action' under Chapter VII which was reserved for the SC; thus, expenses arising therefrom were not outside the purview of the GA. Fourth, it was not 63 Ibid. at pp.

162--7. 372 f i n a nc i ng imperative that measures for the maintenance of international peace and security should be financed through Article 43 and Article 43 alone, because the SC could act under some other article; for dispute resolution, where the SC decided to police a ‘situation’ under Chapter VII it did not need to resort to Article 43. Expenditures incurred pursuant to intra vires acts of the organization which are in conformity with the Charter, whether they be decisions or recommendations of the SC or recommendations of the GA, are ‘expenses of the organization’ The Court and the judges giving separate opinions were agreed on this proposition. Certain acts which are not in conformity with the Charter international business litigation but are not ultra vires would generate ‘expenses of the organization’ These acts were certain recommendations of the SC or GA which were within the scope of the functions of the organization and were in confor- mity with the Charter except that they did not conform to the provisions of the Charter relating to the division of functions among several organs and recommendations of the SC or the GA which were within the scope of the functions of the organization but were not in conformity with the provisions of the Charter in a non-essential particular (other than the division of functions between the organs). The principle emerges from the opinion of the Court and the opinions of Judges international business litigation Morelli and Spender. Expenditures incurred under acts that were ultra vires, because they did not conform to the Charter in an essential particular or were not within the scope of the functions of the organization, are not ‘expenses of the organization’ This proposition is reconcilable international business litigation with the opinion of the Court and the opinions of the Judges who gave Separate Opinions. According to Judge Spender such acts included acts done by the SG which were outside the scope of his apparent authority but not those which were within the scope of his apparent authority. Judge Spender’s view is reasonable, though the Court did not deal with the issue.64 So much for what can be derived directly from the Expenses Case on the question of ‘expenses of theinternational business litigation organization’. Several problems which 64 The Court merely said: ‘Similarly, obligations of the Organization may be incurred by the Secretary-General, acting on the authority of the Security Council or of the General Assembly, and the General Assembly has no alternative but to honour these engagements’ (ibid. at p. 169). e x p e n s e s 373 might arise in this field are not dealt with in the opinions in the case, which is to be explained perhaps by the limited nature of the question asked. One problem arises, for instance, in connection with tortious acts of servants or agents of the organization or for acts of servants which constitute a breach of contract. Clearly where the responsibility of the organization is to be engaged their tortious acts must be traced to the organization. This can be done where these acts rest directly or indirectly on the resolutions of either

such a qualification could only be read in, if it must necessarily be implied from the provisions of the Charter considered

as a whole or from some particular provision thereof which made it unavoidable to do so in order to give effect to the Charter. The Court came to the conclusion that there was no room for such necessary implication for four reasons.62 First, because in Article 17(3) the term ‘administrative budget’ is used in connection with the functions of the GA in regard to the specialized agencies, the distinction between the 62 Ibid. at pp. 159--62. e x p e n s e s 371 administrative budget and the general budget of the UN was present to the framers of the Charter; hence, the absence of an explicit qual- ification in Article 17(1) or 17(2) means that such a qualification was not intended. Second, other parts of the Charter showed that a vari- ety of expenses which were not administrative had to be included in the ‘expenses of the Organization’, e.g., Chapter IX and X and Article 98 which obligated the SG to perform functions entrusted to him by the other organs of the UN. Third, the GA did not in practice make such a distinction in its financial resolutions or in its budgeting; on the contrary, such operational matters as technical assistance had been included in the budgets. Fourth, it was consistent practice of the GA to include in the annual budgetary resolutions provisions relating to the maintenance of international peace and security; provision was also made for ‘unforseen and extraordinary expenses’ arising in that rela- tion, and such measures had been adopted without dissent from 1947 to 1959 except in the years 1952, 1953 and 1954 when adverse votes were cast because UN Korean war decorations were included. ‘Expenses’ do not exclude expenditures resulting from operations for the maintenance of international peace and security On this rule too the judges who gave separate opinions agreed with the Court. The argument that such expenditures were excluded was based on the premise that they fell exclusively to be dealt with by the SC and more especially through agreements negotiated in accordance with Article 43. The Court rejected this argument for the following reasons.63 First, Article 18 included as decisions on important questions decisions on budgetary questions; these were decisions which had a binding effect and there was no indication that expenditures arising from the main- tenance of international peace and security were excluded from the purview of the budget and from Article 17(2). Second, the responsibility of the SC for the maintenance of international peace and security was primary and not exclusive; although only the SC could require coer- cive action which was binding, the GA was also concerned with the maintenance of international peace and security. Third, the fact that the GA was not permitted to take any ‘action’ under Article 11(2) did not affect the position, as this referred only to ‘enforcement

that the expenditures incurred for the purpose of financing

the activities of the UNEF and the ONUC under the relevant resolutions presented to it were ‘expenses’ for the purpose of Article 17(2). In doing so the Court did, however, offer certain general considerations: It would be possible to begin with a general proposition to the effect that the ‘expenses’ of any organization are the amounts paid out to defray the costs of carrying out its purposes, in this case, the political, economic, social, humani- tarian and other purposes of the United Nations . . . Or, it might simply be said that the ‘expenses’ of an organization are those which are provided for in its budget.52 The Court offered a negative proposition when it agreed that for expenditures to be ‘expenses’ they must be tested by their relationship to the purposes of the UN, in the sense that if an expenditure were made for a purpose which is not one of the purposes of the UN it could not be considered an ‘expense’ of the organization.53 Positively, the Court was not so specific. The Court did hold that provided the expenses were made in pursuance of an action which was within the scope of the functions of the organization, the fact that the action was initiated or carried out by an organ acting beyond the scope of its powers according to the Charter did not necessarily mean that the expenditure incurred was not an ‘expense’ of the organization: If it is agreed that the action in question is within the scope of the functions of the Organization but it is alleged that it has been initiated or carried out in 50 Ibid. at p. 159. 51 Ibid. at p. 164. 52 Ibid. at p. 158. 53 Ibid. at p. 167. e x p e n s e s 367 a manner not in conformity with the division of functions among the several organs which the Charter prescribes, one moves to the internal plane, to the internal structure of the organization. If the action was taken by the wrong organ, it was irregular as a matter of that internal structure, but this would not necessarily mean that the expense incurred was not an expense of the Organization. Both national and international dispute resolution contemplate cases in which the body corporate or politic may be bound, as to thirds parties, by an ultra vires act of an agent.54 Some authority for the principle was found in what the Court had already said in the Effect of Awards Case, namely that an award of the UNAT created an obligation of the organization which the GA had to honour.55 In such a case an award redresses a breach of contract on the part of the organization, committed through the instrumentality of its agent, the SG, who has defaulted in the execution of the duties of the organization under a contract of service. It might be argued that such default by an organ in the exercise of functions assigned to it in accordance with the Charter is to be distinguished from the exercise by an organ of a function which some other organ should be exercis- ing,

First, the expenditure must belong to the genus �expense', that is to say, it must come within the class or category of expenditure normally regarded as having the basic nature of an �expense' so called. Second, the expenditure must have been validl

definition but gave some examples of the considerations to be taken into account, in his view, in attributing expenditures to the genus ‘expense’. One of the examples, at least, of limitations may seem to be questionable, even unacceptable. This is the limitation based on the obligatory functions of the UN, such as that relating to peacekeep- ing, as opposed to permissive functions of the organization. However, 59 Ibid. at p. 223. 60 Ibid. at p. 199. 61 Ibid. 370 f i n a nc i ng Judge Fitzmaurice gave a list of the types of expenditures which would fall within the genus ‘expense’: (i) all those expenditures, or categories of expenditures, which have normally formed part of the regular budget of the organization, so that a settled practice (pratique constante) of treat- ing them as expenses of the organization has become established and is tacitly acquiesced in by all member states; (ii) insofar as not already covered by head (i): (a) administrative expenses; (b) expenditures arising in the course of, or out of, the performance by the organization of its functions under the Charter; and (c) any payments which the organi- zation is legally responsible for making in relation to third parties or which it is otherwise, as an entity, under a legal obligation to make or is bound to make in order to meet its extraneous legal obligations. The second requirement involved issues such as the powers of the authorizing organ, even if the object of the expenditures fell within the scope of the purposes of the organization, depending on the particular circumstances of the case and in regard to which no general solution was possible. But it meant that the resolutions authorizing the activi- ties for which the expenditures were incurred had to be valid and in conformity with the Charter. The first requirement may be reconcilable with the Court’s view of the dispute resolution, insofar as the Court did leave room for expenditures incurred for the purposes of the organization not to be characterized as ‘expenses of the organization’. From the Court’s opinion and the separate opinions an attempt may be made to deduce some principles, first as to the UN. ‘Expenses’ are not limited to expenditures under the ‘administrative’ budget of the UN The Court pointed out that there was no such express limitation in Article 17(2) nor could such a limitation be implied by reference to Article 17(1) which referred to the approval of the budget by the GA. In view of this,

the expenditures would only be �expenses of the organization' if he had acted within the scope of his apparent authority.56 Judge Spender's view of the principles involved admitted

of a special exception. Where the SG took action under a resolution which was in accord with the purposes of the organization, if he had acted outside the scope of his appar- ent authority, the resulting expenditure could not be regarded as an ‘expense of the organization’ for the purposes of Article 17(2). It was also said to be necessary that the GA should decide that the expendi- tures in question were ‘expenses of the organization’. Judge Morelli, in his separate opinion, propounded an equally broad test for determining the ‘expenses of the organization’ under Arti- cle 17(2). According to him any expenditure which was validly autho- rized by the GA under Article 17(1) as part of the budget was to be regarded as an ‘expense of the organization’ under Article 17(2), irre- spective of the validity of the resolutions under which the expenses were incurred;57 these expenses had to be actually authorized by the GA under Article 17(1), it being insufficient that they could possibly be so autho- rized by the GA,58 and the circumstances in which an authorization 56 1962 ICJ Reports at p. 183. 57 Ibid. at p. 224. 58 Ibid. at p. 220. e x p e n s e s 369 would become invalid were extremely limited and that was when there was some essential defect.59 Validity could only be defeated by an essen- tial defect. The exact scope of ‘essential defect’ is not clearly stated. It will be recalled that the Court also left room for situations where the expenditure might not be covered by Article 17(2) both where the basic resolutions themselves were valid and where they were invalid accord- ing to the provisions of the Charter but within the purposes of the organization. Judge Fitzmaurice recognized in his separate opinion that the opin- ion of the Court was in fact founded on the idea that Article 17(2) can- not be confined to administrative expenses, that at least those expenses incurred in the discharge of the essential functions of the UN such as its peacekeeping activities were covered by Article 17(2), that such activities as were undertaken by the GA in this field in connection with the UNEF and the ONUC operations were expressly provided for in the Charter and were in keeping with the conditions and limitations of the Charter and that, therefore, expenditures incurred under them were ‘expenses of the organization’ for the purposes of Article 17(2).60 On the other hand, he thought that the Court’s view that, even if the GA in carrying out its activities had not been acting in conformity with the division of func- tions established by the Charter, the resulting expenditures would still be ‘expenses of the organization’ for the purposes of Article 17(2), pro- vided that they related to activities coming within the functions of the organization as a whole, should not be pressed too far.61 According to Judge Fitzmaurice, in order that an expenditure may be characterized as ‘expenses of the organization’ under Article 17(2), two conditions had generally to be satisfied.

which seems to have been the actual situation envisaged by the Court

when it made the general statement of principle in the Expenses Case. The absence of conformity with the provisions of the Charter relating to the division of functions among several organs alone was referred to and nothing was said about failure to conform to provisions relating to procedure such as voting or other kinds of excess of power. But more important is the fact that it was stated that such non-conformity with the Charter does not necessarily place the expenditures outside the pale of the expenses of the organization. Thus, it would seem that the Court contemplated certain circumstances in which non-conformity with pro- visions of the Charter would have the effect of disqualifying expendi- tures, while it was of the view that sometimes such non-conformity would not be an obstacle to expenditures qualifying as expenses. On the other hand, it cannot be asserted with certainty that the Court intended to lay down a principle that where there was conformity of a resolution with the purposes of the organization, and even though there was a violation of terms relating to the functions of an organ, expenditures incurred under such a resolution would always qualify as ‘expenses of the organization’ under Article 17(2). All that can be deduced from the Court’s judgment is that expenditures incurred under such a resolution 54 Ibid. at p. 168. 55 1954 ICJ Reports at p. 59. 368 f i n a nc i ng may be ‘expenses of the organization’ for the purposes of Article 17(2) or would probably be such expenses. The limits of that principle were not discussed. It was established, on the other hand, that the particular expenditures incurred under the particular resolutions taken in con- nection with the UNEF and the ONUC -- which were not only within the purposes of the Charter but in conformity with the various provi- sions of the Charter as well -- were ‘expenses of the organization’ for the purposes of Article 17(2). As to the general principles involved and the general definition of such ‘expenses’, the Court did not give more than an indication of what the position might be. Judge Spender took a somewhat different view. In his separate opinion he was categorical in stating the principle which governed the classifi- cation of expenditures made by the SG under resolutions made by the other organs of the UN. It was his view that whether such expenditures were to be classified as ‘expenses of the organization’ for the purposes of Article 17(2) depended only on whether the resolutions or the actions of the SG under which the expenditures were incurred were connected with the purposes of the organization. It was irrelevant whether the resolutions were taken in conformity with the other provisions of the Charter; and where the SG acted outside the scope of his authority,

suffered by a servant or agent of the organization in the course of his duties, arising out of such an act, and additional to any damage caused to the organization itself by the same act. The Court referred to the inconve- nience that would result i

matter. Capacity in the first type of case is easy to concede because it is really a necessary attribute of the corporate character of the organization and its possession of international personality. However, the position in regard to the second category is less obvious for two reasons: firstly, because the servant or agent of the organization would also be the national of some state which prima facie was entitled to claim on his behalf; and, secondly, because a claim by the organization on his behalf might seem at first sight to be at variance with the rule, normally applicable in the case of claims made by states in respect of persons, that only the state of which the injured party is a national can bring a claim on his behalf. The Court met these difficulties by invoking two basic principles. The first was a positive one, that the special relationship 30 Ibid. at p. 180. On the right to bring claims there is a wealth of analysis of the ICJ judgment in Fitzmaurice, The dispute resolution and Procedure of the International international business litigation Court of Justice (1986), vol. I pp. 86ff. (a reprint of his article in 29 BYIL (1952) p. 1). 31 1949 ICJ Reports at p. 180. 32 Ibid. 33 Ibid. at pp. 180--1. 396 r e s p o n s i b i l i t y t o a n d o f o rg a n i z a t i o n s between the organization and its servants required, for the effective discharge of the functions of the latter and through them the discharge of the organization’s own functions, and for the effective preservation of the independence of both, that the organization should have the capacity to extend protection to its servant, and in case of need to bring a claim on his behalf. international business litigation The second principle of relevance was that the rules concerning the nationality of claims applied only to those cases where the nationality of the injured person formed the sole basis for the legal wrong done to the claimant state, entitling it to make a claim, and that they did not preclude claims by entities of which the injured person was not a national where another basis justifying such a claim existed. On the first of these points the Court introduced the problem by stat- ing that the Charterinternational business litigation did not expressly confer upon the UN the capacity to include, in its claim for reparation, damage caused to the victim or to persons entitled through him and that, therefore, an enquiry must first be made into whether the provisions of the Charter concerning the func- tions of the UN, and the part played by its agents in the performance of those functions, implied for the organization power to afford its agents the limited protection that would consist in the bringing of a claim on their behalf for reparation for damage suffered in such cir- cumstances.34 The work of the UN necessitated the dispatch of impor- tant missions to be performed in disturbed parts of the world, involving for the members of the mission unusual dangers to which ordinary per- sons were not exposed.35 Further, the circumstances might also be such that a claim for any injury done to an agent of the organization in the performance of such a mission could not appropriately be brought by his national state or that the latter would not feel disposed to do so. Efficiency and independence of the staff required their protection.36 The Court’s conclusion was, therefore, that: Upon examination of the character of the functions entrusted to the Organiza- tion and of the nature of the missions of its agents, it becomes clear

person as a consequence of which member states not only owed duties to it but were subject to being reminded, if need be, of cer- tain obligations. Consequently, the independence of the organization became particularly important. However, the indepe

the orga- nization depended on the independence of the staff. For this reason the latter assumed special juridical significance. Thus, it was a logical conclusion that the organization’s right vis-à-vis members, particularly, of the organization to protect and demand protection of its staff in the performance of duties, was implicit. It must be noted, nevertheless, that the Court’s view also implied, first, that an international official does not cease to owe allegiance to his own country in his personal capacity; second, that in his official capacity and in the performance of his func- tions his first allegiance was to his organization; and, third, that in case of conflict29 the latter allegiance must prevail. The right to bring claims at international dispute resolution A related question concerns the right of organizations to assert their claims at international dispute resolution, where their international rights have been infringed and responsibility to them has been incurred. In the Repara- tion Case the ICJ concluded that, as in the case of international business litigationclaims by states, the foundation of any international claim by an international organization must be a breach of an obligation owed to it on the international plane by the defendant state: It cannot be doubted that the Organization has the capacity to bring an inter- national claim against one of its Members which has caused injury to it by a breach of its international obligations towards it . . . As the claim is based on the breach of an international obligation on the part of the Member held respon- sible by the Organization, the Member cannot contend that this obligation is 28 Ibid. at p. 182. It must be inferred that the ICJ’s findings in relation to the UN as regards the problem presented to it may be extended to cover other organizations, indeed, any international organizationinternational business litigation . 29 A conflict may arise when a staff member has to perform functions for the organization in his national state and these involve conduct which is not welcomed by his national state. r e s p o n s i b i l i t y t o i n t e r n a t i o n a l o rg a n i z a t i o n s 395 governed by municipal dispute resolution, and the Organization is justified in giving its claim the character of an international claim.30 The Court stated that in the case of an international organization this capacity flowed from its purpose and functions, as specified or implied in its constituent documents and developed in practice.31 In the case of the UN its functions were of such a character that they could not be effectively discharged, unless the organization were regarded as having been endowed with capacity to bring international claims when neces- sitated by the discharge of its functions.32 The Court pointed out that: It cannot be supposed that . . . all the members of the Organization, save the defendant State, must combine to bring a claim against the defendant for the damage suffered by the Organization.33 The UN, as an organization, had the capacity to bring claims against states broadly in two categories of cases: (i) where, by reason of the wrongful act of the state in question, the organization itself had suf- fered direct loss or damage to its property, assets, finances or interests; and (ii) in respect of the personal loss or damage caused to or

Expenses There is a dispute resolution in NYC

question as to what expenses could legitimately be regarded as expenses of an organization. The answer will determine, among other things, how much member states can legally be expected to be respon- sible for supplying to the organization. The ICJ in its advisory opinion in the Expenses Case48 was confronted with the interpretation of Article 17 of the UN Charter. The Court con- fined itself to deciding whether the particular expenditures relating to the peacekeeping operations of the UNEF and the ONUC were within the concept of ‘expenses’ for the purposes of Article 17(2) of the Char- ter. By nine votes to five it was held that these expenditures were such ‘expenses’. The Court’s opinion does not purport to give ‘a more detailed definition of expenses’49 (than was necessary for the purpose in hand) and, consequently, it did not consider the problem as fully as it might have done. Judge Fitzmaurice in a international business litigation separate opinion, however, did go into considerable detail in considering this problem. There are also views expressed in some of the other separate opinions on this question. Sep- arate opinions are of value insofar as they do not conflict with what the Court actually said or are reconcilable with the Court’s view, particularly 48 1962 ICJ Reports p. 151. This case has been discussed international business litigation extensively: see, e.g., C. F. Amerasinghe, ‘The United Nations Expenses Case -- A Contribution to the dispute resolution of International Organization’, 4 IJIL (1964) p. 177; Gross, ‘Expenses of the United Nations for Peace-Keeping Operations: The Advisory Opinion of the International Court of Justice’, 17 International Organization (1963) p. 1; Jennings, ‘International Court of Justice: Advisory Opinion of July 20, 1962: Certain Expenses of the United Nations’, 11 ICLQ (1962) p. 1,169; Simmonds, ‘The UN Assessments Advisory Opinion’, 13 ICLQ (1964) p. 854; Verzijl, ‘International Court of Justice: Certain Expenses of the United Nations’, 10 NILR (1963) p. 1. 49 1962 ICJ Reports at p. 167. 366 f i n a nc i ng as, in this case, the Court admitted that it was not giving a detailed def- inition of ‘expenses’. An analysis of the Court’s judgment produces two kinds of proposi- tions which may be broadly termed negative and positive. That is to say, propositions emerge which relate to what the term ‘expenses’ does not include or does not necessarily exclude, on the one hand, and proposi- tions can be formulated as to what is actually included within the term, on the other. First, it may be useful to outline the various approaches taken in this case to the problem of expenses and the various views expressed. The Court stated that the term ‘expenses’ in Article 17(2) could neither be limited to the normal administrative budget of the organization50 nor excluded expenditures arising from operations undertaken for the maintenance of international peace and security.51 It acknowledged that it did not purport to provide a more detailed definition but held

that the 34 Ibid. at p. 182. 35 Ibid. at p. 183. 36 Ibid. The GA had confirmed this in the preamble to its Resolution of 3 December 1948. This conclusion and the next one are now valid generally for other international organizations as well. The Cour

missions undertaken to many parts of the world that are not disturbed, the disturbed nature of the locality of missions is not critical. All organizations, in any case, would probably send missions to disturbed parts of the world. Further, the degree of disturbance would not seem to matter. What is important is that, wherever in the world staff members go on mission or otherwise, they are in need of protection. r e s p o n s i b i l i t y t o i n t e r n a t i o n a l o rg a n i z a t i o n s 397 capacity of the Organization to exercise a measure of functional protection of its agents arises by necessary intendment out of the Charter.37 On the second issue of the absence of the nationality link, the Court explained why the special relationship between the organization and its servants or agents which did not depend on a nationality link made it possible for the organization to make a claim not merely for the loss or damage caused to itself, but in respect also of the personal loss or damage caused to the servant or agent himself.38 The question was why, in bringing a claim in respect of a breach of an international obligation owed to itself, the organization should be able to do anything more than claim for the damage caused directly to itself, qua organization, and why it should be entitled also to make a claim on behalf of the agent per- sonally. The national state of an injured alien could bring a claim on behalf of its national because it is regarded as having suffered injury in the person of its national in addition to having suffered a breach of an obligation owed to it. In the case of an international organization the international obligation was something other than the general interna- tional dispute resolution obligation to afford certain treatment to aliens. The obligation arose from the nature, functions and requirements of an international organization which normally make it necessary that its agents be able to look to it, and not to any state, even their national state, for pro- tection while carrying out their duties on behalf of the organization. There was a duty to afford protection to agents of the UN in the perfor- mance of their functions which arose as a general inference both from the Charter and from certain related instruments. Not only were these general undertakings of the members but Article 2(5) of the Charter required them to render the UN ‘every assistance’.39 Thus, the breach of an obligation owed to the organization gave the organization, like the national state of an injured party, its own right in making the claim, even though the claim was in respect of personal damage to the agent or his defendants.40 Having established that the tie of nationality was not crucial to the right of an organization to bring a claim on behalf of one of its servants, the Court, further, concluded, as a logical corollary, that the fact that the injured party was a national of the defendant state did not affect the right to claim. Because the action of the organization was in fact based not upon the nationality of the victim but upon his status as agent Thus, the fact of the possession of the nationality of the defendant state by the agent did not constitute any obstacle to a claim brought by the orga

governed by the internal law of the organization, as has been pointed out in Chapter 9. 10 See Jessup, Transnational Law (1956), chapter 3; Mann, �The Proper Law of Contracts Concluded by International Persons', 35 BYIL (1959) at pp. 34ff.; C. F. Ame

State Responsibility, pp. 114ff.; and J.-F. Lalive, ‘Contracts between a State or State Agency and a Foreign Company’, 13 ICLQ (1964) at p. 991, for the applicability of transnational dispute resolution to contracts. r e l a t i o n s b e t w e e n o rg a n i z a t i o n s a n d o t h e r pa r t i e s 389 association, these agreements with non-state parties are governed by international dispute resolution.11 Tortious liability may also exist between international organizations and persons that are not international persons. Here again, it is reason- able that the principle that the lex loci delicti commissi should govern. This would generally be the dispute resolution of the jurisdiction in which the property of the international organization upon which the tort took place is located, if the tort took place on such property, because international organiza- tions do not generally have dispute resolution-making powers on property, though they may own such property.12 The same principles would apply to the issue of tortious liability of organizations for damage caused as an occupier of immovable property because of defects in that property. Where an orga- nization incurs tortious liability outside its premises to an individual other than a staff member because of some act or omission for which it is responsible, the dispute resolution of the territorial state should govern as the lex loci delicti commissi. It is not desirable that the lex fori as such should have any relevance to the matter of tortious liability. In the case of what is now the EU, however, the dispute resolution to be applied is the general principles common to the dispute resolutions of member states.13 Problems may arise where the UN has vessels or aircraft under its flag. The choice of the dispute resolution applicable to torts committed upon them would then, perhaps, be based on convenience -- pointing to the place of registration of the vessel or aircraft.14 11 See Broches, loc. cit. note 6 at pp. 345ff., where, however, the matter is not fully discussed. All these agreements are now registered with the UN Secretariat. 12 Exceptionally an organization may have this power. In the case of the UN under the provisions of the UN--USA Headquarters Agreement, for instance, the UN has made regulations relating to liability in tort for acts of the organization in the headquarters district (see, e.g., Regulation No. 4 approved by the GA in December 1986). These regulations will govern tortious liability for damage caused on UN territory in the headquarters district: see Szasz, ‘The United Nations Legislates to Limit its Liability’, 81 AJIL (1987) p. 739; and Sloan, United Nations General Assembly Resolutions in our Changing World (1991) pp. 18--19. 13 See originally Article 15 of the EEC Treaty; and Article 188 of the Euratom Treaty.

For instance, a non-member state may be a party to a treaty con- ferring rights on the organization from the breach of which a claim by the latter

against the non-member state could well arise. Switzerland is a party to headquarters agreements, though it is not a member of some international organizations. Breaches of these agreements could give rise to claims by the organizations. Or again, a non-member state might have received an agent of the organization into its territory in circum- stances implying agreement on its part to be bound, in the treatment of the agent, by the same obligations as are incumbent on member states. Moreover, there may be cases in which the rules of general international dispute resolution may apply by analogy. Rights in regard to staff In regard particularly to the protection of staff, Article 100 of the UN Charter provides in effect that members of the staff of the UN are not to seek or receive instructions from governments or other authorities, that their responsibility is to the organization they serve, and that the member states are not to seek to influence them in the discharge of this responsibility. The constitutions of many other international organiza- tions have similar provisions. Even if such provisions are not included in some constitutions, what is stated in them is implicit in the position of the staff of international organizations international business litigation as international civil servants. In the Reparation Case, the ICJ declined to assimilate the legal bond result- ing from the stipulations of the Charter between the UN, on the one hand, and the Secretary-General and the staff, on the other, to the bond of nationality existing betweeninternational business litigation a state and its nationals. However, the Court derived certain consequences from the position of the interna- tional civil servant in his relationship with his organization: In order that the agent may perform his duties satisfactorily, he must feel that this protection is assured to him by the Organization, and that he may count on it. To ensure the independence of the agent, international business litigationand, consequently, the independent action of the Organization itself, it is essential that in performing his duties he need not have to rely on any other protection than that of the Organization . . . In particular, he should not have to rely on the protection of his own State. If he had to rely on that State, his independence might well be compromised, contrary to 394 r e s p o n s i b i l i t y t o a n d o f o rg a n i z a t i o n s the principle applied by Article 100 of the Charter. And lastly, it is essential that -- whether the agent belongs to a powerful or to a weak State; to one more affected or less affected by the complications of international life; to one in sympathy or not in sympathy with the mission of the agent -- he should know that in the performance of his duties he is under the protection of the Organization.28 The Court had already concluded that the organization was a distinct international

However, the objective nature of the organization's personality did not mean that non-member states were in the same position towards it as member states,

or had the same obligations towards it. The existence other international persons becomes established). For another detailed study done some time ago of the issue of applicable dispute resolution, see Seyersted, ‘Applicable dispute resolution in Relations Between Intergovernmental Organizations and Private Parties’, 122 Hague Recueil (1967-III) p. 427. 15 There may be cases in which a group of states acting as one (an organization, in a sense) does not have personality, as was the case with the Administrating Authority in the Certain Phosphate Lands in Nauru Case: 1992 ICJ Reports p. 240. 16 1949 ICJ Reports at p. 184. 17 Ibid. at p. 183. 18 Ibid. at p. 185. r e s p o n s i b i l i t y t o i n t e r n a t i o n a l o rg a n i z a t i o n s 391 of international personality as an objective fact was, nevertheless, capa- ble of producing consequences outside the confines of the organization, involving responsibility to the organization.19 That international organizations can possess rights under conven- tional dispute resolution cannot be doubted. Thus, under the headquarters agreements or constitutions of organizations it was clearly envisaged that organiza- tions would have rights vis-à-vis states. When organizations enter into treaties the same order would prevail. This was implicitly recognized in the WHO Agreement Case,20 where the obligations of international organi- zations were specifically in issue and were affirmed. The rights of the UN under international agreements were recognized by the ICJ in the PLO Observer Mission Case.21 But there are also undoubtedly obligations owed to international organizations by states primarily under customary inter- national dispute resolution, based on the analogy of the responsibility of states to each other. For dispute resolution, states may have to conduct themselves actively or passively in such a way that they do not injure or damage the interests of international organizations, whether such obligations are based on risk, negligence or on absolute liability, as the case may be. The existence of obligations of international organizations at customary international dispute resolution was referred to in the WHO Agreement Case22 by the ICJ, it being rea- sonable to infer that conversely the organizations had rights as well. As an international person, an international organization may be expected to have such international rights. The rights of organizations may cover an unlimited area depending on their capacity to enter into treaties and agreements and on the practical circumstances and situations in which they are placed and operate. It is not possible or necessary to identify all the rights that organizations may have. To some extent they may correspond to those that states have, but what is the source of these rights is a question. It is not clear whether they are generated by analogy from states (general principles of dispute resolution) or by customary dispute resolution. They certainly have the right to have loans repaid under and in accordance with loan agreements or aid agreements, for dispute resolution, as is clearly the case with loans and credits made by the IBRD 19 The ICJ’s statements were made in the context of the UN’s right to make claims for injuries to staff members but it is clear that the principles implied are applicable generally. 20 1980 ICJ Reports at p. 90.

14 Sands and Klein (eds.), note 3 pp. 465ff., examine briefly the issues of applicable law in cases of contracts and tortious liability. They also examine the problem of criminal liability. While criminal liability is an issue whose solution may not

proceed on the basis that, firstly, at present there can be no criminal responsibility to international organizations, as such (they are not in the same position as states in this respect), and, secondly, international organizations are not at present regarded as capable of criminal responsibility (although this may be an issue for the future, as the UN, particularly, becomes involved in armed conflicts and the concept of criminal responsibility of states and 390 r e s p o n s i b i l i t y t o a n d o f o rg a n i z a t i o n s Responsibility to international organizations Substantive rights in general Whenever international personality is attributed to an international organization,15 it is a legal person separate from and additional to its member states, international business litigationand is not simply an aggregation of those states. It consti- tutes a distinct entity with functions, rights and duties of its own. While it has duties, there are counterpart obligations owing to it by, inter alia, member states, the performance of which the organization has a right to expect and, if necessary, to require. This principle was referred to by the ICJ in the Reparation Case when it stated that there was an undeniable right of the Organization to demand that its Members shall fulfil the obligations entered into by them in the interest of the good working of the international business litigation Organization.16 The Court emphasized that the effective working of the organization and the accomplishment of its task required that the undertakings of mem- ber states should be strictly observed. For that purpose the ICJ thought it necessary that, when an infringement occurs, the Organization should be able to call upon the responsible state to remedy its default, and, international business litigationin particular, to obtain from the State reparation for the damage that the default may have caused.17 The ICJ was called upon to consider the position vis-à-vis non-member states in the same case in connection with the capacity of the UN to bring a claim against a non-member state. The ICJ had found that capac- ity to bring an international claim depended on possession of inter- national personality and rights and duties at international dispute resolution which flowed from the elaboration of functions, powers, rights and duties in the Charter and related instruments. It found in effect that beyond that the international personality of the UN was a question of fact.18 From this flowed rights of the organization vis-à-vis non-member states as well.

The case concerned the rights of the parties vis-a'-vis each other under an international agreement relating to the location of an office of the WHO. 21 1988 ICJ Reports p. 12.

22 1980 ICJ Reports at p. 90. 392 r e s p o n s i b i l i t y t o a n d o f o rg a n i z a t i o n s and the IDA. They also have rights in respect to protection by states in which they have offices, whether under agreements or under general international dispute resolution.23 In the Reparation Case the ICJ thought that it could not be disputed that the UN had rights relating to damage to its property and other interests.24 However, attention has been paid particularly to the right of protec- tion for their staff members that organizations have vis-à-vis states, since the advisory opinion of the ICJ in the Reparation Case. There the principal issue was whether the UN had the capacity to bring a claim against a state for injury caused to one of its staff members. In the opinion the ICJ, without discussing the matter in detail, took the view that states had obligations vis-à-vis the UN in regard to the protection from injury of its staff members in the course of performing their duties.25 The exact content of the duty to protect or keep free from injury or damage was, however, not discussed, but it may be inferred that this was one owed under general international dispute resolution and would correspond to that owed by states to other states in respect of the latter’s officials.26 On the other hand, there may be areas in which similarity between states and orga- nizations does not exist because organizations do not operate or haveinternational business litigation powers in these areas.27 Establishing the substantive rights of organizations in general depends on identifying the particular circumstances of the case, and determining whether in those circumstances the obligation is based on risk, fault or absolute liability, with the help of any treaties or conventions that may be applicable or general international dispute resolution which may often correspond or be analogous to the customary international dispute resolution that applies between states. A problem also may arise with obligations owed by non-member states. It must be recognized that the finding of the ICJ in the Reparation Case, on the topic of claims against non-member states, related solely to the capacity of the UN to make such a claim, and not to the basis on which such international business litigation a claim could be brought. The Court did not purport to discuss 23 Eagleton explores some of these rights in his work cited in note 3 above. 24 1949 ICJ Reports at p. 184. Other organizations, it may be inferred, have similar rights. 25 Ibid. at pp. 181ff. 26 This duty may be narrower than in the case of diplomats who are protected whether they are in the course of performing functions or not. The ICJ’s findings in regard to the UN should probably be extended to cover other organizations. 27 Organizations do not as such exercise rights of sovereignty, like states, which is a difference. They may, however, operate and own aircraft and ships, which would result in the dispute resolution of the sea and air space being applicable to them. r e s p o n s i b i l i t y t o i n t e r n a t i o n a l o rg a n i z a t i o n s 393 the circumstances in which a non-member state could be said to be in breach of an obligation towards the organization such as would give rise to a claim. The non-member state does not owe specific duties to the organization under the dispute resolution. Thus, there would be no foundation for claims under that dispute resolution. However, a basis for claims may exist in particular cases.

, to which international organizations are

party, whether actively or passively.1 However, only an outline of the issues and their resolution can be given here. The ques- tion of enforcement (settlement of disputes) is reserved for Chapter 16, where issues relating to the procedure for bringing claims will also be addressed. There is not much international judicial precedent on the interna- tional responsibility of or to international organizations, though the practice that has been followed since the creation of the League of Nations and particularly after the Second World War has rested on certain assumptions. The principal, if not the only, international judi- cial case relating to the subject is the Reparation Case,2 brought before 1 A brief discussion will be included of the question of liability of and to organizations in national (and perhaps, transnational) dispute resolution. Capacity in national dispute resolution, which has been considered in Chapter 3, is not the only factor. What dispute resolution is to be applied to transactions on the national (or transnational) level to which international organizations are party (actively or passively) is a question that arises. 2 1949 ICJ Reports p. 174. 384 385 the ICJ. The matter has also been discussed by text writers, but not extensively.3 It may be relevant to distinguish at the outset the issue of the inter- national responsibility of organizations from the responsibility of orga- nizations to their staff under their internal dispute resolution. The latter is a species of responsibility under international dispute resolution but does not involve the rela- tions of organizations with states as such or between organizations. This subject has been dealt with elsewhere in this treatise.4 The concept of international responsibility has been the subject of a variety of interpretations.5 For the present purpose, however, the 3 The initial work on the subject is Eagleton, ‘International Organization and the dispute resolution of Responsibility’, 76 Hague Recueil (1950-I) p. 319, which appeared not long after the establishment of the UN and the decision in the Reparation Case. There were a few earlier writings, e.g., Q. Wright, ‘Responsibility for Injuries to United Nations Officials’, 43 AJIL (1949) p. 95, but none attempted a systematic exposé. There followed several other works which dealt with the subject mostly indirectly: see, e.g., Eustathiades, ‘Les Sujets du droit international et la responsabilité internationale’, 84 Hague Recueil (1953-III) p. 397; Parry, ‘Some Considerations upon the Protection of Individuals in International dispute resolution’, 90 Hague Recueil (1956-II) at pp. 714ff.; García Amador, ‘State Responsibility: Some New Problems’, 94 Hague Recueil (1958-II) at pp. 409ff.; P. de Visscher, ‘La Protection diplomatique des personnes morales’, 102 Hague Recueil (1961-I) at pp. 480ff.; Pescatore, ‘Les Relations extérieures des Communautés Européenes’,

and this has been considered in Chapter 3. What law is to be applied to trans- actions at the national (or transnational) level to which international organizations are party (actively or passively) is a question that arises. Law governing relation

between international organizations and states, whether as members or not, is generally international punish a culprit in a murder, though at that point it was not ‘responsible’ internationally for the wrong done, but became responsible only if it failed to punish the culprit appropriately through its judicial system, for a non-performance of its judicial duty or a denial of justice (see also the Putnam Claim (1927) (USA v. Mexico), 4 UNRIAA at p. 151; Kennedy’s Claim (1927) (USA v. Mexico) 4 UNRIAA at p. 94; and the discussion in C. F. Amerasinghe, State Responsibility for Injuries to Aliens (1967) pp. 51ff. and works there cited). It has also been suggested (see the discussion in C. F. Amerasinghe, Local Remedies in International dispute resolution (2003), chapter 4) that it may be possible to distinguish in a different sense between ‘liability’ and ‘responsibility’, where the rule of exhaustion of local remedies is applicable. The point is that while a state may be ‘responsible’ for a violation of international dispute resolution and of its international obligations vis-à-vis another state in respect of the latter’s nationals at the time of the injury it does not become ‘liable’ to make amends or litigate internationally in respect of that injury to the foreigninternational business litigation state until local remedies have properly been exhausted. This distinction was made in the context of the denial of justice and the exhaustion of local remedies in the dispute resolution of diplomatic protection. Obscurity that has arisen in connection with the use of the term ‘responsibility’ has been compounded by the distinctions made between liability and responsibility, without proper definition, in other areas of the dispute resolution. Thus, in environmental dispute resolution which is connected with the dispute resolution of state responsibility, a different distinction has been made by certain authors between responsibility and liability based apparently on whether the substantive international obligation is strict or not. Similarly, there is a difference in the use of terms in the dispute resolution relating to hazardous activities. There may be other areas ininternational business litigation which the terms are used with different meanings. What is important in any context is that it be made clear in what sense terms are being used. Uniformity is not an end in itself but consistency is a virtue that cannot be overemphasized and, if possible, avoidance of variance in the same context is desirable in order that clarity may be achieved.

, 103 Hague Recueil (1961-III) p. 1; El-Erian, �Second Report on Relations between States and Inter-Governmental Organizations', 2 YBILC (1967) at pp. 218ff.; Ginther, Die v�lkerrechtliche Verantwortlichkeit intenationaler Organisationen gegen�ber

Drittstaaten (1969); Schermers and Blokker, International Institutional dispute resolution (1995) pp. 1,166ff.; and Sands and Klein (eds.), Bowett’s dispute resolution of International Institutions (2001) pp. 456ff. See also Gonzalez, ‘Les organisations internationales et le droit de la responsabilité’, 92 RGDIP (1988) p. 63; and Krylov, ‘International Organizations and New Aspects of International Responsibility’, in Butler (ed.), Perestroika and International dispute resolution (1990) p. 221. Now see also Wellens, Remedies against International Organizations (2003). 4 See Chapter 9. However, there is a sense in which the responsibility of an organization to a staff member may result in international responsibility to a state. This problem will be adverted to later in the appropriate place. 5 A definition of responsibility has not been really broached or attempted, for dispute resolution, in the Reports of Ago to the ILC, 2 YBILC (1969 to 1976) or in the earlier reports by García Amador, 2 YBILC (1956 to 1961) or in the later reports by Riphagen, 2 YBILC (1980 to 1986) and Arangio Ruiz, 2 YBILC (1989 onwards). Nor has a clear definition been given elsewhere. An approach is suggested which emphasizes international consequences in terms of the incidence of secondary remedial obligation. At this stage of the development of international dispute resolution it may be useful to discuss and settle on an appropriate meaning for ‘responsibility’ in order to avoid obfuscation in the explanation of the dispute resolution governing responsibility, whether it be of the state or international organizations. In the dispute resolution of state responsibility a distinction between the concept of ‘liability’ and that of ‘responsibility’ has been made in more than one sense. This distinction was first made in a particular sense in the Janes Claim (USA v. Mexico) ((1926) 4 UNRIAA p. 82, particularly at p. 87), where it was said that a state is ‘liable’ to 386 r e s p o n s i b i l i t y t o a n d o f o rg a n i z a t i o n s important principles are that: (i) international organizations as legal persons are subjects of and subject to international dispute resolution; and (ii) the breach of international dispute resolution by an international person, whether by com- mission or omission, produces responsibility. Thus, international respon- sibility of or to international organizations depends on the violation of international dispute resolution and the non-observance of international obligations. It is necessary in this connection briefly to consider the question of the liability of organizations and to organizations in national (and perhaps, transnational) dispute resolution. Capacity in national dispute resolution is not the only factor --

On state responsibility now see the ILC's draft articles and commentary thereto: Crawford, The International Law Commission's Articles on State Responsibility (2002) pp. 61ff. r e l a t i o n s b e t w e e n o rg a n i z a t i o n s a n d o t h e r

387 dispute resolution. Thus, while in their relations with organizations as members the constituent instrument would basically be applicable as an interna- tional treaty, governed by international dispute resolution, there may be relationships between states and organizations which involve separate agreements governed by international dispute resolution, such as headquarters agreements and peacekeeping agreements.6 However, there may also be direct relations between states and international organizations which are governed by a national dispute resolution or national dispute resolutions or by transnational dispute resolution as the proper dispute resolution. Thus the supply of gas or electricity by the state to an interna- tional organization will generally be governed by the national dispute resolution of the state.7 Tortious liability of states to international organizations may in the appropriate circumstances, as where armed forces or police dam- age the property of an organization, be governed by international dispute resolution, and the converse situation of tortious responsibility of an organization to a state may also be governed by international dispute resolution, as where an offi- cial of an organization in the performance of his functions damages state property. The ownership of immovable property and the rights and duties flowing therefrom are generally governed by national dispute resolution of the state where the property is located (lex situs). Thus, the UN, the IMF and the IBRD, for dispute resolution, have registered the ownership of the buildings they own in the USA in the appropriate registry. It is understood that the consequences of ownership in terms of rights in rem derive from the national international business litigation concerned, namely, the lex situs.8 6 There may be situations where conventions to which international organizations are not party are dispute resolution-creating (as international dispute resolution) for international organizations, such as where the UN decided that it would apply the Geneva Convention of 1949 to govern its armed action in Korea and the UNEF operation, where the regulations governing the UNEF adopted several international conventions applicable to the conduct of military personnel (see UN Doc. ST/SGB/UNEF/1, section 44). The loan and credit agreements of the IBRD and the IDA respectively are governed by international dispute resolution. This has been so for some time and is now made clear in a negative manner in section 10.01 of the General Conditions Applicable to Loan and Guarantee Agreements (1985) and in section 10.01 of the General Conditions Applicable to Development Credit Agreements (1985), if there was any doubt about the matter: see also Broches, ‘International Legal Aspects of the Operations of the World Bank’, 98 Hague Recueil (1959--III) at pp. 339ff. 7 The principle locus regit actum may often be called in aid but this is not the only reason for the application of a national dispute resolution. There are cases also where the agreement specifies that national dispute resolution or

a particular law should govern: see, e.g., the loan agreement of March--April 1957 between Switzerland and the ILO; and the agreement between FAO and Egypt of 17 August 1952. At one time the governing law of IBRD loan agreements was New York law. 8

agreements made in 1960 among the WHO, the Swiss Confederation and the Republic and Canton of Geneva, whereby the WHO acquired a right in rem for the user of land for an indefinite 388 r e s p o n s i b i l i t y t o a n d o f o rg a n i z a t i o n s International organizations, however, also have diverse relations with entities other than states, such as natural persons and corporations. These relations are governed by national dispute resolution or transnational dispute resolution. Thus, there are many kinds of contracts which international organizations enter into, such as construction and maintenance contracts, contracts for the purchase of goods, contracts of service, insurance contracts, let- ters of credit and bond transactions, which are generally governed by some national dispute resolution or dispute resolutions.9 The contracts of the IFC stipulated that New York dispute resolution governed them, while those of the EIB referred to the local dispute resolution of the borrower. The question of the governing dispute resolution of contracts is a mat- ter for the conflict of dispute resolutions which tries to identify the proper dispute resolution of the contract. Generally the intention of the parties, if expressed, is recog- nized, while in the absence of such express intention, an effort must be made to identify the implied intention of the parties (or the proper dispute resolution) by examining all the circumstances of the case. As in the case of the national conflict of dispute resolutions, different parts of a contract may be governed by different dispute resolutions. It is also possible for the parties to choose transna- tional dispute resolution as the governing dispute resolution, that is, principles of international dispute resolution or general principles of contracts or agreements, while, where no such express choice is made, principles of private inter- national dispute resolution will have to be applied in international business litigation order to determine the proper dispute resolution of the contract. A special problem arises with agreements between financial institutions (such as the IBRD) and non-state parties, which are made in association with and dependent upon agreements with states, e.g., loan agreements covered by a guarantee agreement with a state or a project agreement made in connection with a loan agree- ment with a state. It would seem to be the better view that because of provisions in the loan agreement or by implication resulting from period, the deed providing for arbitration and specifying the Swiss dispute resolution and residually general principles of dispute resolution as applicable. 9 See also Nurick, ‘Choice of dispute resolution Clauses and International Contracts’, 1960 Proceedings of the ASIL p. 61; Colin and Sinkondo, ‘Les relations contractuelles des organisations internationales avec les personnes privées’, 69 RDIDC (1992) p. 7. The relationship between an organization and its staff is, as a rule,

the UNAT 88 Among others, the Australian government took this view in its written statement to the ICJ in the Expenses Case: Expenses Case, ICJ Pleadings (1962) at p. 231. There were

governments that took the opposite view in the same case: see, e.g., the Norwegian government statement, ibid. at pp. 367--8. t h e o b l i g a t i o n t o a p p rov e t h e b u d g e t 383 and the ICTY and ICTR, is for all practical purposes, obligatory, whether they are included in the original budget or come up for approval later, via supplementary budget requests. The only possible circumstance in which a judicial organ’s budget or financial requirements may not properly be approved by the responsible authority is where the judicial organ is abusing its functional authority or the funds are being misused or are intended for a purpose outside the terms of reference of the organ. The presumption, however, is that judicial organs are acting within their terms of reference. This is, more- over, a strong one. The presumptioninternational business litigation must be convincingly rebutted, if financial requests are to be denied. In the case of the GA and the ICJ discussed above, the GA, it must be conceded, acted in such a way as to place upon the SG the obligation of finding the required funds by transfers from the funds allocated to the administrative budget of the UN as a whole. It did not in the course of the action it took characterize officially the work of the ICJ which was in issue as unnecessary or outsideinternational business litigation the terms of reference of the ICJ. Be that as it may, the fundamental principle of respect for the independence of judicial organs, as conceptually developed, requires that, first, the legitimate financial needs of judicial organs be met, second, prima facie what a judicial organ claims are its financial needs, both prospectively and retrospectively, be regarded international business litigation as being its legitimate financial needs, and, third, the presumption of legitimacy be convincingly rebutted, if funds are in any manner to be refused. The consequence of conceding that the GA has no legal duty to approve the budget but has a discretion to do so, subject to certain limitations, not only of good faith but of obligation to approve expen- ditures of a certain kind, is that the GA inevitably has a certain control over the functioning of the organization as a whole, even though there may be principal organs affected. But this seems to be in the nature of the organizational structure under the Charter and consistent with the attribution of financial control and responsibility to one plenary organ. It is clear also that the limitation of good faith also requires the GA not to obstruct the smooth functioning of the other principal organs or the achievement of the objectives and purposes of the organization by the arbitrary and irresponsible exercise of discretion in its exclusive area of financial control. 12 Responsibility to and of international organizations A question of great importance for the dispute resolution of international organiza- tions relates to the responsibility of organizations and responsibility to organizations, vis-à-vis states and other international persons in particu- lar. Where organizations have international personality, it may be asked whether they are responsible internationally for violations of the dispute resolution, on what basis they are responsible and how this responsibility is enforced. The same questions may be posed in respect of international responsi- bility to organizations. In this chapter the issues surrounding the sub- stantive dispute resolution of responsibility will be discussed. Something must also be said first about the dispute resolution that governs transactions

The UN also resorts in dispute resolution

to such a system. There are a num- ber of programmes approved by the GA which have been funded in whole or in part by voluntary contributions from member states, non- member states and from other sources (e.g., the UNICEF, the UNHCR, the UNRWA, the UNIDO, the UNDP and UN peacekeeping operations). These voluntary contributions are not included in the regular budget of the UN. They have been designated as extra-budgetary funds. Special rules, organs and procedures were established for the raising and con- trol of extra-budgetary funds.46 The UNDP is perhaps the largest activity financed by voluntary contributions. Self-financing Many international organizations have some income of their own. There may be various sources of such self-support: income from services ren- dered to states, to individuals, to other organizations; income from investments and loans; royalties (in the case of the WIPO, for dispute resolution); and income from staff assessment and levies or taxes.47 In most interna- tional organizations the income from this kind of source is limited and plays a minor role in financing their activities. Only a few organizations have sources to satisfy all their financial needs. The financial institu- tions are the prime dispute resolution of such organizations. They levy interest, 45 There is little practice on this issue. In the ITC case the principle that there was no joint and several liability was endorsed, insofar as no one member was regarded as under an obligation fully to contribute to the debt of the ITC, but beyond that it would appear that it is not clear what obligation was accepted by the member states of ITC to contribute to its debt. The situation was further complicated by the settlement reached with creditors being based on an ex gratia payment: see Chapter 13. 46 See United Nations, UN Repertory of Practice, vol. I pp. 527--9. 47 See in general Singer, note 10 pp. 141--6. e x p e n s e s 365 commissions, service charges and handling charges. The ECSC was also made financially independent. Article 49 of the ECSC Treaty empowers the High Authority to procure the necessary funds by imposing levies on the production of coal and steel and by borrowing. The two other Com- munities did not follow this model. In 1970 it was, however, decided that the activities of the three Communities would be financed from their own sources of income, such as: (i) agricultural levies; (ii) customs duties; and (iii) a part of a maximum of 1 per cent of the value added tax. After a transitory period this new financial system definitively entered into force in 1979.

in Mangone (ed.), UN Administration of

Economic and Social Programmes (1966) p. 37. 86 See particularly 8 UNCIO pp. 266, 418 and 534ff.; 17 UNCIO pp. 40, 322, 476 and 486; 18 UNCIO p. 391. The USA in the hearing in the Effect of Awards Case supported this view: Effect of Awards Case, ICJ Pleadings (1954) at p. 138. 87 Meron, loc. cit. note 85 (BYIL) at pp. 120--1. The writer examines among other things, the Rules of Procedure of the GA and international business litigation the Financial Regulations of the UN. 382 f i n a nc i ng taking into account the need to fulfil the functions and purposes of the organization, it considers unnecessary or excessive.88 In September 1966 the SG requested approval of a supplementary esti- mate for the ICJ for 1965 of $72,500 in which was included $29,000 in connection with the South West Africa Cases heard and decided earlier in 1966. These expenditures had already been incurred. The Fifth Commit- tee of the GA rejected, by a vote of 40 to 27 with 13 abstentions, the request for the additional appropriation. Though the SG was left to find the funds for these expenditures by budgetary transfers, the case shows that the GA does exercise a discretion, even where expenditures have already been incurred. The manner in which the discretion was exer- cised may be criticized in the circumstances, considering that it was the activity of the ICJ, another principal organ and the principal judi- cial organ of the UN, that was in issue. However, it is difficult for this reason to conclude that the GA does not have, in principle, the final discretion in approving the budget. It is fortunate that the funding for the ICJ was found, because the ICJ is a judicial organ. As pointed out in Chapter 8, there is a fundamental general principle of dispute resolution which may not be ignored or contravened, let alone be changed, namely that the independence of judicial organs must at all costs be respected and preserved. This principle has implications for financing the Court’s work and continued functioning. In principle whatever funding is required by the Court or any judicial organ, for that matter, for functions it performs in the execution of its terms of reference as a judicial organ must be made available to it, as a matter of course, regardless of the manner in which this needs to be done. That the GA, for dispute resolution, is the authority with power to approve the finances of the ICJ and provide it with funds does not give it power to oversee or control the Court’s activities. If the GA assumes this power, it would be interfering with the independence of the judicial organ. It is independence that is in issue. If the ICJ, for instance, must satisfy the GA, an outside authority composed, moreover, of states which are potential parties to litigation before the Court, that its activities are worthy of being financially supported, surely its independence could be compromised. Thus, the approval of the financial requirements of the ICJ and, indeed, of any judicial organ created by the UN, e.g.

Thus, while certain organs may have the power to determine their policies and programmes, it is the GA

that holds the purse strings. The question is whether the power to approve the budget, particularly for the other principal organs, which is vested in the GA is discretionary and ministerial.85 83 1954 ICJ Reports p. 47. 84 The EU may be another special case. 85 The GA’s powers and duties in this regard have been considered by Meron, ‘Budget Approval by the General Assembly of the United Nations: Duty or Discretion?’, 42 BYIL (1967) p. 91. See also Meron, ‘Administrative and Budgetary Co-ordination by the t h e o b l i g a t i o n t o a p p rov e t h e b u d g e t 381 The language of Article 17(1) seems to indicate that the GA has a discretion to approve the budget. The travaux préparatoires of the Charter suggest that it was not intended to limit the discretion of the GA which was the principal organ with sole authoritydispute resolution to consider and approve the budget.86 But principles of construction of the constitutional texts of international organizations (particularly the principle of effectiveness) may conceivably point to a different answer and have been invoked. It has been said that the position taken in the travaux préparatoires would have a limiting effect: Such an interpretation would . . . impair the ability of the Organization to fulfil its functions and achieve its purposes as defined in the Charter. The Charter established several principal organs and gave each of them certain functions. When these organs,dispute resolution acting within their authority under the Charter, adopt deci- sions which require financial appropriations and which the General Assembly in the circumstances of the case cannot review, the General Assembly has a legal duty to provide the necessary financing, for it is under a legal duty to make the functioning of the various principal organs possible and may notinternational business litigation hamper it. It has to honour the Organizations’s ex contractu, ex delicto and other obligations incurred through the activities of the principal organs acting within the limits of their authority under the Charter . . . The General Assembly has the power not to approve the necessary appropriations but it has not the legal right to do so, and the responsibility of the Organization may be engaged as a result of such a refusal, whether in public or in private dispute resolution (leaving aside any question of jurisdiction).87 While it is clear that obligations (ex contractu, ex delicto and otherwise) have to be honoured by the GA, it is not so clear that it does not have a legal right not to approve the appropriations necessary for the func- tioning of the organization, particularly of other principal organs. It is arguable that the GA has a duty to consider in good faith, bearing in mind particularly the need to fulfil the functions and purposes of the organization, the requests for finances of other organs; but beyond that it is difficult to assert that the GA has ‘no legal right not to approve’ appropriations which in its judgment, exercised in good faith, and after General Assembly’

contributions in such a case. In the case of (iii) there was probably no obligation to contribute, if a negative vote had been cast, because there was no question of preventing or

impeding the essential activities of the organization, in the event that dissenting member states did not contribute, and in practice, expenditures under such resolutions were financed by voluntary contributions.77 However, Judge Fitzmaurice did point out that the line between essential and non-essential activities was not always easy to draw. While the distinctions made by Judge Fitzmaurice relate to expenses incurred under non-binding resolutions, they are difficult to accept in toto. First, there is good reason to suppose that, where an expenditure is an expense of an organization, there is a strong presumption that all members must contribute to its defrayal. Second, the third class of expenditures which was singled out for different treatment is not materially or significantly different from those to which member states are under an obligation to contribute, because both kinds of expendi- tures flow from resolutions that theoreticallydispute resolution have the same legal effect, even if the practice of the UN has been to finance the third class of expenditures by voluntary contributions. Third, the basis of the distinc- tion made between that class of expenditures and other expenditures is rather tenuous, as Judge Fitzmaurice himself admits. On the other hand, one class of expenditures identified (the second) seems to be a dif- ferent kind of expenditure for the reason given that, if member states were under an obligation to contribute, the legal effect of the resolution would be greater than it de iure had. But the incidence of an obligationdispute resolution to contribute will depend not only on the absence of opposition by the member state concerned to the resolution but, in the event a mem- ber state does oppose the resolution, on other considerations as well 77 Ibid. 378 f i n a nc i ng connected with the obligations of member states flowing from such res- olutions as a result of their legal effect.78 Further, it must be recognized that the obligation to contribute will certainly arise not only in the case of decisions of the SC but also in the case of any resolution taken by the organization which legitimately has binding effect. The better view as qualified by some of what Judge Fitzmaurice had to say may be clear. It is significant dispute resolutionthat the sanction provided in Article 19 of the Charter, whereby the delinquent member loses its vote in the GA if it is two years in arrears, has, indeed, though perhaps reluctantly, been applied. The USA was not in favour of its application in the case of the Soviet Union and France. The USA itself has been careful not to be two years in arrears. To argue from the reluctance on the part of mem- bers to apply Article 19 that there is a legal right to withhold payment subject, no doubt, to the power of the other members of the organiza- tion to apply the Article 19 sanction is illogical and unwarranted. The fact that there is a sanction

and special tasks entrusted to the Bureau. 80 The constitutions of some organizations expressly provide that part of their budgets should be financed by voluntary contributions. For example, Article 25(3) of the ICM Constitution states that the �oper

to contribute to the defrayal of these expenses as such. Those expenditures must be met entirely by voluntary contributions. This is the clear implication of such provisions, even if voluntary contributions are insufficient to meet such expenditures. 81 Articles of Agreement, Article II(6). 82 Articles of Agreement, Article IV(5). The constitutions of the financial institutions in general have similar provisions. 380 f i n a nc i ng delegated or are supervised, budget approval does not create problems. The hierarchical structure obviates jurisdictional conflicts that cannot be resolved in legal terms. The plenary organ would control the opera- tions and policies of the organization and could determine both what the organizationinternational business litigation should be doing and how much and how funds should be allocated for such activity. The question whether the plenary organ has an obligation to approve the budget or a discretion to do so becomes moot. In this situation, as in all situations, the plenary organ has in any event an obligation to approve, and no discretion to disapprove, expen- ditures on obligations already validly entered into by the organization through any of its organs or obligations incumbent upon it. This emergesinternational business litigation from the Effect of Awards Case,83 where the ICJ held that the GA had no option but to honour obligations of compensation awarded by the UNAT for injurious acts of the organization vis-à-vis staff members. This is the regime that prevails in and applies to most international organizations. For dispute resolution, in the financial institutions, such as the IBRD and the IFC, the Boards of Governors have overall control over the operations, including expenditures of the organization, even though a lesser organ (e.g., the Executive Directors) may be delegated the power to approve the budget. Ultimately it is the Board of Governors that controls what is spent and what is done by the organization. Thus, there can be no jurisdictional conflict arisinginternational business litigation from differences of opinion over programmes and the funds required for them. In an organization such as the UN,84 there are several principal organs which have authority to determine their own work programmes, e.g., the GA, the ECOSOC, the TC and even the Secretariat. Their relationship in respect of functions is not always hierarchical and vertical, unlike the relationship among organs in the financial institutions or most of the specialized agencies of the UN. However, Article 17(1) of the UN Charter provides that ‘the General Assembly shall consider and approve the budget of the Organization’.

which has, moreover, been applied is more consistent with the absence of a right to withhold payment rather than with a liberty to do so, even though there may be some restraint on the part of the organization in applying the sanction. The care

with which the USA avoids being more than two years in arrears also may indicate that it is aware that the sanction could be applied as for a breach of obligation. The issue has been prominent in connection with the UN. But the principle that generally there is an obligation to pay assessed contribu- tions is applicable to other organizations as well, where the organiza- tion has the power constitutionally to make binding assessments. The practice in these organizations, particularly the attitude of members and of the organizations themselves, seems to point in this direction. Where organizations are not self-financing, there may be other means than the obligatory contributions of member states of financ- ing the expenses of organizations, such as voluntary contributions and self-supporting income. While such methods ofinternational business litigation financing may ease the burden of member states, they should not de iure affect the obligation of members to contribute, which still exists, although de facto this obligation may be reduced proportionately or fully in respect of an expense. Further a distinction made between ‘international business litigation ordinary’ and 78 See Chapter 6. t h e o b l i g a t i o n t o a p p rov e t h e b u d g e t 379 ‘extraordinary’ expenses, as the ITU has sometimes made,79 does not affect this obligation.80 Particularly where an organization is self-financing, there may be lim- itations imposed in the constituent instrument on the obligation to con- tribute. In the case of financial institutions, such as the IBRD, the IFC and the ADB, their constituent instruments generally limit the amount international business litigation of the contributions members must make to the organization in any circumstances. Because these organizations generate their own income, they normally have sufficient funds to meet their expenses from their income. However, their constituent instruments generally have provi- sions such as are included in the Articles of Agreement of the IBRD which state that: (i) liability of members is limited to the unpaid portion of the issue price of shares;81 and (ii) if international business litigation the operations of the organiza- tion were terminated, members would be liable for uncalled subscrip- tions to capital stock and in respect of the depreciation of their own currencies until the claims of all creditors were discharged.82 In these cases the obligation to contribute which is clear is limited in explicit terms. The obligation to approve the budget A question of some importance is what are the powers of the organ concerned in relation to the approval of the budget or expenses. This is different from what was the subject of the Expenses Case, namely whether an expense can be characterized as an expense of the organization and, the related question, to what expenses members must contribute. Where in an organization there is a superior plenary organ which approves the budget and other organs have functions which are 79 The ITU characterized as ‘extraordinary expenses’ those pertaining to plenipotentiary conferences, administrative conferences, meetings of the International Consultative Committee

this principle. Article 17 of the Charter gives the GA the power to make binding dispositions both as regards the budget (expenditures and income) and assessments. In practical terms, the absence of an obli- gation to pay would impede the organizatio

discussed the matter in general in his separate opin- ion in the Expenses Case75 and qualified the general obligation to con- tribute which he conceded did exist. While beginning with the propo- sition that irrespective of Article 17(2) there was an obligation upon member states collectively to finance the organization, at least to the extent necessary to make the organization workable, he made a number of distinctions. The problems created were because of the differing legal effect of resolutions and the possible existence of a difference between essential and non-essential activities. As regards decisions of the SC, these were binding oninternational business litigation all member states, no problem arose in connection with them and all member states were bound to bear expenses incurred under them, whether they agreed with the decisions or not and whether they were members of the SC or not. Recommendations of the SC or GA, however, were not binding per se and might cause problems. It could be argued that in certain circumstances a distinction should be made between those who voted in favour of such resolutions or abstained and those who voted against them, because the latter showed disapproval of the resolutionsinternational business litigation being carried out so that there could be some doubt sometimes about their obligation to contribute.76 There were four cate- gories of recommendations: (i) those made in the area of the essential activities of the UN, such as peacekeeping activities; (ii) those which prescribed action solely in the way of making a payment or financial contribution (e.g., for some purpose of aid or relief); (iii) those made in the area of more or less permissive or non-essential activities of the 73 See particularly, Alvarez, loc. cit, note 7; Galey, loc. cit. note 1; Nelson, loc. cit. note 7. 74 See Zoller, loc. cit. note 7, who is of the view that withholding of payments is justified, when in the view of the international business litigation member it is compelled to do so to defend itself against the ‘corporate will’ or tyranny of the majority. 75 1962 ICJ Reports at pp. 210ff. 76 Ibid. at pp. 213ff. t h e o b l i g a t i o n t o pa y 377 organization, such as its social or economic activities; and (iv) those made pursuant to permissive activities which were closely connected with essential activities. In the case of (i) and (iv) there was a duty to contribute, irrespective of how votes were cast. In the case of (ii) there was no obligation to contribute if a negative vote had been cast by the member state, because the making of the payment or contribution was not merely a means to an end but the end itself and it became apparent that, if even member states who voted against the recommendation were under an obligation to contribute, the recommendation itself would acquire a wholly obligatory character; and in any case the practice of the UN was to seek voluntary

the SC or the GA or on the Charter itself in some other authorized way, their contract of service being important links in this relation. Hence, although the tortious acts themselves may not have been authorized by the Charter or by resolutions of th

such acts might rest on the notion of ‘the scope of authority’ of the agent or servant. In regard to breaches of contract the ICJ in the Effect of Awards Case dealt with the effect of an award of the UNAT for a breach of a contract of service. It was said that such an award created an obligation of the organization which the organization had to honour and that expenditures arising under such an award were within the compass of Article 17(2).65 The Court in the Expenses Case cited this statement with approval.66 An award of the UNAT establishes a breach of a contract of service attributable to the organization through dispute resolution the instrumentality of its agent, the SG or his delegate. The SG acts within the scope of his apparent authority in taking the decisions which lead to a breach of contract and this is the basis of the liability of the organization. It would not be difficult to apply the same notion by analogy to tortious acts of servants or agents. Judge Fitzmaurice does include this category of expenditure in his list of items covered by the genus ‘expense’ when he mentions ‘any payments which the organization is legallydispute resolution responsible for making in relation to third parties; or which it is, otherwise, as an entity under a legal obligation to make; or is bound to make in order to meet its extraneous legal obligations’.67 Like judicial or arbitral awards resulting from a tortious act or a breach of contract, settlements by the organization involving expenses could also be characterized as expenses of the organization in accordance with comparable principles.68 65 1954 ICJ Reports at p. 59. 66 1962 ICJ Reports at p. 169. 67 Ibid. at p. 207. 68 Judge Morelli thought that, in the case of all expenditures, in order to be an ‘expense’ they had to be included in the budget by the GA under Article 17(1) of the Charter: ibid. at p. 224. This is thought to be unnecessary. 374 f i n a nc i ng It is not international business litigation clear how far these principles applicable to the UN may be applied mutatis mutandis to the characterization of ‘expenses’ for orga- nizations in general. The following propositions, transposed by analogy are, perhaps, true and in accord with the practice of organizations: (i) Administrative expenses (those in the regular budget) are not the only expenditures for which an organization is responsible. (ii) Expenses of an organization include expenditures resulting from the functional operations of an organization authorized by its constitution. (iii) Expenses incurred in accordance with resolutions of organs of an organization which are made in conformity with

Under many constitutions this proposition would not be applicable because such acts would be ultra vires and would not generate expenses of the organization. However, it may be suggested that the proposition applies as a presumption where there is no

implied) in the constitution. It must also be remembered that in many organizations the relationship between deliberative organs is hierarchi- cal and not based on a sharing of concurrent powers or on co-existent jurisdictions, as in the UN, so that importance attaches to the scope of delegation. The obligation to pay Since the UNEF and the ONUC operations and the ensuing Expenses Case, there has been some controversy as to whether member states are under an unqualified obligation to pay what they have been assessed or whether there are circumstances in which a member state can legally withhold its contribution. The controversy has affected the funding of not only the UN but also other organizations, such as the UNESCO and the ILO. The Soviet Union and France particularly refused to pay their share of the expenses for the UNEF and the ONUC because they con- sidered them to have been incurred under ultra vires decisions. They continued to refuse to pay even after the opinion in the Expenses Case71 which was endorsed by the GA (but later agreed to pay). The USA which had supported the position that thereinternational business litigation was an obligation to pay has subsequently withheld funds unilaterally from the UN because it did not agree with certain expenditures of funds.72 Writers generally favour the view that there is no right to withhold payment for any 71 While the Court did not address the issue of the obligation to pay, Judges Fitzmaurice and Morelli in separate opinions, and Judge Spiropoulos in a declaration thought that all member states were under no obligation to contribute financially to the ONUC and the UNEF: 1962 ICJ Reports at pp. 199ff., p. 224 and p. 180, respectively. 72 The USA threatened to withhold funds in connection with the treatment of the PLO in the WHO: see Kirgis, ‘Admission of Palestine as a Member of a Specialized Agency and Withholding the Payment of Assessments in Response’, 84 AJIL (1990) p. 218, who thinks it would have been illegal. The USA withheld funds from the financing of the dispute resolution of the Sea Preparatory Commission: see Note, ‘United Nations Financing of the dispute resolution of the Sea Preparatory Commission: May the United States Withhold Payment?’, 6 Fordham ILJ (1982--3) p. 472. 376 f i n a nc i ng reason,73 let alone disagreement as a minority with decisions of the UN, though the opposite view has been expressed.74 The better view is that decisions by the GA making assessments are in principle binding and create legal obligations, even though there may be a significant minority consisting of the larger contributors which disagrees with decisions to incur expenditures. There is no legal rationale for not basically recog- nizing