Revisiting the Chorzów Factory Standard of Reparation – Its Relevance in Contemporary International Law and Practice

Felix E Torres

doi:10.1163/15718107-bja10023

Abstract

Abstract The Chorzów Factory standard of reparation has been consolidated in the mind-set of international actors since the International Law Commission’s Articles on State Responsibility were adopted in 2001. This article analyses to what extent the recent case law of the International Court of Justice and other international practice concerning injury to aliens and property rights, especially expropriations, reflect the Chorzów Factory standard. It does so by considering whether ‘full reparation’ is the central issue in international disputes that involve state responsibility, if restitutio in integrum prevails over other forms of redress, and if the amount of compensation is established in light of the principle of ‘full reparation’. The interaction between the secondary rules of state responsibility and the primary rules of expropriation will be considered in investor-state disputes. In addressing these questions, the role that adjudicating bodies understand they play in international law and the interests pursued by stakeholders – states and private investors – are examined.

Highlights

In Chorzów Factory, the Permanent Court of International Justice outlined a standard of reparation (‘full reparation’) that has for a long time occupied a central place whenever the consequences of an internationally wrongful act are dealt with in public international law: The essential principle contained in the actual notion of an illegal act – a principle which seems to be established by international practice and in particular by the decisions of arbitral tribunals – is 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
Finding a pragmatic solution to restore mutual relationships or move forward to perform the commitments acquired very often determine how state disputes are solved, with the rules on state responsibility and reparations laying in the background as negotiating instances
When reparations are invoked, restitutio in integrum does not prevail over other forms of redress, insofar as compensation – and satisfaction – often outweigh restitution

Summary

Introduction

In Chorzów Factory, the Permanent Court of International Justice (pcij) outlined a standard of reparation (‘full reparation’) that has for a long time occupied a central place whenever the consequences of an internationally wrongful act are dealt with in public international law: The essential principle contained in the actual notion of an illegal act – a principle which seems to be established by international practice and in particular by the decisions of arbitral tribunals – is 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. The state is not “directly responsible for making good all the damages caused by the crime itself” but for paying “reasonable indemnity” taking into account the claimant’s grief and the mistrust and lack of safety resulting from the failure to prosecute and punish the offender.[85] This indemnity is due not because of an obligation to pay reparation strictu sensu, but as a means of “satisfaction for damages of the stamp of indignity, grief, and other similar wrongs”.86 This analytical framework was applied in cases involving death or personal injury to aliens in many decisions made by other commissions in the early 20th century.[87] In most of them, ‘full reparation’ was never granted; instead, the partial amount of compensation recognised varied significantly and randomly according to different interpretations of what ‘denial of justice’ meant, ranging from failure to apprehend and prosecute, delays on the prosecution, improper trial procedures, to inadequate sentencing.[88] Already in 1957, Special Rapporteur F.V. García-Amador warned about the difficulties to establish any reference upon which it could be determined whether acts or omissions give rise to state responsibility and the extent to which reparation was due from. Non-state actors’ responsibility for their contribution to the injury may remain in the twilight, outside the scope of state responsibility.[90]

Expropriations and Other Property-Related Disputes in the Arbitral

The Secondary Rules of Reparations in Non-Expropriation Cases

Conclusion