No consent to ICSID jurisdiction found under Venezuelan Investment Law: distinction drawn between the intention of the drafters and the intentions of the State

In OPIC Karimun Corporation v Venezuela, an ICSID tribunal has held that Venezuela’s Investment Law’s reference to ICSID did not, without more, provide consent to ICSID jurisdiction. Due to the ambiguous wording of the law, the tribunal looked at the intention of Venezuela and was unable to conclude that it had intended to provide consent. This was despite evidence from one of the drafters of the law that he had intended the relevant provision of the law to constitute such consent. The Tribunal drew a distinction between the intention of the drafters, and the intention of the State.

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Egypt prevails on “fork-in-the-road” provision

In an unpublished ICSID decision last month (the Decision), reported in Global Arbitration Review and Investment Arbitration Reporter, the Arab Republic of Egypt (Egypt) successfully knocked out the majority of claims brought by California-based H&H Enterprises Investments (H&H) by way of jurisdictional arguments based on the “fork-in-the-road” provision contained in the US-Egypt bilateral investment treaty (the BIT).

Fork-in-the-road provisions in BITs generally limit an investor to choosing only one of a number of agreed dispute resolution procedures. For example, if an investor submits its dispute to the local courts, then a fork-in-the-road provision would prevent the investor from also pursuing other dispute resolution procedures under the BIT, such as international arbitration. In the absence of a fork-in-the-road provision, submission of a dispute to local courts will not preclude the investor from pursuing other dispute resolution options.

It is thought that this is only the second BIT claim to be denied jurisdiction on the basis of a fork-in-the-road provision. It serves as a reminder to investors with potential contractual and international law claims to consider carefully the provisions of the relevant BIT before beginning proceedings in any forum.

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Tanzanian Courts Injunct ICSID Proceedings

On 23 April 2014, the Tanzanian High Court ordered both parties in on-going ICSID arbitration proceedings, Standard Chartered Bank (Hong Kong) Limited (SCB HK) and the Tanzania Electric Supply Company (Tanesco), to refrain from “enforcing, complying with or operationalising” a decision made by the Tribunal in those ICSID proceedings on 12 February 2014.

This injunction was granted on an ex-parte basis. It is a clear breach of the ICSID Convention and of Tanzania’s international law obligations. If it is not reversed, it will be of significant concern to other international investors in Tanzania, and will likely discourage new investment.

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Breach of fair and equitable treatment standard (ICSID)

In Ioan Micula and others v Romania (ICSID Case No. ARB/05/20), an ICSID tribunal considered whether Romania was in breach of the Sweden-Romania bilateral investment treaty.

The majority of an ICSID tribunal (Laurent Lévy and Stanimir Alexandrov) held that Romania breached the fair and equitable treatment standard in the Sweden-Romania bilateral investment treaty by repealing incentives offered regarding investments made in some of the country’s deprived regions. A different majority (Laurent Lévy and Georges Abi-Saab) dismissed the claimants’ allegation that Romania had breached the umbrella clause in the BIT due to lack of evidence. The tribunal also discussed the role of EU law within the context of investment treaty disputes.

The award is of interest as it discusses in detail the FET standard and even proffers a test in respect of the stability aspect often considered to fall within the scope of FET. The award also concludes (departing from other cases) that unilateral declarations made by a state would fall within the scope of an umbrella clause. Finally, the discussion in the award of EU issues is topical, given the number of ongoing disputes where the inter-relation between EU law and investment treaty arbitration is in issue.

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Argentina settles five outstanding investment treaty arbitration claims in historic break with its anti-enforcement stance

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).

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Pakistan Supreme Court declares a contract – and the arbitration clause within that contract – void on public policy grounds

In a decision earlier this year the Pakistan Supreme Court declared that a joint venture agreement between a local development authority and BHP for the exploration of minerals was void on a number of public policy grounds. A subsequent novation of the agreement was also found to be void. Of particular interest to readers of this blog is that this decision included a finding that the arbitration clause in the agreement was also void, notwithstanding previous overtures from the Pakistani courts that it recognises the separability of an arbitration agreement.

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Further steps given by Ecuador to terminate its bilateral investment treaty with the USA

On 6 March 2013, Ecuador’s President, Mr Rafael Correa, requested that Ecuador’s legislature (the National Assembly) approve the denunciation of the bilateral investment treaty (BIT) between the USA and Ecuador (the Treaty).  This is a further testament to the Government of Ecuador’s disaffection with the investor-state protection system implemented before Mr Correa became the country’s President in 2007.  This blog post provides general background on this development and briefly discusses the legal consequences of Ecuador denouncing the Treaty.

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President Hugo Chavez’s Legacy: What Future for Investors in Venezuela?

Overnight the Venezuelan government has confirmed the death of President Hugo Chavez after a long battle with cancer.

President Chavez had been a constant force in Latin America since he came to power in 1999, and his impact on foreign investors in Venezuela has been significant, as has been his impact on numerous other countries in the region.

A polemic figure who advocated a revolutionary style of socialism, President Chavez undertook a diverse campaign of expropriation, which affected various industry sectors.  This led to numerous investor-State arbitration claims being commenced against Venezuela, and most recently led to the country denouncing the ICSID Convention in January 2012.  The ICSID Convention establishes a unique multilateral regime which facilitates the protection of foreign investors’ international rights – not least by establishing a process for international arbitration.

Beyond Venezuela’s borders, President Chavez was a staunch supporter and pioneer of what have become known as “ALBA” states (notably Venezuela, Bolivia, Ecuador, Nicaragua and certain others).  Together, these countries have adopted a stance which seeks to establish a counter-balance to what is perceived to be the influence of capital exporting countries such as the United States and Europe.  That stance manifested itself most clearly in the denunciation of the ICSID Convention, which was first undertaken by Bolivia in 2007, and followed by Ecuador in 2009.

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Ambiente Ufficio S.p.A. and others v Argentine Republic (ICSID Case No ARB/08/9)

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.

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Tribunal navigates the procedural minefield in Abaclat v Argentina, issuing its 17th procedural order

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?

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