The Tinoco Arbitration

(1932-1934) 2 Annual Digest of Public International Law Cases 341

 Background:

o 1917 - Government of Costa Rica [President Alfredo Gonzales] overthrown by

Federico Tinoco.

o Tinoco assumed power & established new constitution

o During his tenure, he:

 Granted certain concession to search for oil to a British company

 Passed legislation issuing certain new currencies, and British banks [in the
course of business] became holders of much of this currency

o 1919 - Tinoco retired, left the country – Government fall.

o Old constitution restored and elections were held.

o August 22, 1922, restored government passed Acts nullifying the currency laws it
had made

o Consequence: Invalidated all transactions involved

o The restored government is a signatory of the treaty of arbitration.

 The Claim:

o Brought by Great Britain on behalf of two British Corporations:

 Royal Bank of Canada

 Central Costa Rica Petroleum Company

o Royal Bank of Canada claimed:

 Banco Internacional of Costa Rica and the Government of Costa Rica are
indebted to it proven by the holding of 998 1000 colones bills

o Central Costa Rica Petroleum Company [CCRPC] claimed:

 It owns the rights to explore and exploit petroleum reserves in Costa Rica

 This is based on a grant issued by Tinoco

1
At page 176 and 379.
 The Defense:

o Great Britain:

 On behalf of its nationals, legislation passed invalid

 Restored g’ment should recognize the concessions given to CCRPC and the
validity of Tinoco’s currency held by the Royal Bank of Canada

 During the period in question, the Tinoco Government had been the de
facto and de jure government2

 Supported by the fact that the government was not opposed in any
significant manner

 Thus giving the government legitimacy

 All its acts were valid and its successor has no right to repudiate[annul]
them

o Costa Rica:

 Objected. Claimed that any acts carried out by the government were void
because the Tinoco regime violated the Costa Rican constitution.

 Because Great Britain did not recognize the Tinoco Government as

legitimate, it cannot then turn around and claim agreements with an
illegitimate government as binding.

 Held:

o Rejected Costa Rica arguments

o While the failure on the part of Great Britain to recognize Tinoco government
was evidence to be taken into account in deciding on the status of that
government, it was not decisive as the status of the government had to be
determined in the light of all evidence

o In fact, the Tinoco g’ment had been a de facto g’ment during the period of its
existence

2
UK always refused to recognize the Tinoco g’ment as either de facto or de jure government. H/ever, they
still claim at the

arbitration proceedings that the Tinoco g’ment was in fact a de facto and de jure government.
  For the two years while in power, the Tinoco government served its
role in a peaceful environment

 No objections, no revolution and no power dispute.

o The court then holds that “the Tinoco government was an actual sovereign
government.”

o The court finds in favor of the Royal Bank of Canada, but finds the petroleum
concession to be a violation of the 1917 Constitution (which means Tinoco
could have nullified the agreement as well).

 Courts arguments which is significance to the aspect of International law:

o Scholarly writing: Dr. John Basset Moore: “Changes in the government or the
international policy of a state do not as a rule affect its position in
international law.”

o States may change between forms of government without ceasing to be that

state in the eyes of international law, or in terms of its international
obligations.

o “The principle of the continuity of states” = “state is bound by engagements

entered into by governments that have ceased to exist; the restored
government is generally liable for the acts of the usurper.”

© 2009 Khairul Idzwan Kamarudzaman

Faculty of Law, Universiti Teknologi MARA