The ICJ decides on the content of international protection standards: A lost opportunity?


In late March 2023, the International Court of Justice (ICJ) handed down a much-anticipated judgment on the merits in Certain Iranian Assets (Islamic Republic of Iran v. United States of America). The decision closed the proceedings running at the ICJ since 2016. This case was one in a series of multiple proceedings based on the same treaty—the 1955 Treaty of Amity, Economic Relations, and Consular Rights (the 1955 Treaty)—before the highest judicial organ of the United Nations between the two states. It was one offshoot of the protracted and complex history of animosity between the two countries.[1]

While the judgment, together with the numerous accompanying individual opinions, has touched on many legal issues, ranging from sovereign immunities, unilateral sanctions, exhaustion of local remedies, unclean hands doctrine, and applicability of national security exceptions, the case was watched with particular interest in the community of international investment lawyers. Due to the alleged violations claimed by Iran in this case, it was virtually inevitable that the ICJ would have to tackle the questions of perennial relevance to this community: the content of crucial investment protection standards, in particular, FET, non-impairment standard, full protection and security (FPS), and indirect (judicial) expropriation. Given the importance of investment law-related ICJ jurisprudence in ISDS practice, it could be expected that this judgment will be frequently cited in future awards. Although we will have to wait to assess the impact of the decision, we can already evaluate how well the ICJ has approached the opportunity to bring some clarity into the inconsistent and often contradictory practice of ISDS tribunals. This paper aims at such a preliminary analysis. After discussing the factual and procedural background of the case, I will focus on the court´s analysis of four standards that are likely going to be referred to in future investment jurisprudence: FET, non-impairment standard, FPS, and expropriation.


The claimed violations concerned a series of legislative, executive, and judicial measures directed at various Iranian financial entities, including the Iranian central bank—the Bank Markazi—as part of U.S. efforts to combat acts of terrorism. These measures ranged from deprivation of sovereign immunity for entities designated as “State Sponsors of Terrorism,” asset freezes, and automatic execution or attachment in aid of execution of judgments against the entities in scope. The legislative and executive measures were challenged by the Iranian entities before U.S. courts, generally with no to limited success.

Following these acts, Iran claimed that its entities have suffered serious and ongoing harm that violated numerous provisions of the 1955 Treaty. In particular, Iran claimed that the U.S failed to recognize the separate juridical status of the Iranian entities (Art. III.1), treated these entities and their property in an unfair and discriminatory manner, thereby impairing their legally acquired rights, including their contractual rights (Art IV.1), failed to accord most constant protection and security (Art IV.1), committed expropriation without compensation (Art IV.2), as well as violated other rights under the 1955 Treaty related, among others, to restrictions to payments and transfers and interference with freedom of commerce.

As the court decided in its 2019 judgment on preliminary objections that claims arising out of customary international law on sovereign immunities were not within its jurisdiction (not being based on the 1955 treaty), Iran had to frame the claims as relating to the treatment of “companies” within the meaning of the 1955 treaty’s provisions. In the present judgment, the court held that while Bank Markazi could not be considered a “company” within the meaning of the treaty and hence acts related to its treatment are outside its jurisdiction, claims regarding other Iranian financial institutions are within its jurisdictional remit.[2] In the next section, I focus on the court’s analysis of the treaty’s standards of protection.

Claims related to standards of protection

After the court dismissed the remaining jurisdiction and admissibility objections (based on the clean hands doctrine, abuse of rights, and failure to exhaust local remedies) as well as held that the national security exception in Art XX did not apply (para 108), the court turned to violation claims based on Arts III and IV.

As Art III imposed an obligation to recognize the separate legal personality of the contracting parties´ companies,[3] the court considered that it could answer this question only in the context of examination of claims under Art IV, which, it considered, included, in its first paragraph, a set of three distinct obligations (para. 138): an obligation to provide FET, prohibition of impairment by unreasonable and discriminatory measures (non-impairment standard), and effective means to enforce contractual rights.[4]

Just how autonomous is an autonomous fair and equitable treatment standard?

Investment law and policy commentators following the case had probably expected the most from the ICJ regarding its pronouncements on the content of the FET standard, one of the most controversial standards that is ubiquitous in investment treaties. It could be safely said that the court has not brought much clarity on the topic. Perhaps aware of the potential impact of its decision beyond this case, the court adopted a highly restrained approach to the question, effectively all but sidelining the issue. First, it stated that as the FET provision in the text of the treaty makes no reference to customary international law in general, or the customary international minimum standard, in particular, it does not need to examine the content of the latter (para 141). While this approach may be understood from the perspective of judicial economy, it may have negative repercussions in that ISDS tribunals interpreting an FET standard not tied to customary international law may view this pronouncement as a licence to applying a more exacting standard than that of the minimum standard.

However, the court´s second step in the analysis, although arguably also influenced by judicial restraint, could hint at a more restrictive application of an “autonomous” FET standard. The court took refuge in the fact that both parties to the dispute argued the FET claim by reference to denial of justice, even though they disagreed on the content. This allowed the ICJ to dispose of the FET claim by its fairly frugal analysis of the doctrine. The court held that the rights of the companies to appear before the court and make submissions have not been curtailed by the challenged measures. The fact that certain legal defences (e.g., those based on separate legal personality) were not available to them does not “constitute a serious failure in the administration of justice amounting to denial of justice” (para. 143). This, for all practical purposes, ended the court’s FET analysis.

Non-impairment by unreasonable or discriminatory measures—a vague test of reasonableness as the main criterion

The court then moved to the crux of its analysis under Art IV.1, which it based on examination of the non-impairment standard claim. Even if the court recognized that there is an overlap between FET and non-impairment obligation (para 144) and that FET “can encompass[..] unreasonable and discriminatory measures,” it considers these to be two distinct standards (para. 145). In this sense, it is possible that the court´s analysis of the non-impairment standard will influence ISDS jurisprudence under FET as well.

The court´s approach to determining violation of the non-impairment standard hinged on the analysis of “reasonableness.” Given the treaty uses a disjunctive unreasonable or discriminatory, finding of any of the two sufficed for violation of the standard (para. 145). The judgment started with its standard incantation that what is reasonable depends on particular circumstances, referring to its earlier case law. It went on to deduce three criteria of unreasonableness within the meaning of the 1955 treaty.

  1. If the measure does not pursue a legitimate public purpose.
  2. If there is not an appropriate relationship between the purpose pursued and the measures adopted.
  3. If the measure’s adverse impact is manifestly excessive in relation to the purpose pursued.

While it stated these criteria for the purposes of the 1955 treaty, it relied on its past case law that applied other instruments (e.g., Dispute regarding Navigational and Related Rights (Costa Rica v. Nicaragua)). On criterion (1.), the ICJ agreed that providing effective remedies to plaintiffs that had been awarded damages for being victims of terrorism was a legitimate purpose (para 147). On (2.), it also viewed that the attachment and execution of assets of entities that have been found liable could generally be considered an appropriate relationship. However, it concluded that the measures’ adverse impact on the Iranian companies was manifestly excessive.

The court opined that the challenged measures employed very broad terms, such as any agency, and property or interest held directly or indirectly, and they dispensed with the requirement of assets being previously blocked. According to the court, this “plainly disregarded the Iranian companies’ own legal personality, making it possible to impair their legally acquired rights and interest, namely those related to their ownership of, or interest in, the assets liable to attachment and execution” (para. 150). Recalling the Barcelona Traction case, the court stated that lifting the corporate veil “has been found justified and equitable in certain circumstances or for certain purposes” (para 155). However, it did not such circumstances present in the present case. In the present case, the companies’ legal personality “has been set aside, under the conditions described above (see paragraph 150), in relation to liability judgments rendered in cases in which those companies could not participate and in relation to facts in which those companies do not appear to have been involved” (ibid.). The court found this to be manifestly excessive and, as a result, unreasonable.

The court extended its conclusion regarding unreasonableness according to Art IV.1 to its analysis of Art. III.1 violation. As the measures were held unreasonable under Art. IV.1, the disregard of the separate legal personality the measures implied was therefore viewed as constituting a violation of Art. III.1 as well.[5]

Expropriation analysis—conflating the applicable standards?

The judgment’s analysis of expropriation will likely influence future investment disputes that involve acts of the judiciary—what is sometimes referred to as “judicial expropriation.” This is for the deprivation of the Iranian companies’ assets was effected through U.S. courts’ decisions. The court framed its inquiry around the question as to whether the attachment and execution may constitute a taking under Art. IV.2. The court’s answer to that question was that they do not per se because an additional element of illegality is required, for example, resulting from a denial of justice, or when “a judicial organ applies legislative or executive measures that infringe international law and thereby causes a deprivation of property” (para. 184). Implicitly, this illegality must relate to some other norm of international law than expropriation.

In analyzing whether this was the case, the court went on to analyze the United States’ defence of police powers. It started with the recognition of the doctrine, stating that “bona fide non-discriminatory exercise of certain regulatory powers aimed at the protection of legitimate public welfare is not deemed expropriatory or compensable  [note: citing to various arbitral awards, including Saluka v. Czech Republic]…. Governmental powers in this respect, however, are not unlimited” (para. 185).

Although the court recognized the applicability of the police powers doctrine, which would normally be considered a substantive defence, the court immediately held that reasonableness is one of the limits of police powers. As the measures on the basis of which the U.S. courts decided in favour of the plaintiffs were held unreasonable under Art IV.1 by the court, this meant that the police powers defence could not be upheld. This finding was sufficient for the court to conclude that, as a result, this was an expropriation in breach of Art IV.2.

The judgment effectively subsumed its finding of unreasonableness under Art. IV.1 under its analysis of expropriation, which is typically considered a norm with a higher threshold of violation than FET.[6] A number of judges had an issue with the majority´s reasoning. Judge Bhandari, for instance, found the analysis lacking depth and the support of authorities. He opined that the majority erred by framing judicial expropriation in debatably broad terms. For him, the prevailing understanding of judicial expropriation is that the element of international unlawfulness must taint the judicial decision itself. Judge Charlesworth, similarly, considered in her separate opinion that the reasonableness analysis does not displace the elaborate criteria of expropriation developed in jurisprudence. For her, “it is not obvious that the applicable standard under the two obligations is identical, nor that breach of one will necessarily entail breach of the other.” Judge ad hoc Barkett, appointed by the United States, viewed the matter similarly, adding that the money was owed by virtue of liability judgments and as such, they created a debt, a fact she considered undisputed by Iran. If the Iranian companies owed the money, it would be absurd to require the U.S. government to pay it back, according to her.

Full protection and security protects only the physical aspects of the property

Another discussion with great import for ISDS practice is the court´s analysis of the FPS standard or, in the language of the 1955 Treaty, most constant protection and security. A contentious point regarding the interpretation of the FPS standard in arbitral jurisprudence and scholarship is whether the standard covers merely physical security of the investment, or whether it also extends to the investment´s legal security and broader legal framework.[7]

With respect to FPS, the judgment did bring some needed clarity. It held quite unequivocally that the standard only protects from physical harm, especially from third parties, in which context the state must exercise due diligence (para. 190).[8] Citing to the ELSI case, the court stated that FPS cannot be construed as giving a warranty that property shall never in any circumstances be occupied or disturbed. As Iran failed to identify facts establishing physical harm, the court dismissed the FPS claim.

Importantly, the court opined that should FPS also cover the so-called legal protection, it would overlap significantly with FET, which could not have been intended by the treaty parties. It must be stressed, however, that the court did not find the issue of standards’ overlap problematic when it came to the link between FET and non-impairment standards, as discussed above. In fact, the court even rubberstamped an effective overlap between FET and expropriation, as its expropriation finding hinged on the legislative and executive measures’ unreasonableness. As a result, the judgment suffers from incoherence in important aspects of the court’s reasoning.


Time will tell what investment tribunals will take from the ICJ judgment in Certain Iranian Assets. But it may be said that the court helped clarify some, although limited, aspects of international investment law on which past tribunals have diverged a great deal. The court´s statement that the FPS standard protects merely the physical security of property is perhaps the most welcome clarification. However, when it comes to other common investment treaty standards, the court´s guidance is less useful. First, the court might have legitimized approaches that argue that an FET standard that is not textually linked to international law may be interpreted autonomously of customary international law. At the same time, it did not provide much guidance as how this autonomous interpretation is to be carried out. Second, its interpretation of reasonableness will likely be referenced in future cases, but the three-criteria test devised by the court does not give enough texture such that it could guide future applications. Finally, the judgment’s treatment of judicial expropriation is probably the most disappointing element of the decision. The court formulated an extremely broad standard, potentially paving the way for future findings of so-called judicial expropriation. At the same time, the court’s reasoning here is at its sparsest, as recognized by a number of dissenting judges who pointed out weaknesses in the majority’s analysis.


Josef Ostřanský is a Policy Advisor for Sustainable Investment at IISD and Managing Editor of the Investment Treaty News


[1] Many cases following the Iranian revolution, including those brought by individuals and companies, have been also decided by the Iran United States Claims Tribunal (

[2] This aspect of the merits judgment has attracted criticism of some individual judges (Yusuf; Sebutinde; Salam; Robinson; Momtaz; Bennouna) and commentators. The central bank’s assets formed significantly larger part of the assets impacted by the measures (USD 1.8 billion). As I will not discuss it in this paper any further, the reader may consult, for example, Rhades, M. (2023). Certain Iranian (frozen) assets: Der widersprüchliche Umgang des IGH mit der iranischen Zentralbank. Völkerrechtsblog.; Razipour, K. (2023). After ICJ’s “Certain Iranian Assets” judgment, Iran and United States both claim victory. Just Security.

[3] “Companies constituted under the applicable laws and regulations of either High Contracting Party shall have their juridical status recognized within the territories of the other High Contracting Party. It is understood, however, that recognition of juridical status does not of itself confer rights upon companies to engage in the activities for which they are organized. As used in the present Treaty, “companies” means corporations, partnerships, companies and other associations, whether or not with limited liability and whether or not for pecuniary profit.”

[4] “Each High Contracting Party shall at all times accord fair and equitable treatment to nationals and companies of the other High Contracting Party, and to their property and enterprises; shall refrain from applying unreasonable or discriminatory measures that would impair their legally acquired rights and interests; and shall assure that their lawful contractual rights are afforded effective means of enforcement, in conformity with the applicable


[5] Several judges dissented from this conclusion, arguing that the extent of the obligation to recognize separate legal personality under Art III.1 was much narrower (Tomka; Abraham; Barkett; Iwasawa; Nolte; Sebutinde).

[6] Some investment tribunals recently proceeded with a similar approach to the relation between FET and expropriation, such as Rockhopper v. Italy, Final Award, 23 Aug 2022 (

[7] For recent ITN articles analyzing various aspects of FPS see Kinda, A. (2022). The loss compensation clause and the protection and security clause: Two risky provisions neglected by investment treaty reform? Investment Treaty News.; and  Greenman, K. & Tzouvala, N. (2023). International investment law and repressive state power: Rethinking a relationship. Investment Treaty News.

[8] Judge Sebutinde disagreed with the majority on this point. Separate and dissenting opinion of Judge Sebutinde (