On July 3, 2018, Uruguay passed its International Commercial Arbitration Act after its upper house, the Chamber of Senators, signed off the draft in May. A day later, it was Argentina’s turn. These enactments mark the final step of a long awaited reform of the Argentinean and Uruguayan arbitration legislations, and finally place them on an equal footing with neighbouring states.
Two recent decisions by tribunals have advanced the body of tribunal practice considering the issue of counterclaims by respondent states in investment treaty arbitration: Burlington Resources Inc. v. Ecuador, in which the tribunal awarded damages against the investor for breach of Ecuadorian environmental law in the performance of its investment, and Urbaser SA and Consorcio de Aguas Bilbao Bizkaia v. Argentina, in which the tribunal accepted jurisdiction to hear Argentina's counterclaim asserting that the investor had violated international human rights obligations. These decisions arise in the context of conceptual challenges to the pursuit of counterclaims in investment arbitration.
In a 7-2 majority decision on 5 March 2014, the United States Supreme Court has reinstated BG Group (BG)’s US$185 million arbitral award against Argentina. The Supreme Court sought to clarify the delineation between “procedural” and “substantive” arbitrability issues in relation to pre-conditions to arbitrate. The Supreme Court found that a litigation pre-condition to arbitrate was procedural in nature, and that issues of arbitrability arising out of such a pre-condition were, therefore, for the arbitrators, not the courts, to decide. Although Article 8 of the Argentina-UK bilateral investment treaty (BIT) was a dispute resolution provision in a treaty between two sovereign nations, both the majority and the dissenters on the Supreme Court limited their analyses to principles of US commercial contracts law. All justices appeared to have found a common ground in their deliberate disregard of the rules of treaty interpretation under international law. In this respect, the decision of the District Court of Columbia that originally confirmed the award remains the only instance in the BG v Argentina US court saga that recognised the relevance of international law, and of its rules of interpretation under the Vienna Convention, in the context of treaty arbitration.
Argentina has agreed to settle five separate investment treaty arbitration claims at a cost of around USD 500 million, in an historic departure from the Latin American state’s refusal to comply with awards made by international investment treaty arbitration bodies.
It was reported in an Argentine newspaper last Thursday, and confirmed by the counsel involved, that the settlements relate to the French media conglomerate Vivendi SA, British electricity and gas utility National Grid PLC, Continental Casualty Company (a subsidiary of the American financial and insurance products provider CNA Financial Corp), the American water company Azurix, and Blue Ridge Investments, the wholly owned subsidiary of Bank of America Corp. These companies were each successful in bringing claims against Argentina through the International Centre for the Settlement of Investment Disputes (ICSID) over the past 12 years, with the exception of National Grid which brought its claim under the Rules of the United Nations Commission on International Trade Law (UNCITRAL Rules) and Blue Ridge Investments, which acquired the ICSID award from the original claimant, CMG Gas Transmission.
While the details of the settlement are not yet clear, local newspapers in Argentina report that the settlement agreement involves a reduction of 15% of the original amount of the awards (USD 677 million) and 45% of the interest accrued, leading to an overall nominal discount of 25% on the amount originally claimed. The settlement is to take the form of sovereign bonds, which is a controversial choice given that Argentina has also been subject to ICSID claims regarding the state’s default on sovereign bonds, several of which are still outstanding. The settlement agreement is also reported to commit the parties benefiting from it to reinvest 10% of the amount (USD 67 million) in the purchase of additional sovereign bonds (BAADE).
In the latest development in Argentina’s challenge of the BG Group v Argentina arbitral award, the United States Solicitor General (“SG“) has argued that the United States Supreme Court should deny BG Group’s petition for a writ of certiorari (the application to the US Supreme Court for an appeal of the US District Court’s decision) (the “Petition“).
In the SG’s opinion, (1) the decision of the US Court of Appeals for the District of Columbia Circuit, reported at 665 F.3d 1363, had had been correct in ascertaining that it rather than the arbitral tribunal had jurisdiction to determine the gateway issue with regard to the 18 month litigation precondition in the UK-Argentina BIT; (2) the D.C. Circuit applied settled principles in determining a question of arbitrability by reference to the intent of the parties; (3) the decision did not conflict with decisions of other United States courts of appeals because all prior decisions were fact-specific; (4) the vacatur of the BG Group award was unlikely to have implications beyond the unusual circumstances of this case; and (5) because no modern treaty to which the United States is a party includes litigation as a precondition to arbitration, the D.C. Circuit decision did not implicate the interests of the United States. As a result, the SG considers that no further review by the US Supreme Court was warranted in this case.
In urging the Supreme Court to deny the Petition, the SG disregards the long-established distinction between “admissibility” and “jurisdiction” in international law, the long-established distinction between procedural and substantive admissibility in U.S. jurisprudence, and the threat that the D.C. Circuit decision poses both to treaty and commercial arbitration in the United States. The SG’s brief is truly a disappointment to arbitration practitioners, perhaps even more disappointing than the D.C. Circuit’s decision.
In Ambiente Ufficio S.p.A. and others v Argentine Republic, an ICSID tribunal held that it had general jurisdiction over a multi-party claim commenced by 90 distinct Italian nationals against Argentina in respect of harm said to result from Argentina’s default and later partial restructuring of its sovereign debt. It might at first blush appear that the tribunal’s willingness to admit a 90-party claim is an affirmation of the favourable approach to so-called “mass claims” taken by its “sister tribunal” in Abaclat (and others) v The Argentine Republic. However, the number of claimants in those two cases differs markedly, and the tribunal avoided deliberating on the correctness of the Abaclat award.
On 8 February 2013, the majority of the tribunal in the famous Abaclat and Others v Argentina case issued its 17th procedural order. The first such order dates back to 2008 and this will no doubt not be the last. As is now well known, in 2011, a divided tribunal found that it had jurisdiction to deal with a mass claim brought by 60,000 Italian bondholders in relation to a sovereign debt default by Argentina in 2001 during its financial crisis. In its procedural orders, the tribunal has sought to “reconcile equal treatment of the Parties with considerations of efficiency and the right to be heard“.
This order is particularly significant in that it deals with the appointment of an expert (Dr Wühler) and the scope of his mission to review information in relation to all of the separate entities bringing the claim. As such, it paves the way for the case to proceed. There is, of course, huge pressure for the tribunal to make the case workable in the wake of so much criticism of the Decision on Jurisdiction and Admissibility (the Decision) and in light of so much speculation as to how the procedure will be managed. How will the procedure be formulated within an ICSID framework that does not, on its face, accommodate mass claims?
As reported in our earlier blog post, on 29 and 30 November 2012, the International Tribunal for the Law of the Sea (the ITLOS) heard an application by Argentina for provisional measures against Ghana under Article 290(5) of the UN Convention on the Law of the Sea (UNCLOS) regarding the detention of its naval ship, the ARA Libertad. The ARA Libertad was detained in Ghana following a successful application in the High Court in Accra by NML Capital, one of Argentina’s creditors (see our earlier blog post). Argentina commenced arbitration proceedings against Ghana under Annex VII of UNCLOS and, by way of its application for interim relief, sought an order requiring Ghana unconditionally to release the frigate.
On 15 December 2012, the ITLOS granted the requested provisional measures, ordering Ghana to release the ARA Libertad and ensure that it, its commander and crew are able to leave the maritime areas under the jurisdiction of Ghana. Ghana has complied with the ruling, and the Libertad set sail from Tema yesterday.
The full Order can be found here.
On 29 and 30 November 2012, the International Tribunal for the Law of the Sea (ITLOS) heard an application by Argentina for provisional measures against Ghana under Article 290(5) of the UN Convention on the Law of the Sea (UNCLOS). The application is regarding Ghana’s continued detention of the Argentine warship, the ARA Libertad. The ITLOS action is the latest instalment in Argentina’s long-running battle with a number of holdout bondholders who are pursuing Argentine state assets around the globe in a bid to recoup their substantial losses following Argentina’s default on US$80 billion of public debt in 2001.
The vessel was detained in the Ghanaian port of Tema on 2 October 2012 when one of Argentina’s creditors, NML Capital, successfully obtained an injunction detaining the vessel from the Ghanaian High Court in Accra. A subsequent challenge to the injunction by the Argentine government on the grounds of state immunity was unsuccessful (which we covered here). Argentina has since filed an appeal against that decision with the Ghanaian Court of Appeal, which is expected to be heard in January 2013. NML Capital is owed just under US$300 million by Argentina, and has sought to enforce judgments handed down in its favour by the US courts against Argentine state assets around the globe.
On 25 October, News agencies reported that a second Argentine navy vessel has been targeted by NML Capital, this time in South Africa. This followed the news on 11 October 2012, that the Ghanaian Commercial Court in Accra rejected a motion filed by the Argentinian government for the release of the ARA Libertad, an Argentine military training vessel. The ship had been detained in the Ghanaian port of Tema at the request of NML Capital, a subsidiary of the hedge fund Elliott Capital Management which is a creditor of the Argentine government. Elliott Capital is owed just under $300m by the Argentinian government following the country’s default on $80 billion of public debt in 2001, the largest in history. The court ruled that Argentina had waived its sovereign immunity in relation to claims by NML Capital, a topic we covered in our webinar earlier this month on sovereign immunity and enforcement against state assets.