Calvo Clause

1.) Definition

A Calvo Clause is a provision inserted in contracts in which the foreigner agrees in

advance not to seek the diplomatic protection of his national State. A waiver of
diplomatic protection running from the concessionary company to the conceding State.

2.) History

The Calvo Clause, which was later developed, was a corollary of the Calvo
Doctrine. The historical and geographical circumstances surrounding the development
of the Calvo Doctrine and of the Calvo Clause may help better understand both. Carlos
Calvo (1824–1906) was born in Buenos Aires, at a time when Argentina had just
achieved independence from Spain. Preservation of its sovereignty was thus one of
the main concerns of the new nation, as it continued to be for quite a while.

Calvo, as a jurist, fully understood the legal implications of such a policy. The
Calvo Doctrine, which he originally expressed in his 1863 treatise on international law,
reflected that understanding. More precisely, the doctrine was born out of a sense of
imbalance in the exercise of diplomatic protection, which Calvo perceived as an
infringement by stronger States over the sovereign rights of weaker States.

3.) The Calvo Doctrine

Calvo doctrine came to be incorporated in concession agreements between

States and aliens. The Calvo Doctrine rests upon one core proposition: aliens should
not be entitled to any rights or privileges not accorded to nationals. A classic example
of a Calvo Clause will be found in the contract between North American Dredging Co
and the government of Mexico of 23 November 1912, which came before the United
States (‘US’) and Mexico General Claims Commission in the case North American
Dredging Company of Texas v United Mexican States (‘North American Dredging Co
Case’). The contract provided in Art. 18 that:

“The contractor and all persons who, as employees or in any other

capacity, may be engaged in the execution of the work under this contract
either directly or indirectly, shall be considered as Mexicans in all matters,
within the Republic of Mexico, concerning such work and the fulfilment of
their contract. They shall not claim, nor shall they have, with respect to the
interests and the business conducted within this contract, any other rights
or means to enforce the same than those granted by the Republic to
Mexicans, nor shall they enjoy any other rights than those established in
favor of Mexicans. They are consequently deprived of any rights as aliens,
and under no conditions shall the intervention of foreign diplomatic agents
 be permitted, in any matter related to this contract (United States
Department of State, Digest of International Law [US Gov Print Off 1967]
vol 8, 19).”

4) Validity of the Calvo Clause under International Law

The validity of the Calvo Clause has been tested time and again, mainly during
the course of alien States proceedings before arbitral tribunals. Most often, these
claims were submitted by aliens alleging that they had suffered violations of State
contracts. While a number of decisions have been rendered on this very issue, no
clear solution has emerged. There are decisions which hold that the Calvo Clause is
valid and must therefore be given its full force and effect, if for no other reason than
that this was the common intent of the parties; and decisions which hold that the Calvo
Clause is invalid and must therefore be declared devoid of any force and effect,
because no individual can forfeit his right to diplomatic protection.

The North American Dredging Co Case takes a middle stance and has been
considered by most commentators as the soundest pronouncement on the validity of
the Calvo Clause. The starting point of the reasoning of the General Claims
Commission is that the right to exercise diplomatic protection does not belong to the
individual who has been aggrieved, but to the State of which he is a national. Hence,
it is the State, and not the individual, which elects to exercise or not to exercise
diplomatic protection. This includes the power formally to renounce the right to
exercise diplomatic protection. Since that power is vested in the State, not in the
individual, the individual may not renounce it. The General Claims Commission
therefore held that the claimant could ‘not deprive the government of his nation of its
undoubted right of applying international remedies to violations of international law
committed to his damage’.

The General Claims Commission was thus led to draw a distinction between
those rights which the claimant could waive because they belonged to him, and those
rights which the claimant could not waive, because they belonged to his government.

In general, International Courts have disregarded such clauses, as the right to

diplomatic protection is a right which belongs to a State, and waiver from an individual
does not bind his State.