(Diplomatic Protection & International Liability for Injurious Consequences Arising out of Acts not Prohibited by International Law)

New York, 1 November 2004

Mr. Chairman,

Since this is my first time taking the floor at the 6th Committee, please allow me to congratulate on your election as the Chairman of this Committee. My congratulations also go to other elected members of the bureau. I believe that under the leadership of you and the bureau, the current session will surely achieve its positive results. The Chinese delegation listened attentively to the clear introduction to the work of the International Law Commission (ILC) by its Chairman of the current session Mr. Teodor Viorel Melescanu. We would like to congratulate the ILC on its achievements made under the capable leadership of its Chairman Mr. Melescanu. Now I would like to offer my comments on the following two topics: “diplomatic protection” and “international liability for injurious consequences arising out of acts not prohibited by international law”.

As to the topic “diplomatic protection”, the ILC adopted, at its 56th session, as planned and on first reading, a set of 19 draft articles on diplomatic protection. We offer our congratulations upon this achievement, and express our appreciation to the Special Rapporteur Mr. Dugard for his outstanding contribution to the treatment of the topic.

The draft articles adopted on first reading have not only codified in a systematic manner the rules of customary international law on diplomatic protection and confirmed the rule of customary international law providing that the right of diplomatic protection belongs to the State of nationality of the injured natural or legal person, and the rule requiring the exhaustion of local remedies as a prerequisite for diplomatic protection, but have also, in the context of the progressive development of international law, formulated provisions with regard to diplomatic protection of stateless persons, refugees and legal persons other than corporations; furthermore, the articles also seek to define the relationship between diplomatic protection and other protection regimes. Broadly speaking, we are satisfied with the draft articles.

Following are our observations on a few specific questions contained in the draft articles or the commentaries. We reserve our right to make further comments on the draft in the future.

The first observation is with regard to the commentary to article 12. Article 12 is a provision on “direct injury to shareholders”. It states: “To the extent that an internationally wrongful act of a State causes direct injury to the rights of shareholders as such, as distinct from those of the corporation itself, the State of nationality of any such shareholders is entitled to exercise diplomatic protection in respect of its nationals.” The commentary states in para 4: “Article 12 does not specify the legal order that must determine which rights belong to the shareholder as distinct from the corporation. In most cases this is a matter to be decided by the municipal law of the State of incorporation. Where the company is incorporated in the wrongdoing State, however, there may be a case for the invocation of general principles of company law in order to ensure that the rights of foreign shareholders are not subjected to discriminatory treatment.” We agree that, in principle, the matter of which rights belong to the shareholder is to be decided by the municipal law of the State of incorporation. However, we cannot agree with the view that “where the company is incorporated in the wrongdoing State, there may be a case for the invocation of general principles of company law in order to ensure that the rights of foreign shareholders are not subjected to discriminatory treatment”. There is no automatic linkage between a company’s incorporation in the wrongdoing State and possible discriminatory treatment to be suffered by foreign shareholders. The mere fact that the company is incorporated in the wrongdoing State is insufficient basis to presume that the rights of foreign shareholders will be subjected to discriminatory treatment. The presumption will be valid only when the rights of foreign shareholders accorded by the municipal law of the State are unreasonably less than the rights accorded to local shareholders. Furthermore, it remains undefined what rules constitute “general principles of company law”. Even if such “general principles” do exist, it remains unclear to what extent such “general principles” can play a role in ascertaining the rights of foreign shareholders and in ensuring that their rights are not subjected to discriminatory treatment. Therefore, even in the case where the company is incorporated in the wrongdoing State, in principle, the matter of which rights belong to the shareholders and which rights belong to the corporation should still be decided by the municipal law of the State.

The second observation is on article 16. This article provides for 4 situations where local remedies do not need to be exhausted: (a) The local remedies provide no reasonable possibility of effective redress; (b) There is undue delay in the remedial process which is attributable to the State alleged to be responsible; (c) There is no relevant connection between the injured person and the State alleged to be responsible or the circumstances of the case otherwise make the exhaustion of local remedies unreasonable; (d) The State alleged to be responsible has waived the requirement that local remedies be exhausted. Of the 4 exceptions, (d) poses no difficulty for us. Nonetheless, we feel the need to stress that for a waiver to be valid it has to be an express one. As to whether a given circumstance constitutes one of the other three exceptions, there is a question of who makes the judgment. The commentary may need to further elaborate on the question. In practice, it is the injured natural or legal person who would first present to the State of nationality the claim that local remedies need not be exhausted. The State of nationality would review the case and make a decision. If the claim is viewed favorably, then, before the person concerned exhausts local remedies, and for the protection of its national, the State of nationality can make diplomatic representations with the State of wrongful act; or, it can seek to hold the State of wrongful act to bear international responsibility through international judicial means, and, when it does so, it will be the relevant international judicial bodies that would make a final judgment on whether the circumstance warrants an exception. It can be seen that the State of nationality of the injured person plays a major role in judging whether there is a case where local remedies do not need to be exhausted, and its judgment has a direct bearing on whether an international claim can be made before local remedies are exhausted. Despite the intention of the Commission to provide for objective and clear exceptions in article 16, we feel that in the case of (a) (b) and (c), there is still considerable room for discretionary judgment by the State of nationality, making it hard to prevent abuses of the exceptions.

The third observation relates to the commentary to article 16. In para 3, it states: “it (the Commission) therefore preferred the third option which avoids the stringent language of “obvious futility” but nevertheless imposes a heavy burden on the claimant by requiring that he prove that in the circumstances of the case, and having regard to the legal system of the respondent State, there is no reasonable possibility of an effective redress.” Here the term “claimant” seems to refer to the injured person rather than his State of nationality. The question here is: to whom is the injured person proving that local remedies need not be exhausted. If it is the State of nationality, then the commentary does not need to offer an explanation because the matter falls in the domestic procedure of the State of nationality; if it concerns an international judicial body dealing with the issue of diplomatic protection, then, an individual does not really have access in order to present a case. We are of the view that, at the international level, the burden of proof falls on the State making a claim on behalf of its national, rather than on the national as an individual. We therefore hope that the Commission will consider making appropriate revisions with regard to this part of the commentary.

With regard to (c), the third exception, para 7 and 8 of the commentary give examples of the absence of a voluntary link. Some, for instance those afforded by transboundary environmental harm, are indeed examples of the absence of a voluntary link. But we do not believe it is proper to discuss such examples in the context of exceptions to the local remedies rule. The reason is that the injuries shown by the examples may arise out of acts not prohibited by international law rather than out of internationally wrongful acts of the State. Such injuries therefore would go beyond the scope of diplomatic protection, because the prerequisite of the rules of diplomatic protection is the existence of an internationally wrongful act of a State.

Our fourth observation is on article 18, which states: “The present draft articles do not apply where, and to the extent that, they are inconsistent with special treaty provisions, including those concerning the settlement of disputes between corporations or shareholders of a corporation and States.” This provision in effect gives precedence to “all special treaty provisions” over our draft articles. It is somewhat discordant with the provision of article 17, which states: “The present draft articles are without prejudice to the rights of States, natural persons or other entities to resort under international law to actions or procedures other than diplomatic protection to secure redress for injury suffered as a result of an internationally wrongful act.” It is also at odds with the original intention of the Commission for article 18. Initially, the Commission only intended, through this article, to give precedence to those “special treaty provisions” such as contained in investment protection treaties over the draft articles in the application. We therefore propose the deletion of the wording “including those”, so that the text of article 18 will read:” The present draft articles do not apply where, and to the extent that, they are inconsistent with special treaty provisions concerning the settlement of disputes between corporations or shareholders of a corporation and States.”

Our fifth observation relates to article 19, which says:” The right of the State of nationality of the members of the crew of a ship to exercise diplomatic protection on their behalf is not affected by the right of the State of nationality of a ship to seek redress on behalf of such crew members, irrespective of their nationality, when they have been injured in the course of an injury to the vessel resulting from an internationally wrongful act.” In so far as the article confirms that the right of the State of nationality of the crew members to exercise diplomatic protection is not affected, we view the article favorably. On the other hand, even though we do not oppose a draft article providing for the right of the State of nationality of a ship to seek redress on behalf of foreign crew members, bearing in mind the interest of the progressive development of international law, strictly speaking, whether this right is well established in international law needs to be further studied. Besides, we believe article 17 in fact has covered the matter in a general sense. We therefore hope that the Commission will give further thought to the need for a separate article on the right of the State of nationality of a ship to seek redress for foreign crew members.

Now comes the topic “international liability for injurious consequences arising out of acts not prohibited by international law”. In just 3 years following the conclusion of its work in 2001 on the draft articles on prevention of transboundary harm from hazardous activities, the International Law Commission successfully completed its first reading of the Draft Principles on the Allocation of Loss in case of Transboundary Harm Arising out of Hazardous Activities. On behalf of the Chinese delegation, I would like to congratulate the Commission on this accomplishment. Our appreciation also goes to Mr. Rao, the Special Rapporteur, for his outstanding contribution in this regard.

The draft articles on prevention of transboundary harm from hazardous activities serve as a useful guide for States in the prevention of transboundary damage. However, preventive measures alone cannot completely eliminate the possibility of transboundary damage. Therefore, compensation for the victims in transboundary damage and the determination of the liability of the operator or the State are still important issues the international community needs to resolve. The Draft Principles on the Allocation of Loss in the Case of Transboundary Harm Arising out of Hazardous Activities seek to regulate compensation liability and damage allocation from the perspective of general principles. On the whole, the provisions are balanced and will make a significant contribution to the resolution of compensation issues in transboundary damage.

We endorse the principle of prompt and adequate compensation to victims provided for in the draft principles. The primary liability should lie with the operator. In our view, the draft principles are complementary in nature and are without prejudice to existing international regimes. They should not have any major effect on the domestic regimes of States either.

We have two specific comments on the draft principles.

Firstly, we have reservations on the inclusion of damage to the environment in the definition of damage. In our view, the inclusion of damage to the environment per se lacks adequate grounds in international law. We hope that the International Law Commission will carefully study the advisability of including damage to the environment per se in the draft principles.

Secondly, the strict liability regime governing transboundary damage in the draft principles lacks flexibility and is not entirely consistent with current international practice. We believe that the draft principles should consider the approach adopted by some treaties and adopt a regime combining strict liability and fault liability, which is applicable mutatis mutandis to specific cases.

As to the final form of the outcome of the work on this topic, we believe that it can take the form of a declaration, a guiding principle or a model law which can serve as a guide for states and also form a basis for a future convention.

This concludes my comments.

Thank you, Mr. Chairman.