98 Report of the International Law Commission on the work of its fifty-third session has a broad meaning, encompassing any action that needs to be taken by the responsible State to restore the situation resulting from its internationally wrongful act. the rights and obligations in issue arise directly on the international plane. In that context restitution plays a particularly important role. (6) What may be required in terms of restitution will often depend on the content of the primary obligation which has been breached. Restitution, as the first of the forms of reparation, is of particular importance where the obligation breached is of a continuing character, and even more so where it arises under a peremptory norm of general international law. In the case, for example, of unlawful annexation of a State, the withdrawal of the occupying State’s forces and the annulment of any decree of annexation may be seen as involving cessation rather than restitution.506 Even so, ancillary measures (the return of persons or property seized in the course of the invasion) will be required as an aspect either of cessation or restitution. (10) In certain cases, the position of third parties may have to be taken into account in considering whether restitution is materially possible. This was true in the Forests of Central Rhodopia case. But whether the position of a third party will preclude restitution will depend on the circumstances, including whether the third party at the time of entering into the transaction or assuming the disputed rights was acting in good faith and without notice of the claim to restitution. (7) The obligation to make restitution is not unlimited. In particular, under article 35 restitution is required “provided and to the extent that” it is neither materially impossible nor wholly disproportionate. The phrase “provided and to the extent that” makes it clear that restitution may be only partially excluded, in which case the responsible State will be obliged to make restitution to the extent that this is neither impossible nor disproportionate. (8) Under article 35, subparagraph (a), restitution is not required if it is “materially impossible”. This would apply where property to be restored has been permanently lost or destroyed, or has deteriorated to such an extent as to be valueless. On the other hand, restitution is not impossible merely on grounds of legal or practical difficulties, even though the responsible State may have to make special efforts to overcome these. Under article 32 the wrongdoing State may not invoke the provisions of its internal law as justification for the failure to provide full reparation, and the mere fact of political or administrative obstacles to restitution does not amount to impossibility. (9) Material impossibility is not limited to cases where the object in question has been destroyed, but can cover more complex situations. In the Forests of Central Rhodopia case, the claimant was entitled to only a share in the forestry operations and no claims had been brought by the other participants. The forests were not in the same condition as at the time of their wrongful taking, and detailed inquiries would be necessary to determine their condition. Since the taking, third parties had acquired rights to them. For a combination of these reasons, restitution was denied.507 The case supports a broad understanding of the impossibility of granting restitution, but it concerned questions of property rights within the legal system of the responsible State.508 The position may be different where (Footnote 505 continued.) the provisions of the said treaties and instruments; and that this régime must continue in force so long as it has not been modified by agreement between the Parties” (p. 172). See also F. A. Mann, “The consequences of an international wrong in international and municipal law”, BYBIL, 1976–1977, vol. 48, p. 1, at pp. 5–8. 506 See above, paragraph (8) of the commentary to article 30. 507 Forests of Central Rhodopia (see footnote 382 above), p. 1432. 508 For questions of restitution in the context of State contract arbitration, see Texaco Overseas Petroleum Company and California Asiatic Oil Company v. The Government of the Libyan Arab Republic (1977), (11) A second exception, dealt with in article 35, subparagraph (b), involves those cases where the benefit to be gained from restitution is wholly disproportionate to its cost to the responsible State. Specifically, restitution may not be required if it would “involve a burden out of all proportion to the benefit deriving from restitution instead of compensation”. This applies only where there is a grave disproportionality between the burden which restitution would impose on the responsible State and the benefit which would be gained, either by the injured State or by any victim of the breach. It is thus based on considerations of equity and reasonableness,509 although with a preference for the position of the injured State in any case where the balancing process does not indicate a clear preference for compensation as compared with restitution. The balance will invariably favour the injured State in any case where the failure to provide restitution would jeopardize its political independence or economic stability. Article 36. Compensation 1. The State responsible for an internationally wrongful act is under an obligation to compensate for the damage caused thereby, insofar as such damage is not made good by restitution. 2. The compensation shall cover any financially assessable damage including loss of profits insofar as it is established. Commentary (1) Article 36 deals with compensation for damage caused by an internationally wrongful act, to the extent that such damage is not made good by restitution. The notion of “damage” is defined inclusively in article 31, paragraph 2, as any damage whether material or moral.510 Article 36, paragraph 2, develops this definition by specifying that compensation shall cover any financially ILR, vol. 53, p. 389, at pp. 507–508, para. 109; BP Exploration Company (Libya) Limited v. Government of the Libyan Arab Republic, ibid., p. 297, at p. 354 (1974); and Libyan American Oil Company (LIAMCO) v. Government of the Libyan Arab Republic ibid., vol. 62, p. 141, at p. 200 (1977). 509 See, e.g., J. H. W. Verzijl, International Law in Historical Perspective (Leiden, Sijthoff, 1973), part VI, p. 744, and the position taken by the Deutsche Gesellschaft für Völkerrecht (German International Law Association) in Yearbook ... 1969, vol. II, p. 149. 510 See paragraphs (5) to (6) and (8) of the commentary to article 31.