debate was triggered by the premise of the umbrella clause, namely the existence of a
contractual undertaking, which is an issue governed by its own, typically internal law
chosen by the parties or otherwise determined pursuant to the applicable conflict of
laws rules. It is incontestable that contract claims fall to be determined by the law
applicable to the contract, while treaty claims are governed by international law. The
umbrella clause is a treaty provision, but its application rests, on the premise that a
contract breach has occurred. A contract breach is to be determined according to the law
applicable to that contract. On the other hand, a contract can be breached only by its
contracting parties. This apparent normative conflict between the law applicable to the
premise of the umbrella clause and that of its operation for the purposes of a State’s
international law responsibility led to the aforementioned debate. The coexistence of
internal and international law obligations in itself should not have created a problem. As
P 256 a tribunal put it, ‘[t]he breach of an international obligation will need, by definition, to
be judged in terms of international law. To establish the facts of the breach, it may be
necessary to take into account municipal law.’ (1700)
It appears that the settled position is that the question whether the host State is an
159
obligor for the purposes of the umbrella clause falls to be resolved under the law
applicable to the contract in question. (1701) This position is correct as it takes into
account the specific character of the umbrella clause. As noted above, the application of
the umbrella clause is premised on the existence of a particular relationship between an
obligor and an obligee governed by its own set of rules, including with respect to the
issue of the privity of that relationship and the related rules of representation.
The international rules of attribution in the ILC Articles were not intended to apply to the
issue of State representation in entering into commitments on behalf of the State. (1702)
That remains the case even if the observance of the commitment allegedly binding the
State is protected by the operation of an umbrella clause in an IIA.
The non-attribution of a contractual undertaking to a State under an umbrella clause
does not mean that the State cannot be held internationally responsible for its conduct
related to that contract under other treaty standards. The investor may still have
available a treaty claim involving the FET standard or an expropriation claim arising out
of sovereign interference with a contract.
In the absence of an umbrella clause protecting contractual undertakings, other treaty
standards do not, however, protect against an ordinary breach of contract. In the words of
the ILC:
the breach by a State of a contract does not as such entail a breach of
international law. Something further is required before international law
becomes relevant, such as a denial of justice by the courts of the State in
proceedings brought by the other contracting party. But the entry into or
breach of a contract by a State organ is nonetheless an act of the State for the
purposes of article 4, and it might in certain circumstances amount to an
internationally wrongful act. (1703)
For example, the termination of an investment contract may constitute an expropriatory
act in breach of an IIA, if it is carried out in the exercise of the State’s sovereign powers.
(1704) Further, the concept of legitimate expectations is of similar limited application
when it comes to alleged breaches of contractual undertakings. Professor Crawford
observed that contractual undertakings may inform the application of the fair and
equitable treatment standard, but cautioned that ‘the expectations of the investor
cannot act as a substitute for the relevant contractual and treaty arrangement’. (1705)
P 257 There is a line of investment treaty cases holding that, for the purposes of establishing
a violation of the FET standard, the claimant must show that the State committed the
alleged breach of contract in the exercise of its sovereign powers. (1706)
[2] Umbrella Clauses and Attribution in the Investment Arbitration Jurisprudence
Due to the limited use of the protection against expropriation and the concept of
legitimate expectation, as part of the FET standard, the issue of the attribution of
contractual undertakings to the State arose most frequently in practice in relation to the
interpretation of the scope ratione personae of the umbrella clause.
In EDF v. Romania the claimant argued that the alleged contractual breaches of AIBO and
TAROM, two State Enterprises, constituted a breach of the umbrella clause. (1707) The
relevant umbrella clause reads: ‘Each contracting party shall observe any obligation it
may have entered into with regard to investments of nationals or companies of the other
contracting party.’ (1708)
The respondent submitted that the State was not a party to the contracts in question, as
AIBO and TAROM did not act on behalf of the State in entering into those contracts. (1709)
The tribunal noted that the provision clearly referred to obligations entered into by
Romania. It added that under an umbrella clause a State does not assume international
law responsibility for the breach of a contract to which it is not a party: ‘The breach of
contractual obligations by a party entails such party’s responsibility at the contractual
level. There is in principle no responsibility by the State for such breach in the instant
case since the State, not being a party to the contract, has not directly assumed the
contractual obligations the breach of which is invoked.’ (1710)
The ad hoc Annulment Committee in CMS v. Argentina considered whether the tribunal’s
finding that ‘the obligation under the umbrella clause under [the BIT] had not been
observed by the Respondent’ was in a manifest excess of the tribunal’s powers and was
lacking reasons. (1711) The tribunal’s finding was challenged in light of the fact that the
respondent did not contract directly with CMS, but with Transportadora de Gas del Norte
(TGN), a local company in which CMS held a minority shareholding. The Annulment
Committee noted that the umbrella clause ‘[was] concerned with consensual obligations
P 258 arising independently of the BIT itself (i.e. under the law of the host State or possibly
under international law)’ (1712) and such consensual obligations concern a particular
relationship between the obligor and obligee. (1713)
The tribunal held that ‘[t]he effect of the umbrella clause is not to transform the
obligation which is relied on into something else; the content of the obligation is
unaffected, as is its proper law. If this is so, it would appear that the parties to the
obligation (i.e., the person bound by it and entitled to rely on it) are likewise not changed
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by reason of the umbrella clause.’ (1714) The Annulment Committee partially annulled the
tribunal’s award for failure to state the reasons for which CMS could enforce the
obligations of Argentina to TGN. (1715)
Similarly, the tribunal in Hamester v. Ghana held that there was no basis to extend the
scope ratione personae of the umbrella clause to contractual obligations assumed by
entities separate from the State: (1716) It added that, contrary to some early arbitral
decisions, international law principles of attribution do not apply to the scope ratione
personae of umbrella clauses. (1717) The tribunal noted that, even if the ILC attribution
principles were to apply, the claimant concluded the JVA with Cocobod without the
State’s involvement and held that the umbrella clause does not transform the
contractual commitments of Cocobod into treaty commitments of the State itself. (1718)
In some cases, the terms of the contract subject to the umbrella clause were conclusive
with respect to the participation of the State and there was no need to resort to
extraneous legal principles, whether by reference to the law of the contract or otherwise.
For example, in Garanti Koza v. Turkmenistan the tribunal found that the construction
contract between the claimant and State Concern ‘Turkmenavtoyollary’ (TAY) was signed
on behalf of the State, because TAY, an agency of Turkmenistan, according to the
contract, was ‘acting on behalf and under instructions of the Government of Turkmenistan’
and the contract stated that it was concluded on the basis of a presidential decree. (1719)
In the circumstances, the tribunal noted that ‘[i]t [was] not necessary to find TAY to be an
organ of the State in order to conclude that the obligations it undertook in the Contract
P 259 were obligations entered into on behalf of Turkmenistan with regard to Garanti Koza’s
investment in Turkmenistan within the meaning of [the umbrella clause] of the BIT.’ (1720)
[C] Conclusion
The attribution of contractual undertakings, whether for the purposes of the tribunal’s
jurisdiction ratione personae or for the purposes of the application of an umbrella clause,
involves primarily the interpretation of the contract in question. Depending on the
internal law applicable to the contract, the role played by the parties in the contract’s
negotiation and performance may also be relevant. Further, when the interpretation of
the contract in question was inconclusive, tribunals have examined the overall factual
relationship between the investor and the State, by reference to the law of the contract,
or, in some early cases, to the international principles of attribution, as embodied in the
ILC Articles.
The applicability of the ILC Articles to the issue of whether the State is a party to the
contract and, as such, is a proper party to the dispute has long been debated in scholarly
writings and in the jurisprudence. The settled view that has emerged is that the law of the
contract, rather than an attribution rule in the ILC Articles, determines if a host State is a
party to a contract to which the impugned conduct relates.
If the impugned conduct concerns sovereign interference into a contract concluded by a
separate State entity, the issue of the attribution of the contractual undertakings to the
host State does not arise.
§6.04 THE ATTRIBUTION OF FACTUAL CIRCUMSTANCES

[A] Attribution of Knowledge
It flows from the principle of unity of the State that the State cannot invoke its lack of
actual knowledge of acts committed by its organs and instrumentalities in order to
escape the legal consequences that may attach to that knowledge in international
investment law. The question of whether a State can be held to have knowledge of a
particular fact or matter involves a process of attribution of the knowledge of relevant
individuals. (1721)
Further, in the context of the State’s duty to protect the investor against violence
committed by a non-State actor, the legality of the State’s conduct is necessarily
predicated on the State’s actual knowledge of the harmful acts or the threat of such acts.
In this scenario, while the State is generally held to have a duty to exercise due diligence
to protect investors, the alleged harm to investors by private actors does not
automatically mean that the State itself has engaged in an internationally wrongful
conduct. However, once the knowledge of such private acts is imputed to the State, the
P 260 State’s duty to protect the investor is triggered and the State’s failure to exercise its
law enforcement powers may constitute an internationally wrongful act.
Whether the underlying act is committed by State or non-State actors, the determination
of the State’s knowledge of that act involves the attribution of a factual circumstance to
the State. It is a matter of fact whether the State knew or should have known of the
underlying act. Such factual circumstance, while not in itself unlawful, may be a relevant
factor in assessing the legality of the State’s conduct under international investment law.
[B] Knowledge of the Conduct of State Actors

The question whether the State may be expected to have knowledge of the lawful acts of
its organs has been considered both in a procedural and in a substantive context in the
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investment arbitration jurisprudence.
[1] Procedural Context
As SIAG v. Egypt illustrates, the attribution of knowledge of a State actor’s act to the State
may produce procedural consequences in an investor-State arbitration. The case,
resolved under the ICSID arbitration rules, concerned the expropriation of the claimants’
investments in a tourist development project and related property on the Sinai
Peninsula. (1722) Almost five months after the tribunal’s decision on the respondent’s
objections to jurisdiction, the respondent claimed that it had discovered that Mr Siag,
one of the claimants, had been declared bankrupt by an Egyptian court and thus had no
standing in the arbitration. (1723)
The claimants submitted that the Egyptian courts were part of the State under
international law and the State had therefore been fully aware of the alleged bankruptcy
at a much earlier stage. (1724)
The respondent argued that there was no central bankruptcy register in Egypt and
therefore the respondent had no knowledge of Mr Siag’s bankruptcy at the time of the
jurisdictional phase of the arbitration. (1725) It added that ‘[t]he knowledge of the
Egyptian courts could not be attributed to Egypt under the [ILC Articles] because the
judgment declaring Mr Siag bankrupt was not an internationally wrongful act, to which the
scope of the ILC Articles was limited.’ (1726)
The claimants argued that under ICSID Rule 41(1) the respondent must be deemed to
have waived its jurisdictional objection, because it failed to raise it ‘as early as possible’
and it failed to demonstrate that it could not reasonably have learned of the bankruptcy
P 261 issue in time to raise during the jurisdictional phase of the proceedings. (1727) They
submitted that ILC Article 4 set out a general principle of international law, which
applied also to lawful acts such as bankruptcy proceedings conducted by the courts of
Egypt, as State organs. (1728)
The respondent argued that ‘although Egypt could be held responsible for the acts of its
judiciary, that was a different thing to attributing to Egypt the knowledge of every
decision rendered by its courts. Such a contention was unsupported by authority and
stretched the legal fiction of state unity’. (1729)
The tribunal noted that, under Rule 41(1) of the ICSID Arbitration Rules, the respondent
was obliged to make any jurisdictional objection as early as possible and no later than in
its counter-memorial, unless the facts on which the objection was based were unknown to
the party at the time. (1730) It referred to Professor Schreuer’s commentary that if the
objection was not raised immediately upon discovery of the relevant facts, such
objection would not be considered as having been filed in a timely manner and may thus
be both disregarded and considered to be waived under the ICSID rules. (1731)
The tribunal accepted the claimants’ argument that the ILC Articles applied also to the
lawful acts of the State. It noted that the implication behind the attribution of ultra vires
or internally wrongful acts to the State under ILC Articles 7 and 4 was that lawful acts were
even more so attributable to the State. In the words of the tribunal, ‘[t]he clear corollary
of [the attribution of acts of State organs to the State even if they are contrary to the law]
is that acts of a State’s organs that are not contrary to law or in excess of authority will be
applied a fortiori to the State. Accordingly, the non-wrongful acts of Egypt’s judiciary are
the acts of the Egyptian State.’ (1732) As it could not deny knowledge of its judiciary’s acts,
the State was in a position to raise its jurisdictional objection relating to the Egyptian
bankruptcy proceedings in a timely manner and it failed to do so. (1733)
[2] Substantive Context
In MTD v. Chile the tribunal considered whether the lack of internal coordination between
the Ministry of Housing and Urban Development and the FIC, two State organs, was
attributable to the State for the purposes of its obligation to accord a fair and equitable
treatment to the investment of the claimants. Pursuant to the law of Chile, FIC was
empowered to approve on behalf of the State the inflow of foreign capital and to
stipulate the terms and conditions of the corresponding contracts. Its members were all
at the ministerial level except for the President of the Central Bank. (1734) The Foreign
Investment Law of Chile provided that ‘[i]n order for the FIC to exercise its functions, the
P 262 Executive Vice-Presidency is responsible, inter alia, for the coordination of foreign
investments and to carry out and expedite the procedures required by public institutions
that must report or grant their authorization prior to the approval of the applications
submitted to the FIC.’ (1735)
In a session attended by the President of the Central Bank, the Undersecretary of
Finance, the Undersecretary of Mining, and the Undersecretary of Planning and
Cooperation and the Minister of Economy, Development and Reconstruction, FIC
approved the claimants’ initial investment in a property development project in Pirque,
a location within the metropolitan area of Santiago. (1736) The Minister of Housing and
Urban Development did not attend the FIC session, which approved the claimants’
project. Subsequently, the claimants made additional investments approved by the FIC.
The claimants and the FIC signed two Foreign Investment Contracts in relation to the
project. (1737) The land on which the project was to be developed was zoned for
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agricultural use and its rezoning had to be endorsed by the Ministry of Housing and Urban
Development (MINVU). The MINVU refused to implement a rezoning of the urban planning
to allow the project to proceed stating that the requested rezoning was not in line with
Santiago’s urban development policy. (1738) The FIC asserted that it was unable to assist
with the rezoning efforts of MTD as it was beyond its competence. (1739) The respondent
argued that the role of the FIC was ‘only to approve the capital transfer and not the
details of the project itself’ (1740) and FIC was not a ‘one-stop window’ for foreign
investments in Chile. (1741)
The claimants argued that the respondent committed investment treaty violations when
it ‘created and encouraged strong expectations that the Project … could be built in the
specific proposed location and entered into a contract confirming that location, but then
disapproved that location as a matter of policy after MTD irrevocably committed its
investment to build the Project in that location’. (1742)
The tribunal noted that the ministerial membership of the FIC evidenced the importance
that Chile attributed to its function and accorded with ‘the objective to coordinate
foreign investment at the highest level of the Ministries concerned’. (1743) It observed
that, by law, the FIC was required to carry out a minimum of diligence internally and
externally in relation to the regulatory framework of projects submitted to it for approval.
(1744) The tribunal found that there was an ‘inconsistency of action between two arms of
the same Government vis-à-vis the same investor even when the legal framework of the
country provide[d] for a mechanism to coordinate. (1745) In relation to the respondent’s
argument that it was the investors’ responsibility to carry out due diligence regarding the
P 263 legal and technical feasibility of the project, the tribunal stated that ‘the coherent
action of the various officials through which Chile acts [was] the responsibility of Chile,
not of the investor’. (1746) The respondent was obliged to ensure coherent State action
and the consistent application of its policies, because, under international law the State
of Chile had to be considered as a unit. (1747) The tribunal held that the FIC’s approval of
an investment for a project that was against the urban development policy of the
Government breached the respondent’s obligation to treat an investor fairly and
equitably. (1748) The tribunal found also that, irrespective of the respondent’s actions,
the investor did not conduct adequate due diligence prior to investing and reduced the
amount of damages by 50%. (1749)
The tribunal effectively attributed to the State the knowledge of its policies as the
premise on which the State was obliged to act coherently vis-à-vis the investors. Although
the tribunal relied on the concept of the unity of the State under international law, its
decision to hold the State responsible for the FIC’s approval of an investment contrary to
State policy appears to have been swayed by the requirement under the Foreign
Investment Law of Chile for FIC to coordinate foreign investments with other competent
public institutions.
An ad hoc Annulment Committee considered whether the tribunal’s decision was
annullable based on the grounds for annulment in the ICSID Convention. The Committee
noted that ‘the Tribunal drew a distinction between individual permissions and licenses,
which the investor had to obtain under the law of the host State, and the question
whether the Project was possible from a regulatory point of view’. (1750) The Committee
was satisfied that the tribunal did not apply the FET obligation so as ‘to eliminate the
distinction between acts and omissions or to avoid all elements of risk for the investor’
and upheld the tribunal’s decision concerning the State’s responsibility for FIC’s
approval. (1751)
MTD v. Chile shows that uncoordinated, inconsistent conduct between various State
organs may lead to a finding of breach of the FET standard when the circumstances of the
case justify the attribution of knowledge of the conduct of its State organs to the State. In
practice, such attribution may not be justifiable beyond those cases where a degree of
coordination is required by virtue of the functions, the structure or hierarchy of the State
organs involved.
[C] Knowledge of the Conduct of Non-State Actors

The State’s knowledge of the conduct of non-State actors is a relevant factor in assessing
the State’s substantive obligation to exercise due diligence in protecting investments
subject to IIA. The question whether such knowledge is attributable to the State is
necessarily fact-specific.
P 264
In Pantechniki v. Albania (1752) the sole arbitrator summarised the relevant facts as
follows:
A contractor’s road work site in Albania was overrun and ransacked by looters
during severe civil disturbances in March 1997. It is estimated that two-thirds
of the country’s adult population had lost much of their savings to Ponzi
schemes in which government officials were said to be complicit. Waves of
rioting battered the country. Hundreds of people were killed. The government
fell. Disorder was everywhere – particularly in the southern region where the
work site was located. Neither public nor private security forces could
163
withstand the onslaught of looting. The contractor’s site at Bushtriza was in a
remote location. The nearest police station was distant. The contractor’s on-
site private security personnel were overwhelmed. What equipment could not
be stolen was destroyed.
Pantechniki S.A. Contractors & Engineers (Pantechniki) was the contractor for bridge and
road constructions works caught up in the aforementioned disturbance. Following an
unsuccessful attempt to exercise its contractual remedies, Pantechniki brought
investment treaty claims against Albania alleging, among others, that the State violated
its duty to offer full protection and security to the claimant’s property in Albania. (1753) In
particular, the claimant alleged that ‘Albania was under an obligation not only to actively
protect the Claimant’s investment from looting but also to take precautionary measures
to prevent it from occurring.’ (1754) In turn, the respondent argued that the claimant
failed to demonstrate that the State acted negligently in relation to the riots. (1755)
Sole arbitrator Paulsson noted that the duty of protection and security is not an absolute
one, in practice being susceptible for modulation by reference to the consciousness and
proportionality of the State’s alleged conduct: ‘it seems difficult to maintain that a
government incurs international responsibility for failure to plan for unprecedented
trouble of unprecedented magnitude in unprecedented places’. (1756)
The arbitrator found that, in light of the scale of the looting, the police was unable to
intervene, which was ‘crucially different from a refusal to intervene’. (1757) Therefore,
Albania was not found to have breached its duty to extend full protection and security to
the claimant’s property. (1758)
The State’s knowledge of the imminent harm was applied in other investment treaty
cases too as a relevant predicate for the State’s duty to extend protection and security.
In Ampal v. Egypt the question was whether Egypt acted diligently in preventing the
attacks on the Trans-Sinai pipeline and repairing the damage caused to the pipeline.
(1759) The tribunal acknowledged that the security situation in the North Sinai
P 265 deteriorated following the Arab Spring as armed militant groups took advantage of the
political instability. (1760) In these circumstances, the tribunal held that the State could
not have prevented the first attack on the pipeline. (1761) However, it found that ‘[the]
four first attacks should have been seen as a warning to the Egyptian State that further
attacks might be carried out if security measures were not taken and implemented.’
(1762) It thus concluded that that the Egyptian authorities failed to take concrete steps to
protect the claimants’ investment from damage in reaction to third-party attacks on the
upstream pipeline system and such failure constituted a breach of the obligation of
Egypt to ensure the full protection and security of the claimants’ investment. (1763)
In MNSS v. Montenegro the tribunal stated that ‘the standard of “most constant protection
and security” requires the Government to have a more pro-active attitude to ensure the
protection of persons and property …, particularly when it had been forewarned’. (1764)
In that case, the tribunal found that Montenegro breached its investment treaty
obligation to provide protection and security due to its failure to provide police
protection during two episodes of labour unrest that led to the assault and eviction of the
management of a steel plant majority-owned by MNSS. (1765) The respondent did not
dispute that it was informed of the imminent labour unrests or that it refused to provide
protection, as per the claimants’ account, because the steel plant was a private property
owned by private business. The tribunal considered that the police had a duty to ensure
the physical integrity of buildings and persons irrespective of their location or ownership.
(1766)
As the aforementioned cases illustrate, the State’s duty to extend protection and security
is typically considered in light of the State’s knowledge of the relevant security situation.
The imputation of such knowledge is thus a factual premise to the State’s duty to adopt a
proactive attitude to protect the investment.
[D] Conclusion
In the interpretation and application of the substantive standards of investment
protection or the procedural rules applicable in an investment treaty arbitration,
tribunals may attribute factual circumstances to the State. Such factual examinations of
State involvement in investment relations, being premised on the notion that the State is
a single unit under international law, is redolent of the traditional notion of attribution in
the context of State responsibility.
In practice, in a procedural context, the attribution of the knowledge of the State’s act
P 266 prevented the State from raising untimely jurisdictional objections. In a substantive
context, the attribution of knowledge of State policies led to a finding of breach of a
State’s duty to adopt a consistent position in its administrative decision-making vis-à-vis
the investors. Finally, the State’s knowledge of the harmful acts of non-State actors may
trigger the State’s duty to extend protection and security to the investor’s investments.
P 266
164
References
1548) See §§3.03 and 3.04.
1550) International Thunderbird Gaming Corp. v. United Mexican States, UNCITRAL, Award
(26 January 2006), para. 147.
1551) Metalclad Corp v. United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (30
August 2000), paras 89, 107; Gold Reserve Inc. v. Venezuela, ICSID Case No.
ARB(AF)/09/1, Award (22 September 2014), para. 571.
1552) Petrochilos, supran. 142, para. 314.
1553) Ibid., at 315.
1554) Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No.
ARB (AF)/00/2, Award (29 May 2003), para. 154.
1555) Oko Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. The Republic of
Estonia, ICSID Case No. ARB/04/6, Award (19 November 2007), para. 247.
1556) MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No.
ARB/01/7, Decision on Annulment (21 March 2007), para. 67.
1557) Ioan Micula, Viorel Micula, SC European Food SA SC Starmill SRL and SC Multipack
SRL v. Romania, ICSID Case No. ARB/05/20, Award (11 December 2013), para. 669.
1558) Ibid.
1559) Ibid., para. 674.
1560) Ibid., para. 686.
1562) Southern Pacific Properties (Middle East) Limited v. Egypt, ICSID Case No. ARB18413,
Award (20 May 1992).
1563) Ibid., para. 42.
1566) Ibid., para. 81.
1567) Ibid., para. 82.
1568) Ibid., para. 83.
1569) Ibid., para. 82.
1570) Ibid., para. 85.
1571) Ibid.
1572) Kardassopoulos v. Georgia (Jurisdiction), paras 193 et seq.
1573) See §5.05[B] supra.
1574) Claudia Annacker, Role of Investors’ Legitimate Expectations in Defense of
Investment Treaty Claims, in Andrea Bjorklund ed., Yearbook on International
Investment Law and Policy, 2013-2014, 239 (Oxford University Press, 2015).
1575) Crawford, Mertenskötter, supran. 164, at 35; Commentary on ILC Articles, Chapter II,
para. 4.
1576) Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, ICSID Case
No. ARB/03/28, Award (18 August 2008).
1577) In respect of the doctrine of estoppel, the tribunal noted at para. 231 that:
One of the fundamental facets of good faith within Peruvian law is the
doctrina de los actos propios. This key aspect of good faith – known in
various legal systems as venire contra factum proprio non valet, la
doctrina de los actos propios, allegans contraria non est audiendus,
estoppel or the principle of consistency – has also been universally
applied as a general legal principle, both in civil and international law,
to prohibit a State from taking actions or making representations which
are contrary to or inconsistent with actions or representations it has
taken previously to the detriment of another.
1578) Duke Energy v. Peru, para. 232.
1579) Ibid., para. 242.
1580) Ibid., para. 244.
1581) Ibid., para. 247.
1582) Ibid., para. 248.
1583) Article 46 of the VCLT reads:
Provisions of internal law regarding competence to conclude treaties
1. A State may not invoke the fact that its consent to be bound by a
treaty has been expressed in violation of a provision of its internal
law regarding competence to conclude treaties as invalidating its
consent unless that violation was manifest and concerned a rule of
its internal law of fundamental importance.
2. A violation is manifest if it would be objectively evident to any
State conducting itself in the matter in accordance with normal
practice and in good faith.
1584) Ibid.
1585) Ibid., para. 250.
1586) Ibid., para. 251.
165
1587) Duke Energy v. Peru, Partial Dissenting Opinion of Arbitrator Dr Pedro Nikken, 22
July 2008.
1588) Ibid., para. 10.
1589) James Crawford, Treaty and Contract in Investment Arbitration, 24(3) Arbitration
International, 351, 356 (2008).
1591) Ibid.
1592) Rutsel Silvestre J. Martha, The Financial Obligation in International Law, 32 (Oxford
University Press 2015); Petrochilos conflated the representation and its frustration
positing that the ILC attribution rules may be applied ‘[w]here the wrongful
conduct is the frustration of a prior representation,… on the basis that the
representation is a necessary predicate of the wrongful act.’, seesupran. 142, at 322.
1593) Crawford, supran. 1589, at 363; Stanimir Alexandrov, Breach of Treaty Claims and
Breach of Contract Claims: Is It Still Unknown Territory, in Arbitration under
International Investment Agreements, ed. Katia Yannaca-Small, at 333.
1594) Ceskoslovenska Obchodni Banka, A.S. (CSOB) v. The Slovak Republic, ICSID Case No.
ARB/97/4, Decision on Jurisdiction, (24 May 1999), para. 35.
1595) Grupo Francisco Hernando Contreras, S.L. v. Equatorial Guinea, ICSID Case No.
(AF)12/2), Award on Jurisdiction (4 December 2015), para. 84.
1596) History of the ICSID Convention, ICSID (1968), SID/62-2 (7 January 1963) Memorandum
of the meeting of the Committee of the Whole, 27 December 1962, not an approved
record, para. 35.
1597) McLachlan, Shore, Weiniger, supran. 17, para. 4.47; Alexandrov, supran. 1593, at 331;
Anthony Sinclair, Bridging the Contract/Treaty Divide, in Christina Binder, Ursuala
Kriebaum, August Reinisch, Stephan Wittich eds, International Investment Law for
the 21st Century, Essays in Honour of Christoph Schreuer, 102 (Oxford University
Press, 2009). For a minority view that broad dispute resolution clauses in IIAs do
not cover disputes based on any cause of action, see SGS Société Générale de
Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision
of the Tribunal on Objections to Jurisdiction (6 August 2003), para. 161; see also
Sinclair, at 95–96.
1599) Crawford, Mertenskötter, supran. 164, at 35; Olleson, supran. 137, at 465–466; for a
position that international law should apply to question whether the State is
bound by a contractual undertaking protected by an IIA, see Petrochilos, supran.
142, at 318.
1601) See §6.03[B] infra.
1603) In relation to umbrella clause claims, see Crawford, Mertenskötter, supran. 164, at
30. However, the same observation applies to any treaty standard protecting
investment agreements.
1604) Nick Gallus, An Umbrella Just for Two? BIT Obligations Observance Clauses and the
Parties to a Contract, 24 Arbitration International, 157, 166 (2008).
1605) Feit, supran. 209, at 37.
1606) EnCana v. Ecuador, para. 154.
1607) Crawford, Mertenskötter, supran. 164, at 35; in relation to the law applicable to the
creation of a contractual undertaking, see Garanti Koza v. Turkmenistan, para. 331.
1609) See §5.03[D] in relation to the background of Flemingo Duty Free v. Poland.
1610) Flemingo Duty Free v. Poland, para. 418.
1611) Ibid.
1612) Ibid., para. 418.
1613) Ibid., para. 448.
1614) See §5.03[C] in relation to the background of Hamester v. Ghana.
1615) Hamester v. Ghana, para. 143; see also Chapter 8 (The Procedural Treatment of
Attribution).
1616) Ibid., para. 91.
1617) Ibid., para. 144.
1618) Ibid., para. 145.
1619) Saipem S.p.A. v. The People’s Republic of Bangladesh, ICSID Case No. ARB/05/07,
Decision on Jurisdiction and Recommendation on Provisional Measures (21 March
2007).
1620) Ibid., para. 144.
1621) For a background of the case and the tribunal’s analysis, see §3.02[B][2] supra.
1622) Seesupran. 751.
1623) Impregilo v. Pakistan, para. 216.
1624) Ibid.
1625) Ibid., para. 219.
1626) Vivendi I, Decision on Annulment, para. 105. See also Ampal v. Egypt, Decision on
Jurisdiction (1 February 2016), paras 254–255 and Vivendi II, Award (20 August 2007),
para. 7.3.10.
1627) Khan Resources Inc., Khan Resources B.V., and CAUC Holding Company Ltd. v. The
Government of Mongolia, PCA Case No. 2011-09, UNCITRAL, Decision on Jurisdiction
(25 July 2012).
166
1628) Ibid., para. 345.
1629) Ibid., para. 59.
1630) Ibid., paras 21–23 and 335.
1631) Ibid., para. 23.
1632) Ibid., para. 335.
1633) Ibid., para. 24.
1634) Ibid., para. 25.
1635) Ibid., para. 52.
1636) Ibid., para. 73.
1637) Ibid., para. 113.
1638) Ibid.
1639) Ibid., para. 114.
1640) Ibid., para. 117.
1641) Ibid., para. 118.
1642) Ibid., para. 123.
1643) Ibid., para. 125.
1644) Ibid., para. 128.
1645) Ibid., para. 129.
1646) Ibid.
1647) Ibid., para. 139.
1648) Ibid., para. 142.
1649) Ibid.
1650) Ibid., para. 143.
1651) Ibid., para. 334.
1652) Ibid.
1653) Ibid., para. 345.
1654) Ibid., para. 346.
1655) Ibid., para. 348.
1656) Ibid.
1657) Ibid., para. 349.
1658) Ibid., para. 350.
1659) Ibid., paras 351–353.
1660) See §5.03[E] in relation to the background of Generation Ukraine v. Ukraine.
1661) Generation Ukraine v. Ukraine, para. 8.9.
1662) Ibid., para. 6.5.
1663) Ibid., para. 6.7.
1664) Ibid., paras 6.8 and 6.10.
1665) Ibid., para. 6.8.
1666) Ibid., para. 6.9.
1667) Ibid., para. 6.10.
1668) Ibid., para. 7.1.
1669) Ibid., para. 8.12.
1670) Ibid., para. 8.10.
1671) Ibid., para. 8.1.2.
1672) Ibid., para. 8.13.
1673) Ibid., para. 10.5.
1674) Ibid.
1675) Noble Energy, Inc. and Machalapower Cia. Ltda. v. The Republic of Ecuador and
Consejo Nacional de Electricidad, ICSID Case No. ARB/05/12, Decision on Jurisdiction
(5 March 2008).
1676) Ibid., para. 63.
1677) Cable Television of Nevis, Ltd. and Cable Television of Nevis Holdings, Ltd. v.
Federation of St. Kitts and Nevis, ICSID Case No. ARB/95/2, Award (13 January 1997),
para. 2.33.
1678) Ibid., para. 2.28.
1679) Ibid.
1680) Ibid., para. 2.33.
1681) William Nagel v. The Czech Republic, SCC Case No. 049/2002, Final Award (9
September 2003).
1682) Ibid., para. 15.
1683) Ibid., para. 265.
1684) Ibid., paras 161, 163, 166 and 201.
1685) Ibid., para. 46.
1686) Ibid., paras 108–109 and 117.
1687) Ibid., para. 110.
1688) Ibid., paras 111–112.
1689) Ibid., para. 119.
1690) Ibid., para. 274.
1691) Ibid., para. 279.
1692) Ibid., para. 278.
1693) Ibid., para. 280.
1694) Ibid., para. 281.
1695) Ibid., para. 284.
1696) Alexandrov, supran. 1593, at 325–327.
167
1697) Malicorp v. Egypt, ICSID Case No. ARB/08/18, Award (7 February 2011), para. 103(b).
1698) Under an umbrella clause, the host State typically assumes the responsibility to
observe obligations it has with regard to investments of investors of the other
contracting party. See for example, Art. 10(1) of the ECT: ‘Each Contracting Party
shall observe any obligations it has entered into with an Investor or an Investment
of an Investor of any other Contracting Party’. According to some estimates,
approximately 40% of BITs contain such an ‘umbrella’ clause. See Judith Gill
Matthew Gearing, Gemma Birt, Contractual Claims and Bilateral Investment Treaties:
A Comparative Review of the SGS Cases, 21 Journal of International Arbitration, 397
(2004); Seemingly in light of the unsettled jurisprudence concerning the scope and
effect of the umbrella clause, recent IIAs no longer contain an umbrella clause. See
Raúl Pereira de Souza Fleury, Umbrella Clauses: A Trend Towards Its Elimination, 31
Arbitration International 679 (2015).
1699) For a summary of the different positions, see Crawford, Mertenskötter, supran. 164,
at 30 et seq.
1700) MTD v. Chile, para. 204.
1701) McLachlan, Shore, Weiniger, supran. 17, para. 4.168; Crawford, Mertenskötter,
supran. 164, at 35; Olleson, supran. 137, at 465.
1704) Vigotop v. Hungary, para. 280.
1706) Bayindir v. Pakistan, para. 180; RFCC v. Morocco, paras 33–34; Waste Management,
para. 115; Impregilo v. Pakistan, paras 266–270; Duke Energy v. Ecuador, para. 345.
1708) Ibid., para. 314.
1709) Ibid., para. 174.
1710) Ibid., para. 317.
1711) CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No.
ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment of
the Argentine Republic (25 September 2007), paras 86–87.
1712) Ibid., para. 95(a).
1713) Ibid., para. 95(b).
1714) Ibid., para. 95(c).
1715) Ibid., para. 97.
1717) Ibid.; the referenced early arbitral decisions were: Noble Ventures v. Romania,
paras 68, 79–80; Eureko BV v. Republic of Poland, paras 115–134; Nykomb v. Latvia,
section 4.2. Further, the tribunal in Deutsche Bank v. Sri Lanka, paras 403–405,
considered this issue of the attribution of the hedging contract of CPC to the State.
It held that in light of its findings that the related conduct of the Central Bank and
the Supreme Court violated the treaty, there was no need for it to decide the
secondary claim concerning the breach of the umbrella clause. Consequently, it
did not reach a firm conclusion as to whether the issue of the attribution of the
contract of CPC for the purposes of the umbrella clause was governed by
international law or English law, as the law governing the contract.
1719) Garanti Koza v. Turkmenistan, para. 352.
1720) Ibid.
1722) SIAG v. Egypt, para. 2.
1723) Ibid., paras 117–118.
1724) Ibid., para. 120.
1725) Ibid., para. 128.
1726) Ibid.
1727) Ibid., paras 132 and 138.
1728) Ibid., para. 135.
1729) Ibid., para. 163.
1730) Ibid., para. 176.
1731) Ibid., para. 187.
1732) Ibid., para. 195.
1733) Ibid., para. 203.
1734) Ibid., para. 162.
1735) Ibid.
1736) Ibid., para. 53.
1739) Ibid., para. 76.
1740) Ibid., para. 119.
1741) Ibid., para. 122.
1742) Ibid., para. 116.
1743) Ibid., para. 163.
1744) Ibid.
1745) Ibid.
1746) Ibid., para. 164.
168
1747) Ibid., para. 165.
1748) Ibid., para. 166.
1749) Ibid., paras 178, 242 and 243.
1750) MTD v. Chile, Decision on Annulment (21 March 2007), para. 38.
1751) Ibid., para. 71.
1752) Pantechniki S.A. Contractors & Engineers (Greece) v. The Republic of Albania, ICSID
Case No. ARB/07/21, Award (30 July 2009), para. 1.
1754) Ibid., para. 73.
1755) Ibid., para. 75.
1756) Ibid., para. 77.
1757) Ibid., para. 82.
1758) Ibid., para. 84.
1760) Ibid., para. 284.
1761) Ibid., para. 285.
1762) Ibid., para. 289.
1763) Ibid., para. 290.
1765) Ibid.
1766) Ibid., paras 354–355.
169
Document information Chapter 7: The Attribution of Claims by State Enterprises
§7.01 INTRODUCTION
Publication As discussed in Chapter 5, at the intersection of the law of State responsibility with
Investment Law international investment law, attribution serves to determine the host State’s
involvement in an investment dispute. State Enterprises, including sovereign wealth
funds, play an increasingly international role in the global marketplace and make FDIs.
(1767) The participation of State Enterprises in foreign investment relations may give rise
Topics to investment disputes, which in turn may require a determination whether their home
Investment Arbitration State is the real party to that dispute. In legal terms, such analysis verifies if State
Enterprises have standing to bring arbitration claims against the host State.
As discussed in Chapter 6, lawful conduct may be attributed to the State for a number of
Bibliographic different purposes in international investment law. One such purpose is the
determination of the tribunal’s jurisdiction ratione personae, under the ICSID Convention
reference and/or under IIAs, over State Enterprises making investments in foreign countries. From
'Chapter 7: The Attribution the perspective of the relationship of the State Enterprise with its home State, it may be
of Claims by State questioned whether the home State is involved in an investment dispute indirectly,
Enterprises', in Csaba P 268 through a State Enterprise appearing as claimant. This issue can be viewed as one of
Kovács , Attribution in attribution when the relevant acts of the investor bringing the claims would be
International Investment considered as acts of a State under international law. (1768)
Law, International
Arbitration Law Library, This chapter discusses the standing of State Enterprises to bring arbitration claims under
Volume 45 (© Kluwer Law the ICSID Convention and IIAs. First, it addresses the specific attribution questions arising
International; Kluwer Law from the limited personal scope of a tribunal’s jurisdiction under the ICSID Convention.
International 2018) pp. 267 The attribution of claims in an ICSID-specific context is followed by a brief examination
- 288 of the standing of State Enterprises as investors under IIAs.
§7.02 THE ATTRIBUTION OF CLAIMS UNDER THE ICSID CONVENTION

[A] State Enterprises as Claimants under the ICSID Convention
In the context of the ICSID Convention, the question is whether the ambit of Article 25 on
the jurisdiction of ICSID, and in particular the phrase ‘a national of another Contracting
State’ extends to State Enterprises acting as investors in another Contracting State.
The ICSID Convention aims to promote economic development. (1769) Its preamble
highlights the role of private international investment in economic development:
‘[c]onsidering the need for international cooperation for economic development, and the
role of private international investment therein’. The focus on private investment is
apparent also in the Report of the Executive Directors on the Convention, which provides
that the primary purpose of the ICSID Convention is ‘to stimulate a larger flow of private
international investment into [the Contracting States.]’. (1770) Further, the Executive
Directors stated that ICSID was ‘designed to facilitate the settlement of disputes between
States and foreign investors’ and its creation was seen as ‘a major step toward promoting
an atmosphere of mutual confidence and thus stimulating a larger flow of private
international capital into those countries which wish to attract it.’ (1771)
The language of the preamble and the Report of the Executive Directors thus suggest that
the ICSID Convention was drafted with private sector investors in mind. Therefore, as the
leading commentary on the ICSID Convention avers, ‘States acting as investors have no
access to [ICSID] in that capacity.’ (1772) The drafting history of the ICSID Convention
shows that ‘a conscious decision was made to exclude States, State agencies or
international organizations from access to ICSID proceedings on the investor’s side.’ (1773)
P 269 The drafters dismissed even the idea of granting standing to such State actors as
parties that have compensated the investor and thus have become subrogated in its
place. (1774)
As recorded in its travaux préparatoires, the ICSID Convention was created around the
idea that it ‘would offer a means of settling directly, on the legal plane, investment
disputes between the State and the foreign investor, and would insulate such disputes
from the realm of politics and diplomacy.’ (1775) The denial of standing for State investors
to claim against host States under the ICSID Convention is consistent with the drafters’
objective to depoliticize disputes. (1776) Further, as noted by Broches, the main architect
of the ICSID Convention, disputes between States, including their subdivisions or
agencies, were excluded from the jurisdiction of ICSID also on the basis that for such
interstate disputes ‘there exist traditional methods of settlement under international
law.’ (1777)
In any event, States rarely, if ever, make foreign investments directly in the sovereign
territories of other States. In reality, such foreign investments are made by State
Enterprises. The position on the standing of these State Enterprises in ICSID proceedings
is more nuanced. A comment on the preliminary draft of the ICSID Convention indicates
that the term ‘national’ in what became Article 25 of the ICSID Convention was not meant
to be ‘restricted to privately owned companies, thus permitting a wholly or partially
government-owned company to be a party to proceedings brought by or against a foreign
170
State.’ (1778) However, Contracting States cannot circumvent the denial of direct access
to the ICSID mechanism as claimants by interposing a State Enterprise, whose claims are
attributable to the State under international law.
In an account on the drafting of the ICSID Convention, which is considered to be still the
best guideline to date, (1779) Broches described the contours of the standing of State
Enterprises as ICSID claimants in the following terms:
There are many companies which combine capital from private and
governmental sources and corporations all of whose shares are owned by the
government, but who are practically indistinguishable from the completely
privately owned enterprise both in their legal characteristics and in their
activities. It would seem, therefore, that for purposes of the Convention a
mixed economy company or government-owned corporation should not be
disqualified as a ‘national of another Contracting State’ unless it is acting as
an agent for the government or is discharging an essentially governmental
function. I believe that it is fair to say that there was a consensus on this point
P 270 among those participating in the preparation of the Convention. No attempt
was made, however, to reduce this common understanding to a legal
definition, which would have been a difficult task. (1780)
Broches considered that the traditional distinction between private and public capital
has become outdated. (1781) Instead of the public or private source of the capital, in
order to define the State, he proposed to rely on two alternative factors, which turned out
to effectively mirror the customary international law rules of attribution later embodied
in ILC Articles 5 and 8.
In the application of the Broches test, the first question is whether the mixed company or
State Enterprise acts as an agent of the home State in relation to the investment, which is
alleged to be harmed by the host State’s conduct. This test is redolent of the scenario
where an entity is acting under the instructions or directions of the State under ILC Article
8. (1782) Alternatively, the next question is whether the mixed company or State
Enterprise performs a governmental function on behalf of the home State in relation to
the investment in question. This test mirrors the attribution of the conduct of State
instrumentalities under ILC Article 5. (1783)
In both cases, the analysis is necessarily context-specific, focusing on the establishment
and operation of the investment in question, including the factual setting giving rise to
the claims. Accordingly, the overall status of the mixed company or State Enterprise
under the internal law framework of its home State is not determinative. Based on the
jurisprudential approaches to the application of ILC Articles 5 and 8, it does not matter
that the mixed company or State Enterprise plays a role in the implementation of a State
policy. It must be recalled in this regard that the majority view in the investment
arbitration jurisprudence is that the public service element of a transaction or contract is
irrelevant for a finding of governmental authority for the purposes of the application of
ILC Article 5. (1784) Similarly, for the purposes of the effective control test under ILC
Article 8 the mere congruence of the State Enterprise’s activities with the State’s policies
is insufficient to attribute the conduct of the State Enterprise to the State. Instead, the
test concerns the actual use of corporate or public law control by the State to enforce
public policy or exercise sovereign powers in relation to the act in question. (1785) Hence,
the fact that the State owns or controls the entity in question is a relevant predicate for
the analysis of the attribution of claims, but it is not in itself relevant in determining that
analysis.
The application of the Broches test may lead to a conclusion that the mixed company or
State Enterprise does not qualify as ‘a national of another Contracting State’ and hence
the tribunal lacks jurisdiction ratione personae under Article 25 of the ICSID Convention.
There are no such rulings in the investment arbitration jurisprudence to date and their
future occurrence is relatively unlikely given that, in making and managing their foreign
P 271 investments, mixed companies or State Enterprises perform commercial acts on the
global marketplace in most cases on an equal footing with privatelyowned investors.
Mohtashami and El-Hosseny even posit that the Broches test has become anachronistic in
contemporary investment relations. They observe that ‘the prevailing view during
Broches’ time – i.e. at the heart of the Cold War – was that SOEs could not be assimilated
to private enterprises and only the latter were capable of engaging in free market
dynamics’. (1786) They further argue that the practical delineation between the public
and private sectors in the contemporary investment environment is not always clear.
(1787)
Be that is it may, there is still a genuine concern among policymakers that in making a
foreign investment, State Enterprises, particularly sovereign wealth funds, could further,
at least in part, the governmental objectives of its home State. There is no question that
State Enterprises can combine, and in reality do combine, commercial and non-
commercial objectives. (1788) This much is also clear from the various international and
national guidelines and regulations recently adopted or planned to be adopted in
relation to the State investors.
By way of example, the Generally Accepted Principles and Practices (GAPP) for sovereign
171
wealth funds, referred to as the ‘Santiago Principles’, adopted by the members of the
International Forum of Sovereign Wealth Funds, state that ‘[t]he policy purpose of the
SWF should be clearly defined and publicly disclosed.’ (1789)
Similarly, the OECD Guidelines on Corporate Governance of State-Owned Enterprises call
for a level playing field among State Enterprises and private investors. The Guidelines
provide that ‘[w]here SOEs combine economic activities and public policy objectives,
high standards of transparency and disclosure regarding their cost and revenue
structures must be maintained, allowing for an attribution to main activity areas.’ (1790)
States may have investment entry policies in recognition of the fact that State
Enterprises may advance governmental policy interests. For example, in relation to the
application of the Investment Canada Act, the Government of Canada issued a Statement
Regarding Investment by Foreign State-Owned Enterprises. The Statement acknowledges
that ‘foreign SOEs are, although to varying degrees, inherently susceptible to foreign
government influence that may be inconsistent with Canadian national industrial and
P 272 economic objectives’. (1791) Further, in relation to foreign investment in the Canadian
oil sands the Statement underlines that ‘given the inherent risks posed by foreign SOE
acquisitions in the Canadian oil sands the Minister of Industry will find the acquisition of
control of a Canadian oil sands business by a foreign SOE to be net benefit to Canada on
an exceptional basis only.’ (1792)
In its guidance, the Committee on Foreign Investment in the United States (CFIUS), a
governmental committee charged with considering the national security implications of
transactions that might result in control of a US business by a foreign person or entity,
states that:
[i]n reviewing foreign government-controlled transactions, CFIUS considers,
among all other relevant facts and circumstances, the extent to which the
basic investment management policies of the investor require investment
decisions to be based solely on commercial grounds; the degree to which, in
practice, the investor’s management and investment decisions are exercised
independently from the controlling government, including whether
governance structures are in place to ensure independence; the degree of
transparency and disclosure of the purpose, investment objectives,
institutional arrangements, and financial information of the investor; and the
degree to which the investor complies with applicable regulatory and
disclosure requirements of the countries in which they invest. (1793)
On 20 November 2007, the Swiss Federal Government issued a public note concerning the
standing of State investors under IIAs and the ICSID Convention. (1794) It noted that
‘several public investment funds – in particular those of Gulf States or China – have
become inclined to … invest in strategic sectors for the State in question, such as natural
resources.’ (1795) The Public International Law Department of the Swiss Federal Ministry
of Foreign Affairs considered the question of whether public international law requires
differentiated legal treatment of foreign investments depending on their private or
public nature. (1796) It concluded that, in principle, there is no need to distinguish
between a private investor and a State investor if the latter does not act in the exercise
of its sovereign powers. (1797)
The EU is considering a proposal to establish a framework for the screening of FDIs into
the EU. (1798) In the discussion of the results of its impact assessment, the European
P 273 Commission noted the constant growth of inward investments to the EU, adding that
such investments ‘increasingly emanate from state owned enterprises or investors with
strong links to governments.’ (1799) The European Commission’s proposed regulation
expressly provides that, as part of their screening mechanism, ‘Member States and the
Commission should also be able to take into account whether a foreign investor is
controlled directly or indirectly (e.g. through significant funding, including subsidies) by
the government of a third country.’ (1800)
Such national and international concern to ensure a level-playing field with private
investors while maintaining some degree of control over foreign investments in strategic
sectors suggest that at least the potential for State Enterprises to cross the line between
commercial and governmental activities is real. Hence, far from being on the ebb, the
Broches test, admittedly adapted to the realities of contemporary cross-border
investments, is yet to have a practical role to play and may eventually yield a positive
result in the attribution of a State Enterprise’s claims to the home State in a future
dispute under the ICSID Convention.
As the Broches test itself is unlikely to ebb, the debate around its application may not
recede either. In respect of the application of the Broches test, Feldman posits that ‘[i]n
many instances, the goals driving a State-owned entity’s activities will be relevant for
purposes of determining whether the “function” of a State-owned entity is essentially
governmental or commercial, and thus relevant for distinguishing private from public
foreign investment.’ (1801)
In the debate on the application of the Broches test, a purposive approach is unlikely to
lead in the analysis of the relationship between a State Enterprise and its home State. To
the extent that the application of Broches test is shaped by the application of the
172
attribution rules in ILC Articles 5 and 8, the extension of the scope of sovereign conduct
solely on the basis of the public or governmental policy element of the investment
activities in question seems to be unwarranted.
The debate around the application of the Broches test may have significant practical
implications. By way of example, in the UK the Hinkley Point C GBP 20.3 billion nuclear
power station building is financed by Électricité de France (EDF), which is majority-owned
by the French government, and China General Nuclear Power Group (CGN), a Chinese State
Enterprise. Reportedly, ‘[f]or the French government, which owns 85 per cent of EDF, the
Hinkley Point project is crucial for maintaining the competencies of the French nuclear
P 274 sector and supporting its suppliers.’ (1802) Based on the purposive test proposed by
Feldman for the demarcation of sovereign activity in the application of the Broches test,
a hypothetical claim brought by EDF may arguably be attributable to France on the basis
that the project has strategic implications for the nuclear sector of France. On the other
hand, if the test focuses on the nature of the investment, it is clear that EDF acted as a
commercial party in relation to the project. Similar questions may arise also in relation
to the investments made by Chinese State Enterprises under the umbrella of China’s ‘One
Belt One Road’ Policy. (1803)
As noted above, the application of the Broches test in a manner analogous to that of the
attribution rules in the ILC Articles requires establishing, with respect to the foreign
investment of the mixed company or State Enterprise, that (1) the home State had
delegated and actually used its sovereign powers in the territory of the host State or (2)
the home State had used its corporate control over a State Enterprise in order to enforce
its sovereign policy in the territory of a host State.
The extra-territorial reach of the home State is immediately questionable at least from
an international law perspective. The idea of the use of sovereign powers in the territory
of another State, namely the host State of the foreign investment, seems startling. As
Mohtashami and El-Hosseny aptly observed, ‘it hardly needs recalling that, as a matter of
customary international law, states can exercise their prérogatives de puissance publique
only within their own jurisdiction, and not within the jurisdiction of another state.’ (1804)
Thus, the idea behind the Broches test lends itself more to a de facto extension of the
territorial reach of the home State of the investment.
To conclude, using the words of Broches, when State Enterprises are ‘practically
indistinguishable from the completely privately owned enterprise both in their legal
characteristics and in their activities’, (1805) there is no justification for their different
jurisdictional treatment under the ICSID Convention. However, when the State Enterprises
act as in a non-commercial capacity in relation to the investment activities in question,
the Broches test may lead to the attribution of the claims of State Enterprises relating to
such activities to the State. (1806)
[B] The Attribution of Claims in the ICSID Jurisprudence

Just a few tribunals constituted under the ICSID Convention have tackled the question
whether their jurisdiction ratione personae is affected by the alleged links between the
State-owned and/or controlled claimant and the home State of such claimant. As
discussed below, akin to the application of ILC Articles 5 and 8 to the State’s
internationally wrongful conduct, the distinction between commercial and governmental
acts settled the question of the attribution of claims in these cases.
P 275
[1] The Nature of the Acts

In Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic (1807) the tribunal
considered the relationship between Ceskoslovenska Obchodni Banka, A.S. (CSOB) and its
home State, the Czech Republic. CSOB was the foreign trade bank of the former
Czechoslovakia. In the context of its restructuring in preparation for privatisation, CSOB
concluded a Financial Consolidation Agreement with the Ministry of Finance of the Slovak
Republic and the Ministry of Finance of the Czech Republic. (1808) Under the agreement,
CSOB assigned certain non-performing loan portfolio receivables to two Collection
Companies, including one established by the Slovak Republic.
The claimant alleged that the Slovak Republic failed to cover, as agreed, the losses
incurred by the Slovak Collection Company. It based ICSID’s jurisdiction, among others,
on the governing law clause of the Financial Consolidation Agreement, which
incorporated by reference the BIT between the Czech Republic and the Slovak Republic.
(1809)
Following the commencement of the arbitration, CSOB assigned to the Czech Republic its
claims relating to the receivables from the Slovak Collection Company. (1810)
The respondent challenged the jurisdiction ratione personae of the tribunal arguing that
the dispute was not ‘between a Contracting State and a national of another Contracting
State’, as required under Article 25(1) of the ICSID Convention. It argued that CSOB had no
standing before an ICSID tribunal because the real claimant was the Czech Republic. It
submitted that CSOB was merely an agent of the Czech Republic and the assignments of
the contested receivables to Czech Republic transformed the Czech Republic into the
173
real party in interest. (1811)
The respondent argued that CSOB was an agent or representative of the State to the
international banking and trading community and, as such, it discharged essentially
governmental functions including with respect to the matters in dispute. (1812)
The tribunal acknowledged that the ICSID Convention did not provide for the settlement
of interstate disputes. Instead, the dispute settlement mechanism under the ICSID
Convention was designed to deal with disputes between Contracting States and nationals
of other Contracting States. (1813) The tribunal observed that the term ‘national’ in Article
25(2) of the ICSID Convention encompasses both natural and juridical persons, but the
ICSID Convention does not define either of the two terms. It noted that the legislative
history of the ICSID Convention indicated that the term ‘juridical persons’ and, hence, the
concept of ‘national’, was intended to cover also wholly or partially government-owned
P 276 companies. (1814) The tribunal stated that ‘the question whether a company qualifies
as a “national of another Contracting State” within the meaning of Article 25(1) does not
depend upon whether or not the company is partially or wholly owned by the
government.’ (1815) It then noted that the parties accepted the commonly used Broches
test as determinative for the question of CSOB’s standing before ICSID. (1816)
The tribunal focused on the nature of CSOB’s activities in the discharge of its functions on
behalf of the State stating that:
it cannot be denied that for much of its existence, CSOB acted on behalf of the
State in facilitating or executing the international banking transactions and
foreign commercial operations the State wished to support and that the
State’s control of CSOB required it to do the State’s bidding in that regard. But
in determining whether CSOB, in discharging these functions, exercised
governmental functions, the focus must be on the nature of these activities
and not their purpose. While it cannot be doubted that in performing the
above-mentioned activities, CSOB was promoting the governmental policies
or purposes of the State, the activities themselves were essentially
commercial rather than governmental in nature. (1817)
The tribunal thus recognised that ‘for much of its existence’ CSOB acted as a State agent.
The tribunal was prepared to accept even that ‘the non-performing assets [were] derived
from activities conducted by CSOB as an agent of the State.’ (1818) That provisional
conclusion appears to reflect the outcome of the attribution test under ILC Article 8,
which should have been sufficient to attribute the claims to the Czech Republic.
Nevertheless, as noted above, the application of the agency test under ILC Article 8 to the
Broches test entails establishing that the home State used its corporate control over a
State Enterprise in relation to the matter in dispute in order to enforce its sovereign
policy in the territory of the host State. The tribunal did not make any such findings in
relation to CSOB’s acts under the Financial Consolidation Agreement. To the contrary, it
held the activities of CSOB were commercial in nature:
Although these activities were driven by State policies, as was true generally
of economic activities during the country’s command economy, the banking
transactions themselves that implemented these policies did not thereby lose
their commercial nature. They cannot therefore be characterized as
governmental in nature. (1819)
The tribunal observed that, in relation to the non-performing loan receivables, CSOB
acted as any private party undergoing a restructuring would have acted: ‘the measures
taken by CSOB to remove [the non-performing receivables] from its books in order to
improve its balance and consolidate its financial position in accordance with the
provisions of the Consolidation Agreement, must be deemed to be commercial in
character.’ (1820)
P 277
In relation to the respondent’s submissions that the Financial Consolidation Agreement
was concluded in preparation of the privatisation of CSOB, which was a State function,
the tribunal noted:
It cannot be denied that a State’s decision to transform itself from a command
economy to a free market economy involves the exercise of governmental
functions. The same is no doubt true of legislative and administrative
measures adopted by the State that are designed to enable or facilitate the
privatization of State-owned enterprises. It does not follow, however, that a
State-owned enterprise is performing State functions when it takes advantage
of these State policies and proceeds to restructure itself, with or without
governmental cooperation, in order to be in a position to compete in a free
market economy. Nor does it follow that the measures taken by such an
enterprise to achieve this objective involve the performance of State or
governmental functions. In both instances, the test as to whether or not the
acts are governmental or private turn on their nature. (1821)
174
The tribunal’s focus on the nature of the acts, namely its distinction between commercial
and governmental acts, as the decisive factor in the non-attribution of CSOB’s claims to
the Czech Republic, foreshadowed in 1999 what in fact turned out to be the majority
position on the application of ILC Articles 5 and 8 in the subsequent investment
arbitration jurisprudence. (1822)
Finally, the tribunal noted that the involvement of various State entities in the Financial
Consolidation Agreement did not alter its conclusion that the functions performed by
CSOB and the Financial Consolidation Agreement had a commercial character. (1823)
The tribunal concluded that it had jurisdiction ratione personae over CSOB’s claims,
because CSOB was not acting as an agent of the State, nor was it discharging essentially
governmental activities in relation to the subject matter of the dispute. (1824)
The respondent also argued that CSOB’s assignment of its claims against the Slovak
Collection Company to the Czech Republic showed that the real party in interest was the
Czech Republic. That submission failed on the basis that at the time when the ICSID
proceedings were instituted, assignments in question had not yet been concluded. (1825)
The tribunal noted that ‘it is generally recognized that the determination whether a party
has standing in an international judicial forum for purposes of jurisdiction to institute
proceedings is made by reference to the date on which such proceedings are deemed to
have been instituted.’ (1826)
In endorsing the CSOB tribunal’s analysis, the tribunal in Beijing Urban Construction Group
Co. Ltd. v. Republic of Yemen, (1827) a more recent case concerning the building of an
airport terminal, commented that ‘the important point about the CSOB case is the
P 278 focus on a context-specific analysis of the commercial function of the investment’. (1828)
The BUCG tribunal applied the same contextual approach to the facts in that case.
The respondent relied on the Broches test in asserting that BUCG was ‘an agent of the
Chinese Government and discharge[d] governmental functions even in its ostensible
commercial undertakings. (1829) In this regard, it submitted evidence showing that
institutional and political supervision mechanisms were in place, because in general
BUCG was expected to advance China’s national interest. (1830) The respondent also
argued that Communist Party committees in State Enterprises such as BUCG were
responsible for ‘monitoring the implementation of the scientific concepts of
development and national policies, to promote enterprises to play a leading role in
carrying out political and social responsibility.’ (1831)
The claimant argued that ‘State-owned entities may bring claims under the ICSID
Convention when operating as ordinary commercial entities’. (1832) In relation to the
Broches test, the claimant submitted that it acted in a commercial capacity, rather than
as an agent of the Chinese Government, in respect of the Sana’a airport contract and did
not discharge any governmental functions in making its investment in Yemen. (1833)
The tribunal accepted that BUCG was ‘a publicly funded and wholly state-owned entity
established by the Chinese Government.’ (1834) In applying the Broches test, the tribunal
noted that its factors ‘are the mirror image of the attribution rules in [ILC] Articles 5 and 8
… . The Broches test lays down markers for the non-attribution of State status.’ (1835)
The tribunal remarked that the corporate controls and mechanisms in place with respect
to BUCG were normal in the context of Chinese State Enterprises. (1836) It then stated
that ‘the issue is not the corporate framework of the State-owned enterprise, but whether
it functions as an agent of the State in the fact-specific context.’
The tribunal found that, in building an airport terminal in Yemen, BUCG was acting as a
commercial contractor and not as an agent of the Chinese State. (1837) It noted that
BUCG, as a general contractor, was awarded the project based on the commercial merits
of its bid, following an open tender. (1838) On the respondent’s case, the Construction
Agreement was terminated for BUCG’s failure to perform its commercial services and not
for any reason associated with the China’s decisions or policies. (1839)
In relation to the alternative limb of the Broches test, namely whether BUCG was
discharging an essentially governmental function, the tribunal noted that the
respondent’s positioning of BUCG in the broad context of China’s State-controlled
P 279 economy was ‘convincing, but largely irrelevant’. (1840) The tribunal’s finding
concerning the role of BUCG in China may have settled the issue of the attribution of
claims with respect to China’s numerous State Enterprises acting as investors abroad. The
tribunal reiterated that the relevant focus was on BUCG’s functions in the context of the
Sana’a International Terminal project and there was no evidence that in that capacity
BUCG was discharging a governmental function. (1841)
The tribunal observed that the respondent’s arguments concerning the general operation
of BUCG, namely that the Chinese State was the ultimate decision maker for key
management, operational and strategic decisions of BUCG, was ‘too remote from the facts
of the Sana’a International Airport project to be relevant.’ (1842) The tribunal aptly noted
that ‘[t]he alleged military aggression was not by Yemen against the People’s Republic of
China (or the consequences might have been more severe) but in relation to BUCG as an
airport contractor that, [Yemen Civil Aviation and Meteorology Authority] alleges, fell
down on the job.’ (1843) The tribunal thus concluded that ‘BUCG was not fulfilling Chinese
175
governmental functions within the sovereign territory of the Republic of Yemen.’ (1844)
The CSOB and BUCG cases show that the traditional distinction between governmental
and commercial acts is the decisive factor for the alternative attribution situations
envisaged by Broches for the purposes of access to arbitration under the ICSID
Convention. The general status of the State Enterprise within the internal law framework
of its home State is of no relevance in the application of the Broches test. Thus, it does
not matter whether the State Enterprise generally advances State policies. As with the
attribution of internationally wrongful conduct to the State under ILC Articles 5 and 8, an
analysis whether the State Enterprise’s claims are attributable to the State requires
focus on the actual role of the State Enterprise in the particular project and the specific
facts alleged to give rise to State Enterprise’s claims.
[2] The Decision to Invest
In Masdar v. Spain (1845) the respondent relied on ILC Articles 5 and 8 in arguing that in
reality the dispute was between two States, namely the UAE (Abu Dhabi) and Spain, and
therefore the tribunal lacked jurisdiction ratione personae under Article 26 of the ECT and
Article 25 of the ICSID Convention. (1846) The respondent based its jurisdictional
objection on the links between the claimant and the Government of Abu Dhabi. The
claimant was a company owned and controlled by Abu Dhabi Future Energy Company
(ADFEC). ADFEC was founded, as part of the programme for the economic diversification of
P 280 Abu Dhabi, to make investments in renewable energy and sustainable technology in
Abu Dhabi and overseas. It was wholly controlled by Mubadala Development Company,
which, in turn, was owned by the Government of Abu Dhabi. (1847) The respondent
conceded that it had no evidence that the claimant exercised any public function
prerogative and, therefore, it maintained only its argument that the claimant acted
under the control of Abu Dhabi. (1848) In the view of the respondent, the approval of the
claimant’s investment by the Abu Dhabi Government, acting through Mubadala, showed
that the claimant acted under governmental control. (1849)
The claimant noted that both it and ADFEC, as subsidiaries of Mubadala, had a level of
delegated authority to pursue investment plans and that above that level, decisions were
referred to the investment committee or Board of Mubadala. (1850) The investment in
solar energy plants in Spain was decided by the investment committee of Mubadala,
without the involvement of Abu Dhabu. The claimant added that the Mubadala Group was
not required to take on any investments proposed by the Government and only
considered investments meeting its financial criteria. (1851) The tribunal acknowledged
that the invoked ILC Articles codified customary international law on attribution for
purposes of asserting State responsibility. (1852) It observed that the question was
‘whether the acts of Claimant, as a separate entity, can be attributed to the State of Abu
Dhabi, either because it exercises governmental authority (“prérogatives de puissance
publique”) or because it is under the effective control of the State in its investment
activities.’ (1853) The tribunal found that the respondent did not establish that the
claimant exercised any public function prerogative or that the State of Abu Dhabi
exercised a general control over claimant and a control on its investment decisions.
(1854) Although the tribunal did not anchor its attribution analysis in the Broches test, its
reliance on ILC Articles 5 and 8 in a jurisdictional context is justifiable on the basis that
the factors embodied in those articles are a mirror image of the Broches test applied by
the CSOB and BUCG tribunals.
[3] Other ICSID Cases Involving State-Owned Claimants
A number of other ICSID arbitrations have involved State-owned claimants without the
parties disputing the jurisdiction ratione personae of the tribunal.
In CDC v. Seychelles (1855) the dispute concerned two guarantees provided by the
respondent to CDC Group plc (CDC), a development finance institution owned by the UK
P 281 government, in relation to amounts owed by the Public Utilities Corporation (PUC), a
statutory corporation incorporated in the Republic of the Seychelles, to CDC under two
Loan Agreements between PUC and CDC.
The respondent did not object to the sole arbitrator’s jurisdiction ratione personae over
CDC. In any event, the sole arbitrator observed that CDC’s activities were ‘commercial in
substance and nature’ and related to investments made on a commercial basis, namely
the expansion of the capacity of the Baie Ste Anne Power Station on the Island of Praslin
and the upgrading of Victoria A Power Station on the Island of Mahé. (1856)
In Hrvatska Elektroprivreda d.d. v. Republic of Slovenia (1857) the tribunal noted that it
was a threshold issue whether Hrvatska Elektroprivreda d.d (HEP), the national electricity
company of Croatia, could bring a case against Slovenia under an agreement to which
only Croatia and Slovenia were parties. The dispute concerned the ownership and
operation of Krško Nuclear Power Plant, a significant national power resource for both
countries. (1858)
The tribunal noted that ‘issues of jurisdiction were not seriously contested between the
parties to this arbitration; nevertheless, some questions were asked and in any event the
Tribunal is obliged to be satisfied of its jurisdiction.’ (1859)
HEP was the legal successor of the original Croatian investor. Under the founding
176
agreements of the joint venture, Slovenia was obliged to deliver, based on a so-called
parity principle, fifty per cent electricity output of the plant to HEP. In settlement of a
dispute concerning the delivery of electricity and HEP’s rights of the co-ownership and
management of the plant, Croatia and Slovenia entered into a treaty (the 2001
Agreement) pursuant to which Slovenia undertook to resume the electricity deliveries
and restore HEP’s rights by a specified date. (1860) Article 2(2) of the 2001 Agreement
provided that the joint venture would operate on a cost basis and would not produce
either losses or profits as a result of its operation. (1861) The 2001 Agreement was signed
on behalf of Croatia and Slovenia and it conferred on the shareholders of the joint
venture operating and managing the plant, including HEP, the right to refer disputes to
arbitration before ICSID. (1862)
A dispute arose concerning Slovenia’s performance of its obligations under the 2001
Agreement and HEP commenced an ICSID arbitration against Slovenia in which it alleged
also breaches of the ECT.
As noted above, the respondent did not contest the tribunal’s jurisdiction. The tribunal
P 282 briefly addressed its jurisdiction under the 2001 Agreement. It noted that:
[t]he two State Parties to that Agreement have entered into it as the ultimate
shareholders of the immediate ‘Shareholders’ of NEK d.o.o. The Agreement
establishes in detail the points generally included in a shareholders
agreement. In doing so it gives their respective wholly-owned immediate
‘Shareholders’ of NEK d.o.o. the right to arbitrate directly against the ‘other
State Party’ for any failure on the latter’s part to cause its wholly-owned
‘Shareholder’ to comply with the Agreement. (1863)
The tribunal did not address its jurisdiction ratione personae under Article 25 of the ICSID
Convention. The tribunal’s approach to the interpretation of the nature of the dispute, as
apparent from the above passage, suggests that the tribunal was satisfied that the
dispute was not an interstate dispute for which an ICSID arbitration would not have been
available to the parties. Despite the fact that the source of the parties’ relationship was a
specific purpose treaty, the tribunal appear to have equated the parties’ dispute with an
ordinary commercial shareholder dispute. On that basis, the Broches test would have
indeed led to the non-attribution of HEP’s claims to Croatia.
Commentators have questioned the tribunal’s lack of analysis of its jurisdiction ratione
personae under the ICSID Convention. The suggestion was that HEP was not acting in
commercial capacity, because the 2001 Agreement provided for a not-for-profit
operation of a plant, which was a significant energy resource for the two Contracting
States. (1864) The legitimacy of such comments is not unfounded. The parties’ consent to
ICSID arbitration in an individual agreement is not sufficient for the purposes of a
tribunal’s jurisdiction in an arbitration conducted under the ICSID Convention. As the
Report of the Executive Directors stated, ‘[w]hile consent of the parties is an essential
prerequisite for the jurisdiction of [ICSID], consent alone will not suffice to bring a dispute
within its jurisdiction. In keeping with the purpose of the Convention, the jurisdiction of
[ICSID] is further limited by reference to the nature of the dispute and the parties
thereto.’ (1865)
In the absence of any analysis by the tribunal on its jurisdiction under the ICSID
Convention, there cannot be a definite answer as to what the tribunal may or may not
have considered in relation to the Broches test. It seems fair to assume that the declared
not-for-profit nature of the joint venture’s activities under the 2001 Agreement was
insufficient to detract from the non-governmental nature of HEP’s investment in the
plant, which it sought to protect in the arbitration. The parties’ complex relationship
would have warranted additional considerations. Under the 2001 Agreement, HEP was
also the off-take beneficiary of electricity delivered by the plant. HEP’s conduct did not
appear to have transgressed the boundaries of the conduct of any corporate shareholder.
Further, as noted in the discussion of the attribution of the wrongful conduct to the State,
P 283 the strategic importance of an investment to a State’s economy is not a sufficient
factor to describe a State entity’s function as governmental and thus attribute to the
State that entity’s conduct affecting that investment.
In Telenor v. Hungary (1866) the dispute submitted to arbitration under the ICSID
Convention concerned a concession agreement for the provision of mobile telephone
services concluded between the Hungarian Minister of Transport, Communications and
Water Management and Pannon GSM Telecommunications RT (Pannon). Pannon was the
wholly owned subsidiary of Telenor, a company majority-owned by the State of Norway.
(1867) The respondent brought jurisdictional objections based on the narrow scope of the
applicable BIT’s dispute resolution provision. There were no objections concerning the
standing of Telenor as claimant in an ICSID arbitration.
Other ICSID cases involving a State-owned claimant include State General Reserve Fund of
Oman v. Bulgaria (1868) and ČEZ, a.s. v. Bulgaria, (1869) both pending at the time of
writing. There are no reports of jurisdictional objections in either of the two cases.
[4] The Ultimate Beneficiary of the Investment
In Rumeli Telekom v. Kazakhstan the respondent argued that the Turkish State was the
177
real claimant having an interest in the dispute, because the Turkish Savings Deposit
Insurance Fund (TSDIF), a Turkish State agency, seized control of over two hundred
companies allegedly belonging to, or controlled by, the Uzan family, including the
claimants. (1870) The respondent argued that since the seizure by TSDIF, the claimants
ceased to exist as ‘independent commercial entities in any meaningful sense.’ (1871) It
further argued that the benefit of any sums recovered through the arbitration would go
directly to the Turkish Treasury. (1872) In relation to the application of the Broches test, it
submitted that the claim was being brought by TSDIF in the exercise of its statutory and
governmental powers in an attempt to recover the losses suffered by the Turkish State as
a result of the Uzan family’s massive-scale worldwide frauds.’ (1873) In that regard, it
submitted that the claim was funded and directed by the Turkish State and was designed
to recoup a large amount of foreign currency for the Turkish Treasury, which was not a
function available to a private party. (1874)
The claimants submitted that the TSDIF only managed the two companies, which did not
affect their corporate existence or ownership structure and, through the statutory
appointment of TSDIF managers, the claimants did not lose their standing to bring their
P 284 claims against Kazakhstan. (1875) The Turkish law expert appointed by the claimants
opined that the ‘ultimate transfer of proceeds of any resulting award to third parties, be
they State entities or private entities, would not in any event deprive Claimants of their
commercial status’. (1876) In the alternative, the claimants argued that the application of
the Broches test would not deprive them of their standing, because the TSDIF managers
simply carried out the commercial plans of the previous, privately appointed managers:
the previous managers of Rumeli and Telsim wrote to Respondent stressing
that they intended to submit the dispute to [ICSID]. When Rumeli and Telsim’s
previous management was replaced by TSDIF appointed management, the
new managers simply carried out the previous managements’ commercial
plans to submit [the] Rumeli and Telsim dispute with Kazakhstan for final
resolution to ICSID. The TSDIF-appointed managers did not exercise any
special prerogatives in fulfilling the previous managements’ ‘firm intentions’.
(1877)
The tribunal noted that the TSDIF, through the exercise of its statutory management role,
did not become an owner of shares in the claimants and did not obtain the right for the
Turkish State to be the sole beneficiary of the proceeds of an award. Instead, any such
proceeds would be used to pay the claimants’ creditors, according to the relevant rules
of Turkish law. The tribunal found that ‘the role of the TSDIF may be compared to some
extent to the role of a receiver or liquidator or judicial manager. The presence of such an
entity as manager of the company in accordance with the law is no bar to the jurisdiction
of [ICSID]’. (1878) In light of its finding concerning the status of the TSDIF, the tribunal did
not have to apply the Broches test to the circumstances of the case.
The Broches test came up also in the context of an argument that the ultimate
beneficiary of the award would have been the host State of the investment. PNG
Sustainable Development Program Ltd. v. Independent State of Papua New Guinea
involved, in the words of Professor Dolzer, the respondent’s legal expert, ‘a unique legal
setting which does not fall into any traditional category of a private or public company’.
(1879) The company in question was PNG Sustainable Development Program Ltd, a
company limited by guarantee and incorporated under the laws of Singapore. It financed
and oversaw several development and environmental projects from low-risk investments
made in the international markets from dividends earned from its shareholding in Ok
Tedi Mining Ltd. (OTML). (1880) OTML was a company incorporated in Papua New Guinea
(PNG), which held a Special Mining Lease in relation to an open pit copper and gold mine
in the Star Mountains of the Western Province of PNG. (1881)
P 285
The dispute concerned the cancellation of the claimant’s shares in OTML. (1882) The
claimant was gifted the majority shareholding in OTML by BHP Minerals Holdings Pty Ltd
(BHP), the former co-owner and operator of the mine. BHP ‘intended to entrust an
independent, foreign-registered company with the management of the development of
the Ok Tedi mine (through OTML) and the use of its earnings from the mine to promote
sustainable development within PNG and to advance the general welfare of the people of
PNG’. (1883)
The respondent argued that the claimant had no standing under the ICSID Convention,
because it was not a private investor and did not meet the Broches test to qualify as a
State-controlled company. (1884) It submitted that the background to the claimant’s
incorporation and its objectives and functions suggested that the claimant discharged an
essentially governmental function with respect to its alleged investment in OTML,
because it was ‘not motivated by profit in the ordinary sense of a pure commercial entity
would be’ and it was a ‘trustee-style not-for-profit company, holding the Gifted Shares on
behalf of the People’. (1885)
The claimant submitted that the ICSID Convention did not explicitly contain a
requirement as to ‘private investments’ and, in any event, the claimant met the Broches
test, the structural and the functional test or any combination of the these tests. (1886) In
178
particular, it submitted that (1) it did not act as a Government agent and did not
discharge an essentially governmental function, (2) structurally, it was constituted to
prevent government control, rather than enable it and (3) functionally, it used the
dividends from the operation of the mine for specified purposes, for the benefit of the
people of PNG and of the Western Province in particular and performed commercial
activities, its assets being managed by fund managers instructed to make profits. (1887)
The respondent in turn argued that there is only ‘a single set of guidelines’, namely the
Broches test and the so-called functional and structural tests were merely ‘approaches
for the application of the Broches test’. (1888) The respondent also relied on public
‘admissions’ by the Chairman of the claimant that the claimant was ‘doing the
Government’s job’. (1889)
The claimant finally contended that the Broches test was not satisfied because the
claimant was not wholly or partially owned by the State, nor was it controlled by the
State. (1890) It admitted that, even on the respondent’s case, the State had at most joint
oversight rights with BHP over the claimant, which did not raise a question of State
control. (1891)
P 286
The tribunal found that there was no State consent to arbitration under the invoked PNG
Investment Promotion Act and therefore it had no jurisdiction ratione voluntatis. (1892)
Consequently, it considered unnecessary to decide the respondent’s objection to the
tribunal’s jurisdiction ratione personae under the ICSID Convention. (1893)
It is unlikely that the tribunal would have dismissed its jurisdiction over the claimant
based on the application of the Broches test. The claimant was a foreign company
placing the earnings from its shareholding in OTML in international investments for
environmental and other sustainable development purposes of the local population in
PNG. As a foreign company, it was ‘a national of another Contracting State’. Further, the
fact that the ultimate beneficiaries of the investments were the people of PNG does not
seem to negate a conclusion that the investments were practically indistinguishable from
private investments. In other words, the not-for-profit nature of the investments does not
automatically mean that these investments were public or State investments. (1894)
Private entities also engage in not-for-profit activities. In the words of UNCTAD:
[t]he kinds of activities in which a non-profit entity engages may produce
desirable forms of investment, such as a research facility or a hospital.
Further, non-profit entities often acquire shares in commercial enterprises in
order to earn revenue to support their charitable or educational activities. In
that capacity, non-profit entities are likely to act in the same way as any other
portfolio investor and their distinct status as non-profit entities would seem of
little significance. (1895)
Further, the claimant asserted that it carried ‘significant risk as a shareholder in OTML
due to, inter alia, its undertaking to take over BHP’s liabilities in respect of the mining
activities (and its broader obligations as a shareholder), and indemnities that the
Claimant granted in respect of environmental claims and claims arising out of BHP’s
stewardship of OTML’. (1896) Finally, in the absence of a specific requirement in the ICSID
Convention that a qualifying investment must be made with an expectation of profit, the
tribunal could have decided that the claimant’s shareholding did not fall outside an
objective meaning of ‘investment’.
§7.03 THE ATTRIBUTION OF CLAIMS UNDER IIAs

The Broches test should not be applied to determine a tribunal’s jurisdiction ratione
P 287 personae under IIAs. Most IIAs are silent on the issue whether State-owned or
controlled entities qualify as investors and, as such, have standing to bring arbitration
claims against the host State. (1897)
In other cases, IIA drafters adopted a variety of textual approaches in referring to the
protection of a State and/or State Enterprise acting as investors. For example, the US-
Korea FTA expressly includes a State party and its State Enterprises within its definition
of ‘investor’. (1898) The Japan-Kenya BIT defines in part ‘enterprise of a Contracting Party’
as ‘… any legal person or any other entity duly constituted or organised under the
applicable laws and regulations of that Contracting Party, whether or not for profit, and
whether private or government owned or controlled …’. (1899) Where the IIAs refer to
State-controlled enterprises, it should be borne in mind that, under international law,
the concept of control is flexible and broad, encompassing managerial responsibility,
voting rights and other corporate leverage tools that may not necessarily reflect the level
of shareholding. (1900)
Just a few IIAs exclude expressly State-owned enterprises from the scope of treaty
coverage. (1901)
The fact that many IIAs do not explicitly cover State Enterprises does not mean that such
entities do not qualify as investors benefitting from international investment law
protection. (1902) In the absence of an express carve-out of State Enterprises from the
179
class of investors that benefit from the investment protection, there is no basis to
distinguish between privately owned and State-owned and/or controlled investors. In the
absence of a treaty limitation or exclusion with respect to State Enterprises, no issue of
attribution arises under the particular IIA, whose protection thus extends to State
Enterprises even assuming that they act in a governmental capacity in making and/or
operating their foreign investments. (1903)
P 288
The definition of covered investors under an IIA cannot be overridden or altered by
reference to the Broches test or customary international law rules, including those
embodied in the ILC Articles. (1904) Nevertheless, this conclusion is altered if, as most
IIAs do, the applicable IIA contains an option for the investor to refer investment disputes
with the host State to arbitration under the ICSID Convention. If the State Enterprise
covered by the IIA opts for arbitration under the ICSID Convention, the question arises
whether it has access to the ICSID mechanism of dispute settlement even when it acts in
governmental capacity. (1905) No similar considerations arise under the alternative
dispute resolution routes, such as UNCITRAL or ICC arbitration, typically available under
IIAs. Therefore, a State Enterprise acting in governmental capacity may still elect to refer
its dispute with the host State to a non-ICSID forum.
§7.04 CONCLUSION
The issue of whether State Enterprises are entitled to rely on the protections offered by
IIAs, including the dispute resolution mechanism under such IIAs, may raise a question of
attribution when the State Enterprises are alleged to have such close links with their
home State that the real claimant in the dispute is the home State. In practice, such
scenario, while not escaping the concern of policymakers, appears to be questionable
and has yet to produce an actual positive attribution.
The Broches test applied in the context of determining the State Enterprises’ standing
under the ICSID Convention resonates with the ILC rules for identifying whether the
internationally wrongful conduct of State Enterprises is attributable to the State.
Accordingly, the question of whether the investment activities of the State Enterprises
appearing as claimants are driven by, or are incidentally promoting, State policies is of
no relevance. In attributing claims to the home State of the investor, the focus is on the
functions of the State Enterprise in the fact-specific context. Hence, the question is
whether the investment activities of the State Enterprise, that are alleged to have been
affected by the host State’s wrongful conduct, involved the performance of State or
governmental functions.
Absent an express limitation or exclusion in the applicable IIA, State Enterprises benefit
from investment treaty protection, being entitled to rely also on the relevant dispute
resolution mechanism. However, if the State Enterprise acting as the claimant investor
opts for an ICSID arbitration it may be required to establish that its activities are not
distinguishable from that of a private investor, as envisaged under the Broches test.
P 288
References
1767) In its World Investment Report, Global Investment Prospect and Trends, at 31,
UNCTAD notes that ‘[i]n 2017, there were close to 1,500 [State-owned multinational
enterprises (SO-MNEs)], with more than 86,000 foreign affiliates operating
worldwide … . A particularly large number of SO-MNEs (more than 400) are
headquartered in the EU. State ownership in some cases, especially in the
financial sector, results from rescue operations after the 2008–2009 financial
crisis.’ UNCTAD defined SO-MNEs as ‘entities (separate from public administration)
that have a commercial activity where the government has a controlling interest
(full, majority or significant minority) whether listed or not on the stock exchange.
The rationale is often industrial/ regional policy and/or the supply of public goods
(often in utilities and infrastructure – such as energy, transport and
telecommunications)’, Ibid., at 30.
1768) Mark Feldman, State-Owned Enterprises as Claimants in International Investment
Arbitration, 31 ICSID Review, 1, 24, 29 (2016).
1769) Schreuer, Malintoppi, Reinisch, Sinclair, supran. 188, at 4.
1770) Report of the Executive Directors on the Convention, para. 12, published on the
website of ICSID https://icsid.worldbank.org (accessed 17 February 2018).
1771) Ibid., para. 9.
1773) Ibid., at 187.
1774) Ibid., at 186–187.
1775) History of the ICSID Convention: Documents Concerning the Origin and the
Formulation of the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States, Vol. II-1, 303 (Washington D.C., ICSID 1970).
180
1777) Aron Broches, The Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States, Recueil des Cours, Collected Courses of the
Hague Academy of International Law, 1972, II, 354 (A.W. Sijthoff, 1973).
1778) History of the ICSID Convention, supran. 1775, at 170 and 230.
1780) Broches, supran. 1777, at 354–355.
1781) Ibid., at 354.
1782) See §5.05 (Conduct Directed or Controlled by the State); Feldman, supran. 1768, at
27.
1783) See §5.04 (State Instrumentalities), Feldman, supran. 1768, at 27.
1784) See §5.04[D].
1785) See §5.05[C].
1786) Reza Mohtashami, Farouk El-Hosseny, State-Owned Enterprises as Claimants Before
ICSID: Is the Broches Test on the Ebb?, 3(2) BCDR International Arbitration Review,
371, 378 (2016).
1787) Ibid., at 380.
1788) European Commission, State Enterprises in the EU, Lessons Learnt and Ways Forward
in a Post-Crisis Context, Institutional Paper 031, July 2016, at 6,
https://ec.europa.eu/info/sites/info/files/file_import/ip031_en_2.pdf (accessed
22 February 2018).
1789) GAPP Principle 2, Santiago Principles, International Forum of Sovereign Wealth
Funds, 2008, http://www.ifswf.org/santiago-principles (accessed 17 February 2018).
1790) OECD Guidelines on Corporate Governance of State-Owned Enterprises, III State-
owned enterprises in the marketplace, Guideline C,
http://www.oecd.org/corporate/guidelines-corporate-governance-SOEs.htm
(accessed 22 February 2018).
1791) Government of Canada, Statement Regarding Investment by Foreign State-Owned
Enterprises, http://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk81147.html (accessed 22
February 2018).
1792) Ibid.
1793) Office of Investment Security, Guidance Concerning the National Security Review
Conducted by the Committee on Foreign Investment in the United States, 73 Fed
Reg 74567, 74571 (8 December 2008), https://www.treasury.gov/resource-
center/international/foreign-investment/Pages/cfius-guidance.aspx (accessed on
28 February 2018).
1794) Swiss Federal Department of Foreign Affairs, Accords de promotion et protection des
investissements. Qualité d’investisseur octroyée à un Etat et traitement à donner à
ses investissements, Avis de droit du 20 novembre 2007, 183 (JAAC, 2008).
1795) Ibid., 184.
1796) Ibid.
1797) Ibid., 188.
1798) European Commission, Proposal for a Regulation of the European Parliament and
of the Council establishing a framework for screening of foreign direct investments
into the European Union, COM(2017) 487, 13 September 2017,
http://www.europarl.europa.eu/legislative-train/theme-a-balanced-and-
progressive-trade-policy-to-har... (accessed 24 February 2018); see also Screening
of investments: Council agrees its negotiating stance, Council of the EU Press
Release, 13 June 2018, http://www.consilium.europa.eu/en/press/press-
releases/2018/06/13/screening-of-investments-council-a... (accessed 26 June
2018).
1799) Ibid., European Commission Proposal, 10.
1800) Ibid., 17.
1801) Mark Feldman, The Standing of State-Owned Entities under Investment Treaties, in
Karl P. Sauvant ed., Yearbook on International Investment Law & Policy 2010-2011,
630 (Oxford University Press, 2012).
1802) French government reassures on Hinkley Point project, Financial Times, 28 June
2016, https://www.ft.com/content/e7baa7ac-3d34-11e6-8716-a4a71e8140b0
(accessed on 17 February 2018).
1803) At http://english.gov.cn/beltAndRoad/ (accessed on 17 February 2018).
1804) Mohtashami, El-Hosseny, supran. 1786, at 376–377.
1805) Broches,supran. 1777, at 354.
1806) Dolzer, Schreuer, supran. 21, at 44.
1807) Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No.
ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction (24 May 1999).
1808) Ibid., paras 1–2.
1809) Ibid., para. 4. The BIT between the Czech Republic and the Slovak Republic had not
yet entered into force when the proceedings were instituted.
1810) Ibid., para. 28.
1812) Ibid., para. 19.
1813) Ibid., para. 16.
1814) Ibid.
1815) Ibid., para. 17.
1816) Ibid.
181
1817) Ibid., para. 20.
1818) Ibid., para. 21.
1819) Ibid.
1820) Ibid., see also para. 25.
1821) Ibid., para. 23.
1822) See §5.04[D] and §5.05[C] supra.
1823) Ibid., para. 26.
1824) Ibid., para. 27.
1826) Ibid., para. 31.
1827) See §3.04[B][1] in relation to the background of Beijing Urban Construction Group Co.
Ltd. v. Republic of Yemen.
1828) BUCG v. Yemen, ICSID Case No. ARB/14/30, Decision on Jurisdiction (31 May 2017),
para. 35.
1829) Ibid., para. 29.
1830) Ibid., paras 37–38.
1831) Ibid., para. 38.
1832) Ibid., para. 30.
1833) Ibid.
1834) Ibid., para. 32.
1835) Ibid., para. 34.
1836) Ibid., para. 39.
1838) Ibid., para. 40.
1839) Ibid.
1840) Ibid., para. 42.
1841) Ibid.
1842) Ibid., para. 43.
1843) Ibid.
1844) Ibid., para. 44.
1845) Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1,
Award (16 May 2018).
1846) Ibid., paras 145-146.
1847) Ibid., paras 82-83.
1848) Ibid., paras. 148-156.
1849) Ibid., paras 153-154.
1850) Ibid., para. 160.
1851) Ibid., para. 162.
1852) Ibid., para. 170.
1853) Ibid., para. 169.
1854) Ibid., paras 170-171.
1855) CDC Group plc v. Republic of Seychelles, ICSID Case No. ARB/02/14, Award (17
December 2003).
1856) Ibid., para. 17.
1857) Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24,
Decision on the Treaty Interpretation Issue (12 June 2009).
1858) Ibid., para. 6.
1859) Ibid., para. 166.
1860) Ibid., para. 11.
1861) Agreement between the Government of the Republic of Croatia and the
Government of the Republic of Slovenia on Regulation of Status and Other Legal
Relations regarding the Investment, Use and Dismantling of Nuclear Power Plant
Krško, Art. 2(2), attached to Decision on the Treaty Interpretation.
1862) Ibid., para. 130.
1863) Ibid., para. 168.
1864) For a view that HEP’s legal characteristics and activities would not have met the
Broches test and, as such, the tribunal lacked ratione personae jurisdiction under
the ICSID Convention, see Feldman, supran. 1801, at 625; see also Julien Chaisse, Dini
Seiko, Investor-State Arbitration Distorted: When the Claimant is a State, in Leila
Choukroune ed., Judging the State in International Trade and Investment Law, fn. 78
(Springer, 2016).
1865) Report of the Executive Directors on the Convention, supran. 1770, para. 25.
1866) Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No.
ARB/04/15, Award (13 September 2006).
1867) Ibid., para. 16.
1868) State General Reserve Fund of the Sultanate of Oman v. Republic of Bulgaria, ICSID
Case No. ARB/15/43.
1869) ČEZ, a.s. v. Republic of Bulgaria, ICSID Case No. ARB/16/24.
1870) Rumeli Telekom v. Kazakhstan, paras 160 and 241–243.
1871) Ibid., para. 242.
1872) Ibid., para. 275.
1873) Ibid., para. 300.
1874) Ibid., para. 298.
1875) Ibid., para. 191.
1876) Ibid., para. 196.
182
1877) Ibid., para. 213.
1878) Ibid., para. 327.
1879) PNG Sustainable Development Program Ltd. v. Independent State of Papua New
Guinea, ICSID Case No. ARB/13/33, Award (5 May 2015), para. 126.
1880) Ibid., para. 35.
1881) Ibid., para. 31.
1882) Ibid., para. 39.
1883) Ibid., para. 32.
1884) Ibid., paras 78–80.
1885) Ibid., para 81.
1886) Ibid., paras 123–124.
1887) Ibid., para. 124.
1888) Ibid., para. 170.
1889) Ibid.
1890) Ibid., para. 237.
1891) Ibid.
1892) Ibid., para. 373.
1893) Ibid., para. 379.
1894) Dolzer, Schreuer, supran. 21, at 44.
1895) UNCTAD, Scope and Definition, UNCTAD Series on Issues in International Investment
Agreements II, 2011, at 80–81, http://unctad.org/en/Docs/diaeia20102_en.pdf
(accessed 21 February 2018).
Guinea, ICSID Case No. ARB/13/33, Decision on Respondent’s Objections under Rule
41(5) (28 October 2014), para. 22.
1897) Shima, Y., The Policy Landscape for International Investment by Government-
controlled Investors: A Fact Finding Survey, OECD Working Papers on International
Investment, 2015/01, OECD Publishing, Paris, at 11-12.
http://dx.doi.org/10.1787/5js7svp0jkns-en (accessed 23 February 2018).
1898) Article 11.28 of Chapter Eleven (Investment) of Free Trade Agreement between the
United States and the Republic of Korea signed on 30 June 2007.
1899) Article 1(d) of Agreement between the Government of Japan and the Government of
the Republic of Kenya for the Promotion and Protection of Investment, signed on 28
August 2016.
1900) Lucy Reed, Jan Paulsson, Nigel Blackaby, Guide to ICSID Arbitration, 62 (2nd ed.,
Kluwer Law International, 2011); Feldman, supran. 1768, at 28.
1901) Shima, supran. 1897, at 13: ‘Only 3 BITs with Panama exclude SOEs by providing that
“companies” mean “all those juridical persons constituted in accordance with
legislation in force in Panama … which have their domicile in the territory of the
Republic of Panama, excluding State-owned enterprises.”’; see also Jo En Low,
State-Controlled Entities as ‘Investors’ under International Investment Agreements,
Columbia FDI Perspectives No. 80 (8 October 2012).
1902) Mohtashami, El-Hosseny, supran. 1786, at 380–381; Feldman, supran. 1768, at 27.
1903) Feldman observes that, due to the broad meaning of control under international
law, an ‘investor’ definition referring to State-owned enterprises, and not to State-
controlled Enterprises, would not pre-empt an analysis whether such State
Enterprise can qualify as ‘investor’ even when the State controls its foreign
investment activities to a degree that would raise the issue of attribution. He also
posits that when the ‘investor’ definition in the IIA does not mention State
Enterprises, their qualification ‘even when engaging in conduct that would be
attributable to a State, based on the lack of an express bar on such claims under
the applicable treaty, would raise questions under existing treaty practice.’ See
Feldman, supran. 1768, at 29. The author agrees with the position expressed by
Mohtashami and El-Hosseny that ‘Tribunals should not infer exceptions in the
absence of express provisions excluding SOEs’ even when such State Enterprises
act in a governmental capacity. See Mohtashami, El-Hosseny, supran. 1786, at 381.
For a view, based on the guidance of the Swiss Ministry of Foreign Affairs, that the
protection of the Swiss BITs extends to States and State entities investing abroad
except when they act jure imperii and therefore enjoy immunity under the rules of
State immunity, see Feldman, id., 30.
1904) Claudia Annacker, Protection and Admission of Sovereign Investment under
Investment Treaties, 10 Chinese Journal of International Law, 531, 564 (2011).
1905) See §7.02 supra.
183
Document information Chapter 8: The Procedural Treatment of Attribution
§8.01 INTRODUCTION
Publication Depending on the legal context in which the State’s involvement is examined, the
Investment Law procedural treatment of attribution necessarily varies in investment disputes. For
example, the application of the rules of attribution for the purposes of a State’s
international law responsibility raises not only different substantive issues, but also
different procedural dilemmas from an examination whether a State is bound by a
Topics contractual undertaking or a claim brought by State Enterprise is attributable to the
Investment Arbitration State. Nevertheless, as discussed below, there are overlapping evidentiary issues.
Further, multiple attribution issues may arise in different contexts in the same case.
Therefore, these procedural issues are addressed together in this chapter.
Bibliographic §8.02 THE ATTRIBUTION OF INTERNATIONALLY WRONGFUL CONDUCT
reference
'Chapter 8: The Procedural [A] The Issue of Characterisation: Jurisdiction or Merits?
Treatment of Attribution', All international investment law claims against a host State are based on attribution.
in Csaba Kovács , (1906) As a normative operation aimed at determining whether there is an act of the
Attribution in International State, attribution involves the identification of the actors and their association with the
Investment Law, State. (1907) Therefore, attribution appears to have a role in identifying if the State is a
International Arbitration proper respondent in an investment dispute. On the other hand, attribution is a
Law Library, Volume 45 necessary condition for an internationally wrongful act. (1908) As a condition for State
(© Kluwer Law P 290 responsibility, attribution of internationally wrongful conduct belongs to the merits
International; Kluwer Law analysis, where the State’s involvement can be determined with the consideration of all
International 2018) pp. 289 the relevant facts. Further, the question may arise if attribution should be properly
- 306 determined before or after the determination of a breach of an international obligation
of the State. Tribunals constituted in investment disputes have addressed these
procedural matters differently.
In Maffezini v. Spain (1909) the respondent challenged the jurisdiction of ICSID under
Article 25 of the ICSID Convention arguing that the dispute was not between the Kingdom
of Spain and the claimant, but between the claimant and SODIGA. (1910) The tribunal
noted that the claimant’s case was that the actions and omissions of SODIGA affecting his
investment were attributable to the respondent. (1911)
The tribunal identified two separate questions: first, ‘whether or not SODIGA [was] a State
entity for the purpose of determining the jurisdiction of the Centre and the competence
of the Tribunal’, and, second, whether the impugned actions and omissions were
attributable to the State. It characterised the first question a jurisdictional issue and the
second question an issue that ‘bears on the merits of the dispute and can be finally
resolved only at that stage’. (1912)
The tribunal noted that, in the absence of relevant guidance in the ICSID Convention or
the applicable BIT, it would be guided by the rules of international law applied in the
context of the law of State responsibility in deciding whether a particular entity is a State
body. (1913) In that regard, it set out a structural and a functional test. It described the
Broches test as the functional test used in the context of a Stated-owned and/or
controlled investor’s qualification as ‘a national of another Contracting State’. It then
noted that the Broches test ‘may also be relevant in determining whether a state
enterprise may be subsumed within the definition of the term “Contracting Party”’ under
Article 25 of the ICSID Convention. (1914) Being in the jurisdictional stage of the
arbitration, the Maffezini tribunal noted that ‘when all or most of the tests result in a
finding of State action, the result, while still merely a presumption, comes closer to being
conclusive’. (1915)
The tribunal then applied the structural and functional tests in order to determine
whether SODIGA was a State entity acting on behalf of the respondent. In its Decision on
the claimant’s objections to jurisdiction, it found that SODIGA met both tests and
concluded that SODIGA was a State entity acting on behalf of the respondent. (1916) It
added that:
[w]hether SODIGA is responsible for the specific acts and omissions
complained of, whether they are wrongful, whether all these acts or omissions
always were governmental rather than commercial in character, and, hence,
P 291 whether they can be attributed to the Spanish State, are questions to be
decided during the proceedings on the merits of the case. (1917)
The tribunal’s application of the rules of attribution in the determination of its
jurisdiction ratione personae was criticised by scholars and was not followed by
subsequent investment arbitration tribunals. (1918) The main criticism is that, despite of
its apparent caution that its findings at the jurisdictional stage with respect to the status
of SODIGA were ‘still merely a presumption’, the tribunal had effectively predetermined
issues of attribution at the jurisdictional stage, thus blurring the distinction between
jurisdiction and merits and prejudicing the parties’ due process rights. (1919) This
criticism is not unfounded because, as discussed in Chapter 5, the attribution of wrongful
184
conduct entails an enquiry into the involvement of the State in the specific conduct
complained of, which should be conducted having the benefit of the parties’ full
pleadings. Contrary to this approach, the Maffezini tribunal delved into the extent and
quality of the relationship between SODIGA and Spain in making its jurisdictional finding.
As discussed below, the position that subsequently emerged in the investment
arbitration jurisprudence focuses on the prima facie existence of a relationship between
the separate State entity and the State, which excludes analysing the extent or quality of
that relationship in the jurisdictional stage.
The question of characterisation is of lesser procedural significance when the
jurisdictional and merits issues are not bifurcated. (1920) In Flemingo Duty Free v. Poland
(1921) – a case in which the jurisdictional and merits issues were joined – the tribunal
considered that the question of the involvement of the State in the impugned acts and
omissions of the PPL to Poland was relevant to its jurisdiction. The tribunal noted that it
had to verify whether the dispute involved Poland, because under the BIT the tribunal
only had jurisdiction to settle disputes between ‘an investor of one Contracting Party and
the other Contracting Party’. (1922) It added that the question ‘also bears on the merits of
the dispute as Respondent may only be held responsible for acts and omissions which
are attributable to it. Both jurisdiction and merits aspects of attribution can be analysed
together’. (1923)
The procedural significance of the characterisation of the issue of attribution lies in the
parties’ right to be heard, bearing in mind the different factual enquiries conducted at
the jurisdiction and merits stages. Due process issues may be of less concern when both
parties address attribution early on in the proceedings. The parties’ extensive
submissions on attribution in the jurisdictional phase was a relevant consideration in
Salini v. Morocco. (1924) The respondent argued that tribunal lacked jurisdiction ratione
P 292 personae because the claims were founded on the acts of Société Nationale des
Autoroutes du Maroc (ADM), which, in its view, was not a State entity. The tribunal noted
that the claims directed against the State were founded on treaty violations and thus it
was not necessary for the determination of the tribunal’s jurisdiction to know whether
ADM was a State entity. However, it ruled on the matter ‘in order to satisfy the legitimate
expectations of the Parties’ in light of the fact that the issue ‘has been discussed at
length by the Parties and may possibly, as the case may be, have an influence on the
merits of the case’. (1925)
In Jan de Nul v. Egypt (1926) the respondent argued that the dispute was not between an
investor and a State but rather between an investor and its contractual counterpart, the
SCA, which was a legal entity distinct from the State. (1927) The tribunal acknowledged
that the issue of the status of the SCA under international law was a matter to be resolved
in accordance with the attribution principles codified in the ILC Articles. (1928) It noted
that unless it was manifest that the entity involved had no link whatsoever with the State,
the issue whether the case was properly brought against the State and involved its
responsibility was not to be determined at the jurisdictional stage. (1929) The tribunal
found that the exception concerning the complete absence of links with the State did not
apply to the SCA. (1930) It admitted also that a further exception may apply when the
parties, as in Salini v. Morocco, have addressed the issue of attribution in their pleadings.
That due process exception did not apply in the event, because the parties in Jan de Nul
v. Egypt had only briefly touched upon the issue of the attribution in the jurisdictional
phase. (1931)
Tribunals should avoid determining issues of State responsibility in the jurisdictional
stage simply on the basis that the parties addressed these issues to some extent at that
stage. As noted above, the Salini tribunal acknowledged that the issue of attribution may
influence the merits of the case. Unless the relationship between the entity in question
and the State is simple and easy to understand, a well-grounded qualitative assessment
in respect of the attribution of an entity’s wrongful conduct to the State can be made only
at the merits stage when all facets of the entity’s relationship with the State are revealed
in the context of the relevant conduct.
In Noble Energy v. Ecuador (1932) the respondents argued that the disputes involved third
parties and that the State was not responsible for the actions of distribution companies.
(1933) In its Decision on Jurisdiction, the tribunal noted that these arguments raise the
issue of the attribution of State responsibility for the disputed measures. It added that ‘it
is not for the Tribunal at the jurisdictional stage to examine whether the acts complained
of give rise to the State’s responsibility, except if it were manifest that the entity
involved had no link whatsoever with the State’. (1934)
P 293
In Hamester v. Ghana (1935) the tribunal distinguished between the different factual
premise applicable to a jurisdictional question and a merits question. It noted that, ‘[i]f
jurisdiction rests on the existence of certain facts, they have to be proven at the
jurisdictional stage. However, if facts are alleged in order to establish a violation of the
relevant BIT, they have to be accepted as such at the jurisdictional stage, until their
existence is ascertained (or not) at the merits stage.’ (1936) The tribunal observed that
the ‘[t]he question whether the issue of attribution is, in a given case, one of jurisdiction
or of merits is not … susceptible of a clear-cut answer.’ (1937)
185
The tribunal acknowledged that, due to its objective of determining the involvement of
the State in a dispute, attribution looks like a jurisdictional question. However, it added
that, as a practical matter, attribution is best examined at the merits stage, where the
relationship between the impugned acts and the State is fully revealed. In the tribunal’s
words:
the question of ‘attribution’ does not, itself, dictate whether there has been a
violation of international law. Rather, it is only a means to ascertain whether
the State is involved. As such, the question of attribution looks more like a
jurisdictional question. But in many instances, questions of attribution and
questions of legality are closely intermingled, and it is then difficult to deal
with the question of attribution without a full enquiry into the merits. In any
event, whatever the qualification of the question of attribution, the Tribunal
notes that, as a practical matter, this question is usually best dealt with at the
merits stage, in order to allow for an in-depth analysis of all the parameters of
the complex relationship between certain acts and the State. (1938)
The tribunal observed that this approach is particularly appropriate where the
evidentiary record is more complex and where, ‘while the extent of the State’s
involvement is unclear’, the existence of the State’s involvement in at least some of the
acts is not contested. (1939)
The tribunal in Tulip v. Turkey (1940) agreed with the Hamester tribunal’s approach. (1941)
It noted first that the issue of attribution relates to both jurisdiction and merits:
Attribution is relevant in the present context to ascertaining whether there is a
dispute with a Contracting State, here Turkey, for the purposes of the BIT and
Art 25 of the ICSID Convention. At the same time, the claims presented in this
investment arbitration (particularly with respect to the conduct of Emlak) may
P 294 only succeed if they are attributable to the State. In that sense, the issue of
attribution is also relevant to the merits of the dispute. Finally, purely
contractual conduct per se does not amount to (wrongful) action of the State.
(1942)
Similar to Hamester, the respondent accepted that some of the alleged wrongful conduct
involved State actors, while it contested that the acts of Emlak, the contractual partner of
the claimant, were attributable to the State. (1943) The tribunal thus noted that, for the
purposes of its jurisdiction, it was satisfied that the claimant’s allegations involved State
actions. (1944) The tribunal did not bifurcate the question of its jurisdiction ratione
personae. Having joined this issue to the merits, it noted that ‘taking into account that the
question of attribution is also relevant to the merits, the Tribunal may not limit its
enquiry to a prima facie standard and must, instead, make an informed and dispositive
ruling on the question of attribution’. (1945)
In considering whether it was seized with contract or treaty claims, the tribunal
expressed the view that the question whether the impugned conduct involved the
exercise of sovereign power was ‘inexorably intertwined with the issue of attribution’.
(1946) It considered that its finding, reached in the context of attribution, that Emlak’s
conduct was contractual in nature, informed its determination that the claims with
respect to Emlak’s conduct could not properly be characterised as treaty claims. (1947)
The ad hoc Annulment Committee in Tulip v. Turkey questioned whether ‘attribution is
really relevant to ascertaining the existence of a dispute between Tulip and Turkey’
under the applicable BIT or the ICSID Convention. (1948) It noted that:
although the Tribunal announced that its inquiry into the issue of attribution
would be relevant in order to ascertain whether there is a dispute with Turkey
for the purposes of the BIT and Article 25 of the ICSID Convention, it did not
expressly state its conclusion on this question. Rather, it focused on
attribution for purposes of determining whether the impugned conduct of
Emlak was attributable to Turkey because, as it correctly stated, the claims
with respect to Emlak’s conduct ‘may only succeed if they are attributable to
the State.’ (1949)
The ad hoc Committee considered also the tribunal’s view that attribution and the
characterisation of the claims as contract or treaty claims were intermingled. (1950) The
Committee noted that in its reasoning the tribunal linked the issue of the attribution of
Emlak’s acts with the issue of its jurisdiction, but in the end the tribunal did not rule in
the dispositive part of its award that it lacked jurisdiction to consider the claims relating
P 295 to Emlak’s conduct. (1951) As the dispositive part is the operative part of an award
binding on the parties, the Committee found that the tribunal did not manifestly exceed
its jurisdiction when it considered the merits with respect to Emlak’s acts. (1952)
In Mesa Power v. Canada (1953) the respondent agreed that the impugned acts of the
Government of Ontario were attributable to it, but contested the attributability of the
acts of certain State entities. (1954) The respondent’s position was that its case on
attribution impacted the jurisdiction of the tribunal. (1955) In rejecting the respondent’s
argument, the tribunal noted:
186
[w]hile the distinction makes no relevant difference in this case where
jurisdiction and merits are joined, on a proper analysis questions of
attribution such as those that arise in this case concern the responsibility of a
State party for the acts and omissions of others. Whether or not a State party
is indeed so responsible is ordinarily a matter concerning the State party’s
liability, and as such within a tribunal’s competence to determine. It does not
generally govern the competence of the tribunal to hear the case itself. (1956)
In Teinver v. Argentina (1957) the respondent contended that the issue of attribution of
responsibility under international law was jurisdictional in nature. (1958) In particular,
the respondent argued that it was not responsible for the acts of the labour unions
involved in the strikes affecting the claimants’ investments. (1959) The claimants in turn
submitted that the question of attribution should be resolved in the merits phase,
because it was intertwined with the merits and it required an in-depth analysis of the
complex relationships between certain acts and the State. (1960) Ultimately, both parties
made submissions in the jurisdictional phase on the attribution of the acts of the unions
to the State.
The tribunal noted that ‘[c]ase law on this subject does support the conclusion that
matters of state attribution should be adjudicated at the jurisdictional stage when they
represent a fairly cut-and-dry issue that will determine whether there is jurisdiction.’
(1961) In particular, the tribunal referred to the Maffezini and CSOB decisions on
jurisdiction. (1962) It added that it was not necessary to resolve the issue of attribution in
order for the tribunal to have jurisdiction over the dispute, because the claimants
alleged also wrongful conduct by Argentine government institutions, whose attribution to
the State was uncontested. (1963) The tribunal also agreed with the claimants that the
issue of the attribution of the acts of the unions was not clear-cut as it was closely
P 296 connected to the alleged treaty breaches and raised ‘the difficult and fact-intensive
question of whether the Argentine government tolerated or encouraged or otherwise
supported the union activities in question’. (1964)
In Electrabel v. Hungary the tribunal similarly decided to deal with the question of
attribution at the merits stage, with the benefit of a full enquiry into the relevant facts.
(1965)
The tribunal in Toto Costruzioni v. Lebanon (1966) applied the rules of attribution in the
jurisdictional phase to determine its jurisdiction ratione personae under the applicable
BIT for acts committed by Conseil Exécutif des Grands Projets (CEGP) and its successor, the
CDR. (1967) The respondent argued that the claims were contractual claims and, as such,
outside the jurisdiction of the treaty-based tribunal. (1968) Both parties made extensive
submissions on the status of CEGP and CDR, two public entities that contracted with the
claimant. The tribunal noted that the claims followed from acts and omissions of the
CEGP and the CDR and that the respondent would only be held responsible under the BIT
for acts and omissions that can be attributed to it. (1969) It found that CEGP and the CDR
exercised in the context of the contract the governmental authority of Lebanon. (1970)
In Bayindir v. Pakistan (1971) the tribunal was similarly faced with the issue whether the
impugned acts of the NHA were merely contractual claims or were treaty claims
predicated on acts committed in the exercise of the State’s sovereign authority. (1972) In
its Decision on Jurisdiction, the tribunal noted that ‘the fact that a State may be
exercising a contractual right or remedy does not of itself exclude the possibility of a
treaty breach’. (1973) It concluded that the claims were founded in the BIT and the
question whether the impugned acts were sovereign acts was a question to be resolved
on the merits. (1974) In any event, the tribunal noted that ‘the test of “puissance publique”
would be relevant only if Bayindir was relying upon a contractual breach (by NHA) in
order to assert a breach of the BIT’. (1975) In its award on the merits, the tribunal noted
that the issue of attribution was a preliminary issue to the merits issue ‘whether the acts
of NHA amounted to an exercise of sovereign authority or merely of contractual rights’.
(1976)
The Bayindir tribunal’s approach to resolving the objection to its jurisdiction based on the
distinction between contract claims and treaty claims and without analysing the
attribution of a separate entity’s act to the State was embraced by subsequent treaty-
P 297 based tribunals. (1977) Hence, for distinguishing between contract and treaty claims, it
appears to be sufficient that the claimant relies on alleged treaty breaches, irrespective
of whether the invoked treaty standard is a self-standing one or, in the case of an
umbrella clause, is predicated on the breach of a contract.
Professor Crawford observed that the issue whether an investment contract is with the
State itself, and not with a separate State entity, is sometimes framed as a question of
attribution. He posited that such position is unfounded, because:
attribution has nothing to do with [jurisdiction]. The issue of attribution arises
when it is sought to hold the state responsible for some breach of an
international obligation, including one arising under a substantive provision of
a BIT. The problem here concerns jurisdiction, not merits; the formation of a
secondary agreement to arbitrate, not the breach of a primary obligation
concerning the protection of investments. In short, the question [whether the
187
State itself is a party to an investment contract] is one of interpretation of the
jurisdictional offer, not attribution of conduct to the state. (1978)
As a rule, the international law attribution rules should be applied only in the merits
phase, typically before determining whether the State has breached an international law
obligation. Exceptionally, if the question of attribution is straightforward, such as
occasionally in the case of a de jure State organ under ILC Article 4, (1979) tribunals may
decide the issue of attribution in the jurisdictional phase. Additionally, if the parties
have extensively pleaded the issue of attribution in the jurisdictional phase, the tribunal
may decide that procedural fairness in the particular circumstances of the case dictates
that it addresses the issue in its decision on jurisdiction.
In the merits phase there is no single correct answer whether the issue of attribution
always lends itself for determination as a preliminary issue. In Electrabel v. Hungary the
tribunal noted that:
[i]n order to constitute a violation of the ECT, an act has to be both
attributable to the State and a violation of an international obligation under
the ECT. The Tribunal must therefore first examine the question of attribution.
If an act is considered attributable to Hungary, the Tribunal must then
determine whether such an act entails its international responsibility under
the ECT. If the Tribunal were to find that an act is not attributable to Hungary,
this should ordinarily be the end of the matter. (1980)
Similarly, in UAB E Energija v. Latvia the tribunal described the issue of attribution as ‘the
threshold question whether the conduct of which the Claimant complains is attributable
to the Respondent under international law’. (1981) In Almas v. Poland the tribunal noted
that if the impugned act, namely the Polish Agricultural Property Agency’s termination of
the Lease Agreement, were not attributable to Poland, all the claims would be ‘fatally
undermine[d]’ and therefore the issue of attribution must be considered first. (1982)
P 298
As such, non-attribution is ordinarily dispositive of the claim arising from the reviewed
conduct and it is not necessary for a tribunal to address the issue of the alleged treaty
breaches. (1983) Often in these situations, in recognition of the parties’ efforts in pleading
the issues of legality, the tribunals address the remaining merits issues too. (1984)
Conversely, attribution clears the way for the tribunal’s consideration of the alleged
wrongful conduct in light of the State’s invoked obligations.
In Plama v. Bulgaria the tribunal reversed the sequence of its merits analysis: it
concluded first that the alleged acts were not in violation of the State’s treaty obligations
and then it noted that it was unnecessary to address the issue of the attribution of the
acts of Biochim Bank, a State-owned bank, to the State. (1985) It grounded its approach to
the order of its analysis in the following statement in the Commentary to ILC Article 8: ‘if
such corporations [State-owned and controlled] act inconsistently with the international
obligations of the State concerned the question arises whether such conduct is
attributable to the State’. (1986) However, the Commentary on the ILC Articles states
elsewhere that ‘[f]or particular conduct to be characterized as an internationally wrongful
act, it must first be attributable to the State.’ (1987) Therefore, the statement quoted by
the tribunal cannot be interpreted as prescribing that the analysis of attribution must
necessarily follow the analysis of the impugned acts’ legality under international law.
Similarly, in WNC Factoring v. the Czech Republic, (1988) having found that its jurisdiction
was confined to the expropriation claims, the tribunal noted that it ‘does not need to
consider the attribution issue unless it finds that there is conduct capable of breaching
the expropriation standard in the BIT’. (1989) In the event, the tribunal found that the
alleged acts of the CEB were driven by commercial considerations or were
unsubstantiated and thus did not amount to expropriation. (1990)
Apart from considerations of procedural efficiency, there does not seem to be a cogent
reason to hold that tribunals should always address attribution as a preliminary matter
in respect of the merits of the case. There may be situations where the State’s
responsibility for failure to protect may be called into question, in which case, as
P 299 Petrochilos put it, ‘[t]he rules of attribution help identify which conduct may be
actionable’. (1991) For example, in Wena Hotels v. Egypt the tribunal addressed the
relationship between the EHC, a public sector company and Egypt without attributing to
the State EHC’s seizures of the hotels. (1992) Instead, it held that the State was directly
responsible for its failure to protect the investor against the unlawful acts of EHC. (1993)
Further, an attribution analysis may involve an examination into the governmental or
commercial capacity in which the State may have acted with respect to the alleged
wrongful conduct. In Bayindir v. Pakistan the tribunal noted that, in their case on the
merits, the parties focused on the issue ‘whether the acts of NHA amounted to an exercise
of sovereign authority or merely of contractual rights’. The tribunal added that ‘[b]efore
dealing with this distinction, the Tribunal must logically first review whether the acts of
NHA allegedly in breach of the Treaty are attributable to Pakistan.’ (1994) Thus, although
analytically different, the attribution analysis may inform the legality of the alleged
conduct. (1995) Therefore, it is advisable and, indeed typically also more efficient, to
188
address the issue of attribution for the purposes of State responsibility as a preliminary
matter on the merits.
[B] Evidentiary Issues

As the existence of conduct attributable to the State under international law is a
necessary condition for a State’s international law responsibility, a treaty-based tribunal
must consider the issue of attribution even sua sponte if the parties have not addressed
it or have addressed it only implicitly. (1996) This, however, does not mean that the
claimant is absolved of its burden of proof – actori incumbit probatio or ‘he who asserts
must prove’ – in respect of the facts on which the claimant relies in support of its
attribution arguments. In practice, tribunals may direct the parties to address specific
attribution questions. For example, in UAB E Energija v. Latvia the tribunal issued a
procedural order in which it invited the parties to file a short post-hearing submission on
the question whether the acts of Rēzekne Siltumtīkli and/or Rēzeknes Enerģija, two State
Enterprises, were attributable to Latvia. (1997)
The standard of proof is the normal rule of balance of probabilities. (1998) The
application of that standard to the issue of attribution does not seem to raise any special
difficulties.
P 300
In practice, tribunals emphasised that the effective control test developed by the ICJ and
subsumed under the second limb of ILC Article 8 was ‘very demanding’. (1999) There
seems to be no reason to raise the evidentiary threshold under ILC Article 8 higher than
the general standard of balance of probabilities. Historically, it is worth recalling that the
second limb of ILC Article 8, namely acting ‘under the direction or control’ of a State, was
introduced in recognition of the difficult evidentiary task required by the first limb of ILC
Article 8, namely acting on an express State instruction. (2000) On the other hand, the
investment arbitration jurisprudence yielded examples where, in light of the difficulty of
establishing that a separate State entity acted ‘on the instructions of, or under the
direction or control’ of a State, tribunals drew inferences, in the application of ILC Article
8, based on a systematic analysis of the whole case.
In Yukos v. Russia (2001) the tribunal drew an inference from a press statement of
President Putin (2002) that Rosneft’s purchase of the YNG shares from Baikal was directed
in the interest of the State. (2003) Similarly, in UAB E energija v. Latvia the tribunal relied
on statements made by the Mayor of Rēzekne to infer that Rēzeknes Enerģija was an
instrument in the removal of Latgales Enerģija, as operator of a district heating system.
(2004) The tribunal noted that there was a ‘dearth of direct evidence as to any [State]
instruction, direction or control’, in part in light of the fact that the respondent did not
present any witness of fact for cross-examination on this point. (2005) However, the
tribunal found that a ‘body of circumstantial evidence’ supported its conclusion that the
City council stood behind the impugned actions of the two State Enterprises in question.
(2006) The tribunal concluded that ‘on the balance of probabilities’ the respondent
directed Rēzeknes Siltumtīkli and Rēzeknes Enerģija in relation to the impugned acts,
namely their respective claims against Latgales Enerģija. (2007)
Similarly, the tribunal in Flemingo Duty Free v. Poland relied on public statements made
by the Minister of Transport in finding that PPL may be considered a de facto State organ.
(2008)
These cases are rather outliers, as inculpatory statements by State officials are rare and,
in their absence, tribunals do not generally make inferences concerning the
attributability of the conduct of State Enterprises to the State. (2009) Indeed, the real or
perceived difficulties in proving facts giving rise State responsibility do not justify the
lowering of the evidentiary standard. In Lao Holdings v. Laos (2010) the tribunal
acknowledged that a claimant ‘is often unable to furnish direct proof of facts giving rise
P 301 to responsibility, because, as the Claimant argues, such evidence is often “exclusively
within the control of the Government”’. (2011) It added, however, that:
Where … the Claimant’s case is based on ‘inferences of fact and circumstantial
evidence’ a Tribunal must be careful not to shift the onus of proof from the
Claimant to the Respondent Government or to bend over backwards to read in
inferences against ‘the sovereign state’ that are simply not justified in the
context of the whole case. (2012)
To conclude, no special evidentiary issues arise in the attribution of internationally
wrongful conduct to the State. As attribution entails ‘in principle, a certain factual link
between the State and the actor’, (2013) the evidentiary task should not be overlooked.
Tribunals should exercise their procedural powers, including by inviting submissions and
evidence on the issue of attribution if necessary, and judge the probative value of any
such evidence adduced.

[A] The Issue of Characterisation: Jurisdiction or Merits?
189
As discussed in Chapter 6, the issue of whether a relevant lawful conduct is that of the
State itself may arise both in jurisdictional and in merits contexts. The purpose for which
such lawful conduct is ultimately attributed to the State determines also whether the
attribution in question goes to the jurisdiction of the tribunal or the merits of the case.
The attribution of representations to the State for the purposes of the operation of the
concept of legitimate expectations (2014) is thus a merits issue. The concept of legitimate
expectations is applicable to the conduct of the State irrespective of the State organ or
representative making the representation attributable to the State. (2015) In the context
of the merits of an investment treaty dispute, attribution of a specific representation to
the State is a critical factor in the finding of a legitimate expectation protected by the
fair and equitable treatment standard.
The attribution of contractual undertakings to the State for the purposes of a treaty-
based tribunal’s jurisdiction over contract claims (2016) is a jurisdictional issue. When the
tribunal’s jurisdiction is founded on the host State’s consent, given in an IIA, to submit to
arbitration all disputes relating to investments or specifically disputes relating to
investment agreements, the jurisdictional question arises whether the host State is a
contracting party, and as such the proper respondent to the contractual dispute. (2017)
P 302
Further, when the claims concern an alleged breach of an umbrella clause in an IIA, the
issue of attribution appears as a mixed jurisdictional and merits question. It seems to be
a settled issue that an umbrella clause is effective to confer jurisdiction upon a treaty-
based tribunal in relation to contractual obligations arising independently of the IIA
itself. (2018) In that sense, the attribution of contractual undertakings for the purposes of
the application of an umbrella clause has a jurisdictional connotation. On the other hand,
the umbrella clause requires the observance of undertakings entered into by the host
State. From that perspective, the scope ratione personae of the umbrella clause requires
a verification of the State’s involvement in the contract in question, which ordinarily
would be a merits issue pertaining to the interpretation and application of the umbrella
clause, as a substantive standard of investment protection. (2019) However, when the
treaty-based tribunal’s jurisdiction derives from the umbrella clause, the tribunal needs
to be satisfied that the claimant has advanced a treaty claim based on an umbrella
clause, which operates vis-à-vis the host State. In other words, the scope ratione personae
of the umbrella clause may need to be decided as a preliminary issue at the
jurisdictional stage. (2020) When, for example due to a wide dispute resolution provision
in the IIA, the tribunal’s jurisdiction over contract claims is not necessarily dependant on
the effect of an umbrella clause, the scope ratione personae of the umbrella clause is
best examined at the merits stage. As noted above, the question of whether the State
itself has contracted with the investor can be investigated more fully at the merits stage,
taking into account the factual links between the State and its organs and
instrumentalities in the framework of the law applicable to the relevant contractual
relationship.
Finally, there cannot be a generalisation concerning the procedural treatment of the
attribution of factual circumstances to the State. (2021) As seen in Chapter 6, factual
circumstances may be attributable to the State in different contexts and procedural
stages of an investment dispute.

The above observations concerning the burden of proof in relation to the attribution of
wrongful conduct to the State generally apply also to the attribution of lawful conduct. In
particular, when the attribution of the lawful conduct is analysed in a jurisdictional
context, the burden of proof does not shift to the respondent, even though the relevant
jurisdictional objection will have been initiated by the respondent. (2022)
The standard of proof in relation to both jurisdictional issues and the merits is balance of
probabilities. (2023) To the extent that the attribution of lawful conduct is alleged to
P 303 involve a factual inquiry in a jurisdictional context, it should be considered if the
relevant fact goes to the tribunal’s jurisdiction or involves a more extensive inquiry that
should be deferred to the merits stage. This is because, for due process purposes,
tribunals commonly apply the so-called pro tem (2024) test in the context of jurisdiction
to ascertain that the acts alleged are susceptible of constituting treaty breaches. (2025)
That test essentially means that in the jurisdictional stage the tribunal conducts only a
limited factual inquiry. In the words of the Infinito Gold v. Costa Rica tribunal, ‘it is clear
that all the facts that underlie the jurisdictional requirements set by the ICSID
Convention and the BIT must be established – proven – at the jurisdictional stage’. (2026)
At the same time, the inquiry whether the claims asserted may constitute treaty breaches
is subject only to a prima facie assessment in a jurisdictional context:
For the Tribunal, this is equivalent to the pro tem test articulated by Judge
Higgins in the Oil Platforms case. Accordingly, to determine whether the claims
are ‘sufficiently plausibly based’ upon the applicable treaty, the appropriate
analysis ‘is to accept pro tem the facts as alleged by [the claimant] to be true
and in that light to interpret [the applicable treaty] for jurisdictional purposes
190
– that is to say, to see if on the basis of [the claimant’s] claims of fact there
could occur a violation of one or more [provisions of the treaty].’ (2027)
The attribution of lawful conduct is a fact-sensitive exercise. In attaching legal
consequences to the attribution of lawful conduct to the State, investment treaty
tribunals relied on internal law and drew inferences from prior occurrences. Different
lawful acts attributable to a State may generate legal effects in the realm of
international investment law in many ways. Therefore, the generally applicable
evidentiary principles or procedural rules in investor-State arbitration are likely to be
tested in new factual settings for which the existing investment arbitration practice offers
little guidance.
§8.04 THE ATTRIBUTION OF CLAIMS BY STATE ENTERPRISES

[A] The Issue of Characterisation
There is no controversy with respect to the characterisation of the attribution of claims
by State Enterprises. As discussed in Chapter 7, the issue is whether State-owned and/or
controlled investors are protected under IIAs and have access to the investor-State
arbitration mechanism. As such, the attribution of claims informs the jurisdiction ratione
personae of the tribunal over the State-owned/controlled claimant investor. To the
extent that the Broches test – which is applied to verify if the home State of a State
Enterprise is the real party to an ICSID dispute – mirrors ILC Articles 5 and 8, the
principles embedded in those ILC Articles end up being applied in a jurisdictional
P 304 context. As discussed in the context of the attribution of wrongful conduct, the ILC
attribution principles are best examined at the merits stage. Therefore, the application
of the Broches test in bifurcated proceedings raises some concerns, particularly when the
underlying factual enquiry is intertwined with the merits of the case.

Apart from an ongoing debate whether materials extraneous to the terms of Article 25(1)
of the ICSID Convention may be relied upon in determining a State investor’s access to
ICSID arbitration, (2028) no special evidentiary issues arise in attribution of claims by
State Enterprises.
The burden of proving the tribunal’s jurisdiction rests on the claimant and the standard
of proof is that of balance of probabilities.
The scope of application of the ICSID arbitration rule on summary dismissals was tested
in a case involving an objection to the standing of a claimant whose alleged foreign
investment was held for the benefit of the local population. In PNG Sustainable
Development v. Papua New Guinea (2029) the tribunal considered whether the issue of the
existence of a private foreign investment for the purposes of ICSID’s jurisdiction under
Article 25(1) of the ICSID Convention was ripe for determination as a preliminary objection
under Rule 41(5) of the ICSID Arbitration Rules. (2030) Rule 41(5), introduced in the ICSID
rules in 2006, enables a summary determination of whether a claim is ‘manifestly without
legal merit’. (2031)
The claimant submitted that the respondent’s objection required a factual enquiry,
which was outside the scope of Rule 41(5). (2032) It contended that ‘the State’s argument
is a factual one which should not be determined summarily …, because the Respondent’s
submissions regarding the transactions which underpin the Claimant’s alleged
investments and the origin of the investment capital … will require evidence and a closer
analysis than the Rule 41(5) procedure can afford’. (2033)
The tribunal noted that the standard of proof for a Rule 41(5) objection was ‘very
demanding’. (2034) While it acknowledged that the preliminary objection procedure was
available for both jurisdictional and merits issues, it noted that ‘Rule 41(5) is not
intended to resolve novel, difficult or disputed legal issues, but instead only to apply
undisputed or genuinely indisputable rules of law to uncontested facts.’ (2035)
P 305
The tribunal held that the respondent’s objection concerning the claimant’s standing was
inappropriate for determination under Rule 41(5). (2036) It observed that the objection
called for ‘a factual analysis of the character of the Claimant itself and the circumstances
behind its economic activity in PNG’. (2037) It found that the respondent’s objection
raised novel issues of law, which would in principle be inappropriate for consideration
and resolution in a summary fashion, because a preliminary determination ‘would
inevitably limit the Parties’ opportunity to be heard and the Tribunal’s opportunity to
reflect. That is particularly true where those issues are disputed and potentially
complex’. (2038)
The tribunal’s approach highlights the need to carefully navigate procedural issues when
the claimant investor’s status raises complex factual issues.
§8.05 CONCLUSION
191
The purpose for which the State’s involvement is examined determines also the
characterisation of the issue as jurisdictional or relating to the merits of the case. The
traditional attribution analysis is a condition for State responsibility and, as such, it
belongs to the merits analysis. In the jurisdictional stage, tribunals may look at the
existence of a relationship between a separate State entity and the State, but the extent
and quality of that relationship is generally a matter for the merits of the case. As part of
the merits of the case, attribution is typically examined as a preliminary issue, before
analysing the issue of the legality of the conduct.
In a jurisdictional context, the involvement of the State, whether as a claimant or a
respondent, is a question of the interpretation of the scope ratione personae of the
arbitration agreement and, in ICSID disputes, a question of the interpretation of the
scope ratione personae of Article 25(1) of the ICSID Convention.
The burden of proof rests with the claimant, regardless of whether the attribution issue is
jurisdictional or belong to the merits of the case. The balance of probabilities is the
relevant standard of proof. The procedural treatment of attribution may raise due
process considerations, which tribunals have generally been apt to address in the
investment arbitration practice.
P 305
References
1906) Vivendi I v. Argentina (Decision on Annulment), fn. 17.
1907) Commentary on ILC Articles, Chapter II, paras 4 and 9.
1908) ILC Art. 2.
1909) See §5.04[C] in relation to the background of Maffezini v. Spain.
1910) Maffezini v. Spain (Jurisdiction), para. 71.
1911) Ibid., para. 72.
1912) Ibid., para. 75.
1914) Ibid., para. 79.
1915) Ibid., para. 80.
1916) Ibid., para. 89.
1917) Ibid.
1918) Olleson, supran. 137, at 467–468; Schicho, supran. 289, at 36.
1919) Ibid.
1920) Mesa Power v. Canada, para. 340.
1921) See §5.03[D] in relation to the background of Flemingo Duty Free v. Poland.
1923) Ibid.
1924) See §5.03[D] in relation to the background of Salini v. Morocco.
1925) Ibid., para. 30.
1926) See §3.04[A] in relation to the background of Jan de Nul v. Egypt.
1927) Jan de Nul v. Egypt (Decision on Jurisdiction), paras 59 and 83.
1928) Ibid., para. 84.
1929) Ibid., para. 85.
1930) Ibid.
1931) Ibid., paras 86–87.
1932) See §6.03[A] in relation to the background of Noble Energy v. Ecuador.
1933) Noble Energy v. Ecuador, para. 166.
1934) Ibid.
1935) See §5.03[C] in relation to the background of Hamester v. Ghana.
1936) Hamester v. Ghana, para. 143; on the so-called pro tem test – namely whether the
alleged facts, if ultimately proven true, would be capable of constituting a breach
– see also Bayindir v. Pakistan, paras 194–195.
1937) Ibid., para. 140.
1938) Ibid., paras 143–144.
1939) Ibid., para. 145.
1940) See §5.03[C] in relation to the background of Tulip v. Turkey.
1942) Ibid., para. 276.
1943) Ibid., paras 256 and 279.
1944) Ibid., para. 279.
1945) Ibid., para. 280.
1946) Ibid., para. 358.
1947) Ibid., para. 359.
1948) Tulip v. Turkey, Decision on Annulment (30 December 2015), paras 176 and 179.
1949) Ibid., para. 182.
1950) Ibid., paras 191 and 194–195.
1951) Ibid., para. 197.
1952) Ibid., para. 202.
1953) See 5.04[C] in relation to the background of Mesa Power v. Canada.
192
1954) Mesa Power v. Canada, para. 339.
1955) Ibid., para. 340.
1956) Ibid.
1957) See §5.05[B] in relation to the background of Teinver v. Argentina.
1958) Teinver v. Argentina, Decision on Jurisdiction (21 December 2012), para. 266.
1959) Ibid., paras 263–264.
1960) Ibid., para. 267.
1961) Ibid., para. 271.
1962) Ibid., para. 272.
1963) Ibid., para. 273.
1964) Ibid., paras 273–274.
1965) Electrabel v. Hungary, Decision on Jurisdiction, Applicable Law and Liability (30
November 2012), para. 7.61.
1966) See §5.04[C] in relation to the background of Toto Costruzioni v. Lebanon.
1967) Toto Costruzioni v. Lebanon (Decision on Jurisdiction), para. 60.
1968) Ibid., para. 28.
1969) Ibid., para. 43.
1970) See §5.04[C] supra.
1971) See §5.03[C] in relation to the background of Bayindir v. Pakistan.
1972) Bayindir v. Pakistan, Decision on Jurisdiction (14 November 2005), paras 139 et seq.
1973) Ibid., para. 157.
1974) Ibid., para. 183.
1975) Ibid.
1976) Bayindir v. Pakistan (Merits), para. 111.
1977) See, for example, Garanti v. Turkmenistan, para. 244.
1979) Olleson, supran. 137, fn. 54.
1981) UAB E energija v. Latvia, para. 795.
1983) In Jan de Nul v. Egypt, para. 174, the tribunal pointed to a situation where
attribution did not necessarily dispose of all claims. In particular, the tribunal
noted that, as a result of the non-attribution of the acts of the SCA to the State, it
could not review the conduct of the SCA in the conclusion and performance of the
contract as such. However, in the tribunal’s view, non-attribution did not prevent
the tribunal from reviewing elements of the conclusion and performance of the
contract by SCA in the context of its analysis of the decision of the local court
concerning that contract. Thus, even when the acts complained of are not
attributable to the State, the same act may be subject to domestic court
proceedings and tribunal may review it again in the context of a denial of justice
claim.
1984) Electrabel v. Hungary, para. 7.58; Tulip v. Turkey, paras 360 et seq.
1985) Plama v. Bulgaria, para. 302.
1986) Ibid., para. 298 quoting Commentary on ILC Art. 8, para. 6.
1988) See §5.04[C] in relation to the background of WNC Factoring v. the Czech Republic.
1989) WNC Factoring v. the Czech Republic, para. 376.
1990) Ibid., para. 396.
1992) Wena Hotels v. Egypt, paras 65–69.
1994) Bayindir v. Pakistan (Merits), para. 111.
1995) As noted in the Commentary on ILC Articles, Chapter II, Attribution of Conduct to a
State, para. 4: ‘there is often a close link between the basis of attribution and the
particular obligation said to have been breached, even though the two elements
are analytically distinct.’
1996) In Bayindir v. Pakistan (Merits), para. 117, the tribunal considered that the
attribution issues were implied in the parties’ arguments and those issues were in
any event ‘a necessary step in the Tribunal’s analysis’.
1997) UAB E energija v. Latvia, para. 813.
1998) Gary B. Born, On Burden and Standard of Proof, in Meg Kinnear, Geraldine R. Fischer,
et al. eds, Building International Investment Law: The First 50 Years of ICSID, 50
(Kluwer Law International, 2015).
1999) Jan de Nul v. Egypt, para. 173; Hamester v. Ghana, para. 179.
2000) See §5.05[A][2] supra.
2001) See §5.05[B][7] supra.
2002) Ibid.
2003) Yukos v. Russia, para. 1472.
2004) UAB E energija v. Latvia, paras 827–829.
2005) Ibid., para. 826.
2006) Ibid., para. 827.
2007) Ibid., para. 830.
2009) See §5.05[B][8] supra.
2010) Ibid.
193
2011) Lao Holdings v. Laos, para. 11.
2012) Ibid.
2014) See §6.02 supra.
2015) McLachlan, Shore, Weiniger,supran. 17, paras 7.102 and 7.184.
2016) See §6.03[A] supra.
2017) McLachlan, Shore, Weiniger, supran. 17, paras 4.167–4.168 and 4.223.
2018) Ibid., paras 4.168, 4.225.
2019) Ibid.
2020) Impregilo v. Pakistan, para. 223.
2021) See §6.04 supra.
2022) Born, supran. 1998, at 49.
2023) PNG Sustainable Development v. Papua New Guinea, para. 255; Born, supran. 1998, at
54.
2024) From the Latin pro tempore, meaning ‘for the time being’.
2025) Mesa Power v. Canada, para. 340; Infinito Gold Ltd. v. Costa Rica, ICSID Case No.
ARB/14/5, Decision on Jurisdiction (4 December 2017), paras 237–242.
2026) Infinito Gold v. Costa Rica, para. 234.
2027) Ibid., para. 237.
2028) See, for example, PNG Sustainable Development Program Ltd. v. Independent State
of Papua New Guinea, ICSID Case No. ARB/13/33, Decision on the Respondent’s
Preliminary Objections (28 October 2014), para. 97; Pantechniki v. Albania, para. 42;
Mohtashami, El-Hosseny, supran. 1786, at 383; see also §7.02[A] supra.
2029) See §7.02[B][3] supra in relation to the background to PNG Sustainable Development
v. Papua New Guinea.
Guinea, ICSID Case No. ARB/13/33, Decision on the Respondent’s Preliminary
Objections (28 October 2014), paras 31–32.
2031) Reed, Paulsson, Blackaby, supran. 1900, at 144.
2032) PNG Sustainable Development v. Papua New Guinea (Preliminary Objections), para.
57.
2033) Ibid., para. 59.
2034) Ibid., para. 91.
2035) Ibid., para. 89.
2036) Ibid., para. 98.
2037) Ibid., para. 93.
2038) Ibid., para. 94.
194
Document information Chapter 9: Attribution Issues in EU Investment
Agreements
Investment Law The EU, as an international organization (IO) possessing legal personality, (2039) is a
subject of international law. As an IO equipped with treaty-making powers in the area of
FDIs, the EU may become a party to foreign investment disputes. Similarly to the
Jurisdiction participation of States in international law relations, the participation of the EU in
investment relations with non-EU countries raises attribution issues. However, unlike in
European Union the case of States, the responsibility of an IO does not always rest on the attribution of
wrongful conduct to the IO. Further, the legal framework applicable to the attribution of
internationally wrongful conduct to States reviewed in Chapter 5 does not apply to the
Topics EU.
Investment Arbitration Due to its sui generis status (2040) even among the class of IOs, special issues arise in
relation to the acts of the EU that may call into question its international law
responsibility. The unique constitutional structure and function of the EU raise specific
Bibliographic challenges in determining the involvement of the EU in investment disputes under IIAs to
which it is a Contracting Party.
reference This chapter gives an overview of attribution issues that may arise in the context of the
'Chapter 9: Attribution EU’s acts concerning inbound FDIs. So far as relevant to the application of the rules of
Issues in EU Investment attribution, the chapter considers also the question of apportionment of international
Agreements', in Csaba law responsibility between the EU and its Member States.
Kovács , Attribution in
International Investment A brief look at the IIAs concluded or still negotiated by the EU sets the scene. The
Law, International procedural question of identifying whether the proper respondent is the EU itself or one
Arbitration Law Library, of its Member States follows. The chapter then addresses the application of the rules of
Volume 45 (© Kluwer Law P 308 attribution and responsibility to the EU or its Member States in the realm of
International; Kluwer Law international investment law. This chapter examines mainly the legal landscape on
International 2018) pp. 307 attribution under EU IIAs. (2041) By EU IIAs, the author refers to IIAs concluded with the
- 328 joint participation of the EU and its Member States.
It is important to note that the subject of the role of the EU on the international plane
and the interaction of EU law with international investment law is a complex,
progressively developing topic, which is beyond the scope of a monograph on attribution
in international investment law.
§9.02 THE EU LAW FRAMEWORK OF EU IIAs

[A] The Constitutional Framework
Historically, foreign investment policy was the province of the Member States. Since the
entry into force of the Treaty on the Functioning of the European Union (TFEU) on 1
December 2009, the EU is vested with exclusive competence in taking external Union
action in relation to FDIs, including the negotiation and conclusion of international
agreements. Article 216(2) of the TFEU provides that such agreements are binding upon
the institutions of the Union and its Member States.
Article 207 of the TFEU includes FDI among the areas covered by the common commercial
policy of the Union, which is an area of exclusive competence of the EU. (2042) As the
Court of Justice of the European Union (CJEU) noted in its Opinion on the EU-Singapore
Free Trade Agreement (FTA), ‘the European Union has exclusive competence … to approve
any commitment vis-à-vis a third State relating to investments made by natural or legal
persons of that third State in the European Union and vice versa which enable effective
participation in the management or control of a company carrying out an economic
activity’. (2043)
In the exercise of the EU’s exclusive competence, in 2010, the European Commission
launched the EU agenda for the negotiation of IIAs with non-EU countries and laid down
‘broad principles and parameters for future investment agreements’. (2044) The
Commission recognised that the advent of the EU as a significant global actor in
international investment law would require an allocation of international law
responsibility between the EU and its Member States:
In line with the Commission’s aim to develop an international investment
policy at EU level, the issue of the international responsibility between the EU
P 309 and the Member States in EU investment agreements needs to be
addressed. The European Union, represented by the Commission, will defend
all actions of EU institutions. Given the exclusive external competence, the
Commission takes the view that the European Union will also be the sole
defendant regarding any measure taken by a Member State which affects
investments by third country nationals or companies falling within the scope
of the agreement concerned. (2045)
Nevertheless, as it will be seen below, the EU departed from the Commission’s initially
195
anticipated approach to determine respondent status in disputes under EU IIAs.
The EU’s treaty-making policy reflects the Union’s external competences under its
constitutional framework. In the situations where the EU has no external competence, the
EU concludes international agreements with the joint participation of the Member States.
The Member States must give their consent to these mixed agreements. Mixed
agreements raise the question of the international responsibility of the Member States
and/or the Union and externalise the issue of EU law division of competences between
the Union and its Member States. (2046)
Until the TFEU, the ECT, counting both the Member States and the European Communities
–now the EU – among its Contracting Parties, was the only such mixed agreement with
investment protection provisions, including a binding dispute resolution mechanism. In a
Statement submitted to the Secretariat of the Energy Charter, the European Communities
recognised that, along with the Member States, they were ‘internationally responsible for
the fulfilment of the obligations contained [in the ECT], in accordance with their
respective competences’. (2047)
The TFEU did not eliminate mixed agreements from the EU’s treaty-making competences.
At the time of writing, the EU negotiated such mixed agreements with an investment
protection framework including investor-State dispute settlement provisions with
Singapore, (2048) Vietnam (2049) and Canada. (2050)
The division of competences between the EU and its Member States in the area of
investment treaty-making is addressed further in CJEU Opinion 2/15 and Regulation
1219/2012.
P 310
[B] CJEU Opinion 2/15

The EU originally intended to conclude FTAs including investment protection provisions
without the participation of the Member States. However, in 2015 the Commission
requested an opinion from the CJEU in relation to the requisite competence to sign and
conclude alone such an FTA with Singapore. In Opinion 2/15 of 16 May 2017, the CJEU
opined that the provisions on non-direct foreign investment (2051) and investor-State
dispute settlement mechanism concern the EU’s shared competence and, being a mixed
agreement, the Member States must ratify the FTA. The CJEU held that a legal regime
allowing not only the EU but also the Member States to be parties to investment
disputes, as the respondent, cannot be established without the Member States’ consent.
(2052)
The CJEU ruling has implications for similar agreements, including CETA and the FTA with
Vietnam. As a result of the CJEU’s ruling, the European Commission decided to separate
the EU-Singapore Investment Protection Agreement from the FTA, (2053) which could be
the way forward also in relation to other EU IIAs in the pipeline. (2054)
The EU intends to replace gradually the current wide portfolio of BITs concluded by EU
Member States with third countries (2055) with EU IIAs. It will take considerable time to
replace the wide extra-EU BIT portfolio of Member States with new agreements
negotiated by the EU. As discussed, below, Regulation 1219/2012 provides a transitional
framework until the EU negotiates and concludes IIAs in the exercise of its treaty-making
powers, as interpreted by CJEU Opinion 2/2015.
[C] Regulation 1219/2012

The EU adopted grandfathering rules in Regulation 1219/2012 of the European Parliament
and of the Council of 12 December 2012 establishing transitional arrangements for
bilateral investment agreements between Member States and third countries. (2056)
Regulation 1219 is aimed at providing legal security in relation to extra-EU BITs until their
replacement by EU-wide investment deals. It also lays down also a procedure for the
P 311 Member States to obtain EU authorisation to conclude new IIAs with an investor-State
dispute resolution mechanism. (2057) The authorisation procedure ensures that the
amendment of existing IIAs or the conclusion of new IIAs by Member States does not
violate the division of competences under the TFEU. For example, as part of the
authorisation, ‘the Commission may require the Member State to include or remove from
such negotiations and prospective bilateral investment agreement any clauses where
necessary to ensure consistency with the Union’s investment policy or compatibility with
Union law’. (2058) While the overwhelming majority of the IIAs concluded by the Member
States predate the TFEU or Regulation 1219, the Commission granted authorisations to
Member States to amend existing IIAs or conclude new IIAs with third countries. (2059) A
review concerning the maintenance of the Commission’s authorisation procedure is due
by 10 January 2020 and an appropriate legislative proposal will have to accompany a
recommendation to discontinue or modify the existing procedure. (2060)
In light of the delay that followed in the implementation of the EU’s treaty-making
agenda as a result of the CJEU Opinion 2/2015, such authorisation procedure or some
variation of it is likely to continue beyond 2020.
196
§9.03 THE DETERMINATION OF THE PROPER RESPONDENT UNDER EU IIAs
[A] Framing the Issue
The joint participation of the Union and the Member States in EU IIAs may give rise to
complex procedural questions. Non-EU investors must know whether the EU or a Member
State is the proper respondent under such agreements. No issues of jurisdiction ratione
personae arise when both the EU and the Member States agree in the applicable IIA to
submit investment disputes to the jurisdiction of the relevant forum. Unlike in
arbitrations involving only a host State, the determination of the proper respondent
under EU IIAs is a preliminary issue concerning the admissibility of the claim. In the
absence of dealing with such preliminary issue, the non-EU investor takes the risk of
bringing claims against the wrong respondent and, as discussed below, even before the
wrong forum.
Unlike in investment disputes involving States under non-EU IIAs, the determination of
the proper respondent under EU IIAs raises the issue of the allocation of international law
P 312 responsibility between two international law subjects: a Member State and the EU as
an IO. If the impugned conduct clearly concerns exclusively a Member State, no
difficulties should arise: the involved Member State should respond to the claim and the
attribution rules concerning the internationally wrongful conduct of a State apply. (2061)
However, in situations where the impugned conduct may involve the EU or one of its
institutions, whether directly or indirectly and whether solely or jointly with the Member
States, the determination of the proper respondent under an EU IIA necessarily raises its
own set of questions.
[B] The Position Before the TFEU

Upon its entry in the international arena as a subject of international investment law, the
EU internalised the decision on the determination of the responsible Contracting Party.
In the statement submitted to the Secretariat of the Energy Charter, the EU, as it was
then, declared in relation to investment disputes that may arise under the ECT:
The Communities and the Member States will, if necessary, determine among
them who is the respondent party to arbitration proceedings initiated by an
Investor of another Contracting Party. In such case, upon the request of the
Investor, the Communities and the Member States concerned will make such
determination within a period of 30 days. This is without prejudice to the right
of the investor to initiate proceedings against both the Communities and their
Member States. (2062)
The EU did not indicate what would be the relevant factors in its decision to allocate ECT
claims to the EU or a Member State as respondent. Further, the wording of the statement
provides that the internal determination mechanism would be activated upon the
investor’s request, which indicates that it is not a mandatory procedural step before
filing a claim. Professor Hoffmeister observed that in such potential determinations
‘liability would normally fall upon the EU if Member States’ organs were simply
implementing Union law’. (2063) In Electrabel v. Hungary (2064) the tribunal accepted
Professor Hoffmeister’s view. (2065) The claimant’s principal claim was that Hungary
violated the ECT by terminating the PPA following a legally binding Final Decision of the
European Commission, the requirements of which were in dispute. (2066) The
Commission, as an intervening non-disputing party, submitted that the claimant should
have resorted to the internal EU procedure to identify the correct respondent in the
P 313 arbitration. (2067) The Commission does not appear to have indicated what would have
been the outcome of the EU’s internal procedure in that scenario. The tribunal observed
that, in any event, the EU could not have become a disputing party, whether as a second
respondent or otherwise. It noted that the claimant chose to file the case before ICSID
and that forum was not accessible to the EU, since only States may join the ICSID
Convention. (2068) Further, the tribunal considered that Hungary was not legally
responsible for the Commission’s decision under the ECT or international law:
Where Hungary is required to act in compliance with a legally binding
decision of an EU institution, recognized as such under the ECT, it cannot (by
itself) entail international responsibility for Hungary. Under international law,
Hungary can be responsible only for its own wrongful acts. The Tribunal
considers that it would be absurd if Hungary could be liable under the ECT for
doing precisely that which it was ordered to do by a supranational authority
whose decisions the ECT itself recognises as legally binding on Hungary. (2069)
The tribunal held that ‘if and to the extent that the European Commission’s Final Decision
required Hungary, under EU law, prematurely to terminate Dunamenti’s PPA, that act by
the Commission cannot give rise to liability for Hungary under the ECT’s FET standard’.
(2070) The tribunal found that the Commission’s decision required the termination of the
PPA. However, it distinguished between the Final Decision and Hungary’s implementing
acts:
the issue before this Tribunal does not turn precisely on whether or not the
197
Final Decision required Hungary under EU law to terminate the PPA. The ECT’s
FET standard raises a different question, namely whether Hungary irrationally
or arbitrarily interpreted the Final Decision as imposing such a requirement
under EU law, in breach of the ECT’s FET standard. (2071)
In the event, the tribunal concluded that Hungary’s conduct in the implementation of the
Final Decision was not unreasonable, irrational or arbitrary. (2072) In light of its finding on
the legality of Hungary’s impugned acts, the tribunal did not consider whether the claims
were inadmissible on the basis of the attributability of Hungary’s conduct to the
Commission in light of the latter’s normative control (2073) over Hungary’s conduct in the
implementation of the decision. Based on its finding that the Final Decision required the
termination of the PPA and Hungary’s conduct in its implementation could not have been
attributable to Hungary, the inadmissibility of the claims premised on Hungary’s
implementation of the Final Decision could have been a conceivable outcome. (2074) The
tribunal’s analysis may have been influenced by the fact that the parties did not impugn
P 314 the validity of the Final Decision under international investment law. (2075) However,
in order to engage the international law responsibility of the EU, the claims do not have
to be framed so as to impugn the EU measure itself, instead of its implementing act. A
Member State’s implementation of an EU measure under the normative control of the EU
may also raise the question of the inadmissibility of a claim against the implementing
Member State. As Professor Hoffmeister observed:
the EU can affect an investor not only directly (through regulation or decision
addressed to the investor), but also indirectly ‘through directive or decision
addressed to the Member State which then acted accordingly’. In accordance
with this logic, the EU would thus be the correct respondent in an agent
situation, with the consequence that cases wrongly brought against the
Member State would then be inadmissible. (2076)
Delgado Casteleiro commented that Electrabel v. Hungary shows that ‘the EU’s normative
control is progressively being accepted within the field of international investment law’.
(2077) As discussed below, the attribution rules applicable to IOs enable the application
of the concept of normative control to the determination of the EU’s international law
responsibility based on the functional relationship between the EU and its Member
States. Further, the concept of normative control has made its way into the internal EU
rules on the allocation of financial responsibility in investment disputes under EU IIAs.
[C] The Position After the TFEU

The EU seems to have recognised that the internal determination framework put forward
in the ECT was inadequate following the transfer of external competences relating to FDIs
under the TFEU. Therefore, in designing its new international investment policy, the EU
adopted internal rules and negotiated treaty provisions expressly addressing, albeit to
varying degrees, the determination of the proper respondent under EU IIAs.
[1] The EU Law Position
After two years of negotiations, the Council and the Parliament adopted Regulation
912/2014 establishing a framework for managing financial responsibility linked to
investor-to-state dispute settlement tribunals established by international agreements
P 315 to which the EU is party (the FRR). (2078) The FRR identifies in which cases the EU or its
Member States can act as respondent under EU IIAs. It specifies at the outset that its
application ‘[does] not affect the delimitation of competences established by the
Treaties, including in relation to the treatment afforded by the Member States or the
Union and challenged by a claimant in investor-to-state dispute settlement conducted
pursuant to an agreement.’ (2079) Nevertheless, in the recital the FRR states that the
division of competences informs the issue of international responsibility, which in turn,
and in principle, determines the respondent status of the Union or a Member State in an
EU IIA:
International responsibility for treatment subject to dispute settlement
follows the division of competences between the Union and the Member
States. As a consequence, the Union will in principle be responsible for
defending any claims alleging a violation of rules included in an agreement
which fall within the Union’s exclusive competence, irrespective of whether
the treatment at issue is afforded by the Union itself or by a Member State.
(2080)
The FRR makes a distinction between the EU’s international legal responsibility and its
financial responsibility. (2081) It further states in its recital that:
an adverse award may potentially flow either from treatment afforded by the
Union itself or from treatment afforded by a Member State. It would as a
consequence be inequitable if awards and the costs of arbitration were to be
paid from the budget of the Union where the treatment was afforded by a
Member State, unless the treatment in question is required by Union law.
198
Despite such declarative statements denoting a distinction between international and
financial responsibility, the FRR, rather controversially, links the question of
international responsibility, which is, by definition, an international law matter, to the
issue of the apportionment of financial responsibility between the EU and the Member
States, which is an internal EU law matter.
The main criterion for both the apportionment of financial responsibility (2082) and the
conferral of respondent status in investment disputes under EU IIAs (2083) is whether the
dispute concerns treatment afforded by the EU, acting through its institutions, bodies,
offices or agencies, or treatment afforded by a Member State. Exceptionally, where the
challenged Member State measure was required by EU law, the EU bears financial
responsibility provided the measure was not adopted in order to remedy the
inconsistency with Union law of a prior act. (2084) The EU’s financial responsibility in the
situations where the impugned treatment by the Member State complied with EU law
requirements is grounded in the principle of normative control over Member State
conduct. As discussed below, the concept of normative control should apply also to the
EU’s international law responsibility.
P 316
The FRR sets out a cooperation procedure for the EU and the Member State concerned
and provides that, following such procedure, the Commission makes the decision
concerning the respondent status. (2085) Article 9 provides that the Member State shall
act as respondent, unless within forty-five days of receiving the notice of dispute the
Commission has taken a decision or the Member State has confirmed to the Commission
that it does not intend to act as the respondent. In the latter two situations, the Union
acts as the respondent. The FRR does not address any situations in which the joint
responsibility of the EU and the Member States would arise. (2086)
It is also unclear how, if at all, the provisions of the FRR concerning the determination of
the respondent interact with the dispute settlement provisions of the existing EU IIAs.
(2087)
[2] The Relevant Provisions in the EU IIAs
The EU IIAs with dispute settlement provisions recently negotiated by the EU contain
merely a framework procedure to determine whether the respondent in an investment
dispute concerning the treatment of a non-EU investor should be the Union or a Member
State. (2088) These agreements provide that the identification of the proper respondent
rests with the Union and such identification is binding on the claimant and the tribunal.
Further, the EU IIAs provide that neither the EU nor the Member State may object to the
claim or award on the ground that the respondent was not properly determined.
The dispute settlement provisions in these agreements envisage the possibility for either
the EU or a Member State to stand as respondent in an investment dispute. For example,
pursuant to Article 3.5.2 of Chapter Three (Dispute Settlement) the EU-Singapore
Investment Protection Agreement, ‘[w]here a notice of intent has been sent to the Union,
the Union shall make a determination of the respondent within two months from the date
of receipt of the notice.’ Article 3.5.3 further provides that where the EU has not made a
determination of the respondent pursuant to Article 3.5.2 the following shall apply:
(a) in the event that the notice of intent exclusively identifies treatment by
a Member State of the Union, that Member State shall act as respondent;
(b) in the event that the notice of intent identifies any treatment by an
institution, body or agency of the Union, the Union shall act as
respondent.
Such allocation of respondent status seems to exclude the possibility of joint
responsibility of the EU and its Member States. (2089)
P 317
The EU IIAs do not address the concept of normative control, when the treatment
concerns the implementation of an EU measure by a Member State. As noted above, it is
also unclear from the provisions of the EU IIAs if the EU will determine the respondent
based on the rules set out in the FRR. If that is the case, the FRR, which is otherwise res
inter alios acta vis-à-vis the investor, is effectively elevated to the rank of international
law by the EU IIA’s conferral of binding effect to the unilateral EU determination of the
proper respondent.
It has been suggested that, as a consequence of the EU’s determination, ‘[a] tribunal can
and should impose obligations on the Union or Member State having been named as the
respondent even if it might be of the opinion that it is the other entity which should be
internationally responsible for the disputed conduct.’ (2090) The same author posited
that the EU IIAs effectively created lex specialis of international responsibility. (2091)
Another author argued that the EU’s externalised determination of the respondent status
should not be conflated with the attribution of wrongful conduct to the respondent party
thus identified: ‘The determination of the respondent to disputes under CETA is severed
from the question of attribution of responsibility in these disputes. The tribunal is,
therefore, not prevented from ruling on the inadmissibility, ratio personae, of the claim
199
where the conduct or responsibility is attributed to a party other than the respondent.’
(2092) The latter view is supported by the Commentary on the 2011 ILC Draft Articles on
the Responsibility of International Organizations, which provides that ‘[a]ttribution of
conduct to the responsible party is not necessarily implied [by the attribution of
responsibility].’ (2093) Another author observed that entrusting the determination of the
international responsibility rules in the relations between the EU and its Member States
is ‘at the least, highly controversial’, because it poses a threat to the principle of
autonomy of EU law, including in relation to the delimitation of competences between
the EU and the Member States. (2094)
Whichever view prevails in practice, the current legal landscape merely frames a lex
specialis, which still leaves open many unanswered questions in respect of the attribution
of wrongful conduct and the allocation of international law responsibility under the EU
IIAs and the normative interplay between the FRR and the EU IIAs in respect of such
questions.
These gaps in the EU IIAs are not conducive to provide the necessary legal certainty in
the interpretation and application of the relevant rules to the wide array of factual
P 318 situations that may arise from the complex constitutional relationship between the EU
and its Member States. (2095) As observed by Delgado Casteleiro, ‘[i]f the EU wants to be
a relevant actor in the field of international investment law it should aim towards simple
rules of responsibility to be included in its future international investment agreement.’
(2096) Implicit in that statement is that the EU’s determination of the proper respondent
should follow clear and transparent rules. It is in all stakeholders’ interests to avoid a
repeat of the situation that arose in Electrabel v. Hungary where the parties’ legal experts
admitted that they knew nothing about the internal EU procedure for the determination
of the respondent in an ECT dispute and there were no further materials submitted to the
tribunal regarding its function or scope. (2097)
§9.04 THE ATTRIBUTION OF CONDUCT AND RESPONSIBILITY

[A] The ILC Articles on the Responsibility of International Organizations
In Electrabel v. Hungary the tribunal applied the attribution rule in ILC Article 6 (2098) by
analogy to the issue whether Hungary’s conduct was responsible under international law
when it was required to act in compliance with a legally binding decision of an EU
institution. (2099) The tribunal stated that ‘[w]hilst the European Union is not a State
under international law, in the Tribunal’s view, it may yet by analogy be so regarded as a
Contracting Party to the ECT for the purpose of applying Article 6 of the ILC Articles in the
present case.’ (2100)
The Commentary to ILC Article 6 makes it clear that the attribution rule enshrined in that
article was intended to apply only in an interstate context:
Similar questions could also arise in the case of organs of international
organizations placed at the disposal of a State and exercising elements of that
State’s governmental authority. This is even more exceptional than the inter-
State cases to which article 6 is limited. It also raises difficult questions of the
relations between States and international organizations, questions which fall
outside the scope of these articles. Article 57 accordingly excludes from the
ambit of the articles all questions of the responsibility of international
organizations or of a State for the acts of an international organization. (2101)
Hence, the ILC Articles discussed in Chapter 5 of this book do not apply to the issue of the
attribution of an internationally wrongful conduct to an IO, including the EU. The ILC
Articles remain applicable if the impugned conduct does not involve the EU. The
P 319 question of whether an impugned conduct is attributable either to the EU or to its
Member State is governed by its own lex specialis or by the general attribution rules in
the 2011 ILC Articles on the Responsibility of International Organizations (ARIO). (2102) The
question may arise both in relation to claims under an EU IIA, such as the ECT, or IIAs
concluded by Member States with non-EU States.
The ARIO Commentary makes an important admission concerning the difference between
the ILC Articles and ARIO based on the limited judicial practice on the responsibility of
international organisations relative to the development of the area of State
responsibility:
The fact that several of the present draft articles are based on limited
practice moves the border between codification and progressive
development in the direction of the latter. It may occur that a provision in the
articles on State responsibility could be regarded as representing
codification, while the corresponding provision on the responsibility of
international organizations is more in the nature of progressive development.
In other words, the provisions of the present draft articles do not necessarily
yet have the same authority as the corresponding provisions on State
The challenges arising from the limited practice on the responsibility of IOs are
200
magnified with respect to the EU, because of the sui generis nature of the EU and not
least because the interaction of EU law and international investment law is still a
relatively unsettled area in itself.
[B] The Existence of a Lex Specialis in Relation to the EU

There is a debate as to whether the ARIO applies to the allocation of responsibility
between the EU and its Member States or whether there is a lex specialis of international
responsibility, which prevails by virtue of the general principle lex specialis derogat legi
generali incorporated in Article 64 of ARIO. The question is of particular relevance to the
situations when a Member State carries out the obligations arising from its membership
of the EU.
Article 64 of ARIO provides:
These articles do not apply where and to the extent that the conditions for the
existence of an internationally wrongful act or the content or implementation
of the international responsibility of an international organization, or a State
in connection with the conduct of an international organization, are governed
by special rules of international law. Such special rules of international law
may be contained in the rules of the organization applicable to the relations
between an international organization and its members.
The ARIO Commentary acknowledges that the carve-out was intended to accommodate
P 320 the attribution of the conduct of Member States to the EU when they implement
binding acts of the EU. (2104) In this case, the premise of attribution is the EU’s normative
control over the Member States conduct implementing an EU act. It has been said that
ARIO does not contain an equivalent general attribution rule based on the concept of
normative control. (2105)
The practical occurrence of situations involving the exercise of normative control is
evident from the particular nature of the relationship between the EU and the Member
States. As noted by Cortés Martín, ‘[w]hile the EU is equipped with normative powers in
many policy fields, it only exceptionally has the administrative capacity to implement
legislation by itself. In most other cases, the Union relies on administrations and courts of
the member States to carry out Union law.’ (2106) Therefore, investment disputes would
often involve the question of the EU’s normative control in some form.
The EU’s normative control in these situations does not rest on the extent of the
discretion of the EU Member State implementing the EU act in question. According to
Professor Hoffmeister, the Union exercises normative control over the conduct of the
Member States implementing an EU act ‘[w]hen it is established that Union law governs
both the substantive legality of and the available remedies for a measure.’ (2107) While
the application of a special attribution rule based on the concept of normative control is
yet to be properly tested in the practice of international investment law, (2108) scholarly
writings advocate that the EU should be held responsible for the conduct of its Member
States when the latter are acting under EU’s normative control. (2109) Further, Article 3(1)
(c) of FRR (2110) embodies the normative control concept in the allocation of the
respondent status to the EU when the challenged measure of the EU Member State was
required by EU law. While a practice has yet to develop around the concept of normative
control in investment disputes, it is unquestionable that the scope of such lex specialis
rule does not cover the wide array of factual scenarios that may raise attribution issues
under investment disputes having an EU element. Therefore, a summary look at the
general attribution rules of ARIO that could potentially apply in an EU context follows.
[C] The Rules of Attribution of ARIO in an EU Context

[1] General Observations
While both States and IOs are subjects of international law, IOs are governed by the
P 321 principle of speciality, which means that the attribution of conduct to an IO follows a
functional test. Whereas States possess a general competence, IOs have been established
in order to exercise specific functions. (2111) The rules of attribution in the ARIO reflect
this important specific feature of IOs.
The issue of the attribution of internationally wrongful conduct may arise under both IIAs
concluded by Member States and EU IIAs. In respect of the latter situation, as seen in
Electrabel v. Hungary, the issue of the attribution of the conduct may incidentally arise
also before ICSID, which is not an accessible forum to the EU. When the impugned
conduct is attributable to the EU and the claim is not made under an EU IIA, a tribunal
would dismiss the claim as inadmissible. On the other hand, when the impugned conduct
is attributable to the EU, the claim cannot be brought under an EU IIA, such as the ECT,
before ICSID, because the arbitration mechanism under the ICSID Convention is not
accessible to an IO. When the impugned conduct is attributable to the EU under an EU
IIA, the non-EU investor may have recourse to the non-ICSID dispute settlement
mechanisms that may be available under that IIA. If the EU IIA contains binding
provisions with respect to the determination of respondent status, those provisions
should be followed in order to ensure the admissibility of the claim.
201
Finally, it should be noted that an EU IIA does not automatically entail the joint
responsibility of the EU and its Member States. The fact that two international law
subjects may be bound by the same obligation does not automatically mean that they
should be held jointly responsible. In fact, as noted above, the EU IIAs seem to exclude
the joint responsibility of the EU and the Member States by allocating respondent status
to one or the other. Further, as noted by Delgado Casteleiro, ‘the responsibility should be
established by the application of clear rules of attribution, regardless of whether the EU
and its Member States are bound by the same obligations’. (2112) This is in line with the
conditions of international law responsibility set out in ARIO Article 4 (2113) and ILC
Article 3, respectively.
[2] The Attribution of Conduct to the EU
ARIO contains general rules on the attribution of conduct to an IO. These rules seek to
determine, based on functional criteria, whether a particular conduct is attributable to
either the IO or its Member States. (2114)
[a] The Organs and Agents of the EU
The main rule concerning the attribution of conduct to an IO is Article 6 of ARIO, which
P 322 provides:
1. The conduct of an organ or agent of an international organization in the

performance of functions of that organ or agent shall be considered an
act of that organization under international law, whatever position the
organ or agent holds in respect of the organization.
2. The rules of the organization shall apply in the determination of the
functions of its organs and agents.
Article 2 of ARIO defines ‘organ’ as ‘any person or entity which has that status in
accordance with the rules of the organization’, while an ‘agent’ is ‘an official or other
person or entity, other than an organ, who is charged by the organization with carrying
out, or helping to carry out, one of its functions, and thus through whom the organization
acts’. The ARIO Commentary on Article 6 clarifies that ‘[t]he distinction between organs
and agents does not appear to be relevant for the purpose of attribution of conduct to an
international organization’ (2115) because the broad definition of ‘agent’ ensures that the
equivalent situations of attribution of conduct to States in ILC Articles 5 and 8 are
captured. (2116)
It is uncontroversial that the acts of the EU institutions are attributable to the EU. In an
EU context, the question under Article 6 of ARIO is whether the person or entity in
question is acting functionally as an organ or agent of the EU. Such functional
determination is to be made under EU rules. As provided in the ARIO Commentary,
exceptionally, ‘functions may be considered as given to an organ or agent even if this
could not be said to be based on the rules of the organization’. (2117) The Commentary
does not shed light on what these exceptional circumstances would be.
Member States could not be deemed to act as organs of the EU, because they are not
formally integrated into the institutional structure of the EU. (2118) Under the principle of
conferral enshrined in Article 5 of the TFEU, the EU acts within the limits of the
competences conferred upon it by the Member States and all other competences remain
with the Member States. Where the EU takes normative decisions based on its
competences, the implementation of such decisions remains typically with the Member
States. In these cases, the authorities of the Member States continue to act as State organ
and agents, rather than as EU organs or agents. In other words, Article 6 of ARIO does not
attempt to capture the normative control of the EU over the Member States’ conduct in
implementing an EU measure. (2119)
In the process of drafting the ARIO, Special Rapporteur Gaja recognized that the different
degrees of integration between an IO and its Member States might lead to a situation
where the attribution of conduct to an IO is not a prerequisite to the international law
responsibility of an IO:
Responsibility of an organization does not necessarily have to rest on
attribution of conduct to that organization. It may well be that an organization
P 323 undertakes an obligation in circumstances in which compliance depends on
the conduct of its member States. Should member States fail to conduct
themselves in the expected manner, the obligation would be infringed and the
organization would be responsible. However, attribution of conduct need not
be implied. Although generally the organization’s responsibility depends on
attribution of conduct … this does not necessarily occur in all circumstances.
(2120)
Further, the ILC accepts that an IO may incur international law responsibility even
without being the author of an internationally wrongful act:
An international organization may … be held responsible if it aids or assists a
State or another organization in committing an internationally wrongful act, or
202
if it directs and controls a State or another organization in the commission of
such an act, or if it coerces a State or another organization to commit an act
that would, but for the coercion, be an internationally wrongful act. (2121)
Hence, ARIO left open the possibility for the EU to be held responsible without the
application of ARIO’s general rules on attribution of conduct when the Member States’
implementation of an EU measure may constitute an internationally wrongful act. (2122)
In conclusion, Article 6 of ARIO applies in an EU context and in the area that is the focus
of this book only when the EU’s own organs and agents commit internationally wrongful
acts under EU IIAs, which would then be attributed to the EU, as a condition of the EU’s
international law responsibility.
[b] The Attribution of Ultra Vires Acts
Article 8 of ARIO covers the situation when an IO outside its functions as determined by
its rules:
The conduct of an organ or agent of an international organization shall be
considered an act of that organization under international law if the organ or
agent acts in an official capacity and within the overall functions of that
organization, even if the conduct exceeds the authority of that organ or agent
or contravenes instructions.
In an EU context, under Article 8 of ARIO, the internal invalidity of the conduct of EU
organs does not affect its attribution to the EU. In other words, the fact that the alleged
conduct was committed in breach of the EU’s internal rules is irrelevant in terms of the
attribution of that conduct to the EU for the purposes of its international law
responsibility.
P 324
[c] The Attribution of Conduct of State Organs Placed at the Disposal of the EU
Article 7 of ARIO covers the situation when a State organ is seconded to an IO:
The conduct of an organ of a State or an organ or agent of an international
organization that is placed at the disposal of another international
organization shall be considered under international law an act of the latter
organization if the organization exercises effective control over that conduct.
The rule is premised on ‘the factual control that is exercised over the specific conduct
taken by the organ or agent placed at the receiving organization’s disposal’. (2123) The
rule was meant to cover mainly the placement of national contingents at the disposal of
peacekeeping forces of an IO. (2124) Delgado Casteleiro comments that Article 7 of ARIO
‘could easily be applied to internationally wrongful acts committed by Member State
agents placed at the disposal of the EU’. In his view, an example of such application
would be the case of customs officials of Member States which functionally act as an
organ of the EU when applying the EU common customs tariff. (2125)
[d] Conduct Acknowledged and Adopted by the EU
Article 9 of ARIO deals with the situation when conduct is acknowledged and adopted by
an IO as its own:
Conduct which is not attributable to an international organization under
articles 6 to 8 shall nevertheless be considered an act of that organization
under international law if and to the extent that the organization
acknowledges and adopts the conduct in question as its own.
The EU may decide to adopt the conduct committed by another person or entity, which
was not otherwise attributable to it. To the extent that the EU’s acknowledgment or
adoption of the conduct of the Member States as its own would exclude the international
law responsibility of a Member State, it is unclear if such unilateral decision would be
binding on the claimant. (2126) Such unilateral action on the part of the EU is unlikely to
occur in practice. While the FRR provides for the apportionment of financial
responsibility and the allocation of respondent status between the EU and the Member
States, such apportionment can be done, in principle, without the need for the EU to
acknowledge and adopt the Member States’ alleged wrongful conduct as its own.
P 325
[3] The Attribution of Conduct to the Member States

The ARIO Commentary notes that the questions of attribution of conduct to a State
remain within the scope of the rules on State responsibility for internationally wrongful
acts even when an IO is involved. (2127) It adds that, although these situations are not
expressly addressed in the Commentary to the ILC Articles, it is conceivable that an IO or
one of its organs may act as a de facto State organ under ILC Article 4. Similarly, an IO or
its organ may act also as a person or entity empowered by the law of a State to exercise
203
elements of governmental authority as per the attribution rule in ILC Article 5. Finally, the
ARIO Commentary mentions that the question of attribution may arise also under ILC
Article 6 when an IO places one of its organs at the disposal of a State. (2128)
[D] The Rules of Responsibility of ARIO in an EU Context

The ARIO contains symmetrical rules applying to the international responsibility of an IO
for the conduct of a State (2129) and international responsibility of a State for the
conduct of an IO. (2130)
[1] The Secondary Responsibility of the EU in Connection with an Act of a Member State
The general rules found in Articles 14–17 of ARIO mirror the State responsibility rules in
the ILC Articles where a State aids or assists, directs and controls, or coerces another
State in the commission of an internationally wrongful act. The equivalent scenario in the
context of an IO is where an IO aids or assists, directs and controls, or coerces a Member
State in the commission of an internationally wrongful act. Since the wrongfulness of the
IO’s conduct is predicated in a Member State committing a breach of its international
obligations, these rules of responsibility can be described as ancillary or secondary
responsibility rules. (2131) This is evident also in the ARIO rules on the responsibility of an
IO for the conduct of a State, which are stated to apply ‘without prejudice to the
international responsibility of the State or international organization which commits the
act in question, or of any other State or international organization’. (2132) Hence, these
rules do not affect the attribution of conduct to, and the international law responsibility
P 326 of, the author of the impugned act. Nevertheless, due to their ancillary nature, the
application of these rules to the EU would entail the prior establishment of the
responsibility of a Member State. (2133) As Professor Hoffmeister observed, the situations
leading to the responsibility of the IO in connection with an act of a State ‘would
generally lead to responsibility of both the member state and the organization for the
conduct in question’. (2134)
Should one consider that no equivalent lex specialis rule exists in relation to the
normative control of the EU, Article 15 of ARIO, focusing on the concept of direction or
control of a state or another IO, may acquire significance in an EU context. (2135) The
ARIO Commentary observes:
the adoption of a binding decision on the part of an international organization
could constitute, under certain circumstances, a form of direction or control in
the commission of an internationally wrongful act. The assumption is that the
State or international organization which is the addressee of the decision is
not given discretion to carry out conduct that, while complying with the
decision, would not constitute an internationally wrongful act. (2136)
Thus, the EU could be held responsible under EU IIAs as a result of the normative control
it exercises over its Member States. A similar EU responsibility could not of course arise
under IIAs concluded by its Member States to which the EU is not a party. Further, for the
normative control of the EU to trigger its responsibility under Article 15 of ARIO, it would
have to be ascertained that the Member State had no discretion when acting. (2137)
[2] The Secondary Responsibility of a Member State in Connection with an EU Act
Articles 58–60 of ARIO reflect the converse scenario where a Member State is secondarily
responsible for the acts of an IO. In addition, Article 61 of ARIO concerns the situation
where a Member State, in order to circumvent its international obligations, attempts to
abuse the separate personality of an IO. (2138) Delgado Casteleiro observes that the
latter rule could not apply to mixed or Union agreements, because the EU would be
P 327 bound by the international obligation which in principle would be violating as an alleged
instrument of the Member States. (2139) He adds that in principle the rule ‘could only be
applied to situations where the EU cannot become a member of the agreement either
because it has no external competence on the issue, or due to the fact that the
agreement is only open to States’. (2140) The latter scenario does not apply to EU IIAs,
but it could, apply, in principle, to IIAs concluded by Member States with non-EU
countries.
§9.05 CONCLUSION
The issues of attribution involving the EU and a Member State raise the preliminary issue
of the allocation of international law responsibility between the two international law
subjects. Under international law, each subject is responsible only for its own wrongful
acts. The EU’s determination of respondent status follows the same principle, albeit
subject to some exceptions. The EU IIAs seem to exclude the joint responsibility of the EU
and the Member State concerned by allocating respondent status to one or the other.
Particular issues arise when the treatment concerns the implementation of an EU
measure by a Member State. Such issues can be resolved by recourse to the concept of
normative control, which should be clearly incorporated into the EU IIAs. The progressive
development of customary international law rules reflected in the ARIO does not provide
a clear path to EU responsibility for Member State conduct in implementing an EU
measure. There is an emerging framework of lex specialis as to the allocation of
204
responsibility between the EU and its Member State in these situations. In the absence of
jurisprudence, there remain many unanswered questions in respect of the attribution of
internationally wrongful conduct and the allocation of international law responsibility
under the EU IIAs and the normative interplay of the latter with EU’s internal rules
regulating these questions.
P 327
References
2039) Article 47 of the Treaty on the European Union.
2040) Brunno Simma, Dirk Pulkowski, Of Planets and the Universe: Self-contained Regimes
in International Law, 17(3) The European Journal of International Law, 483, 516 (2016).
2041) For a comprehensive study of EU responsibility in other international law fields,
see Andrés Delgado Casteleiro, The International Responsibility of the European
Union, From Competence to Normative Control, Cambridge Studies in European Law
and Policy (Cambridge University Press, 2016).
2042) Article 3(1), TFEU.
2043) Opinion 2/15 of the Court of Justice of the European Union, 16 May 2017, para. 82.
2044) Communication from the Commission to the Council, the European Parliament, the
European Economic and Social Committee and the Committee of the Regions:
Towards a comprehensive European international investment policy,
COM(2010)343, 7 July 2010, at 6,
http://trade.ec.europa.eu/doclib/docs/2010/july/tradoc_146307.pdf (accessed on
7 March 2018).
2045) Ibid., para. 10.
2046) Delgado Casteleiro, supran. 2041, at 34–36.
2047) Statement submitted by the European Communities to the Secretariat of the
Energy Charter pursuant to Art. 26(3)(b)(ii) of the Energy Charter Treaty, 98/181/EC,
ECSC, Euratom: Council and Commission Decision of 23 September 1997 on the
conclusion, by the European Communities, of the Energy Charter Treaty and the
Energy Charter Protocol on energy efficiency and related environmental aspects.
2048) EU-Singapore Investment Protection Agreement, authentic text as of April 2018,
http://trade.ec.europa.eu/doclib/press/index.cfm?id=961 (accessed on 21 April
2018).
2049) Section 2 (Investment Protection) and section 3 (Resolution of Investment
Disputes), Chapter II (Investment) in Chapter 8 (Trade in Services, Investment and
E-Commerce) of EU-Vietnam Free Trade Agreement, agreed text as of January 2016
at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437 (accessed on 9
March 2018).
2050) Section D (Investment Protection) and section F (Resolution of investment disputes
between investors and States), Chapter Eight (Investment) of the Comprehensive
Economic and Trade Agreement (CETA), signed on 30 October 2016,
http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-chapter-by-chapter/
(accessed on 9 March 2018).
2051) Portfolio investments, namely investments made without any intention to
influence the management and control of an undertaking, see §2.02 supra.
2052) Opinion 2/15, Free Trade Agreement between the European Union and the
Republic of Singapore, 16 May 2017, paras 286 and 292.
2053) European Commission proposes signature and conclusion of Japan and Singapore
agreements, Press Release, EU Commission, 18 April 2018,
http://trade.ec.europa.eu/doclib/press/index.cfm?id=1826 (accessed 21 April
2018).
2054) Legislative Train Schedule, A Balanced and Progressive Trade Policy to Harness
Globalisation, http://www.europarl.europa.eu/legislative-train/theme-a-
balanced-and-progressive-trade-policy-to-har... (accessed 21 April 2018).
2055) At the time of the entry into force of the TFEU, the EU Member States’ investment
treaty portfolio consisting of 1,400 BITs accounted to nearly half of the world’s BITs.
2056) Regulation (EU) No. 1219/2012 of the European Parliament and of the Council of 12
December 2012 establishing transitional arrangements for bilateral investment
agreements between Member States and third countries, Official Journal of the
European Union L 351 (20 December 2012).
2057) Ibid., Arts 7–11.
2058) Ibid., Art. 9(2).
2059) For example, Agreement between the Government of the Republic of Colombia and
the Government of the Republic of France on the Reciprocal Promotion and
Protection of Investments, signed on 10 July 2014; see List of the bilateral
investment agreements referred to in Art. 4(1) of Regulation (EU) No. 1219/ 2012 of
the European Parliament and of the Council of 12 December 2012 establishing
transitional arrangements for bilateral investment agreements between Member
States and third countries in Official Journal of the European Union, C 147/1 (11 May
2017).
205
2060) Regulation 1219/2012, Art. 15(1) and 15(3).
2061) See Chapter 5 (The Attribution of Unlawful Conduct).
2062) Statement submitted by the European Communities to the Secretariat of the
Energy Charter pursuant to Art. 26(3)(b)(ii) of the Energy Charter Treaty, supran.
2047.
2063) Frank Hoffmeister, Litigating against the European Union and Its Member States –
Who Responds under the ILC’s Draft Articles on International Responsibility of
International Organizations?, 21(3) The European Journal of International Law, 723,
736 (2010).
2064) See §5.03[C][1] in relation to the background of Electrabel v. Hungary.
2065) Electrabel v. Hungary, paras 6.75–6.76.
2066) Ibid., para. 2.24. The Commission’s decision established that the obligation to
purchase energy by virtue of the PPAs constituted State aid incompatible with the
common market and therefore must be repaid by its recipients.
2067) Ibid., para. 3.19.
2068) Ibid., para. 3.21.
2069) Ibid., para. 6.72.
2070) Ibid., para. 6.76.
2071) Ibid., para. 6.91.
2072) Ibid.
2073) The concept of normative control in this context is set on the premise that the
applicable EU law limits the autonomy of Member States when they are
implementing EU law. Pursuant to Art. 291(1) of TFEU, ‘Member States shall adopt
all measures of national law necessary to implement legally binding Union acts’;
see also Delgado Casteleiro, supran. 2041, at 227.
2075) Electrabel v. Hungary, paras 1.46 and 4.11.
2076) Hoffmeister, supran. 2063, at 736, quoting Happ, The Legal Status of the Investor vis-
à-vis the European Communities: Some Salient Thoughts, 74 International
Arbitration Law Review, 77 (2007).
2077) Delgado Casteleiro, supran. 2041, at 205.
2078) Regulation 912/2014 of the European Parliament and of the Council of 23 July 2014
establishing a framework for managing financial responsibility linked to investor-
State dispute settlement tribunals established by international agreements to
which the European Union is party, Official Journal of the European Union, L
257/121 (28 August 2014).
2079) Article 1(1), FRR.
2080) Recital 3, FRR.
2082) Article 3(1)(a) and 3(1)(b), FRR.
2083) Articles 4(1) and 5, FRR.
2084) Article 3(1)(c), FRR.
2085) Articles 6 and 9, FRR.
2086) Angelos Dimopoulos, The Involvement of the EU in Investor-State Dispute
Settlement:A Question Of Responsibilities, 51 Common Market Law Review, 1671, 1703
(2014).
2088) Article 6(2)-(6), section 3, Annex entitled Agreements between Member States of
the European Union and Vietnam, EU-Vietnam FTA; Art. 8.21, Chapter 8, CETA.
2090) Tomáš Fecák, International Investment Agreements and EU Law, 301 (Kluwer Law
International, 2016).
2091) Ibid.
2092) H. Lenk, Issues of Attribution: Responsibility of the EU in Investment Disputes under
CETA, 13(1) Transnational Dispute Management, 22 (March 2016).
2093) ILC Draft Articles on the Responsibility of International Organizations, with
commentaries (ARIO Commentary), Chapter II Attribution of conduct to an
international organization, para. 3.
2094) Dimopoulos, supran. 2086, at 1701.
2095) Delgado Casteleiro, supran. 2041, at 219, observes that ‘the flexible rule of
attribution enshrined in CETA seems to be designed to protect the strategic
interests of the EU rather than providing certainty to investors.’
2096) Ibid., at 223.
2098) See §5.07 supra.
2100) Ibid.
2101) Commentary to ILC Art. 6, para. 9. ILC Art. 57 makes it clear that the ILC Articles are
‘without prejudice to any question of the responsibility under international law of
an international organization, or of any State for the conduct of an international
organization.’
2102) Adopted by the International Law Commission at its sixty-third session, in 2011,
and submitted to the General Assembly as a part of the Commission’s report
covering the work of that session (A/66/10).
2103) ARIO Commentary, General Commentary, para. 5.
206
2104) ARIO Commentary, Art. 64, para. 2.
2105) José Manuel Cortés Martín, European Exceptionalism in International Law, in
Maurizio Ragazzi ed., Responsibility of International Organization, Essays in Memory
of Sir Ian Brownlie, 194 (Martinus Nijhoff Publishers, 2013).
2106) Ibid., 192.
2107) Hoffmeister, supran. 2063, at 742.
2108) See discussion of Electrabel v. Hungary at §9.03[B] supra.
2109) Delgado Casteleiro, supran. 2041, at 205–206; Lenk, supran. 2092, at 18.
2110) See §9.03[C][1] supra.
2111) ARIO Commentary, General commentary, para. 7.
2113) Article 4 of ARIO provides: ‘There is an internationally wrongful act of an
international organization when conduct consisting of an action or omission: (a) is
attributable to that organization under international law; and (b) constitutes a
breach of an international obligation of that organization.’
2114) Delgado Casteleiro, supran. 2041, at 55; ARIO Commentary, Art. 1, para. 8.
2116) Ibid., paras 10–11.
2117) Ibid., para. 9.
2119) Ibid.
2120) Second report on responsibility of international organizations by Mr Giorgio Gaja,
Special Rapporteur, A/CN.4/541, 2 April 2004, para. 11.
2121) ARIO Commentary, Art. 1, para. 4; see §9.04[D][1] infra.
2122) See also discussion of lex specialis in §9.04[B].
2124) Ibid., paras 1, 3 and 5.
2125) Delgado Casteleiro, supran. 2041, at 72 and 75.
2126) Ibid., at 77.
2128) Ibid.
2129) Chapter IV (Responsibility of an international organization in connection with the
act of a State or another international organization), Part Two (The internationally
wrongful act of an international organization) of ARIO.
2130) ARIO Art. 1(2). According to the ARIO Commentary, ‘[t]he main question that was left
out in [ILC Articles], and that is considered in the present draft articles, is the issue
of the responsibility of a State which is a member of an international organization
for a wrongful act committed by the organization.’ see also Part Five of ARIO
(Responsibility of a State in connection with the conduct of an international
organization).
2132) Article 19 of ARIO.
2134) Hoffmeister, supran. 2063, at 727.
2135) ARIO, Art. 15: An international organization which directs and controls a State or
another international organization in the commission of an internationally
wrongful act by the State or the latter organization is internationally responsible
for that act if:
(a) the former organization does so with knowledge of the
circumstances of the internationally wrongful act; and
(b) the act would be internationally wrongful if committed by that
organization.
2138) ARIO, Art. 61:
1. A State member of an international organization incurs
international responsibility if, by taking advantage of the fact that
the organization has competence in relation to the subject-matter
of one of the State’s international obligations, it circumvents that
obligation by causing the organization to commit an act that, if
committed by the State, would have constituted a breach of the
obligation.
2. Paragraph 1 applies whether or not the act in question is
internationally wrongful for the international organization.
2139) Delgdo Casteleiro, supran. 2041, at 102.
2140) Ibid.
207
Document information Chapter 10: Attribution: Quo Vadis?
§10.01 INTRODUCTION
Publication State participation in foreign investment relations necessarily involves a reference to a
Investment Law set of rules. In the context of the discussion of the role of the State in international
investment law, we have seen that the rules of attribution tell us what acts count as acts
of the State for a variety of purposes. A study of the relevant investment arbitration
jurisprudence confirms the proposition that, despite the occasional differences on
Topics discrete issues, a generally shared understanding exists with respect to the operation of
Investment Arbitration the rules of attribution in most legal contexts in which the State’s involvement takes
shape in investment disputes.
Bibliographic §10.02 THE ATTRIBUTION OF INTERNATIONALLY WRONGFUL CONDUCT

The attribution rules in the area of State responsibility are widely accepted and, to a
reference large degree, consistently applied in international investment law. Credit is due to the
'Chapter 10: Attribution: work of the ILC over several decades, including several distinguished Special
Quo Vadis?', in Csaba Rapporteurs, who codified the customary international rules of attribution of wrongful
Kovács , Attribution in conduct. The success of these rules may explain the scarcity of lex specialis in IIAs.
International Investment
Law, International At a time when a working group of the Sixth Committee of the UN is considering the
Arbitration Law Library, potential for a convention on responsibility of States for internationally wrongful acts or
Volume 45 (© Kluwer Law other appropriate action on the basis of the ILC Articles, one may question the way
International; Kluwer Law forward as to the current general rules of attribution.
International 2018) pp. 329 As the limited responsibility of the State underlies the notion of attribution, (2141) the
- 332 expansion of the current scope of the rules of attribution is unlikely and admittedly
P 330 unwarranted by the wide consensus that has emerged as to application of the existing
rules. However, an in-depth survey of the investment arbitration jurisprudence suggests
that the current ILC attribution rules could benefit from clarification in at least one
respect: the exercise of governmental authority by non-State organs through contractual
or commercial means.
There is a lack of consensus on the important question of whether the subject matter and
purpose of a transaction or activity should be considered in delineating governmental
activity from private activity in the application of ILC Articles 5 and 8. While this question
transgresses the boundaries of international investment law, the conceptual divergences
are perhaps more apparent in the investment law jurisprudence. (2142)
Professor Crawford acknowledged that the analytical distinction between acta jure
gestionis and acta jure imperii is a useful connecting factor and achieves consistency
between the law of immunity and the law of responsibility. (2143) In light of the States’
sovereign discretion to organise their activities, that distinction should ultimately be
approached on a case-by-case basis.
The question of whether the purpose of the impugned act should be taken into account in
distinguishing between commercial and sovereign acts was in fact one of the most
disputed issues also in the drafting of the UN Convention on Jurisdictional Immunities of
States and Their Property, (2144) which was adopted some years after the ILC Articles.
This lack of consensus indicates that the use of the purposive test in determining
governmental acts is unlikely to gain acceptance. Nevertheless, a solution should be
found to those cases where the State could effectively avoid responsibility by exercising
governmental authority through contractual or commercial means. As discussed in
Chapter 5, if a transaction involves an asset or activity reserved to the State, a State
Enterprise’s role in that transaction is likely to involve some exercise of public powers in
an otherwise commercial context. Conversely, if the State Enterprise operates in normal
open market conditions, the activities of the State Enterprise can be deemed to have a
commercial character even if the State Enterprise is set up to meet needs in the general
interest. A market-based delineation between governmental and commercial activities
would also ensure a level-playing field between State Enterprises and private investors
when the former are engaged on their own account in commercial activities.

We have seen that the attribution of lawful conduct is examined, in most scenarios, by
reference to the internal law governing that conduct. International law governs, however,
the issue of whether State Enterprises are entitled to rely on the protections offered by
IIAs, including the dispute resolution mechanism under such IIAs. With the increasing
participation of State Enterprises in foreign investment in strategic sectors, policymakers
P 331 turn to screening mechanisms to control the flow of FDIs that raise concerns for security
or public order of host State(s). (2145) In determining whether a FDI is likely to affect
security or public order, screening authorities may take into account whether the foreign
investor is controlled by the government of a third country, including through significant
funding. (2146) Therefore, the question whether the planned foreign investment is
attributable to the State may be resolved in certain instances at the entry level. In light
of this circumstance, and considering that in most cases State Enterprises act as any
208
other commercial investor, the question of attribution of claims of State Enterprises to
their home State is unlikely to lead to a positive finding in the ICSID jurisprudence, where
such question is likely to arise.
§10.04 CONCLUSION
The existing attribution rules and their application provide a reliable normative
framework. In an investment law context, the rules on attribution necessarily reflect the
diversity of States when it comes to the organisation and conduct of their investment
activities. Any future international action involving the notion of attribution in the law of
State responsibility should balance the need to defer to such diversity and observe the
principle of limited State responsibility for internationally wrongful conduct while setting
out a common ground for effective rules for State conduct subject to international law.
P 331
References
2141) First Report on State responsibility, by Mr James Crawford, Special Rapporteur,
para. 154.
2142) See 5.04[C][5] and [12] supra.
2144) Seesupran. 1141.
2145) See, for example, Proposal for a Regulation of the European Parliament and of the
Council establishing a framework for screening of foreign direct investments into
the European Union, supran. 1798.
2146) Ibid., Art. 4.
209
Document information Table of Cases
Investor-State Tribunals and Annulment Committees
Publication ADC Affiliate Ltd. ADC & ADMC Management Limited v. Hungary, ICSID Case No. ARB/03/16,
Investment Law Award (2 October 2006), 18
ADF Group Inc. v. United States of America, ICSID Case No. ARB (AF)/00/1, Award (9 January
2003), 19
Bibliographic Adel A Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/11/33, Award (3
November 2015), 52
reference
'Table of Cases', in Csaba AES Corporation and Tau Power B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/10/16,
Kovács , Attribution in Award (1 November 2013), 65
International Investment Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia, ICSID Case
Law, International No. ARB/99/2, Award (25 June 2001), 20
Volume 45 (© Kluwer Law Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16, Award (8 November
International; Kluwer Law 2010), 77, 93
International 2018) pp. 333 Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1, Award
- 340 (20 November 1984), 100
Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1, Ad
hoc Committee Decision on the Application for Annulment (16 May 1986), 100
Ampal-American Israel Corp., EGI-Fund (08-10) Investors LLC, EGI Series Investments LLC,
and BSS-EMG Investors LLC v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision
on Liability and Heads of Loss (21 February 2017), 41, 87
Asian Agricultural Products Ltd (AAPL) v. Sri Lanka, ICSID Case No. ARB/87/3, Final Award
(27 June 1990), 6
Bayindir Insaat Turizm Ticaret ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No.
ARB/03/29, Decision on Jurisdiction (14 November 2005), 296
Bayindir Insaat Turizm Ticaret ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No.
ARB/03/29, Award (27 August 2009), 89
Beijing Urban Construction Group Co. Ltd. v. Republic of Yemen, ICSID Case No. ARB/14/30,
Decision on Jurisdiction (17 May 2017), 23
Bernhard von Pezold and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15, Award
(28 July 2015), 33, 101
P 334
Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22,
Award (24 July 2008), 150
Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine, ICSID Case
No. ARB/08/11, Award (25 October 2012), 22, 33, 172
Burlington Resources Inc. v Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on
Liability (14 December 2012), 37, 65
Cable Television of Nevis, Ltd. and Cable Television of Nevis Holdings, Ltd. v. Federation of
St. Kitts and Nevis, ICSID Case No. ARB/95/2, Award (13 January 1997), 252
CDC Group plc v. Republic of Seychelles, ICSID Case No. ARB/02/14, Award (17 December
2003), 280
eskoslovenska Obchodní Banka A.S. v. the Slovak Republic, ICSID Case No. ARB/97/4,
Decision on Objections to Jurisdiction (24 May 1999), 178, 275
Churchill Mining PLC and Planet Mining Pty Ltd v. Republic of Indonesia, ICSID Case No.
ARB/12/14 and 12/40, Award (6 December 2016), 20
CMS Gas Transmission Company v. Republic of Argentina, ICSID Case No. ARB/01/8, Award
on Jurisdiction (17 July 2003), 9
CMS Gas Transmission Co. v Argentina, ICSID Case No. ARB/01/8, Decision of the Ad Hoc
Committee on the Application for Annulment of the Argentine Republic (25 September
2007), 40
Compañía de Aguas del Aconquija S.A. and Vivendi Universal (formerly Compagnie Générale
des Eaux) v. Argentine Republic, ICSID Case No. ARB/97/3 (Vivendi I v. Argentina), Decision
on Annulment (3 July 2002), 8
Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic,
ICSID Case No. ARB/97/3 (formerly Compañía de Aguas del Aconquija, S.A. and Compagnie
Générale des Eaux v. Argentine Republic) (Vivendi II v. Argentina), Award (20 August 2007),
66
Consortium RFCC v. Royaume du Maroc, ICSID Case No. ARB/00/6, Award (22 December
210
2003), 77
Dan Cake S.A. v. Hungary, ICSID Case No. ARB/12/9, Decision on Jurisdiction and Liability
(24 August 2015), 20
Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2,
Award (31 October 2012), 114
Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No.
ARB/04/19, Award (18 August 2008), 84, 140, 184
Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, ICSID Case No.
ARB/03/28, Award (18 August 2008), 239
Eastern Sugar B.V. v. Czech Republic, SCC Case No. 088/2004, Partial Award (27 March
2007), 67, 102
ECE Projektmanagement v. The Czech Republic, UNCITRAL, PCA Case No. 2010-5, Award (19
September 2013), 19
EDF (Services) Ltd v. Romania, ICSID Case No. ARB/05/13, Award (8 October 2009), 19
Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain,
ICSID Case No. ARB/13/36, Award (4 May 2017), 64
P 335
Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction,
Applicable Law and Liability (30 November 2012), 14, 217
Electrabel S.A. v. Hungary, ICSID Case No. ARB/07/19, Award of the Tribunal (25 November
2015), 65
El Paso Energy International Co v. Argentina, ICSID Case No. ARB/03/15, Decision on
Jurisdiction (27 April 2006), 39
Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of the
Tribunal on Objections to Jurisdiction (25 January 2000), 142
Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award (13 November
2000), 142
EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN 3481, Award (3 February
2006), 157
Enkev Beheer B.V. v. Republic of Poland, PCA Case No. 2013-01, First Partial Award (29 April
2014), 19
Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No.
ARB/01/3, Award (22 May 2007), 64
Everest Estate LLC et al. v. The Russian Federation, UNCITRAL, PCA Case No. 2015-36,
Decision on Jurisdiction (20 March 2017), 3
Eureko B.V. v. Republic of Poland, Partial Award and Dissenting Opinion (19 August 2005),
28, 67
Fireman’s Fund Insurance Company v. United States of Mexico, ICSID Case No.
ARB(AF)/02/01, Final Award (11 July 2007), 56
Flemingo DutyFree Shop Private Limited v. Republic of Poland, UNCITRAL, Award (12 August
2016), 118
Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award (8 April 2013),
102
F-W Oil Interests, Inc. v. The Republic of Trinidad and Tobago, ICSID Case No. ARB/01/14,
Award (3 March 2006), 50, 129, 155
Frontier Petroleum Services Ltd. v. The Czech Republic, UNCITRAL, Final Award (12
November 2010), 107
Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20, Award (19 December 2016),
182
Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award (16 September 2003),
123
Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award
(22 September 2014), 20
Grupo Francisco Hernando Contreras, S.L. v. Equatorial Guinea, ICSID Case No. (AF)12/2),
Award on Jurisdiction (4 December 2015), 242
Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24,
Award (18 June 2010), 67, 90
Hassan Awdi, Enterprise Business Consultants, Inc. and Alfa El Corporation v. Romania,
ICSID Case No. ARB/10/13, Award (2 March 2015), 69
211
H&H Enterprises Investments, Inc. v. Arab Republic of Egypt, ICSID Case No. ARB 09/15,
Award (6 May 2014), 129
P 336
Hrvatska Elekroprivreda DD v. Republic of Slovenia, ICSID Case No. ARB/05/24, Decision on
the Treaty Interpretation Issue (12 June 2009), 35
Impregilo S.p.a. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3, Decision on
Jurisdiction (22 April 2005), 37, 77
Infinito Gold Ltd. v. Costa Rica, ICSID Case No. ARB/14/5, Decision on Jurisdiction (4
December 2017), 303
International Thunderbird Gaming Corp. v. United Mexican States, UNCITRAL, Award (26
January 2006), 236
International Thunderbird Gaming Corporation v. The United Mexican States, UNCITRAL,
Separate Opinion of Thomas Wälde (1 December 2005), 16
InterTrade Holding GmbH v. Czech Republic, UNCITRAL, PCA Case No. 2009-12, Final Award
(29 May 2012), 75
Invesmart v. Czech Republic, UNCITRAL, Award (26 June 2009), 97, 127
Ioan Micula, Viorel Micula, SC European Food SA SC Starmill SRL and SC Multipack SRL v.
Romania, ICSID Case No ARB/05/20, Award (11 December 2013), 237
Ioannis Kardassopoulos v. The Republic of Georgia, ICSID Case No. ARB/05/18, Decision on
Jurisdiction (6 July 2007), 189
Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No.
ARB/04/13, Decision on Jurisdiction (16 June 2006), 30
Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No.
ARB/04/13, Award (6 November 2008), 30
Jan Oostergetel and Theodora Laurentius v. Slovak Republic, UNCITRAL, Final Award (23
April 2012), 67, 108
Joseph C. Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and
Liability (21 January 2010), 67
Joy Mining Machinery Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/03/11, Award on
Jurisdiction (6 August 2004), 14
Khan Resources Inc., Khan Resources B.V., and CAUC Holding Company Ltd. v. The
Government of Mongolia, PCA Case No. 2011-09, UNCITRAL, Decision on Jurisdiction (25 July
2012), 247
Kristian Almås and Geir Almås v. The Republic of Poland, PCA Case No. 2015-13, Award (27
June 2016), 63
Lao Holdings N.V. v. Lao People’s Democratic Republic, ICSID Case No. ARB(AF)/16/2,
Decision on the Merits (10 June 2015), 225
LESI, S.p.A. and Astaldi, S.p.A. v. People’s Democratic Republic of Algeria, ICSID Case No.
ARB/05/3, Award (12 November 2008), 62, 145
Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Final Award (26 March
2008), 69
Luigiterzo Bosca v. Lithuania, UNCITRAL, Award (17 May 2013), 69, 73
Malaysian Historical Salvors, SDN, BHD v. The Government of Malaysia, ICSID Case No.
ARB/05/10, Decision on the Application for Annulment (16 April 2009), 14
Malicorp Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/08/18, Award (7
February 2011), 255
Marco Gavazzi and Stefano Gavazzi v. Romania, ICSID Case No. ARB/12/25, Award (18 April
2017), 25
P 337
Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award
(16 December 2002), 19
Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award
(16 May 2018), 279
M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No.
ARB/03/6, Award (31 July 2007), 69
Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA Case No. 2012-17, Award
(24 March 2016), 170
Metalclad Corp v. United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (30 August
2000), 236
212
MNSS B.V. and Recupero Credito Acciaio N.V. v. Montenegro, ICSID Case No. ARB(AF)/12/8,
Award (4 May 2016), 15, 43, 97
Mohammad Ammar Al-Bahloul v. Republic of Tajikistan, SCC Case No. V064/2008, Partial
Award on Jurisdiction and Liability (2 September 2009), 48, 67
MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7,
Award (25 May 2004), 20, 37
MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7,
Decision on Annulment (21 March 2007), 236
Noble Energy Inc. and MachalaPower Cía. Ltd. v. Republic of Ecuador and Consejo Nacional
de Electricidad, ICSID Case No. ARB/05/12, Decision on Jurisdiction (5 March 2008), 34
Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award (12 October 2005), 27, 70
Nykomb Synergetics Technology Holding AB v. Republic of Latvia, SCC Arbitral Award (16
December 2003), 113
OAO Tatneft v. Ukraine, UNCITRAL, Award on the Merits (29 July 2014), 20, 105
Oko Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. The Republic of Estonia,
ICSID Case No. ARB/04/6, Award (19 November 2007), 236
Pantechniki S.A. Contractors & Engineers (Greece) v. The Republic of Albania, ICSID Case No.
ARB/07/21, Award (30 July 2009), 264
Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award (11
September 2007), 19, 125
Peter A. Allard v. Government of Barbados, UNCITRAL, Award (27 June 2016), 77
Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental
Republic of Uruguay, ICSID Case No. ARB/10/7, Decision on Jurisdiction (2 July 2013), 14
Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award (15 April 2009),
14
Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award (27
August 2008), 106
PNG Sustainable Development Program Ltd. v. Independent State of Papua New Guinea,
ICSID Case No. ARB/13/33, Decision on Respondent’s Objections under Rule 41(5) (28
October 2014), 286, 304
PNG Sustainable Development Program Ltd. v. Independent State of Papua New Guinea,
ICSID Case No. ARB/13/33, Award (5 May 2015), 284
P 338
Poštová banka, a.s. and Istrokapital SE v. Hellenic Republic, ICSID Case No. ARB/13/8,
Award (9 April 2015), 15
Robert Azinian, Kenneth Davitian & Ellen Baca v. United Mexican States, ICSID Case No.
ARB(AF)/97/2, Award (1 November 1999), 103
Romak S.A. (Switzerland) v. The Republic of Uzbekistan, UNCITRAL, PCA Case No. AA280,
Award (26 November 2009), 15
RosInvestCo UK Ltd. v. Russian Federation, SCC Case No. V079/2005, Final Award (12
September 2010), 102, 103
Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of
Kazakhstan, ICSID Case No. ARB/05/16, Award (29 July 2008), 105
Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on
Jurisdiction and Recommendation on Provisional Measures (21 March 2007), 246
Saipem S.p.A. v. The People’s Republic of Bangladesh, ICSID Case No. ARB/05/07, Award (30
June 2009), 20
Saint-Gobain Performance Plastics Europe v. Bolivarian Republic of Venezuela, ICSID Case
No. ARB/12/13, Decision on Liability and the Principles of Quantum (30 December 2016),
184
Salini Costruttori SpA and Italstrade SpA v. Kingdom of Morocco, ICSID Case No. ARB/00/4,
Decision on Jurisdiction (23 July 2001), 14
Sanum Investments Limited v. The Government of The Lao People’s Democratic Republic,
UNCITRAL, PCA Case No. 2013-13, Decision on Jurisdiction (13 December 2013), 3
Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v.
Government of Mongolia, Award on Jurisdiction and Liability (28 April 2011), 18, 21, 69
SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No.
ARB/01/3, Decision of the Tribunal on Objections to Jurisdiction (6 August 2003), 39, 243
SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No.
213
ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction (29 January 2004), 39
Sistem Muhendislik Insaat Sanayi ve Ticaret A.S. v. Kyrgyz Republic, ICSID Case No.
ARB(AF)/06/1, Award (9 September 2009), 102
State General Reserve Fund of the Sultanate of Oman v. Republic of Bulgaria, ICSID Case
No. ARB/15/43, 283
Southern Pacific Properties (Middle East) Limited v. Egypt, ICSID Case No. ARB18413, Award
(20 May 1992), 238
Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del
Agua S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Decision on Liability (30 July
2010), 64
Swisslion DOO Skopje v. The Former Yugoslav Republic of Macedonia, ICSID Case No.
ARB/09/16, Award (6 July 2012), 102
Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB
(AF)/00/2, Award (29 May 2003), 236
P 339
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Argentine
Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction (21 December 2012), 34
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The
Argentine Republic, ICSID Case No. ARB/09/1, Award (21 July 2017), 126
Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15,
Award (13 September 2006), 283
The Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/06/3, Award (6 May 2013), 104
Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/01, Decision on Objections to
Jurisdiction (25 August 2006), 56
Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability (27
December 2010), 64
Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon, ICSID Case No. ARB/07/12,
Decision on Jurisdiction (11 September 2009), 161
Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon, ICSID Case No. ARB/07/12,
Award (7 June 2012), 162
Tradex Hellas S.A. v. Republic of Albania, ICSID Case No. ARB/94/2, Award (29 April 1999),
128
Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No.
ARB/11/28, Award (10 March 2014), 33
Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No.
ARB/11/28 Decision on Annulment (30 December 2015), 48
UAB E energija (Lithuania) v. Republic of Latvia, ICSID Case No. ARB/12/33, Award (22
December 2017), 28
Ulysseas, Inc. v. The Republic of Ecuador, UNCITRAL, Interim Award (28 September 2010),
para. 154, and Final Award (12 June 2012), 85
United Parcel Service of America Inc. v. Government of Canada, UNCITRAL, Award on the
Merits (24 May 2007), 23, 165
Victor Pey Casado and President Allende Foundation v. Republic of Chile, ICSID Case No.
ARB/98/2, Award (8 May 2008), 14
Vigotop Limited v. Hungary, ICSID Case No. ARB/11/22, Award (1 October 2014), 154
Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No.
ARB/05/15, Award (1 June 2009), 33
Waste Management Inc. v. United Mexican States [II], ICSID Case No. ARB(AF)/00/3, Final
Award (30 April 2004), 84, 110
Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award (8
December 2000), 42
White Industries Australia Limited v. The Republic of India, Final Award (30 November 2011),
20, 203
William Nagel v. The Czech Republic, SCC Case No. 049/2002, Final Award (9 September
2003), 253
William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and
Bilcon Delaware Inc. v. Government of Canada, PCA Case No. 2009-04, Award on Jurisdiction
and Liability (17 March 2015), 49, 111
P 340
214
Windstream Energy LLC v. Government of Canada, PCA Case No. 2013-22, Award (27
September 2016), 168
WNC Factoring Limited v. The Czech Republic, UNCITRAL, PCA Case No. 2014-34, Award (22
February 2017), 158
Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case No. AA
227, Hulley Enterprises Limited (Cyprus) v. The Russian Federation, UNCITRAL, PCA Case No.
AA 226, Veteran Petroleum Limited (Cyprus) v. The Russian Federation, UNCITRAL, PCA Case
No. AA 228, collectively referred to as Yukos v. Russia, Final Award (18 July 2014), 222
Yuri Bogdanov and Yulia Bogdanova v. Republic of Moldova, SCC Case No. V091/2012, Final
Award (16 April 2013), 74
Other International Courts and Tribunals

Application of the Convention on the Prevention and Punishment of the Crime of Genocide
(Bosnia and Herzegovina v. Serbia and Montenegro), Judgment (26 February 2007), I.C.J.
Reports 2007, 43 (the Bosnian Genocide case), 63
Certain German Interests in Polish Upper Silesia, Merits, Judgment (25 May 1926) PCIJ Series
A, No. 7, 58
Elettronica Sicula S.p.A. (ELSI), United States of America v. Italy, Judgment (20 July 1989)
1989 ICJ Reports 15, 20
Hyatt International Corporation v. The Government of the Islamic Republic of Iran (1985)
Iran-U.S. Claims Tribunal Reports, vol. 9, 136
Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of
America), Merits, Judgment, I.C.J. Reports 1986, 193
Prosecutor v. Duško Tadic (the Tadic Case), International Tribunal for the Former
Yugoslavia, Case IT-94-1-A (1999), ILM, vol. 38, No. 6 (November 1999), 193
United States - Definitive Anti-Dumping and Countervailing Duties on Certain Products from
China - AB-2010-3 - Report of the Appellate Body, WT/DS379/AB/R (11 March 2011), 135, 137
P 340
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Document information Chapter 1: The State as an International Investment Law

§1.03 THE EVOLUTION OF INTERNATIONAL INVESTMENT LAW

§1.04 THE STATE AS AN INTERNATIONAL LAW SUBJECT

§2.03 STATE PARTICIPATION IN FOREIGN INVESTMENT RELATIONSHIPS

[A] The Regulatory Function

[B] The Executive Function

[C] The Judicial Function

[D] Other State Activities

[E] State Enterprises

where the operation of a State enterprise is at the core of an international

§3.03 THE DEFINITION AND ROLE OF ATTRIBUTION

§3.04 THE USES OF ATTRIBUTION IN INTERNATIONAL INVESTMENT LAW

[B] Specific Uses of Attribution in International Investment Law

§3.05 COMMON PRACTICE OF ATTRIBUTION IN INTERNATIONAL INVESTMENT

[B] The General Attribution Rules in the Investor-State Context

[3] ILC Article 7: Excess of Authority or Contravention of Instructions

[C] Lex Specialis

§4.03 THE ATTRIBUTION OF LAWFUL CONDUCT

§4.04 THE ATTRIBUTION OF CLAIMS BY STATE ENTERPRISES

§5.02 ATTRIBUTION AS A CONDITION OF STATE RESPONSIBILITY

§5.03 STATE ORGANS

[B] The Connecting Factors for a State Organ

persons, groups of persons or entities may, for purposes of international

[C] De Jure State Organs

[d] The Armed Forces and Police

[c] Enforcement Agents

[d] Other Persons or Entities Involved in a Judicial Process

[D] De Facto Organs: The Actual Degree of Autonomy

Latvenergo held a dominant position as a major domestic producer of electric

[the Provisional National Defence Council] Co-ordinating Secretary may, after

[E] Political or Administrative Subdivisions

[F] Acting in Official Capacity

§5.04 STATE INSTRUMENTALITIES

Public corporations were characterized by their specific, rather than general,

[B] The Scope of Governmental Authority

[C] State Agencies and State Enterprises

[7] Contractual and Sovereign Powers

[14] The Attribution of the Conduct of Private Entities

§5.05 STATE ORGANS AND INSTRUMENTALITIES ACTING ULTRA VIRES OR IN

[B] The Application of the Rule in the Investment Arbitration Jurisprudence

§5.06 CONDUCT DIRECTED OR CONTROLLED BY A STATE

[B] The Application of the Rule in the Investment Arbitration Jurisprudence

[4] Governmental Authority and Effective Control

Discuss with PDVSA the purchase of the Proppants produced and

§5.07 SUBSEQUENT ADOPTION OF CONDUCT BY A STATE

[B] The Application of ILC Article 11 in the Investment Arbitration Jurisprudence

§5.08 OTHER GROUNDS OF ATTRIBUTION

1048) UPS v. Canada, para. 68.

§6.02 ATTRIBUTION AND THE CONCEPT OF LEGITIMATE EXPECTATIONS

[B] The Attribution of Representations in the Investment Arbitration Jurisprudence

§6.03 ATTRIBUTION OF CONTRACTUAL UNDERTAKINGS

[B] Merits Issues

§6.04 THE ATTRIBUTION OF FACTUAL CIRCUMSTANCES

[B] Knowledge of the Conduct of State Actors

[C] Knowledge of the Conduct of Non-State Actors

§7.02 THE ATTRIBUTION OF CLAIMS UNDER THE ICSID CONVENTION

[B] The Attribution of Claims in the ICSID Jurisprudence