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Docteur Berk Demirkol

Professeur adjoint - Université Galatasaray

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Exhaustion of Local Remedies

I. Introduction

1.

The literal meaning of exhaustion of local remedies is the satisfaction by individuals of a requirement to resort to all available and effective local remedies that exist in a domestic legal order. This requirement has two appearances in international law and more specifically in international investment law: a procedural prerequisite prior to submitting an international claim (referred to in this Note as the local remedies rule), and a substantive requirement for the completeness of the breach in the context of certain internationally wrongful acts.

II. Procedural Prerequisite (Local Remedies Rule)

A. Local remedies rule under customary international law

2.

As envisaged in Article 14 of the International Law Commission (ILC)’s Articles on Diplomatic Protection (ADP)1 and ILC’s Commentary to ADP,2 the local remedies rule is a “rule of customary international law requiring the exhaustion of local remedies as a prerequisite for the exercise of diplomatic protection”.3 The customary international law nature of the local remedies rule has also been recognised in the judgments of the International Court of Justice in the context of diplomatic protection cases.4 The local remedies rule is also included in Article 44(b) of the ILC’s Articles on State Responsibility and its commentaries.5

B. Local remedies rule in other fields of international law

3.

The local remedies rule does not in principle directly find application in the context of international treaties allowing individuals with direct access to international courts or tribunals. Indeed, the local remedies rule requirement was often dispensed with in the first half of the twentieth century in international mechanisms granting procedural status to individuals.6 However, similarly to ILC’s ADP, both the Convention for the Protection of Human Rights and Fundamental Freedoms, Article 35(1), and the International Covenant on Civil and Political Rights, Article 41(1)(c) require all domestic remedies to be exhausted before bringing a claim under the Convention.

C. Local remedies rule in ICSID arbitration

4.

In investment treaty arbitration, the local remedies rule does not usually find application unless it is specifically required in the applicable international investment agreement.7 The Convention on the Settlement of Investment Disputes Between States and Nationals of other States, Article 26, confirms that the local remedies rule is reversed in the field of investment arbitration.

D. Local remedies rule in investment arbitration other than ICSID arbitration

5.

In investment treaty arbitrations administered under arbitration rules other than ICSID Arbitration Rules, investment tribunals have referred to the specific requirement envisaged in the applicable investment agreement.8 Even in the absence of such specific rule, it is accepted that the local remedies rule does not find application in investment treaty arbitrations administered under arbitration rules other than ICSID Arbitration Rules, unless otherwise provided by the contracting parties of the international investment agreements.9

III. Substantive requirement for the completeness of the breach

A. Difference between the procedural and substantive requirements

6.

The main rationale for the procedural local remedies rule is to ensure that “the State where the violation occurred should have an opportunity to redress it by its own means, within the framework of its own domestic system”.10 Accordingly, the procedural requirement is rooted in customary international law, grounded on practical and political considerations,11 and serves simply as an established “comity” rule in public international law in favour of the host State.12 However, non-compliance with the substantive requirement to exhaust the local remedies makes an internationally wrongful act inchoate, incomplete, or “not consummated” under some circumstances,13 such that as a result of the failure of an element of the wrongful act there would be no breach of international law.14 See also the use of the Most favoured nation clause.

B. Substantive requirement to exhaust local remedies in denial of justice claims

7.

A number of tribunals considered exhaustion of local remedies as a substantive requirement for the occurrence of denial of justice.15 Indeed, the obligation on States under international law to protect individuals from the occurrence of denial of justice requires States “to create and maintain a system of justice”.16 For that reason, denial of justice does not occur until the entire judicial system is deemed to have failed to render justice. Accordingly, State responsibility for denial of justice would not be engaged in principle unless the judiciary has rendered its final and binding decision.17 The question of whether States could be held responsible for the acts of their judicial organs outside the context of denial of justice and without the satisfaction of the substantive requirement of exhaustion of local remedies is a rather controversial subject but has been increasingly more often answered positively.18 See further Denial of justice in Fair and equitable treatment and Judicial expropriation, Section III.

C. Substantive requirement to exhaust local remedies in claims asserting the breach of the effective means standard

8.

An analysis of the case law on the effective means standard suggests that tribunals are divided as to whether the effective means standard corresponds completely to the protection against denial of justice,19 or alternatively, whether it affords a broader protection than the customary international law obligation to provide a functioning system of justice.20 The investment tribunal in Chevron v Ecuador I distinguished the substantive requirement to exhaust local remedies for a breach of the effective means standard to be completed, from the strict prior exhaustion requirement applied to denial of justice. The Tribunal stated that the former is a “qualified” requirement of exhaustion of local remedies.21 This approach is followed by the Tribunal in White Industries v India.22 See further Effective means to assert claims and enforce rights.

Bibliography

Amerasinghe, C. F., Local Remedies in International Law, 2nd ed., 2004.

Cançado Trindade, A.A., Exhaustion of Local Remedies in International Law Experiments Granting Procedural Status to Individuals in the First Half of the Twentieth Century, Netherlands International Law Review, 1977, pp. 373-392.

Cançado Trindade, A.A., Denial of Justice and its Relationship to Exhaustion of Local Remedies, Philippine Law Journal, 1978, p. 404.

Cançado Trindade, A.A. The Application of the Rule of Exhaustion of Local Remedies in International Law: Its Rationale in the International Protection of Individual Rights, 1983.

Demirkol, B., Judicial Acts and Investment Treaty Arbitration, 2018.

Demirkol, B., Exhaustion of Local Remedies and Wrongful Judicial Acts other than Denial of Justice, Transnational Dispute Management, 2019.

Fawcett, J.E.S., The Exhaustion of Local Remedies: Substance or Procedure?, British Year Book of International Law, 1954, p. 452.

Paulsson, J., Denial of Justice in International Law, 2005.

Sattorova, M., Denial of Justice Disguised? Investment Arbitration and the Protection of Foreign Investors from Judicial Misconduct, International and Comparative Law Quarterly, 2012, pp. 223-246.

Schreuer, C., Calvo's Grandchildren: The Return of Local Remedies in Investment Arbitration, The Law and Practice of International Courts and Tribunals, 2005, pp. 1-17.

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