I. Legal framework of Cuba’s Nationalization and Indemnification Process(1959-1960)
The legal framework for the nationalization of foreign and national assets is based upon and originates from the original, primary and congenital right of peoples to self-determination that is consecrated as an ius cogens norm or principle in the first part of the United Nations Charter.
Beyond this first instance of support, the regulation of nationalization processes is determined by the essential components inherent to the existence itself international society and the status of their current development. These essential components are: on subject par excellence to international relations; and on the other hand, International Law, which is conceived as the legal order among States that arises solely from freely granted consensus among them. This results in general, regional or particular international customs that are accepted by a State as tacit international agreements and in equally freely agreed-to international treaties as the expression of an explicit agreement.
The international legal system also rests upon the necessary delimitation of the material areas of competence of Domestic Law, in other words, of sovereignty and International Public Law, which at any given historical moment is determined by the evolution and content of international politics. Finally, the international legal system is also determined within the United Nations by the General Assembly, a universal forum, that has been building up a new International Public Law since 1945.
No attempt can now be made to retroactively throw out and disregard the legal framework that took shape and gained substance between 1945 and 1974 and validly regulated international relations during that period. Nor can that legal framework be distorted today as it responds to the precise balance that the key factors in the structure of today’s international society need to maintain. These key factors are: State sovereignty and International Public Law; the guarantors of international society.
II. NATIONALIZATION POLICIES AFTER THE SECOND WORLD WAR
In the list of nationalization policies implemented in the international sytem after 1945 it is necessary to highlight those implemented in Western, Central and Eastern Europe: France and Britain applied them after 1945 as did also the German Democratic Republic, Poland, Czechoslovakia, Hungary, Rumania, Bulgaria and Yugoslavia when they transformed themselves into socialist-style planned central economies after the Second World War; those implemented in Africa: the United Arab Republic nationalized the Suez Canal in 1956 and Algeria applied nationalization policies upon its independence in 1963; in Asia, Indonesia implemented nationalization policies in 1964; in the middle East, Iran pursued a nationalization policy in 1952 with respect to Anglo-Iranian oil assets; and in Latin America, nationalization policies were implemented in Mexico between 1917 and 1930, in Argentina between 1945 and 1949; Bolivia in 1952; Guatemala, 1952; Cuban as of 1959; Brazil, 1962; Peru, 1968 and 1975; Chile in 1970 and 1971, and Venezuela from 1975 to 1976.
2. Appraisal of the Facts
The analysis, comparison and homogenisation of the peculiarities of each nationalization process reveal the following general features:
a) In the more developed economies, the decisions to nationalize during the postwar period were made as part of political programs to rebuild the economy in which the State and the injection of public capital were to play a vital role without this radically affecting the structure itself of the capitalist production apparatus. In the minimally-diversified single-product economies that were dependent on foreign capital, on the other hand, the decisions to nationalize responded to the structure of the economy in order to satisfy the needs of the majority of the population.
In some cases this led to the adoption of State capitalism as the means of pursuing development, and in others, it led to the centralized planning of development programs. In any case, in both types of economy, despite their differences, the political legitimacy of the partial or total nationalization of companies or sectors seemed indisputable as nationalization was seen as an instrument of State policy that aimed to make private property of both foreigners and nationals a social function of public interest.
b) both in the developed and the less diversified economies, the payment or offered payment of a compensation for the nationalized foreign assets seems to have been a common factor. Confiscation only occurred as an exception.
c) The States and the owners of nationalized foreign assets argued that they had a special status as foreigners which was supposedly laid down by International Public Law which they tried to set up as limits on the right to nationalize.
Despite this, the most generally used practice revealed a clear and undisputed tendency for indemnities, in the case of the nationalization of economic sectors, to more often than not be the product of the negotiation of the opposing interests in which the political wills of the nationalizing State and the State claiming on behalf of its nationals reached a point of conciliation in which the economic capacity of the nationalizing State played a fundamental role in disregarding, in practice, the demand made by the State of the expropriated national for a “prompt, adequate and effective” compensation. This resulted in the payment of lump sums as indemnities that were smaller amounts than the arithmetical sum of the individual claims, and the corresponding terms of payment respected the real capacity of the nationalizing State to pay an indemnity according to its real availability of foreign exchange1
III. NATIONALIZATION PROCESS IN CUBA(1959 to 1962)
In February 1959, the revolutionary government of the Republic of Cuba issued a Fundamental Law that established the basic guidelines for a new political, social and economic regime that the Cuban people had chosen in the exercise of their right to self-determination. This “natural” right, a rule of International Public Law that can not be dissociated from the existence itself of any politically organized people even prior to their constitution as a State, had already been sanctioned at the international level in the United Nations Charter in 1945 as an inalienable and imprescriptibly right.
Like all historical processes that radically change a society’s political institutions, the Cuban revolutionary threw out no longer valid institutions, but kept other socially legitimate and useful ones such as the provisions set forth in the 1940 Constitution regarding the regulation of land ownership that was jeopardised at that time by the effects of the latifundium system and the traditional view of property being firmly anchored in private interests.
Article 24 of the Fundamental law of 1959 established the following:
Article 24: Confiscation of property is prohibited, but the Law authorizes the confiscation of property in such cases: the property of the tyrant(Fulgencio Batista) overthrown on December 31, 1958; the property of his collaborators; the property of natural, or legal persons responsible for crimes against the national economy or the Public Treasury; or the (property) of persons that enrich themselves or have enriched themselves shielded by Public Office; or the property of those persons sanctioned by law as for committing crimes considered by law as counterrevolutionary: the property of those persons that flee in any manner the national territory to evade legal process in Revolutionary Courts of Law; the property of those persons that after having abandoned our national territory carry out conspirative plots abroad against the Revolutionary Government. No other natural or legal persons may be deprived of property, unless by competent authority, or for reasons of public need or social or national interest. The Law will regulate the procedure to enact expropriations and will establish due forms of payment and the competent authority to declare the causes for public need or social or national interest, and the need for expropriations.
The transcribed provision was developed and applied on the basis of diverse and successive legal instruments that make up a single and sole nationalization process of all the property existing at present in Cuba. In exercising its sovereignty, the Republic of Cuba adopted different nationalization procedures in these instrument, taking into account the characteristics of certain foreign investment and the type of relations in existence at that time between Cuba and the country that originally made investment.
The expropriation process began with the first Law for Agrarian Reform dated May 17th, 1959, based on the principle of mandatory expropriation based on the public use set down in article 24 of the Fundamental Law already transcribed. In said Law, the payment of an indemnity is considered by means of bonds that would earn no more than 4.5% annually to be amortized over a twenty(20) year period for both Cubans and foreigners alike.
This expropriation process continued with Law 851 and the nationalization process was complemented by other legal actions such as Law 890( October 13th, 1960) and Law 1076(December 5th, 1962), whose objective was the expropriation of the rest of the property belonging to nationals and foreigners. In this latter instance, the property of U.S., Swiss, Spanish, French and British nationals was expropriated.
Law 85, July 6th, 1960(seem Annex 6) established the ways and means of indemnifying the value of property belonging to natural or legal persons of the United States of America that had been the object of nationalization. In this respect, article 1 and 5 of said Law established the following.
“Article 1. The President of the Republic and the Prime Minister are hereby authorized to jointly decree through government resolutions-when they consider it convenient for the defense of national interests- the nationalizations, through compulsory expropriation, of properties and companies that include interests or participation of such persons, even if they are constituted in accordance with Cuban laws”.
“Article 5. Payment for expropriated property will be made after its appraisal, according to the following basis:
a) payments will be made with Republic Bonds which are to be issued to that effect by the Cuban State and which will be subject to the conditions established by this Law.
b) To refund these bonds and as a guarantee, the Cuban State will open a fund that will be increased with twenty-five per cent(25%) of the foreign hard currency earned from additional purchases of Cuban sugar made by the United States in each calendar year over three million long Spanish tons, bought for internal consumption, and at a price not less than 5.75 U.S. cents for each English puond weight unit(F.A.S.). To that effect, the National Bank of Cuba will open a special U.S: dollar account named “Payment Fund for the Refunding of Properties and Companies Expropriated from U.S. Nationals”.
c) Bonds will be refunded at an interest rate of not less than two per cent(2%) annually, which will be paid exclusively from the Fund that is to be raised according to(b).
d) Annual interests that cannot be paid by the Fund mentioned in (b) will not accumulate since their payment obligation will be considered closed.
e) Bonds will be refunded in a period of not less than thirty(30) years, counting from the date of the expropriation of the property or company. The President of the National Bank is authorized to establish form and proportion of such refunding.
Later, through Joint Resolutions issued by the President of the Republic and the Prime Minister and other juridical nationalization measures, the effective nationalization of movable and immovable assets belonging to North Americans in the Republic of Cuba was confirmed. These Joint Resolutions were No 1, August 6th, 1960, whereby twenty-six (26) North American companies were nationalized, No 2, September 17th, 1960, whereby the First National City Bank of New York, First National Bank of Boston and the Chase Manhattan Bank were nationalized, and No 3, October 24th, 1960, whereby the remaining North American properties were nationalized.
As a result, once the nationalization process concluded, all the property of foreigners in Cuba was expropriated.
As is gleaned from the above-mentioned Article 24 of the fundamental Law in force at the time of the expropriations, the established constitutional ruling specifically recognized the right of national or foreign assets holders to an indemnity in the case of expropriation. The only exception was the confiscation contemplated in the case of people specifically mentioned in the article for the reasons it specifies as well.
Once carried out, the nationalization process had various effects that led to negotiations with the foreign owners of nationalized assets which culminated wit the signing of international agreements (called Lump Sum Agreements or Indemnité Globale Forfaitaire). This was established international practice at that time.
The States of the foreign nationals affected(Spanish, French, Swiss, British, Canadian and others) represented their nationals and accepted a lump sum as an indemnity that was not discriminated according to the particular assets that had been expropriated and which was moreover payable under the terms agreed to during the negotiations which reconciled the interests of both the owners of the nationalised assets and the State of Cuba.
The final stage of the expropriation was not concluded, namely the payment of the indemnification in the case of the property of North American citizens, despite the Cuban State’s willingness to offer payment and the specific offer made in Article 5 of Law 851, 1960.
The Government of the United States, through Presidential declaration 3355, dated July 6, 1960, the President of the United States of America suspended the remainder of the sugar quota pending for 1960; with declaration 3383, December 16, 1960, he suspended the quota for the first quarter of 1961 and with the following declaration, which was 3401, March 31, 1960, the total amount of the sugar quota was suspended. In this manner, the Government of the United States had eliminated any capacity to refund North American nationals for nationalized properties.
When the relevant facts of the process are set forth in this way, the specific features of this nationalization process are noteworthy. It should be pointed out that the expropriations were carried out in the public interest and for a public purpose that responded to the general needs of Cuban society. This public interest had two angles: the need to redirect the Cuban production apparatus towards satisfying society’s needs on the one hand, and the need to preserve Cuban national security on the other
2. The Law
2.1 Domestic Law
The expropriations were made in accordance with pre-existing legal provisions that were both constitutional and legal and formed part of Cuban Internal State Law stemming from the revolutionary process and particularly those established prior to the expropriations. It should be pointed out that sovereignty itself, inasmuch as it refers to the territorial competence of the State, provides the necessary and adequate legal foundation for a sovereign State to be able to nationalize foreign assets located in its national territory . Moreover, in this case, the expropriations were not discriminatory and an indemnity was offered as compensation for those affected.
Furthermore, the expropriations were carried out according to General International Public Law in force at the time and were accepted as valid by the U.S. State as singular acts undertaken at both the Executive Power and the Judicial Power level in the United States demonstrate. Finally, they were carried out in accordance with international practice of the times.
It is important to consider that the Cuban nationalizing process was legal according to International Public Law. This means determining whether a sovereign State has a right to nationalise that is derived from the International Public Law, and, if so, if that right is limited by the general rules of International Public Law. In order to determine this, the contemporary sources of the international legal order need to be examined.
Due to the universal nature of the affiliation of the Member States of the United Nations, Article 38 of the Statute of the International Court of Justice has been recognised as the starting point for any knowledge and interpretation of the content of the main sources of the international legal system. The first instance that needs to be examined for the ensuing analysis is the existence of international treaties.
2.2.1 The existence of general or particular international treaties
During the period 1959 to 1962, there were no general or particular treaties signed or in force between Cuba and the United States of America that could have influenced the nationalization issue or the expropriation of foreign assets in Cuba.
2.2.2 International custom as a source of law
The second source of International Public Law that will be focused on is international custom. In this matter a distinction needs to be made between international practice that arises for reasons of reciprocal usefulness and international practice that is ensured by the conviction that it has become a norm, in other words, obligatory. In the case of the latter, international custom per se is being dealt with, which is sometimes difficult to distinguish from more utilitarian practice that can not be invoked as a crystallized legal precept.
Particular, regional and universal or general international custom needs to be examined. If one begins with the first two of these, the assertion can be made that there was no particular or bilateral consuetudinary practice conceived as International Public Law between the United States and Cuba regarding the nationalization of foreign assets during the period 1959 to 1962.
There was at the time, however, a normative set of concordant precedents regarding foreign investment that had been reiterated over time among Latin American States. This consisted on the one hand of the identical legal treatment of foreigners and nationals and on the other of the pre-eminence of the Constitution over International Public Law in the regulation of foreigners´ rights.
This meant there were various norms and declarations agreed to by the Latin American States in the Pan American Conference held during that time at which decisions regarding expropriation were implicitly presumed or explicitly declared to fall within the realm of State sovereignty. As far as the nationalization of the United States assets in Latin America is concerned, there is, in chronological order, the process in Mexico that began in 1917, the Bolivian nationalization process of 1952 and the Guatemalan nationalization process of 1953. The Argentine nationalization process is excluded because the main actors involved were British nationals.
The Mexican expropriations are relevant as, like the Cuban ones, they recovered farm land from private hands first, in 1915, and then oil companies in 1938. The process was regulated by the General and Special Claims Agreements of September 8 and 10 of 1923 and by the Global Agreement of 1934, which were reached between Mexico and the United States. The latter put and end to the disagreement that had arisen as a result of the non-oil expropriations that took `lace in 1910 and 1920. An international agreement was also reached through the exchange of notes of October 9 and 12, 1938 between the two States as well as another agreement of November19, 1941 that put an end to U.S. claims of any kind.
If the position of the Latin American States regarding this matter is linked to the content of the agreements on expropriations and indemnification reached between the United States and Mexico, the United States are seen to have accepted certain realities regarding expropriations such as: the right to nationalize foreign assets for the cause of public utility as a right derived from the principle of sovereignty; the fact that the corresponding indemnity can be subject to negotiation between the expropriating State and the national State of the victims of expropriation, and that said indemnity can consist of a lump sum whose payment can be made in over time in annual instalments. All of the previously mentioned is done regardless of the doctrine that enshrines an international obligation to provide indemnities in a “prompt, adequate and effective” manner which the United States of America was in fact the first to technically formulate on the occasion of the Mexican expropriations.
These principles or guidelines were also acknowledged in practice by the United States in the case of Bolivia. In fact the nationalization of Standard Oil by the decree issued on March 13, 1937 was also accepted as the sovereign right of the Bolivian State. It was also agreed that the regulation of the indemnity could consist of an international agreement that involved a prior negotiation process and the conciliation of interests and not the application of a supposed international norm.
Finally, with respect to the nationalization process in Guatemala, it can hardly be invoked as a precedent in bilateral relations as the nationalization of United States owned farm land through the Agrarian Reform Law of June 17, 1952 which started in 1953 and aborted when the government of Jacobo Arbenz was overthrown in 1954.
2.2.3 The Resolutions of International Organizations
As far as the evolution of general international custom is concerned, it is essential to examine the evolution of international legal practice in light of the set of United Nations resolutions that existed during the period in question. Within the U.N. and in the General Assembly in particular, at the end of the fifties, for the first time the new States that were emerging from the de-colonization process were coming face to face with the norms of Public International Law then in force.
The new States disagreed with some of the norms of International Public Law which followed a tradition created by the old colonial metropolises. Declarations were also made with majority backing in the U.N: and in the General Assembly in particular that led to the appearance and acknowledgement of novel kinds of customary norms that were based upon the self-determination of peoples and the sovereignty of States that became the cardinal principles of the U.N. and aimed to ratify the competence that International Public Law necessarily awards State sovereignty.
Thus it can be asserted that the international-legal foundation of the right to nationalize is “derived from the principle that each people has permanent sovereignty over its natural resources” . By 1962, an international legal practice had crystallized around this principle which was adhere to by an important number of State and, as it stemmed from a collective and organic decision, it had attained the status of an acknowledged customary international norm whereby States had a sovereign right to nationalize foreign assets in their territory.
This customary norm, whose existence seems to be acknowledged by Resolution No. 1803(XVII) of the United Nations General Assembly on December 14, 1962 under the title “Permanent Sovereignty over Natural Resources” can be seen as the culmination of a gradual process of consolidation and expansion of the right to nationalization which nullified the traditional norm of respect for acquired rights which had been mechanically transferred by the colonialist States from Domestic Law to International Law wit ha view to guaranteeing the preservation of their investments.
This Resolution marked the end of a process highlighted by Resolution No. 626(VIII) of December 21, 1952 from which the concept of “economic self-determination” arises and the draft article adopted in 1955 by the Third Commission of the General Assembly as part of the Convention on Human Rights , the second paragraph of which reads as follows:
“A people may, for their own ends, freely dispose of their natural wealth and resources without restrictions imposed by any obligation derived from international economic cooperation upon the basis of the principle of reciprocal benefit and International Law. Under no circumstances may people be deprived of their own means of existence”
This evolution found its most perfect expression years later in the contents of Resolution No. 3281 of the General Assembly which issues the Declaration that contains the “Charter of the Economic Rights and Duties of States” of December 12, 1974 which was backed by an even greater majority than the aforementioned Resolution 1803.
This Charter sets forth that every State has the right to exercise full and permanent sovereignty, including possession, use and disposition, over all its wealth, natural resources and economic activities, whereby it can nationalise, expropriate or transfer the ownership of foreign assets. In this case the expropriating State must pay an appropriate compensation according to its applicable laws and regulations and all circumstances it considers relevant.
Finally, in any case that the question of the indemnity causes controversy, such controversy shall be resolved according to the national law of the nationalising State and by its courts unless the interested State freely agree to use other pacific means on the basis of the sovereign equality of the States and in accordance with the principle of the free choice of such means.
The importance of this General Assembly Resolutions lies in their connection with a reiterated international practice which makes them acquire the value and status of an “opinio iuris necessitatis”. The Resolution of International Organizations have therefore been considered to be turning into a new kind of source of International Public Law that is not contemplated in the framework norm contained in Article 38 of the Statute of the International Court of Justice.
It is however important to add that this new source of International Public Law fall into the category of secondary, heteronymous or auxiliary sources, in other words, those whose value and meaning is derived from their revelation or highlighting of the appearance of a primary or autonomous international norm and from specifying the content, scope and effects of the latter.
It should be pointed out that not all the “Decisions” of international organizations have the value of a secondary, heteronymous or auxiliary source of International Law. Only those that, through the majority support expressed by the States that contribute to its formation, represent the expression of a general and unequivocal desire of the Member States of international society attain this status. Under this assumption, they constitute the most appropriate way of revealing the “crystallization”, “generation” or “declaration” of customary international norms.
Resolution 1803(VII) of the United Nations General Assembly has therefore been specially classified as the recognition of customary International Public Law in force regarding the nationalization of foreign assets. In the arbitral sentence handed down in the Texaco-Calasiatic case of January 19, 1977, the single arbiter R.J. Dupuy stated in his analysis of the various General Assembly Resolutions that with respect to Resolution 1803:
“…when voting upon a Resolution that establishes the existence of a customary rule, the States concerned clearly express their viewpoints. The consensus of a majority of States that belong to different representative groups undoubtedly indicates the universal recognition of the rules incorporated in this manner”.
The analysis of whether the Republic of Cuba’s right to nationalize foreign assets in 1959 and 1960 complied with International Public Law in our opinion, clearly and categorically reveals the existence of a general consuetudinary law that establishes such a right. It now remains for us to corroborate the existence of this right through another of the autonomous sources of International Public Law: the Unilateral Acts of States.
2.2.4 The Unilateral Acts of States
It is necessary to study two acts taken by the United States which were at the time duly known by the Cuban Government and which together seemingly constitute a “unilateral act of acknowledgement2 by the United States, the acceptance of or agreement with the nationalization of assets owned by United States nationals according to International Public Law.
These acts taken under these circumstances and in light of the principle of good faith in relations between States that forms part of the contemporary ius cogens, apparently compromise the United Sates and does so to such an extent that any later repudiation, in addition to being a failure to meet its international obligations such as “Good Faith” in the handling of relations between sovereign States from which the State’s international responsibility is derived, would justify, from the procedural viewpoint in the eyes of any jurisdictional body, “stopple” recourses.
The acts referred to are the Note of June 12, 1959 from the United States government to Cuba that states:
“The U.S. recognizes that according to International Law, a State has the power to expropriate within its territory for the purposes of public use and in the absence of contractual provisions or any other agreement to the contrary. This right, however, must be accompanied by the corresponding obligation of the a State to ensure that such expropriation be accompanied by a prompt, adequate and effective compensation”.
The second act is the sentence handed down by the Supreme Court of the United States in the case “Sabbatino versus Banco Nacional de Cuba” in 1994, which states that:
“despite how costly an expropriation of this kind may be for the public norm of this country and the States that it is composed of, the conclusion reached is that national law govern among nations by upholding the doctrine of the Act of Sovereign Power so that in this case its application reigns.”
It would seem that the Hickenlooper amendment included in the External Aid Law of October 1966 could not revoke or annul the effects already consummated two years previously.
The aforementioned Diplomatic Note could be interpreted in different ways. On the one hand and sticking closely to the wording and immediate juridical meaning of the text, it could be said to express the recognition of the Republic of Cuba’s having a right to expropriate that is linked to a complementary obligation that involves the payment of an indemnity in the terms stated. This could mean that as long as the holder of the right does not assume such an obligation, the right is not consolidated or legally valid. This assertion can, however, be contradicted by stating that right and obligation are two separate and independent acts. Therefore the right to expropriate has been consolidating even if the related obligation is still outstanding. In fact, this obligation would be contrary to the Law in any case for the reasons that shall outlined immediately.
On the other hand and pursuing a slightly different direction, it could be claimed that the Diplomatic Note in question consecrates a right whose existence is suspended until certain conditions are met. In other words, the existence of the right is dependent upon a future uncertain event that consists of the payment of a “prompt, adequate and effective” indemnity that has not been made so far.
The response to this line of argument is to point out that it is vitiated by a contraction. On the one hand it explicitly admits that a State has the right to expropriate foreign assets as a expression of State sovereignty and then subjects that right to a supposed suspensive condition that intrinsically attempts to deny the sovereignty of the State and thereby represents the denial of the United States´ obligation to respect the Republic of Cuba’s sovereignty which is a fundamental right a any State.
The exercise of this right implies the power to nationalize for reasons of public interest which has an accessory aspect, namely the indemnity payment modalities. Not recognizing the validity of the act of a sovereign State on the other hand is an attempt to base one’s argument on a supposed customary norm of International Public Law such as the obligation to make a “prompt, adequate and effective” indemnity which is no more tan a unilateral political pretension assumed by the United States and other Western States that are in line with this U.S. policy. This norm has in any case not been adhere to in the general practice adopted by these same States in their undertaking in Eastern Europe, Africa, Asia and Latin America in the decades following the Second World War.
This pretension is in fact contrary to a customary norm of International Public Law that does exist and which the International Community recognized retroactively to 1952 in the United Nations through Resolution 1803 which has already been mentioned in this analysis. Furthermore, with or without the aforementioned Resolution, the demand for an indemnity in the terms set forth in the U.S. document is a violation of the United States´ obligation to respect Cuba’s sovereignty.
It must therefore be concluded that the acknowledgement of a right while attempting to impose conditions on its existence that are impossible to fulfil, from a legal standpoint, due to their non-compliance with the obligation to respect State sovereignty constitutes an act of intervention and represents the non-compliance with an international customary norm that is in force and should the therefore be considered pure and simple recognition of the right.
Now that the international legality of Cuba’s nationalization process has been confirmed by the coinciding action of two kinds of valid international legal norms, it is necessary to examine, in addition to these norms that stem from primary and autonomous sources if International Public Law, other sources that are secondary or auxiliary in kind, such as international jurisprudence and the Writings of Publicists.
2.2.5 Judicial Decisions
One internationally relevant precedent in terms of judicial decisions that could be cited in favor of the legitimacy of Cuba’s nationalization process and which was mentioned earlier, is the arbitral sentence of J.R. Dupuy in the case of Texaco versus Calasiatic of 1997 which indirectly confirms this legitimacy.
2.2.6 The Doctrines of Publicists
Reference will be made to such internationally prestigious authors as Ian Brownlie in the Unite Kingdom; Charles Rousseau, Hubert Thierry, Serge Sur Jean, Combacau and Charles Vallé in France and Antonio Remiro Brotons and Fernando Mariño Menéndez in Spain. They all coincide in stating one way or another that the expropriation or nationalization of foreign assets situated in the territory of a State for purposes of public and social interest is a real right derived from the Sovereignty of States and objectively consecrated in a customary norm of International Public Law that is recognized by the International Community through Resolution No. 1803 of 1962 of the united Nations General Assembly. As a result of this declared recognition, the norms´ effect is retroactive to the moment the norm was born.
This should be the moment when the General Assembly adopted Resolution No. 626 on December 21, 1952 which sets forth the norm’s first guidelines. Another observation that could be added is that the “permanent” sovereignty over natural assets that Resolution 1803 alludes to makes the norm an ius cogens one of International Public Law in the sense that Eduardo Jiménez grants it of not being able to be compromised by any restriction would imply a violation of sovereignty.
This affirms and contributes towards the definition of the legal identity of the sovereignty of States and affirms that the content and exercise of this sovereignty has no other limits than those imposed by the norms of International Public Law. International Public Law does not have objective norms that establish defined limits for the legal requirement or not for compensation in the case of the expropriation of foreign assets by a State or that establish the form this compensation could take in practice. This Organization shares the opinion of Dominique Carreau, Patrick Juillard and Thiebaut Flory whereby:
“the Right to nationalize no longer recognizes any rules of form. Its departure from the realm of International Law and entry into the realm of international order leaves State authorities that issue a nationalization order free to choose the modes of procedure that the State deems appropriate. The superior essential legal value attributed to the principle of permanent sovereignty over natural resources makes any allegation of illegality that is based on the attempted violation of the minimum standard in terms of form untenable.”
2.2.7 International Practice
Finally, if one observes the international practice of the United Sates of America and Western European States in terms of nationalization, an overwhelming sequence of lump sum agreements for expropriations were reached before, during and after the Cuban nationalization process by the Eastern European Socialist States which, regardless of their content, reveal the following: 1) the acceptance of the right to nationalize foreign assets, 2) that the payment of a compensation for the nationalized assets can be negotiated between the expropriation State and the expropriated national and 3) that the amount of the indemnity does not necessarily correspond to the simple sum of the value attributed to each asset that is nationalized but to a global compensatory amount that can be and generally is less than the total amount claimed by the interposed State.
This practice is in fact demonstrated in the following International Agreements: The Yugoslav-United States compensation agreement of July 19, 1948, the Rumanian-United States lump sum agreement of March30, 1960, the Polish-United States lump sum agreement of July 16, 1960, the Polish-Norwegian States lump sum agreement of December 23, 1955, the Swedish-Czechoslovakian lump sum agreement of December 23, 1956, the British-Yugoslav lump sum agreement of December 23, 1948, the British-Bulgarian lump sum agreement of 1960, the British-Hungarian lump sum agreement of 1960, and others.
The payment of indemnities for nationalized foreign assets still needs to be considered in greater detail in light of the Doctrine, however.
As has been said, “in the past”, the attempt by the a State to exercise its sovereignty over wealth in its territory through a nationalization policy clashed with the allegation of Western countries, in the exercise of diplomatic protection of their nationals whose assets were expropriated, that there is a norm of International Law according to which dispossessed foreigners have the right in any case to a prompt, adequate and effective compensation.
It was worth remembering that:
“it was in Latin America that the existence or not of this norm took historical shape when the most appropriate ingredients for provoking a confrontation came together: A set of formally independent States; 2) A strong economic and political penetrations by industrialized countries, especially the United States and 3) some clientele were thrown out of power by radical or revolutionary movements which after attaining power either through armed force or the ballot box, tried to change the country’s structure to find themselves clashing with underlying interests…this conflict contributed towards establishing the right of a State to nationalize foreign assets. In response to the rapid, adequate and effective compensation claimed according to the formula coined in 1938 by the then U.S. Secretary of State, Cordell Hull, and invoked since then by Western countries as a minimum international standard, Latin American governments maintained that the only right of a foreigner was to not be discriminated against with respect to nationals… This intuitive response(Derecho internacional americano…) was a warning of the universal scale conflict that three decades later and in the same vein was instigated by the States that emerged from the de-colonisation process”
With respect to these opposing criteria, General assembly Resolution 1803 of 1962 established that the only interpretation was that the right owners of nationalized assets consisted only of receiving and appropriate indemnity according to the norms in force in the International Law of the expropriating State which the latter could freely adopt in the exercise of its sovereignty. This means that it can be stated that International Public Law only provides for an appropriate indemnity or, as other argue, a compensation, but under no circumstances, a “prompt, adequate and effective” compensation.
Nevertheless, according to the aforementioned Resolution, nationalization processes must be implemented in accordance with International Public Law. This means there may be certain limits to the right to nationalize which, despite the practically unlimited content of sovereignty as the source of Law in this case, could be inferred from certain very general principles of International Public Law. Although there are no precise norms on the matter, the prestigious Anglo-Saxon internationalist, Ian Brownlie, proposes four circumstances in which limitations should apply: 1) when the nationalization process is implemented by bodies of the State as part of broader State action that constitutes crimes against humanity, war, crimes or acts of genocide; 2) when nationalization implies the violation of treaty provisions; 3) when nationalization constitutes an illegal reprisal and 4) when the measure is discriminatory inasmuch as it affects, among others, only the nationals of one State.
If one examines the Cuban nationalization process in light of these possible limitations to the right to nationalize, which many authors claim has no limitations whatsoever other than those derived from State sovereignty and domestic law, one can equally conclude that the Cuban nationalizations were and legitimate. They were expropriations decided upon within a program that was inspired and motivated by the desire to give the Cuban people a worthy way and means of life. There was no violation of any treaty by the Cuban government at the time they decided to nationalize. Nor did the expropriation constitute a reprisal against the particular policy of one State or a group of States. Instead they represented the determination to create the necessary primary conditions for the social, economic and political development of the Cuban people.
Finally, the Cuban expropriations were not discrimatory. They equally affected, according to the legal instruments that brought them about, Cuban, British, Swiss, Spanish, Canadian, French, Italian and U.s. assets as the respective payment agreements show. The conclusion regarding their lawfulness is therefore incontrovertible.
IV. THE CAIMS SETTLEMENT AGREEMENTS SIGNED BY CUBA(1967- 1986)
1. The Facts
To date the Republic of Cuba has signed five agreements that settle foreigners´ claims regarding the expropriation their assets were subject to in 1959 and 1960. These agreements were reached with Canada, the united Kingdom, Spain, France and Switzerland in the following chronological order: France, March 16, 1967; Switzerland, March 2, 1967; the United Kingdom, October 18, 1978; Canada, November 7, 1980 and Spain, January 26, 1988.
2. Appraisal of the Facts
An analysis of the content of these agreements implies first of all that they have been reached over a long period of time in a concordant manner, without any involution or setback of any kind, which reflects a consistent and repeated practice.
Secondly, none of the agreements reflect the acceptance or homologation of the minimum international standard proposed by the United States of America and other Western European States as of 1938 as the demand for a prompt, adequate and effective indemnity. Their characteristics instead are more in line with the lump sum agreements that do not uphold the “adequate” aspect of the agreed indemnity as they take the particular conditions and interests of the expropriation States into account. This is apparent in the way the amount agreed to for the compensation does not single out or detail the individual claims(except in the case of the British nationals). They refer to a lump sum for all the assets of the natural and juridical persons that are nationals of the claiming State and were affected by the laws decreed by the Government of Cuba after 1959.
Thirdly, it should be pointed out that all the agreements established periods of time in which the indemnity payment was to be made, in other words, it was agreed that the obligation could be met over a period pf time. The compensation was stipulated as payable in successive instalments. Even in the case of the Agreement with the United Kingdom, a period for payment was established even if it was shorter than on other cases. This form of fulfilling the obligation does not meet the criterion of making a “prompt”(in other words immediate) indemnity that the so-called “minimum international standard” calls for.
Fourthly, the form of payment of the compensation agreed to in the agreements can not be considered “effective” according to the so-called “minimum international standard”. Sometimes the indemnity was paid in the currency of the State that was owed(pesetas in the case of Spain, sterling pounds in the case of the United Kingdom, Swiss francs in the case of Switzerland, French francs in the case of France, and Canadian dollars in the case of Canada). In other cases, such as in the agreement with Spain and Switzerland, payments in kind were also stipulated.
Finally, it needs to be pointed out that none of the agreements were signed with the natural or juridical persons whose assets had been expropriated, but with the State of their nationality. This intervention supports the criterion that the State that intervenes of its own accord has specifically renounced the supposed minimum international standard to which it had supposedly adhered in the past.