Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 25
diplomatic protection and inter-State dispute settlement are
subject to the requirement to exhaust local remedies. 52 While
this affords the host State an opportunity to redress the
violation of rights of a foreign investor in its own courts, the rule
constitutes an impediment to efficient ex post stabilization of
investor-State contracts to the extent the host State’s courts are
not impartial and independent enough in sanctioning
opportunistic behavior. 53
Secondly, as a consequence of the distinction between
domestic and international law, the home State is vested, under
international law, with exclusive control over the rights of their
nationals on the international level and is entitled to settle,
waive, or modify the rights of their nationals by an international
agreement with the host State. 54 In practice, this entitlement
has led to the settlement by lump-sum agreements of
international claims concerning the violation of the rights of
foreigners. 55 These agreements were used in particular to deal
with the compensatory framework in the aftermath of armed
conflicts or other large-scale events like revolutions and
traditionally fixed the compensation of foreign nationals to a
fraction of the full claim and ruled out any exceeding
compensation.
Thirdly, in view of the distinction between the rights of the
investor and the rights of its home State the entitlement to
receive compensation for the violation of international law
protecting foreign nationals is not vested in the alien but in its
Bundesverfassungsgericht [BVerfGE] [F.R.G. Federal Constitutional Court] 55, 349
(1980), 90 Int’l Law Rep. 387 (on the situation in Germany); see also Annemarieke
Vermeer-Künzli, Restricting Discretion: Judicial Review of Diplomatic Protection, 75
NORDIC J. INT’L L. 279 (2006) (discussing national jurisprudence and developments
on the international level and observing an emerging development towards a State’s
obligation to exercise diplomatic protection in cases of serious violation of human
rights law).
52. See CHITTHARANJAN FELIX AMERASINGHE, LOCAL REMEDIES IN
INTERNATIONAL LAW (2nd ed. 2005); A. A. CANCADO TRINDADE, THE APPLICATION OF
THE RULE OF EXHAUSTION OF LOCAL REMEDIES IN INTERNATIONAL LAW (1983).
53. Cf. supra Part II.B.1.
54. BORCHARD, supra note 51, at 366–75; see also RUDOLF DOLZER, EIGENTUM,
ENTEIGNUNG UND ENTSCHÄDIGUNG IM GELTENDEN VÖLKERRECHT 136–39, 147 (1985)
(arguing that human rights law restricts the home State’s disposition over claims of
its nationals); JULIANE HAGELBERG, DIE VÖLKERRECHTLICHE VERFÜGUNGSBEFUGNIS
DES STAATES ÜBER RECHTSANSPRÜCHE VON PRIVATPERSONEN 49–52 (2006).
55. See RICHARD B. LILLICH & BURNS H. WESTON, INTERNATIONAL CLAIMS:
THEIR SETTLEMENT BY LUMP-SUM AGREEMENTS (1975); BURNS H. WESTON ET AL.,
INTERNATIONAL CLAIMS: THEIR SETTLEMENT BY LUMP-SUM AGREEMENTS 1975–95
(1999).