The Republic of Concordia has just two seaports, one at Ustinov, the other at Romanoff.
Although neighbouring Dalmasca has its own port facilities, it is often cheaper for Dalmascan imports to be shipped to either Ustinov or Romanoff, and then transported overland through Dalmasca into Concordia.
38 months ago, Concordia and Dalmasca entered into a treaty, the key articles of which read as follows:
1. In return for Dalmasca paying $10 million per annum towards the maintenance of port facilities at Ustinov, and $10 million per annum towards the maintenance of port facilities at Romanoff, Concordia undertakes, for the period of 10 years, to permit Dalmascan shipping companies unlimited access to both of those ports.
2. In the event of a significant and yet unforeseen change in the quantity of goods bound for Dalmasca passing through Ustinov and/or Romanoff, the maintenance grant payable by Dalmasca in relation to the port(s) in question shall be subject to variation. Any increase or decrease in the grant shall be the subject of good faith negotiations between the two states.
3. In the event of any negotiations anticipated in Article 2 not resulting in agreement after the period of one month, any dispute relating to grants payable by Dalmasca shall be settled by arbitration in accordance with Article 4.
4. [Article 4 contains detailed provisions relating to the arbitration of disputes relating to maintenance grants payable by Dalmasca.
Two months ago, and three years after the treaty came into effect and operation, an earthquake rendered the port at Ustinov totally unusable. Consequently, Concordia has agreed to waive the grant relating to Ustinov as from the date of the earthquake. However, as a result of the destruction of Ustinov, the volume of Dalmascan imports passing through Romanoff has doubled, and seems unlikely to decrease for the term of the treaty. Since this is putting additional strain on the port facilities in Romanoff, Concordia is proposing that Dalmasca should pay an additional $5 million per annum towards maintenance of that port.
In the meantime, there has now been a change of government in Dalmasca. The new government would prefer to terminate the treaty altogether and invest the money it would have paid to Concordia in development of Dalmascan seaports.
You are legal adviser to the Concordian government. Assuming that the above treaty is governed by the Vienna Convention on the Law of Treaties(VCLT), and the treaty does 2 nothing to vary the application of that Convention save to the extent contained in Articles 1 to 4 of the above treaty, which of the following is the best advice to give:
A. When there is a fundamental change in circumstances such as that brought about by an unforeseen earthquake, states are always permitted to terminate treaties that are affected by such a change. Termination of a treaty means that all rights and obligations created by that treaty come to an end. Dalmasca is entitled to cease paying towards the maintenance of both ports, although if it chooses that option then we are entitled to deny Dalmasca their use.
B. When there is a fundamental change in circumstances, such as that brought about by an unforeseen earthquake, states are always permitted to terminate treaties that are affected by such a change. Termination of a treaty means that all rights and obligations created by that treaty come to an end. Our right to vary the maintenance grants through negotiation and, if necessary, arbitration, no longer applies. We are going to have to allow Dalmasca to continue to use Romanoff in return for payment of $10 million a year.
C. The concept of national sovereignty means that states are entitled to govern their own affairs. If Dalmasca now wishes to develop its own ports rather than pay to use ours then we have to respect Dalmasca?s right to do that.
D. If we want to increase the maintenance grant for the use of Romanoff then we are obliged, in international law, to conduct good faith negotiations with Dalmasca to that effect. If we have not agreed an increase after one month of negotiations then we are required to refer the matter to arbitration in accordance with the terms of our treaty with Dalmasca.
E. If we want to increase the maintenance grant for the use of Romanoff then we are obliged, in international law, to conduct good faith negotiations with Dalmasca to that effect. If we have not agreed an increase after one month of negotiations then we shall have to follow the dispute resolution procedure set out in Articles 65 and 66 of the VCLT.
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