I. Case Concerning Ahmadou Sadio Diallo (Republic of Guinea v Democratic Republic of the Congo) Preliminary ObjectionsFootnote 1
A. Background
On 28 December 1998, the Republic of Guinea instituted proceedings against the Democratic Republic of Congo (DRC) by way of diplomatic protection on behalf of Diallo Ahmadou Sadio, a business man of Guinean nationality who had been resident in the DRC for 32 years. Guinea alleged that by subjecting Mr Diallo to humiliating and degrading treatment, and further expelling him from the DRC, and depriving him of his investments, businesses, moveable and immoveable property, and bank accounts without appropriate compensation, the DRC was in breach of various international obligations owed to it. These rights, Guinea alleged, included: the principle that foreign nationals should be treated in accordance with a minimum standard of civilization; the obligation to respect the freedom and property of foreign nationals; and the right of foreign nationals accused of an offence to a fair trial on adversarial principles by an impartial court.Footnote 2 Mr Diallo had settled in Zaire (later DRC) in 1964 and in the intervening period successfully established two companies which were at the centre of the dispute: Africom-Zaire and Africontainers-Zaire. In the course of their business dealings, these two companies were owed large sums of money by the State of the Democratic Republic of Congo, as well as by mining and oil companies operating in the DRC. The attempts by Mr Diallo and his companies to sue and recover monies owed was not viewed favourably by Congolese authorities who, on successive occasions, managed to block or set aside judgments obtained, including on appeal from the Congolese courts. According to the Guinean Memorial the decision of the Congolese authorities to expel Mr Diallo in November 1995 was taken in order to irrevocably frustrate his attempt to enforce a judgment obtained against Zaire Shell for the sum of US$6,000 million. Guinea argued that the intervention of the DRC Government in the dispute was the result of corrupt practices on the part of senior Congolese Government officials, who had accepted substantial payments by way of bribes from Zaire Shell and related companies.Footnote 3 The DRC on the other hand had justified the expulsion on the grounds that the continued presence and conduct of Mr Diallo breached public order in Zaire.
B. The Legal Issues
The jurisdiction of the International Court was not contested. Both States had made declarations accepting the compulsory jurisdiction of the Court under Article 36(2) of the ICJ Statute. Significantly, Mr Diallo's Guinean nationality was also not in issue even though he had not lived in that country for the 32 years preceding his expulsion. Nor was the Court particularly troubled by the tenuousness of the connections between him and the State of his nationality.Footnote 4 The approach in the Diallo Case may be contrasted with that taken by the same Court more than 50 years earlier in the Nottebohm case.In its decision in the Nottebohm case the International Court had rejected Liechtenstein's right to bring an action against Guatemala because of Mr Nottebohm's tenuous connections with the principality and the existence of strong links with Guatemala, where Nottebohm had lived for 34 years before the action.Footnote 5 In Nottebohm, the court had pronounced that for nationality to be valid on the international plane and therefore the basis of diplomatic protection, it had to be based on a genuine link, at any rate if the claim is against a State with which the national has tangible links.Footnote 6 In much of the subsequent literature on the Nottebohm case there was uncertainty whether the Court was laying a rule of general application or whether in fact the genuine link requirement only applied in relation to applications by persons who were dual nationals (Nottebohm was German by birth) or where the state claiming a right of diplomatic protection had conferred it by fraudulent means.Footnote 7
That Guinea was able to bring this action without any challenge by the respondent state or adverse comment by the court is further indication of the prevailing uncertainty as to the exact reach of the ‘genuine link’ requirement as laid down in the Nottebohm case.Footnote 8 Until his expulsion from the DRC, it appears that all of Mr Diallo's links for a period of 32 years were with that State—a period not wholly dissimilar to the 34-year link between Nottebohm and Guatemala in the Nottebohm case. At the very least the Diallo decision lends some support to the view that notwithstanding what it said, the Court in Nottebohm, by insisting on genuine link as the basis of diplomatic protection, was not laying down a broad rule of general application, but one which was necessitated by the peculiar facts before it.Footnote 9
In addition to claims of direct injury to the rights of Mr Diallo and also to his rights as associé (shareholder) in the two companies, Guinea's third claim rested on the existence of an exception to diplomatic protection of companies by their national state. The exception it argued entitled it to exercise diplomatic protection of shareholders by ‘substitution’ for the company when the State whose responsibility is at issue is also the national State of the company.
The DRC raised preliminary objections as to the admissibility of the application on the following grounds:
First, that the application of Guinea was inadmissible because it failed to prove that Mr Diallo or the companies in question had exhausted local remedies in Zaire (subsequently the DRC), or that there existed exceptional circumstances justifying a failure to exhaust them as required by international law before action could be commenced on the international plane.
Secondly, that the Republic of Guinea lacked locus standi to bring the application in so far it related to wrongs allegedly done to Africom-Zaire and Africontainers-Zaire, these being Congolese companies. Citing the Barcelona Traction case,Footnote 10 the DRC argued that these two companies as societés privées à responsabilité limitée (SPRLS) incorporated under Zairean law, had independent legal personality, distinct and separate from Mr Diallo as associé. It further maintained that positive international law at present does not entitle a State to bring an action on behalf of shareholding interests in a registered company. The DRC further argued that contrary to the contentions of Guinea, international law did not recognize a process of ‘substitution’ whereby the rights of a company could be assigned to a shareholder for purposes of enforcement, when the State whose responsibility was at issue was also the national State of the company.
C. The Court's Judgment on Preliminary Objections
1. Exhaustion of local remedies
The judgment confirms in material respects a number of accepted orthodoxies in the field of diplomatic protection. First, it confirmed its previous jurisprudence that the rule requiring the exhaustion of local remedies was an indispensable pre-requisite to the admissibility of claims on the international plane.Footnote 11 However, the duty only related to legal remedies and not those that were discretionary or available as a matter of grace. Since the expulsion of Mr Diallo was not appealable under Congolese law, the existence of the possibility for administrative review of a discretionary kind did not alter the fact that there were no remedies as a matter of Congolese law to be exhausted. It said:
… while the local remedies that must be exhausted include all remedies of a legal nature, judicial redress as well as redress before administrative bodies, administrative remedies can only be taken in consideration for purposes of local remedies rule if they are aimed at vindicating a right and not at obtaining a favour … Thus the possibility open to Mr. Diallo of submitting a request for reconsideration of the expulsion decision to the administrative authority having taken it—that is to say the Prime Minister—in the hope that he may retract his decision as a matter of grace cannot be deemed a local remedy to be exhausted.Footnote 12
The Government of the DRC had been unable to demonstrate that remedies existed which could have reversed the expulsion order issued against Mr Diallo and accordingly the objection based on failure to exhaust local remedies was rejected.
2. Protection of the rights of Mr Diallo as associé (shareholder)
The Court next considered the DRC's contention that Guinea's second claim was inadmissible in so far as it sought to protect Mr Diallo's direct rights as associé (shareholder) in Africom-Zaire and Africontainers-Zaire. Guinea had argued that the purpose of the expulsion was to prevent Mr Diallo from exercising his direct rights as associé in Africom-Zaire and Africontainers Zaire and was therefore an interference with his direct right as shareholder, distinct from wrongs done to the company. Although the DRC accepted that international law in some circumstances permitted the state of nationality to exercise diplomatic protection in favour of associés or shareholders when there was an injury to their direct rights as such, it insisted that no direct rights of Mr Diallo in that capacity had been injured, the alleged wrongs having been taken against Africom-Zaire and Africontainers, two companies having Congolese nationality.
The Court rejected the DRC's preliminary objection on this point and accepted that Guinea was entitled to exercise diplomatic protection in respect of Mr Diallo rights as shareholder in the two companies. The precise nature of his rights as associé under Congolese law and the effect of the expulsion on the exercise of those rights was a matter of substance to be decided at the merits phase. The protection of shareholding interest has continued to be surrounded in controversy ever since the Barcelona Traction case, for despite the recognition that shareholders are in certain circumstances entitled to protection, substantial problems of definition remain as to the precise instances when such protection is available, the range of interests capable of protection and the modalities of reconciling competing claims of diplomatic protection. These issues have now been raised in more detail in the merits phase of the Diallo case, and it is hoped that the judgment on the merits will shed some light in this area of the law.
3. Diplomatic protection by substitution
The judgment of the International Court in the Barcelona Traction case left unresolved the question whether shareholders were entitled to diplomatic protection if the company had the nationality of the wrongdoing State. In that case the Court had avoided giving a categorical answer to this question by stating that since the respondent Spain was not the national State of Barcelona Traction (a Canadian registered company) the matter did not arise on the facts before it, although a number of judges were sympathetic to the protection of shareholders in this situation. In any event in a passage of great interest which was explicitly referred to by the Court in the Diallo case,Footnote 13 the Court had left open the possibility of an exception. It said:
On the other hand, the Court considers that, in the field of diplomatic protection as in all other fields of law, it is necessary that the law be applied reasonably. It has been suggested that if in a given case it is not possible to apply the general rule that the right of diplomatic protection of a company belongs to its national state, considerations of equity might well call for the possibility of protection of the shareholders in question by their own national state.Footnote 14
In the Diallo case, Guinea's third claim rested squarely on the alleged existence of this exception by claiming a right of diplomatic protection by way of substitution, since the DRC, the national State of Africom-Zaire and Africontainers-Zaire, was also the wrong-doing State.
The Court categorically denied the existence of this exception as a matter of customary international law.Footnote 15 In support of its claim for a right of diplomatic protection by way of substitution, Guinea had relied on arbitral awards, decisions of the European Commission on Human Rights, ICSID jurisprudence and bilateral treaties for the promotion and protection of investment disputes, which had recognized protection of shareholder interests where the respondent State was also the national State of the company. The Court treated these arbitral awards and conventional provisions as lex specialis and not in any way supportive of a broad right of diplomatic protection by way of substitution.Footnote 16 The Court was conscious that in its earlier decision in the Elettronica Sicula case, a chamber of the Court had allowed the United States to bring a claim in respect of a wrong done to an Italian company the shares of which were held by two American corporations.Footnote 17 The Court noted that in allowing these claims the Chamber was not basing itself on general international law but on the terms of a Treaty of Friendship, Commerce and Navigation which allowed protection of shareholding interests in the circumstances that had arisen.Footnote 18
In its draft Articles on diplomatic protection, the International Law Commission (ILC) had considered a more limited exception which would only allow protection of shareholding interest where a company's incorporation in the State that allegedly committed a violation of international law was required by it as a precondition for doing business there.Footnote 19 The Court noted that on the facts before it there was no evidence that Africom-Zaire and Africontainers-Zaire had been incorporated in Zaire (DRC) as a condition for doing business there. It therefore expressed no opinion on the validity of the ILC's proposed exception as a matter of customary international law.
The Court thus upheld DRC's objection to the admissibility of this particular aspect of the claim on the basis that the wrongs in question were done to Congolese companies and general international law did not recognize any right of diplomatic protection whereby the State of the shareholder's nationality could exercise diplomatic protection by substituting the companies. This aspect of the Court's judgment must surely be regarded as correct. Any right of substitution is difficult to reconcile with the argument advanced by the majority of the International Court in the Barcelona Traction case that when a wrong is done to a company, the interests of shareholders may be affected but it is only the company that has rights as a matter of strict law. If shareholders are entitled to protection in this situation where the wrong done to the company is by the very State of which it is a national, what is the legal basis of protection? Moreover, it is difficult to reconcile with the traditional rule that a state is not guilty of violating international law when it harms one of its own nationals.Footnote 20 It is not clear that there is a process whereby shareholding interests can be transformed into rights capable of legal protection.
D. Conclusion
Although a number of significant issues remain to be resolved at the merits phase, the significance of the Court's judgment at the preliminary phase should not however be exaggerated. The Court itself noted that the role of diplomatic protection has largely faded since most issues relating to diplomatic protection of corporations and shareholding interests are now dealt with comprehensively in international treaties.Footnote 21 One of the more regrettable features of the Barcelona Traction case is the very protracted nature of the litigation spanning several years before a judgment was delivered on the merits. This aspect of the Barcelona litigation has unfortunately not been corrected; it is now almost 10 years since Guinea instituted proceedings against the DRC and the Court is yet to deliver a judgment on the merits.
