A. Trusteeship in International Law

The principle of trusteeship had a long history that arose with and applied even during the colonial enterprise and thus may be used to overcome the inter-temporal argument. It is arguable that the principle of trusteeship had been an essential and accepted principle of international law since its modern beginnings. Certainly, the architects of the mandate system considered this history of trusteeship when creating the institution.Footnote ²⁹ Inspiration was provided by Francisco de Vitoria, in the lectures he delivered in the 1530s, which are considered among the very first works of modern international law. Vitoria, when considering the legal grounds on which the Spanish could govern the Indians, the Indigenous peoples of the Americas, presented a view that “[i]t might therefore be argued that for their own benefit the princes of Spain might take over their administration, and set up urban officers and governors on their behalf, or even give them new masters, so long as this could be proved to be in their interest.”Footnote ³⁰ Vitoria states of this argument, “I myself do not dare either to affirm or condemn it out of hand.”Footnote ³¹ His hesitance persists but he reiterates that Spanish rule might be justified “if everything is done for the benefit and good of the barbarians, and not merely for the profit of the Spaniards. But[,] it is in this latter restriction that the whole pitfall to souls and salvation is found to lie.”Footnote ³² Several other Spanish clerics and scholars, such as Palacios Rubios and, famously, Las Casas, had written in defense of the Indians.Footnote ³³

In his study of the principle of trusteeship, Christopher Weeramantry points to the variety of thinkers and legal systems that promoted the principle of trusteeship as a way of protecting human dignity of dependent peoples. Edmund Burke, in his famous attack on Warren Hastings, for his exploitation of India, accused him of breaching this trust, and indeed, in his opening speech of indictment, used the term, “sacred trust,” the very term that was to later appear in Article 22 of the League of Nations, which referred to the “sacred trust of civilization.”Footnote ³⁴ The concept of a trust relationship, further, was to be found in the United States relationship with Native Americans. Chief Justice Marshall stated that the Native Americans “are in a state of pupillage; their relation to the United States resembles that of a ward to his guardian.”Footnote ³⁵ British legislation in many colonies placed restrictions on the alienation of native lands in order to prevent them from being exploited by private land traders.Footnote ³⁶ The roots of this system too could be traced back to the idea of trusteeship. In the sphere of international law itself, the idea of trusteeship was embodied for instance in Article 6 of the Treaty of Berlin which grandiosely and ironically declared in part that “[a]ll the Powers exercising sovereign rights or influence in the aforesaid territories bind themselves to watch over the preservation of the native tribes, and to care for the improvement of the conditions of their moral and material well-being.”Footnote ³⁷ All the great powers of Europe at the time were signatories to this Treaty.

More generally, the institution of trusteeship was well-established in private law, in the Roman law that so powerfully influenced international law. The broad ideas of guardianship or wardship were developed to protect minors and the infirm;Footnote ³⁸ and this idea was the explicit basis of Vitoria’s argument that the Indians could be considered wards of the Spanish, as the Indians were likened to childrenFootnote ³⁹ in need of protection. Vitoria’s words serve as the foundation of the argument made by eminent international lawyers such as Quincy Wright, in his masterly work on the mandate system, that trusteeship over dependent peoples had always been a governing principle of international law.Footnote ⁴⁰ Other scholars such as Duncan Hall claimed that the ideas of the sacred trust and trusteeship emerged from early humanitarian concerns for native peoples—this is a reference to the Spanish writers—and further, “as a guiding principle of government policy, with unbroken historical continuity up to the present day, it dates from British government proclamations and parliamentary discussions in the eighteenth century, including those relating to the slave trade.”Footnote ⁴¹ Crucially, Hall points to consistency, state practice entrenched in parliamentary procedures and a principle that encompasses the slave trade. Hall demonstrates that this principle animated a number of significant legal instruments including the British Royal Proclamation of 1763 following the Seven Years War, which treated the lands the British acquired from France as being held in trust intended to protect the “several Nations or Tribes of Indians.”Footnote ⁴² Trusteeship, as mentioned earlier, was central to Burke’s indictment of Warren Hastings for all his depredations in India. Importantly, Burke proclaimed: “I impeach him [Hastings] in the name of the people of India.”Footnote ⁴³ And further, pointing to the enduring natural law roots of trusteeship, he said: “I impeach him in the name of human nature itself.”Footnote ⁴⁴ He argued that what is being tried is “the cause of Asia in the presence of Europe.”Footnote ⁴⁵ Burke, in other words, viewed trusteeship as a universal principle, and one that served as a foundation for legal proceedings.Footnote ⁴⁶ The trust, then, was a general principle of all legal systems; and a system drawing upon “private law analogies” appeared to have readily assimilated this principle into international law itself.

The legal and institutional structure of trusteeship was evident in colonial legislation, which provided in various forms for remedies.Footnote ⁴⁷ The principle of trusteeship, its substance, its institutional and legal forms, took on this character in the Anglo-Saxon world, influencing British colonial policy, as well as the approach of the United States to the Native Americans. It is likely, however, that the same ideas informed French and German thinkers and colonial policy. German mining legislation, for instance, offered significant protection for native populations such as the Nauruans.Footnote ⁴⁸ As such, the principle of trusteeship might be added to the jurisprudence being developed in different ways by scholars such as Hébié, Wittman, von Arnauld, Theurer, and Goldmann. A strong case can be made to suggest that this was a pan-European concept of customary international law. After all, we see even in this brief survey how an idea that had its origins in Roman private law, adopted and extended by Spanish jurists, incorporated into international treaty law, domestic legislation, and indeed, expressed even for instance in the Japanese-Korea treaty leading to the annexation of Korea, the Berlin Treaty of 1885 all suggest a binding obligation. It is also arguable that trusteeship is a general principle of law, and as such, a valid source of law by virtue of Article 38(1)c of the Statute of the ICJ.Footnote ⁴⁹

B. The Contemporary Relevance of Trusteeship

I have argued that the principle of trusteeship included principles that would later be refined and clarified in the law of human rights. Many of these principles are relevant to current reparations claims. The CARICOM campaign for reparations includes at Point 5 an “Assistance in Remedying the Public Health Crisis” and at Point 6, “Education Programmes.” A common theme in each of these points is that colonial rule driven by exploitation, failed to provide proper educational and health care and that the consequences are still being felt by peoples in the Caribbean and the governments trying to address these ongoing crises. It is arguable that the colonial governments failed, in these very specific respects, to discharge the rights of the Caribbean peoples by advancing and promoting their progress toward self-government. Article 73 of the UN Charter, which deals with Non-self Governing Territories, incorporates the concept of trusteeship, referring again to a “sacred trust.” Most significantly, that same article refers to the “well-being of the inhabitants of these territories” and specifically requires colonial states to “ensure” the “political, economic, social, and educational advancement” of the peoples.Footnote ⁵⁰ “People”—even colonized people—have personality under international law. They are explicitly provided protection by the UN Charter itself. And the Nauru case holds in effect that when that protection is not provided, those “people,” upon becoming sovereign states, may take action in the international realm for a violation of international law. Many questions, about causality, the passage of time, and so on remain. But an argument can be made, based on trusteeship, and the provisions of the UN Charter which track the protections initially connected with trusteeship, to a failure to provide proper health and educational systems.Footnote ⁵¹ What this also indicates is that at least some of the claims made by CARICOM are based on existing law, rather than the larger question of the legality of slavery. The inter-temporal problem does not arise in such a stark form.

C. Retroactivity and Nuremburg

The principle of trusteeship offers one solution to the problem of retroactivity as do the works of scholars discussed above, such as Hébié, von Arnauld, and Theurer. However, as scholars and campaigners have pointed out, the problem of retroactivity has been raised and addressed in many other cases. Retroactivity was an issue squarely confronting the prosecutors at Nuremburg, the basic argument being that the accused were on trial for actions, such as “[c]rimes against humanity,”Footnote ⁵² that were not illegal under international law at the relevant time. The defendants alleged that the principle of nullum crimen sine lege was being violated. The Tribunal responded vigorously to these arguments, asserting that the “ex post facto rule cannot apply in the international field as it does under constitutional mandate in the domestic field.”Footnote ⁵³ The Tribunal in Alstotter basically suggested that international law was comparable to the common law, and that “to apply the ex post facto principle to judicial decisions of common international law would have been to strangle that law at birth.”Footnote ⁵⁴ Further, the Tribunal resorted to a version of natural law in reaching its decision, positivist international law having been proved to be so tragically deficient and inadequate to deal with atrocities committed by the Nazis. The Tribunal states that “in the first place, it is to be observed that the maxim nullum crimen sine lege is not a limitation on sovereignty, but is in general a principle of justice.”Footnote ⁵⁵ If justice is the desired goal, then it is just to take actions against the Nazis when they “persecuted and murdered countless Jews and political opponents in Germany,” as those Nazis “knew that what they were doing was wrong.”Footnote ⁵⁶ Makua wa Mutua has explored in detail the ramifications of the Nuremburg approach and how it provides support for claims for reparations. As he argues, “Nuremberg is a great example of a constitutional moment in which a society realizes that certain abuses, though not criminalized, are so inimical to morality and decency that leaving them unpunished sets an untenable precedent.”Footnote ⁵⁷ Equally importantly, it was precisely the principle of “crimes against humanity” that prevailed against the charge of retroactivity in Nuremberg and colonial crimes must surely fall within this same category, a point made in the Durban Declaration.

The basic point is that an entire system of law was created, over objections based on retroactivity, to further the cause of justice. The simple question is why such an approach cannot be adopted to deal with the massive crimes against humanity that were committed in a colonial context. What is also notable here is, more broadly, the jurisprudential resources used to address these objections in a manner that sought to preserve the integrity of the law. It is notable, for instance, that recourse was made to a “principle of justice.” Within the vocabulary of international law, such a jurisprudence engages with a particular legal universe, one that has close affinities with natural law, and equity, often the bridge between “justice” and a narrower application of strictly positive law. And, equity is a principle of international law.Footnote ⁵⁸

A. Reverse Colonial Reparations: Historical Instances

The origins of the Western system of reparations that currently prevails may be linked to what I term “reverse colonial reparations,” that is, reparations claimed by the colonizers from the colonized. One instance of “reverse colonial reparations” is suggested by the Treaty of Nanking. Here notoriously, the United Kingdom claimed 12 million dollars in “reparations” from China, because China sought to end the opium trade that was debilitating its people.Footnote ⁶⁰ The United Kingdom asserted that China had violated the natural law principle of the right to trade by opposing the opium trade; and that consequently the British government was compelled to wage a war whose costs China had to bear. The reparations paid by China, twelve million dollars, amounted to a sum as large as the Alaska purchase.Footnote ⁶¹ Simply, then, imperial forces postulated a law that had been ostensibly violated and prescribed the remedies, including compensation, that had to be paid. It is the imperial power that creates the framework for reparations. It was common for colonized peoples to pay for the costs of their own conquest, both formally and informally. Conquest, after all, passes title to territory, all the intricate rules of property collapsing inelegantly when confronted by the successful use of force.

Another such instance of “reverse colonial reparations” arises from the scandalous fact that Haiti had to pay reparations to France for the losses French citizens suffered as a result of the stunningly successful Haitian slave revolt against their masters.Footnote ⁶² The massive “debt” that Haiti incurred because of this crippled Haiti’s prospects of emerging as a successful sovereign state. The international system, ruled over by European and Western powers, had to ensure that any efforts by a non-European people, especially slaves, to establish themselves as equal members of the international community had to be opposed at all costs. As the Haitian historian Jean Casimir put it, “[t]he state of Haiti was born into a world that considered its very existence inconceivable and undesirable.”Footnote ⁶³ Haiti was burdened with a debt, an “indemnity” it had to pay, of 150 million francs—reparations to France and French slave owners in order to win international recognition. International personality came at an enormous cost, which basically crippled the new, sovereign state of Haiti. The payment of the debt involved borrowing money at high interest rates from French banks, hence giving rise to the infamous “double debt.” In broad terms, the case of Haiti was emblematic of the dilemma, the trauma, facing colonial nations as they fought and achieved independence. Simply, in many cases, independence, winning sovereign status came at the cost of incurring debt. Indonesia, for instance, had to pay its Dutch colonial master upon achieving independence.Footnote ⁶⁴

In another variation of this theme, the British government, following the Slavery Abolition Act of 1833 took loans of fifteen million pounds, and a further five million pounds later to finance the slave compensation package. The compensation was paid, not to the slaves, but to the slave owners.Footnote ⁶⁵ British taxpayers continued to pay off this loan and interest until 2015. Indeed, slaves themselves were made to pay for their own freedom, once again, through a manipulation of legal doctrine. Kris Manjapra points out that “[a]t the stroke of midnight on [August 1,] 1834, the enslaved were freed from the legal category of slavery—and instantly plunged into a new institution called ‘apprenticeship.’”Footnote ⁶⁶ This new institution once again, required the supposedly liberated slave to work for free. Further, the compensated slaver owners used their funds to establish new plantations, extending beyond the Caribbean to British plantation colonies in Africa and Asia. Here, indentured laborers—not slaves—manned these plantations. Indentured labor technically may not have been slavery, but it was a legal institution that enabled further exploitation of labor.Footnote ⁶⁷

B. Reparations and State Responsibility

The principle of reparations is integrally tied to the framework of state responsibility. The international law of reparations is classically based on the Chorzów case, the principle that “reparation must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed.”Footnote ⁶⁸ The principle is set out in its authoritative form in Article 31 of the Draft Articles on State Responsibility, which states that: “The responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act.”Footnote ⁶⁹ This is law that is explored and elaborated on in studying the jurisprudence of reparations and state responsibility.Footnote ⁷⁰ The duty to pay reparations is one of the foundational elements, of the framework for the venerable system of law, the law of state responsibility.

Historically, the development of this law took place in the context of what might be termed, broadly, neocolonial economic tensions. The whole structure of state responsibility was initially focused on the question of the rights of aliens, that is, the rights of Western aliens in Latin America after those states had won their independence in the nineteenth century.Footnote ⁷¹ The term “alien” encompassed both natural persons and, in time, as a result of a very deliberate campaign, corporations. State responsibility could arise in relation to any state violation of international law—as Article 1 of the Draft Articles of State Responsibility make clear.Footnote ⁷² However, historically, the development of the law of state responsibility was intimately connected with the issue of the protection of the rights of aliens.Footnote ⁷³ This body of law was designed to protect British and American investors, especially in Latin America in the nineteenth century. As the character of economic relations between the center and periphery changed, so too did the debates and contests over the principles of this law. Even up to the 1950s, the broad topic of state responsibility in fact focused on “the responsibility of a State to damage done in its territory to the person or property of foreigners.”Footnote ⁷⁴

Much of the preceding debate centered on the proposition famously enunciated by Elihu Root in 1910, that there existed a “standard of justice, very simple, very fundamental, and of such general acceptance by all civilized countries as to form a part of the international law of the [whole] world.”Footnote ⁷⁵ Thus aliens were protected by this ostensibly universal standard and an injury or loss suffered by an alien could violate this standard and give rise to state responsibility. It is notable further, that Root himself, like the Nuremberg Tribunal, focuses not so much on positive law—perhaps because Latin American countries would have fiercely dissented—but on a “standard of justice,” the justice to be enjoyed by aliens as economic actors. The League of Nations efforts to codify the law focused on a related set of issues, such as the protection of foreigners from damage caused by private individuals, and acts of armed force or authorities in the suppression of insurrection.Footnote ⁷⁶ Broadly, for instance, a failure of the state to protect the alien from the actions of rebels could incur state responsibility.

For F.S. Dunn, the function of this standard was clear: it was “essential to a continuation of the existing social and economic order of European capitalist civilization.”Footnote ⁷⁷ Imperialism was an integral element of this “European capitalist civilization,”Footnote ⁷⁸ and it was hardly surprising that Latin-American scholars saw it as such, and Carlos Calvo and Luis Drago responded by formulating the famous doctrines named after them,Footnote ⁷⁹ this as a way to protect their sovereignty.

C. Decolonization and the Battle Over State Responsibility

The topic of state responsibility was contested again when countries that emerged from colonialism, the so-called new states, sought to regain control over their natural resources, citing in support the principle of permanent sovereignty over natural resources, by nationalizing the foreign corporations that controlled those assets. These foreign corporations had obtained concessions from the colonial states, the Netherlands for instance granting mineral concessions to Dutch corporations operating in Indonesia. Upon independence, formerly colonized states seeking to consolidate their economic status, began nationalizing such foreign corporations. Nationalizations in Asia and Africa became now a major concern of Western states and indeed, international lawyers.Footnote ⁸⁰ In response, Western states argued that nationalizations had to be accompanied by compensation, payable according to international standards, and that a failure to pay such compensation was a violation of international law and incurred state responsibility. Astonishingly, it was the West that asserted that the developing countries had “unjustly enriched themselves,” and that their property rights had been illegally expropriated and that the developing countries had thus incurred state responsibility. Intense debates took place over the doctrine of state succession, whether the new states were bound, and to what extent, by the actions of their preceding colonial masters. Thus, the issue of the rights of aliens, an issue central to “capitalist civilization” was connected to state responsibility, acquired rights, and state succession.

It is hardly surprising then, that S.N. Guha Roy, in his seminal article presenting the Third World perspective on state responsibility, an article that appeared in the American Journal of International Law, deals centrally with the issue of reparations. As Guha Roy puts it, “this much can hardly be doubted, that reparation as a germinal principle of bare justice runs as much through different systems of municipal law as through international law.”Footnote ⁸¹ What is equally important about Guha Roy’s article, written at the height of the debate about permanent sovereignty over natural resources, is that its discussion on reparations takes the form of a review of the ongoing debate on state responsibility in the specific context of the law of aliens, that is, the law that was deployed to seek compensation for nationalization. The framework of state responsibility was profoundly shaped then, by this tussle. Guha Roy argued that the rules of state responsibility had been established, essentially, by colonial powers to the exclusion of the colonized states, and that a new law of state responsibility was called for because “the birth of a new world community has brought about a radical change which makes the traditional basis of obligation outmoded.”Footnote ⁸² During this period, reparations for aliens was a topic dealt with by a deeply divided International Law Commission (ILC), where lawyers and jurists from developing countries countered and contested Western versions of state responsibility.

D. Reparations and Internationalized Contracts

The disputes in the ILC on state responsibility and alien rights were so intransigent that Roberto Ago, succeeding Garcia-Amador, the ILC special rapporteur who had grappled unsuccessfully with the topic, decided to exclude the rights of aliens as a principal focus, and concentrate instead on the so called “secondary rules” of state responsibility, the rules dealing with the effects and obligations following upon a violation of any rule of international law giving rise to state responsibility. This shift generated criticism. Prominent lawyers such as Richard Baxter and Myres McDougal argued that severing the historic connection between state responsibility and alien protection was artificial and would lead to a very abstract discussion.Footnote ⁸³ Alien rights having been excised from state responsibility, the task of completing the Draft Articles on State Responsibility, at the heart of which lay the Chorzów standard, could be continued and finalized under James Crawford. Reparations for aliens however, had also been developing in parallel in another arena: arbitration.

Classically, only states could claim reparations. But a series of developments that took place over the last seven or eight decades have ensured that the corporation can claim reparations under international law, and, further, do so by bringing cases in arbitral tribunals specially created to hear their claims. Each of these developments represents a radical change. This jurisprudence emerged again, in response to the battle over nationalization. The Iranian nationalization of the Anglo-Iranian corporation has significant consequences that extend to the present. In legal terms, the nationalization led to the major case in the ICJ, the Anglo-Iranian case.Footnote ⁸⁴ There, the United Kingdom unsuccessfully argued that the concession agreement between Iran and the Anglo-Iranian oil company could be likened to a treaty, and hence, existed on the international plane, creating international obligations governed by international law.Footnote ⁸⁵ The Court denied this argument. Following the Anglo-Iranian case, a dedicated team of lawyers worked on what was to become the Abs-Shawcross Draft, named after Dr. Herman Abs, a prominent German banker, and Sir Hartley Shawcross, renowned as the British prosecutor at Nuremberg.Footnote ⁸⁶ The Abs-Shawcross collaboration, immortalized by the draft treaty was disconcerting and incongruous to say the least, given that Abs because of his senior position at Deutsch Bank, worked closely with the Nazis that Shawcross had made his name prosecuting. But such awkward differences as may have arisen were immaterial, as they were both united in the larger cause of furthering international commerce. Abs was a brilliant financier who played a prominent role in the post-war German miracle and Shawcross had furthered his career as a lawyer for a major multinational, Shell.Footnote ⁸⁷

The Abs-Shawcross treaty contained provisions that were startling at the time as a result of which what was intended to be a multilateral treaty never came into being. However, those provisions eventually became basic elements of the foreign investment regime. Concession agreements were contracts between the corporation and the state and traditionally governed by the national law of the host country. In order to escape the strictures of national jurisdiction, Sir Elihu Lauterpacht proposed the “umbrella clause” by which the contractual provisions between corporation and state would assume an international character akin to a treaty provision between states. Lauterpacht himself recognized the radical step he was taking: “[f]or an ‘umbrella treaty’ of this character I regret that I have been unable to find any direct precedent ….”Footnote ⁸⁸ Equally radically, the draft treaty proposed that corporations, rather than relying on the classic doctrine of diplomatic protection, would be empowered to initiate actions themselves, sue states in an international forum.Footnote ⁸⁹

In a parallel but related set of developments, a series of arbitral decisions sought, in a different, arena, to “internationalize” the contract, elevate it beyond the national realm and ensure that contractual terms in agreements between states and foreign corporations now took the form of international obligations.Footnote ⁹⁰ In this way, the sovereign right of a country to manage its own affairs, to develop its own laws as applied by its own court system was undermined and the corporation was elevated to an international actor who could invoke principles such as pacta sunt servanda to protect its rights. More peculiarly, this internationalization only applied to concession agreements entered into by developing countries. The differentiation was justified on the grounds that developing countries benefitted uniquely from such agreements. The novelty of all these developments were not lost on international lawyers. M. Sornarajah has critically examined the steps by which contracts were internationalized.Footnote ⁹¹ Ian Brownlie pointed out that “[b]efore the Second World War the view that concession contracts operated on the plane of international law was heretical.”Footnote ⁹² Derek Bowett, examining such agreements, raised the question of “why such contracts are “only internationalized” if concluded by developing States.”Footnote ⁹³ These objections to the theory were understandable, given that the ICJ had decided that contracts between states and corporations could not be likened to treaties.

E. Bilateral Investment Treaties and Expanding Corporate Power

With the advent of bilateral investment treaties, many of the innovations of the Abs-Shawcross draft including Lauterpacht’s great innovation, the “umbrella clause” became standard. The contract had become internationalized. Further, open ended and vague terms that created new grounds of liability and compensation, such as “fair and equitable treatment” and “full protection and security” became standard terms now in bilateral investment treaties. “Stabilization clauses,” another common feature in investment treaties, sought to ensure that no changes would be made to the legal system in ways that would impact the investment. The legal framework existing at the time the investment was made had to be preserved. The concept of “expropriation” was expanded to explicitly encompass “indirect expropriation.”

Equally significantly, the corporation was granted even further power. The Chorzów case, the defining case for reparations, established that a wrong done to the corporation could give rise to international liability. Classically, however, the corporation had to make its claims through the mechanism of diplomatic protection. With the advent of bilateral investment treaties however, the corporation was empowered to make claims for reparations on its own behalf without seeking the protection of the state-a protection granted through the terms of the treaty. The corporation was thus explicitly given standing in the international system. The corporation, through bilateral investment treaties, were empowered to directly sue states at the international level. Equally significantly, these claims could be brought in international arbitral tribunals created especially for this purpose. The earlier law of state responsibility was based on the person, the “foreign alien”; but this law was driven by the alien understood very specifically as an “investor,” as the alien corporation, and it was around the interests of the corporation, an economic entity intent created for profit that the new system was created, a system based on the goal of “corporate reparations.” The treaties were asymmetrical as states could not sue corporations for violations of international law such as human rights law.

I have offered here an unsatisfactory sketch of foreign investment law and investment arbitration. These are topics that have been studied extensively, exhaustively, in far more expert detail. What then is the utility of studying this vast topic in terms of the prism, the lens of reparations, or more specifically, corporate reparations? At one level, this is merely to remind us of the historical origins of the system of reparations as it exists now in international law. The system of state responsibility, driven by the topic of reparations, was essentially created, beyond the somewhat abstract ideas of Vattel, to protect foreign property, initially in the newly independent states of Latin America. And something might be learned about the politics, the strategies, and the personnel involved in the process, and how extraordinary innovations took place, departing from settled principles of international law—relating to standing, legal personality, and breach. This might be seen, as it has been by many, as a triumph of ingenuity, a demonstration of the adaptability of international law to create the structures indispensable to social progress and economic growth. The investment regime might be seen as comparable to the human rights revolution, for instance. Most crucially, further, this regime was created through the consent of the states subjected to it. Countries have now signed more than 3,000 investment agreements in one form or another. The success of the regime, with its formidable system of enforcement, one lacking in virtually all other areas of international law, is one of the prominent features of modern international law. At one level, then, my effort is simply to understand how this formidable regime of reparations came about and how it operates, and how a particular vision of justice became legalized.

As many scholars, such as M. Sornarajah,Footnote ⁹⁴ Kate Miles,Footnote ⁹⁵ Grietje BaarsFootnote ⁹⁶ and David Schneidermann,Footnote ⁹⁷ have argued, however, foreign investment law, like the law of state responsibility criticized by Rao, could be viewed as a neocolonial system, one that was devised to prevent developing countries from regaining control of their resources, and to facilitate the transfer of resources from the poor world to the rich world. In this respect, Western reparations can be connected with an earlier system of reverse colonial reparations. It is a paradox that corporations were central to colonial expansion, and yet developing states now sought to encourage corporations to operate in their countries by entering into bilateral investment treaties. Developing countries, fearful of the extraordinary power of corporations and their impact on their hard-won sovereignty, had attempted to manage that power through the United Nations, which set up a Commission on Transnational Corporations.Footnote ⁹⁸ At the same time, these countries, particularly in the 1990s, entered into these treaties. The puzzle that developing countries entered into these agreements that were often so disadvantageous to them has also been the subject of ongoing study.Footnote ⁹⁹ But much had to do with the promise of development, the ideology of development, and in particular, especially after the Cold War, the policies propagated by the Bretton Woods institutions that made liberalization and foreign investment imperative. The International Centre for the Settlement of International Disputes (ICSID), which is central to the modern investor-state system, is after all a part of the World Bank Group.Footnote ¹⁰⁰

Within this broader, decisive world view the legal regime of bilateral investment treaties was natural and logical. Many developing countries suffered from a lack of expert knowledge and capacity, a befuddlement as to the meaning of these complex terms, such as the umbrella clause, and an overestimation of the benefits of investment treaties. Nevertheless they entered into them because of the promise of foreign investment and the entire apparatus of neoliberal ideology, and institutionalism promoting this system, one that in many ways derives from the colonial and indeed, post-colonial history I have attempted to sketch.Footnote ¹⁰¹ The broad point is that the authoritative vision of reparations depends on the dominant vision of global justice and indeed, the legal imagination in constructing that vision of justice and devising the legal regimes that would further it.

The system of what might now be termed “corporate reparations” thus came into existence. Among legal systems, it is unparalleled in its reach and effectiveness. Most ironically, it developed precisely in response to the efforts of developing countries to regain control over their own resources, to end the exploitation by colonial corporations. Whereas the Nauru case was unique and singular, a situation where an extraordinary combination of historical circumstances enabled Nauru to bring action based on the mandate and trusteeship treaty obligations, the system of corporate reparations became institutionalized and wide-ranging, a crucial aspect of global governance itself, because allied with the ideology of development. What is equally significant is that this system facilitates cross border reparations, as it were. Human rights law, as embodied for instance, in the two major covenants, civil and political rights and economic and social rights, do not readily allow people in the Caribbean to make claims against the United Kingdom for colonial exploitation. The use of the concept of trusteeship raises complications because it is premised on the Western view that non-European peoples were in some respect, backward or immature, in need of protection. But it does provide one means of exposing, even within the European system itself, bases of responsibility for the ongoing effects of colonialism. And it is these ongoing effects that are central to the validity of colonial claims despite the inter-temporal rule.

F. Fairness and Equity: The Natural Law Jurisprudence of Corporate Reparations

Corporations were empowered to advance claims for reparations under international law, first through arbitration and then investment arbitration. Equally significantly, the development of the applicable law has, over time, expanded the ability of corporations to argue that their rights have been violated and that compensation is therefore payable. That expanding law has in many respects drawn upon the related notions of justice, equity, fairness, general principles and natural law.

The jurisprudence of the Nuremberg Tribunals, and indeed, the innovative work being done on how principles relating to the law of reparations may be re thought, amended, adapted, to negate the injustices of colonialism, has, in broad terms, suggested recourse to natural law and its associated concepts of equity and furthering justice.Footnote ¹⁰² This form of jurisprudence promises to ameliorate in some way the injustices that may be furthered through the strict application of positive law. My broad argument here is that it is precisely by recourse to broad notions and principles of justice and equity and “general principles” that corporate reparations have been furthered. In some of the earliest arbitrations dealing with concession agreements, arbitrators had already identified “general principles of international law” as a source of applicable law. Thus, Lord McNair wrote a very influential article on “general principles,” which argued for the recognition of the rights of private property and the principle of unjust enrichment, this in relation to the rights of corporations.Footnote ¹⁰³ These principles of commercial law, principles that were integral to the municipal law of Britain, were presented as so “universal” that they represented a “modern law of nature,” in the words of Lord Asquith in the Abu Dhabi Award.Footnote ¹⁰⁴ In broad terms then, a system of arbitration, specifically set up to protect the rights of private parties, developed a rich and innovative jurisprudence, that drew upon general principles, equity, and natural law, all this in ways that broadly furthered the interests of the corporation and enhanced its powers to claim reparations.

Equity is a recognized principle in international law. Advocates of this position point to Article 38(1)(c) of the Statute of the ICJ, general principles, to justify this position. In the case of investment law, however, equity is a principle that is expressly included in bilateral investment treaties. The United States model Treaty of 2012, for instance, states:

It is notable that it is the “covered investments,” property itself, that enjoys the right to “equitable treatment” and “full protection and security.” The treaty seems to set limits to these rights by referring to the “customary international law minimum standard,” stating that the treaty provision does not “create additional substantive rights.”Footnote ¹⁰⁶ Arbitral decisions, however, have continuously expanded the meaning of “equitable treatment.” Arbitrators, innovatively held that any disappointment of the “legitimate expectations” of the investor amounted to inequitable treatment. The concept of “legitimate expectations” was “plucked from the air.”Footnote ¹⁰⁷ “Inappropriate behaviour” by a state could violate legitimate expectations.Footnote ¹⁰⁸ Surveying the arbitral cases that brought about the dramatic expansion of the already open concept of “equitable treatment” through this recourse to a vague standard of “legitimate expectations,” a concept perhaps derived from the concept of legitimate expectations in administrative law, M. Sornarajah comments that “[a] standard vaguely formulated has been shrouded in further vagueness involving a notion of inappropriate behaviour defined circularly as involving unfairness and inequity.”Footnote ¹⁰⁹

This is not the place to explore more closely all the complexities regarding the equitable standard and legitimate expectations and the various divisions found in arbitral awards regarding these principles, their validity, scope and application.Footnote ¹¹⁰ But for the limited purpose of my exploration, the point is that these broad concepts, with their invocations of “equity” and “justice” have been developed to further the claims of corporations to reparations; and, equally importantly, these corporations have ready access to tribunals, to judicial remedies; and these tribunals are manned, as it were, by a small and elite community of international lawyers who are intent on preserving this systemFootnote ¹¹¹ that has been explicitly designed to protect and further the interests of corporations.Footnote ¹¹²

The jurisprudence of international investment law is innovative, creative, and opportunistic, as even this unsatisfactory summary coverage of “equitable treatment” and “legitimate expectations” suggests. The decisions made by arbitral awards, often inconsistent, are not readily appealable. As such, international investment law offers a cornucopia of principles to draw upon by arbitrators constructing innovative grounds of liability, and who doubtless seem themselves as nobly furthering the cause of international justice, dealers in virtue.Footnote ¹¹³ It is within this hallowed forum, furthermore, that new concepts of “investment” and “property” are being developed, enabling foreign investors to make claims that would never be recognized in domestic law using valuation techniques that are highly questionable.Footnote ¹¹⁴ In the Tethyan case, an award of amounting to six billion dollars was handed down against PakistanFootnote ¹¹⁵ in relation to an expectation of a right. The concept of “legitimate expectations” was central to the case. In the Rockhopper case, the Italian government’s measures to ban offshore mining in a designated area was held by an ICSID Tribunal to be an “expropriation.” Italy was ordered to pay an award of one hundred and eighty-five million pounds, the compensation amounting to two hundred forty million pounds when interest was taken into account. As commentators noted, what was striking about this award was not only the defensiveness of the Tribunal and their claim that the award did not in any way inhibit the regulatory power of the Italian government. It was also the fact that the putative production concession that was allegedly appropriated had not as yet been officially granted. That is, the notion of property rights was extended to a “right to a concession,” rather than the concession itself.Footnote ¹¹⁶ It is doubtful whether such an attenuated “right,” the right to a concession would have been recognized in any system of national law.

But the larger point is that these arbitral awards are creating new forms of “rights,” a right to a concession, a right to claim violation of “legitimate expectations.” In effect, new grounds of liability, the crucial issue in reparations, are being continuously constructed. And these rights are proprietary in character, rights that may be the basis for awards amounting to millions if not billions of dollars.Footnote ¹¹⁷ The decisions of these tribunals are, then, extraordinarily consequential. The sums of money involved, for the developing countries against whom these awards are made, are sufficient to wipe out health, education and welfare budgets. The compensation—the reparations—handed to corporations is increasing all the time.Footnote ¹¹⁸ The valuation standards are controversial and questionable.

It is because arbitrators have interpreted these wide-ranging terms in startling and expansive ways that states, including, ironically, the rich, developed states that promoted the whole regime, have attempted to define in more detail their understanding of terms such as “minimum standard of treatment” and “fair and equitable.” They have done so by specifying in recent model treaties, for instance, that “fair and equitable” means “fair and equitable” as established by customary international law.Footnote ¹¹⁹ As the Eco Oro case suggests, however, even this may not be enough.Footnote ¹²⁰ Equally importantly, the prospect of being sued by corporations inhibits developing countries from passing environmental regulation. This is the so-called “chilling effect.”

In any event, the excesses of investment arbitration have become now so obvious that investor-state dispute settlement (ISDS) was excluded as between the United States and Canada in the United States-Mexico-Canada Agreement that replaced NAFTA. Western European states including France, Germany, the Netherlands, Italy, and Spain, have withdrawn or are withdrawing from the Energy Charter which had been negotiated and promoted, perhaps on the happy assumption that the system would only apply to the countries of Eastern Europe as they emerged from communism. The European Parliament has approved the withdrawal of the Union from the ECT.Footnote ¹²¹ This is following the trend of many developing countries.Footnote ¹²²

These withdrawals by major states in the developed world, authors and relentless promoters of the system, must surely establish a basic point that pertains to the issue of why developing countries first signed onto bilateral treaties and then recoiled against them: they simply did not intend the system to expand and operate in the way that it eventually did. In this respect—as in many others—the developed world is experiencing a crisis that was first felt, in a more dramatic way, in the developing world itself. Further, the economic emergence of China and India has led to investors from those countries purchasing assets in the West, and those countries run the risk of being at the receiving end of a system they had championed and richly benefitted from. As a consequence of these developments, the whole investor state regime is subject to new and close scrutiny.Footnote ¹²³ What is being realized now by Western countries are many dimensions of investment law that were identified much earlier by M. Sornarajah, as his erudite writings, spanning now more than four decades on the development and ramifications of arbitration and investor state dispute settlement, have been proven to be brilliantly prophetic.

A. Structural Injustice: Debt and Reparations

The failure to pay a debt is a basis for reparations. Indeed, as I have mentioned, the law of state responsibility emerged in part as an effort to protect European and American bondholders when their investments in Latin America failed. I have made the argument that the system of ISDS is, first, an established system for the claiming of reparations. Many of the same arguments could be made with respect to the international system for the management of debt. Colonial debt often accompanied the winning of sovereign status, and that debt has continued.Footnote ¹⁴¹ Debt has been a perpetual and indeed, intensifying reality for the vast majority of developing countries. As Mohammed Bedjaoui noted in 1979, “[t]he more and more unbearable indebtedness of these countries has become a structural phenomenon.”Footnote ¹⁴² The programs of the IMF that have been intended to solve the problem of debt have, rather, exacerbated them. The austerity and structural adjustment programs prescribed by the IMF have intensified inequality and taken a heavy toll on the social welfare of many states. In a world beset by crises, health, environmental, and financial, every crisis increases the debt burden of the poorer countries, translating and transferring massive human suffering into the ambit of this regime that has basically continued to enrich the developed states. The original debt of developing countries was 6.18 billion dollars; the total external debt of developing countries in 2007 was 3.3 trillion dollars; the total amount paid in debt servicing by developing countries during this period was 7.7 trillion dollars.Footnote ¹⁴³ The ability of governments to sustain social, health, and education systems has been crippled as a result, giving rise to what James Gathii has termed “debt governance.” The situation is further exacerbated by the ability of debt holders to now turn, precisely, to ISDS, with all the features I have outlined above, to pursue their claims. The ability of private creditors, backed by vulture funds, to use investment arbitration and recourse to other such forums in order to leverage their rights has disrupted debt negotiations. All these developments have profoundly affected the socioeconomic well-being of the people in these debtor countries.Footnote ¹⁴⁴ It is unsurprising then, that a major claim of the CARICOM countries is debt cancellation.Footnote ¹⁴⁵ It is in this context that principles such as trusteeship might be used to point to the ongoing effects of the colonial past.