Oman Held Not Liable for Actions of State-Owned Enterprise
In their International Investing column, Elliot E. Polebaum and Helene Gogadze discuss a recent investor-state arbitration in which a tribunal decided that the actions of the Omani state-owned enterprise Oman Mining Company were not attributable to Oman, and therefore the state of Oman could not have breached its obligations under the U.S.-Oman Free Trade Agreement.
December 02, 2015 at 09:00 PM
11 minute read
Foreign investors often deal with individuals or entities related to the government of the country in which they invest, rather than directly with government officials or arms of the state that have traditionally been regarded as state organs. In the event of a dispute related to their investment, foreign investors can hold a host state liable under international law (e.g., for breach of an investment treaty) only for those acts and measures that are attributable to the state. Therefore, whether the investor can establish that the state is responsible for the wrongful conduct of an individual or an entity can be an important threshold question in investor-state arbitrations.
The ILC Principles on the Responsibility of States for Internationally Wrongful Acts (ILC Articles) are generally accepted to reflect customary international law on the attribution of conduct to states. International arbitration tribunals often rely on the ILC Articles when deciding an attribution issue. Pursuant to the ILC Articles, a state can be held responsible for an individual's or an entity's wrongful conduct on at least one of the following grounds: (A) when the individual or the entity is a “State organ,” whether legislative, executive, or judicial (Article 4); (B) when the individual or the entity is not a state organ but “is empowered by the law of that State to exercise elements of the governmental authority … [and] is acting in that capacity in the particular instance (Article 5);” or (C) when the individual or the entity “is in fact acting on the instructions of, or under the direction or control of, [a] State in carrying out the conduct” (Article 8).
Despite the guidance provided by the ILC Articles, the issue of attribution in investor-state arbitrations has been the subject of much controversy, and the jurisprudence is far from settled on certain parameters of attribution. The question of attribution should as a general matter be straightforward when an investor is complaining about the acts of traditional state organs, but it may become complicated and controversial when the dispute arises from actions of entities owned and controlled by the government or of entities otherwise closely related to the government.
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