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.
In its recent judgment in Progas Energy Limited and ors v Pakistan , the English High Court (the Court) granted Pakistan’s request for security for their costs in defending a challenge to an investment treaty award. The Court declined Pakistan’s application for security for its unpaid costs in the arbitration awarded to them by the tribunal. The case is of particular interest because the Court considered the relevance to the applications of the fact that the Claimants were funded by a third-party funder.
The EU Commission (the Commission) has launched a public consultation on the multilateral reform of the investment dispute settlement system. The survey is found here and responses are due by 15 March 2017. The consultation is the next step in furtherance of the Commission's objective to develop a multilateral system for the resolution of international investment disputes and, amongst other things, seeks to explore views on its proposal to develop a permanent multilateral investment court system.
The development of the Commission's position over the last couple of years and the Commission's introduction to the consultation both suggest a determination to pursue wholesale change to the system of resolution of investor-state disputes, rather than a more nuanced approach in evaluating the perceived flaws in the current system under which investor-state disputes are largely resolved by ad hoc arbitration (often under the auspices of ICSID, part of the World Bank). However, notwithstanding its clearly stated objective, the Commission's survey also countenances in the alternative the establishment of a Multilateral Appeal Tribunal which would consider appeals from the decisions of ad hoc investment arbitration tribunals established under the current system.
The responses to the consultation will be significant in terms of the future of the Commission's objective to establish a Multilateral Investment Court. In particular, it will be crucial that a constructive and positive response is received from the third party states who are asked to partner with the Commission in developing the Multilateral Investment Court system. However, it remains to be seen whether the survey will elucidate clear responses which will assist the Commission in considering further its proposals for the future of investor-state dispute settlement: the majority of the survey questions treat as interchangeable the two different approaches (the establishment of a Multilateral Investment Court system and the establishment of a Multilateral Appeal Tribunal) and the survey does not seek responses on the development of a Multilateral Appeal Tribunal alongside reform of the current system of ad hoc arbitration. It is not clear whether this option continues to be considered by the Commission.
The issues and controversies surrounding the resolution of investor-state disputes are complex and any changes to the system pursued by the Commission would ideally be based on clearly expressed views from a range of stakeholders. It is to be hoped therefore that respondents to the survey take the opportunity offered by the Commission to clarify their responses by way of uploading a position paper.
With unprecedented growth in foreign direct investment, issues concerning substantive investment protection and the way in which investor-state disputes are resolved both now and in the future are significant for both states and investors. If you would like to discuss these issues or the Commission's consultation, please contact: Larry Shore, Partner, Dominic Roughton, Partner, Christian Leathley, Partner, Andrew Cannon, Partner, Iain Maxwell, Of Counsel, Vanessa Naish, Professional Support Consultant, Hannah Ambrose, Professional Support Consultant or your usual Herbert Smith Freehills contact.
In its decision of 3 March 2016 (I ZB 2/15), published on 11 May 2016, the German Federal Court of Justice ("BGH") announced that it would request the Court of Justice of the European Union ("CJEU") to make a preliminary ruling on the validity of arbitration agreements concluded under intra-EU bilateral investment treaties pursuant to Art. 267 TFEU. While this decision takes the underlying investor state dispute to yet another level, the BGH's request for preliminary ruling by the CJEU bears the potential of becoming a turning point in the history of investor state dispute settlement in that it forces the CJEU to rule on the relationship between EU law and international investment law.
In this video post in the “Observations on Arbitration” series, Christian Leathley provides an Introduction to the Fair and Equitable Treatment (FET) Standard in investment arbitration. Christian discusses the circumstances in which the FET standard has been applied, and the key elements of the FET standard, as developed by tribunals in investment arbitrations.
The video posts can be downloaded to your computer for offline viewing.
After a lengthy final period of negotiation in Atlanta, it has been announced that the TPP, the world’s largest mega-regional trade and investment deal, has been agreed. The investment chapter is not yet available but is briefly summarised on USTR’s website here. As anticipated, the TPP includes substantive investment protections found in many investment agreements, and the suggestion from available information is that the formulation of those provisions replicates much of what is found in the US Model BIT 2012. For example, (and in contrast to other recently negotiated free trade agreements such as the CETA and EU-Singapore FTA), investors are granted a minimum standard of treatment in accordance with customary international law. This does not come as much of a surprise – as reported in our earlier blog post here, the leaked investment chapter of the TPP contained many of the features of the US Model BIT 2012, although some differences too.
Herbert Smith Freehills is pleased to announce that Christian Leathley, partner in the International Arbitration and Public International Law groups, has moved to the firm’s New York office.
Christian is both English and New York qualified. His practice centres on arbitration of investment disputes, including under investment treaties and other international agreements. Christian is currently representing the Kingdom of Spain in claims brought against it under the Energy Charter Treaty, and the Republic of Costa Rica in claims against it under the DR-CAFTA. Christian will continue to work with the firm’s strong network of investment arbitration specialists, who provide a seamless service to clients advising on investment protection issues and investment disputes.
Christian’s practice also encompasses international commercial arbitration. He has advised clients on commercial disputes in the energy, mining and infrastructure sectors, and his current matters include advising a major mining company in Chile, a Colombian oil company in a series of disputes that touch on business and human rights allegations, and a UK publicly listed oil company in proceedings in Argentina and Brazil, among others.
In this video post in the "Observations on Arbitration" series, Christian Leathley provides an Introduction to Investment Arbitration, discussing the ways in which an investment arbitration can arise, explaining what bilateral investment treaties (BITs) are and outlining the nature of the obligations owed by a state to an investor under such agreements. Continue reading
As the US Senate is poised to pass legislation granting President Obama the trade promotion authority which will facilitate the passing of the Trans-Pacific Partnership Agreement (TPP), the future of the most controversial parts of the TPP and many other recent trade agreements – investment protection and investor-state dispute settlement (or ISDS) – remains uncertain.
In our 23 June 2015 webinar, “The changing landscape of Investment Treaty arbitration”, four of our Investment Treaty arbitration specialists looked at the ongoing debate surrounding investment protection and ISDS, focusing on the TTIP and TPP and the current approaches being adopted in their negotiation. They considered what the future looks like for ISDS if these two treaties form a “blueprint” for the future of investment protection. The webinar also provides an update on recent developments in the sphere of investment arbitration, including the EU’s developing position on Intra-EU claims, provisional measures, arbitrator challenges and the annulment process.
To access a recording of this webinar, please contact Prudence Heidemans.
Isabelle Michou, Partner, International Arbitration, Paris (Chair)
Christian Leathley, Partner, International Arbitration, London
Andrew Cannon, Partner, International Arbitration, Paris
Iain Maxwell, Of Counsel, International Arbitration, London