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Some International Law Problems Posed by the Nationalization of the Copper Industry by Chile

Published online by Cambridge University Press:  28 March 2017

Francisco Orrego Vicuña
Francisco Orrego Vicuña*
Affiliation:
University of Chile, Santiago
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Extract

The complex process surrounding the nationalization of the copper industry in Chile has raised numerous important questions and engendered conflicting claims about principles and standards required by international law in property takings affecting the interests and rights of aliens. The purpose of this article is to examine, in an objective fashion, some of these questions and claims with particular reference to well-established precedents and contemporary doctrines in this problematic area of international law. Such an attempt at objectivity is not easy since the Chilean nationalization involves necessarily disparate notions about the right to property and its protection under municipal and international law.

Type
Research Article
Information
American Journal of International Law , Volume 67 , Issue 4 , October 1973 , pp. 711 - 727
Copyright
Copyright © American Society of International Law 1973

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References

1 The Presidential motion of Dec. 21, 1970 which proposed the constitutional amendment concerning natural resources and their nationalization, states that this measure is “a right recognized by the Charter of the United Nations” and “even by the Supreme Court of the United States.” Chilean Senate Bull. No. 25.073: Annex to the Report of the Committee on Constitutional Affairs of the Senate, Jan. 17, 1971, at 15 (hereinafter cited as Senate Bull.). The proposed constitutional amendment is reproduced in 10 ILM 430–35 (1971). According to what was later stated by the representatives of the Executive in the Senate Committee, the references in the Presidential motion were to General Assembly Resolution 1803 (XVII). 17 UN Gaoh Supp. 17, at 42, UN Doc. A/5217 (1962), and to the Sabbatino case. Senate Bull. at 34, 93. Resolution 1803(XVII) was mentioned in almost every session of the Committee and of the Senate, and was reproduced in full in the official records in two occasions. Although professors and experts in mining and constitutional law were consulted regularly by the Senate Committee, this was not the case with international lawyers. The point of view of international law was introduced by university professors in articles published by the newspaper El Mercurio, on Feb. 5 & 18 and April 20, 1971.

2 In addition to the references to the resolution made during the discussion of the constitutional amendment in Congress, it has been invoked in many other instruments and declarations. See, for example, transitory Article 17 of the Constitution, which refers to the “exercise of the sovereign and inalienable right of the State freely to dispose of its natural wealth and resources.” 10 ILM 1068 (1971); and Decree No. 92 of Sept. 28, 1971 on deduction of excess profits. 10 ILM 1238 (1971). See also Address by the Undersecretary of Foreign Affairs of Chile in the Second regular meeting of the General Assembly of the Organization of American States in OAS Docs. AG. C-136/72. (1972).

3 Resolution 1803 (XVII) originated in the recommendations of the Commission on Permanent Sovereignty over Natural Resources, created by Resolution 1314(XIII) of Dec. 12, 1958. These recommendations were introduced in the Draft Resolution submitted by the Delegation of Chile, See Gess, , Permanent Sovereignty Over Natural Resources , 13 Int. and Comp. L. Q. 398 (1964)CrossRefGoogle Scholar. See also, Schweitzer, , Debate en el Senado Sobre Soberanía y Recursos Naturales , El Mercurio, Jan. 26, 1971, at 3 Google Scholar. See also, Schwebel, , Story of the U.N.’s Declaration on Permanent Sovereignty over Natural Resources , 49 A.B.A.J. 463 (1963)Google Scholar.

4 See in general Asamoah, O.Y., The Legal Significance of the Declabations of the General Assembly of the United Nations (1966)Google Scholar. (Hereinafter cited Asamoah).

5 See address by the Undersecretary of Foreign Affairs, supra note 2. See also statement by the Chilean Minister of Foreign Affairs before the Chamber of Deputies on Aug. 2, 1972 in La Nación, Aug. 6, 1972.

6 UN Doc. A/C.2/SR.842 at 12; also UN Doc. A/C.2/SR. 834 at 19.

7 Garcfa-Amador, , Revised Draft on International Responsibility of the State for Injuries Caused in its Territory to the Person or Property of Aliens , 2 Y.B. Int. L. Comm, 46 (1961)Google Scholar; Sohn, and Baxter, , Draft Convention on the International Responsibility of States for Injuries to Aliens , 55 AJIL 548 (1961)Google Scholar.

8 Statement by Mr. Meyer, Charles A. Before the Subcomm. on Inter-American Affairs of the House Comm. on Foreign Affairs in 60 Dept. State Bull. 498 (1971)Google Scholar. See also, Meyer, , Reply of the Delegation of the United States to the Statements of the Delegates of Ecuador and Chile in O.A.S. G.A. Doe. AG/C-143/72 (1972)Google Scholar.

9 For an examination of the decisions of international courts and tribunals on this point, See Garcia-Amador, F. V., Principios de Debecho Internacional que Rigen la Responsabilidad 306–10 (1963)Google Scholar.

10 Doctrines and decisions in Garcia-Amador, (Fourth) Report on International Responsibility, 2 Y.B. Int. L. Comm. 4 (1959). (Hereinafter cited as Fourth Report.) See also Aramco, Arbitration in 8 Whiteman, Digest of Int. Law 912 (1967)Google Scholar.

11 Some newly-independent countries proposed that only those rights acquired after independence should be respected, not those acquired under colonial rule UN Doc. A/C.2/SR.846 at 7; A/C.2/SR.851 at 6–7. Preambular para. 5 was introduced to deal with this matter. It follows therefore that rights acquired in an independent state are clearly protected by the resolution. The Delegation of Chile agreed from a legal point of view with the position of The Netherlands, which favored the protection of rights acquired under any circumstance, but suggested detailed provisions should not be included. UN Doc. A/AC. 97/SR.28 at 5. Although President Allende has stated that “the American exploitation of copper is a real colonial enclave in the Chilean economy,” that is hardly the situation. Senate Bull., supra, note 1, at 6.

12 Asamoah, supra note 4, at 89; Gess, supra note 3, at 443; Garcia-Amador, supra note 9, at 201; Schwebel, supra note 3, at 468.

13 This position had been taken by international decisions as early as 1930. Fourth Report, supra note 10, at 5.

14 For an examination of this criticism, See Fourth Report, id., at 5–7, citing particularly Fhtedman, S., Expropriation in International Law 126 (1953)Google Scholar and Kaeckenbeeck, , La Protection Internationale des Droit Acquis , 59 Rec. Des Cours de L’academte de Droit International 361 (1937)Google Scholar.

15 Although both Chile and the United States signed the Economic Agreement of Bogotá in 1948, which imposes strict conditions concerning the property of aliens, neither country ratified it The different approach of the Latin American countries and of the United States to this problem became quite evident during the discussion of the agreement. 8 Whiteman, Digest of Intl. Law 1091–92 (1967).

16 Texts of the agreements and other materials in: 6 ILM 424–53, 454–65, 1146–61 (1967), 8 ILM 1073–78 (1969) and 9 ILM 921–74 (1970).

17 10 ILM 432 (1971).

18 Senate Bull., supra note 1, at 110–12, 123–24, 132, 141.

19 Id., at 124. Is it possible from this statement to understand that when the right has been lawfully acquired it must be respected?

20 Id., at 112.

21 Universal Declaration of Human Rights, adopted by the General Assembly on Dec. 10, 1948, UN Doc. A/810, Art 17.2 (1948).

22 Friedmann, W., The Changing Structure of International Law 196 (1964)Google Scholar.

23 Fourth Report, supra note 10, at 5.

24 Id., also citing Cheng, , General Principles of Law as Applied by International Courts and Tribunals 48 (1953)Google Scholar. See also, Friedmann, , Social Conflict and the Protection of Foreign Investment , Proc. Am. See. Int. L. 131–32 (1963)Google Scholar.

25 Fourth Report, supra note 10, at 15.

26 García-Amador, , (Second) Report on International Responsibility , 2 Y.B. Intl. L. Comm. 110–12 (1957)Google Scholar.

27 Proposed constitutional amendment, supra note 1, at 435.

28 Transitory Art. 17(c) of the Constitution, as amended, 10 ILM 1069 (1971).

29 The exclusion of the Chilean judiciary from reviewing any matter arising from the copper nationalization was officially proposed by the Executive on the ground that the Court would apply “a criterion that belittles the matter reducing the whole subject to a mere relationship between private parties governed by private law.” Stern, , The Judicial and Administrative Procedures Involved in The Chilean Copper Expropriations , Proc. Am. Soc. Int. L. 205–13 (1972)Google Scholar; Senate Bull, at 38. For the purposes of the agrarian reform in Chile, which represents another major area where expropriation has been implemented under the authority of law, specialized courts were also established to resolve all legal disputes. On these procedures, See Goldman, and Paxman, , Real Property Valuations in Argentina, Chile, and Mexico in 2 The Valuation of Nationalized Property in International Law 142–44 (Lillich, R. ed. 1973)Google Scholar. (Hereinafter cited as Valuation).

30 Fourth Report, supra note 10, at 16, as reformulated in García-Amador, supra note 9, at 222.

31 Decision of Aug. 11, 1972 of the Special Copper Tribunal on the question of excess profits of nationalized copper companies in 11 ILM 1013–61 (1972).

32 Summary of opinions id., at 1013–16.

33 Id., at 1056.

34 Id., at 1059–60.

35 Id., at 1059.

36 Id., at 1035, 1031.

37 Doctrine and decisions in García-Amador, , (First) Report on International Responsibility , 2 Y.B. Int. L. Comm. 204–06 (1956)Google Scholar.

38 Id., at 220–22.

39 See Response of the Delegation of Chile to the Reply of the Representative of the United States, O.A.S. Doc. AG/C-145/72, at 1–2 (1972). See also statement by Chilean Minister of Foreign Affairs, supra note 5, at 13.

40 Anglo-Iranian, Oil Co. case: Memorial of the United Kingdom, in 8 Whiteman, Digest of International Law 1055 (1967)Google Scholar.

41 Presidential motion of Dec. 21, 1970, supra note 1, at 15. See also Address by the President on the nationalization of copper in La Nación, Dec. 22, 1970.

42 Affidavit introduced by the President of the Council for the Defense of the State in the case Braden Copper Company v. Administrative Commission, Corporación del Cobre, Empresa Nacional de Minería, and John Doe (72 Civ. 508), Feb. 1972, at 3.

43 Declaration of the representative of the Executive before the Senate Committee, Dec. 29, 1970 and Jan. 11, 1971 in Senate Bull, at 37, 203. The danger of the application of the Hickenlooper Amendment was mentioned in this context.

44 Senate Bull, at 31–32, 89–91, 267–68, 278–79; also Senate session No. 25 of Jan. 19, 1971; session No. 26 of Jan. 20, 1971; and session No. 31 of Feb. 2, 1971. Records published in El Mercurio of Jan. 23, 26 and Feb. 5, 1971.

45 Senate Bull, at 32. See Monbeal, E. Novoa, La Batalla Por El Cobre 107–72 (1972)Google Scholar. [Hereinafter cited as Novoa].

46 An indentical expression was used by the Cuban Law of Nationalizations No. 851 of July 6, 1960 in 8 Whiteman, , Digest of International Law 1042 (1967)Google Scholar.

47 Senate Bull, at 282, 306. Several Senators understood, however, that this was only a problem of wording and not of concepts. Debate in Senate session No. 31 of Feb. 2, 1971 in El Mercurio of Feb. 5, 1971.

48 Senate Bull, at 91, 267.

49 Katzarov, K., Teória De La Nacionalizacion 264 et seq. (1963)Google Scholar. When explaining the draft constitutional amendment proposed by the government, the representative of the Executive indicated that the nationalization affected the property of the copper industry and not the enterprises or the corporations. Senate Bull, at 204, 278. Later it was indicated that the measures affected the enterprises and the jointly-owned corporations. Id., at 128. See also note 42, supra, and Novoa, supra note 45, at 172–97.

50 Fourth Report, supra note 10, at 13.

51 Wortley writes that “Nationalization is not a term of art.” Wortley, B. A., Expropriation in Public International Law 36 (1959)Google Scholar.

52 Katzarov, supra note 49, at 566–67.

53 UN Doc. A/AC.97/L.3/Rev. 1.

54 Statements by the Delegate of Chile in UN Doc. A/C.2/SR.834 at 20–21, and UN Doc. A/AC.97/SR. 25 at 12. The reference to international law made by Resolution 1803 was introduced for the specific purpose of filling the gap left by Resolution 626 (VII) of Dec. 12, 1952. On the latter point, See Hyde, Permanent Sovereignty over Natural Wealth and Resources, 50 AJIL 854–67 (1956).

55 UN Doc. A/C.2/L.669.

56 UN Doc. A/AC.97/SR.32 at 7–8.

57 UN Doc. A/AC.97/L.2/Rev.l. Similar proposals were introduced in the Second Committee of the General Assembly. Gess, supra note 3, at 422–23.

58 Id., at 420–24.

59 Fourth Report, supra note 10, at 18.

60 Katzarov, supra note 49, at 524.

61 Drucker, , Compensation Treaties Between Communist States , 10 Int. & Comp. L. Q. 238 (1961)CrossRefGoogle Scholar. In all cases, the postwar European nationalizations made provisions for the payment of compensation, Fourth Report, supra note 10, at 21.

62 UN Doc, supra note 56, at 7–8.

63 UN Doc. A/C.2/L.670.

64 Also Afghanistan submitted an amendment proposing that the compensation be paid “when and where appropriate” (UN Doc. A/C.2/L.655), explaining that otherwise the economy of the country and that of the world as a whole would be endangered. UN Doc. A/C.2/SR.834 at 11.

65 17 UN GAOR, at 231, UN Doc. A/C.2/SR.834.

66 UN Doc. A/AC.97/SR.22 at 8.

67 Response of the Delegation of Chile, supra note 39, at 1–2. See also, Statement by the Minister of Mining before the Senate. Session No. 25. Jan. 19, 1971 in El Mercurio, Jan. 23, 1971, at 8.

68 Statement by Charles A. Meyer, supra note 8, at 498. However, the statement of the Secretary of State on Oct. 13, 1971 referred to “reasonable provision for payment of just compensation.” 65 Dept. State Bull. 478 (1971). For an examination of the governing principles of international law as interpreted in support of this position, see, An Analysis of the Expropriation of the Properties of Sociedad Minera El Teniente by Chile in Light of International Law Principles in Valuation, supra note 29, at 55–86.

69 Response of the Delegation of Chile, supra note 39, at 2. See also statement by the Chilean Minister of Foreign Affairs, supra note 5, at 13. Both statements indicate that this is the meaning of Resolution 1803.

70 Gess, supra note 3, at 427–28. Schwebel, supra note 3, at 465–66.

71 UN Doc. A/C.2/L.668. Statements in UN Doc. A/C.2/SR. 835 at 5, 10.

72 17 UN GAOH at 231–32, UN Doc. A/C.2/SR.834. This balanced point of view of Resolution 1803 is also the basic element underlined by some interpretations. See Friedmann, supra note 22, at 138 and Asamoah, supra note 4, at 97.

73 For the opinion of writers on this point, See Garcia-Amador, supra note 37, at 241. Also Katzarov admits that the standards of compensation are governed by international law, supra note 49, at 496.

74 For an examination of practice and decisions, See Fourth Report, supra note 10, at 19–20. For a useful discussion about the opaque concept of “prompt,” “adequate,” “effective,” “fair,” “just,” and “appropriate” compensation, and the need to define the elements and criteria of valuation, See Baxter, Forward to Valuation, supra note 29.

75 Weigel and Weston, Valuation upon the Deprivation of Foreign Enterprise: A Policy-Oriented Approach to the Problem of Compensation Under International Law, in Valuation, supra note 29, at 3–39. See also McCosker, Book Values in Nationaliation Settlements, ibid, 36–51.

76 Friedmann, supra note 24, at 132.

77 Senate Bull, at 91–93, 268, 278–79, 310.

78 Id., at 91–93, 278–79. Percentages of compensation ranging from 0% to 70% were mentioned in this context.

79 Id., at 124, 132.

80 See generally, Friedmarm, supra note 24, at 132.

81 See Sohn and Baxter, Draft Convention supra note 7. Art. 10. No. 4. See also Fourth Report, supra note 10, at 24.

82 See the Presidential motion of Dec. 21, 1970 in Senate Bull, at 14

83 Fourth Report, supra note at 24. See also Art. 9.2 of the draft of Dec. 11, 1961, supra note 7.

84 Fourth Report, supra note 10, at 18–19.

85 See Art 9.1 of the draft of Dec. 11, 1961, supra note 7.

86 Garcia-Amador makes a distinction on this point between the case of expropriation and that of nationalization. Compare Articles 9.1 and 9.2, of the draft of Dec. 11, 1961, supra note 7.

87 Resolution of the Comptroller General on Compensation of Oct. 11, 1971 in 10 ILM 1240–53 (1971).

88 See note 36, supra.

89 Statement by the representative of the Executive before the Senate Committee in the session of Dec. 29, 1970. Senate Bull, at 47.

90 See in general Fatouhos, A., Government Guarantees to Foreign Investors (1962)Google Scholar and Amerasinghe, , State Breaches of Contracts with Aliens and International Law , 58 AJIL 881–913 (1964)CrossRefGoogle Scholar.

91 Fourth Report, supra note 10, at 31–32.

92 Presidential motion of Dec. 12, 1970. SENATE BULL, at 11.

93 Senate Bull, at 24, 285.

94 Id., at 123–24, 132, 283.

95 Id., at 286.

96 See final sections of Article 10, Sec. 10 of the Constitution as amended. 10 ILM 1068 (1971).

97 Senate Bull, at 310.

98 Transitional Art. 17(h) of the Constitution, as amended.