Maclaine Watson & Co. Ltd v International Tin Council, 26 October 1989, United Kingdom House of Lords, 81 ILR 670
Relevance of the case
The present case is one of the first in which a court was squarely confronted with the problem of determining whether the separate legal personality of an international organization is consistent with the possibility of members being held responsible for the conduct of the organization. The House of Lords denied that, as a general rule, members are responsible, concurrently and subsidiarily, for the wrongful conduct of the organization. Its judgment showed the uncertainties surrounding this legal question and marked the beginning of an intense debate which is still ongoing.
I. The facts of the case
The International Tin Council was an international organization established, at the relevant time, under the 1981 Sixth International Tin Agreement. The members comprised twenty-three states and the European Economic Community. The purpose of the organization was to provide for adjustment between world production and consumption of tin and to prevent excessive fluctuations in the price of tin. To this end, the ITC managed a buffer stock.
In 1985 the supported price of tin collapsed and the Tin Council suspended its activities, owing debts estimated at several million Pounds Sterling. Since the organization was insolvent, creditors initiated proceedings against the members in domestic courts of different states and before the European Court of Justice.
Among the several proceedings instituted before UK courts, the two most interesting cases brought against the members were initially decided, respectively on 24 June 1987 and on 29 July 1987, by the Commercial Court (JH Rayner [Mincing Lane] Ltd v Department of Trade and Industry and Others) and by the High Court, Chancery Division (Maclaine Watson & Co Ltd v Department of Trade and Industry). All claims were struck out. In its judgment of 27 April 1988 the Court of Appeal, in a nonunanimous decision, dismissed the appeals.
Before the House of Lords the plaintiffs advanced various alternative submissions. Under the first submission they argued that the Tin Council did not have separate legal personality under English law and that therefore the contracts concluded by the organization were to be considered as contracts concluded jointly by all members of the organization. Secondly, even if the organization possessed separate legal personality, the members were to be regarded as responsible, concurrently or subsidiarily, for the debt incurred by the organization. Thirdly, it was argued that the International Tin Council had acted as an agent of its members. The last submission related to the receivership action, by which the creditor aimed at enforcing the claims of the International Tin Council against its members.
II. The legal question
The case raises two distinct, albeit interrelated, questions. The first one concerns the nature of the legal personality enjoyed by the International Tin Council before UK courts. The problem is whether the effects stemming from the possession of a separate legal personality is to be assessed by reference to international law or by reference to the domestic law of the forum state. Article 16 of the Sixth International Tin Agreement provided that the Council ‘shall have legal personality’. On the other hand, the 1972 International Tin Council (Immunities and Privileges) Order, a domestic act which gave effect in English law to the International Tin Council- United Kingdom Headquarters Agreement, established that the Council was to have ‘the legal capacities of a body corporate’. Confronted with two distinct sets of rules, both substantially recognizing that the Council possessed separate legal personality, the House of Lords was called upon to decide whether the nature of such personality had to be determined by reference to international law, as claimed by the plaintiffs, or whether the legal effects of the personality had rather to be assessed in the light of UK law.
The other legal question relates to the international responsibility of the members for the conduct of the organization. In fact, this is the question to which the judgment of the House of Lords is usually associated, although, admittedly, it was only slightly addressed by the UK court. Since the Council had no assets from which the creditors could seek recovery on their claims, proceedings were instituted against the members for the debts incurred by the organization. The question was therefore relatively straightforward: can states or international organizations, under international law, be held responsible, concurrently or subsidiarily, for the obligations of the organization of which they are members?
The appellants submitted that if Parliament had intended to do more than endow 23 sovereign states and the E.E.C. trading in this country with a collective name, then Parliament would have created the I.T.C. a body corporate. But the Government of the United Kingdom had by treaty concurred in the establishment of the I.T.C. as an international organisation. Consistently with the treaty, the United Kingdom could not convert the I.T.C. into an United Kingdom organisation. In order to clothe the
I.T.C. in the United Kingdom with legal personality in accordance with the treaty, Parliament conferred on the I.T.C. the legal capacities of a body corporate. The courts of the United Kingdom became bound by the Order of 1972 to treat the activities of the I.T.C. as if those activities had been carried out by the I.T.C. as a body incorporated under the laws of the United Kingdom. The Order of 1972 is inconsistent with any intention on the part of Parliament to oblige or allow the courts of the United Kingdom to consider the nature of an international organisation. The Order of 1972 is inconsistent with any intention on the part of Parliament that creditors and courts should regard the I.T.C. as a partnership between 23 sovereign states and the E.E.C. trading in the United Kingdom like any private partnership. The Order of 1972 is inconsistent with any intention on the part of Parliament that contracts made by the I.T.C. with metal brokers, bankers, staff, landlords, suppliers of goods and services and others, shall be treated by those creditors or by the courts of the United Kingdom as contracts entered into by 23 sovereign states and the E.E.C. The Order of 1972 conferred on the I.T.C. the legal capacities of a body corporate. Those capacities include the power to contract. The I.T.C. entered into contracts with the appellants.[...]
The third argument described as submission B(2) is that a rule of international law imposes on sovereign states, members of an international organisation, joint and several liability for the default of the organisation in the payment of its debts unless the treaty which establishes the international organisation clearly disclaims any liability on the part of the members. No plausible evidence was produced of the existence of such a rule of international law before or at the time of I.T.A.6 in 1982 or thereafter. The appellants submitted that this House was bound to accept or reject such a rule of international law and should not shrink from inventing such a law and from publishing a precedent which might persuade other states to accept such law.
My Lords, if there existed a rule of international law which implied in a treaty or imposed on sovereign states which enter into a treaty an obligation (in default of a clear disclaimer in the treaty) to discharge the debts of an international organisation established by that treaty, the rule of international law could only be enforced under international law. Treaty rights and obligations conferred or imposed by agreement or by international law cannot be enforced by the courts of the United Kingdom. The appellants concede that the alleged rule of international law must imply and include a right of contribution whereby if one member state discharged the debts of the I.T.C., the other member states would be bound to share the burden. The appellants acknowledge that such right of contribution could only be enforced under international law and could not be made the subject of an order by the courts of the United Kingdom. This acknowledgment is inconsistent with the appellants’ submission B(2). An international law or a domestic law which imposed and enforced joint and several liability on 23 sovereign states without imposing and enforcing contribution between those states would be devoid of logic and justice.
I can only hope that the assurance given on behalf of the Government in 1944 still holds true because it seems to me that the obvious just solution is that the governments that contributed to the buffer stock should provide it with funds to settle its debts in the same proportion that they contributed to the buffer stock. But this end must be pursued through diplomacy and an international solution must be found to an international problem; it can not be solved through English domestic law.
Lord Oliver of Aylmerton[.]
Whilst it is, of course, not inaccurate to describe article 4 of the Order as one which ‘recognises’ the I.T.C. as an international organisation, such ‘recognition’ is of no consequence in domestic law unless and until it is accompanied by the creation of a legal persona. Without the Order in Council the I.T.C. had no legal existence in the law of the United Kingdom and no significance save as the name of an international body created by a treaty between sovereign states which was not justiciable by municipal courts. What brought it into being in English law was the Order in Council and it is the Order in Council, a purely domestic measure, in which the constitution of the legal persona is to be found and in which there has to be sought the liability of the members which the appellants seek to establish, for that is the act of the I.T.C.’s creation in the United Kingdom. [...]
It is contended that there is a rule of international law that where sovereign states by treaty bring into being an international organisation which is intended to engage in commercial transactions, the member states are liable, secondarily, for the organisation’s debts to third parties (whether states or individuals) unless (a) the treaty expressly excludes such liability and (b) the exclusion is brought to the notice of third parties. Now assuming that such a rule could be established, I can see that it might be said that it forms part of English law and that reference to the treaty would not be precluded by the non-justiciability rule inasmuch as such reference would be solely for the purpose of seeing whether it contained an express exclusion of liability and thus of determining whether the rule—on this hypothesis now part of domestic law— applies. Such an argument cannot run, nor indeed has it, I think, been advanced in precisely these terms. If such a rule exists, it is at highest a rule of construction, and however the matter is looked at, the question of liability or no liability stems from an unincorporated treaty which, without legislation, can neither create nor destroy rights under domestic law.
I accordingly concur in the reasoning of Ralph Gibson L.J. and would hold that submission B(2) falls at the first hurdle. But even if this were wrong, I am clearly of opinion that the majority of the Court of Appeal were right to reject it for the other reasons which they gave.
First and foremost, the ‘authorities’ to which your Lordships were referred, which consisted in the main of an immense body of writings of distinguished international jurists, totally failed to establish any generally accepted rule of the nature contended for. Such writings as tended to support the supposed rule were in publications taking place since the affairs of the I.T.C. came before the courts in 1986 and express simply the views of particular jurists about what rule of international law ought to be accepted. They were, in any event, unclear as to whether the liability suggested was primary or secondary, whether it was joint or several, and whether it was to be contributed to equally or in some other proportions. It was indeed submitted that it was not only open to your Lordships but was your Lordships’ duty to decide these points as, indeed, Nourse L.J. had opined in the Court of Appeal. For my part, I cannot accept this. A rule of international law becomes a rule—whether accepted into domestic law or not—only when it is certain and is accepted generally by the body of civilised nations; and it is for those who assert the rule to demonstrate it, if necessary before the International Court of Justice. It is certainly not for a domestic tribunal in effect to legislate a rule into existence for the purposes of domestic law and on the basis of material that is wholly indeterminate.
In an endeavour to establish acceptance of the supposed rule, attention was drawn to some 16 treaties establishing international organisations which contained provisions expressly excluding liability on the part of the members, but there was a very large number of similar treaties which did not and the Court of Appeal found it impossible to make any useful deduction from them. So do I. Equally—although for the reasons given I do not think that the question arises—I have been unable to accept the suggestion that there can be found in the terms of the treaty itself indications of an intention that the member states should assume liability for the I.T.C. debts. Indeed, such indications as there are seem to me to point in the contrary direction and to indicate that any liability assumed was merely to the I.T.C. itself and existed only to the extent prescribed. [...]
I agree with Millett J. and with the Court of Appeal that, however the matter is approached, any claim of the I.T.C. against the member states for indemnity must ultimately rest upon I.T.A.6. This is an issue which is not justiciable by your Lordships and it is therefore unnecessary to decide whether, in any event, any such claim would also be precluded by [an] act of state non-justiciability. I would accordingly dismiss this appeal also.
Does the separate legal personality of an international organization preclude that the members can be held responsible, due to their membership, for the conduct of such an organization? When, in 1989, the House of Lords rendered its judgment in the present case, this question had already been addressed by other tribunals. In an interim award rendered in 1984, an arbitral tribunal had recognized that the four member states of the Arab Organization for Industrialization could incur responsibility for the acts of the organization—a decision which was reversed by Swiss courts a few years later.1 However, perhaps because of the numbers of states involved and of the amount of debts incurred by the organization, the cases which originated from the failure of the International Tin Council contributed more than others to highlight the importance of the question concerning the responsibility of the members of an organization.
The possession of a separate legal personality is a necessary requirement for an international organization to be responsible for a wrongful act.  Absent a separate legal personality, the conduct of the organization is to be attributed to the members, which have to bear responsibility for it. On the other hand, the fact that an organization possesses legal personality is not incompatible, at least in principle, with the possibility that members are to be considered, simply because of their membership, concurrently or subsidiarily responsible for the acts of the organization.
The present case did not directly concern the question of whether members of an organization are responsible under international law. It related to the civil liability arising out of the non-fulfilment of obligations contracted by the International Tin Council with private parties under UK law. However, the fact that the claims directed against the organization or its members are made under the domestic law of a state does not imply that the question of the concurrent or subsidiary responsibility of the members must also be addressed as a matter of domestic law. Since this question relates to the status of an entity which was set up by an international instrument and which exists as a subject of international law, a better approach is to regard it as a matter to be governed by reference to international law. This would also avoid that the question of the responsibility of the members of a given organization could receive different answers by domestic courts of different states.
Before the House of Lords the plaintiffs advocated the view that the responsibility of the members of the International Tin Council had to be assessed by reference to international law. However, the House of Lords took a strict dualist approach according to which the nature of the legal personality enjoyed by an international organization before UK courts was to be assessed by reference exclusively to domestic law. According to the House of Lords it was the 1972 International Tin Council (Immunities and Privileges) Order which, by conferring on the organization the capacities of a body corporate, ‘created’ the organization for the purposes of English law. The nonjusticiability principle also played a role for excluding the possibility of taking into account the nature of the International Tin Council under international law.
The approach of the House of Lords on this point can be criticized for having introduced too rigid a distinction between the legal personality of the Tin Council under UK law and its personality under international law. Such an approach might have been influenced by the fact that, under the UK legal order, international rules on the domestic legal personality of a given international organization are not given direct effect. The recognition of legal personality presupposes the adoption of a domestic act providing for such personality. It might also be suggested that the House of Lords preferred to rely primarily on domestic law, rather than to refer to international law, because of the uncertainties as to the content of the international rule governing the question of the responsibility of the members of an organization. In this respect, it will be interesting to see whether, and to what extent, in future cases raising these type of issues, domestic courts will be willing to rely on the rules set forth in the ARIO adopted in 2011 by the International Law Commission. Significantly, some domestic courts have already referred to the ARIO, although, admittedly, not in relation to the question of the concurrent or subsidiary responsibility of the members.
The approach taken by the House of Lords in analyzing the legal consequences attached to the separate personality of the International Tin Council explains why much of its reasoning focused exclusively on English law. It remains, however, that the judgment also contains several important references to international law aspects of the problem. Moreover, some of the arguments developed with regard to English law offer interesting elements if considered from the perspective of international law.
The main issue of international law raised by the plaintiffs, and addressed, albeit rapidly, by the judgment, concerned the existence of a rule of general international law according to which, in the absence of an express provision in the constitutive treaty excluding or limiting the responsibility of the members, they are responsible, jointly and severally, for the breach by the organization of its obligations to third parties. The evidence relied upon by the plaintiffs to support the existence of such a rule mainly consisted of the writings of jurists and the fact that a number of international treaties establishing international organizations contain clauses excluding or limiting the responsibility of the members. The House of Lords did not regard these elements as being sufficient to establish a general rule recognizing the responsibility of the members. This conclusion, in itself, is hardly objectionable. Indeed, it would be difficult not to agree with Lord Oliver’s observations that the writings of distinguished international jurists, at the end, ‘express simply the views of particular jurists about what rule of international law ought to be accepted’, or that it is ‘impossible to make any useful deduction’ from treaty clauses expressly excluding liability on the part of the members. While the House of Lords was right in stressing the lack of practice supporting the rule advocated by the plaintiffs, no elements were offered to prove the existence of the opposite rule, namely the rule excluding that members, solely by reasons of their membership, can be held responsible for the conduct of the organization. The House of Lords simply did not find it necessary to address this point. Since the two main points made in the judgment are, first, that the International Tin Council enjoyed separate legal personality under international law,  and secondly, that there is no general rule establishing the responsibility of the members, one is left with the impression that, according to the House of Lords, attribution of separate legal personality to the organization is decisive of the issue of the responsibility of the members. Be that as it may, the indication that one may safely infer from the judgment is that, as a general rule, when an international organization is recognized separate legal personality under international law, membership alone cannot entail for the members responsibility for the acts of the organization. This basic proposition was later assumed as the starting point in the works conducted on this matter by the Institut de droit international" and by the International Law Commission," both referring to the judgment of the House of Lords as an important precedent.
The fact that membership alone does not entail responsibility of the members for the acts of the organization does not rule out the possibility that members accept to bear such responsibility. Lord Oliver admitted this possibility, although he was ‘unable to accept the suggestion that there can be found in the terms of the treaty itself indications of an intention that the member states should assume liability for the I.T.C. debts’.13 While in the present case the only form of acceptance which was contemplated by the plaintiffs and by the judges was an acceptance which resulted from the terms of the treaty establishing the organization, acceptance may also be expressed in other ways. As the International Law Commission put it, ‘acceptance may be expressly stated or implied and may occur either before or after the time when responsibility arises for the organization’/4 Moreover, the fact that the constitutive instrument contains a clause providing for the responsibility of the members does not necessarily imply that members have accepted to bear responsibility in relation to third parties. Such clauses may well have been intended as producing effects only towards the organization. This point was rightly stressed by Lord Oliver when he observed that, under the treaty provisions referred to by the plaintiffs, ‘any liability assumed was merely to the I.T.C. itself and existed only to the extent prescribed’/5
According to one of the arguments advanced by the plaintiffs, the members of the Tin Council were to bear responsibility for the debts incurred by the organization because the latter, when contracting with third parties, had acted as agent for its members/6 While this argument, as well as the House of Lords’ assessment of it, was entirely based on English law, one aspect deserves to be mentioned because it raises an interesting issue when considered from the perspective of international law. In order to demonstrate the existence of a principal-agent relationship, plaintiffs relied on the way in which the International Tin Council conducted its operations under its constitutive treaty, stressing that the organization operated under the ‘immediate direction’ of its members/7 From the viewpoint of international law, direction and control over a specific conduct of the organization could give rise to the responsibility of the members if that conduct amounts to a breach of an obligation also incumbent on them/8 However, the situation envisaged by the plaintiffs’ argument is one in which direction and control over the conduct of the organization result from acts taken within the framework of the organization and in accordance with the rules governing its management. It seems extremely unlikely that participation in the decisionmaking process of the organization could constitute a form of direction and control in the commission of a wrongful conduct by the organization. The ARIO specify that,
Session (n. 2), p. 164. For the opposite view, see I. Brownlie, ‘The Responsibility of States for the Acts of International Organizations’, in M. Ragazzi (ed.), International Responsibility Today. Essays in Memory of Oscar Schachter (Brill 2005), pp. 355-62.
as a general rule, ‘[a]n act by a State member of an international organization done in accordance with the rules of the organization does not as such engage the international responsibility of that State under the terms of this article’. This situation must be distinguished from the one in which a state is responsible for its own conduct taken in the framework of an international organization. As the International Court of Justice has recently recognized in its judgment in the Application of the Interim Accord of 13 September 1995 case, the conduct of a state representative participating in the decision-making process of an organization is to be attributed to the state and, if it is contrary to an international obligation of that state, it gives rise to its international responsibility.    
A last point worth mentioning concerns the right of an international organization to be indemnified by its members for the debts incurred by it against third parties. In the present case one of the appellants sought the appointment of a receiver in order to receive and enforce the right vested in the International Tin Council to be indemnified by its members. Seen from an international law perspective, this raises the question of the obligation of members to assist the organization in discharging its duties to make reparation in cases when it incurs in international responsibility. Lord Griffiths appeared to allude to that obligation when he observed that ‘it seems to me that the obvious just solution is that the governments that contributed to the buffer stock should provide it with funds to settle its debts in the same proportion that they contributed to the buffer stocks There is little doubt that in most cases one can infer from the rules of the organization an obligation of members to provide the organization with the funds to repair its debts.22 Whether the existence of such an obligation can provide a real guarantee against the risk that third parties may fail to obtain the reparation owed to it by the organization is an altogether different matter. In most cases the organization will lack effective means for ensuring the enforcement of the obligation of members to put it in fund. Moreover, if the injured party is not a member of the organization, it has no legal means at its disposal to ensure the performance of this obligation by members.23
In an overall assessment of the different points addressed by the House of Lords in the case under analysis, it may safely be said that this judgment constitutes one of the most authoritative precedents in favour of the principle of non-responsibility of members for acts of the organization. When the judgment was rendered, many commentators shared the view of Lord Griffiths that ‘the appellants have suffered a grave injustice’,^ and urged to fill what they perceived as a gap in the law of international responsibility.  More than twenty years later the International Law Commission has attempted to fill this gap. Significantly, the solution adopted by the Commission confirms the approach taken by the House of Lords in 1989. The 2011 ARIO admit that members may be held responsible for an internationally wrongful act of the organization, but this possibility is restricted to rather exceptional situations. Obviously, the adoption of the ARIO does not put to an end the debate triggered by the failure of the Tin Council. This is the more so since, as the Commission itself has recognized, the fact that several draft articles ‘are based on limited practice moves the border between codification and progressive development in the direction of the latter’^6 In this respect, when one considers the question of the responsibility of members for the acts of the organization, it is a fact that the relevant practice still remains confined to very few cases.