4th EFILA Annual Conference 2019: The EU and the future of international investment law and arbitration – 31 January 2019, London

The European Federation for Investment Law and Arbitration (EFILA) will be holding its fourth Annual Conference, on 31 January 2019, at Herbert Smith Freehills’ offices in London. The conference will focus on four topics:

  1. the EU’s external investment policy;
  2. the EU’s investment policy towards Asia;
  3. constructing a multilateral investment court: the path ahead; and
  4. the EU’s Energy investment policy.

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ICSID Tribunal declines jurisdiction due to claimants’ failure to obtain environmental impact assessment in breach of local law

In a recent investment arbitration Award, in Cortec Mining v Kenya, an ICSID tribunal has declined jurisdiction over a claim brought by a trio of mining companies on the basis that the mining licences at issue had not been obtained lawfully due to the Claimants’ failure to obtain the required environmental impact assessments.

In its award of 22 October 2018, the tribunal held that the withdrawal of the Claimants’ mining licence by the Kenyan Government could not be challenged under the 1999 UK-Kenya bilateral investment treaty (“BIT“), as the relevant mining licence had not been obtained lawfully. Despite the fact that the BIT contained no express requirement of compliance with local law, the tribunal nevertheless held that the BIT and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1966 (the “ICSID Convention“) protect only lawful investments. The tribunal affirmed that a principle of proportionality should apply when assessing the impact of unlawful conduct on the right to bring a BIT claim, with minor omissions or inadvertent misstatements not precluding the BIT from applying. However, in this case, environmental considerations were of fundamental importance and non-compliance with the protective regulatory framework was a “serious matter” justifying the tribunal in declining jurisdiction.

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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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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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Upheaval and uncertainty in mineral regulation in parts of Africa: resurgence of resource nationalism highlights the importance of investment treaty protections

The last few months have seen significant changes to mining regulations in various African states, giving rise to a concern that a regional trend of resource nationalism may be (re-)emerging. In this context it is important for companies associated with the mining sector to be aware of the protection international investment treaties may provide against the impact of resource nationalism on their assets, and how to maximise that protection before risks materialise.  This bulletin briefly considers some of the last few months’ developments, before discussing how companies can use investment treaties to protect themselves against the risks they pose.

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State-to-State dispute settlement under the EU’s draft Withdrawal Agreement: CJEU jurisdiction not arbitration

We have known for some time now that the UK and EU have very different views regarding the state-to-state dispute resolution mechanism to be contained in the Withdrawal Agreement between the EU and the UK. The EU has never made any secret of its intention for the CJEU to adjudicate on disputes between the UK and the EU over the interpretation of, and compliance with, the Withdrawal Agreement. Yesterday the EU released a draft Withdrawal Agreement for the UK’s consideration which contains a state-to-state dispute resolution provision which is consistent with that approach. This post provides an initial reaction to this draft provision.

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ITLOS rules in favour of Ghana in long-standing maritime dispute with Côte d’Ivoire

On 23 September 2017, a Special Chamber of the International Tribunal for the Law of the Sea (ITLOS) delivered its judgment on the longstanding maritime boundary dispute between Ghana and Côte d’Ivoire.

The Special Chamber reconfirmed the relevance of the equidistance methodology in determining the maritime boundary between the two States. The judgment also touches on important issues affecting States and international companies operating in disputed waters such as the applicable obligations pending resolution of such disputes.
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The European Court of Justice renders its opinion on the EU-Singapore free trade agreement: investment chapter is not within EU’s exclusive competence

On 16 May, 2017 the European Court of Justice (the Court) rendered its Opinion on the competence of the European Union to conclude the Free Trade Agreement (FTA) with Singapore. The Opinion recognises exclusive EU competence over most of the agreement and largely settles a long-standing dispute between the Commission and the Member States on the division of competences under the Lisbon Treaty.

Importantly, in the context of investor-state dispute resolution, the Court's Opinion is likely to render any agreement including protection for non-direct foreign investments or investor-state dispute settlement (ISDS) provisions a so-called "mixed agreement" which requires each of the Member States as well as the EU itself to become party, unless certain aspects commonly found in such agreements are removed or the Member States otherwise agree (discussed further below).  

The Opinion will have a major impact on the negotiation of future EU trade agreements, whether pending or anticipated (including the potential FTA between the UK and the EU following Brexit).

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ICSID announces sixteen topics for consideration in its review of the ICSID Arbitration Rules

Following invitations to ICSID member States and the public to submit topics for potential review, ICSID has published a paper on the Rules Amendment Process. The paper lists sixteen topics which are to be canvassed in the next stage of the review. The topics include areas of arbitral practice which have been subject to much broader discussion – such as the disclosure of third party funding (a point picked up in the SIAC Investment Arbitration Rules which took effect earlier this year), and the possible introduction of a code of conduct for arbitrators. Also included for review are aspects of the procedure, such as consolidation, the annulment mechanism, the preliminary objections process and the possible publication of decisions and orders. Further, ICSID will consider security for costs and allocation of costs.

Each of the sixteen topics will be addressed by ICSID in background papers to be published in early 2018.  The goal of the amendments is to (i) incorporate lessons learnt from case law; (ii) to make the process increasingly time and cost effective whilst maintaining due process and a balance between investors and States, and (iii) make the procedure less paper-intensive.

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Herbert Smith Freehills’ Response to EU Consultation: the Future of Investor-State Dispute Settlement

As discussed in our blog post here, on 21 December 2016 the EU Commission launched a public consultation on the multilateral reform of the investment dispute settlement system. The consultation closed on 15 March 2017 with a full report of the responses anticipated later this year. Herbert Smith Freehills has submitted a position paper to the Commission in response to the consultation.

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