As previously noted in April 2015, India amended its model bilateral investment treaty (the Indian Model BIT) and has reportedly been deploying it in recent months to seek to re-negotiate bilateral investment treaties (BITs) with over 47 countries (see previous post of July 2016). One of these negotiations was with Brazil, a country historically known for not having any BITs in force, despite signing several in the 1990s. A specialised news source (Investment Arbitration Reporter) has now reported the conclusion of negotiations between India and Brazil culminating in a near-final treaty between the two nations.1]
The 'Law on Transparency, Anti-corruption Measures and the Modernisation of the Economy' presented by Michel Sapin, Minister for the Economy and Finance, to the Council of Ministers on 30 March 2016, known as the « Sapin II » law, has finally been approved by the French National Assembly on 8 November 2016, after undergoing two examinations by each of the French Parliament's chambers. The law is currently being reviewed by the Conseil Constitutionel to confirm its constitutionality (from which it is unlikely to emerge unscathed), and is expected to enter into force by the end of 2017.
Besides making other important reforms in a number of areas, this law will affect the enforcement of foreign decisions and arbitral awards rendered against States. The intervention of the legislator has been considered necessary especially with regard to the recent variations of French case law on this issue, which have been considered by the Government as a potential risk for French diplomatic relations. Thus, the « Sapin II » law seeks to clarify the protection of the property of foreign States situated in France.
The UK’s vote to leave the EU brings with it the possibility of so-called 'hard Brexit'. Business needs to understand what Britain leaving the EU without a smooth transition to a new framework might mean for cross-border trade both within Europe and between Europe and the rest of the world.
At the point when the British government announces its formal intention to exit the EU by triggering Article 50, a two-year countdown will begin to the UK leaving the EU. Understanding the various changes, analysing the risks they pose and working through potential solutions will all be essential to help firms position themselves to navigate the challenges and opportunities that lie ahead.
The peculiarity of the Article 50 process – with its two-year ticking clock – makes this preparatory work all the more urgent. If no alternative relationship or even temporary transitional arrangement were to be agreed between Britain and the EU before the two years run out, the EU treaties would cease to apply to the UK, with nothing to replace them. This has profound implications for both sides.
Herbert Smith Freehills has worked in collaboration with The Boston Consulting Group and Global Counsel to produce a report that considers the potential impact on trade in goods and services if the UK left the EU single market and the EU Customs Union without any new trade agreement in place.The report is designed to help business leaders understand and prepare for a sharp shift in the UK’s relationship with the EU: hard Brexit. Regardless of the eventual outcome, planning for a hard Brexit scenario provides businesses with a baseline to see most clearly the potential impact of the possible changes and to make corresponding plans of action.
Our conversations with business leaders suggest the mood is not necessarily one of negativity, but the scale of the potential change coupled with the lack of clarity as to how it might be effected leaves a lot of uncertainty in the short-to-medium term. Businesses are struggling to understand what Brexit would mean for them. Understanding hard Brexit is a good place to start.
‘We do not necessarily think that a hard Brexit is the most likely outcome of negotiations,’ says Lode Van Den Hende, a partner and international trade law specialist at Herbert Smith Freehills. ‘But planning for this scenario is the most effective way for businesses to compare their current position from within the EU single market with a counterfactual position in which the UK trades with the EU and the rest of the world on the basis of WTO rules. From this baseline, organisations can see most clearly the potential impact of the possible changes and make a corresponding plan of action.’
This report not only aims to help businesses understand the implications of a hard Brexit, but the role they may play in shaping that or an alternative outcome.
The report, produced by Herbert Smith Freehills, The Boston Consulting Group and Global Counsel contains expert contributions from Stephen Adams, Partner, Global Counsel, Pierre Mercier, Senior partner and managing director, The Boston Consulting Group, and Lode Van Den Hende, Partner, Herbert Smith Freehills.
Please follow this link to Herbert Smith Freehills' Brexit hub to download a copy of the report.
Live webcast of hearing on jurisdiction and the merits: United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia (ICSID Case No. ARB/14/24)
A hearing on jurisdiction and the merits in ICSID Case No. ARB/14/24, United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v Republic of Estonia, will be transmitted live via internet feed from Monday, November 7, 2016 to Tuesday, November 15, 2016 (from 9:00 a.m. to approximately 5:00 p.m. CET (Central European Time) on November 10, 2016 and from 10:00 a.m. to approximately 6:00 p.m. CET on all other days).
This webcast is being made available pursuant to the parties’ agreement. To access the webcast, please click here.
Herbert Smith Freehills is co-counsel for the Claimants.
Herbert Smith Freehills is pleased to announce today that it has officially joined the United Nations Global Compact, the world's largest global corporate sustainability initiative. This commits Herbert Smith Freehills to supporting and implementing the ten principles of the Global Compact on human rights, labour, environment and anti-corruption and requires the firm to publish a Communication on Progress every year, which will describe how the firm has sought to implement these principles.
As part of its commitment to supporting and implementing the ten principles, Herbert Smith Freehills will:
- participate and engage with the Global Compact Local Networks in its main countries of operation;
- continue with and build on its work supporting NGO's, charities, and developing country governments through its Pro Bono & Citizenship programme; and
- take steps to encourage its clients, suppliers, sub-contractors and other business partners to observe standards similar to those of Herbert Smith Freehills.
Sonya Leydecker, Chief Executive Officer said: " We are delighted to become a signatory to the UN Global Compact. This is a great initiative which has revolutionised the way in which companies conduct their business to act responsibly and keep their commitments to society. Joining reinforces Herbert Smith Freehills' commitment to the ideals underlying the Compact. The firm will continue to enhance its business practices in line with the Compact and contribute to the broader dialogue to help achieve the UN's goal of global corporate sustainability"
Launched in 2000, The Global Compact is the world’s largest global corporate sustainability initiative, with over 8,000 companies and 4,000 non-business participants based in over 160 countries. The initiative is a call to companies everywhere to voluntarily align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. To this end, participants across industries are changing the way they operate to implement responsible practices and developing innovative solutions to address poverty and inequality, and support education, health and peace, to name just a few areas.
Sonya LeydeckerChief Executive Officer
++44 20 7466 2337
On 10 June 2016 the EU signed an Economic Partnership Agreement (EPA) with the Southern Africa Development Community EPA Group comprising Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland (the SADC EPA).
On 10 October 2016 that agreement entered into effect between the EU and five of those countries: with Mozambique in the process of ratifying the agreement and due to join immediately thereafter.
The SADC EPA represents the latest agreement in a scheme to create a free trade area between the EU and the African, Caribbean and Pacific Group of States (ACP). Like previous EPAs, a key objective is to support the conditions for increasing investment and economic growth in the SADC EPA states. The EU is the SADC EPA Group's largest trading partner. Export products from the SADC region include, notably, diamonds (from South Africa, Botswana, Lesotho and Namibia) as well as agricultural products, oil and metals. Manufactured goods, wine and food products are exported from South Africa, the largest EU trading partner in the region. EU imports to the SADC EPA Group include vehicles, machinery, electrical equipment, pharmaceuticals and processed food.
The key provisions of the SADC EPA are discussed below.
International Criminal Court to prioritise prosecution of crimes involving destruction of the environment, illegal exploitation of natural resources and land-grabbing
The International Criminal Court ("ICC") intends to prioritise the prosecution of cases involving the destruction of the environment, illegal exploitation of resources and land-grabbing, according to a new Policy Paper on Case Selection and Prioritisation published by the ICC's Office of the Prosecutor ("OTP") in September. A number of NGOs declared the announcement to be a "warning shot" to company executives and investors that they might be tried for their role in these crimes.
The Policy Paper follows a recent trend of calls for international tribunals – including the ICC – to investigate corporate involvement in land-grabbing and environmental destruction committed during peacetime. At the present time, the risk of a company or its executives being prosecuted at the ICC for these crimes seems remote; there are serious practical and jurisdictional hurdles to any prosecution actually taking place. Nonetheless, the reputational risks for a company of being associated with an investigation into any of the crimes that fall within the ICC's jurisdiction – genocide, war crimes and crimes against humanity – could be devastating.
AIPN EA CHAPTER EVENT: NEGOTIATING STATE IMMUNITY ISSUES IN INTERNATIONAL ENERGY CONTRACTS – LAW & PRACTICE
The immunity of states and their assets from the reach of national courts is an area of law with considerable practical implications for both private and state owned entities entering into international energy contracts.
In this panel discussion, the speakers will address the issue of immunity from a number of perspectives, considering key principles of the UK and international law on state immunity, in the light of recent developments. The panel will draw on their experience to highlight how immunity may apply to states, state-owned entities and other international actors involved in the energy sector. The speakers will also consider the practicalities of negotiating waivers of immunity, as well as their key features and implications.
Please find further details below.
As an EU member state the UK is currently part of the EU internal market, which is one of the most advanced trade areas in the world and has been developed and extended since 1951. Originally referred to as the 'common market' it consists of a customs union with no tariffs on goods traded between member states and a common tariff for goods entering the EU from outside. In addition to the basic trade rules, it includes a network of more advanced trade related rights and obligations which are enforced by the European Courts.
Central to the internal market are the 'four freedoms' (free movement of goods, persons, services and capital) which are enshrined in the EU Treaties. The Treaty provisions establish these free movement principles which are further refined by a raft of internal market legislation designed to complete the creation of the internal market by abolishing any remaining trade barriers and creating regulatory harmonisation.
Access to the internal market is therefore about much more than removing tariffs on goods. So what does it mean, and is it possible for a member state to leave the EU but retain full access to this internal market? There are a number of existing alternatives to EU membership, each of which provide to a greater or lesser extent participation in the internal market and some of the EU's wider policies and related obligations. Furthermore, the EU has also agreed various levels of market access for goods and access in individual trade agreements with third countries.
For further information, please contact Lode Van Den Hende, Partner, Andrew Cannon, Partner, Dorothy Livingston, Consultant, Gavin Williams, Partner, James Quinney, Head of Competition, Regulation & Trade or Kristien Geeurickx, Professional Support Lawyer.
Kristien GeeurickxProfessional Support Lawyer
+44 20 7466 2544
In L R Avionics Technologies Limited v. The Federal Republic of Nigeria, Attorney General of the Federation of Nigeria  EWHC 1761 (Comm), the English High Court has set aside a charging order enforcing an arbitral award and related foreign judgment made against the Federal Republic of Nigeria ("Nigeria"). The charging order had been issued over a property owned by Nigeria but leased to a private company to process Nigerian visa and passport applications. In reaching its decision, the Court followed recent case law on the circumstances in which it can be said that property is “in use or intended for use for commercial purposes” pursuant to section 13(4) of the State Immunity Act 1978 (“SIA“).
The claimant, LR Avionics Technologies Ltd. (the "Claimant"), had entered into a contract with Nigeria for the supply of military equipment. The contract was governed by Nigerian law and provided for arbitration in Nigeria under domestic law. Following a dispute, an award was issued for damages and costs to the Claimant (without interest) (the "Award"). Following enforcement proceedings in Nigeria, the Federal High Court of Nigeria entered judgment in terms of the Award and also ordered the defendants to pay interest (the "Nigerian Judgment").
Nigeria did not comply with the Award or the Nigerian Judgment. As a consequence, the Claimant commenced proceedings in the UK to register the Award under s.101 of the Arbitration Act 1996, and the Nigerian Judgment under s.9 of the Administration of Justice Act 1920 (the "Administration of Justice Act").
The Claimant applied to the Court for an interim, and then a final, charging order against freehold office premises (the "Property") owned by Nigeria but leased to a company called Online Integrated Solutions Ltd ("OIS") for the purpose of providing visa and passport services in exchange for an annual rent of £150,000. Nigeria was served (albeit with some irregularities), but did not participate in the proceedings. Once the final charging order was obtained, the Claimant sought an order for sale of the property. At this stage Nigeria issued an application to discharge or set aside the final charging order, arguing that the Property was exempt from execution on the basis of state immunity.
2. The Decision
The Court identified three main "issues of substance" in connection with the question of whether the Property was immune from execution under the SIA. First, could the Award be enforced; second, could the Nigerian Judgment be enforced; and third, in the event that enforcement of the Award or Nigerian Judgment was permitted, was the Property being used for "commercial purposes" such that state immunity would not apply under s.13(4) of the SIA and a charging order could be made against it. The court also considered whether the Property formed part of the Nigerian diplomatic mission.
2.1 The scope of the "arbitration exception" under s.9 of the SIA
Under s.9 of the SIA, where a State has agreed in writing to submit disputes to arbitration, "the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration". The Court disposed of the first issue quickly by following established case law, to the effect that proceedings "which relate to the arbitration" include those for the recognition and enforcement of an award (Svenska Petroleum Exploration AB v. Government of the Republic of Lithuania  EWCA Civ 1529 and NML Capital Ltd. v. Republic of Argentina  UKSC 11). Accordingly, the Claimant was entitled to register the Award for recognition and enforcement.
2.2 Enforcement of the Nigerian Judgment
It remained material to determine this question because the Nigerian Judgment included interest, whereas the Award did not. English courts have considerable discretion under the Administration of Justice Act in relation to the enforcement of foreign judgments, and must consider whether enforcement of a foreign judgement would be "just and convenient". The Court accepted the Claimant's submission that the Nigerian Judgment was simply the conversion of an arbitral award into a judgment under a foreign statutory provision similar to s.66 of the Arbitration Act 1996. Accordingly, the Court held that these proceedings were all part of the process of enforcement of an award, and that its discretion should therefore be exercised in favour of enforcement of the judgment, for the same reasons as set out in Svenska and NML Capital.
2.3 Use of the Property for "commercial purposes"
However, the Court decided in favour of Nigeria on the third issue. Its decision turned on whether the Property was immune from execution, or whether the Property was "for the time being in use or intended for use for commercial purposes", such that the exception from immunity contained in s.13(4) of the SIA applied.
During the proceedings and pursuant to s.13(5) of the SIA, the Nigerian High Commissioner issued a certificate stating that the Property was "in use for Consular activities" and not for commercial purposes, which had the effect under the SIA of shifting the burden to the Claimant to prove the contrary.
The Claimant presented seven arguments in an attempt to demonstrate that the Property was being used for "commercial purposes". These included use of the Property by OIS, a private company, against payment of rent, OIS' partnerships with other national diplomatic missions, and the Property's availability (at one point in time) as a property which was available to rent on the open market. The Claimant submitted that OIS was therefore an agent which was operating on a commercial basis, and that this would satisfy the "commercial purposes" requirement under s.13(4) of the SIA.
The Court held that while OIS' operations would constitute a "typical commercial activity" from OIS' point of view, the Property was "being used for a consular activity" when viewed from the Nigerian High Commission's perspective. Noting the decision of the UK Supreme Court in SerVaas Incorporated, the Court observed that "the primary consideration must be the nature or character of the relevant activity". Although the Property may be connected with a commercial transaction (the contract for the supply of services by OIS to Nigeria), but the purpose for which it was in use was the provision of visa and passport services. This provision of consular services would constitute performance of a public function "regardless of whether that function is carried out by the defendant state itself or…an agent". Accordingly, the Court ruled that the Claimant had not discharged the burden upon it of proving that the Property was in use for commercial purposes, and set aside the charging order.
This case provides a useful illustration of the broad scope of the arbitration exception under the English law of sovereign immunity. It upholds the consistent line of case law that immunity will not apply to defeat enforcement proceedings in relation to an arbitral award, and also clarifies that the Court will likely exercise its discretion in favour of enforcing foreign judgments that have been entered in the terms of an arbitral award.
However, the case also highlights that recognition and enforcement of an arbitral award can be a pyrrhic victory if that Award cannot also be executed against that State's property. Notwithstanding the numerous links in this case between the Property and the private sector, the Court was clear that the Property ultimately was in use for public, consular, purposes, and should enjoy immunity.
Here, the court continued the line of case law begun in Servaas Incorporated by interpreting the "commercial purposes" exception narrowly, thus demonstrating the difficulties associated with executing arbitral awards and court judgments against state-owned property. The Claimant's inability to proceed with execution in this case therefore highlights the importance of including a well-drafted waiver of state immunity in contracts which involve state parties to ensure that a clear written waiver for execution against State property is included, removing the need to rely upon the "commercial purposes" exception.
For further information, please contact Andrew Cannon, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.