Foreign investors often deal with individuals or entities related to the government of the country in which they invest, rather than directly with government officials or arms of the state that have traditionally been regarded as state organs. In the event of a dispute related to their investment, foreign investors can hold a host state liable under international law (e.g., for breach of an investment treaty) only for those acts and measures that are attributable to the state. Therefore, whether the investor can establish that the state is responsible for the wrongful conduct of an individual or an entity can be an important threshold question in investor-state arbitrations.
The ILC Principles on the Responsibility of States for Internationally Wrongful Acts (ILC Articles) are generally accepted to reflect customary international law on the attribution of conduct to states. International arbitration tribunals often rely on the ILC Articles when deciding an attribution issue. Pursuant to the ILC Articles, a state can be held responsible for an individual’s or an entity’s wrongful conduct on at least one of the following grounds: (A) when the individual or the entity is a “State organ,” whether legislative, executive, or judicial (Article 4); (B) when the individual or the entity is not a state organ but “is empowered by the law of that State to exercise elements of the governmental authority … [and] is acting in that capacity in the particular instance (Article 5);” or (C) when the individual or the entity “is in fact acting on the instructions of, or under the direction or control of, [a] State in carrying out the conduct” (Article 8).
