Following an incident last November, the International Tribunal for the Law of the Sea (“ITLOS”) has prescribed provisional measures requiring Russia to release three Ukrainian naval vessels.
The November 2018 incident and institution of arbitration
In late November 2018, the Russian coast guard arrested and detained three Ukrainian naval vessels near the Kerch Strait in the Black Sea. The 24 Ukrainian servicemen on board the vessels were also arrested and detained. The Russian authorities have since commenced criminal proceedings against the servicemen.
Ukraine subsequently instituted arbitration proceedings against Russia under Annex VII to the United Nations Convention on the Law of the Sea (the “Convention”). It alleged that Russia had breached its obligations under the Convention, notably in respect of the immunity of foreign naval vessels. These proceedings are in addition to a separate Annex VII arbitration which Ukraine commenced in 2016.
On 30 April 2019, the Court of Justice of the European Union (“CJEU“) confirmed that the mechanism for the settlement of disputes between investors and states set out in the Comprehensive Economic and Trade Agreement between the EU and Canada (“CETA“) was compatible with EU law. This confirms the Attorney General’s opinion discussed here.
The CJEU’s opinion will lend support to the EU’s effort to develop the tribunals established under trade agreements like CETA into a permanent and multilateral Investment Court System (“ICS“) in future.
The Republic of Djibouti is the latest country to become a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). Djibouti’s Minister of Economy and Finance, Ilyas Moussa Dawaleh, signed the ICSID Convention on 12 April 2019. Djibouti must now ratify the ICSID Convention in order for it to become a Contracting State (or Member State) to the ICSID Convention, and for the ICISD Convention to come into force for Djibouti.
The English High Court’s decision in State A v Party B  EWHC 799 (Comm), handed down in January 2019 but only recently published, concerned the court’s dismissal of an application to extend the time for bringing a jurisdictional challenge under section 67 of the Arbitration Act 1996 in circumstances where the challenge was 959 days late (available here).
The decision found that where the delay is lengthy and the application for an extension is based on fresh evidence, an extension will only be justified by fresh evidence that is “transformational” or “seismic“. The decision illustrates the importance that the English court places on the timeliness of challenges to awards and the high threshold that must be met in order to obtain an extension.
The Dutch Government has recently published the final version of its model Bilateral Investment Treaty (the Model BIT). The key changes since the May 2018 Draft Model BIT (discussed in our blog post here) are addressed below.
The Model BIT includes some practical guidance for investors as to how the requirement of “substantive business interests” in a Contracting Party may be fulfilled. Among the innovative provisions, it includes a potential liability on investors in their home State for significant damage, personal injury or loss of life caused in the host State and a commitment to promote equal opportunities and participation for women and men in the economy.
The Model BIT reflects a change in emphasis in modern international investment agreements. The investor protections remain but there is an undoubted rebalancing of the operation of those provisions in the context of the treaty as a whole to address what is perceived by many to be a historic investor-bias in treaty drafting. Further, the Model BIT seeks to implement policy aims through a number of provisions which require recognition of, or aspirational behaviour towards, the achievement of certain development goals by the Contracting Parties.
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.
In advance of the next meeting of UNCITRAL Working Group III (WG III) in April 2019, the European Union and its Member States have made a submission on “Establishing a standing mechanism for the settlement of international investment disputes” (the Submission), as well as a possible work plan for achieving this aim. As described in our blog post here, WG III has identified a number of concerns in relation to the resolution of investor-state disputes by ad hoc tribunals. In the Report of the 36th Session, WG III encouraged governments to submit proposals as to how the concerns about ISDS identified in the 36th Session should be addressed by way of reform.
The Submission advocates systemic structural change, proposing a two tier “standing mechanism” as “the only available option that effectively responds to all the concerns identified in the working Group” and “the only option that captures the intertwined nature of those concerns“. The features of the “standing mechanism” proposed in the Submission are unsurprising given the previously published views of the EU’s institutions, in particular the European Commission (the Commission). The rhetoric in the Submission differs from the previous articulations coming out of the EU institutions which refer overtly to an “investment court system“. However, the Commission’s news page makes clear that the “standing mechanism” described in the Submission is a “multilateral investment court“. In addition, whilst the Submission makes reference to “adjudicators” rather than judges, the characteristics of the “adjudicators” are those described in the EU’s previous papers on this topic (see here).
The Commission has historically been the flag-bearer for the EU’s reform of ISDS. In the Submission however, it is emphasised that the proposal represents the views of the EU “and its Member States“. This proposition may be tested if the proposed standing mechanism ultimately finds support: further to CJEU Opinion 2/15 on the European Union–Singapore Free Trade Agreement (FTA) on May 16, 2017, the instrument establishing a standing mechanism will need to be ratified by each of the Member States.
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.
One of the Advocates General to the Court of Justice of the European Union (“CJEU“), 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 (“EU“) law.
If the opinion is adhered to by the CJEU, it confirms the viability of the EU’s mooted Investment Court System (“ICS“) in terms of its co-existence with the EU legal order, and permits the EU to continue to pursue adoption of the ICS on a wider scale across all of the EU’s trade agreements. Continue reading
The United Nations Commission on International Trade Law (“UNCITRAL“) has been considering the possible reform of investor-state dispute settlement (“ISDS“). UNCITRAL Working Group III (“WGIII“) has been given a broad mandate to identify concerns regarding ISDS procedure, consider whether reform is desirable, and, if so, develop relevant solutions to be recommended to the main UNCITRAL body (see our previous blog post here and article (issue 5, page 38) here). While WGIII enjoys broad discretion in discharging its mandate, any solutions devised will take into account the ongoing work of relevant international organisations, and each State may decide the extent to which it chooses to adopt the proposed solutions.
In the recent 36th session of WGIII, it was agreed that reform was desirable in at least three areas: (i) inconsistency and incorrectness of arbitral rulings; (ii) concerns about arbitrators and decision-makers; and (iii) the cost and duration of ISDS. However, the precise type of reform remains to be decided. Some States (and the EU) are advocating systemic reform while others propose a more nuanced approach, fixing perceived problems within the framework of the existing system.
Whilst WGIII’s mandate is limited to the procedural aspects of ISDS, changes to the way in which investor-state disputes are resolved may affect the value investors place on the substantive protections in investment treaties as a way of mitigating risks connected with foreign investment. Continue reading