Anglo-Iranian Oil Company Case

139 tains a broad most-favoured-nation clause to the effect that investments and investors of each country shall be placed on the footing of the most-favoured-nation “in all respects”

and a provision concerning dispute resolution, the most-favoured-nation clause also ap-plies to provisions concerning the procedural protection of investors’ rights.

nation clause contained in two Anglo-Iranian commercial treaties of 1857 and 1903.⁵²⁸ They argued that the most-favoured-nation clause was essentially a contingent clause without substance whose material content was determined by the third-party treaty, which meant that the decisive treaties were ratified subsequent to the declaration. They therefore argued that the ICJ as the successor of the PCIJ had jurisdiction under the optional clause of Article 36 (2) of the ICJ Statute.

b. Decision of the Court

The ICJ denied jurisdiction, arguing that the basic treaties conferring a right to the United Kingdom were those containing the most-favoured-nation clauses, which had been rati-fied before the declaration of acceptance.⁵²⁹ The Court held that the third-party treaty it-self did not create a legal relation between Iran and the United Kingdom, but was res inter alios acta. The Court observed:

“Without considering the meaning and scope of the most-favoured-nation clause, the court confines itself to stating that this clause is contained in the Treaties of 1857 and 1903 between Iran and the United Kingdom, which are not subsequent to the ratification of the Iranian Declaration.”⁵³⁰

The Siemens tribunal invoked this part of the judgment to argue that jurisdiction could not be denied on the grounds of this decision, since the denial of jurisdiction was not based on

528 The Treaty mainly relied upon was a Treaty of Friendship, Establishment and Commerce between Iran and Denmark, signed on 20 February 1934, which provided in Art. IV that “The nationals of each of the High Contracting Parties shall, in the territory of the other, be received and treated, as regards their per-sons and property, in accordance with the principles and practice of ordinary international law. They shall enjoy therein the most constant protection of the laws and authorities of the territory for their persons, prop-erty, rights and interests.” The United Kingdom argued that the nationalization undertaken by the Iranian government was in violation of the principles and practice of international law. Additionally, the Claimants relied on a treaty between Iran and Switzerland of 25 April 1934 and a treaty between Iran and Turkey of 14 March 1937.

529 The Court held: “A third party treaty, independent and isolated from the basic treaty, cannot pro-duce any legal effect as between the beneficiary State and the granting State (it is res inter alios acta).”

(Anglo-Iranian Oil Co. case (jurisdiction), Judgment of 22 July 1952, ICJ Reports 1952, p. 109) Therefore the Treaty containing the most-favoured-nation clause was to be considered the basic treaty that established the legal connection between the beneficiary State and the third state.

530 Anglo-Iranian Oil Co. case (jurisdiction), Judgment of 22 July 1952, ICJ Reports 1952, p. 109.

(Italics added by the author)

141 the non-applicability of the most-favoured-nation clause to jurisdiction, but rather on the timely application of treaties.⁵³¹

Yet in its second string of argumentation, the Court made a further statement, which was completely ignored by the Siemens tribunal. The relevant question presented by the Unit-ed Kingdom did not only focus on the question of the time of ratification of treaties, but related more closely to the invocation of jurisdictional provisions by operation of the most-favoured-nation clause. The United Kingdom argued that in contrast to Denmark, although it benefited from the substantive provisions of the treaty between Iran and Den-mark, it had no possibility to submit disputes as to the application of this treaty before the ICJ, which meant that it was not in the position of the most favoured nation. The Court rejected this argument, suggesting that the most-favoured-nation clauses, whose wording was actually rather broad, covering treatment “in every respect” or “in all respects”,⁵³² did not relate to jurisdictional matters. In the words of the Court,

„The Court needs only observe that the most-favoured-nation clause in the Treaties of 1857 and 1903 between Iran and the United Kingdom has no relation whatever to jurisdictional matters between the two Governments. If Denmark is entitled under Article 36, paragraph 2, of the Statute, to bring before the court any dispute as to the application of its Treaty with Iran, it is because that Treaty is subsequent to the rati-fication of the Iranian Declaration. This can not give rise to any question in relation to most-favoured-nation treatment.”⁵³³

c. Assessment

531 Siemens v. Argentina, Decision on Jurisdiction, 3 August 2004, ICSID Case No. ARB/02/8, para.

96. 532 The most-favoured-nation clause in the British-Iranian Commercial Convention of 1857 provided:

“The High Contracting Parties shall engage […] that the treatment of their respective subjects, and their trade, shall […], in every respect, be placed on the footing of the treatment of the subjects and commerce of the most-favoured nation.” The Commercial Convention of 1903 provided that: “[…] British subjects and importations in Persia, as well as Persian subjects and Persian importations in the British Empire, shall con-tinue to enjoy in all respects, the régime of the most-favoured nation.” See Anglo-Iranian Oil Co. case (ju-risdiction), Judgment of 22 July 1952, ICJ Reports 1952, p. 108.

533 Anglo-Iranian Oil Co. case (jurisdiction), Judgment of 22 July 1952, ICJ Reports 1952, p. 110.

The Anglo-Iranian Oil Company case offers no unequivocal guidance on the issue of ap-plicability of the most-favoured-nation clause to jurisdictional questions.

What was finally decisive for the outcome of the case was not a refined analysis of the scope of the most-favoured-nation clause, but the nature of the treaty containing the clause as the basic treaty and its time of ratification. The major argument brought forward by the ICJ was that the treaties containing the MFN clause were ratified previous to the Declaration establishing the jurisdiction of the ICJ. Thus, the case must be read as deny-ing adjudication on the grounds of the Iranian Declaration and the chronology of ratifica-tions.

The assertion of the Court that the MFN clause had ”no relation whatever to jurisdictional matters”, which the Plama tribunal took as evidence against applicability of MFN clauses to jurisdictional questions⁵³⁴, cannot be cited as an argument against the application of MFN clauses to jurisdictional matters. The Court declined jurisdiction not because it con-sidered that an MFN clause could in principle not incorporate more favourable jurisdic-tional provisions. Indeed its finding that the MFN clause in question had no relation to jurisdictional matters rather indicates that the Court did not exclude that treaty rights of a procedural nature may be part of the “treatment” guaranteed by a broadly-worded MFN clause. Rather, the jurisdiction of the ICJ was limited by the Court’s statute in connection with the Iranian declaration. The treaties containing the MFN clause and the third-party treaties did not contain a reference to a dispute settlement mechanism, but jurisdiction of the Court could only be based upon the Iranian Declaration. The case therefore does not serve to reject the application of MFN clauses to jurisdictional provisions, but is based on the specific circumstances of the case where consent to the Court’s jurisdiction could not be based on the MFN clause in connection with third-party BITs, but only on the Iranian Declaration under Art. 36 (2) ICJ Statute.

534 Plama v. Bulgaria, Decision on Jurisdiction, 8 February 2005, ICSID Case No. ARB/03/24, para.

214.

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