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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