Tams, C. J. (2016) State succession to investment treaties: mapping the issues. ICSID

Review: Foreign Investment Law Journal, 31(2), pp. 314-343.

There may be differences between this version and the published version. You are

advised to consult the publisher’s version if you wish to cite from it.

http://eprints.gla.ac.uk/116860/

Deposited on: 26 February 2016

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http://eprints.gla.ac.uk

Electronic copy available at: http://ssrn.com/abstract=2733318

Tams,StateSuccessiontoInvestmentTreaties

STATESUCCESSIONTOINVESTMENTTREATIES:MAPPINGTHEISSUES

ChristianJ.Tams*

1.Introduction

Overthepasttwodecades,asthedisciplinehasmoved intothe legalmainstream,

investment lawyers have engaged with many core aspects of public international

law. Rules on remedies, defences such as necessity, the canons of treaty

interpretation, Vienna Convention rules on denunciation – all these now regularly

featurein investmentjurisprudenceandformthesubjectofengagedcommentary.

Theirincreasingrelevancereflectsthegradualintegrationofinvestmentlawintothe

internationallegaldiscourse.1

Among the core aspects of international law, the legal rules governing State

successionoccupyaspecialplace.Statesuccession–typicallyunderstoodtomean

“thedefinitivereplacementofoneStatebyanotherinrespectofsovereigntyovera

giventerritory”2–isoneofthelesser-likedbranchesofpublicinternationallaw.Itis

widely perceived to be technical, complex and controversial: an area of law

characterisedby“analmosttotaldoctrinalschism”3(notablybetweensupportersof

acontinuityapproach,andthosearguingthatnewStateshouldbeabletostartwith

a ‘clean slate’4), but also by the nitty-gritty detail of bilateral diplomatic practice.

Many international lawyers, including thosewithgeneralist leanings, tend to steer

*TheauthorisProfessorofInternationalLawattheUniversityofGlasgowandanAcademicMemberofMatrix(London)[christian.tams@glasgow.ac.uk].1For academic commentary see e.g. F. Baetens (ed), Investment Law Within International Law:Integrationist Perspectives (2013); R. Hofmann/C.J. Tams (eds), Investment Law and GeneralInternationalLaw:FromClinicalIsolationtoSystemicIntegration?(2011);R.Hofmann/C.J.Tams(eds),InternationalInvestmentLawandItsOthers(2012).2J Crawford, Brownlie’s Principles of Public International Law (8th edn., 2012), 423. A very similardefinition is set out in Article 2(1)(b) of the 1978 Vienna Convention on Succession of States inRespectofTreaties,UnitedNationsTreatySeries,vol.1946,3,and InternationalLegalMaterials17(1978),1488.3M Craven, The Problem of State Succession and the Identity of States under International Law,EuropeanJournalofInternationalLaw9(1998)142,143.4Seefurtherbelow,sections2and4.

Electronic copy available at: http://ssrn.com/abstract=2733318

2

clear of it. Until recently, investment lawyers did not show much interest in it

either.5

In fairness, until recently, State succession to investment treaties may not have

seemed a topic worthy of detailed analysis. The contemporary incarnation of the

investment protection regime, based on bilateral investment treaties and regular

access to international arbitration, is of fairly recent origin after all; it was

establishedsimplytoolatetobeaffectedbythemainwavesofstatesuccessionthat

swepttheinternationalsystembeforethe1970s.Tobesure,themostimportantof

them–thedecolonisationprocessthatresultedinthecreationofdozensofStates

after 1945 – prompted heated debates about the status of alien property post

independence. 6 However, at the time, these debates typically implicated

contractual arrangements and rules of general international law (notably on

expropriation)ratherthaninvestmenttreatiesandtreaty-basedarbitration.7Infact,

eventhenextwaveofsuccession,viz.thebreak-upofStatesinCentralandEastern

Europe during the 1990s, for a while was not considered to raise real issues of

investmenttreatylaw.8

Yetchangeseemsunderway.Twoprominentdecisionsinthependingproceedings

between Sanum and the Lao People's Democratic Republic (‘Laos’) have exposed

sharp divisions in the application of State succession rules: in the course of the

5Inarecentpiece,PatrickDumberry lamented“[t]heabsenceofanyresearchonthe issueofStatesuccessiontoBITs"andcriticisedtribunalsforhaving,withfewexceptions,failedtooffer"reasoningon … basic State succession issues" (which he considered "disappointing"): see An UnchartedQuestion of State Succession: Are New States Automatically Bound by the BITs Concluded byPredecessorStatesBefore Independence?,Journalof InternationalDisputeSettlement6(2015),74,at96.6 Mohammed Bedjaoui’s Second Report to the UN International Law Commission (discussingeconomic and financial acquired rights) gives a flavour of the debates: see Second Report onSuccessionofStatesinRespectofMattersOtherThanTreaties,ILCYearbook1969,vol.II,69.7NewcombeandParadellmakethepointveryclearly:"Theforeigninvestmentdisputesthatensued[following decolonization] focused on two principal issues: the extent to which acquired rights,including natural resource concessions granted by colonial powers,were to be respected; and thestandard of compensation for the expropriation of those acquired rights" (in Law and PracticeofInvestmentTreaties:StandardsofTreatment(2009),at19).8Seebelow,section4,forbriefcomment.

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proceedings, an UNCITRAL tribunal9and the Singapore High Court10disagreed on

whethertheChina-LaosBITconcludedin1993appliedtoMacao(aterritoryformerly

administered by Portugal, but returned to China in 1999).11Arbitration websites

reporta that“[i]nadramaticholding"of January2016,anUNCITRALtribunalheld

Kazakhstantobeboundby thetermsofaBITconcludedby theSovietUnion,and

speculateaboutfurthercasesturningonissuesofstatesuccession.12Theexistence

of independencemovements inStates fully integrated intothepresent investment

protectionregime(inScotland/theUnitedKingdom,Catalonia/Spain,etc.) suggests

that the issue will remain on the agenda for the foreseeable future. Perhaps

unsurprisingly, recentacademiccommentaryhasbeguntoexploretherelationship

between investment treaties and State succession; however, so far, much of it

remains focused on the issues raised in the Sanum litigation13and the perennial

“doctrinal schism” 14 between adherents of ‘clean slate’ and ‘strict continuity’

approaches.15

9Sanum Investments Limited v Laos, UNCITRAL (PCA Case No 2013-13), Award on Jurisdiction, 13December 2013. A related claim has been registered by the parent company Sanum InvestmentLimited:seeLaoHoldingsNVvLaoPeoplesDemocraticRepublic(ICSIDCaseNoARB(AF)/12/6).10LaoPeople’sRepublicv.SanumInvestmentsLimited,Judgment,[2015]SGHC15.11For brief comment see below, section 5. Kugelmann provides a concise historical account: DKugelmann,Macau,inMaxPlanckEncyclopediaofPublicInternationalLaw(www.mpepil.com).12SeeLEPetersen,Inadramaticholding,UNCITRALtribunalfindsthatKazakhstanisboundbytermsofformerUSSRBITwithCanada,InvestmentArbitrationReporter,28Jan2016(athttp://www.iareporter.com/articles/in-a-dramatic-holding-uncitral-tribunal-finds-that-kazakhstan-is-bound-by-terms-of-former-ussr-bit-with-canada/)andfurtherMDGoldhaber,ArbitrationScorecard2013:TreatyDisputes,TheAmericanLawyer,athttp://www.americanlawyer.com/id=1202607030938/Arbitration-Scorecard-2013-Treaty-Disputes(describingSudapetCompanyLtd.v.RepublicofSouthSudan–thoughperhapsnotquiteaccurately,aswillbecomeclearinthecourseofthisarticle–as"thefirstICSIDdispute[believed]toturnonissuesofstatesuccession").13See e.g. N Hart and S Srikumar, Investor-State Arbitration before the High Court of Singapore:Territoriality,NationalityandArbitrability,CambridgeJournalofInternationalandComparativeLaw4(2015), 191; G Wang, International Investment Law: A Chinese Perspective (2014), at 568-570; MHwangandAChang,CaseComment:GovernmentoftheLaoPeople’sDemocraticRepublicvSanumInvestments Ltd: A Tale of Two Letters, ICSID Review 30 (2015), 506; D Lim, Case Comment:Government of the Lao People's Democratic Republic v Sanum Investments Ltd [2015] SGHC 15,Singapore Law Blog, at http://www.singaporelawblog.sg/blog/article/95; as well as The Virtue ofJudicialRestraint:TwoCommentsonLaosvSanum,GlobalArbitrationReporter,vol.10/2(2015),athttp://globalarbitrationreview.com/journal/article/33620/virtue-judicial-restraint-two-comments-laos-v-sanum.14Craven(n3),143.15SeenotablyDumberry(n5)aswellasid.,StateSuccessiontoBilateralTreaties:AFewObservationsonthe IncoherentandUnjustifiableSolutionAdoptedforSecessionandDissolutionofStatesunder

4

Against this background of long-term neglect and recent (selective) interest, the

present paper presents a bird’s eye account of questions of State succession that

ariseinrelationtoinvestmenttreaties.Theapproachadoptedisdeliberatelybroad:

what is intended is not an in-depthdiscussionofparticularproblems (suchas, for

example, the status of Macao under Chinese BITs). Instead, the subsequent

considerations are in the form of a conspectus of the legal rules applicable to

differenttypesofsuccessionscenarios,offeredtoinformdebateaboutaparticularly

trickyareaofpublicinternationallawnowconfrontinginvestmentlawyers.

2.SuccessiontoTreaties:BasicFeatures

WhenoneStatereplacesanotherasthesovereignofaparticularpartofterritory,a

number of legal problems can arise. Do individuals affected by the change

automatically become nationals of the new State? How are State assets and

liabilities tobedealtwith?What is the fateofclaims lodgedbefore thechangeof

sovereignty?Andwhathappenstotreatiesconcludedintopriortothatdate?These

issues all relate to the transfer of some legal entitlement or obligation from one

State to another; and they are commonly addressed as questions of ‘State

succession’.16Tosetthestagefortheanalysisofproblemsinrelationtoinvestment

treaties,afewintroductorywordsaboutthebasicfeaturesoflegalregimegoverning

Statesuccessionseeminorder.

the 1978 Vienna Convention, Leiden Journal of International Law 28 (2014), 3 (offering a vigorouscritiqueofthe‘strictcontinuity’approach);andfurtherAGenest,SudanBilateralInvestmentTreatiesand South Sudan: Musings on State Succession to Bilateral Treaties in the Wake of Yugoslavia'sBreakup,TransnationalDisputeManagement,vol.11/3(2014);QQerimiandSKrasniqi,TheoriesandPractice of State Succession to Bilateral Treaties: The Recent Experience of Kosovo, German LawJournal14(2013),1359.Goingbeyondcountrystudies,Tai-HengChengprovidesafulleranalysis,buthis approach isbasedona ratherbroadnotionof ‘State succession’,which, contrary tomost legalauthorities, he understands to encompass “state and government succession”: see his StateSuccessionandCommercialObligations(2006),at4;andcf.below,section2.b.,forcomment.16As Crawford notes, "the phrase 'state succession’ is employed to describe an area, a source ofproblems:itdoesnotconnoteanyoverridingprinciple,orevenapresumption,thatatransmissionorsuccessionoflegalrightsanddutiesoccursinagivencase”;inthissense,the“municipalanalogyofcontinuityoflegalpersonalityinanindividual’sgeneralproperty,passingasaninheritance,involvingapartialor‘universalsuccession'”isindeed“misleading”:seeCrawford(n2),423-424;andfurtherMCraven,TheDecolonizationofInternationalLaw:StateSuccessionandtheLawofTreaties(2007),at29-31.

5

a)AFragmentedandDisputedAreaofLaw

Thelegalregimegoverningquestionsofsuccessionisfragmentedand,asageneral

matter,notwellestablished.17Tobeginwith,itsorganisingconcept–thenotionofa

State’s‘replacementinrelationtoterritory’18–isratherdiffuse.Itcoversinstances

as diverse as the separation (secession) of parts of a State from that State; a

dependent territory’s move to independence; the complete dismemberment

(dissolution) of a State; the incorporation of one State into an existing one; the

merger (fusion) of two ormore States into a new State; and cessions of territory

betweenexistingStates.Aswillbeshowninthefollowing,thelegalregimeofState

succession draws distinctions between these different modalities of succession –

thoughwhereandhowthelinespreciselyaredrawnisoftenamatterofdebate.

Thepresent inquirycentresonlegalrelationsbasedontreaties,anditdiscussesto

whatextentthesuccessorStatesucceedstotreatyrightsandobligationscontracted

by its predecessor in the field of investment law.Of the various succession issues

enumeratedabove(successiontodebts,toassets,tonationality,etc.)thisisperhaps

themostprotracted.Fordecades,atleastwhereinstancesofsuccessionhaveledto

the emergence of a new State, commentators have disagreed on the correct

starting-point: should new States be required to adhere to treaty commitments

17According to theGerman Federal Constitutional Court, it “one of among themost disputed andleast secure parts of international law” ("eine[r] der umstrittensten und unsichersten Teile desgesamtenVölkerrechts"):seeCollectionofDecisionsoftheFederalConstitutionalCourt,vol.96,68,at79.ForexcellentoverviewsofthelegalregimeseeCrawford(n2),423-444;GHafnerandGNovak,StateSuccessioninRespectofTreaties,inDBHollis(ed),TheOxfordGuidetoTreaties(2012)396;AZimmermann, State Succession in Treaties, inMax Planck Encyclopedia of Public International Law(www.mpepil.com)(‘Zimmermann,EPIL’);andAZimmermannandJGDevaney,SuccessiontoTreatiesand the Inherent Limits of International Law, in CJ Tams/ A Tzanakopoulos/A Zimmermann (eds),ResearchHandbookontheLawofTreaties(2014),521.ComprehensiveaccountsareprovidedbyAZimmermann, Staatennachfolge in völkerrechtliche Verträge— zugleich ein Beitrag zu denMöglichkeitenundGrenzenvölkerrechtlicherKodifikation (2000) (‘Zimmermann,Staatennachfolge’);BStern,Lasuccessiond’Etats,inReceuildesCours,vol.262(1996),9;AGruber,Ledroitinternationalde la succession d'États (1986); PK Menon, TheSuccession of States in Respect to Treaties, StateProperty, Archives, and Debts (1991); and DP O’Connell, State Succession In Municipal andInternational Law, 2 vols. (1967). Based on work conducted since 1994, the International LawAssociation (‘ILA’) in 2008 adopted Resolution on ‘Aspects of the Law of State Succession’; theresolution and the Committee’s Report are available at http://www.ila-hq.org/en/committees/index.cfm/cid/11 and contained in ILA, Report of the Seventy ThirdConference,RiodeJaneiro(2008).18Cf.Article2(1)(b)ofthe1978ViennaConvention.

6

enteredintobytheirpredecessors,orshouldtheybeabletostart‘life’withaclean

slate?1920th century international practice, prompted e.g. by the great waves of

territorial re-ordering at the end of the two World Wars and the decolonisation

movement, has not provided a clear-cut answer to this question.20From the late

1960sonwards,theUNInternationalLawCommission(‘ILC’)engagedinaconscious

effortof(partial21)legalclarificationanddevelopment,22whicheventuallyledtothe

adoption of the 1978 Vienna Convention on Succession of States in respect of

Treaties (‘the1978ViennaConvention’).23ThatConvention laysdowndefault rules

and provides an important point of reference; but its ratification record is

disappointing,24andanumberof itsnormativepropositionsremaincontroversial.25

Asaconsequence,theConvention’simpactonconcreteinstancesofsuccessionhas

been mixed: in the more recent cases – the dissolution of the Soviet Union, the

CSFR; the break-up of Yugoslavia and the ensuing separation ofMontenegro and

Kosovo; theemergenceofEastTimor,EritreaandSouthSudanasnewStates;and19Craven (n 16) offers a detailed historical account (at 29-92); Zimmermann and Devaney (n 17)presentasuccinctanalysis(at516-518).20Having surveyed practice, the International Law Commission observed in 1974 that "[a] closeexaminationofStatepracticeaffordednoconvincingevidenceofanygeneraldoctrinebyreferencetowhichthevariousproblemsofsuccessioninrespectoftreatiescouldfindtheirappropriatesolution”:seeILCYearbook1972,vol.II/1,226(para.31).21AsBrigitteSternnotes,the1978ViennaConventiondoesnotaimtoregulatesuccessiontotreatiescomprehensively(n17,at125).Notably,itprovidesverylittleguidanceonthequestionofsuccessionto constitutive treaties establishing international organisations: on this see Article 4 of the 1978ViennaConvention;andfurtherbelow,section3.22The problem of state succession had already been included in Hersch Lauterpacht’s ‘Survey ofInternationalLaw inRelationto theWorkofCodificationof the InternationalLawCommission’,UNDoc.A/CN.4/1/Rev.1(1949).EncouragedbytheUNGeneralAssembly’sResolution1686(1961),theILCbegantoconsiderquestionofsuccessiontotreatiesinthe1960s,withSirHumphreyWaldockandSir Francis Vallat acting as special rapporteurs, and in 1974 presented a set of ‘Draft Articles andCommentariesonSuccessionofStatesinrespectofTreaties’(ILCYearbook1974,vol.II/1,at174etseq.). For details and documents see the ILC’s Analytical Guide, athttp://legal.un.org/ilc/guide/3_2.shtml#top.23Seethereference in fn.2. Inparallel, the ILCalsoworkedonotheraspectsof the lawofStatesuccession;thisledtotheadoptionofthe1983ViennaConventiononSuccessionofStatesinrespectofStateProperty,ArchivesandDebts,InternationalLegalMaterials22(1983),306(notyetinforce).24 Nearly forty years after its adoption, the Convention has no more than 22 parties: seehttps://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXIII-2&chapter=23&lang=en.25In its written submissions in the Gabcikovo Nagymaros case before the International Court ofJustice,Hungaryargued that the1978ViennaConventionwas "widely regardedasanunsuccessfulexerciseininternationallaw-making…whichdoesnotcorrespondtosubsequentpractice":seeReplyof Hungary, 20 June 1995 (http://www.icj-cij.org/docket/files/92/10965.pdf), at 173. For furtherdiscussionofoneoftheConvention’smostcontroversialpropositionsseebelow,section4a.

7

the territorial transfers ofMacao, Hong Kong andWalvis Bay, to name themost

prominent – States and other stakeholders have drawn inspiration from it; but

perhaps not much more: pragmatism, rather than adherence to abstract legal

propositions, has been the guiding principle. 26 The result is a legal regime

characterised, more than in other areas of international law, by a practice of

“diplomaticbricolage, thecollectingofbitsandpieces fromnormativematerials…

lyingaroundintreaties,doctrinalwritingsanddiplomaticdiscourse”.27

b)DistinguishingStateSuccessionfromOtherPhenomena

Before assessing thework of the ‘diplomaticbricoleurs’ in the field of investment

law,itisusefultodelimitthescopeofapplicationoftheregimeofStatesuccession.

While the preceding section has emphasised the breadth of the notion of ‘State

replacement’(whichisattheheartoftheStatesuccessionregime),itisimportantto

note that that regime does not apply to other ruptures affecting treaty relations.

Threesuchotherrupturesmeritatleastsomebriefcomment.

ChangesnotaffectingaState’slegalpersonality:First,Statesuccessionneedstobe

distinguishedfromchangesthatdonotaffectthelegalpersonalityoftheState.28In

essence, where a State, notwithstanding changes to its structure or territory,

remainsidentical,thequestionofsuccessiontotreatiesdoesnotarise:asthelegal

personalityoftheStateremainsthesame,sodo itstreatyrightsandobligations.29

26 As noted by Zimmermann, "recent instances of international practice [in the field of Statesuccession] … have not followed any hard and fast legal rules": A Zimmermann, The InternationalCourt of Justice and State Succession to Treaties: Avoiding Principled Answers to Questions ofPrinciple,inCJTams/JSloan(eds),TheDevelopmentofInternationalLawbytheInternationalCourtofJustice(2013),53,at54.27MKoskenniemi,ReportoftheDirectorofStudiesoftheEnglish-SpeakingSectionoftheCentre,inPM Eisemann and M Koskenniemi (eds), State Succession: Codification Tested against the Facts(2000),65,at132.28AsCraven(n3)notes,theproblemisof“classificationortaxonomy“,and"structural"innature(at146).ForsuccinctaccountsseeCrawford(n2),426-427;Zimmermann/Devaney(n17),512-516;forafuller treatment see Stern (n 17), at 39-86;W Czaplinski, La continuité, l’identité et la successiond’Etats, Revuebelgededroit international26 (1993), 375, andKMarek, Identity andContinuity ofStatesinPublicInternationalLaw(1968).29As Zimmermann notes, "[a]s a matter of principle, State continuity and State succession aremutually exclusive concepts": A Zimmermann, Continuity of States, inMax Planck Encyclopedia ofPublicInternationalLaw(www.mpepil.com),atpara.6.

8

All this is clear in theory, but can be highly problematic in practice, as there are

relatively fewagreedcriteria fordeterminingwhenaStatechanges itspersonality:

toillustrate,wastheFederalRepublicofYugoslavia,comprisingtheterritoryofthe

former Yugoslav Republics of Serbia and Montenegro, identical to the Socialist

Federal Republic of Yugoslavia (SFRY), comprised of Serbia, Montenegro, Croatia,

Slovenia,MacedoniaandBosniaHerzegovina?CouldRussiaclaimafter1991claimto

beidenticaltotheSovietUnion?Objectivefactors,suchastheimpactofthechange

on a State’s structure, may be indicative;30but much depends on the subjective

perceptionofthechange,bytheStateitselfandbytheinternationalcommunity31–

which eventually decided to reject the FRY’s claim to continuity, but accepted

Russia’s.32Asisclearfromthesetwoexamples,theproperlegalassessmentoftenis

the result of a lengthy process of claim and contestation, in which historical

narratives,perceptionsoflegitimacyandtheviewsofkeyplayersplayanimportant

role. Yet while indeed “precarious”, 33 the distinction between identity and

successionremainsfundamentalasamatteroflaw.

Regimechange:Second,instancesofStatesuccessionneedtobedistinguishedfrom

changestotheState’sinternalsystemofgovernment.Premisedonachangeinthe

State’slegalpersonality,thelawofStatesuccessionignoresrupturesinthedomestic

organisationoftheState.34Thisdoesnotmeanthatsuchruptureshadnoimpacton

30Sternprovidesathoroughanalysisofinternationalpractice:seen17,at68-82.31ZimmermannandDevaney(n17),at515:“whatoftenmattersmostisnotobjectivefacts,suchasthesizeofterritoryorpopulation,butrathertowhatextenttheclaimtocontinuationofidentitywasgenerally accepted by the inter- national community as a whole, including internationalorganizations”.32For contemporary perspectives see R Mullerson, The Continuity and Succession of States byReferencetotheFormerUSSRandYugoslavia,InternationaladComparativeLawQuarterly42(1993),473;M Shaw, State Succession Revisited, Finnish Yearbook of International Law 5 (1994), 34. It isworth noting that in the case concerning Application of the International Convention on theEliminationofAllFormsofRacialDiscrimination(GeorgiavRussia),theInternationalCourtofJusticereferred to the Respondent as “the State continuing the legal personality of the Union of SovietSocialistRepublics”:ICJReports2008,353,para.105.33Crawford(n2),427.34Historically, claims todiscontinuity advancedbynew, often socialist, regimes (such as the SovietUnion in 1917, or Cuba after theCuban revolution) havemetwith opposition. (Hafner andNowakrefertothisasthe“socialistaberration”ofthecleanslatetheory:n17,at401).IntroducingitsDraftArticlesontheSuccessionofStatesinRespecttoTreaties,theILCstatedthatithad“concludedthatitwasappropriate toexclude fromthescopeof thedraftarticlesproblemsof successionarisingasa

9

the State's external relations: the more drastic changes in fact are likely to have

consequences for the State’s approach to international treaties. However, these

changes will result from re-negotiations of existing treaties or the new regime's

decisiontosuspendorterminateexistingtreaties(whichmaybevalidornot),orto

agreetonewones.Theydonotresult fromtheoperationofrulesgoverningState

succession.

Illegaloccupationofterritory:Finally,theregimeofStatesuccessiontotreatiesdoes

notapplytosituationsofillegaloccupationofterritory.Theseinvolverupturesofa

particular kind, to which international law responds with particular sets of rules,

notablyaimedatprecludingthevalidation,inlaw,ofthesituationcreatedinfact.35

Asageneralprinciple,conductoftheoccupyingStateisgovernedbytheregimeof

belligerentoccupation,aswellashumanrights lawand internationalhumanitarian

law to the extent that these rules apply extraterritorially. The regime of State

successiondoesnotcomeintoplay.36

YetevenwheninstancesofStateidentity,regimechangeandillegaloccupationare

lefttoaside,thelistof'proper'ofStatesuccessionissuesremainsconsiderable.The

subsequent sections group them into three distinct categories, which take up

internal divisions within the applicable legal regime: (i)Section 3 analyses the

resultofchangesofregimebroughtaboutbysocialorotherformsofrevolution”(ILCYearbook1974,vol.II,at170).SeefurtherMarek(n28),24etseq.35Hence annexations procured by force are illegal, andmust not be recognised as lawful by thirdStates:seeGeneralAssemblyResolution2625(XXV)('FriendlyRelationsDeclaration’),principleI("Noterritorialacquisitionresultingfromthethreatoruseofforceshallberecognizedaslegal");GeneralAssemblyResolution3314(XXX)('DefinitionofAggression'),atArticle5(3)("Noterritorialacquisitionorspecialadvantageresultingfromaggressionisorshallberecognizedaslawful");andArticles40,41of the ILC’s Articles on State Responsibility. For details seeRHofmann,Annexation, inMaxPlanckEncyclopedia of Public International Law (www.mpepil.com); and LMälksoo, Illegal Annexation onStateContinuity(2003).36AccordingtoitsArticle6,the1978ViennaConvention"appliesonlytotheeffectsofasuccessionofStatesoccurringinconformitywithinternationallaw";pursuanttoArticle40,istprovisions"shallnotprejudgeanyquestionthatmayariseinregardtoatreatyfromthemilitaryoccupationofaterritory."ForadetaileddiscussionseeMarek(n28),73etseq.Examiningarecent(on-going)conflict,ThomasGrant states that "there is no indication thatUkrainewould accept that a successionof StateshastakenplaceinrespectofCrimea(oranyotherterritoryrecognizedtofallwithintheStatebordersofUkraine)":seehisAggressionAgainstUkraine:Territory,Responsibility,andInternationalLaw(2015),at94.

10

positionofnewStatesvis-à-vis the ICSIDConvention(asthemostrelevantdispute

settlement framework). (ii)Section 4 inquires whether new States are bound by

bilateral investment treaties (‘BITs’) concludedby theirpredecessors. (iii)Section5

looks at the particular problems of territorial cessions and their impact on

investment treaties. Finally, section 6 offers a number of general conclusions and

highlightsopenquestions.

3.NewStatesandICSIDMembership

Asathresholdissue,questionsofsuccessionarisewithrespecttomembershipinthe

ICSID Convention regime. Can a successor State simply automatically follow the

predecessorState’sICSIDmembershipandexercisemembershiprights?Conversely,

caninvestorslodgeclaimsagainstsuccessorStatesiftheirpredecessorhadbeenan

ICSID party? Or do successor States only become bound by the ICSID Convention

oncetheyhavejoinedtheregimeasanewtreatyparty,inlinewiththeprocedures

set out in Articles 67 and 68? The proceedings in the case ofMNSSB.V. et. al. v.

Montenegro, a BIT-based arbitration brought against Montenegro in 2011, 37

illustratesthatthesequestionsarenotofapurelyacademiccharacter:Montenegro

hadnot,atthetimeoftherequestforarbitration,ratifiedtheICSIDConventioninits

own right; but the Socialist FederalRepublicof Yugoslavia (fromwhich Serbia and

Montenegro emerged) had.38So was Montenegro, in 2011, to be treated as a

‘Contracting State’ for the purposes of Article 25 of the ICSID Convention?39The

subsequent sections address this, and related, questions by outlining the general

regimegoverningsuccessiontomembership(a)andapplyingittothespecialcaseof

ICSID(b).

37InformationprovidedontheICSIDwebsiteislimited;butsee‘MontenegrotoFaceSecondKnownInvestmentTreatyClaim,ThisTimeOverBankruptSteelworks’, InvestmentArbitrationReporter,10December 2012, at http://www.iareporter.com/articles/montenegro-to-face-second-known-investment-treaty-claim-this-time-over-bankrupt-steelworks/.38Montenegrosigned the ICSIDConventionon19 July2012andratified iton10April2013. In linewith Article 68 of the Convention, it therefore became bound on 10 May 2013. Details onMontenegro’smembership,and thatofothercontractingparties,are listed inDoc. ICSID/3 ('ListofMember States’), athttps://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/Database-of-Member-States.bak.aspx.39AsSchreuer,Malintoppi,ReinischandSinclairnote,"[p]articipationintheConventionoftheStatepartytoproceedingsisanabsoluterequirement":seeTheICSIDConvention.ACommentary(2ndedn.,2011),at144.

11

a)TheGeneralRegime:BetweenOrthodoxPrincipleandPragmaticApplication

Onthefaceofit,membershipintheICSIDConventioncouldbelookedatasregular

questionofsuccessiontotreaties.However,itconcernsatreatyofaparticularkind,

namelyoneestablishingan internationalorganization,viz. the InternationalCentre

for the Settlement of Investment Disputes (‘Centre’). While the Centre is closely

affiliated with theWorld Bank andwhile its activities, compared to that of other

international organisations, are not themost visible, it possesses an autonomous

legal personality 40 and enjoys privileges and immunities commonly granted to

international organisations.41As for the ‘inner life’ of the Centre, once they have

joined theConvention, contractingpartiesparticipate in theCentre’sdeliberations

anddecisions,notablythroughtheAdministrativeCouncil;42theyaremembersofan

internationalorganizationasmuchaspartiestoamultilateraltreaty.

AllthishasimplicationsfortheapplicablerulesonStatesuccession.43Becauseofthe

higherlevelofintegrationwithininternationalorganizations,theorthodoxapproach

has long treated membership as a special category of treaty participation: a

40SeeArticle18oftheICSIDConvention.TheReportoftheExecutiveDirectorsleavesnodoubtinthisrespect;itstates:“TheConventionestablishestheInternationalCentreforSettlementofInvestmentDisputesasanautonomousinternationalinstitution(Articles18–24)"(inICSIDReports,vol.1,at26).41 Such as: immunity from suit, tax exemptions and the like: see Articles 19-24 of the ICSIDConvention.42See notably Articles 4, 6, 10 and 17 of the ICSID Convention (regulating the composition andfunctionsoftheAdministrativeCouncil);andfurtherArticle7(procedure)andArticle13(designationofpanelists).43For details on succession to membership see K Bühler, State Succession and Membership inInternationalOrganizations:LegalTheoriesVersusPoliticalPragmatism(2001); id.,StateSuccession,Identity/ContinuityandMembershipinTheUnitedNations,inKoskenniemi/Eisemann(n27),187;HGSchermerandNMBlokker, International Institutional Law (4thed.,2003),81-91;and,morebriefly,Crawford(n2),442-443.

From the beginning of its work on questions of succession, the ILC had separated questions ofmembership in international organisations from the other aspects of succession to treaties: seeReportbyManfredLachs, ILCYearbook1963,vol. II,260,at261(para.13).Article4(a)ofthe1978ViennaConventionrecognisesthespecialcharacterofmembershiprights:itclarifiesthat,asregardsthe acquisition of membership in international organisations (which could be seen a question ofsuccessiontotheconstitutivetreaty),the1978ViennaConventionis“withoutprejudicetotherulesconcerning acquisition of membership and without prejudice to any other relevant rules of theorganization”.

12

“personal status” 44 not easily transferred unless explicitly envisaged in the

organization’s constituentdocuments.45Pursuant to this "traditionalaxiomofnon-

succession to membership”, 46 new States have regularly been expected to go

throughtheorganisation’sadmissionsprocessandjoinasnewmembers.47

Theorthodoxapproachhashowevernotbeenfollowedthroughrigorously;"political

pragmatism"has(toadaptthesubtitleofadetailedstudy)tosomeextentmollified

thestricturesof"legaltheories"or“traditionalaxioms”.48Pragmaticconsiderations

havee.g.ledinternationalorganisationstoacceptaclaimtocontinuedmembership,

whereanewStatehadbeenestablishedthroughafusionofpreviousmembers(as

in the case of Yemen, which came into existence in 1990when North and South

Yemen merged), or where a State could credibly claim to revert to a prior

membership status (e.g. Syria and Egypt after the dissolution of their short-lived

mergerintotheUnitedArabRepublic).49Thepracticeofcertainfinancialinstitutions

(includingtheWorldBank)seemsequallytohavebeendrivenbypragmatismrather

than strict application of principle: desirous to preserve assets deposited by

predecessorStates,theIMFandtheWorldBank,duringthe1990s,e.g.treatedthe

CzechandSlovakRepublics,aswellasthevariousStatesemergingduringthebreak-

44Crawford (n 2), 443; K Zemanek, State Succession after Decolonization, Recueil des Cours 161(1965), 182, at 253 (“[m]embership of international organizations is a personal right to which, inprinciple,successionisnotpossible”);CWJenks,StateSuccessioninRespectofLaw-MakingTreaties,BritishYearbookofInternationalLaw29(1952),105,at134.In itsReport(n17)theILAspeaksofa"colorationfortementpersonnelle"(at43).45Only in rare instancesdoconstitutivedocumentsexpresslypermit theacquisitionofmembershipbywayof succession,usually fornewly independentStates thathadpossessedsome formofpriorstatuswithintheorganisation:seee.g.the1953InternationalSugarAgreement(Article66),andthe1960(Second)InternationalTinAgreement(ArticleXXII(6).Arighttosucceedtothe1899and1907Hague Dispute Settlement Conventions was created by a unanimous decision of the PCAAdministrativeCouncilin1959.FordetailsandreferencesseeBühler(n43),26-30.46Bühler(n43),30.47This approachwas followedwithin organisations with a formal process of admission, as well asthose that permitted admission by virtue of a unilateral act: see Bühler (n 43), 31-32;Schermers/Blokker(n43),90.48Cf.thesubtitleofBühler’sdetailedstudy(n43).49See Schermers/Blokker (n XX), 82: "In these cases [Yemen, United Arab Republic, etc], the newstate replaced the old ones as a member of the international organizations in which they hadparticipated.No new admissionwas required, not evenwhere one of the constituent parts of thefederation had not previously been a member of the organization” (footnote omitted). Bühlerprovidesdetails(n43,at50etseq.).

13

up of Yugoslavia, as successors of the CSFR and the SFRY.50Drawing on thismore

recentpractice,commentatorshaveputforwarddistinctionsbasedonthecharacter

oftheorganizationconcerned–excludingsuccessiontomembershipwithinpolitical

organisations emphasising close integration, while admitting it in principle for

'universal-technical organisations’ aimed at wide participation. 51 Yet while that

distinctionmayserveasausefulguidelineflexibility isthedefiningfeatureof legal

regime: largelyunconstrainedby firm rules, internationalorganisationsare free to

determineissuesofmembershipinlightoftheirinstitutionalpreferences.52

b)ICSIDPractice:OrthodoxyAffirmed

Against thisbackground, ICSID’s institutionalpracticemerits attention. It is, ashas

beennoted,“scant"53(as inmany instances, therespectivepredecessorStateshad

notbeenICSIDparties,andhencesuccessionwasnotanoption54).Butcontraryto

views expressed by commentators, 55 the scant practice yields relatively

straightforwardresults.AlthoughICSIDaspirestouniversalmembershipandallows

WorldBankmemberstojoinwithoutundergoinganyadmissionsprocedure,56ithas

50Thiswaswidelyconsideredtobeabreakwiththeorthodoxapproach:seee.g.PRWilliams,StateSuccessionandthe InternationalFinancial Institutions:PoliticalCriteriav.ProtectionofOutstandingFinancialObligations,InternationalandComparativeLawQuarterly43(1994),776,807:"Asaresultof the break-up of Yugoslavia and Czechoslovakia, the IMF andWorld Bank have for the first timedeveloped a conditional succession approach to address the questions posedby the break-upof amember State.” According to Oeter, “State practice in this field seems to differ considerably fromstatepracticeconcerningmembership inotherorganizations -a fact largelydue todifferentvotingproceduresanddifferentstatesofinterestdominatingintheseorganizations”:inILAReport(n17),at43.51Seee.g.BühlerinKoskenniemi/Eisemann(n43),at227-233.52AsnotedbytheILAinits2008Report,thislimitsthepurchaseofgeneralrules:“Toutconflitentreles règlesde la successiond’Etat et toute règle relative à l’acquisitionde laqualitédemembreoutouteautrerèglepertinentede l’organisation -dispositionqui inclut lesrègles issuesde lapratiquedes organisations - se résout en faveur de ces dernières. C’est l’intérêt de l’organisation et sonéquilibre institutionnel qui sont protégés et qui doivent l’emporter sur l’intérêt individuel de l’Etatsuccesseur“(n17,at46)53Schreueretal.(n39),at169(footnote401).54Thise.g.appliestotheSovietUnionandEthiopia(inrelationtoEritrea).Insofarascolonialpowers,pursuanttoArticle70,appliedtheICSIDConventiontooverseasterritoriesforwhoserepresentationtheyboreresponsibility(e.g.theNetherlandsinrespectofSurinameandtheNetherlandsAntilles),noattempthasbeenmadeto'upgrade’thestatusoftheseterritoriestofullmembership.55Contraste.g.JAFratermannSecession,StateSuccessionandInternationalArbitration,availableathttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=2313401(at19).56Article67runsasfollows:"ThisConventionshallbeopenforsignatureonbehalfofStatesmembersof theBank. It shallalsobeopen forsignatureonbehalfofanyotherStatewhich isaparty to the

14

clearly followed the orthodox approach precluding succession to membership.

Invariably,newStates thathave joinedthe ICSIDConventionhavedonesoasnew

members, even though this opened up a time-gap in the application of the ICSID

regime.57ThispracticehasbeenfollowedinrelationtothefollowingnewStates:58

- the Czech and Slovak Republics (which joined as newparties in 1993/1994

ratherthancontinuingtheCSFR’spriormembership),

- the agreed successor States of the SFRY (itself a first-generation ICSID

membersince1967),namelySlovenia(admittedasanewmemberin1994),

Bosnia and Herzegovina (1997), Croatia (1998) and the Former Yugoslav

RepublicofMacedonia(1998);

- Serbia, which joined as a new member in 2006 after the separation of

Montenegroandafter ithadgivenup itsearlierclaimtocontinue the legal

personalityoftheSFRY;subsequentlyby

- Montenegro,which(asnotedabove)joinedin2013,afteritsseparationfrom

Serbia and Montenegro; as well as Kosovo and South Sudan, which

unsurprisinglydidnot seek tocontinue themembership statusofSerbiaor

Sudan,butinsteadjoinedasnewpartiesin2009and2012,respectively.

The brief summary of practicereflects the continued appeal of the ‘traditional

axiom’59: even though membership rights and duties are relatively limited, ICSID

membership is regarded as a personal linkwith theorganization that a newState

needstoestablishinitsownright.Successionhasneitherbeensoughtnorgranted;

infact,newStatesoftenhavejoinedICSIDquicklysotosignaltheirintegrationinto

the international economic community or – particularly in cases of contested

statehood,suchasKosovo’s–theirstatusasamemberofthecommunityofnations.

StatuteoftheInternationalCourtofJusticeandwhichtheAdministrativeCouncil,byavoteoftwo-thirdsofitsmembers,shallhaveinvitedtosigntheConvention."Schreueretal.(n39)notethatinitialdrafts envisaged amore open regime thatwould have opened the Convention for signature by allsovereignStates;thishowever,wasresistedbyrepresentativesofdividedStates(at1267-1268).57AccordingtoArticle68(2),theConventionenters intoforceforthem30daysafterthedepositoftheirinstrumentofratification,accessionorapproval.Untilthatdate,thenewStatethereforeisnota“ContractingState”forthepurposesofArticle25oftheConvention.58The following information is based on information provided by ICSID: see Doc. ICSID/3 (whichcontainsfurtherdetailsonmembership).59Bühler(n43),30.

15

ICSID’shandlingoftheMNSSB.V.et.al.v.Montenegrocaseconfirmsthisapproach,

and illustrates its implications. Having requested arbitration under the ICSID

Convention,theclaimantsrealisedthatMontenegrowasnota‘ContractingState’in

thesenseofArticle25of the ICSIDConventionand, irrespectiveofwhether ithad

consented to arbitration in an applicable BIT, could not be a respondent in ICSID

proceedings. According to the Investment Arbitration Reporter’s account, "[t]he

claimantsthereforerequestedICSID’sapprovaltomakeuseoftheAdditionalFacility

Rules, which was granted on 7 December 2011. After delays of nearly a year, a

formalnoticeofarbitrationwas lodged inNovemberof2012,and it isunderstood

thatICSIDultimatelyregisteredthedisputeundertheAdditionalFacilityRuleson6

December2012.”60

4.NewStatesandBilateralInvestmentTreaties

As isclear fromtheprecedingsection,anewState’sdecisionnot to join the ICSID

regime need not be fatal, as investors can explore other jurisdictional options

(Additional Facility proceedings, UNCITRAL proceedings, etc.). Such proceedings,

however,presupposethatthenewStatehasconsentedtosomeformofinvestment

arbitration. The subsequent considerations focus on the most relevant basis of

consent, namely bilateral investment treaties; they ask whether new States are

boundbyinvestmentagreementsconcludedbytheirpredecessor.Thisquestionhas

arisen,andcontinuestoarise,quitefrequently,asallnewStatesthathaveemerged

sincethe1990shavehadto takeapositiononthe fateofpriorBITs.To illustrate,

based on publicly available information,61at the time of its demise the Czech and

SlovakFederalRepublic(‘CSFR’)waspartyto16BITs;38BITswereinforceforSerbia

andMontenegrowhenMontenegroseparatedfromitin2006;62whileSudan,upon

60 See http://www.iareporter.com/articles/montenegro-to-face-second-known-investment-treaty-claim-this-time-over-bankrupt-steelworks/(December2012).61 See the information on applicable BITs (and dates of their entry into force) provided athttp://investmentpolicyhub.unctad.org/IIA/IiasByCountry#iiaInnerMenu.62SerbiaandMontenegrowasestablishedon27April1992,as the ‘FederalRepublicofYugoslavia’(‘FRY’),proclaimedontheterritoryoftwooftheconstituentpartsoftheterritoryofYugoslavia,i.e.

16

theindependenceofSouthSudan,hadenteredintoatleast6313BITs.Withrespect

toallofthese–andthemanymoreBITsatstakeduringthebreak-upoftheformer

Yugoslavia and the Soviet Union, etc. – it needs to be assessed whether the

respectivesuccessorStates,afterindependence,areboundbytreatiesconcludedby

theirpredecessors.64

The question of succession to treaties has long been, and remains, highly

controversial.Itisherethatthemajordebatebetween‘strictcontinuity’and‘clean

slate’ approaches has historically been played out. The 1978 Vienna Convention’s

attempt toprovidea strongdefault rule favouring continuityhasmetwith limited

success. Rather than endorsing one guiding principle, practice and debates since

1978reflectatrendtowardsprocess(encouragingnegotiatedagreementsontreaty

succession)andflexibility(proposingdifferentiatedsolutionsfordifferentcategories

of treaties). The subsequent sections outline these developments (a) and indicate

howtheyaffectthestatusofnewStateswithrespecttobilateralinvestmenttreaties

enteredintobytheirpredecessors(b).

a) The General Regime: Automatic Succession, Its Discontents, and the Turn to

ProcessandFlexibility

Thegeneral regime isnoteasilysummarised,as it is rather inastateof fluxanda

numberofcorepropositions remainuncertain.This, in turn, isa resultofanover-

ambitious attempt at codification based on overarching principle, and a body of

practice favouring case-by-case solutions. The 1978 Vienna Convention stands for

thefirstapproach.Itsetoutarelativelystraightforwardrule:accordingtoitsArticle

Serbia and Montenegro. In 2003, the name of FRY was amended to ‘State Union of Serbia andMontenegro’. In2006,Monetenegroseparated fromthatUnion to forman independentState.Forreasonsof simplicity, the textuses 'SerbiaandMontenegro’ todescribe theStateexistingbetween1992-2006.63AccordingtoUNCTAD’srecentcountrystudy,thefigureissignificantlyhigher:seeInvestmentPolicyReview: Sudan (http://unctad.org/en/PublicationsLibrary/diaepcb2014d5_en.pdf, at 54), which lists21BITs.64Itisworthnotinginpassingthat,irrespectiveofdebatesaboutthelevelofcustomaryprotection,ininvestment law, it isprotectionby treaty thatmatters, asonly the treatywill typically conferuponclaimantsarighttoraisetreatyviolationsbeforearbitraltribunals,andasthatrightwillberestrictedto treatybreaches.As a consequence, oneof the commonarguments in successiondebates - thatcustomaryinternationallawwouldoffercontinuousprotection-providesnoeasywayout.

17

34,newStates–whethersecedingfromexistingStatesoremerginginprocessesof

dismemberment–areboundbyalltreatiesbindingupontheirpredecessors.65There

are, to be sure, nuances. Importantly, the rule of automatic succession applies by

default.Statescanalwaysagreeotherwise(Article34(2)(a));andnewStatesdonot

automatically succeed if "the application of the [prior] treaty in respect of the

successorStatewouldbeincompatiblewiththeobjectandpurposeofthetreatyor

wouldradicallychangetheconditionsfor itsoperation"(Article34(2)(b)).66What is

more, the Convention adopts a very different approach for newly independent

Statesthathaveobtainedindependencefromcolonialrule:theseremainboundby

localized, territorially-grounded treaties,67 but otherwise can start with a ‘clean

slate’.68

Yet notwithstanding these nuances, the Convention's approach is surprisingly

straightforward. Outside the colonial context, and outside the relatively narrow

exceptionofArticle34(2)(b),newStatesarepresumedtocontinueall treatyrights

and obligations of their predecessors, irrespective of whether these derive from

multilateralorbilateralagreements.Thisnodoubthastheappealofsimplicity,but

inretrospect, itseemsclearthat, foratreatyseekingtoattractwideparticipation,

the 1978 Vienna Conventionmay have adopted too straightforward an approach.

EversincedraftprovisionsforeshadowingArticle34appearedduringthe1970s,the65ThecrucialprovisionisArticle34(1)(a),whichprovides:"WhenapartorpartsoftheterritoryofaStateseparatetoformoneormoreStates,whetherornotthepredecessorStatecontinuestoexist:(a)anytreatyinforceatthedateofthesuccessionofStatesinrespectoftheentireterritoryofthepredecessor State continues in force in respect of each successor State so formed…".According toZimmermann, the question addressed by Article 34 "may be considered the most controversialquestionwithinthelawofstatesuccessiontotreaties":Zimmermann,inTams/Sloan(n26),59.66Article34(2)(b).67Articles11and12;andseeCrawford(n2),439-440.TheICJaffirmedthecustomarystatusofArticle12intheGabcikovoNagymaroscase:seeICJReports1997,7,atpara.123.68SeeArticle16,whichrunsasfollows:"AnewlyindependentStateisnotboundtomaintaininforce,ortobecomeapartyto,anytreatybyreasononlyofthefactthatatthedateofthesuccessionofStates the treatywas in force in respectof the territory towhich the successionofStates relates."According to Article 24, bilateral treaties are "considered as being in force between a newlyindependentStateand theotherStatepartywhen: (a) theyexpressly soagree;or (b)by reasonoftheirconducttheyaretobeconsideredashavingsoagreed".ForcommentseeHafner/Novak(n17),409-410;andZimmermann/Devaney(n17),at518(arguingthat,duringthedecolonizationprocess,"the universal succession to obligations of previous colonial powers was seen as completelyirreconcilable …. [this] ultimately resulted in the inclusion of the special regime for newlyindependentStatesintheVCSST").

18

automaticityprinciplehasbeenwidelycriticisedasoverlybroad(failingtoreflectthe

diversepracticeofStates)andasunjust(based,asit is,onacategoricaldistinction

betweennewly-independentandothersuccessorStates).69Resistancetoautomatic

successioninfactissaidtobearelevantfactorexplainingthelowacceptancerateof

the1978ViennaConventionasatreaty.70

Given these concerns, it comes as no surprise that Article 34 has had a limited

impact on international practice. In fact, there is widespread agreement that

international practice since 1978 does not bear out a general rule of automatic

successionforalltreaties.71Ratherthanrelyingontheoperationofoneoverarching

principle, States have sought actively to shape the fate of ‘their’ treaty rights and

obligations post independence. The various State successions of the 1990s in

particularresultedinrichbodyoftreatypractice,includingunilateraldeclarationsby

successorStates,agreementswiththeirtreatypartners,anddepositarystatements,

which provide guidance on the fate of specific treaties.72This practice has usually

accommodatedageneraldesiretoavoidruptures;asaconsequence,inthemajority

ofinstances,theStatesinvolvedinnegotiationshavesoughttoensurethestability

of treaty relations.73But thisoverarchinggoalhasbeen reached indifferentways,

andpursuedwithdifferentdegreesofvigour.

69Seee.g.Crawford (n2),438-439;Hafner/Novak (n17),413-414;AAust,ModernTreaty LawandPractice(2rdedn.,2007),368-369;DVagts,StateSuccession:TheCodifiers’View,VirginiaJournalofInternationalLaw33(1993),275,at283;Dumberry(nXX),78("bothincoherentandunjustifiable“).O’Connell’s criticism of the Conventionwas particualrly trenchant; to him, "this particular essay inrefashioningthe lawwasmarredfromits inceptionbyapreoccupationwiththespecialproblemofdecolonisation,aroundwhichmythandemotionhaveaccumulated likemists in themarsh, so thatthe whole context became intellectually distorted": see DP O’Connell, Reflections on the StateSuccessionConvention,ZeitschriftfürausländischesöffentlichesRechtduVölkerrecht39(1979),725,at726.70Vagts(n69),287-288.71Seee.g.Crawford(n2),438;JKlabbers,CatonaHotTinRoof:TheWorldCourt,StateSuccession,andtheGabcikovo-NagvmarosCase,LeidenJournalofInternationalLaw11(1998),345,at348-349.72In its Report, the ILA made the point very clearly, when noting that negotiations are the mostcommonmeansofaddressingsucccessionissues(n17,at27):"lapratiquedelanégociationprévautconcernantlasuccessionenmatièredetraités".73AccordingtotheILA,negotiationsproceedfroma‘presumptionoftreatycontinuity’:seeILAReport(n17,at27):"laprésomptiondelacontinuitéestlaprémissefondamentaleenmatièredesuccessiond'Etats-afindesauvegarderlastabilitédesrelationsinternationales".

19

A case-by-case handling of succession issues,which has been aptly described as a

turn from ‘substance’ (or substantive legal principle) to ‘procedure’ (or process),74

cannodoubtclarifythestatusofparticulartreaties.However,ithasleftthegeneral

regime in a state of flux: outside party agreement on the continuity (or dis-

continuity)ofagiventreaty,thereisaratherlargegreyzoneofuncertainty.Atthe

sametime,themorerecentdebatereflectsadesireforgreaterdifferentiationand

flexibility: while terms such as ‘strict continuity’ and ‘clean slate’ remain popular,

practice has sought to explore "more nuanced solutions".75For present purposes,

twosuch“nuancedsolutions”–bothofwhichpoint toamoreflexiblehandlingof

successionissues–areofparticularrelevance.

Afirstapproachproceedsfromadistinctionbetweendifferentcategoriesoftreaties.

Whileageneralruleofautomaticsuccessionforalltreaties(asenvisagedbyArticle

34ofthe1978ViennaConvention)seemsoverlyambitious,practicemightsupporta

more restrictive rule requiring new States to succeed to major multilateral

conventionsformulating‘goldstandards’ofinternationalrelations,inwhichthereis

a clear community interest in automatic succession.76For universal human rights

agreements in particular, it has been argued that, as "[t]he rights enshrined in

[humanrightsagreements]belong to thepeople ...,once thepeopleareaccorded

theprotectionoftherights...,suchprotectiondevolveswithterritoryandcontinues

to belong to them, notwithstanding... State succession".77By contrast, this first

approach has tended to view bilateral treaties as mere inter-party bargains,

dominated by the personal element and of an “essentially voluntary character".78

74Koskenniemi(n27),69.75Zimmermann,EPIL(n17),para.5.SeealsoZimmermann/Devaney(n17,at516):"falsedichotomy”.76Thedifferentviewson thismatterare reflected inMTKamminga,StateSuccession inRespectofHuman Rights Treaties, European Journal of International Law 7 (1996), 469; A Rasulov, RevisitingState Succession to Humanitarian Treaties: Is There a Case for Automaticity?, European Journal ofInternationalLaw14(2003),141;Zimmermann/Devaney(n17),at533-536;andAust(n69),at371-372.77HumanRightsCommittee,GeneralCommentNo.26 (61),UNDoc.CCPR/C/21/Rev.1/Add.8/Rev.1(1997), at para. 4. While enjoying considerable support, practice regarding major multilateralconventions is not unequivocal, and the ICJ, in the various Genocide cases submitted to it, hasrefrainedfromendorsingaruleoflimitedautomaticity:seeZimmermann,inTams/Sloan(n26,at61-63)foradetailedassessment.78Asnotedby the ILC in itscommentary to theDraftArticlesonSuccessionofStates inRespectof

20

According tomost commentators,whatever the general rule, bilateral treaties are

notsubjecttoaruleofautomaticsuccession;79accordingtotheILA,"the[ir]fate...is

generally decided throughnegotiation between the successor State and the other

party".80

Asecondapproachseeksdifferentiatedsolutionsonthebasisofafullerappreciation

of the parties’ intentions. Of course, in an ideal case, those intentions will be

expressedinformalagreementsordeclarationsofsuccession(which,asmentioned

above,havebecomeapopularmeansofclarifyingwhichtreatiesapply).Butevenin

theabsenceofsuchexplicitguidance,practiceseemstohaveacceptedsomedegree

of flexibility. Notably, domestic courts have on occasion continued to apply prior

treatiesonthebasisofpresumed(tacit)consent,where“continuity [was] inevery

State’sinterest”.81Wherethiswasthecase(ase.g.inrelationtoextraditionorFCN

treaties), domestic courts have not infrequently relied on informal statements or

conduct to establish consent; 82 and "[s]ometimes simple intertia [has been]

upgradedascontinuity".83Similarly,intheCroatianGenocidecase,theInternational

CourtofJusticereadafairlygeneralpolicystatementadoptedbyanun-authorised

assembly of parliamentarians as amounting to a valid declaration of succession.84

Needless to say, suchattempts to infer consent fromstatementsor conduct faces

“inherent difficulties"; 85 however, given the uncertainty of the applicable legal

Treaties:ILCYearbook1974,vol.II/1,at239.79Stern(n17),315-316;Dumberry(n5),78-82;Shaw(n32),67;aswellasJKlabbers,MKoskenniemiandORibbelink andA Zimmermann (eds),State Practice Regarding State Succession and Issues ofRecognition(1999),116.80ILA2008Resolution(n17),para.8.81Koskenniemi(n27),89.AccordingtoO’Connell(n69,at736),“[t]heclearlypersonaltreaties,suchascommercialorextraditiontreaties,havegivenrisetonoproblems".82See e.g. R. Director of Public Prosecution, ex parte Schwartz (Jamaica), 73 ILR, 45-48 (1987)(continuedapplicationofaUS-UKextraditiontreaty);Mv.FederalDepartmentofJusticeandPolice(Switzerland)(continuedapplicationofaUK-SwisstreatyinregardtoSouthAfrica),75 ILR, 109-113(1987);ReBottali (Italy) (continuedapplicationofanextraditiontreatybetweenItalyand India),78ILR111(1988);andfurtherGruber(n17),206-216.83Koskenniemi(n27),89.84Namely in theCroatian-SerbianGenocidecase, ICJReports2008,412,atpara.108.ForcommentseeZimmermanninTams/Sloan(n26),at67-68.85Genest(n15),22.

21

standards, theattractionof"pragmaticarguments fromtacitconsent"86isobvious.

Andoverall, itmayperhapsbesaidthatthemoreflexibleapproachesjustoutlined

facilitate the search forequitable solutions reflecting the intentionsof theparties,

andatleastofferguidelinesfortheapplicationofafairlyunsettledlegalframework.

b)SuccessiontoBITs:WidespreadTreatyPractice,andtheNeedtoLookBeyondIt

Asnotedabove,therehassofarbeennocomprehensiveefforttoapplythegeneral

rulesonStatesuccessiontobilateralinvestmenttreaties.Arbitralpracticehasyetto

engagefullywiththeissues;wheresuccessionquestionshavearisen,tribunalshave

generally preferred to tread softly. Commentators have only recently begun to

explore arguments about succession to BITs; and while there is now a body of

commentary,87it remains focusedon thegrandnormativedebate - donewStates

automaticallysucceedtopriorBITs?Thisquestionnodoubtisrelevant;butinlight

oftheprecedingconsiderations,itneednotalwaysarise.Infact,thetrendstowards

processandflexibilityhighlightedabovemeanthatquiteoften,itcanbeavoided.To

illustrate this point, and seeking topresent abalancedaccountofpotential issues

arising in investment treaty disputes, the subsequent sections provide an

(admittedlyselective)overviewofrecenttreatypracticeregardingsuccessiontoBITs

(aa),andhighlightfactorsthat,intheabsenceofexpressagreement,couldindicate

that the parties implicitly agreed to the continued application of a prior BIT (bb).

Following these considerations, section (cc) briefly revisits the debate about

automaticsuccessiontoBITs.

aa)ExplicitPartyAgreements

The firstpoint isbasedona rather triteproposition:before rehearsingarguments

aboutautomaticsuccessiontotreaties,itisusefultoanalysewhether“thefateof[a

BIT has been] decided through negotiation between the successor State and the

otherparty..."88. This in facthappens rather frequently: successor Statesand their

treatypartners regularlyprovideexplicit answers toquestionsof State succession.

86Cf.Koskenniemi(n27),89.87Seee.g.Dumberry(n5),id.(n15);Genest(n15).88Cf.ILAResolution(n17),para.8.

22

Thefullextentofthispracticeisdifficulttoassess,ifonlybecauseinformationisnot

alwaysreadilyavailable.89Yetanillustrativereviewoftwoofthebetter-documented

instancesofStatesuccessionsuggeststhatpracticeissignificant.

SerbiaandMontenegro:ThepracticeofSerbiaandMontenegro(whichwaswidely

considered a successor to the Socialist Federal Republic of Yugoslavia [‘SFRY’ or

‘formerYugoslavia’],andwhicheventuallygaveup itsclaimtohavecontinued the

former Yugoslavia’s legal personality90) provides a first example in point. By late

1991,theSFRYhadenteredintosevenBITs.91Withrespecttothreeoftheseseven

priortreaties,SerbiaandMontenegroanditsrespectivetreatypartneragreedthat

the old treaty would continue to apply: this is true with respect to France, the

Netherlands and Germany.92 In two further instances, Serbia and Montenegro,

during the 2000s, entered into a new BIT with the treaty partners of the former

SFRY:thisappliestoEgyptandAustria.93(SerbiaandMontenegroalsoconcludeda

newBITwiththeNetherlands,withwhichithadinitiallyagreedtocontinuetheold

SFRY BIT.94) Importantly, according to their express terms, the new BITs entered

89Thedecisioninfavourofcontinuityistypicallyembodiedinabilateralagreement,whichinturnisoftenpart of awiderdecisionabout the futureof treaty relationsbetween theparties. Yetnot allsuchagreementsaremadepublic;comprehensivefindingswoulddependonadetailedexaminationofdiplomaticpractice.Suchadetailedexaminationisbeyondthescopeofthepresentinquiry,whichdrawsoninformationmadeavailableviagovernmentwebsites,dedicatedinvestmentlawdatabases,andpublishedcollectionsoftreatypractice.90Seesupra,section2.b.91NamelywithCanada(1973),theNetherlands(1976)),France(1974),Egypt(1977),Sweden(1978),Germany (1989), Austria (1989). The five latter treaties are available athttp://investmentpolicyhub.unctad.org; the Canadian and Dutch treaties are at http://www.treaty-accord.gc.ca/text-texte.aspx?id=101508 and(https://verdragenbank.overheid.nl/en/Verdrag/Details/011240respectively.92 See the bilateral agreeements recorded inhttp://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA20030037 (France),https://zoek.officielebekendmakingen.nl/trb-2002-181.HTML (Netherlands), and Federal Gazette(Bundesgesetzblatt)1997,vol.II,961(Germany).

Followingitsindependencein2006,MontenegroagreedwithGermanyandFrancethattheoldSFRYBITwould continue to apply: seeFederalGazette (Bundesgesetzblatt) 2011, vol. II, 746 (Germany);http://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA00000468 (France). FollowingKosovo’s declaration of independence, the parties agreed that the old SFRY BITs would apply toKosovo: see http://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA00000940 (France)andFederalGazette(Bundesgesetzblatt)2011,vol.II,748(Germany).93SeeAustria-Serbia/MontenegroBIT(2001);Egypt-Serbia/MontenegroBIT(2005).94SeeNetherlands-Serbia/MontenegroBIT(2002).

23

between Serbia and Montenegro on the one hand, and Egypt, Austria and the

Netherlands on the other, terminated (and thus replaced) the prior SFRY

agreements.95Whilesuchaterminationprovisionmayhavebeenincludedtoclarify

thesituation, itsexistencesuggeststhatthenewtreatypartiesdidnotconsiderto

havestartedfromacleanslate.

In short, of the seven BITs entered into by the SFRY, five were either expressly

continuedorreplacedbynewBITs.Inthetworemainingcases,thesituationismore

equivocal.Basedonreadilyavailableinformationinthepublicdomain,Swedenand

SerbiaandMontenegroseemnottohavereachedanexplicitagreementtocontinue

the old SFRY-Sweden BIT (nor concluded a new BIT); yet the old BIT was clearly

treatedasapplicableinproceedingsbetweentheEuropeanCommissionandSweden

beforetheEuropeanCourtofJustice.96CanadadidenterintoanewBITwithSerbia

in2014 (i.e.after theseparationofMontenegro),but this treaty remainssilenton

the fate of the SFRY-CanadaBIT.97As is clear from these latter two examples, the

practiceoftreatypartiespostsuccessiondoesnotaddressallthe issues.However,

an analysis of Serbian-Montenegrin practice suggests that diplomatic exchanges

betweentheStatesconcernedsignificantlyreducetheareasofuncertainty.

Czech Republic: The treatment of BITs entered into by Czech and Slovak Federal

Republic(‘CSFR’or‘formerCzechoslovakia’)yieldsevenclearerfindings.Atthetime

of itsdissolution,16BITswere in force for theCSFR.During thedissolutionof the

CSFR, the Czech Republic (as well as the Slovak Republic) indicated that it would

consider itself bound by multilateral and bilateral treaties entered into by the

95See Austria-Serbia/Montenegro BIT (2001), Article 12(4); Egypt-Serbia/Montenegro BIT (2005),Article 13; Netherlands-Serbia/Montenegro BIT (2002), Article 14(5). The ‘replacement clauses’ ofthese treaties are not identical, but relatively similar. By way of illustration, Article 12(4) of theAustria-Serbia/Montenegro BIT (2001) provides that "[t]he entry into force of this Agreementbetween the Government of the Republic of Austria and the Federal Government of the FederalRepublic of Yugoslavia shall terminate the provisions of the Agreement on the Promotion andProtectionof Investmentsbetween theRepublicofAustriaand theSocialist FederativeRepublicofYugoslavia,signedinBelgradeon25October1989.”96SeeEuropeanCourtof Justice,Commissionof theEuropeanCommunities v. Kingdomof Sweden,CaseC-249/06.97Seehttp://investmentpolicyhub.unctad.org/Download/TreatyFile/3152,

24

CSFR.98Followingindependence,theCzechRepublicanditstreatypartnersclarified

thefutureapplicationofbilateraltreatiesconcludedwiththeCSFR.In14ofthe16

cases,theCzechRepublicanditsrespectivetreatypartnerexplicitlyagreedthatthe

priorCSFRBITwouldcontinuetoapply, typicallyby includingtheprior treatyona

list of treaties that would “remain in force”: agreements along the lines were

reached with the Netherlands,99Austria,100 Switzerland,101Germany,102France,103

the United Kingdom,104the United States,105as well as Denmark, Finland, Spain,

Sweden,Greece,Norway,theUnitedStatesandtheBelgium-LuxembourgEconomic

Union.106In the two remaining instances (the CSFR-China and CSFR-Canada BITs),

newBITswere concluded. Both of these newBITs expressly terminated (and thus

replaced) the treaties agreedwith theCSFR107- again suggesting that the old BITs

hadnot simply ceased toapply. In fact, theCzech-CanadianBITaccepted that the

prior CSFR-Canada would “continue to apply to any dispute between either

Contracting Party and an investor of the other Contracting Party that has been

98 See e.g. ‘Proclamation to all Parliaments and Nations of the World’ of 17 December 1992,reproducedinKlabberset.al.(n79),at402;seealsoArticle5(2)ofConstitutionalActNo.4/1993(athttp://www.usoud.cz/fileadmin/user_upload/ustavni_soud_www/Pravni_uprava/AJ/4_1993_EN.pdf).ItisworthnotingtheformerCzechoslovakiahadbeenapartytothe1978ViennaConvention.99See Tractatenblad 1995, Nr. 27, at 3, 5: see https://zoek.officielebekendmakingen.nl/trb-1995-27.HTML100 Seehttp://www.bmwfw.gv.at/Aussenwirtschaft/investitionspolitik/Documents/Bilaterale%20Investitionsschutzabkommen/Tschechien2.pdf.101Seewww.admin.ch/opc/de/classified-compilation/19900247/index.html#fn1.102FederalGazette(Bundesgesetzblatt)1993,vol.II,762.103Seehttp://www.diplomatie.gouv.fr/traites/affichetraite.do?accord=TRA19950270.104SeeUKTreatySeries1996,ThirdSupplementaryList,96.105According to Williams, on 24 April 1993, the Czech Ministry of Foreign Affairs notified the USDepartment of State of a number of prior bilateral agreements (incl. the CSFR-US BIT) that itconsidered to remain in force: PRWilliams, The Treaty Obligations of the Successor States of theFormerSovietUnion,Yugoslavia,andCzechoslovakia:DoTheyContinueinForce?,DenverJournalofInternationalLawandPolicy23(1994-1995),1,at40-41.AccordingtoinformationprovidedbytheUSTradeRepresentative“[a]fterthebreakupofCzechoslovakiain1993,[theCSFR-USBIT]continuedineffect for the successor states, the Czech Republic and Slovakia” (athttp://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_002809.asp). See alsoDumberry(n5),85(hisfn.72).106SeethereferencesinKlabberset.al.(n79),at442,444,454,458,460.107Czech-ChineseBIT,Article13(4);Czech-CanadianBIT,ArticleXV(7).

25

submitted to arbitration pursuant to that Agreement by the investor prior to the

datethatthisAgreemententersintoforce.”108

Thebriefsummarysuggeststhat,whenaddressingthefateofpriorBITs,theCzech

Republic and its treaty partners opted for a near-absolute continuity. Against that

background, it should perhaps not come as a huge surprise that arbitral tribunals

addressingtherathermanyBIT-basedclaimsagainsttheCzechRepublichaveseen

littlereasontoprovidedetailedreasoning.AsDumberrynotes,mostoftherelevant

awards"barelymentioned…therelevantsuccessionissues";109indeedoften110they

nomorethanrecord,inasinglephrase,that"theCzechRepublicsucceededtothe

rightsandobligationsoftheCzechandSlovakFederalRepublicundertheTreaty".111

And while brief statements like this one may indeed not do full justice to the

intricaciesof the lawofState succession, the tribunals’ telegraphic “reasoning”no

doubtgiveseffecttotheintentionofthetreatyparties. Inthevariousproceedings

against the Czech Republic, it simply (as noted by another tribunal) was "not in

disputethattheRespondentsucceededtotherightsandobligationsundertheΒΙΤ

asoriginallyenteredintobytheCzechandSlovakFederalRepublic”.112

***

108Czech-Canadian BIT, Article XV(7). The provision also refers to “the Agreement between theGovernment of Canada and the Government of the Czech and Slovak Federal Republic for thePromotionandProtectionofInvestments,doneatPragueon15November1990,insofarasitisnowanAgreementbetweenCanadaandtheCzechRepublic”(emphasisadded).109Dumberry(n5),96.Seeibid.,84-89,forafullerreviewofarbitraljurisprudenceincasesinvolvingtheCzechandSlovakRepublics.110Similarlybriefisthe'discussion’inthefollowingawards:Binderv.CzechRepublic,UNCITRAL,FinalAward, 15 June 2007, para. 385; European Media Ventures SA v. The Czech Republic, UNCITRAL,PartialAwardonLiability,8July2009,para.1;Invesmartv.CzechRepublic,UNCITRAL,Award,26June2009,para.8;EasternSugarBV(Netherlands)vTheCzechRepublic (SCCCaseNo088/2004),PartialAward,27March2007,para.5.111SeeCME Czech Republic BV v Czech Republic, UNCITRAL, Partial Award, 13 September 2001, atpara.3.112 ECE Projektmanagement & Kommanditgesellschaft PANTA AchtundsechzigsteGrundstücksgesellschaftmbH&Co.v.TheCzechRepublic,UNCITRAL,PCACaseNo.2010-5,Award,19September2013,para.3.139.

26

This summary review of Czech and Serbian-Montenegrin practice illustrates the

importanceofexplicitpartyagreementsdeterminingthefateofpriortreaties.Such

agreements may be difficult to trace and often are reached some time after the

succession,leavingthelawuncertainduringtheinterim(‘twilight’)period.However,

thetwocasestudiessuggestthatexplicitagreementsarenumerousand,inalarge

numberof instances,clarifywhetheranewState isboundbytreatiesenteredinto

by its predecessor. As to the outcome of such agreements, Czech and Serbian-

Montenegrinpractice is also indicative:whendiscussing the fateof a prior treaty,

the Czech Republic, Serbia and Montenegro and their respective treaty partners

havealmostinevitablyoptedforsomeformofcontinuity–typicallybyagreeingthat

anoldBITshouldcontinuetoapply,alternativelybyreplacingitwithanewone.This

practice reflects the considerable appeal of stability in investment treaty relations

and it bears out Cheng’s more general observation that “[i]n most instances of

succession,acceptingtheoverallcontinuityofcommercialarrangementsistheonly

realisticoption."113

bb)InferringConsent

While treaty parties are numerous, they donot cover all BITs, andof course they

maytaketimetobereached.EvenStatesthatarekeentoclarifythestateoftheir

treatyrightsandobligationspostindependencemayneedtimetoreachagreement

withtheirtreatypartners. Inother instances,newStates,foranumberofreasons,

may struggle to identify the manifold bilateral treaties raising issues of State

succession. To illustrate, the position of South Sudan vis-à-vis prior BITs remains

largely uncertain. At the time of writing and based on the publicly available

information,ofthe(atleast114)13BITsenteredintobySudan,onlyonehasbeenthe

subjectofanexplicitagreement,andeveninrespectofthatonetreaty,information

is incomplete.115As regards the fate of the twelve other treaties that applied

113Cheng(n15),404.114Seesupra,informationinfn.63.115TheGermangovernmentwebsitestatesthattheGermany-SudanBITapplies inrelationtoSouthSudan: seehttp://www.bmwi.de/DE/Themen/Aussenwirtschaft/Investitionsschutz/investitionsschutzvertraege.html.Itdoesnotrefertoaformalagreementtothiseffect,though.

27

between Sudan and its respective treaty partners, publicly available information

providesnoclearguidance.

The question is how to deal with this uncertainty. According to one approach,

"diplomaticclarificationsorexpressstatements…representtheonlywaytoliftthe

cloudofuncertainty”116–whichseemstosuggestthatallotherinstanceswouldbe

covered by the general rule governing succession to bilateral treaties. Such an

approach is straightforward, but too categorical; it ignores the trend towards

flexibility that characterises the general regime of State succession.117As noted

above,thecrucialquestioniswhetherthenewStateandtheotherpartytotheprior

treaty intended to apply the treaty post independence. Especially in the bilateral

context,wheretheparties’ intentiontobeboundbyatreatydoesnotneedtobe

expressedinaformalmanner,118thereiscertainlyroomforabroaderanalysisthat

looksbeyondexplicitpartyagreements.119Whilstdefinitivefindingswilldependon

anoverallassessmentoftheavailableevidence,thefollowingelementscouldguide

theanalysis:

-UnilateralstatementsbythesuccessorState:Intheabsenceofanexplicitbilateral

agreementbetweenthetreatyparties,successorStatesmayhaveunilaterallytaken

a view on the application of prior bilateral treaties. Such unilateral statements

cannotbindputativetreatypartners,120buttheymayhelp identifytheviewofone

party.Wheretheviewofthatparty isnotopposed, itcanprovidethebasis foran

116 Discussing putative obligations of South Sudan post independence, Genest e.g. notes that"diplomatic clarifications or express statements … represent the only way to lift the cloud ofuncertaintyhoveringovertheSudanBITsinrespectofSouthSudan"(n15,at22).117Seesupra,section4.a.118Contrast e.g. the more formalised process governing expressions to be bound by multilateraltreaties; theseoftenprescribe specificmodesof becomingbound (accession, ratification, etc.) andtypicallydesignateadepositarytoensurequestionsofconsent,partystatus,arehandledimpartially.119See Aust (n 69), 369: "In the case of abilateral treaty,much depends onwhat can be agreed,expressly or tacitly, between the successor state and the third state“ (italics in the original).Moregenerally, see also J Brunnée, Consent, in Max Planck Encyclopedia of Public International Law(www.mpepil.com),atpara.20:"IndividualStates’explicitconsentremainscentral,inboththeinitialadoptionandsubsequentdevelopmentoftreaties.Inthelattercontext,attenuatedformsofconsent,suchasconsentthatispresumedsubjecttoopt-out,areincreasinglycommon."120SeeArticle9ofthe1978ViennaConvention,whichclarifiesthat, inandofthemselves,unilateralstatementscannotcreaterightsandobligationsforthirdStates.

28

argumentbasedontacitpartyconsent.Bywayofillustration,itisindicativethatina

number of disputes against the Czech and Slovak Republic, investment tribunals

relied on unilateral statements as evidence of the new States’ willingness to

continue prior treaty obligations.121In the recent UNCITRAL award inWorldWide

Minerals v. Kazakhstan (which, as noted above, has not been released so far), the

Claimants are equally said to have “adduced a series of specific statements and

representationsbyKazakhstanthatwereallegedtosignalthatcountry’sintenttobe

boundbythisparticularU.S.S.R.BIT”.122

-Unilateralstatementsbytheputativetreatypartner:Conversely,statementsbythe

putativetreatypartnermayprovideguidance.Bywayofillustration,treatypartners

of the predecessor State may have formulated expectations about the successor

State’s approach to prior treaties, e.g. before extending recognition.123While such

expectationsmaynoteasilybeenforceablepost recognition, theycanprovide the

basisofatacitagreementifthesuccessorStateacceptsthem.

-Statementscontainedindevolutionorrelatedagreements:Devolutionagreements

betweentheStatesinvolvedinanegotiatedprocessofseparationordissolution,just

as further arrangements, provide another "rich source of data on the law on

succession".124LikeunilateralstatementsbythesuccessorState,theydonotassuch

121Seee.g.SalukaInvestmentsBVvCzechRepublic(UNCITRAL),JurisdictionovertheCounterclaim,7May 2004: "The Czech Republic confirmed to the Kingdom of The Netherlands that, upon theseparationoftheCzechandSlovakFederalRepublicintotwoseparaterepublics,theTreatyremainedin force between the Czech Republic and the Kingdomof TheNetherlands" (at para. 2). The keyquestion iswhether the other party can be taken to have consented: this depends on the regularoperation of principles governing consent inferred from silence or passivity; the specificity andauthorityoftheunilateralstatementarerelevantinthisrespect.122InvestmentArbitrationReporter,InDramaticHolding...(n12).123For example,Williams refers to letters sent byUSPresidentBush to thePrimeMinisters of theCzech and Slovak Republics on 1 December, proposing "that the United States and the respectivestates'conductfulldiplomaticrelations'basedontheaffirmationoftheRepublicstofulfillanumberofcommitments, includingthe'commitmenttofulfillthetreatyandotherobligationsoftheformerCzechoslovakia’“. While Williams criticises "the deficiencyof the U.S.approach to securingcontinuationofbilateralbilateraltreaties",arbitralpracticehasacceptedthecontinuedapplicationofthepriortreaties.SeePRWilliams(n105),at30and32;andcf.supra,section4.b.aa.forasummaryofarbitralpractice.124Cheng(n15),262.

29

bind third parties;125but they can help identify a new State’s approach to prior

treatyobligations.In1991,themembersofthenewly-establishedCommonwelathof

Independent States (‘CIS’) e.g., in a general manner, affirmed their desire to

"discharge the international obligations incumbent on them under treaties and

agreements entered into by the former Union of Soviet Socialist Republics”.126As

regards South Sudan, a bilateral cooperation agreement of 2012 recorded the

intention of Sudan and South Sudan to abide by obligations arising out of their

membership in global and regional trade organisations and "other similar

institutions".127As the other types of evidence mentioned, none of this need be

conclusive:broadstatementssuchasthosemadebytheCISmemberStatesmaytoo

generaltoprovideevidenceofawillingnesstocontinuespecifictreaties;128whilethe

more specific Sudan-South Sudan Agreement may not cover obligations under

BITs.129However,thereislittlereasontoignoretheagreementsaltogether.

-Conductduringproceedings:Inadditiontoearlierstatements,thesuccessorState’s

conductduringarbitralproceedingsmayberelevant.WhiletheapplicabilityofaBIT

isamatterforobjectivedeterminationbythetribunal,therespondentState’sviews

intheproceedingsmaybeindicative.130Insomeoftheproceedingsbroughtagainst

the Czech and Slovak Republics, arbitral tribunals e.g. seemed willing to treat

questions of succession en passant because the Claimant and Respondent were

125SeeArticle8ofthe1978ViennaConvention.126Minsk Agreement (establishing the Commonweath of Independent States), International LegalMaterials31(1992),147,atArticle12;andfurthertheDeclarationofAlmaty,ibid.,at148.127 Agreement on Trade and Trade-Related Issues, Article 2 (athttp://sudanwatch.blogspot.de/2013/03/full-text-nine-agreements-between-sudan.html).128But see the reference, in fn.84, to the ICJ’s judgment in theCroatian-SerbianGenocide case, inwhichageneraldeclarationwastreatedasavaliddeclarationofsuccession.129See Genest (n 15), at 5: "Articles 2(1) and 2(2) [of the Agreement on Trade and Trade-RelatedIssues] raise twounansweredquestionswith likelynegativeanswers: first,whether theSudanBITsconstitute abodyof rules arisingoutof themembership to an institution similar to theWTO, andsecondwhethertheyconstitute‘otherrelevanttradeprinciples’."130Supportforthegeneralproposition(thatconductduringtheproceedings isrelevant)cane.g.befound inthecaseofUSv.Bowe, inwhichthePrivyCouncil foundthat"thetwoGovernmentshaveshownbytheirconduct, includingtheirconduct inthepresentproceedings,thattheybothintendedtheirextraditionarrangementstoremaininforce"(InternationalLawReports,vol.85,144;emphasisadded).

30

agreedonthematter.131

The list is illustrative rather than exhaustive: clearly, in seeking to establish the

intentionoftheparties,tribunalsorotherdecision-makersarenotboundtoastrict

canonofadmissible sources. It alsobears re-iterating that,whateverevidencehas

been brought forward, will need to be evaluated in the light of all factual

circumstances.However,with these caveats, thepreceding considerations suggest

that, such intention can be deduced from other statements, or inferred from

conduct. In this respect, the absence of an explicit party agreement on (dis-

)continuitydoesnotconcludematters;itmeansthatthematterneedstobestudied

morefully.

cc)AutomaticSuccessiontoBITs?

In the light of the preceding considerations, the question of automatic succession

mayperhapsnotarisefrequently; inmanydisputes,thetreatyparties,explicitlyor

implicitly, have expressed a view. Nevertheless, it remains relevant, both

conceptually and in relation to cases in which the parties’ intention cannot be

established.

On the basis of the general regime of State succession (controversial as it is), the

argument for automatic succession to bilateral treaties meets with considerable

obstacles. Of course, new States would automatically be bound by prior BITs if

Article34ofthe1978ViennaConventionapplied(whichithardlyeverdoes).Yet,as

noted above, 132 the better view is that Article 34 does not reflect customary

internationallaw–andthatitcertainlydoesnotreflectcustomaryinternationallaw

asfarasbilateraltreatiesareconcerned:aslongastheseareseenasonecategory,

andviewedasinter-partybargainsofan“essentiallyvoluntary”character,thecase

131See e.g.HICEE BV v Slovak Republic, UNCITRAL (PCA Case No 2009-11), Partial Award, 23May2011,atpara.3fn.2:"Itisnotindisputethat,afterthedissolutionoftheCzechandSlovakFederalRepublicon31December1992,theSlovakRepublicsucceededtothe[CSFR-NetherlandsBIT]."132Seesupra,section4.a.

31

forautomaticsuccessionisweak.133Thefactthat,whendeterminingthefateofBITs

through explicit agreements, new States and their treaty partners have almost

inevitablyopted for treaty stability,doesnotnecessarilyaffect thisunderstanding.

As inotherareasof international law, the impactofexplicit treatyagreementson

theunderlyingcustomarynormisambivalent:whileexplicitagreementsreflectthe

appeal of continuity (and thus the ratio of Article 34), the fondness of States for

negotiated outcomes can equally be said to undermine the case for automatic

succession.134On thebasisof thesearguments, recent studies reject theview that

newStateswereautomaticallyboundbypriorBITs;unlessthepartieshaveagreed

otherwise,thenewStatepositionstartswithaclean‘BITslate’.135

There is force to such an approach, but perhaps it does not do full justice to

arguments in favour of automatic succession to BITs. If that caseweremade,136it

wouldneedtobebasedonanalysis that looksbeyondthenumberofparties,and

that takes issue with the characterisation of BITs as “essentially voluntary” inter-

Statearrangements.137Anargumentforautomaticitycouldinsteademphasisethat,

133SeeILCYearbook1974,vol.II/1,at239;andcf.supra,section4.a.134SeeDumberry(n5),82:"theveryfactthatsuchnegotiationtookplaceinmostcasessuggeststhatthirdStateshavegenerallynotacceptedtheprincipleofautomaticsuccession."135SeeGenest(n15),9(arguingthat"cleanslateandmutualconsentshouldprevailforallsecedingstatesinrespectofbilateraltreaties");Dumberry(n15),27("thetabularasaprincipleshouldapplytoallnewstates");Dumberry(n5),81("thereisnoautomaticcontinuityofbilateraltreatiesbecauseoftheparticularnatureofthesetreaties.

Anytreatycontinuationisultimatelytheresultoftheexpress

(ortacit)agreementofbothStates"[footnotesomitted]).136Sofar,totheauthor’sknowledge,thecaseforautomaticityhasnotsofarbeensetoutindetail.For a clear exposition of its likely starting point – in the context of a separate State successionquestion–seethetheaffidavitofSirDanielBethlehemsubmittedintheSanumproceedingsbeforethe SingaporeHighCourt: At para. 42, SirDaniel notes: "While it is a treaty between the PRC andLaos,bindingonthetwoStatesasparties,[theChina-LaosBIT]alsoestablishesalegalframeworkthatis expressly intended for the benefit of private persons who qualify as ‘investors’, both naturalpersonsandeconomicentities (PRC/LaosBIT,Article1(2)).Morespecifically,Articles2–6oftheBITcreate rights for qualified investors that are actionable in their own name under the disputesettlementprovisionsofArticle8oftheBIT.So,althoughtheBITisaninstrumentconcludedbythePRCandLaos,andbindinguponthem,italsocreatesactionablerightsfornaturalandlegalpersonshaving the nationality, or which are established under the laws, of the Contracting States. As theArticle 12(4) legal framework stability clause makes clear, such persons have acquired rights andlegitimateexpectationsinthearrangementsestablishedbytheBIT":seeSanumInvestmentsLimitedv. Lao People’s Democratic Republic, Affidavit of Sir Daniel Bethlehem KCMG QC, athttp://www.italaw.com/cases/documents/3696.FormoreontheSanumcaseseebelow,section5.137IntheSanumcase,thearbitralrecognisedthatnotallbilateraltreatiescouldbetreatedalike:“theTribunal considers that it would be excessive to say that all bilateral treaties are so personal, sorelated to intuitupersonaequestions that theycannot surviveaState’s succession. Inotherwords,

32

whileconcludedbetweenStates,BITsestablishsubstantiverightsofinvestors,which

are directly enforceable in arbitral proceedings. While formally bilateral, it does

indeedseemoverlyrestrictivetoviewBITsmerelyasinter-Statebargains.Yetonce

the focus is broadened to include the interests of foreign investors, two related

argumentsinfavourofautomaticitycouldbeadvanced.First,treaty-basedinvestor

rightscouldbelikenedto‘vested’or‘acquired’rights,whichoccupiedaprominent

place in traditional debates about State succession – and which were claimed by

manytosurviveinstancesofStatesuccession.138Appliedtothepresentcontext,one

couldperhapsarguethatforeigninvestorsmakinganinvestmentwhenaBITapplies

shouldacquiretherighttohavethatinvestmentprotectedbytheBITaftertheState

successionhastakenplace.139

Second,pressingthepointinlightofrecentargumentsaboutautomaticsuccession

to particular categories of treaties, there might be room for a ‘human rights

analogy’: adapting a prominent dictum by the UN Human Rights Committee, one

could indeedarguethat,asrightsunderBITs"belong[toforeign investors]...,once

[foreigninvestors]areaccordedtheprotectionoftherightsunderthe[treaty],such

protectiondevolveswithterritoryandcontinuestobelongtothem,notwithstanding

...Statesuccession".140

theTribunalconsidersthatit isnecessarytoconsidertheapplicationofthegeneralruletobilateraltreatiesonacase-by-casebasis"(n9,atpara.281).138See notably O’Connell (n 17), vol. 1, 304 et seq. For details see Ko Swan Sik, The Concept ofAcquiredRights in International Law: a Survey, inHMeijers andBVierdag, Essayson InternationalLawandRelations inHonourofA.J.P.Tammes(1977),120;andMITorresCazorla,RightsofPrivatePersonsonStateSuccession:anApproachtotheMostRecentCases,inEisemann/Koskenniemi(n27),663.139Seee.g.Vagts (n69),281: "States in their relationswitheachotherareentitled to relyoneachother'scommitments.…Inothercases,theindividualcitizensdotherelying–theymakeinvestmentsintheterritoryoftheotherstatebecauseoftheassurance(oftencontainedinatreatyoffriendship,commerce and navigation or bilateral investment treaty) that they have a right to establishthemselvesandthattheirinvestmentwillnotbetakenfromthemexceptuponprompt,adequateandeffective compensation." It is worth noting that, in order for such an argument to open the waytowardstreaty-basedarbitration,onewouldneedtoarguethatrightsacquiredunderanapplicableBITareopposabletothesuccessorStateasamatteroftreatylaw.140HumanRightsCommittee,GeneralCommentNo.26(61),UNDoc.CCPR/C/21/Rev.1/Add.8/Rev.1(1997),atpara.4.

33

Thesepointsarepurposivelyputtentatively,asthedebateisatanearlystage–and

as quite often, the parties have determined the fate of their BITs explicitly or

implicitly.Itmustberecognisedthatthecaseargumentforautomaticsuccessionto

BITs is anything but straightforward. It depends on a particularly investor-friendly

reading of those treaties, which – given recent backlashes against investment

arbitration–mayhavelostsomeofitsappeal.However,thebriefsketchofpotential

argumentssuggeststhatthematterisatleastopentoargument.

***

Of the various succession issues addressed in the present inquiry, the question of

successiontopriorBITsisthemostrelevant.Astheprecedingdiscussionsuggests,it

eschews a clear-cut answer. The general regime governing succession to treaties

offers relatively limited guidance; as a consequence, States are well advised to

determinethefateofBITsthroughexplicitagreements.Wheresuchagreementsare

concluded,theyclearlybearouttheimmenseappealoftreatycontinuity.

Absentexplicitagreements,tribunalsandotherdecision-makersarelikely,infuture

disputes,toestablishtheparties’ intentionsfrom‘circumstantialevidence’,suchas

unilateralstatementsorconduct.Thisapproachnowdoubtisfraughtwith“inherent

difficulties",141but, if undertaken properly, can facilitate the search for equitable

solutions. Finally, future disputes may witness a return to the ‘big debate’ about

automatic succession to treaties, which so far has hardly begun: as noted in the

preceding paragraphs,with respect to BITs creating investor rights, that debate is

perhapsmoreopenthantheliteratureonsuccessiontobilateraltreatiessuggests.

5.Cession,IncorporationandTheirImpactonInvestmentTreaties

Questionsof treaty successionarenot restricted to theemergenceofnewStates.

ThebroaddefinitionsetoutinArticle2(1)(b)ofthe1978ViennaConventionbrings

141Genest(n15),22.

34

within the scope of succession instances in which an existing State "replace[s] …

anotherintheresponsibilityfortheinternationalrelationsofterritory”.Cessionsof

territory(i.e.theagreedtransferofapieceofterritoryfromoneStatetoanother142)

and incorporation (i.e. the voluntary integration of one State into another143) are

casesinpoint.AstheydonotinvolvetheemergenceofanewState,theseinstances

ofsuccessiongiverisetoparticularissuesandaresubjecttoaparticularregime.At

leastwithrespecttocessions,thisparticularregimeisenshrinedinArticle15ofthe

1978 Vienna Convention, which declares that following the transfer of territory,

“(a)treatiesofthepredecessorStateceasetobeinforceinrespectoftheterritory

towhichthesuccessionofStatesrelates"while“(b)treatiesofthesuccessorState

areinforceinrespectoftheterritorytowhichthesuccessionofStatesrelates.”This

provisioniswidelyheldtoreflectgeneralinternationallaw;144unlikewithrespectto

other questions of State succession, debates therefore proceed from an agreed

starting-point.

Thatsaid, therecentSanum litigationhasthrown intostarkrelief theconsiderable

uncertainties in the application of the law. As noted in the Introduction, in early

2015,theSingaporeHighCourtheldthatthe1993China-LaosBITdidnotapplytoan

investorincorporatedunderthelawsofMacao;thisdirectlycontradictedanearlier

findingbyanUNCITRALtribunal.145Thesubsequentdiscussionseekstoidentifythe

sourceofthisdisputeandsituateitwithinthelegalregimegoverningtreatiesduring

instances of cession or incorporation; beyond that, it also shows that,

notwithstanding the prominence of the conflicting decisions in the Sanum

142ODörr,Cession,inMaxPlanckEncyclopediaofPublicInternationalLaw(www.mpepil.com),para.1;Hafner/Novak(n17),404;Zimmermann,Staatennachfolge(n17),17.143Dörr(n142),para.2;Hafner/Novak(n17),405;Zimmermann,Staatennachfolge(n17),19.144See e.g. In its commentary to draft article 14 (which became Article 15 of the 1978 ViennaConvention),theILCmadeclearthattheprovisioncodifiedanexistingcustomaryruleYearbookILC1974, vol. II/1, 208-209. Hafner/Novak note succinctly that "State practice before 1978 ... hasconfirmedthevalidityofthisrule[Article15]aspartofcustomaryinternationallaw“(n15,at411).ForfurthersupportseeZimmermann,EPIL(n17),para.8;KOdendahl,CommentarytoArticle29,inODörr/KSchmalenbach(eds),TheViennaConventionontheLawofTreaties(2012),500.IntheSanumcase,thearbitraltribunalnotedthattherewas"unanimityor‘quasi-unanimity’amongthedoctrinetoconsiderthatArticle15…representscustomaryinternationallaw"(n9,atpara.221).145Seereferencesinfn.8and9.

35

proceedings, the rulesapplicable to this typeofStatesuccessionare in fact rather

settled.

a)TheGeneralRegime:MovingTreatyFrontiers

The general regimehas beendevelopedby reference to instances of cession. It is

premisedontheunderstandingthat,whileapartofterritoryistransferred,thelegal

personalityofthetransferringandreceivingStatesremainsintact.146Inthisscenario,

the widely accepted default rule leaves the treaty status of the two States

untouchedandmerelyextends thegeographical scopeof treatiesbymoving their

‘frontiers’. The result is relatively straightforward: as noted by Zimmermann,

“treaties of the predecessor cease to be in force in respect of the ceded territory

while treatiesof the successorgenerallyextend ipso facto to this territory.”147The

twoparagraphsofArticle15ofthe1978Conventionprovideforthissubstitution;in

so doing, they ensure that, for each State, treaties are "binding in respect of its

entireterritory".148

As with other rules (and as the use of the term ‘generally’ in Zimmermann’s

formulation suggests), themoving treaty frontiers rule does not apply absolutely.

Thelawleavesroomforagreementtothecontrary;andwhereatreatyspecifically

relatestothecededterritory,acontraryapproachmayindeedbecalledfor.Article

15ofthe1978ViennaConventiongiveseffecttotheseconsiderationsbyadmitting

for exceptions to the moving frontier principle if its application “would be

incompatiblewiththeobjectandpurposeofthetreatyorwouldradicallychangethe

146AstheILCnotedinitscommentary,instancesofcession"doinvolvea'successionofStates'inthesense that this concept isused in thepresentdraft articles,namelya replacementofoneStatebyanotherintheresponsibilityfortheinternationalrelationsofterritory"(ILCYearbook1974,vol.II/1,208).147Zimmermann,EPIL(n17),para8.Waldock’smorecomplicatedformulationdistinguishesbetweenapositiveaspect(“thetreatiesofthesuccessorStatebeginautomaticallytoapply inrespectofthe[ceded] territory as from the date of the succession”) and a negative aspect (“the treaties of thepredecessorState…ceaseautomaticallytoapplyinrespectoftheterritory”);butinessence,theruleremainsoneof“asimplesubstitutionofonetreatyregimeforanother”:HWaldock,SecondReportonSuccessioninRespectofTreaties,ILCYearbook1969,vol.II,at52.148AsindicatedbyArticle29ofthe1969ViennaConventionontheLawofTreaties.

36

conditions for its operation“;149further exceptions flow from the application of

Articles 11 and 12 of the 1978 Vienna Convention, pursuant to which successor

States are bound to observe boundary and other localised treaties. 150 But

notwithstanding theseexceptions, as aprinciple, the ‘moving treaty frontiers rule’

hasregularlybeenapplied,andwaswellestablishedbythetimeoftheadoptionof

the1978ViennaConvention.151

Statepracticesince1978isrelativelysparse.Ofthefewinstancesofcessionand/or

incorporation that have taken place, some would seem to affirm the approach

adoptedinArticle15ofthe1978ViennaConvention,whileintwoparticularcases,

Stateshaveoptedforanuancedapproach.Asforconfirmatorypractice,thetransfer

ofWalvisBayfromSouthAfricatoNamibia illustratestheoperationofthemoving

treaty frontiers rule.152 After 1994, and subject to some special arrangements,

“treatiesofthepredecessor[SouthAfrica]cease[d]tobe inforce inrespectofthe

ceded territorywhile treatiesof the successor [Namibia] generallyextend[ed] ipso

factoto[WalvisBay].”153Byandlarge,themovingfrontiersprinciplehasalsoshaped

practice during the process of German unification, generally treated as a case of

incorporation, to which the rules governing cessions were applied by analogy:154

149SimilarexceptionsareincludedinArticle29VCLT,pursuanttowhichtreatiesgenerallyapplytotheentiretyofaState’sterritory:thispresumptiondoesnotapplyif"adifferentintentionappearsfromthetreatyorisotherwiseestablished“.IntheSanumcase,thearbitraltribunalheld"theexceptionstoArticle15oftheVCST[tobe]encompassedintheexceptionstoArticle29oftheVCLT"(nXX,atpara.229).150Seesupra,section4.a.151Seethereferencesinfn.141.152SeetheTreatybetweentheGovernmentoftheRepublicofSouthAfricaandtheGovernmentofthe Republic of Namibiawith Respect toWalvis Bay and theOff-Shore Islands, International LegalMaterials 33 (1994), 1526; and further Zimmermann, Staatennachfolge (n 17), 447-449. Forbackground information see AJ Hoffmann, Walvis Bay, in Max Planck Encyclopedia of PublicInternationalLaw(www.mpepil.com).153Cf.Zimmermann,EPIL(n17)para8.Specialarrangementsweree.g.reachedtoaccommodatetherightsofSouthAfricanresidentsinWalvisBayandtheeffectofpublicactsrenderedduringtheSouthAfricanrule:seeHoffmann(n152),paras.15-17.154See Hafner/Novak (n 17), 411-412; Zimmermann, Staatennachfolge (n 17), 245-282 (withmanydetails).Thisanaloguousapplication initiallyofthemovingtreatyfrontiersruletotheunificationofGermanymetwithsomeresistance,asthe1978ViennaConventiondoesnotlaydownspecialrulesforanincorporationofaState,but instead, inArticle31,formulatedaparticularrulegoverningtheunitingofStates. InthecaseofGermany,Article31clearlywasnotapplied.ForaclearanalysisseeStern(n17),237-242.

37

according to Article 11 of the Unification Treaty,155agreements concluded by the

Federal Republic ofGermany (‘FRG’), as a rule,would apply to the entireGerman

territory;whereastheFRGwouldmerelyenterintoconsultationsregardingthefate

oftheGermanDemocraticRepublic’sformertreatiesaccordingtoArticle12.156

Thetwomostprominentterritorialtransfersthathavetakenplacesince1978–viz.

the return to China, of Hong Kong andMacao157– however have followed a very

different (perhaps indeed “unique”158) logic. As Macao and Hong Kong were to

retainaspecialstatuswithinthePRC,themovingfrontierprinciplewasnotapplied

in an unqualified manner. In addition to ensuring the transfer, the arrangements

betweenChinaontheonehand,andtheUnitedKingdomandPortugalontheother,

soughttopreservepre-existingtreatiesirrespectiveofwhetherthesehadappliedto

Chinabeforethetransfer.Tothateffect, intheirbilateralDeclarationsof1984and

1987,thetreatypartiesdidnotautomaticallyextendChinesetreatiestoHongKong

andMacao.159Moreimportantly,theyenvisagedthat(asnotedinthe1984UK-China

Declaration)“[i]nternationalagreementstowhichthePeople’sRepublicofChina is

notaparty,butwhichareimplementedinHongKong,mayremainimplementedin

the[HongKongSpecialAdministrativeRegion]”.160AsregardsHongKong,theJoint

LiaisonGroupestablishedunderthe1984Declarationwastomakeampleuseofthe

latter option (continued implementation) as far as multilateral treaties are

155TreatyontheUnificationofGermany,InternationalLegalMaterials30(1991),457.156As Aust notes (n 69, 374), while not bound by the Unification Treaty, other states generallyacceptedtheapproachadoptedinArticles11and12.ForfurtherdetailseeDPapenfuß,TheFateoftheInternationalTreatiesoftheGDRwithintheFrameworkofGermanUnification,AmericanJournalofInternationalLaw92(1998)469;andthereferencesinfn.154.157 Whether these instances are properly characterised as 'State succession' is a matter ofcontroversy:accordingtothePRC’sview,itwasamere"resumption"ofsovereigntyoverterritoriesthat had never been ceded. However, even on that basis, both instances would involve the “thereplacementofoneStatebyanotherintheresponsibilityfortheinternationalrelationsofterritory”(asperArticle2(1)(b)ofthe1978ViennaConvention).ForcommentseetheSanumaward,atpara.237;butcf.Wang(n13),569-570.158Aust(n69),386.159See International LegalMaterials 1984, 1366 (JointUK-ChinaDeclaration) andUNTreaty Series,vol.1498,228(JointChina-PortugalDeclaration).ForafulleranalysisseeRMushkat,HongKongandSuccessionof Treaties, International andComparative LawQuarterly 46 (1997), 181; Zimmermann,Staatennachfolge(n17),432-337;andCheng(n15),209-236.160SeeAnnexI,SectionXIofthe1984JointUK-ChinaDeclaration(n159).

38

concerned; with the result that, “with few exceptions, multilateral treaties which

had applied to Hong Kong before handover continued to apply thereafter in all

essential respects”.161Forbilateral treaties, thepartieswerealsokeen topreserve

someautonomyforMacaoandHongKong,butadoptedadifferentapproach:inthe

wordsofonecommentator (speakingto thesituation inHongKong),“noneof the

then existing bilateral treaties with third States would apply to the HKSAR after

handover.”162Rather, Hong Kong and Macao were entrusted directly to conclude

bilateralagreementsintheirownright,whichwouldthenremaininforce.

Theseconsiderationshighlight the flexibilityof thegeneral framework,whichdoes

notprecludeStatesfromagreeingonspecialsolutionsforparticularproblems–and

which in thecaseofHongKongandMacao,allowed theparties to implement the

‘one country, two systems’ approach that informed the eventual arrangements.

Lookingatdevelopmentssince1978,perhapsitcouldbesaidthatpracticehasnot

onlybeensparse,butalsodominatedbyunusualcases;andthatthearrangements

reached with respect to Hong Kong and Macao (and to some extent Germany)

reflectthatfact.

b) Investment Treaty Practice: Agreement on Principle, but Difficulties with

‘Unique’Cases

Investmenttreatypracticelargelymirrorsthegeneraldevelopmentsoutlinedinthe

preceding section. Given the recent focus on the Sanum litigation with its

contradictory outcomes, it is worth underlining that there is a large measure of

agreement on the applicable regime, and on the presumptive relevance of the

movingfrontiersprincipleinparticular.

Read properly, the decisions rendered in the Sanum litigation reflect different

interpretations of the peculiar status of Macao under Chinese BITs entered into

beforeMacao’s return. Thesedifferent interpretationsmighthave implications for

161Aust(n69),390.162Aust(n69),390.

39

thestatusofHongKong(inrelationtowhichsimilarquestionsmightarise),butare

unlikelytobeofmoregeneralrelevance. Infact, intheirapproachtothestatusof

Macao,theUNCITRALarbitraltribunalandtheSingaporeHighCourtmaynothave

beenthatfarapart.ProceedingfromtherulesetoutinArticle15ofthe1978Vienna

Convention,theybothagreedthattreatiespresumptivelyappliedtotheentiretyofa

State’s territory (and thus ‘moved’with the treaty party’s frontiers), but that this

presumptioncouldberebutted.Themainquestiondividingthemwaswhetherthe

applicableBITbetweenChinaandLaoscamewithinthescopeoftheexceptionsto

the principle. Their disagreement on this point can however to some extent be

explainedbytheavailabilityofevidence:whilethearbitraltribunalhadtodecidein

theabsenceofinstructiveinformation,163theSingaporeHighCourtcouldrelyonan

exchange of letters, between China and Laos, suggesting that the BIT should not

apply to Macao.164This party agreement (once accepted and admitted into the

proceedings165) clearly strengthened the case for an exception. Conversely, the

relianceplacedon it limits the impact of theSanumdecisionon future cases; the

statusofMacao(andHongKong)inrelationtootherChineseBITsnotablyremains

opentodebate.166UnlessthepartiestothesetreatiesfollowtheleadofChinaand

Laosandprovideexplicit clarification,167thematter is likely tobeargued in future

disputes implicatingHongKongorMacao (orHongKong/Macao-based claimants):

on thebasisof theconsiderationsadvancedabove,168thebetterviewwouldbeto

acceptthatfortheunusualcasesofcessionssuchasHongKongandMacao(which

163Seepara.232of theSanumUNCITRALaward (n9), referring to the"paucityof factualelementspresentedbytheParties“.164AccordingtotheSingaporeHighCourt,thiswasa"keyplank“oftheevidence:seeSingaporeHighCourt(n10),para.38.165Whether the letters should be admitted at the review stage (even though theywere producedafterthearbitraltribunalhadrendereditsaward)wasacrucialquestion:seeparas.43-56oftheHighCourtjudgment(n10);andHwang/Chang(n13),517-519,forcomment.166SeeHart/Srikumar (n13),198:“the lettersexchanged in relation to theChina-LaosBITwillhavelittlesaliencefortheinterpretationofotherBITsinfuturedisputes.”167ItisworthnotingthatsomeofChina’sBITsexpresslyaddressthematter:seee.g.the2006China-RussiaBITandProtocol(stipulatingthat"[u]nlessotherwiseagreedbybothContractingParties,theAgreementdoesnotapplytotheHongKongSpecialAdministrativeRegionofthePeople'sRepublicofChinaandtheMacaoSpecialAdministrativeRegionofPeople'sRepublicofChina").168Seeabove,section5.a.

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purposefully avoid the full integration of the ceded territory), the moving treaty

frontiersruleneedstobequalified.169

Whatever position is taken on the geographical scope of Chinese BITs, it isworth

notingthatoutsidetheparticulararrangementsobtaininginMacaoandHongKong,

cessionsandincorporationsraisefewproblems.Thelimitedpracticeavailablesofar

in fact suggests that they are dealt with routinely, by a simple application of the

moving frontiers rule. In line with that rule, German BITs concluded before

unification were routinely applied to the GDR after 1990.170As for institutional

arrangements, Germany’s ICSIDmembershipwas automatically extended to cover

theunitedGermanyinitsentirety.171AsregardsWalvisBay,theavailableevidenceis

limited; however, it seems the one investment treaty concluded by South Africa

priorto1994(a1974BITwithPortugal)didnotapplytoWalvisBayafteritsreturn

to Namibia. 172 Lastly, it is worth noting that, at least in respect of the ICSID

Convention,thearbitraltribunalinTzaYapShumv.Peruappliedthemovingtreaty

frontiersprincipleeveninrelationtoChina/HongKong:assessingtheproprietyofa

claimbyaHongKong-based investor, the tribunalwas content tonote thatChina

hadnotexcludedtheapplicationoftheICSIDConventiontoHongKongpursuantto

its Article 70; under those circumstances, it was sufficient for the investor to

establish that it was a Chinese national (irrespective of the place of its

169Asaseparatematter,itisworthconsideringwhether,inrelationtoMacao-(orHongKong-)basedclaimantsinvokingprovisionsofChineseBITs,theplaceof incorporationisdeterminative:accordingtoHart/Srikumar,"whethertheMacanesecompanyenjoyedtheBIT'sprotectionshouldhaveturnedonthecompany'snationality",nottheplaceofitsincorporation:seeHart/Srikumar(n13),195-197.OntherespectiverolesofnationalityandgeographicalscopeofapplicationseefurthertheawardinTza Yap Shum v Republic of Peru (Decision on Jurisdiction and Competence) (ICSID Case NoARB/07/06),atparas.67-77,andbelow,textatfn.173.170ThisfollowedfromArticle11oftheUnificationTreaty(n155).TheGermangovernmentnotifieditstreatypartnersoftheapproachadoptedunderthattreaty;itsdiplomaticnotesmetwithlittle,ifany,resistance:seeZimmermann,Staatennachfolge(n17),246-251withreferences.171Giventhedistinctlegalregimesaddressedinsections3and4above,itbearsunderlyingthatthemoving treaty frontiers rule covers institutional treaties aswell. In linewith this, Article 11 of theUnification Treaty (n 155) expressly mentioned treaties involving membership in internationalorganisations.172ForbriefinformationseeLPoulsen,BoundedRationalityandEconomicDiplomacy(2015),168(fn.28).

41

incorporation).173Allthissuggeststhatinstancesofcessionandincorporationdonot

giverisetoanyconceptualproblems.

6.ConcludingObservations

The preceding sections have revisited some of the more relevant issues facing

investment lawyers as they seek to apply rules of State succession to investment

treatylaw.NotwithstandingthepopularperceptionofStatesuccessionasahotbed

of legalcontroversy, it isworthnotingthat therearerelevantareasofagreement,

where the law is settled. The treatment of membership rights (not generally

susceptible to be 'inherited' by succession) is one such area; the impact of the

moving treaty frontiers principle on cessions of territory (resulting, under normal

circumstances, in the extensionof treaties of the 'receiving State') another.When

these issues have arisen, arbitral investment treaty practice seems to follow

the general regime: hence new States join ICSID as newmembers, and debates

aboutcessionsofterritoryproceedfromthemovingtreatyfrontiersprinciple,which

providesthewidely-agreedstartingpointandappliespresumptively.

Needless to say that not everything is settled; the preceding sections have also

highlighted areas of contestation and uncertainty. The proper application of the

moving treaty frontiers principle to unusual cessions of territory - such as those

involving Macao and Hong Kong - counts among these. Notwithstanding two

decisionsbyanUNCITRALarbitraltribunalandtheSingaporeHighCourt,thestatus

ofthetwoterritorieswithrespecttoChineseBITssofarremainsuncertain:asnoted

above,thebetterviewwouldbetotreatMacaoandHongKongasspecialinstances

ofcessionnotpresumptivelygovernedbythemovingtreatyfrontierprinciple.

While raising important legal issues, the status of Macao and Hong Kong under

ChineseBITs isaspecificproblemthat implicatesrelativelymarginalaspectsofthe

regime of succession. By contrast, the status of new States in relation to BITs173TzaYapShumv.Peru(n169),atparas.68-70.WhetherthesameargumentshouldapplytoaBITisamatterofdebate:seesupra,fn.169.

42

concludedbytheirpredecessorsraisesstructuralquestionsofgeneralrelevance:this

is a major area of uncertainty. As the above analysis demonstrates, investment

tribunalshaveso faravoideda fullengagementwith the long-standingconceptual

debatebetween'strictcontinuity'and'cleanslate'approaches.Tosomeextent,they

could do so as (in line with general developments), State parties to investment

treaties have frequently determined the fate of prior BITs through explicit

agreements - which almost inevitably ensure continuity in investment treaty

relations.Giventherenewedpopularity, inrecentscholarship,ofthelong-standing

conceptual debate, it is worth underlining that, where no explicit agreement has

beenreached, there is roomtoengagewithargumentsbasedon implied,or tacit,

consent: suchargumentsnodoubtneed tobemadecarefully,but inprincipleare

available.The key task throughout is to identify the intention of the (putative)

partiestothetreaty,whichdoesnothavetobeexpressedinaparticularform.Only

if neither explicit nor implied consent can be established does the question of

automatic succession to BITs arise. As noted above, the argument in favour of

automaticity is a difficult one, as bilateral treaties have traditionally been seen as

mere inter-State exchanges of benefits. However, claims for automatic treaty

continuity should not be dismissed out of hand. They can e.g. be supported by

reference to the particular nature of BITs,which after all establish rights of third-

partybeneficiaries;thesecouldbesaidtodevolvewiththeterritory.

Steppingbackfromthedebatesaboutparticularities,itisinterestingtonotethatso

far,theapplicationofStatesuccessionrulestoinvestmenttreatieshassofarrarely

becomeamajor issue(thoughcasessuchasSanumandWorldWideMineralsmay

signal a change). To the extent that it is settled, investment lawyers seem

comfortable inapplying thegeneral regimeofState succession:byand large, they

acceptthegeneralrulesandgiveeffecttothemwithinthefieldofinvestmentlaw.

Where thegeneral regime isuncertain (as itnotably iswith respect tonewStates

andpriorBITs), investmenttribunalshavesoughtto'muddlethrough' insearchfor

pragmatic and equitable solutions; they have (to adapt LordWright’s description)

"proceed[ed] fromcase to case, like the ancientMediterraneanmariners, hugging

thecoast frompoint topointandavoiding thedangersof theopenseaof system

43

andscience".174Suchanapproachisunderstandable,asthegeneralregimeofState

succession can indeed very much feel like an ‘open sea’ and – unlike other core

aspectsofpublicinternationallaw–needstobeapproachedwithoutthebenefitof

detailed charts and compasses. But conversely, having ‘hugged the coast’,

investment tribunals have so far done relatively little to clarify the law of State

succession:theyhavetendedtobereceiversofgeneralrules,notshapedthem.This

inturnhasmeantthatanareaoflawratherinneedofclarificationremainsinmany

waysobscure: thepotentialof arbitral awards to consolidateanddevelop the law

hassofarnotbeenrealised.

Afinalthought:iftheapplicationofStatesuccessionruleshassofarrarelybecomea

major issue in investment arbitration, this would also seem to suggest that

investment treaties are not viewed as particular controversial commitments. As

notedabove,inmanyinstances,successorStatesarequitehappytocontinuethem.

This preference for stability in investment treaty relations is in line with general

trends in recent succession practice – and yet, it deserves to bementioned, as it

stands in marked contrast to debates during decolonisation, when arrangements

benefiting foreign investors (then typically contract-based) prompted major

controversy. Seen in this light, the pragmatic handling of State succession issues

maybe taken to reflectagradualacceptanceof the investmentprotection regime

overthepastdecades.

174SeeRA(Lord)Wright,TheStudyoftheLaw,LawQuarterlyReview54(1938),185,at186.