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III. The International Court of Justice
2.2. Conditions for a Decision on the Merits
2.2.1. Exhaustion of Local Remedies

¤ Elettronica Sicula S.p.A. (ELSI)
Judgment of 20 July 1989
I.C.J. Reports 1989, p. 15

[pp. 42-44] The United States questioned whether the rule of the exhaustion of local remedies could apply at all to a case brought under Article XXVI of the FCN Treaty. That Article, it was pointed out, is categorical in its terms, and unqualified by any reference to the local remedies rule; and it seemed right, therefore, to conclude that the parties to the FCN Treaty, had they intended the jurisdiction conferred upon the Court to be qualified by the local remedies rule in cases of diplomatic protection, would have used express words to that effect; as was done in an Economic Co-operation Agreement between Italy and the United States of America also concluded in 1948. The Chamber has no doubt that the parties to a treaty can therein either agree that the local remedies rule shall not apply to claims based on alleged breaches of that treaty; or confirm that it shall apply. Yet the Chamber finds itself unable to accept that an important principle of customary international law should be held to have been tacitly dispensed with, in the absence of any words making clear an intention to do so. This part of the United States response to the Italian objection must therefore be rejected.
The United States further argued that the local remedies rule would not apply in any event to the part of the United States claim which requested a declaratory judgment finding that the FCN Treaty had been violated. The argument of the United States is that such a judgment would declare that the United States own rights under the FCN Treaty had been infringed; and that to such a direct injury the local remedies rule, which is a rule of customary international law developed in the context of the espousal by a State of the claim of one of its nationals, would not apply. The Chamber, however, has not found it possible in the present case to find a dispute over alleged violation of the FCN Treaty resulting in direct injury to the United States, that is both distinct from, and independent of, the dispute over the alleged violation in respect of Raytheon and Machlett. The case arises from a dispute which the Parties did not "satisfactorily adjust by diplomacy"; and that dispute was described in the 1974 United States claim made at the diplomatic level as a "claim of the Government of the United States of America on behalf of Raytheon Company and Machlett Laboratories, Incorporated". The Agent of the United States told the Chamber in the oral proceedings that "the United States seeks reparation for injuries suffered by Raytheon and Machlett". And indeed, as will appear later, the question whether there has been a breach of the FCN Treaty is itself much involved with the financial position of the Italian company, ELSI, which was controlled by Raytheon and Machlett.
Moreover, when the Court was, in the Interhandel case, faced with a not dissimilar argument by Switzerland that in that case its "principal submission" was in respect of a "direct breach of international law" and therefore not subject to the local remedies rule, the Court, having analysed that "principal submission", found that it was bound up with the diplomatic protection claim, and that the Applicant's arguments "do not deprive the dispute ... of the character of a dispute in which the Swiss Government appears as having adopted the cause of its national ... (Interhandel, Judgment, I.C.J. Reports 1959, p. 28). In the present case, likewise, the Chamber has no doubt that the matter which colours and pervades the United States claim as a whole, is the alleged damage to Raytheon and Machlett, said to have resulted from the actions of the Respondent. Accordingly, the Chamber rejects the argument that in the present case there is a part of the Applicant's claim which can be severed so as to render the local remedies rule inapplicable to that part.
There was a further argument of the Applicant, based on estoppel in relation to the application of the local remedies rule, which should be examined. In the "Memorandum of Law" elaborating the United States claim on the diplomatic plane, transmitted to the Italian Government by Note Verbale of 7 February 1974, one finds that the whole of Part VI (pp. 53 et seq.) deals generally and at some length with the "Exhaustion of Local Remedies". There were also annexed the opinions of the lawyers advising the Applicant, which dealt directly with the position of Raytheon and Machlett in relation to the local remedies rule. The Memorandum concluded that Raytheon and Machlett had indeed exhausted "every meaningful legal remedy available to them in Italy" (paragraph 46 above). In view of this evidence that the United States was very much aware that it must satisfy the local remedies rule, that it evidently believed that the rule had been satisfied, and that it had been advised that the shareholders of ELSI had no direct action against the Italian Government under Italian law, it was argued by the Applicant that Italy, if it was indeed at that time of the opinion that the local remedies had not been exhausted, should have apprised the United States of its opinion. According to the United States, however, at no time until the filing of the Respondent's Counter-Memorial in the present proceedings did Italy suggest that Raytheon and Machlett should sue in the Italian courts on the basis of the Treaty. The written aide-mémoire of 13 June 1978, by which Italy rejected the 1974 claim, had contained no suggestion that the local remedies had not been exhausted, nor indeed any mention of the matter.
It was argued by the Applicant that this absence of riposte from Italy amounts to an estoppel. There are however difficulties about drawing any such conclusion from the exchanges of correspondence when the matter was still being pursued on the diplomatic level. In the Interhandel case, when Switzerland argued that the United States had at one time actually "admitted that Interhandel had exhausted the remedies available in the United States courts", the Court, far from seeing in this admission an estoppel, dismissed the argument by merely observing that "This opinion was based upon a view which has proved unfounded" (Interhandel, Judgment, I.C.J. Reports 1959, p. 27). Furthermore, although it cannot be excluded that an estoppel could in certain circumstances arise from a silence when something ought to have been said, there are obvious difficulties in constructing an estoppel from a mere failure to mention a matter at a particular point in somewhat desultory diplomatic exchanges.

[pp. 46-47] With such a deal of litigation in the municipal courts about what is in substance the claim now before the Chamber, it was for Italy to demonstrate that there was nevertheless some local remedy that had not been tried; or at least, not exhausted. This burden Italy never sought to deny. It contended that it was possible for the matter to have been brought before the municipal courts, citing the provisions of the treaties themselves, and alleging their violation. This was never done. In the actions brought before the Court of Palermo, and subsequently the Court of Appeal of Palermo, and the Court of Cassation, the FCN Treaty and its Supplementary Agreement were never mentioned. This is not surprising, for, as Italy recognizes, the way in which the matter was pleaded before the courts of Palermo was not for Raytheon and Machlett to decide but for the trustee. Furthermore, the local remedies rule does not, indeed cannot, require that a claim be presented to the municipal courts in a form, and with arguments, suited to an international tribunal, applying different law to different parties: for an international claim to be admissible, it is sufficient if the essence of the claim has been brought before the competent tribunals and pursued as far as permitted by local law and procedures, and without success.
The question, therefore, reduces itself to this: ought Raytheon and Machlett, suing in their own right, as United States corporations allegedly injured by the requisition of property of an Italian company whose shares they held, have brought an action in the Italian courts, within the general limitation-period (five years), alleging violation of certain provisions of the FCN Treaty between Italy and the United States; this mindful of the fact that the very question of the consequences of the requisition was already in issue in the action brought by its trustee in bankruptcy, and that any damages that might there be awarded would pass into the pool of realized assets, for an appropriate part of which Raytheon and Machlett had the right to claim as creditors?
Italy contends that Raytheon and Machlett could have based such an action before the Italian courts on Article 2043 of the Italian Civil Code, which provides that "Any act committed either wilfully or through fault which causes wrongful damages to another person implies that the wrongdoer is under an obligation to pay compensation for those damages." According to Italy, this provision is frequently invoked by individuals against the Italian State, and substantial sums have been awarded to claimants where appropriate. If Raytheon and Machlett suffered damage caused by violations by Italian public authorities of the FCN Treaty and the Supplementary Agreement, an Italian court would, it was contended, have been bound to conclude that the relevant acts of the public authorities were wrongful acts for the purposes of Article 2043. It is common ground between the Parties that implementing legislation ("ordini di esecuzione") was enacted (Law No. 385 of 15 June 1949 and Law No. 910 of 1 August 1960), to give effect in Italy to the FCN Treaty and Supplementary Agreement, but that their provisions cannot be invoked in protection of individual rights before the Italian courts unless those provisions are regarded by the courts as self-executing. In order to show that the relevant provisions would be so regarded, decisions of the Court of Cassation have been cited by Italy in which provisions of the FCN Treaty (not the provisions relied on in the present case) have been applied for the benefit of United States nationals who have invoked them before Italian courts, and a provision of a treaty between Italy and the Federal Republic of Germany, said to be comparable with Article V of the FCN Treaty, was given effect.
However, those decisions were not based on Article 2043 of the Italian Civil Code; and the treaty provisions applied were given effect in conjunction with municipal legislation or the provisions of other treaties through the mechanism of a most-favoured-nation provision. In none of the cases cited was the FCN Treaty provision relied on to establish the wrongfulness of conduct of Italian public officials. When in 1971 Raytheon consulted two Italian jurists on the question of local remedies for the purposes of a diplomatic claim, it apparently did not occur to either of them to refer even as a possibility to action under Article 2043 in conjunction with the FCN Treaty. It thus appears to the Chamber to be impossible to deduce, from the recent jurisprudence cited, what the attitude of the Italian courts would have been had Raytheon and Machlett brought an action, some 20 years ago, in reliance on Article 2043 of the Civil Code in conjunction with provisions of the FCN Treaty and Supplementary Agreement. Where the determination of a question of municipal law is essential to the Court's decision in a case, the Court will have to weigh the jurisprudence of the municipal courts, and "If this is uncertain or divided, it will rest with the Court to select the interpretation which it considers most in conformity with the law" (Brazilian Loans, P.C.I.J., Series A, Nos. 20/21, p. 124). In the present case, however, it was for Italy to show, as a matter of fact, the existence of a remedy which was open to the United States stockholders and which they failed to employ. The Chamber does not consider that Italy has discharged that burden.

[p. 94 D.O. Schwebel] First, the Judgment applies a rule of reason in its interpretation of the reach of the requirement of the exhaustion of local remedies. It holds not that every possible local remedy must have been exhausted to satisfy the local remedies rule but that, where in substance local remedies have been exhausted, that suffices to meet the requirements of the rule even if it may be that a variation on the pursuit of local remedies in the particular case was not in fact played out. It has of course long been of the essence of the rule of exhaustion of local remedies that local remedies need not be exhausted where there are no effective remedies to exhaust. It may be said that the Chamber has done no more than to reaffirm this established element of the rule. In fact it has reaffirmed it, but in doing so the Judgment makes a contribution to the elucidation of the local remedies rule by indicating that, where the substance of the issues of a case has been definitively litigated in the courts of a State, the rule does not require that those issues also have been litigated by the presentation of every relevant legal argument which any municipal forum might have been able to pass upon, however unlikely in practice the possibilities of reaching another result were. The United States of America submitted that the claims brought by it were admissible since "all reasonable" local remedies had been exhausted; in substance, the Chamber agreed, and rightly so. Its holding thus confines certain prior constructions of the reach of the rule of exhaustion of local remedies to a sensible limit.