The Function of Equity in International Law 0198868006, 9780198868002

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The Function of Equity in International Law

The Function of Equity in International Law C AT HA R I N E T I T I

1

3 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Aikaterini Titi 2021 The moral rights of the author have been asserted First Edition published in 2021 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2021931973 ISBN 978–​0–​19–​886800–​2 DOI: 10.1093/​oso/​9780198868002.001.0001 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

For Mum and Dad

Foreword Aequitas soror iuris. If equity is the sister of the law, she is a much-​neglected sibling. Only rarely does equity step out of the shadow of the law to make an independent appearance. Most of the time, equity is seen as a natural attribute of the law that does not require much attention. But equity has a far more active life than would appear at first sight. Equity is hidden and yet ubiquitous. It influences legislators as well as adjudicators. Both are driven by considerations of equity. The legislator strives to make laws that are equitable in the sense of distributive justice. The adjudicator attempts to make decisions that are not merely correct but also just. It is no coincidence that the Latin aequitas stands not just for equity but also for equanimity. Our conscience demands equity. Fairness is essential for our peace of mind. Sometimes equity is in a state of tension with the strictures of the law. Roman law developed a separate body of law the ius honorarium or ius praetorium to soften the rigidity of the ius civile. Over time, the two bodies of rules merged, and their separate existence disappeared. Similarly, in English law, the Court of Chancery supplemented and softened the inflexible common law and statute law through the development of equity. In both these systems, equity was ultimately absorbed into the mainstream of the law. International law is a relatively young discipline and its relationship to equity appears still unsettled. Concepts like equity contra legem and the exceptional power of tribunals to decide ex aequo et bono appear to juxtapose law and equity suggesting their separate existence. International courts and tribunals have been bashful and cautious about relying on equity. They do refer to equitable considerations, but only sparingly. Authorisations to decide ex aequo et bono are seldom given and even where they exist, tribunals are reluctant to make full use of them. A closer look, however, reveals that equity plays a central role in international law. In some areas of international law, equity has traditionally been dominant. Equitable considerations have for some time governed the calculation of damages, although there is a clear trend towards specific rules. The requirement to state detailed reasons reinforces this trend. Maritime delimitation depends in large measure on equity, although the jurisprudence of the ICJ

viii Foreword shows an increasing dependence on consistent methods. These methods are in the process of solidifying into recognised rules. Some of the equitable innovations of the past are in the process of becoming hard law. Some developments in the field of international law are driven by equitable considerations. One example is the demand for a New International Economic Order, especially when it comes to the distribution of natural resources and the common heritage of mankind principle. Other examples are the evolving law governing cultural heritage and international waterways. In a wider sense, the development of international human rights goes back to considerations of justice and equity. The standard of fair and equitable treatment in international investment law is a good illustration of the process of solidification of broad equitable principles into specific rules of law. Over a relatively short period of time, tribunals have given concrete meaning to this precept, developing several specific standards such as the requirements to protect legitimate expectations, to guarantee procedural fairness, and to desist from coercion, harassment, and discrimination. Catharine Titi’s monograph is the first systematic and comprehensive study of the role of equity in contemporary international law. She diagnoses three major functions of equity: equity as corrective justice, equity as distributive justice, and equity as supplementary justice. The first category is designed to correct injustice that would otherwise result from the strict application of the law. Often this can be achieved by selecting from a range of available options. Distributive justice looks at the allocation of resources and the distribution of benefits and burdens. Supplementary justice essentially serves the filling of gaps. At the same time, she discards the traditional triad of equity infra, praeter, and contra legem. Not only are the boundaries between these categories fluid. Most importantly, all types of equity are elements of the law and, consequently, equity contra legem is a contradiction in terms. The central theme of this book is that equity is part of international law. It is a general principle of international law of a customary law nature. At the same time, equity is one of the most important sources of international law. Equity permeates international law and is inherent in its sound application. It is part of the jurisprudence constante of international courts and tribunals. Several norms that are obvious manifestations of equity have become well-​ established parts of international law. Examples are the principles of equality, reasonableness, estoppel, acquiescence, good faith, unjust enrichment, the clean hands doctrine, the prohibition of abuse of rights, and proportionality. To these, one may add the principles of humanity, respect for life, and human

Foreword  ix dignity. International courts and tribunals apply these equitable principles as part of the established body of international law, usually without invoking equity. Therefore, equity is not an extra-​legal concept. It does not stand in contrast to international law. Rather, it is part of the fabric of international law. It is a source of international law –​perhaps the source of international law: aequitas mater iuris. Christoph Schreuer

Acknowledgements Many people have supported me in this book project. I would like to thank especially Charalampos Apostolidis, Freya Baetens, Joanne Gabrynowicz, Anastasios Gourgourinis, Ted Gleason, Clifford Hendel, August Reinisch, Calliope Sudborough, Christian Tams, Tullio Rodolfo Treves, and Frans von der Dunk for taking the time to consider, review, and discuss different parts of the book. I am particularly indebted to Christoph Schreuer for his generous support and counsel and to Attila Tanzi for encouraging me to turn to the sources of international law, for his support, advice, and thoughtful comments throughout this project. From Oxford University Press, I am grateful to Emma Collison, Elissa Connor, Libby Holcroft, and Arokia Anthuvan Rani and, in particular, to my wonderful editors, Merel Alstein and Jack McNichol.

Contents Abbreviations 

xvii

1. Introduction 

I. Equity in International Law  A. The Concept of Equity  B. Equity, Law, and Justice 

1

1 1 3

II. Scope of the Book 

6

III. Outline of the Book 

11

A. Overall Purpose  B. Coverage of International Courts and Tribunals 

6 8

PA RT I   P R E L I M I NA RY M AT T E R S 2. Origins of Equity 

17

3. Equity before International Courts and Tribunals 

29

I. Introduction  II. Greek and Roman Law Origins: From Aristotle to Cicero  III. From the Middle Ages to the Late Modern Period  IV. Equity in English Law  V. Later Development  VI. Conclusions  I. Introduction  II. Mixed Claims Commissions and Early Arbitration Tribunals  III. The Permanent Court of International Justice  IV. The International Court of Justice 

A. Maritime Delimitation and Allocation of Maritime Resources  B. The Barcelona Traction Case: A Missed Opportunity? 

17 18 23 24 27 28 29 30 37 38 39 50

V. The International Tribunal for the Law of the Sea  VI. Interstate Arbitration 

58 59

VII. Conclusions 

65

A. The Rann of Kutch Case  B. The Anglo-​French Continental Shelf Case  C. Later Cases 

60 61 63

xiv Contents

PA RT I I   E QU I T Y I N G E N E R A L 4. The Purpose of Equity 

I. Introduction: ‘The way is equity, the end is justice’  II. Equity as Corrective Justice  A. Equity as Individualised Justice  B. Softening Law’s Rigidity 

69

69 70 71 74

III. Equity as Distributive Justice 

76

IV. Equity as Supplementary Justice  V. Conclusions 

82 83

A. Allocation of Resources, Distribution of Benefits and Burdens  B. The Common Heritage of Mankind  C. Intergenerational Equity  D. Equitable Representation 

77 79 80 81

5. Traditional Typology of Equity 

84

A. Equity infra legem  B. Equity praeter legem  C. Equity contra legem 

85 87 91

I. Introduction  II. Three Kinds of Equity 

III. The Limitations of the Traditional Typology  IV.  Antigone’s Law  V. Revisiting Equity contra legem  VI. Conclusions 

6. Power to Resort to Equity 

I. Introduction  II. Equity and Law  III. A Principle and a Rule  IV. Equity as a Source of Law 

A. Treaty Law  B. Customary International Law  C. General Principles of Law  D. Customary International Law Revisited: General Principles of International Law 

V. Conclusions 

84 85

92 99 101 103

104

104 105 108 113 114 122 128 132

135

PA RT I I I   SP E C I F IC A SP E C T S O F E QU I T Y 7. Jurisdiction ex aequo et bono  I. Introduction  II. International Courts  III. Interstate Arbitration 

139

139 142 145

Contents  xv IV. International Investment Arbitration 

A. Investment Law’s ex aequo et bono Decisions  B.  Ex aequo et bono as a Ground for Annulment 

V. For What Types of Disputes Is ex aequo et bono Appropriate?  VI. Compatibility with the Judicial Function  VII. Conclusions 

147 147 151

154 158 159

8. Variations on Equity and Related Concepts 

161

9. Equity, Compensation, and Costs 

185

I. Introduction  II. Equality  III. Reasonableness  IV. Estoppel  V. Acquiescence  VI. Good Faith  VII. Unjust Enrichment  VIII. The Clean Hands Doctrine  IX. Abuse of Rights  X. Proportionality  XI. Conclusions  I. Introduction  II. Compensation  III. Costs 

A. Allocation of Costs  B. Security for Costs 

IV. Conclusions 

161 162 163 165 168 171 173 174 178 181 184 185 186 193 194 195

198

10. Conclusion 

199

Index 

203

Abbreviations AFDI AJCL AJIL ARIEL ASDI AU ILR BIT BYIL CETA

Annuaire français de droit international American Journal of Comparative Law American Journal of International Law Austrian Review of International and European Law Annuaire suisse de droit international American University International Law Review Bilateral investment treaty British Yearbook of International Law Comprehensive Economic and Trade Agreement between the European Union and its Member States and Canada CJEU Court of Justice of the European Union CJTL Columbia Journal of Transnational Law CLJ Cambridge Law Journal CPTPP Comprehensive and Progressive Agreement for Trans-​Pacific Partnership between the European Union and Canada CUP Cambridge University Press DRC Democratic Republic of the Congo Duke JCIL Duke Journal of Comparative & International Law ECHR European Court of Human Rights EJIL European Journal of International Law FCN Friendship, commerce and navigation HUP Harvard University Press IAReporter Investment Arbitration Reporter ICC International Criminal Court ICJ International Court of Justice ICLQ International & Comparative Law Quarterly ICLR International Community Law Review ICPRCP Intergovernmental Committee for Promoting the Return of Cultural Property to its Countries of Origin or its Restitution in case of Illicit Appropriation ICSID International Centre for Settlement of Investment Disputes ICSID Convention Convention on the Settlement of Investment Disputes between States and Nationals of Other States IJCP International Journal of Cultural Property ILA International Law Association ILC International Law Commission ILJ International Law Journal

xviii Abbreviations ILO ILR Intl ITLOS IUSCT IYHR JIDS JIL JILP JWIT LCIA LJ LJIL LRev MaxPlanckEPIL NAFTA OECD OJLS OUP PACER Plus PCA PCIJ QUTLJJ RBDI RIAA SCC U UN UNCITRAL UNCLOS UNCTAD UNECE UNESCO UNGA UNIDROIT USMCA VCLT VJIL WTO YB

International Labour Organization International Law Reports International International Tribunal for the Law of the Sea Iran-​US Claims Tribunal Israel Yearbook on Human Rights Journal of International Dispute Settlement Journal of International Law Journal of International Law & Policy or Politics Journal of World Investment & Trade London Court of International Arbitration Law Journal Leiden Journal of International Law Law Review Max Planck Encyclopedia of Public International Law North American Free Trade Agreement Organisation for Economic Co-​operation and Development Oxford Journal of Legal Studies Oxford University Press Pacific Agreement on Closer Economic Relations Plus Permanent Court of Arbitration Permanent Court of International Justice Queensland University Technology Law & Justice Journal Revue belge de droit international Reports of International Arbitral Awards Stockholm Chamber of Commerce University United Nations United Nations Commission on International Trade Law United Nations Convention on the Law of the Sea United Nations Conference on Trade and Development United Nations Economic Commission for Europe United Nations Educational, Scientific and Cultural Organization United Nations General Assembly International Institute for the Unification of Private Law United States-​Mexico-​Canada Agreement Vienna Convention on the Law of Treaties Virginia Journal of International Law World Trade Organization Yearbook or Year Book

1 Introduction I.  Equity in International Law A.  The Concept of Equity Few legal concepts have sustained heated controversy and impassioned debate over such protracted periods of time. But equity has spanned the ages both serving as a torchlight in the quest for justice and breeding disagreement. Expression of the maxim summum ius, summa iniuria,1 protean and chameleon-​like, equity takes different shapes in the eye of the beholder. Agreement about its semantic content is obtained only at a high level of abstraction and defining it can prove an insuperable challenge. Almost nowhere is equity used with the exact same meaning. Equity is that which is ‘fair and reasonable in the administration of justice’;2 it is the instillation of reasonableness and good faith in legal relations;3 an attribute of a developed legal system;4 an ‘agent of legal change’;5 and ‘an element in the progressive development of international law’.6 A ‘direct emanation of the idea of justice’,7 equity requires a balancing of competing interests;8 it encompasses a body of legal principles ‘designed to critique the law’ and to encourage fairness in international relations.9 It is what is ‘fair and just’, ‘an element of law’ that ushers ‘ethical values into the legal norms’.10 It is ‘justice normatively expressed as law’.11 Equity also 1 Cited in Cicero, De Officiis, Book I, 33. 2 Francesco Francioni, ‘Equity in International Law’ (2013) MaxPlanckEPIL, para 1. 3 Georg Schwarzenberger, ‘Equity in International Law’ (1972) YB World Affairs 346, 347. 4 ibid (‘The movement from primitive and archaic legal systems to mature and developed legal systems tends to be accompanied by a change in emphasis from jus strictum to jus aequum’). 5 Henry Sumner Maine, Ancient Law (16th edn, John Murray 1897) 44. 6 Francioni, ‘Equity’ (n 2) para 29. 7 Continental Shelf (Tunisia/​Libya) (Judgment) [1982] ICJ Rep 18 [71]. See also Continental Shelf (Libya/​Malta) (Judgment) [1985] ICJ Rep 13 [45]; Norwegian Shipowners’ claims (Norway v United States) (1922) 1 RIAA 307, 331. 8 Hugh Thirlway, The International Court of Justice (OUP 2016) 28. 9 Thomas Franck, ‘Fairness in the International Legal and Institutional System’ (1993) 240 Recueil des Cours 9, 62. 10 Ralph Newman, ‘Introduction’ in Ralph Newman (ed), Equity in the World’s Legal Systems (Bruylant 1973) 15. 11 Anastasios Gourgourinis, ‘Delineating the Normativity of Equity in International Law’ (2009) 11 ICLR 327, 346. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0001

2 Introduction refers to the power conferred on certain courts and tribunals to decide a dispute ex aequo et bono without necessary reference to legal norms.12 Equity can be all that, and yet none of these descriptions captures the fulcrum of what equity is. Antinomies are observed13 and only the most munificent reading can push beyond such disparate understandings and focus on the content of equity. Partly because of the uncertainty that surrounds it, the use of equity has been accompanied by statements of caution. An identified potential problem, a whiff of judicial discretion exercised at the expense of legal certainty, has made the international judiciary wary about invoking it too often. International courts have trod circumspectly around equity, at least outside disputes concerning maritime boundaries and to some extent the allocation of scarce resources. When they do refer to it, they are at pains to stress that what they apply is equity within the law.14 Sometimes, they prefer not to address it, although the disputing parties raise it in their pleadings.15 Ex aequo et bono adjudication on the basis of Article 38(2) of the Statute of the International Court of Justice (ICJ) –​and its predecessor, Article 38 of the Statute of the Permanent Court of International Justice (PCIJ) –​has notoriously never been used: the political connotations of an ex aequo et bono mandate were said to threaten to diminish the authority of the Court’s judicial function.16 Ian Brownlie’s vehement denunciation of equity still resounds decades after it was pronounced: ‘Whatever the particular and interstitial significance of equity in the law of nations, as a general reservoir of ideas and solutions for sophisticated problems it offers little but disappointment.’17 Such an understanding of equity is disappointing indeed. Whatever its real or perceived failings, equity permeates the fabric of international law. Inherent feature of this law, it is present in the reasoning of international courts and tribunals, sometimes called by its proper name and sometimes cloaked under its aliases and variations: good faith, reasonableness, 12 Francioni, ‘Equity’ (n 2) para 1. 13 For instance, to canvass equity as ‘an element of law’ and to state that equity is ‘designed to critique the law’ points to two different understandings of the relationship between equity and law. This topic is discussed in ch 6, section II Equity and Law. 14 See ch 5. 15 Eg see Obligation to Negotiate Access to the Pacific Ocean (Bolivia v Chile) (Judgment) [2018] ICJ Rep 507 [44], [73], where both Chile and Bolivia invoked equity to buttress their respective position. In the Memorial of the Bolivian Government (17 April 2014) vols I–​II, pts I–​II, the term ‘equity’ and its derivatives appeared no less than 43 times. However, equity’s relevance to each and every case must not be taken for granted. In casu, the ICJ did discuss equitable principles underlying the respective arguments, notably acquiescence and estoppel, Judgment, [149]–​[159]. 16 Markus Kotzur, ‘Ex Aequo et Bono’ (2009) MaxPlanckEPIL, para 7; ch 7, section VI Compatibility with the Judicial Function. 17 Ian Brownlie, ‘Legal Status of Natural Resources in International Law (Some Aspects)’ (1979) 162 Recueil des Cours 247, 288.

Equity in International Law  3 clean hands, unjust enrichment, proportionality, estoppel, fair and equitable treatment, equitable sharing –​to name but a few. Despite an apparent disinclination to expressly rely on equity, its reach stretches well beyond the boundaries of maritime delimitation and the allocation of resources. But this simple truth often goes unnoticed. From international cultural heritage law to environmental law, from judgments on transboundary disputes to procedural decisions on security for costs in investment arbitration, the relevance of equity is more far-​reaching than has previously been conceded. Moreover, as the importance of international law increases, continuously covering new domains, the value of equity increases with it. Equity influences international law at its ‘formative stage’,18 it infuses it during its lifetime, such as through treaty amendment, and it intervenes when international law is applied.19 New equity is continually incorporated in legal norms, it ‘is a stage in the growth of law’.20 As equity becomes embedded in legal norms, it loses some of its flexibility and new equity is still necessary. That said, equity is also needed where international law is the least developed. Examples include the incipient international law on food security and health21 and, in environmental law, the legal framework going forward on climate change. Resort to equity can further mark an absence of regulation and serve to identify the need for an enabling legal framework to guide the international judiciary in decision-​making. And so long as much of international law remains a blank slate, and new areas are yet to be regulated, equity has a place and a role to play. It is this new function of equity in the international law of the 21st century that this book explores.

B.  Equity, Law, and Justice One of the most controverted discussions about equity, and one that remains at the core of this book, concerns the relationship between equity, law, and justice. The bulk of this debate has focused on the binomials ‘law and justice’, ‘equity and justice’, and ‘law and equity’. While the first binomial, ‘law and justice’, is

18 Francesco Francioni, ‘Compensation for Nationalisation of Foreign Property’ (1975) 24(2) ICLQ 255, 256. 19 ibid. 20 Roscoe Pound, ‘The Decadence of Equity’ (1905) 5(1) Columbia LRev 20, 21. 21 To this effect, UN General Assembly (UNGA) Res 74/​274 (20 April 2020) UN Doc A/​RES/​74/​ 274, issued in the thick of the COVID-​19 pandemic, provides for equitable access to, inter alia, health products, preventive tools, laboratory testing, medical supplies, drugs, and vaccines, and sets targets for research and development funding, international scientific cooperation and coordination, while ‘adhering to the objectiv[e]‌of . . . equity’, recitals, paras 2–​3.

4 Introduction mostly beyond the scope of this book, ‘equity and justice’ and ‘law and equity’ provide the backbone for its narrative and are the focus of dedicated parts. A few introductory words are apposite at this point. As to the first pair, ‘law and justice’, the Charter of the United Nations, of which the Statute of the ICJ is an integral part, states that one of the purposes of the United Nations is ‘to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations that might lead to a breach of the peace’.22 The Preamble to the Charter refers to the establishment of ‘conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained’.23 But the hendiadys of international law and justice has given some scholars reason to pause and somewhere along the line it has begged the question of whether justice, on the one hand, and treaty law or obligations arising from other sources of international law, on the other, are two distinct animals. Hans Kelsen argued that to announce respect for justice and international law simultaneously is problematic.24 Either ‘justice’ and ‘international law’ are the same, in which case one of the two is superfluous, or they are not. If they are not, which seems more credible, there can be situations in which the one may oppose the other.25 Kelsen deduced that the organs of the United Nations called upon to apply such provisions would be able to choose between international law and justice; this would weaken respect for international law.26 Nonetheless, the precept or obligation is directed among others to the ICJ, as the ‘principal judicial organ of the United Nations’.27 Article 38(1) of the Statute of the ICJ enjoins the Court to decide ‘in accordance with international law’ but is agnostic about ‘justice’.28 Since ‘justice’ is not listed in Article 38 of the Statute, would that mean that for the Court international law always trumps justice?29 The dilemma points to a high degree of sophistication in the philosophy of law but may have little practical significance. As a way of solving it, and in accordance with an interpretative presumption against normative conflict,30 it has been suggested that law and justice are two parts of a triad, of which the 22 UN Charter art 1(1). See also art 2(3) (‘All Members shall settle their international disputes by peaceful means in such a manner that international peace and security, and justice, are not endangered’). 23 Emphasis added. 24 Hans Kelsen, The Law of the United Nations (Lawbook Exchange 1950, 2000) 16–​17. 25 ibid 17–​18. 26 ibid 18. 27 UN Charter art 92. 28 Kelsen (n 24) 365–​366. 29 This view was criticised in Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Weeramantry) [1993] ICJ Rep 211 [97]–​[98] (‘Such views, with great respect, do not take into account the fact that much of international law already embodies equity’). 30 Robert Kolb, The Law of Treaties (Edward Elgar 2016) 183.

Equity in International Law  5 third part is equity.31 Indeed sometimes law, equity, and justice are mentioned simultaneously.32 It is possible that international law and justice need not be in opposition to each other and the introduction of equitable principles in the application of international law can ensure respect for both. According to Shabtai Rosenne, no opposition can be admitted between ‘justice’ and ‘obligations arising from treaties and other sources of international law’ ‘for what we have is a “monad” of equity, law and justice’.33 But the unity, if unity it is, of justice, law, and equity tells us little about how to do justice, how to apply the law (and equity), if in a concrete case there is a conflict between them. Is an application in tandem always possible? Turning to the second binomial, the close relationship between ‘equity’ and ‘justice’ has been repeatedly observed. It goes back to the Aristotelian legacy of distinguishing between different types of justice and the discussion of equity as corrective, distributive, and supplementary justice.34 The purpose of equity is to do justice. Justice is the rationale of equity and its ethical foundation. The ICJ has remarked that it must apply equity because it is its duty to administer justice,35 although such justice must be in accordance with the rule of law.36 Equity then is the link that tethers international law to justice. The relationship between equity and justice is addressed in Chapter 4. But probably the most formidable challenge is posed by the relationship between ‘law’ and ‘equity’. According to a well-​known aphorism, if men were perfect, there would be no need for laws; if laws were perfect, there would be no need for equity.37 If one is to rely on this statement, then equity may at first 31 Louis Sohn, ‘The Role of Equity in the Jurisprudence of the International Court of Justice’ in Bernard Dutoit and Etienne Grisel (eds), Mélanges Georges Perrin (Payot 1984) 304. 32 Eg Tunisia/​Libya (n 7) [71]; North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3 [88]; Barcelona Traction, Light and Power Company (Separate Opinion Fitzmaurice) [1970] ICJ Rep 64 [36]. For an earlier example, see Aroa Mines, Mixed Claims Commission (Great-​Britain-​Venezuela) (merits) (1903) 9 RIAA 402, 445. See also Treaty of Amity, Commerce and Navigation between his Britannick Majesty and the United States of America (19 November 1794) (Jay Treaty) art 7, according to which claims should be decided according to ‘Justice, Equity and the Laws of Nations’. See further Emer de Vattel, The Law of Nations (6th American edn, Johnson 1844); Hersch Lauterpacht, Private Law Sources and Analogies of International Law (Longmans, Green & Co 1927) 63–​67; Sohn, ‘Role of Equity’ (n 31) 305–​306, n 7; Louis Sohn, ‘The Function of International Arbitration Today’ (1963) 108 Recueil des Cours 1, 43; Eric Agostini, ‘L’équité’ (1978) (Chronique II) Recueil Dalloz-​Sirey 7, 8; Bin Cheng, ‘Justice and Equity in International Law’ (1955) 8 Current Legal Problems 185, 211; William Bishop, ‘Sources of International Law’ (1965) 115 Recueil des Cours 148, 246; Gourgourinis, ‘Normativity of Equity’ (n 11) 346. 33 Shabtai Rosenne, ‘The Position of the International Court of Justice on the Foundations of the Principle of Equity in International Law’ in An International Law Miscellany (Martinus Nijhoff 1993) 204. 34 See ch 4. 35 Tunisia/​Libya (n 7) [71]. 36 Libya/​Malta (n 7) [45]. 37 Magdi Sami Zaki, ‘Définir l’équité’ (1990) 35 Archives de philosophie du droit 87, 87.

6 Introduction appear to be distinct from law. But this leaves us in a different kind of quandary: is it really possible and theoretically sound to view equity as distinct from law? Is equity to be pressed into service to avoid compliance with the law? Can equity actually be applied contra legem? The Statute of the ICJ, as the Statute of the PCIJ before it, does not contemplate the application of equity as distinct from law;38 equity itself is not listed as a source of law in Article 38 of the Statute. The ICJ has felt its way cautiously, formulating its recourse to equity as fulfilling or supplementing the law rather than in terms of opposition to the law.39 This prophylactic approach did not preserve the ICJ from criticisms,40 and there are authors who discuss equity as distinct from the law.41 Whilst the opposition between equity and law can prove unpalatable on many a ground, different functions of equity are typically placed on a continuum between perfect identity with the law (infra legem) and effective departure from it (contra legem). For example, teleological interpretation that introduces equitable considerations can be seen as consonant with the law if its purpose is to reconcile the letter of the law with its spirit but it may also be seen as contra legem interpretation –​or as nonapplication of the law. However, this book argues that what is canvassed as a digression from the law is a departure from the mere letter of the law. Equity is a general principle of international law and as such it is applicable in international relations. The relationship between equity and law, and equity as a source of law, are assessed in Chapter 6. The book will leave aside the age-​old philosophical discussion about the relationship between law and justice but the relationship between equity and justice and, especially, law and equity is fundamental to any understanding of the function of equity in international law.

II.  Scope of the Book A.  Overall Purpose The book provides a systematic and comprehensive study of the role of equity in contemporary international law, while challenging some unquestioned assumptions about it. One of them is the common premise that equity is an 38 Diversion of Water from the Meuse (Netherlands v Belgium) (Individual Opinion Hudson) PCIJ Series A/​B No 70 (28 June 1937) [322]. 39 Rosenne (n 33) 204. 40 For the criticisms, see ch 3, section IV The International Court of Justice. 41 Eg Robert Jennings, ‘Equity and Equitable Principles’ (1986) XLII ASDI 27, 30.

Scope of the Book  7 extra-​legal concept operating at a remove from law –​or an appeal to natural justice –​a position that is disproved in this book. Since equity is polysemous and, as a form of particularised justice, circumstance-​specific and malleable, the book does not attempt to define it but explores the kinds of function that it assumes in international law. There is a common approach to equity across a number of international courts and tribunals and the book documents it for the first time in a detailed comparative setting. International law has never been so important. The body of judicial and arbitral case law is larger and more varied than it had been: while international adjudication is still concerned with land and maritime boundary delimitation, new disputes arise from conflicts relating to the distribution of wealth and the exercise of regulatory power within states.42 The boom of investor-​state disputes has produced a rich case law that tends to be ignored in public international law scholarship and has certainly not previously been considered in any general analysis of equity. Investment decisions can make an appreciable contribution to the development of international law, if only because of their sheer number and the variegated issues they address. The book draws extensively on this case law, especially in Part III. Furthermore, equitable considerations present in the reasoning of international courts and tribunals have been integrated in conventional law,43 and new avenues to the application of equity are opened constantly. The book covers a number of fields of public international law, including new fields of international law. Modern international law is increasingly concerned with ‘matters internal to the state’, such as the protection of the environment.44 Such new fields have generally been left outside the study of equity. Little is known for instance about equity in international space law or in international cultural heritage law. The book further questions the premise that equity is relevant only when called by its proper name and explores it even when camouflaged with its various manifestations. The tendency to disregard equity unless expressly mentioned has carved out of the field very significant developments in international law in the last forty years. It has also led to a fragmentation of our understanding of equity. For example, to regard the clean hands doctrine as part of equity is conducive to appreciably different exegeses of both the doctrine and equity than to consider that it is something apart. The book turns to such variations on equity.



42 James Crawford, ‘International Law and the Rule of Law’ (2003) 24(3) Adelaide LRev 3, 7. 43 See ch 6, section IV A Treaty Law. 44 Crawford (n 42) 7.

8 Introduction Ultimately, evolutions in international law mean that a set of contemporary issues have yet to be addressed. If earlier studies paid considerable attention to matters such as under what conditions and with what limitations international courts and tribunals invoked equity, the field has moved on. New questions abound, while some old questions remain unanswered. Does equity have a particular role in international law? Is equity distinct from law? Or is it a different kind of animal, displaying a different timbre; a predominantly interpretive element that belongs properly to the sphere of judicial discretion? Is application of equity compulsory or is it a mere appurtenance of such discretion? Can equity’s use or non-​use enter the pale of the law through masterful legerdemain? What role can distributive equity play in the context of climate change? In the end, are we too sophisticated to resort to equity45 or is it a necessary complement of the international legal system? The book provides answers to such questions, drawing new conclusions from issues that were thought to have been settled. That equity is both appropriate and necessary in international law is the overarching thesis of this book. Focusing on the legal concept that is equity, which it perceives as an imperative of justice, the book argues that international courts and tribunals are bound to apply it, since equity is a source of international law. For this reason, the book breaks with the traditional understanding of a type of equity that opposes the strict letter of the law and suggests that to speak of an equity contra legem is a contradiction in terms. By the same token, the book draws a clear distinction between the ex aequo et bono mandate and other applications of equity. Abuse is possible, but this is unrelated to equity; rather it is a corollary of international judicial and arbitral decision-​making. Equity’s relatively inconspicuous presence should not deceive; its application, in the law of the sea as in other fields of public international law, spans turbulent depths. It is the purpose of this book to explore these and provide a new perspective on equity.

B.  Coverage of International Courts and Tribunals This book is concerned with equity in international law. However, it does not purport to cover all of international law. It focuses on public international law and confines itself to equity in the practice of four types of international courts or tribunals: (1) the International Court of Justice and its forerunner the Permanent Court of International Justice; (2) adjudicative bodies under Part XV of the United

45 Alfred Denning, ‘The Need for a New Equity’ (1952) 5(1) Current Legal Problems 1, 8.

Scope of the Book  9 Nations Convention on the Law of the Sea (UNCLOS), notably the International Tribunal for the Law of the Sea (ITLOS); (3) claims commissions and interstate arbitration tribunals; and (4) investment arbitration tribunals, chiefly tribunals operating under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). The book has selected these courts and tribunals because they are broadly based on the same model and display appreciable commonalities in their approach to equity. Adjudicative bodies under (2) chiefly hew to the model of the ICJ. Without denying the differences between international courts and arbitral tribunals, similarities to the same model are observed, at least in part, in interstate arbitration tribunals and investment tribunals constituted under the ICSID Convention.46 For instance, the statutes of these courts and tribunals provide for adjudication ex aequo et bono if the parties so agree47 or, in the case of claims commissions and some early interstate tribunals, decision-​making in accordance with ‘absolute equity’.48 Interstate arbitral tribunals and in recent times arbitration tribunals have famously decided on the basis of an ex aequo et bono mandate, even if the ICJ, the PJIJ, and ITLOS have not. The book leaves outside its scope a number of other adjudicative bodies –​ and sub-​fields of international law –​that are worthy of study but that do not follow the same model. These include international criminal tribunals, regional human rights courts, the adjudicative organs of the World Trade Organization (WTO), and regional economic integration courts, such as the Court of Justice of the European Union (CJEU) and the Court of Justice of the Andean Community. Because of their subject-​matter, international criminal courts and regional human rights’ courts engage in different kinds of equitable considerations. These courts are focused on the individual. To be sure, some parallels exist between human rights courts and investment tribunals: for instance, both operate on the basis of international instruments that guarantee the protection of property to non-​state parties. However, their rationale is different. 46 Although the nature of investment arbitration as a public, private (ie commercial), or hybrid mode of dispute settlement is debated, according to Aron Broches, General Counsel of the World Bank from 1951 to 1979 and ‘principal architect’ of the ICSID Convention (Christoph Schreuer and others, The ICSID Convention: A Commentary (2nd edn, CUP 2009) 2), the Convention should be distinguished from commercial arbitration; ‘[t]‌he parallel if any lay with the International Court of Justice’, see ICSID, History of the Convention (vol 2 pt 1, 1968) 414, 423. 47 Eg ICJ Statute art 38(2); PCIJ Statute art 38(4); UNCLOS art 293(2); ICSID Convention art 42(3). On ex aequo et bono, see ch 7. 48 Eg Jay Treaty art 7; Spain-​United States Friendship, commerce and navigation (FCN) treaty (1795) art XXI; Convention between the United States, Germany, and Great Britain relating to Settlement of Samoan Claims (1899) art 1. This is also the case of Venezuelan mixed-​claims commissions established under the Washington Protocols, see ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals.

10 Introduction While human rights’ treaties are in a sense anthropocentric, the purpose of investment protections is to promote and protect foreign investment. That these courts are excluded from the book is in no way to deny the tremendous contributions their jurisprudence has made to equity and equitable considerations. Notably, the need for equity was to some extent quenched by the emergence of human rights law;49 and we owe much of our current understanding of proportionality to the development of this concept in the jurisprudence of the European Court of Human Rights. Proportionality is discussed in this book as a manifestation of equity. To an important extent equitable considerations before human rights courts, criminal courts, and even before WTO panels and the Appellate Body revolve around procedural equity, notably the notions of fair trial50 and due process.51 This book is properly interested in substantive equity, although some notions of procedural equity are touched upon52 when they cannot be clearly distinguished from substantive equity or for the sake of completeness of a particular discussion.53 Equity in the WTO itself has been the focus of a recent study.54 Finally, regional economic integration courts have been excluded because of their sui generis nature: although creatures of international law, these courts function essentially as domestic courts safeguarding an autonomous legal order.55

49 Thomas Cottier, ‘Equity in International Law’ in Thomas Cottier, Shaheeza Lalani, and Clarence Siziba (eds), Intergenerational Equity (Brill Nijhoff 2019) 18. 50 Eg David Weissbrodt and Rüdiger Wolfrum (eds), The Right to a Fair Trial (Springer 1997); Piero Leanza and Ondrej Pridal, The Right to a Fair Trial (Kluwer Law International 2014); Ryan Goss, Criminal Fair Trial Rights (Hart Publishing 2014); Catherine Namakula, Language and the Right to Fair Hearing in International Criminal Trials (Springer 2016). 51 Eg Anastasios Gourgourinis, Equity and Equitable Principles in the World Trade Organization (Routledge 2016) 94–​134; John Gaffney, ‘Due Process in the World Trade Organization’ (1999) 14(4) AU ILR 1173; Andrew Mitchell, ‘Due Process in WTO Disputes’ in Rufus Yerxa and Bruce Wilson (eds), Key Issues in WTO Dispute Settlement (WTO/​CUP 2005). 52 Eg in chs 2, 4, 8. 53 The distinction between substantive and procedural equity is not easy to draw. Eg in Jan Mayen (Weeramantry) (n 29) [25]–​[27], Judge Weeramantry viewed the fact that the Court takes a host of factors into account in delimiting maritime boundaries as an element of procedural fairness, and so procedural equity. 54 Gourgourinis, Equity (n 51). 55 Eg Catharine Titi, ‘Opinion 1/​17 and the Future of Investment Dispute Settlement: Implications for the Design of a Multilateral Investment Court’ in Lisa Sachs, Lise Johnson, and Jesse Coleman (eds), Yearbook on International Investment Law & Policy 2019 (OUP 2021); Ramses Wessel and Steven Blockmans (eds), Between Autonomy and Dependence (Asser 2013); Jenö Czuczai, ‘The Autonomy of the EU Legal Order and the Law-​Making Activities of International Organizations’ (2012) 31(1) YB of European Law 452; Bruno de Witte, ‘European Union Law: How Autonomous is its Legal Order?’ (2010) 65(1) Zeitschrift für öffentliches Recht 141; Gráinne de Búrca, ‘The European Court of Justice and the International Legal Order After Kadi’ (2010) 51(1) Harvard ILJ 1; Karen Alter and Laurence Helfer, Transplanting International Courts: The Law and Politics of the Andean Tribunal of Justice (OUP 2017) 106–​108.

Outline of the Book  11 Limiting the coverage of the book in this manner inevitably narrows the generality of its conclusions but it has the merit of permitting an in-​depth examination of equity as to the selected courts and tribunals and respective fields of international law. Occasional references will be made to the excluded courts but the latter will not be the focus of specific study.

III.  Outline of the Book The book is structured in the following manner. It consists of three parts and comprises ten chapters. Following this introduction, Part I entitled ‘Preliminary Matters’ introduces the topic of equity and places it in context. Chapter 2 canvasses the origins of equity. Our understanding of the modern concept of equity can be traced as far back as ancient Greece, and the writings of Aristotle. Subsequently, equity was relayed to Roman law, where it was for the most part associated with the ius honorarium developed by the praetor and other lesser magistrates. Later it formed part of canon law and pervaded progressively legal systems around the world. This chapter considers equity’s Greek and Roman law origins tracing a journey from Aristotle to Cicero, bridging these early years to the Middle Ages and the late modern period, and equity in English law. It completes the overview of the historical foundations of equity with later developments until the end of the 19th century. The purpose of the chapter is to show equity’s continuity in time and across legal systems, which serves as a stepping stone to the argument presented later in the book that equity is a source of international law. The chapter chronicles equity’s tendency to harden into strict law and explains that the distinct ways in which we make sense of equity owe something to its historical evolution in our respective legal systems. Ultimately, the chapter highlights equity’s trajectory from municipal legal systems to international law. Chapter 3 delves into equity before international courts and tribunals and studies the jurisprudential evolution of the concept. Equity was introduced in international decision-​making through claims commissions and early arbitration tribunals, whereupon it started to be incorporated in the jurisprudence of international courts. Today, equity in international law is often associated with judgments involving maritime boundary delimitation. Recourse to equitable considerations in this field evolved over time, hardening into something very much approaching a method of equitable delimitation. However, iconic a status though the treatment of equity in the delimitation of maritime boundaries may have reached, equity is relevant to all of international law. In effect, some of the

12 Introduction most interesting applications of equity have been made by interstate tribunals deciding other types of disputes. The chapter reviews ‘classic’ pronouncements on equity by international courts and tribunals and appraises this jurisprudential narrative that conditions how we perceive equity in international law. Part II surveys ‘Equity in General’. Chapter 4 explores the rationale and ethical foundations of equity in international law and suggests that the overarching purpose of equity is to do justice. The chapter considers in turn equity as corrective, distributive, and supplementary justice. Under the heading of corrective justice, it canvasses equity as individualised justice and as justice that tempers the rigour of law. Distributive justice is conceptualised in relation to the allocation of resources and the sharing of benefits and burdens, the common heritage of mankind, intergenerational equity, and equitable representation in the composition of international bodies. The chapter further studies the role of equity as supplementary justice, when legal rules are absent. The analysis exposes certain roles of equity as justice, notably equity as a corrective and as individualised justice, that inform the entire book and it reveals justice as the backbone and rationale for the broader need for equity. The traditional typology of equity is critically addressed in Chapter 5. Following an initial inquiry into the distinction between equity infra legem, praeter legem, and contra legem, the chapter turns to its limitations. It argues that, while this taxonomy offers a conceptual framework that can help us comprehend three roles that equity can assume, it remains a heuristic construct; strict divisions between different kinds of equity are unsustainable. In addition, the traditional breakdown of equity fails to account properly for the relationship between contra legem equity and law. Against this background, the chapter reviews a classic example of contra legem equity in Antigone and revisits the concept. It concludes that the most important flaw of the tripartite typology is that it does not account for the fact that equity may never truly function contra legem, since equity is an element of law. Chapter 6 documents the complex relationship between equity and international law building on the findings of the preceding chapter and analyses equity as a source of law. The thrust of its argument is that equity is a source of international law, which means that international adjudicators have the power to apply it. The chapter critically examines the position that equity may be perceived as distinct from international law. While conceding that the felicitous conjunction of law and equity is uniquely challenging, it suggests that equity can only be conceived as forming part of the law. To better frame this argument, the chapter outlines the different functions of equity as a principle and as a rule. This lays the groundwork for the discussion of equity as a source of

Outline of the Book  13 international law. The chapter commences this part of the analysis by considering equity expressly embedded in conventional law, notably in the law of the sea, in international water law, in international investment law, in environmental law, in international cultural heritage law, and in international space law. Subsequently, the chapter canvasses customary international law, general principles of law, and general principles of international law. It posits that equity is a source of international law, even when it is not laid down in treaty law. It is a general principle of international law of a customary law nature, having metamorphosed from a general principle of law through its repeated application by international courts and tribunals and reliance upon it by states in judicial and arbitral proceedings. Part III of the book addresses ‘Specific Aspects of Equity’. Chapter 7 opens the discussion with a study of the ex aequo et bono mandate found in a number of court statutes and arbitration rules, such as in Article 38(2) of the Statute of the ICJ and Article 42(3) of the ICSID Convention. The chapter reviews the unwillingness of disputing parties to submit to ex aequo et bono jurisdiction and the scepticism displayed by courts about using it. It contrasts this wariness with investment arbitration, which claims the few known decisions to have been rendered ex aequo et bono in contemporary public international law. Next, the chapter surveys the types of dispute for which ex aequo et bono decision-​ making is appropriate, such as cases where the international legal framework is incomplete or uncertain. Finally, the chapter refutes the contention that jurisdiction ex aequo et bono is incompatible with the judicial function. Overall, the chapter argues that the power to decide ex aequo et bono must not be conflated with equity that an international court or tribunal can apply anyway without the parties’ agreement and stresses that ex aequo et bono adjudication is legal adjudication. The experience with ex aequo et bono decisions testifies to tribunals’ reluctance to depart from positive law, although the uncertainty inherent in this type of decision-​making and the fact that it invites digressions from the legal rights of one of the parties make it likely that it will remain marginal. Chapter 8 analyses variations on equity and related concepts that originate in equity, including objections grounded in equity. In particular, the chapter studies equality, reasonableness, estoppel, acquiescence, good faith, unjust enrichment, the clean hands doctrine, abuse of rights, and proportionality. It suggests that some of these concepts, such as the clean hands doctrine and abuse of rights, can be seen as permissible applications of contra legem equity without the parties’ agreement –​with the caveat that equity cannot truly exist contra legem. The chapter reveals the extent to which equity is inherent in the reasoning of the international adjudicator and pervades international law.

14 Introduction The following chapter (Chapter 9) analyses recourse to equity when adjudicators determine compensation and decide on costs. Just as equitable considerations can inform a court or tribunal’s decision in the early phases of the adjudicatory process, so equity may have a role to play in fixing the amount of compensation, in allocating costs, and in deciding whether to grant security for costs, although its significance in this area is generally overlooked. The chapter commences by tracking equity in the reasoning of international courts and tribunals leading to the award of compensation. It continues with decisions relating to costs in investment arbitration. In particular, the chapter reviews equity in decisions on the apportionment of costs between the disputing parties and on security for costs, a provisional measure in whose application equitable considerations are noticeably prominent. Chapter 10 concludes the book and summarises its main findings.

PART I

PRE L IMINA RY M AT T E R S

2 Origins of Equity I. Introduction Our understanding of the modern concept of equity can be traced at least as far back as ancient Greece, although some accounts identify the presence of inchoate or rudimentary equitable principles in ancient Egypt and in the civilisations of the Tigris-​Euphrates basin since the 21st century BCE.1 Unlike early law, which was concerned with general human confrontations and was inflexible, as society’s focus began to shift to the individual, rules of law acquired some flexibility, which rendered them malleable in circumstances that digressed from the general rule.2 So it was that equity started to permeate the law. In Greece, equity was expressed by the term epieikeia (ἐπιείκεια),3 which properly translates as clemency and includes an element of moderation.4 The function of equity as we understand it today was articulated by Aristotle.5 The Romans talked of aequitas, which for the most part was associated with the ius honorarium developed by the praetor and other lesser magistrates.6 Aequitas in Roman law sometimes translates as ‘equality’,7 while clemency is given by

1 Neil Snyder, ‘Natural Law and Equity’ in Ralph Newman (ed), Equity in the World’s Legal Systems (Bruylant 1973) 34–​35. See further Georg Schwarzenberger, ‘Equity in International Law’ (1972) YB World Affairs 346, 348–​350, for a discussion of equity in Hittite state practice in the 14th and 13th centuries BCE. 2 Ralph Newman, ‘Introduction’ in Newman, Equity in the World’s Legal Systems (n 1) 17. 3 Raymond Marcin, ‘Epieikeia; Equitable Lawmaking in the Construction of Statutes’ (1978) 10 Connecticut LRev 377, 382–​383, explaining that the term epieikeia entered Anglo-​American jurisprudence, and by inference the English language, owing to medieval translators’ predilection for transliteration. 4 John Tasioulas, ‘The Paradox of Equity’ (1996) 55(3) CLJ 456, 462; Stephen DeVine, ‘Polyconnotational Equity and the Role of Epieikeia in International Law’ (1989) 24 Texas ILJ 149, 225. 5 See ch 1 text to n 12. 6 Willem Zwalve and Egbert Koops, ‘Introduction: The Equity Phenomenon’ in Egbert Koops and Willem Zwalve (eds), Law & Equity: Approaches in Roman Law and Common Law (Martinus Nijhoff 2014) 19; William Buckland and Arnold McNair, Roman Law and Common Law (2nd edn, revised by FH Lawson, CUP 1952) 3; George Mousourakis, A Legal History of Rome (Routledge 2007) 66. 7 Eg Henry Sumner Maine, Ancient Law (16th edn, John Murray 1897) 58–​61; María José Falcón y Tella, Equity and Law (Peter Muckley tr, Martinus Nijhoff 2008) 22–​23. It was said that Roman law ‘discerned the idea of equality’ in equity, North Sea Continental Shelf (Separate Opinion Ammoun) [1969] ICJ Rep 101 [10], citing Giorgio del Vecchio. For the etymology of aequitas, see Antonio Guardino, Pagine di diritto romano IV (Jovene 1993) 200–​203. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0002

18  Origins of Equity the term clementia.8 In the Middle Ages, the development of equity stalled, revolving especially around the reception of Aristotle in contemporaneous texts, including religious writings. Evolutions in the English Court of Chancery towards the end of this period breathed new life into the concept, an evolution that echoed the earlier development of Roman aequitas.9 If equity in international law must be plainly distinguished from its historical origins, the latter, including notably Roman aequitas and English equity, which leave the sphere of philosophy or theology and markedly enter the law, constitute evidence of state practice on equity. They point to the presence of equitable considerations in municipal legal systems since antiquity. What this means for equity as a source of international law, we will see in Chapter 6. The origins of equity are so varied and rich that this chapter merely foregrounds some important historical foundations of equity, giving a snapshot of various stages of the evolution of the concept. While a full historical study is outside the scope of the book, this narrative serves to highlight the continuity of equity over time and across legal systems but also the way it metamorphoses and influences the way we think about law. Beginning with Greece and Rome, the chapter turns to the Middle Ages and the late modern period, English law, and finally equity in more recent times.

II.  Greek and Roman Law Origins: From Aristotle to Cicero In Greece, equity is traceable to Homer’s epic rhapsodies The Iliad and Odyssey and, a handful of centuries later, to the poetic writings of Sophocles and Hesiod, the rhetoric of Demosthenes, Gorgias, Isocrates, and Lysias, the historical writings of Thucydides, and the philosophy of Plato, among others.10 But nowhere is equity so indomitably argued as in the writings of Aristotle.11 8 Seneca, De Clementia; cf the respective use of the term clemency (lenitas or clementia) and aequitas in Cicero, Epistulae ad Quintum Fratrem, Book I, I:21 (lenitas), I:25 (clementia), and I:45 (aequitas). 9 Charles Brice, ‘Roman Aequitas and English Equity’ (1913–​ 1914) 102 Georgetown LJ 16; Francesco Francioni, ‘Equity in International Law’ (2013) MaxPlanckEPIL, para 1; Edward Re, ‘The Roman Contribution to the Common Law’ (1961) 29 Fordham LRev 447; for a comparison of the two systems, see Falcón y Tella (n 7) 56–​58; cf William Buckland, Equity in Roman Law (U London Press 1911); Alan Watson, ‘Roman Law and English Law’ (1990) 36(2) Loyola LRev 247. 10 Darien Shanske, ‘Four Theses: Preliminary to an Appeal to Equity’ (2005) 57(6) Stanford LRev 2053, 2056–​2057; Falcón y Tella (n 7) 15; Eric Havelock, The Greek Concept of Justice (HUP 1978) 254–​255. 11 It is no wonder then that much ink has been spilled on Aristotelian equity. See eg Shanske, ‘Four Theses’ (n 10); Darien Shanske, ‘Revitalizing Aristotle’s Doctrine of Equity’ (2008) 4 Journal of Law, Culture and the Humanities 352; Falcón y Tella (n 7) 12–​22; Anton-​Hermann Chroust, ‘Aristotle’s Conception of Equity (Epieikeia)’ (1942) 18(2) Notre Dame LRev 119; John Triantaphyllopoulos,

Greek and Roman Law  19 There is widespread agreement that our modern perception of equity has its origins in Aristotle.12 Aristotle canvassed equity or the equitable (τὸ ἐπιεικὲς, to epieikes) extensively. In his Nicomachean Ethics, he wrote: [E]‌quity, though just, is not legal justice but a rectification of legal justice. This is because all law is universal yet some cases cannot correctly fall into universal statements. When then it is necessary to use universal statements but it is not possible to do so correctly, the law takes account of the majority of cases yet it also recognises the possibility of error. . . . So when the law makes a universal statement and a particular case arises that falls outside this statement, it is appropriate to correct the legislator’s omission or error due to the generality of the statement by acting as the legislator would have acted if he were present and had known. Therefore, the equitable is just and, in some respects, it is better than just; not in general but because of the mistakes that arise due to the general character of the law. And this is the nature of the equitable, a correction of the law, where the law is flawed due to its universal character.13

Aristotle repeats this idea that the law is couched in general terms and cannot foresee all individual cases in other writings.14 Equity then is interposed between a strict application of the law and the individual case.15 In Rhetoric, Aristotle provides the following example. The law prescribed that, if a man bearing a ring lifted his arm to strike, he should be punished.16 By such terms the law targeted those presumed to bear arms against the city-​state,17 therefore equity would prevent the punishment from being meted out literally to any man lifting a ring-​bearing arm when such a gesture was unrelated to an attack on the city-​state.18 In Rhetoric, Aristotle further canvasses equity as applied by ‘Aristotle’s Equity’ in Alfredo Mordechai Rabello (ed), Aequitas and Equity (Sacher Institute 1997); John Triantaphyllopoulos, ‘Aristotle’s Equity and the Doctrine of the Mean’ (1989) 1 Syllecta Classica 43; Roger Shiner, ‘Aristotle’s Theory of Equity’ (1994) 27 Loyola of Los Angeles LRev 1245; Alan Beever, ‘Aristotle on Equity, Law and Justice’ (2004) 10(1) Legal Theory 33; Francesco D’Agostino, Epieikeia: il tema dell’equità nell’antichità greca (Giuffrè 1973); Matthew Berry, ‘More Just than Justice: Aristotle’s Account of Equity in the Nicomachean Ethics’ (unpublished, on file with the author). 12 Mark Weston Janis, ‘The Ambiguity of Equity in International Law’ (1983) 9(1) Brooklyn JIL 7, 7; Shanske, ‘Four Theses’ (n 10) 2056, 2059ff. 13 Aristotle, Nicomachean Ethics, Book V, ch 10, 1137b, 3ff (author’s translation, based in part on the translation by H Rackham, Loeb Classical Library 1926). 14 Eg Aristotle, Politics, Book II, ch 8, 1269a, 10; Aristotle, Rhetoric, Book I, ch 13, 13–​14; cf Aristotle, Topica, Book VI, 141a, 15. 15 See ch 4, section II A Equity as Individualised Justice. 16 Aristotle, Rhetoric, Book I, ch 13, 14. 17 Falcón y Tella (n 7) 21. 18 Aristotle, Rhetoric, Book I, ch 13, 14.

20  Origins of Equity the adjudicator.19 He draws a distinction between the arbitrator and the judge and considers that, in contrast with judges who look only to the law, arbitrators take account of equity;20 if arbitrators are appointed, equity will prevail.21 The idea that arbitrators are better suited than judges to apply equity is recurrent even in contemporary scholarship.22 More broadly, Aristotle distinguishes between what is unfair and what is unlawful and suggests that while what is unlawful may not always be unfair, what is unfair is always unlawful.23 Otherwise stated, what is inequitable cannot be lawful. To refer to what is unfair Aristotle uses the term ‘ἄνισον’ (anison), which in effect means ‘unequal’ or ‘imbalanced’. He explains that what is lawful and equal is just, and what is unlawful and unequal is unjust.24 While Aristotle associates equality with justice, he also identifies the need for proportionality.25 It has been said that the Greeks preferred to apply the law broadly, even risking an injustice (dura lex sed lex, as the Romans would put it),26 rather than encroach on its generality.27 Equity in Aristotle aims to correct such injustice.28 From the Greek philosophical and rhetorical tradition, equity carried over in Roman law.29 In the Late Republic, equity figured prominently in the writings and oratory of Marcus Tullius Cicero30 and is routinely associated

19 ibid Book I, ch 13, 19. 20 ibid. 21 ibid. 22 Eg Yoram Dinstein, ‘The Interaction of International Law and Justice’ (1986) 16 IYHR 9, 39. 23 Aristotle, Nicomachean Ethics, Book V, ch 2, 1130b. 24 ibid Book V, ch 1, 1129a. 25 ibid Book V, ch 3, 1131a. 26 cf the attitude of Socrates, accepting his death sentence although unjust, eg Plato, Apology, 35c; Plato, Crito, 54c. See further RE Allen, Socrates and Legal Obligation (U Minnesota Press 1981) 22 (‘In equity Socrates was innocent’); Rex Martin, ‘Socrates on Disobedience to Law’ (1970) 24(1) Review of Metaphysics 21; Frances Olsen, ‘Socrates on Legal Obligation’ (1984) 18 Georgia LRev 929; Chris Isaac, ‘Socrates and the Public Laws of Athens’ (1994) 4 Aporia 45; Brett Benson, ‘Rule of Law in Plato’s Crito and Apology’ (1998) 8 Aporia 1; Anthony D’Amato, ‘Obligation to Obey the Law: A Study of the Death of Socrates’ (2010) Northwestern U School of Law Faculty Working Papers No 111. 27 Falcón y Tella (n 7) 20. 28 See ch 4, section II Equity as Corrective Justice. 29 Hermagoras of Temnos, a Greek rhetorician of the Rhodian School and a teacher of rhetoric in Rome, is often associated with this process. The Hermagorean tradition opposed the letter of the law to equity. Matthijs Wibier, ‘Cicero’s Reception in the Juristic Tradition’ in Paul Du Plessis (ed), Cicero’s Law: Rethinking Roman Law of the Late Republic (Edinburgh University Press 2016) 118; Martin Bloomer, ‘Roman Declamation’ in William Dominik and Jon Hall (eds), A Companion to Roman Rhetoric (Wiley-​Blackwell 2007) 300; John Vaughn, ‘Law and Rhetoric in the Causa Curiana’ (1985) 4(2) Classical Antiquity 208, 208; Albrecht Dihle, The Theory of Will in Classical Antiquity (U California Press 1982) 138; Miklós Könczöl, ‘Law, Fact and Narratives in Ancient Rhetoric’ (2008) Intl Journal for the Semiotics of Law 21, 29, 32; Brice (n 9) 19. 30 Eg Cicero, De Inventione, Book I, xi 14; Cicero, De Oratore, Book I, xxxviii 173; Cicero, De Officiis, Book I, 33.

Greek and Roman Law  21 with him,31 although the Ciceronian tradition is not the beginning of Roman equity.32 Discussing summum ius, summa inuria, Cicero instanced a truce called between Sparta and Argos for thirty ‘days’. The Spartan king Cleomenes ambushed the Argives by ‘night’, killing some and taking others as prisoners. When his disgruntled enemies confronted him with the reproach that he had breached his oath, he riposted that he had never agreed not to attack by night, since the truce stipulated ‘days’.33 Cicero’s approach to equity evolved later in his life. Until about the age of sixty, Cicero viewed equity as separate from law and justice; from about that time he accorded greater importance to philosophy, which led him to perceive equity, law, and justice as one.34 Equity was expressed in Roman praetorian law, that is, the ius praetorium or ius honorarium.35 The praetor (urbanus) as a source of equity must be understood more as a lawmaker than as a judge.36 Upon taking office, the praetor issued an edict introducing the actions and remedies he would accept and announcing the principles that would guide his actions.37 Formally, praetorian edicts were valid for one year but they tended to be renewed from one year to the next with new praetors typically adding to the actions and remedies established by their predecessors.38 Praetorian law was intended to soften the rigidity of the ius civile, which was a combination of statutory and customary law.39 In the formulary procedure –​so named because of the formula, a document containing a description of the dispute and the praetor’s instructions to the judge assigned to hear the case –​the praetor was able to offer three principal kinds of remedies for cases not covered by the ius civile.40 The actio in factum was based on the facts of a particular case; the

31 Eg Jill Harries, ‘Cicero and the defining of the Ius Civile’ in Gillian Clark and Tessa Rajak (eds), Philosophy and Power in the Graeco-​Roman World (OUP 2002) 59ff; Falcón y Tella (n 7) 32–​34; Shanske, ‘Four Theses’ (n 10) 2060–​2061; William Buckland, A Text-​Book of Roman Law from Augustus to Justinian (3rd edn, revised by Peter Stein, CUP 1963) 55. 32 Wibier (n 29) 118; Bloomer (n 29) 300. 33 Cicero, De Officiis, Book I, 33. In reality, the truce was for seven days. The incident is reported in Plutarch, Apophthegmata Laconica, Of Cleomenes the Son of Anaxandridas, 45. Cicero’s and Plutarch’s versions of the story do not coincide perfectly. 34 See in general Georges Ciulei, ‘Les rapports de l’équité avec le droit et la justice dans l’œuvre de Cicéron’ (1968) 48 Revue historique de droit français et étranger (Quatrième série) 639, 639–​647. 35 Buckland, Equity (n 9). 36 Zwalve and Koops (n 6) 19; Buckland, Equity (n 9) 5; cf Buckland and McNair (n 6) 3. 37 Zwalve and Koops (n 6) 19; Peter Stein, ‘Equitable Principles in Roman Law’ in Newman, Equity in the World’s Legal Systems (n 1) 76; Mousourakis (n 6) 13. 38 Zwalve and Koops (n 6) 19; Stein (n 37) 76; Mousourakis (n 6) 13–​14; Buckland and McNair (n 6) 3. 39 Zwalve and Koops (n 6) 19; Stein (n 37) 76. 40 Mousourakis (n 6) 65–​66. See further William Turpin, ‘Formula, Cognitio and Proceedings Extra Ordinem’ (1999) 46(3) Revue internationale des droits de l’antiquité 499, 506ff.

22  Origins of Equity actio utilis was used to provide remedies analogous to already existing remedies; the actio fictitia provided for an action on the basis of a counterfactual.41 Roman equity is tethered to such intercalary remedies. Yet, as in the case of modern equity, Roman equity did not set aside the ius civile, rather it bypassed it.42 As time wore on, the independent role of praetorian law diminished until it fell into abeyance during the reign of Emperor Hadrian with the Julian codification.43 The codification ended the division between the ius civile and the ius honorarium.44 The equitable principles that underlay the praetorian edicts were subsumed in the codification,45 which became known as the ‘perpetual edict’ (edictum perpetuum).46 The tradition of equity lived on in the writings of Roman jurists and only later, in the middle of the 3rd century CE, is Roman equity said to have ceased to develop.47 Modern international law owes a debt of gratitude to Roman equity. A number of Roman equitable remedies are part of the international law acquis today. The equitable Roman remedy of the interdict48 (corresponding to the English Chancery’s injunction)49 is reflected in the ability of current international courts and tribunals to issue provisional measures.50 The equitable remedy of restitutio in integrum51 is part of the contemporary law on state responsibility.52 These remedies are so well-​rooted in the international law mainstream that we no longer necessarily perceive them as manifestations of equity. The impact of Roman equitable rights, such as laches,53 acquiescence,

41 Mousourakis (n 6) 66; Zwalve and Koops (n 6) 19; Saskia Roselaar, ‘Cicero and the Italians’ in Du Plessis (n 29) 147; Craig Anderson, Roman Law (Dundee University Press 2009) 103–​106. 42 Buckland and McNair (n 6) 4. 43 Mousourakis (n 6) 127. 44 Kaius Touri, ‘Hadrian’s Perpetual Edict’ (2006) 27 Journal of Legal History 219, 227; Thomas Glyn Watkin, An Historical Introduction to Modern Civil Law (first published Ashgate 1999, Routledge 2017) 42. 45 Mousourakis (n 6) 127. 46 Touri (n 44); Watkin (n 44) 42. 47 Brice (n 9) 23. 48 Buckland, Equity (n 9) 25–​31. 49 ibid; George Spence, The Equitable Jurisdiction of the Court of Chancery (vol I, Lea/​Blanchard 1846) 673, referring to the Chancellor’s ‘praetorian jurisdiction’. 50 Eg Statute of the International Court of Justice (ICJ) art 41; Statute of the International Tribunal for the Law of the Sea (ITLOS) art 25; Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) art 47; ICSID Convention Arbitration Rules rule 39; Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) (2010/​2013) art 26; Cameron Miles, Provisional Measures before International Courts and Tribunals (CUP 2017). 51 Buckland, Equity (n 9) 31–​37. 52 Attila Tanzi, ‘Restitution’ (2013) MaxPlanckEPIL, para 4; Borzu Sabahi, Compensation and Restitution in Investor-​State Arbitration (OUP 2011) ch 2. 53 Buckland, Equity (n 9) 56–​60.

Middle Ages to Late Modern Period  23 and estoppel must also be recalled. Acquiescence and estoppel are examined in Chapter 8.

III.  From the Middle Ages to the Late Modern Period The historical evolution of equity beyond antiquity and until modern times largely revolves around the reception of Aristotle in later writings, including religious texts. In the Middle Ages, Roman and canon law scholars known as ‘the glossators’54 contributed to an understanding of equity as a method of interpretation, prioritising the letter of the law over its telos.55 Their successors, the post-​glossators,56 reversed this practice by placing emphasis on the telos of the law over its letter.57 The reception of Aristotelian equity in canon law occurred especially with the work of the theologian Thomas Aquinas in the 13th century.58 Aquinas anchored equity in a natural divine law that limits what laws a legislator may adopt.59 This equity, dubbed ‘canonical equity’ and linked to compassion and benevolence,60 was seen as a ‘humanitarian virtue’ (‘misericordia’, ‘humanitas’, ‘pietas’, and ‘caritas’ are some of the terms mentioned).61 In this context, equity remained very much a moral value rather than an element in the interpretation of law.62 In later years, equity became linked to the writings of a number of scholars. Francisco Suarez and his De Legibus, ac Deo Leislatore, published in 1612, discussed equity as applicable in customary international law.63 Hugo Grotius and his De Jure Belli ac Pacis, published in 1625, canvassed at length Aristotelian equity.64 Samuel Pufendorf, and his Elementorum Jurisprudentiae, published in 1672, also elaborated on Aristotelian equity situating it squarely in 54 Magnus Ryan, ‘Glossators and Post-​glossators’ in Peter Cane and Joanne Conaghan (eds), The New Oxford Companion to Law (OUP 2008). 55 Falcón y Tella (n 7) 41. 56 The distinction between glossators and post-​glossators, also referred to as ‘commentators’, is somewhat arbitrary. The term ‘post-​glossators’ refers to law teachers from about the 1260s, Ryan (n 54). 57 Falcón y Tella (n 7) 41. 58 Marcin (n 3) 389–​392; Stephen DeVine, ‘The Concept of Epieikeia in the Chancellor of England’s Enforcement of the Feoffment to Uses before 1535’ (1987) 21 U British Columbia LRev 323, 332–​334; Shanske, ‘Four Theses’ (n 10) 2061–​2062. 59 Shanske, ‘Four Theses’ (n 10) 2062. 60 Falcón y Tella (n 7) 37. 61 ibid 34–​35. 62 ibid 34–​41. 63 DeVine, ‘Polyconnotational Equity’ (n 4) 224–​231. 64 Hugo Grotius, On the Law of War and Peace (AC Campbell tr, Jazzybee Verlag 2016), Book II, ch 16, para XXVI. For an analysis, see DeVine, ‘Polyconnotational Equity’ (n 4) 233–​236.

24  Origins of Equity international law and arguing that the judge has a duty to apply it.65 Samuel Rachel, another 17th-​century scholar, and his De Jure Naturae et Gentium, published in 1676, considered equity as applicable in international law, since the generality of international law means that it cannot cover every factual matrix, which may lead to harsh outcomes in particular cases.66 Emer de Vattel and his Le droit des gens ou principes de la loi naturelle, published in 1758, regarded equity as inherent in the power of government to mitigate the effects of the rigorous application of law for reasons of public welfare.67 While the period stretching from the Middle Ages to the 18th century does not reveal a grand evolution of the legal concept of equity, still medieval and early modern antecedents are not devoid of interest. The legacy of the glossators and post-​glossators –​a corollary of their infatuation with Roman law and Justinian’s Digest –​are the ‘codified and all-​encompassing’ civil law systems of the Continent.68 The rigidity of these code systems was softened as equity was instantly, ‘albeit mysteriously’, incorporated in them.69 To this day, in civil law systems equitable principles are received into the general norms, as opposed to forming a separate body of law as in the Anglo-​Saxon legal tradition –​they are ‘universal constants of the legal norms’.70 Legal scholars’ engagement with equity in this period testifies to the continued pertinence of the concept to law and marks its importance to international law.

IV.  Equity in English Law If the evolution of the legal concept of equity seemingly slowed down in the Middle Ages, English equity was an exception to this rule. With roots in Roman law,71 English equity originated in the English Court of Chancery, which began as the royal secretariat.72 As a member of the King’s Council and head of this bureau, the Chancellor was from the beginning involved in the administration of justice, since to commence an action in the common law courts it was necessary to obtain a royal writ issued by this office.73 From the middle 65 DeVine, ‘Polyconnotational Equity’ (n 4) 236–​239. 66 ibid 231–​232. 67 ibid 239–​240. 68 Christopher Rossi, Equity and International Law (Transnational 1993) 38. 69 ibid. 70 Ralph Newman, ‘Equity in Comparative Law’ (1968) 17 ICLQ 807, 832. 71 See n 9. 72 John Baker, An Introduction to English Legal History (5th edn, OUP 2019) 107; DeVine, ‘The Concept of Epieikeia’ (n 58) 326. 73 Baker (n 72) 107; Howard Oleck, ‘Historical Nature of Equity Jurisprudence’ (1951) 20(1) Fordham LRev 23, 35; DeVine, ‘The Concept of Epieikeia’ (n 58) 334.

English Law  25 of the 13th century, in an attempt to rein him in, a limitation was placed on his power: the Chancellor could no longer award new writs for the common law courts without the consent of the king and Council.74 Yet the Chancellor was in a position to throw his weight about. The result was that instead of seeking consent to issue new writs, he began to keep the petitioners’ requests within his chancery.75 Gradually, the king’s ‘equitable role in the administration of justice’ was delegated to the Chancellor,76 who was now regarded as the keeper of the king’s conscience.77 The petitions (known as ‘bills’),78 which had initially been addressed to the king, started to be conveyed directly to the Chancellor.79 Since the medieval Chancellor was an ecclesiastic,80 English equity introduced in the common law has been dubbed ‘an ecclesiastically tinted Aristotelian corrective’.81 The first courts of equity were established in the mid-​14th century.82 By that time, the common law had lost its flexibility, owing to strictly formulated procedural and substantive rules that had hardened through stare decisis83 and it became necessary to soften its ‘hard edges’.84 So it was that equity developed as an alternative jurisdiction85 to furnish relief to those who did not have an adequate remedy at common law.86 In this respect, the propinquity of 74 Oleck (n 73) 37; Falcón y Tella (n 7) 59. 75 Oleck (n 73) 37. 76 DeVine, ‘The Concept of Epieikeia’ (n 58) 326, 334; Michael Levenstein, Maxims of Equity (Algora 2013) 43; Joseph Parkes, A History of the Court of Chancery (Longman 1828) 28. 77 Conscience has been described as ‘the hallmark of the medieval Chancery’, so that what we call equity courts were ‘courts of conscience’, Dennis Klinck, Conscience, Equity and the Court of Chancery in Early Modern England (Ashgate 2010) vii, 13; AWB Simpson, A History of the Common Law of Contract (OUP 1975) 398 (‘If one had inquired of a late-​fifteenth-​century lawyer the appropriate title for a book on what went on before the court of Chancery, he would without doubt have said “Conscience”, not “Equity” ’). See further Baker (n 72) 111–​112, 114–​116; Mike Macnair, ‘Equity and Conscience’ (2007) 27(4) OJLS 659; Sharon Dobbins, ‘Equity: The Court of Conscience or the King’s Command, the Dialogues of St German and Hobbes Compared’ (1991) 9 Journal of Law & Religion 113; WT Barbour, The History of Contract in Early English Equity (Clarendon Press 1914) 82–​84; Falcón y Tella (n 7) 59; Oleck (n 73) 35. 78 Baker (n 72) 106; Falcón y Tella (n 7) 59; Parkes (n 76) 28. However, in early procedure an action could also be started informally, by word of mouth, Baker (n 72) 111. 79 Frederic William Maitland, Equity: The Forms of Action at Common Law (CUP 1909) 5. 80 DeVine, ‘The Concept of Epieikeia’ (n 58) 338; Gwilym Dodd, ‘Reason, Conscience and Equity’ (2014) 99(2) History 213. 81 DeVine, ‘The Concept of Epieikeia’ (n 58) 323, 338. See further Barbour (n 77) 158, 167–​178. 82 Gary McDowell, Equity and the Constitution (U Chicago Press 1982) 24; Joseph Hendel, ‘Equity in the American Courts and in the World Court’ (1996) 6(3) Indiana International & Comparative LRev 637, 640–​641; Brice (n 9) 16. 83 Hendel (n 82) 641; WS Holdsworth, ‘The Relation of Equity Administered by the Common Law Judges to the Equity Administered by the Chancellor’ (1916) 26(1) Yale LJ 1, 3; Oleck (n 73) 36; Henry Campbell Black (ed), Black’s Law Dictionary (6th edn, West 1990) 540; Bryan Garner (ed), Black’s Law Dictionary (10th edn, Thomson Reuters 2014) 656. 84 McDowell (n 82) 24. 85 Black (n 83) 540. See also Garner (n 83) 656. 86 Robert Bone, ‘Mapping the Boundaries of a Dispute’ (1989) 89 Columbia LRev 1, 22, 24; Hendel (n 82) 641; Oleck (n 73) 36.

26  Origins of Equity English equity to its Roman law antecedent is patently obvious. Unconstrained by guiding precedent and the formalities of the common law, equity provided a more malleable framework and relied on natural justice.87 Later, it became necessary to adopt a consistent approach in order to treat like cases alike and thus respect equality, itself an attribute of equity, and routine procedures were established to deal with the thousands of petitions received as equity courts became popular.88 Precedents started to develop and equity too became a rules-​oriented system gradually losing its elasticity.89 With time, equity jurisprudence became a ‘body of equitable law, as complex, doctrinal, and rule-​ haunted as the common law ever was’.90 English equity carried over into the law of the United States, albeit with modifications. In the United States, jurisdiction over actions at equity and at common law started to be vested in the same court in 1846.91 The distinction between the two was abandoned in favour of a single ‘civil action’ covering both.92 In England, the separation between common law courts and equity courts was abolished with the Judicature Acts of 1873–​1875.93 Other common law jurisdictions passed similar legislation, which led to the progressive amalgamation of procedures at common law and equity around the world.94 English equity has been described as ‘surely [echoing] a universal notion of equity, which in some form or other is found in all developed legal systems’.95 Having said that, the centuries-​old separation of equity from the common law lies at the origin of a lingering conviction among some common lawyers that equity is somehow distinct from law and that it is its hierarchical inferior.96 On that view, equity is an extraordinary relief to be resorted to when no other adequate remedy is available at law.97 This perception has somehow carried over into international law98 and it is refuted in Chapter 6.99

87 Bone (n 86) 22; Hendel (n 82) 641; Joseph Story, Commentaries on Equity Jurisprudence (4th edn, vol I, Maxwell 1846) 23. 88 Baker (n 72) 118–​119. 89 Bone (n 86) 22–​24; Baker (n 72) 119; Hendel (n 82) 641–​642; Brice (n 9) 23. 90 H Jefferson Powell, ‘ “Cardozo’s Foot”: The Chancellor’s Conscience and Constructive Trusts’ (1993) 56(3) Law and Contemporary Problems 7, 8. 91 Oleck (n 73) 42. See further Hendel (n 82) 643. 92 Oleck (n 73) 42; Hendel (n 82) 643. 93 DM Kerly, An Historical Sketch of the Equitable Jurisdiction of the Court of Chancery (CUP 1890) 293–​294; Baker (n 72) 123; Oleck (n 73) 40; Miles (n 50) 24. 94 In some cases, this happened tardily. In New South Wales, actions at common law and equity were separate until 1972, Miles (n 50) 24. 95 Robert Jennings, ‘Equity and Equitable Principles’ (1986) XLII ASDI 27, 27. 96 Rossi (n 68) 32. 97 ibid. 98 ibid 32–​33. 99 See ch 6, section II Equity and Law.

Later Development  27

V.  Later Development The later development of equity brings us to modern times and the equitable adjudication that will be the focus of the next chapter. Suffice it to note at this stage that with the creation of international adjudicatory bodies, from claims commissions to international courts, equity started to be resorted to at the international level. Recourse to equity was encouraged through its increasing incorporation in treaties, from equitable considerations as part of substantive rights and obligations100 to dispute settlement provisions on absolute equity101 and ex aequo et bono jurisdiction.102 An example of the former is offered by Articles 74 and 83 of the United Nations Convention on the Law of the Sea (UNCLOS), which provide for an equitable delimitation of the exclusive economic zone and the continental shelf of states with opposite or adjacent coasts.103 An example of the latter is Article 38 of the Statute of the Permanent Court of International Justice (PCIJ), which provided for ex aequo et bono adjudication.104 The provision was never used in the Court’s lifetime,105 but it was subsequently transferred verbatim to Article 38 of the Statute of the International Court of Justice (ICJ).106 In parallel, international courts and tribunals started to incorporate equity in their legal reasoning, thus placing it in the mainstream of international law.107 The scholarly debate about equity in international law peaked twice in the last century. First, it gained momentum in the 1930s, when the international community had high hopes for international dispute settlement.108 At the time, the establishment was envisaged of an international equity tribunal that would ‘adjust the rights of the parties –​by reference not merely to the strict law, but to the rule which is fair in all the circumstances of the particular case’.109 This tribunal, which would dispense distributive justice110 and echo English equity by constituting a jurisdiction parallel to the PCIJ and later the ICJ, was never established.111 Second, interest in equity was rekindled four decades later in the 100 See ch 6, section IV A Treaty Law. 101 See ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals. 102 See ch 7. 103 See ch 6, section IV A i Law of the sea. 104 PCIJ Statute art 38(4). 105 Weston Janis (n 12) 10. 106 ICJ Statute art 38(2). 107 cf Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Weeramantry) [1993] ICJ Rep 211 [88]. 108 Weston Janis (n 12) 12. 109 William Holdsworth as cited in Weston Janis (n 12) 12. 110 Rossi (n 68) 147. 111 New Commonwealth Research Bureau, ‘The Tribunal in Equity’, Research Material No 1 (November 1934) https://​www.peacepalacelibrary.nl/​pmfiles/​N24-​36-​024.pdf; Rossi (n 68) 143–​148.

28  Origins of Equity wake of a number of judgments and arbitral awards that included the landmark ICJ judgment in North Sea Continental Shelf.112 Since then equity occasionally garners interest, notably in the context of maritime delimitation, equity’s traditional stronghold, and then interest subsides. Yet if scholarly attention to equity followed peaks and troughs, in international decision-​making, in treaty drafting, and in the way we think about international law, equity is a constant.

VI. Conclusions Equitable considerations have been present in human societies for unfathomable aeons. From ancient Greece and Rome to modern times, through ecclesiastical law and the medieval English Chancery, equity has introduced considerations of fairness in legal thought and has helped mitigate the harshness of draconian laws. What is considered equitable has varied over time, with the equitable innovations of the past typically becoming the hard law of today. In this manner, Roman praetorian equity lost its flexibility when it became incorporated in the Julian codification and English equity metamorphosed into a set of hard and fast rules. However, the role of equity (whether we choose to call it epieikeia, aequitas, or equity) has changed little. It is still, inter alia, the Aristotelian corrective that needs to take account of the particular case or soften the harshness of the strict law to do justice. At the same time, this account of the origins of equity is not merely a reminiscence of the past. It reveals the fluidity and continuity of equity as it was transmitted from one system to the next. Greek epieikeia carried over into Roman equity. Roman equity was at the root of English equity. The Roman codifications that subsumed praetorian equity inspired the civil law systems. These different narratives help elucidate to some extent the distinct ways in which we make sense of equity as something embedded in or distinct from law. Ultimately, equity’s ubiquity –​its presence over the ages and in a variety of settings –​contributes to explaining why equity is a source of international law, a topic discussed in Chapter 6.



112

North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3.

3 Equity before International Courts and Tribunals I. Introduction Equity first made its way in international decision-​making through claims commissions and early arbitration tribunals, whereupon it started to be incorporated in the jurisprudence of international courts. This sequence in the reception of equity in the legal reasoning of international adjudicatory bodies must not come as a surprise. Historically, interstate disputes were resolved through recourse to arbitration, although the latter’s popularity for this type of dispute ultimately declined in favour of judicial settlement.1 Today, equity in international law is often associated with judgments of the International Court of Justice (ICJ), especially those involving maritime delimitation.2 Recourse to equitable considerations in maritime disputes evolved over time, hardening into something very much approximating a method of equitable delimitation. However, equity’s relevance reaches beyond the settlement of maritime disputes to cover all of international law. In effect, some of the most interesting applications of equity have been made by interstate tribunals deciding other types of disputes. This chapter takes stock of ‘classic’ pronouncements on equity by international courts and tribunals and documents equity’s jurisprudential history. It focuses on traditional interstate disputes and so it does not delve into the jurisprudence of investment tribunals. The latter is examined in Part III. It is not that the judgments and awards discussed in this chapter necessarily belong in the pantheon of great international law decisions on equity –​although some of them probably do –​but they have conditioned our understanding of 1 Christine Gray and Benedict Kingsbury, ‘Developments in Dispute Settlement: Inter-​ State Arbitration Since 1945’ (1992) 63(1) BYIL 97. See also Charles Brower II, ‘The Functions and Limits of Arbitration and Judicial Settlement Under Private and Public International Law’ (2008) 18 Duke JCIL 259, 265–​266. 2 Equity in maritime delimitation is also the subject of dedicated publications, eg Thomas Cottier, Equitable Principles of Maritime Boundary Delimitation (CUP 2015); LDM Nelson, ‘The Roles of Equity in the Delimitation of Maritime Boundaries’ (1990) 84 AJIL 837, 839. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0003

30  International Courts and Tribunals the concept. No longer is it possible to discuss equity without taking them into account. While they should not be viewed as the holy grail of equity, they help provide an overview and a basis from which to explore it. The chapter begins by examining equity in the awards of mixed claims commissions and early arbitration tribunals. Next, it turns to the Permanent Court of International Justice (PCIJ) and the Diversion of Water from the Meuse case.3 It continues with the ICJ and its rich jurisprudence on maritime delimitation, from the North Sea Continental Shelf cases4 to the Maritime Dispute (Peru v Chile) judgment,5 before inquiring into Barcelona Traction,6 an exception to the Court’s equitable jurisprudence. The chapter continues by reviewing equitable considerations in judgments of the International Tribunal for the Law of the Sea (ITLOS) and, finally, interstate arbitral awards.

II.  Mixed Claims Commissions and Early Arbitration Tribunals Modern interstate arbitration is typically considered to have originated in the friendship, commerce, and navigation (FCN) treaty concluded between the United States and Great Britain in 1794, commonly known as the Jay Treaty.7 The Jay Treaty set in place arbitral commissions, some of which dealt effectively with interstate claims and some constituted claims tribunals established to process claims espoused by US and British nationals.8 The mixed claims commissions discussed in this section were formed about a century later in order to settle large numbers of claims for damage arising out of revolutionary movements in Venezuela between 1898 and 1902.9 The arbitration tribunals covered operated at about the same time and a little later in the 1920s. These early awards considered equity and justice as foundations of international law, although some of their successors tended to define them as digressions from 3 Diversion of Water from the Meuse (Netherlands v Belgium) (Judgment) PCIJ Series A/​B No 70 (28 June 1937). 4 North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3. 5 Maritime Dispute (Peru v Chile) (Judgment) [2014] ICJ Rep 3. 6 Barcelona Traction, Light and Power Company (Judgment) [1970] ICJ Rep 3. 7 See also Jackson Harvey Ralston, International Arbitration from Athens to Locarno (Lawbook Exchange 1929) 191; Gray and Kingsbury (n 1) 97; Brower II (n 1) 266. 8 Richard Lillich, ‘The Jay Treaty Commissions’ (1962–​1963) 37 St John’s LRev 260; David Bederman, ‘The Glorious Past and Uncertain Future of International Claims Tribunals’ in Mark Weston Janis (ed), International Courts for the Twenty-​First Century (Martinus Nijhoff 1992) 164; John Collier and Vaughan Lowe, The Settlement of Disputes in International Law (OUP 1999) 32. 9 Gabriel Bottini, Admissibility of Shareholder Claims under Investment Treaties (CUP 2020) 84; Laurence Boisson de Chazournes and Danio Campanelli, ‘Mixed Commissions’ (2006) MaxPlanckEPIL, para 10.

Mixed Claims Commissions and Early Arbitration  31 positive law.10 Nevertheless, if claims commissions and early arbitration tribunals invoked equity, their findings must be treated with caution: in their case, equity tended to be expressly part of the applicable law.11 The underlying treaties and arbitration clauses revealed a certain trust in the flexibility that equitable dispute settlement can offer that was lost along the way. The Venezuelan claims commissions were created by the so-​ called Washington Protocols, concluded between Venezuela and other states in 1903.12 The Protocols were signed following a naval blockade of Venezuelan ports by Great Britain, Germany, and Italy, in order to settle claims between Venezuela and nationals of the three blockading powers together with nationals of Belgium, France, Mexico, the Netherlands, Norway, Spain, Sweden, and the United States.13 The Protocols offer an early example of equitable considerations laid down in treaties. The commissioners ought to decide, inter alia, in accordance with ‘the principles of justice’14 and ‘absolute equity’.15 An example is the Italy-​Venezuela Mixed Claims Commission, constituted to hear Italian claims against Venezuela in relation to injury to persons and property sustained as a consequence of revolutionary movements between 1898 and 1900.16 The commission was tasked with deciding on the basis of ‘absolute equity, without regard to objections of a technical nature or of the provisions of local legislation’.17 The same mandate was given to the mixed claims commissions constituted under the other Washington Protocols.18 The Protocols

10 Charles de Visscher, De l’équité dans le règlement arbitral ou judiciaire des litiges de droit international public (Pedone 1972) 17–​18, with examples from early case law. 11 This is also true of the Jay Treaty (art 7). 12 International Law Commission (ILC), Draft Articles on State Responsibility, Part 1, Articles 1–​35, Report of the Commission to the General Assembly (1973), Yearbook of the International Law Commission, vol II (1975), commentary on art 14, para 14. 13 Luis Drago, ‘State Loans in Their Relation to International Policy’ (1907) 1 AJIL 692, 703; John Bassett Moore, A Digest of International Law, vol 7 (Government Printing Office, Washington 1906) 118. 14 Great Britain-​Venezuela Protocol (7 May 1903); Italy-​Venezuela Protocol (7 May 1903) art II; Germany-​Venezuela Protocol (7 May 1903) art II. 15 For a discussion, see de Visscher (n 10) 69–​73. 16 The commission was constituted under the Italy-​Venezuela Protocols of 13 February and 7 May 1903. 17 Italy-​Venezuela Protocol (7 May 1903) art II. 18 Great Britain-​Venezuela Protocol (7 May 1903); United States-​Venezuela Protocol (17 February 1903) art I; Mexico-​Venezuela Protocol (26 February 1903) art I; France-​Venezuela Protocol (27 February 1903) art I; Netherlands-​Venezuela Protocol (28 February 1903) art I; Belgium-​Venezuela Protocol (7 March 1903) art I; Norway-​Venezuela Protocol (10 March 1903) art I; Sweden-​ Norway-​Venezuela Protocol (10 March 1903) art I; Spain-​Venezuela Protocol (2 April 1903) art I; Germany-​Venezuela Protocol (7 May 1903) art II. An earlier 1869 convention between Great Britain and Venezuela did not stipulate the applicable law; when the commissioners were called to apply the convention, they decided on the basis of ‘justice and equity’, Rudolf Dolzer, ‘Mixed Claims Commissions’ (2011) MaxPlanckEPIL, para 15. For other examples, Jay Treaty art 7; Spain-​United States FCN treaty (1795) art XXI; Convention between the United States, Germany, and Great Britain relating to Settlement of Samoan Claims (1899) art 1. For treaties referring to ‘principles of

32  International Courts and Tribunals concluded between Venezuela and the three blockading powers further recognised ‘in principle the justice of the claims’ against Venezuela.19 ‘Absolute equity’ or ‘strict equity’20 is the precursor to ex aequo et bono jurisdiction,21 expressly allowing the adjudicative body to ignore the technicalities of the law and provisions of the state’s municipal law. According to the umpire in the Aroa Mines case, ‘absolute equity’ is ‘equity unrestrained by any artificial rules’.22 This does not mean that the absolute equity mandate is incompatible with international law. As the umpire pointed out: Since this is an international tribunal established by the agreement of nations there can be no other law, in the opinion of the umpire, for its government than the law of nations; and it is, indeed, scarcely necessary to say that the protocols are to be interpreted and this tribunal governed by that law, for there is no other; and that justice and equity are invoked and are to be paramount is not in conflict with this position, for international law is assumed to conform to justice and to be inspired by the principles of equity.23

In the unlikely case that the precepts of international law cannot be reconciled with justice, recourse must be had to ‘the underlying principles of justice and equity applied as best may be to the cause in hand’.24 In the Brignone case, the umpire mitigated the disregard to be had towards the provisions of Venezuela’s municipal law.25 He held that the ‘usual’ provision of absolute equity commands a ‘rational’ interpretation, meaning that ‘local legislation which operates against equity shall be rejected. An extended interpretation rejecting any and all local legislation would . . . defeat the very purposes of the Commission’.26 In Oliver Romberg, the umpire held that the commission was a ‘court of equity’

law and equity’, see ch 6 n 211. See further Louis Sohn, ‘The Function of International Arbitration Today’ (1963) 108 Recueil des Cours 1, 43. 19 Germany-​Venezuela Protocol (13 February 1903) art I, Great Britain-​Venezuela Protocol (13 February 1903) art I, and Italy-​Venezuela Protocol (13 February 1903) art I. On the preferential treatment of Great Britain, Germany, and Italy, see The Venezuelan Preferential Case (1904) 9 RIAA 99. See further Moore (n 13) 118. 20 Cervetti, Mixed Claims Commission (Italy-​Venezuela) (1903) 10 RIAA 492, 493. 21 See ch 7. 22 Aroa Mines, Mixed Claims Commission (Great-​Britain-​Venezuela) (merits) (1903) 9 RIAA 402, 444. 23 ibid. 24 ibid 445. 25 Brignone, Mixed Claims Commission (Italy-​Venezuela) (1903) 10 RIAA 542, 550. 26 ibid, emphasis added.

Mixed Claims Commissions and Early Arbitration  33 and should decide ‘taking preferably into account what it considers to be just and equitable’.27 In Kunhardt, the US-​Venezuela Commission was called upon to decide two claims, one of which related to the annulment of a concession owned by a company, three-​fourths of whose capital was held by Kunhardt & Co.28 The US commissioner found that although ‘the property of a corporation in esse’ does not belong to the stockholders but to the corporation,29 upon the dissolution of the corporation, the shareholders’ interests ‘become equitable rights to proportionate shares of the corporate property’ after the company’s creditors have been paid.30 As the ‘equitable’ owner of its proportionate share in the corporate property, after payment of the company’s debts,31 Kunhardt & Co had ius standi to claim for losses sustained owing to the annulment of the concession.32 The commission ultimately rejected this claim due to the lack of evidence as to the amount of corporate debts.33 The case is the antipodes of the Barcelona Traction judgment, discussed below.34 In Heirs of Jean Maninat, the French-​Venezuelan Commission discussed equity in relation to generosity.35 The umpire remarked that generosity has no part in equity.36 Rather, equity requires that ‘exactly the right thing [be] done between the parties. Neither more nor less than this is equity.’37 What is generous to one party may be harsh to another, such that a ‘poorly understood indulgence’ is not equitable but unjust.38 In the Sambiaggio case, the umpire held that the Italy-​Venezuela Mixed Claims Commission was mandated to ‘apply equitably to the various cases submitted the well-​established principles of justice, not permitting sympathy for suffering to bring about a disregard for law’.39 However, ‘sympathy for suffering’ may become relevant, if suffering is brought about by abuse of right.40

27 Oliver Romberg, in Albert Geouffre de La Pradelle and Nikolaos Politis, Recueil des arbitrages internationaux: 1856–​1872 (vol II, Pedone 1923) 564, 565 (author’s translation). 28 Kunhardt & Co, US-​Venezuela Commission (1903–​1905), 9 RIAA 171, 172–​173. 29 ibid 171, 175. 30 ibid. 31 ibid 175–​176. 32 ibid. 33 ibid 176. 34 See section IV B The Barcelona Traction Case: A Missed Opportunity?. 35 Heirs of Jean Maninat, French-​Venezuelan Commission (1905) 10 RIAA 55. 36 ibid 82. 37 ibid. 38 María José Falcón y Tella, Equity and Law (Peter Muckley tr, Martinus Nijhoff 2008) 110. 39 Sambiaggio, Mixed Claims Commission (Italy-​Venezuela) (1903) 10 RIAA 499, 524. 40 See ch 8, section IX Abuse of Rights.

34  International Courts and Tribunals Commissioners were also instructed to effect an ‘equitable result settlement’ in some Mexican claims commissions41 created to deal with claims arising out of the Mexican Revolution, which began in 1910.42 Others were instructed to decide ‘in accordance with the principles of international law, justice, and equity’.43 The express mention of equity did not prevent the commissions from applying international law.44 Equity was also invoked in early arbitrations, of which two are the focus of the remainder of this section. The first is the 1922 Norwegian Shipowners’ claims arbitration.45 The dispute arose when the United States declared war on Germany in 1917 and requisitioned all ships over 2,500 tons including some that were being built for Norwegian nationals in US shipyards.46 The parties’ special agreement that governed the dispute provided that the tribunal should decide the claims ‘in accordance with the principles of law and equity’.47 The tribunal cited James Brown Scott,48 according to whom an international tribunal is authorised to apply international law, seeing that unless the parties expressly lay down some other applicable law ‘international law is the law of an international tribunal’.49 The tribunal dismissed the possibility of interpreting the terms ‘law and equity’ in line with the Anglo-​Saxon tradition50 and reasoned that ‘law and equity’ should be ‘understood to mean general principles of justice as distinguished from any particular system of jurisprudence or the municipal law of any State’.51 The tribunal drew no clear distinction between equity and ex aequo et bono adjudication. The distinction remains murky partly because the double mention of ‘law and equity’ in the arbitration clause could be perceived to identify either the applicable law or the manner in which the arbitration must be

41 Eg General Claims Commission (Agreement of 8 September 1923) (United Mexican States, United States) 4 RIAA 7, 13, [21]; French-​Mexican Claims Commission (France, United Mexican States (13 April 1928–​24 June 1929) 5 RIAA 307, 315; German-​Mexican Claims Commission (Germany, United Mexican States) (19 January 1927–​11 April 1927) 5 RIAA 561, 569. 42 Bottini (n 9) 84. 43 Mexico-​United States General Claims Convention of 8 September 1923 art I. 44 AH Feller, The Mexican Claims Commissions 1923–​1934 (Macmillan 1935) 224, para 198, noting that ‘the Commissions proceeded on the view that “equity” was to be restricted to the decisions of the question of Mexico’s responsibility, and that as to all other questions the rules of international law were to be applied’; Bottini (n 9) 80. 45 Norwegian Shipowners’ claims (Norway v United States) (1922) 1 RIAA 307. 46 ibid. 47 Special agreement between Norway and the United States (30 June 1921) art I. 48 Norwegian Shipowners’ claims (n 45) 331. 49 James Brown Scott, ‘Introduction’ in James Brown Scott (ed), The Hague Court Reports (OUP 1916) xxi. 50 Norwegian Shipowners’ claims (n 45) 331. 51 ibid.

Mixed Claims Commissions and Early Arbitration  35 conducted.52 When discussing the settlement of disputes ‘on the basis of respect for law’,53 the tribunal construed the meaning of that phrase to be that ‘the arbiter shall decide in accordance with equity, ex aequo et bono, when positive rules of law are lacking’.54 The second arbitration is the 1926 Cayuga Indians case, where an arbitral tribunal referred to an ‘elementary principle of justice that requires us to look at the substance and not stick in the bark of the legal form’.55 The arbitration clause provided that the tribunal should decide in accordance with ‘the principles of international law and of equity’.56 The case concerned an annuity that had been granted by the New York State to the Cayuga Nation through a series of agreements. The Cayuga Nation had legal personality under New York law and at the time of the claim it did not have British nationality. Most Cayuga Indians emigrated to Canada and after 1810 the annuity was only paid to Cayuga Indians residing in the United States. Canadian Cayugas were British nationals and Great Britain initiated the arbitration for the part of the annuity that had not been paid to them.57 The tribunal accepted the ‘equitable claim’ of the Canadian Cayuga Indians, thus granting the local tribe legal standing. It reasoned: When a situation legally so anomalous is presented, recourse must be had to generally recognized principles of justice and fair dealing in order to determine the rights of the individuals involved. The same considerations of equity that have repeatedly been invoked by the courts where strict regard to the legal personality of a corporation would lead to inequitable results . . . may be invoked here. In such cases courts have not hesitated to look behind the legal person and consider the human individuals who were the real beneficiaries.58

This passage reads like a castigation of the Barcelona Traction case, which was to follow almost half a century later and where the ICJ, without an explicit mandate to take account of equity but paying lip service to it, refused to lift the corporate veil to grant ius standi to the shareholders’ home state.59 Considering 52 cf Malcolm Shaw, Rosenne’s Law and Practice of the International Court: 1920–​2015 (vol 2, Brill online 2017), ch 9, para 159. 53 Convention for the Pacific Settlement of International Disputes (18 October 1907) art 37. 54 Norwegian Shipowners’ claims (n 45) 330–​331, citing Heinrich Lammasch. 55 Cayuga Indians (Great Britain) v United States (1926) 6 RIAA 173, 179. 56 ibid 174. 57 ibid 175–​179. 58 ibid 179. 59 Barcelona Traction (Judgment) [1970] (n 6). For a discussion, see section IV B The Barcelona Traction Case: A Missed Opportunity?.

36  International Courts and Tribunals its mandate to decide in accordance with principles of international law and equity, the Cayuga Indians tribunal continued: An examination of the provisions of arbitration treaties shows a recognition that something more than the strict law must be used in the grounds of decision of arbitral tribunals in certain cases; that there are cases in which –​like the courts of the land –​these tribunals must find the grounds of decision, must find the right and the law, in general considerations of justice, equity and right dealing, guided by legal analogies and by the spirit and received principles of international law. Such an examination shows also that much discrimination has been used in including or not including ‘equity’ among the grounds of decision provided for.60

In contrast with the Norwegian Shipowners’ claims arbitration, the tribunal in Cayuga Indians distinguished its mandate from ex aequo et bono jurisdiction.61 It reasoned that, contrary to ex aequo et bono decision-​making, in its case it was a matter of invoking ‘general and universally admitted principles of justice and right dealing, as against the harsh operation of strict doctrines of legal personality in an anomalous situation for which such doctrines were not devised’.62 In addition to these two arbitrations, it is worth noting the Salem case,63 where the minority arbitrator Fred Nielsen interpreted the phrase ‘principles of law and equity’ to mean that the case should be decided ‘by a just application of law’.64 His opinion was noted approvingly in legal scholarship, where the term was described as ‘a liberal interpretation of the legal rule impregnated with equity’.65 Finally, in Naulilaa, an arbitral tribunal found that it had to apply Article 38 of the Statute of the PCIJ and that, absent rules of international law, it should fill the gap ‘by deciding in accordance with the principles of equity, while staying within the spirit of international law, applied by analogy, and taking account of its evolution’.66 Overall, in the decisions of these claims commissions and early arbitration tribunals

60 Cayuga Indians (n 55) 180. 61 ibid. 62 ibid. 63 Salem (Egypt, United States) (1932) 2 RIAA 1161. 64 Salem (Egypt, United States) (Dissenting Opinion Nielsen) (1932) 2 RIAA 1225. 65 de Visscher (n 10) 21. 66 Responsabilité de l’Allemagne à raison des dommages causés dans les colonies portugaises du sud de l’Afrique (Portugal v Germany) (1928) 2 RIAA 1011, 1116 (author’s translation).

Permanent Court of International Justice  37 there emerge some of the most noteworthy applications of equity, without attracting particular criticisms or revealing disrespect for international law.

III.  The Permanent Court of International Justice Equity in the jurisprudence of the PCIJ is inextricably linked to the Diversion of Water from the Meuse case.67 The dispute brought the Netherlands and Belgium to loggerheads over the application of an 1863 treaty governing diversions from the River Meuse to supply water for navigation and irrigation canals.68 In 1936, the Netherlands instituted an injunctive proceeding arguing that Belgium diverted water from the River Meuse in violation of the treaty.69 In its counter-​memorial, Belgium rejected the Dutch claims and submitted a counterclaim alleging that a barrage and other works in the Netherlands breached the treaty.70 In 1937, the PCIJ rejected all claims and counterclaims.71 The Court reasoned that the Dutch claims implied that the treaty ‘intended to place the Parties in a situation of legal inequality by conferring on the Netherlands a right of control to which Belgium could not lay claim’.72 That would only have been possible if the treaty expressly indicated the intention to engender such inequality.73 Accordingly, equality was described as the guiding equitable principle of that judgment.74 But the Court also relied on the clean hands doctrine,75 although this is especially fleshed out in the separate opinions of Judges Hudson and Anzilotti.76 Judge Hudson noted that both parties had diverted water from the River Meuse77 and wondered whether this implied that the Netherlands had lost the right to invoke the treaty against Belgium.78 To address this issue, he considered ‘principles of equity’, which he distinguished

67 Meuse (Judgment) (n 3). 68 ibid [15]. 69 ibid [47]. 70 ibid [8]‌, [106]. 71 ibid [129]. 72 ibid [60]. 73 ibid [62]. 74 Christopher Grauer, ‘The Role of Equity in the Jurisprudence of the World Court’ (1979) 37 U Toronto Faculty LRev 101, 103. See also ch 8, section II Equality. 75 See ch 8, section VIII The Clean Hands Doctrine, especially text to nn 137–​141. 76 Diversion of Water from the Meuse (Netherlands v Belgium) (Individual Opinion Hudson) PCIJ Series A/​B No 70 (28 June 1937); Diversion of Water from the Meuse (Netherlands v Belgium) (Dissenting Opinion Anzilotti) PCIJ Series A/​B No 70 (28 June 1937). 77 The Netherlands had in fact diverted water before Belgium did. 78 Meuse (Hudson) (n 76) [320].

38  International Courts and Tribunals from the power to decide ex aequo et bono.79 Relying on reasoning that reveals equity in the light of a general principle of law, he wrote: It would seem to be an important principle of equity that where two parties have assumed an identical or a reciprocal obligation, one party which is engaged in a continuing non-​performance of that obligation should not be permitted to take advantage of a similar non-​performance of that obligation by the other party. The principle finds expression in the so-​called maxims of equity which exercised great influence in the creative period of the development of the Anglo-​American law. Some of these maxims are, ‘Equality is equity’; ‘He who seeks equity must do equity’. It is in line with such maxims that ‘a court of equity refuses relief to a plaintiff whose conduct in regard to the subject-​matter of the litigation has been improper’. A very similar principle was received into Roman Law. . . . The exceptio non adimpleti contractus required a claimant to prove that he had performed or offered to perform his obligation . . . . This conception was the basis of Articles 320 and 322 of the German Civil Code.80

In his dissenting opinion appended to the same judgment, Judge Anzilotti argued along similar lines.81 He expressed his conviction that the principle inadimplenti non est adimplendum is ‘so just, so equitable, so universally recognized, that it must be applied in international relations’.82 It is in fact a general principle of law within the meaning of Article 38 of the Statute of the ICJ.83 Both opinions are remarkable for highlighting equity’s embeddedness in law, a topic that is addressed in Chapter 6.

IV.  The International Court of Justice Equitable considerations in the jurisprudence of the ICJ figure expressly in maritime boundary delimitation and the allocation of maritime resources. The following examination focuses on this jurisprudence, before turning to a different case, the controversial Barcelona Traction, where equity was invoked but played a lesser role.

79

ibid [321]–​[322].

80 ibid [323].

81 Meuse (Anzilotti) (n 76). 82 ibid [211]. 83 ibid [211].

International Court of Justice  39

A.  Maritime Delimitation and Allocation of Maritime Resources This section offers an overview of the ICJ’s equitable jurisprudence on maritime boundary delimitation and the allocation of maritime resources. The narrative opens with the North Sea Continental Shelf cases, followed by the Fisheries Jurisdiction cases,84 Tunisia v Libya Continental Shelf,85 and Libya v Malta Continental Shelf.86 Next, the section turns to the ICJ’s more recent two-​and three-​step delimitation method and the treatment of equity in Jan Mayen,87 Black Sea,88 Territorial and Maritime Dispute (Nicaragua v Colombia),89 and Maritime Dispute (Peru v Chile).90 i. The North Sea Continental Shelf cases The ICJ’s landmark judgment in North Sea Continental Shelf lay the groundwork for the Court’s later equitable jurisprudence on maritime boundary delimitation. Its contribution to equity is well-​documented91 and this book will refer to it frequently, so this section gives only a brief account. The dispute concerned the delimitation of the continental shelf in the North Sea between, on the one hand, Germany and, on the other, Denmark and the Netherlands.92 Two separate proceedings were instituted but were later joined.93 In a judgment delivered on 20 February 1969, the Court held that delimitation must be effected by agreement between the states in accordance with equitable principles.94 Prior to the Court’s judgment, states had sought to establish a conventional norm to govern maritime delimitation. Article 6(2) of the 1958 Geneva Convention on the Continental Shelf enshrined the equidistance-​special circumstances rule according to which, when two adjacent states fail to agree on the boundary of their continental shelf, this should be determined by

84 Fisheries Jurisdiction (Germany v Iceland) (Merits Judgment) [1974] ICJ Rep 175; Fisheries Jurisdiction (United Kingdom v Iceland) (Merits Judgment) [1974] ICJ Rep ICJ 3. 85 Continental Shelf (Tunisia/​Libya) (Judgment) [1982] ICJ Rep 18. 86 Continental Shelf (Libya/​Malta) (Judgment) [1985] ICJ Rep 13. 87 Maritime Delimitation in the Area between Greenland and Jan Mayen (Judgment) [1993] ICJ Rep 38. 88 Maritime Delimitation in the Black Sea (Romania v Ukraine) (Judgment) [2009] ICJ Rep 89. 89 Territorial and Maritime Dispute (Nicaragua v Colombia) (Judgment) [2012] ICJ Rep 624. 90 Peru v Chile (n 5). 91 It would not be a gross overstatement to say that effectively every publication on equity and international law cited in this book mentions the judgment. 92 North Sea Continental Shelf (Judgment) (n 4). 93 North Sea Continental Shelf (Order of 6 April 1968) [1968] ICJ Rep 9. 94 North Sea Continental Shelf (Judgment) (n 4) [85].

40  International Courts and Tribunals application of the equidistance line, unless another boundary is justified by special circumstances.95 The possibility of digression from the equidistance line in the case of ‘special circumstances’ invited corrective equity.96 But the Court did not have recourse to equity via the special circumstances exception. Germany had not ratified the Geneva Convention on the Continental Shelf, therefore the Court held that the equidistance-​special circumstances rule was not opposable to Germany as conventional law.97 Nor had the Convention achieved the status of customary international law.98 Instead, a different solution proffered itself. The Court invoked equity. It reasoned that ‘[w]‌hatever the legal reasoning of a court of justice, its decisions must by definition be just, and therefore in that sense equitable’.99 The Court observed that it was: not a question of applying equity simply as a matter of abstract justice, but of applying a rule of law which itself requires the application of equitable principles, in accordance with the ideas which have always underlain the development of the legal régime of the continental shelf in this field.100

Considering that the equidistance delimitation method was not obligatory between the parties and that no single method of delimitation is compulsory in all circumstances, the Court decided that delimitation was ‘to be effected by agreement in accordance with equitable principles, and taking account of all the relevant circumstances’.101 This should happen in a way that, to the extent possible, each state is allocated the ‘parts of the continental shelf that constitute a natural prolongation of its land territory into and under the sea, without encroachment on the natural prolongation of the land territory of the other’.102 If the delimitation effected in this manner leaves overlapping areas, these should be divided between the parties according to their agreement or, if no agreement is reached, in equal parts.103 The Court then set out the factors that the 95 Geneva Convention on the Continental Shelf (1958) art 6(2) provides: ‘Where the same continental shelf is adjacent to the territories of two adjacent States, the boundary of the continental shelf shall be determined by agreement between them. In the absence of agreement, and unless another boundary line is justified by special circumstances, the boundary shall be determined by application of the principle of equidistance from the nearest points of the baselines from which the breadth of the territorial sea of each State is measured.’ 96 Thomas Franck, ‘Fairness in the International Legal and Institutional System’ (1993) 240 Recueil des Cours 9, 76; Cottier (n 2) 378. See further text to nn 162–​165 and 305ff. 97 North Sea Continental Shelf (Judgment) (n 4) [26]. 98 ibid [60]–​[81]. 99 ibid [88]. 100 ibid [85]. 101 ibid [101]. 102 ibid. 103 ibid.

International Court of Justice  41 parties needed to take under advisement for their negotiations, including the general configuration of the coasts, the physical and geological structure of the continental shelf areas, and ‘a reasonable degree of proportionality, which a delimitation carried out in accordance with equitable principles ought to bring about between the extent of the continental shelf areas appertaining to the coastal State and the length of its Coast’.104 The judgment was criticised for concluding that there was a customary international law rule on delimitation105 and for engaging in distributive justice.106 While finding the Geneva Convention on the Continental Shelf to be inapplicable, the ICJ effected a delimitation that comported with that Convention’s provision for an equidistance line except in the case of special circumstances.107 In a separate opinion, Judge Ammoun declared that ‘recourse may be had to the equidistance method, qualified by special circumstances, as a legal rule applicable to the case and derived from a general principle of law, namely equity praeter legem’.108 In other words, the equidistance-​special circumstances rule already made it possible to take into account equitable considerations. Despite the criticisms, the judgment is notable for expressly introducing equity in maritime delimitation, thus setting a trend that would be followed in future cases. ii. The Fisheries Jurisdiction cases In 1972, the United Kingdom and Germany instituted separate proceedings against Iceland over the latter’s proposed extension of its exclusive fisheries jurisdiction from 12 to 50 nautical miles from baselines around its coast.109 The ICJ issued its judgments on the merits on 25 July 1974.110 It found that ‘in order to reach an equitable solution’, Iceland’s preferential fishing rights, which depended on coastal fisheries, should be reconciled with the traditional fishing rights of Germany and the United Kingdom.111 Yet such a reconciliation could not mean a phasing-​out of the fishing rights of Germany and the United Kingdom in adjacent waters outside the 12 nautical miles, especially when 104 ibid. 105 Donald McRae, ‘The Applicable Law’ in Alex Oude Elferink, Tore Henriksen and Signe Veierud Busch (eds), Maritime Boundary Delimitation (CUP 2018) 95. 106 Wolfgang Friedmann, ‘The North Sea Continental Shelf Cases –​A Critique’ (1970) 64 AJIL 229, 236–​240; McRae (n 105) 95; Krystyna Marek, ‘Le problème des sources du droit international dans l’ârret sur le Plateau Continental de la Mer du Nord’ (1970) 6 RBDI 44. 107 Franck (n 96) 78. 108 North Sea Continental Shelf (Separate Opinion Ammoun) [1969] ICJ Rep 101 [56]. 109 Germany v Iceland (Merits Judgment) (n 84) [1]‌, [12]; United Kingdom v Iceland (Merits Judgment) (n 84) [1], [11]. 110 ibid. 111 Germany v Iceland (Merits Judgment) (n 84) [61]; United Kingdom v Iceland (Merits Judgment) (n 84) [69].

42  International Courts and Tribunals such rights stemmed from ‘a situation of economic dependence and long-​term reliance’ on the same fishing grounds.112 The Court judged that such a solution would neither square with the concept of preferential rights ‘nor would it be equitable’.113 It added that it was a matter of gauging the states’ respective dependence on the fisheries in question and ‘of reconciling them in as equitable a manner as is possible’.114 The Court concluded that Iceland’s unilateral extension of its exclusive fishing rights to 50 nautical miles was not opposable to Germany or the United Kingdom and that Iceland could not exclude German and British fishing vessels from the disputed area.115 The parties had a mutual obligation to undertake negotiations in good faith paying ‘reasonable’ attention to each other’s legal rights in adjacent waters outside the 12 nautical miles.116 The aim was to contrive ‘an equitable apportionment’ of the fisheries having regard to the particular situation and the interests of other states with ‘established fishing rights in the area’.117 In his separate declaration appended to the two judgments, Judge Singh commented that there had always been a need in maritime matters for ‘reasonable’ attention to be paid to the interests of other states.118 Therefore even the preferential fishing rights of a coastal state should be exercised with ‘due regard to the rights of other States’ and all claims and counterclaims should ‘be resolved on the basis of considerations of equity’.119 He remarked that since there was as yet no applicable treaty law governing the matter, it was ‘the evolution of customary law which has furnished the basis of the Court’s Judgment in this case’.120 The judgments were never complied with. Soon after they were rendered, Iceland –​which continued to claim that the Court lacked jurisdiction –​adopted an exclusive fishery zone of 200 nautical miles, an action that was emulated a little more than a year later by Germany and the United Kingdom.121 112 ibid. 113 ibid. 114 United Kingdom v Iceland (Merits Judgment) (n 84) [70]. 115 Germany v Iceland (Merits Judgment) (n 84) [77]; United Kingdom v Iceland (Merits Judgment) (n 84) [79]. 116 Germany v Iceland (Merits Judgment) (n 84) [69], [77]; United Kingdom v Iceland (Merits Judgment) (n 84) [78]–​[79]. 117 ibid. 118 Fisheries Jurisdiction (Germany v Iceland) (Declaration Judge Singh) [1974] ICJ Rep 211, 213; Fisheries Jurisdiction (United Kingdom v Iceland) (Declaration Judge Singh) [1974] ICJ Rep ICJ 38, 40. 119 ibid. 120 ibid. See also Germany v Iceland (Merits Judgment) (n 84) [44]; United Kingdom v Iceland (Merits Judgment) (n 84) [52]. 121 Peter Tomka, ‘Fisheries Jurisdiction Cases (United Kingdom v Iceland; Federal Republic of Germany v Iceland)’ (2007) MaxPlanckEPIL, paras 15–​16.

International Court of Justice  43 iii.  Tunisia v Libya and Libya v Malta Continental Shelf cases The next milestones in this narrative are the Tunisia v Libya122 and the Libya v Malta Continental Shelf123 cases. In Tunisia v Libya Continental Shelf, the parties requested the ICJ to identify the principles and rules of international law that may apply to the delimitation of the continental shelf between them, taking account of ‘equitable principles’ and the ‘relevant circumstances’ of the area.124 The Court, which was bound by the parties’ agreement to apply ‘equitable principles’, reasoned that: It is . . . the result which is predominant; the principles are subordinate to the goal. The equitableness of a principle must be assessed in the light of its usefulness for the purpose of arriving at an equitable result. It is not every such principle which is in itself equitable; it may acquire this quality by reference to the equitableness of the solution. The principles to be indicated by the Court have to be selected according to their appropriateness for reaching an equitable result. From this consideration it follows that the term ‘equitable principles’ cannot be interpreted in the abstract; it refers back to the principles and rules which may be appropriate in order to achieve an equitable result.125

With the Tunisia v Libya Continental Shelf case, the ICJ started to display a greater reliance on the equitable solution as the end result. While still guided by the North Sea Continental Shelf judgment,126 the case was influenced by the Third Conference on the Law of the Sea127 –​just as later cases were influenced by the United Nations Convention on the Law of the Sea (UNCLOS).128 The result-​oriented approach to equity has been criticised as recourse to a subjective equity129 that one observer dubbed ‘fairness in the thinnest of jurisprudential 122 Tunisia/​Libya (n 85). 123 Libya/​Malta (Judgment) (n 86). 124 Special agreement between Tunisia and Libya (10 June 1977) art 1, reproduced in Tunisia/​Libya (n 85) [2]‌, [4]. 125 ibid [70]. 126 Eg North Sea Continental Shelf (Judgment) (n 4) [90], [92]. 127 Special agreement between Tunisia and Libya (n 124) art 1. 128 UNCLOS arts 74, 83. 129 Jonathan Charney, ‘Ocean Boundaries between Nations’ (1984) 78 AJIL 582, 593–​594; Stephen DeVine, ‘Polyconnotational Equity and the Role of Epieikeia in International Law’ (1989) 24 Texas ILJ 149, 178–​182; Attila Tanzi and Maurizio Arcari, The UN Convention on the Law of International Watercourses (Martinus Nijhoff 2001); cf ED Brown, ‘The Tunisia-​Libya Continental Shelf Case’ (1983) 7 Marine Policy 142, 161–​162. Equity’s subjectivity is a recurrent criticism, eg see North Sea Continental Shelf (Dissenting Opinion Koretsky) [1969] ICJ Rep 155, 166, criticising the majority judgment because ‘to introduce so vague a notion into the jurisprudence of the International Court may open the door to making subjective and therefore at times arbitrary evaluations’; Elihu Lauterpacht, ‘Equity, Evasion, Equivocation and Evolution in International Law’ (1977–​1978) 1977 Proceedings of the American Branch of the International Law Association (ILA) 33, 45, commenting that, from ex aequo et bono decisions to equity within the law, ‘we are talking about a situation in which the court is being asked

44  International Courts and Tribunals veils’, considering that the Court inscribed this equity on a ‘blank page’, having rejected equidistance and natural prolongation.130 The tautological strain in the Court’s reasoning (the circumlocution that the equitable principle is one that yields an equitable result) can leave the semantic content of equity eminently uncertain. This was not made better by the Court’s admission that that ‘terminology’ was not altogether satisfactory.131 The Court further resorted to proportionality to review ex post facto the equitableness of the delimitation.132 The parties were in agreement as to the need to respect proportionality and the Court agreed with them that proportionality was mandated ‘by the fundamental principle of ensuring an equitable delimitation’.133 The Court distinguished the application of equitable principles from a decision ex aequo et bono.134 Ultimately, it suggested the relevant circumstances and the practical method to be followed in order to achieve an equitable delimitation.135 The focus on equity qua end result (with a similar circular effect) was replicated in Libya v Malta Continental Shelf,136 where the Court invoked the at-​the-​ time-​inoperative provision of Article 83(1) of UNCLOS and its requirement to effect the delimitation of the continental shelf boundary in a manner that yields ‘an equitable solution’.137 Having rejected the idea that the equidistance rule may be obligatory even when drawing a provisional line,138 the Court emphasised that the delimitation of the continental shelf ‘must be effected by the application of equitable principles in all the relevant circumstances in order to achieve an equitable result’.139 Here too, the Court distinguished its decision-​ making from jurisdiction ex aequo et bono.140 It added: to apply a subjective or discretionary element. The court is not applying the law; it is creating the law for the parties’; M Chemillier-​Gendreau, ‘La signification des principes équitables dans le droit international contemporain’ (1981–​1982) RBDI 509; cf Francesco Francioni, ‘Equity in International Law’ (2013) MaxPlanckEPIL, para 14. 130 DeVine (n 129) 178. 131 Tunisia/​Libya (n 85) [70]. 132 ibid [103]. See ch 8 Proportionality; Yoshifumi Tanaka, ‘The Disproportionality Test in the Law of Maritime Delimitation’ in Elferink, Henriksen, and Veierud Busch (n 105) 296. 133 Tunisia/​Libya (n 85) [103]. 134 ibid [71]. 135 ibid [133]. 136 Libya/​Malta (Judgment) (n 86). See also Delimitation of the Maritime Boundary in the Gulf of Maine Area (Judgment) [1984] ICJ Rep 246 [112]. The popularity of this result-​oriented equity is said to have ebbed and flowed, Cottier (n 2) 409–​413, drawing a distinction between result-​oriented equity and ‘a more rule-​oriented’ equity in the jurisprudence; Yoshifumi Tanaka, ‘Reflections on the Territorial and Maritime Dispute between Nicaragua and Colombia before the International Court of Justice’ (2013) 26(4) LJIL 909, 914–​919, drawing a distinction between result-​oriented equity and corrective equity in the Court’s jurisprudence. 137 Libya/​Malta (Judgment) (n 86). 138 ibid [43]. 139 ibid [45]. 140 ibid [45], citing Tunisia/​Libya (n 85).

International Court of Justice  45 [T]‌he justice of which equity is an emanation, is not abstract justice but justice according to the rule of law; which is to say that its application should display consistency and a degree of predictability;141 even though it looks with particularity to the peculiar circumstances of an instant case, it also looks beyond it to principles of more general application. This is precisely why the courts have, from the beginning, elaborated equitable principles as being, at the same time, means to an equitable result in a particular case, yet also having a more general validity and hence expressible in general terms.142

The same case is notable for its treatment of proportionality, also subservient to the equitable result.143 The Court held that, while proportionality is ‘intimately related’ to the ‘governing principle of equity’,144 it is one among other possibly relevant ‘factors’ to be considered145 but it is not a ‘principle’ or ‘rule of international law’ applicable to delimitation.146 To support its position, it cited the North Sea Continental Shelf judgment.147 However, the latter, while appearing to relegate proportionality to a ‘factor’ that the parties needed to take into account in the course of their negotiations, held that a delimitation according to equitable principles must lead to ‘a reasonable degree of proportionality’.148 The Court further stated that proportionality’s ‘practical applicability’ in the case should be examined once the appropriate delimitation method had been identified.149 Ultimately, the Court reiterated the equitableness of its delimitation line in view of the proportionality test, finding ‘no evident disproportion’ in the respective shelf areas as attributed to the parties ‘such that it could be said that the requirements of the test of proportionality as an aspect of equity were not satisfied’.150 Judge Oda contended that the judgment revealed

141 This finding of the Court has been criticised, DeVine (n 129) 195 (‘the Court’s jurisprudence . . . cannot be termed either consistent or predictable’); Margaret White, ‘Equity –​A General Principle of Law Recognised by Civilised Nations?’ (2004) 4(1) QUTLJJ 103, 115–​116; Tanaka, ‘Disproportionality’ (n 132) 304; cf Géraldine Giraudeau, Les différends territoriaux devant le juge international (Martinus Nijhoff 2013) 358, 366. 142 Libya/​Malta (Judgment) (n 86) [45]. See also Barbados v Trinidad and Tobago, PCA Case No 2004-​02, Award, 11 April 2006 [230] (‘The search for predictable, objectively-​determined criteria for delimitation, as opposed to subjective findings lacking precise legal or methodological bases, emphasized that the role of equity lies within and not beyond the law’, referring to Libya/​Malta). 143 See ch 8, section X Proportionality. 144 Libya/​Malta (Judgment) (n 86) [55]. 145 ibid [57]. 146 ibid [57], also [74]–​[75]. 147 ibid [57]. 148 North Sea Continental Shelf (Judgment) (n 4) [101]. See text to n 104. 149 Libya/​Malta (Judgment) (n 86) [59]. 150 ibid [75].

46  International Courts and Tribunals precious little about ‘the reasoning on the basis of which the Court finds the line “equitable” ’,151 although others have been less critical.152 iv. The Court’s two-​step and three-​step approach Over time, the ICJ developed what is now known as the two-​step and three-​ step approach to equitable maritime delimitation, also referred to as the ‘equidistance/​relevant circumstances’ approach.153 The Court’s two-​step approach consists in the adoption of a provisional delimitation line, typically an equidistance line, followed by recourse to equity in order to consider an adjustment is necessary to achieve an equitable result.154 The Court’s three-​step approach adds to the above a disproportionality test to evaluate the equitableness of the result. This change of tack occurred under the influence of UNCLOS, which became increasingly applicable to maritime delimitations.155 In Jan Mayen, the ICJ was requested to delimit the maritime boundary between the Danish territory of Greenland and the Norwegian island of Jan Mayen.156 The Court held that it had to apply Article 6 of the 1958 Geneva Convention on the Continental Shelf and customary international law, which required ‘a delimitation based on equitable principles’.157 The Court took account of UNCLOS to which both disputing parties were signatories, although neither of them had ratified it,158 and Articles 74(1) and 83(1) of that Convention, pursuant to which delimitation must be effected by agreement ‘in order to achieve an equitable solution’.159 The Court reasoned that the goal must always be to contrive an equitable result.160 It noted that the Geneva Convention mandated ‘the investigation of any “special circumstances” ’, while customary international law ‘based upon equitable principles . . . the investigation of “relevant circumstances” ’.161 The Court concluded that if the equidistance-​special circumstances rule expresses ‘a general norm based on equitable principles, it must be difficult to find any material difference . . . between the effect of Article 6 151 Continental Shelf (Libya/​Malta) (Dissenting Opinion Oda) [1985] ICJ Rep 123 [26]. 152 Eg David Colson, ‘The Delimitation of the Outer Continental Shelf between Neighboring States’ (2003) 97 AJIL 91. 153 The term is used both for the two-​step and the three-​step approach, eg Barbados v Trinidad and Tobago (n 142) [242], [300]; Delimitation of the Maritime Boundary in the Bay of Bengal (Bangladesh/​ Myanmar) (Judgment) [2012] ITLOS Rep 4 [239]. 154 Cottier (n 2) 413. 155 ibid. 156 Jan Mayen (Judgment) (n 87) [1]‌. 157 ibid [44]–​[46]. 158 UNCLOS entered into force in November 1994, more than a year after the judgment. Norway did not ratify UNCLOS until 1996 and Denmark until 2004. See https://​treaties.un.org. 159 Jan Mayen (Judgment) (n 87) [48]. 160 ibid [54]. 161 ibid.

International Court of Justice  47 and the effect of the customary rule which also requires a delimitation based on equitable principles’.162 Ultimately, the Court held that both the ‘special circumstances’ in Article 6 of the Geneva Convention and the ‘relevant circumstances’ under customary law are ‘intended to enable the achievement of an equitable result’.163 With this pronouncement, the ICJ endorsed a similar statement made by the Court of Arbitration in the earlier Anglo-​French Continental Shelf case.164 Other courts and tribunals approved this approach.165 In the case, the ICJ drew a provisional median line and considered whether ‘special circumstances’ required an adjustment or shifting of the line.166 The Court found that the great disparity between the respective lengths of the coasts of Greenland and Jan Mayen constituted a ‘special circumstance’ within the meaning of Article 6 of the Geneva Convention.167 In light of this disparity, the median line led to ‘manifestly inequitable results’ as to the fishery zones.168 The median line would not guarantee Denmark’s ‘equitable access’ to fish stocks169 and should therefore be adjusted in Denmark’s favour.170 Later judgments and awards endorsed the pursuit of the equitable result and used it to adjust the provisional delimitation line.171 The Black Sea case ushered in the ICJ’s three-​step approach to delimitation.172 Accordingly, the first step for the Court is to draw the provisional equidistance line.173 In the next step, the Court considers whether relevant circumstances call for an adjustment of the provisional equidistance line in order to achieve an equitable result.174 Finally, the Court reviews the provisional equidistance line to ensure that it does not ‘lead to an inequitable result by reason of any marked disproportion’.175 Proportionality, instead of being one of the relevant circumstances, has evolved into a distinct disproportionality test.176 In Black 162 ibid [46]. 163 ibid [56]. 164 See text to n 305ff. 165 Eg Land and Maritime Boundary between Cameroon and Nigeria (Cameroon v Nigeria, Equatorial Guinea intervening) (Judgment) [2002] ICJ Rep 303 [288], describing the two methods of delimitation as ‘very similar’; Guyana v Suriname, PCA Case No 2004-​04, Award, 17 September 2007 [302], [335], referring indiscriminately to ‘special or relevant circumstances’. 166 Jan Mayen (Judgment) (n 87) [51], [54]. 167 ibid [68]. 168 ibid. 169 ibid [76]. 170 ibid [86]. 171 Maritime Delimitation and Territorial Questions between Qatar and Bahrain (Merits Judgment) [2001] ICJ Rep 40 [176]; Cameroon v Nigeria (n 165) [289]–​[294]. For the arbitrations, see Later Cases. 172 Black Sea (n 88). 173 ibid [118]–​[119]. 174 ibid [120]–​[121]. 175 ibid [122]. 176 Massimo Lando, Maritime Delimitation as a Judicial Process (CUP 2019) 21.

48  International Courts and Tribunals Sea, the ICJ explained that this final step, a ‘check for an equitable outcome’, is intended to ensure that there is ‘no great disproportionality of maritime areas’ compared to the states’ coastal lengths.177 Agreeing with the dictum in the Anglo-​French Continental Shelf arbitration178 that it is disproportion rather than proportionality that matters,179 the ICJ held that the continental shelf and the exclusive economic zone are not to be delimited in proportion to the length of the respective coastlines; rather the Court must confirm, ex post facto, ‘the equitableness of the delimitation line it has constructed’.180 However, the equitableness of this delimitation line will ‘only be approximate’.181 The Court recognised that no clear requirements have emerged regarding ‘whether the real coastline should be followed, or baselines used, or whether or not coasts relating to internal waters should be excluded’.182 Diverse conclusions have been drawn over the years regarding what disparity in costal lengths is important enough to qualify as a ‘significant disproportionality’ requiring an adjustment of the provisional delimitation line.183 In casu, the Court concluded that the provisional line was to stand as drawn with no alternation.184 Since Black Sea, the three-​step approach has become the uncontested method of delimiting maritime boundaries.185 In Territorial and Maritime Dispute (Nicaragua v Colombia),186 the Court reiterated its earlier jurisprudence by confirming the three steps. In a first step, the Court establishes a provisional delimitation line, employing ‘methods that are geometrically objective and appropriate for the geography of the area’.187 For instance, for adjacent coasts, it will draw a provisional equidistance line and for opposite coasts a median line.188 No legal consequences arise from the use of one or the other term, since the method of delimitation is the same; it implies a line whose every point has an equal distance from the nearest points on the corresponding coasts,189 unless compelling reasons render its establishment impractical.190 In a second 177 Black Sea (n 88) [122]. 178 Delimitation of the Continental Shelf (United Kingdom/​France) (1977) 28 RIAA 3 [101]. 179 Black Sea (n 88) [210]. 180 ibid [211]. 181 ibid [212]. 182 ibid. 183 ibid 89 [213]. 184 ibid [216]. 185 Eg Nicaragua v Colombia (n 89); Peru v Chile (n 5); Maritime Delimitation in the Caribbean Sea and the Pacific Ocean (Costa Rica v Nicaragua) and Land Boundary in the Northern Part of Isla Portillos (Costa Rica v Nicaragua) (Judgment) [2018] ICJ Rep 139 [135], [168]; cf Bangladesh/​Myanmar (n 153). 186 Nicaragua v Colombia (n 89). 187 ibid [191]. 188 ibid. 189 ibid; Black Sea (n 88) [116]. 190 Nicaragua v Colombia (n 89) [191], [194]; Black Sea (n 88) [116]; Territorial and Maritime Dispute between Nicaragua and Honduras in the Caribbean Sea (Nicaragua v Honduras) (Judgment) [2007] ICJ

International Court of Justice  49 step, the Court considers the presence of any relevant circumstances that may require an adjustment of the provisional delimitation line in order to achieve an equitable result.191 If necessary, the Court may also devise other solutions –​ for example it may construct an enclave around remote islands, always with the aim to achieve an equitable result.192 In a third step, the Court engages in a disproportionality test, which serves to assess whether the provisional delimitation line creates a marked disproportion between the disputing parties’ shares of the relevant area and coasts.193 The disproportionality test corresponds to ‘the use of injustice as a test of justice’, which has a long standing in philosophical thought.194 Describing the disproportionality test, the Court underlined its task to ‘check for a significant disproportionality’;195 that is, ‘a disproportion so gross as to “taint” the result and render it inequitable’.196 Whether such a disproportion exists cannot be resolved by applying a mathematical formula, rather the issue must be considered in light of the circumstances of the case.197 The Court concluded that the provisional line did ‘not entail such a disproportionality as to create an inequitable result’.198 The judgment was criticised for departing significantly from the provisional equidistance line and for placing too much weight on proportionality.199 In Maritime Dispute (Peru v Chile), the ICJ found that there was an agreed maritime boundary that did not rely on the equidistance method.200 The Court decided to apply the three-​step approach in order to achieve an equitable solution and started by constructing a provisional equidistance line from ‘the end point of the existing maritime boundary’.201 The Court rejected the presence of relevant circumstances requiring an adjustment of the provisional equidistance line.202 Finally, the Court examined whether the provisional equidistance line produced a significant disproportion between the division of the relevant Rep 659 [272], [283] (in the latter case, the Court found that it could not draw a provisional equidistance line and decided to use the angle bisector method instead, [280]–​[281], [287]. For a criticism, see Territorial and Maritime Dispute between Nicaragua and Honduras in the Caribbean Sea (Nicaragua v Honduras) (Separate Opinion Ranjeva) [2007] ICJ Rep 765 [16]–​[17]). 191 Nicaragua v Colombia (n 89) [192]. 192 ibid. 193 ibid [193]. 194 Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Weeramantry) [1993] ICJ Rep 211 [105]–​[106]. 195 Nicaragua v Colombia (n 89) [240]. 196 ibid [242]. 197 ibid. 198 ibid [247]. 199 Tanaka, ‘Reflections on the Dispute between Nicaragua and Colombia’ (n 136) 930. 200 Peru v Chile (n 5) [22], [24]–​[151]. 201 ibid [184]. 202 ibid [191].

50  International Courts and Tribunals area and the lengths of the corresponding coasts.203 However, the agreed maritime boundary made it ‘difficult, if not impossible’ to gauge the length of the coasts and the relevant area by relying on the canonical method of ‘mathematical calculation of the proportions’.204 The Court reiterated that in this third step of the process of delimitation ‘the calculation does not purport to be precise and is approximate’, involving ‘a broad assessment of disproportionality’.205 Ultimately, the Court concluded summarily that no significant disproportion cast doubt on the equitableness of the provisional delimitation line.206 Over the years, the ICJ developed a certain method of equitable maritime delimitation, with the equitable result driving the process. Through its incorporation in this jurisprudence, equity is already losing some of its flexibility. Yet it is debated whether these judgments are conducive to predictable legal outcomes,207 although arguably they do rely on a set of relatively consistent steps. That said, equity as particularised justice by necessity turns on the circumstances of the given case and it would be quixotic to expect that an abstract equitable solution could be applicable to all future delimitation cases.

B. The Barcelona Traction Case: A Missed Opportunity? In Barcelona Traction, the ICJ considered equity but found that it did not stretch enough to allow a state to exercise diplomatic protection of its national shareholders when the contested measures targeted a company incorporated under the law of a third state rather than the shareholders directly. Belgium had sought reparation for alleged damages caused by organs of the Spanish State to Belgian nationals, shareholders in the Canadian Barcelona Traction, Light and Power Company, on account of acts that Belgium claimed were contrary to international law.208 The measures directed against Barcelona Traction had allegedly led to the company’s bankruptcy and liquidation.209 Although Barcelona Traction was incorporated in Canada, according to Belgium,

203 ibid [192]. 204 ibid [193]. 205 ibid [194]. 206 ibid. 207 See n 141. 208 Barcelona Traction, Light and Power Company (New Application: 1962) (Requête introductive d’instance, 19 June 1962) [1962] ICJ Pleadings (vol I) 1, 2. 209 Barcelona Traction, Light and Power Company (Requête introductive d’instance du Gouvernement belge, 23 September 1958) reproduced in [1970] ICJ Pleadings 1, 3.

International Court of Justice  51 88 percent of its capital was held by Belgian nationals.210 For Belgium, this dominance of Belgian interests in the company gave it the right to exercise diplomatic protection of the entire company.211 It requested that Spain fully reinstate Barcelona Traction in its property, rights, and interests and compensate for any other harm suffered by the company by reason of the bankruptcy and related proceedings.212 Early on, Spain raised the objection that Belgium did not have ius standi to present the claim in favour of Belgian shareholders, given that the contested measures were directed against the Canadian incorporated Barcelona Traction but not against a particular Belgian national as such.213 After the original proceeding was discontinued,214 Belgium filed a new application,215 and the ICJ decided Belgium’s legal standing in a judgment delivered in 1970.216 The Court held that when ‘legal issues arise concerning the rights of States with regard to the treatment of companies and shareholders, as to which rights international law has not established its own rules, it has to refer to the relevant rules of municipal law’.217 Accordingly, the Court found that the shareholders cannot be identified with the company and that, for as ‘long as the company is in existence the shareholder has no right to the corporate assets’.218 The Court conceded that ‘a wrong done to the company frequently causes prejudice to its shareholders’.219 Yet the fact that both corporation and shareholders sustain damage does not mean ‘that both are entitled to claim compensation’.220 According to the Court, the case would have been different if the alleged

210 Barcelona Traction, Light and Power Company (Memorial of the Belgian Government) [15 June 1959] [37]; Barcelona Traction (Judgment) [1970] (n 6) [95]. 211 Barcelona Traction (Memorial of the Belgian Government) (n 211) [259]. 212 Barcelona Traction (Requête introductive d’instance du Gouvernement belge) (n 209) 19. 213 Barcelona Traction, Light and Power Company (Belgium v Spain) (Preliminary Objections filed by the Spanish Government) [21 May 1960] 303. See also Barcelona Traction, Light and Power Company (Belgium v Spain) (Preliminary Objections filed by the Spanish Government) [15 March 1963] 175ff; Barcelona Traction, Light and Power Company (Judgment) [1964] ICJ Rep 6, 44; Barcelona Traction (Judgment) [1970] (n 6) [32]. 214 Case concerning the Barcelona Traction, Light and Power Company (Belgium v Spain) (Order of 10 April 1961) [1961] ICJ Rep 9. 215 Barcelona Traction (Requête introductive d’instance) (n 208) vol I. 216 Barcelona Traction (Judgment) [1970] (n 6). In the 1964 judgment, the ICJ had decided to join the question of Belgium’s ius standi to the merits. Its reasoning in both judgments as to whether this is an admissibility issue or whether it goes to the merits is ambiguous, Barcelona Traction (Judgment) [1964] (n 213) 45–​47. It is generally conceded that the matter was one of the admissibility of the Belgian claim. Herbert Briggs, ‘Barcelona Traction: The Jus Standi of Belgium’ (1971) 65 AJIL 327, 329, 331; FA Mann, ‘The Protection of Shareholders’ Interests in the Light of the Barcelona Traction Case’ (1973) 67 AJIL 259, 259–​260; Bottini (n 9) 129. 217 Barcelona Traction (Judgment) [1970] (n 6) [38]. 218 ibid [41]. 219 ibid [44]. 220 ibid.

52  International Courts and Tribunals infringement concerned one of the shareholders’ direct rights, such as ‘the right to any declared dividend, the right to attend and vote at general meetings, the right to share in the residual assets of the company on liquidation’.221 Considering municipal law, the Court reasoned that special circumstances might justify lifting the corporate veil.222 In this respect, the Court sought to ascertain whether either one of two conditions obtained: the company had ceased to exist or the company’s national company lacked the capacity to espouse its claim.223 First, although Barcelona Traction had ‘lost all its assets in Spain’, had gone into receivership in Canada, and was financially ‘entirely paralyzed’,224 the Court deduced that the company had not ceased to exist nor had it become ‘incapable in law of defending its own rights and the interests of the shareholders’.225 FA Mann, counsel for Belgium in Barcelona Traction, later fiercely criticised the ICJ’s cursory findings in relation to the company’s existence and its failure to engage with the facts, including the bankruptcy proceedings and what they meant for the capacity of the company to defend its rights and interests.226 Second, for a period of time Canada had ‘exercised the protection of Barcelona Traction by diplomatic representation’ by approaching the Spanish Government.227 This diplomatic protection later ceased for unknown reasons.228 Therefore, for the Court, Canada ‘retained its capacity to exercise diplomatic protection’.229 But this finding can be questioned. The issue was raised whether Canada would have been allowed to bring the claim, in light of the unresolved question of whether Barcelona Traction possessed a more genuine link with Canada than it did with Belgium.230 It is true the 221 ibid [47]. It is interesting to counterpoint the Court’s finding with the arguments presented by Elihu Lauterpacht, who acted as counsel for Belgium. According to Lauterpacht, the bankruptcy organs had replaced Barcelona Traction’s board in the management of the company with disastrous effects. ‘Not only was the company thus completely destroyed,’ declaimed Lauterpacht, ‘but nothing was left of the considerable excess of its assets over its liabilities. . . . If the shares of Barcelona Traction were thus emptied of all their valuable content, how is it possible to conceive that this was not a damage to the shareholders? The Court thus finds itself confronted with a situation in which the shareholders have been deprived of all three of the traditional elements in a shareholder’s rights: the right to administration; the right to a share in the profits; and the right to participate in the distribution of assets’, Barcelona Traction, Light and Power Company (New Application: 1962) (Argument Lauterpacht –​Oral hearing of 8 May 1969) [1969] ICJ Pleadings (vol VIII) 1, 459. For a discussion, see Mann (n 216) 265–​269. 222 Barcelona Traction (Judgment) [1970] (n 6) [58]. 223 ibid [64]. 224 ibid [65]. 225 ibid [66]–​[68]. 226 Mann further pointed out that under Spanish law ‘the company had lost its capacity except within the framework of the bankruptcy proceedings’, Mann (n 216) 261–​269. 227 Barcelona Traction (Judgment) [1970] (n 6) [75]–​[76]. 228 ibid [77]. 229 ibid [77]–​[84]. 230 Mann (n 216) 269.

International Court of Justice  53 Court dismissed the relevance of the Nottenbohm case,231 which had required a ‘genuine connection’ in the case of a natural person who was a dual national to allow his claim to be espoused by a state.232 Even so a doubt is permitted. At any rate, it still needed to be shown that, if the state of incorporation of the company is disqualified from filing a claim for measures directed towards the company, ‘then the state or states of the shareholders acquire a jus standi to protect the shareholders against the economic consequences of the same acts’.233 The Court held that ‘where it is a question of an unlawful act committed against a company representing foreign capital, the general rule of international law authorizes the national State of the company alone to make a claim’.234 It reasoned that, since this general rule did not allow Belgium to make a claim, the issue remained to be considered whether, as Belgium had argued, equity might not grant it a right to exercise diplomatic protection.235 The Court had recognised that in some circumstances, it may be ‘justified and equitable’ to lift the corporate veil in the interest of the shareholders.236 It conceded that a theory had developed, according to which, ‘for reasons of equity’, the state of nationality of the shareholders can exercise diplomatic protection when the state whose responsibility is invoked is the state of nationality of the company.237 This was not the case in Barcelona Traction, since the company was Canadian and not Spanish.238 Then the Court accepted that ‘in the field of diplomatic protection as in all other fields of international law, it is necessary that the law be applied reasonably’.239 But its reasoning is not set out very clearly. First, the Court appeared to accept that equitable considerations may allow the state of nationality of the shareholders to intervene, if ‘it is not possible to apply the general rule that the right of diplomatic protection of a company belongs to its national State’.240 However, it added that all that equity requires is the possibility ‘for some protector State to intervene, whether it be the national State of the company, by virtue of the general rule mentioned above, or, in a secondary capacity, the national State of the shareholders who claim protection’.241 Then its reasoning became even more convoluted, when it stated that:

231

Barcelona Traction (Judgment) [1970] (n 6) [70]–​[76]. Nottebohm (Second Phase) (Judgment) [1955] ICJ Rep 4, 23, 26. 233 Briggs (n 216) 343. 234 Barcelona Traction (Judgment) [1970] (n 6) [88]. 235 ibid [92]. 236 ibid [56]–​[58]. 237 ibid [92]. 238 ibid. 239 ibid [93]. 240 ibid. 241 ibid [94]. 232

54  International Courts and Tribunals account should also be taken of the practical effects of deducing from considerations of equity any broader right of protection for the national State of the shareholders. It must first of all be observed that it would be difficult on an equitable basis to make distinctions according to any quantitative test: it would seem that the owner of 1 per cent and the owner of 90 per cent of the share-​capital should have the same possibility of enjoying the benefit of diplomatic protection. The protector State may, of course, be disinclined to take up the case of the single small shareholder, but it could scarcely be denied the right to do so in the name of equitable considerations. In that field, protection by the national state of the shareholders can hardly be graduated according to the absolute or relative size of the shareholding involved.242

It is difficult to subscribe to the above statement. Whether shareholders own 1 or 90 percent of the company makes all the difference for equity, which is circumstance-​specific.243 The Court was not mandated to lay down the law for all future cases nor did it need to set a threshold of a percentage of ownership that would grant a right to diplomatic protection. All it had to do was decide, for the case at hand, that is, for the Belgian shareholders who held 88 percent of Barcelona Traction’s capital, whether it was equitable to allow them to be protected by Belgium, the state of their nationality. But the Court was not swayed. It discarded the ‘theory of diplomatic protection of shareholders as such’; it reasoned that accepting it would open the door to ‘competing diplomatic claims’, which could engender ‘an atmosphere of confusion and insecurity in international economic relations’.244 It considered that the ‘danger would be all the greater inasmuch as the shares of companies whose activity is international are widely scattered and frequently change hands’.245 The risk of double recovery –​ by the shareholders and by the company –​, which might have been used as an admissibility ground,246 had been rejected by Belgium: no reparation had been paid to Barcelona Traction for the damage inflicted on it, from which the shareholders would have benefited.247 The Court stressed that diplomatic protection is discretionary and foreign investors are usually driven by considerations such as tax advantages in the host state.248 For this reason, it found that it was not ‘in any way inequitable’ that securing such advantages should be counterbalanced

242 ibid. 243

Ch 4, section II A Equity as Individualised Justice. Barcelona Traction (Judgment) [1970] (n 6) [96]. 245 ibid. 246 Bottini (n 9) 128–​138. 247 Barcelona Traction (Judgment) [1970] (n 6) [25]. 248 ibid [99]. 244

International Court of Justice  55 by the assumption of risks, seeing that ‘the protection of the company and hence of its shareholders is thus entrusted to a State other than the national State of the shareholders’.249 Thus the Court reduced a complex relationship to a baffling equation: it is equitable for the shareholders to receive tax or other advantages in exchange for a lack of diplomatic protection by the state of their nationality. As a consequence, the Court concluded that considerations of equity did not grant Belgium ius standi and dismissed the Belgian claim.250 Notwithstanding its mentions of equity, it is unclear that the ICJ effectively engaged with considerations of equity that could, in this author’s opinion, have granted Belgium ius standi to protect its shareholders. The overstated fear of ‘competing claims’ and the unsubstantiated possibility of double recovery led the Court ultimately to deny protection to the shareholders.251 The judgment can be contrasted to the Kunhardt and Cayuga Indians cases, discussed above.252 The judgment did not resonate with the views of many observers and was roundly criticised, inter alia for resorting to municipal law and for discounting the relevance of international case law on shareholder claims; for ignoring that states would not exercise diplomatic protection on the sole basis of incorporation, while the criterion that matters is the extent to which the national economy is affected; and for refusing to embrace the evolution of international law.253 In his separate opinion annexed to the earlier 1964 judgment, Judge Koo had noted apropos Spain’s ius standi objection: 249 ibid. 250 ibid [101], [103]. 251 Francisco Orrego Vicuña, ‘Changing Approaches to the Nationality of Claims in the Context of Diplomatic Protection and International Dispute Settlement’ (2000) 15 ICSID Review 340, 356, citing Wilhelm Karl Geck, ‘Diplomatic Protection’ in Encyclopedia of Public International Law. 252 See respectively text to nn 28–​34 and nn 55–​62. 253 Richard Lillich, ‘Two Perspectives on the Barcelona Traction Case’ (1971) 65 AJIL 522 (describing part of the judgment as ‘a mixture of flaccid thought laced with rigid conceptualism’, 524; and considering that the Court transposed the municipal law of corporation to the international plane ‘without serious analysis’, thus ‘foregoing an excellent opportunity to place its judicial imprimatur upon a developing rule of customary international law with respect to shareholder claims’, 531); Rosalyn Higgins, ‘Aspects of the Case Concerning the Barcelona Traction, Light and Power Company, Ltd’ (1971) 11 VJIL 327, 331, 334 (‘To assume that because a municipal law creation, a company, is concerned, municipal law necessarily has to be applied where there presently are gaps in international law, is both to deny any law-​developing role to the Court and to assume that the functions of international law are the same as those of municipal law’, 331); Stephen Kubiatowski, ‘The Case of Elettronica Sicula SpA’ (1991) 29 CJTL 215, 226 (‘If the Court were required to ensure that “institutions of international law” always correspond to “relevant institutions of municipal law”, it would effectively abdicate its international judicial function. The Court was in no way obligated to apply municipal law without any modification merely because customary international law was unclear on the subject of shareholder claims. Quite the contrary, the Court’s duty is to fill the gaps in international law’); de Visscher (n 10) 89; Mann (n 216); Ian Laird, ‘A Community of Destiny –​The Barcelona Traction Case and the Development of Shareholder Rights to Bring Investment Claims’ in Todd Weiler (ed), International Investment Law and Arbitration (Cameron May 2005) 82; Barcelona Traction, Light and Power Company (Separate Opinion Gros) [1970] ICJ Rep 267 [19] (‘The foundation of a rule of economic international law must abide by economic realities.

56  International Courts and Tribunals International law, being primarily based upon the general principles of law and justice, is unfettered by technicalities and formalistic considerations which are often given importance in municipal law. . . . [T]‌he fundamental right of diplomatic intervention of a State to protect its nationals against another State and to seek redress for them for any wrongful act on its part aims generally to protect the genuine interests of its nationals. It is the reality which counts more than the appearance. It is the equitable interest which matters rather than the legal interest. In other words it is the substance which carried weight on the international plane rather than the form.254

Judge Tanaka concurred in his separate opinion appended to the 1970 judgment.255 He argued that diplomatic protection should be approached ‘from a teleological angle, namely from the spirit and purpose of diplomatic protection, without being bound by municipal law and private law concepts’.256 He added that legal personality could not be used as an obstacle to the diplomatic protection of shareholders.257 He stressed that ‘international law looks into the substance of matters instead of the legal form or technique; it pays more consideration to ascertaining where real interest exists, disregarding legal concepts. International law in this respect is realistic and therefore flexible.’258 Judge Tanaka affirmed that, in the circumstances, the national state of the shareholders should be permitted to protect its nationals.259 He considered that a ‘vacuum with respect to protection should not be tolerated: otherwise shareholders would be left in an entirely helpless condition and the result would be injustice and inequity’.260 The judgment elicited a similar criticism The company’s link of bare nationality may not reflect any substantial economic bond. As between the two criteria the judge must choose the one on the test of which the law and the facts coincide: it is the State whose national economy is in fact adversely affected that possesses the right to take legal action’). See also Zachary Douglas, ‘The Hybrid Foundations of Investment Treaty Arbitration’ (2003) 73 BYIL 151, 172. 254 Barcelona Traction, Light and Power Company (Separate Opinion Koo) [1964] ICJ Rep 51 [32]. 255 Barcelona Traction, Light and Power Company (Separate Opinion Tanaka) [1970] ICJ Rep 114, 127. 256 ibid. 257 ibid. 258 ibid. 259 ibid 130. 260 ibid. See also Barcelona Traction, Light and Power Company (Separate Opinion Morelli) [1970] ICJ Rep 223, 229 (arguing that ‘to say that there is no rule which authorizes diplomatic protection of shareholders on account of measures taken in respect of the company is to exclude the existence of any obligation of Spain in this connection, vis-​à-​vis any other States. Belgium’s right is thereby denied, not because such a right might hypothetically belong to a State other than Belgium (in other words, not for lack of capacity on the part of Belgium), but rather because no such right can be invoked by any State, since no rule exists from which it could derive’).

International Court of Justice  57 with respect to the Court’s resort to municipal law and its purported failure to appreciate the rules of international law concerning the treatment of aliens in the only dissent, penned by Judge ad hoc Riphagen.261 Judge Fitzmaurice expressed the opinion that it was inadmissible to leave important interests utterly unprotected and, by the same token, to prevent what may possibly be grave wrongs from even being investigated.262 Like Judge Tanaka, he remarked on the need for flexibility: equitable considerations require ‘a less inelastic treatment’ of some of the admissibility issues involved.263 Yet, that judge too voted with the majority, however grudgingly, deeming that it is ‘an unsatisfactory state of the law that obliges the Court to refrain from pronouncing on the substantive merits of the Belgian claim’.264 The ICJ has considered shareholder claims in further cases. In Elettronica Sicula (ELSI), the ICJ accepted to hear a case instituted by the United States against Italy on the basis of the Italy-​US FCN treaty of 1948 and an agreement supplementing that treaty, in respect of ELSI, an Italian company said to have been 100 percent owned by US companies.265 The case went to the merits,266 which in the past led some observers to state that the Barcelona Traction case has been ‘superseded as the statement of international law’ on the issue.267 However, after the 2007 Diallo judgment, this is less certain.268 The espousal of shareholder claims in diplomatic protection has mainly been displaced by the direct access to investor-​state dispute settlement accorded by thousands of international investment agreements to shareholders,269 even though the exact relationship between the customary international law of shareholder protection and the protection of shareholders under international investment agreements is fiercely debated.270 Although the Court has not thus far recognised 261 Barcelona Traction, Light and Power Company (Separate Opinion Riphagen) [1970] ICJ Rep 334 [3]‌(‘It is in making the rights and obligations of States under customary public international law depend purely and simply on the rules of municipal law concerning the rights and obligations of private persons in their relations inter se, that the Judgment seems to me to fail to appreciate the nature of the rules of customary international law, including the rules of international law concerning the rights and obligations of States in the field known as “the treatment of aliens”, emphasis in original). 262 Barcelona Traction, Light and Power Company (Separate Opinion Fitzmaurice) [1970] ICJ Rep 64 [35]. 263 ibid. 264 ibid [1]‌. 265 Elettronica Sicula (ELSI) (Judgment) [1989] ICJ Rep 15 [6]‌. 266 ibid [137]. 267 Laird (n 253) 85, 94; Orrego Vicuña (n 251) 359. 268 Ahmadou Sadio Diallo (Guinea v Democratic Republic of the Congo (DRC)) (Preliminary Objections Judgment) [2007] ICJ Rep 582 [76]–​[94]; Ahmadou Sadio Diallo (Guinea v DRC) (Merits Judgment) [2010] ICJ Rep 639. See further Bottini (n 9) 141; Lukas Vanhonnaeker, Shareholders’ Claims for Reflective Loss in International Investment Law (CUP 2020) 75–​76. 269 Christoph Schreuer, ‘Shareholder Protection in International Investment Law’ (2005) 2(3) Transnational Dispute Management 1; Laird (n 253) 83–​93; Bottini (n 9) 154–​171. 270 Bottini (n 9) 141–​146; Laird (n 253) 94–​96.

58  International Courts and Tribunals the protection of shareholders under customary international law, at least one author has argued that customary law has evolved but the Court has failed to recognise it.271 Other authors have been more supportive of Barcelona Traction.272 Gabriel Bottini has argued in favour of compensating the company rather than the shareholders for damage inflicted on the former, since the company’s assets are the guarantee of its debts and the rights of third parties, the company’s creditors, may be at stake.273 According to that author, the protection of the rights of such third parties may also involve considerations of equity.274 In conclusion, the judgment in Barcelona Traction canvassed equitable considerations but it is arguable whether it contrived an equitable result. It seems that it may have been more equitable to grant Belgium ius standi and, if appropriate, to reject the claim on the merits.

V.  The International Tribunal for the Law of the Sea Established under UNCLOS, the International Tribunal for the Law of the Sea is expressly mandated to decide disputes in accordance with that Convention.275 In delimiting the exclusive economic zone and the continental shelf between states with opposite or adjacent coasts, ITLOS must apply Articles 74 and 83 of UNCLOS, which expressly steer the international judge to an ‘equitable solution’. In other words, ITLOS de iure must strive to decide equitably. In Bangladesh/​Myanmar, ITLOS followed the ICJ’s three-​step approach in order to delimit the exclusive economic zone and the continental shelf between Bangladesh and Myanmar.276 After establishing a provisional equidistance line,277 the Tribunal considered the existence of any relevant 271 Ben Juratowitch, ‘Diplomatic Protection of Shareholders’ (2011) 81(1) BYIL 281, 299 (‘Indeed it is unfortunate that in Diallo the Court did not take the opportunity to acknowledge this change as already having occurred. It is difficult to see what practical alternatives, other than having concluded thousands of [investment] treaties, would have been open to states seeking to change customary international law on this topic’). 272 Eg Briggs (n 216); Bottini (n 9) 128–​138. 273 Bottini (n 9) 134–​135. Contrast Barcelona Traction (Tanaka) (n 255) 132, stating that ‘in a company, the shareholders, as being its real substance, and the subject of interests, must be considered as the object of diplomatic protection; not the company itself which has nothing but a fictive existence’. 274 Bottini (n 9) 138. 275 ITLOS Statute art 23 and UNCLOS art 293(1). 276 Bangladesh/​Myanmar (n 153) [239]–​[240]. 277 ibid [241]–​[274].

Interstate Arbitration  59 circumstances that may require an adjustment of the provisional delimitation line.278 Such a circumstance was identified in the concavity of the coast of Bangladesh, which led the provisional delimitation line to cut across Bangladesh’s coastal front, thus producing ‘a pronounced cut-​off effect’ over a significant part of the delimitation area.279 Turning to the disproportionality test, the Tribunal found that the adjusted delimitation line did not create a significant disproportion between the maritime areas it allocated to the parties and the length of their respective coasts and, as a result, there was no need to shift ‘the adjusted equidistance line in order to ensure an equitable solution’.280 A Special Chamber of ITLOS also adopted the three-​step approach in the 2017 Ghana v Côte d’Ivoire case.281 An earlier reference to individualised ‘justice’ rather than ‘equity’ is also relevant to this discussion. In the second M/​V ‘SAIGA’ case, a dispute arising out of the arrest of the oil tanker ‘Saiga’ by Guinea off the coast of West Africa, one of Guinea’s admissibility objections was that, at the time of its arrest, the vessel was not registered in Saint Vincent and the Grenadines and therefore it did not have the nationality of the other disputing party.282 ITLOS held that ‘in the particular circumstances of this case, it would not be consistent with justice if the Tribunal were to decline to deal with the merits of the dispute’.283 For that reason, it rejected Guinea’s objection.284 Ultimately, the Tribunal found that in arresting the M/​V ‘Saiga’, Guinea had violated the rights of Saint Vincent and the Grenadines and awarded compensation.285

VI.  Interstate Arbitration This penultimate section of the chapter reviews interstate arbitration. It considers in turn the Rann of Kutch case and the Anglo-​French Continental Shelf case, before turning to more recent arbitration awards from the 1980s to the 2010s. 278 ibid [275]ff, [290]–​[297]. 279 ibid [297], [323]. 280 ibid [499]. 281 Delimitation of the Maritime Boundary between Ghana and Côte d’Ivoire in the Atlantic Ocean (Ghana/​Côte d’Ivoire) (Judgment) [2017] ITLOS Rep 4 [360]. 282 M/​V ‘SAIGA’ (No 2) (Saint Vincent and the Grenadines v Guinea) (Judgment) [1999] ITLOS Rep 10 [55]–​[74]. 283 ibid [73]. 284 ibid [74]. 285 ibid [183]

60  International Courts and Tribunals

A. The Rann of Kutch Case In the Rann of Kutch case, an ad hoc tribunal determined part of the boundary between India and Pakistan in an area known as the Great Rann of Kutch (or the Great Rann or the Rann).286 The dispute existed for centuries but came to the fore when India and Pakistan became independent states.287 Hostilities broke out in 1965288 and, eventually, India and Pakistan agreed to settle their dispute by arbitration.289 Pakistan’s proposal to establish an ex aequo et bono mandate was turned down by India.290 The tribunal considered, and ruled out, the possibility of deciding ex aequo et bono, given that the arbitration agreement did not mandate it ‘clearly and beyond doubt’ to do so, nor had the parties subsequently authorised it to decide ex aequo et bono.291 However, the tribunal agreed with India and Pakistan that equity forms part of international law and, as a corollary, the parties could argue their case by relying on ‘principles of equity’.292 From then on, the extent to which the tribunal actually relied on equity is debated and the award was even criticised for relegating equity to a minor role.293 The Chairman announced that he drew his conclusions as to the boundary between India and Pakistan ‘with due regard to what is fair and reasonable as to details’.294 As determined, the boundary chiefly followed the northern edge of the Rann, which included a peninsula flanked on each side by a narrow inlet.295 The tribunal awarded the inlets to Pakistan, since it would be ‘inequitable’ to do otherwise, given that they were entirely surrounded by Pakistan.296 According to the tribunal, this would help prevent friction and conflict in the region and it would be conducive to ‘peace and stability’.297

286 Indo-​Pakistan Western Boundary (Rann of Kutch) between India and Pakistan (India, Pakistan) (1968) 27 RIAA 1. 287 ibid 7; Gillis Wetter, ‘The Rann of Kutch Arbitration’ (1971) 65 AJIL 346, 346. 288 Wetter (n 287) 346. 289 Rann of Kutch (n 286) 7–​8. 290 ibid 11. 291 ibid. 292 ibid. 293 Thomas Franck and Dennis Sughrue, ‘The International Role of Equity-​as-​Fairness’ (1993) 81 Georgetown LJ 563, 564–​565 n 7. 294 ibid 570. 295 ibid. 296 ibid 570–​571. 297 ibid 571.

Interstate Arbitration  61

B. The Anglo-​French Continental Shelf Case The Anglo-​French Continental Shelf case concerned the delimitation of the maritime boundary between France and the United Kingdom in the English Channel.298 The parties had reached an agreement in principle on the delimitation of a portion of the continental shelf but could not agree on other areas.299 The proximity of the Channel Islands to France meant that an equidistance line between the Islands and mainland France would benefit the United Kingdom.300 Both parties having ratified the Geneva Convention on the Continental Shelf, the United Kingdom argued that the equidistance rule was opposable to France, while France rejected this argument on the basis of a reservation it had registered to Article 6 of the Convention.301 The Court of Arbitration found that the Geneva Convention on the Continental Shelf was applicable in the relations between the parties302 except to the extent of the French reservations,303 which covered the Channel Islands region.304 However, the Court of Arbitration held that the French reservations had little practical significance for the delimitation,305 since, if Article 6 was inapplicable, customary international law would be applicable in its stead.306 In the circumstances, the Court found that customary international law led very much to the same result as Article 6, so that the application or nonapplication of Article 6 would not make much difference in practice to the delimitation line –​that is, if it made any difference at all.307 The Court reasoned that the purpose of the ‘special circumstances’ exception in Article 6 was to ‘ensure an equitable delimitation’ and the effect of the ‘equidistance-​special circumstances’ rule that, if states abutting on the same continental shelf cannot agree on their maritime boundary, this must be determined on the basis of equitable principles.308 The Court explained that both the equidistance-​special circumstances rule and customary international law aim to delimit the boundary ‘in

298 Anglo-​French Continental Shelf (n 178). 299 France-​UK Arbitration Agreement (10 July 1975) preamble. 300 Franck (n 96) 79. 301 Anglo-​ French Continental Shelf (n 178) 10–​ 21, containing the parties’ memorials and counter-​memorials. 302 ibid [47]ff. 303 ibid [61]. 304 ibid [75]. 305 ibid [65]. 306 ibid [61]–​[65]. 307 ibid. 308 ibid [70], [82].

62  International Courts and Tribunals accordance with equitable principles’.309 This approach was later adopted by the ICJ.310 The Court of Arbitration reiterated that, whether under the Geneva Convention on the Continental Shelf or customary law, the appropriateness of a particular method of delimitation is predicated on the relevant circumstances of the case, including geographical features, and ‘the fundamental norm that the delimitation must be in accordance with equitable principles’.311 With respect to the area of the Channel Islands, the Court reasoned that its role was one of ‘balancing the equities’ in the region.312 The presence of the Channel Islands close to the French mainland, ‘if permitted to divert the course of that mid-​Channel median line, effects a radical distortion of the boundary creative of inequity’.313 The Court decided that the primary boundary should be a mid-​Channel median line314 but that the Channel Islands should be accorded 12 nautical miles from the established baselines extending north and west.315 Turning to the Atlantic region, the Court regarded the Scilly Isles as a ‘special circumstance’ with ‘distorting effects’ on the equidistance boundary,316 whose disproportion should be remedied.317 It decided to take into account the Scilly Isles as part of the United Kingdom’s coastline but to accord them ‘less than their full effect in applying the equidistance method’.318 It added: Just as it is not the function of equity in the delimitation of the continental shelf completely to refashion geography, so it is also not the function of equity to create a situation of complete equity where nature and geography have established an inequity. . . . What equity calls for is an appropriate abatement of the disproportionate effects of a considerable projection on to the Atlantic continental shelf of a somewhat attenuated portion of the coast of the United Kingdom.319

309 ibid [75]. See also Cottier (n 2) 365 (‘While the terminology of the method of delimitation applied may vary from equitable principles-​relevant circumstances to equidistance-​special circumstances, the consideration of equitable principles is inherent to the process of delimitation under all methods’). 310 See text to n 156ff. 311 Anglo-​French Continental Shelf (n 178) [97]. 312 ibid [187]. 313 ibid [199]. 314 ibid [201]. 315 ibid [202]–​[203]. 316 ibid [250]. 317 ibid [244], [249]–​[250]. 318 ibid [249]. 319 ibid.

Interstate Arbitration  63 The Anglo-​French Continental Shelf case, decided only a few years after the ICJ’s North Sea Continental Shelf cases, differs in at least one significant respect from the latter. In contrast with North Sea Continental Shelf, where the ICJ was asked to decide on the principles and rules applicable to the delimitation –​delimitation that the parties themselves would then effect by agreement320 –​in Anglo-​ French Continental Shelf, the Court of Arbitration was requested to determine the actual course of the boundary.321 The award was received with mixed appraisals. On the one hand, the Court was castigated for allegedly using equitable principles as ‘no more than a bundle of highly impressionistic ideas’,322 for taking ‘upon it the role of dispenser of distributive, rather than legal, justice’,323 and for equating the equidistance-​special circumstances rule with a delimitation under customary international law in accordance with equitable principles.324 On the other hand, the award also met with approval and was cited in later case law.325

C.  Later Cases Arbitral tribunals have continued to apply equity and look to the equitable solution.326 In Barbados v Trinidad and Tobago, an arbitration conducted in accordance with Annex VII of UNCLOS, the parties were at loggerheads over the delimitation of their continental shelf and exclusive economic zone in the areas ‘opposite or adjacent to their coasts’.327 After they failed to negotiate an agreement, the dispute was submitted to arbitration.328 The tribunal resorted to the two-​step approach to delimit the eastern part of the disputed maritime area.329 It observed that from the very beginning international courts and tribunals have used equity to delimit maritime boundaries, which is also the approach 320 Special agreement between Denmark and Germany (2 February 1967) art 1; Special agreement between Germany and the Netherlands (2 February 1967) art 1. 321 France-​UK Arbitration Agreement (10 July 1975) art 2(1). 322 Ian Brownlie, ‘Legal Status of Natural Resources in International Law (Some Aspects)’ (1979) 162 Recueil des Cours 247, 287. 323 DeVine (n 129) 174. For further criticisms, see MD Blecher, ‘Equitable Delimitation of Continental Shelf ’ (1979) 73 AJIL 60. 324 Anglo-​French Continental Shelf (n 178) (Declaration Briggs) 120; ED Brown, ‘The Anglo-​French Continental Shelf Case’ (1979) 16 San Diego LRev 461, 506–​507. 325 Eg Black Sea (n 88) [210]. 326 Eg Case concerning the Delimitation of the Maritime Boundary between Guinea and Guinea-​Bissau (1985) 19 RIAA 149 [88]; Case concerning the Delimitation of Maritime Areas between Canada and France (1992) 21 RIAA 265 [38]. 327 Barbados v Trinidad and Tobago (n 142) [193]. 328 ibid [194]ff. 329 ibid [295]ff, see also [242], [317].

64  International Courts and Tribunals stipulated in UNCLOS.330 Commenting on the aim of an equitable solution in Articles 74 and 83 of UNCLOS, the tribunal observed: This apparently simple and imprecise formula allows in fact for a broad consideration of the legal rules embodied in treaties and customary law as pertinent to the delimitation between the parties, and allows as well for the consideration of general principles of international law and the contributions that the decisions of international courts and tribunals and learned writers have made to the understanding and interpretation of this body of legal rules.331

In Guyana v Suriname, the tribunal considered Articles 74 and 83 of UNCLOS and stated that it must reach an equitable solution by drawing a provisional equidistance line that ‘may be adjusted in the light of relevant circumstances in order to achieve an equitable solution’.332 This tribunal then also adopted the ICJ’s two-​step approach.333 In Bangladesh v India, an award delivered after the ICJ judgment in Black Sea, a tribunal adopted the three-​step approach.334 Before doing so, the tribunal assessed ‘whether a presumption exists in favour of the equidistance/​relevant circumstances method for the delimitation of the exclusive economic zone and the continental shelf within 200 [nautical miles]’.335 Noting that Articles 74 and 83 of UNCLOS do not provide for a specific delimitation method,336 the tribunal concluded that it should determine the appropriate method of delimitation in accordance with ‘the mechanisms for the peaceful settlement of disputes’.337 Reiterating that the equitable result is the cardinal objective that guides international courts and tribunals, it added that the case law in this area constitutes ‘an acquis judiciaire, a source of international law under article 38(1)(d) of the Statute of the International Court of Justice, and should be read into articles 74 and 83 of the Convention’.338

330 ibid [229]. 331 ibid [222]. 332 Guyana v Suriname (n 165) [342]. 333 ibid [335]. 334 In the Matter of the Bay of Bengal Maritime Boundary (Bangladesh v India), PCA Case No 2010-​16, Award, 7 July 2014. 335 ibid [337]. 336 ibid [338]–​[339]. 337 ibid [339]. 338 ibid [339].

Conclusions  65

VII. Conclusions This chapter has presented a brief jurisprudential history of equity, viewed across a number of international courts and tribunals. Equity has thrived in the decisions of claims commissions and arbitration tribunals, especially those constituted to hear disputes on the basis of absolute equity. If the absolute equity mandate has been critiqued, the bulk of the case law does not corroborate the claim that adjudicators used it to disengage themselves from applying positive rules of law and resort to natural justice.339 Equity also prospered in maritime boundary delimitation, becoming part and parcel of an evolving delimitation method that first emerged with the North Sea Continental Shelf cases and gradually changed under the influence of UNCLOS. At the same time, equity has not always been applied. In this respect, the Barcelona Traction case was discussed as a missed opportunity. Naturally, not all decisions that have relied on equity are free from criticisms, and some observers have deplored either the broad discretion involved in the application of equity or the failure of the international judiciary to develop consistent criteria that provide predictability for the future. Yet such statements must be put in perspective: on the one hand, equity must remain adaptable in order to be able to account for the individual case and, on the other, a set of criteria have actually developed –​this can be said especially of maritime boundary disputes –​that both frame equity and the way international lawyers think about it. These infuse the adjudicative process with equity and, by the same token, reduce the flexibility inherent in its application.



339

Contrast Christopher Rossi, Equity and International Law (Transnational 1993) 70–​72.

PART II

EQU IT Y IN GE NE R A L

4 The Purpose of Equity I.  Introduction: ‘The way is equity, the end is justice’ The purpose of equity is to do justice. ‘Equity as a legal concept is a direct emanation of the idea of justice. The Court whose task is by definition to administer justice is bound to apply it.’1 Thus referred the International Court of Justice (ICJ) to equity in the Tunisia v Libya Continental Shelf case.2 This chapter could also have been entitled ‘Equity and Justice’, since to explore the purpose of equity is to review the binomial ‘equity and justice’.3 The umpire in Aroa Mines, a case decided on the basis of absolute equity,4 reasoned that he would ‘apply the precepts of international law in all cases where such use will [e]‌nsure justice and equity’ and stressed that ‘these precepts are to be used as a means to the end, which end is justice’.5 Justice provides the backbone and rationale for the broader need for equity. Following in the Aristotelian tradition of distinguishing between corrective and distributive justice, as forms of ‘particular’ justice,6 equity can be regarded as a corrective and as an element that brings about a just distribution.7 Equity can also operate as supplementary justice, when the law is silent.8 Other classifications are possible. Some authors, drawing on Thomas Aquinas,9 contrast commutative and distributive justice in Aristotle and canvass corrective justice

1 Continental Shelf (Tunisia/​Libya) (Judgment) [1982] ICJ Rep 18 [71]. 2 ibid. 3 cf María José Falcón y Tella, Justice and Law (Brill Nijhoff 2014) 127–​129. 4 Great Britain-​Venezuela Protocol (7 May 1903). 5 See Aroa Mines, Mixed Claims Commission (Great-​Britain-​Venezuela) (merits) (1903) 9 RIAA 402, 445. 6 Aristotle draws a distinction between ‘general’ and ‘particular’ justice, with corrective and distributive justice being subdivisions of particular justice, Aristotle, Nicomachean Ethics, Book V. See further ARW Harrison, ‘Aristotle’s Nicomachean Ethics, Book V, and the Law of Athens’ (1957) 77 Journal of Hellenic Studies 42; DG Ritchie, ‘Aristotle’s Subdivisions of “Particular Justice” ’ (1894) 8(5) Classical Review 185. 7 Aristotle, Nicomachean Ethics, Book V, chs 2ff, 1130b, 1ff and ch 10, 1137a, 31–​35 and 1137b, 1ff. 8 Eg Papinian described equitable law as correcting, supporting or supplementing the strict law, Papinian, ‘De Justitia et Jure’ in Justinian’s Digest or Pandects, Book I, 7. 9 Ritchie (n 6) 187. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0004

70  The Purpose of Equity as forming part of commutative or distributive justice.10 Others distinguish between restorative and retributive justice, which is more pertinent to criminal law.11 The goal of this chapter is not to offer a theory of justice but to highlight certain functions of equity qua justice. For this reason, it does not purport to be exhaustive in its exposition of justice. For instance, it discusses only corrective equity as individualised justice, although distributive and supplementary equity too may be mindful of the circumstances of the particular case;12 and while it describes equity applied in the absence of legal rules as supplementary justice, distributive justice too may be applied praeter legem to fill a gap in the law. The chapter sets to one side such conundrums. One particular contribution it seeks to make is to underline the role of equity as individualised justice. Sweeping conclusions about how equity is to be applied in future cases cannot be made in the abstract, because equity needs to be alive to the particular case. This chapter probes the ethical foundations of equity in international law, surveying in turn equity as corrective, distributive, and supplementary justice.

II.  Equity as Corrective Justice Law cannot anticipate all contingencies and when unforeseen situations emerge, equity is called upon to correct the injustice that would otherwise obtain from the strict application of law.13 Equity in this sense is a reaction to what is imperfect in the law.14 For this reason, the corrective function of equity is often tied to equity contra legem,15 a type of equity that is regarded as opposing the law.16 When equity is couched in the legal rule, the need to resort to its corrective function is less pronounced –​the rule itself is equitable. Similar reasoning led to one of the ICJ’s less compelling pronouncements in Tunisia v Libya Continental Shelf, that since equity is ‘directly applicable as law’, international law has no use for it as a corrective.17 Yet even equity expressly 10 Anton-​Hermann Chroust and David Osborn, ‘Aristotle’s Conception of Equity’ (1942) 17(2) Notre Dame LRev 129. For a critical analysis, Ritchie (n 6). 11 Donald Hermann, ‘Restorative Justice and Retributive Justice’ (2017) 16(1) Seattle Journal for Social Justice 71. 12 Eg the allocation of benefits and burdens according to distributive justice may take into account the level of development of states. 13 Aristotle, Nicomachean Ethics, Book V, Chs 2ff, 1130b, 1ff and Ch 10, 1137a, 31–​35 and 1137b, 1ff. See also ch 2 text to n 12ff. 14 Eric Agostini, ‘L’équité’ (1978) (Chronique II) Recueil Dalloz-​Sirey 7, 8. 15 Eg María José Falcón y Tella, Equity and Law (Peter Muckley tr, Martinus Nijhoff 2008) 136–​143. 16 See ch 5, section II C Equity contra legem. 17 Tunisia/​Libya (Judgment) (n 1) [71], holding that equity ‘was often contrasted with the rigid rules of positive law, the severity of which had to be mitigated in order to do justice. In general, this contrast

Equity as Corrective Justice  71 laid down in the legal rule can assume a corrective role.18 The assumption that corrective justice is solely the function of contra legem equity is predicated upon two related hypotheses that are ultimately dismissed in this book, namely that equity is antithetical to law19 and that we can perceive of an equity contra legem.20 The ensuing paragraphs discuss corrective equity as individualised justice and as an element that tempers the rigour of the law, although in effect these two aspects are entwined.

A.  Equity as Individualised Justice Equity is circumstance-​sensitive and can function as individualised justice.21 It does not affect the generality of the legal norm but adapts it ad hoc as required by the individual case.22 Equity does not repeal the law but it corrects it with a care for the specific case.23 To apply equity as individualised justice means to ‘render justice in the concrete case, by means of a decision shaped by and adjusted to the relevant “factual matrix” of that case’.24 This is not licence to reach ‘a capricious decision in each particular case, but to reach that decision which, in the light of the individual circumstances, is just and fair for that case’.25 A counterfactual application of equity as individualised justice in the Barcelona Traction case is the following.26 The ICJ could have reasoned that, while in principle the right to exercise diplomatic protection lay with the state of nationality of the corporation,27 in casu, Canada, the state of incorporation of Barcelona Traction, had ceased to exercise diplomatic protection and it is doubtful that a belated decision to press a claim would have been admissible.28 Since then in view of the particular concatenation of has no parallel in the development of international law; the legal concept of equity is a general principle directly applicable as law’. Contrast ch 3 text to nn 96 and 121. 18 Eg Vienna Convention on the Law of Treaties (VCLT) art 44(3)(c) on the separability of treaty provisions, Anastasios Gourgourinis, ‘Delineating the Normativity of Equity in International Law’ (2009) 11 ICLR 327, 342. The term ‘unjust’ is employed in this provision. 19 See ch 6, section II Equity and Law, especially text to nn 10–​16. 20 See ch 5, section V Revisiting Equity contra legem. 21 Charles de Visscher, De l’équité dans le règlement arbitral ou judiciaire des litiges de droit international public (Pedone 1972) 3. 22 ibid 4. 23 Falcón y Tella, Equity and Law (n 15) 13, 21, 192. However, equity may help develop the law, see text to nn 54–​63. 24 Continental Shelf (Tunisia/​Libya) (Separate Opinion Jiménez de Aréchaga) [1982] ICJ Rep 100 [24]. 25 ibid [25]. 26 Barcelona Traction, Light and Power Company (Judgment) [1970] ICJ Rep 3. 27 ibid [88]. 28 See ch 3 text to n 230.

72  The Purpose of Equity circumstances Canada would not have exercised diplomatic protection in favour of Barcelona Traction, granting ius standi to Belgium, the state of nationality of the majority shareholders who held 88 percent of the capital, would have been equitable such that they may not be left without a legal remedy.29 An ‘excessive individualisation’ of law has been criticised as ‘incompatible with the very concept of law’.30 Judge Ammoun argued that the type of equity that is ‘a possible derogation from general law in a particular case, has never been applied in international law’.31 Such equity, he contended, would make an international court a lawmaker and the resultant uncertainty ‘would drive States away from a tribunal as to which they could not foresee, with any degree of probability, what law would be applied by it’.32 Like Judge Ammoun, others have harboured reservations about judicial or arbitral discretion in the application of equity.33 Yet discretion is inherent in the process of decision-​making, it is not specific to the application of equity,34 nor does it make international courts and tribunals lawmakers.35 Rather, equity helps the decision-​maker select from a range of available options in a particular case.36 This is an essential and valuable facet of equity. If wielded incautiously or unreasonably, discretion

29 See ch 3, section IV B The Barcelona Traction Case: A Missed Opportunity?. 30 Continental Shelf (Libya/​Malta) (Counter-​Memorial of Malta) [1983] ICJ Pleadings 238 [111]. 31 Barcelona Traction, Light and Power Company (Separate Opinion Ammoun) [1970] ICJ Rep 286 [42]. 32 ibid. 33 Vaughan Lowe, ‘The Role of Equity in International Law’ (1989) 12 Australian YB International Law 54, 78 (‘Certainly, discussions by judges of equity infra legem, equity controlled by law, and so on, often have the flavour of an attempt to prove that there is a legal warrant for what might otherwise appear to be unrestrained judicial discretion’); Ian Brownlie, ‘Legal Status of Natural Resources in International Law (Some Aspects)’ (1979) 162 Recueil des Cours 247, 287–​288; Mark Weston Janis, ‘Equity and International Law’ (1982) 57 Tulane LRev 80, 81; Mark Weston Janis, ‘The Ambiguity of Equity in International Law’ (1983) 9(1) Brooklyn JIL 7, 12; John Tasioulas, ‘The Paradox of Equity’ (1996) 55(3) CLJ 456, 461. 34 Maritime Delimitation in the Area between Greenland and Jan Mayen (Judgment) [1993] ICJ Rep 38 [90] (citing ‘the measure of discretion conferred on the Court by the need to arrive at an equitable result’); Barbados v Trinidad and Tobago, PCA Case No 2004-​02, Award, 11 April 2006 [244] (‘the Tribunal considers that it has both the right and the duty to exercise judicial discretion in order to achieve an equitable result’); cf Hugh Thirlway who claimed that principles do not require judicial discretion. It is rather the absence of principles that invites judicial discretion. Principles fill in the gap that would otherwise exist, thus leaving no room for discretion. Hugh Thirlway, ‘Concepts, Principles, Rules and Analogies’ (2002) 294 Recueil des Cours 265, 307. If we apply this reasoning to equity, this would lead us to the conclusion that equity fills the gap and does not leave space for discretion. cf Christopher Ford, ‘Judicial Discretion in International Jurisprudence: Article 38(1)(c) and “General Principles of Law” ’ (1994) 5 Duke JCIL 35. 35 cf Phaedon John Kozyris, ‘Lifting the Veils of Equity in Maritime Entitlements’ (1998) 26 Denver JILP 319, 331. 36 Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Weeramantry) [1993] ICJ Rep 211 [142]; Tunisia/​Libya (Judgment) (n 1) [71].

Equity as Corrective Justice  73 may infringe upon legitimate expectations and lead to an inequitable result. Ultimately, this would not be an application of equity. The debate about equity as individualised justice also leaves us in a different kind of quandary: how to solve the ineluctable tension between predictability of the legal framework and individual justice or ‘greater fairness’ in specific circumstances.37 It has been argued that when judges interpose equity between a strict application of the law and the individual case they weaken respect for international law.38 In the North Sea Continental Shelf cases, Judge Sørenson deplored the fact that the ICJ discarded the equidistance-​special circumstances delimitation rule in favour of equity considering that this produced ‘considerable legal uncertainty’.39 However, this statement may be questioned on more than one ground; as discussed elsewhere in this book, the equidistance-​special circumstances model and equity are not too dissimilar, since the former invites the international adjudicator to take into account equitable considerations anyway and the circumstances of the individual case.40 In other words, it is doubtful that the introduction of equity has led to a higher degree of unpredictability. Since equity needs to have regard to the individual case, it must remain flexible. This does not necessarily come at a cost to predictability –​in the same way that other general principles, such as good faith, do not have to reduce predictability. An international court or tribunal would anyway not be expected to ‘act as an automatic slot-​machine, totally divorced from the social and political realities of the international community’.41 The concerns about equity as individualised justice are not particular to the application of equity. Rather these are risks inherent in international adjudication. Equity as a corrective and as individualised justice aims to adjust the law to the particular factual situation not in order to reject the general law but in order to avert an injustice.

37 Weston Janis, ‘Equity and International Law’ (n 33) 81; Ralph Newman, ‘Introduction’ in Ralph Newman (ed), Equity in the World’s Legal Systems (Bruylant 1973) 17; Thomas Main, ‘Traditional Equity and Contemporary Procedure’ (2003) 78 Washington LRev 429, 430. 38 Michael Akehurst, ‘Equity and General Principles of Law’ (1976) 25(4) ICLQ 801, 808–​809. 39 North Sea Continental Shelf (Dissenting Opinion Sørenson) [1969] ICJ Rep 242, 257. See also Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Schwebel) [1993] ICJ Rep 118, 120 (‘if what is equitable is as variable as the weather of The Hague, then this innovation may be seen as, and it may be, as defensible and desirable as another’). 40 See ch 3 text to nn 96, 162–​165, 305ff. 41 Hersch Lauterpacht, The Function of Law in the International Community (first published 1933, OUP 2012) 327.

74  The Purpose of Equity

B.  Softening Law’s Rigidity ‘Law,’ wrote Roscoe Pound, ‘must be stable and yet it cannot stand still. Hence all the thinking about law has struggled to reconcile the conflicting demands of the need of stability and of the need of change.’42 Nowhere is the tension between stability and change so flagrant as in the struggle between the strict application of law and equity.43 Law has a tendency to become static.44 Societal imperatives tend to march ahead of the law and, although new law tries to close the gap, this constantly reopens.45 It has been argued that the happiness of a society rests on the promptness with which this gap is narrowed.46 One aspect of the corrective function of equity relates precisely to the need to remedy the disjunction between the law as it is and the law as it should be, when change in law is hard to impel.47 To borrow the words of Manfred Lachs, ‘we must beware of petrifying the rules of yesterday and thereby halting progress in the name of process. If one consolidates the past and calls it law he may find himself outlawing the future.’48 Alfred Denning’s remarks about equity in England bear the hallmarks of equity in international law too: [Equity] arises out of the tendency of all law to become rigid. The rules of law, when enunciated by legislators or judges, are usually founded on reasons which appear satisfactory at the time. Once these rules are given the force of law, however, they must be obeyed for their own sake, and not for the goodness of the reasons which prompted them. No society can permit its members to disobey its laws simply because they disapprove of the reasons for them. In the course of time the reasons may cease to be valid: but the rules remain binding.49

If compliance with international law is sustained owing to international opprobrium that its disrespect would entail and sanctions that transform legal texts into ‘controlling reality’,50 time erodes the robustness of law and exposes 42 Roscoe Pound, Interpretations of Legal History (CUP 1923) 1. 43 cf ibid. 44 Alfred Denning, ‘The Need for a New Equity’ (1952) 5(1) Current Legal Problems 1, 1. 45 Henry Sumner Maine, Ancient Law (16th edn, John Murray 1897) 24. See further Gary Watt, Equity Stirring (Hart Publishing 2009) 10. 46 Sumner Maine (n 45) 24. 47 This is also the justification for the development of equity in common law jurisdictions. RE Megarry and PV Baker, Snell’s Principles of Equity (26th edn, Sweet & Maxwell 1966) 5–​6. 48 Manfred Lachs, President of the ICJ, Commemorative Speech at the United Nations General Assembly (UNGA) (12 October 1973). 49 Denning (n 44) 1. 50 Michael Reisman, ‘The Enforcement of International Judgments’ (1969) 63(1) AJIL 1, 6–​7.

Equity as Corrective Justice  75 its flaws, its pitfalls, and inadequacies. According to the Georges Pinson claims commission, this is to admit that law is imperfect and may on occasion need to be corrected by a ‘superior principle’.51 Equity responds by mitigating the harshness of positive law.52 The corrective function of equity in this context allows the nonapplication of the strict letter of the law when the latter would lead to unjust results.53 By the same token, corrective equity comports with an evolutive interpretation of international law.54 On this view, the work done by the ICJ in laying ‘the foundations of an equitable jurisprudence for the evolving law of the sea’, even before the United Nations Convention on the Law of the Sea (UNCLOS),55 may be contrasted to the Barcelona Traction case.56 In the latter, the ICJ could have been assisted by the ‘continuous evolution of international law’,57 including the law on the protection of international investments,58 to allow Belgium to exercise diplomatic protection for reflective loss. Relatedly, one of the criticisms levelled at the Court concerned this facet of corrective equity: The judicial function surely includes developing and applying international law to hitherto untested situations in order to obtain socially desirable and enlightened results. International law can never develop beyond the rudimentary state if the Court feels that the distinction between lex lata and lex ferenda forever prevents it from applying international law in a progressive manner in hitherto untested situations. Judicial decisions are an acknowledged source of law; they must play their part in law development.59 51 Georges Pinson (French-​Mexican Claims Commission) (1928–​1929) 5 RIAA 327, 355. 52 Tunisia/​Libya (Judgment) (n 1) [71]; Direction générale des ports et voies de communication v Schwartz (1927) in Recueil des décisions des tribunaux arbitraux mixtes, vol VII, 1927–​1928, 744. See further Manley Hudson, International Tribunals (CEIP/​Brookings Institution 1944) 103; Robert Jennings, ‘Equity and Equitable Principles’ (1986) XLII ASDI 27, 32; LDM Nelson, ‘The Roles of Equity in the Delimitation of Maritime Boundaries’ (1990) 84 AJIL 837, 839; Karl Strupp, ‘Le droit du juge international de statuer selon l’équité’ (1930) 33 Recueil des Cours 351, 462. 53 Georges Pinson (n 51) 355. 54 Evolutive interpretation could also point to supplementary justice, when the law is silent, see section IV Equity as Supplementary Justice. On evolutive interpretation of treaties, see International Law Commission (ILC), ‘Report of the International Law Commission on the Work of its 60th Session’ (5 May–​6 June and 7 July–​8 August 2008) UN Doc A/​63/​10 (Annex I, Georg Nolte); Eirik Bjorge and Robert Kolb, ‘The Interpretation of Treaties over Time’ in Duncan Hollis (ed), The Oxford Guide to Treaties (2nd edn, OUP 2020); Francisco Pascual-​Vives, ‘Evolutive Interpretation as a Method of Interpretation in Public International Law’ in Consensus-​Based Interpretation of Regional Human Rights Treaties (Brill Nijhoff 2019). 55 Jan Mayen (Weeramantry) (n 36) [3]‌; cf Delimitation of the Continental Shelf (United Kingdom/​ France) (1977) 28 RIAA 3 [47]–​[48]. 56 Barcelona Traction (Judgment) (n 26). 57 ibid [37]. 58 ibid [89]–​[90]. 59 Rosalyn Higgins, ‘Aspects of the Case Concerning the Barcelona Traction, Light and Power Company, Ltd’ (1971) 11 VJIL 327, 331, 341.

76  The Purpose of Equity Corrective equity could have mitigated the harshness of what the Court found to be the law, a law it drew from municipal legal systems,60 viz. that it was not possible for the state of nationality of the shareholders to exercise diplomatic protection, which left the majority shareholders without an effective legal remedy outside the limited scope of the national bankruptcy proceedings.61 This is not to prejudge how the ICJ might have decided the merits of the case. The correction would have fashioned an international law for the diplomatic protection of shareholders, which the Court has rejected again after Barcelona Traction.62 Softening the rigour of the law in this sense could have a direct impact on law development.63

III.  Equity as Distributive Justice The notion of distributive justice refers to that which is divisible and encompasses the idea of proportional or meritorious equality.64 Equity as distributive justice is generally linked to the distribution of wealth.65 This type of equity then may involve an extra-​legal dimension, the need for political decision-​making.66 For this reason, while for corrective equity we tend to look to the adjudicator, distributive equity is often regarded as the prerogative of the legislator; in this sense, it is more likely than corrective equity to be couched in treaty law.67 Judge Schwebel was critical of what he saw as distributive justice in the jurisprudence of the ICJ.68 The idea of administering distributive justice has also been rejected while applying equity: in Libya v Malta Continental Shelf, the ICJ held that there could be ‘no question of distributive justice’.69 The ensuing paragraphs address distributive equity 60 Barcelona Traction (Judgment) (n 26) [38]. 61 See ch 3 n 221 and text to n 226. 62 See ch 3 text to nn 265–​271. 63 cf text to n 23. 64 For a discussion, see Ernest Weinrib, ‘Corrective Justice in a Nutshell’ (2002) 52 U Toronto LJ 349, 349–​352. 65 Eg Wilfried Hinsch, ‘Global Distributive Justice’ (2001) 32 Metaphilosophy 58; Tsuneo Ishikawa, Income and Wealth (OUP 2002) ch 2; Julian Lamont and Christi Favor, ‘Distributive Justice’ (2017) Stanford Encyclopedia of Philosophy https://​plato.stanford.edu/​archives/​win2017/​entries/​justice-​ distributive/​. 66 Eg consider Jeffrey Dunoff, ‘The Political Geography of Distributive Justice’ in Chi Carmody and others (eds), Global Justice and International Economic Law (CUP 2012). 67 Shabtai Rosenne, ‘The Position of the International Court of Justice on the Foundations of the Principle of Equity in International Law’ in An International Law Miscellany (Martinus Nijhoff 1993) 228; cf Fisheries Jurisdiction (United Kingdom v Iceland) (Separate Opinion Dillard) [1974] ICJ Rep ICJ 53, 71. 68 Jan Mayen (Schwebel) (n 39) 118. 69 Continental Shelf (Libya/​Malta) (Judgment) [1985] ICJ Rep 13 [46].

Equity as Distributive Justice  77 in the allocation of resources and the distribution of benefits and burdens, the common heritage of mankind, intergenerational equity, and equitable representation.

A.  Allocation of Resources, Distribution of Benefits and Burdens According to Judge Dillard, ‘questions of establishing a system or régime of equitable allocation of resources engage elements of distributive justice’.70 Equity as distributive justice has been canvassed in the context of maritime disputes requiring ‘the wise or meritorious allocation of limited resources or what are presumed to be limited resources’.71 In fact, scarcity of recourses is not a necessary component of this kind of equity. In North Sea Continental Shelf, the ICJ asserted that maritime boundary disputes involve an exercise in delimitation rather than apportionment.72 Delimitation implies the drawing of ‘a boundary line between areas which already appertain to one or other of the States affected’.73 But the Court ruled out the possibility of awarding de novo any shares of an area.74 In drawing this distinction, the Court aimed to show that it does not engage in distributive justice.75 Yet equitable sharing of benefits and burdens, which also falls under the umbrella of distributive justice, is sometimes expressly laid down in treaty law. Examples include various provisions of UNCLOS,76 the United Nations Convention on the Law of Non-​Navigational Uses of International Watercourses (hereinafter UN Convention on the Law of International Watercourses),77 and the Agreement Governing the Activities of States on the Moon and Other Celestial Bodies (hereinafter Moon Agreement).78 These are discussed in Chapter 6. Suffice it to note at this stage that international courts and tribunals have applied some of these provisions, thus effectively engaging in distributive justice, although this was a possibility the ICJ appeared to reject in the North Sea Continental Shelf cases.



70 United Kingdom v Iceland (Dillard) (n 67), emphasis in original. 71 ibid 70.

72 North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3 [18]–​[20]. 73 ibid, emphasis added.

74 ibid. See further Frontier Dispute (Judgment) [1986] ICJ Rep 554 [149].

75 See further North Sea Continental Shelf (n 72) [91]; Anglo-​French Continental Shelf (n 55) [249]. 76 Eg UNCLOS arts 69(1), 70(1), 140(2).

77 Eg UN Convention on the Law of International Watercourses arts 5, 25(2). 78 Moon Agreement art 11(7).

78  The Purpose of Equity Distributive justice in modern international law is sometimes linked to the demands of the New International Economic Order.79 More recently, requests for distributive justice of this kind have thrived in environmental law. Such demands relate to the polluter pays principle;80 historical responsibility predicated on the argument that developed countries benefitted in the past from deforestation, emissions of ozone depleting substances, and greenhouse gases; a right to development, meaning that until equality is attained between developing and developed countries the latter should make a greater commitment to protect the environment, such as by phasing out traditional energies in favour of renewable energies without expecting developing countries to do the same, or by paying for the efforts made by developing countries.81 Effectively, these are demands for differential treatment of developing countries, taking account of their capacity to reduce pollution and respond to environmental harm.82 Some of these demands have made their way into international agreements. For instance, the UN Framework Convention on Climate Change provides that ‘the developed country Parties should take the lead in combating climate change’ and its effects.83 The same Convention states that ‘full consideration’ should be given to the ‘specific needs and special circumstances’ of developing countries, and ‘especially those that are particularly vulnerable to the adverse effects of climate change, and of those Parties, especially developing country Parties, that would have to bear a disproportionate or abnormal burden under the Convention’.84 In practice, the Convention’s commitment is a soft one: it urges contracting parties to give full consideration to the listed elements. These ‘common but differentiated responsibilities’85 have been carried over into the 2016 Paris Agreement.86 Distributive equity in such a context leaves open manifold questions of practical significance, such as the controverted issue of

79 UNGA Resolution 3201 (S-​VI) of 1 May 1974 (A/​RES/​S-​6/​3201). On the New International Economic Order, see Weston Janis, ‘Ambiguity of Equity’ (n 33) 16–​19, although the author discusses equity as distributive justice separately at 19–​22. 80 Sanford Gaines, ‘The Polluter-​Pays Principle’ (1991) 26 Texas ILJ 463. 81 Ken King, ‘The Incremental Costs of Global Environmental Benefits’ (1993) Global Environmental Facility Working Paper No 5, 27; Paul Baer and others, The Greenhouse Development Rights Framework (2nd edn, Heinrich Böll Foundation and others 2008); Frank Ackerman, ‘Financing the Climate Mitigation and Adaptation Measures in Developing Countries’ (2009) UNCTAD G-​24 Discussion Paper Series No 57. 82 Pieter Pauw and others, ‘Different Perspectives on Differentiated Responsibilities’ (2014) German Development Institute Discussion Paper 6/​2014; Dinah Shelton, ‘Equity’ in Daniel Bodansky, Jutta Brunnée, and Ellen Hey (eds), The Oxford Handbook of International Environmental Law (OUP 2008) 652ff. 83 UN Framework Convention on Climate Change art 3(1). 84 ibid art 3(2). 85 ibid preamble; Paris Agreement preamble. 86 Paris Agreement preamble, arts 4(4), 7, 9(3).

Equity as Distributive Justice  79 incremental costs that developed countries have to meet for measures taken by developing states in order to comply with obligations under environmental treaties that benefit the international community.87

B.  The Common Heritage of Mankind The concept of the common heritage of mankind has a pedigree going back two centuries, although its modern conceptualisation developed in the 1960s.88 Unlike equity in the allocation of resources, which presumes that resources belong to states and must therefore be equitably shared, the starting point of common heritage equity is that some resources beyond the purview of national jurisdiction are the patrimony of all mankind.89 For this reason, they are not subject to appropriation or the creation of any kind of ownership rights.90 The concept of the common heritage of mankind has been especially influential in UNCLOS and in the Moon Agreement.91 UNCLOS states that ‘[t]‌he Area and its resources are the common heritage of mankind’.92 The Moon Agreement provides that the ‘moon and its natural resources are the common heritage of mankind’.93 It adds that the moon ‘is not subject to national appropriation by any claim of sovereignty, by means of use or occupation, or by any other means’94 and ‘[n]either the surface nor the subsurface of the moon, nor any part thereof or natural resources in place, shall become property of any State, international intergovernmental or non-​governmental organization, national organization or non-​governmental entity or of any natural person’.95 However, caution is necessary. The concept of the common heritage of mankind has on occasion been invoked to promote partisan positions; in cultural heritage law, it has been relied upon to argue in favour of arrogating to some cultural

87 UN Framework Convention on Climate Change art 4(3); Convention on Biological Diversity art 20(2). 88 Malgosia Fitzmaurice, ‘International Protection of the Environment’ (2001) 293 Recueil des Cours 9, 150–​152. 89 Thomas Franck, ‘Fairness in the International Legal and Institutional System’ (1993) 240 Recueil des Cours 9, 92; GJH van Hoof, ‘Legal Status of the Concept of the Common Heritage of Mankind’ (1986) 7 Grotiana 49, 54. 90 Moon Agreement art 11. 91 Fitzmaurice (n 88) 152–​153; Rüdiger Wolfrum, ‘The Principle of the Common Heritage of Mankind’ (1983) 43 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 312; John Noyes, ‘The Common Heritage of Mankind’ (2012) 40 Denver JILP 447; cf Franck (n 89) 92–​95. 92 UNCLOS art 136. 93 Moon Agreement art 11(1). 94 ibid art 11(2). 95 ibid art 11(3).

80  The Purpose of Equity property belonging to others with the explanation that local or national heritage should be shared with all mankind.96

C.  Intergenerational Equity The concept of intergenerational equity is closely linked to the common heritage of mankind.97 Both are conceptualised as a trust.98 However, unlike the common heritage of mankind, intergenerational equity focuses on conservation and sustainable development with an intertemporal dimension: the requirement to meet ‘the needs of the present without compromising the ability of future generations to meet their own needs’.99 In this sense, common heritage equity is a broad synonym of intra-​generational equity100 but not of intergenerational equity. Intergenerational equity relies on the idea that we are both beneficiaries and custodians of our natural environment.101 The main

96 This argument lies at the heart of one of the thorniest debates in international cultural heritage law that opposes, on the one hand, art-​rich countries, archaeologists, and the United Nations Educational, Scientific and Cultural Organization (UNESCO) and, on the other, market countries, ‘universal’ or ‘encyclopaedic’ museums (more recently also known as ‘world’ museums), auction houses, art dealers, and collectors. For such a use of the term ‘heritage of mankind’, see John Henry Merryman, ‘Cultural Property Internationalism’ (2005) 12 IJCP 11, 11. Merryman relied on an out-​of-​context reading of the term ‘cultural heritage of all mankind’ in the preamble to the Convention for the Protection of Cultural Property in the Event of Armed Conflict (1954) to wage war against countries rich in cultural heritage, archaeologists, and UNESCO. One may instance Merryman’s argument that the Parthenon marbles that form part of the Elgin Collection in the British Museum, unlawfully removed from Greece in the early 1800s, should remain in the United Kingdom, because they are ‘the cultural heritage of all mankind’ and therefore do not belong in Greece, John Henry Merryman, ‘Thinking about the Elgin Marbles’ (1985) 83(8) Michigan LRev 1880, 1916, 1919–​1923. For a kindred line of argument, see James Cuno, Who Owns Antiquity? (Princeton University Press 2011) 49. Merryman’s interpretation of the term ‘cultural heritage of all mankind’ is belied by the Convention’s preamble, which runs: ‘Being convinced that damage to cultural property belonging to any people whatsoever means damage to the cultural heritage of all mankind, since each people makes its contribution to the culture of the world’. For a criticism of Merryman, see David Rudenstine, ‘The Rightness and Utility of Voluntary Repatriation’ (2001) 19 Cardozo Arts & Entertainment LJ 69, 74–​75; Lyndel Prott, ‘The International Movement of Cultural Objects’ (2005) 12 IJCP 225, 230. 97 Fitzmaurice (n 88) 156–​158. 98 ibid 190. 99 UN, ‘Our Common Future’ (Brundtland Report) (1987), para 27. See further Rio Declaration on Environment and Development (1992), Principle 3; Declaration of the United Nations Conference on the Human Environment (Stockholm Declaration) (1972), Principles 1, 2; Edith Brown Weiss, ‘In Fairness to Future Generations and Sustainable Development’ (1992) 8(1) American U JILP 19, 19; Edith Brown Weiss, In Fairness to Future Generations (Transnational UN U 1989); Attila Tanzi and Maurizio Arcari, The UN Convention on the Law of International Watercourses (Martinus Nijhoff 2001) 113; Otto Spijkers, ‘Equity across Generations in International and Domestic Water Law’ in Thomas Cottier, Shaheeza Lalani, and Clarence Siziba (eds), Intergenerational Equity (Brill Nijhoff 2019) 93–​96. See also Gabčíkovo-​Nagymaros Project (Hungary/​Slovakia) (Judgment) [1997] ICJ Rep 7 [140]. 100 On intra-​generational equity, see Shelton (n 82) 642–​643; Laurie Kaye Nijaki, ‘Justifying and Juxtaposing Environmental Justice and Sustainability’ (2015) 39(1) Public Administration Quarterly 85. 101 Brown Weiss, ‘In Fairness to Future Generations’ (n 99) 20.

Equity as Distributive Justice  81 attendant ‘principle’ is the need to conserve our natural environment and its diversity for future generations.102 Some embryonic notion of intergenerational equity emerged in the Advisory Opinion in Legality of the Threat or Use of Nuclear Weapons, although the term was not used.103 In that case, as well as in the earlier Request for an Examination (New Zealand v France) case, Judge Weeramantry issued dissenting opinions stressing that the ICJ must recognise and protect the rights of future generations.104 Intergenerational equity has been highly influential in the development of international environmental law,105 although its reach is broader.106 However, as a legal concept, it lacks sufficient clarity; it is quixotic and aspirational. Unworkability is its main criticism, including the uncertainty as to who has ius standi to claim and what may be the appropriate remedy in case of violation.107

D.  Equitable Representation Equity as distributive justice is also manifested in provisions on equitable representation in the composition of international bodies and courts. The Charter of the United Nations establishes the need to pay due regard to ‘equitable geographical distribution’ in the election of the non-​permanent members of the Security Council.108 The statutes of international courts tend to make provision for geographical representation of their membership;109 in some cases they especially stipulate that such representation must be ‘equitable’.110 The 102 Shelton (n 82) 643. 103 Legality of the Threat or Use of Nuclear Weapons (Advisory Opinion) [1996] ICJ Rep 226 [29], [35]–​[36]. 104 Legality of the Threat or Use of Nuclear Weapons (Dissenting Opinion Weeramantry) [1996] ICJ Rep 429, 455; Request for an Examination of the Situation in Accordance with Paragraph 63 of the Court’s Judgment of 20 December 1974 in the Nuclear Tests (New Zealand v France) Case (Dissenting Opinion Weeramantry) [1995] ICJ Rep 317, 341–​342, 357. 105 Fitzmaurice (n 88) 187. 106 Eg international cultural heritage law recognises the duty to conserve cultural heritage for future generations, see Convention concerning the Protection of the World Cultural and Natural Heritage (1972) art 4; Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (1970) art 5, referring to the protection of ‘areas reserved for future archaeological research’. See further Alexander Bauer, ‘New Ways of Thinking about Cultural Property’ (2007) 31(3) Fordham ILJ 690, 702; cf Mark Lynott, ‘Ethical Principles and Archaeological Practice’ (1997) 62(4) American Antiquity 589, 597. 107 Catherine Redgwell, Intergenerational Trusts and Environmental Protection (Manchester University Press 1999) 143; Fitzmaurice (n 88) 201–​202. 108 UN Charter art 23(1). 109 Catharine Titi, ‘Nationality and Representation in the Composition of the International Bench: Lessons from the Practice of International Courts and Tribunals and Policy Options for the Multilateral Investment Court’ (2020) CERSA Working Papers on Law and Political Science 1/​ 2020, 11–​19. 110 ibid.

82  The Purpose of Equity Statute of the International Tribunal for the Law of the Sea (ITLOS) states that ‘[i]‌n the Tribunal as a whole the representation of the principal legal systems of the world and equitable geographical distribution shall be assured’.111 The Rome Statute of the International Criminal Court (ICC) provides that, when selecting judges, states should take into account the ‘need’ in respect of the membership of the Court for ‘(i) The representation of the principal legal systems of the world; (ii) Equitable geographical representation; and (iii) A fair representation of female and male judges.’112 This kind of equity is effectively procedural and it is not discussed further in this book.

IV.  Equity as Supplementary Justice Equity can also function as supplementary justice when legal rules are absent.113 On this view, supplementary justice can coincide with distributive justice to the extent that the latter involves the creation of legal norms that distribute wealth.114 Supplementary justice is predominantly the function of equity praeter legem.115 In Georges Pinson, the French-​Mexican Claims Commission explained that equity can constitute a ‘supplementary principle’ when the letter of the law is silent, although it also recognised that equity can function as a corrective;116 in casu, the commission applied equity as a subsidiary source of international law.117 Equity of a similar kind, where a judge or arbitrator is mandated to reach a solution by balancing the relevant circumstances in an area where the law does not provide sufficiently detailed rules, has also been described as ‘autonomous’ equity, sine lege.118 Some authors have suggested that the law of maritime delimitation has been fashioned by such autonomous equity.119 Judge Jiménez de Aréchaga canvassed a conception of equity which is not ‘a correction or moderation of a non-​existent rule of law’ but the ‘ “lead rule” well adapted to the shape of the situation to be measured’.120 111 ITLOS Statute art 2(2). 112 Rome Statute art 36(8)(a). For a discussion, see Titi (n 109). 113 Arguably, recourse to equity to interpret vague legal rules may also qualify as supplementary justice, to the extent that obscurity of the law may resemble silence of the law, cf ch 5 n 28. 114 See text to nn 65–​67. 115 See ch 5, section II B Equity praeter legem. 116 Georges Pinson (n 51) 355. 117 ibid. Contrast ch 6, section IV Equity as a Source of Law. 118 Robert Kolb, Good Faith in International Law (Hart Publishing 2017) 35–​36. 119 ibid 36; Robert Kolb, Case Law on Equitable Maritime Delimitation (Alan Perry tr, Martinus Nijhoff 2003); Thomas Cottier, Equitable Principles of Maritime Boundary Delimitation (CUP 2015) 378. See also Lowe (n 33) 74. 120 Tunisia/​Libya (Jiménez de Aréchaga) (n 24) [26]; cf Cottier (n 119) 378 (‘Equity forms the very foundation of the rule’).

Conclusions  83 This view of the role of such autonomous equity, without law, is contrasted to the competing views that maritime delimitation is shaped by corrective121 or distributive equity.122 In Barcelona Traction, the ICJ could have resorted to equity as supplementary justice, instead of turning to municipal law,123 when it found that the case raised legal issues as to which international law had not established its own rules.124 Nonetheless, these possible interpretations underline that the distinction between equity as corrective, distributive, and supplementary justice is schematic and fluid.

V. Conclusions According to the memorable apophthegm of Umpire Plumley in the Aroa Mines case, ‘[t]‌he way is equity, the end is justice’.125 This chapter reviewed the foundations of equity as corrective, distributive, and supplementary justice. Under the heading of corrective justice, it canvassed equity as individualised justice and as justice that tempers the rigour of the law. Distributive justice was considered in relation to the allocation of resources and the sharing of benefits and burdens, the common heritage of mankind, intergenerational equity, and the equitable distribution of seats in international bodies or courts. The chapter stressed that distributive justice may include a political or extra-​legal component which is outside the scope of the book. The chapter further examined equity as supplementary justice when legal rules are absent. Counter-​instances of how the ICJ might have decided in Barcelona Traction were used to highlight that the different roles of corrective, distributive, or supplementary equity can overlap. Overall, the chapter has foregrounded justice as the rationale of equity: the purpose of equity is to do justice.

121 See text to n 17; Yoshifumi Tanaka, ‘Reflections on the Territorial and Maritime Dispute between Nicaragua and Colombia before the International Court of Justice’ (2013) 26(4) LJIL 909 916–​919; Yoshifumi Tanaka, ‘Reflections on Arctic Maritime Delimitations’ (2011) 80 Nordic JIL 459, 470–​473; cf MD Blecher, ‘Equitable Delimitation of Continental Shelf ’ (1979) 73 AJIL 60, 86 (‘Here “equity” is used in the sense of being a corrective, not of the effect of applying strict law but of the results of different methods of delimitation’). 122 cf Cottier (n 119) 378. 123 Barcelona Traction (Judgment) (n 26) [38]. 124 ibid. 125 See Aroa Mines (n 5) 443; ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals.

5 Traditional Typology of Equity I. Introduction It is customary to distinguish between three kinds of equity: equity infra legem, which is equity within the law; equity praeter legem, which performs a gap-​filling function; and equity contra legem, which is equity that derogates from the law. These three categories represent ideal types of equity. They are simplifications and, as this chapter argues, the line between them is often blurred: recourse to one or another type of equity is a matter of interpretation. Other classifications are possible. Francesco Francioni draws a distinction between three different kinds of equity: equity as a general principle of law (Article 38(1) of the Statute of the International Court of Justice (ICJ)); equity infra legem as a means of interpretation in light of Article 31(3)(c) of the Vienna Convention on the Law of Treaties (VCLT); and equity requiring ‘the creation of individualized rules by the judge for the settlement of the dispute ex aequo et bono’ (Article 38(2) of the Statute of the ICJ).1 Under the latter category, Francioni groups together equity praeter and contra legem.2 By contrast, other authors canvass ex aequo et bono adjudication as forming a separate category of equity,3 and sometimes it is viewed as coterminous with equity contra legem.4 Because jurisdiction ex aequo et bono refers to the entire mandate of a court or tribunal rather than to a specific application of the law, this type of equitable decision-​making is discussed in a distinct chapter in this book.5 Bin Cheng categorised equity yet differently, suggesting that there are four types of equity: equity in the exercise of judicial discretion (essentially, equity infra legem);

1 Francesco Francioni, ‘Equity in International Law’ (2013) MaxPlanckEPIL, paras 4–​9. 2 ibid. 3 Vaughan Lowe, ‘The Role of Equity in International Law’ (1989) 12 Australian YB International Law 54, 56. 4 North Sea Continental Shelf (Separate Opinion Ammoun) [1969] ICJ Rep 101 [37]; Barcelona Traction, Light and Power Company (Separate Opinion Ammoun) [1970] ICJ Rep 286 [42]. See further Louis Sohn, ‘Arbitration of International Disputes Ex Aequo et Bono’ in Pieter Sanders (ed), International Arbitration Liber Amicorum for Martin Domke (Martinus Nijhoff 1967) 332–​333; Stephen Beaglehole, ‘The Equitable Delimitation of the Continental Shelf ’ (1984) 14 Victoria U Wellington LRev 415, 417; cf Lowe (n 3) 56, n 9; Attila Tanzi, Introduzione al diritto internazionale contemporaneo (5th edn, Wolters Kluwer/​CEDAM 2016) 366. 5 See ch 7. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0005

Three Kinds of Equity  85 equity supplementing the law (ie praeter legem); absolute equity; and adjudication ex aequo et bono.6 This chapter commences by exploring equity infra legem, equity praeter legem, and equity contra legem as three distinct functions of equity. The taxonomy offers a conceptual framework to help make sense of three roles that equity can assume but it remains a theoretical device. Following this inquiry into the traditional typology, the chapter turns to its limitations. It explains that, no matter how tantalising to a mind craving certainty, strict divisions between different types of equity are untenable. The chapter then argues that a further flaw of the three-​prong classification is that it does not account properly for the relationship between contra legem equity and law. Against this backdrop, it reviews Antigone as the epitome of what may appear as contra legem equity and closes by revisiting the concept. It concludes that equity may never truly function contra legem.

II.  Three Kinds of Equity By definition, the distinction between equity infra, praeter, and contra legem turns on the degree of their perceived compliance with or digression from the law. While this book argues that such variance relates to the mere letter of the law, for the purposes of the present discussion, it outlines how the three types of equity are traditionally understood to function. This section studies in turn infra, praeter, and contra legem equity.

A. Equity infra legem Equity infra legem falls squarely within the law and, as a corollary, it is the most uncontroverted kind of equity. It is customary to hold that there is no distinction between equity infra legem and the ‘law proper’.7 Some alternative terms figure in the literature –​equity intra legem,8 secundum legem, and propter legem9 –​underlining the fusion between this type of equity and law. 6 Bin Cheng, ‘Justice and Equity in International Law’ (1955) 8 Current Legal Problems 185, 202ff. For yet another categorisation, see Thierry Debard and Serge Guinchard, Lexique des termes juridiques 2017–​2018 (Dalloz 2017) 478–​479. 7 Lowe (n 3) 56. 8 According to an older edition of Black’s Law Dictionary, intra has been replaced by infra in many modern Latin terms (Henry Campbell Black (ed), Black’s Law Dictionary (6th edn, West 1990) 822, also 780); according to the newer edition, equity intra legem is ‘[a]‌lso written equity infra legem’, Bryan Garner (ed), Black’s Law Dictionary (10th edn, Thomson Reuters 2014) 657. 9 Black (n 8) 780, 822; Louis Sohn, ‘The Role of Equity in the Jurisprudence of the International Court of Justice’ in Bernard Dutoit and Etienne Grisel (eds), Mélanges Georges Perrin (Payot 1984) 306,

86  Traditional Typology of Equity Equity infra legem has been described as the power of the adjudicator to choose from among different possible interpretations of the law in order to produce the most equitable solution.10 For this reason, it has been dubbed ‘interpretive equity’.11 In reality, recourse to any type of equity involves an element of interpretation.12 In Frontier Dispute, the ICJ qualified equity infra legem as a mode of interpretation and as an attribute of the law.13 Equity infra legem has also been labelled an element of judicial discretion.14 Another understanding of equity infra legem is that it adapts the law to the circumstances of the individual case.15 In Tunisia v Libya Continental Shelf, the ICJ held that ‘when applying positive international law, a court may choose among several possible interpretations of the law the one which appears, in the light of the circumstances of the case, to be closest to the requirements of justice’.16 It added for good measure that it was ‘bound to apply equitable principles as part of international law, and to balance up the various considerations which it regard[ed] as relevant in order to produce an equitable result’.17

n 9; María José Falcón y Tella, Equity and Law (Peter Muckley tr, Martinus Nijhoff 2008) 131; Cheng (n 6) 210. 10 Sohn, ‘Role of Equity’ (n 9) 306; Christopher Grauer, ‘The Role of Equity in the Jurisprudence of the World Court’ (1979) 37 U Toronto Faculty LRev 101, 102. 11 Falcón y Tella, Equity and Law (n 9) 105; Francioni (n 1) paras 7–​8. 12 Just as every application of the law is also an interpretation of the law, Roscoe Pound, The Spirit of the Common Law (Marshall Jones 1921) 179; Franklin Berman, ‘International Treaties and British Statutes’ (2005) 26(1) Statute LRev 1, 10; Falcón y Tella, Equity and Law (n 9) 95; Dominique Carreau and Fabrizio Marrella, Droit international (12nd edn, Pedone 2018) 359. Contra Anastasios Gourgourinis, ‘The Distinction between Interpretation and Application of Norms in International Adjudication’ (2011) 2(1) JIDS 31. That application of equity is tightly linked to the interpretation of a legal rule has been made clear both in cases where the international adjudicator allowed equity to influence interpretation (eg Question of Jaworzina (Polish-​Czechoslovakian Frontier) (Advisory Opinion) PCIJ Series B No 8 (6 December 1923) 40, ‘Since the object of this clause is one of equity, it must not be interpreted in too rigid a manner’) and in cases where such influence was disallowed (eg in Affaire de la Dette publique ottomane (Bulgarie, Irak, Palestine, Transjordanie, Grèce, Italie et Turquie) (1925) 1 RIAA 529, 548–​549, where the arbitrator considered that he had to interpret faithfully the conventional terms and that under no condition could he substitute what the parties had agreed upon with a ‘more just or equitable’ solution). 13 Frontier Dispute (Judgment) [1986] ICJ Rep 554 [28]. 14 Cheng (n 6) 210. 15 Michael Akehurst, ‘Equity and General Principles of Law’ (1976) 25(4) ICLQ 801, 801. See further Case concerning the Loan Agreement between Italy and Costa Rica (dispute arising under a financing agreement) (1998) 25 RIAA 21 [69]. 16 Continental Shelf (Tunisia/​Libya) (Judgment) [1982] ICJ Rep 18 [71]. The ICJ has described this elsewhere as justice in accordance with the rule of law, Continental Shelf (Libya/​Malta) (Judgment) [1985] ICJ Rep 13 [45]. Others however have discussed this as ‘autonomous’ equity, eg see Lowe (n 3) 74. See also ch 4 n 119. 17 Tunisia/​Libya (n 16) [71].

Three Kinds of Equity  87 In Fisheries Jurisdiction, the ICJ established that what matters is not simply to achieve an equitable solution, but to achieve ‘an equitable solution derived from the applicable law’.18 This dictum was later cited in Frontier Dispute when the Court discussed equity infra legem.19 It might be said that the judgments in Tunisia v Libya Continental Shelf and in the Fisheries Jurisdiction cases encapsulate the function of equity infra legem. However, neither judgment makes reference to equity infra legem –​or, for that matter, to equity praeter or contra legem.20 The better view is that the ICJ in these cases envisaged all equity as within the law, in other words, as equity infra legem.

B. Equity praeter legem Equity praeter legem has a supplementary function: it remedies ‘the insufficiencies of international law and fill[s]‌in its logical lacunae’.21 In other terms, equity praeter legem is used to fill gaps in the law.22 For this reason, it is sometimes termed ‘additional’ or extra legem equity.23 In interpreting Article 38 of the Statute of the Permanent Court of International Justice (PCIJ), an arbitral tribunal established under the Treaty of Versailles held that, in the absence of applicable rules of international law, the tribunal may fill the lacuna by deciding on the basis of the principles of equity.24 But it hastened to add that, while doing so, the tribunal must remain within the meaning of international law, applied by analogy and taking into account its evolution.25 According to

18 Fisheries Jurisdiction (Germany v Iceland) (Merits Judgment) [1974] ICJ Rep 175 [69]; Fisheries Jurisdiction (United Kingdom v Iceland) (Merits Judgment) [1974] ICJ Rep ICJ 3 [78]. 19 Frontier Dispute (n 13) [28]. 20 In Tunisia/​Libya (n 16) [71], the ICJ draws the distinction between equity as a general principle of law (as quoted) and ex aequo et bono adjudication (omitted from the quote). 21 Barcelona Traction (Ammoun) (n 4) [42], emphasis removed. The judgment uses the adjective ‘logical’ to draw a distinction with a ‘social’ gap in the law, gap-​filling of the latter kind seen as equivalent to equity contra legem. 22 Akehurst (n 15) 801; cf Sohn, ‘Arbitration’ (n 4) 332. It is uncertain whether recourse to equity to fill gaps in legal evidence, as opposed to gaps in the law, qualifies as equity praeter legem. In Guiana Boundary, the arbitrator found that incomplete geographical knowledge did not allow for an equal division of the disputed territory and favoured a frontier that ‘the better lends itself to a fair decision of the disputed territory’, Guiana Boundary (Brazil, Great Britain) (1904) 11 RIAA 11, 22. 23 Falcón y Tella, Equity and Law (n 9) 132; cf Baron Descamps, ‘Note’ (Annex 6), in PCIJ Advisory Committee of Jurists, Procès-​Verbaux of the Proceedings of the Committee 16 June–​24 July 1920 (Lawbook Exchange 2006) 48, arguing that ‘if it is the duty of the judge to apply the law, where it exists, we must not forget that equity is, in international as well as in national law, a necessary complement of positive law’. 24 Responsabilité de l’Allemagne à raison des dommages causés dans les colonies portugaises du sud de l’Afrique (Portugal v Germany) (sentence sur le principe de la responsabilité) (1928) 2 RIAA 1011, 1016. 25 ibid.

88  Traditional Typology of Equity another interpretation, equity praeter legem is applied together with law, when a court or tribunal has been ‘specifically empowered to decide in accordance with international law and equity’.26 By the same token, it has been claimed that the parties’ consent is necessary to apply equity that supplements the law.27 To a greater degree than application of equity infra legem, recourse to equity praeter legem is properly a function of interpretation: the adjudicator reasons that there is a gap in the legal fabric that needs to be filled. In this sense, equity praeter legem becomes an interpretive workaround to avert a holding of non liquet.28 Traditionally, a distinction is drawn between ‘genuine’ and ‘false’ gaps.29 Genuine gaps can be normative or technical. Normative gaps exist when the law is genuinely silent on an issue.30 International law in the 1970s did not regulate either cyberspace or ecommerce, since none existed at the time. Contrariwise, technical gaps are said to exist when the law guides the judge but does not control his or her decision through detailed legal provisions.31 The distinction between technical and normative gaps is not easy to draw. In Abaclat v Argentina, the investment tribunal held by a majority that it had jurisdiction to hear a claim brought jointly by several thousand Italian bondholders against Argentina.32 The respondent state had argued that 26 Sohn, ‘Arbitration’ (n 4) 332, emphasis in original. 27 Cheng (n 6) 209. 28 The concept of non liquet relates to the idea of the completeness of international law, Daniel Bodansky, ‘Non Liquet’ (2006) MaxPlanckEPIL, paras 5–​16; Ige Dekker and Wouter Werner, ‘The Completeness of International Law and Hamlet’s Dilemma’ (1999) 68 Nordic JIL 225; Prosper Weil, ‘ “The Court Cannot Conclude Definitively . . . ” Non Liquet Revisited’ (1998) 36 CJTL 109; Hersch Lauterpacht, The Function of Law in the International Community (first published 1933, OUP 2012) 59–​92. Some rules expressly disallow a finding of non liquet, eg Model Rules on Arbitral Procedure of the International Law Commission (ILC) (1958) art 11; Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) art 42(2). See further Mariano Aznar-​Gómez, ‘The 1996 Nuclear Weapons Advisory Opinion and Non Liquet in International Law’ (1999) 48(3) ICLQ 3, who undertakes a comparative study of European approaches to non liquet. All national systems examined in the article prohibit it, although they vary in the solutions they propose (4–​7). Eg, French Civil Code (2018) art 4 provides that a judge who refuses to pronounce judgment by invoking the silence, obscurity, or insufficiency of the law, can be prosecuted for denial of justice, while Swiss Civil Code art 1(2) establishes that, in the absence of a relevant provision of applicable law and of customary law, the judge decides ‘according to the rules that he would establish if he had to legislate’ (author’s translation, emphasis added). Only one municipal legal system is known to have allowed a finding of non liquet, the one to which we owe the term: Roman law, Michael Reisman, ‘International Non-​Liquet’ (1969) 3(4) International Lawyer 770, 770. 29 Falcón y Tella, Equity and Law (n 9) 101ff; Ulrich Klug, ‘Observations sur les problèmes des lacunes en droit’ in Chaïm Perelman (ed), Le problème des lacunes en droit (Bruylant 1968) 98–​99. 30 Falcón y Tella, Equity and Law (n 9) 102. 31 ibid 103. 32 Abaclat and others v Argentina, ICSID Case No ARB/​ 07/​ 5, Decision on Jurisdiction and Admissibility, 4 August 2011. On Abaclat, see Hans van Houtte and Bridie McAsey, ‘Abaclat and others v Argentine Republic: ICSID, the BIT and Mass Claims’ (2012) 27(2) ICSID Review 231; Andrea Steingruber, ‘Abaclat and Others v Argentine Republic: Consent in Large-​scale Arbitration Proceedings’ (2012) 27(2) ICSID Review 237; Donald Donovan, ‘Abaclat and others v Argentine Republic: As a Collective Claims Proceeding’ (2012) 27(2) ICSID Review 261; SI Strong, ‘Mass Procedures as a Form of Regulatory Arbitration’ (2013) 38 Journal of Corporation Law 259.

Three Kinds of Equity  89 by adhering to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) it had not consented to mass claims.33 The ICSID Convention contains no reference to collective proceedings. For the respondent, this was a ‘qualified silence’, which means that this type of proceedings is not possible under the Convention.34 If the drafters of the ICSID Convention had intended it to cover mass claims, they would have said so. The tribunal majority reasoned differently. It conceded that the ICSID Convention does not refer to mass proceedings as a form of arbitration35 but held that this should be interpreted as a ‘gap’ –​rather than as ‘qualified silence’ –​which the tribunal has the power to fill.36 Consequently, the majority upheld jurisdiction. Although the case instanced above does not come from equity, it shows how ‘gaps’ can be used. If we consider that this contested ‘gap’ is a genuine gap, it is unclear if it is a normative gap (the ICSID Convention is silent on mass claims because at the time of its conclusion the possibility of mass claims was not envisaged) or a technical gap (the Convention gives the general direction, it does not specifically cover mass claims). But it is also possible that the international adjudicator deliberately reads a ‘gap’ in the law in order to be able to fill it.37 Besides genuine legal gaps, false gaps also exist. False gaps are divided into conflict gaps and axiological gaps. Conflict gaps arise out of legal antinomies, when two genuinely conflicting rules make each other ineffective.38 Axiological gaps are said to exist when the judge or arbitrator considers that the normative framework is inadequate, because it does not take into account certain elements; had the legislator known about these elements, in keeping with Aristotle’s Nicomachean Ethics,39 he would have included them in the law.40 Gap-​filling of the axiological type can be a perilous exercise

33 Abaclat v Argentina (n 32) [516]. 34 ibid. 35 ibid [517]. 36 ibid [520], see also [517]ff. The tribunal majority held that it had the power to fill the ‘gap’ under ICSID Convention art 44, which provides that ‘[i]‌f any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the Tribunal shall decide the question’. 37 Lowe (n 3) 62. 38 Falcón y Tella, Equity and Law (n 9) 105–​106; Klug (n 29) 102. 39 Aristotle, Nicomachean Ethics, Book V, ch 10, 1137b, 3ff. 40 Carlos Alchourrón and Eugenio Bulygin, Normative Systems (Springer 1971) 106ff; Riccardo Guastini, Defeasibility, ‘Axiological Gaps, and Interpretation’ in Jordi Ferrer Beltrán and Giovanni Battista Ratti (eds), The Logic of Legal Requirements (OUP 2012) 182; Jordi Ferrer Beltrán and Giovanni Battista Ratti, ‘Defeasibility and Legality’ in Ferrer Beltrán and Ratti (ibid) 27; Falcón y Tella, Equity and Law (n 9) 104.

90  Traditional Typology of Equity bordering on (and covering) not only praeter legem interpretation but also judicial lawmaking. If international law exhibits gaps, these are fewer today than they used to be,41 which might be expected to reduce the relevance of equity praeter legem.42 In reality, customary international law and general principles of law tend to cover the existing gaps.43 In the words of Hersch Lauterpacht, there ‘may be gaps in a statute or in the statutory law as a whole; there may be gaps in the various manifestations of customary law. There are no gaps in the legal system taken as a whole.’44 Courts tend to ‘adapt existing principles’ to match new situations.45 If no existing principle can be pressed into service, courts develop ‘new ones by appealing to some antecedent or more fundamental concept, or by invoking doctrines in the light of which an essentially innovatory process can be carried out against a background of received legal precept’.46 Since either a rule or principle of law can be found to be applicable in almost every case, some have contended that the international adjudicator can have recourse to other gap-​filling techniques and equity praeter legem is not needed in international law.47 While this is a valid argument, what we are discussing here is the particular manner of acceding to equity. As will be argued in Chapters 6 and 8, equity is a source of international law and many a general principle used to fill ‘gaps’ includes equitable considerations or is a plain and simple manifestation of equity. And so equity is applied, although not necessarily invoked. But if equity is applied, it is unclear why the international judiciary should be circumspect about invoking it. As the example of reading ‘gaps’ in the law shows, judicial or arbitral discretion in this context does not relate to equity but to the decision as to whether there is a gap. 41 Akehurst (n 15) 806. 42 cf Emmanuel Voyiakis, ‘Do General Principles Fill Gaps in International Law’ (2009) 14 ARIEL 239, 241. 43 Akehurst (n 15) 806. 44 Lauterpacht (n 28) 72; See also Hans Kelsen, General Theory of Law and State (Anders Wedberg tr, Lawbook Exchange 1945, 2009) 146–​149. 45 Gerald Fitzmaurice, ‘Judicial Innovation –​Its Uses and its Perils’ in Cambridge Essays in International Law (Stevens 1965) 24–​25. 46 ibid. 47 Lowe (n 3) 61–​63. Eg in the Corfu Channel case, the ICJ held that the Albanian authorities had a duty to warn approaching British warships of the danger to which they were exposed because of the existence of a minefield in Albanian territorial waters. According to the ICJ, this duty was based not on conventional law but on ‘certain general and well-​recognized principles’, including ‘elementary considerations of humanity’ (Corfu Channel (Judgment of 9 April 1949) [1949] ICJ Rep 4, 22). Some authors refer to this passage as an example of equity praeter legem (Ruth Lapidoth, ‘Equity in International Law’ (1987) 22(2) Israel LRev 161, 173). Others are critical of the assumption that ‘elementary considerations of humanity’ are a manifestation of equity. Eg Lowe (n 3) 59–​60, argues that, if that were the case, the ICJ had no need to fill in a gap because it could rely on customary international law.

Three Kinds of Equity  91

C. Equity contra legem By definition, equity contra legem cannot be a mere application of law.48 The epitome of corrective justice,49 equity contra legem is applied in derogation of the law,50 in order to refuse compliance with ‘unjust laws’.51 According to Judge Ammoun, the role of equity contra legem is ‘with the agreement of the parties, to remedy the social inadequacies of the law’.52 This idea that the parties need to agree for an international court or tribunal to apply equity contra legem is recurrent in the literature.53 However, the form that such agreement should take remains eminently uncertain. Some assume that equity contra legem can only be applied if the parties have conferred on the tribunal an ex aequo et bono mandate.54 In Frontier Dispute, the ICJ having ruled out the possibility of deciding ex aequo et bono held that since the disputing parties had not entrusted the Court ‘with the task of carrying out an adjustment of their respective interests, it must also dismiss any possibility of resorting to equity contra legem’.55 The Court reasoned that only an ex aequo et bono mandate would allow it to resort to equity contra legem. Some authors deny the possibility that equity may exist contra legem; this is implicit in statements that equity can only ever be part of the law or that equity ‘is certainly an element “infra legem” ’.56 Unsurprisingly, application of equity contra legem is the most controverted use of equity. Similarly to equity praeter legem, an inspection of cases discussed as belonging to this category readily shows that often recourse to equity contra

48 Lowe (n 3) 63. 49 See ch 4, section II Equity as Corrective Justice. 50 Sohn, ‘Role of Equity’ (n 9) 307. 51 Akehurst (n 15) 801. 52 North Sea Continental Shelf (Ammoun) (n 4) [37]. 53 Akehurst (n 15) 807; Tanzi (n 4) 366. See also North Sea Continental Shelf (Ammoun) (n 4) [37]; cf Indo-​Pakistan Western Boundary (Rann of Kutch) between India and Pakistan (India, Pakistan) (1968) 27 RIAA 1, 11. 54 Aron Broches, Selected Essays: World Bank, ICSID, and Other Subjects of Public and Private International Law (Martinus Nijhoff 1995) 231; Rudolf Bernhardt, ‘Custom and Treaty in the Law of the Sea’ (1987) 205 Recueil des Cours 249, 315; Enrico Milano, ‘General Principles Infra, Praeter, Contra Legem? The Role of Equity in Determining Reparation’ in Mads Andenas and others (eds), General Principles and the Coherence of International Law (Brill 2019) 66. See also ch 7 text to nn 17–​18. 55 Frontier Dispute (n 13) [28]. But in that case, the ICJ also decided that it would not apply equity praeter legem and justified its use of equity infra legem as based on the agreement on the parties, [27]–​ [28], [149]. The Court stressed that ‘to resort to the concept of equity in order to modify an established frontier would be quite unjustified’; ‘the obvious deficiencies of many Frontiers inherited from colonization, from the ethnic, geographical or administrative standpoint, cannot support an assertion that the modification of these frontiers is necessary or justifiable on the ground of considerations of equity. These frontiers, however unsatisfactory they may be, possess the authority of the uti possidetis and are thus fully in conformity with contemporary international law’, [149]. 56 Manfred Lachs, ‘Equity in Arbitration and in Judicial Settlement of Disputes’ (1993) 6(2) LJIL 323, 326.

92  Traditional Typology of Equity legem is otiose, since the international adjudicator can invoke customary international law or a general principle of law to reach the same outcome. Lowe argues that application of a ‘complex legal rule’ could be perceived as recourse to equity contra legem.57 He draws on the case law of the Iran-​US Claims Tribunal58 to explain that the outcome of the application of ‘what many would describe as equity contra legem’ could be achieved by ‘the equitable application of the law’, by reference to general principles of law or, in short, by ‘the dexterous application of legal rules and principles’.59

III.  The Limitations of the Traditional Typology Describing the different functions of equity provides a useful heuristic construct to grasp the concept. However, the taxonomy identifies ‘ideal’ types of equity and is of theoretical value only. If we take the distinction at face value, the kinds of equity just presented can be situated on a continuum according to the degree of their digression from the law;60 equity infra legem reveals the least degree of digression, if any, and equity contra legem the widest. The same continuum has been described as one ‘along which the international judge or arbitrator exercises varying degrees of discretion in the interpretation, integration, and correction of the applicable rules and principles of international law’.61 Nonetheless, the boundaries between the different types of equity are fluid and often what is equity infra, praeter, and even contra legem depends on the eye of the beholder. The ensuing paragraphs seek to demonstrate this fluidity by relying on three selective illustrations: the debate about the type of equity that the ICJ applied in its landmark judgment in the North Sea Continental Shelf cases,62 application of equity as part of the real or purported telos of a treaty, and equity used to bypass the ‘technicalities’ of international law. The North Sea Continental Shelf judgment is emblematic of the uncertainty over the function of these distinct types of equity. When setting aside the

57 Lowe (n 3) 63–​64. 58 Sea-​Land Service v Iran, Ports and Shipping Organization, IUSCT Case No 33, Award No 135-​33-​1, 22 June 1984; Gould Marketing v Ministry of National Defence, IUSCT Case Nos 49–​50, Award No 136-​ 49/​50-​2, 29 June 1984; Foremost Tehran and others, and Iran and others, IUSCT Case Nos 37 and 231, Award No 220-​37/​231-​1, 11 April 1986. 59 Lowe (n 3) 64–​66. 60 Sohn, ‘Role of Equity’ (n 9) 307. 61 Francioni (n 1) para 21. 62 North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3.

Limitations of the Traditional Typology  93 equidistance principle enshrined in Article 6(2) of the Geneva Convention on the Continental Shelf, the ICJ considered that it was using equity within the law (infra legem); it reasoned that it was applying ‘a rule of law which itself requires the application of equitable principles’,63 and stressed that: when mention is made of a court dispensing justice or declaring the law, what is meant is that the decision finds its objective justification in considerations lying not outside but within the rules, and in this field it is precisely a rule of law that calls for the application of equitable principles.64

According to this normative explanation, the Court used equity not to fill a gap in the legal fabric but because ‘a gap-​free law’ decreed the application of equity.65 Subsequently, the Court endorsed this interpretation and the North Sea Continental Shelf judgment was instanced as an application of equity infra legem.66 Nonetheless, the same judgment has sometimes been canvassed as paradigmatic of recourse to equity praeter legem. Judge Ammoun in his separate opinion appended to the judgment considered that the fact that Germany was not bound by the equidistance rule meant that there was a gap in the law that needed to be filled by a general principle of law. He argued that: the principle of equity which must be applied is not the abstract equity contemplated by the Judgment, but that which fills a lacuna, like the principle of equity praeter legem, which is a subsidiary source of law.67 Contrary to the opinion of the Court, there is a lacuna in international law when delimitation is not provided for either by an applicable general convention (Article 38, paragraph 1(a)), or by a general or regional custom (Article 38, paragraph 1(b)). There remains sub-​paragraph (c) [general principles], which appears to be of assistance in filling the gap. . . . Does there exist a general principle of law recognized by the nations, as provided for by Article 38, paragraph (c) [caveat lector], of the Statute of the Court from which would follow a rule to the effect that the continental shelf could, in case of disagreement, be delimited equitably between the Parties?68

63 ibid [85]. 64 ibid [88]. 65 Lowe (n 3) 61. 66 Eg Frontier Dispute (n 13) [28]. 67 Judge Ammoun reiterates that equity praeter legem is a subsidiary source of international law, in North Sea Continental Shelf (Ammoun) (n 4) [37]. 68 ibid [32]–​[33].

94  Traditional Typology of Equity Francioni argued that the ICJ resorted to equity not so much in order to ‘bend the law towards a just result’ but as a concept creating legal obligations ‘besides and almost independently of the law’.69 According to the same author, the Court acted as if equity was needed to fill a gap in the law and agreed with Judge Morelli who, in his dissenting opinion, described the Court’s resort to equity as ‘a source of principles and criteria outside the scope of the law’.70 Other legal commentators reasoned differently. By such singular arguments, they contended, did the Court hope to persuade that it was resorting to equity within the law, when in reality it had arrogated to itself the right to decide ex aequo et bono.71 Knowing that an ex aequo et bono mandate is habitually seen as licence to apply equity contra legem,72 this interpretation may be implying that the ICJ actually resorted to equity contra legem. The difficulty in distinguishing between different types of equity is also evident when equity is applied as part of the telos of a treaty. Teleological interpretation is a time-​honoured method of treaty interpretation enshrined in customary international law. The VCLT mandates that a treaty ‘be interpreted in good faith in accordance with the ordinary meaning to be given to [its terms] in their context and in the light of its object and purpose’.73 Teleological interpretation is particularly relevant to international treaties, because the compromises reached in the course of negotiations often leave them teeming with vague or elliptical provisions. The question may be asked whether the ‘ordinary meaning’ of the treaty terms may be subservient to ‘its object and purpose’ –​in other words, whether the spirit of the law may trump its letter. In the South West Africa cases, the ICJ reasoned that the rule of interpretation that relies on the ‘natural and ordinary meaning of the words’ is not ‘absolute’.74 If such an interpretation ‘results in a meaning incompatible with the spirit, purpose and context of the clause or instrument in which the words are contained, no reliance can be validly placed on it’.75 While the South West Africa cases antedated the adoption of the VCLT, 69 Francioni (n 1) para 13. 70 ibid. See North Sea Continental Shelf (Dissenting Opinion Morelli) [1969] ICJ Rep 198 [19] (‘The fact that a rule of law makes a reference to extra-​legal criteria by no means signifies that those criteria are embodied in the rule of law. They are criteria which the legal rule makes it obligatory to apply, but which remain outside that legal rule’). 71 Wolfgang Friedmann, ‘The North Sea Continental Shelf Cases –​A Critique’ (1970) 64 AJIL 229, 236. The question is also asked in Thomas Cottier, Equitable Principles of Maritime Boundary Delimitation (CUP 2015) 430–​435, who appears to reject this idea, 435. See also North Sea Continental Shelf (Dissenting Opinion Tanaka) [1969] ICJ Rep 172, 196. 72 See ch 7. 73 VCLT art 31(1). 74 South West Africa Cases (Ethiopia v South Africa; Liberia v South Africa) (Preliminary Objections Judgment) [1962] ICJ Rep 319, 336. 75 ibid.

Limitations of the Traditional Typology  95 the above reasoning has informed subsequent decisions.76 Some authors discuss situations where the spirit of the law, and equity as part of it, are allowed to prevail over its letter as infra legem equity.77 If equity is used in teleological interpretation to fill a gap in the law, this can be equity praeter legem. Bin Cheng classified decisions that disregard the letter of the law in favour of its spirit as ‘decisions according to absolute equity’.78 Arguably, use of equity contra legem could sometimes stem from teleological interpretation, since the latter taken to extremes can lead to contra legem outcomes. The following example readily shows the potential for teleological interpretation to be wielded in this manner. In Sempra v Argentina and Enron v Argentina, two arbitrations that arose out of Argentina’s economic and financial crisis of 2001, the applicable investment treaty contained an exception allowing the state to take measures necessary for the protection of its essential security interests.79 The parties were at issue over whether the exception was self-​judging.80 A self-​judging exception allows the state to be the sole arbiter of whether the conditions for its application are met or not.81 The tribunals considered that the treaty’s object and purpose –​that is, the promotion and protection of investments, including ‘fair and equitable treatment of investment . . . in order to maintain a stable framework’, as expressed in the preamble82 –​meant that the treaty’s protections should apply in situations of economic hardship. This, they reasoned, justified a restrictive interpretation of the exception. They held that ‘any interpretation resulting in an escape route from the defined obligations cannot be easily reconciled with that object and purpose’.83 To conclude therefore that the exception was self-​judging, thus allowing the state broad

76 Eg Arbitral Award of 31 July 1989 (Guinea-​Bissau v Senegal) (Judgment) [1991] ICJ Rep 53 [48]. 77 Akehurst (n 15) 802. 78 Cheng (n 6) 204. On absolute equity, see ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals. 79 Argentina-​US Bilateral Investment Treaty (BIT) (1991) art XI. 80 On self-​judging exceptions, see Catharine Titi, The Right to Regulate in International Investment Law (Nomos/​ Hart Publishing2014) 190–​ 205; William Burke-​ White and Andreas von Staden, ‘Investment Protection in Extraordinary Times’ (2008) 48(2) VJIL 307, 376–​381. 81 The difference between self-​judging and non-​self-​judging exceptions is textual. A non-​self-​judging exception provides for measures ‘necessary’ for the protection of an interest; a self-​judging exception, allows the state to take measures ‘that it considers’ necessary for the protection of an interest, therefore offering it broader discretion. Argentina-​US BIT art XI does not include the phrase ‘that it considers’, meaning that in principle the exception is not self-​judging. See also Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States) (Merits Judgment) [1986] ICJ Rep 14 [222]; Gabčíkovo-​Nagymaros Project (Hungary/​Slovakia) (Judgment) [1997] ICJ Rep 7 [51]; Oil Platforms (Iran v United States) (Judgment) [2003] ICJ Rep 161 [43]; Titi (n 80) 190–​205. 82 Argentina-​US BIT preamble. 83 Sempra Energy International v Argentina, ICSID Case No ARB/​02/​16, Award, 28 September 2007 [373]; Enron Creditors Recovery Corporation and Ponderosa Assets LP v Argentina, ICSID Case No ARB/​ 01/​3, Award, 22 May 2007 [331].

96  Traditional Typology of Equity discretion, would be hard to square with the treaty’s object and purpose.84 The tribunals insisted that had they done so, they would deprive the treaty ‘of any substantive meaning’.85 Under the circumstances recourse to the ordinary meaning of the treaty terms would have sufficed to show that the exception was not self-​judging. However, the tribunals appeared to make a broad statement to the effect that self-​judging exceptions –​and such exceptions exist in many a trade and investment agreement86 –​are incompatible with such treaties. What they would do if faced with a genuine self-​judging exception is a matter of speculation. What the tribunals did in casu, in the absence of a self-​judging exception, is a matter of fact: they went out of their way to use a complex line of argument that led them to behave as if the exception, one that could ‘not be easily reconciled’ with the treaty’s object and purpose, did not exist.87 These awards have now been annulled.88 Arguably, an interpretation that disapplies expressly-​negotiated exceptions because they are seen as contrary to the spirit of the treaty is contra legem. Although equity was not the means of interpretation in this context, the tribunals’ reasoning led them to conclude that an equitable standard in favour of the investor had been violated.89 Indirectly, the cases show that equity could be wielded to bend the letter of the law to its will, including by ignoring a treaty exception. The line between equity infra and contra legem in such situations may be agonisingly thin indeed. There is further debate about the type of equity that can be used in order to disregard ‘various technicalities of the law’.90 Exceptions to the exhaustion of local remedies are an example. In the field of diplomatic protection, the requirement to exhaust local remedies is part of customary international law.91 Yet equity ushers in an element of flexibility so that the requirement can be waived when domestic remedies are absent or inadequate (futility exception).92 84 Sempra v Argentina (Award) (n 83) [374]; Enron v Argentina (Award) (n 83) [332]. 85 ibid. 86 Eg General Agreement on Tariffs and Trade (GATT) art XI; General Agreement on Trade in Services (GATS) art XIV bis; North American Free Trade Agreement (NAFTA) art 2102; Energy Charter Treaty (ECT) art 24(3). For more examples from North American investment treaty practice, see Titi (n 80) 196, n 1055. 87 Titi (n 80) 199–​200. 88 Sempra Energy International v Argentina, ICSID Case No ARB/​02/​16, Decision on Annulment, 29 June 2010; Enron Creditors Recovery Corporation and Ponderosa Assets LP v Argentina, ICSID Case No ARB/​01/​3, Decision on Annulment, 30 July 2010. 89 Sempra v Argentina (Award) (n 83) [290]–​[304] and operative part; Enron v Argentina (Award) (n 83) [251]–​[268] and operative part. 90 Sohn, ‘Arbitration’ (n 4) 332. 91 Georges Pinson (French-​Mexican Claims Commission) (1928–​1929) 5 RIAA 327, 351. 92 Charles de Visscher, De l’équité dans le règlement arbitral ou judiciaire des litiges de droit international public (Pedone 1972) 91.

Limitations of the Traditional Typology  97 Equitable considerations in the interpretation of the local remedies requirement were introduced in the case law.93 In the Finnish shipowners case, the parties conceded that the need to exhaust local remedies does not apply where there is no effective remedy to be exhausted.94 In Certain Norwegian Loans, Norway had argued that the French bondholders on whose behalf the French Government had instituted proceedings had not exhausted local remedies; France raised the objection that such remedies were not shown to be effectual.95 The ICJ eventually declined jurisdiction on unrelated grounds and did not examine the futility of the local remedies.96 Nevertheless, Hersch Lauterpacht in his separate opinion sympathised with the French contention that there were no effective remedies to be exhausted, although he added unhelpfully that ‘however contingent and theoretical these remedies may be, an attempt ought to have been made to exhaust them’.97 These cases need to be distinguished from Georges Pinson, where equity was relied upon to waive the requirement to exhaust local remedies.98 In Georges Pinson, equity was explicitly part of the applicable law,99 in other words, it was by necessary implication infra legem. Similarly, a distinction needs to be drawn with equity relied upon at the expense of ‘minutely observing legal procedures and formalities’100 in the context of the Venezuelan mixed claims commissions deciding on the basis of ‘absolute equity’.101 The mandate of these commissions explicitly provided that decisions would be taken ‘without regard to objections of a technical nature’.102 By the same token, in the case of the Mexican claims commissions, the contracting parties, ‘desirous of effecting an equitable settlement of the claims of their respective citizens thereby affording them just and adequate compensation for their losses or damages’ expressly forbade that claims should be rejected for non-​exhaustion of local remedies.103 Some 93 Robert Kolb, Good Faith in International Law (Hart Publishing 2017) 188. 94 Claim of Finnish shipowners against Great Britain in respect of the use of certain Finnish vessels during the war (Finland, Great Britain) (1934) 3 RIAA 1479, 1503. The actual disagreement in that case concerned whether futility needed to be obvious or whether a mere appearance of futility would suffice, 1498, 1504–​1505. 95 Certain Norwegian Loans (Judgment) [1957] ICJ Rep 9, 15, 17. 96 ibid 27. 97 Certain Norwegian Loans (Separate Opinion Hersch Lauterpacht) [1957] ICJ Rep 34, 39. 98 Georges Pinson (n 91) 351. 99 France-​Mexico Convention (25 September 1924) art 6. See also Georges Pinson (n 91) 351. 100 Oliver Romberg, in Albert Geouffre de La Pradelle and Nikolaos Politis, Recueil des arbitrages internationaux: 1856–​1872 (vol II, Pedone 1923) 564, 564. 101 See ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals. 102 Eg Italy-​Venezuela Protocol (7 May 1903) art II. 103 General Claims Commission (Agreement of 8 September 1923) (United Mexican States, United States) 4 RIAA 7, 13 and [21]; French-​Mexican Claims Commission (France, United Mexican States) (1928–​1929) 5 RIAA 307, 315; German-​Mexican Claims Commission (Germany, United Mexican States) (1927) 5 RIAA 561, 569.

98  Traditional Typology of Equity ‘implicit’ equitable exceptions have now been more formally endorsed, such as that local remedies need not be exhausted if they are absent or futile.104 In other cases, courts have failed to read an equitable exception in the law and were consequently criticised for it. In Barcelona Traction, the ICJ appeared to accept that equitable considerations may allow the state of nationality of the shareholders to intervene but ultimately rejected Belgium’s ius standi.105 Contrariwise, in Harza v Iran, the Iran-​US Claims Tribunal held that ‘ordinarily’ shareholders may not assert the claims of their company, but ‘equity requires that they take such claims subject to the defences and counterclaims that could have been raised against the corporation’.106 Reading implicit exceptions into the law can help take account of the individual case and avoid an ‘unjust’ outcome. Some authors discuss such equitable exceptions as occurrences of equity infra legem,107 considering that a rule, such as the obligation to exhaust local remedies, contains an inherent requirement for balancing.108 The absence of an exception may also be perceived as a gap that needs to be filled by praeter legem equity. Others still deem this to be a use of equity contra legem; the equitable exception is introduced against the law.109 Francioni has used the example of a state measure breaching contractual obligations owed to foreign investors in order to wrestle with a near economic collapse; the investors impugn the state measure, and an arbitrator subsequently seized of the dispute resorts to equity ‘to alleviate the strict liability of the respondent State in contradiction with an applicable investment treaty’. Francioni then asked the question of whether this is a case of ‘application of equitable principles underlying the law of treaties’, viz. infra or possibly praeter legem, or whether it is a case of equity contra legem.110

104 Eg ILC Articles on Diplomatic Protection (2006) art 15. For a discussion, see James Crawford and Thomas Grant, ‘Local Remedies, Exhaustion of ’ (2007) MaxPlanckEPIL, paras 13–​41. 105 Barcelona Traction, Light and Power Company (Judgment) [1970] ICJ Rep 3. For a discussion, see ch 3, section IV B The Barcelona Traction Case: A Missed Opportunity?. 106 Richard Harza v Iran, Award No 232-​97-​2 (1986) 11 IUSCT 76, 110. 107 Akehurst (n 15) 802. See also Grauer (n 10) 102. 108 de Visscher (n 92) 91. 109 Sohn, ‘Arbitration’ (n 4) 332; Sohn, ‘Role of Equity’ (n 9) 307. In the latter work, Sohn instances Orinoco Steamship Company (United States/​Venezuela), PCA Case No 1909-​02, Award, 25 October 1910, which is not very relevant to what equity contra legem may or may not do, because it concerned a challenge to an award arbitrated on the basis of absolute equity. The challenged award had dismissed the claims in light of domestic legislation that required the exhaustion of domestic remedies, although the compromis explicitly stipulated that the award be rendered without regard to objections of a technical nature or to the provisions of local legislation. For a criticism, see Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Weeramantry) [1993] ICJ Rep 211 [63]. 110 Francioni (n 1) para 18.

Antigone’s Law  99 The above readily shows that the traditional typology of equity is at best schematic and impressionistic.111 However, beyond the absence of a clear distinction between the three types of equity, a further weakness remains. It becomes evident when one tries to determine the relationship between equity and law. The tripartite classification seemingly suggests that every type of equity relates differently to the law and, in particular, it fails to reflect appropriately the relationship between equity contra legem and law. The remainder of this chapter will address this issue.

IV.  Antigone’s Law No analysis of equity can be complete without a discussion of Antigone, the 5th-​century BCE play by the Greek tragedian Sophocles. Antigone is also used as an example in Aristotle’s discourse on equity.112 Although one of Antigone’s main themes is civil disobedience,113 a topic properly relating to the domestic legal sphere and so beyond the scope of this book,114 the play’s formidable dilemma has spanned the ages and is relevant to any understanding of equity today, including equity in international law. In the Theban civil war, Antigone’s twin brothers, Eteocles and Polyneices, died fighting each other for the throne of Thebes. Creon, Antigone’s uncle and new king of Thebes, decreed that Eteocles should be honoured and Polyneices dishonoured; the punishment he had reserved for Polyneices is one of the most shocking in the ancient Greek world: he should be left unburied on the field of battle and become carrion to animals of prey.115 In consequence, Antigone finds herself torn between her duty to bury her dead brother and the need to comply with Creon’s edict which made her brother’s burial illegal. The threat of punishment notwithstanding, Antigone decides to ignore Creon’s edict and bury her brother. But she is found out and in the incandescent exchange with Creon that follows, she admits to her actions and challenges the legality of his edict. Her declamation has a numinous quality about it: 111 The illustrations presented above are selective. Other examples are possible. Eg see ch 9 text to nn 1–​3. 112 Aristotle, Rhetoric, Book I, chs 13, 2 and 15, 4. 113 María José Falcón y Tella, Civil Disobedience (Peter Muckley tr, Brill 2004) 12. 114 Civil disobedience has been defined as ‘the conscious and intentional breaking of a legal norm . . . as appealing to ethical principles, to reasons of conscience, with legal system innovation and reform in view’, see Falcón y Tella, Equity and Law (n 9) 253–​254 (emphasis removed), where the author discusses civil disobedience in relation to equity. 115 cf David Bederman, International Law in Antiquity (CUP 2001) 257–​260; Ian Morris, Burial and Ancient Society (CUP 1987) 49.

100  Traditional Typology of Equity [I]‌t was not Zeus [who] published me that edict [nor Justice] . . . Nor did I think that your decrees were of such force that a mortal could override the unwritten and unfailing statutes given us by the gods. For their life is not of today or yesterday, but for all time, and no man knows when they were first put forth. Not for fear of any man’s pride was I about to owe a penalty to the gods for breaking these.116

Antigone bears testimony to an extreme situation in which state laws are rejected to comply with equitable imperatives that lie beyond the purview of state power. This age-​old narrative expresses a fearsome dilemma: on the one horn, application of the strict letter of the law with an inequitable result; on the other, disrespect for the law, because of the inequitable result that would otherwise obtain. It also captures the fulcrum of equity. If the law is unjust –​and there is no doubt that in Antigone the law is unjust –​how should one deal with it? Nonetheless, Antigone is not a legal text. It is not so much the legality of Creon’s edict that is at issue; rather the question is how Antigone should act: if she does not comply with the edict, she will be punished. If we translate Antigone’s quandary into legal terms and transpose it to international law, we find the following. Creon’s edict is the written law. One could then assume that it corresponds to conventional law. To explain non-​compliance with it, the protagonist invokes divine law.117 This ‘divine law’ would denote a norm imposed by a strong sense of justice. Arguably, this would be customary international law or a general principle of law. We are then confronted with a conflict between conventional law and customary international law or a general principle of law. If that were all, conflict rules would kick in and might indicate that conventional law is a lex specialis and would prevail over contrary customary international law or a contrary general principle of law.118 Nonetheless, the ‘divine law’ that Antigone invokes appears to be of a ius cogens or peremptory nature. Antigone feels compelled by this superior norm. If a conventional rule contravenes a peremptory norm, the conventional rule is void.119 Strictly speaking, 116 Sophocles, Antigone (Richard Jebb ed, CUP 1891) lines 450–​459. 117 For the role of divine law and religion in antiquity, see Bederman (n 115) 58ff. 118 That said, the question of a hierarchy of norms in international law beyond ius cogens (and the UN Charter) is contested. See Mario Prost, ‘Sources and the Hierarchy of International Law’ in Samantha Besson and Jean d’Aspremont (eds), The Oxford Handbook of the Sources of International Law (OUP 2017); Erika de Wet, ‘Sources and the Hierarchy of International Law’ in Besson and d’Aspremont (ibid); Christopher Greenwood, ‘Sources of International Law: An Introduction’, 2008, http://​legal. un.org/​avl/​pdf/​ls/​greenwood_​outline.pdf; Dinah Shelton, ‘Normative Hierarchy in International Law’ (2006) 100(2) AJIL 291; Mario Prost, ‘Hierarchy and the Sources of International Law’ (2017) 39(2) Houston JIL 285. 119 VCLT art 53.

Revisiting Equity contra legem  101 under this hypothesis there is no need to resort to equity, even though there is little doubt that equitable considerations are part of the identification of ius cogens norms.120 The international judge could bypass the inequitable rule by invoking contrary customary international law of a ius cogens nature without the need to invoke equity. Equity would still be present in the ius cogens norm that would displace the inequitable rule. To take another example, if a treaty defies ius cogens by contemplating or conniving in slave trade, piracy, or genocide,121 the solution need not come from equity but from a simple conflict of laws equation with the ius cogens norm prevailing. This is the first interpretation, or transposition, of Antigone’s invidious position in legal terms. There is a second one: at this juncture, let’s assume that there is no customary norm of a ius cogens nature that could prevail over the inequitable rule. We can contemplate a treaty that allows the kidnapping of foreign diplomats,122 assuming arguendo that prohibition of such an act is not a ius cogens norm. Would the international judge be able to apply equity in order to disrespect the inequitable provision? The only possible answer is ‘yes’; faced with the inequity of strict law, the judge would be in a position to apply equity. Only, in such a case, equity would be applied contra legem. This begs the next question: would the judge need the parties’ agreement to use equity contra legem? As we saw earlier, the parties’ consent is generally considered necessary to resort to equity contra legem.123 But the answer to this dilemma must be ‘no’, because under no conditions should an international judge uphold an inequitable provision such as one that allows the kidnapping of foreign diplomats. The fear of abuse of judicial discretion, the assumption that by a blanket statement of resort to equity one can reach any decision, is properly one of potential misuse of judicial power and not one of equity.

V.  Revisiting Equity contra legem In light of the foregoing, it is necessary to reconsider equity contra legem. If some international lawyers are uncomfortable with equity contra legem outside 120 An interesting commonality between equity and ius cogens is that they can both assume a corrective function, Michael Reisman, ‘The Regime for Lacunae in the ICSID Choice of Law Provision and the Question of Its Threshold’ (2000) 15(2) ICSID Review 362, 374–​377. 121 UN Conference on the Law of Treaties, ‘Official Records, Documents of the Conference’, A/​ CONF.39/​11/​Add.2 (UN 1971) 67–​68. 122 In reality, foreign diplomats are protected by conventional law, eg Vienna Convention on Diplomatic Relations (1961) art 29. See Eileen Denza, Diplomatic Law (OUP 2016). 123 See section II C Equity contra legem.

102  Traditional Typology of Equity the confines of an ex aequo et bono mandate, others, including the author of this book, suggest that this type of equity has a grander role to play. Lowe proposes that equity contra legem may be needed in two scenarios: first, when the judge can arrive at the desired result but can only do so ‘within the law’ by reasoning that he or she finds ethically unacceptable;124 second, when the parties to a dispute are concerned about reasoning and future ground rule-​setting as much as with settling a particular dispute; an example is that of a state keen on the recognition of an ‘equitable’ standard of compensation as opposed to fair market value.125 The assumption in such cases tends to be that equity contra legem is not normatively necessary, since the desired outcome could always be reached by relying on other rules. In the example of the kidnapping of foreign diplomats, the international adjudicator could reason that he or she is in the presence of a peremptory norm. In the alternative, he or she could apply equity. A different argument is put forward by Francioni, who argues that equity contra legem can be used to buttress the transformation of customary international law ‘under the pressure of new social necessities’.126 Customary international law is not static but evolves with time and what at a given point can be described as contra legem at a later juncture can become the law.127 The metamorphosis of a contra legem customary law norm into one that is infra legem is assisted by equity, including equity contra legem, which anticipates the change in the law and provides its ethical justification.128 But in the lapse of time between the moment when the norm is contra legem and the moment when it is infra legem there is a grey area of mutation. Finally, the use of equity contra legem leaves us in a different quandary. If resort must be had to equity contra legem, such as in order to justify nonapplication of a provision that allows the kidnapping of foreign diplomats, what is the source of this type of equity? According to the argument propounded in this book, equity is a general principle of international law. As such, it is part of the law, even if it may contradict the letter of the law. Since equity is part of the law, it can then never truly exist contra legem. Stated differently, equity contra legem is a contradiction in terms, because what is equitable is always part of the law. This is also the principal weakness of the traditional classification of equity, that it fails to account for the fact that all types of equity are part of the law. This topic is discussed in the next chapter.

124

Lowe (n 3) 67. ibid 68. 126 Francioni (n 1) para 29. 127 ibid para 17. 128 ibid. 125

Conclusions  103

VI. Conclusions The fluid borderline between the different types of equity reveals the limitations of the traditional classification. While the distinction between equity infra, praeter, and contra legem offers a useful heuristic construct to help us appreciate different functions of equity, real decision-​making situations may not fall squarely within one or another of the three ideal types. International courts and tribunals claim to apply equity infra legem more readily than equity praeter legem, and never do they admit to applying equity contra legem. Judges and arbitrators are not required to invoke any type of equity to reach a desired outcome, since other means of interpretation are usually available that can lead to the same result. Antigone offers the classic example of what may appear as equity contra legem and shows that the adjudicator could easily decide that a contrary ius cogens customary norm trumps the undesired inequitable law. While the underlying dilemma is an ethical one –​should the law be ignored because it is unjust? –​the solution can be legal. The palette of the international judge and arbitrator is so rich that a rule of customary international law or a general principle would be found to be applicable to render a discussion of equity contra legem superfluous. However, if the international adjudicator is called to apply an unjust law, use of equity ‘contra legem’ would be justified. In effect, as Chapter 8 will show, international courts and tribunals do resort to such ‘contra legem’ equity. But this is still an application of law. Equity cannot be perceived to contradict international law, since, as the following chapter will show, it is a source of international law.

6 Power to Resort to Equity I. Introduction Article 38(1) of the Statute of the International Court of Justice (ICJ) does not list equity as a source of law. The second paragraph of the same article provides for ex aequo et bono decision-​making on condition that the parties agree to it, thus prima facie excluding at least some kind of equity from the sources of international law. This begs the question: what is equity’s legal foundation? Judge Hudson addressed this issue in his individual opinion in the Diversion of Water from the Meuse case, when discussing equity’s embeddedness in law. He wrote: The Court has not been expressly authorized by its Statute to apply equity as distinguished from law. . . . The Court’s recognition of equity as a part of international law is in no way restricted by the special power conferred upon it ‘to decide a case ex aequo et bono, if the parties agree thereto’. . . . It must be concluded, therefore, that under Article 38 of the Statute, if not independently of that Article,1 the Court has some freedom to consider principles of equity as part of the international law which it must apply.2

This statement invites a few observations. The first concerns equity’s relationship to law. Equity, according to Judge Hudson, cannot be distinguished from law. The second observation concerns the relationship between equity and ex aequo et bono adjudication. This issue is addressed in the next chapter.3 Third, the question is raised of what kind of legal source equity is. Judge Hudson 1 Some authors refer to equity as a standalone ‘body of law’. Eg see Philippe Kahn, ‘The Law Applicable to Foreign Investments’ (Arthur Fell tr) (1968) 44(1) Indiana LJ 1, 19 (‘Although no express reference is made to this body of law, which has not yet even received a name, numerous clauses can be correctly interpreted only by admitting the existence of such law. Such is the case for most clauses referring to equity, amiable composition (friendly mediation), good faith, general principles of law . . . ’). For a criticism of this statement of the Permanent Court of International Justice (PCIJ), see Christopher Rossi, Equity and International Law (Transnational 1993) 160; cf Ruth Lapidoth, ‘Equity in International Law’ (1987) 22(2) Israel LRev 161, 176. 2 Diversion of Water from the Meuse (Netherlands v Belgium) (Individual Opinion Hudson) PCIJ Series A/​B No 70 (28 June 1937) [322]. 3 See ch 7. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0006

Equity and Law  105 considered that equity is a general principle of law and as such it does not require the parties’ consent.4 Whatever equity’s status at the time of the Diversion of Water from the Meuse case, this book sets forth a different argument. This chapter posits that, while equity is sometimes expressly included in conventional law, it is still applicable when it is not, because it is a source of international law –​it is a general principle of international law of a customary law nature. General principles of law can metamorphose into customary international law, when courts and tribunals apply them and states invoke and recognise them. This process also reflects the evolution of equity. Following this brief introduction, the chapter proceeds as follows. In two preliminary sections, it reviews the relationship between equity and law and considers whether equity is a principle or a rule. Next, the chapter turns to the crucial interrogation about equity as a source of international law within the scope of Article 38(1) of the Statute of the ICJ. In this respect, the chapter examines equity and treaty law, customary international law, and general principles of law. It finds that there is evidence that equity can enter the pale of international law through all three channels but it concludes that, outside conventional law, equity is a general principle of international law of a customary law nature. However, the chapter does not insist on the importance of this particular explanation. Rather the thrust of its argument is that equity is a source of international law, which means that international adjudicators have the power to apply it.

II.  Equity and Law In the 19th century, Alexandre-​Géraud Mérignhac affirmed that there is no opposition between applying international law and deciding according to equity; the formula that appeared to him to carry the day was that international law is to be applied with equity.5 International law has witnessed a sea change since then, and references to equity in treaty law and in the jurisprudence of international courts and tribunals have evolved.6 However, one common thread remains: the felicitous conjunction of law and equity presents

4 Meuse (Hudson) (n 2) [322]. 5 Alexandre-​Géraud Mérignhac, Traité théorique et pratique de l'arbitrage international (Larose 1895) para 303. 6 See ch 3 and section IV A Treaty Law.

106  Power to Resort to Equity a formidable interpretive challenge, with equity’s role in the structure of law being regarded as a curious one, since equity is ‘separate from, and yet a part of the legal norms’.7 A matter of enduring debate, the relationship –​or relationships –​between law and equity has not been definitively settled.8 Are equity and the law intrinsically blended root and branch? Are they indivisible because equity is part of the law? Does their relationship vary depending on the kind of equity in question? This book suggests that while equity as a concept is distinct from law, since law and equity are not coterminous (in the way that a sub-​field of international law is distinct from international law while still being part of it), in substance equity is part of the law, it is one of its dimensions, since it is a source of international law.9 As a form of corrective justice, equity is sometimes conceptualised in relation to the legal norm from which it invites a bigger or smaller digression.10 Such digression, if admitted, appears to denote a certain cleft between law and equity.11 Similarly, to the extent that we perceive equity as an exception we necessarily draw a distinction between equity and ius strictum; an opposition between law and equity is assumed in the traditional definition of equity contra legem.12 In Rhetoric, Aristotle wrote that equity is ‘justice beyond the written law’.13 Yet Aristotle did not understand equity to be antithetical to law.14 Rather he saw it as integrated in the will of the legislator, the telos of the legal norm.15 As discussed in the previous chapter, this apparent opposition is resolved when we draw a distinction between law and the strict letter of the law –​that very ius strictum. To borrow Judge Weeramantry’s words, ‘[l]‌iteral interpretations, wedded to the letter of the law and to formalism, contrast with liberal interpretations, based upon an equitable approach’.16

7 Ralph Newman, ‘Introduction’ in Ralph Newman (ed), Equity in the World’s Legal Systems (Bruylant 1973) 15. 8 ibid 17; Roscoe Pound, ‘Theories of Law’ (1912) 22(2) Yale LJ 114, 149. 9 See section IV Equity as a Source of Law. 10 Charles de Visscher, De l’équité dans le règlement arbitral ou judiciaire des litiges de droit international public (Pedone 1972) 3. 11 cf Robert Jennings, ‘Equity and Equitable Principles’ (1986) XLII ASDI 27, 30. 12 See ch 5 section V Revisiting Equity contra legem. 13 Aristotle, Rhetoric, Book I, Ch 13, 13 (author’s translation). 14 Stephen DeVine, ‘The Concept of Epieikeia in the Chancellor of England’s Enforcement of the Feoffment to Uses before 1535’ (1987) 21 U British Columbia LRev 323, 328; Phaedon John Kozyris, ‘Lifting the Veils of Equity in Maritime Entitlements’ (1998) 26 Denver JILP 319, 331 (‘Equity is not better than the law, but only better law’). 15 Aristotle, Rhetoric, Book I, ch 13, 17; contrast ch 15, 4. 16 Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Weeramantry) [1993] ICJ Rep 211 [129].

Equity and Law  107 The better view appears to be that equity is embedded in law. According to one author, law and equity are ‘so thoroughly commingled as to be inseparable, and it is not clear that an attempt to separate them would be either informative or interesting’.17 According to another, ‘the relationship between equity and law is not one between the legal system and a phenomenon exterior to it; equity is built into the legal system. . . . Its function is to lead to an interpretation of a rule of law in the context of a concrete situation and to balance all the elements of the relationship between the parties concerned’.18 Equity ‘is clearly a part of public international law’;19 it is inherent in the sound application of international law;20 it is ‘an element of international law itself ’;21 it is ‘part of the legal rule’.22 And it ‘enriches the rule of law . . . by requiring that attention be paid to the specific circumstances of each individual case’.23 In Diversion of Water from the Meuse, Judge Hudson foregrounded equity’s embeddedness in the law in no uncertain terms: What are widely known as principles of equity have long been considered to constitute a part of international law, and as such they have often been applied by international tribunals. . . . A sharp division between law and equity, such as prevails in the administration of justice in some States, should find no place in international jurisprudence . . . . Whether the reference in an arbitration treaty is to the application of ‘law and equity’ or to justiciability dependent on the possibility of applying ‘law or equity’, it would seem to envisage equity as a part of law.24

In conclusion, the conundrum of equity’s embeddedness in or separateness from law is only a perceived one, since equity is part of international law. The latter part of this chapter will delve into this issue to explain that equity is a source of international law. 17 Vaughan Lowe, ‘The Role of Equity in International Law’ (1989) 12 Australian YB International Law 54, 54. 18 Manfred Lachs, ‘Equity in Arbitration and in Judicial Settlement of Disputes’ (1993) 6(2) LJIL 323, 325. 19 Jan Mayen (Weeramantry) (n 16) [12]. 20 Institut de droit international, Resolution, ‘La compétence du juge international en équité’ (1937). However, the Resolution added that the international judge has to take it into account ‘to the extent that it is compatible with the respect for law’ (author’s translation). 21 Manley Hudson, The Permanent Court of International Justice 1920–​1942 (Macmillan 1943) 616–​617. 22 Shabtai Rosenne, ‘The Position of the International Court of Justice on the Foundations of the Principle of Equity in International Law’ in An International Law Miscellany (Martinus Nijhoff 1993) 230. 23 Lachs, ‘Equity’ (n 18) 326. 24 Meuse (Hudson) (n 2) [321].

108  Power to Resort to Equity

III.  A Principle and a Rule Preliminary to the discussion of equity’s status as a source of international law is the question of whether equity is a principle or a rule. This section argues that equity tends to function as a principle, including when it is expressly incorporated in conventional law, but this is by no means absolute; equity can also function as a rule. This position reflects the continuum on which principles and rules are placed and the fact that the distinction between them often has little practical significance. For this reason, the book ultimately does not retain the distinction between principles and rules for the purposes of the analysis of equity. Principles and rules are legal norms.25 A ‘principle’ is a ‘general normative proposition’ expressive of a number of more detailed rules.26 Several idiosyncratic features have been advanced to establish a distinction between principles and rules, resulting in what one author described as a ‘confusing variety of distinguishing criteria . . . on offer’.27 The most widely-​accepted criterion is that of generality: a principle is an abstraction, that is, it has a general, quasi-​ impressionistic normative content, while rules by comparison are narrow and precise.28 Qualitatively, principles have been described as optimisation requirements, exacting realisation of something to the ‘greatest extent’ permitted by the factual and legal framework, while the ‘scope of what is legally possible is determined by opposing principles and rules’.29 Rules contain ‘fixed points’ within the scope of what is ‘factually and legally possible’.30 Thus, rules are absolute, they are ‘applicable in an all-​or-​nothing fashion’ and are invariably either complied with or not.31 Rules are ‘definitive commands’;32 they set out ‘legal consequences that follow automatically when the conditions provided

25 Robert Alexy, A Theory of Constitutional Rights (Julian Rivers tr, OUP 2002) 45; Robert Kolb, ‘Les maximes juridiques en droit international public’ (1992) 2 RBDI 407, 426. 26 Robert Kolb, ‘General Principles of Procedural Law’ in Andreas Zimmermann and others (eds), The Statute of the International Court of Justice: A Commentary (OUP 2006) 794, citing Hugh Thirlway, ‘Procedure of International Courts and Tribunals’ 1128. 27 Alexy, A Theory (n 25) 45. 28 ibid; International Law Association (ILA), Committee on Formation of Customary (General) International Law, ‘Final Report –​Statement of Principles Applicable to the Formation of General Customary International Law’ (ILA 2000), s 2(i), commentary; Kolb, ‘Les maximes’ (n 25) 426–​427; Michel Virally, ‘Le rôle des “principes” dans le développement du droit international’ in En hommage à Paul Guggenheim –​ Recueil d’études de droit international (IUHEI 1968) 531, 532. 29 Alexy, A Theory (n 25) 47–​48. 30 ibid 48. 31 Ronald Dworkin, ‘The Model of Rules’ (1967) 35 U Chicago LRev 14, 25; Kolb, ‘Les maximes’ (n 25) 427; Alexy, A Theory (n 25) 48. 32 Robert Alexy, ‘Formal Principles’ (2014) 12(3) Intl Journal of Constitutional Law 511, 512, emphasis removed.

A Principle and a Rule  109 are met’.33 As a corollary, a conflict of rules is resolved if an exception is read into the rule or if one of the rules is found to be invalid (eg by applying the maxim lex posterior derogat legi priori or lex specialis derogat legi generali).34 In contrast, the application of principles is relative, it depends on context; principles need to be counterpoised or weighed against other principles competing for application.35 They have an axiological content closely attached to values, such as justice and the rule of law.36 They offer general guidance for conduct.37 A principle ‘underlies a rule, and explains or provides the reason for it. A rule answers the question “what”: a principle in effect answers the question “why”.’38 Principles occupy ‘an important role in smoothening the application of the law in a given case and have a sort of adapting or equitable function’; they play a key role in the development of law, providing the reason for the adoption of new rules.39 Rules are traceable to principles that form their ratio legis.40 Nevertheless, none of these distinguishing features is on its own definitive.41 When one considers the predominant criterion of generality, it becomes obvious that it can only reflect a difference of degree.42 One would be hard-​pressed to reconcile the claim that each norm is ‘either a rule or a principle’43 with the grey area of the transformation of principles into rules. Does a principle incorporated in a concrete rule cease to be a principle and exist only as a rule? Equitable considerations expressly couched in law, do they constitute principles or rules? One may argue that they are principles, since equity generally does not impose black-​or-​white obligations or rights. When fair and equitable treatment was inserted in investment treaties, it was an amorphous standard, a behavioural lodestar whose semantic content was distilled by arbitral tribunals over the years. But somewhere along the line, it crystallised into a set of concrete obligations for the host state. Now fair and equitable treatment encompasses more or less precise obligations, such as good faith and the protection of the investors’ legitimate expectations.44 Some new generation investment treaties 33 Dworkin (n 31) 25. 34 ibid; Alexy, A Theory (n 25) 49. 35 Dworkin (n 31) 27; Kolb, ‘Les maximes’ (n 25) 427; Alexy, A Theory (n 25) 50; Alexy, ‘Formal Principles’ (n 32) 512. 36 Kolb, ‘Les maximes’ (n 25) 427; Dworkin (n 31) 23. 37 Gentini (1903) 10 RIAA 551, 556. 38 Gerarld Fitzmaurice, ‘The General Principles of International Law Considered from the Standpoint of the Rule of Law’ (1957) 92 Recueil des Cours 1, 7. 39 Kolb, ‘General Principles’ (n 26) 795. 40 Kolb, ‘Les maximes’ (n 25) 428; Alexy, A Theory (n 25) 46; Hugh Thirlway, ‘Concepts, Principles, Rules and Analogies’ (2002) 294 Recueil des Cours 265, 308. 41 Kolb, ‘Les maximes’ (n 25) 430. 42 Alexy, A Theory (n 25) 47; Michael Akehurst, ‘Equity and General Principles of Law’ (1976) 25(4) ICLQ 801, 815. 43 Alexy, A Theory (n 25) 48. 44 See section IV A iii International investment law.

110  Power to Resort to Equity reduce the scope of fair and equitable treatment to narrowly-​defined egregious situations, such as denial of justice and manifest arbitrariness.45 A comparable tendency towards crystallisation can be observed in the progressive development of the law of the sea in view of equity’s incorporation in the United Nations Convention on the Law of the Sea (UNCLOS), with the relevant provisions reflecting customary international law, as well as in the development of the ICJ’s three-​stage approach to maritime boundary delimitations.46 The clear-​cut distinction between principles and rules is untenable in practice. Staying with the example of fair and equitable treatment, if the tribunal finds that the investor’s host state has not respected fair and equitable treatment, it will conclude that the provision has been violated. In this sense, equitable considerations expressly incorporated in treaty law allow the provision formally to function as a rule. But substantively the provision also functions as a principle to the extent that the application of the rule that contains it makes a renvoi to equitable principles lying beyond the rule.47 Sometimes, this renvoi is explicit. Part II of the UN Convention on the Law of International Watercourses establishes ‘general principles’, including the principle of ‘equitable utilization’ of international watercourses.48 As a rule of thumb, when equity or equitable considerations become expressly incorporated in a rule, they undergo a transformation. This transformation has two results: first, equity forms part and parcel of the rule, and it is inconceivable that the rule should be applied without regard to equity –​gone is the need to justify resort to equity; second, equity loses some of its flexibility. When the principle is incorporated in a rule, what has to be applied is no longer the principle but the rule, although the rule cannot be applied without reference to the principle. Equity is often discussed in terms appropriate for principles (eg the weighing of the various elements in order to do justice or the need to contrive an equitable result), including when it is incorporated in a rule. For example, to determine what constitutes ‘a reasonable and equitable use’ of international watercourses, the UN Convention on the Law of International Watercourses stipulates that a number of factors must be considered and their relative weight must be assessed ‘in comparison with that of other relevant factors’.49 The ICJ too has discussed equity in such terms. In North Sea Continental Shelf, it held

45 Eg EU-​Canada Comprehensive Economic and Trade Agreement (CETA) art 8.10. 46 See ch 3, section IV A Maritime Delimitation and Allocation of Maritime Resources. 47 Dworkin (n 31) 28; cf André von Walter, ‘The Investor’s Expectations in International Investment Arbitration’ (2009) 6(1) Transnational Dispute Management 1, 28. 48 See section IV A ii International water law. 49 UN Convention on the Law of International Watercourses art 6(3).

A Principle and a Rule  111 that there is no limit to the considerations that states may take into account to ensure ‘that they apply equitable procedures’.50 It added that ‘more often than not it is the balancing-​up of all such considerations that will produce this result rather than reliance on one to the exclusion of all others’.51 That said, in the same judgment, the Court also referred to equity as a ‘rule’.52 Judge Jiménez de Aréchaga too explained the need to balance various elements in the application of equity in his separate opinion in the Tunisia v Libya Continental Shelf case. He wrote: To resort to equity means, in effect, to appreciate and balance the relevant circumstances of the case, so as to render justice, not through the rigid application of general rules and principles and of formal legal concepts, but through an adaptation and adjustment of such principles, rules and concepts to the facts, realities and circumstances of each case. . . . All the relevant circumstances are to be considered and balanced; they are to be thrown together into the crucible and their interaction will yield the correct equitable solution of each individual case.53

This idea of balancing is uppermost in the judge’s mind. Nonetheless, he perceives equity not –​merely –​as a principle but as a value occupying a higher place in the hierarchy of ‘general rules and principles’, which he proposes must be used to adapt to the particular circumstances of the case. Like the ICJ in North Sea Continental Shelf, his contribution is not an apologia for equity as either a rule or a principle. When viewed against the broader background of ICJ jurisprudence, there is little in this to occasion surprise. The distinction between principles and rules, and the role of equity in this setting, tend not to be rigorously drawn. In Tunisia v Libya Continental Shelf, the ICJ held that ‘the term “equitable principles” cannot be interpreted in the abstract; it refers back to the principles and rules which may be appropriate in order to achieve an equitable result’.54 That same judgment’s memorable statement that ‘equity is a general principle directly applicable as law’55 employs the term ‘principle’ and in the same breath refers to ‘direct’ (or automatic) application, which is 50 North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3 [93]; cf Rudolf Bernhardt, ‘Custom and Treaty in the Law of the Sea’ (1987) 205 Recueil des Cours 249, 314. 51 North Sea Continental Shelf (n 50) [93]. 52 ibid [88], [92]. 53 Continental Shelf (Tunisia/​Libya) (Separate Opinion Jiménez de Aréchaga) [1982] ICJ Rep 100 [24], [35]. 54 Continental Shelf (Tunisia/​Libya) (Judgment) [1982] ICJ Rep 18 [70]. 55 ibid [71].

112  Power to Resort to Equity associated with rules. The Court reiterated this approach in Gulf of Maine, according to which: the association of the terms ‘rules’ and ‘principles’ is no more than the use of a dual expression to convey one and the same idea, since in this context ‘principles’ clearly means principles of law, that is, it also includes rules of international law in whose case the use of the term ‘principles’ may be justified because of their more general and more fundamental character.56

The ICJ stressed the distinction between, on the one hand, the ‘principles and rules of international law’ and, on the other, ‘the various equitable criteria and practical methods that may be used to ensure in concreto that a particular situation is dealt with in accordance with the principles and rules in question’.57 In such a matter, the Court continued, ‘customary international law’ can only furnish ‘a few basic legal principles’, but it does not ‘specify the equitable criteria to be applied or the practical, often technical, methods to be used’; these ‘remain simply criteria and methods even where they are also, in a different sense, called “principles” ’.58 On numerous occasions the terms ‘rules’ and ‘principles’ have been employed indiscriminately to refer to international law norms. According to Prosper Weil, in legal language, rules and principles are coterminous, with the caveat that we tend to qualify as principles norms of a more general and fundamental nature.59 Others have not drawn such a distinction. In his separate opinion in Jan Mayen, Judge Weeramantry used the term ‘equitable principles’ to comprise not only ‘principles’ but also ‘concepts, black-​letter rules and standards’.60 As mentioned at the outset, this is also broadly speaking the approach adopted here. The book is mindful of the distinction between principles and rules but equity can occupy a grey area where it can be interpreted either as a principle or as a rule, because of its flexible and malleable nature. The use of the terms ‘rules’ and ‘principles’ in the analysis of equity as a source of law should not, at least with the exception of general principles of law, be interpreted to ascribe to equity particular characteristics of either rules or principles. 56 Delimitation of the Maritime Boundary in the Gulf of Maine Area (Judgment) [1984] ICJ Rep 246 [79]. 57 ibid [80]. 58 ibid [81]. 59 Prosper Weil, ‘Le droit international en quête de son identité’ (1992) 237 Recueil des Cours 12, 150. See also James Crawford, Brownlie’s Principles of Public International Law (8th edn, OUP 2012) 37; ILA (n 28), s 2(i), commentary. 60 Jan Mayen (Weeramantry) (n 16) [22], [145].

Equity as a Source of Law  113

IV.  Equity as a Source of Law The idea that equity is firmly embedded in international law is recurrent in decisions of international courts and tribunals.61 Equity ‘is built into international law’, so that even a legal norm that ‘does not refer to equity must be applied in an equitable manner’.62 It is probably on that account that Malcolm Shaw, when discussing the sources of international law in his international law manual, included a dedicated section on equity.63 There is but one snag. If equity is not listed as a source of law in Article 38(1) of the Statute of the ICJ, on what authority can it be applied? Is its application a matter of judicial or arbitral discretion? Discussing equity’s ‘routes of entry’ into international law –​rather than equity as a source of law64 –​Judge Weeramantry observed that equity has been drawn into judgments through several routes and insisted that concentrating our ‘attention on only one or other of these routes of entry can constrict the full scope of operation of equity in a given case’.65 It is unclear whether Judge Weeramantry meant these ‘routes of entry’ of equity into international law to be identified with sources of international law. What matters is that effectively he suggests that equity has been introduced into international law as a treaty norm, as customary international law, as a general principle of law, among others, and that it is immaterial which of the above routes of entry the international adjudicator uses to resort to equity.66 Equity is sometimes expressly included in treaty law. Outside treaty law, there is authority to suggest both that equity is incorporated in customary international law and that it is a general principle of law. International courts and tribunals have applied it under all three headings. Is it then necessary to decide whether equity is a treaty norm, a customary international law norm,

61 Eg North Sea Continental Shelf (n 50) [85], [88]; Fisheries Jurisdiction (Germany v Iceland) (Merits Judgment) [1974] ICJ Rep 175 [69]; Fisheries Jurisdiction (United Kingdom v Iceland) (Merits Judgment) [1974] ICJ Rep ICJ 3 [78]; Case concerning the Loan Agreement between Italy and Costa Rica (dispute arising under a financing agreement) (1998) 25 RIAA 21 [69]; Jan Mayen (Weeramantry) (n 16) [94]. See also ch 3; Louis Sohn, ‘The Function of International Arbitration Today’ (1963) 108 Recueil des Cours 1, 308. 62 Manfred Lachs, ‘Some Reflections on the Contribution of the International Court of Justice to the Development of International Law’ (1983) 10(2) Syracuse JIL & Commerce 239, 274. 63 Malcolm Shaw, International Law (8th edn, CUP 2017) 78–​81. 64 Jan Mayen (Weeramantry) (n 16) [74]–​[102]. 65 ibid [74]. 66 In fact, the same judge discusses equity as part of ‘international law’, an expression which, when used by others, he interprets to mean that equity is part of customary international law, Jan Mayen (Weeramantry) (n 16) [79]–​[80], [88].

114  Power to Resort to Equity or a general principle of law? Or, as Judge Weeramantry proposed, is it best to allow equity to enter international law under any heading? The chapter concedes that whether equity is customary international law or a general principle of law may appear to be something of a metaphysical conundrum with little practical significance, since international courts and tribunals apply it anyway. What is important is to show that adjudicators have the power to apply equity. The chapter’s preferred normative explanation is that equity is a general principle of law of a customary law nature –​it belongs to a category of general principles of law that, like good faith, have mutated from being general principles of law into customary international law. However, ultimately, the purpose of this chapter is not to insist on this explanation over the others but to emphasise the fact that equity is a source of international law. The ensuing paragraphs address in turn treaty law, customary law, general principles of law, and equity as a general principle of international law.

A.  Treaty Law As international law develops into a close-​knit framework, equitable considerations are increasingly and steadily blended into its fabric through treaty-​ making.67 This section canvasses equity as a legal norm expressly inserted in treaties, focusing in turn on the law of the sea, international water law, international investment law, environmental law, cultural heritage law, and space law. i. Law of the sea The United Nations Convention on the Law of the Sea is replete with references to equity. The preamble cites the ‘equitable and efficient utilization’ of the resources of seas and oceans, and the ‘realization of a just and equitable economic order’. Article 59 of UNCLOS on conflicts regarding the attribution of rights and jurisdiction in the exclusive economic zone provides for the resolution of disputes ‘on the basis of equity and in the light of all the relevant circumstances, taking into account the respective importance of the interests involved to the parties as well as to the international community as a whole’.68 Articles 69(1) and 70(1) of UNCLOS grant land-​locked and geographically disadvantaged states the ‘right to participate, on an equitable basis’, in the exploitation 67 Edward McWhinney, ‘Equity in International Law’ in Newman, Equity in the World’s Legal Systems (n 7) 587. 68 The provision for dispute settlement ‘on the basis of equity’ in this article must be distinguished from an ex aequo et bono mandate. This is laid down in UNCLOS art 293(2).

Equity as a Source of Law  115 of the living resources in the exclusive economic zones of coastal states of the same region. Articles 74(1) and 83(1) of UNCLOS provide that the delimitation of the exclusive economic zone and of the continental shelf between states with opposite or adjacent coasts shall be made ‘by agreement on the basis of international law’ in order to reach ‘an equitable solution’. These articles are an adoption of the ICJ’s reasoning in the North Sea Continental Shelf cases,69 and reflect a broader interpretation canon applicable even outside the context of maritime disputes.70 UNCLOS further states that payments and contributions made with respect to the exploitation of the continental shelf beyond 200 nautical miles will be distributed ‘on the basis of equitable sharing criteria, taking into account the interests and needs of developing States, particularly the least developed and the land-​locked among them’.71 The benefits derived from activities in the deep seabed (the Area) will be distributed on the basis of equitable sharing.72 Ample reference is made to equitable geographical distribution and equitable geographical representation in relation to the membership and composition of the various organs set up by UNCLOS and its Annexes, such as the International Seabed Authority, the Commission on the Limits of the Continental Shelf, and the International Tribunal for the Law of the Sea (ITLOS).73 Finally, UNCLOS provides that states shall endeavour to create favourable conditions ‘for the transfer of marine technology for the benefit of all parties concerned on an equitable basis’.74 ii. International water law International water law’s principle of ‘equitable utilization’ of international watercourses is probably its most conspicuous but certainly not the only example of equity enshrined in the treaty text.75 The UN Convention on the Law of International Watercourses, generally seen as reflective of customary 69 Yehuda Blum, ‘The Role of Equity in International Law’ in Will ‘Justice’ Bring Peace? (Brill Nijhoff 2016) 397. See also ch 3, section IV A i The North Sea Continental Shelf cases. 70 Lachs, ‘Equity’ (n 18) 326. 71 UNCLOS art 82(4). 72 UNCLOS arts 140(1), 155, 160(2)(g), 162(2), 173(2). 73 Eg UNCLOS arts 161(1), 163, 274; Annex II art 2; Annex IV art 5; ITLOS Statute arts 2, 35. 74 UNCLOS art 266(3). 75 On the principle of ‘equitable utilization’ of international watercourses, see Attila Tanzi, The Consolidation of International Water Law (Editoriale Scientifica 2017) 57–​ 83; Ibrahim Kaya, Equitable Utilization (Ashgate 2003); Attila Tanzi and Maurizio Arcari, The UN Convention on the Law of International Watercourses (Martinus Nijhoff 2001) 93–​140; Ximena Fuentes, ‘Sustainable Development and the Equitable Utilization of International Watercourses’ (1998) 69 BYIL 119; Lucius Caflisch, ‘Règles générales du droit des cours d’eau internationaux’ (1989) 219 Recueil des Cours 9, 141–​ 160, discussing equitable ‘participation’; Günther Handl, ‘The Principle of “Equitable Use” as Applied to Internationally Shared Natural Resources’ (1978–​1979) 14 RBDI 41; Owen McIntyre, Environmental Protection of International Watercourses under International Law (Ashgate 2007) ch 3.

116  Power to Resort to Equity international law,76 lays down this ‘equitable utilization’ principle.77 The Convention applies to ‘uses of international watercourses and of their waters for purposes other than navigation and to measures of protection, preservation and management’ of the watercourses and their waters.78 It enjoins states to utilise international watercourses in their respective territories ‘in an equitable and reasonable manner’79 and to ‘participate in the use, development and protection of an international watercourse in an equitable and reasonable manner’.80 It specifies that states must use international watercourses ‘with a view to attaining optimal and sustainable utilization thereof and benefits therefrom, taking into account the interests of the watercourse States concerned’.81 The Convention further supplies an indicative list of factors relevant to the equitable and reasonable utilisation of watercourses. These include the ‘social and economic needs’ of the riparian states, the effects of a state’s use of a watercourse on other states,82 and the ‘conservation’, ‘protection’, and ‘development’ of the use of the watercourse’s resources.83 The Convention contains further provisions on equity and equitable sharing,84 addressing in tandem the equitable sharing of river water and intergenerational equity.85 The Convention on the Protection and Use of Transboundary Watercourses and International Lakes of the United Nations Economic Commission for Europe (UNECE Convention) (1992, amended in 2003) enjoins parties to adopt ‘all appropriate measures’ in order to ‘ensure that transboundary waters are used in a reasonable and equitable way, taking into particular account their transboundary character, in the case of activities which cause or are likely to cause transboundary impact’.86 The relevant criteria here are different to those in the UN Convention on the Law of International Watercourses.87 The UNECE Convention is noteworthy for being alive to the needs of future generations, thus going a step further in terms of intergenerational equity.88

76 Tanzi, Consolidation (n 75) 137–​139. See also section IV B Customary International Law. 77 UN Convention on the Law of International Watercourses art 5. 78 ibid art 1(1). 79 ibid art 5(1). 80 ibid art 5(2). 81 ibid art 5(1). 82 ibid art 6(1)(b), (d). 83 ibid art 6(1)(f). 84 ibid arts 17(1), 25(2), 33(8). 85 See ch 4, section III A Allocation of Resources, Distribution of Benefits and Burdens and C Intergenerational Equity. 86 UNECE Convention art 2(2). 87 For a comparison, see Tanzi, Consolidation (n 75) 58ff. 88 UNECE Convention art 2(5).

Equity as a Source of Law  117 Equity is also introduced in bilateral or regional treaties, such as the Convention on Cooperation for the Protection and Sustainable use of the Danube River (1994),89 the Framework Convention on the Protection and Sustainable Development of the Carpathians (2003),90 and the Guarani Aquifer Agreement (2010).91 iii. International investment law Equity is at the root of fair and equitable treatment,92 international investment law’s most important standard.93 International investment law comprises a dense network of more than 3,000 international investment agreements.94 The majority of these agreements regulate investment relations at the bilateral level.95 According to the IIA Mapping Project of the United Nations Conference on Trade and Development (UNCTAD), about 95 percent of mapped bilateral investment treaties (BITs) contain a clause on fair and equitable treatment,96 albeit with varying formulations.97 Provision for fair and equitable treatment is also made in multilateral treaties.98 Some investment treaties provide for unqualified ‘fair and equitable treatment’.99 For example, the Georgia-​Switzerland BIT states that ‘[i]‌nvestments of investors of each Contracting Party shall at all times be accorded fair and equitable treatment’ 89 Convention on Cooperation for the Protection and Sustainable use of the Danube River arts 2(1), 6. 90 Framework Convention on the Protection and Sustainable Development of the Carpathians art 6. 91 Guarani Aquifer Agreement arts 4, 11(2). 92 Stephen Vasciannie, ‘The Fair and Equitable Treatment Standard in International Investment Law and Practice’ (2000) 70(1) BYIL 99; Peter Muchlinski, ‘ “Caveat Investor”? The Relevance of the Conduct of the Investor under the Fair and Equitable Treatment Standard’ (2006) 55(3) ICLQ 527, 531–​ 533; Campbell McLachlan, ‘Investment Treaties and General International Law’ (2008) 57 ICLQ 361, 382, 400; Anastasios Gourgourinis, ‘Delineating the Normativity of Equity in International Law’ (2009) 11 ICLR 327, 328; Todd Weiler, Interpretation of International Investment Law (Brill 2013) 200; Roland Kläger, ‘Fair and Equitable Treatment’ in International Investment Law (CUP 2011) 22, 41; UNCTAD, Fair and Equitable Treatment: A Sequel (UN 2012); José Alvarez, ‘A BIT on Custom’ (2009) 42 NYU JILP 17, 77; Rumana Islam, The Fair and Equitable Treatment Standard in International Investment Arbitration (Springer 2018) 10–​11; Merrill & Ring Forestr v Canada, ICSID Case No UNCT/​07/​1, Award, 31 March 2010 [210] (‘the standard protects against all such acts or behavior that might infringe a sense of fairness, equity and reasonableness’); Bilcon of Delaware and others v Canada, PCA Case No 2009-​04, Award on Jurisdiction and Liability, 15 March 2015 [435], [440] (quoting Merrill v Canada, ibid); EDF International and others v Argentina, ICSID Case No ARB/​03/​23, Award, 11 June 2012 [1001]; cf Martins Paparinskis, The International Minimum Standard and Fair and Equitable Treatment (OUP 2013) 115ff; von Walter (n 47) 27–​28. 93 Christoph Schreuer, ‘Fair and Equitable Treatment in Arbitral Practice’ (2005) 3(6) JWIT 357, 357. 94 UNCTAD, ‘International Investment Agreements Navigator’ https://​investmentpolicy.unctad.org/​ international-​investment-​agreements. 95 ibid. 96 IIA Mapping Project https://​investmentpolicy.unctad.org/​international-​investment-​agreements/​ iia-​mapping. 97 Ruldolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn OUP 2012) 132; Kläger (n 92) 13–​22; UNCTAD, Fair and Equitable Treatment (n 92) 17–​18. 98 Eg ECT art 10(1). 99 UNCTAD, Fair and Equitable Treatment (n 92) 17.

118  Power to Resort to Equity without further specifications.100 Some treaties provide for fair and equitable treatment linked in some way to international law.101 The Japan-​Ukraine BIT establishes that ‘[e]ach Contracting Party shall in its Area accord to investments of investors of the other Contracting Party treatment in accordance with international law, including fair and equitable treatment’.102 Other treaties, especially but not exclusively those signed by Canada, Mexico, and the United States, tether fair and equitable treatment to customary international law or the minimum standard of treatment under customary international law.103 For instance, the Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) accords investors ‘fair and equitable treatment’ and explains, ‘[f]or greater certainty’, that the provision ‘prescribes the customary international law minimum standard of treatment of aliens as the standard of treatment to be afforded to covered investments’.104 It adds that fair and equitable treatment does ‘not require treatment in addition to or beyond that which is required by that standard, and do[es] not create additional substantive rights’.105 Moreover, some newer treaties describe the types of obligations covered by fair and equitable treatment.106 Investment treaties contain additional references to equity, including in the preamble.107 For instance, the Uruguay-​ US BIT provides that a party may prevent the investor’s free transfer of capital ‘through the equitable, non-​discriminatory, and good faith application of its laws’.108 The Australia-​Uruguay BIT provides for compensation ‘in accordance with generally recognised principles of valuation and equitable principles’.109 100 Georgia-​Switzerland BIT (2015) art 4(1). For other examples, see Cambodia-​Russia BIT (2015) art 3(1); Kenya-​Slovakia BIT (2011) art 2(2); Czech Republic-​Sri Lanka BIT (2011) arts 2(2), 3(1)-​(2); Guinea-​South Africa BIT (2007) art 4(1); Austria-​Philippines BIT (2002) art 2(1); Finland-​Mexico BIT (1999) art 2(2). 101 UNCTAD, Fair and Equitable Treatment (n 92) 18. 102 Japan-​Ukraine BIT (2015) art 6(1). For other examples, see Finland-​Mongolia BIT (2007) art 2(2); Guatemala-​Spain BIT (2002) art 3(1); Italy-​Qatar BIT (2000) art 2(1); Argentina-​US BIT (1991) art II(2). 103 See text to n 168ff. 104 CPTPP (2018) art 9.6(2) and annex 9-​A. For similar examples, see Pacific Agreement on Closer Economic Relations Plus (PACER Plus) (2017) art 9(2); Pacific Alliance Additional Protocol (2014) art 10.6; Canada-​Honduras free trade agreement (FTA) (2013) art 10.6; India-​Japan Economic Partnership Agreement (EPA) (2011) art 87(1); Canada-​Latvia BIT (2009) art II(2); Rwanda-​US BIT (2008) art 5; Canada-​Peru BIT (2006) art 5(2); Belgium-​Luxembourg Economic Union (BLEU)-​Peru BIT (2005) art 3(1); Uruguay-​US BIT (2005) art 5; Iceland-​Mexico BIT (2005) protocol art 3; Czech Republic-​Mexico BIT (2002) protocol ad art 2. 105 See CPTPP art 9.6(2) and annex 9-​A. 106 Eg CETA art 8.10; Cabo Verde-​Hungary BIT (2019) art 2(3); cf CPTPP art 9.6(2)(a). 107 Azerbaijan-​San Marino BIT (2015). 108 Australia-​Uruguay BIT (2019) art 9(3); Uruguay-​US BIT (2005) art 7(4). See also Azerbaijan-​San Marino BIT (2015) art 8(3); Georgia-​Switzerland BIT (2015) art 5(2); cf Finland-​Mexico BIT (1999) arts 3(4), 7(4). 109 Australia-​Uruguay BIT (2019) art 7(2). For other examples, see Brazil-​India BIT (2020) art 20(2); Cabo Verde-​Hungary BIT (2019) art 15(2).

Equity as a Source of Law  119 This chapter will return to fair and equitable treatment when discussing customary international law.110 iv. Environmental law Equity is also relevant to environmental law.111 In this context, mentions of equity tend to relate to the conservation, sustainable development, and management of global resources, or to the equitable sharing of benefits derived from natural resources.112 The International Law Commission’s (ILC) Articles on Prevention of Transboundary Harm from Hazardous Activities, adopted in 2001, provide for ‘solutions based on an equitable balance of interests’.113 They explain the factors and circumstances that states need to take into account to achieve an equitable balance of interests.114 The 1992 Convention on Biological Diversity offers an example of ‘fair and equitable’ sharing of benefits stemming from the utilisation of genetic resources,115 as does the 2010 Nagoya Protocol.116 Two additional examples are the 1994 UN Convention to Combat Desertification,117 and the 1992 UN Framework Convention on Climate Change.118 The latter provides, inter alia, that the parties ‘should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity’,119 thus making provision for intergenerational equity. The 2016 Paris Agreement, takes this objective further. It stipulates that the parties’ actions to address climate change must ‘respect, promote and consider’ their obligations with respect to intergenerational equity.120 It also emphasises ‘the intrinsic relationship that climate change actions, responses and impacts have with equitable access to sustainable development and eradication of poverty’.121 Finally, the Agreement provides that it ‘will be implemented to reflect equity’.122

110 See section IV B Customary International Law. 111 Elli Louka, International Environmental Law (CUP 2006). 112 Francesco Francioni, ‘Equity in International Law’ (2013) MaxPlanckEPIL, para 25. 113 ILC Articles on Prevention of Transboundary Harm from Hazardous Activities art 9(2). 114 ibid art 10. 115 Convention on Biological Diversity arts 15(7), 19(2). 116 Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits arising from their Utilization to the Convention on Biological Diversity, multiple recitals and arts 1, 5, 8, 10, 12, 22(5). 117 UN Convention to Combat Desertification arts 16–​18. 118 UN Framework Convention on Climate Change arts 3(1), 4(2), 11(2). 119 ibid art 3(1). 120 Paris Agreement preamble. 121 ibid; cf Pulp Mills on the River Uruguay (Argentina v Uruguay) (Judgment) [2010] ICJ Rep 14 [177], interpreting River Uruguay Statute (1975) art 27. 122 Paris Agreement preamble art 2(2); see also art 4(1).

120  Power to Resort to Equity v. Cultural heritage law Equitable considerations are present in international conventions on the protection of cultural heritage. Mentions of equity in that context tend to focus on procedural equity, notably equitable geographical distribution.123 For instance, the Convention on the Protection of Underwater Cultural Heritage provides that the member states ‘may establish a Scientific and Technical Advisory Body composed of experts nominated by the States Parties with due regard to the principle of equitable geographical distribution’.124 There are fewer occurrences of substantive equity. An example is offered by the Convention on the Protection and Promotion of the Diversity of Cultural Expressions of the United Nations Educational, Scientific and Cultural Organization (UNESCO), which identifies ‘[e]‌quitable access to a rich and diversified range of cultural expressions from all over the world’ as a guiding principle.125 The Convention on Stolen or Illegally Exported Cultural Objects of the International Institute for the Unification of Private Law (UNIDROIT) employs the terms ‘fairness’ and ‘reasonableness’ in relation to various aspects of the possession of stolen or illegally exported cultural objects.126 Accordingly, the possessor of a stolen or illegally exported cultural object is entitled to ‘fair and reasonable compensation’ when returning the object, ‘provided that the possessor neither knew nor ought reasonably to have known’ that the object was stolen or illegally exported.127 Article 59 of UNCLOS with its reference to dispute resolution ‘on the basis of equity’ discussed above128 is also relevant to disputes involving underwater cultural heritage in the exclusive economic zone.129 The reason for this is that the provision applies when UNCLOS does not confer rights or jurisdiction upon the coastal state or upon other states within that zone and, in effect, UNCLOS does not expressly grant coastal states jurisdiction over underwater cultural heritage in the exclusive economic zone.130

123 Eg Convention concerning the Protection of the World Cultural and Natural Heritage art 8(2); Convention on the Protection of Underwater Cultural Heritage (2001) art 23(4); Convention on the Protection and Promotion of the Diversity of Cultural Expressions (2005) art 23(5); Convention for the Safeguarding of the Intangible Cultural Heritage (2003) art 6(1). 124 Convention on the Protection of Underwater Cultural Heritage art 23(4). 125 Convention on the Protection and Promotion of the Diversity of Cultural Expressions art 2(7). 126 UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects (1995) arts 4, 6. 127 ibid arts 4(1), 6(1). 128 See text to n 68. 129 Sarah Dromgoole, Underwater Cultural Heritage and International Law (CUP 2013) 259. 130 ibid 260. See also UNCLOS art 59.

Equity as a Source of Law  121 vi. Space law Equity is also expressly couched in international space law, including in relation to equitable sharing, participation, and compensation. The 1979 Moon Agreement identifies the ‘equitable sharing by all States Parties in the benefits derived from those resources’ as one of the main purposes of the international regime it establishes.131 The UN Convention on International Liability for Damage Caused by Space Objects stipulates ‘a full and equitable measure of compensation’ for victims of damage caused by space objects.132 The same Convention provides that the compensation owed by the state that has launched a space object ‘shall be determined in accordance with international law and the principles of justice and equity’.133 Provision for compensation ‘in accordance with international law and the principles of justice and equity’ is also made in the UN Principles Relevant to the Use of Nuclear Power Sources in Outer Space.134 Equity in relation to ancillary matters is included in the Convention on Registration of Objects Launched into Outer Space. The Convention establishes a duty of response by state parties to a request by a party ‘for assistance under equitable and reasonable conditions’ to identify a space object which has caused damage to that state party or one of its natural or legal persons, or which may be of ‘a hazardous or deleterious nature’.135 Equitable considerations are also incorporated in the UN Principles on outer space. These include opportunities for participation in remote sensing activities ‘on equitable and mutually acceptable terms’;136 and the freedom of states to ‘determine all aspects of their participation in international cooperation in the exploration and use of outer space on an equitable and mutually acceptable basis’.137 Provision is also made for ‘fair and reasonable’ contractual terms in cooperative ventures for the exploration and use of outer space.138 Finally, even where equity is not properly labelled as such, the treaties contain other provisions that arguably are based on equitable considerations.139

131 Moon Agreement art 11(7). 132 Convention on International Liability for Damage Caused by Space Objects (1972) preamble. 133 ibid art XII. 134 Principles Relevant to the Use of Nuclear Power Sources in Outer Space principle 9[2]‌. 135 Convention on Registration of Objects Launched into Outer Space art VI. 136 Principles Relating to Remote Sensing of the Earth from Outer Space principle V. 137 Declaration on International Cooperation in the Exploration and Use of Outer Space for the Benefit and in the Interest of all States, Taking into Particular Account the Needs of Developing Countries point 2. 138 ibid. 139 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies art IX.

122  Power to Resort to Equity

B.  Customary International Law The establishment of a norm as one of customary international law calls for the presence of general state practice accepted as law.140 Practice must be widespread, uniform, and consistent, and it must have a certain duration.141 For the recognition of a norm as one of customary international law, state conduct need not be ‘in absolutely rigorous conformity’ with the norm; conformity ‘in general’ is sufficient,142 which means that ‘some inconsistencies and contradictions are not necessarily fatal to a finding of “a general practice” ’.143 State practice may be established on the basis, inter alia, of municipal court decisions, domestic legislation, executive practice and decisions, diplomatic practice, pleadings before international courts and tribunals, and treaty practice.144 The second, the ‘subjective’, element in the identification of customary international law, acceptance as law or opinio iuris, that is state practice undertaken because of a sense of legal obligation,145 can be evidenced, inter alia, by public 140 ICJ Statute art 38(1)(b). See also Continental Shelf (Judgment) [1969] ICJ Rep 3 [77]; Continental Shelf (Libya/​Malta) (Judgment) [1985] ICJ Rep 13 [27]; Legality of the Threat or Use of Nuclear Weapons (Advisory Opinion) [1996] ICJ Rep 226 [64]; ILA, ‘Formation and Evidence of Customary International Law’, A/​CN.4/​659, 14 March 2013 [12]ff; ILC, ‘Draft Conclusions on Identification of Customary International Law, with Commentaries’ (2018); Crawford (n 59) 24–​27; Patrick Dumberry, The Formation and Identification of Rules of Customary International Law in International Investment Law (CUP 2016) chs 3–​4; Brian Lepard, Customary International Law (CUP 2010); Michael Byers, Custom, Power and the Power of Rules (CUP 1999) 130; Maurice Mendelson, ‘The Formation of Customary International Law’ (1998) 272 Recueil des Cours 155; Mark Villiger, Customary International Law and Treaties (Martinus Nijhoff 1985) 13, 24–​25; Luigi Ferrari Bravo, ‘Méthodes de recherche de la coutume internationale dans la pratique des États’ (1985) 192 Recueil des Cours 233. 141 Colombian-​Peruvian Asylum (Judgment) [1950] ICJ Rep 266, 276; North Sea Continental Shelf (n 50) [74] (practice should be ‘extensive and virtually uniform in the sense of the provision invoked’); Fisheries Jurisdiction (United Kingdom v Iceland) (Joint Separate Opinion Forster, Bengzon, Jiménez de Aréchaga, Nagendra Singh and Ruda) [1974] ICJ Rep 45 [16] (‘State practice must be common, consistent and concordant’); Gulf of Maine (n 56) [111] (‘a sufficiently extensive and convincing practice’); Maritime Delimitation and Territorial Questions between Qatar and Bahrain (Merits Judgment) [2001] ICJ Rep 40 [205]. See further n 140. 142 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States) (Merits Judgment) [1986] ICJ Rep 14 [186]. 143 ILC, ‘Draft Conclusions’ (n 140) conclusion 8. 144 ILA, ‘Formation and Evidence’ (n 140) paras 23–​25; ILA, ‘Final Report by Special Rapporteur Michael Wood: Formation and Evidence of Customary International Law’, A/​CN.4/​663, 17 May 2013, para 50; ILC, ‘Draft Conclusions’ (n 140) conclusion 6; Crawford (n 59) 24; Dumberry, Customary International Law (n 140) 157ff; Andrew Guzman, ‘Saving Customary International Law’ (2005) 27 Michigan JIL 115, 151–​153. See also Glamis Gold v United States, UNCITRAL, Award, 14 May 2009 [603]; cf Alain Pellet, ‘Article 38’ in Andreas Zimmermann, Christian Tomuschat, and Karin Oellers-​ Frahm (eds), The Statute of the International Court of Justice: A Commentary (2nd edn, OUP 2012) 852 (‘the practice to be taken into account in order to establish the existence of custom is to be sought in the international sphere’, emphasis in original); Tullio Treves, ‘The Expansion of International Law’ (2019) 398 Recueil des Cours 9, 144–​145. 145 North Sea Continental Shelf (n 50) [77] (‘Not only must the acts concerned amount to a settled practice, but they must also be such, or be carried out in such a way, as to be evidence of a belief that this practice is rendered obligatory by the existence of a rule of law requiring it. The need for such a belief, ie, the existence of a subjective element, is implicit in the very notion of the opinio juris sive necessitatis. The States concerned must therefore feel that they are conforming to what amounts to a legal obligation’).

Equity as a Source of Law  123 statements, diplomatic practice, decisions of domestic courts, United Nations General Assembly (UNGA) resolutions, and treaty practice, while failure to react to a practice may be used as evidence of opinio iuris.146 There is a marked overlap between acts that constitute evidence of state practice and opinio iuris.147 The double-​counting of the same act or the same kind of act as evidence of state practice and opinio iuris has led to debate, however it is broadly conceded that evidence of opinio iuris actually needs to be gleaned from state practice.148 In addition, the decisions of international courts and tribunals and the teachings of the most highly qualified publicists constitute subsidiary means for the determination of rules of customary international law.149 In effect, such decisions are more than just ‘subsidiary means’.150 In North Sea Continental Shelf, the ICJ relied on the 1945 Truman Proclamation.151 The Truman Proclamation provided that, in cases where the continental shelf of the United States and its neighbours may need to be determined, such determination would be made by the United States and the state concerned ‘in accordance with equitable principles’.152 In the judgment, the Court held that the Proclamation had ‘propounded the rules of law in this field’ and set out ‘certain basic legal notions which . . . have from the beginning reflected the opinio juris in the matter of delimitation’.153 For the Court, two concepts, delimitation by agreement and delimitation in accordance with equitable principles, ‘have underlain all the subsequent history of the subject. They were reflected in various other State proclamations of the period, and after, and in the later work on the subject.’154 The Court did not cite these other proclamations and later work on delimitation. The judgment further relied on the reasoning of the ILC.155 It held that, precisely because the ILC pursued the 146 ILC, ‘Draft Conclusions’ (n 140) conclusion 10; Dumberry, Customary International Law (n 140) 309–​321; Lepard (n 140) 171–​217. See further Military and Paramilitary Activities (n 142) [188]; Legality of the Threat or Use of Nuclear Weapons (n 140) [70]. 147 Hugh Thirlway, ‘Human Rights in Customary Law’ (2015) 28 LJIL 495, 502; cf Harmen van der Wilt, ‘State Practice as Element of Customary International Law’ (2019) International Criminal LRev 1 (advance publication), 11ff. 148 Dumberry, Customary International Law (n 140) 309–​321; Lepard (n 140) 122–​139; Jan Klabbers, An Introduction to International Institutional Law (2nd edn, CUP 2009) 187; Jörg Kammerhofer, ‘Uncertainty in the Formal Sources of International Law’ (2004) 15 EJIL 523, 526; Byers (n 140) 136–​ 141; Mendelson (n 140) 206–​207; Thirlway, ‘Human Rights’ (n 147) 502; Alvarez (n 92) 58. 149 ICJ Statute art 38(1); cf ILC, ‘Draft Conclusions’ (n 140) conclusions 13–​14. 150 Alvarez (n 92) 45–​48. 151 North Sea Continental Shelf (n 50) [47], [85]–​[86]. 152 US Presidential Proclamation No 2667, ‘Policy of the United States with Respect to the Natural Resources of the Subsoil and Sea Bed of the Continental Shelf ’, 28 September 1945. 153 North Sea Continental Shelf (n 50) [47], [85]–​[86]. 154 ibid [47]. 155 ibid [48]–​[55]. However, it is questionable whether the views expressed by the ILC can by themselves constitute practice or opinio iuris, Thomas Cottier, Equitable Principles of Maritime Boundary Delimitation (CUP 2015) 422.

124  Power to Resort to Equity belief that delimitation should be effected on the basis of equitable principles, it inserted the ‘special circumstances’ exception in ‘the draft that emerged as Article 6 of the Geneva Convention’, which however was not enough.156 The Truman Proclamation was central to the ICJ’s reasoning that introduced equitable considerations in maritime delimitation disputes but it is debatable that, as some have suggested, it was the first evidence of state practice on equity.157 As this book shows, such evidence has existed since antiquity.158 Without purporting to conduct a detailed analysis of state practice and opinio iuris, this book suggests the following acts that may manifest, depending on the example, either state practice or opinio iuris. Equity and equitable considerations are repeatedly invoked in official statements,159 states’ submissions to the ICJ,160 they are present in UNGA resolutions,161 national laws and court decisions,162 and, as this chapter has shown, they are routinely incorporated in treaties, including multilateral treaties.163 States’ acquiescence in the decisions of the ICJ and submission to equitable delimitation may serve as further evidence of state conduct.164 Evidence of state practice and opinio iuris may also be adduced with respect to equity’s constitutive elements or variations, such as good faith, reasonableness, and acquiescence. These are discussed separately.165 A concrete example of conduct that, depending on the circumstances, can constitute either state practice or opinio iuris can be drawn from international investment law’s fair and equitable treatment, which kindled a lively debate as to whether it reflects customary international law.166 The uncertainty led 156 North Sea Continental Shelf (n 50) [55]. 157 Cottier (n 155) 421; cf Stephen Beaglehole, ‘The Equitable Delimitation of the Continental Shelf ’ (1984) 14 Victoria U Wellington LRev 415, 428. 158 Eg see ch 2. 159 Eg for US statements beyond the Truman Proclamation, see Edward Collins and Martin Rogoff, ‘The International Law of Maritime Boundary Delimitation’ (1982) 34 Maine LRev 1, 16; Mark Feldman and David Colson, ‘The Maritime Boundaries of the United States’ (1981) 75 AJIL 729. 160 Eg Barcelona Traction, Light and Power Company (Observations and Submissions of the Belgian Government) [14 August 1963]; Frontier Dispute (Memorial of Mali) [3 October 1985] 16; Maritime Dispute (Peru v Chile) (Memorial of Peru) [20 March 2009]; Maritime Dispute (Peru v Chile) (Counter-​ Memorial of Chile) [9 March 2010] [2.161]; Obligation to Negotiate Access to the Pacific Ocean (Bolivia v Chile) (Judgment) [2018] ICJ Rep 507 [44], [73]. 161 Eg International cooperation to ensure global access to medicines, vaccines and medical equipment to face COVID-​19, UNGA Res 74/​274 (20 April 2020) UN Doc A/​RES/​74/​274, recitals and paras 2–​3; UN Declaration on the Rights of Peasants and Other People Working in Rural Areas, UNGA Res 39/​12 (28 September 2018) UN Doc A/​HRC/​RES/​39/​12 arts 5(2), 15(2) and (5), 16(3), 17(6), 19(1), 21(2), 25(3); Development and International Economic Co-​operation, UNGA Res 3362 (S-​VII) (16 September 1975) I(3)(a), I(10), II(15). 162 See in general Newman, Equity in the World’s Legal Systems (n 7). 163 See section IV A Treaty Law. 164 Alvarez (n 92) 77, making the same argument in relation to arbitral outcomes. 165 See section IV D Customary International Law Revisited and ch 8. 166 Eg see Weiler (n 92) ch 6.

Equity as a Source of Law  125 Canada, Mexico, and the United States to issue a statement through the North American Free Trade Agreement’s (NAFTA) Free Trade Commission167 to expound that fair and equitable treatment does not require treatment ‘in addition to or beyond’ what is mandated by customary international law.168 This interpretive statement has been carried over into the United States-​Mexico-​ Canada Agreement (USMCA),169 the treaty that replaced NAFTA, it is present in the model BITs of the United States and Canada,170 and in numerous other investment agreements.171 Several arbitral tribunals, including some deciding non-​NAFTA cases, have held that fair and equitable treatment is to be equated with the minimum standard of treatment under customary international law.172 This approach is certainly not uniform, and there are grounds to suggest that, unless expressly tethered to the minimum standard of treatment, fair and equitable treatment is an autonomous standard.173 However, it remains a matter of controversy how the content of fair and equitable treatment that does not reflect customary international law differs from fair and equitable treatment that does.174 Some have recognised fair and equitable treatment as a customary international law standard.175 In this respect, drafting differences of the 167 NAFTA art 2001. 168 NAFTA Free Trade Commission, ‘Notes of Interpretation of Certain Chapter 11 Provisions’ (31 July 2001). 169 USMCA art 14.6(2). 170 US Model BIT art 5(2) and annex A; Canadian Model BIT art 6(2). 171 Eg CPTPP art 9.6; PACER Plus (2017) art 9(2); Pacific Alliance Additional Protocol (2014) art 10.6; Colombia-​Korea FTA (2013) art 8.5(2); Australia-​Malaysia FTA (2012) art 12.7(2); Canada-​Peru BIT (2006) art 5(2). See also section IV A iii International investment law. 172 Eg Merrill v Canada (n 92) [210]–​[211]; CMS Gas Transmission Co v Argentina, ICSID Case No ARB/​01/​8, Award, 12 May 2005 [284]; Occidental Exploration and Production Company v Ecuador, LCIA Case No UN3467, Final Award, 1 July 2004 [189]–​[190]; Siemens v Argentina, ICSID Case No ARB/​02/​8, Award, 17 January 2007 [291]; cf Técnicas Medioambientales Tecmed v Mexico, Case No ARB (AF)/​00/​2 Award, 29 May 2003 [155]. 173 Saluka Investments v Czech Republic, UNCITRAL, Partial Award, 17 March 2006 [294]; Schreuer (n 93) 364. 174 For different approaches to this debate, see Kenneth Vandevelde, ‘A Unified Theory of Fair and Equitable Treatment’ (2010) 43 NYU JILP 43, 47–​48; Stephan Schill, ‘Fair and Equitable Treatment as an Embodiment of the Rule of Law’ (2006) IILJ Working Paper 2006/​6, 3; Patrick Dumberry, The Fair and Equitable Treatment Standard (Kluwer Law International 2013); Tarcisio Gazzini, ‘The Role of Customary International Law in the Field of Foreign Investment’ (2007) 8 JWIT 691, 698–​699; UNCTAD, Fair and Equitable Treatment (n 92) 8, 22; OECD, ‘Fair and Equitable Treatment Standard in International Investment Law’ (2004) OECD Working Papers on International Investment 1, 40; Hussein Haeri, ‘A Tale of Two Standards’ (2011) 27(1) Arbitration International 27; Katia Yannaca-​ Small, ‘Fair and Equitable Treatment Standard’ in Katia Yannaca-​ Small (ed), Arbitration under International Investment Agreements (OUP) 388; Iona Tudor, The Fair and Equitable Treatment Standard in International Foreign Investment Law (OUP 2008) 154; Crawford (n 59) 616–​619. 175 Rudolf Dolzer and André von Walter, ‘Fair and Equitable Treatment’ in Federico Ortino and others (eds), Investment Treaty Law –​Current Issues II (BIICL 2007) 99–​100, 112. The authors argue that while investment treaties developed because customary law was deemed not to offer sufficient protections, fair and equitable treatment ‘has emerged as a new concept in customary law governing foreign investment’. See also Tudor (n 174) 75; Attila Tanzi, ‘Conclusions’ in Mads Andenas and others (eds), General Principles and the Coherence of International Law (Brill 2019) 299; cf Andreas Lowenfeld,

126  Power to Resort to Equity standard are regarded as having no impact on its substance, which allows the uniformity requirement to be satisfied.176 Others have taken exception to this position or deny customary law status to fair and equitable treatment with the argument that there is no opinio iuris.177 What cannot be gainsaid is fair and equitable treatment’s link with equity.178 Even if fair and equitable treatment has not attained customary international law status, its repeated inclusion in investment treaties, as a reference to equity, certainly constitutes state practice for those states that do not equate fair and equitable treatment with customary international law and opinio iuris for those states that do equate it with customary international law.179 If we concede the existence of state practice (and opinio iuris) on equity, we also need to consider whether it is such as to create a customary law norm. One particular issue that can prove challenging is whether the uniformity requirement is satisfied, or whether it is even appropriate to suggest the need for uniformity, when we are discussing equity in general. In this author’s opinion, the uniformity requirement cannot bar the creation of such a customary law norm, on the ground that what we are considering is not a specific application of equity but equity as an infusion of fairness into the legal system.180 The rich and variegated practice on equity and equitable considerations underpins equity’s ubiquity and, if backed with opinio iuris, reveals equity as part of customary international law. However, this book does not need to press this point further for two reasons. First, although international courts and tribunals have not generally engaged in an examination of state practice and opinio iuris in relation to equity,181 equity’s status as a customary international law norm finds overwhelming support in the jurisprudence.182 Starting with the North Sea Continental Shelf ‘Investment Agreements and International Law’ (2003) 42 CJTL 123, 130; Alvarez (n 92) 60, also 77, suggesting more generally that investment law reflects customary international law. 176 Tudor (n 174) 77, 154; Alexandra Diehl, The Core Standard of International Investment Protection: Fair and Equitable Treatment (Wolters Kluwer 2012) 135–​136; cf Alvarez (n 92) 63; Stephan Schill’s review of Tudor’s book in (2009) (20)1 EJIL 236. 177 Schreuer (n 93) 364; Dumberry, Customary International Law (n 140) 140–​151; Kläger (n 92) 268; Vasciannie (n 92) 157–​158; cf Bolivia v Chile (n 160) [162]. 178 See n 92. 179 An argument against opinio iuris might be made in the case of treaties that include a recital in the preamble to the effect that the parties agree ‘that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment’, the term ‘desirable’ arguably demonstrating the absence of a sense of a legal obligation, eg Argentina-​US BIT (1991) preamble. 180 cf text to nn 209–​210. 181 Eg see the summary discussion in North Sea Continental Shelf (n 50) [47]. 182 Eg North Sea Continental Shelf (n 50) [47], [85]; Gulf of Maine (n 56) [113], also [114]; Maritime Delimitation in the Area between Greenland and Jan Mayen (Judgment) [1993] ICJ Rep 38 [48], [56]; Delimitation of the Continental Shelf (United Kingdom/​France) (1977) 28 RIAA 3 [65], [74]–​[75], [97], [148]; Case concerning the Delimitation of the Maritime Boundary between Guinea and Guinea-​Bissau

Equity as a Source of Law  127 cases, the Court canvassed equitable principles as forming part of customary international law: [T]‌he essential reason why the equidistance method is not to be regarded as a rule of law is that, if it were to be compulsorily applied in all situations, this would not be consonant with certain basic legal notions which . . . have from the beginning reflected the opinio juris in the matter of delimitation; those principles being that delimitation must be the object of agreement between the States concerned, and that such agreement must be arrived at in accordance with equitable principles.183

In the Anglo-​French Continental Shelf case, the Court of Arbitration expressly referred to delimitation in accordance with equitable principles as customary law.184 In the Gulf of Maine case, the ICJ held that ‘the fundamental norm of customary international law governing maritime delimitation’ is that delimitation ‘must be based on the application of equitable criteria and the use of practical methods capable of ensuring an equitable result’.185 More recently, in Jan Mayen, the ICJ stated that ‘an “equitable solution” as the aim of any delimitation process reflects the requirements of customary law’.186 Admittedly, in these cases, the analysis of equity qua customary international law took place in the context of maritime delimitation187 but this does not detract from the fact that, as this book shows, equity is part of the jurisprudence of international courts and tribunals more broadly. Beyond the jurisprudence, another illustration of equity as customary international law comes to us from international water law; there it is manifested in the requirement for an equitable utilisation of international watercourses, codified in Article 5 of the UN Convention on the Law of International Watercourses.188 The ILC

(1985) 19 RIAA 149 [43], [87]–​[88]. See also Fisheries Jurisdiction (Germany v Iceland) (Declaration Judge Singh) [1974] ICJ Rep 211, 213; Fisheries Jurisdiction (United Kingdom v Iceland) (Declaration Judge Singh) [1974] ICJ Rep ICJ 38, 40. 183 North Sea Continental Shelf (n 50) [85]. 184 Anglo-​French Continental Shelf (n 182) [65], [74]–​[75], [97], [148]. 185 Gulf of Maine (n 56) [113], also [114]. 186 Jan Mayen (Judgment) (n 182) [48], [54], [56]. 187 That equity constitutes customary international law even in maritime law is not accepted by everyone. Thomas Cottier has challenged the position, arguing that in maritime boundary agreements there are more references to the equidistant or median line, which the ICJ found not to reflect customary law (North Sea Continental Shelf (n 50) [73]–​[81]), than to equity. See Cottier (n 155) 364, 422. Contrast Yoshifumi Tanaka, ‘Reflections on Arctic Maritime Delimitations’ (2011) 80 Nordic JIL 459, 469–​470. 188 See text to n 76.

128  Power to Resort to Equity observed that equitable utilisation of international watercourses is a general rule of law, and concretely: A survey of all available evidence of the general practice of States, accepted as law, in respect of the non-​navigational uses of international watercourses –​ including treaty provisions, positions taken by States in specific disputes, decisions of international courts and tribunals, statements of law prepared by intergovernmental and non-​governmental bodies, the views of learned commentators and decisions of municipal courts in cognate cases –​reveals that there is overwhelming support for the doctrine of equitable utilization as a general rule of law for the determination of the rights and obligations of States in this field.189

Second, the book does not press the point further because, although jurisprudence alone does not suffice to make equity customary international law,190 there is a better argument to be made, and that is that equity is a general principle of international law. The advantage of this argument is that ultimately it does not oblige us to choose between equity’s status as customary international law or as a general principle of law or argue over state practice and opinio iuris. Following these prolegomena on equity as customary international law, the topic will be revisited, because it is this recourse to equity that matters and which has a transformative power turning equity into a general principle of international law.191

C.  General Principles of Law General principles of law are the third source of international law listed in Article 38(1) of the Statute of the ICJ. Article 38 refers to principles ‘recognized by civilized nations’ and, accordingly, general principles are imported from national legal systems,192 provided they are capable of application in public international 189 ILC, ‘Report of the International Law Commission on the work of its 46th session, 2 May–​22 July 1994’, Official Records of the General Assembly, 49th sess, Suppl No 10, Doc A/​49/​10 (1994) Yearbook of the International Law Commission vol. II (2), commentary on art 5, para 10. 190 Cottier (n 155) 365. But contrast text to n 246. 191 See section IV D Customary International Law Revisited. 192 Hugh Thirlway, ‘The Sources of International Law’ in M Evans (ed), International Law (4th edn, OUP 2014) 105; Giorgio Gaja, ‘General Principles of Law’ (2013) MaxPlanckEPIL, paras 7–​16; Crawford (n 59) 34–​37; Oscar Schachter, ‘International Law in Theory and Practice’ (1982) 178 Recueil des Cours 9, 75ff; Paolo Palchetti, ‘The Role of General Principles in Promoting the Development of Customary International Rules’ in Andenas and others (n 175) 48.

Equity as a Source of Law  129 law relations;193 but this category also comprises principles that acquire relevance directly in international law.194 International courts and tribunals resort to general principles of law195 when international law does not otherwise supply a relevant rule.196 In this sense, general principles of law function as a safeguard against a finding of non liquet.197 However, caution is necessary: municipal law cannot be imported ‘lock, stock, and barrel’ into international law.198 While it is possible to use it ‘as a reservoir for international law’, this process is subject to limitations, ‘for there may be a fault of logic in approaching problems of international law and international administration by the standards of internal law and practices’.199 The term ‘general principles of law’ has also been interpreted even more broadly to cover ‘general principles of abstract jurisprudence’.200 In short, general principles of law constitute ‘a body of international law’ whose content is influenced by municipal law but which remains ‘its own creation’.201 There is ample authority to support the view that equity under different guises is a general principle of law within the meaning of Article 38(1)(c) of the Statute of the ICJ.202 Comparative studies of the world’s legal systems leave the 193 Schachter (n 192) 78–​79. 194 Thirlway, ‘The Sources’ (n 192) 105; Gaja (n 192) paras 17–​19, 32; Grigory Tunkin, ‘Co-​existence and International Law’ (1958) 95 Recueil des Cours 1, 24, citing Dionisio Anzilotti, Corso di diritto internazionale (1928) (‘In the opinion of MD Anzilotti the general principles of law indicated in paragraph (c), Article 38 of the Statute of the Court, are first of all general principles of international law and, in the second place, principles universally recognized in the legislation of different countries’); Cherif Bassiouni, ‘A Functional Approach to “General Principles of International Law” (1990) 11 Michigan JIL 768, 772; Patrick Dumberry, ‘The Clean Hands Doctrine as a General Principle of International Law’ (2020) 21 JWIT 489, 516–​518; ILC, ‘First Report on General Principles of Law by Marcelo Vázquez-​ Bermúdez, Special Rapporteur’ (ILC 71st session’ –​29 April–​7 June and 8 July–​9 August 2019) UN Doc A/​CN.4/​732, para 235; Pulp Mills on the River Uruguay (Argentina v Uruguay) (Separate Opinion Cançado Trindade) [2010] ICJ Rep 135 [20]–​[21], [26]ff; text to nn 224–​227; cf Schachter (n 192) 75–​82; Attila Tanzi, Introduzione al diritto internazionale contemporaneo (5th edn, Wolters Kluwer/​CEDAM 2016) 115; Anastasios Gourgourinis, ‘General/​Particular International Law and Primary/​Secondary Rules’ (2011) 22 EJIL 993, 1008–​1009; Pellet (n 144) 835. 195 Akehurst (n 42) 820. 196 Attila Tanzi, A Concise Introduction to International Law (Eleven International 2019) 77; cf Barcelona Traction, Light and Power Company (Judgment) [1970] ICJ Rep 3 [38] (‘whenever legal issues arise concerning the rights of States with regard to the treatment of companies and shareholders, as to which rights international law has not established its own rules, it has to refer to the relevant rules of municipal law’). 197 Malcolm Shaw, Rosenne’s Law and Practice of the International Court: 1920–​2015 (vol 3, Brill online 2017) ch 27, para 376. On non liquet, see ch 5 n 28. 198 International Status of South-​West Africa (Separate Opinion McNair) [1950] ICJ Rep 146, 148. 199 Shaw, Rosenne’s Law and Practice (n 197) vol 3, ch 27, para 376. 200 ibid. 201 Crawford (n 59) 35; Tunkin (n 194) 23–​26 (‘ “general principles of law” can only be principles of international law’, 26). 202 Robert Jennings, ‘General Course on Principles of International Law’ (1967) 121 Recueil des Cours 324, 343; Lowe (n 17) 55; Rossi (n 1) 81; Tanzi, Introduzione (n 194) 150, 366ff; Francioni (n 112) para 5; Diversion of Water from the Meuse (Netherlands v Belgium) (Dissenting Opinion Anzilotti) PCIJ Series A/​B No 70 (28 June 1937) [211]; Meuse (Hudson) (n 2) [321]ff. See further Barcelona Traction, Light and Power Company (Separate Opinion Ammoun) [1970] ICJ Rep 286 [42]. cf SK

130  Power to Resort to Equity reader in no doubt that equity is common to the world’s legal systems.203 Not only is equity common to the world’s legal systems but it is also applicable to different fields, including for instance civil law, criminal law, tax law, and canon law.204 By way of example, equity is present in some form or other in Argentine law, Belgian law, Dutch law, French law, English law, German law, Greek law, Italian law, Japanese law, Scots law, Spanish law, Swedish law, Swiss law, and US law.205 Certainly, in some systems equity is more autonomous than in others. In English law, equity denotes a system of rules and jurisprudence that developed in parallel to the common law.206 Two authors have claimed that equity is not universal but that it varies within and among societies carrying particular features in each system.207 However, if ‘the learning and ingenuity of comparative lawyers can discover striking similarities in the “general principles” of widely differing systems’, the

Chattopadhyay, ‘Equity in International Law’ (1975) 5 Georgia Journal of Intl & Comparative Law 381, 397. In 2019, at the 71st session of the ILC, some members suggested that the Commission should examine the relationship between general principles of law and equity, ILC, ‘Report of the International Law Commission –​71st session’ (29 April–​7 June and 8 July–​9 August 2019) UN Doc A/​74/​10, para 233. The issue was taken up in ILC (Vázquez-​Bermúdez) (n 194). 203 Newman, Equity in the World’s Legal Systems (n 7), including Ralph Newman, ‘The General Principles of Equity’, ibid 592ff, 603ff, although the author also identifies some instances of ‘inadequate reception’ of equity in domestic legal systems, 599, 643ff; María José Falcón y Tella, Equity and Law (Peter Muckley tr, Martinus Nijhoff 2008) 47–​86; René David, Camille Jauffret-​Spinosi, and Marie Goré, Les grand systèmes de droit contemporains (12th edn, Dalloz 2016) –​for an older English version, see René David and John Brierley, Major Legal Systems in the World Today (3rd edn, Stevens & Sons 1985); Lowe (n 17) 55; Rossi (n 1) 81 (‘it is virtually impossible to conceive of a legal order in which [principles of equity] do not exist’). See also Meuse (Hudson) (n 2) [322]. 204 Eg Falcón y Tella (n 203) 211–​278; Newman, Equity in the World’s Legal Systems (n 7) 587; John Coughlin, ‘Law, Person, and Community’ (OUP 2012) 101–​126; Peter Landau, ‘ “Aequitas” in the “Corpus Iuris Canonici” ’ (1994) 20 Syracuse JIL & Commerce 95. 205 See contributions by Ernesto Eduardo Borga, ‘Equity in Argentine’s Judicial Order’ (J Angel Mejia and Ralph Newman trs); J Renauld, ‘Reflections on the Concept of Equity in Belgian Law’ (Ralph Newman tr); JLM Elders, ‘Equity in Dutch Law’; Derek Davies, ‘Equity in English Law’; Benoit Jeanneau, ‘The Reception of Equity in French Private and Public Law’ (Ralph Newman and M Guillois trs); Jacques Dufaux, ‘Equity and French Private Law’; and, Maxime Letourneur, ‘The Concept of Equity in French Public Law’ (Ralph Newman tr); Uwe Diederichsen and Karl-​Heinz Gursky, ‘Principles of Equity in German Civil Law’; Josef Esser, ‘The Infiltration of Aequitas in the German Civil Law’ (Richard Packham tr); Pan. Zepos, ‘Equity in Greek Law’; Mario Matteucci, ‘Equity in Italian Law’; Junkichi Koshikawa, ‘Equity in Japanese Law’; David Walker, ‘Equity in Scots Law’; Stig Strömholm, ‘Equity in Swedish Law’; Bernard Dutoit, ‘Good Faith and Equity in Swiss Law’ (Ralph Newman tr); and Brendan Brown, ‘Equity in the Law of the United States of America’ in Newman, Equity in the World’s Legal Systems (n 7). See further Marjorie Fouletier, Recherches sur l’équité en droit public français (LGDJ 2003); Falcón y Tella (n 203) 47ff; Jennings, ‘Equity’ (n 11) 27; Joseph Hendel, ‘Equity in the American Courts and in the World Court’ (1996) 6(3) Indiana International & Comparative LRev 637; American Law Institute, Restatement of the Law (Third) –​Foreign Relations Law of the United States (vol 1, American Law Institute 1987) §102; Ralph Newman, ‘The Principles of Equity as a Source of World Law’ (1966) 1(4) Israel LRev 616; ch 2, section IV Equity in English Law. 206 See ch 2, section IV Equity in English Law. 207 Laura Nader and June Starr, ‘Is Equity Universal?’ in Newman, Equity in the World’s Legal Systems (n 7).

Equity as a Source of Law  131 same can be done with a vengeance when it comes to identifying ‘equally relevant divergences’.208 Small variations between legal rules belonging to different municipal systems do not hinder the creation of a general principle of law, so long as ‘there is an underlying common principle’.209 In fact, we may even find that ‘there is a general principle of law when different systems of municipal law achieve the same result by different means’.210 A question to consider is whether some old treaties, concluded mainly in the interwar period, that provided for dispute resolution in accordance with ‘general principles of law and equity’ or in accordance with ‘principles of law and equity’211 meant to draw a distinction between equity and general principles of law –​or even between equity and the sources of international law.212 Caution is necessary. These treaties tend to make reference to ‘principles of law’ rather than adopt the formula ‘general principles of law recognized by civilized nations’ then couched in Article 38 of the Statute of the Permanent Court of International Justice (PCIJ).213 They do not attempt to distinguish between equity and the sources of international law –​some of them even predate the Statute of the PCIJ.214 Other contemporaneous treaties differentiate between ‘general principles of law recognised by civilised nations’ and a decision ‘in accordance with considerations of equity’ that requires the parties’ agreement.215 Such provisions have led the ILC Secretariat to suggest that those treaties ‘distinguished between considerations of equity, on the one hand, and the sources

208 Robert Jennings as cited in Akehurst (n 42) 818. 209 Akehurst (n 42) 814. 210 ibid. 211 Arbitration Agreement between France, Portugal, Spain, and the United Kingdom (1913) reproduced in Affaire des propriétés religieuses (France, Royaume-​Uni, Espagne contre Portugal) (1920) 1 RIAA 7, 9 art III; Convention between Germany and Poland and the Free City of Danzig concerning Freedom of Transit between East Prussia and the Rest of Germany (1921) art 11; Special agreement between Norway and the United States (30 June 1921) art I; Convention between Hungary and Czechoslovakia Regulating the Running of Czechoslovak Trains over the Hungarian Section of the Čata-​Lučenec Line (1923) art 15(1); Arbitration Treaty Between the United States and Finland (1928) art I; Treaty of Arbitration and Conciliation between Denmark and Haiti (1928) art 4; Treaty between Austria and Hungary for the Regulation of Conditions of Transit and Connections in the Railway Traffic between the Two Countries (1930); Convention between Denmark and Iceland regarding the Procedure to Be Followed for the Settlement of Disputes (1930) art 2; Treaty between Germany and Poland regarding Social Insurance (1931) art 47(2); Agreement between the United States and Egypt regarding Arbitration of the Claim of George Salem (1931) art 3. See also ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals. 212 cf section II Equity and Law. 213 See n 211. 214 Eg Arbitration Agreement between France, Portugal, Spain, and the United Kingdom (n 211). 215 Eg see Convention of Arbitration and Conciliation between Germany and the Netherlands (20 May 1926) art 4; Convention of Arbitration and Conciliation between Germany and Sweden (29 August 1924) art 5; Treaty of Arbitration and Conciliation between Germany and Luxembourg (11 September 1929) art V.

132  Power to Resort to Equity of international law, including general principles of law, on the other’.216 This observation is misleading: the provisions in question are nothing short of a resort to absolute equity or an ex aequo et bono mandate; they have no bearing on ‘regular’ equity.217 In short, recourse to equity and equitable considerations is common to the world’s legal systems. Although equity may be manifested differently from country to country, ultimately an indivisible core remains. Equity fulfils the criteria to be a general principle of law. However, this book relies on this fact to propound a different argument, that equity is a general principle of international law. It is to this matter that the chapter will now turn.

D.  Customary International Law Revisited: General Principles of International Law The foregoing reveals that there is authority to suggest both that equity is part of customary international law and a general principle of law. Recognising that there can be no clear-​cut demarcation between the sources of international law,218 this book argues that the better view is that equity has become a general principle of international law of a customary law nature. The term ‘general principles of international law’ is susceptible of various interpretations. Different authors use it to refer to either customary international law or general principles of law,219 to general principles at a remove from municipal legal systems,220 to ‘particularly important and deep-​rooted principles of international law’,221 and even to ‘certain logical propositions underlying judicial reasoning on the basis of existing international law’.222 The term is sometimes used as synonymous with the expression ‘general international law’.223 216 ILC, ‘General Principles of Law –​Memorandum by the Secretariat’ (72nd session –​29 June–​7 August 2020) UN Doc A/​CN.4/​742, para 18. 217 For a discussion, see ch 7. 218 Crawford (n 59) 37; Treves (n 144) 178; Emmanuel Voyiakis, ‘Do General Principles Fill Gaps in International Law’ (2009) 14 ARIEL 239, 254–​255. 219 Crawford (n 59) 37; Gourgourinis, ‘General/​Particular International Law’ (n 194) 1008–​1009; Panel Report, European Communities –​ Measures Affecting the Approval and Marketing of Biotech Products, WT/​DS291/​R, WT/​DS292/​R, WT/​DS293/​R, Add. 1 to Add. 9, and Corr. 1, adopted 21 November 2006, DSR 2006:III–​VIII [7.86]. 220 Weil, ‘Le droit’ (n 59) 149. 221 Humphrey Waldock, ‘General Course on Public International Law’ (1962) 106 Recueil des Cours 1, 68. 222 Crawford (n 59) 37. 223 Prosper Weil, ‘Towards Relative Normativity in International Law’ (1983) 77 AJIL 413, 436. In ILC, Report on ‘Fragmentation of International Law’, A/​CN.4/​L.682, 13 April 2006, para 179, n 237, while citing the Georges Pinson case (Georges Pinson (French-​Mexican Claims Commission) (1928–​ 1929) 5 RIAA 327), the ILC translated the reference to ‘general international law’ (droit international

Equity as a Source of Law  133 As previously discussed, the mainstream of Article 38(1)(c) of the Statute of the ICJ refers to principles derived from municipal law, yet it is also possible to conceive of principles that find their origin in international law.224 Such principles can emerge in international law without a necessary counterpart in domestic law ‘because of the differences that characterize these two legal systems’.225 In his separate opinion in Pulp Mills, Judge Cançado Trindade stressed that, given the current level of development of international law, ‘there is epistemologically no reason not to have recourse to general principles of law as recognized in domestic as well as international law’.226 The existence of such principles that originate in international law ‘is corroborated by the practice of States and the decisions of international courts and tribunals’.227 The argument has been made that general principles of law, when they are repeatedly used at the international level, whether they are rooted in municipal legal systems or international law, are a different kind of animal;228 unfettered from national legal systems, they no longer need to be traced to them229 and evolve into something more akin to customary international law.230 In other words, general principles of law consistently applied by international courts and tribunals, invoked and complied with by states, can transform into customary international law.231 From then on, international courts and tribunals apply them as customary norms232 or they apply them as general principles of international law.233 On that view, general principles of international law refer commun) in the original French text as ‘general principles of international law’; cf Lepard (n 140) 147, commenting that on several occasions the ICJ ‘has applied “equitable” principles as part of general international law’. Others have regarded descriptions of equity as an element of ‘international law’ as reflective of the position that equity is customary international law, eg Jan Mayen (Weeramantry) (n 16) [79]–​[80]; Palchetti (n 192) 58. The ICJ has employed the expression ‘general international law’ as opposed to treaty law, eg North Sea Continental Shelf (n 50) [37], referring to ‘rules of general or customary international law’; Barcelona Traction (Judgment) (n 196) [87], referring to ‘treatment guaranteed by general international law, in the absence of a treaty applicable to the particular case’; United States Diplomatic and Consular Staff in Tehran (Judgment) [1980] ICJ Rep 3 [62], holding that Iran’s obligations were not solely treaty obligations ‘but also obligations under general international law’. 224 See text to n 194. 225 Bassiouni (n 194) 772. 226 Pulp Mills (Cançado Trindade) (n 194) [27]. 227 ILC (Vázquez-​Bermúdez) (n 194) para 235. 228 Tanzi, Concise Introduction (n 196) 77–​78. 229 Weil, ‘Le droit’ (n 59) 149; Pierre-​Marie Dupuy, ‘L’unité de l’ordre juridique international’ (2002) 297 Recueil des Cours 9, 182. 230 Pellet (n 144) 852; Tanzi, Concise Introduction (n 196) 77–​78; Weil, ‘Le droit’ (n 59) 149; Palchetti (n 192) 47–​48. 231 Pellet (n 144) 852; Waldock (n 221) 62; Fabián Raimondo, General Principles of Law in the Decisions of International Criminal Courts and Tribunals (Brill 2008) 40; Tanzi, ‘Conclusions’ (n 175) 301–​02. 232 Raimondo (n 231). This is confirmed in the ICJ’s jurisprudence on equity, see section IV B Customary International Law. 233 Tanzi, ‘Conclusions’ (n 175) 301–​302; Pellet (n 144) 852.

134  Power to Resort to Equity to international customary norms deriving from the repeated application of general principles of law in interstate relations.234 Alternatively, it is suggested that general principles of international law may originate in state practice, although they ‘have been accepted for so long and so generally as no longer to be directly connected to state practice’.235 One author regards general principles of international law as encompassing ‘legal principles entirely derived from international conventional and customary rules’.236 Ultimately, no matter what their genesis, general principles of international law are usually deemed to be tethered to customary international law.237 By this token, they may also be described as principles of customary international law.238 If the term ‘principles is retained, it is because they tend to be broader in content and scope than customary international law rules.239 In this sense, they still ‘perform their gap-​filling function with regard to the gaps left by the more specific treaty or customary rules’.240 However, this may make the distinction between principles of international law and rules seem deceptively clear –​it is not.241 What matters for the purposes of the present discussion is that general principles of international law have been ‘invoked and applied in practice so frequently’ that ‘their existence and validity cannot be doubted’.242 Such general principles of international law include good faith, pacta sunt servanda (both enshrined in the Vienna Convention on the Law of Treaties (VCLT)),243 the sovereign equality of states, the principle of consent, unjust enrichment, estoppel, abuse of rights, res iudicata, nemo judex in re sua, 234 Tanzi, ‘Conclusions’ (n 175) 300–​301. Tullio Treves draws attention to the Rome Statute of the International Criminal Court (ICC), which ‘avoids the confusion between general principles of international law and general principles of law to be imported from domestic legal orders’. That statute refers separately to, and establishes a hierarchy between, ‘the principles and rules of international law’ and ‘general principles of law derived by the Court from national laws of legal systems of the world’, Treves (n 144) 185–​186 and ICC Rome Statute art 21(1). 235 Crawford (n 59) 37, emphasis in original. 236 Raimondo (n 231) 41. See also Antonio Cassese, International Law (2nd edn, OUP 2005) 188. 237 Manfred Lachs, ‘The Development and General Trends of International Law in Our Time’ (1980) 169 Recueil des Cours 9, 196; Tanzi, Concise Introduction (n 196) 77–​78; Shabtai Rosenne, ‘The Perplexities of Modern International Law’ (2001) 291 Recueil des Cours 9, 63; Weil, ‘Le droit’ (n 59) 150–​151; Virally (n 28) 532; Raimondo (n 231) 41. This view is not shared by everyone, eg Dumberry, ‘Clean Hands Doctrine’ (n 194) 517–​518. 238 For a use of the term, see Military and Paramilitary Activities (n 142) [190], [202], [290]–​[291]; cf Manley Hudson, International Tribunals (CEIP/​Brookings Institution 1944) 102; Mohammed Bedjaoui, ‘L’ “énigme” des “principes équitables” dans le droit des delimitations maritimes’ (1990) 42(2) Revista Española de Derecho Internacional 367, 372; Pellet (n 144) 829. 239 Tanzi, ‘Conclusions’ (n 175) 301. 240 Tanzi, Concise Introduction (n 196) 78; Pellet (n 144) 829. 241 Weil, ‘Le droit’ (n 59) 149–​150; Virally (n 28) 532; Krystyna Marek, ‘Le problème des sources du droit international dans l’ârret sur le Plateau Continental de la Mer du Nord’ (1970) 6 RBDI 44, 72; cf Jan Mayen (Judgment) (n 182) [46]. 242 Virally (n 28) 532 (author’s translation). 243 Eg VCLT arts 26, 31(1), and preamble.

Conclusions  135 and equitable considerations in maritime delimitation (now enshrined in UNCLOS).244 This book argues that equity at large, in other words, equity ‘as part of justice’ that a ‘court is bound to administer’,245 is such a general principle of international law. Equity may have started as a general principle of law that subsequently mutated into customary international law. In reality, it is not essential to confirm whether at the outset equity was a general principle of law or whether it originated in state practice. What matters is not its origin but the fact that equity has become part of the jurisprudence of international courts and tribunals,246 which in turn means that it is repeatedly invoked in state pleadings, that states accept it when they comply with judgments and awards that rely on it, and so on. It is this repeated application of equity by international courts and tribunals that acts as the catalyst metamorphosing it into a general principle of international law. To borrow the words of Judge Weeramantry when discussing equity as embodied in judicial decisions in light of Article 38(1)(d) of the Statute of the ICJ: The jurisprudence of this Court has now reached a stage where a considerable body of equitable principles is contained within the decisions of the Court and where there is frequent resort to equity as an aid towards the process of decision. Through their adoption by the Court, they have thus entered the mainstream of international law.247

V. Conclusions While equity and law may be distinct concepts, equity is part of international law. Equity is often a principle rather than a rule but the line between the two is blurred and ultimately this book does not adopt an ironclad division between principles and rules for the purposes of the discussion of equity. Equity is a source of international law. It is present in treaty law governing different sub-​ fields of international law. There is also evidence that equity is regarded both as customary international law and as a general principle of law. This chapter has preferred a different normative explanation, that is, that equity is a general

244 Lachs, ‘The Development’ (n 237) 196, 199; Weil, ‘Le droit’ (n 59) 149; Dupuy (n 229) 182; Raimondo (n 231) 40; Crawford (n 59) 37; Tanzi, Concise Introduction (n 196) 78; Dumberry, ‘Clean Hands Doctrine’ (n 128) 525, without necessarily conceding their customary law status. 245 Jan Mayen (Weeramantry) (n 16) [94]. 246 See ch 3 and n 61. See further Jan Mayen (Weeramantry) (n 16) [94]. 247 Jan Mayen (Weeramantry) (n 16) [88].

136  Power to Resort to Equity principle of international law of a customary international law nature. That said, determining that equity is customary law or a general principle of law or a general principle of international law is of little practical significance. As Judge Weeramantry remarked, to insist on one source over another and to allow equity to enter international law only as customary international law or as a general principle of law would be counterproductive. What matters is that equity is applicable as a source of international law.

PART III

SPECIFIC ASPE C T S OF E QU I T Y

7 Jurisdiction ex aequo et bono I. Introduction Jurisdiction ex aequo et bono is understood to relate to decision-​making in accordance with ‘what is equitable and good’,1 ‘in justice and fairness’,2 inspired by equity without being bound by the applicable law.3 An ex aequo et bono agreement authorises a court or tribunal to reach, if appropriate, outside the law in order to decide ‘on objective grounds of fair dealing and good faith’.4 It frees the adjudicator from ‘the strict application of legal rules in order to bring about an appropriate settlement’.5 However, it would be a mistake to conclude that an ex aequo et bono decision takes ‘no account whatsoever of positive law’,6 that it is beyond or outside the law,7 or that it is ‘against the law’.8 While ex aequo et bono adjudication mandates the court or tribunal to apply rules that lead to a just and fair outcome without necessary reference to the law, it is explicitly provided for in law and it is only possible if the parties agree to it.9 The fact that a court or tribunal assumes ex aequo et bono powers does not rule out the application of law.10 For instance, the court or tribunal may apply equity in some respects and law in others.11 In effect, the ex aequo et bono mandate need not cover the entire dispute but may be limited to certain aspects12 or it may be combined with positive law.13 In Benvenuti & Bonfant v Republic 1 Bryan Garner (ed), Black’s Law Dictionary (10th edn, Thomson Reuters 2014) 679. 2 Henry Campbell Black (ed), Black’s Law Dictionary (6th edn, West 1990) 557. 3 Institut de droit international, Resolution, ‘La compétence du juge international en équité’ (1937). 4 Manley Hudson, International Tribunals (CEIP/​Brookings Institution 1944) 103. 5 Continental Shelf (Tunisia/​Libya) (Judgment) [1982] ICJ Rep 18 [71]. 6 Hugh Thirlway, The International Court of Justice (OUP 2016) 28. 7 North Sea Continental Shelf (Separate Opinion Ammoun) [1969] ICJ Rep 101 [37]. 8 Margaret White, ‘Equity –​A General Principle of Law Recognised by Civilised Nations?’ (2004) 4(1) QUTLJJ 103, 107. See also Delimitation of the Maritime Boundary in the Gulf of Maine Area (Judgment) [1984] ICJ Rep 246 [59] (‘The Chamber is however bound by its Statute, and required by the Parties, not to take a decision ex aequo et bono, but to achieve a result on the basis of law’). 9 Eg ICJ Statute art 38(2). 10 Christoph Schreuer and others, The ICSID Convention: A Commentary (2nd edn, CUP 2009) 635–​ 636; ICSID, History of the Convention (vol 2 pt 1, 1968) 420, 570. 11 Schreuer and others (n 10) 636. 12 ibid. 13 Eg this was the case in Atlantic Triton Company v Guinea, ICSID Case No ARB/​84/​1, Award, 21 April 1986 [6]‌–​[7]. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0007

140 Jurisdiction ex Aequo et Bono of the Congo and in Atlantic Triton v Guinea, the tribunals’ authorisation to decide ex aequo et bono did not prevent them from applying positive law.14 Ex aequo et bono must not be conflated with equitable considerations that an international court or tribunal is entitled to take into account without the parties’ agreement.15 Seeing that equity is a source of international law,16 its application cannot depend on ‘any special agreement’ reached by the parties.17 Consistent with the argument presented in this book, equity for which the parties’ consent is not required includes not only infra and praeter legem equity but also the type of equity to which a contra legem nature is inaccurately imputed.18 Since international courts and tribunals have broad leeway in the application of equity, it is difficult to draw the dividing line between equity applied as part of their regular adjudicative duty and ex aequo et bono.19 In an attempt to distinguish the mainstream of equity from ex aequo et bono adjudication, Robert Jennings argued that the power to decide ex aequo et bono must surely be something ‘beyond the quite considerable equitable discretion’ that courts have and therefore it must refer to ‘the possibility of some kind of political, or compromise, determination’.20 Another distinction is possible. When the adjudicator takes into account equitable considerations outside an ex aequo et bono authorisation, the starting point for his or her legal reasoning must be the existing law;21 it is only after examining ‘the legal merits of the dispute’ that

14 SARL Benvenuti & Bonfant v People’s Republic of the Congo, ICSID Case No ARB/​77/​2, Award, 8 August 1980 [4.98]; Atlantic Triton v Guinea (n 13) [6]‌–[​ 7]; see text to nn 90–​102. 15 Robert Jennings, ‘General Course on Principles of International Law’ (1967) 121 Recueil des Cours 324, 343; Hudson, International Tribunals (n 4) 103; Schreuer and others (n 10) 636; Tunisia/​Libya (n 5) [71]; Barcelona Traction, Light and Power Company (Separate Opinion Fitzmaurice) [1970] ICJ Rep 64 [36]; Zhinvali Development v Georgia, ICSID Case No ARB/​00/​1, Separate Opinion Jacovides (Award), 24 January 2003 [6]‌; MTD v Chile (n 123) [48]; Adem Dogan v Turkmenistan, ICSID Case No ARB/​09/​9, Decision on Annulment, 15 January 2016 [99]; cf Técnicas Medioambientales Tecmed v Mexico, Case No ARB (AF)/​00/​2 Award, 29 May 2003 [190]. 16 This issue was addressed in ch 6. 17 Jennings, ‘General Course’ (n 15) 343. 18 Ch 5, section V Revisiting Equity contra legem, text to nn 1–​6 and 54–​55. Contrast Aron Broches, Selected Essays: World Bank, ICSID, and Other Subjects of Public and Private International Law (Martinus Nijhoff 1995) 231; Aron Broches, ‘The Convention on the Settlement of Investment Disputes between States and Nationals of Other States’ (1972) 136 Recueil des Cours 332, 394; Rudolf Bernhardt, ‘Custom and Treaty in the Law of the Sea’ (1987) 205 Recueil des Cours 249, 315; Enrico Milano, ‘General Principles Infra, Praeter, Contra Legem? The Role of Equity in Determining Reparation’ in Mads Andenas and others (eds), General Principles and the Coherence of International Law (Brill 2019) 66. 19 Bernhardt (n 18) 315. 20 Jennings, ‘General Course’ (n 15) 343. See further Alain Pellet, ‘Article 38’ in Andreas Zimmermann, Christian Tomuschat, and Karin Oellers-​Frahm (eds), The Statute of the International Court of Justice: A Commentary (2nd edn, OUP 2012) 795. 21 cf ch 4 text to nn 118–​120.

Introduction  141 he or she may ‘supplement’ or ‘modify the existing law’.22 By contrast, with an ex aequo et bono mandate, the discretion of the decision-​maker is seemingly ‘more unfettered’.23 Such discretion further comes with the burden of a heavier responsibility and the pressure on the adjudicator to assess a broader range of factors than would otherwise be necessary.24 Finally, even though ex aequo et bono jurisdiction does not dispense with the need to state reasons, the obligation is de facto ‘lighter’ than in the case of decisions rendered on the basis of a court or tribunal’s regular jurisdiction.25 The adjudicator is allowed to be more creative with the law even if he or she does not provide granular legal reasoning. On the whole, the differences between the application of equity within and outside ex aequo et bono jurisdiction appear to be differences of degree rather than substance. An ex aequo et bono mandate will normally be granted either prior to a dispute by means of a generic dispute settlement clause, such as one inserted in a treaty,26 or by means of a special instrument drafted when the dispute arises or in the course of the proceedings,27 such as in Benvenuti & Bonfant v Republic of the Congo.28 The agreement must be express but it has been argued that it does not need to be formal, so that, in accordance with the principle of forum prorogatum,29 the fact that the adjudicatory body is satisfied that the disputing parties intended to confer on it ex aequo et bono powers will suffice.30 The following sections of this chapter start by surveying the reluctance of international courts to assume an ex aequo et bono mandate and continue by addressing interstate arbitration and especially investor-​state arbitration. If court statutes and arbitration rules often provide for the possibility of ex aequo et bono adjudication,31 international courts and tribunals rarely use it. Less successful 22 The argument advanced here draws on a related yet distinct comparison made by Hersch Lauterpacht between ex aequo et bono and some cases he discussed in Hersch Lauterpacht, The Function of Law in the International Community (first published 1933, OUP 2012) 322. 23 ibid. 24 Hersch Lauterpacht, Function of Law (n 22) 327. 25 Schreuer and others (n 10) 631, 637. 26 Eg European Convention for the Peaceful Settlement of Disputes (1957) art 26. 27 Schreuer and others (n 10) 633; Hersch Lauterpacht, Function of Law (n 22) 336. 28 See section IV A Investment Law’s ex aequo et bono Decisions. See also AGIP v People’s Republic of the Congo, ICSID Case No ARB/​77/​1, Award, 30 November 1979, where the respondent had unavailingly tried to suggest that the tribunal act as amiable compositeur. See Christoph Schreuer, ‘Decisions Ex Aequo et Bono Under the ICSID Convention’ (1996) 11(1) ICSID Review 37, 43. 29 Malcolm Shaw, Rosenne’s Law and Practice of the International Court: 1920–​2015 (vol 2, Brill online 2017) ch 11, para 181. 30 ibid vol 3, ch 27, para 380. 31 Eg ICJ Statute art 38(2); Statute of the Permanent Court of International Justice (PCIJ) art 38(4); United Nations Convention on the Law of the Sea (UNCLOS) art 293(2); Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) art 42(3); ICSID Additional Facility Rules art 54(2); Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) art 35(2); Arbitration Rules of the Permanent Court of

142 Jurisdiction ex Aequo et Bono than its predecessor, the ‘absolute equity’ mandate,32 ex aequo et bono adjudication is limited in contemporary times to less than a handful of investment arbitration cases. On the contrary, ex aequo et bono or arbitration ‘in equity’ has flourished in private international law, notably in commercial and sports arbitration,33 but these fields are outside the purview of this book. The chapter further considers the types of dispute for which an ex aequo et bono mandate is appropriate and the compatibility of the mandate with the judicial function. Overall, it shows that states are generally reluctant to confer ex aequo et bono powers upon international courts and tribunals. It is not that ex aequo et bono adjudication is inappropriate for or incompatible with the resolution of legal disputes. It is rather that it tends to increase uncertainty and that it invites digressions from the legal rights of one of the two disputing parties. That said, on the rare occasions when tribunals are instructed to act ex aequo et bono, they discharge their powers conservatively, staying as close as possible to positive law.

II.  International Courts No international court is known to have exercised ex aequo et bono jurisdiction. Whenever the suspicion of an ex aequo et bono mandate reared its head, international courts –​and states too –​displayed maximal caution. In Free Zones, a ‘sharply divided’ Permanent Court of International Justice (PCIJ)34 refused to decide ex aequo et bono.35 The case hinged on a provision of the Treaty of Versailles that had rendered the regime of the free zones between Switzerland and France ‘no longer consistent with present conditions’.36 The parties disagreed as to whether Switzerland had a right to the free zones and therefore whether their abrogation required Swiss consent.37 The parties Arbitration (PCA) (2012) art 35(2); Arbitration Rules of the International Chamber of Commerce art 21(3). Exceptionally, some instruments preclude ex aequo et bono adjudication, eg Algiers Peace Agreement between Ethiopia and Eritrea (2000) art 4(2). 32 See ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals. 33 Eg Juan Pablo Cárdenas Mejía, ‘El arbitraje en equidad’ (2003) 105 Vniversitas 347; Martim Della Valle, Da decisão por eqüidade na arbitragem comercial internacional (PhD, U São Paolo 2009). For an award ex aequo et bono, see Djuro Ostojic and Miodrag Raznatovic v PAOK KAE, 0001/​07 FAT Award, 16 August 2007. 34 Thomas Franck, ‘Fairness in the International Legal and Institutional System’ (1993) 240 Recueil des Cours 9, 70. 35 Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Order) PCIJ Series A No 24 (6 December 1930). 36 Treaty of Versailles art 435(2). 37 Free Zones (Order 1930) (n 35) [4]‌; Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Order) PCIJ Series A No 22 (19 August 1929) [7].

International Courts  143 concluded a special agreement according to which the PCIJ should decide whether the Treaty of Versailles had abrogated the regime of the free zones; having determined this question, and prior to rendering judgment, the Court should accord the parties ‘a reasonable time to settle between themselves’ the new regime; failing such agreement, the Court should pronounce judgment and ‘settle’ all questions.38 The PCIJ held that the treaty did not abrogate the regime and accorded the parties a reasonable time to settle.39 After they failed to do so, the Court dismissed France’s argument that the special agreement by habilitating the Court to settle all questions conferred upon it ex aequo et bono powers.40 It held that such powers are of ‘an absolutely exceptional character’ and could only derive from ‘a clear and explicit provision to that effect’.41 Judge Kellogg’s observations in Free Zones, counselling against recourse to extra-​legal considerations in relation to an ex aequo et bono mandate, have resonated in the jurisprudence of international courts42 and, as we will see later, in legal scholarship.43 Concerned that the Court, with the consent of the parties, might assume jurisdiction over ‘purely political questions upon considerations of expediency without regard to the legal rights of the Parties’, he adverted against ex aequo et bono decision-​making.44 He considered that by turning down ex aequo et bono jurisdiction, the Court had averted a catastrophe for its future and for ‘the development of the judicial settlement of international disputes’.45 He contended that it was ‘scarcely possible’, even with the parties’ agreement, that the PCIJ ‘should take jurisdiction of political questions, should exercise the function of drafting treaties between nations or decide questions upon grounds of political and economic expediency’.46 According to Judge Kellogg, the Court’s power to decide ex aequo et bono was mere licence to ‘apply the principles of equity and justice in the broader signification of this latter word’.47 While this author considers that no ex aequo et bono mandate had been given in the case, Judge Kellog’s remarks are not altogether convincing. As Hersch Lauterpacht pointed out, if jurisdiction ex aequo et bono ‘means legal

38 Free Zones (Order 1930) (n 35) [4]‌; Free Zones (Order 1929) (n 37) recitals. 39 Free Zones (Order 1930) (n 35) [4]‌; Free Zones (Order 1929) (n 37). 40 Free Zones (Order 1930) (n 35) [3]‌. 41 ibid. 42 Thomas Franck and Dennis Sughrue, ‘The International Role of Equity-​as-​Fairness’ (1993) 81 Georgetown LJ 563, 571. 43 See section VI Compatibility with the Judicial Function. 44 Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Order, Observations Kellogg) PCIJ Series A No 24 (6 December 1930) 29. 45 ibid. 46 ibid 34. 47 ibid 40.

144 Jurisdiction ex Aequo et Bono justice not inconsistent with the existing law, then, in fact, it is difficult to see why an express authorization of the parties should be necessary in order to enable the Court to do what is plainly its duty’.48 An ex aequo et bono mandate was suggested in the context of the territorial dispute between the United Kingdom and Guatemala over British Honduras –​ now Belize –​in the 1940s.49 In February 1946, the United Kingdom made a declaration recognising the compulsory jurisdiction of the International Court of Justice (ICJ) ‘in all legal disputes concerning the interpretation, application or validity of any treaty relating to the boundaries of British Honduras, and over any questions arising out of any conclusion which the Court may reach with regard to such treaty’.50 In January 1947, Guatemala’s declaration accepting the compulsory jurisdiction of the ICJ excluded the dispute in question ‘concerning the restoration of the territory of Belize, which the Government of Guatemala would, as it has proposed, agree to submit to the judgment of the Court, if the case were decided ex aequo et bono’.51 The United Kingdom did not take up the Guatemalan proposal for an ex aequo et bono mandate and the dispute was not adjudicated. In 2019, more than 70 years later, the parties, now Guatemala and Belize, took their ‘territorial, insular and maritime’ dispute to judicial settlement, after popular referenda in both countries approved the dispute’s submission to the ICJ.52 According to the parties’ special agreement, the Court must decide ‘in accordance with applicable rules of international law as specified in Article 38(1) of the Statute of the Court’,53 thus patently excluding the possibility of ex aequo et bono jurisdiction. In Haya de la Torre, the ICJ held that a choice among the various courses of action propounded by the parties could not be based on ‘legal considerations, but only on considerations of practicability or of political expediency’.54 The ICJ remarked that the parties themselves were better placed to make the choice and directed them to settle their dispute with regard to ‘considerations

48 Hersch Lauterpacht, Function of Law (n 22) 328. 49 On the Belize dispute, see DAG Waddell, ‘Developments in the Belize Question 1946–​1960’ (1961) 55 AJIL 459; Shaw (n 29) vol 2, ch 9, para 159; Elihu Lauterpacht and Christopher Greenwood (eds), (1995) 100 International Law Reports 318–​319; Donald Grunewald, ‘The Anglo-​Guatemalan Dispute over British Honduras’ (1965) 5(2) Caribbean Studies 17; Luis Aycinena Salazar, El Procedimiento ex Aequo et Bono y la Controversia Angloguatemalteca sobre Belice (Tipografía Nacional de Guatemala 1949). 50 UNTS 1946–​1947, vol I, No 1, 3–​5. 51 UNTS 1946–​1947, vol I, No 12, 49–​51. 52 Special agreement between Guatemala and Belize to submit Guatemala’s territorial, insular and maritime claim to the ICJ (8 December 2008) and Protocol (25 May 2015); ICJ, ‘Press release: The Court seised of a dispute between Guatemala and Belize’ (12 June 2019). 53 Special agreement between Guatemala and Belize (n 52) art 2. 54 Haya de la Torre (Colombia v Peru) (Judgment) [1951] ICJ Rep 71, 79.

Interstate Arbitration  145 of courtesy and good neighbourliness’.55 According to Gerald Fitzmaurice, this amounted to a recommendation that the parties should turn to negotiations ‘in a spirit of good faith and good will’.56 Exceptionally, in the antecedent Asylum (Colombia v Peru) case, Judge Azevedo had observed that the parties should rather have given the ICJ the authority to decide ex aequo et bono. He wrote that ‘whilst having urgently appealed to the Court to resolve the dispute’, the parties had failed to grant it ‘the means to arrive at an independent solution’, which would have been possible if they had entrusted it with ex aequo et bono powers.57 The absence of these powers prevented the Court from deciding the issue at the heart of the dispute, which was how to deal with Haya de la Torre’s reclusion as a refugee in the Colombian Embassy at Lima.58

III.  Interstate Arbitration In contrast with international courts, a few interstate arbitration tribunals have decided disputes ex aequo et bono. To these must be added the numerous tribunals that have settled disputes on the basis of ‘absolute equity’. Absolute equity was examined in Chapter 3.59 This section will consider some disputes where tribunals were granted ex aequo et bono or equivalent powers. A caveat is in order: none of these cases is contemporary. In Honduras Borders,60 the parties had agreed that the tribunal should determine their border in accordance with the utis possidetis of 1821.61 Nevertheless, were the tribunal to find that the parties had established other ‘interests which should be taken into account’ when determining the definitive frontier, the tribunal should ‘modify, as it may see fit’, the utis possidetis line and ‘fix the territorial or other compensation which it may deem just’.62 The tribunal held that it must determine the definitive boundary ‘on the basis of equity and justice’.63

55 ibid 83. 56 Gerald Fitzmaurice, ‘The Law and Procedure of the International Court of Justice, 1951–​4’ (1958) 34 BYIL 1, 132. 57 Colombian-​Peruvian Asylum (Dissenting Opinion Azevedo) [1950] ICJ Rep 332 [29]. 58 Shaw (n 29) vol 2, ch 9, para 159; Charles de Visscher, De l’équité dans le règlement arbitral ou judiciaire des litiges de droit international public (Pedone 1972) 75. 59 See ch 3, section II Mixed Claims Commissions and Early Arbitration Tribunals. 60 Honduras Borders (Guatemala, Honduras) (1933) 2 RIAA 1307. 61 Treaty of Arbitration between Guatemala and Honduras (16 July 1930) art V. 62 ibid. 63 Honduras Borders (n 60) 1336–​1337, 1341.

146 Jurisdiction ex Aequo et Bono This led it to assess a number of factors, including the actual possession and whether it was in good faith, and geographical features.64 In the Chaco arbitration between Bolivia and Paraguay,65 the disputing states had agreed that their boundary would be determined by the Presidents of Argentina, Brazil, Chile, Peru, Uruguay, and the United States in their capacity as ‘arbitrators in equity . . . acting ex aequo et bono’.66 The arbitrators deciding on behalf of the Presidents took into account aerial photographic material and reconnaissance of the territory, the wealth of experience gained from the Peace Conference, the needs of the parties as to their mutual security, and geographic and economic needs.67 The review of these elements and the opinions of the military assessors convinced the arbitrators of the equitableness of the frontier line that they suggested.68 In the earlier Brig ‘Macedonian’ case, a dispute arising out of the seizure of gold for goods on the brig Macedonian, the arbitrator did not appear to expressly rely on equity, despite his ex aequo et bono mandate.69 This was also the case, except for some references to reasonableness, in the James Pugh arbitration, related to the treatment of an Irish sailor who was clubbed to death by Panamanian police officers when he resisted arrest while in a state of inebriation.70 The interstate arbitral decisions discussed here, of which the most recent was rendered in 1938, indicate that tribunals have used their ex aequo et bono mandate rather conservatively. The absence of new cases underlines that jurisdiction ex aequo et bono has fallen in disuse in interstate arbitrations.71

64 ibid 1352. 65 Chaco (Bolivia, Paraguay) (1938) 3 RIAA 1817. 66 Treaty of Peace, Friendship and Boundaries between Bolivia and Paraguay art 2 (author’s translation). 67 Chaco (n 65) 1824. 68 ibid. 69 Case of the Brig ‘Macedonian’ (United States v Chile), Decision of the King of Belgium, 15 May 1863. 70 In the matter of the death of James Pugh (Great Britain, Panama) (1933) 3 RIAA 1439. 71 Exceptionally, in Croatia/​Slovenia, PCA Case No 2012-​04, Final Award, 29 June 2017, a five-​member tribunal was required to apply ‘international law, equity and the principle of good neighbourly relations in order to achieve a fair and just result by taking into account all relevant circumstances’ with a view to determining ‘Slovenia’s junction to the High Sea’ and ‘the regime for the use of the relevant maritime areas’, Croatia-​Slovenia Arbitration Agreement (4 November 2009) arts 3(1) and 4(b). An earlier draft of the same arbitration agreement provided instead that the tribunal should apply ‘[e]‌quity and the principle of good neighbourly relations, taking into account also vital interests of both Parties and all relevant circumstances, in order to achieve a fair and just result; And should therefore decide ex aequo et bono’. However, ultimately this wording was not retained, [111], [117].

International Investment Arbitration  147

IV.  International Investment Arbitration International investment law claims the rare contemporary decisions to have been rendered ex aequo et bono. Like the interstate decisions considered above, these awards offer ground to argue that tribunals interpret their mandate narrowly. At the same time, annulment committees’ review of investment awards reveals a continuing perusal of the scope of an ex aequo et bono mandate. Investment awards and decisions on annulment are now considered in turn.

A.  Investment Law’s ex aequo et bono Decisions At least a couple of investment awards are known to have been delivered ex aequo et bono. In Benvenuti & Bonfant v Republic of the Congo, a contractual dispute involving an Italian water bottling plant, interference with the investment led to most of the Italian staff fleeing the country.72 The company’s registered office became occupied by the Congolese army.73 The parties had not made a choice of law and the default rule of Article 42(1) second sentence of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) was applicable.74 Accordingly, the tribunal should apply the law of the host state and applicable rules of international law.75 In the course of the proceedings, the parties agreed to attempt to settle their dispute amicably and instructed the tribunal that, should amicable settlement fail, it could render an award ex aequo et bono.76 When the negotiations between the parties broke down,77 the tribunal assumed its competence. It applied the law identified in the default rule of the ICSID Convention and used its power to decide ex aequo et bono, in accordance with the parties’ agreement.78 In particular, the tribunal relied on its ex aequo et bono jurisdiction to decide on the quantum of damages.79 For this evaluation, the tribunal had recourse to the opinion of financial experts, concrete calculations, and considerations of

72 Benvenuti & Bonfant v Republic of the Congo (n 14) [2.23]. The case is discussed in detail in Schreuer (n 28) 45–​47. See also Schreuer and others (n 10) 638–​639. 73 Benvenuti & Bonfant v Republic of the Congo (n 14) [2.23]. 74 ibid [4.2]. 75 ICSID Convention art 42(1) second sentence. 76 Benvenuti & Bonfant v Republic of the Congo (n 14) [1.22]. 77 ibid [1.23]. 78 ibid [4.1]–​[4.4]. 79 ibid [4.65]ff.

148 Jurisdiction ex Aequo et Bono reasonableness and equity.80 The tribunal also used equity to award a sum for a claim admitted by the respondent,81 an amount of damages for intangible loss,82 and to decide on the rate of interest and the dates from which it would run.83 Let us consider the example of the tribunal’s determination of the rate of interest. The claimant had asked for interest at the rate of 15 percent a year on the sums awarded.84 The tribunal took into account the law of the host state that laid down a ‘significantly lower rate of interest’ and the fact that the respondent, in its Memorial of Defence, had suggested an interest rate of 10 percent in relation to its counterclaim.85 Consequently, ‘[b]‌y virtue of its power to rule ex aequo et bono’, the tribunal concluded that it was ‘equitable’ to adopt this rate of 10 percent in connection with the damages awarded to the claimant.86 The tribunal exercised probably the broadest discretion in the allocation of costs, where it also drew on equity, when it awarded some procedural costs to the investor,87 although the parties’ agreement provided for the arbitration costs to be shared equally between the parties.88 In making this decision, the tribunal noted the respondent’s initial non-​participation in the proceedings, which led to delays and additional costs for the investor, a statement to which the respondent had not objected.89 Atlantic Triton v Guinea was another contractual dispute decided under the ICSID Convention, arising out of a management agreement concerning three Norwegian fishing vessels.90 The operation of the vessels came to a halt nine months after their arrival in Guinea and the parties attributed this failure sometimes to the inadequate infrastructure of the port of Conakry sometimes to the fact that the vessels were unsuitable for fishing in Guinean waters.91 Soon afterwards, the investor commenced arbitration proceedings.92 The applicable contract provided for adjudication ex aequo et bono.93 Guinean law was also designated as applicable.94 Consequently, the tribunal applied both the respondent’s municipal law and equity.95 In particular, the tribunal used

80 ibid [4.66]ff. 81 ibid [4.81]. 82 ibid [4.96]. 83

ibid [4.98]–​[4.100].

84 ibid [4.97]. 85 ibid [4.98]. 86 ibid.

87 ibid [4.129]. 88 ibid [4.124]. 89

ibid [4.127]–​[4.129].

90 Atlantic Triton v Guinea (n 13) [1]‌. The case is discussed in detail in Schreuer (n 28) 47–​50. 91 Atlantic Triton v Guinea (n 13) [3]‌. 92

ibid [4]‌. ibid [2]‌. 94 ibid. 95 Eg ibid [6]‌–​[7]. 93

International Investment Arbitration  149 its ex aequo et bono mandate to decide on damages.96 It conditioned the payment of a claim on the investor posting security in favour of Guinea in order to ensure that the latter would not be called to pay twice, since the investor was a debtor of a Norwegian construction company.97 The tribunal made this finding motu proprio on the basis of its ex aequo et bono mandate.98 In reality, even without such powers, the tribunal would have been able to issue security on its own initiative as a provisional measure under the ICSID Convention.99 Taking into account the limited services that the claimant provided in the last phase of the contract’s execution, the tribunal decided to limit the management fees.100 It reasoned, among others, that the investor had not demonstrated the necessary diligence in the exploitation of the vessels and decided in its capacity as amiable compositeur101 that it was ‘equitable to reduce to the lump sum of US$100,000 (out of the US$344,444 claimed)’ the management fees owed by Guinea to Atlantic Triton for the execution of the contract.102 To the above cases one may add the award in Parienti v Panama, a dispute arising out of the revocation of a licence to construct and operate a transport terminal, brought on the basis of the France-​Panama bilateral investment treaty (BIT) of 1982.103 The arbitral tribunal seized of the case rendered, in its own terms, an ‘award in equity’.104 The Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) of 1976, applicable in casu, provide that the tribunal shall apply ‘the law designated by the parties as applicable to the substance of the dispute’; and that, if the parties have not designated the applicable law, the tribunal shall ‘apply the law determined by the conflict of laws rules which it considers applicable’.105 According to the same Rules, the tribunal shall decide as ‘amiable compositeur or ex aequo et bono only 96 ibid [5]‌–​[6]. 97 ibid [5]‌. 98 ibid. 99 ICSID Convention art 47; ICSID Convention Arbitration Rules rule 39(3). 100 Atlantic Triton v Guinea (n 13) [5]‌. 101 The term amiable compositeur is generally seen as broadly synonymous with ex aequo et bono adjudication. In the early Alsop case (Alsop Claim (United States/​Chile), Award by King George V (as ‘amiable compositeur’), 5 July 1911, (1911) 5 AJIL 1079, 1081, the task of the amiable compositeur was described as that of ‘pronouncing an award which shall do substantial justice between the parties without attaching too great an importance to the technical points which may be raised on either side’. See also PCA Arbitration Rules (2012) art 35(2); Schreuer (n 28) 43. Other authors distinguish between a court or tribunal acting ex aequo et bono and as amiable compositeur, eg Karl Strupp, ‘Le droit du juge international de statuer selon l’équité’ (1930) 33 Recueil des Cours 351, 338, 440, 467, who perceives the task of an amiable compositeur as one of obligatory and binding mediation. 102 Atlantic Triton v Guinea (n 13) [6]‌(author’s translation). 103 Laurent Jean-​ Marc Parienti v Autoridad de Transito y Transporte Terrestre and Panama, UNCITRAL, Award in Equity, 27 January 2005. 104 ibid. 105 UNCITRAL Arbitration Rules (1976) art 33(1).

150 Jurisdiction ex Aequo et Bono if the parties have expressly authorized’ it to do so and if this is allowed by the law applicable to the arbitration.106 The France-​Panama BIT does not include a provision on applicable law. Panama’s arbitration law stipulates that an arbitration may be at law or in equity, that is, ex aequo et bono.107 If the parties have not agreed on whether the arbitration is at law or in equity, this is determined by the applicable rules and, if there is no relevant provision, the arbitration is in equity.108 While assuming ex aequo et bono jurisdiction, the tribunal identified as applicable several provisions of positive law, including the France-​Panama BIT and the UNCITRAL Arbitration Rules.109 The tribunal reasoned that in the absence of an express provision, in accordance with the Panamanian arbitration law, this was going to be an arbitration in equity.110 Consequently, in accordance with equity, the tribunal found that compensation should be ‘just, prompt, adequate and effective’,111 thus principally using the dominant Hull doctrine and the applicable treaty’s provision for compensation that is prompt, adequate, and effective.112 The award was later set aside by the Supreme Court of Panama on the ground, inter alia, that the tribunal had acted ex aequo et bono without the express agreement of the parties and despite the fact that such agreement was required by the UNCITRAL Arbitration Rules.113 However, the award received exequatur in France in 2009.114 The foregoing supports the argument that arbitrators deciding ex aequo et bono ‘barely leave the confines of positive law’.115 The awards reveal that tribunals have mainly used their ex aequo et bono powers to determine quantum and interest.116 But even outside an ex aequo et bono mandate, investment tribunals often resort to equitable considerations when it comes to compensation and costs.117 The tribunals did not invoke ex aequo et bono in order to disregard positive law.118 An exception to this rule was the award of some procedural 106 ibid art 33(2), see also art 33(3). Similar provision is made in ICSID Additional Facility Rules 54(2). Contrast UNCITRAL Arbitration Rules art 35. 107 Decree Law No 5 of 8 July 1999 art 3. 108 ibid. 109 Parienti v Panama (n 103) 2–​3. 110 ibid 76–​77. 111 ibid 77. 112 France-​Panama BIT art 5(2). On the Hull doctrine, see Catharine Titi, ‘Police Powers Doctrine and International Investment Law’ in Filippo Fontanelli, Andrea Gattini, and Attila Tanzi (eds), General Principles of Law and International Investment Arbitration (Brill 2018) 328–​329. 113 Supreme Court of Justice (Panama), Judgment, 20 September 2006. 114 Damien Charlotin, ‘Looking Back: Unorthodox 2005 BIT Award Finally Surfaces, as French Investor Persists with Effort to Collect on Award that Was Set Aside at Seat’, IAReporter (7 June 2018). 115 Schreuer (n 28) 62. 116 See also Schreuer and others (n 10) 639. 117 See ch 9. 118 Schreuer and others (n 10) 639.

International Investment Arbitration  151 costs to the investor in Benvenuti & Bonfant v Republic of the Congo, since the parties’ agreement provided for an equal share of costs between the parties. Another instance where the ex aequo et bono mandate might have made a difference, although it was not actually used to bypass positive law, is the Atlantic Triton tribunal’s decision to recommend on its own initiative security that had not been requested by the respondent. Yet strictly speaking the tribunal would have anyway been allowed to recommend security as a provisional measure sua sponte. Overall, these two exceptions do not change the predominant impression, to wit that the ex aequo et bono mandate has not led to unpredictable decisions at odds with positive law.

B.  Ex aequo et bono as a Ground for Annulment Annulment under the ICSID Convention refers to the review of tribunal awards by annulment committees.119 Annulment may be granted on a number of limited grounds, including manifest excess of powers.120 According to the case law, a tribunal’s failure to apply the applicable law may give rise to a manifest excess of powers.121 Since under the ICSID Convention the possibility of jurisdiction ex aequo et bono is part of the provision on applicable law,122 then logically resort to ex aequo et bono powers where none have been given may constitute an annullable error for manifest excess of powers.123 It is less certain 119 ibid 890ff. 120 ICSID Convention art 52(1). 121 ICSID, ‘Updated Background Paper on Annulment for the Administrative Council of ICSID’ (2016) 57–​58. 122 ICSID Convention art 42. 123 Amco Asia Corporation and others v Indonesia, ICSID Case No ARB/​ 81/​ 1, Decision on Annulment, 16 May 1986 [28]; Amco Asia Corporation and others v Indonesia, ICSID Case No ARB/​81/​ 1, Decision on the Applications for Annulment of the 1990 Award and the 1990 Supplemental Award, 3 December 1992 [7.28]; Maritime International Nominees Establishment (MINE) v Guinea, ICSID Case No ARB/​84/​4, Decision on Annulment, 14 December 1989 [5.03]; MTD Equity Sdn Bhd and MTD Chile v Chile, ICSID Case No ARB/​01/​7, Decision on Annulment, 21 March 2007 [45] (citing MINE v Guinea, ibid); CMS Gas Transmission Co v Argentina, ICSID Case No ARB/​01/​8, Decision on Annulment, 25 September 2007 [50] (citing MINE v Guinea, ibid); Azurix Corp v Argentina, ICSID Case No ARB/​ 01/​12, Decision on Annulment, 1 September 2009 [136]; Enron Creditors Recovery Corporation and Ponderosa Assets LP v Argentina, ICSID Case No ARB/​01/​3, Decision on Annulment, 30 July 2010 [218] (citing Azurix v Argentina, ibid); Joseph C Lemire v Ukraine, ICSID Case No ARB/​06/​18, Decision on Annulment, 8 July 2013 [237]; Adem Dogan v Turkmenistan (n 15) [98]; Total v Argentina, ICSID Case No ARB/​04/​1, Decision on Annulment, 1 February 2016 [198]; Antoine Abou Lahoud and Leila Bounafeh-​Abou Lahoud v Democratic Republic of the Congo (DRC), ICSID Case No ARB/​10/​4, Decision on Annulment, 29 March 2016 [118]; Mobil Exploration and Development Argentina and Mobil Argentina v Argentina, ICSID Case No ARB/​04/​16, Decision on Annulment, 8 May 2019 [67]. It is reported that in the annulment proceeding of the resubmitted Klöckner v Cameroon case (Klöckner Industrie-​Anlagen and others v Cameroon and Société Camerounaise des Engrais, ICSID Case No ARB/​ 81/​2, Second ad hoc committee Decision on Annulment, 17 May 1990, not public), Cameroon had argued that the fact that the tribunal had assumed the power to decide ex aequo et bono was both a failure

152 Jurisdiction ex Aequo et Bono whether a tribunal’s hypothetical refusal to decide ex aequo et bono when the parties have asked it to do so may also amount to a manifest excess of powers. A point-​blank refusal to exercise the ex aequo et bono mandate will probably constitute a manifest excess of powers, while reasoning that positive law is more appropriate under the circumstances than equity will not.124 In Klöckner v Cameroon, a contractual dispute, the parties had not endowed the tribunal with ex aequo et bono authority.125 The annulment committee observed that excess of powers may consist in application of municipal law when the tribunal is required to decide in accordance with equity, or conversely if, while required to decide in accordance with municipal law, it decides in accordance with equity.126 The committee reasoned that the tribunal’s reasoning seemed ‘very much like a simple reference to equity, to “universal” principles of justice and loyalty’ such as may be invoked by amiables compositeurs.127 The committee concluded that the tribunal had acted outside the applicable law, ‘applying concepts or principles it probably considered equitable’ like an amiable compositeur.128 Still it explained that acting as amiable compositeur should not be conflated with resorting to ‘equitable considerations’. 129 But the committee was not interested in whether the award was ‘justified’ and concluded that the tribunal had manifestly exceeded its powers.130 It held that in the tribunal’s evaluation of the respective obligations or debts, legal reasoning was replaced by an ‘equitable estimate’ based ‘on “approximately equivalent” estimates or approximations’.131 While the Klöckner committee tried to draw a distinction between equity applied as part of the law and the ex aequo et bono mandate, its reasoning is not terribly compelling, especially as there is considerable linguistic overlap between the committee’s discussion of ex aequo et bono jurisdiction (‘equitable concepts or principles’) and of equity outside ex aequo et bono jurisdiction (‘equitable considerations’). The annulment decision was criticised for to state reasons and a manifest excess of powers. See Damien Charlotin, ‘Looking Back: Resubmission Tribunal in Klöckner v Cameroon Awards Compensation to Investor, and Second ad hoc Committee Declines to Annul Award’, IAReporter (19 May 2019). 124 cf Klöckner Industrie-​Anlagen and others v Cameroon and Société Camerounaise des Engrais, ICSID Case No ARB/​81/​2, Decision on Annulment, 3 May 1985 [59]. 125 Klöckner Industrie-​Anlagen and others v Cameroon and Société Camerounaise des Engrais, ICSID Case No ARB/​81/​2, Award, 21 October 1983. 126 ‘Equity’ in this quote is ‘absolute equity’, Klöckner v Cameroon (Annulment) (n 124) [59]. 127 ibid [77]. 128 ibid [79]. 129 ibid. 130 ibid. 131 ibid [176], see also [161].

International Investment Arbitration  153 its ‘conjectural’ assumption that the tribunal decided ex aequo et bono and for ignoring the fact that the tribunal’s recourse to equity was within the limits of the applicable law.132 In Amco v Indonesia, another contractual dispute, the tribunal remarked that, since the disputing parties had not agreed to an ex aequo et bono mandate, the case ought to be decided in accordance with the applicable rules of law.133 It found that the revocation of the investor’s licence was contrary to ‘the general and fundamental principle of due process’.134 In the annulment proceeding, the respondent alleged that due process as relied upon by the tribunal had ‘every appearance of being based on equity’ and not on the applicable law.135 The annulment committee explained that not every mention of equitable considerations ‘necessarily amounts to a decision ex aequo et bono’.136 In fact, such considerations ‘may indeed form part of the law to be applied by the Tribunal’.137 The committee added that annulment would have been appropriate only if the tribunal had ‘decided an issue ex aequo et bono in lieu of applying the applicable law’.138 Moreover, ‘the general and fundamental principle of due process’ was not qualitatively different from the ‘general standards of Indonesian law’,139 which was the law applicable in the case. This aspect of the decision may be contrasted to the Klöckner committee’s indifference to whether the award was ‘justified’. The Amco committee ultimately annulled the award on different grounds.140 In Lemire v Ukraine, the respondent had argued that the tribunal majority’s ‘failure to apply the legal test for causation’ amounted to nonapplication of the applicable law and therefore the tribunal had decided ex aequo et bono without the parties’ authorisation.141 The annulment committee disagreed.142 It reasoned that a tribunal acts ex aequo et bono if it decides in equity when it must decide at law.143 The committee found that not only had the tribunal decided at law but it had also followed the respondent’s assertions according to which injured claimants must prove that the quantum ‘flows from the host State’s 132 Schreuer (n 28) 57–​59. 133 Amco Asia Corporation and others v Indonesia, ICSID Case No ARB/​81/​1, Award, 20 November 1984 [147]. 134 ibid [201]. 135 Amco v Indonesia (Annulment) (n 123) [77]. 136 ibid [26], [28]. 137 ibid. 138 ibid [28]. 139 ibid [78]. 140 ibid operative part. 141 Lemire v Ukraine (n 123) [238]. 142 ibid [252]–​[254]. 143 ibid [253].

154 Jurisdiction ex Aequo et Bono conduct’, that ‘the causal relationship is sufficiently close’, and reparation extends only to damages caused by an unlawful act.144 In Mobil v Argentina, the annulment committee considered the respondent’s argument that the tribunal had not applied the appropriate standard of compensation.145 It held that in order to find a manifest excess of powers in the calculation of damages, it must be shown that the tribunal deliberately did not apply the applicable law and decided instead ex aequo et bono.146 The committee found no proof that the tribunal had calculated the damages ex aequo et bono.147 Annulment committees’ analysis of the outer contours of the ex aequo et bono mandate tends to confirm the view, with some exceptions, that ex aequo et bono adjudication is something quite distinct from the discretion that tribunals have anyway. At the same time, the bulk of this discussion comes from annulment committees reviewing awards issued in the absence of an ex aequo et bono mandate rather than by investment tribunals actually operating in accordance with ex aequo et bono powers.

V.  For What Types of Disputes Is ex aequo et bono Appropriate? States’ unwillingness to authorise courts and tribunals to decide ex aequo et bono is easy to comprehend. To grant an ex aequo et bono mandate for unspecified future disputes, states need to come to terms with the greater uncertainty that inheres in this type of adjudication. After all, states may be ‘more comfortable with the law as it is than as it should be’.148 This is rather to be expected, even if it is not ‘a great aspiration to justice’.149 Once a dispute has arisen, an additional difficulty emerges. Perhaps one of the parties believes that a law is unjust and seeks an ex aequo et bono decision in order to ensure that regard will be had to the equitable considerations favouring its claim.150 But it is less probable that both disputing parties will be willing to authorise such a decision

144 ibid. 145 Mobil v Argentina (n 123) [66]. 146 ibid [67]. 147 ibid. 148 Pellet (n 20) 796. 149 ibid. 150 Louis Sohn, ‘Arbitration of International Disputes Ex Aequo et Bono’ in Pieter Sanders (ed), International Arbitration Liber Amicorum for Martin Domke (Martinus Nijhoff 1967) 333.

Appropriateness of ex Aequo et Bono  155 that may clash with the legal rights of one of them.151 It is possibly for this reason that the authorisation to decide ex aequo et bono is sometimes viewed as ‘an act of goodwill and accommodation on the part of the State favoured by the law in force’.152 Whatever one thinks of the likelihood of such a mandate, there may be some disputes for which jurisdiction ex aequo et bono may not be inappropriate. First, this is the case of disputes where the legal framework is incomplete, not highly developed, inadequate, or uncertain.153 A possible example concerns disputes falling within the purview of the nascent international law on the return of cultural property but placed outside the scope of existing non-​ retroactive conventions. Notably, these are the disputes arising out of the removal of cultural property as a result of foreign occupation, colonial domination or illicit trafficking prior to the entry-​into-​force of the 1970 Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property of the United Nations Educational, Scientific and Cultural Organization (UNESCO). This Convention protects against the unlawful removal of cultural property from the time of its entry-​ into-​force for each member state –​that is, it is not retroactive. This means that numerous requests for the return of cultural property illicitly removed from its original context, such as Egypt’s request for the return of the bust of Nefertiti currently in Berlin, remain outside its ambit. While a customary international law on the return of some such plundered cultural property is emerging,154 its contours have yet to be tested. For example, can the requesting state’s human rights record or political situation constitute a bar to repatriation? Geoffrey Robertson has drafted a convention on the return of ‘important cultural property’ in an attempt to help codify customary international law in this area.155 In his draft, he makes numerous choices, such as regarding the types of cultural property liable to be returned and various bars to repatriation.156 While the author explains these choices, it is doubtful that all of

151 Jennings, ‘General Course’ (n 15) 344. See further Yoram Dinstein, ‘The Interaction of International Law and Justice’ (1986) 16 IYHR 9, 38. 152 Hersch Lauterpacht, Function of Law (n 22) 321, also 336. 153 Eg at the time when international law was still a rudimentary system, the General Act for the Pacific Settlement of International Disputes (1928) art 28 provided that ‘the Tribunal shall apply the rules in regard to the substance of the dispute enumerated in Article 38 of the Statute of the Permanent Court of International Justice. In so far as there exists no such rule applicable to the dispute, the Tribunal shall decide ex aequo et bono’. The latter is interesting for its premise that it is possible for international law to have gaps, Dinstein (n 151) 35. 154 See also Geoffrey Robertson, Who Owns History? (Biteback Publishing 2019) ch 6. 155 ibid ch 8. 156 ibid.

156 Jurisdiction ex Aequo et Bono them –​including a time-​limit of 275 years, no more no less –​constitute customary international law. The power to decide ex aequo et bono may be useful in such an area where the legal framework is uncertain and new customary international law has not yet been authoritatively and scrupulously confirmed by an international court.157 However, there is also a downside to exercising ex aequo et bono jurisdiction in such a field. The ex aequo et bono mandate could impede the contribution of any resultant decision to the development of international law, much needed in such contexts. Future courts or tribunals may reject the relevance of the most innovative or equitable findings of an ex aequo et bono ruling, if they are considered to have been made possible only because of the ex aequo et bono mandate. In this sense, while ex aequo et bono powers may be deemed appropriate for a specific dispute, they may be detrimental to the development of the law. Second, ex aequo et bono decision-​making may be appropriate for the most ‘political’ among legal disputes, in other words, when sensitive issues are at stake. The need here is for a solution that does not simply put an end to a dispute but that is also sustainable going forward. For example, it has been suggested that if the requirements of law and peace pull towards different results, an ex aequo et bono decision may help maintain the peace, while a decision rendered ‘in accordance with strict law may lead to a breach of peace’.158 Certainly, what is ‘political’ or sensitive is subjective and will be decided by each state. States have sometimes been unwilling to adjudicate such ‘political’ disputes in the absence of an ex aequo et bono mandate. One may instance the Belize dispute, which was not submitted to the ICJ in the 1940s, Guatemala having conditioned the Court’s jurisdiction over the dispute on an ex aequo et bono authorisation.159 Third, ex aequo et bono adjudication may be an appropriate alternative to mediation or conciliation. Mediation and conciliation are soft dispute resolution mechanisms where parties drive the process and retain control over the outcome.160 One of the reasons why parties may resort to mediation or conciliation is that instead of the all-​or-​nothing solution that the existing legal

157 Interestingly, equity’s relevance to cultural heritage law –​although not necessarily the need for an ex aequo et bono mandate –​is confirmed by demands for ‘cultural justice’, eg Derek Fincham, ‘Justice and the Cultural Heritage Movement’ (2012) 20 Virginia Journal of Social Policy & Law 43. 158 Sohn (n 150) 333. 159 See text to nn 49–​53. See also ch 3, section VI A The Rann of Kutch Case. 160 Eg Catharine Titi and Katia Fach Gómez (eds), Mediation in International Commercial and Investment Disputes (OUP 2019).

Appropriateness of ex Aequo et Bono  157 framework has to offer, they prefer a balancing of their interests. To the extent that an ex aequo et bono mandate can result in a balancing of the parties’ interests, it may not be inapposite to the resolution of such disputes. Mediation too is sometimes recommended for highly sensitive disputes.161 To return to the example of cultural heritage law, disputes that in principle fall outside the purview of the non-​retrospective 1970 UNESCO Convention can be submitted to mediation or conciliation in a specially-​created UNESCO body, the Intergovernmental Committee for Promoting the Return of Cultural Property to its Countries of Origin or its Restitution in case of Illicit Appropriation (ICPRCP).162 This reiterates the fact that disputes where the legal framework is not yet definitively settled may be appropriate for mediation and that in the same context an ex aequo et bono mandate may be considered. Fourth, it has been suggested that investment disputes involving ‘complex long-​term relationships’ may be suitable candidates for ex aequo et bono adjudication.163 Such investment relationships may evolve over time and new circumstances may change the status quo, including in light of economic, political, and technological developments.164 In such cases, if efforts to renegotiate an investment contract fall on stony ground, ex aequo et bono decision-​making may be called for.165 Finally, it must be borne in mind that an ex aequo et bono mandate need not cover all points at issue. It is possible to envisage a dépeçage, whereby ex aequo et bono applies to limited matters,166 those more appropriate to such a mandate. Depending on the dispute, this may even be preferable to granting comprehensive ex aequo et bono powers. Writing almost a century ago, Hersch Lauterpacht remarked that the history of international dispute settlement shows that agreements on ex aequo et bono are both ‘possible and practicable’.167 If this is less true today, it must be recalled that the applicable law, or equity as part of international law, does not necessarily have to lead to different results than an ex aequo et bono mandate. In this respect, the usefulness of the latter, also taking into account the uncertainty it entails, is limited. Yet, as this section has argued, it remains possible.

161 ibid. 162 Statutes of the ICPRCP. See also Catharine Titi, ‘International Dispute Settlement in Cultural Heritage Law and in the Protection of Foreign Investment’ (2017) 8 JIDS 535, 554–​555. 163 Broches, Selected Essays (n 18) 231; Schreuer and others (n 10) 632; Schreuer (n 28) 40; Leon Trakman, ‘Ex Aequo et Bono: Demystifying an Ancient Concept’(2008) 8(2) Chicago JIL 621, 621. 164 Broches, Selected Essays (n 18) 231; Schreuer and others (n 10) 632; Schreuer (n 28) 40. 165 ibid. 166 Schreuer (n 28) 44–​45; Schreuer and others (n 10) 633. 167 Hersch Lauterpacht, Function of Law (n 22) 321, also 336.

158 Jurisdiction ex Aequo et Bono

VI.  Compatibility with the Judicial Function Some observers have suggested that ex aequo et bono adjudication cannot be readily reconciled with the judicial function.168 The respective standpoint of those opposed to this kind of decision-​making varies. Some consider that ex aequo et bono is not legal adjudication and therefore it is only appropriate for non-​judicial disputes.169 Relatedly, some suggest that ex aequo et bono jurisdiction does not require legal training170 and results in legal settlement of non-​legal, that is, non-​justiciable, disputes.171 Others describe it as ‘a species of legislative activity’.172 Others still suggest that an ex aequo et bono mandate is inappropriate for an international court and better-​suited to international arbitration.173 Nonetheless, to presume that ex aequo et bono decisions are inapposite to judicial disputes is to beg the question. Ex aequo et bono adjudication does not rely on a non-​judicial power.174 However inconclusively, provisions on ex aequo et bono address the question ‘what is the applicable law?’.175 For this reason, ex aequo et bono and dispute settlement according to law may be regarded as ‘points on a continuum’.176 The hypothesis that ex aequo et bono jurisdiction is inappropriate for the settlement of judicial disputes is further contradicted by the fact that international courts and tribunals decide in principle legal disputes.177 One may instance the compulsory jurisdiction of the 168 James Crawford, Brownlie’s Principles of Public International Law (8th edn, OUP 2012) 728; Paul Reuter, ‘Quelques réflexions sur l’équité en droit international’ (1980) 15 RBDI 165, 167; Markus Kotzur, ‘Ex Aequo et Bono’ (2009) MaxPlanckEPIL. 169 Eg Free Zones (Observations Kellogg) (n 44) 29; see text to nn 42–​47. See further Gillis Wetter, ‘The Rann of Kutch Arbitration’ (1971) 65 AJIL 346, 348, noting that since the Rann of Kutch tribunal had rejected an ex aequo et bono mandate, the proceedings were ‘judicial in character’; Treaty of Arbitration and Conciliation between Denmark and Haiti (1928) art 4 (‘disputes which in the opinion of the Court are not of a juridical character may be settled by the Court according to the principles of law and equity’, emphasis added); cf Free Zones (Order 1930) (n 35) 10, 15. 170 Robert Jennings, ‘Equity and Equitable Principles’ (1986) XLII ASDI 27, 30. 171 Reuter (n 168) 167. 172 Hersch Lauterpacht, The Development of International Law by the International Court (first published 1958, Grotius 1982) 213, 321. However, the author does not disapprove of the conferment of ex aequo et bono jurisdiction on this ground, 325–​327. See also Elihu Lauterpacht, ‘Equity, Evasion, Equivocation and Evolution in International Law’ (1977–​1978) 1977 Proceedings of the American Branch of the International Law Association (ILA) 33, 45; Wolfgang Friedmann, ‘The North Sea Continental Shelf Cases –​A Critique’ (1970) 64 AJIL 229, 235. 173 Eg Dinstein (n 151) 39, although the author refers interchangeably to ex aequo et bono jurisdiction and equity contra legem. 174 cf Cayuga Indians (Great Britain) v United States (1926) 6 RIAA 173, 183. 175 Broches, ‘The Convention’ (n 18) 388; cf Shaw (n 29) vol 2, ch 9, para 159, where the provision on ex aequo et bono adjudication is described as ‘misplaced’ in ICJ Statute art 38(2). In fact, the provision is drafted as an exception to the sources of international law (‘This provision shall not prejudice’, etc). 176 JG Merrills, International Dispute Settlement (6th edn, CUP 2017) 105. 177 Contrast Hans Kelsen, Principles of International Law (first published 1952, Lawbook Exchange 1959) 380–​382, arguing that the distinction between legal and political disputes depends on the nature

Conclusions  159 ICJ178 and the jurisdiction of ICSID tribunals.179 Such disputes can be submitted to ex aequo et bono dispute settlement not because of their extra-​legal nature –​they are by definition legal disputes –​but because of the parties’ agreement.180 It is the parties’ agreement that makes the decision ‘a strictly legal one’.181 The adjudicator decides according to the will of the parties and the ‘will of the parties is law’.182 Modus et conventio vincunt legem.183 An ex aequo et bono decision does not create new rights and obligations; such rights and obligations are already contained in the parties’ agreement.184 This is not to say that the ex aequo et bono mandate is not subject to limitations. Ex aequo et bono jurisdiction is not an exercise is casuistry.185 Nor does it amount to licence for a court or tribunal to act capriciously or arbitrarily; the judicial organ must rely for its decision on rational considerations of ‘what is fair and just’.186 It can certainly not disregard peremptory norms,187 assuming, arguendo, that a digression from ius cogens could ever be described as equitable, and it must state reasons.188 Therefore, in discharging an ex aequo et bono mandate, judges and arbitrators perform a judicial function and the extra-​ legal nature of the powers thus conferred on a court or tribunal should not be assumed.

VII. Conclusions The chapter has examined ex aequo et bono adjudication having regard to the jurisprudence of international courts and tribunals, with a focus on of the norms to be applied to their resolution: a dispute is legal if it ‘is to be settled by the application of legal norms’ and political ‘if it is to be settled by the application of other norms –​such as principles of equity, justice, and the like’. 178 ICJ Statute art 36(2). 179 ICSID Convention art 25(1). See also Broches, ‘The Convention’ (n 18) 393–​394 (‘only legal disputes are within the jurisdiction of the Centre and these legal disputes may by the express provision of Article 42(3) be decided ex aequo et bono’); Broches, Selected Essays (n 18) 230. 180 Broches, Selected Essays (n 18) 231; Schreuer and others (n 10) 632. 181 Hersch Lauterpacht, Function of Law (n 22) 325. 182 ibid. 183 ibid. 184 ibid 326–​327. 185 Ulrich Scheuner, ‘Decisions Ex Aequo et Bono by International Courts and Arbitral Tribunals’ in Pieter Sanders (ed), International Arbitration Liber Amicorum for Martin Domke (Martinus Nijhoff 1967) 283; cf Hersch Lauterpacht, Function of Law (n 22) 322. 186 Manley Hudson, The Permanent Court of International Justice 1920–​1942 (Macmillan 1943) 620. See also Broches, ‘The Convention’ (n 18) Law 394; Schreuer and others (n 10) 637; Schreuer (n 28) 51; Pellet (n 20) 796. 187 Pellet (n 20) 796; Schreuer and others (n 10) 638. 188 See text to n 25.

160 Jurisdiction ex Aequo et Bono investor-​state arbitration. It has highlighted that states tend to be wary of conferring ex aequo et bono powers upon international courts and tribunals and that the latter tread lightly when exercising such powers. The chapter has also considered the types of dispute for which an ex aequo et bono mandate may be suitable and rejected the claim that ex aequo et bono is incompatible with the settlement of legal disputes. In line with the argument presented earlier in the book, the chapter reiterated that ex aequo et bono jurisdiction is not synonymous with the application of equity contra legem. Nonetheless, in some respects the difference between an application of equity ‘within the law’ and an ex aequo et bono decision is merely one of degree. This is evident, for example, in the required detail of legal reasoning; a court or tribunal may be more creative with the law when acting ex aequo et bono without having to produce minute legal reasoning to justify its recourse to equity. In practice, when acting ex aequo et bono, arbitrators do not generally stray from positive law and invoke their special powers when according compensation. In this sense, the authorisation to decide ex aequo et bono is not necessarily the wild card it is made out to be and the fear it inspires must not be pressed too far. However, the heightened uncertainty of this type of adjudication and the fact that it invites digressions from the legal rights of one of the disputing parties mean that it will almost certainly remain marginal, and equitable considerations will instead be taken into account outside the ex aequo et bono mandate.

8 Variations on Equity and Related Concepts I. Introduction Equity is at the origin of concepts such as good faith, pacta sunt servanda, unjust enrichment, estoppel, acquiescence, abuse of rights, ius cogens, proportionality, and rebus sic stantibus.1 It is also at the root of human rights.2 These are normative variations on equity, sometimes described as ‘principles of equity’3 or ‘principles of law-​as-​fairness’.4 When decision-​makers apply them, they also apply equity.5 Some of them have been discussed at length by investment tribunals and this chapter draws extensively on this case law, gaining insights into the application of the principles from this valuable source that is generally ignored in public international law scholarship. The purpose of this chapter is twofold. First, it probes some of these concepts to demonstrate that equity lies deep in the international law mainstream and is applied even if we are not constantly aware of this. Second, the chapter aims to topple the myth that some forms of equity, notably contra legem equity, are only applied if the parties agree. The principles discussed here are ordinarily applied by international courts and tribunals irrespective of whether they are laid down in the strict law. Some of them, such as the clean hands doctrine and abuse of rights, are applied despite the strict law.

1 Thus, Judge Weeramantry identified equity’s creativity and predicted that ‘the future holds for it a similarly vital creative role’, Maritime Delimitation in the Area between Greenland and Jan Mayen (Separate Opinion Weeramantry) [1993] ICJ Rep 211 [17], [98], [159]. See further Delimitation of the Maritime Boundary in the Gulf of Maine Area (Judgment) [1984] ICJ Rep 246 [130]; Thomas Franck, ‘Fairness in the International Legal and Institutional System’ (1993) 240 Recueil des Cours 9, 63; Anastasios Gourgourinis, ‘Delineating the Normativity of Equity in International Law’ (2009) 11 ICLR 327, 345–​346; P van Dijk, ‘Nature and Function of Equity in International Economic Law’ (1986) 7 Grotiana 4, 17; Thomas Cottier and others, ‘The Principle of Proportionality in International Law’ (2017) 18 JWIT 628, 666. 2 cf María José Falcón y Tella, Equity and Law (Peter Muckley tr, Martinus Nijhoff 2008) 188–​189. 3 Jan Mayen (n 1) [145]; van Dijk (n 1) 17; Christopher Rossi, Equity and International Law (Transnational 1993) 81–​82. 4 Franck (n 1) 63. 5 Jan Mayen (n 1) [145]. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0008

162  Variations and Related Concepts

II. Equality The idea that equity can be found in equality goes back to Aristotle6 and was present in Roman aequitas.7 ‘Equality is equity’ is also a maxim of English equity.8 In Frontier Dispute, the International Court of Justice (ICJ) noted that the pool of Soum ‘is a frontier pool; and that, in the absence of any precise indication in the texts of the position of the frontier line, the line should divide the pool of Soum in two, in an equitable manner’.9 According to the Court, in the absence of ‘special circumstances’, equality tends to be the ‘best expression’ of equity.10 In the earlier Frierdich and Company case, the France-​Venezuela Mixed Claims Commission held that, if an equilibrium is achieved, then ‘justice is done’.11 Yet the link between equity and equality should not be drawn too closely: the two notions are not coterminous. In a celebrated passage in North Sea Continental Shelf, the ICJ reasoned: Equity does not necessarily imply equality. There can never be any question of completely refashioning nature, and equity does not require that a State without access to the sea should be allotted an area of continental shelf, any more than there could be a question of rendering the situation of a State with an extensive coastline similar to that of a State with a restricted coastline.12

This argument was taken up in the Anglo-​French Continental Shelf case, where the arbitrators held that equity does not ‘produce absolute equality of treatment, but an appropriate abatement of the inequitable effects of the distorting geographical feature’.13 In Black Sea, the ICJ emphasised that equity is not equality, since the purpose ‘is to achieve a delimitation that is equitable, not an equal apportionment of maritime areas’.14 As previously noted, by such terms, courts and tribunals have tried to show that theirs is a task of delimitation, not apportionment –​that is, they do not engage in distributive justice.15 Ultimately,

6 See ch 2, section II Greek and Roman Law Origins and ch 4 text to n 64. 7 See ch 2 text to n 7. 8 RE Megarry and PV Baker, Snell’s Principles of Equity (26th edn, Sweet & Maxwell 1966) 30, 40ff; Michael Levenstein, Maxims of Equity (Algora 2013) 103–​104. 9 Frontier Dispute (Judgment) [1986] ICJ Rep 554 [150]. 10 ibid. 11 Frierdich and Co (1905) 10 RIAA 45, 54. See also Cayuga Indians (Great Britain) v United States (1926) 6 RIAA 173, 190. 12 North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3 [91]. 13 Delimitation of the Continental Shelf (United Kingdom/​France) (1977) 28 RIAA 3 [251]. 14 Maritime Delimitation in the Black Sea (Romania v Ukraine) (Judgment) [2009] ICJ Rep 89 [111]. 15 See ch 4 text to nn 73–​75.

Reasonableness  163 equity cannot simply require equal treatment of all.16 The Permanent Court of International Justice (PCIJ) drew a distinction between equality in law and equality in fact. It underlined that, while equality in law ‘precludes discrimination of any kind’, equality in fact may call for differential treatment in order to establish a balance between different situations.17 In effect, ‘only equals shall be treated equally’,18 since a mechanical application of equality that ignores ‘all concrete factors’ would create injustice.19

III. Reasonableness What is equitable must be reasonable and, conversely, what is unreasonable can only be inequitable. The close ties between equity and reasonableness –​but also between reasonableness and two other equitable principles, good faith and proportionality –​are frequently acknowledged.20 Sometimes reasonableness has been invoked because it was expressly laid down in the applicable law, such as in some International Tribunal for the Law of the Sea (ITLOS) cases and in investment arbitration.21 However, more often than not, the mention of reasonableness in the law is not necessary for international courts and tribunals to take it into account. Reasonableness as invoked in Fisheries (United Kingdom v Norway) is an illustration of what could otherwise have been termed ‘equity’.22 The dispute

16 Yoram Dinstein, ‘The Interaction of International Law and Justice’ (1986) 16 IYHR 9, 12. 17 Minority Schools in Albania (Advisory Opinion) PCIJ Series A/​B No 64 (6 April 1935) [63]–​[64]. 18 Hans Kelsen, What Is Justice? (U California Press 1957) 15; cf HLA Hart, The Concept of Law (3rd edn, OUP 2012) 160; John Rawls, A Theory of Justice (Belknap/​HUP 1999) 52. 19 South West Africa (Second Phase) (Dissenting Opinion Tanaka) [1966] ICJ Rep 250, 306, 308. 20 Eg James Crawford, Brownlie’s Principles of Public International Law (8th edn, OUP 2012) 44; Olivier Corten, ‘The Notion of “Reasonable” in International Law’ (1999) 48 ICLQ 613, 613; Olivier Corten, ‘Reasonableness in International Law’ (2013) MaxPlanckEPIL, paras 20–​23; Asier Garrido-​ Munoz, ‘Managing Uncertainty: The International Court of Justice, Objective Reasonableness and the Judicial Function’ (2017) 30 LJIL 457, 462, 466–​471; North Sea Continental Shelf (Judgment) [1969] ICJ Rep 3 [90]; Gulf of Maine (n 1) [158]; Gabčíkovo-​Nagymaros Project (Hungary/​Slovakia) (Judgment) [1997] ICJ Rep 7 [85], [142]; Pulp Mills on the River Uruguay (Argentina v Uruguay) (Judgment) [2010] ICJ Rep 14 [177]; Whaling in the Antarctic (Australia v Japan, New Zealand intervening) (Judgment) [2014] ICJ Rep 226; Philip Morris Brands v Uruguay, ICSID Case No ARB/​10/​7, Award, 8 July 2016 [409]; RREEF Infrastructure Limited and RREEF Pan-​European Infrastructure Two Lux v Spain, ICSID Case No ARB/​13/​30, Decision on Responsibility and Quantum, 30 November 2018 [460]–​[466]. See also UN Convention on the Law of International Watercourses art 5(1). Contrast North Sea Continental Shelf (Separate Opinion Ammoun) [1969] ICJ Rep 101 [36]. 21 Eg ‘Volga’ (Russian Federation v Australia) (Prompt Release Judgment) [2002] ITLOS Rep 10; ‘Juno Trader’ (Saint Vincent and the Grenadines v Guinea-​Bissau) (Prompt Release Judgment) [2004] ITLOS Rep 17; Ioan Micula and others v Romania, ICSID Case No ARB/​05/​20, Award, 11 December 2013. See also Chester Brown, ‘Reasonableness in the Law of the Sea’ (2003) 16 LJIL 621. 22 Fisheries (United Kingdom v Norway) (Judgment) [1951] ICJ Rep 116.

164  Variations and Related Concepts arose when Norway enacted a decree delimiting fishing grounds to be reserved for Norwegian nationals. Norway conceded that the delimitation baselines should ‘respect the general direction of the coast’ and ‘be drawn in a reasonable manner’.23 The ICJ took into account the rights that were traditionally reserved for Norwegian residents, ‘founded on the vital needs of the population and attested by very ancient and peaceful usage’,24 and held that they ‘may legitimately be taken into account in drawing a line which, moreover, appears to the Court to have been kept within the bounds of what is moderate and reasonable’.25 In North Sea Continental Shelf, considering that irregularities in the coastline are ‘magnified’ by the equidistance line, the ICJ reasoned that ‘the further from the coastline the area to be delimited, the more unreasonable are the results produced’.26 According to the Court, the application of equitable principles must lead to a reasonable result.27 In its World Health Organization and Egypt Advisory Opinion, the ICJ explained that equity and reasonableness have in common that they both depend on the particular circumstances of each case.28 Reasonableness also has found a place in the case law of investment tribunals, which often consider it as forming part of the host state’s obligation to grant fair and equitable treatment.29 Since Saluka v Czech Republic, a number of investment tribunals examined whether ‘the State’s conduct bears a reasonable relationship to some rational policy’.30 In AES Summit v Hungary, the tribunal found that a rational policy, which must be aimed at a public interest, is not enough.31 The contested state measure must also be strictly speaking ‘reasonable’.32 For the AES Summit tribunal, this meant that there must ‘be an appropriate correlation between the state’s public policy objective and the measure adopted to achieve it’.33 Similar reasoning was adopted by later tribunals in

23 ibid 140–​141. 24 ibid 142. 25 ibid 142–​143. 26 North Sea Continental Shelf (Judgment) (n 20) [89]. 27 ibid [90]. 28 Interpretation of the Agreement of 25 March 1951 between the WHO and Egypt (Advisory Opinion) [1980] ICJ Rep 73 [49]. 29 Saluka Investments v Czech Republic, UNCITRAL, Partial Award, 17 March 2006 [309]; Biwater Gauff (Tanzania) v Tanzania, ICSID Case No ARB/​05/​22, Award, 24 July 2008 [692]. On fair and equitable treatment, see ch 6, section IV A iii International investment law. 30 Saluka v Czech Republic (n 29) [460]; Biwater v Tanzania (n 29) [693]; Invesmart v Czech Republic, UNCITRAL, Award, 26 June 2009 [444]; Marfin Investment Group Holdings and others v Cyprus, ICSID Case No ARB/​13/​27, Award, 26 July 2018 [1213]. 31 AES Summit Generation and AES-​Tisza Erömü v Hungary, ICSID Case No ARB/​07/​22, Award, 23 September 2010 [10.3.7]–​[10.3.9]. 32 ibid. 33 ibid [10.3.9].

Estoppel  165 Micula v Romania,34 Electrabel v Hungary,35 and Stadtwerke v Spain.36 The RREEF tribunal held that reasonableness in the exercise of the state’s regulatory power presupposes a legitimate objective, a ‘pressing social need’, and the measure’s suitability for the legitimate purpose pursued.37

IV. Estoppel Estoppel flows from ‘the fundamental principles of good faith and equity’.38 One of the ‘most common’ expressions of equity in international law,39 estoppel emanates from the prohibition of contradicting one’s behaviour (non concedit venire contra factum proprium)40 and is grounded in the need for consistency and predictability in international relations.41 Estoppel protects a state’s legitimate expectations created by the conduct of another state42 by precluding that state from acting as if ‘it did not agree to, or recognize, a certain situation’.43 Yet the mere creation of a legitimate expectation is generally not considered enough.44 International legal practice has developed a number of conditions that must be met before state conduct can give rise to estoppel. In particular, the representation that creates legitimate expectations must be clear and unequivocal, unconditional and voluntary; it must be made by a competent

34 Micula v Romania (n 21) [525]. 35 Electrabel v Hungary, ICSID Case No ARB/​07/​19, Award, 25 November 2015 [179]. 36 Stadtwerke Munchen and others v Spain, ICSID Case No ARB/​15/​1, Award, 2 December 2019 [318]. 37 RREEF v Spain (n 20) [464]. 38 Gulf of Maine (n 1) [130]; Steven Reinhold, ‘Good Faith in International Law’ (2013) 2 UCL Journal of Law & Jurisprudence 40, 53; DW Bowett, ‘Estoppel before International Tribunals and its Relation to Acquiescence’ (1957) 33 BYIL 176, 176; IC MacGibbon, ‘Estoppel in International Law’ (1958) 7 ICLQ 468, 471–​473; James Crawford, State Responsibility (CUP 2013) 560. 39 Rossi (n 3) 127. 40 Case Concerning the Factory at Chorzów (Claim for Indemnity –​Merits) PCIJ Series A No 17 (13 September 1928) 31; Legal Status of Eastern Greenland (Denmark v Norway) (Judgment) PCIJ Series A/​ B No 53 (5 April 1933) 69–​71. See further Hans Das, ‘Estoppel et l’Acquisescement’ (1997) 30 RBDI 607, 611. Contrast Cottier and Müller (n 42) para 3. 41 MacGibbon, ‘Estoppel’ (n 38) 468–​469; Thomas Franck and Dennis Sughrue, ‘The International Role of Equity-​as-​Fairness’ (1993) 81 Georgetown LJ 563, 566; Megan Wagner, ‘Jurisdiction by Estoppel in the International Court of Justice’ (1986) 74 California LRev 1777, 1779; Christopher Brown, ‘A Comparative and Critical Assessment of Estoppel in International Law’ (1996) 50 U Miami Law Review 369, 384; Duke Energy International Peru Investments No 1 v Peru, ICSID Case No ARB/​03/​28, Award, 18 August 2008 [231]; cf Arnold McNair, ‘The Legality of the Occupation of the Ruhr’ (1924) 5 BYIL 17, 35. 42 Thomas Cottier and Jörg Paul Müller, ‘Estoppel’ (2007) MaxPlanckEPIL, para 1; Robert Kolb, ‘General Principles of Procedural Law’ in Andreas Zimmermann and others (eds), The Statute of the International Court of Justice: A Commentary (OUP 2006) 833. 43 Delimitation of the Maritime Boundary in the Bay of Bengal (Bangladesh/​Myanmar) (Judgment) [2012] ITLOS Rep 4 [124]. See further McNair (n 41) 34. 44 Christopher Brown (n 41) 397–​398.

166  Variations and Related Concepts authority; and the other party must have relied on it in good faith to its detriment.45 Perhaps the two most frequently-​invoked conditions for estoppel are the clear and unequivocal representation and detrimental reliance on it. In the words of dissenting Judge Spender in the Temple of Preah Vihear case: [T]‌he principle operates to prevent a State contesting before the Court a situation contrary to a clear and unequivocal representation previously made by it to another State, either expressly or impliedly, on which representation the other State was, in the circumstances, entitled to rely and in fact did rely, and as a result that other State has been prejudiced or the State making it has secured some benefit or advantage for itself.46

In that case, Judge Spender found that there was no ‘clear and unequivocal representation’ nor had any evidence of detriment been adduced.47 However, the Temple of Preah Vihear case involved reasoning based on both estoppel and acquiescence48 and for acquiescence to apply these conditions need not be fulfilled. The case is discussed in the next section. In Eastern Greenland, the PCIJ held that Norwegian treaties describing Greenland as Danish territory indicated that Norway recognised all of Greenland as Danish.49 Norway was thus debarred from opposing ‘Danish sovereignty over the whole of Greenland, and, in consequence, from proceeding to occupy any part of it’.50 In addition, the Court considered an oral statement made by Norway’s Minister of Foreign Affairs to the effect that Norway would create no difficulties in the settlement of the Danish claim 45 Bowett (n 38) 188–​194; Cottier and Müller (n 42) para 3; Das (n 40) 611; Aguilar-​Amory and Royal Bank of Canada claims (Great Britain v Costa Rica) (1923) 1 RIAA 369 (Tinoco case), 383–​384 Case concerning the payment of various Serbian Loans issued in France, PCIJ Series A No 20 (12 July 1929) 39; Eastern Greenland (Judgment) (n 40) 72; Bangladesh/​Myanmar (n 43) [124]; Gulf of Maine (n 1) [130]; Case concerning the Temple of Preah Vihear (Cambodia v Thailand) (Separate Opinion Fitzmaurice) [1962] ICJ Rep 52, 63; Land, Island and Maritime Frontier Dispute (El Salvador/​Honduras), Application to Intervene (Judgment) [1990] ICJ Rep 92 [63]; Duke v Peru (n 41) [231], [249]–​[250]; Pope & Talbot v Canada, UNCITRAL, Interim Award, 26 June 2000 [111]; Philippe Gruslin v Malaysia, ICSID Case No ARB/​99/​3, Final Award, 27 November 2000 [20.2]; Canfor Corporation and others v United States, UNCITRAL, Order of the Consolidation Tribunal, 7 September 2005 [168]; Pan American Energy and BP Argentina Exploration Company v Argentina, ICSID Case No ARB/​03/​13, Decision on Preliminary Objections, 27 July 2006 [159]; Cambodia Power Company v Cambodia, CSID Case No ARB/​09/​ 18, Decision on Jurisdiction, 22 March 2011 [161]; cf Christopher Brown (n 41) 397–​398. Contrast MacGibbon, ‘Estoppel’ (n 38) 473–​75. 46 Case concerning the Temple of Preah Vihear (Cambodia v Thailand) (Separate Opinion Spender) [1962] ICJ Rep 101, 143–​144. 47 ibid 142. 48 Case concerning the Temple of Preah Vihear (Cambodia v Thailand) (Merits Judgment) [1962] ICJ Rep 6. 49 Eastern Greenland (Judgment) (n 40) 68–​69. 50 ibid 69.

Estoppel  167 over Greenland.51 Although Norway later refused to confirm the statement in writing, the Court regarded it as ‘unconditional and definitive’ and reiterated that Norway was ‘under an obligation to refrain from contesting Danish sovereignty over Greenland as a whole, and a fortiori to refrain from occupying a part of Greenland’.52 In the Case concerning the Arbitral Award made by the King of Spain, Nicaragua had contested the validity of an arbitral award establishing part of the frontier between Honduras and Nicaragua.53 Honduras sought execution of the award, arguing that Nicaragua’s failure to comply with it constituted a breach of an international obligation.54 The ICJ noted that Nicaragua had accepted the designation and jurisdiction of the arbitrator and participated in the proceedings.55 Relying on both estoppel and acquiescence, it held: Nicaragua, by express declaration and by conduct, recognized the Award as valid and it is no longer open to Nicaragua to go back upon that recognition and to challenge the validity of the Award. Nicaragua’s failure to raise any question with regard to the validity of the Award for several years after the full terms of the Award had become known to it further confirms the conclusion at which the Court has arrived.56

In North Sea Continental Shelf, the ICJ considered whether Germany’s conduct precluded it from contending that it was not bound by the Geneva Convention on the Continental Shelf.57 To determine the issue, the Court examined whether Germany had ‘clearly and consistently evinced acceptance of that regime’ and whether Denmark or the Netherlands had relied on such conduct to their detriment.58 Under the circumstances, the Court found no such evidence.59 In Duke v Peru, an investment tribunal discussed estoppel at some length and explained that ‘the State assumes the risk for the acts of its organs or officials which, by their nature, may reasonably induce reliance [by] third parties’.60 What is relevant for estoppel ‘is that there has been a declaration, 51 ibid 69–​73. 52 ibid 72–​73. 53 Case concerning the Arbitral Award made by the King of Spain on 23 December 1906 (Judgment) [1960] ICJ Rep 192. 54 ibid 195–​196. 55 ibid 206–​209. 56 ibid 213, also 209. 57 North Sea Continental Shelf (Judgment) (n 20) [30]. 58 ibid. 59 ibid. 60 Duke v Peru (n 41) [246], emphasis removed.

168  Variations and Related Concepts representation, or conduct which has in fact induced reasonable reliance by a third party’.61 Estoppel has been considered in many another judgment and arbitral award, including investment awards,62 where the links between estoppel and the protection of investors’ legitimate expectations as part of fair and equitable treatment have sometimes been expressly drawn.63

V. Acquiescence Like estoppel, acquiescence is rooted in equity.64 Acquiescence stands for the proposition that the ‘absence of protest in circumstances which generally call for a positive reaction’ creates legal effects;65 it is ‘consent inferred from a juridically relevant silence or inaction’66 and an expression of the Latin slogan ‘qui tacet consentit’.67 Although presented as ‘a promise implied in the context of lapse of time’,68 acquiescence relies on the conduct of the state to determine whether a claim has been extinguished.69 The passage of time alone is not enough.70 What is legally significant is a state’s failure ‘to assert its claim over a period of time by remaining passive in circumstances where some sort of 61 ibid. 62 Barcelona Traction, Light and Power Company (Judgment) [1964] ICJ Rep 6, 24–​25; Flegenheimer (1958) 14 RIAA 327, 381–​382; Chagos Marine Protected Area Arbitration (Mauritius v United Kingdom), PCA Case No 2011-​03, Award, 18 March 2015 [435]ff; Amco Asia Corporation and others v Indonesia, ICSID Case No ARB/​81/​1, Decision on Jurisdiction, 25 September 1983 [47.5]–​[47.6]; Ceskoslovenska obchodní banka v Slovakia, ICSID Case No ARB/​97/​4, Decision on Jurisdiction, 24 May 1999 [47]; Yukos Universal (Isle of Man) v Russia, PCA Case No 2005-​04/​AA227, Interim Award on Jurisdiction and Admissibility, 30 November 2009 [287]–​[288]; Nova Scotia Power Incorporated v Venezuela, PCA Case No 2009-​14, Award on Jurisdiction, 22 April 2010 [141]–​[143]; Mobil Exploration and Development Argentina and Mobil Argentina v Argentina, ICSID Case No ARB/​04/​16, Decision on Jurisdiction and Liability, 10 Apr 2013 [228]; Mamidoil Jetoil Greek Petroleum Products v Albania, ICSID Case No ARB/​ 11/​24, Award, 30 March 2015 [469]; Vestey Group v Venezuela, ICSID Case No ARB/​06/​4, Award, 15 April 2016 [257]; Pac Rim Cayman v El Salvador, ICSID Case No ARB/​09/​12, Award, 14 October 2016 [8.47]; Karkey Karadeniz Elektrik Uretim v Pakistan, ICSID Case No ARB/​13/​1, Award, 22 August 2017 [628]; UAB E energija (Lithuania) v Latvia, ICSID Case No ARB/​12/​33, Award, 22 December 2017 [532]; Chevron Corporation and Texaco Petroleum Corporation v Ecuador, PCA Case No 2009-​23, Second Partial Award on Track II, 30 August 2018 [7.88]-​[7.114]; Oded Besserglik v Mozambique, ICSID Case No ARB(AF)/​14/​2, Award, 28 October 2019 [426]. 63 Suez, Sociedad General de Aguas de Barcelona SA, and Vivendi Universal v Argentina, ICSID Case No ARB/​03/​19, Separate Opinion Nikken (Decision on Liability), 30 July 2010 [22]. 64 See n 38; Nuno Sérgio Marques Antunes, ‘Acquiescence’ (2006) MaxPlanckEPIL, para 19; Christian Tams, ‘Waiver, Acquiescence and Extinctive Prescription’ in James Crawford and others (eds), The Law of International Responsibility (OUP 2010) 1043. 65 IC MacGibbon, ‘The Scope of Acquiescence in International Law’ (1954) 31 BYIL 143, 143. 66 Marques Antunes (n 64) para 6. 67 Contrast ibid para 19, discussing qui tacit neque negat, neque utique fatetur (he who keeps silent neither denies nor accepts). 68 Crawford, Principles (n 20) 422. 69 Crawford, State Responsibility (n 38) 559. 70 ibid 559–​562.

Acquiescence  169 action on its part would have been expected’.71 Acquiescence can operate as a form of estoppel,72 whereby silence is regarded as a representation to the effect that a party has agreed or waived its rights.73 Some authors insist on the distinction between acquiescence and estoppel on the argument that, in contrast with estoppel, acquiescence is a unilateral act that does not require detrimental reliance by another party.74 However, in reality the dividing line between the two concepts is not as easily drawn as this statement appears to suggest.75 An early tribunal to consider acquiescence was the one constituted to hear the Grisbådarna case, a dispute concerning the delimitation of part of the maritime boundary between Sweden and Norway.76 The tribunal found that a demarcation assigning the Grisbådarna region to Sweden was supported by several circumstances, including the fact that some measures it took were ‘based on the conviction that these regions were Swedish’.77 Notably, Sweden had placed beacons and stationed a lightvessel, necessary for the safety of navigation in the area.78 These undertakings ‘involved considerable expense’, while at the same time Norway admitted that it ‘showed much less concern in this region in these various regards’ and had not protested at Sweden’s actions.79 In Fisheries (United Kingdom v Norway), the ICJ noted that the United Kingdom had not formulated reservations in relation to Norway’s use of straight baselines to delimit its fisheries zone, ‘a situation which could only be strengthened with the passage of time’.80 The Court considered the United Kingdom’s prolonged failure to object and stressed that Norway’s ‘method had been consolidated by a constant and sufficiently long practice, in the face of which the attitude of governments bears witness to the fact that they did not consider it to be contrary to international law’.81 The United Kingdom’s claims were rejected.

71 ibid 559. See also International Law Commission (ILC), ‘Draft Articles on Responsibility of States for Internationally Wrongful Acts with commentaries 2001’ (UN 2008), commentary on art 45, paras 6, 9, 11. 72 Temple of Preah Vihear (Fitzmaurice) (n 45) 62–​63; MacGibbon, ‘Acquiescence’ (n 65) 147; Georg Schwarzenberger, ‘The Fundamental Principles of International Law’ (1955) 87 Recueil des Cours 195, 257; Franck (n 1) 68; Bowett (n 38) 199–​202; Wagner (n 41) 1783. 73 Temple of Preah Vihear (Fitzmaurice) (n 45) 62. 74 Crawford, Principles (n 20) 422. See also Gulf of Maine (n 1) [130]. 75 Tams (n 64) 1045; Marques Antunes (n 64) paras 6, 23; cf Gulf of Maine (n 1) [129], quoting Canada’s counsel as stating in the oral proceeding that estoppel is ‘the alter ego of acquiescence’. 76 Grisbådarna (Norway v Sweden), PCA Case No 1908-​01, Award, 23 October 1909 (unofficial English translation). 77 ibid 6–​7. 78 ibid. 79 ibid. 80 Fisheries (United Kingdom v Norway) (n 22) 139. 81 ibid.

170  Variations and Related Concepts The Temple of Preah Vihear case concerned a territorial dispute between Cambodia and Thailand concerning the territory surrounding the ruins of the Temple of Preah Vihear.82 The case turned on both estoppel and acquiescence. The ICJ noted that an early-​20th-​century Franco-​Siamese treaty established that the frontier ran along the watershed line and a map published on behalf of a Mixed Delimitation Commission showed the temple to be in Cambodia.83 Thailand argued that the map was not binding and that it, Thailand, had never accepted it as far as the temple was concerned or, in the alternative, if it did accept it, this was on the basis of the ‘mistaken belief ’ that the map corresponded correctly to the watershed line.84 The ICJ found that, when drafted, the map was indeed not binding.85 However, Thailand did not raise the issue of the map and it even produced a map of its own placing the temple in Cambodia.86 It did not complain about the temple before a conciliation commission was constituted with the specific mandate to ‘make recommendations on an equitable basis in regard to, any complaints or proposals for revision’ as to the frontier settlements.87 Later, Thailand failed to ‘react in any way’ when, during an official Thai visit to the temple, a French flag was flying.88 For the Court, a ‘clearer affirmation of title on the French Indo-​Chinese side [could] scarcely be imagined. It demanded a reaction. Thailand did nothing.’89 Overall, Thailand’s ‘subsequent conduct’ confirmed that it ‘recognized the line and thereby in effect agreed to regard it as being the frontier line’.90 The ICJ stressed that one of the primary purposes of establishing borders between countries is to secure ‘stability and finality’, a purpose that would be frustrated if the borderline could be called into question at any moment.91 It found that the temple was located in Cambodian territory. Acquiescence has also been discussed in a number of investment arbitrations in relation to investors’ alleged failure to object to regulatory changes affecting their investment.92 In Lauder v Czech Republic, a dispute arising out of

82 Temple of Preah Vihear (Merits Judgment) (n 48). 83 ibid 16–​21. 84 ibid 21. 85 ibid. 86 ibid 27–​28. 87 ibid 28. 88 ibid 30–​31. 89 ibid. 90 ibid 32–​33. 91 ibid 34. 92 Ronald Lauder v Czech Republic, Final Award, 3 September 2001 [271]–​[273]; Siemens v Argentina, ICSID Case No ARB/​02/​8, Award, 17 January 2007 [306]; MCI Power Group and New Turbine v Ecuador, ICSID Case No ARB/​03/​6, 31 July 2007 [302]; Joseph C Lemire v Ukraine, ICSID Case No ARB/​06/​18, Dissenting Opinion Voss (Award), 1 March 2011 [153]–​[161]; AES Corporation and Tau Power v Kazakhstan, ICSID Case No ARB/​10/​16, Award, 1 November 2013 [235]–​[237];

Good Faith  171 measures taken by the Czech Media Council, the tribunal took note of the fact that the claimant had not raised objections and, on the contrary, he had ‘fully collaborated’.93 This led the tribunal to conclude that the investor had acquiesced to certain actions of the Media Council and was barred from claiming on that basis.94 However, in contrast with the previously-​discussed cases, Lauder v Czech Republic and other investment cases hinged on the investor’s implicit acceptance of host state measures, rather than acceptance inferred from the lapse of time.

VI.  Good Faith Good faith is ‘[o]‌ne of the basic principles governing the creation and performance of legal obligations, whatever their source’.95 It is a principle of ‘overriding’ significance whose import ‘touches every aspect of international law’.96 Good faith is a general principle of international law97 and an emanation of equity,98 although ‘it is not in itself a source of obligation where none would otherwise exist’.99 According to the Charter of the United Nations, members must ‘fulfil in good faith the obligations’ they have assumed in accordance with the Charter.100 According to the Vienna Convention on the Law of

NextEra Energy Global Holdings and NextEra Energy Spain Holdings v Spain, ICSID Case No ARB/​14/​ 11, Decision on Jurisdiction, Liability and Quantum Principles, 12 March 2019 [269]. 93 Lauder v Czech Republic (n 92) [271]–​[272]. 94 ibid [273]. 95 Nuclear Tests (Australia v France) (Judgment) [1974] ICJ Rep 253 [46]. 96 Robert Jennings and Arthur Watts (eds), Oppenheim’s International Law (vol 1, Longman 1992) 38; Schwarzenberger (n 72) 325–​326, describing it as a ‘fundamental principle’; Inceysa Vallisoletana SL v El Salvador, ICSID Case No ARB/​03/​26, Award, 2 August 2006 [230]; Vigotop v Hungary, ICSID Case No ARB/​11/​22, Award, 1 October 2014 [310]. 97 Andreas Ziegler and Jorun Baumgartner, ‘Good Faith as a General Principle of (International) Law’ in Andrew Mitchell, M Sornarajah, and Tania Voon (eds), Good Faith and International Economic Law (OUP 2015); Manfred Lachs, ‘The Development and General Trends of International Law in Our Time’ (1980) 169 Recueil des Cours 9, 197–​199; Schwarzenberger (n 72) 290–​326. However, other authors recognise it as a general principle of law, within the meaning of art 38(1)(c) of the ICJ Statute, eg Robert Kolb, Good Faith in International Law (Hart Publishing 2017) 15–​28; Robert Kolb, ‘Principles as Sources of International Law (with Special Reference to Good Faith)’ (2006) 53(1) Netherlands Intl LRev 1, 17–​20; Reinhold (n 38) 40. 98 cf Hersch Lauterpacht, The Development of International Law by the International Court (first published 1958, Grotius 1982) 213, arguing that insomuch as equity is ‘identical with principles of good faith’ it forms part of international law; Emily Sipiorski, Good Faith in International Investment Arbitration (OUP 2019) 11. 99 Border and Transborder Armed Actions (Nicaragua v Honduras) (Jurisdiction and Admissibility Judgment) [1988] ICJ Rep 69 [94]; Vigotop v Hungary (n 96) [585]. 100 UN Charter art 2(2).

172  Variations and Related Concepts Treaties (VCLT), treaty obligations must be performed in good faith (pacta sunt servanda).101 On this view, good faith serves as a principle to evaluate the reasonableness of behaviour.102 States must exercise their rights in a manner compatible with their obligations, which means that they must exercise rights ‘reasonably’.103 ‘The reasonable and bona fide exercise of a right implies an exercise which is genuinely in pursuit of those interests which the right is destined to protect.’104 In this sense, good faith protects states’ legitimate expectations, it prohibits the abuse of rights and prevents states from benefiting from ‘non-​ loyal conduct’.105 Estoppel and abuse of rights, discussed here as manifestations of equity, are part of good faith.106 Good faith is also a standard of treaty interpretation, since treaties must ‘be interpreted in good faith’,107 and it can constitute a standard of review in international dispute settlement.108 While good faith and equity are patently distinct concepts, it is difficult to draw a general dividing line between them. This difficulty is explained not only by the fact that good faith derives from equity but also because the two concepts can assume such variegated roles and different authors understand them differently.109 For this reason, the various distinctions drawn in legal scholarship are relative, or at least not fully satisfactory. For example, Robert Kolb discusses differences between equity and good faith by relying on the argument that equity is opposed to or completes the strict law, while good faith is part of this law.110 However, as we have seen in Chapter 6, equity too can be part of the strict law, while good faith is also a general principle of international law, therefore it is applicable even when not included in the strict law. Good faith too can allow digressions from the letter of the law –​for example, treaty ‘obligations should be fulfilled in good faith and not merely in accordance with the letter of the treaty’.111 101 VCLT art 26. More than half a century before the adoption of the VCLT, this principle was recognised in North Atlantic Coast Fisheries (Great Britain, United States) (1910) 11 RIAA 167, 187–​189. 102 Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens & Sons 1953) 131–​132; Kolb, Good Faith (n 97) 15–​28. 103 Cheng (n 102) 131–​132. 104 ibid. 105 Kolb, Good Faith (n 97) 15–​28; Cheng (n 102) 115–​119. 106 Kolb, ‘Principles’ (n 97) 19; Cheng (n 102) 121, 131–​132; WTO, United States –​ Import Prohibition of Certain Shrimp and Shrimp Products, Appellate Body Report (6 November 1998) WT/​DS58/​AB/​R [1998] 7 DSR 2755 [158]. 107 VCLT art 31(1). See also Eric de Brabandere and Isabelle van Damme, ‘Good Faith in Treaty Interpretation’ in Mitchell, Sornarajah, and Voon (n 97). 108 Eg Kolb, Good Faith (n 97) 195–​242; Bernardo Cremades, ‘Good Faith in International Arbitration’ (2012) 27(4) AU ILR 761; William Burke-​White and Andreas von Staden, ‘Investment Protection in Extraordinary Times’ (2008) 48(2) VJIL 307, 376ff; Andrew Mitchell, ‘Good Faith in WTO Dispute Settlement’ (2006) 7 Melbourne JIL 339. 109 Robert Kolb, La bonne foi en droit international public (Graduate Institute Publications 2000) pt II text to n 176. 110 ibid pt II text to n 178. 111 Cheng (n 102) 114, emphasis added.

Unjust Enrichment  173 Another distinction that has been suggested is that equity relates to the ‘rule aspect of things’ while good faith relates to behaviour (‘We rule equitably, we act in good faith’).112 In reality, equity is not limited to the ‘rule aspect of things’. Consider, for example, international investment law’s fair and equitable treatment, which is a standard of behaviour. Investment tribunals have affirmed that good faith inheres in fair and equitable treatment,113 although bad faith is not necessary to find a violation of the standard.114 However, the above distinction is broadly correct. A least one aspect of good faith does mainly relate to behaviour that allows one party to place confidence in another and ultimately in the legal system as a whole. Equity relates more to the justice element of a legal system. In the end, however, both concepts are necessary.

VII.  Unjust Enrichment Widely accepted as a general principle of law,115 unjust enrichment is an equitable remedy intended to prevent a party from enriching itself to the detriment of another without legal justification.116 Its function is to adjust ‘shifts of assets from one person to another’ when these are at variance with the apportionment of assets envisaged by law.117 In this manner, the principle mitigates 112 Falcón y Tella (n 2) 159. 113 Técnicas Medioambientales Tecmed v Mexico, Case No ARB (AF)/​00/​2 Award, 29 May 2003 [153]; Waste Management v Mexico, ICSID Case No ARB(AF)/​00/​3, Award, 30 April 2004 [138]; Saluka v Czech Republic (n 29) [307]; Siemens v Argentina (n 92) [308]; Sempra Energy International v Argentina, ICSID Case No ARB/​02/​16, Award, 28 September 2007 [298]; Jan Oostergetel and Theodora Laurentius v Slovakia, UNCITRAL, Final Award, 23 April 2012 [227]; Cervin Investissements and Rhone Investissements v Costa Rica, ICSID Case No ARB/​13/​2, Award, 7 March 2017 [686]; Indian Metals & Ferro Alloys v Indonesia, PCA Case No 2015-​40, Award, 29 March 2019 [226]; SunReserve Luxco Holdings and others v Italy, SCC Case No V2016/​32, Final Award, 25 March 2020 [737]. 114 Mondev International v United States, ICSID Case No ARB(AF)/​99/​2, Award, 11 October 2002 [116]; Loewen Group and Raymond Loewen v United States, ICSID Case No ARB(AF)/​98/​3, Award, 26 June 2003 [132]; LG&E Energy and others v Argentina, ICSID Case No ARB/​02/​1, Decision on Liability, 3 October 2006 [129]; Siemens v Argentina (n 92) [299]; RSM Production Corporation and others v Grenada, ICSID Case No ARB/​10/​6, Award, 10 December 2010 [7.2.24]. For a discussion of good faith and fair and equitable treatment, see Sipiorski (n 98) 180–​185. 115 Christoph Schreuer, ‘Unjustified Enrichment in International Law’ (1974) 22 AJCL 281, 282 n 11; Francesco Francioni, ‘Compensation for Nationalisation of Foreign Property’ (1975) 24(2) ICLQ 255, 272–​274; Ambatielos Claim (Greece, United Kingdom) (Dissenting Opinion Spiropoulos) (1956) 12 RIAA 126, 129; Sea-​Land Service v Iran, Ports and Shipping Organization, IUSCT Case No 33, Award No 135-​33-​1, 22 June 1984 [60]; Saluka v Czech Republic (n 29) [449]; cf Inceysa v El Salvador (n 96) [253]. Contrast Dickson Car Wheel Company (USA) v Mexico (Mexico-​United States General Claims Convention) (1931) 4 RIAA 669, 676. 116 Franck (n 1) 64; DP O’Connell, ‘Unjust Enrichment’ (1956) 5 AJCL 2, 2; Schreuer (n 115) 281; Francioni (n 115) 275; Sea-​Land Service (n 115) [62]; Shannon and Wilson v Atomic Energy Organization of Iran, IUSCT Case No 217, Award No 207-​2017-​2 5 December 1985 [17]; cf HC Gutteridge and RJA David, ‘The Doctrine of Unjustified Enrichment’ (1934) 5 CLJ 204, 211. 117 Christina Binder and Christoph Schreuer, ‘Unjust Enrichment’ (2017) MaxPlanckEPIL, para 1, citing Zweigert and Müller-​Gindullis.

174  Variations and Related Concepts ‘the hardships which would result in certain cases from an application of strict law by applying principles of justice and equity’.118 Unjust enrichment’s basis in equity makes it necessary to look to the ‘circumstances of each specific situation’.119 The principle was present in Roman jurisprudence120 and it is recognised in the great majority of municipal legal systems.121 It is routinely invoked in the process of calculating damages in cases of expropriation122 and it is closely related to the prevention of double recovery for the same damage.123 It finds application in various areas of international law and treaty regimes, from restitution in cultural heritage law to the economic consequences of the invalidity and termination of treaties.124 Claims for unjust enrichment can take place when there is ‘no contractual or other remedy available to the injured party’ so that compensation may be sought.125 A claim for unjust enrichment does not aim to indemnify a party for losses but rather to deprive the party that has unjustly enriched itself of the ‘unjustly gained benefits’.126 In contrast with a claim for losses, unjust enrichment does not necessarily require an unlawful act.127

VIII.  The Clean Hands Doctrine Expression of the principle of good faith,128 the clean hands doctrine has its roots in Roman law and is expressed by a number of maxims, including

118 O’Connell (n 116) 16. 119 Sea-​Land Service (n 115) [61], citing Jiménez de Aréchaga. 120 Francioni (n 115) 273, 275. 121 ibid; Schreuer (n 115) 281–​284; Binder and Schreuer (n 117) paras 10–​11; Sea-​Land Service (n 115) [60]. 122 Franck (n 1) 64. 123 Venezuela Holdings and others v Venezuela, ICSID Case No ARB/​07/​27, Award, 9 October 2014 [378]. On the prevention of double recovery, see Alabama claims of the United States against Great Britain (1871) 29 RIAA 124, 133 (‘in order to arrive at an equitable compensation for the damages which have been sustained, it is necessary to set aside all double claims for the same losses’); Affaire du Guano (Chili/​France) (1901) 15 RIAA 77, 117; Martini Case (of a general nature) (1903) 10 RIAA 644, 661; Factory at Chorzów (n 40); Pan American v Argentina (n 45) [219]; EDF International and others v Argentina, ICSID Case No ARB/​03/​23, Decision on Annulment, 5 February 2016 [258]; Perenco Ecuador v Ecuador, ICSID Case No ARB/​08/​6, Decision on Counterclaims, 7 February 2017 [52]; cf ch 3, section IV B The Barcelona Traction Case: A Missed Opportunity?. 124 Binder and Schreuer (n 117) paras 5–​8, 13–​26. 125 Sea-​Land Service (n 115) [62]; cf Libyan American Oil Company (LIAMCO) v Libya, ad hoc arbitration, Award, 12 April 1977 [252]. 126 Binder and Schreuer (n 117) para 3; Azurix Corp v Argentina, ICSID Case No ARB/​01/​12, Award, 14 July 2006 [436]. 127 Azurix (n 126) [436]. 128 Patrick Dumberry, ‘The Clean Hands Doctrine as a General Principle of International Law’ (2020) 21 JWIT 489, 494 n 26.

The Clean Hands Doctrine  175 inadimplenti non est adimplendum (exception of non-​performance), ex iniuria ius non oritur (injustice cannot create law), ex turpi causa non oritur actio (a dishonourable cause cannot serve as the basis of an action at law), and nemo auditur propriam turpitudinem allegans (no one can be heard when invoking his own turpitude).129 ‘He who comes into equity must come with clean hands’ is a maxim of Anglo-​American equity.130 In international law, the clean hands doctrine stands for the proposition that a state that has engaged in unlawful conduct may be denied legal standing to complain of ‘corresponding illegalities on the part of other States, especially if these were consequential on or were embarked upon in order to counter its own illegality’.131 Like some other principles examined in this chapter that prevent the exercise of a legal right or deprive a party of a right because of that party’s conduct or the manner in which it exercises its right, the clean hands doctrine is an application of what is traditionally understood as contra legem equity. The question of the status of the clean hands doctrine has polarised international courts and tribunals.132 Legal scholars too at times recognise it as a general principle of law or as a general principle of international law133 and at times they do not134 –​although on occasion it is just the case of refusing its relevance to a particular context, for example, diplomatic protection.135 Early on the doctrine was recognised by claims commissions136 and was subsequently addressed by both the PCIJ and the ICJ, and by arbitral tribunals. The Diversion of Water from the Meuse case is often seen as the epitome of the application of the clean hands doctrine.137 In that case, the Netherlands had complained about Belgium’s lock that diverted water from the River Meuse, even though 129 cf Stephen Schwebel, ‘Clean Hands, Principle’ (2013) MaxPlanckEPIL, para 1. 130 Megarry and Baker (n 8) 35–​36. See also Diversion of Water from the Meuse (Netherlands v Belgium) (Individual Opinion Hudson) PCIJ Series A/​B No 70 (28 June 1937) [323]. 131 Gerald Fitzmaurice, ‘The General Principles of International Law Considered from the Standpoint of the Rule of Law’ (1957) 92 Recueil des Cours 1, 119. 132 Guyana v Suriname, PCA Case No 2004-​04, Award, 17 September 2007 [417]–​[422]; cf Schwebel (n 129) para 3. 133 Cheng (n 102) 155; Richard Kreindler, ‘Corruption in International Investment Arbitration’ in Kaj Hobér and others (eds), Between East and West (Juris 2010) 317; Dumberry, ‘Clean Hands Doctrine’ (n 128). 134 Charles Rousseau, Droit international public (vol V, Sirey 1983) 177, arguing that it is not customary international law; ILC, ‘Second Report on State Responsibility by James Crawford, Special Rapporteur’ (1999) UN Doc A/​CN.4/​498 and Add.1–​4, para 336, citing Rousseau (ibid). 135 Jean Salmon, ‘Des “mains propres” comme condition de recevabilité des réclamations internationales’ (1964) 10 AFDI 225; ILC (Crawford) (n 134) 332–​336; ILC, ‘Sixth Report on Diplomatic Protection by John Dugard, Special Rapporteur’ (2004) UN Doc A/​CN.4/​546. 136 Eg Cases of the Good Return and the Medea (Opinion of Commissioner Hassaurek) (1865) 29 RIAA 88, 107 (‘A party who asks for redress must present himself with clean hands’). For other examples, see Cheng (n 102) 155–​157. 137 Diversion of Water from the Meuse (Netherlands v Belgium) (Judgment) PCIJ Series A/​B No 70 (28 June 1937).

176  Variations and Related Concepts it had itself constructed similar works in the past.138 The PCIJ held that in the circumstances, it was difficult to find that the Netherlands was ‘warranted in complaining of the construction and operation of a lock of which [it itself] set an example in the past’.139 Judges Hudson and Anzilotti were even more categorical about the application of the doctrine.140 According to Judge Hudson: [E]‌ven if the Court should be of the opinion that the Belgian action with regard to the functioning of the Neerhaeren Lock is contrary to the Treaty of 1863, it should nevertheless refuse in this case to order Belgium to discontinue that action. In equity, the Netherlands is not in a position to have such relief decreed to her. Belgium cannot be ordered to discontinue the operation of the Neerhaeren Lock when the Netherlands is left free to continue the operation of the Bosscheveld Lock.141

The clean hands doctrine was also applied in all but name in Chorzów Factory (Claim for Indemnity), where the PCIJ held that it is ‘a principle generally accepted’ both by municipal courts and in international arbitration that a disputing party cannot rely on ‘the fact that the other has not fulfilled some obligation or has not had recourse to some means of redress, if the former Party has, by some illegal act, prevented the latter from fulfilling the obligation in question, or from having recourse to the tribunal’.142 In his dissenting opinion in Eastern Greenland, Judge Anzilotti suggested that Norway’s request for a declaration from the PCIJ that the occupation effected by Norway was lawful and valid should be rejected, since ‘an unlawful act cannot serve as the basis of an action at law’.143 In its Namibia Advisory Opinion, the ICJ held that a fundamental principle governing international relations is that a party that ‘disowns or does not fulfil its own obligations cannot be recognized as retaining the rights which it claims to derive from the relationship’.144 In Gabčíkovo-​Nagymaros Project, the ICJ explained that facts that ‘flow from wrongful conduct’ do not ‘determine the law’ 138 See ch 3, section III The Permanent Court of International Justice. 139 Meuse (Judgment) (n 137) [84]. 140 See ch 3, section III The Permanent Court of International Justice. 141 Meuse (Hudson) (n 130) [326]. 142 Case Concerning the Factory at Chorzów (Claim for Indemnity –​Jurisdiction) PCIJ Series A No 9 (26 July 1927) 31. 143 Legal Status of Eastern Greenland (Denmark v Norway) (Dissenting Opinion Anzilotti) PCIJ Series A/​B No 53 (5 April 1933) 95. 144 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970) (Advisory Opinion) [1971] ICJ Rep 16 [91].

The Clean Hands Doctrine  177 and added that the principle ex iniuria ius non oritur ‘is sustained by the Court’s finding that the legal relationship created by the 1977 Treaty is preserved and cannot in this case be treated as voided by unlawful conduct’.145 The clean hands doctrine was also invoked by dissenting Judges Schwebel in Military and Paramilitary Activities in and against Nicaragua146 and van den Wyngaert in Arrest Warrant of 11 April 2000.147 In oral pleadings in the Legality of Use of Force cases, respondent states contended that the injunctions sought should fail because the applicant state did not come to the Court with clean hands.148 The claims were ultimately rejected on different grounds.149 In a number of additional cases, the ICJ did not find it necessary to decide on the basis of the clean hands doctrine.150 More recently, in Somalia v Kenya,151 and in Jadhav (India v Pakistan),152 the ICJ dismissed objections based on the clean hands doctrine. In Certain Iranian Assets (Preliminary Objections), the Court appeared to reject the clean hands doctrine as an admissibility objection,153 although it explained that it might supply as a defence on the merits.154 In that case, the United States had argued that the time was ripe for the ICJ to recognise and apply the doctrine.155 Overall, the ICJ has often avoided applying the clean hands doctrine but it has certainly not ruled out its relevance.156 Investment tribunals have endorsed the clean hands doctrine in more unambiguous terms, or at least that illegality on the part of the investor may deprive it of the protections of an investment treaty.157 In effect, treaty provisions requiring 145 Gabčíkovo-​Nagymaros Project (Judgment) (n 20) [133]. 146 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States) (Dissenting Opinion Schwebel) [1986] ICJ Rep 259 [268]–​[272]. 147 Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo (DRC) v Belgium) (Dissenting Opinion van den Wyngaert) [2002] ICJ Rep 137 [35]. 148 Legality of Use of Force (Serbia and Montenegro v Canada) ICJ Pleadings CR 99/​16 [5]‌; Legality of Use of Force (Serbia and Montenegro v Germany) ICJ Pleadings CR/​99/​18 [1.6]; Legality of Use of Force (Serbia and Montenegro v Portugal) ICJ Pleadings CR/​99/​21 [3.1.4]; Legality of Use of Force (Serbia and Montenegro v United Kingdom) ICJ Pleadings CR/​99/​23 [24], [31]; Legality of Use of Force (Yugoslavia v United States) ICJ Pleadings CR/​99/​24 [3.1.7]. 149 Schwebel (n 129) para 6. 150 Eg LaGrand (Germany v United States) (Judgment) [2001] ICJ Rep 466 [63]; Legal Consequences cf the Construction of a Wall in the Occupied Palestinian Territory (Advisory Opinion) [2004] ICJ Rep 136 [63]–​[64]; cf Certain Iranian Assets (Iran v United States) (Preliminary Objections Judgment) [2019] ICJ Rep 7 [122]. 151 Maritime Delimitation in the Indian Ocean (Somalia v Kenya) (Preliminary Objections Judgment) [2017] ICJ Rep 3 [142]. 152 Jadhav (India v Pakistan) (Judgment) [2019] ICJ Rep 418 [61]. 153 Certain Iranian Assets (n 150) [122]. 154 ibid [123]. 155 Certain Iranian Assets (n 150) [117]. 156 Schwebel (n 129) para 12; Dumberry, ‘Clean Hands Doctrine’ (n 128) 497–​498. 157 Eg Inceysa v El Salvador (n 96) [244]; World Duty Free Company v Kenya, ICSID Case No ARB/​ 00/​7, Award, 4 October 2006 [138]–​[188]; Plama Consortium v Bulgaria, ICSID Case No ARB/​03/​24, Award, 27 August 2008 [135]–​[139], [144]–​[146]; Phoenix Action v Czech Republic, ICSID Case No

178  Variations and Related Concepts that investment covered under the treaty comply with host state laws158 can be regarded as incorporating the clean hands doctrine.159 In Fraport v Philippines, the tribunal found that the investor had violated domestic legislation, which deprived it of treaty protection.160 According to the tribunal, investment case law confirms that investment ‘treaties do not afford protection to illegal investments either based on clauses of the treaties’, as was the case in casu, ‘or, absent an express provision in the treaty, based on rules of international law, such as the “clean hands” doctrine or doctrines to the same effect’.161 Exceptionally, a few investment tribunals rejected the clean hands doctrine.162

IX.  Abuse of Rights An abuse of right occurs when a state exercises a right in a manner that hinders other states’ enjoyment of their rights or in a manner that contradicts the purpose for which the right exists with the result that another state is harmed.163 According to Hersch Lauterpacht, ‘no legal right, however well established, . . . could not, in some circumstances, be refused recognition on the ground that it has been abused’.164 Expression of the principle of good

ARB/​06/​5, Award, 15 April 2009 [101]; Fraport Frankfurt Airport Services Worldwide v Philippines, ICSID Case No ARB/​11/​12, Award, 10 December 2014 [328]; Hesham TM Al-​Warraq v Indonesia, UNCITRAL, Final Award, 15 December 2014 [646], [654]; Churchill Mining and Planet Mining v Indonesia, ICSID Case Nos ARB/​12/​14 and ARB/​12/​40, Award, 6 December 2016 [493]; cf Rusoro Mining v Venezuela, ICSID Case No ARB(AF)/​12/​5, Award, 22 August 2016 [492]; Niko Resources (Bangladesh) v Bangladesh, ICSID Case Nos ARB/​10/​11 and ARB/​10/​18, Decision on Jurisdiction, 19 August 2013 [476]–​[485]. 158 Ursula Kriebaum, ‘Investment Arbitration –​Illegal Investments’ in Christian Klausegger and others (eds), Austrian Arbitration Yearbook 2010 (Beck 2010) 307; Stephan Schill, ‘Illegal Investments in Investment Treaty Arbitration’ (2012) 11(2) The Law and Practice of International Courts and Tribunals 281; Zachary Douglas, ‘The Plea of Illegality in Investment Treaty Arbitration’ (2014) 29(1) ICSID Review 155. 159 Patrick Dumberry, ‘State of Confusion: The Doctrine of “Clean Hands” in Investment Arbitration after the Yukos Award’ (2016) 17 JWIT 229; Rahim Moloo, ‘A Comment on the Clean Hands Doctrine in International Law’ (2011) 8(1) Transnational Dispute Management 1; Carolyn Lamm, Hansel Pham, and Rahim Moloo, ‘Fraud and Corruption in International Arbitration’ in MA Fernández-​Ballestos and David Arias Lozano (eds), Liber Amicorum Bernardo Cremades (La Ley 2010) 724–​726. 160 Fraport v Philippines (n 157) [467]–​[468]. 161 ibid [328]. 162 Eg Veteran Petroleum (Cyprus) v Russia, PCA Case No 2005-​05/​AA228, Final Award, 18 July 2014 [1358]–​[1363]; Yukos Universal (Isle of Man) v Russia, PCA Case No 2005-​04/​AA227, Final Award, 18 July 2014 [1358]–​[1363]; Hulley Enterprises (Cyprus) v Russia, PCA Case No 2005-​03/​AA226, Final Award, 18 July 2014 [1358]–​[1363]; South American Silver v Bolivia, PCA Case No 2013-​15, Award, 30 August 2018 [444]–​[445], [453]. 163 Alexandre Kiss, ‘Abuse of Rights’ (2006) MaxPlanckEPIL, para 1; Cheng (n 102) 131–​132; Saipem v Bangladesh, ICSID Case No ARB/​05/​07, Award, 30 June 2009 [160]. 164 Lauterpacht, Development of International Law (n 98) 164.

Abuse of Rights  179 faith,165 the prohibition of abuse of rights points to a distinction between the existence of a legal right and the manner of its exercise.166 In light of its general reception in the world’s legal systems, the concept is broadly regarded as a general principle of law.167 The prohibition of an abuse of right has been equated to an application of equity.168 The concept is also tightly connected to abuse of process, which has been scrutinised by the ICJ and, especially, by investment tribunals.169 A discussion of abuse of process is beyond the scope of this chapter. Two early cases considering abuse of rights in light of equity are Portendick170 and Closure of the Port of Buenos Aires.171 In Portendick, France, which was at war with a local tribe in Senegal, believing English vessels to supply the tribe with munitions, closed the coast of Portendick to international commerce. English vessels that had set off from Great Britain uninformed of the closure suffered damages and the dispute was submitted to the King of Prussia for arbitration. The question put to him was whether the prejudice sustained by the English vessels had been unduly caused and whether France was ‘equitably’ required to repair such losses. The King of Prussia ruled in favour of Great Britain.172 He held that the closure of a port to international commerce, while in principle lawful, must be accompanied by adequate publicity to prevent unnecessary harm to third parties and so not to constitute an abuse of rights.173 165 Cheng (n 102) 121, 131–​132; Abaclat and others v Argentina, ICSID Case No ARB/​07/​5, Decision on Jurisdiction and Admissibility, 4 August 2011 [646]; Metal-​Tech v Uzbekistan, ICSID Case No ARB/​ 10/​3, Award, 4 October 2013 [127]; Renco Group v Peru, ICSID Case No UNCT/​13/​1, Partial Award on Jurisdiction, 15 July 2016 [175]; cf Phoenix v Czech Republic (n 157) [113]. 166 Charles de Visscher, De l’équité dans le règlement arbitral ou judiciaire des litiges de droit international public (Pedone 1972) 35; Kiss (n 163) para 3. 167 Hersch Lauterpacht, The Function of Law in the International Community (first published 1933, OUP 2012) 300–​308; Michael Byers, ‘Abuse of Rights’ (2002) 47 McGill LJ 389; Kiss (n 163) para 9; cf Lauterpacht, Development of International Law (n 98) 164, advising that the principle ‘must be wielded with studied restraint’; Gabčíkovo-​Nagymaros Project (Hungary/​Slovakia) (Separate Opinion Weeramantry) [1997] ICJ Rep 88, 95, describing it as a ‘well-​established area of international law’; cf Renco v Peru (165) [175], characterising it as a ‘general principle of international law’. 168 de Visscher (n 166) 33; Charles Dupuis, ‘Règles générales du droit de la paix’ (1930) 32 Recueil des Cours 2, 94. See further Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Judgment) PCIJ Series A/​B No 46 (7 June 1932) 167. 169 Eg Immunities and Criminal Proceedings (n 180) [146]–​[152]; Certain Iranian Assets (n 150) [103]–​ [115]; Arbitral Award of 31 July 1989 (Guinea-​Bissau v Senegal) (Judgment) [1991] ICJ Rep 53 [27]; Philip Morris Asia Limited v Australia, PCA Case No 2012-​12, Award on Jurisdiction and Admissibility, 17 December 2015 [554]; Transglobal Green Energy and others v Panama, ICSID Case No ARB/​13/​28, Award, 2 June 2016 [126]; Pac Rim v El Salvador (n 62). 170 France-​Grande-​Bretagne, Affaire de Portendick (1843) in Albert Geouffre de La Pradelle and Nikolaos Politis, Recueil des arbitrages internationaux: 1798–​1855 (vol I, Pedone 1905) 512ff. 171 République argentine-​Grande-​Bretagne, Affaire de la fermeture de Buenos-​Ayres (1870) in Albert Geouffre de La Pradelle and Nikolaos Politis, Recueil des arbitrages internationaux : 1856–​1872 (vol II, Pedone 1923) 637ff. 172 Portendick (n 170) 512ff. 173 Nikolaos Politis, ‘Le problème des limitations de la souveraineté et la théorie de l’abus des droits dans les rapports internationaux’ (1925) 6 Recueil des Cours 1, 96, 98.

180  Variations and Related Concepts In Closure of the Port of Buenos Aires, the facts at issue were broadly similar. Argentina, at war with Uruguay, had blockaded the port of Montevideo. Unable to impose respect of the blockade, it decided to close the port of Buenos Aires to vessels that had first docked at Montevideo. Six English commercial vessels coming from Europe and passing first from Montevideo, uninformed of the measure, had been unable to dock at Buenos Aires and suffered as a consequence tremendous losses. The President of Chile was called upon to arbitrate the dispute. While there was no question that a state can lawfully close its ports, it was disputable whether this could happen without prior publicity. In contrast to Portendick, the arbitrator found that it was Argentina’s lawful right to close its port if it so wished. Abuse of rights was not accepted nor did the arbitrator resort to equity. The decision was subsequently criticised.174 It has been observed that equity required ‘appropriate notice’ to be given and that the decree that imposed these measures made no exception for vessels that may have reached Montevideo for reparations or because weather conditions forced them to do so.175 These two cases have been discussed in legal scholarship in relation to both abuse of rights and equity.176 Abuse of rights has also been considered by international courts, starting with the Polish Upper Silesia177 and Free Zones178 cases, where the PCIJ found no evidence of an abuse. The ICJ appeared to endorse the concept in Fisheries (United Kingdom v Norway).179 In Equatorial Guinea v France, the ICJ found that abuse of rights could not be assessed in the admissibility phase but should be deferred until the merits.180 Abuse of right has been invoked in state pleadings181 and in dissenting opinions.182 It is sometimes discussed in the context of the sharing of international watercourses,183 transboundary pollution,184 immigration,185 statelessness and the expulsion of foreigners,186 and it is also

174 ibid 100ff; fermeture de Buenos-​Ayres (n 171) 637ff. 175 Politis (n 173) 98; fermeture de Buenos-​Ayres (n 171) 639 (author’s translation). 176 Eg de Visscher (n 166) 39–​40; cf fermeture de Buenos-​Ayres (n 171) 637ff. 177 Case concerning certain German interests in Polish Upper Silesia (Merits Judgment) Series A No 7 (25 May 1926) 30. 178 Free Zones (Judgment) (n 168) 167. 179 Fisheries (United Kingdom v Norway) (n 22) 142. 180 Immunities and Criminal Proceedings (Equatorial Guinea v France) (Preliminary Objections Judgment) [2018] ICJ Rep 292 [146]–​[152]. 181 Eg Nottebohm (Memorial Submitted by Liechtenstein 26 January 1952) [1955] ICJ Pleadings (vol I) 21 [51]. For examples, see Byers (n 167) 397–​398. 182 Gabčíkovo-​Nagymaros Project (Weeramantry) (n 167) 95. 183 Byers (n 167) 408. 184 ibid 424. 185 Politis (n 173) 89–​90. 186 de Visscher (n 166) 37–​38; Byers (n 167) 423; Nottebohm (n 181) 21; Boffolo, Mixed Claims Commission (Italy-​Venezuela) (1903) 10 RIAA 528.

Proportionality  181 laid down in conventional law. An example is the United Nations Convention on the Law of the Sea (UNCLOS), which provides that the parties ‘shall exercise the rights, jurisdiction and freedoms recognized in this Convention in a manner which would not constitute an abuse of right’.187 The notion of abuse of rights –​the fact that it prevents the exercise of a legally recognised right –​is closely related to the traditional understanding of equity contra legem. It is in fact an application of contra legem equity. The adjudicator does not apply the strict letter of the law because doing so under the circumstances would constitute an abuse of rights, in other words, it would be manifestly unjust or would lead to an inequitable result. By the same token, abuse of rights is exceptional and ‘subject to a high threshold’.188 Having said that, like some other principles considered in this chapter, abuse of rights helps debunk the myth that only infra legem applications of equity are permitted. The prohibition of abuse of rights is precisely regarded as allowing the adjudicator to develop the law and impel normative change,189 so that a hitherto ‘legally recognized right ceases to be so and becomes abusive, and as such contrary to law’.190 This in itself is a function of equity.191

X. Proportionality The link between equity and proportionality is already present in Aristotelian thought.192 In the jurisprudence of international adjudicative bodies, equity and proportionality often make an appearance pari passu.193 The dispute settlement organs of the World Trade Organization (WTO), the Court of Justice of the European Union (CJEU), and the European Court of Human Rights, all resort to some form of proportionality analysis.194 Proportionality also plays a role in the decisions of the international courts and tribunals covered in this book, including in the context of state responsibility, notably in relation

187 UNCLOS art 300. 188 Chevron Corporation and Texaco Petroleum Corporation v Ecuador, PCA Case No 2007-​02/​ AA277, Interim Award, 1 December 2008 [143]. 189 Lauterpacht, Function of Law (n 167) 307–​08; Byers (n 167) 429–​30. 190 Lauterpacht, Function of Law (n 167) 307–​08. 191 See ch 4, section II B Softening Law’s Rigidity. 192 Aristotle, Nicomachean Ethics, Book V, ch 5. See further ch 2, section II Greek and Roman Law Origins. 193 See further Cottier and others (n 1) 666, discussing proportionality’s foundations in equity. 194 Bernhard Schlink, ‘Proportionality in Constitutional Law’ (2012) 22 Duke JCIL 291, 296; Cottier and others (n 1).

182  Variations and Related Concepts to countermeasures and restitution,195 in ius ad bellum and ius in bello,196 in maritime delimitation, and in investment arbitration.197 In broad terms, proportionality requires that a state measure be commensurate with the objective pursued;198 it expects that it should bear ‘a reasonable relationship to some rational policy’ and that it does not place an excessive burden on the adversely-​ affected party.199 In its elaborate form, proportionality involves some or all of the following: an analysis of the suitability of the challenged measure to the goal pursued; a necessity test to weigh the measure against available alternatives; an examination of the measure’s effect to ascertain that it is not ‘disproportionate’ or excessive in light of the interests affected; and an evaluation of the legitimacy of the objective pursued.200 In maritime delimitation disputes, in lieu of the state measure, it is the proposed delimitation that is tested in light of proportionality. In view of proportionality’s large and variegated coverage, this section will focus on proportionality in maritime delimitation, fleshing out its reception in some cases that have already been considered in Chapter 3. In North Sea Continental Shelf, the ICJ held that the continental shelf rights of states with coastlines comparable in length should not be ‘considerably different’ depending on the shape of the coastline.201 The Court considered that proportionality was a factor that the parties ought to take into account in their negotiations in order to effect a delimitation in accordance with equitable principles, thus establishing a balance between states with differently-​shaped coastlines.202 Some commentators considered that proportionality was useful 195 Eg ILC Articles on the Responsibility of States for Internationally Wrongful Acts arts 35, 51; Gabčíkovo-​Nagymaros Project (Weeramantry) (n 167) [85]. See further Michael Newton and Larry May, Proportionality in International Law (OUP 2014) 181–​200. 196 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States) (Merits Judgment) [1986] ICJ Rep 14 [176], [194]. See in general Newton and May (n 195). 197 Valentina Vadi, Analogies in International Investment Law and Arbitration (CUP 2016) 206; Gebhard Bücheler, Proportionality in Investor-​State Arbitration (OUP 2015) 66; Catharine Titi, ‘Refining the Expropriation Clause: What Role for Proportionality?’ in Julien Chaisse (ed), China-​European Union Investment Relationships (Edward Elgar 2018); August Reinisch and Christoph Schreuer, International Protection of Investments: The Substantive Standards (CUP 2020) 446–​453. For the case law, see eg Electrabel v Hungary (n 35) [179]; Cortec Mining Kenya and others v Kenya, ICSID Case No ARB/​15/​29, Award, 22 October 2018; SolEs Badajoz v Spain, ICSID Case No ARB/​15/​38, Award, 31 July 2019. Investment tribunals have often discussed proportionality as part of fair and equitable treatment, eg Total v Argentina, ICSID Case No ARB/​04/​1, Decision on Liability, 27 December 2010 [123]; Occidental Petroleum Corporation and others v Ecuador, ICSID Case No ARB/​06/​11, Award, 5 October 2012 [404]; AES v Kazakhstan (n 92) [403]ff; Charanne and Construction Investments v Spain, SCC Case No V 062/​2012, Final Award, 21 January 2016 [514], [517]; RREEF v Spain (n 20) [324]; Indian Metals v Indonesia (n 113) [226]; OperaFund Eco-​Invest SICAV PLC y Schwab Holding AG v Spain, ICSID Case No ARB/​15/​36, Award, 6 September 2019 [555]; Cavalum SGPS v Spain, ICSID Case No ARB/​15/​34, Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020 [414]; Eskosol SpA in liquidazione v Italy, ICSID Case No ARB/​15/​50, Award, 4 September 2020 [410]. 198 Newton and May (n 195) 15. 199 Marfin v Cyprus (n 30) [1213]. 200 Titi (n 197) 112–​113. 201 North Sea Continental Shelf (Judgment) (n 20) [91]. 202 ibid [98], [101].

Proportionality  183 to achieve ‘geographical equity’ and that this made sense in the case because the states had adjacent rather than opposing coastlines.203 This limitation was reversed by the ICJ in later jurisprudence that took account of proportionality irrespective of geography.204 In the Anglo-​French Continental Shelf case, proportionality was used to assess ‘the reasonable or unreasonable –​the equitable or inequitable –​effects of particular geographical features or configurations’.205 The Court of Arbitration dismissed the idea that proportionality may constitute ‘an independent source of rights’ and insisted that it should be considered as a mere ‘criterion or factor relevant in evaluating the equities of certain geographical situations’.206 For the Court, the relevant factor was ‘disproportion’,207 since it was ‘a question of remedying the disproportionality and inequitable effects’ created by particular geographical features.208 In Barbados v Trinidad and Tobago, the arbitral tribunal turned to proportionality as a relevant circumstance that is ‘a final check’ on the equitableness of the provisional delimitation line to ‘ensure that the result is not tainted by some form of gross disproportion’.209 The purpose of proportionality was to take account of the different lengths of the coastlines in order to prevent a disproportionate ‘and hence inequitable’ result.210 The tribunal discussed proportionality as ‘a function of equity’.211 With Black Sea, disproportionality evolved from a relevant circumstance to a standalone ex post facto check on the equitableness of the provisional delimitation line (the third step of the delimitation process).212 The same approach was followed in Territorial and Maritime Dispute (Nicaragua v Colombia),213 Bangladesh/​Myanmar,214 Ghana v Côte d’Ivoire,215 and Maritime Delimitation (Costa Rica v Nicaragua).216

203 Continental Shelf (Libya/​Malta) (Dissenting Opinion Oda) [1985] ICJ Rep 123 [18]. For examples, see Yoshifumi Tanaka, ‘The Disproportionality Test in the Law of Maritime Delimitation’ in Alex Oude Elferink, Tore Henriksen, and Signe Veierud Busch (eds), Maritime Boundary Delimitation (CUP 2018) 294, nn 13–​14. 204 Tanaka (n 203) 304. 205 Anglo-​French Continental Shelf (n 13) [99]–​[100]. 206 ibid [101]. 207 ibid. 208 ibid. For a criticism, see Thomas Cottier, Equitable Principles of Maritime Boundary Delimitation (CUP 2015) 545; MD Blecher, ‘Equitable Delimitation of Continental Shelf ’ (1979) 73 AJIL 60, 74–​76. 209 Barbados v Trinidad and Tobago, PCA Case No 2004-​02, Award, 11 April 2006 [238]. 210 ibid [240]. 211 Ibid [338]. 212 Black Sea (n 14) [211]. 213 Territorial and Maritime Dispute (Nicaragua v Colombia) (Judgment) [2012] ICJ Rep 624; text to ch 3 n 186–​199. 214 Bangladesh/​Myanmar (n 43) [499]. 215 Delimitation of the Maritime Boundary between Ghana and Côte d’Ivoire in the Atlantic Ocean (Ghana/​Côte d’Ivoire) (Judgment) [2017] ITLOS Rep 4 [533]. 216 Maritime Delimitation in the Caribbean Sea and the Pacific Ocean (Costa Rica v Nicaragua) and Land Boundary in the Northern Part of Isla Portillos (Costa Rica v Nicaragua) (Judgment) [2018] ICJ Rep 139 [159], [161].

184  Variations and Related Concepts The application of proportionality in maritime delimitation cases leaves open many questions, including the relationship between proportionality as a relevant circumstance (step two) and the disproportionality test (step three), since if relevant circumstances are thoroughly assessed, the disproportionality test may well be redundant.217 Some decisions employed proportionality, others disproportionality; some used it as a factor, others as a relevant circumstance, others still as an ex post facto test. As is obvious from even this brief exposition of the case law, no single or uniform approach has emerged; what we have is a motley set of precedents each appropriate for a different geographical configuration.218 Putting these considerations to one side, however, proportionality is useful as a legal principle allowing equity to be applied.

XI. Conclusions This chapter has considered principles that are variations on equity. Most, albeit not all, of these principles are undisputed sources of international law. From estoppel to unjust enrichment, and from good faith to proportionality, international courts and tribunals apply equitable principles, even when they do not invoke equity. They apply them regardless of whether a digression from the strict law is necessary, as is evident in the case of some of these principles, such as abuse of rights and the clean hands doctrine, which this chapter discussed as applications of contra legem equity. The wide use of these principles confirms Christopher Rossi’s dictum that, whenever ‘a compelling equitable principle applies, judges do not hesitate to apply it’.219



217

Donald McRae, ‘The Applicable Law’ in Elferink, Henriksen, and Busch (n 203) 113–​14. Cottier (n 208) 554. 219 Rossi (n 3) 165. 218

9 Equity, Compensation, and Costs I. Introduction Just as equitable considerations can inform a court or tribunal’s decision during the early phases of the adjudicatory process, so equity may have a role to play in decisions on compensation and costs. The assessment of compensation has been canvassed as a function of equity infra legem.1 When the law does not provide precise guidance, fixing the amount of compensation by reference to equitable principles may equally signify recourse to equity praeter legem.2 One author has suggested that equity is relied upon to adjust compensation for material injury to an amount lower than has been proved by the claimant may be described as contra legem.3 Others have voiced scepticism about equity’s relevance to compensation in different terms. Elihu Lauterpacht famously argued that equity cannot be ‘sprinkled like salt on every part of the law’ and that, while ‘[i]‌t is not that anyone seeks “inequitable” compensation’, equity has no place when applying ‘a specific formula like “the full equivalent of the property taken” ’.4 Irmgard Marboe has also contended that when the rules on compensation are clear, it is inappropriate to resort to equity.5 Some such arguments may conceivably also be made in relation to decisions on costs. This chapter argues that international adjudicators are sometimes guided by equitable considerations when determining compensation, apportioning costs, and deciding on security for costs, although the role of equity in this area is typically overlooked. While a few authors have considered equity in the

1 Bin Cheng, ‘Justice and Equity in International Law’ (1955) 8 Current Legal Problems 185, 210–​211; Michael Akehurst, ‘Equity and General Principles of Law’ (1976) 25(4) ICLQ 801, 802–​803. 2 Vaughan Lowe, ‘The Role of Equity in International Law’ (1989) 12 Australian YB International Law 54, 57–​58. 3 Enrico Milano, ‘General Principles Infra, Praeter, Contra Legem? The Role of Equity in Determining Reparation’ in Mads Andenas and others (eds), General Principles and the Coherence of International Law (Brill 2019) 70, 73, contrast 77. On the traditional infra, praeter, and contra legem roles ascribed to equity, see ch 5. 4 Elihu Lauterpacht, ‘Issues of Compensation and Nationality in the Taking of Energy Investments’ (1990) 8 Journal of Energy & Natural Resources Law 241, 249–​250. 5 Irmgard Marboe, Calculation of Compensation and Damages in International Investment Law (2nd edn, OUP 2017) 154–​155. The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0009

186  Equity, Compensation, and Costs assessment of compensation,6 equity in decisions on cost apportionment and security for costs has hitherto not garnered interest. This in itself is not surprising. Decisions on cost apportionment have generally received little attention outside investment arbitration, while orders for security for costs –​whose relevance in international law is also limited to investment arbitration –​are a novel phenomenon.7 The chapter shows that recourse to equity when determining compensation occurs especially when assessment proves difficult or nearly impossible and that the applicable rules often furnish little or no guidance. For decisions on costs, provision for equitable considerations is sometimes made in the arbitration rules, while security for costs, in particular, is an equitable remedy. To reach a decision in this context, international courts and tribunals tend to review a host of factors relevant to the case. The chapter proceeds in two parts. First, it considers equitable considerations when international courts and tribunals determine compensation. Second, it addresses equitable considerations in relation to decisions on costs in investment arbitration. In this respect, the chapter examines first the apportionment of costs between the parties and, second, investment decisions on security for costs.

II. Compensation Equitable considerations have guided international courts and tribunals when allocating compensation for material and non-​material damage,8 notably when the legal framework provides incomplete guidance or when the quantification of compensation proves an uncommonly taxing issue.9 According to the International Law Commission (ILC), the assessment of compensation for damage caused by an internationally wrongful act depends on ‘the content of particular primary obligations, an evaluation of the respective behaviour of the parties and, more generally, a concern to reach an equitable and acceptable

6 Eg Charles de Visscher, De l’équité dans le règlement arbitral ou judiciaire des litiges de droit international public (Pedone 1972); Marboe (n 5) 153–​162. 7 Romesh Weeramantry and Montse Ferrer, ‘RSM Production Corporation v Saint Lucia: Security for Costs –​A New Frontier?’ (2015) 30(1) ICSID Review 30, 30; Christine Sim, ‘Security for Costs in Investor-​State Arbitration’ (2017) 33 Arbitration International 427, 439. 8 Gabriel Bottini, Admissibility of Shareholder Claims under Investment Treaties (CUP 2020) 210; Sergey Ripinsky with Kevin Williams, Damages in International Investment Law (BIICL 2008) 124; Thomas Wälde and Borzu Sabahi, ‘Compensation, Damages, and Valuation’ in Peter Muchlinski and others (eds), The Oxford Handbook of International Investment Law (OUP 2008) 1105. 9 Marboe (n 5) 154–​155.

Compensation  187 outcome’.10 While valuation of compensation has evolved into a sophisticated business involving experts, the assertion that at times the adjudicators, ‘after elaborate analysis of the law, seemingly pluck the amount of an award out of thin air’ retains a part of truth.11 The broad discretion that international courts and tribunals have in fixing the amount of compensation explains why equitable considerations can offer useful guidance in this context. Early on, equitable considerations were provided for in the applicable law. This is the case of a historical peculiarity, a now extinct clause on compensation ex gratia, which conferred on the Mexican claims commissions the competence to rule on quantum ‘according to the principles of equity’.12 Such a clause was included in the France-​Mexico Convention of 25 September 1924 concerning the settlement of disputes arising from losses and damage caused to French citizens by revolutionary acts that occurred in Mexico between 1910 and 1920.13 The clause provided that the commissioners should decide the cases ‘according to the principles of equity’, since ‘Mexico has the will to compensate on its own accord for damages suffered and not to have its responsibility established in accordance with the general principles of international law’.14 In Georges Pinson, the French-​Mexican Claims Commission held that the fact that Mexico had accepted responsibility ex gratia ‘and beyond the limits established by international law’ did not mean that damages should be reduced to a minimum.15 Rather, the commission should ‘balance the equities on both sides’.16 In Feuillebois, the majority of the French-​Mexican Claims Commission held that the anomalous situation at the time of events in Mexico required ‘in light of equity, a certain moderation’ as regarded the estimation of the amount of compensation and interests.17 The calculation of compensation in some early arbitrations also took place on the basis of a clause on compensation ex gratia –​or on the basis of an absolute equity mandate or equivalent.18 In Eastern Extension, the parties’ special 10 ILC, ‘Draft Articles on Responsibility of States for Internationally Wrongful Acts with commentaries 2001’ (UN 2008), commentary on art 36, para. 7, emphasis added. 11 Patrick Norton, ‘A Law of the Future or a Law of the Past –​Modern Tribunals and the International Law of Expropriation’ (1991) 85(3) AJIL 474, 495. 12 Eg Georges Pinson (French-​Mexican Claims Commission) (1928–​1929) 5 RIAA 327; Cornelia J Pringle and others (Santa Isabel Claims) (USA) v United Mexican States (1926) 4 RIAA 783. 13 France-​Mexico Convention of 25 September 1924. 14 ibid art 2 (author’s translation). 15 Georges Pinson (n 12). 16 ibid. 17 Louis and Joseph Feuillebois (France) v United Mexican States (French-​ Mexican Claims Commission) (1929) 5 RIAA 542, 543 (author’s translation). 18 Eg British Property in Spanish Morocco (Spain v United Kingdom) (1925) 2 RIAA 615, 652; Eastern Extension, Australasia and China Telegraph Company (Great Britain) v United States (1923) 6 RIAA 112, 116

188  Equity, Compensation, and Costs agreement provided that the tribunal was to decide ‘in accordance with treaty rights and with the principles of international law and of equity’.19 The case arose out of the destruction by US naval authorities of submarine cables belonging to a neutral company in Manila Bay in the thick of the Spanish-​ American War.20 The tribunal held that: If the strict application of a treaty or of a specific rule of international law conducts to a decision which, however justified from a strictly legal point of view, will result in hardship, unjustified having regard to the special circumstances of the case, then it is the duty of this Tribunal to do their best to avoid such a result . . . 21

The tribunal concluded that no compensation was due ‘on the ground of equity’ since the destruction of the cables was a legitimate act of war and the company was aware of the risk.22 In British Property in Spanish Morocco, the arbitrator held that although prolonged Spanish occupation of British property would have entitled the owner to a rent as compensation, there was no need to impose rent payment in equity, since the value of the property increased appreciably and this increase, thanks in part to the Spanish protectorate in Morocco, could be held to be ‘reasonable compensation’ for the use of the property.23 In Spadafora, equity led the tribunal to have regard to the impecunious situation of the respondent state in order to reduce the amount of compensation.24 In Norwegian Shipowners’ claims,25 the tribunal interpreted the specific requirement to determine compensation ‘in accordance with the principles of law and equity’26 as authorising it to decide the issue ex aequo et bono.27 In Cayuga Indians, Great Britain had sought an annuity on behalf of the Canadian Cayugas and a declaratory award to the effect that they were entitled to the annuity for the future.28 The tribunal held that it could only grant a monetary award but it could not make a declaration concerning future rights. For this

19 Eastern Extension (n 18) 116. 20 ibid 112–​114. 21 ibid 116. 22 ibid 113, 117. 23 Spain v United Kingdom (n 18) 682. 24 Spadafora (Colombia, Italy) (1904) 11 RIAA 1, 9–​10. 25 Norwegian Shipowners’ claims (Norway v United States) (1922) 1 RIAA 307. See ch 3 text to nn 45–​54. 26 Special agreement between Norway and the United States (30 June 1921) art I. 27 Norwegian Shipowners’ claims (n 25) 339 (‘It has been somewhat difficult to fix the real market value of some of these shipbuilding contracts. The value must be assessed ex aequo et bono’). 28 Cayuga Indians (Great Britain) v United States (1926) 6 RIAA 173. See ch 3 text to nn 55–​62.

Compensation  189 reason, it held that its monetary award should contain a ‘just share in the payments of the annuity’ from a given point in time (from 1849) and a sum equal to half of the annuity for the future.29 Without reliable data concerning the relative numbers of Cayuga Indians in Canada and the United States, and in the absence of a demonstrable ‘mathematical basis of distribution’, the tribunal proceeded in line with the maxim ‘equality is equity’.30 The Permanent Court of International Justice (PCIJ) and the International Court of Justice (ICJ) have also had recourse to equitable considerations when assessing the amount of compensation. In Mavrommatis Jerusalem Concessions, the applicable law made provision for equitable compensation.31 In Corfu Channel, the ICJ took note of an experts’ report which affirmed that the figures advanced by the United Kingdom ‘may be taken as a fair and accurate estimate of the damage sustained’ and found them to be ‘reasonable’.32 It may, but just as easily may not, be significant that under an earlier head of claim, the United Kingdom had valued the damage it had sustained at a somewhat lower amount than was estimated by the experts. In respect of that head of claim, although not expressly mentioning the ne ultra petita rule, the Court reasoned that it could not award more than was claimed by the United Kingdom.33 In its Advisory Opinion in Administrative Tribunal of the International Labour Organization (ILO),34 the ICJ affirmed the judgments previously rendered by that Tribunal, in which equity had been taken into account to assess the compensation awarded to employees of the United Nations Educational, Scientific and Cultural Organization (UNESCO) after their fixed-​term contracts were not renewed.35 It was unfortunate that the Tribunal had erroneously mentioned redress ex aequo et bono.36 The ICJ confirmed that this had not been an intention ‘to depart from principles of law’; rather, as no specific legal rule determined the exact amount of compensation to be awarded, the Tribunal set the ‘true measure’ and ‘reasonable figure’ of the compensation.37 The ICJ relied on the substance of the Tribunal’s findings, which seems appropriate, although

29 Cayuga Indians (n 28) 189. 30 ibid 190. 31 Mavrommatis Jerusalem Concessions (Greece v United Kingdom), PCIJ Series A No 5 (26 March 1925) 7. 32 Corfu Channel (Judgment of 15 December 1949) [1949] ICJ Rep 244, 249. 33 ibid 248–​249. 34 Judgments of the Administrative Tribunal of the ILO upon complaints made against the UNESCO (Advisory Opinion) [1956] ICJ Rep 77. 35 ibid. 36 cf Christopher Rossi, Equity and International Law (Transnational 1993) 176, 190–​191. 37 Administrative Tribunal of the ILO (n 34) 100.

190  Equity, Compensation, and Costs this need not have prevented it from pointing out that the term ex aequo et bono was inappropriate. In Diallo, the ICJ relied on equity to award compensation for material and non-​material injury. With respect to non-​material injury, the Court found that Diallo had suffered psychological harm and loss of reputation due to his arrests, detentions, and expulsion from the Democratic Republic of the Congo (DRC).38 Referring to the jurisprudence of regional human rights courts,39 the ICJ reasoned that the quantum of compensation for non-​material harm ‘necessarily rests on equitable considerations’.40 These led it to award US$85,000 under that head of claim.41 Next, the Court turned its attention to material harm and awarded US$10,000 for the loss of Diallo’s personal property, on the basis of equitable considerations.42 However, it rejected other heads of claim –​ for example, it did not award compensation in respect of Diallo’s lost earnings during his detentions and after his expulsion.43 In this respect, Judge Yusuf argued that equitable considerations should have led the Court to award compensation in light of the causal link between Diallo’s unlawful detentions and the material injury he suffered.44 Judge Greenwood disagreed, contending that the evidence adduced by Guinea concerning Diallo’s and the companies’ finances undermined its claim for loss of earnings.45 Accordingly, equity ‘should not be used to make good the shortcomings in a claimant’s case by being substituted for evidence which could have been produced if it actually existed’.46 More recently, the ICJ turned to equity and reasonableness as an aid in the quantification of claims in Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v Nicaragua).47 Referring to Diallo, the Court recalled that the lack of ‘adequate evidence as to the extent of material damage will not, in all situations, preclude an award of compensation for that damage’.48 It cited

38 Ahmadou Sadio Diallo (Guinea v DRC) (Compensation Judgment) [2012] ICJ Rep 324 [19]–​[23]. 39 ibid [24], [33]. See Al‐Jedda v United Kingdom, Application No 27021/​08 (Judgment) [2011] ECHR Rep [114]; Chaparro Alvarez and Lapo Iñiguez v Ecuador (Preliminary Objections, Merits, Reparations and Costs, Judgment) [2007] IACHR Series C No 170 [240], [242]; Lupsa v Romania, Application No 10337/​04 (Judgment) [2006] ECHR Rep VII [70]–​[72]; Cantoral Benavides v Peru (Reparations and Costs, Judgment) [2001] IACHR Series C No 88 [53]. 40 Diallo (n 38) [24]. 41 ibid [25]. 42 ibid [33], [36], [55]. 43 ibid [50]. 44 Ahmadou Sadio Diallo (Guinea v DRC) (Declaration Jusuf) [2012] ICJ Rep 385 [11]–​[17]. 45 Ahmadou Sadio Diallo (Guinea v DRC) (Declaration Greenwood) [2012] ICJ Rep 391 [5]. 46 ibid. 47 Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v Nicaragua) (Compensation Judgment) [2018] ICJ Rep 15. 48 ibid [35].

Compensation  191 with approval the Trail Smelter case,49 itself quoting the US Supreme Court,50 to the effect that: Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate.51

The Court further relied on the notion of reasonableness in relation to different heads of claim. It stressed that ‘international law does not prescribe any specific method of valuation for the purposes of compensation for environmental damage’, which was at issue in the case, and that the Court should consider ‘the specific circumstances and characteristics of each case’.52 To determine compensation, the Court stressed that uncertainty about the extent of the damage would not ‘preclude it from awarding an amount that it considers approximately to reflect the value of the impairment or loss of environmental goods and services’.53 In Sapphire v National Iranian Oil Company, the sole arbitrator held that the compensation to be paid should cover not only the loss suffered but also lost profit.54 Since it was difficult to establish accurately the amount due for lost profit, the arbitrator held that he should ‘decide it ex aequo et bono by considering all the circumstances’.55 He concluded that it was ‘reasonable and equitable’ to fix the quantum of compensation for lost profit at US$2,000,000.56 Regrettably, the arbitrator employed the term ex aequo et bono, when in effect by this term he appeared to merely acknowledge the discretion he had. Earlier in the award, he had stated that he had ‘no intention of deciding the case according to “equity”, like an “amiable compositeur” ’.57

49 Trail Smelter (United States, Canada) (1938 and 1941) 3 RIAA 1905, 1920. 50 Story Parchment Company v Paterson Parchment Paper Company (1931) 282 US 555. 51 Trail Smelter (n 49) 1920; Certain Activities (n 47) [35]. 52 Certain Activities (n 47) [52]. 53 ibid [86]. 54 Sapphire International Petroleum v National Iranian Oil Company, Award, 15 March 1963 (1967) ILR 136, 186. 55 ibid 189. 56 ibid 190. 57 ibid 175.

192  Equity, Compensation, and Costs In Loan Agreement (Italy v Costa Rica), a dispute arising out of Costa Rica’s failure to pay back a loan to Italy, an arbitral tribunal reasoned that it should determine the amount owed by the respondent according to ‘international law and notably equitable principles, deriving from the idea of justice’ ​​ and taking account of all the circumstances, including the causes of the delay of payment suffered, misunderstandings, and the fact that Costa Rica’s unjust enrichment was not excessive.58 The award has been criticised for awarding Italy much less than the amount to which it would have been entitled according to the financial agreement concluded between the two states.59 Investment tribunals too have resorted to equity to determine compensation. From the Libyan nationalisation cases and the Iran-​US Claims Tribunal to modern investment arbitrations, investment tribunals have had ample occasion to reiterate their right to consider equitable principles when setting the amount of compensation.60 In LIAMCO v Libya, the tribunal found that ‘it would be reasonable and just to adopt the formula of “equitable compensation” as a measure for the estimation of damages’ in the dispute.61 In Phillips Petroleum, the Iran-​US Claims Tribunal held that some adjustments were necessary, since ‘the determination of value by a tribunal must take into account all relevant circumstances, including equitable considerations’.62 In AMT v Zaire, the tribunal stated that for ‘reasons founded on equitable principles’, the respondent, which was found to be responsible under international law, should compensate the investor.63 58 Case concerning the Loan Agreement between Italy and Costa Rica (dispute arising under a financing agreement) (1998) 25 RIAA 21 [71], [76]–​[77] (author’s translation). 59 Milano (n 3) 70. 60 Libyan American Oil Company (LIAMCO) v Libya, ad hoc arbitration, Award, 12 April 1977 [326], [346], [354], [365]; The American Independent Oil Company (Aminoil) v Kuwait, ad hoc arbitration, Final Award, 24 March 1982 [78]; Amoco International Finance Corporation v Iran, IUSCT Case No 56, Partial Award No 310-​56-​3, 14 July 1987 [220] (‘The choice between all the available methods must rather be made in view of the purpose to be attained, in order to avoid arbitrary results and to arrive at an equitable compensation in conformity with the applicable legal standards’); Phillips Petroleum Company Iran v Iran, IUSCT Case No 39, Award No 425-​39-​2, 29 June 1989 [112]; Técnicas Medioambientales Tecmed v Mexico, Case No ARB (AF)/​00/​2 Award, 29 May 2003 [190]; American Manufacturing & Trading (AMT) v Zaire, ICSID Case No ARB/​93/​1, Award, 21 February 1997 [7.16] (‘For practical reasons founded on equitable principles, the Tribunal finds that the Republic of Zaire which is responsible in international law, is under a duty to compensate AMT’); Compañia del Desarrollo de Santa Elena v Costa Rica, ICSID Case No ARB/​96/​1, Award, 8 June 2000 [92], [103] (‘the determination of interest is a product of the exercise of judgment, taking into account all of the circumstances of the case at hand and especially considerations of fairness which must form part of the law to be applied by this Tribunal’); cf Asian Agricultural Products Ltd (AAPL) v Sri Lanka, ICSID Case No ARB/​87/​3, Dissenting Opinion Asante (Award), 15 June 1990, (1991) 6(2) ICSID Review 574, 596, where the dissenting arbitrator argued that the claim should be dismissed on strict legal grounds but that, had the tribunal been given an ex aequo et bono mandate, he would have recommended compensation ex gratia. 61 LIAMCO v Libya (n 60) [326]. 62 Phillips Petroleum v Iran (n 60) [112]. 63 AMT v Zaire (n 60) [7.16].

Costs  193 In some cases, equitable considerations helped a tribunal navigate various valuation methods or adjust the amount obtained through a given valuation method.64 In Gold Reserve v Venezuela, the tribunal pointed to the difficulties that inhere in the assessment of damages, which involves approximations and the weighing of competing ‘facts, valuation methods and opinions’.65 Reasoning along similar lines, the tribunal in Total v Argentina noted that ‘[d]‌ifferent assumptions and methodologies may lead to widely different estimates of damages’.66 The tribunal pointed to the divergent results reached by ‘the same experts when calculating damages for a specific item under two different assumptions and methodologies’67 and explained that tribunals must ‘use their prudent judgment in order to award damages in a reasonable amount’.68 Finally, some tribunals have determined compensation by resorting to proportionality or identifying the ‘reasonable rate of return’ on the investment.69 In conclusion, international courts and tribunals do sometimes fix the amount of compensation by reference to equitable principles, including notably when the quantum of compensation is difficult to calculate. Generally, in such cases the law offers little or no guidance on how to assess compensation. When resorting to equity in this context, international courts and tribunals tend to show that they are mindful of the particular circumstances surrounding the case.

III. Costs Having considered equity when determining compensation, this section turns to costs in investment arbitration. The term ‘costs’ may refer to either or both the parties’ legal costs, that is, fees and expenses of counsel, experts, and witnesses, and the costs of the proceeding, that is, fees and expenses of arbitrators, tribunal secretaries, and arbitral institutions.70 The following paragraphs address in turn equity in the allocation of costs and in decisions on security for costs. 64 Amoco v Iran (n 60) [220]; Phillips Petroleum v Iran (n 60) [112]. 65 Gold Reserve v Venezuela, ICSID Case No ARB(AF)/​09/​1, Award, 22 September 2014 [686]. See further Ripinsky with Williams (n 8) 124. 66 Total v Argentina, ICSID Case No ARB/​04/​1, Award, 27 November 2013 [32]. 67 ibid. 68 ibid. 69 Eg RREEF Infrastructure Limited and RREEF Pan-​European Infrastructure Two Lux v Spain, ICSID Case No ARB/​13/​30, Decision on Responsibility and Quantum, 30 November 2018 [472], [522] ff; BayWa RE Renewable Energy and BayWa RE Asset Holding v Spain, ICSID Case No ARB/​15/​16, Decision on Jurisdiction, Liability and Quantum, 2 December 2019 [497]–​[515]. 70 Gabriel Bottini and others, ‘Excessive Costs and Recoverability of Costs Awards in Investment Arbitration’ (2020) 21 JWIT 251, 255.

194  Equity, Compensation, and Costs

A.  Allocation of Costs Investment decisions on cost apportionment can also rest on equitable principles. Research has shown that considerations of equity and reasonableness provide the basis for costs decisions in almost 40 percent of final investment awards.71 In contrast with the international courts covered in this book, where in principle each party bears its own costs,72 cost apportionment in investment arbitration is a vexed matter. Two reasons for this are that costs tend to be high73 and there is little certainty about how they are to be split between the parties.74 Tribunals have broad discretion in this regard, which further explains why resort to equity may be useful. Some arbitration rules and investment treaties direct arbitrators to have regard to equitable considerations. The Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), which state that in principle the costs will be borne by the losing party, also provide that the tribunal may apportion costs between the parties, ‘if it determines that apportionment is reasonable, taking into account the circumstances of the case’.75 The Rules do not spell out what such circumstances may be, but one may instance the outcome of the arbitration, the reasonableness of the parties’ costs, and their conduct during the proceedings.76 For example, the fact that a party’s claims or objections are frivolous or manifestly lack legal merit may weigh against that party when the tribunal decides on costs. The 2012 US Model bilateral investment treaty (BIT) expressly requests tribunals to take such frivolousness into account.77 As regards objections, the same model treaty provides that the successful party may be awarded ‘reasonable costs and attorney’s fees incurred in submitting or opposing the objection’.78 Provision for ‘reasonable costs’ is also made in arbitration rules.79 In Duke v Peru, the parties had agreed that the costs of the International Centre for Settlement of Investment Disputes (ICSID) would be shared between them in 71 Susan Franck, Arbitration Costs (OUP 2019) 241, 246. 72 PCIJ Statute art 64; ICJ Statute art 64; Statute of the International Tribunal for the Law of the Sea (ITLOS) art 34. 73 Bottini and others (n 70). 74 Eg Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) art 61; ICSID Convention Arbitration Rules rule 28; UNCITRAL Arbitration Rules art 42(1). See also Bottini and others (n 70) 258–​259. 75 UNCITRAL Arbitration Rules arts 42(1). 76 cf ICSID, ‘Working Paper #4: Proposals for Amendment of the ICSID Rules’ (vol 1, 2020) rule 52. 77 US Model BIT art 28(6). 78 ibid. 79 Eg UNCITRAL Arbitration Rules art 40(2); Arbitration Rules of the Stockholm Chamber of Commerce (SCC) (2017) art 50; ICSID Convention Arbitration Rules rule 28.

Costs  195 equal measure.80 To determine the apportionment of legal costs, the tribunal considered the extent to which the claimant had prevailed and that an estoppel claim it brought was not in bad faith.81 It concluded that, in the circumstances, it was ‘just and equitable’ that each party should bear its own legal costs.82 In Eurogas v Slovakia, the tribunal found ‘equitable’ that the costs of the tribunal should be allocated ‘just as they were borne by the Parties during the proceeding’.83 Some tribunals relied on the notion of reasonableness to apportion costs, notably referring to the reasonableness of the costs incurred. In Tenaris v Venezuela, the tribunal held that the claimants were only entitled to their ‘reasonable’ costs.84 In ESPF v Italy, the majority of the tribunal awarded the claimants ‘a proportion of their legal and expert fees and costs and other expenses proportionate to their degree of success in the arbitration’, corresponding to 60 percent of their ‘reasonable legal fees and other expenses’.85 In Bahgat v Egypt, a tribunal deciding on the basis of the UNCITRAL Arbitration Rules considered the reasonableness of the parties’ costs. It noted that the claimant’s costs exceeded the equivalent costs of the respondent, notably owing to the success fees that were due to the claimant’s counsel and the funding costs claimed by his third-​party funders.86 The tribunal decided that the success fees were ‘reasonable legal costs’ but that the third-​party funding costs should be borne by the claimant.87 Finally, provision for reasonable costs was made in a different context, that of an amicus curiae submission being conditioned on the amicus curiae assuming the parties’ ‘reasonable costs’ resulting from its participation in the proceedings.88

B.  Security for Costs Security for costs in investment arbitration is a provisional measure that facilitates the recovery of adverse cost awards, notably against the claimant.89 80 Duke Energy International Peru Investments No 1 v Peru, ICSID Case No ARB/​03/​28, Award, 18 August 2008 [497]. 81 ibid [499]. 82 ibid [500]. 83 EuroGas and Belmont Resources v Slovakia, ICSID Case No ARB/​14/​14, Award, 18 August 2017 [474]. 84 Tenaris and Talta v Venezuela, ICSID Case No. ARB/​12/​23, Award, 12 December 2016 [848]. 85 ESPF Beteiligungs and others v Italy, ICSID Case No ARB/​16/​5, Award, 14 September 2020 [950]. See also ICW Europe Investments v Czech Republic, PCA Case No 2014-​22, Award, 15 May 2019 [664]. 86 Mohamed Abdel Raouf Bahgat v Egypt, PCA Case No 2012-​07, Final Award, 23 December 2019 [587]. 87 ibid [589]–​[591]. 88 Antaris Solar and Michael Göde v Czech Republic, PCA Case No 2014-​01, Award, 2 May 2018 [41]; WA Investments-​Europa Nova Limited v Czech Republic, PCA Case No 2014-​19, Award, 15 May 2019 [38]. 89 Bottini and others (n 70) 290.

196  Equity, Compensation, and Costs If granted, the claimant must post security in order to guarantee the payment of an award on costs, in case the investor is unsuccessful in its claim.90 Decisions granting security for costs frequently rely on equity, reasonableness, or proportionality.91 This is appropriate, all the more so because security for costs is a provisional measure and provisional measures originate in equity.92 By the same token, security for costs may itself be described as equitable remedy. In Eskosol v Italy, the tribunal explained that it ‘should ensure that the particular measures requested are proportionate, in the sense that they do not impose such undue burdens on the other party as to outweigh, in a balance of equities, the justification for granting them’.93 The tribunal held that proportionality is essential to decisions on provisional measures and that the need for the measures must not be ‘outweighed by the hardships to which the other party would be subjected if the measures are granted’. 94 Other tribunals have reasoned similarly.95 In Sanum v Laos, the tribunal found that the respondent’s refusal to contribute to the case deposits was an additional ‘equitable factor’ militating against the provisional measure it sought.96 Although the respondent applied for security for costs, it had itself refused to contribute to tribunal costs. For the tribunal, ‘[a]‌party that seeks to avail itself of discretionary relief under the ICSID framework should not, at the same time, insist on the other party funding in the entirety the very arbitral procedures necessary to consider its application’.97 In García Armas v Venezuela, a case decided on the basis of the UNCITRAL Arbitration Rules, the tribunal embarked on a granular analysis

90 Sim (n 7) 428. 91 Some arbitration rules direct the tribunal to take into account proportionality, see eg UNCITRAL Arbitration Rules art 26(3) (‘Harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted’). For a discussion of proportionality in decisions on security for costs, see Lars Markert, ‘Security for Costs Allocations in Investment Arbitrations Involving Insolvent Investors’ (2018) 11(2) Contemporary Asia Arbitration Journal 217, 235–​240. 92 See ch 2 text to n 50. 93 Eskosol SpA in liquidazione v Italy, ICSID Case No ARB/​15/​50, Procedural Order No 3, 12 June 2017 [36], emphasis in original. 94 ibid [38]. 95 Eg Nova Group Investments v Romania, ICSID Case No ARB/​16/​19, Procedural Order No 7, 29 March 2017 [242]; Lao Holdings and Sanum Investments v Laos, ICSID Case No ARB(AF)/​16/​2 and ICSID Case No ADHOC/​17/​1, Procedural Order No 6, 26 July 2018 [36]. Edward McWhinney, ‘Equity in International Law’ in Ralph Newman (ed), Equity in the World’s Legal Systems (Bruylant 1973). 96 Sanum v Laos (n 95) [43]. 97 ibid.

Costs  197 of the proportionality of the requested security,98 ultimately concluding that the harm to Venezuela would probably be more serious than the hardship suffered by the investors.99 The tribunal affirmed its ‘discretion’ as regards the amount of security to be posted.100 It stated that, in view of the exceptional nature of the provisional measure and the fact that security is granted following only a prima facie analysis of the issues in dispute, if in the end the investors prevail and it is shown that security for costs should not have been posted, Venezuela must defray the expenses incurred by the claimants in order to obtain security.101 The tribunal considered this to be ‘an equitable and balanced solution’ from the viewpoint of the distribution of risks.102 The tribunal further called on the parties to reach an agreement regarding the ‘form and content’ of security, so as to allow the claimants to post security in the least onerous manner, while guaranteeing the protection of Venezuela’s interests.103 In Kazmin v Latvia, in order to decide on the request for security for costs, the tribunal took into account proportionality.104 It remarked that to order provisional measures, including security for costs, it was necessary to balance the parties’ interests.105 The tribunal found that since the claimant denied that he was impecunious and claimed that he had several assets, it would not be ‘difficult for him to obtain a bank guarantee at a reasonable cost’.106 The claimant could have avoided the security for costs order, if he had produced ‘convincing and reliable evidence of [his] assets’.107 Since he failed ‘to do so and even to offer a letter of comfort or other undertaking to pay a potential adverse cost award, the Tribunal had no choice but to order the security’.108 In doing so, the tribunal was careful to ensure that the amount of security was ‘proportional’ and its form ‘the least expensive for the Claimant’.109 It found that posting security of ‘a reasonable amount’ was ‘a proportional measure’ and did not impose ‘an undue burden on the Claimant’.110

98 García Armas v Venezuela, PCA Case No 2016-​08, Procedural Order No 9, 20 June 2018 [228]–​[237]. 99 ibid [237]. 100 ibid [255]. 101 ibid [259]. 102 ibid (author’s translation). 103 ibid [257] (author’s translation). 104 Eugene Kazmin v Latvia, ICSID Case No ARB/​17/​5, Procedural Order No 6, 13 April 2020 [61]. 105 ibid. 106 ibid. 107 ibid. 108 ibid. 109 ibid. 110 ibid.

198  Equity, Compensation, and Costs

IV. Conclusions This chapter has argued that, when international courts and tribunals assess compensation and when investment tribunals decide on cost apportionment and security for costs, they sometimes rely on equity. In doing so, they tend to be mindful of the circumstances of the particular case. Decisions on compensation take equitable considerations into account when quantifying both material and non-​material harm, especially when the determination is challenging or the law does not provide detailed guidance. Costs decisions have regard both to the equitableness or reasonableness of the division of costs between the parties and the reasonableness of the costs incurred. Finally, equitable considerations in decisions on security for costs are distinctly appropriate, since security for costs is by its nature a provisional measure and so an equitable remedy. Certainly, not all decisions on compensation and costs have or must have recourse to equitable principles. When the law is clear and the assessment straightforward, to do so may be unnecessary. Ultimately, the decision on whether to have recourse to equity is predicated on the applicable law and the particularities of each case.

10 Conclusion This book has tried to make sense of the legal concept of equity as it operates in the international law of the 21st century, setting it on a new basis and dealing with some common misconceptions about it. One of them is the received idea that equity, as it functions in international law, is an extra-​legal concept –​an appeal to natural justice –​which this book has firmly rejected. A principle with a long pedigree, equity has been present in legal thought and in municipal legal systems since antiquity. Introduced in international legal decisions through claims commissions and arbitral tribunals, sometimes operating on the basis of an absolute equity mandate, equity became progressively part and parcel of the international law mainstream. To appreciate equity in all its breadth and complexity, the book has examined it in light of the jurisprudence of a number of international courts and tribunals. In contrast with earlier studies on the topic, the book has been informed by a body of judicial and arbitral case law that has never been so large and varied. Moreover, it has drawn extensively on the prolific case law of investment tribunals, gaining insights from a valuable source that is typically ignored in public international law scholarship. The thrust of this book’s argument is that equity is a legal concept and a source of international law whose reach stretches beyond what has previously been conceded. International courts and tribunals apply equity much more widely than is generally understood. They apply it when deciding disputes with largely varying subject-​matters, from the early phases of the adjudicatory process, such as when they give effect to the futility exception, to the calculation of compensation and decisions on costs. They also apply equity, even if they do not invoke it, when they resort to equitable principles, such as reasonableness, estoppel, and proportionality. Equity permeates international law and this is why it is so important to understand it. The book has challenged the idea that equity opposes the law or that it is something distinct from it. It suggested that equity is applicable in international law, even when it is not embedded in treaties. International courts and tribunals generally regard equity either as customary international law or as a general principle of law. While acknowledging that equity fulfills the The Function of Equity in International Law. Catharine Titi, Oxford University Press. © Aikaterini Titi 2021. DOI: 10.1093/​oso/​9780198868002.003.0010

200 Conclusion criteria to qualify as either, the book has advanced a different normative explanation, which is that equity is a general principle of international law of a customary law nature, owing to its repeated application at the international level. Ultimately, however, the book stressed that what matters most is to recognise that the international judge or arbitrator has the power to apply equity because, whether one subscribes to one normative explanation or another, equity is a source of international law. By the same token, the book rejected the idea that equity can function contra legem. After a critical review of the traditional understandings of equity as infra, praeter, and contra legem, the book argued that, useful as this typology may be as a heuristic device, it flies in the face of reality. Strict divisions between different types of equity are untenable and this tripartite typology does not account properly for the relationship between contra legem equity and law. When international courts and tribunals invoke equity, they typically claim to apply infra legem equity, equity ‘within the law’. They rarely claim to apply equity praeter legem and certainly never do they admit to applying equity contra legem. However, international courts and tribunals do apply what is traditionally perceived as contra legem equity. This became obvious, for instance, in the examination of equitable principles. At least two of these principles –​the clean hands doctrine and abuse of rights –​are applications of contra legem equity, since the letter of the strict law is ignored in order to do justice. The book has taken a step further to explain that to talk of an equity contra legem is to fall into a contradiction, since equity –​including contra legem equity –​does not oppose the law; it may only oppose the letter of the law. An application of contra legem equity is still an application of law. The book also underlined the necessary distinction between ex aequo et bono decision-​making and other applications of equity, including contra legem equity, with which the ex aequo et bono mandate is sometimes equated. It argued against the common assumption that ex aequo et bono is incompatible with the settlement of legal disputes and stressed that the rare arbitration tribunals to have rendered ex aequo et bono decisions have tended to exercise their mandate cautiously. That said, the uncertainty inherent in this type of decision-​ making and its tendency to run counter to the rights of one party mean that it will remain exceptional and equitable considerations will instead be taken into account outside this mandate. Equity contributes to the development of international law and, as international law grows, continually covering new fields and types of disputes, the value of equity grows with it. By definition circumstance-​specific, equity must remain flexible in order to fulfil its function qua justice. Yet over time, through

Conclusion  201 its express incorporation in international law and in the jurisprudence of international courts and tribunals, equity hardens. In effect, some of the equitable innovations of the past are today’s hard law. This means both that equity is more fully received into the international legal system than may first appear and that new equity is still necessary. If its evolution thus far is anything to go by, equity will inform new international law and it will continue to have a place and a role to play. As time goes by, equity will still be necessary and useful, part of international law, and an imperative of law as justice that international courts and tribunals are bound to apply.

Index For the benefit of digital users, indexed terms that span two pages (eg 52–​53) may, on occasion, appear on only one of those pages.  absolute equity  8–​9, 27, 31–​33, 65, 69, 84–​ 85, 94–​95, 97–​98, 108, 131–​132, 141–​ 142, 145, 152n126, 187–​188, 199 see also ex aequo et bono  abuse of rights  viii–​ix, 13, 33, 134–​135, 161, 171–​172, 178–​181, 184, 200 acquiescence  viii–​ix, 2n15, 13, 22–​23, 124, 161, 166–​167, 168–​171 aequitas see Roman equity amiable compositeur  141n28, 148–​150, 152, 191 Anglo-​French Continental Shelf case  46–​48, 59, 61–​63, 127, 162–​163, 183 annulment of investment awards  33, 147, 151–​154 Antigone  12, 85, 99–​101, 103 Aristotle  5, 11, 17–​20, 23–​25, 28, 69–​70, 89–​90, 99, 106, 162, 181–​182 Atlantic Triton v Guinea  139–​140, 148–​149 Barcelona Traction case  30, 33, 35–​36, 38, 50–​58, 65, 71–​72, 75, 76, 82–​ 83, 87n21, 98, 132n223 Benvenuti & Bonfant v Republic of the Congo  139–​141, 147–​148, 150–​151 Cayuga Indians case  35–​36, 55, 188–​189 Cicero  1n1, 11, 18n8, 20–​21 civil disobedience  99 claims commissions  8–​9, 11–​12, 27, 29, 30–​34, 36–​37, 65, 74–​75, 82–​83, 97–​ 98, 162, 175–​176, 187, 199 clean hands doctrine  7, 13, 37–​38, 161, 174–​178, 184, 200 climate change  3, 8, 78–​79, 119 common heritage of mankind  viii, 12, 76–​ 77, 79–​81, 83 compensation  14, 50–​52, 58–​59, 97–​98, 101–​102, 117–​119, 120–​121, 145–​146,

150–​151, 154, 159–​160, 174, 185–​193, 198, 199 corrective justice see justice cost apportionment  14, 185–​186, 194–​ 195, 198 cultural heritage  viii, 2, 7, 12–​13, 79–​80, 81n106, 114, 120, 155–​157, 174 see also cultural property, restitution of cultural property, restitution of  80n96, 155–​157, 174 customary international law  viii, 12–​13, 21–​24, 39–​42, 46–​47, 55n253, 57–​58, 61–​62, 63–​64, 88n28, 90–​92, 94, 96–​ 97, 100–​101, 102–​103, 105, 109–​110, 112–​119, 122–​128, 132–​136, 155–​156, 175n134, 199–​200 disproportionality see proportionality distributive justice see justice Diversion of Water from the Meuse case  30, 37–​38, 104–​105, 107, 175–​176 double recovery see unjust enrichment English equity  18, 24–​26, 27–​28, 162 epieikeia  17–​20, 28 see also Aristotle equality  viii–​ix, 13, 17–​18, 20, 25–​26, 37–​ 38, 76–​78, 134–​135, 162–​163, 188–​189 equitable representation  12, 76–​77, 81–​82 equity  contra legem  vii–viii, 5–​6, 8, 12, 13, 70–​ 71, 84–​85, 87, 91–​92, 94–​96, 98–​99, 101–​102, 103, 106, 140–​141, 158–​160, 161, 174–​175, 181, 184, 185, 200 infra legem  viii, 6, 12, 72n33, 84–​87, 88, 91, 92–​98, 102–​103, 140–​141, 181, 185, 200 intergenerational  12, 76–​77, 80–​81, 83, 115–​116, 119

204 Index equity (cont.) praeter legem  viii, 12, 41, 60, 69–​70, 82–​83, 84–​90, 91–​93, 94–​95, 98, 103, 140–​141, 185–​186, 200 relationship with law  vii–​5, 6, 12–​13, 34–​37, 74, 85, 87–​88, 94–​95, 99, 105–​ 107, 114, 129–​132, 135–​136, 158n169, 188–​189, 200 estoppel  viii–​ix, 2, 13, 22–​23, 134–​135, 161, 165–​169, 170, 171–​172, 184, 194–​ 195, 199 ex aequo et bono  vii, 1–​2, 8–​9, 13, 27, 32, 34–​38, 43–​44, 60, 84–​85, 87n20, 91, 94, 101–​102, 104–​105, 114n68, 131–​ 132, 139–​160, 188–​190, 192n60, 200 see also absolute equity exhaustion of local remedies  96–​98 fair and equitable treatment  viii, 2, 95–​96, 109–​110, 117–​119, 124–​126, 164–​165, 167–​168, 173, 182n197 gaps in law  36–​37, 69–​70, 72n34, 84–​85, 87–​90, 93–​95, 98, 134 general principles of international law  viii, 6, 12–​13, 64, 102, 105, 114, 128–​129, 132–​136, 171–​172, 179n167, 175–​176, 187, 199–​200 general principles of law  12–​13, 37–​38, 41, 56, 84–​85, 87n20, 90–​93, 100–​101, 104–​105, 112, 113–​114, 128–​136, 171n97, 173–​176, 178–​179, 199–​200 glossators  23–​24 good faith  viii–​ix, 1–​2, 13, 42, 73, 94, 104n1, 109–​110, 114, 117–​119, 124, 134–​135, 139, 144–​146, 161, 163, 165–​ 166, 171–​173, 174–​175, 178–​179, 184 individualised justice see justice intergenerational equity see equity international equity tribunal  27–​28 international space law  7, 12–​13, 114, 121 investment arbitration  2, 8–​9, 13, 14, 141–​ 142, 147–​154, 163, 170–​171, 181–​182, 185–​186, 192–​193, 194–​197 ius cogens  100–​103, 159, 161

justice  corrective  viii, 5, 12, 19, 24–​25, 28, 39–​40, 44n136, 69–​77, 82–​83, 91, 100n120, 106 distributive  vii, 5, 8, 12, 27–​28, 41, 63, 69–​70, 76–​83, 162–​163 relationship with equity and law  3–​6 individualised  6–​7, 12, 50, 59, 69–​70, 71–​73, 83 supplementary  viii, 5, 12, 69–​70, 75n54, 82–​83 legal disputes  141–​142, 144, 156–​160, 200 maritime boundary delimitation  vii–​viii, 4n29, 7, 10n53, 11–​12, 27–​28, 29–​30, 38, 39–​50, 58–​59, 61–​65, 77, 82–​83, 109–​110, 114–​115, 124, 127–​128, 134–​ 135, 144, 162–​163, 169, 181–​184 mediation  104n1, 149n101, 156–​157 mixed claims commissions see claims commissions non liquet  88, 128–​129 see also gaps in law North Sea Continental Shelf cases  27–​28, 30, 39–​41, 43–​45, 63, 65, 73, 77, 92–​93, 110–​112, 114–​115, 123–​124, 126–​127, 127n187, 162–​164, 167, 182–​183 Norwegian Shipowners’ claims  34, 36, 188–​189 political disputes see legal disputes post-​glossators  23–​24 principles and rules  43, 63, 91–​92, 108–​ 112, 134n234, 135–​136 proportionality  viii, 2, 9–​10, 13, 20, 33, 40–​41, 44–​50, 58–​59, 62, 76–​77, 78–​79, 161, 163, 181–​184, 193, 195–​197, 199 provisional measures  14, 22–​23, 148–​151, 195–​197, 198 Rann of Kutch case  59, 60, 158n169 reasonableness  viii, 1–​2, 13, 40–​41, 42, 45, 60, 110–​111, 115–​119, 120–​121, 124, 142–​143, 146–​148, 163–​165, 167–​168, 171–​172, 181–​182, 183, 188, 189–​198, 199

Index  205 Roman equity  vii, 11, 17–​18, 20–​23, 24–​26, 28, 38, 88n28, 162, 174–​175 rules and principles see principles and rules security for costs  2, 14, 185–​186, 193, 195–​ 197, 198 sources of international law  viii, 4–​5, 11–​13, 18, 28, 64, 82–​83, 90, 93n67, 103, 104–​ 108, 113–​136, 140–​141, 184, 199–​200 see also customary international law; general principles of law; general principles of international law

supplementary justice see justice teleological interpretation  6, 23, 92, 94–​ 96, 106 UNCLOS  8–​9, 27, 43–​44, 46–​47, 58, 63–​ 65, 75, 77, 79–​80, 109–​110, 114–​115, 120, 134–​135, 180–​181 UNESCO  80n96, 120, 155–​157, 189–​190 unjust enrichment  viii–​ix, 13, 54–​55, 134–​ 135, 161, 173–​174, 184, 192