Print Page
News & Press: TaxTalk

Diplomatic Protection: In the New Age of Globalisation, the Genuine link Theory Cannot Stand

Thursday, 06 May 2010   (0 Comments)
Posted by: Author: Terrence H. Fraser
Share |
Diplomatic Protection: In the New Age of Globalisation, the Genuine link Theory Cannot Stand
Thomas Jefferson School of Law
"Following on from this article in a following edition of TAXtalk, the significance of the diplomatic protection doctrine as it applies to tax will be explored. SARS may in the near future be facing their first encounter with this doctrine in a case where US shareholders of a South African taxpayer company are contemplating suing the South African Government for SARS’ failure to refund to the company (indirectly affecting the US shareholders) taxes overpaid in error through a miscalculation made by a large auditing firm on the application of the provisions of s24I of the Income Tax Act. SARS has avoided repaying the amount by stating that on a technicality s102 on refunds does not apply,nor does s 79A for clerical errors made. In the latter instance, they have raised prescription as a defence. What they fail to realise is that prescription as it applies to s 79A does not extinguish the debt due to the taxpayer. It only prevents the taxpayer making the claim. The debt remains intact and due. It is this debt that SARS owes which the taxpayer will sue for in an action against the SA Government in the International Court under the diplomatic protection doctrine – note by Prof D N Erasmus,”

I. Introduction


Diplomatic protection (or diplomatic espousal) is defined as the invocation by a state of the responsibility of another state for an injury caused by an internationally wrongful act of that state to a natural or legal person that is a national of the former state with a view to the implementation of such responsibility. Under international law, a state is responsible for injury to an alien caused by that state’s wrongful act or omission. Diplomatic protection is the procedure employed by the state of nationality of the injured person to secure protection of that person, and to obtain reparation for the internationally wrongful act inflicted. Such protection extends to both natural and legal persons. Diplomatic protection is a discretionary right of a state and may take any form that is not prohibited by international law.It can include consular action, negotiations with other state, political and economic pressure, judicial or arbitral proceedings, or other forms of peaceful dispute settlement. 


Customary international law recognises the existence of certain requirements that must be met before a state can validly espouse its national’s interest.The requirements for diplomatic protection are (i) internationally wrongful acts; (ii) exhaustion of local remedies and; (iii) continuous nationality.Because of the complexity and extensiveness of diplomatic protection, this article will only discuss briefly the history of diplomatic protection and the requirement of ‘nationality of the natural person of a single state’.


II. Brief history of diplomatic protection


Diplomatic protection has a controversial history. In 1758, Emmerich de Vattel rationalised diplomatic protection when he explained that the sovereign of the injured citizen must avenge the deed and, if possible, force the aggressor to full satisfaction or punish him, since otherwise the citizen will not obtain the chief end of civil society, which is protection.In The Law of Nations Vattel said, "Whoever ill-treats a citizen indirectly injures the state, which must protect that citizen.” As could be conceived from such rhetoric, a variety of powerful nations, under the pretext of protection of their nationals, have intervened into the affairs of less powerful nations. And on many occasions,such interventions were carried out by means of force.For instance, the Anglo-Boer War (1899 – 1902) was justified by Great Britain as an intervention to protect its nationals who owned the goldmines of Witwatersrand.Another example is China during the Boxer Rebellion and Venezuela in the early 20th century.Latin America is replete with instances of forcible interventions by the United States to protect its nationals.


Consequently, Latin America devised the Calvo Doctrine to avoid the invocation of diplomatic protection by Western nationals. On other occasions, demands for compensation arising out of injury to the person or property of nationals, were satisfied by negotiation or arbitration.In order to curb the abuse of such demands, a number of procedural safeguards were employed in the practice of states, mainly relating to the identification of the nationality of the injured person as a condition for bringing the claim, and to the need to exhaust local remedies before proceeding to the international plane.


As a result of what reasonably could be characterised as unreasonable demands for compensation and unjustifiable forcible interventions by powerful imperialist nations into the affairs of the less powerful nations under the guise of protection of nationals of the powerful nations,"the doctrine of diplomatic protection has attracted much criticism particularly in former colonies”.


Its controversial history notwithstanding, diplomatic protection is recognised as customary international law by international courts and tribunals as well as scholars.Today, diplomatic protection may be enforced only by peaceful means, such as negotiation, arbitration or judicial proceedings, and not by forcible means.


Circumstances for which diplomatic protection can be invoked apparently are several.For instance, internationally prohibited acts for which diplomatic protection can be engaged may come in the form of, among other things, basic human rights violation, an improper assessment of tax by the revenue authority of the responsible state, or the responsible state’s unjustifiable refusal to abate or refund a tax 

payment mistakenly made by the national.States do have responsibility in tax matters, as Hans Pijl states in his article, State Responsibility in Tax Matters.A national who has exhausted his local remedies unsuccessfully in the court system of the state of responsibility may ask the state of the national to seek diplomatic protection on behalf of the national for the economic or tax injury caused to such national.  


III. The requirement of nationality


Nationality of the individual

As already stated, nationality is a prerequisite for diplomatic protection. Nationality is defined as the status of belonging to a particular nation by birth or naturalisation.For the purposes of the diplomatic protection of a natural person, a state of nationality means a state whose nationality that person has acquired, in accordance with the law of that state, by birth, descent, naturalisation, succession of states 

or in any other manner, not inconsistent with international law.  


A natural person who is seeking diplomatic protection based on the allegation that he has been  wronged must maintain the nationality of the espousing state from the moment of injury until at least the presentation of the claim by way of diplomatic espousal.If the nationality of the individual in question changes in the interim, the state of his former nationality will not be able validly to espouse his claims.The claim by a state on behalf of its national may also be dismissed or declared inadmissible if there is no effective and genuine link between the national concerned and the state that seeks to protect him.


An individual who is a national of a state by virtue of being born there or having obtained citizenship there by way of the naturalisation process does not necessarily mean that he qualifies as a national of that state for international law purposes.In other words, being born or having obtained citizenship of a state apparently does not automatically make the individual a national of the state that seeks to protect him, infra.For diplomatic protection to be accorded an individual must be born or obtain citizenship plus he must have effective and genuine link with the state that seeks to protect him. 


The Liechtenstein v. Guatemala case turned on whether Liechtenstein could exercise diplomatic protection on behalf of its national Nottebohm.The issue was whether Nottebohm was a national of Liechtenstein under the common international law.This depended upon whether Nottebohm had an effective and genuine link with Liechtenstein, who sought to protect him.


The facts: 

"Nottebohm was born in 1881 as a German citizen in Germany and went to Guatemala in 1905 where he developed his activities in the field of commerce, banking and plantations.During one of his brief visits to Liechtenstein, where a brother of his had been living since 1931, he applied for Liechtenstein nationality which he obtained in 20 October 1939 and also received a Liechtenstein passport.At the beginning of 1940, he returned to Guatemala to resume his former business activity.He had never become a national of Guatemala. 


In October 1943, the Guatemala authorities arrested Nottebohm and he was deported to the United States and interned there for two years and three months.In 1944, after he had been deported to the United States, legal proceedings were commenced in Guatemala designed to expropriate, without compensation to him, all his properties in Guatemala.After the war, Nottebohm was not allowed back to Guatemala and, in 1946, took up residence in Liechtenstein.The issue was therefore not one of a dual nationality but whether Liechtenstein could exercise diplomatic protection on behalf of Nottebohm.


The ICJ (International Court of Justice) came to the conclusion that his ties with Liechtenstein during the relevant period before and during the taking of his properties in Guatemala were not of such a nature as to allow Liechtenstein to exercise diplomatic protection before the ICJ. 


The ICJ’s statement: "According to the practice of states, to arbitral and judicial decisions and to the opinions of writers, nationality is a legal bond having as its basis a social fact of attachment, a genuine connection of existence, interests and sentiments, together with the existence of reciprocal rights and duties. It may be said to constitute, either directly by the law or as the results of an act of the authorities,  is in fact more closely connected with the population of the state conferring nationality than with that of any other state.Conferred by a state, it only entitles that state to exercise protection vis-à-vis another state, if it constitutes a translation into juridical terms of the individual’s connection with the state which has made him its national.”


The court agreed with Guatemala and held that the claim by Liechtenstein was inadmissible.Although the court stated that it is the sovereign right of all states to determine its own citizens and criteria for becoming one in municipal law, such a process would have to be scrutinised on the international plane in question of diplomatic protection.The court upheld the principle of effective nationality, where the national must prove a meaningful connection to the state in question.  


What constitutes an effective and genuine link between the national concerned and the state that seeks to protect such national? As mentioned above, the ICJ indicated this requires a social fact of attachment; a genuine connection of existence, interests and sentiment.The court reasoned that the ties between Nottebohm and Liechtenstein were extremely tenuous when compared to the close ties between Nottebohm and Guatemala for a period of over 34 years. 


The Nottebohm decision has been criticised by many.These critics have said that the majority apparently left Nottebohm, at least for the purposes of diplomatic protection, with no nationality, no state to espouse his claims, and therefore no remedy under international law.


In effect, it denied him an opportunity to be heard and due process of law based on what emerges, as a matter of the international law of the era, as a novel and contrived procedural barrier.Some of the Nottebohm dissents had precisely this concern in mind. Judge Read, for example, wrote: 


"I am bound to proceed on the assumption that Liechtenstein might be entitled to a finding of denial of justice, if the case should be considered on the merits. In view of this situation, I cannot overlook the fact that the allowance of the plea, national or international.I do not think that a plea in bar, which would have such effect, should be granted, unless the grounds on which it is based are beyond doubt.”


Others have suggested that the genuine link theory has received misguided recognition as a more general constraint applicable to a broad and diverse range of issues – well beyond the particular question so meticulously framed by the majority.The ILC’s First Report on Diplomatic Protection notes that, strictly construed, the genuine link theory:


Would exclude literally millions of persons from the benefit of diplomatic protection.In today’s world of economic globalisation and migration, there are millions of persons who have drifted away from their state of nationality and made their lives in states whose nationality they never acquire. Moreover, there are countless others who have acquired nationality by birth, descent or operation of law of states with which they have a most tenuous connection.


Critics of the genuine link theory have proposed a functional account of nationality, which, they argue, is descriptively more accurate and normatively more appealing.The concept of nationality expressed in Nottebohm certainly describes one plausible vision of nationality, and it continues to have salience in some areas of international law.However, the genuine link theory is neither the only nor, necessarily, the most appropriate, regulatory tool. No single doctrine will be effective and well-suited to the international regulation of nationality in every circumstance.Rather, international law would be better served by atomising the concept by its distinct functions and regulating (or not regulating) nationality at the international level commensurately.If the existence of a genuine link were required in addition to nationality for the purpose of diplomatic protection in situations where millions of people have moved away from their state of nationality and made their lives in states whose nationality they never acquire, or have acquired nationality by birth or descent from states with which they have a tenuous connection, would the genuine link between such individual or individuals and the state be an appropriate application for the purposes of diplomatic protection? I think not.In the new age of globalization, the genuine link theory cannot stand alone. 


Source: By Terrence H. Fraser (TaxTALK)




Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

  • Tax Practitioner Registration Requirements & FAQ's
  • Rate Our Service

    Membership Management Software Powered by YourMembership  ::  Legal