Max Planck Institute for Comparative Public Law and International Law Logo Max Planck Institute for Comparative Public Law and International Law

You are here: Publications Archive World Court Digest

World Court Digest

II. Substantive International Law - Second Part
13. INTERNATIONAL ECONOMIC LAW

¤ Oil Platforms
(Islamic Republic of Iran v.
United States of America)
Preliminary Objections
Judgment of 12 December 1996,
I.C.J. Reports 1996, p. 803

[pp. 818-820] 45. The Court must now consider the interpretation according to which the word "commerce" in Article X, paragraph 1, is restricted to acts of purchase and sale. According to this interpretation, the protection afforded by this provision does not cover the antecedent activities which are essential to maintain commerce as, for example, the procurement of goods with a view to using them for commerce.

In the view of the Court, there is nothing to indicate that the parties to the Treaty intended to use the word "commerce" in any sense different from that which it generally bears. The word "commerce" is not restricted in ordinary usage to the mere act of purchase and sale; it has connotations that extend beyond mere purchase and sale to include "the whole of the transactions, arrangements, etc., therein involved" (Oxford English Dictionary, 1989, Vol. 3, p. 552).

In legal language, likewise, this term is not restricted to mere purchase and sale because it can refer to

"not only the purchase, sale, and exchange of commodities, but also the instrumentalities and agencies by which it is promoted and the means and appliances by which it is carried -on, and transportation of persons as well as of goods, both by land and sea" (Black's Law Dictionary, 1990, p. 269).

Similarly, the expression "international commerce" designates, in its true sense, "all transactions of import and export, relationships of exchange, purchase, sale, transport, and financial operations between nations" and sometimes even "all economic, political, intellectual relations between States and between their nationals" (Dictionnaire de la terminologie du droit international (produced under the authority of President Basdevant), 1960, p. 126 [translation by the Registry]).

Thus, whether the word "commerce" is taken in its ordinary sense or in its legal meaning, at the domestic or international level, it has a broader meaning than the mere reference to purchase and sale.

46. Treaties dealing with trade and commerce cover a vast range of matters ancillary to trade and commerce, such as shipping, transit of goods and persons, the right to establish and operate businesses, protection from molestation, freedom of communication, acquisition and tenure of property. Furthermore, in his Report entitled "Progressive Development of the Law of International Trade", the Secretary-General of the United Nations cites, among a number of items falling within the scope of the Law of International Trade, the conduct of business activities pertaining to international trade, insurance, transportation, and other matters (United Nations, Official Records of the General Assembly, Twentyfirst Session, Annexes, Agenda item 88, doe. A/6396; also in Basic Documents on International Trade Law, Chia-Jui Cheng (ed.), 2nd rev. ed., p. 3).

The Court notes that the Treaty of 1955 also deals, in its general articles, with a wide variety of matters ancillary to trade and commerce.

47. It should also be noted that, in the original English version, the actual title of the Treaty of 1955 - contrary to that of most similar treaties concluded by the United States at that time, such as the Treaty of 1956 between the United States and Nicaragua - refers, besides "Amity" and "Consular Rights", not to "Commerce" but, more broadly, to "Economic Relations".

48. The Court also notes that, in the decision in the Oscar Chinn case (P.C.I.J., Series A/B, No. 63, p. 65), the Permanent Court of International Justice had occasion to consider the concept of freedom of trade under Article I of the Convention of Saint-Germain. The dispute before the Court arose in the context of measures taken by the Belgian Government in relation to river traffic in the waterways of the Congo. The Permanent Court observed:

"Freedom of trade, as established by the Convention, consists in the right - in principle unrestricted - to engage in any commercial activity, whether it be concerned with trading properly so-called, that is the purchase and sale of goods, or whether it be concerned with industry, and in particular the transport business; or, finally, whether it is carried on inside the country or, by the exchange of imports and exports, with other countries." (Ibid., p. 84.)

The expression "freedom of trade" was thus seen by the Permanent Court as contemplating not only the purchase and sale of goods, but also industry, and in particular the transport business.

49. The Court concludes from all of the foregoing that it would be a natural interpretation of the word "commerce" in Article X, paragraph 1, of the Treaty of 1955 that it includes commercial activities in general not merely the immediate act of purchase and sale, but also the ancillary activities integrally related to commerce.

50. The Court should not in any event overlook that Article X, paragraph 1, of the Treaty of 1955 does not strictly speaking protect "commerce" but "freedom of commerce". Any act which would impede that "freedom" is thereby prohibited. Unless such freedom is to be rendered illusory, the possibility must be entertained that it could actually be impeded as a result of acts entailing the destruction of goods destined to be exported, or capable of affecting their transport and their storage with a view to export.

The Court points out in this respect that the oil pumped from the platforms attacked in October 1987 passed from there by subsea line to the oil terminal on Lavan Island and that the Salman complex, object of the attack of April 1988, was also connected to the oil terminal on Lavan by subsea line.

51. The Court notes that Iran's oil production, a vital part of that country's economy, constitutes an important component of its foreign trade.
On the material now before the Court, it is indeed not able to determine if and to what extent the destruction of the Iranian oil platforms had an effect upon the export trade in Iranian oil; it notes nonetheless that their destruction was capable of having such an effect and, consequently, of having an adverse effect upon the freedom of commerce as guaranteed by Article X, paragraph 1, of the Treaty of 1955. It follows that its lawfulness can be evaluated in relation to that paragraph. The argument made on this point by the United States must be rejected.

52. The conclusions which the Court has reached above as to Article X, paragraph 1, are confirmed by the nature of the Treaty of which this provision forms a part. Its Article I has, as already observed, been drafted in terms so general that by itself it is not capable of generating legal rights and obligations. This is not to say, however, that it cannot be invoked for the purpose of construing other provisions of the Treaty. The Court cannot lose sight of the fact that Article I states in general terms that there shall be firm and enduring peace and sincere friendship between he Parties. The spirit and intent set out in this Article animate and give meaning to the entire Treaty and must, in case of doubt, incline the Court to the construction which seems more in consonance with its overall objective of achieving friendly relations over the entire range of activities covered by the Treaty.

[pp. 887-888 D.O. Schwebel] The fact of the matter is that commerce in ordinary and in legal usage is simply not understood to embrace production. Oscar Chinn gives the Court more, but insufficient support, because the term there under construction was "freedom of trade" not freedom of commerce, and "trade" is widely interpreted as a broader term than commerce, and one which, unlike commerce, may include "industry". Moreover, the "trade" at issue in the Oscar Chinn case was not production but river transport; the "industry" in question was "the transport business". The Court's holding "that the fluvial transport industry is a branch of commerce" is of no relevance or assistance to Iran's position in these proceedings (Oscar Chinn, P.C.I.J., Series A/B, No. 63, pp. 65, 81, 85). In short, the growing of pistachio nuts in Iran is not commerce within the meaning of Article X of the Treaty; the feeding of sturgeon in the Caspian Sea is not commerce within the meaning of Article X of the Treaty; and the production of oil on Iran's continental shelf is not commerce within the meaning of Article X of the Treaty.

This being so, the Court's reliance on "freedom" of commerce does not strengthen its analysis. To be sure, if the wherewithal to exchange is lacking or is destroyed, there can be no exchange; there can be no commerce in non-existent goods. But on the Court's reasoning, action that impairs the life or health of the inhabitants of Iran, or that detracts from its climate, environment, condition of its natural resources, generation of its capital, etc., also prejudices its freedom of commerce in that such action may affect the ability of Iran to produce the goods to exchange. It might in this vein be argued that if pollution originating in country A wafts onto the territory of country B, country A, assuming it to be bound to freedom of commerce with country B, is in violation of its obligation. I do not believe that a treaty provision that, "Between the territories of the two High Contracting Parties there shall be freedom of commerce and navigation" sustains so far-reaching - if not far-fetched - an interpretation. Nor am 1 persuaded that freedom of commerce and navigation within the meaning of the Treaty could be affected by the fact or allegation that some or all of the destroyed oil platforms in question were connected by a pipeline network to port facilities.