Anthony Aust. Handbook of International Law

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state. A multinational company can pose further problems since it may be incorporated in one state,

have its headquarters in another, and do most of its business in other states.

But all depends on the

precise facts and circumstances, including the reason nationality is an issue.

A treaty, especially a bilateral treaty, will often define which companies are to be regarded as

covered by it. This is particularly important for bilateral investment treaties (BITs), which provide

for compensation in the event of expropriation.

The grant of the right to operate scheduled air

services is usually restricted to airline companies that are substantially owned and effectively

controlled by the parties or their nationals.

The jurisdiction of the Iran–US Claims Tribunal

is limited to claims by corporations that are

incorporated under either Iranian or US law, provided that 50 per cent or more of the stock is held by

Iranian or US nationals. Nationality is presumed if the claimant can establish prima facie that there

is such a 50 per cent holding and the respondent produces no evidence to the contrary. But the rule

should not be seen as reflecting any general principle, being limited to the particular

circumstances.

Ships and aircraft

A ship has the nationality of the state whose flag it is entitled to fly irrespective of the nationality of

the person(s), or company, which owns it. The flag can be readily changed.

The flag state is

important for the purpose of jurisdiction over the ship, especially on the high seas.

An aircraft has

the nationality of the state in which it is registered,

but this can also be changed. In both cases,

nationality for the purpose of international claims may have to be made in respect of the beneficial

owner of the ship or aircraft.

Diplomatic protection

A state has the right to protect its nationals abroad, that is to say, to ensure that another state treats

them in accordance with treaties binding on both states and the minimum standards for treatment of

aliens

14. See Oppenheim, p. 863, n. 15, on the complexities of multinational company nationality.

15. See p. 375 below.

16. See p. 348 below.

17. See p. 445 below for more about the Tribunal.

18. See Collier and Lowe, The Settlement of Disputes in International Law, Oxford, 1999, pp. 80–1 and

194–5 for more details of how the rule operates.

19. See further, p. 316 below.

20. See p. 312 below.

21. See further, p. 346 below.

22. See Brownlie, pp. 471–2.

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laid down in customary international law. But there is no corresponding duty on a state to protect its

nationals.

Not surprisingly, this is generally not understood. Whether a state decides to take action

to protect one of its nationals (including legal persons) will depend on several factors: whether the

national can establish the necessary facts that he has been treated wrongly by the foreign state;

whether he can, and has taken, steps to correct the wrong; whether the case is meritorious; whether

the state has the means to take effective action with the foreign state.

If a state makes a formal

claim in respect of one of its nationals, natural or legal, the person must also satisfy the nationality-

of-claims rule.

Since 1997, the International Law Commission has been studying diplomatic

protection, which covers several of the issues outlined in this chapter. The ILC’s work will not be

finished for a few years yet, and some of its conclusions may well be controversial.

Aliens

Oppenheim. Oppenheim’s International Law, 9th edn, London, 1992, pp. 896–948.

In relation to a state, an alien is any person who is not one of its nationals (i.e. a non-national). An

alien will not have the same rights and obligations as nationals, although some states confer on

aliens certain rights otherwise enjoyed only by their nationals. The principal disadvantage of being

an alien is that one has no entitlement to enter or stay in a foreign state, unless this is conferred by

treaty. Entry and residence can be made subject to presentation of a passport or a national identity

card, obtaining a visa and restrictions as to length of stay, place of residence and employment. A

national of an EU state enjoys almost unrestricted freedom of entry into other EU states, although

permanent residence can be subject to certain restrictions. For certain EU states, the Schengen

Agreement 1990 has abolished internal immigration controls for EU and third state citizens.

In the

case of tourists and short-stay visitors, many states have unilaterally waived the requirement of a

visa or have concluded bilateral visa-abolition agreements.

For migrant workers and workers who

frequently cross a

23. Barcelona Traction ICJ Reports (1970), p. 3, at para 78; 46 ILR 178.

24. See Abassi [2002] EWCA Civ 1598.

25. See p. 441 below.

26. See www.un.org/law/ilc/.

27. ILM (1991) 68, and see p. 483 below.

28. For example, the Poland–UK Agreement 1992, UKTS (1992) 69.

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frontier (fronteliers), there are many bilateral treaties waiving visa and passport requirements.

Aliens are subject to the law and jurisdiction of the foreign state. Certain of the laws of his own

state will continue to apply to him, although they may well not be enforceable while he is abroad;

and the jurisdiction of his home state will extend to certain crimes and other acts committed by him

while abroad.

Unless prevented by its treaty obligations, the foreign state is free to treat aliens less

favourably than its own nationals, for example by prohibiting them from owning land (as in

Denmark) or doing certain work, especially in the professions. Aliens are usually not allowed to be

government officials, to stand for parliament or to vote.

But, an alien who takes up residence will

normally be subject to local taxation. If he still remains subject to the tax laws of his own state, a

double taxation agreement between the two states may lessen his tax burden.

The life of an alien is – or at least should be – better if the foreign state is a party to the

International Covenant on Civil and Political Rights 1966.

These require that all persons in the

territory of a party, regardless of national origin, enjoy certain basic rights. Other human rights

treaties will also apply to aliens. Many bilateral treaties afford specific protection to aliens, such as

treaties of commerce and friendship, and consular conventions.

Property of aliens

An alien, whether an individual or a corporation, may be subject to special restrictions on the

holding of property. But if an alien owns property lawfully, customary international law requires the

state to protect his property rights by allowing him access to its courts on an equal footing to its

nationals. But a state (by means of governmental or other public bodies) is not prevented from

expropriating the property of aliens so long as certain conditions are met. ‘Expropriation’ means the

compulsory deprivation of property against the payment of compensation. ‘Nationalisation’ usually

means general expropriation, typically of a whole industry. In contrast, ‘confiscation’ is the taking

of property without compensation.

29. See Oppenheim, pp. 901–3.

30. See pp. 43-5 above.

31. But see p. 180 above for a notable exception.

32. See, for example, the Australia–UK Double Taxation Agreement 2003, UKTS (2004) 5.

33. 999 UNTS 171 (No. 14668); ILM (1967) 368; UKTS (1977) 6. See pp. 235 et seq below.

34. See the extensive references to cases in Oppenheim, pp. 911–33.

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‘Sequestration’ is the taking possession of property temporarily, the legal title to which remains with

the owner. (References below to ‘expropriation’ generally include also nationalisation, confiscation

or sequestration.)

Expropriation can be done by various means. It is rarely effected by sending soldiers to occupy a

factory and replacing all the managers with local officials. It can be done by much less obvious

means, such as imposing penal rates of taxation on certain types of companies to drive them out of

business. One has to examine all the facts and circumstances to determine the substantive effect of

the act that the alien owner claims has deprived him of his property.

An act that causes a

significant diminution in the value of the property may well constitute expropriation.

The factors which must be considered in determining whether an expropriation is lawful in

international law are (1) whether it was done in accordance with proper legislation or arbitrarily; (2)

whether it was done for a public purpose (an environmental concern may not be enough);

(3)

whether aliens were discriminated against; and (4) whether appropriate compensation has been paid.

Whether the compensation is appropriate depends on whether it is adequate and effective, and

promptly paid. Whether these criteria are met will depend on the facts of each case. The calculation

of the amount of compensation is usually complicated, but compensation for loss of property should

reflect its market value immediately before the expropriation was formally announced or had

become known. To be effective, the compensation must be paid in a form that is of value to the

alien. If paid in money, it must be in a currency that can be transferred abroad and freely exchanged.

Such, or similar, criteria have been included in thousands of bilateral investment treaties (BITs),

that are generally concluded between a developed and a developing state.

Disputes may also be

submitted under other multilateral treaties such as the World Trade Organization Agreement,

the

North American Free Trade Agreement (NAFTA)

or Protocol 1 to the European Convention on

Human Rights 1950 (ECHR),

provided the states involved are parties to them. Expropriation

claims may also fall within the jurisdiction of specially established tribunals, such as the Iran–US

Claims Tribunal,

or the UN Compensation Commission

35. See Sporrong and Lönnroth (1982) 5 EHRR 35; 68 ILR 86, at pp. 104 et seq., and Starrett Housing

Corp. v. Iran, ILM (1984) 1090 at 1107–17; 85 ILR 349.

36. Santa Elena v. Costa Rica, ILM (2000) 1317.

37. See p. 373 below.

38. See p. 382 below.

39. See p. 387 below.

40. See p. 237 below.

41. See p. 445 below.

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established by the UN Security Council by Resolution 687 to compensate those who suffered loss as

a result of Iraq’s invasion of Kuwait.

(On dispute settlement generally, see Chapter 22 below.)

Asylum

A state can let an alien enter and remain in its territory even if his own state objects. This is more

correctly called the grant of asylum (or political asylum), and is conferred by states in their

discretion. Aliens have no ‘right’ of asylum,

it is merely the right of the state to grant it. The

practice of asylum pre-dates by centuries the Refugee Convention (see below). The concept is wider

than refugee status in that it can be granted when the person has no fear of persecution. Persons

fleeing from famine or floods and given shelter in a foreign state may often be misdescribed as

‘refugees’ because they seek refuge, but they are more accurately described as displaced persons

who have been given asylum, often only for a temporary period. In the same way, persons genuinely

seeking refuge from persecution are often confusingly referred to as asylum-seekers.

Diplomatic asylum

Diplomatic asylum must be clearly distinguished from the asylum just described. Diplomatic asylum

is the giving of protection by a diplomatic mission to a person fleeing from the authorities of the

host state (not just from a crowd). The person can be a local national, a national of the sending state

or a national of a third state. Except as between some Latin America states, this practice is not

favoured since it amounts to the sending state abusing the inviolability of its diplomatic mission

by acting in a manner which conflicts with its duty to respect the local laws, and indeed the

sovereignty, of the host state.

Nevertheless, from time to time persons will enter a mission and

claim diplomatic asylum. It may be either physically difficult to eject them (though the mission can

authorise the local police to do so) or politically awkward. The intruders may have good grounds for

believing that they will be treated severely by the local authorities, and there will be the inevitable

media attention. If there is

42. See www.unog.ch/uncc/ and p. 446 below.

43. The reference to ‘asylum’ in Article 14 of the Universal Declaration of Human Rights 1948 (see p. 235

below) is to the rights of refugees.

44. See p. 129 below.

45. See p. 152 below.