Dawood Rawat v Mauritius: Dual-national claim dismissed based on treaty context interpretation

 

On 6 April 2018, a Tribunal constituted under the UNCITRAL Arbitration Rules rendered an Award on Jurisdiction in the case Dawood Rawat v. The Republic of Mauritius (PCA Case 2016-20).  Following a thorough analysis of the interpretation of the 1973 Investment Protection Treaty between the Republic of France and Mauritius (the “France-Mauritius BIT” or the “Treaty”), the Tribunal denied protection of the relevant investment protection treaty to a dual national – a French-Mauritian businessman – despite the treaty was silent on its application to dual nationals.  This approach was contrary to prior investment treaty decisions, such as Serafín García Armas and other v Venezuela, in which tribunals have rejected jurisdictional objections brought by respondent states where relevant the bilateral investment treaty (“BIT”) was silent on the exclusion of dual nationals.

Background of the dispute

The claimant in this case is Mr Dawood Rawat, a national of Mauritius who married a French woman in 1969, acquiring French nationality in 1998. In the late 1980s, Mr Rawat acquired a shareholding stake in British American Insurance through his employment.  During the 1990s he acquired further shares in the British American Insurance group and other Mauritian businesses.

In November 2014, the Mauritian government initiated certain investigations into Mr Rawat’s businesses for money laundering. The government allegedly adopted a series of measures against his businesses which the Claimant considered were in violation of the Treaty.

The France-Mauritius BIT does not provide for investor-state arbitration for disputes arising under the Treaty. Instead, the Treaty provides in Article 9 that:

“Agreements relating to investments to be made in the territory of one of the Contracting States by nationals, companies or other legal persons of the other Contracting State, must include a clause providing that their disputes relating to these investments shall be submitted, in the event that an amicable agreement cannot be reached within a short period of time, to the International Center for the Settlement of Investment Disputes [ICSID], with a view to their settlement by arbitration, in accordance with the Convention on the Settlement of Investment Disputes between States and nationals of other States.”

Therefore, the only ‘procedural’ protection that the Treaty grants to foreign investors is that, if they enter into an investment agreement with a Contracting State, that agreement must include an ICSID arbitration clause.

For this reason, the Claimant argued that the most-favored-nation (“MFN”) clause in the Treaty covered dispute settlement.  The Claimant therefore sought to import the dispute settlement mechanism from the Agreement between the Government of the Republic of Finland and the Government of the Republic of Mauritius on the Promotion and Protection of Investments (the “Finland-Mauritius BIT”), in order to gain jurisdiction ratione voluntatis.

Against this background, the Respondent brought two jurisdictional objections: one for lack of ratione personae given that Mr Rawad was a dual national; and another for lack of ratione voluntatis alleging that Mauritius had not consented to submit any disputes under the Treaty to international arbitration. The Tribunal decided to rule on the lack of ratione personae objection first.  Having found merit in the objection – and therefore dismissed the case-, it did not rule on the Respondent’s second objection.

Application of the France-Mauritius BIT to dual nationals

Unlike other BITs, the France-Mauritius BIT does not use the term “investor” in any of its provisions. Instead, the Treaty refers to “national” or “ressortissant” in French.  In addition, the Treaty does not contain a definition of a ‘qualifying investor’.

In ruling on Respondent’s objection, the Tribunal first determined what nationalities Mr Rawat held. Its first factual findings were that (i) the Claimant became a French national long before the dispute arose, and (ii) the Claimant had been a Mauritian national since his date of birth.

The Tribunal then proceeded to consider whether the term “national” as used throughout the Treaty included or excluded dual nationals. The Claimant relied on the plain meaning of the Treaty which contained no express exclusion of dual nationals from its protection. However, the Tribunal went further than the plain meaning interpretation and referred to Article 31 of the Vienna Convention on the Laws of Treaties (“VCLT”) to interpret the France-Mauritius BIT.

Article 31(1) provides that “[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.” Under this provision, the Tribunal concluded that interpreting the ordinary meaning of the term “ressortissant” in its context and in light of the object and purpose of the France-Mauritius BIT pointed to the inclusion of dual nationals under the protection of the BIT.

However, the Tribunal also applied Article 31(2) which provides that “[t]he context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, […] its preamble and annexes.” In this regard, the Tribunal looked at the provisions of the Treaty where the term “ressortissant” was used.  As mentioned, Article 9 of the France-Mauritius BIT provides that nationals from France and Mauritius, who enter into investment contracts with a host state, shall arbitrate their disputes under the ICSID Convention.  Based on this provision, the Tribunal then referred to Article 25(2) of the ICSID Convention which – unlike the Treaty- contains a definition of “national” / “ressortissant” (in the French version).  The ICSID definition of “national of another Contracting State” expressly excludes dual nationals.  Therefore, under Article 25 of the ICSID Convention there would be no ICSID jurisdiction if a dispute arose out of an investment contract entered into by a French-Mauritius dual national (such as Mr Rawat) and a host state.

The Tribunal concluded that the explicit reference to the ICSID Convention in Article 9 of the Treaty was “part of the context in which the BIT term “ressortissant” must be interpreted” (¶ 177). The Tribunal ruled that the inclusion of the ICSID Convention in Article 9 created “a strict and conventional alignment between the notion of “ressortissant” under the ICISD Convention and under the France-Mauritius BIT” (¶ 178). Therefore, the Tribunal concluded that the mandatory reference to the ICSID Convention in Article 9 implicitly excluded dual nationals from the scope of application of the Treaty.

In addition, the Tribunal ruled that the interpretative principle of effet utile supported its conclusion.  Under this principle, the adjudicator shall discard interpretations which would render the text of a treaty or contract meaningless, when a meaningful interpretation is possible (the Tribunal cited to Cemex v Venezuela).  While the effet utile principle is not contained in the VCLT, the Tribunal concluded that it “is generally accepted to flow from the principles of interpretation of treaties in good faith as envisioned in VLCT Article 31(1)” (¶ 182). In applying this principle, the Tribunal considered that it would be meaningless to interpret “ressortissant” in Article 9 as applying to dual nationals because any arbitration clause entered into under Article 9 (providing for ICSID arbitration), would be ineffective.

Application of MFN clauses to dispute settlement provisions

Having found that personal jurisdiction was lacking, the Tribunal did not address the second jurisdictional objection relating to the applicability of the MFN clause from the France-Mauritius BIT to import the dispute settlement clause from the Finland-Mauritius BIT.  However, the Tribunal did refer to the test it would have applied when resolving this legal issue which may be of relevance and interest in future cases based on the MFN clause.  First, it would have defined “matters” / “matiéres” in each MFN clause of the relevant BITs.  Second, it would have decided whether those “matters” were of same kind in order to distinguish “matters” from “treatment of those matters” pursuant to Article 8 of each BIT.

Inconsistent decisions?

Where a BIT is silent on the applicability to dual nationals, investment tribunals have historically allowed claims to be heard. For example, in Serafín García Armas and other v Venezuela, the Tribunal (constituted under the Spain-Venezuela BIT and the UNCITRAL Rules) looked at the BITs entered into by Venezuela and Spain and assessed whether those contained an express exclusion of dual nationals, finding some of them did.  In the Tribunal’s opinion, only express exclusions in the treaty would support a finding that dual nationals cannot abide by its protections. Because the Spain-Venezuela BIT did not contain such language, the Tribunal upheld its jurisdiction to hear the Claimants’ claims.   The Court of Appeals of Paris later annulled this award but on another basis.

One view of reconciling this apparent inconsistency would be to emphasize that the particular provision of Article 9 of the France-Mauritius BIT is uncommon in most BITs, which would normally provide for investor-state arbitration as the applicable dispute resolution mechanism. In this case, the BIT was part of the ‘old generation BITs’ as it was entered into by France and Mauritius in 1973 and later ratified in 1974.

Curiously, France and Mauritius entered into a modern BIT in 2010 which in fact provides for investor-state arbitration. However, this treaty has not yet been ratified by both states.  Mauritius relied heavily on this fact to argue that this showed the Contracting Parties had not consented to investor-state arbitration, denying the Claimant the possibility to establish jurisdiction via the MFN clause.  It will be interesting to see, if in the future, tribunals adopt this view when hearing a case that requires application of the MFN clause to dispute settlement.

For further information, please contact Christian Leathley, Partner, Daniela Paez, Associate, Vanessa Naish, Professional Support Consultant or your usual Herbert Smith Freehills contact.

Christian Leathley
Christian Leathley
Partner
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+1 917 542 7812
Daniela Paez
Daniela Paez
Associate
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+1 917 542 7829
Vanessa Naish
Vanessa Naish
Professional Support Consultant
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+44 207 466 2112

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