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Max Planck Encyclopedia of Public International Law [MPEPIL]

Free Zones of Upper Savoy and Gex Case

Andrea Gattini

From: Oxford Public International Law (http://opil.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 18 August 2019

Peace treaties

Published under the auspices of the Max Planck Foundation for International Peace and the Rule of Law under the direction of Rüdiger Wolfrum.

A.  Introduction

The issue at the core of the judgment of 7 June 1932 of the Permanent Court of International Justice (PCIJ) in the controversy between France and Switzerland was whether a State can get rid of an obligation assumed towards a State through a later treaty concluded with other States. The clear answer of the PCIJ was negative.

B.  Background to the Case

The matter of the controversy was as follows. In the Definite Treaty of Peace, with Additional Article concerning the Abolition of the Slave Trade, and related Conventions and Documents, Including a Treaty of Alliance between the Victorious Forces, and an Act Guaranteeing the Permanent Neutrality of Switzerland (signed in Paris on 20 November 1815; ‘Definite Treaty of Peace’ Peace Treaties), France had taken the obligation towards the other parties, Austria, Prussia, Russia, and the United Kingdom, to withdraw her custom line in the district of Gex from the political frontier with the Swiss Confederation in order to permit an unfettered exchange between the Geneva canton and the Confederation. In the Definite Treaty of Peace the parties confirmed the neutralization of some territories of Upper Savoy belonging to the Sardinian Kingdom. An analogous free zone was established in some territories of Upper Savoy south of Geneva according to the Treaty of Cession and Boundaries between Sardinia and Switzerland between the Sardinian Kingdom, the Canton of Geneva, and the Swiss Confederation, and was later enlarged through a Manifesto of the Sardinian Court of Accounts in 1829. After the cession of Savoy from the Sardinian Kingdom to France with the Treaty of Turin between France and Sardinia concerning the Reunion of Savoy and of the Urban District of Nice with France of 24 March 1860, France unilaterally decided to further enlarge the free zone in Upper Savoy, and this was confirmed in a commercial treaty between France and the Swiss Confederation in 1881, the Convention between France and Switzerland respecting the Customs Regime between Geneva and the Free Zone of Upper Savoy (Commercial Treaties). Soon after the end of the World War I France denounced the 1881 treaty. In springtime 1919 during the negotiations leading to the Versailles Peace Treaty (Treaty of Peace between the Allied and Associated Powers and Germany [1919] 225 CTS 188) ; ‘Versailles Peace Treaty’; Peace Treaties after World War I), France had sought Swiss consent to insert an article in the peace treaty, in which the parties would have stated the lapse of the servitudes of both Upper Savoy and the district of Gex. The Swiss Federal Council, whereas it accepted the abolition of the neutralization of the territories of Upper Savoy, made the most express reservations to the proposed statement that the former stipulations regarding the free zones were ‘no longer consistent with present conditions’ (Art. 435 Versailles Peace Treaty) and that France and the Swiss Confederation would have to come to an agreement with a view to settle between themselves the status of those territories. Notwithstanding, the provisions of Art. 435 Versailles Peace Treaty were adopted without any change. The Swiss note of 5 May 1919 and the French reply of 18 May 1919, in which the French government had reaffirmed her right to adjust her customs line in this region in conformity with her political frontier, were annexed to the article. A new customs treaty which abolished the free zones between the two countries, the Convention for the Settlement of Commercial and Neighbourly Relations between the Former Zones of Upper Savoy and the District of Gex and the Adjacent Swiss Cantons, was signed on 7 August 1921, but it was not ratified by Switzerland because of the negative vote of a popular referendum. Per decree on 10 October 1923 the French government suppressed the free zones. A year later, on 30 October 1924, the two States concluded a special agreement, ratified in 1928, the Compromis d’arbitrage au sujet des zones franches de la Haute-Savoie et du Pays de Gex (Arbitration Compromise concerning the Free Zones of Upper Savoy and Gex [‘Special Agreement’] ; Arbitration and Conciliation Treaties), by which they decided to resort to the PCIJ for the settlement of all the questions involved in the interpretation and execution of Art. 435 (2) Versailles Peace Treaty. (Interpretation in International Law).

C.  Procedural History

The Court made two orders. The first order, issued on 19 August 1929, granted the parties, as it was provided for in the Special Agreement, a period, expiring on 1 May 1930, to settle between themselves the new regime to be applied in the districts mentioned in Art. 435 Versailles Peace Treaty. It is on this occasion that the Court made the wide ranging and often quoted statement regarding its judicial function, according to which

the judicial settlement of international disputes … is simply an alternative to the direct and friendly settlement of such disputes between the Parties; as consequently it is for the Court to facilitate, so far as is compatible with its Statute, such direct and friendly settlement. (Free Zones of Upper Savoy and Gex Order [1929] 13)

The second order, issued on 6 December 1930, Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Order) (‘Free Zones of Upper Savoy and Gex Order (1930)’; PCIJ Series A No 24), granted a further period of about eight months for negotiation[s].

After the expiry of the second delay the Court finally rendered its judgment on 17 June 1932, by six votes to five (Free Zones of Upper Savoy and the District of Gex (France v Switzerland) PCIJ Series A/B No 46; ‘Free Zones of Upper Savoy and Gex Judgment’).

D.  Decision of the PCIJ

In regard to the question formulated in Art. 1 (1) Special Agreement, the Court found that, as between France and Switzerland, Art. 435 (2) Versailles Peace Treaty, with its Annexes, neither had abrogated nor was intended to lead to the abrogation of the provisions of previous treaties and unilateral declarations regarding the customs and economic régime of the free zones of Upper Savoy and the Pays de Gex.

In order to reach this conclusion, the Court had first to face the French government’s contention, according to which Art. 1 Special Agreement had put forward two alternative propositions—either that the abolition of the free zones had already been effected by Art. 435 Versailles Peace Treaty, or that it had necessarily to be effected by a later common agreement—between which the Court had to make its choice, leaving no place for a different solution. The Court seized the opportunity to make a general statement on interpretation of compromissory clauses, which is still valuable. It did not dispute the rule invoked by the French government, namely that ‘every Special Agreement, like every clause conferring jurisdiction upon the Court, must be interpreted strictly’ (Free Zones of Upper Savoy and Gex Judgment 138–39), but it added that that rule could not be applied in such a way as to give the clause a construction which would have prejudged the answer to the question in dispute.

Coming to the first alternative, whether Art. 435 (2) Versailles Peace Treaty had abrogated the provisions concerning the free zones, the Court found that the statement contained in that article, by which the High Contracting Parties agreed that the stipulations regarding the free zones were ‘no longer consistent with present conditions’, was tantamount to a declaration of disinterestedness in regard to their status on the part of the High contracting parties other than France, and by no means involved the abolition of the free zones. At this juncture the Court made the well-known categorical statement concerning the lack of effects of treaties upon third States (Treaties, Third-Party Effect): ‘[I]t is certain that, in any case, Article 435 of the Treaty of Versailles is not binding upon Switzerland, who is not a Party to that Treaty, except to the extent to which that country accepted it’ (ibid 141). Also with regard to the second alternative, whether Art. 435 (2) Versailles Peace Treaty, was at any event intended to lead to the abrogation of the free zones through a later agreement between the parties, the Court found in the text of the article no element prejudging the outcome of the settlement and again reiterated the principle of pacta tertiis, by noting that even if the article were to be interpreted as a mandate involving an obligation for France and Switzerland to proceed to abrogate the provisions relating to the free zones, such mandate ‘would not be enforceable as against Switzerland, which has not accepted it’ (ibid 143).

The Court proceeded on to consider whether it would have been possible for France to abrogate the free zones without the consent of Switzerland, on the hypothesis that the latter had no actual right to the free zones. The Court easily discarded this possibility, by demonstrating that the territorial arrangements in favour of Switzerland were the result of various agreements between that country and the Powers. With particular respect of the Sardinian zone, the Court held that the character of a treaty stipulation to be attributed to the Manifesto of the Sardinian Court of Account of 1829 had to be respected by France ‘as Sardinia’s successor in the sovereignty over the territory in question’ (ibid 145; State Succession in Treaties). Even if the Court did not elaborate on the legal grounds for its affirmation of succession, this statement has been later regarded as authority for the rule of continuity of localized treaties. Having reached the conclusion of the contractual character of both free zones, the Court did not need to consider the legal nature of the Gex zone from the point of view of a stipulation in favour of a third party, but in an obiter dictum it enounced the general rule regarding treaties providing for rights for third States: ‘[I]t must be ascertained whether the States which have stipulated in favour of a third State meant to create for that State an actual right which the latter has accepted as such’ (ibid 148).

10  The Court passed then on to the questions referred to in Art. 2 Special Agreement by which the parties, failing the conclusion of a convention within a specified time, had entrusted the Court also with the task to ‘settle … all the questions involved by the execution of paragraph 2 of Article 435’. Art. 2 Special Agreement, however, subordinated to the consent of the two parties the Court’s judgment to the extent that it would have contemplated the imports of goods free or at reduced rates through the Swiss or French customs barrier. The Court found that condition incompatible with the binding and final character of its judgments under Arts 59 and 60 Statute of the Permanent Court of International Justice ([adopted 16 December 1920, entered into force 20 August 1921] 6 LNTS 389), and added that the settlement of such matters as tariff exemptions ‘is not a question of law, but it is a matter depending on the interplay of economic interests on which no Government can afford to be controlled by an outside organ’ (Free Zones of Upper Savoy and Gex Judgment 162). Therefore the Court regarded its power to fulfil the task entrusted to it as exclusively limited to questions of law and upon the footing of the rights which Switzerland derived from the treaties and other supplementary acts relating to the free zones.

11  Before tackling that issue, however, the Court had to deal with two submissions first presented by France in the course of the oral observations provided for by the orders. On the one side France submitted that the treaties establishing the free zones had elapsed because of the change of circumstances (Treaties, Fundamental Change of Circumstances), namely the institution of the Swiss Federal Customs in 1849, a fact which would have destroyed the economic unit formed by the Canton of Geneva and her contiguous zones. On the other side, with particular regard to the Sardinian zone, France maintained that the provisions of the Treaty of Cession and Boundaries between Sardinia and Switzerland of 1816 had been impliedly abrogated by the conclusion between the parties of subsequent treaties which were incompatible with the continuing existence of the zone. On the ground that ‘a decision of an international dispute of the present order should not mainly depend on a point of procedure’ (ibid 155), the Court decided not to entertain the plea of inadmissibility, and to deal with the merit of the two arguments. The Court missed the opportunity to state its position on these two grounds of termination of treaties (Treaties, Termination), by rejecting the French arguments on the facts. However, in dealing with the rebus sic stantibus argument, the Court made a general statement on the relevance of the consideration given by the parties to some circumstances as the basis of their consent to be bound by the treaty (ibid 156).

12  In the course of the oral arguments before the Court, the Swiss agent had declared, on behalf of his government, that if the zones were maintained, the Federal Government would agree to a more stable and more liberal regime of exchange of goods between the zones and Switzerland. Despite the doubts expressed by the French agent as to the binding character of the Swiss declaration, the Court, ‘having regard to the circumstances in which this declaration was made’ (ibid 170), considered it as binding on Switzerland. Consequently in the dispositif the Court, besides fixing 1 January 1934 as the date by which the French government had to withdrawn the customs line, decided also that some provisions for the importation of goods free of duty or at reduced rates across the line of the federal customs had to be contemplated and to this effect that the declaration made in this regard by the Swiss agent shall be placed on record.

13  The task to resolve all the questions regarding the execution of Art. 435 (2) Versailles Peace Treaty, which the Court had refused to settle, was entrusted by the parties to a group of expert arbiters, which rendered their arbitral award Affaire des zones franches (France v Suisse) on December 1933.

E.  Assessment

14  In its decision on the free zones the PCIJ had the opportunity to clarify some fundamental questions regarding the effects of treaties on third parties, which were later codified in the Vienna Convention on the Law of Treaties(1969) 1155 UNTS 331 (‘VCLT’), be it the lack of effects of treaties imposing obligations upon third States, now codified in Art. 35 VCLT, or the conditions upon which a treaty may be deemed to have conferred rights upon a third State, now codified in Arts 36 and 37 (2) VCLT.

15  Equally important was the statement of the Court regarding the subjective element of the clausula rebus sic stantibus, namely the weight given by the parties to the existence or inexistence of a certain fact as essential for their agreement, which later found its way, together with other conditions, in Art. 62 (1) (a) VCLT.

16  In proceeding to state the terms of the settlement requested by Art. 2 Special Agreement, the Court seized the opportunity to make some observations, the importance of which reaches well beyond the case at hand. For instance, with regard to the Swiss claim that the French fiscal tax at the frontier on imported good was a custom tax in disguise, the Court observed that ‘in case of doubt a limitation of sovereignty must be construed restrictively’ (Free Zones of Upper Savoy and Gex Judgment 167), and upheld the legitimacy of the imposition of fiscal taxes, unless the proof of an abuse of right (Abuse of Rights), which could not be presumed (ibid).

17  In that context the Court gave also a definition of custom duty, which was later almost verbatim adopted by the Court of Justice of the European Communities in 1962 in Joined Cases 2/62 and 3/62 EEC Commission v Luxembourg when defining the notion of a tax of equivalent effect to a custom duty (at [1962] ECR 425, 432): ‘[I]n principle, a tax levied solely by reason of importation or exportation across the frontier must be regarded as a tax in the nature of a customs duty’ (Free Zones of Upper Savoy and Gex Judgment 168).

18  Furthermore, the Court observed that, if by the maintenance in force of the old treaties, Switzerland would obtain the economic advantages derived by the free zones, ‘she ought in return to grant compensatory economic advantages to the people of the zones’ (ibid 169). It is not clear, however, whether and to which extent the Court intended to bestow obligatory character to this element of material reciprocity. On the one hand the French authoritative text employs the present tense ‘doit’ (ibid); on the other hand it must be recalled that the Court in principle excluded that matters such as tariff exemptions were covered by law, a position which, by the way, would be difficult to maintain nowadays having regard to the development of international trade law.

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