MULTILATERAL SETTLEMENTS
MULTILATERAL SETTLEMENTS
When international firms or home governments are unable to reach agreement with a host country, they may agree to have a third party settle the dispute. In cases of trade disputes, the International Chamber of Commerce in Paris, the Swedish Chamber of Commerce, and specialized commodity associations in London frequently are asked to assist the parties. Since the trade transactions are generally among private groups, the disputes do not create the type of widespread emotional environment often attendant upon foreign investment disputes.
Examples of active involvement by third parties in settling investment questions are extremely rare, for such involvement requires a relinquishment of sovereignty by host governments over activities within their own borders. Among the notable uses of external organizations have been the World Bank's agreement to arbitrate the compensation and to act as transfer agent for payments involving the Suez Canal nationalization. Another involved a World Bank nonbinding arbitral award that was accepted by both French bondholders and the City of Tokyo.24 The International Center for Settlement of Investment Disputes operates under the auspices of the World Bank and provides a formal organization for parties wishing to submit their disputes. However, both parties must agree to its use, and countries have been reluctant to do so. In 1974 Jamaica refused to use the center after seizing foreign bauxite holdings, although the investors and the Jamaican government had agreed in earlier years to use the center in case of disputes. As yet there is no effective means of imposing international law on nations; however, as a result of the center's failure to offer potential investors sufficient confidence about LDCs, the World Bank established the Multilateral Investment Guarantee Agency in 1988. This agency offers insurance against expropriations, war, and civil disturbances.
A notable example of multilateral settlement involved claims between the United States and Iran. This situation differed from many other attempted settlements inasmuch as each country had large amounts of investments in the other's territory. In fact, when the two governments froze each other's assets, Iran had substantially more invested in the United States than the United States had in Iran. The two countries agreed to appoint three arbitrators each to an international tribunal at The Hague, and those six selected three more. Part of the assets that the United States had held were set aside for the payment of arbitrated claims.
In limited cases, courts in third countries may be used by international firms or by governments as leverage. In 1972 Kennecott Copper, whose investments in Chile had been nationalized, successfully contested in French courts payment from French importers to the Chilean government on the grounds that Kennecott still owned the operations. In 1987 Britain's High Court ruled that the Libyan government could withdraw $292 million from the London facility of Bankers Trust, even though $161 million of this was on deposit in New York and the U.S. government had frozen Libyan assets in U.S. banks at home and abroad.
After expropriation of their Libyan facilities, California Standard, Texaco, and Arco placed notices in the leading newspapers and periodicals of the major oil-consuming countries warning that they might file lawsuits against purchasers of Libyan oil that the oil firms claimed for themselves. They also had arbitrators appointed by the International Court of Justice at The Hague who ruled in the firms' favor and set an amount of compensation. A problem with the International Court of Justice (the World Court) is that there have been many examples of countries failing to consent to judgments. As a result, the Court handles few cases.
When international firms or home governments are unable to reach agreement with a host country, they may agree to have a third party settle the dispute. In cases of trade disputes, the International Chamber of Commerce in Paris, the Swedish Chamber of Commerce, and specialized commodity associations in London frequently are asked to assist the parties. Since the trade transactions are generally among private groups, the disputes do not create the type of widespread emotional environment often attendant upon foreign investment disputes.
Examples of active involvement by third parties in settling investment questions are extremely rare, for such involvement requires a relinquishment of sovereignty by host governments over activities within their own borders. Among the notable uses of external organizations have been the World Bank's agreement to arbitrate the compensation and to act as transfer agent for payments involving the Suez Canal nationalization. Another involved a World Bank nonbinding arbitral award that was accepted by both French bondholders and the City of Tokyo.24 The International Center for Settlement of Investment Disputes operates under the auspices of the World Bank and provides a formal organization for parties wishing to submit their disputes. However, both parties must agree to its use, and countries have been reluctant to do so. In 1974 Jamaica refused to use the center after seizing foreign bauxite holdings, although the investors and the Jamaican government had agreed in earlier years to use the center in case of disputes. As yet there is no effective means of imposing international law on nations; however, as a result of the center's failure to offer potential investors sufficient confidence about LDCs, the World Bank established the Multilateral Investment Guarantee Agency in 1988. This agency offers insurance against expropriations, war, and civil disturbances.
A notable example of multilateral settlement involved claims between the United States and Iran. This situation differed from many other attempted settlements inasmuch as each country had large amounts of investments in the other's territory. In fact, when the two governments froze each other's assets, Iran had substantially more invested in the United States than the United States had in Iran. The two countries agreed to appoint three arbitrators each to an international tribunal at The Hague, and those six selected three more. Part of the assets that the United States had held were set aside for the payment of arbitrated claims.
In limited cases, courts in third countries may be used by international firms or by governments as leverage. In 1972 Kennecott Copper, whose investments in Chile had been nationalized, successfully contested in French courts payment from French importers to the Chilean government on the grounds that Kennecott still owned the operations. In 1987 Britain's High Court ruled that the Libyan government could withdraw $292 million from the London facility of Bankers Trust, even though $161 million of this was on deposit in New York and the U.S. government had frozen Libyan assets in U.S. banks at home and abroad.
After expropriation of their Libyan facilities, California Standard, Texaco, and Arco placed notices in the leading newspapers and periodicals of the major oil-consuming countries warning that they might file lawsuits against purchasers of Libyan oil that the oil firms claimed for themselves. They also had arbitrators appointed by the International Court of Justice at The Hague who ruled in the firms' favor and set an amount of compensation. A problem with the International Court of Justice (the World Court) is that there have been many examples of countries failing to consent to judgments. As a result, the Court handles few cases.
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