Non-Precluded Measures Clause: Substance or Procedure? A comment on Certain Iranian Assets

On 13 February 2019, the International Court of Justice (ICJ) issued its Judgment on the preliminary objections raised by the US to Iran’s claims in the Certain Iranian Assets case. The dispute involves the exercise of jurisdiction over Iran by US courts and the seizure of assets of Iranian state-owned companies to satisfy those court’s judgments. According to Iran, these actions are in breach of the US obligations under the 1955 Iran-US Treaty of Amity. The background to the case and the Court’s recent decision have been analysed elsewhere (see, eg, here). In this post, I want to comment on one specific element of the Court’s reasoning: its decision in relation to the US objection based on Article XX(1) of the Treaty of Amity.

Article XX(1) states, in relevant part, that:

The present treaty shall not preclude the application of measures …

(c) regulating the production of or traffic in arms, ammunition and implements of war, or traffic in other materials carried on directly or indirectly for the purpose of supplying a military establishment; and

(d) necessary to fulfil the obligations of a High Contracting Party for the maintenance or restoration of international peace and security, or necessary to protect its essential security interests.

The US argued that the function of this provision was to exclude certain matters from the substantive scope of the Treaty, with the consequence that they fell outside the Court’s jurisdiction which is limited, under Article XXI, to disputes relating to the interpretation and application of the Treaty. The Court rejected the US preliminary objection and decided, as it had done on previous occasions, that the provision in question constituted a ‘defence on the merits’ (para 47). This seems to be the right approach: the language of the provision, as well as the context of the Treaty, suggest that the function of Article XX(1) was to render permissible certain measures which could have, otherwise, fallen foul of the treaty obligations assumed by the parties, rather than to regulate the exercise of the Court’s jurisdiction under the Treaty. Nevertheless, the Court’s decision raises two questions for consideration: (1) the rationale for the Court’s decision and (2) the (im)precise language used by the Court in describing the effect of this clause.

Article XX(1): Substance or Procedure?

The question of the characterisation of Article XX(1) of the Treaty of Amity had been already been considered by the Court on previous occasions. In all cases, the Court addressed this provision as a defence on the merits. But in none of them did it provide the reasons for doing so.

In Oil Platforms the US argued that matters relating to the use of force fell outside the scope of the Treaty, and invoked Article XX(1)(d) to buttress this argument (see: Verbatim Record, 17 September 1996, 32-33). The Court’s Preliminary Objections judgment acknowledged the possibility that the provision might constitute a jurisdictional limitation, but went on to hold that ‘in the present case’ it did not restrict its jurisdiction affording, instead, a defence on the merits (para 20). In Alleged Violations of the 1955 Treaty of Amity, also between Iran and the US, the Court’s provisional measures Order also dismissed the US’s objection based on Article XX(1) holding that it had prima facie jurisdiction over the dispute (paras 38-44). In Nicaragua, moreover, the Court considered an analogous provision in the US-Nicaragua 1956 Treaty of Friendship as a defence in the merits phase of the proceedings (para 222).

The Court’s omission to settle the issue of the characterisation of Article XX(1) in its prior case-law was central to the US preliminary objection based on this provision in Certain Iranian Assets (US Preliminary Objections, paras 7.5-7.9). Arguably, due to the peculiarities of each case, it had not been necessary for the Court to justify its choice in any of these prior disputes. But in Certain Iranian Assets the issue was squarely before the Court: the US argued that Article XX(1) was a limitation to the Court’s jurisdiction and Iran countered that it was a defence on the merits. The Court simply asserted that Article XX(1) was a defence on the merits and other than an appeal to its prior case-law, once again, it declined to offer any justification for this choice.

The classification of Article XX(1) as either a jurisdictional objection or as a defence on the merits goes to the heart of the conceptual distinction between substance and procedure. Substantive rules concern the characterisation of conduct; they ‘prescribe rights, obligations, and standards of conduct; determine legal status, title, and conditions; provide legal definitions; and establish international…responsibility’, whereas procedural rules, in contrast, govern judicial (and administrative) proceedings (Talmon, 981-982). The substance/procedure dichotomy is common to many areas of the law and has important legal consequences in many of these. In private international law, for example, matters of procedure are regulated by the law of the forum, whereas matters of substance can be regulated by foreign law. In international law, this dichotomy has been used to deny the derogatory effect of peremptory rules in respect of jurisdictional immunities (Germany v Italy, para 93). Yet, despite its ubiquity and importance, the classification of rules (or legal requirements) as substantive or procedural is not an easy task. The distinction between the two cannot be made in stark terms and there are some blurry edges (Nollkaemper, 772-5). For example, the exhaustion of local remedies can be a substantive requirement (in the delict of denial of justice) and a procedural requirement (in claims of diplomatic protection). And indeed, these blurry edges have been relied upon to criticise the argument that immunities are available against claims of breach of peremptory rules of international law (see, eg, Orakhelashvili).

In light of this, it would have been desirable for the Court to explain the reasons why it chose to classify Article XX(1) as a defence on the merits. This is all the more so since, unlike in Oil Platforms where the Court decided that for the ‘present case’ the provision was a defence on the merits and may have been understood to have left open the possibility that in other cases it might be a jurisdictional limitation (as the US argued in Certain Iranian Assets), here the Court expressly dismissed the possibility that the provision constituted a jurisdictional limitation without narrowing its decision to the ‘present case’. This holding could thus have implications for other cases in which this provision is at issue (eg, Alleged Violations of the 1955 Treaty of Amity) or in which analogous provisions may be at issue in the future. Similarly worded ‘non-precluded measures’ clauses are not uncommon in international investment agreements and have been considered by various investor-State arbitration tribunals (see e.g. the decisions cited below). This decision could also have implications at the WTO, where the national security exception in Article XXI, which for two decades remained in the background, is now being invoked in a number of disputes by the United Arab Emirates, Russia and the US, with the US in particular arguing that the provision amounts to a jurisdictional limitation (on which see Desierto; Vidigal).

The Function of Article XX(1) and the Concepts of Justification and Excuse

At paragraph 42 of the Judgment, the Court, while recording Iran’s argument, describes Article XX(1) of the Treaty as a ‘defence on the merits’ pursuant to which ‘conduct which would otherwise amount to a breach of the Treaty could thus be excused’ (emphasis added). The Court is, admittedly, recounting a party’s argument and not stating its own views on the matter. Nevertheless, the language it uses in this respect is telling, in particular because Iran does not use the expression ‘excuse’ in its written or oral pleadings when referring to Article XX(1) opting instead to use the phrase ‘defence on the merits’ throughout. Nor did the US use the term ‘excuse’ in its pleadings.

As Vaughan Lowe remarked 20 years ago, the distinction between justification and excuse ‘is the very stuff of classical tragedy. No dramatist, no novelist would confuse them. No philosopher or theologian would conflate them’ (406). And indeed neither would most domestic lawyers (at least in western legal systems). Justifications are defences that relate to properties or characteristics of acts and render conduct lawful (permissible or, according to some, warranted). Excuses, in turn, are defences that relate to properties or characteristics of actors and exclude the negative consequences (for that actor) arising out of an unlawful act. Justifications exclude that a wrongful act has been committed, excuses presume that such wrongful act has been committed. The distinction between justification and excuse is acknowledged (if not adopted) in many legal systems and the two concepts are, at their core, clearly distinct (Dressler, cited by Berman at 4; Husak, 496). (There are, admittedly, fuzzy edges, especially in certain circumstances, like excessive or mistaken self-defence in criminal law, see: Greenawalt.)

The Court’s reference to conduct ‘which would otherwise amount to a breach of the treaty’ (emphasis added) in paragraph 42 implies that, when conduct falls within Article XX(1), it is not a breach of the treaty. I think this explanation is correct. The language of Article XX(1) and the focus on the conduct rather than the actor (it is the ‘measures’ which are not precluded) suggest that this provision operates as a justification, namely to render lawful conduct falling within its scope. It is therefore conceptually incorrect to refer to Article XX(1) as an excuse. This is not to say that it was not open to the Court to find that Article XX(1) was properly interpreted as an excuse. If, however, that had been the Court’s view, it would have been wrong to say that conduct falling within the provision would have ‘otherwise’ amounted to a breach: the conduct would have been a breach, just one which did not give rise to the legal consequences of responsibility (cessation and reparation).

The language used by the Court in paragraph 42 is one more example of the (unfortunate) imprecision which pervades the engagement of international tribunals and scholarship in relation to defences, as I have noted elsewhere. Precision and accuracy in legal expression are of fundamental importance for the conduct-guiding function of the law. To use the expressions ‘justification’ and ‘excuse’, two clearly different concepts in ordinary language, philosophy and law, interchangeably at the highest levels of international adjudication is far from satisfactory. This is all the more so given the increasing calls for, and endorsement of, drawing a distinction between these two types of defences in international law (see, eg, CMS v Argentina (Annulment), para 129; Continental Casualty v Argentina, fn 236; El Paso v Argentina, para 553; Christakis; Crawford, ch 9; Lowe; Scalese; Sloane, 482-6; and my own work).