Aspects of the Iron Rhine Arbitration Case

The Kingdom of Belgium and The Kingdom of the Netherlands agreed to submit, a dispute concerning the reactivation of the Iron Rhine railway (IJzeren Rijn, dating from 1879) linking the port of Antwerp, Belgium, to the Rhine basin in Germany, via the Dutch provinces of Noord-Brabant and Limburg, to an arbitral tribunal in 2003 established under the Permanent Court of Arbitration. The reactivation of the Iron Rhine railway was not contested so much, but the two countries differed, inter alia, over the entitlement of Belgium to establish the plan for the reactivation, and the entitlement of the Netherlands to insist on conditions specified under Dutch law for such a reactivation. The Tribunal in its award held that Belgium had the right to establish track specifications for the Iron Rhine railway line in the Netherlands and that Dutch legislation may be applied to its reactivation, provided certain conditions. [1]

The aim of this paper is to analyse the arbitral award rendered by the Tribunal in the Iron Rhine Arbitration Case and reasons attached to the decision by the Tribunal. Chapter 1 discusses the history of the Iron Rhine railways line and the negotiations between the states with respect to its use and re-use till such time as the dispute was submitted to arbitration. Chapter 2 discusses the arbitral procedure, the issues involved and the arguments advanced by the parties. Chapter 3 deals with the award and its analysis.

Chapter 1

Iron Rhine Arbitration- History

History of the case-

On 19 April 1839, the Kingdom of Netherlands and the Kingdom of Belgium agreed to enter into a treaty for Separation of their respective territories called as the Treaty of Separation. Article XII of this Treaty allows for an extension on Dutch territory to construct a new road or dig a new canal on Belgian territory. In 1873 the Netherlands and Belgium, applying Article XII, entered into a treaty for the construction of a railway line, in place of a road or canal, and which specified the route of what was called as the “IJzeren Rijn” (Iron Rhine). On Dutch territory it was to run through the municipalities of Budel, Weert and Roermond. The railway was completed in 1879. [2]

The Iron Rhine was used heavily between 1879 and 1914. After World War I, international use decreased sharply, as Belgium had access to another route, the Hasselt- Montzen-Aken line. The use of the railway in the twentieth century varied, but it was not more than nine trains per day. On 31 May 1991 Belgium stopped the use of the Iron Rhine track for international traffic. [3]

The Iron Rhine track crossed two areas which had a protected status. The Weerter en Budeler Bergen was a special protection area under the Birds Directive and the Meinweg was a protection area under both the Birds and Habitats Directives of the European Community. Both areas were also protected under Dutch national legislation on Nature and Environment. The Belgian Minister of Transport wrote to his Dutch counterpart that the Dutch plan to form a nature park to the east of Roermond, one of the municipalities through which the said railway line passed, would limit the use of the Iron Rhine track and that Belgium would “hold firm to its right of free transport through the Iron Rhine”. [4]

On 10 July 1998, the Belgian Government asked the Netherlands to bring again into activation the Iron Rhine. The Netherlands acknowledged the Belgian right of transport across Dutch territory, while stating that the reactivation would be governed by Dutch environmental legislation and EC legislation on the protection of natural habitats.

Under the Arbitration Agreement, the Parties concurred “to submit their dispute concerning the reactivation of the Iron Rhine to an arbitral tribunal they are to set up under the auspices of the Permanent Court of Arbitration in The Hague” and “to execute the Arbitral Tribunal’s decision as soon as possible”. [5] Thus, the present arbitration took place.

Negotiations between parties-

During attempted negotiations between the two parties, Belgium wished to put the route back into use, while the Netherlands in accordance with their environmental legislation sought to undertake a study of alternative and more environmental friendly routes. The Netherlands appealed to Belgium to allow such an investigation, not only because Dutch laws prescribed it, but also because the situation had changed since 1879, especially in view of the minimal use during the twentieth century and the complete stoppage of international traffic in 1991. Belgium did not want to deviate from its right to use the route given in the 1873 Iron Rhine Treaty – now called “the historic route” – and to accept the Dutch environmental law.

In March 2000, the Netherlands and Belgium reached a compromise, which they laid down in a Memorandum of Understanding (hereinafter “MoU”). [6] According to the terms of the MoU, the Netherlands promised to prepare an environmental impact assessment within a relatively short period of time. This would not only cover the historic and other possible routes for future use by 43 trains, but also ensure a temporary and limited use of the historic track without irreversible environmental damage in the Meinweg area. Belgium would pay for the works necessary to realize this temporary use. The decisions on the temporary use and the long-term use were to be taken simultaneously. This so-called dual decision ensured that the temporary solution would not become permanent.

On the basis of a Route Assessment Environmental Impact Study it was decided in 2001 that a reactivation of the Iron Rhine along the historic route would be the best option, provided that measures were taken to mitigate the adverse impacts of the reactivation on the environment and nature. [7]

The parties were, however, unable to a reach an agreement with respect to who would bear what costs; the construction of a tunnel which would cost about 150 million euro for the reactivation of the railway line. The ongoing negotiations between the parties stalled in 2002. In December of that year, the Belgian Prime Minister asked the Dutch Prime Minister to initiate arbitration proceedings. [8]

Chapter 2

The Arbitration Process

On 22 July 2003 the Netherlands and Belgium agreed to a treaty which was applied from 23 July 2003 and came into force on 1 July 2005. The Netherlands appointed as arbitrators Professor Alfred H.A. Soons and International Court of Justice Judge Peter Tomka. Belgium appointed Professor Guy Schrans and International Court of Justice Judge Bruno Simma and the four arbitrators nominated Judge (now President) Rosalyn Higgins of the International Court of Justice as President of the Arbitral Tribunal. [9]

Questions raised-

To what limits is Dutch legislation and the decision making power based in reference of the use, restoration, adaptation and modernization of lines on Dutch territory applicable, in the same way, to the use, restoration, adaptation and modernization of the route of the Iron Rhine on Dutch territory?

To what limits does Belgium have the right to do or commission work to the use, restoration, adaptation and modernization of the historical route of the Iron Rhine on Dutch territory, and to make plans, specifications and procedures related to it according to Belgian law and the decision-making power based thereon?

In the view of the answers to the previous questions, to what extent should the cost associated with the use, restoration, adaptation and modernization of the historical route of the Iron Rhine on Dutch territory be borne by Belgium or by the Netherlands?

These questions were basically based on a request to determine whether, and to what extent, Dutch legislation, and particularly environmental legislation, is applicable to the reactivation, as well as a request to allocate the costs of the reactivation.

The tribunal was asked to decide the above questions on the basis of international law and invoke Article 292 of the EC Treaty to determine party obligations.

Arguments of the Parties-

The Netherlands and Belgium had different opinions on the interpretation of many passages of Article XII of the Treaty of Separation. The most important were the interpretation of the terms that “a new road” or “a new canal” on Belgian territory would “be extended” on Dutch territory. They were important for the decision whether, and to what extent, Article XII [10] could be invoked to the reactivation of the Iron Rhine. [11]

Belgium had the opinion that its request for reuse was not a request for “a new road, canal or track to be extended”, as the track was made on territory of the Netherlands in 1879 and still existed. Belgium, thus submitted that Article XII dealt only with the construction of the Iron Rhine. Belgium also referred to the fact that the Netherlands maintained the Iron Rhine all throughout the twentieth century and that it had reached an agreement on maintenance with the Dutch company holding the concession to explore the Iron Rhine on Dutch territory. Therefore the Netherlands had the responsibility to maintain and renovate the track of the Iron Rhine in light of what Belgium considered commercially viable. [12] The Netherlands, with regard to the interpretation of Article XII argued that the request to reactivate the railway was new, because considerable amount of adaptation and modernization was necessary to achieve the use by Belgium and that, therefore, Article XII was applicable. The Netherlands was of the view that Belgium, in view of the text of Article XII, would have to bear the costs of the reactivation. [13]

Chapter 3

Analysis Of The Award

The Tribunal interpreted Article XII of the Treaty of Separation, 1839 by applying Articles 31 and 32 of the Vienna Convention on the Law of Treaties, 1969 (hereinafter, “VCLT”), stating that the Netherlands and Belgium were both signatories to it and making reference to cases laid before the International Court of Justice in which these provisions had been applied to treaties concluded before the entering into force of the VCLT.

The Tribunal adopted the same view as of Belgium and took the approach that the ordinary meaning of the words “a new road or a new canal to be extended” should be given. Though, it rejected Belgium’s broad interpretation of the words “maintenance and renovation” saying that these words do not cover “the significant upgrading costs now involved in Belgium’s request”. According to the Tribunal, the main object and purpose behind the Treaty of Separation, 1939 was “to resolve the many difficult problems complicating a stable separation of Belgium and the Netherlands” and that of Article XII was “to provide for transport links from Belgium to Germany”. The object of Article XII “was not for a fixed duration and its purpose was ‘commercial communication’ ” [14] .

The tribunal observed-

“[E]ven in the absence of specific wording, that such works … as might from time to time be necessary or desirable for contemporary commerciality, would remain a concomitant of the right of transit that Belgium would be able to request. That being so, the entirety of Article XII, with its careful balance of the rights and obligations of the parties, remains in principle applicable to the adaptation and modernization requested by Belgium.” [15]

The Tribunal applied the principle of effectiveness, stating that this has “relevance in relation to the object and purpose of a treaty” but “does not entitle a tribunal to revise a treaty”. However, in the 2003 Arbitration Agreement the Netherlands and Belgium agreed that Belgium not only had the right to the use and the restoration of the iron Rhine railway, but also to its adaptation and modernization. [16] That the Iron Rhine railway forms a commercial connection between Antwerp and Germany has never been in dispute between the two States. It was hence made clear that the present-day desires and views of the parties contain “contemporary commerciality” in line with the 1839 object and purpose of Article XII construed by the Tribunal, so that there is no reason for either party to object to “a dynamic and evolutive approach to a treaty that was meant to guarantee a right of commercial transit through time”. [17]

The Tribunal declared that neither the Netherlands nor Belgium were to bear the costs of adaptation and modernization alone. These costs, including those for environmental measures, are primarily for Belgium to take care of. [18] But Netherlands had an obligation to pay for the cost items, for which it already offered to pay for during the negotiations, as well as for any particular quantifiable benefit it derives from the reactivation on the part of the route which it uses. Even more so, the costs for the tunnel in the Meinweg area were to be shared by the Netherlands and Belgium on an equal basis. This, according to the Tribunal, was “attributable to the past conduct of both of the Parties” as the Netherlands ignored Belgium’s right of transit, even though Belgium in February 1987 drew the attention of the Netherlands to this right, whereas Belgium terminated its use of the track in 1991 and did not inform the Netherlands in a timely fashion of a request for reactivation. [19]

As with regard to sovereignty of the Netherlands, the tribunal held-

“The Netherlands has forfeited no more sovereignty than that which is necessary for the track to be built and to operate to allow a commercial connection from Belgium to Germany across Limburg. It thus retains the police power throughout that area, the power to establish health and safety standards for work being done on the track, and the power to establish environmental standards in that area.” [20]

At the end of the arbitration proceedings, the Parties were more or less left to their own devices where it concerned the reasonableness of temporary use of the Iron Rhine track by Belgium. Matters to be discussed in this respect are the financing of such use, the time during which it would be permitted and the measures necessary from a functional and environmental point of view.

The Tribunal finally decided that the legislation of the Netherlands was applicable to the reactivation of the Iron Rhine as long as it did not amount to a denial of Belgium’s right of transit or rendered the exercise by Belgium of its right of transit unreasonably difficult. [21] The Award should not be seen as meaning that Belgium had no right to temporary use of the Iron Rhine. And also the Award should not be interpreted so as containing any pronouncement by the Tribunal upon the circumstances in which any such right may be exercised.

Conclusion

In the instant case, the Arbitration Agreement between the states requested the Tribunal to render its decision on the basis of international law, including European law, while taking into account the Parties’ obligations under Article 292 of the EC Treaty. Article 31(3)(c) of the VCLT states that while interpreting a treaty, “any relevant rules of international law applicable in the relations between the Parties” should be taken into account. While discussing the applicability of the said Article to the instant case, the Tribunal asserted that it was to examine provisions of European law for reasons relating to its jurisdiction. The role of issues concerning European law in the instant case cannot be denied. This gives rise to the question whether the Iron Rhine Tribunal overstepped and encroached upon the jurisdiction of the European Court of Justice (ECJ). With respect to this, the Netherlands and Belgium, in the agreement, took steps to obtain the view of the European Commission and provided the Arbitral Tribunal with an instrument to obtain the necessary decisions from the EC institutions. In the second place the Iron Rhine Tribunal dealt with a very specific and relatively isolated case in which it interpreted a bilateral treaty. The questions thus are whether the Netherlands and Belgium endangered the autonomy of the Community legal order and whether they did incur legal obligations under public international law which may conflict with their obligations under Community law.

In conclusion it may be asserted that the Iron Rhine Arbitration Tribunal has found a solution for dispute settlement cases which concentrate on general international law but still touch upon EC law. Admittedly, this solution may be feasible for only very few cases where the jurisdiction of the ECJ concurs with one of the various international courts and tribunals.