## Facts

- In 1917, Federico Tinoco seized power in Costa Rica, exercised effective control, and governed until his fall in 1919.
- During Tinoco’s rule, Costa Rica entered into (1) an oil concession (Aguilar-Amory), later held by a British-owned successor company, and (2) financial transactions involving funds deposited in the government’s account at the Royal Bank of Canada.
- Great Britain and the United States did not recognize the Tinoco regime.
- After Tinoco’s collapse, Costa Rica’s restored government enacted Law No. 41 (the “Law of Nullities”) in 1920, declaring void contracts made by the Tinoco government, including the concession and bank-related transactions.
- Great Britain espoused the claims of the affected British corporations, asserting that Costa Rica remained internationally responsible for obligations created while Tinoco exercised effective control.
- The states concluded an ad hoc arbitration convention (1922), submitting whether Costa Rica could maintain Law No. 41 against the two claims to a sole arbitrator, William H. Taft.
- Taft issued an award on October 18, 1923.

## Issues

1. Whether the Tinoco regime constituted a de facto government in international law capable of binding Costa Rica despite unconstitutional origin and foreign nonrecognition.
2. Whether Costa Rica, as a continuing state, remained responsible for obligations incurred under the Tinoco government.
3. Whether Great Britain’s nonrecognition of Tinoco estopped it from asserting claims based on Tinoco-era acts.
4. Whether Costa Rica could rely on Law No. 41 to defeat the claims as a matter of international law.
5. Whether the oil concession and the bank transaction were enforceable state obligations or instead invalid, non-bona fide, or personal to Tinoco.

## Decision

- The arbitrator held that the Tinoco regime was a de facto government in international law because it exercised effective control; constitutional irregularity and nonrecognition were not determinative.
- The arbitrator rejected Costa Rica’s estoppel defense; nonrecognition did not bar Great Britain from invoking Tinoco-era acts, absent detrimental reliance by Costa Rica.
- The oil concession claim was denied on the particular facts and circumstances bearing on the concession’s validity and bona fides, not because Tinoco lacked governmental capacity.
- The Royal Bank of Canada claim was allowed only in part: Costa Rica was responsible to the extent the funds were shown to have been applied to legitimate governmental purposes, and not responsible for amounts treated as personal to Tinoco.
- Law No. 41 could not, by itself, control international responsibility; liability turned on international law and the proven character of the transactions.

## Legal Principles

- A regime exercising effective control may constitute a de facto government whose official acts can bind the state under international law, even if the regime came to power unlawfully or lacked diplomatic recognition.
- Recognition or nonrecognition by other states is evidentiary, not constitutive, of governmental status; nonrecognition based on disapproval of origin carries reduced weight compared to evidence of effective control.
- Estoppel in international disputes requires proof that the opposing party relied on the conduct alleged to create the estoppel and changed position to its detriment; nonrecognition alone does not satisfy this requirement.
- A state cannot extinguish international responsibility to foreign claimants solely through domestic legislation declaring prior obligations void.
- Successor governments are not required to honor transactions that are not bona fide state obligations (e.g., transfers primarily for an ousted ruler’s personal benefit), even if executed during a de facto regime.

## Conclusion

The award treated Tinoco’s administration as a de facto government capable of binding Costa Rica, rejected estoppel based on British nonrecognition, and held that domestic nullification could not alone defeat international claims; however, recovery depended on proof that the specific dealings were bona fide governmental obligations, leading to denial of the oil concession claim and partial recovery on the bank claim.


Aguilar-Amory & Royal Bank of Canada Claims (Gr. Brit. v. Costa Rica), 1 R.I.A.A. 369 (1923)