Permanent Sovereignty over Natural Resources

ThiS is a FM Blank Page

Marc Bungenberg • Stephan Hobe
Editors

Permanent Sovereignty over

Natural Resources
Editors
Marc Bungenberg Stephan Hobe
Europa-Institut Faculty of Law
Saarland University University of Cologne
Saarbruecken Cologne
Germany Germany

ISBN 978-3-319-15737-5 ISBN 978-3-319-15738-2 (eBook)

DOI 10.1007/978-3-319-15738-2

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Editors’ Foreword

Resolution 1803 (XVII) of the United Nations General Assembly from

14 December 1962 on ‘permanent sovereignty over natural resources’ is now
more than half a century old. It can be regarded as the kickoff for the development
of an international law on natural resources consisting of principles of customary
international law as well as treaty law. This symposium volume deals with the
development of this principle, its limits as well as corresponding rights and duties.
In the last 50 years, several new developments in specific areas—even special
regimes such as the UN Convention on the Law of the Seas—have brought limits
to the Principle through public international law, as well as through national and
regional legal developments.
In the introductory chapter, Stephan Hobe1 draws the attention on the evolution
of the permanent sovereignty principle. He especially highlights the development
from soft law only being mentioned in resolutions of the General Assembly of the
United Nations to being recognized as a principle of customary international law by
the International Court of Justice in his jurisprudence in 2005. One can observe a
change of focus of the discussion from ‘self-determination’ to ‘permanent sover-
eignty’. Finally, the UN General Assembly adopted the Resolution 1803 on Per-
manent Sovereignty over Natural Resources on 14 December 1962.
Nico Schrijver2 gives then an idea of the different aspects of the permanent
sovereignty over natural resources principle and highlights especially the balance of
rights and duties that forms an integral part of its today’s substance. Core of the
Principle of Permanent Sovereignty over Natural Resources was first the protection
of economic independence and the development of resource-rich countries. After
the emphasis on permanent ‘sovereignty’ in the era of decolonization, today’s main
questions are raised in the direction of the fair and equitable allocation of resources.
The Principle is thus more characterized by human rights and environmental

1
See p. 1.
2
See p. 15.

v
vi Editors’ Foreword

protection considerations, a development which could hardly have been foreseen

50 years ago.
Central topics of resource management regimes are generally questions of State
access to natural resources, mining and exploitation concessions as well as the
necessary infrastructure. Thus, Friedl Weiss3 seeks to identify common and uni-
versal principles of international law as to whether and to what extent they are
applicable to resource management. He takes into account regime theory, according
to which States coordinate their behavior under circumstances where decentralized
and uncoordinated decision-making does not lead to optimal results. He thereby
explains globalization phenomena. Weiss argues that most of the existing or
developing common or universal principles for resource management exist in the
field of international environmental law.
More regional approaches to resource management are taken up by the contri-
butions of Fernando Loureiro Bastos,4 Richard Roeder5 and Manjiao Chi.6 Bastos
describes ‘A Southern African approach to the permanent sovereignty over natural
resources and common resource management systems’, Roeder focuses on the
examination of ‘Australia’s Resource Management System in the light of UNGA
Resolution 1803’, and Manjiao Chi argues that the permanent sovereignty principle
has profound economic implications touching upon foreign investment protection
and foreign trade governance. Because of China’s economic rise and its changing
status in the international community as well as its frequent participation in
international resource-related dispute settlement, this country began to shift its
attitude in regard to resource sovereignty from a developing country-positioned
and ownership-oriented attitude towards a community-based and governance-
oriented attitude.
Viewed from the opposite perspective of mining companies and their home
countries, the focus lies on the protection of investments. International resource
companies have often secured mining concessions in developing countries for
dumping prices, which in various cases has led to the nationalization of even entire
sectors in the raw materials sector. Still ongoing expropriations of foreign investors
in the resources sector—recently, e.g., in the oil sector in Argentina, Bolivia and
Venezuela—should have seen an ‘adequate’ compensation according to the 1962
resolution. But the backlash came: In the course of discussion about the ‘New
International Economic Order’ the compensation amount was considered to be at
the discretion of the expropriating States, as opposed to even the minimum standard
as part of the law of aliens that demanded a higher, i.e. ‘adequate’ compensation. In
agreements on international investment law—mostly bilateral investment
treaties—especially capital exporting countries have enforced compensations ori-
ented at the market value of the respective investment. Through that, expropriations

3
See p. 29.
4
See p. 61.
5
See p. 79.
6
See p. 97.
Editors’ Foreword vii

of ‘sovereign States’ have in fact been hindered. In this context, Marc Bungenberg7
writes on ‘Evolution of Investment Law Protection as Part of a General System of
National Resources Sovereignty’, and draws the attention not only to common
origins, but also to common parallel developments especially in the area of the
inclusion of non-economic issues into international economic (investment) law.
Modern international environmental law demands from resources-rich countries to
implement assessments of environmental effects of resource exploitation due to
environmental damages with cross-border effects, contrary to past opinions that
even cross-border contaminations could not hinder sovereign determination of the
use of natural resources. Shotaro Hamamoto8 argues that compensation standards in
national resources law might differ depending on whether a simple expropriation or
a nationalization has taken place. He concludes that a ‘strict application of the Hull
formula is to be limited to cases of individual expropriations’.
At the end of the papers which discuss the interrelation between national
resources law and investment law, André Thomashausen9 draws the attention
onto (Foreign) Investment Strategies in Africa. Out of 53 African States 43 have
adopted the World Bank’s ICSID investment dispute settlement mechanism. For
them, this triggers significant increases in FDI flows to Africa. The same can be
observed by looking at the China–Africa Cooperation (FOCAC).
As already mentioned, the right on permanent sovereignty is accompanied by
duties of the resources-rich States as well as of the companies. The areas with the
most dynamic development probably are human rights and environmental protec-
tion as well as the taking of measures against corruption in the wake of good
governance initiatives. Karl M. Meessen10 points out that business, i.e. De Beers,
along with governments, mainly of consumer States, started operating a worldwide
certification scheme which effectively distinguishes into stolen blood diamonds and
their legally marketed clones. Although Meessen argues that on other occasions, it
may not be that simple to identify equally effective incentives when business is
being asked to actively promote human rights and good governance, nevertheless
given the mixed prospects of judicial enforcement, Kimberley should be kept in
mind. The extraterritorial enforcement of national law gains momentum in the
protection of international human rights. Against individual non-State actors the
extraterritorial enforcement of national law has been applied. Royal Dutch (Shell),
for example, has been sued in a court in Den Haag for damages for the contami-
nation of soil and groundwater. In the United States, civil damage claims have been
based on the Alien Tort Claims Act, but a fundamental judgment of the US
Supreme Court is eminent. This case concerns complaints against the oil company

7
See p. 125.
8
See p. 141.
9
See p. 155.
10
See p. 173.
viii Editors’ Foreword

for aiding and abetting human rights violations—also in Nigeria. Thus, Hans-Georg
Dederer11 analyzes extraterritorial possibilities of enforcement of human rights in
cases of violations, and states, that the victims of human rights violations may try to
bring claims against the host State or against the transnational corporations’ home
State or against the transnational corporation itself. They may choose to file such
civil lawsuits with foreign courts, i.e. with courts of a third State, even though such
damage claims before foreign courts will be hardly ever successful, as the Kiobel
case under the Alien Tort Statute (ATS) in the U.S. Supreme Court shows.
With this, many aspects of the general topic themes have been covered. How-
ever, a lot of research is still necessary. This is the case, for example, with regard to
transparency and the general fight against corruption. In just a few years, interna-
tional consensus for a better transparency in the natural resources sector has been
reached. On the European level, the committee on legal affairs of the European
Parliament urges Europe-based mining companies to publish their payments not
only for each country, but also for each project. Similar obligations have been
introduced in the United States through the Dodd-Frank-Act in 2010, which has
rearranged US law concerning the financial market and will affect all listed
companies. In a parallel development, we find the Extractive Industry Transparency
Initiative (EITI), whose members now include 36 States and several mining cor-
porations, public and private organizations as well as a big number of institutional
investors. Additionally, the now 10-year-old Publish What You Pay Initiative
facilitates the publication of payments in the mining sector.
From the original principle which was highly focused on the economic interests
of developing countries, an international resources law has emerged. It consists of
investment law as well as international rules on good governance and the protection
of the environment. In this respect, a prognosis is possible insofar as global
struggles for the allocation of resources will bring an INTERNATIONAL
RESOURCES LAW to the center of attention. It is hoped that this book may add
a bit to the necessary discussion about this old and new topic.
As organizers of the Conference ‘Permanent Sovereignty over Natural
Resources’ and editors of this volume, we would like to thank the FoKoS—The
Research Centre ‘Shaping the future’ of Siegen University for the support of the
conference. Anna Dulski (Siegen University) took care of the layout of the manu-
script of this volume. Finally, we would like to thank Dr. Brigitte Reschke from
Springer for accepting this volume as a Springer publication.

Siegen, Germany Marc Bungenberg

Cologne, Germany Stephan Hobe
March 2015

11
See p. 187.
Abbreviations

AB Appellate Body
ABAJ American Bar Association Journal
AEAA African East-Asian Affairs
A.F.D.I. Annuaire Français de Droit International
AIOC Anglo Iranian Oil Company
AJIL American Journal of International Law
Am. U. Int’l L. Rev American University International Law Review
appr. Approximately
Art./Arts. Article/Articles
ASEAN Association of Southeast Asian Nations
ASIL Proc. American Society of International Law
Proceedings
ASIL Insights American Society of International Law Insights
ATS Alien Tort Statute
AU$ Australian Dollar
Aust J Agri Res Econ The Australian Journal of Agricultural and
Resource Economics
BEQ Business Ethics Quarterly
BIT Bilateral Investment Treaty
BoG Bank of Ghana
BP British Petroleum
BYIL British Yearbook of International Law
CC German Criminal Code
CDB China Development Bank
CETA EU-Canada Comprehensive Trade and
Investment Agreement
China Q. The China Quarterly

ix
x Abbreviations

CISDL Center for International Sustainable Development

Law
CJICL Cardozo Journal of International and
Comparative Law
Co. Company
CSIEL Chinese Society of International Economic Law
DAC Development Assistance Committee
DAJV Deutsch-Amerikanische Juristen-Vereinigung
DePaul L. Rev. DePaul Law Review
DRC Democratic Republic of the Congo
DSB Dispute Settlement Body
DSU Dispute Settlement Understanding
ECJ European Court of Justice
ECOWAS Economic Community of West African States
edn. Edition
EDR Economic Demonstrated Resources
ed(s) Editor(s)
EEZ Exclusive Economic Zone
EFTA European Free Trade Association
e.g. Exempli gratia
EITI Extractive Industries Transparency Initiative
EJIL European Journal of International Law
ELJ European Law Journal
Envtl. L. Environmental Law
ESCAP Economic and Social Commission for Asia and
the Pacific
et seq. Et sequence
EU European Union
E&C clauses Expropriation and compensation clauses
EuR Europarecht
FATA Foreign Acquisition and Takeovers Act
FDI Foreign Direct Investment
FET Fair and equitable treatment
FIRB Foreign Investment Review Board
fn. Footnote
FOCAC Forum on China–Africa Cooperation
Fordham Int’l L. Rev. Fordham International Law Review
Foreign Aff. Foreign Affairs
freq. Frequently
FTA Free Trade Agreement
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
Abbreviations xi

Glob. Gov. Global Governance

GNPC Ghana National Petroleum Corporation
GoG Government of Ghana
GPPR The Georgetown Public Policy Review
Harv. Envtl. L. Rev Harvard Environmental Law Review
HuV-I Humanitäres V€olkerrecht - Informationsschrift
i.a. Inter alia
IA Reporter International Arbitrator Reporter
Ibid. Ibidem
ICC International Criminal Court
ICJ International Court of Justice
ICJ Review International Commission of Jurists Review
ICLQ International and Comparative Law Quarterly
ICSID International Centre for Settlement of Investment
Disputes
ICTSD International Centre for Trade and Sustainable
Development
i.e. Id est
IGO International Governmental Organisation
IIA International Investment Agreement
IJIL The Indian Journal of International Law
ILA International Law Association
ILC International Law Commission
ILM International Legal Materials
ILO International Labour Organization
IMF International Monetary Fund
Ind. J. Global Legal Stud. Indian Journal of Global Legal Stud.
Int’l Law The International Lawyer
IO International Organization
ISA Investor-state arbitration
ISO International Organization for Standardization
ITLS International Tribunal of the Law of the Sea
ITN Investment Treaty News
JAL Journal of African Law
J. Bus. Ethics Journal of Business Ethics
J. Conflict Resolut. The Journal of Conflict Resolution
J. Dev. Stud The Journal of Development Studies
JENRL Journal of Energy & Natural Resources Law
JIEL Journal of International Economic Law
J. Int. Arb. Journal of International Arbitration
JPS Journal of Peasant Studies
JWIT Journal of World Investment & Trade
J.W.T. Journal of World Trade
xii Abbreviations

JYIL Japanese Yearbook of International Law

JZ Juristenzeitung
LDD Law, democracy & development
Liamco Libyan American Oil Company
MEP Ministry of Environmental Protection
MFA Master Facility Agreement
MIGA Multilateral Investment Guarantee Agency
MLR Ministry of Land and Resources
M.L.R. The Modern Law Review
m. n. Marginal number
MoFEP Ministry for Finance and Economic Planning
MRA Mineral Resources Act
MRR Mineral Resources Regulation
MRRT Minerals Resource Rent Tax
NDRC National Development Reform Commission
NEPAD New Partnership for Africa’s Development
NGO Non-Governmental Organisation
NIEO New International Economic Order
NILR Netherlands International Law Review
nm Nautical miles
Nw. JIHR Northwestern Journal of International Human Rights
Nw. J. Int’l L. & Bus. Northwestern Journal of International Law and
Business
NZ New Zealand
OECD Organization for Economic Co-operation and
Development
OHBLA Organization for the Harmonization of Business
Law in Africa
OPEC Organization of the Petroleum Exporting
Countries
OPIC Overseas Private Investment Corporation
p(p). Page(s)
para. Paragraph
PCA Permanent Court of Arbitration
PDGG Participatory Development and Good
Governance
PGSA Petroleum and Gas (Production and Safety) Act
PGSR Petroleum and Gas (Production and Safety)
Regulations
PPP Polluter-Pays-Principle
PRC People’s Republic of China
PRRT Petroleum Resource Rent Tax
PSNR Permanent Sovereignty over Natural Resources
PwC PricewaterhouseCoopers
Abbreviations xiii

Rev. Droit Int’l & Legis. Comp. Revue de Droit International et de Législation
Comparée
Rev. Int’l Stud. Review of International Studies
RIW Recht der Internationalen Wirtschaft
RPT Reasonable period of time
SACU Southern African Customs Union
SADC Southern African Development Community
Sa Merc LJ South African Mercantile Law Journal
SASAC State-owned Assets Supervision and
Administration Commission
SAYIL South African Yearbook of International Law
Sect. Section
Tcf Trillion cubic feet
TDM Transnational Dispute Management
TEU Treaty on the European Union
TFEU Treaty on the Functioning of the European Union
TOPCO Texaco Overseas Petroleum Company
Trans. Grot. Soc’y Transactions of the Grotius Society
UN United Nations
UNCTAD United Nations Conference on Trade and
Development
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNGA United Nations General Assembly
UNIPEC China International United Petroleum &
Chemicals Co.
UNTS United Nations Treaty Collection
U. Pa. J. Int’l L. University of Pennsylvania Journal of
International Law
US United States
US$ US Dollar
v. Versus
WAEMU West African Economic and Monetary Union
WBI World Bank Institute
WBRO World Bank Research Observer
WHO World Health Organization
Wld. Today The World Today
WTO World Trade Organization
Yale L. J. The Yale Law Journal
Za€oRV Zeitschrift für ausländisches €offentliches Recht
und V€olkerrecht
ThiS is a FM Blank Page
Contents

Evolution of the Principle on Permanent Sovereignty Over Natural

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Stephan Hobe
Fifty Years Permanent Sovereignty over Natural Resources . . . . . . . . . 15
Nico J. Schrijver
(Existence of) Common or Universal Principles for Resource
Management (?) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Friedl Weiss and Bernhard Scherzer
A Southern African Approach to the Permanent Sovereignty
over Natural Resources and Common Resource Management
Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Fernando Loureiro Bastos
Australia’s Resource Management System in the Light of UNGA
Resolution 1803 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Richard W. Roeder
From Ownership-Orientation to Governance-Orientation . . . . . . . . . . . 97
Manjiao Chi
Evolution of Investment Law Protection as Part of a General System of
National Resources Sovereignty (and Management)? . . . . . . . . . . . . . . . 125
Marc Bungenberg
Compensation Standards and Permanent Sovereignty over Natural
Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Shotaro Hamamoto

xv
xvi Contents

(Foreign) Investment Strategies in Africa . . . . . . . . . . . . . . . . . . . . . . . . 155

André Thomashausen
Kimberley as a Means of Promoting Good Governance: The Role of
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Karl M. Meessen
Extraterritorial Possibilities of Enforcement in Cases of Human Rights
Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Hans-Georg Dederer
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217