Investment Treaty News (ITN)

ICSID tribunal applies ad hoc approach to confidentiality in arbitral proceeding

Elizabeth — Thu, 11 Mar 2010 00:00:00 GMT

By Ugo Ukpabi*

March 11, 2010

In Giovanna A Beccara and Others v. The Argentine Republic a tribunal composed of Pierre Tercier, Georges Abi - Saab, and Albert Jan Van den Berg has decided that questions of confidentiality and transparency in ICSID arbitrations should be determined on a case by case basis.

The dispute – one of many arising out of Argentina’s response to response to its financial crisis – concerns debt security issued by Argentina and held by numerous non-Argentine and Argentine creditors, including the claimants. In late 2001, Argentina was unable to meet its financial obligations and failed to pay amounts owed under those bond instruments. As an alternative to meeting its obligations under the bond issue, the Argentine Republic launched an Exchange Offer (the “Exchange Offer”). Under the terms of the Exchange Offer, the previous bondholders could exchange their bonds (on which Argentina had already suspended payment) for new debt instruments to be issued at a later date.

The claimants refused to participate in that Exchange Offer. Rather, they argued that the respondent’s action amounted to a violation of its obligations under the applicable Argentina – Italy Bilateral Investment Treaty (the BIT). As a result, in the fall of 2006, the claimants commenced arbitral proceedings against Argentina seeking compensatory damages.

The procedural questions raised in this case centered around the disputing claims by the parties on questions of confidentiality. In that regard, the crux of the dispute centered on the appropriate disclosure and use of personal information relating to individual claimants in the case.

Disagreements between the parties began in March of 2008 when Argentina requested production of certain electronic information regarding different claimants in the arbitration. Argentina’s request was grounded in arguments that the format of the information previously provided to it by the claimants was not “in a format easily accessible” and therefore impeded its defence rights.

In response, the claimants stressed that they had already provided the respondent information in a computer-readable and searchable format. However, the claimants indicated that they were willing to provide Argentina with the data requested as long as it agreed to sign a confidentiality agreement. The parties were unable, however, to agree on the proper scope of the claimants’ proposed confidential agreement.

As the stalemate between the parties continued, preparations for arbitral proceedings continued. The claimants and the respondent continued to exchange documents and in the spring of 2009 both parties submitted their designation of witnesses, experts and documents for the jurisdictional phase of the proceedings. At this time, new concerns about confidentiality were raised by the claimants when Argentina submitted documents relating to its examination of witnesses and experts designated by the claimants for the jurisdictional hearing that contained expert opinions and transcripts from other arbitral proceedings.

Specifically, the claimants argued that the exhibits sought to be relied on by the respondent ignored confidentiality protections in the other arbitral proceedings. The claimants also contended that Argentina’s submission of those exhibits violated the principle of equality of the parties because the claimants did not have access to those proceedings, a reality that could lead Argentina to use such evidence selectively and out of context.

In response, Argentina argued that: (i) it had not submitted any document filed in sealed proceedings, (ii) there was no general rule of confidentiality governing ICSID arbitrations, and (iii) it had never been deprived of using such documents in any ICSID proceeding.

With the parties’ continued expression of divergent views on issues of confidentiality in investment arbitration, the tribunal announced in the fall of 2009 that it would make a decision on the matter.

In its ruling, the tribunal started by noting that it had powers to determine the conduct of proceedings brought before it by virtue of Rule 19 of the ICSID Arbitration Rules. As a result, the tribunal reasoned that it had the power to make orders concerning confidentiality.

Having confirmed its jurisdiction, the tribunal went on to discuss the issue of confidentiality in ICSID arbitrations generally. In that regard, the tribunal noted that while various provisions of the ICSID Convention, Administrative and Financial Regulations and Arbitration Rules deal with specific confidentiality duties of tribunals and ICSID, they do not expressly address the actions of parties themselves. Given such silence in ICSID’s legal framework, the tribunal determined that:

…unless there [is] an agreement of the [p]arties on the issue of confidentiality/transparency, the Tribunal shall decide on the matter [questions of confidentiality and transparency] on a case by case basis and, instead of tending towards imposing a general rule in favour or against confidentiality, try to achieve a solution that balances the general interest for transparency with specific interests for confidentiality of certain information and/or documents.

Having refrained from articulating a general principle of law concerning confidentiality questions in ICSID arbitrations, the tribunal went on to categorize the competing claims surrounding confidentiality in the following manner: (a) confidentiality as to the record of the proceedings; (b) confidentiality as to the protection of the claimants’ information; and (c) the admissibility, in the present proceedings, of certain confidential information arising in another arbitration proceeding.

(a) Confidentiality as to the record of the proceeding

With respect to this issue the tribunal noted that in their latest request for a confidentiality order, the claimants had asked that the entire proceedings be covered by a general duty of confidentiality. Specifically, the claimants attempted to limit any disclosure about the case by the parties to “general updates on the status of the case.” Not surprisingly, Argentina resisted the claimants’ request and reiterated its position that there is no general rule of confidentiality governing ICSID arbitrations.

For its part, the tribunal sought to chart a middle course approach different from the polar opposite positions adopted by the claimants and the respondent. In the Tribunal’s view, it was important to take into consideration, the nature of the information at stake because different considerations of confidentiality and transparency may apply, resulting in a differentiated treatment of that information. The tribunal also noted that the stage of the proceedings was another important factor when considering confidentiality issues. In this regard, the tribunal noted that greater caution should be taken while arbitration proceedings are on-going – especially given considerations such as ensuring the orderly conduct of the arbitration, respect for the parties’ equality of rights and avoiding the exacerbation of the dispute.

With the above considerations in mind, the tribunal went on to both allow and restrict disclosure of information related to various aspects of the arbitration. For example, with respect to a general discussion of the case, the tribunal determined that the parties could engage in such discussions publicly, provided that any such public discussion is restricted to what is necessary, and is not used to frustrate resolution of the dispute.**

(b) Confidentiality as to the protection of the claimants’ information

Going back to the events that kick-started the confidentiality dispute between the parties (i.e. Argentina’s request for certain electronic information about the claimants), the tribunal noted that it was important to pay heed to the applicable legislation (e.g. Italian Code and EC provisions) protecting the claimants’ privacy. As such, while it was willing to grant the respondent complete access to the requested information, it imposed limitations on its use. Specifically, the tribunal determined that: (i) disclosure of the requested information be for the sole purpose of conducting the arbitration, (ii) only persons connected with the arbitration be allowed access to the information, (iii) alterations to the information be disallowed, and (iv) disclosure to unauthorized third parties occur only with the claimants’ consent.

Finally, as to the attempt by Argentina to introduce certain exhibits (i.e. expert reports or transcripts of examinations of those experts) from other arbitral proceedings, the tribunal observed that the exhibits were issued in arbitrations different from the present case. In particular the tribunal noted that the arbitrations involved different claimants, circumstances, BITs and alleged substantive violations of those BITs. As a result, the tribunal concluded that exhibits from those proceedings could not easily be “transposed one to one to the present case” and refused to admit those exhibits as evidence in the present proceedings.

* Ugo Ukpabi obtained his PhD from (Osgoode Hall) York University, Toronto. He is a member of the Bars of Nigeria and the Province of Alberta, Canada. Ugo Ukpabi is a sole legal practitioner based in Calgary, Alberta.

** The tribunal also made determinations regarding the parties’ disclosure of : awards, decisions, orders and directions of the tribunal (other than awards), the minutes and records of the hearing, pleadings, written memorials, other written submissions, documents and exhibits related to pleadings, written memorials or other written submissions, and correspondence between the parties and/or the tribunal exchanged in respect of the arbitration.

Sources:

Procedural Order No. 3 (Confidentiality Order) in Re Giovanna is available here:
http://ita.law.uvic.ca/documents/BeccaraConfidentialityOrder.pdf

A merits hearing takes place in protracted NAFTA dispute over US tobacco settlements

Elizabeth — Wed, 10 Mar 2010 23:58:00 GMT

By Elizabeth Whitsitt

March 11, 2010

(NOTE: two corrections have been made to this article. See explanations below.)

A three-member tribunal, composed of Mr. Fali S. Nariman, Professor S. James Anaya, and Mr. John R. Crook, has heard arguments on the merits of the dispute between Grand River Enterprises Six Nations, Ltd., et al. and the United States.

A hearing on the merits of the dispute took place last month some six years after arbitral proceedings in the long-running NAFTA Chapter 11 case began. Over the years, arbitral proceedings have been delayed several times due to jurisdictional and arbitrator challenges.

In fact, just three months ago it seemed that proceedings might be halted once again when the claimants wrote to the tribunal asking to reschedule the merits hearing.

The request arose out of concerns related to the initiation of a federal criminal prosecution of Mr. Montour and other Grand River founders, Kenneth Hill and Jerry Montour, for "trafficking" and for "conspiracy to traffic" cigarettes under US law. Specifically, the claimants were concerned that the US would use evidence, provided by Mr. Arthur Montour during the merits hearing of the NAFTA dispute, in its criminal prosecution of Messer’s Hill and Montour.

Seeking to safeguard Arthur Montour’s due process rights against self-incrimination, the claimants requested that the tribunal reschedule the hearing until after the pending criminal trial was concluded. Alternatively, the claimants sought a declaration from the tribunal that it would not strike or accord less weight to Mr. Montour’s testimony should he abstain from participating in the merits hearing.

Ultimately, however, the tribunal refused the claimants’ request. In a letter dispatched to all parties on December 14, 2009, the tribunal confirmed that hearings on the merits of the NAFTA dispute would take place in February 2010. With respect to Arthur Montour’s due process rights, the tribunal expressed its expectation that Mr. Montour would participate in the hearing. Additionally, the tribunal confirmed counsel’s right to object to any questions that might require Mr. Montour to provide evidence that would be prejudicial to his position in the pending criminal case.

As a result, the merits hearing commenced on February 1st. Due to snow storms in Washington D.C., however, the proceedings were interrupted for approximately one week and finally concluded on February 14th.

Grand River Enterprises is a Canadian corporation involved in the manufacture and sale of tobacco products. Its dispute with the US revolves around the Tobacco Master Settlement Agreement (MSA) signed in 1998 between the four major American tobacco manufacturers and the Attorneys General of 46 U.S. states.
Under the MSA, the tobacco companies agreed to certain marketing and advertising limitations, as well as perpetual annual payments in exchange for protection against future lawsuits by the states.

The heart of the dispute centers on provisions in the MSA related to – Non-Participating Members (NPMs) - companies that refused to sign on the agreement. In order to prevent those companies from benefiting from the lower costs inherent in their non-participation, the MSA required states to adopt a so-called model law.

The model law, implemented by states as so-called Escrow Statutes, required NPMs to make annual deposits into escrow accounts based on their cigarette sales. The amounts reflected what an NPM would have paid as an annual settlement amount if it were part of the MSA. Escrow funds are to be held for up 25 years as insurance in case an NPM is ever sued by one of the states.

Soon after their implementation, states saw problems with the Escrow Statutes. Specifically states felt that NPMs could pay significantly less sums if they concentrated their cigarette sales on just a few states, and that the statutes were hard to enforce against foreign manufacturers.

States responded to these concerns by enacting two new laws. To deal with the perceived enforcement problems, Contraband Laws were enacted, requiring cigarette manufacturers to certify each year that they were complying with the Escrow Statutes, or else have their cigarettes automatically banned as contraband. Second, the Escrow Statues were amended to increase escrow requirements to NPMs, such as the claimants, which had adopted a regional strategy.

As a result, Grand River Enterprises is seeking between US$ 300 – 600 million for alleged violations of NAFTA Articles 1102 (national treatment), 1103 (most-favored-nation treatment), 1104 (better of national or most-favored-nation treatment), 1105 (minimum standard of treatment under international law) and 1110 (expropriation).

Corrections: 11 March 2010

The original version of this article noted Jerry Montour as a being subject to a U.S. federal criminal prosecution along with Arthur Montour and Kenneth Hill. However, Jerry Montour is not subject to that criminal prosecution. Rather, as stated in the Letter from Claimants requesting to reschedule February 2010 merits hearing, the third co-accused is "the elderly father of Claimant Jerry Montour."

The original version of this article noted that the amount of damages sought by the Claimants in this matter was US$ 300-600 million (see: http://www.state.gov/s/l/c11935.htm). ITN notes however that in the Claimants' memorials submitted for the merits hearing, the Claimants appear to have suggested damage valuations in the approximate range of US$ 100-260 million. (For copies of these memorials see: http://www.state.gov/documents/organization/107684.pdf; http://www.state.gov/documents/organization/120621.pdf)

Sources:

Letter to Parties Reconfirming February 2010 Dates for Merits Hearing, available here:

http://www.state.gov/documents/organization/133833.pdf

Letter from Respondent Regarding Claimants’ request to Reschedule February 2010 Merits Hearing, available here:

http://www.state.gov/documents/organization/133832.pdf

Letter from Claimants requesting to Reschedule February 2010 Merits Hearing, available here:

http://www.state.gov/documents/organization/133831.pdf

Previous ITN Reporting:

“Parties file memorials in long-running NAFTA dispute over U.S. tobacco settlements; Canada intervenes with opinion on customary international law related to aboriginal rights,” By Fernando Cabrera and Damon Vis-Dunbar, Investment Treaty News, 29 January 2009, available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/01/29/parties-file-memorials-in-long-running-nafta-dispute-over-u-s-tobacco-settlements-canada-intervenes-with-opinion-on-customary-international-law-related-to-aboriginal-rights.aspx

“Despite time-bar ruling in NAFTA arbitration, Grand River claim will proceed in part”, By Fiona Marshall, Investment Treaty News, 10 August 2006, available here:

http://www.iisd.org/pdf/2006/itn_aug10_2006.pdf

For a description of the U.S. objections to one of the arbitrators see: “US persists with challenge to arbitrator in Grand River Enterprises NAFTA case; arbitrator’s human rights work assisting Native Americans in spotlight”, By Luke Eric Peterson, 15 November 2007, available here:

http://www.iisd.org/pdf/2007/itn_nov15_2007.pdf

Ecuadorians battle Chevron in U.S. court over BIT arbitration in long-running environmental damage dispute

Elizabeth — Wed, 10 Mar 2010 23:52:00 GMT

By Fernando Cabrera Diaz

March 11, 2010

Chevron and Ecuadorian citizens are in U.S. court in the latest chapter of a 16 year battle over environmental damage in Lago Agrio allegedly caused by Texaco Petroleum (TexPet), which Chevron acquired in 2001. In January of this year, a group of Ecuadorian plaintiffs which is suing the company in Ecuador asked a U.S. District Court to enforce Texaco’s alleged promise to that Court that it would submit to the jurisdiction of Ecuadorian courts where a lawsuit is currently under way. The move came in response to a BIT arbitration initiated in September 2009 by Chevron against Ecuador. In its notice of arbitration, Chevron alleges, among other things, that Ecuador and its courts have unfairly favoured the Lago Agrio plaintiffs.

The dispute stems from a 1993 lawsuit launched by Ecuadorian citizens in the U.S. District Court for the Southern District of New York alleging that Texaco, through its subsidiary TexPet, discharged billions of gallons of contaminated “formation water” from the Lago Agrio oil field into the local water supply causing environmental and health problems in the area.

Texaco argued that the case needed to be tried in Ecuadorian courts, which it characterized as adequate. The U.S. Court of Appeals, Second Circuit agreed with the company and sent the case (Aguinda v. Texaco) to Ecuador in 2002 on the condition that Chevron accept jurisdiction there. A group of Ecuadorian citizens responded by filing a new lawsuit in Ecuador.

As reported previously by ITN, Chevron had a different view of Ecuadorean courts when it initiated a previous arbitration against Ecuador in May of 2006 alleging that the country had violated the Ecuador-U.S. Bilateral Investment Treaty (the BIT) because its courts had failed to deal fairly with multiple breach-of-contract cases filed against the state by Texaco Petroleum.

Ecuador had argued that Chevron was merely using this first arbitration to discredit Ecuadorian courts ahead of future arbitration if the Lago Agrio lawsuit in Ecuador did not go its way. Chevron for its part argued that after 2004 the Ecuadorian courts ceased to be independent in the wake of several political purges of Ecuador’s Constitutional, Electoral and Supreme Courts.

Meanwhile the lawsuit in Ecuador continues. Chevron has argued that Petroecuador and the Ecuadorian government are responsible for cleaning any environmental damage in Lago Agrio because Texaco and its subsidiary TexPet were released from any liability shortly after they ceased operations in the region in 1992. During the 1970s and 1980s Texaco and its subsidiary were minority members of the consortium that explored for and produced oil in Lago Agrio under contracts with Ecuador and state-owned oil company, Petroecuador.

ITN spoke to Steven Donziger, an American lawyer representing the plaintiffs in the Lago Argio dispute who said that the agreements releasing Texaco from liability do not apply to private claims such as those being pursued by his clients.

Mr. Donziger also argues that these releases were obtained fraudulently by Texaco, accusing the company of lying to the government about its cleanup efforts which he says consisted of running dirt over a small number of waste pits without cleaning them of toxins. Though a minority partner in the project, Texaco was the exclusive operator of the oil fields and therefore responsible for 100% of the environmental damage, says Mr. Donziger.

Kent Robertson, media relations advisor at Chevron, says that private plaintiffs had no legal grounds to bring this sort of a claim for damages to public lands prior to a 1999 law that is now being applied retroactively and in direct contradiction to Ecuador’s constitution that forbids the retroactive application of law.

He disputes Mr. Donziger’s allegations that Texaco obtained releases through fraud. “At the time of Texaco Petroleum’s remediation, sampling and analysis was performed by the government at every site to determine if the clean-up complied with Ecuador’s requirements,” says Mr. Robertson. “Moreover, two of Ecuador’s Prosecutor Generals have commissioned subsequent analysis of remediated sites and both concluded that the remediation work was effective and complied with the applicable standards,” he adds.

He also notes that since Texaco left Lago Agrio, Petroecuador has run the oil field in an “environmentally-deplorable fashion” causing numerous spills in the area for which Chevron is not responsible.

In September of 2009, with the lawsuit not going well for it in Ecuador, Chevron launched a second arbitration against Ecuador.

In its September notice of arbitration the company accuses Ecuador of not respecting the agreements it signed releasing the Texaco from liability in violation of Article II(3)(c) of the BIT. Chevron also accuses Ecuador of interfering on behalf of the plaintiffs in the lawsuit in violation of the fair and equitable treatment provisions of the BIT. It asks the arbitral panel to declare that Ecuador is liable “for any judgement that may be issued in the Lago Agrio Litigation.”

"Because Ecuador's judicial system is incapable of functioning independently of political influence, Chevron has no choice but to seek relief under the treaty between the United States and Ecuador," said Hewitt Pate, Chevron's vice president and general counsel in a company press release.

This arbitration is taking place at the Court of Arbitration in The Hague under the Rules of the United Nations Commission on International Trade Law.

In response to this second arbitration, Ecuador and the Ecaudorian plaintiffs filed separate suits in December and January, respectively, at the U.S. District Court for the Southern District of New York. Both sets of plaintiffs allege that by filing this latest arbitration Chevron violated a promise made to that court in the previous lawsuit that it would respect any decision of Ecaudorian courts in the dispute.

Mr. Robertson argues that Chevron was not a party to the Aguinda v. Texaco lawsuit and that in any event Texaco made no promises it had to abide by a ruling from Ecuador. Chevron has since filed a motion asking the court to dismiss the lawsuits, arguing that U.S. courts are not authorized to hear requests to bar parties from pursuing arbitrations under international investment treaties.

Mr. Donziger though argues that his clients are not asking the court to intervene in the arbitration, but instead to hold the company to the promise it made to that court that it would abide by a ruling in Ecuador.

A hearing is scheduled March 10 in New York, where all three parties will present preliminary oral arguments.

A new development in the dispute arose on February 9, when Chevron asked the Lago Agrio court hearing the lawsuit to dismiss court-appointed expert Richard Cabrera who had recommended in a report that the court award US$ 27 billion against the company.

In particular, the company claims Mr. Cabrera hid the fact that he is “the co-founder, general manager, majority stockholder, and legal representative of an oilfield remediation company, Compañía Ambiental Minera-Petrolera S.A.” which would stand to gain from a decision against the company.

The plaintiffs argue that Ecuador court rules prohibit Mr. Cabrera and other experts in the case from taking part in any clean-up should one result, and that Cabrera’s involvement in remediation in Ecuador is precisely why he was qualified to issue the report he did.

“Our opinion is that it is not a conflict of interest, and that this is just part of Chevron’s media strategy to discredit the report. In fact the company filed 29 motions in the last 2 years seeking to disqualify Cabrera, and none have been found to have a legal basis,” says Mr. Donziger

“Mr. Cabrera’s conflict of interest is clear and he knowingly and repeatedly concealed his remediation interests from the court,” counters Mr. Robertson.

Sources:

Decision in Aguinda v. Texaco Inc. available at: http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=2nd&navby=case&no=017756

Chevron notice of arbitration of filed September 23, 2009: http://www.chevron.com/documents/pdf/EcuadorBITEn.pdf

Chevron company press releases: http://www.chevron.com/news/press/release/?id=2009-09-23; http://www.chevron.com/news/press/release/?id=2010-02-09

“Chevron, Ecuador Plaintiffs Spar Over Arbitration In Court,” By Mercedes Alvaro, Dow Jones Business News, February 2, 2010.

Previous ITN Reporting:

“Chevron launches investment-treaty claim against Ecuador,” By By Damon Vis-Dunbar, Investment Treaty News, 2 October 2009, available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/10/01/chevron-claims-denial-of-justice-in-investment-treaty-claim-against-ecuador.aspx

“Chevron warns Ecuador on BIT claim as contract and environmental disputes persist”, By Damon Vis-Dunbar, Investment Treaty News, 26 July 2006, available here:

http://www.iisd.org/pdf/2006/itn_july26_2006.pdf

Tribunals have been constituted in ICSID cases involving Egypt, Cambodia and Argentina

Elizabeth — Wed, 10 Mar 2010 23:37:00 GMT

By Elizabeth Whitsitt

March 11, 2010

In the past two months, arbitral tribunals have been convened in a few ICSID arbitrations.

Most recently, a tribunal was constituted in a dispute initiated by an American investor against the Republic of Egypt in relation to the alleged expropriation of its investment in the Arab Republic’s hotel and tourism industry.

In the H&H Enterprises Investments, Inc. v. Egypt matter, under the US - Egypt BIT (1992), the claimant selected Veijo Heiskanen, and the respondent nominated Hamid G. Gharavi. Spanish lawyer and arbitrator, Bernardo M. Cremades will serve as President.*

Additionally, in an ICSID case commenced by Spanish investor Grupo Marsans over Argentina’s alleged expropriation of the country’s largest airline, Aerolineas Argentinas, the claimants have nominated Henri C. Álvarez and the respondent has chosen Kamal Hossain. Thomas Buergenthal has been selected as President of the Tribunal.**

Finally, in a claim involving Cambodia’s electricity generation and distribution sector, the claimant has appointed John Beechey, and the respondent has selected British lawyer, Toby Landau. UK lawyer and arbitrator Neil Kaplan will serve as President of the tribunal. ***

* Bernardo M. Cremades is a partner at the Spanish law firm B. Cremades y Asociados and Catedrático of Universidad de Madrid. Mr. Cremades has acted as counsel, party-appointed arbitrator and president of arbitral tribunals in a number of disputes. Currently, he is a panel member in a variety of ICSID cases, including Fraport AG Frankfurt Airport v. Philippines, Gustav F W Hamester v. Ghana, Marion Unglaube v. Costa Rica, Reinhard Hans Unglaube v. Costa Rica, Quadrant Pacific v. Costa Rica, and Inmaris Perestroika v. Ukraine. Mr. Cremades has also presided over tribunals in many disputes, including the consolidation tribunal in Corn Products International. v. Mexico, Liberian Eastern Timber Corporation v. Liberia, Lanco v. Argentina, Waste Management v. Mexico, Société d'Exploitation des Mines d'Or de Sadiola S.A. v. Mali, and Archer Daniels Midland Company v. Mexico.

Veijo Heikanen is a partner with Swiss law firm, Lalive. He specializes in international arbitration, including investment arbitration, and public international law. He has acted as counsel and arbitrator in numerous international arbitration proceedings. It appears that this is Mr. Heikanen’s first ICSID tribunal appointment.

Hamid G. Gharavi is founding partner of the firm Derains & Gharavi. He has been appointed to the LCIA Court, the Commission on Arbitration of the ICC and the Panel of ICSID Arbitrators. In addition to H&H Enterprises v. Egypt, Mr. Gharavi is an ICSID arbitrator in Shell Nigeria Ultra Deep Limited v. Nigeria.

** Judge Buergenthal is the American judge serving on the International Court of Justice. In addition, he has been a panelist in numerous ICSID arbitrations, including Vivendi v. Argentina, Lucchetti v. Peru, and Maffezini v. Spain. Judge Buergenthal also served on the annulment committee in Gruslin v. Malaysia and is currently presiding in the ICSID dispute between Chevron and Bangladesh.

Mr. Alvarez is a Partner with the law firm of Fasken Martineau. He also sits as an arbitrator in ongoing ICSID disputes against Argentina and Turkey (i.e. Total S.A. v. Argentina and Libananco Holdings v. Turkey). Mr. Alvarez has also sat on arbitral panels in Compagnie Minière Internationale v. Peru, Aguas del Tunari v. Bolivia, Camuzzi v. Argentina, Compañía General de Electricidad. v. Argentina, and Noble Energy v. Ecuador. Mr. Alvarez was also President of the ICSID tribunal in Motorola Credit Corporation v. Turkey.

Mr. Hossain, is a Bangladeshi lawyer and arbitrator, who also sits as arbitrator in the pending ICSID cases, Caratube v. Kazakhstan and Impregilo (II) v. Argentina. Along with Judge Buergenthal, Mr. Hossain sat on the Gruslin v. Malaysia annulment committee. Mr. Hossain also sat as arbitrator in Vacuum Salt Products v. Ghana.

*** Neil Kaplan has recently been appointed to fill a vacancy in Perenco v. Ecuador (see “Pereco-nominated arbitrator disqualified for interview comments in ICSID dispute with Ecuador,” By Fernando Cabrera Diaz, Investment Treaty News, 14 February 2010, at: http://www.investmenttreatynews.org/cms/news/archive/2010/02/10/perenco-nominated-arbitrator-disqualified-for-interview-comments-in-icsid-dispute-with-ecuador.aspx). Mr. Kaplan was also President in the ADC Affiliate Limited v. Hungary arbitration.

Toby Landau is a UK barrister who is currently serving as an arbitrator in GEA v. Ukraine. Mr. Landau has also been a panelist in two other ICSID arbitrations: Impregilo v. Pakistan and Biwater v. Tanzania.

John Beechey is a UK national and a Partner at the law firm of Clifford Chance. Mr. Beechey has served as counsel and arbitrator in numerous ICC cases. Previously he sat as an ICSID panelist in the Ares International and MetalGeo v. Georgia arbitration.

For previous related ITN reporting see:

“ICSID registers claim by Spanish investor against Argentina over airline dispute,” By Fernando Cabrera Diaz, Investment Treaty News, 20 February 2009, available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/02/23/icsid-registers-claim-by-spanish-investor-against-argentina-over-airline-dispute.aspx

“Argentina moves to expropriate airline under threat of US$1 Billion arbitration claim,” By Fernando Cabrera Diaz, Investment Treaty News, 30 November 2008, available here:

http://www.investmenttreatynews.org/cms/news/archive/2008/11/30/argentina-moves-to-expropriate-airline-under-threat-of-us-1-billion-arbitration-claim.aspx

Canadian mining firm accused of links to murder of protester, threatens arbitration over mine closure in Chiapas

Elizabeth — Wed, 10 Mar 2010 23:33:00 GMT

By Fernando Cabrera Diaz

March 11, 2010

Calgary-based mining firm Blackfire Exploration has reportedly threatened Mexican officials in Chiapas with NAFTA Chapter 11 arbitration in response to the closure of its barite mine in the southern Mexican state of Chiapas. The mine’s closure came on the heels of intense local protests against the mine following the murder of a local activist.

On November 27, 2009 Mariano Abarca, leader of the Mexican Network of those Affected by Mining (REMA by its initials in Spanish) was assassinated in front of his home. Mr. Abarca led a local movement against Blackfire’s barite mine near the town of Chicomuselo Chiapas. Locals accuse the mine of contaminating area farms and using up water resources.

According to the Globe and Mail three men have been arrested by Mexican police in connection with the slaying, one a current Blackfire employee and two others who worked for the company in the past. Company President Brent Willis has denied the company had any connection to the killing and has repeatedly stated that the Chiapas mine is being run in an environmentally responsible way that meets Canadian standards.

Less than two weeks after Mr. Abarca’s murder and amidst growing protests, on December 7th state environmental authorities in Chiapas ordered the temporary closure of the mine. Chiapas officials denied the murder played a role in their decision and instead cited pollution and toxic emissions as the reason.

According to reports in Mexican Daily Milenio, Blackfire has threatened to launch NAFTA Chapter 11 arbitration against Mexico seeking almost US$ 800 million as compensation for the illegal closing of its mine in Chiapas. Citing an unnamed Blackfire spokesperson the paper says the company is still willing to negotiate with the Chiapas government over the re-opening of the mine or appropriate compensation if this is not possible.

The Blackfire controversy is providing more ammunition to proponents of Bill-C300 in Canada introduced last February by Canadian Member of Parliament John Mackay. Also known as the Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act, the bill would hold Canadian companies who receive support from the Canadian government responsible in Canada for human rights and environmental abuses in developing countries.

In a bizarre twist to the story, Blackfire revealed to the Globe and Mail that it had filed a complaint with the Congress of Chiapas in June 2009 alleging that the company was being extorted by Chicomuselo mayor Julio Cesar Velazquez Calderon.

In its complaint Blackfire says that it paid the mayor a total of over US$ 17,000 in monthly instalments to prevent members of a co-operative farm near the mine from “taking up arms” against the company. The company says it stopped paying the bribes when the mayor’s demands escalated to include a sexual evening with Mexican nude model Niurka Marcos.

Meanwhile, a coalition of Canadian NGOs and labour rights groups including Common Frontiers-Canada, MiningWatch Canada, the Council of Canadians and United Steelworkers, have called on the Royal Canadian Mounted Police to investigate the company’s alleged corruption of Mexican officials and intimidation of protesters citing the Canadian Corruption of Foreign Public Officials Act.

Sources:

“Empresa canadiense, inconforme con el cierre de mina de titanio, Demandarán al gobierno de Chiapas por 800 mdd,” Milenio Online, February 10, 2010: http://impreso.milenio.com/node/8716870

“RCMP asked to investigate Canadian mining company,” Vancouver Sun, December 19, 2009.

“The mayor, the model and the mining company; Canadian firm Blackfire unearths more controversy by alleging politician sought cash bribe and ‘sexual evening,” By Andy Hoffman, The Globe and Mail, December 12, 2009.

“Citing environment, Mexican state shuts down Canadian-run mine after slaying of activist,” By Manuel de la Cruz, Canadian Press, December 9, 2009.

Text of Bill C-300 is available here: http://www2.parl.gc.ca/HousePublications/Publication.aspx?DocId=3658424&Language=e&Mode=1&File=27#1

Hearings take place in dispute between Electrabel and Hungary despite snowy weather

Elizabeth — Wed, 10 Mar 2010 23:31:00 GMT

By Elizabeth Whitsitt

March 11, 2010

Despite snow storm interruptions a tribunal, composed of Mr. V.V. Vedeer, Ms. Gabrielle Kaufmann-Kohler, and Ms. Brigitte Stern, heard the merits of the dispute between Belgium-based energy firm Electrabel SA and Hungary last month.

Along with AES Summit Generation Limited v. Republic of Hungary, the Electrabel SA v. Republic of Hungary arbitration is one of two Energy Charter Treaty (ECT) disputes, arising from Hungary's efforts to restructure its electric power sector in the wake of its accession to the European Union (EU).

With claims totaling in excess of US$ 700 million, both arbitrations address the Hungarian government’s efforts to minimize the anti-competitive effects of long-term power purchase agreements entered into before Hungary’s accession to the EU on May 1, 2004.

While the parties written submissions are not publicly available, reports indicate that Hungary is defending itself in part on the ground that it was obliged to make changes to those long-term contracts. Apparently, the European Commission determined that those agreements were illegal under EU law because they unnecessarily impeded competition. Specifically, the Commission found that the power purchase agreements provided state aid to power generators and prevented new entrants into Hungary’s energy sector.

Interestingly, in both cases the ECT tribunals have permitted participation by the European Commission, a non-participating party in the dispute.

While the Commission’s intervener submissions are not publicly available, it is widely known that the Commission intervened to defend Hungary’s actions as being required by EU Community law. Apparently the Commission also sought to challenge the jurisdiction of the tribunal, on grounds that portions of the dispute, and the underlying contracts from which the dispute arose, were subject to EU law, and thus subject to Commission’s jurisdiction.

Sources:

The European and Middle Eastern Arbitration Review 2010 (Global Arbitration Review)

“European Commission to intervene in ICSID dispute,” 15 December 2008 (Global Arbitration Review)

“ICSID tribunal will permit European Commission to file legal brief in Energy Charter Treaty arbitration,” Investment Arbitration Reporter, 11 December 2008.

“European Commission moves to intervene in another ICSID arbitration,” Investment Arbitration Reporter, 11 May 2009.
Previous ITN Reporting on Non-Disputing Party Procedure:

“Innovative Steps are Introduced Into Non-Disputing Party ICSID Procedure,” By Elizabeth Whitsitt, Investment Treaty News, 3 November 2009, available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/11/01/innovative-steps-are-introduced-into-non-disputing-party-icsid-procedure.aspx

In Brief: Proceedings are suspended in dispute between French oil company and Ecuador

Elizabeth — Wed, 10 Mar 2010 23:28:00 GMT

By Elizabeth Whitsitt

March 11, 2010

Thomas Bingham, President of the ICSID tribunal in Perenco Ecuador Limited v. Ecuador has resigned.

At the center of the dispute between Perenco and Ecuador is a windfall tax enacted in 2006 (Law 42) by the South American Republic. According to Ecuador, Perenco owes some US$327 million under Law 42. Perenco, on the other hand, contends that the law is in violation of its contract with Ecuador and the France-Ecuador BIT.

Mr. Bingham’s resignation came on February 17, 2010, only month after UK lawyer and arbitrator Neil Kaplan was chosen by Perenco to replace Judge Charles Brower. Following the resignation of Thomas Bingham, proceedings in the case are suspended until the vacancy on the ICSID panel has been filled.

Previous ITN Reporting:

“Perenco-nominated arbitrator disqualified for interview comments in ICSID dispute with Ecuador,” By Fernando Cabrera Diaz, Investment Treaty News, 14 February 2010, available here:

http://www.investmenttreatynews.org/cms/news/archive/2010/02/10/perenco-nominated-arbitrator-disqualified-for-interview-comments-in-icsid-dispute-with-ecuador.aspx

“Ecuador defies provisional measures in dispute with French oil company,” By Damon Vis-Dunbar, Investment Treaty News, 8 June 2009, is available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/06/05/ecuador-defies-provisional-measures-in-dispute-with-french-oil-company.aspx

In Memorium: Sir Ian Brownlie Q.C. (1932 – 2010)

Elizabeth — Wed, 10 Mar 2010 23:25:00 GMT

By Elizabeth Whitsitt

March 11, 2010

A prominent figure in the field of public international law passed unexpectedly on January 3, 2010 at age 77. According to reports, Professor Brownlie died in a car accident while vacationing with his family in Egypt.

The untimely death of Sir Ian Brownlie some two months ago has undoubtedly left a void in the international legal community. Indeed, news of his tragic passing has been met with great sadness.

With a career spanning more than 40 years, Professor Brownlie was elected three times to the International Law Commission. The esteemed barrister was involved in some of the most significant cases at the International Court of Justice, the European Court of Human Rights and the European Court of Justice. He was also a member of the Institut de droit international, and was knighted for his service in the area of public international law last year.

Ian Brownlie grew up in Liverpool, where he attended Alsop high school. He read law at Hertford College, Oxford, and was awarded a first-class degree. Subsequently, Professor Brownlie completed a doctorate at Oxford on the use of military force by states, and was called to the bar at Gray's Inn.

Professor Brownlie began his academic career at Nottingham University, in 1957, but he soon returned to Oxford as a fellow and lecturer. In 1976 he became a professor of international law at the London School of Economics. Four years later he was elected to the Chichele chair in public international law, which he held until his retirement from academia in 1999, and to a fellowship of All Soul's College, Oxford (he was made a distinguished fellow in 2004).

During the course of his career Professor Brownlie also authored numerous works on a wide range of topics in international law. His first book, International Law and the Use of Force by States (1963) identified the United Nations Charter as a significant development for the rules governing military force. Three years later, he published Principles of Public International Law, which is now in its seventh edition, and one of the most widely read discourses on the subject. Ian Brownlie’s other writings cover such topics as African boundaries, the law of state responsibility, human rights and the rule of law.

A widely-recognized leader in the field of international law, Professor Brownlie was serving as a panelist in two ICSID arbitrations at the time of his passing.* Previously, Ian Brownlie had presided in two other ICSID arbitrations: Occidental of Pakistan, Inc. v. Islamic Republic of Pakistan and Compagnie Minière Internationale Or S.A. v. Republic of Peru. In both instances the parties agreed to settle their disputes resulting in a discontinuance of the arbitral proceedings. Professor Bronwlie was also an arbitrator in Scimitar Exploration Limited v. Bangladesh and Bangladesh Oil, Gas and Mineral Corporation, a case that was dismissed at the jurisdictional stage of the proceedings.

Ian Brownlie is survived by his daughter Hannah and son James; his other daughter, Rebecca, was killed in the car accident, in which his wife Christine Appleby was also injured.

* Following this tragedy, Professor Georges ABI-SAAB (Egyptian) has been appointed to serve as an arbitrator in Conocophillips’ ongoing dispute with Venezuela (ICSID Case No. ARB/07/30). An arbitrator has yet to be appointed in a dispute involving Urbaser S.A. and Consorcio de Aguas Bilbao Biskaia, Bilbao Biskaia Ur Partzuergoa and Argentina over water concession services (ICSID Case No. ARB/07/26).

Tribunal’s decision in anticipated Yukos case released to public

Elizabeth — Wed, 10 Feb 2010 19:16:00 GMT

By Elizabeth Whitsitt

February 14, 2010

Three highly anticipated decisions permitting three claimants – all former shareholders of Yukos Oil Corporation OJSC (Yukos) – to proceed to the merits phase of their multi-billion dollar expropriation claim against the Russian government have been released to the public.* Similar in content, all three decisions were issued by the same tribunal, composed of L. Yves Fortier (Chairman), Dr. Charles Poncet, and Judge Stephen M. Schwebel, sitting at the Permanent Court of Arbitration in The Hague.

Cypriot companies, Hulley Enterprises Limited (Hulley) and Veteran Petroleum Limited (VPL) along with Yukos Universal Limited (YUL), a firm organized under the laws of the Isle of Man, commenced arbitral proceedings against the Russian Federation in February, 2005.

Problems between the parties arose two years earlier in the summer of 2003. According to the claimants, measures taken by Russia, including criminal prosecutions, tax reassessments, and its annulment of Yukos’ merger with Sibneft, Russia’s fifth largest oil company, left their investment in Yukos virtually worthless. Subsequently, the claimants brought expropriation claims against Russia under the Energy Charter Treaty (ECT).

While addressing various issues related to the tribunal’s jurisdiction, central to the Yukos jurisdictional dispute was the extent to which the ECT applied to Russia. Russia signed the ECT in 1994 but its Parliament never ratified it. Under Article 45(1) a party, like Russia, that has signed but not ratified the ECT is bound “…to apply [the] [t]reaty provisionally…to the extent that such provisional application is not inconsistent with its constitution, laws or regulations.”

Asserting that it was not bound by dispute settlement provisions in the ECT because they were inconsistent with its Constitution and laws, the Russian Federation argued that the tribunal had no jurisdiction to consider the merits of the claims raised in the arbitration.

In response, the claimants raised two principal counter-arguments. First, the claimants argued that Russia could not limit provisional application of the ECT because it had failed to make a formal declaration to that effect under either Article 45(2) or 45(1). In the alternative, Yukos’ former shareholders contended, that the dispute settlement provisions of the ECT were not inconsistent with Russia’s Constitution or laws.

In its decision, the results of which have been widely publicized, the tribunal ultimately sided with the claimants. But it was not a complete victory for the shareholders of what was once considered Russia’s largest oil company.

Focusing on the plain and ordinary meaning of ECT Article 45, the tribunal rejected the claimants’ first argument that would have made a state’s limitation of the ECT’s provisional application dependent on a formal opt-out declaration. Specifically, the tribunal held that “[n]othing in the language of Article 45 suggests that the limitation clause in Article 45(1) is dependent on the mandatory making of a declaration under Article 45(2).” Similarly, the tribunal observed that Article 45(1) did not expressly require any form of opt-out declaration or notification in order for a signatory party to limit the ECT’s provisional application.

Subsequently, the tribunal focused its analysis on whether the dispute settlement provisions of the ECT were inconsistent with Russia’s Constitution or laws. As a preliminary matter, the tribunal clarified when a signatory state could opt-out of the ECT’s provisional application under Article 45(1). On this point, the parties’ positions differed dramatically.

According to Russia, it could be provisionally bound by each provision of the ECT, but only to the extent performance of the obligation created by that provision was not inconsistent with its Constitution, laws or regulations. Based on this “piecemeal” approach, Russia contended that it was not bound by dispute settlement provisions in the ECT.

The claimants, on the other hand, asserted that Article 45(1) operates on an “all-or-nothing basis.” In particular, the claimants argued that each signatory agrees to be bound by the
ECT if the principle of provisional application is consistent with its domestic law. If, on the other hand, a signatory’s domestic law does not allow it to be bound by way of provisional application, it may decline to assume any international obligations under the ECT. Citing Russia’s long-standing practice of provisionally applying international treaties, the claimants challenged Russia’s contention that the dispute settlement provisions of the ECT were inconsistent with its Constitution or laws.

For its part, the tribunal eventually sided with the claimants. Specifically, the tribunal found that “…by signing the ECT, the Russian Federation [had] agreed that the treaty as a whole would be applied provisionally…unless the principle of provisional application itself was inconsistent ‘with [Russia’s] constitution, laws or regulations.’”

There was no significant debate between the parties on the issue of whether the principle of provisional application was inconsistent with Russia’s Constitution, law or regulations. The Tribunal therefore had no difficulty in concluding that the principle of provisional application was perfectly consistent with Russia’s Constitution, laws and regulations. Accordingly, the Tribunal found that the whole of the ECT applied provisionally in the Russian Federation until October 18, 2009 when Russia’s formal announcement terminating its provisional application of the ECT came into effect.

Under Article 45(3) of the ECT, for energy investments made prior to October 18, 2009, Russia remains bound to the treaty for 20 more years, allowing investors to arbitrate disputes with Russia concerning those investments.

The tribunal will now proceed to hear the merits of former Yukos shareholders’ claims.

In a related development, the European Court of Human Rights has postponed hearing the merits of another claim launched against Russia by Yukos. Initially scheduled for January 14, 2010 the hearing has been adjourned until March 4, 2010 due to the unavailability of both Russia’s ad hoc judge, Andrei Bushev, and its representative government agent, Georgy Matyushkin.**

* Interim Award on Jurisdiction in Hulley Enterprises Limited (Cyprus) v. The Russian Federation is available here: http://ita.law.uvic.ca/documents/HELvRussianFederation-InterimAward-30Nov2009.pdf

Interim Award on Jurisdiction in Yukos Universal Limited (Isle of Man) v. The Russian Federation is available here: http://ita.law.uvic.ca/documents/YULvRussianFederation-InterimAward-30Nov2009.pdf

Interim Award on Jurisdiction in Veteran Petroleum Limited (Cyprus) v. The Russian Federation is available here: http://ita.law.uvic.ca/documents/VPLvRussianFederation-InterimAward-30Nov2009.pdf

** See http://www.khodorkovskycenter.com/news-resources/stories/hearing-yukos-v-russia-case-postponed

Previous ITN Reporting on Yukos Dispute:

“The merits of former Yukos shareholders’ expropriation claim will be heard,” By Elizabeth Whitsitt, Investment Treaty News, 13 January 2010, available here:

http://www.investmenttreatynews.org/cms/news/archive/2010/01/12/in-brief-the-merits-of-former-yukos-shareholders-expropriation-claim-will-be-heard.aspx

“Spanish fund to open new front in arbitration against Russia over Yukos,” By Luke Eric Peterson, Investment Treaty News, 19 July 2006, available here:

http://www.iisd.org/pdf/2006/itn_july19_2006.pdf

“More Spanish portfolio investors line up to sue Russia over Yukos,” By Luke Eric Peterson, Investment Treaty News, 13 October 2006, available here:

http://www.iisd.org/pdf/2006/itn_oct13_2006.pdf

ICSID finds that corruption has no place in annulment proceedings

Elizabeth — Wed, 10 Feb 2010 19:13:00 GMT

By Elizabeth Whitsitt

February 14, 2010

American businessman, Jack J. Grynberg, has suffered another setback in his company’s ongoing dispute with Grenada.

Commenced in 2005, the ICSID claim was one of a myriad of legal avenues pursued by Mr. Grynberg, the president and CEO of RSM Production Corporation (RSM), in an effort to gain an exploration license for oil and gas reserves thought to exist off the coast of Grenada.

Less than a year ago, an ICSID tribunal composed of Mr. V.V.Veeder (President), Professor Bernard Audit, and Dr David S. Berry dismissed RSM’s substantive claims.* Since that time RSM has sought to annul that award on grounds that the tribunal: (i) manifestly exceeded its powers, (ii) that there was a serious departure from a fundamental rule of procedure, and (iii) that the award failed to state the reasons on which it was based.

Before addressing the substantive grounds for annulment, the US firm asked the annulment committee, composed of Dr. Gavan Griffith QC (President), Dato’ Cecil W. M. Abraham, and Professor Campbell McLachlan QC, to investigate suspicions of corruption in the contract underlying the dispute. Specifically, RSM applied to the annulment committee for a finding that a key witness in the arbitral hearing (a cabinet minister in Grenada’s government) was bribed to ensure that the oil and gas exploration contract won by RSM would not be successfully performed.

Corruption allegations surfaced earlier during the merits hearing in the arbitral proceeding. However, counsel for RSM did not request that the tribunal make a finding of fact relating to those assertions. Instead, RSM asked the tribunal to consider evidence of the alleged corruption when considering the testimony of Grenada’s cabinet minister.

For its part, the tribunal did not accept any of the criticisms of Grenada’s key witness. Indeed the tribunal determined that whether or not Grenada’s witness acted corruptly was immaterial to its substantive findings.

Subsequently, RSM revitalized its corruption allegations while attempting to have the tribunals substantive findings annulled. Citing new evidence to support its bribery claims, RSM asserted that the annulment committee possessed inherent jurisdiction to evaluate its request.

In its decision dated December 7, 2009, but only recently made available to the public, the annulment committee flatly rejected RSM’s’ request. Finding that RSM’s request fell outside of its jurisdiction, the committee noted that annulment committees have a narrowly defined jurisdictional mandate exhaustively outlined in Article 52 of the ICSID Convention. As a result, the committee concluded that “it [did] not have the power to exercise an independent jurisdiction” to assess the corruption allegations raised by RSM.

The committee also observed that the ICSID Convention and its Arbitration Rules provided powers to the original tribunal to deal with the proceedings in the post-award phase, including the discovery of new evidence. In the annulment committee’s view, those avenues would have been more appropriate for addressing RSM’s request.

The committee will now move on to hear RSM’s substantive arguments on annulment. In that vein, RSM filed reply arguments in its annulment application on January 15, 2010.

* Award in RSM Production Corporation v. Grenada is available here:

http://ita.law.uvic.ca/documents/RSMvGrenadaAward.pdf

Sources:

Decision on RSM Production Corporation’s Application for a Preliminary Rule of 29 October 2009 is available here:

http://ita.law.uvic.ca/documents/RSMPrelim.pdf

ITN Reporting:

“ICSID tribunal dismisses RSM Production Corporation’s claim against Grenada,” By Damon Vis-Dunbar, Investment Treaty News, 26 March 2009, available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/03/26/icsid-tribunal-dismisses-rsm-production-corporation-s-claim-against-grenada.aspx

Consortium building new Quito Airport takes Ecuador to ICSID

Elizabeth — Wed, 10 Feb 2010 19:02:00 GMT

By Fernando Cabrera Diaz

February 14, 2010

Corporacion Quiport S.A., the company building the new Quito international airport, has initiated arbitration proceedings at ICSID against the Republic of Ecuador in connection with its concession to maintain and operate the existing Quito airport and to construct and operate the New Quito International Airport (NQIA) being built outside Ecuador’s capital.

Two weeks after the arbitration was registered by ICSID on December 30, 2009 it was suspended by agreement of the parties. Citing sources at the Attorney General’s Office, Quito daily El Comercio reported that on January 13, 2010 the parties suspended the arbitration so that they could continue talks related to the airport concession contract.

The central issue in the negotiations arose from a July 2009 decision by the transitional Ecuadorian Constitutional Court which found that the financing plan for the construction of the NQIA found in the original 2002 concession contract was partially unconstitutional under the new Ecuadorian Constitution of 2008.

Under the concession contract Quiport was supposed to pay loans to international lenders, recoup its investment and make a profit through the fees it was given the authority to charge to airport users both at the old Quito Airport, which it also manages, and at the NQIA during the life of the concession .

Yet the Constitutional Court ruled that the fees charged to airport users were actually taxes which could not be handled by a private company under the new Constitution law. The decision of the court is understood not to be appealable.

Following the decision, the sides were forced to enter renegotiations of the concession contract. The Municipality of Quito, which was set to receive US $1.5 million per year as a concession fee, has taken the opportunity to seek a larger share of the profits from the new airport. The international lenders include OPIC, Ex-Im, IDB and EDC.

Mayor Augusto Barrera, who was not in office when the concession contract was signed, has said the concession fee does not serve the city’s interests and is instead seeking new terms under which the city would receive a percentage of the airport’s profits. Quiport is opposed to changing the contractual model, though it has been open to a new economic arrangement which may now be necessary in order to abide by the Constitutional Court’s ruling.

ITN contacted Steve Nackan, President of Aecon Concessions, one of the investors in the project, and Jonathan Hamilton of White & Case LLP which represents the claimants and was told the company had no comment due to the ongoing negotiations. ITN also contacted officials at the Ecuadorian Attorney General’s who also had no comment.

Philippe Baril, president of Quiport, told El Comercio that the international lenders funding the project had imposed a negotiation deadline of January 29, 2010. According to Mr. Baril the project is proceeding but at a diminished pace due to a lack of funds being made available by the project’s lenders.

Corporacion Quiport S.A. is a 100 percent privately owned capital firm originally formed by Canadian companies AECON and Airport Development Corporation (ADC), which later added U.S.-based HAS Development Corporation (HAS-DC) and Brazilian Andrade Gutierrez Concessões (AGC).

Though the current dispute at ICSID was filed under an investment contract, some investors in Quiport are protected by Bilateral Investment Treaties. The American and Canadian BITs with Ecuador contain arbitration clauses which allow for investor-state arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), not just ICSID.

This is significant because Ecuador denounced the ICSID Convention on July 6, 2009 and in accordance with Article 71 of the ICSID Convention, the denunciation took effect on January 7, 2010, six months after ICSID’s receipt of Ecuador's notice. (Read about the possible effects of Ecuador’s withdrawal from ICSID: http://www.investmenttreatynews.org/cms/news/archive/2009/08/28/ecuador-prepares-for-life-after-icsid-while-debate-continues-over-effect-of-its-exit-from-the-centre.aspx)

Quiport won the concession for the NQIA and the management of the existing Quito airport through the Canadian Commercial Corporation (a Canadian Government Crown Corporation), which made a proposal to the city in 2001 setting out the structure of the project.

The City of Quito accepted the proposal and signed the concession and construction contracts with CCC in 2002 for the design, financing, construction, and operation of the new Quito International Airport, as well as the administration and operation of the current Mariscal Sucre International Airport.

Since then, according to public reports, the company claims it has invested US$ 74 million of its equity investment as well as US$ 376 million in international financing for the US$650 million project.

Sources:

“La renegociación cumple 5 meses,” December 19, 2010 (El Comercio).

“Canadian Commercial Corporation visits the new Quito International Airport (NQIA) site,” CCC Press Release, December 9, 2009, available from the CCC website at: http://www.ccc.ca/eng/id_Quito_latestNews.cfm

Quiport website: http://www.quiport.com/www/frontEnd/main.php

The Ecuador-United States Bilateral Investment Treaty available from the United Nations Conference on Trade and Development (UNCTAD) website here: http://www.unctad.org/sections/dite/iia/docs/bits/us_ecuador.pdf

The Canada-Ecuador Bilateral Investment Treaty available from the United Nations Conference on Trade and Development (UNCTAD) website here: http://www.unctad.org/sections/dite/iia/docs/bits/canada_ecuador.pdf

Related ITN Reporting:

“ALBA moves forward with plan to create regional investment arbitration alternative to ICSID at 7th Summit,” By Fernando Cabrera Diaz, Investment Treaty News, 3 November 2009, is available here:
http://www.investmenttreatynews.org/cms/news/archive/2009/11/01/alba-moves-forward-with-plan-to-create-regional-investment-arbitration-alternative-to-icsid-at-7th-summit.aspx

“Ecuador continues exit from ICSID,” By Fernando Cabrera-Diaz, Investment Treaty News, 8 June 2009, is available here:
http://www.investmenttreatynews.org/cms/news/archive/2009/06/05/ecuador-continues-exit-from-icsid.aspx

Claimant seeks enforcement of environmental laws in notice of dispute alleging expropriation of Barbadian nature sanctuary

Elizabeth — Wed, 10 Feb 2010 18:50:00 GMT

By Elizabeth Whitsitt

February 14, 2010

A notice of dispute forwarded to Barbados some five months ago by Mr. Peter Allard, Canadian owner of the Graeme Hall Nature Sanctuary, contends that the Government of Barbados has violated its international obligations by refusing to enforce its environmental laws.

Located on the south coast of Barbados, Graeme Hall Sanctuary consists of 34.25 acres of natural wetlands and is situated within a 240 acre green space that is the last significant mangrove forest and migratory bird habitat in the Caribbean state.

Mr. Allard acquired the land for the Sanctuary in the mid-1990s and subsequently developed it into an eco-tourism facility. In the notice of dispute, Mr. Allard claims to have taken numerous steps to contribute to the sustainability of the Sanctuary only to have such efforts thwarted by the acts and omissions of Barbados.

Mr. Allard asserts that Barbados’ acts and omissions have severely damaged that natural ecosystem relied upon to attract tourists to the Sanctuary. Consequently, Mr. Allard contends that Barbados failed to provide his investment full protection and security and fair and equitable treatment in accordance with the Canada-Barbados BIT.

With respect to Barbados’ omissions to protect the Sanctuary, Mr. Allard argues that Barbados has, among other things, failed to: (i) prevent the repeated discharge of raw sewage into the Sanctuary wetlands, (ii) investigate or prosecute sources of runoff of grease, oil, pesticides, and herbicides from neighboring areas, and (iii) investigate or prosecute poachers that have threatened the wildlife within the Sanctuary.

Additionally, Mr. Allard has made reference to actions taken by the Parliament of Barbados in 2008, which resulted in the adoption of a new National Physical Development Plan. Barbados’ new Development Plan revokes its previously protective land use policies and instead calls for the commercial and residential development of the majority of the 240-acre green space surrounding the Sanctuary. In Mr. Allard’s view those changes, which will inevitably cause further environmental damage to the Sanctuary, have led to the indirect expropriation of his investment.

In an interview with ITN Mr. Allard’s lawyer, Mr. Robert Wisner of McMillan LLP, indicated that while Barbados has yet to respond to his client’s notice of dispute, he is hopeful that an amicable settlement between the parties can be reached.

A press release issued by the Sanctuary indicates that it has been over a year since there has been any face-to-face contact between Sanctuary and Barbadian government officials.

According to the Canada-Barbados BIT, Barbados has until early March, 2010 to respond to Mr. Allard’s notice of dispute. After that Mr. Allard may initiate arbitral proceedings under the ICSID Additional Facility Rules or in accordance with the UNCITRAL Arbitration Rules. Mr. Wisner confirmed to ITN that his client is willing to proceed to arbitration if necessary but indicated that a decision has yet to be made regarding the forum for potential arbitral proceedings.

Sources:

A copy of Mr. Allard’s Notice of Dispute can be found here:

http://graemehall.com/legal/papers/BIT-Complaint.pdf

A copy of the Sanctuary’s press release can be found here:

http://graemehall.com/press/releases/promised-meeting-fails/index.htm

Perenco-nominated arbitrator disqualified for interview comments in ICSID dispute with Ecuador

Elizabeth — Wed, 10 Feb 2010 18:40:00 GMT

By Fernando Cabrera Diaz

February 14, 2010

Permanent Court of Arbitration (PCA) Secretary-General Cristiaan M.J. Kroner has accepted the challenge by Ecuador to remove the Honourable Charles N. Brower as arbitrator in its dispute with oil company Perenco Ecuador Limited. In his December 9, 2009 ruling Mr. Kroner concludes that “comments made by Judge Brower in an August 2009 interview gave rise to reasonable doubts as to Judge Brower’s impartiality or independence in the dispute.”

The challenge to Judge Brower arose out of comments he made in a published article entitled “A World-Class Arbitrator Speaks!” in the August 2009 issue of The Metropolitan Corporate Counsel. Judge Brower was interviewed about a wide range of topic for the article, but the controversial comments came when he was asked what he thought were the most pressing issues in international arbitration.

The Judge responded by saying: “There is an issue of acceptance and the willingness to continue participating in it, as exemplified by what Bolivia has done and what Ecuador is doing. Ecuador currently is expressly declining to comply with the orders of two ICSID tribunals with very stiff interim provisional measures, but they just say they have to enforce their national law and the orders don’t make any difference. But when recalcitrant host countries find out that claimants are going to act like those who were expropriated in Libya, start bringing hot oil litigation and chasing cargos, doing detective work looking for people who will invoke cross-default clauses in loan agreements, etc., the politics may change. After a certain point, no one will invest without having something to rely on.”

Judge Brower was referring in part to Ecuador’s refusal to abide by a temporary restraint order and subsequent provisional measures issued by the tribunal in the Perenco case, which recommended that Ecuador refrain from trying to collect alleged debts from the company while the debts were being disputed in the arbitration.

Ecuador seized Perenco’s oil assets on March 3, 2009 in an attempt to forcibly collect debts the company had allegedly accumulated from its refusal to pay taxes under a windfall tax law (Law 42) enacted amid rising oil prices in 2006. The country has maintained that the tribunal’s provisional measures are not binding as a matter of international law.

In refusing to pay the Law 42 tax, Perenco has argued that Law 42 is in violation of its contract with Ecuador and the France-Ecuador bilateral investment treaty.

After becoming aware of Judge Brower’s comments in August of 2009 Ecuador filed for the judge’s disqualification on September 19, 2009.
By previous agreement of the parties, arbitrator challenges in the dispute are resolved by the Secretary-General of the PCA, applying the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines).

Under the IBA Guidelines the relevant question in resolving the challenge to Judge Brower is whether the interview comments constitute circumstances that, “from a reasonable third person’s point of view having knowledge of the relevant facts, give rise to justifiable doubts as to the arbitrator’s impartiality or independence,” said Secretary-General Kroner in his decision.

According to Mr. Kroner, Judge Brower’s remarks could lead an informed third person to reasonably infer that Judge Brower was drawing an analogy between Ecuador and Libya in the famous nationalizations of oil companies in the 1970s. As a result, Mr. Kroner went on to conclude that although Judge Brower may not have actually prejudged the issue of expropriation, from a reasonable third person’s point of view his comments could give rise to an appearance that he had prejudged the issue.

Based on these reasons, Secretary-General Kroner sustained Ecuador’s challenge and disqualified Judge Brower from the arbitration.
ITN spoke top Perenco spokesperson Rodrigo Marquez, who said that the company had no comment on the disqualification of Judge Brower. Mr. Marquez did confirm that Judge Brower had been replaced by a new Perenco-nominated arbitrator Neil Kaplan.

ITN also contacted a senior official of the Ecuadorian government who called the agreement between the parties to use the PCA and in particular the IBA Guidelines to resolve issues regarding impartiality of arbitrators an important development in the field.

“This precedent is fundamental to the system of settlement of investment disputes. The fact that the parties, on their own initiative, established higher standards of excellence and fairness for the arbitrators than those standards established under the ICSID Convention sends a good message to the arbitrators who have the sensitive and delicate task of judging sovereign states...,”added Mr. Galindo.

The arbitration is now set continue at ICSID with a full panel, added Mr. Marquez.

Sources:

PCA Decision on Ecuador’s Request to Disqualify Judge Brower available at Investment treaty arbitration:

http://ita.law.uvic.ca/documents/PerencovEcuador-Challenge.pdf

Previous ITN Reporting

“Ecuador defies provisional measures in dispute with French oil company,” By Damon Vis-Dunbar, Investment Treaty News, 8 June 2009, is available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/06/05/ecuador-defies-provisional-measures-in-dispute-with-french-oil-company.aspx

ICSID tribunal affirms power to exclude counsel, but declines to do so

Elizabeth — Wed, 10 Feb 2010 18:38:00 GMT

By Elizabeth Whitsitt

February 14, 2010

An ICSID tribunal, composed Sir Franklin Berman, Mr. Donald Donovan and Mr. Marc Lalonde, has determined that Mr. Barton Legum, a partner with Salans & Associés, can continue to represent Dutch firm Rompetrol N.V. in its arbitration against Romania. Mr. Legum formally took over as counsel for Rompetrol in the summer of 2009 after his colleague, Ms. François-Poncet, announced her departure from private practice.

In August 2009, Romania sought “to remove Mr. Legum from the case and to forbid him from participating in it in any way” after learning that Mr. Legum would be taking over legal representation of Rompetrol’s case. Of concern to Romania was the fact that Mr. Legum and Mr. Donald Donovan, a member of the tribunal, had both worked at Debevoise and Plimpton LLP from 2004-2008.

In a rare maneuver, Romania elected to challenge Mr. Legum’s position, rather than to challenge the tribunal itself or any of its members. Neither the ICSID Convention nor the ICSID Arbitration Rules explicitly provide for challenges to the appointment of counsel in arbitral proceedings. As a result, Romania grounded its challenge on the inherent general powers of ICSID tribunals to “police the integrity of [their] proceedings.”

As support for its position, Romania relied upon the 2008 decision of an ICSID tribunal in Hrvatska Elekropriveda d.d. v. Republic of Slovenia. In its ruling the Hrvatska tribunal excluded the participation of counsel in arbitral proceedings after the Republic of Slovenia announced its appointment of Mr. David Mildon QC as co-counsel shortly before hearings in the arbitration were to begin. In that case, concerns about the existence of a conflict of interest were raised when Hrvatska learned that Mr. Mildon QC and a member of the tribunal, Mr. David Williams QC, were members of the Essex Court Chambers in London.

In its decision of January 14, 2009, the Rompetrol tribunal ultimately rejected Romania’s position. In so doing, the tribunal observed that “[a] power on the part of a judicial tribunal of any kind to exercise a control over the representation of the parties in proceedings before it is by definition a weighty instrument…” Moreover, the tribunal concluded that the power to exclude counsel should only be used when there is an “overriding and undeniable need to safeguard the essential integrity of the entire arbitral process.”

Considering the facts of the case (i.e. that the association between Mr. Legum and Mr. Donovan had ceased), the tribunal determined that it should not interfere with Rompetrol’s choice of legal counsel because the integrity of the arbitral process was not an issue.

Apparently concerned about reconciling its decision with the Hrvatska ruling, the Rompetrol tribunal was careful to point out that its analysis should not be seen as second-guessing the assessment of the Hrvatska tribunal. Rather, the Rompetrol tribunal suggested that the Hrvatska tribunal’s decision was materially influenced by Slovenia’s late announcement regarding the appointment of a new lawyer in the arbitration. As a result, the Rompetrol tribunal considered that “…the Hrvatska [d]ecision might better be seen as an ad hoc sanction for the failure to make proper disclosure in good time than as a holding of more general scope.”

Undoubtedly, the Rompetrol tribunal’s re-casting of the Hrvatska decision may well provoke further comment about the power to exclude counsel in arbitral proceedings.

Sources:

Decision of the Tribunal on the Participation of a Counsel in Rompetrol Group N.V. v. Romania is available here: http://ita.law.uvic.ca/documents/RompetrolParticipation.pdf

Related ITN Reporting:

“Arbitrators clash on question of interpretation in Hrvatska Electroprivreda d.d. v. The Republic of Slovenia,” By Elizabeth Whitsitt, Investment Treaty News, 15 July 2009, available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/07/14/arbitrators-clash-on-question-of-interpretation-in-hrvatska-electroprivreda-d-d-v-the-republic-of-slovenia.aspx

TWC Group settles with the Dominican Republic

Elizabeth — Wed, 10 Feb 2010 18:26:00 GMT

By Elizabeth Whitsitt

February 14, 2010

TWC Group, Inc. and its affiliate Dominican Energy Holdings L.P have reached a settlement with the Dominican Republic, ending a dispute that began in 2007.

TWC had been seeking some US$ 680 million for alleged violations of the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR).

In a joint letter issued on 30 June 2009 to a tribunal constituted under the UNCITRAL Arbitration Rules, the parties announced that they had reached an agreement, and requested discontinuance of the arbitration proceedings. In its consent award made available to the public only recently, the tribunal accepted the parties’ request for discontinuance. Additionally the tribunal ordered that costs of the arbitration – which have been fixed at some EUR$ 212 thousand – be born equally between the parties.

The TWC Group did not respond to requests made by ITN for further information about the settlement.

As previously reported by ITN, in 2007 TCW’s French parent company, Société Générale, launched parallel arbitral proceedings against the Caribbean nation under a different treaty, the 2003 Dominican Republic-France bilateral investment treaty (DR-France BIT). In October 2008, an arbitral tribunal issued a decision on jurisdiction in which it allowed the arbitration to proceed to the merits phase of the dispute.

Sources:

Consent Award in TWC Group, Inc. v. Dominican Energy Holdings L.P. is available here: http://ita.law.uvic.ca/documents/TD-DRConsentAward_002.PDF

Procedural Order No. 4 in TWC Group, Inc. v. Dominican Energy Holdings L.P. is available here: http://ita.law.uvic.ca/documents/TD-DRPO4_002.pdf

Related ITN Reporting:

“Société Générale passes jurisdictional hurdle in dispute with Dominican Republic; controversy erupts over press release,” By Fernando Cabrera Diaz, Investment Treaty News (28 October 2008), available here:

http://www.investmenttreatynews.org/cms/news/archive/2008/10/28/soci-233-t-233-g-233-n-233-rale-passes-jurisdictional-hurdle-in-dispute-with-dominican-republic-controversy-erupts-over-press-release.aspx

In Brief: New arbitrator nominated in NAFTA dispute over thwarted Canadian garbage site

Elizabeth — Wed, 10 Feb 2010 18:13:00 GMT

By Eliabeth Whitsitt

February 14, 2010

Canada has nominated Mr. Laurent Lévy to act as arbitrator in its Chapter 11 NAFTA dispute against US investor Vito G. Gallo.

Canada’s original nominee, Mr. J. Christopher Thomas Q.C., resigned from his appointment as an arbitrator in October, 2009 after ICSID Deputy Secretary-General, Nassib G. Ziade, determined that Mr. Thomas could not continue to provide legal advice to Mexico and serving as an arbitrator in the case.

Mr. Lévy is a lawyer and arbitrator with Lévy Kaufmann-Kohler, a Swiss firm specializing in international commercial, investment and sports arbitration.

For previous ITN reporting on the dispute between Vito Gallo and Canada, including the challenge to Mr. Thomas’ appointment as arbitrator in the case see:

“Arbitrator forced to choose in NAFTA dispute over thwarted Canadian garbage site,” By Elizabeth Whitsitt, Investment Treaty News, 6 December 2009, available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/12/04/arbitrator-forced-to-choose-in-nafta-dispute-over-thwarted-canadian-garbage-site.aspx

“US investor notifies Canada of potential arbitration over thwarted waste site,” By Luke Eric Peterson, Investment Treaty News, 15 November 2006, available here:

http://www.iisd.org/pdf/2006/itn_nov15_2006.pdf

“US investor files formal arbitration against Canada over thwarted garbage disposal site,” Luke Eric Peterson, Investment Treaty News, 27 May 2007, available here:

http://www.iisd.org/pdf/2007/itn_may27_2007.pdf

“Tribunal appointed to hear NAFTA claim over thwarted garbage site in Canada,”
By Luke Eric Peterson, Investment Treaty News, 21 February 2008, available here:

http://www.iisd.org/pdf/2008/itn_feb21_2008.pdf

Sources:

“Replacement arbitrator selected by Canada in NAFTA garbage site dispute,” By Luke Eric Peterson, Investment Arbitration Reporter Vol. 3, No. 1, 17 January 2010.

UNCITRAL Tribunal determines that wheat supply contracts are not “investments” under Swiss-Uzbekistan BIT

Elizabeth — Tue, 12 Jan 2010 21:29:00 GMT

By Elizabeth Whitsitt

January 13, 2010

Swiss-based firm Romak S.A. has lost a protracted dispute against the Republic of Uzbekistan regarding alleged non-payment for wheat shipments to the country during the mid-1990s.

On November 26, 2009 an arbitral tribunal composed of Fernando Mantilla-Serrano, Nicolas Molfessis and Noah Rubins dismissed Romak’s claims against the Republic of Uzbekistan on jurisdictional grounds. Specifically, the tribunal determined that it did not have jurisdiction in the case given the absence of any “investment” underlying the dispute.

In the aftermath of the dissolution of the Soviet Union, Romak and several companies entered into a set of contracts for the supply of wheat to Uzbekistan. Having experienced difficulties in obtaining payment for wheat deliveries, Romak commenced arbitral proceedings against one of its Uzbek counterparties under the auspices of the Grain and Feed Trade Association (GAFTA). After obtaining an arbitral award in its favour, however, Romak was unable to enforce the award in several countries, including Uzbekistan. As a result, the Swiss company commenced arbitral proceedings against Uzbekistan under the Swiss-Uzbek BIT in accordance with the UNCITRAL Arbitration Rules.

Seeking more than USD $30 million in damages, Romak alleged that Uzbekistan violated its obligations under the BIT. Arguing that the actions of its Uzbek counterparties were attributable to Uzbekistan, Romak claimed that Uzbekistan violated numerous obligations under the BIT, including the guarantee of fair and equitable treatment, and the prohibition against expropriation or nationalization without compensation. Additionally, Romak argued that by refusing to enforce the GAFTA award Uzbekistan had violated its treaty obligations.

Uzbekistan denied those assertions and contested the jurisdiction of the arbitral panel. Specifically, Uzbekistan contended that the tribunal lacked jurisdiction in the case because neither the wheat supply contracts nor the GAFTA award qualified as an “investment” subject to protection under the BIT. In support of its arguments, Uzbekistan relied upon the “Salini test” sometimes used by ICSID tribunals as an analytical tool to determine the same jurisdictional question as the one presented in the instant dispute (i.e. whether there is an arbitral investment subject to BIT protection).

In response, Romak alleged that the Salini criteria were “inapplicable and irrelevant” to UNCITRAL proceedings given their development within the ICSID system. Pushing for a literal interpretation of the definition of “investments”, Romak argued that the wheat supply contracts and the GAFTA Award fell squarely within the Swiss-Uzbek BIT. Alternatively, Romak asserted that the wheat supply contracts and the GAFTA award qualified as investments under the Salini test.

Romak could not, however, convince the tribunal that its long-running dispute was the proper subject for arbitration under the Swiss-Uzbek BIT.

In particular, the tribunal rejected Romak’s literal construction of the term “investment” in the Swiss-Uzbekistan BIT. In so doing, the tribunal found that an ostensibly broad definition of “investment” in the Swiss-Uzbekistan BIT should not be interpreted in a way that “render[s] meaningless the distinction between investments, on the one hand, and purely commercial transactions on the other.” Using the approach advanced by Romak, the tribunal postulated that “…every contract entered into between a Swiss national and a State entity of Uzbekistan…as well as every award or judgment in favor of a Swiss national…would constitute an investment under the BIT.” Finding such a possibility untenable, the tribunal indicated that one-off sales contracts could constitute investments under the terms of a BIT only in cases where the wording of the BIT left “no room for doubt” that the contracting parties intended the term to carry such an extraordinary meaning.

The tribunal also disagreed with Romak’s contention that “the definition of ‘investment’ in UNCITRAL proceedings (i.e. under the BIT alone) is wider than in ICSID Arbitration.” According to the tribunal, Romak’s suggestion would lead to unreasonable results by narrowing or widening the substantive protections afforded an investor under a BIT depending on the investor’s choice of various dispute settlement mechanisms. Consistent with this reasoning, the tribunal held that there is no basis to suppose that the term “investment” has a different meaning in the ICSID Convention than it bears in relation to the Swiss-Uzbekistan BIT. Thus, the tribunal observed that “the term ‘investments’ under the Swiss-Uzbekistan BIT has an inherent meaning…entailing a contribution that extends over a certain period of time and that involves some risk.”

The tribunal went on to determine that the wheat supply contracts and the GAFTA Award were “inextricably linked” and that any determination as to the existence of an “investment” under the BIT must be made with reference to the entire economic transaction at issue. On that basis the tribunal found that the Romak’s wheat supply arrangement with, and subsequent arbital award against, Uzbekistan failed to display the hallmarks of an “investment” under the Swiss-Uzbekistan BIT (i.e. contribution, duration and risk).

Specifically, the tribunal determined that Romak’s delivery of wheat could not be considered a contribution indicative of an investment as it was “a mere transfer of title over goods in exchange for full payment.” Similarly, the tribunal considered that the duration of Romak’s wheat deliveries, which lasted some five months, did not reflect the sort of commitment normally associated with “investments.” Finally, the tribunal noted Romak’s economic transaction did not involve the risk normally associated with an investment. Specifically, the tribunal described the risk assumed by Romak as “…circumscribed to the possible non-payment of the wheat delivery, which is the ordinary commercial or business risk assumed by all those who enter into a contractual relationship.”

Sources:

Award in Romak S.A. (Switzerland) v. The Republic of Uzbekistan is available here:

http://www.pca-cpa.org/upload/files/ROMAK-UZBEKISTAN%20Award%2026%20November2009.pdf

Ad Hoc Committee refuses to lift stay of enforcement or require security regarding ICSID award against Argentina

Elizabeth — Tue, 12 Jan 2010 21:25:00 GMT

By Elizabeth Whitsitt

January 13, 2010

An ad hoc committee composed of Dr. Gavan Griffith Q.C., Judge Patrick L. Robinson, and Judge Per Tresselt has decided to continue to stay the enforcement of an award rendered against the Argentine Republic in favour of the Enron Corporation. According to the committee, the stay will remain in force until annulment proceedings have been concluded and without any requirement for Argentina to post security.

In May 2008, the committee was formed after Argentina requested the annulment of an arbitral award granting Enron damages in the amount of US$106 million.

Since that annulment request was made, the parties have been enmeshed in a procedural tussle. Argentina has argued for the continued stay of enforcement of the award until a decision regarding annulment has been made. Enron, however, has asked that the stay be lifted, or that Argentina post security, so that if the award is not annulled, Enron is guaranteed payment of the damages to which it would be entitled.

In its first decision* on this issue, the committee focused on a fundamental disagreement between Enron and Argentina regarding the procedures for enforcing ICSID awards. In that decision the committee rejected Argentina’s position that foreign investors must go to an Argentine court in order to obtain enforcement of their ICSID awards and gave the Argentine government 60 days (commencing October 7, 2008) to reconsider its position.

Subsequently, Enron made its second request to lift the provisional stay of enforcement of the award, or in the alternative, to condition such a stay on Argentina’s provision of adequate financial security in the form of a bank guarantee or its monetary equivalent. In support of its position, Enron reiterated its concern that Argentina was unlikely to comply with its obligations to pay the award (pending the outcome of the annulment proceedings).

For its part, Argentina maintained its position that foreign investors must go to an Argentine court in order to obtain enforcement of their ICSID awards. Argentina also argued that: (i) the cost of providing financial security in this case was prohibitive, (ii) given Enron’s bankruptcy any security provided by Argentina may be subject to attachment claims made by Enron’s creditors, and (iii) providing financial security created unacceptable risks of claims made by other creditors of Argentina. With respect to the last two arguments, Argentina raised concerns about its ability to recover any security it provided should it succeed in having Enron’s ICSID award annulled. Specifically, Argentina argued that creditors in other disputes involving either Enron or Argentina might have the right to receive the security posted by Argentina.

In a decision rendered in May 2009, but only recently made available to the public, the committee sided with Argentina. Specifically, the committee reasoned that the ICSID system would be undermined if an award subject to annulment proceedings could be used by strangers to the arbitration proceedings as a means through which to secure enforcement of their own unrelated claims against the respondent.

Acknowledging that it may be impossible in all situations to remove all risks regarding irrecoverability, the committee held that where that risk is very high, as it is in this case, that fact will militate strongly against lifting a stay or against requiring security to be provided as a condition of any continuation of a stay.

* Decision on the Argentine Republic’s request for a Continued Stay of Enforcement of the Award in Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic is available here:

http://ita.law.uvic.ca/documents/Enron-Stay_001.pdf

Sources:

Decision on the Claimant’s second request to Lift Provisional Stay of Enforcement of the Award in Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic is available here:

http://ita.law.uvic.ca/documents/Decision-ENG-ElectronicCopy_002.pdf

Related ITN Reporting:

“Argentina ordered to reconsider its position on payment of ICSID awards,” By Damon Vis-Dunbar, Investment Treaty News, 14 October 2008, available here:

http://www.investmenttreatynews.org/cms/news/archive/2008/10/14/argentina-ordered-to-reconsider-its-position-on-payment-of-icsid-awards.aspx

ICSID Tribunal sides with Chile, rejects claimant’s partial revision request in long running dispute over El Clarin newspaper

Elizabeth — Tue, 12 Jan 2010 20:32:00 GMT

By Fernando Cabrera Diaz

January 13, 2010

An ICSID tribunal has rejected a partial revision request by Pey Casado and the Presidente Allende Foundation of an award rendered in their long-running dispute with Chile over the takeover and closure of the El Clarin newspaper during the early days of the Pinochet regime. This is the first time that an ICSID tribunal has issued a decision relating to a revision request.

As reported previously by Investment Treaty News, the dispute traces its roots to the 1973 coup which overthrew the socialist Chilean President Salvador Allende. Mr. Pey Casado claims he is the rightful owner of El Clarin which was taken over by the dictatorship of General Augusto Pinochet and expropriated by decrees issued under Law No. 77 of 1973, allegedly due to the paper’s sympathies to the Allende Government.

Mr. Pey Casado fled Chile in 1973 to return to his birthplace of Spain. He has assigned 90% of his claim against Chile to the Salvador Allende Foundation, a non-profit group established in 1990 to promote freedom of the press and democratic values in Spanish speaking nations.

The tribunal’s May 8, 2008 decision on the merits awarded the claimants just over US$ 10 million plus interest, a fraction of the US$ 400 million in damages they originally sought. The claim was fundamentally based on the alleged expropriation of El Clarin in 1973. However, the tribunal rejected the expropriation claim and instead found a violation of the fair and equitable treatment provisions of the 1994 Chile-Spain BIT. Specifically, the tribunal found that Chile breached its obligations under the BIT when in April of 2000 it compensated third parties US$ 10 million for the expropriation of the newspaper, instead of the claimants.

Subsequently, the claimants requested revision of the tribunal’s award under ICSID Convention Article 51. In particular, the claimants argued that they had become aware of new information for the tribunal’s consideration with respect to its expropriation claim. The tribunal, however, ultimately disagreed, holding that the claimants could not meet the burden of proof in establishing that the information would have changed the outcome of the award.

At issue was a press release issued by Chile’s Consejo de Defensa del Estado (CDE) on February 22, 2008 referring to a Chilean Supreme Court decision awarding damages in the expropriation of a different newspaper, Horizonte Presse. The claimants allege that they only became aware of CDE’s press release on May 18, 2008, ten days after the tribunal’s decision on the merits was handed down.

The claimants argued that CDE’s press release acknowledged that there was consistent Chilean Supreme Court jurisprudence that the confiscation decrees issued under Decree Law No. 77 of 1973 were null and void ab initio.* Based on that acknowledgement, the claimants reasserted that the government’s expropriation of El Clarin was a continuing illegal act under Chilean law that began in 1973 and continued until well after the Chile-Spain BIT came into force. Accordingly, the claimants argued that they were entitled to significantly more than a $10 million damage award.

In analysing the revision request, the tribunal noted that under Article 51(1) the claimants were required to prove three things: (1) the discovery of a new fact; (2) that neither the claimants nor the tribunal knew of the fact at the time the award was rendered and that such lack of knowledge was not due to the claimants’ negligence; and (3) that the fact would have changed the outcome of the award.

On the first requirement, the tribunal was satisfied that the contents of the CDE’s press release, however characterized, constituted a fact. As to whether it was a new fact, the tribunal expressed doubts that the claimant, Mr. Pey Casado, and/or his lawyers were not aware of the agreement between Horizonte Presse and the CDE because the settlement in that case was widely reported, and in particular was reported in the El Mercurio newspaper to which Mr. Pey Casado was a subscriber.

The tribunal, however, ultimately based its decision on a finding that the claimants did not meet the third requirement that the ‘new’ fact would have a decisive effect on the underlying award, because it agreed with Chile that CDE’s press release applied only to the Horizonte Presse case. Furthermore, given that legal precedent in and of itself is not binding under Chilean law in subsequent cases, even if the CDE’s press release referred to jurisprudence beyond the Horizonte Presse case, such jurisprudence would not be binding on other cases such as Mr. Pey Casado’s case. Based on these findings the tribunal rejected the claimants’ request for partial revision.

The three-member tribunal was composed of Pierre Lalive of Switzerland (President), Mohammed Chemloul of Algeria and Emmanuel Gaillard of France. The long-running dispute was first registered in 1998 and has seen three arbitrators resign, and both sides complain of the “glacial pace” of the proceedings.

On July 6, 2009 ICSID registered an application by Chile for the institution of annulment proceedings relating to the tribunal’s May 8, 2008 award on the merits.

* ITN spoke to Mara Senn, one of the lawyers representing Chile at Arnold & Porter LLP, who said that the CDE was merely defending Chile’s settlement in the Horizonte Presse case and that the language cited by claimants did not refer to the jurisprudence of nullity but rather to the Supreme Court’s consistent position on the issue of damages.

Sources:

ITN Reporting

Revision Request, June 2, 2008, available at Investment Treaty Arbitration at: http://ita.law.uvic.ca/documents/PeyRevisionSPA.pdf

Revision Decision, November 18, 2009 available at investmnetclaims.com

Award on the Merits, May 8, 2008 available at investmentclaims.com

Previous ITN Reporting:

“World Bank President will rule on Chile’s effort to disqualify tribunal in ICSID case,” By Luke Eric Peterson and Damon Vis-Dunbar, Investment Treaty News, 14 December 2005, available at: http://www.iisd.org/pdf/2005/itn_dec14_2005.pdf

Cemex v. Venezuela: challenges to ICSID arbitrators must be made “promptly”

Elizabeth — Tue, 12 Jan 2010 20:28:00 GMT

By Elizabeth Whitsitt

January 13, 2010

On November 6, 2009 two members of an ICSID arbitral tribunal - Judge Gilbert Guillaume (President) and Professor Georges Abi-Saab - dismissed Venezuela’s challenge to the tribunal’s third member, Mr. Robert B. von Mehren. In a decision only recently made public, the two-man tribunal confirms that proposals to disqualify ICSID arbitrators must be made “promptly”.

Arbitral proceedings between Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V. (Cemex) and Venezuela began in October 2008 some seven months after Hugo Chavez, President of the Bolivarian Republic, announced the nationalization of the country’s cement industry. In the context of a state-wide housing shortage and concerns about unaffordable housing, President Chavez’s nationalization of Venezuela’s cement industry was reportedly done to increase the availability and affordability of construction supplies to Venezuela’s domestic market.*

According to a press release dated August 20, 2008, the world’s third largest cement-producer asserts that the nationalization of its investment “highlight[s] a lack of respect for the principles of international law and the treaties relating to the reciprocal protection of investments which forbid the occupation of goods and deprivation of rights without fair and effective compensation and without an expropriation procedure.”**

With the tribunal’s first session set to take place in Paris in mid-November 2009, Venezuela filed a formal proposal for disqualification of Mr. von Mehren on October 26, 2009 only three weeks before the tribunal’s scheduled first session and almost three months after the tribunal was constituted.

Venezuela’s challenge to Mr. von Mehren focused on his relationship with Debevoise & Plimpton LLP, a law firm representing swiss-based Holcim Ltd., another one of the world’s leading cement suppliers, in a similar dispute against Venezuela that was registered by ICSID on April 10, 2009. Counsel for Venezuela did acknowledge that Mr. von Mehren was a retired partner of the law firm. However, counsel also noted that the US national maintained significant connections with the firm as Mr. von Mehren was still listed on Debevoise website, and maintained an office, administrative services and an email account through the firm. Given such ties, Venezuela expressed doubts about whether Mr. von Mehren would “exercise independent judgment” in the dispute and whether his relationship to Debevoise “create[d] a risk of disclosure of confidential information.”

The substance of those concerns is not addressed in the two-man tribunal’s decision, however. Judge Guillaume and Professor Abi-Saab instead focused their reasoning on the timing of Venezuela’s proposal to disqualify Mr. von Mehren. Relying on Rule 9(1) of the ICSID Arbitration Rules, the two men confirmed that proposals for the disqualification of an arbitrator must be made “promptly” and dismissed Venezuela’s challenge on that basis.

Specifically, Judge Guillaume and Professor Abi-Saab determined that “every material element of [Venezuela’s] application for disqualification was well known to it” by the time parallel proceedings were initiated by Holcim Ltd. against Venezuela on April 10, 2009, at least six months prior to its proposal for disqualification. Having waited too long, both men held that Venezuela had “waived its right” to request the disqualification of Mr. Mehren.

Sources:

* “Chavez Plans to Nationalize Venezuela Cement Industry,” By Steven Bodzin and Thomas Black, Bloomberg.com, 4 April 2008.

** Cemex Company Press Release dated 20 August 2008, available on the company’s website at: http://www.cemex.com/qr/mc_pr_082008.asp

UNCITRAL Claimant Given 30 days to Appoint New Arbitrator in UK-Argentina BIT Dispute

Elizabeth — Tue, 12 Jan 2010 20:25:00 GMT

By Elizabeth Whitsitt

January 13, 2010

Later this month UK-based firm, ICS Inspection and Control Services Limited (ICS), is expected to appoint another arbitrator in its dispute against the Argentine Republic which began earlier this summer.

On July 28, 2009 in accordance with the UNCITRAL Arbitration Rules, ICS appointed Mr. Stanimir A. Alexandrov as its nominee to the three-member arbitral tribunal that would decide the outcome of its dispute with Argentina under the UK-Argentina BIT.

Subsequently, Mr. Alexandrov, a partner with Sidley Austin LLP, informed the parties that his law firm had previously represented PWC Logistics, a company with potential connections to ICS. In addition, Mr. Alexandrov notified the parties that he and his law firm were currently counsel to Compañίa de Aguas del Aconquija S.A. and Vivendi S.A., claimants in a long-standing dispute against the Argentine Republic over the provision of water and sewer services (the Vivendi case).*

Less than a week later, Argentina challenged Mr. Alexandrov’s appointment relying on Article 10(1) of the UNCITRAL Rules which provides that, “[a]ny arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence.”

On December 17, 2009 Mr. Jernej Sekolec, the appointing authority designated by the Secretary-General of the Permanent Court of Arbitration to hear the challenge, sided with Argentina.

In reaching this conclusion, Mr. Sekolec rejected arguments raised in opposition to the challenge that the Vivendi case was coming to a conclusion and unrelated to the dispute between ICS and Argentina.

With respect to the former argument, Mr. Sekolec acknowledged that no more action may be required of Mr. Alexandrov given the status of annulment proceedings in the Vivendi case. However, he determined that this reality did not negate Mr. Alexandrov’s conflict as there was still some possibility that the case may continue and “engage Mr. Alexandrov’s firm’s continued representation.”

Regarding the latter argument, Mr. Sekolec noted that the Vivendi case and dispute between ICS and Argentina were “not entirely dissimilar” as “[b]oth matters are investment protection actions of considerable magnitude which raise broadly similar concerns against the same State party…” In addition, he noted that justifiable doubts as to an arbitrator’s impartiality and independence may arise even in circumstances where an arbitrator has represented one of the parties “in an unrelated matter.”

In sustaining Argentina’s challenge, Mr. Sekolec acknowledged that there was “…no reason to doubt Mr. Alexandrov’s personal intention to act impartially and independently…” However, he determined that Mr. Alexandrov and his law firm were “…in a situation of adversity toward Argentina…” and such situations should “be avoided, except where circumstances exist that eliminate any justifiable doubts as to the arbitrator’s impartiality or independence.”

As support for his decision, Mr. Sekolec also referenced the IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) and noted that there were two examples of potential conflicts of interest on the “Orange List” of the IBA Guidelines that were relevant to this case. First, justifiable doubts as to an arbitrator’s impartiality or independence may arise where “an arbitrator’s law firm is currently acting adverse to one of the parties…” or second, where “[an] arbitrator has within the past three years served as counsel against one of the parties…”

Having found that the facts underlying Mr. Alexandrov’s August 7th disclosure to the parties were reflected in those two scenarios, Mr. Sekolec held that the situation “…[gave] rise to objectively justifiable doubts as to Mr. Alexandrov’s impartiality and independence.” Accordingly, Mr. Sekolec gave ICS 30 days from December 17, 2009 to find a replacement arbitrator.

* Previous ITN reporting on the Vivendi case can be found here:

“Vivendi Will Resubmit Argentine Water Claim, Following Recent ICSID Decision,” By Luke Peterson, Investment Law and Policy Weekly News Bulletin, 1 August 2003, available here:

http://www.iisd.org/pdf/2003/investment_investsd_aug1_2003.pdf

“Argentina liable for $100+ Million after expropriating Vivendi water concession,” By Luke Eric Peterson, Investment Treaty News, 30 August 2007, available here:

http://www.iisd.org/pdf/2007/itn_aug30_2007.pdf

Sources:

Decision on the Challenge to Mr. Stanimir A. Alexandrov in ICS Inspection and Control Services Limited (United Kingdom) v. Republic of Argentina, UNCITRAL is available here:

http://ita.law.uvic.ca/documents/ICSArbitratorChallenge.pdf

An ICSID Tribunal splits over whether to hear ancillary claims in dispute over unpaid gas deliveries

Elizabeth — Tue, 12 Jan 2010 20:19:00 GMT

By Elizabeth Whitsitt

January 13, 2010

In a split decision, an ICSID tribunal has refused to hear ancillary claims advanced by American company, Itera International Energy LLC (Itera), and its Dutch parent, Itera Group NV (IGNV).

Itera and IGNV commenced ICSID arbitral proceedings against Georgia in June 2008, broadly asserting violations of the US-Georgia BIT and the Netherlands-Georgia BIT with respect to the claimants’ investment in the chemical fertilizer company JSC Azot. In particular, the claimants asserted that Georgia “…orchestrated the bankruptcy of JSC Azot, a company majority-owned by [the claimants],… and sold Azot’s assets to a third party.” The claimants acquired Azot as part of a state-sanctioned attempt to restructure debts owed to them by Georgian state-owned entities for unpaid gas deliveries.

In their Request for Arbitration, Itera and IGNV also noted their concerns with respect to another debt restructuring arrangement intended to facilitate the further repayment of amounts owed to the claimants for unpaid gas deliveries. Specifically, the claimants noted that arbitration proceedings were already pending before the International Commercial Arbitration Court of the Chamber of Commerce of the Russian Federation (ICAC) with respect to this second debt restructuring arrangement. However, they reserved their rights to introduce additional claims in relation to the latter arrangement “should their losses not be fully compensated as a result of the ICAC proceedings.”

Subsequently, Itera and IGNV attempted to enlarge their case against Georgia in the ICSID proceedings by seeking to admit claims related to the latter debt restructuring scheme. The claimants’ arguments in support of this maneuver were largely focused on issues of procedural efficiency. Observing that “…the various claims currently before the Tribunal [were] inextricably linked…”, the claimants went on to argue that “[a] separation [of the claims] would lead to parallel or consecutive proceedings and/or give rise to the avoidable risk of conflicting outcomes.”

For its part, Georgia alleged that there was “no meaningful factual or legal connection” between the claims. Moreover, Georgia argued that only the tribunal’s dismissal of the claimants’ request for consolidation “…could avoid potentially conflicting decisions [between ICAC and the ICSID Tribunal on the ancillary claims] and serve interests of judicial efficiency and comity.”

On December 4, 2009 a majority of the tribunal, composed of Judge Hans Danaelius and Professor Brigitte Stern, sided with Georgia. In so finding, the majority of the tribunal first addressed the parties’ arguments regarding the connectivity between the claims. In particular, the majority recognized that there was a “link” between the claims as both disputes arose out of a common purpose – to ensure the payment of debts owed to the claimants. In the majority’s view, however, the manner in which those debts were to be repaid involved two separate investments – a fact distinguishing this case from other ICSID cases* in which new claims had been accepted as “ancillary claims.” Accordingly, the tribunal found that “[w]hile the investor is the same [for both claims], it entered into two different types of relationships with Georgia, which in view of the Tribunal, [could not] be analyzed as a single investment.”

In addition, the majority addressed both parties’ arguments regarding efficiency. Specifically, the majority clarified that “…efficiency considerations are not in themselves decisive factors for whether or not a new claim shall be accepted as an ancillary claim…” In the majority’s view ancillary claims should be accepted when “…the link between the claims [is] so strong that the examination of one claim cannot be carried out adequately without the other claim being adjudicated at the same time.” Having found no such link in the present case, the two-person tribunal concluded that the conditions set out in the ICSID Convention and ICSID Rules regarding ancillary claims had not been satisfied.

In direct contrast to the majority, however, the third member of the tribunal, Professor Fancisco Orrego Vicuña, would have admitted the ancillary claims in this case. Viewing the test for the admissibility of ancillary claims less strictly, Professor Vicuña posited that “[t]he facts do not need to be identical in one and the other dispute. It suffices that they both concern the same business operation, the same investor and the same State party.”

Thus, in a two-page dissenting opinion Professor Vicuña, the claimants’ nominee to the tribunal, emphasized that Itera’s and IGNV’s claims arose as a result of “mounting unpaid bills for the supply of gas.” Accordingly, in his opinion, the claimants’ investments were “…conceived as mechanisms to…make the Claimant[s] whole for the monies owed.” In that context, the dissenting arbitrator determined that the claims were “…close enough as to require their simultaneous adjudication so that settlement of the dispute [would] be final.”

* See CMS Gas Transmission Co. v. Argentina (ICSID Case No. ARB/01/8), Decision on Objections to Jurisdiction, 17 July 2003; LG&E Energy Corp. LG&E Capital Corp. and LG&E International, Inc. v. Argentina (ICSID Case No. ARB/02/1), Decision on Objections to Jurisdiction, 30 April 2004, Enron Corporation and Ponderosa Assets L.P. v. Argentina (ICSID Case No. ARB/01/3), Decision on Jurisdiction (Ancillary Claim), 2 August 2004.

Sources:

The majority decision and dissenting opinion on Admissibility of Ancillary Claims in Itera International Energy LLC and Itera Group NV v. Georgia is available at:

http://ita.law.uvic.ca/documents/Itera-AncillaryClaims.pdf

and

http://ita.law.uvic.ca/documents/IteraAncillaryClaims-Dissent.pdf

Spanish firms launch ICSID dispute against Mexico over stalled toxic waste disposal project

Elizabeth — Tue, 12 Jan 2010 20:08:00 GMT

By Fernando Cabrera Diaz

January 13, 2010

Spanish firms Abengoa, S.A. and COFIDES, S.A. have launched a claim with ICSID against Mexico over the stalled opening of a toxic waste disposal plant built by them in the municipality of Zimapán, approximately 200 kilometres north of Mexico City.

The project has been the subject of ongoing protests by local citizens united under the group Todos Somos Zimapán (We are all Zimapán), who are concerned about the potential negative health effects that the plant will have on their population.

The facility began receiving toxic waste in trucks under federal military escort on April 11, 2009 but local protests managed to turn back at least one of the trucks headed to the facility, according to Mexican daily La Jornada.

A few days later the protests prompted the municipal council of Zimapán to withdraw the project’s license to deposit toxic waste at the site. In doing so the council cited irregularities in the granting of the permit by the previous mayor, reports La Jornada.

The facility was again scheduled to receive toxic waste trucks under military escort on September 3, 2009 after federal government officials announced that the plant would open the following day with or without municipal authorization.

Apperently due to public pressure the company did not proceeded with the plant’s re-opening. Instead a meeting was held between the federal, state and municipal governments in another attempt to resolve the dispute.

After that meeting, Hidalgo governor Miguel Ángel Osorio Chong announced to La Jornada that new studies were to be conducted by a ‘prestigious institution’ to determine if the plant is in fact viable and whether it would put the health of the local community at risk.

ITN contacted Dr. Ramon Ojeda Mestre, a lawyer at Mexico City-based Ojeda, Ojeda and Associates and a leading member of protest group Todos Somos Zimapán, who said that no agreement to conduct a new study was reached at the meeting.

According to Dr. Ojeda, the group did propose that a new interdisciplinary and inter-institutional study be conducted to determine the viability of the plant in order to definitively resolve the dispute, but the federal government has yet to respond to the proposal. However, the company has continued to keep the plant closed, confirms Dr. Ojeda.

Explaining his group’s opposition to the facility, Dr. Ojeda says that under previous Mexican regulations a facility with these characteristics could not be placed within 25 km of a population of over 5,000 inhabitants.

Dr. Ojeda says that a week before Abengoa was granted its license for the waste facility the regulation was changed to 5 km. Zimapán’s municipal seat happens to be 6 km from the waste disposal site and has a population of 15,000 inhabitants, he adds.

He says another issue with the site of the facility is that Mexican law on the transportation of toxic and dangerous waste prohibits vehicles from carrying such materials through urban zones, but that the highway that was to be used to reach the facility comes within three blocks of the center of Zimapán. Dr. Ojeda also cites the existence of 24 Ñañhus indigenous communities and 20 fresh water springs within a 5 km radius of the waste facility, as reasons for his group’s opposition.

The company for its part has argued that the facility is safe and without risks. According to company biologist Édgar Ramírez Hernánde the true danger lies in the 390 thousand tons of dangerous waste produced in the state of Hidalgo, half of which he claims goes into rivers, ravines and streams, or runs in the backyards of industrial areas.

The case was registered by ICSID on December 11, 2009. Under the 2006 Mexico-Spain Bilateral Investment Treaty, the companies would have had to notify Mexico of their intent to pursue arbitration at least six months prior to filing for arbitration at ICSID.

Sources:

“Hoy empezará a operar el basurero de Zimapán: SG,” by Carlos Camacho, La Jornada, September 4, 2009, available at: http://www.jornada.unam.mx/2009/09/04/index.php?section=estados&article=034n1est

“Retiran licencia para basurero tóxico en Zimapán, Hidalgo,” by Leonides Sandoval Castañeda, La Jornada, April 11, 2009, available online at: http://www.jornada.unam.mx/2009/04/11/index.php?section=politica&article=008n1pol

“Defiende firma española basurero de tóxicos en Zimapán, Hidalgo,” by Carlos Camacho, La Jornada, February 17, 2008 available online at: http://www.jornada.unam.mx/2008/02/17/index.php?section=estados&article=030n1est

“ACUERDO PARA LA PROMOCION Y PROTECCION RECIPROCA DE INVERSIONES ENTRE EL REINO DE ESPAÑA Y LOS ESTADOS UNIDOS MEXICANOS,” October 20, 2006 (Mexico-Spain BIT), available in Spanish from UCTAD’s website at: http://www.unctad.org/sections/dite/iia/docs/bits/Mexico_Spain_sp.PDF

In Brief: The merits of former Yukos Shareholders’ expropriation claim will be heard

Elizabeth — Tue, 12 Jan 2010 19:55:00 GMT

By Elizabeth Whitsitt

January 13, 2010

In a decision not yet released to the public, it has been reported that former Yukos shareholders may proceed to the merits phase of their multi-billion dollar expropriation claim against the Russian government.

According to various sources* a tribunal of the Permanent Court of Arbitration (PCA) in The Hague has ruled that Russia is bound by the Energy Charter Treaty (ECT), despite having never ratified the agreement.

The tribunal’s decision appears to be based on Article 45 of the ECT. Under Article 45(1) signatory states like Russia agree to apply the treaty “provisionally” (to the extent that such provisional application is not inconsistent with its constitution, laws or regulations).

Russia’s formal announcement terminating its provisional application of the ECT as of October 18, 2009 appears to have had little impact on the tribunal’s jurisdictional holding, a finding likely supported by Article 45(3)(b) of the ECT. According to that provision, for energy investments made in its territory prior to October 18, 2009 Russia remains bound by certain provisions of the treaty for twenty more years.

* “YUKOS owners win ruling in $100 bln case vs Russia,” By Dmitry Zhdannikov and Chris Baldwin, Reuters, 1 December 2009.

“Tribunal in $100 Billion Yukos Arbitration Rules Russia Bound by Energy Charter Treaty,” By Sanjay J. Mullick, Ronan J. McHugh & Irene Dallas (Pillsbury Advisory) 17 December 2009.

“Energy Charter Treaty ruling clarifies effect of Russia’s “provisional application” accepting jurisdiction to hear Yukos’ claim” (Investment protection e-bulletin) 4 December 2009.

Previous ITN Reporting on Yukos Dispute:

“Spanish fund to open new front in arbitration against Russia over Yukos,” By Luke Eric Peterson, Investment Treaty News, 19 July 2006, available here:

http://www.iisd.org/pdf/2006/itn_july19_2006.pdf

“More Spanish portfolio investors line up to sue Russia over Yukos,” By Luke Eric Peterson, Investment Treaty News, 13 October 2006, available here:

http://www.iisd.org/pdf/2006/itn_oct13_2006.pdf

“Spanish financial investors initiate arbitration against Russia over Yukos,” By Luke Eric Peterson, Investment Treaty News, 27 April 2007, available here:

http://www.iisd.org/pdf/2007/itn_april27_2007.pdf

“MFN clause used successfully in bid by minority Yukos shareholders to sue Russia,” By Luke Eric Peterson, Investment Treaty News, 5 February 2008, available here:

http://www.iisd.org/pdf/2008/itn_feb5_2008.pdf

Very High Standard of Review for ICSID Annulment Applications Confirmed

Elizabeth — Fri, 04 Dec 2009 10:20:00 GMT

By Elizabeth Whitsitt

December 6, 2009

An ad hoc committee, established pursuant to the ICSID Arbitration Rules, has rejected the annulment application of two US power companies: M.C.I. Power Group, L.C. (MCI) and New Turbine, Inc. (New Turbine). The companies’ bid for annulment came after an ICSID tribunal dismissed part of the companies’ case against Ecuador on jurisdictional grounds, and dismissed the remainder on the merits in the summer of 2007.

Problems for MCI and New Turbine began some thirteen years ago when MCI and New Turbine (through their subsidiary Seacoast, Inc.) entered into an agreement with Ecuadorian state-owned energy provider Instituto Ecuatoriano de Electrificacion (INECEL) and Old Dominion Electric Cooperative (ODEC) for the sale of electricity. This agreement was signed on November 17, 1995, almost two years before the US-Ecuador BIT entered into force on May 11, 1997.

In April of 1996 various differences arose between the parties to the agreement, which resulted in Seacoast Inc. suspending its electricity operations and complaining that INECEL had not paid for prior power sales. A month later, INECEL unilaterally terminated the agreement. Challenging INECEL’s termination of the agreement and requesting payment of approximately US $25 million in damages for breach of contract, MCI’s and New Turbine’s subsidiary commenced suit in the Ecuadorian courts. The domestic proceedings ended in 2000, however, when the Superior Court of Justice of Quito held that it lacked jurisdiction to hear the case.

On December 16, 2002, MCI and New Turbine commenced arbitral proceedings against Ecuador relying on the 1997 U.S.-Ecuador BIT, claiming that Ecuador had breached its obligations under that treaty. The ICSID tribunal hearing the case rejected arguments by MCI and New Turbine that Ecuador had violated the fair and equitable treatment and expropriation provisions of the US-Ecuador BIT. Additionally, the tribunal ruled that portions of the claim related to acts or omissions occurring before the US-Ecuador treaty entered into force, thus limiting the tribunal’s jurisdiction over certain of the claims alleged by the US claimants.

Some four months later MCI and New Turbine sought partial annulment of the tribunal’s award. Grounding their application on Articles 52(1)(b) and 52(1)(d) of the ICSID Convention, the US investors asserted that the tribunal had manifestly exceeded its powers and failed to state the reasons upon which its decision was based. Specifically the US investors took issue with the tribunal’s application of the non-retroactivity principle to the US-Ecuador BIT.

In considering those arguments, the ad hoc committee, composed of Judge Dominique Hascher, Judge Hans Danelius and Judge Peter Tomka, was clear that “…the role of an ad hoc committee is a limited one, restricted to assessing the legitimacy of the award and not its correctness.” Consequently, the ad hoc committee noted that “[t]heir mission [was] confined to controlling the legality of awards according to the standards set out expressly and restrictively in Article 52 of the [ICSID] Convention.”

The ad hoc committee then went on to reject all of MCI’s and New Turbine’s arguments for annulment. In so doing, the ad hoc committee reiterated that the standard of review applicable in annulment proceedings is very high. Examples of the ad hoc committee’s reasoning in this regard can be seen throughout its decision.

Pursuant to Article 52(1)(b) MCI and New Turbine alleged that “…the [t]ribunal’s interpretation of the principle of non-retroactivity of treaties was egregiously wrong and so grave as to be tantamount to an abrogation of the BIT.” In particular, they complained that the tribunal was wrong to characterize INECEL’s non-payment for power services as an act or omission that only occurred prior to the BIT entering into force. In their view, those non-payments were acts or omissions that continued up to (and beyond) the date on which the US-Ecuador BIT entered into force. Thus, MCI and New Turbine argued that the tribunal could exercise jurisdiction over claims related to those non-payments.

In rejecting those arguments, the ad hoc committee noted that “[f]ailure to apply the proper law is not an independent ground for annulment under Article 52 . . . Ad hoc committee decisions however recognize that a tribunal's failure to apply the applicable law may constitute a manifest excess of powers pursuant to Article 52(1)(b).” Thus, while the ad hoc committee agreed that reasonable minds could disagree regarding the interpretation of the non-retroactivity of the BIT, the tribunal’s decision did not amount to “manifest excess of powers” because, in the ad hoc committee’s opinion, “[a]n egregious violation of the law would assume that there is a departure from a legal principle or legal norm which is clear and cannot give rise to divergent interpretations.”

MCI and New Turbine also challenged the tribunal’s analysis under Article 52(1)(e) of the ICSID Convention. Specifically, the US investors complained that the tribunal “failed to state reasons for the Award by forgetting to address the question whether Ecuador breached the BIT by continuously refusing to pay…outstanding accounts receivable owed to them whether on a continuous basis or only after the entry into force of the Treaty.” This, MCI and New Turbine argued, was “an issue of sufficient importance affecting the outcome of the Award.”

Citing previous arbitral awards, the ad hoc committee noted that annulment under Article 52(1)(e) is concerned with a failure to state any reasons with respect to all or part of an award, not the failure to state correct or convincing reasons. Given such a rigid standard of review, the ad hoc committee went on to reject the US investors’ bid for annulment. In so doing, this ad committee’s decision falls in line with prior decisions by reconfirming that annulment applications under Article 52 of the ICSID Convention are not appeals and a very high standard of review will be applied.*

* See Previous ITN Reporting on standard of review in annulment proceedings:

“Ad Hoc Committee confirms Argentina is on the hook to Azurix for US $165 million” By Elizabeth Whitsitt, Investment Treaty Newsletter, 2 October 2009 available here:

http://www.investmenttreatynews.org/cms/news/archive/2009/09/28/ad-hoc-committee-confirms-argentina-is-on-the-hook-to-azurix-for-us-165-million.aspx

“Argentina must respect award despite ICSID finding that it has errors of law,” By Luke Eric Peterson, Investment Treaty News, 15 October 2007, available here:

http://www.iisd.org/pdf/2007/itn_oct15_2007.pdf

Sources:

Decision on Annulment M.C.I. Power Group L.C. and New Turbine Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6 is available here:

http://ita.law.uvic.ca/documents/MCI-Annulment.pdf