The post is based on the lecture series delivered by Prof. Franceoni F in the summer of 2018 at the Xiamen Academy of International Law. The lectures offered a deeper insight into the way legal concepts such as Most Favored Nation (MFN) are interpreted and informed by ancillary fields such as cultural studies. Such fields are instrumental in developing an understanding of law in context and ultimately forming a coherent and well-informed opinions about legal rules.
The importance of culture is manifold: it is but one element that unites some and creates a sovereign difference among others; it is a source of much cherished diversity and creativity, and also a guarantee of sustainable development. Preservation and maintenance of culture is an important goal of state public policy. In his recent interview, Canadian Prime Minister Justin Trudeau stated that the cultural exemption clause in the new North Atlantic Free Trade Agreement (NAFTA) was something fundamental and vital for the protection of sovereignty and identity of Canada.
The protection of cultural patrimonies has been on the agenda of the international community for a long time now. There are a number of treaties that aim to support the protection of cultural properties, such as the Convention for the Protection of Cultural Property in the Event of Armed Conflict with Regulations for the Execution of the Convention 1954 and the Second Protocol to the Hague Convention of 1954 for the Protection of Cultural Property in the Event of Armed Conflict 1999. With the adoption of the Convention for the Safeguarding of the Intangible Cultural Heritage of the General Conference of the United Nations Educational, Scientific and Cultural Organization (UNESCO), the international community recognized international legal protections for intangible cultural artefacts as well. At the risk of oversimplification for the purposes of the present post, both tangible and intangible cultural patrimonies will be referred to as cultural resources.
The Convention for the Safeguarding of the Intangible Cultural Heritage addresses the reality of globalization and acknowledges the risks it poses to the intangible cultural heritage. It explicitly provides:
“[t]hat the processes of globalization and social transformation, alongside the conditions they create for renewed dialogue among communities, also give rise, as does the phenomenon of intolerance, to grave threats of deterioration, disappearance and destruction of the intangible cultural heritage, in particular owing to a lack of resources for safeguarding such heritage” (emphasis added)
Outline of the Issue
With the cultural protection treaties piling up and the clauses on the cultural exemption clause becoming a common thing, the issue may rise on question whether differentiation between investors based on cultural policy allowed or should even be promoted. In a number of instances, public policies concerning the preservation and protection of antiquities, archeological and historical sites, and other cultural resources have created points of tension between the cultural policies of a state and its obligations under an investment treaty. There are several arbitral decisions that have either explicitly or implicitly reflected upon the weight to be accorded to the furtherance of cultural protection goals. This piece discusses a few instances where the protection of culture proved a viable defense and was recognized by tribunals as legitimate grounds for differentiating between investors in Investor-State Arbitration.
Cultural Heritage Protection Law as an Applicable Law in ISDS
In Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt (1985), the Egyptian government was obligated under international law to cancel the Pyramids Oasis Project to protect the antiquities in the area. The second sentence of Article 42(1) of the International Centre for Settlement of Investment Disputes Convention (ICSID) made the UNESCO Convention for the Protection of the World Cultural and Natural Heritage part of the applicable law to the dispute. In the view of the Tribunal, the government of Egypt:
“[w]as entitled to cancel a tourist development project situated on its own territory for the purpose of protecting antiquities. This prerogative is an unquestionable attribute of sovereignty. The decision to cancel the project constituted a lawful exercise of the right of eminent domain. The right was exercised for a public purpose, namely, the preservation and protection of antiquities in the area.” (emphasis added)
In this particular case the Tribunal held that the government’s decision to cancel the project constituted rational and legitimate grounds. It gave effect to this view through reference to the doctrine of administrative contracts where the public administration is authorized in the public interest to introduce unilateral modifications to a contract. The tribunal, however, held that the modification must be subject to some qualifications: (1) it must be in the public interest, and (2) it must be accompanied by adequate compensation.
In the academic discourse too, an argument has been put forward that if a policy is valid under other relevant rules of international law, it constitutes legitimate and rational grounds for a State to modify its orginal promise. In this particular case the specific grounds for cancellation of the project were to be found in the UNESCO Convention for the Protection of the World Cultural and Natural Heritage.
Indirect Recognition of Cultural Resource Protection in ISDS
In Parkerings-Compagniet AS v. Republic of Lithuania (2007), the Lithuanian city of Vilnius (the defendant) and the Egapris Consortium (the claimant) signed an agreement according to which the Egapris Consortium would design, build, and operate a “modern, integrated parking system” in the City. However, a number of factors impaired the development of the project on the original site and it had to be shifted to the City’s historic Old Town, an area designated as a World Heritage site by the United Nations Educational, Scientific and Cultural Organization (UNESCO). With the development of further issues, the City terminated the contract with the Egapris Consortium and awarded it to Pinus Proprius. The Claimant brought a claim based on discrimination before the ICSID.
Besides stressing that “a public entity may have legitimate motivation of its own at the time to exercise it discretion to contract or not to contract,” the Tribunal concluded that:
“The historical and archaeological preservation and environmental protection could be and in this case were a justification for the refusal of the project. The potential negative impact of the BP project in the Old Town was increased by its considerable size and its proximity with the culturally sensitive area of the Cathedral.” (emphasis added)
Further, the Tribunal added that:
“[t]he differences of size of Pinus Proprius and BP’s projects, as well as the significant extension of the latter into the Old Town near the Cathedral area, are important enough to determine that the two investors were not in like circumstances. Furthermore, the Municipality of Vilnius was faced with numerous and solid oppositions from various bodies that relied on archaeological and environmental concerns. In the record, nothing convincing would show that such concerns were not determinant or were built up to reject BP’s project. Thus the City of Vilnius did have legitimate grounds to distinguish between the two projects. Indeed, the refusal by the Municipality of Vilnius to authorize BP’s project in Gedimino was justified by various concerns, especially in terms of historical and archaeological preservation, and environmental protection.” (emphasis added)
In this case, extension of the project into the Old Town would have changed the cultural fabric of the city. Hence protection of the City’s historic Old Town look was designated as a legitimate ground for distinguishing between the two projects. This case suggests that the protection of cultural resources may be used in the application of the Most Favored Nation (MFN) provisions as grounds for distinguishing between what would otherwise be like investors. From this case, one could conclude in the absence of a law directly protecting cultural resources, tribunals are recognizing the importance of culture and giving it legal recognition in arbitration thus reading into the agreement differentiation between investors based on cultural policy and preferences of the State.
The original issue raised was whether differentiation between investors based on cultural policy allowed or should even be promoted. The piling up of treaties on the cultural protection treaties and ever-increasing number of the clauses on the cultural exemption speak as to the fact that there is a desire to promote such a policy. The present post discussed a few instances where tribunals recognized the importance of culture and give it legal recognition in arbitration, reading ‘unwritten’ terms into the agreement. This speaks to the fact that such differentiation based on cultural policy should be and is allowed. Within the optics of the present post, one could also argue that it is important to understand ancillary fields and go beyond mere study of legal doctrines to understand the way our conception of culture informs the interpretation of legal rules and protection standards.