On 13 February 2019, the International Court of Justice dismissed one of the United States’ jurisdictional objections to a claim by Iran, upheld another and deferred a final jurisdictional objection to the merits phase in the case concerning Certain Iranian Assets (Iran v United States). The substantive claim, brought by Iran against the United States, relates to legislative and executive acts by the latter permitting enforcement against Iranian assets.
Iran filed its application instituting proceedings on 14 June 2016 under the 1955 Treaty of Amity, Economic Relations, and Consular Rights between the United States of America and Iran (a “Party” or the “Parties“) (the “Treaty“), from which the United States has since indicated it will withdraw. This is one of two cases currently pending before the Court between Iran and the United States.
The Judgment on Preliminary Objections (the “Judgment“) is available on the Court’s website, and can be accessed here. Our previous post concerning Iran’s application instituting proceedings in the same case is available here.
Investors in some states face a real risk of reprisals after commencing investment claims. Reprisals may range from entirely legitimate (albeit unusually forceful) investigation of serious wrongdoing, which is the prerogative of a sovereign state, to the abuse of power to obtain unfair advantage in the arbitration, which is prohibited.
Consistent with the approach taken by previous tribunals, two ICSID decisions published in December 2014 show the difficulty that the investors faced in overcoming the “particularly high threshold” necessary to convince a tribunal to interfere with a criminal investigation being conducted by the host state – anything short of “concrete instances of intimidation or harassment” may not be sufficient (Churchill Mining Plc and Planet Mining Pty Ltd v. Indonesia (ICSID Case No. ARB/12/14 and 12/40; Caratube International Oil Company LLP & Mr. Devincci Salah Hourani v. Kazakhstan ICSID Case No. ARB/13/13). Despite an apparent link between the criminal investigation and arbitration in each application, provisional relief was refused.
These decisions illustrate that vigorous criminal investigations may be a legitimate state-response to an investment claim, and should be anticipated by investors prior to making a claim. The consequences of such investigations may be particularly difficult to mitigate where the investor relies on an ongoing relationship with the state to conduct its business. Investors might not be entitled to protection against such investigations by way of provisional measures, except where there is compelling evidence that the state’s conduct amounts to intimidation or harassment, or directly prevents an investor from presenting their case. In practice, as the Churchill Mining and Caratube decisions show, this evidentiary burden may be difficult for an investor to discharge and these risks would be better addressed prior to commencing arbitration. Continue reading