Third party intervention in investment arbitration: Tribunal admits NGO submissions in Gabriel Resources’ claim against Romania concerning mining project

The Tribunal in Gabriel Resources v Romania recently issued an order (the Order) in response to an application (the Application) made by three Romanian NGOs, as non-disputing parties, for participation and an amicus submission (the Submission) in an ICSID arbitration under the Canada-Romania BIT (the BIT). Gabriel Resources’ allegations of breach of the BIT arise in relation to a proposed open pit mining development in Roşia Montană, Romania (the Project) which was not implemented.

The Tribunal granted the Application in part, admitting only certain sections of the Submission to the extent that they referred to factual issues within the specific knowledge of the Applicants and in relation to the interests which the Applicants claim to be protected.  However, the Tribunal denied admission to arguments on the law, as well as references to or reliance on testimonies which could not be tested by cross-examination. The Tribunal also rejected the NGOs’ request to attend and participate in the oral hearing.

The Tribunal’s analysis of the conditions relevant to an application by non-disputing parties – and its approach of considering each section of the Submission in relation to those conditions (rather than the Submission as a whole) – provides a significant contribution to jurisprudence in this area. The application in Gabriel Resources is also consistent with a general increase in such third party interventions, particularly in disputes which touch on issues of public interest, such as environmental protection, public health measures, labour standards, cultural rights and/or human rights.  Such a trend is likely to continue with civil society becoming more active in this context.

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Advocate General finds that CETA’s “Investment Court System” is compatible with EU law

One of the Advocates General to the Court of Justice of the European Union, Advocate General Bot, has issued an opinion confirming that the mechanism for the settlement of disputes between investors and states provided for in the Comprehensive Economic and Trade Agreement  between the EU and Canada (the CETA) is compatible with European Union law.

We discuss the content of the Advocate General’s opinion on our new blog piece, published on our Public International Law blog here.

For further information please contact Andrew Cannon, Partner, Hannah Ambrose, Senior Associate, Vanessa Naish, Professional Support Consultant, Rebecca Warder, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
Partner
+44 20 7466 2852
Hannah Ambrose
Hannah Ambrose
Senior Associate
+44 20 7466 7585
Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112
Rebecca Warder
Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418

Swiss Federal Tribunal refuses to set aside the Deutsche Telekom v India Award

We previously reported here that a Geneva-seated UNCITRAL tribunal (the “Tribunal“) constituted under the India-Germany Bilateral Investment Treaty dated 10 July 1995 (the “India-Germany BIT”) found India in breach of its treaty obligations in relation to its cancellation of a spectrum allocation contract[1] (the “Contract“) in an interim award dated 13 December 2017 (the “Award“).

The Contract was entered into in 2005 between Devas Multimedia Private Limited (“Devas“), an Indian company and Antrix Corporation Limited (“Antrix“), an Indian state-owned satellite company, wherein Devas agreed to pay a fee in return for the lease of the S-band electromagnetic spectrum provided by two orbiting Indian satellites. In the arbitration before the Tribunal, the Claimant, Deutsche Telekom AG (“DT“) (which indirectly held a 20% stake in Devas via a Singaporean subsidiary) alleged a breach of the fair and equitable treatment standard under the India-Germany BIT.

In the Award, the Tribunal dealt with issues of jurisdiction and liability (leaving aside issues of quantum for a later award), and held that it possessed jurisdiction to hear the dispute and that India had indeed violated the standard of fair and equitable treatment under the India-Germany BIT.

India sought to challenge the Award in the Swiss Federal Tribunal (“Federal Tribunal“), being the court of supervision of the arbitration. In a decision last month, the First Civil Law Court of the Federal Tribunal rejected India’s application for the annulment of the Award by a 3:2 majority in a judgment dated 11 December 2018 (available here (in French)).

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Indian Government launches international research project on the impact of Bilateral Investment Treaties on investment flows from/to the country

India entered into its first bilateral investment treaty (BIT), with the United Kingdom, in 1994, as part of a strategy to attract inbound foreign direct investment (FDI).  Having begun to open its economy in the 1990s, India today is a major investment destination.  The Modi government has been keen to attract further investment, including with its “Make in India” campaign.

However, in recent years, a variety of events has led to India being the recipient of a large number of claims by investors under BITs. By 2016, India was one of the most frequently-named respondent states in BIT proceedings.  Following its first loss in a BIT arbitration in 2011 (the White Industries case, discussed here.  Note: India has recently won its first BIT case, discussed here), the stance of the Indian government towards BIT protections for inbound investors appeared to harden, leading it to send notices in 2016 to terminate BITs with 58 countries, including 22 EU countries (discussed here).  This followed its publication of a new 2015 Model BIT (discussed here).  For the remaining BITs not cancelled in 2016/2017 (seemingly because they were within their initial terms), India has circulated a proposed joint interpretative statement to the counterparties to these BITs seeking to align the ongoing treaties with its 2015 Model BIT.

There are no known instances of states agreeing to a new treaty based on India’s 2015 Model BIT, although it was reported last year that the Indian government had approved a joint interpretative note to apply to India’s BIT with Bangladesh

In the meantime, the Indian government, through the Centre for Trade and Investment Law (CTIL), a think-tank established in 2016 by the Ministry of Commerce and Industry, in collaboration with Dr. Rishab Gupta, Partner, of Shardul Amarchand Mangaldas & Co., has instituted a survey on experiences and attitudes towards BIT protections, and their importance to FDI flows into and out of India.  This outbound element is an important aspect of the analysis as Indian businesses are increasingly involved in FDI outside India, and may wish to take advantage of BIT protections over their investments.

A link to the survey can be found below, which we understand will remain active until the end of October 2018. The survey contains 10-12 questions which vary depending on the initial answers regarding the location and type of entity responding.

http://survey.sogosurvey.com/r/r1ocQs

The outcome of the questionnaire together with the rest of the study results are scheduled to be publicly released by the end of 2018. All stakeholders with experience of or insight into the BIT regime applicable to India are encouraged to participate.

For further information, please contact Nicholas Peacock, Head of the India Disputes Practice, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803

Recent Developments in India-related International Arbitration

Herbert Smith Freehills has issued the latest edition of its Indian international arbitration e-bulletin.

In this issue we consider various court decisions, which cover issues such as the applicability of the Arbitration Amendment Act 2015, binding non-signatories to an award, enforcement of an award before the National Company Law Tribunal, and the continued pro-arbitration approach of the Indian courts. In other news, we consider the continued rise of institutional arbitration in India, a detailed analysis of the proposed amendments to the Arbitration Act, as well as India-related bilateral investment treaty news (and other developments).

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Tribunal awards India first BIT case win, dismissing claims of French investor

An UNCITRAL arbitral tribunal has reportedly dismissed a US$36 million claim by a French investor, Louis Dreyfus Armateurs SAS (“LDA“), against India under the 1997 France-India bilateral investment treaty (“BIT“). The award is not public at this time, but press reports state that LDA has also been ordered to pay approximately US$7 million in respect of India’s substantial legal expenses.

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English Court rejects Ukraine’s attempt to set aside enforcement order on grounds of state immunity

The English Court (the “Court“) has dismissed an application by Ukraine to set aside a court order permitting Russian investor, PAO Tatneft, to enforce an arbitral award against Ukraine.  Ukraine argued that it was immune from the Court’s jurisdiction by virtue of the State Immunity Act 1978. The Court found that Ukraine had not waived its right to rely on state immunity arguments, despite not having raising them in the arbitration. However, it found that Ukraine had agreed to submit the disputes in question to arbitration under the Russia-Ukraine Bilateral Investment Treaty (the “BIT“) and was therefore not immune from proceedings in connection with the arbitration by virtue of s9(1) of the State Immunity Act 1978 (“SIA“).

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Delhi High Court refuses to grant injunction restraining Vodafone’s second BIT arbitration against India

In a decision dated 7 May 2018, the Delhi High Court dismissed the Government of India’s application to declare Vodafone’s second BIT arbitration proceedings in relation to the retrospective tax liability imposed on Vodafone’s 2007 acquisition of Hutchison Whampoa’s Indian operations an abuse of process, and in so doing declined to grant a permanent injunction restraining Vodafone from continuing those arbitration proceedings. The Court granted liberty to India to bring the issue before the Tribunal in those second proceedings (under the India-UK Bilateral Investment Protection Agreement) for that Tribunal to decide on the alleged abuse of process on its own merits.

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The new draft Dutch BIT: what does it mean for investor mailbox companies?

The Netherlands has released a new draft investment treaty for public comment (“Draft BIT“).  If adopted, the Draft BIT may raise questions about the Kingdom’s attractiveness for foreign investors who have long taken advantage of Dutch treaty protections by structuring their investment via companies in the Netherlands.  The Netherlands proposes to use the new model as a basis for renegotiating its existing BITs with non-EU states, and, as such, the new draft’s more restrictive provisions may be significant for existing investors with protection under existing BITs, as well as those considering future investments. Key features of the Draft BIT are considered below.

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Progress towards a Multilateral Investment Court? EU-momentum building and divisions in UNCITRAL Working Group III

In the past few years, discontent about Investor-State Dispute Settlement (ISDS, a recognised shorthand for ad hoc arbitration of investor-state disputes) has been fomenting in various parts of the world but nowhere more so than within the EU. The European Commission’s focus on ISDS has been so intense that far-reaching reform has been portrayed by many as inevitable. The Commission’s proposal is for the development of a multilateral investment court system (MIC). The proposal is ambitious, but may not be realistic or achievable. Last year, the ISDS debate moved into the auspices of UNCITRAL Working Group III (WGIII). It is recognised in the report of the 35th session of WGIII[1] that this “constitute[s] a unique opportunity to make meaningful reforms in the field”. Certainly the involvement of high level government representatives from across the world and the transparent nature of WGIII’s process suggest this forum provides the conditions for systemic reform. However, the features of the WG III process expose the Commission’s plans to global scrutiny at a relatively early stage in their development, potentially before the Commission has managed to gain significant support for wholesale change. One of the EU delegation, in its capacity as an observer, noted in the 34th session[2] that the EU was “confident that UNCITRAL is a forum where a solution can be found” even where the delegates start from different positions. The question will be whether the conclusion of the deliberations will lead to the reform that the Commission wants.

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