Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 51
jurisdiction, holding that when “two States have agreed to have
recourse to the Court, the latter’s duty to exercise its
jurisdiction cannot be affected, in the absence of a clause in the
Statute on the subject, by the circumstance that the dispute
relates to a question of municipal law . . . .” 136
Thus clarifying that even if a contractual relationship
between the national of one State and a foreign State was
exclusively governed by municipal law, international law
allowed the home State to exercise diplomatic protection, the
Court observed:
The controversy submitted to the Court in the present case . . . solely
relates to the existence and extent of certain obligations which the
Serbian State is alleged to have assumed in respect of the holders of
certain loans. It therefore is exclusively concerned with relations
between the borrowing State and private persons, that is to say,
relations which are, in themselves, within the domain of municipal
law.
It is however to be noted that the question whether the manner in
which the Serb-Croat-Slovene Government is conducting the service of
its loans is in accordance with the obligations accepted by it, is no
longer merely the subject of a controversy between that Government
and its creditors. When the holders of the Serbian loans, considering
that their rights were being disregarded, appealed to the French
Government, the latter intervened on their behalf with the Serb-Croat-
Slovene Government. . . . As from this point, therefore, there exists
between the two Governments a difference of opinion which, though
fundamentally identical with the controversy already existing between
the Serb-Croat-Slovene Government and its creditors, is distinct
therefrom; for it is between the Governments of the Serb-Croat-
Slovene Kingdom and that of the French Republic, the latter acting in
the exercise of its rights to protect its nationals. 137
Although the dispute was “fundamentally identical with the
controversy already existing between the Serb-Croat-Slovene
Government and its creditors” 138 and “relate[d] exclusively to a
nexus of municipal law between the Serb-Croat-Slovene State as
borrower and the holders of certain States,” 139 the PCIJ did not
consider international law to prevent States from litigating such
disputes in an inter-State forum. Likewise, the application of
domestic law was not an obstacle to the jurisdiction of an inter-
State dispute settlement mechanism.
In sum, neither the PCIJ nor other inter-State dispute
136. Id. at 19.
137. Id. at 18.
138. Id. at 18.
139. Id. at 20.