Facts/ background:
On May 15th. 1946 the British warships passed through the Channel without the approval of the Albanian government and were shot at. Later, on October 22nd, 1946, a squadron of British warships (two cruisers and two destroyers), left the port of Corfu and proceeded northward through a channel previously swept for mines in the North Corfu Strait.
Both destroyers were struck by mine and were heavily damaged. This incident resulted also in many deaths. The two ships were mined in Albanian territorial waters in a previously swept and check-swept channel.
After the explosions of October 22nd, the United Kingdom Government sent a note to the Albanian Government, in which it announced its intention to sweep the Corfu Channel shortly. The Albanian reply, which was received in London on October 31st, stated that the Albanian Government would not give its consent to this unless the operation in question took place outside Albanian territorial waters. Meanwhile, at the United Kingdom Government's request, the International Central Mine Clearance Board decided, in a resolution of November 1st, 1946, that there should be a further sweep of the Channel, subject to Albania's consent. The United Kingdom Government having informed the Albanian Government, in a communication of November 10th, that the proposed sweep would take place on November 12th, the Albanian Government replied on the 11th, protesting against this 'unilateral decision of His Majesty's Government'. It said it did not consider it inconvenient that the British fleet should undertake the sweeping of the channel of navigation, but added that, before sweeping was carried out, it considered it indispensable to decide what area of the sea should be deemed to constitute this channel, and proposed the establishment of a Mixed Commission for the purpose.
It ended by saying that any sweeping undertaken without the consent of the Albanian Government outside the channel thus constituted, i.e., inside Albanian territorial waters where foreign warships have no reason to sail, could only be considered as a deliberate violation of Albanian territory and sovereignty. After this exchange of notes, 'Operation Retail' took place on November 12th and 13th.
One fact of particular importance is that the North Corfu Channel constitutes a frontier between Albania and Greece, that a part of it is wholly within the territorial waters of these States, and that the Strait is of special importance to Greece by reason of the traffic to and from the port of Corfu.
Issues:
The British government claimed the minefield which caused the explosions was laid between May 15th, 1946, and October 22nd, 1946, by or with the approval or knowledge of the Albanian Government. Thus Albania was responsible for the explosions and loss of life and had to compensate the UK government.
In addition to the passage of the United Kingdom warships on October 22nd, 1946, the second question in the Special Agreement relates to the acts of the Royal Navy in Albanian waters on November 12th and 13th, 1946 when the British government carried out a minesweeping operation called 'Operation Retail' without the consent of Albania.
UK held the opinion the passage on October 22nd, 1946 was innocent and that according to rules of international law it had the right to innocent passage through the North Corfu Channel as it is considered part of international highways and does not need a previous approval of the territorial state.

The Albanian Government does not dispute that the North Corfu Channel is a strait in the geographical sense; but it denies that this Channel belongs to the class of international highways through which a right of passage exists, on the grounds that it is only of secondary importance and not even a necessary route between two parts of the high seas, and that it is used almost exclusively for local traffic to and from the ports of Corfu. Thus a previous approval of the territorial state is necessary.

1) Should the North Corfu Channel as it is considered part of international highways?
2) Is Albania responsible under international law for the explosions which occurred on the 22nd October 1946 in Albanian waters and for the damage and loss of human life which resulted from them and is there any duty to pay compensation?'
Analysis:
The court analyses the geographical situation of the channel connects two parts of the high seas and is in fact frequently being used for international navigation. Taking into account these various considerations, the Court concludes that the North Corfu Channel should be considered as belonging to the class of international highways through which an innocent passage does not need special approval and cannot be prohibited by a coastal State in time of peace.

The UK government claims that on October 22nd, 1946, Albania neither notified the existence of the minefield, nor warned the British warships of the danger they were approaching. According to the principle of state responsibility, they should have done all necessary steps immediately to warn ships near the danger zone, more especially those that were approaching that zone. In fact, nothing was attempted by the Albanian authorities to prevent the disaster. These grave omissions involve the international responsibility of Albania.
But Albania's obligation to notify shipping of the existence of mines in her waters depends on her having obtained knowledge of that fact in sufficient time before October 22nd; and the duty of the Albanian coastal authorities to warn the British ships depends on the time that elapsed between the moment that these ships were reported and the moment of the first explosion.

Conclusion of the court:

The Court therefore reaches the conclusion that Albania is responsible under international law for the explosions which occurred on October 22nd, 1946, in Albanian waters, and for the damage and loss of human life which resulted from them, and that there is a duty upon Albania to pay compensation to the United Kingdom.

In the second part of the Special Agreement, the following question is submitted to the Court:

(2) Has the United Kingdom under international law violated the sovereignty of the Albanian People's Republic by reason of the acts of the Royal Navy in Albanian waters on the 22nd October and on the 12th and 13th November 1946 and is there any duty to give satisfaction?

Albania was in fact in war with Greece which means that the coastal state was not in time of peace. UK had not an innocent passage due to the way it was carried out. The court assessed the manner of UK warships after they had been shot at May 15th. Having thus examined the various contentions of the Albanian Government in so far as they appear to be relevant, the Court has arrived at the conclusion that the United Kingdom did not violate the sovereignty of Albania by reason of the acts of the British Navy in Albanian waters on October 22nd, 1946.
The United Kingdom Government does not dispute that 'Operation Retail' was carried out against the clearly expressed wish of the Albanian Government. It recognizes that the operation had not the consent of the international mine clearance organizations, that it could not be justified as the exercise of a right of innocent passage, and lastly that, in principle, international law does not allow a State to assemble a large number of warships in the territorial waters of another State and to carry out minesweeping in those waters. The United Kingdom Government states that the operation was one of extreme urgency, and that it considered itself entitled to carry it out without anybody's consent.
The Court can only regard the alleged right of intervention as the manifestation of a policy of force, such as has, in the past, given rise to most serious abuses and such as cannot, whatever be the present defects in international organization, The United Kingdom Agent, in his speech in reply, has further classified 'Operation Retail' among methods of self-protection or self-help. The Court cannot accept this defense either find a place in international law.
Final conclusion of the court:

1) On the first question put by the Special Agreement of March 25th, 1948,

The court gives judgment that the People's Republic of Albania is responsible under international law for the explosions which occurred on October 22nd, 1946, in Albanian waters, and for the damage and loss of human life that resulted there from; and

Reserves for further consideration the assessment of the amount of compensation and regulates the procedure on this subject.

2) On the second question put by the Special Agreement on the violation of state sovereignty,

The court gives judgment that the United Kingdom did not violate the sovereignty of the People's Republic of Albania by reason of the acts of the British Navy in Albanian waters on October 22nd, 1946; and unanimously, gives judgment that by reason of the acts of the British Navy in Albanian waters in the course of the Operation of November 12th and 13th, 1946, the United Kingdom violated the sovereignty of the People's Republic of Albania, and that this declaration by the Court constitutes in itself appropriate satisfaction.


Source: InterNet