Live webcast of hearing on jurisdiction and the merits: David Aven et al. v. Republic of Costa Rica (UNCITRAL Case No. UNCT/ 15/3) – Public Hearing

A hearing on jurisdiction and the merits in UNCITRAL Case No. UNCT.15/3, will be transmitted live in English and Spanish via internet feed from Monday, December 5, 2016 to Monday, December 12, 2016, excluding Saturday and Sunday, from 9:00 a.m. to approximately 6:00 p.m. EST. The live streaming is being made available pursuant to Article 10.21.2 and of the Dominican Republic-Central America FTA (CAFTA-DR), and section 25.2 of the Tribunal’s Procedural Order No. 1 dated September 10, 2015.  

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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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Don’t count your chickens: tribunal refuses jurisdiction in final stages of UNCITRAL arbitration

In Ruby Roz Agricol and Kaseem Omar v Kazakhstan, UNCITRAL (Award on Jurisdiction) (1 August 2013), Ruby Roz Agricol LLP (Ruby Roz), a Kazakh company in the business of producing, breeding and marketing poultry for the Kazakh market, initiated UNCITRAL arbitration proceedings against the Republic of Kazakhstan on the basis of alleged breaches of Kazakh law and international law, amounting to expropriation of its assets.

Two alternative bases for jurisdiction were submitted – the 1994 Kazakh Law of Foreign Investment (FIL) and an investment contract (Contract), which had later been amended by the parties.

The Tribunal rejected jurisdiction under both instruments, at a late stage in proceedings. Under the FIL, Ruby Roz’s right to rely on the arbitration clause had expired.  The legislation had been repealed and the stabilisation clause, which might have protected Ruby Roz’s right to arbitrate, took effect from the date of the Contract – meaning that the stabilisation period had ended. Under the Contract, Ruby Roz was not entitled to rely on the arbitration clause because as a foreign-owned Kazakh company, it did not qualify as a “foreign investor”. 

The case is of interest to investors in Kazakhstan and clients and practitioners interested in effective arbitration case management. It highlights the advantage of identifying an arguable jurisdictional point early, and in advance of incurring significant costs in addressing issues of liability.  It also highlights the importance of ensuring an arbitration clause will survive the termination of any other applicable instrument. Continue reading

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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OIC investment treaty – investor protection in the Islamic world

One of the key considerations when looking at overseas investment, particularly in the emerging markets, is the protection that the foreign investor will have from state expropriation of the investor’s assets and from other interference in the investment.  Structuring investments to take advantage of a Bilateral Investment Treaty (BIT) is the primary way of claiming investment protection.  Please see our Middle East exchange from January 2011 which covers investor protection using BITs.

In a recent arbitral ruling in Singapore, a Saudi investor successfully argued that the state of Indonesia had a case to answer under a little known treaty – the investment treaty of the Organisation of Islamic Cooperation.

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German court confirms the protection of investors under intra-EU BITs

On 10 May 2012, the Higher Regional Court (Oberlandesgericht) in Frankfurt issued a long-awaited decision in annulment proceedings brought against a jurisdictional award that had been rendered by a tribunal in an UNCITRAL arbitration between Dutch insurer Eureko B.V. and the Slovak Republic.

The decision is important in that it confirms the possibility of European investors to initiate arbitral proceedings under the dispute resolution clauses contained in Bilateral Investment Treaties that have been concluded between EU Member States.  These are typically referred to as intra-EU BITs.  While the European Commission has taken the view that these treaties are in conflict with EU law, the Court’s decision will nonetheless come as comfort to the claimants in a number of proceedings that are presently pending under intra-EU BITs before international arbitral tribunals.

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India liable under BIT for extensive judicial delays

An UNCITRAL tribunal in Singapore has held that the Republic of India breached its obligation under the India-Kuwait bilateral investment treaty (BIT) to provide investors with an “effective means of asserting claims and enforcing rights” through undue delay in the Indian court system.  White Industries Australia Limited (White) had spent nine years attempting to enforce an ICC Award in India, but was subjected to prolonged delays.  It therefore brought a claim under the Australian–Indian BIT but successfully relied on the BIT’s “most-favoured nation” clause to take advantage of the more favourable investor protections in the India-Kuwait BIT.

The UNCITRAL award adds to the developing jurisprudence suggesting that an arbitral award may be treated as a continuation of an investment and, as such, may be subject to such protections afforded to investments by a BIT.  The jurisdictional aspect of this case is also particularly topical given the consolidated appeal in Bhatia International v. Bulk Trading that began in the Supreme Court of India on 10 January 2012, which is considered likely to limit the ability of Indian courts to intervene in arbitrations seated outside India.

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Energy Charter Treaty ruling clarifies effect of Russia’s “provisional application” accepting jurisdiction to hear Yukos’ claim

Summary and business impact

On 30 November 2009, a tribunal sitting at the Permanent Court of Arbitration in The Hague and constituted under the UNCITRAL Rules, ruled that former Yukos shareholders can proceed to the merits phase of their arbitration against the Russian government. Yukos’ expropriation claim is valued at between US$50 and US$100 billion, making it potentially the largest arbitration in history from a quantum point of view.

The claim was brought under the Energy Charter Treaty (the “ECT”), a multilateral instrument which binds over 50 state parties and provides substantial protection to investors in the energy sector, including a standing offer to arbitrate. Russia signed but did not ratify the ECT. In clarifying that Russia is bound by its “provisional application” of the treaty, the tribunal has provided a fundamental precedent for other investors in the energy sector, particularly those with interests in Russia who invested prior to Russia’s withdrawal on 19 October 2009.

Background

The facts of the case will be familiar to many. In 2004, Yukos, Russia’s then largest oil company, and its main shareholder, Mikhail Khodorkovsky, were accused of tax evasion and ordered to pay tens of billions of dollars in back-taxes. In December of that year, the Russian Government ordered the sale of Yukos’ main production unit, Yuganskneftegas, at auction and it was sold, allegedly at an undervalue, to state-controlled oil company Rosneft. Yukos finally went bankrupt in 2007.

It is a well established principle of public international law that states shall not expropriate foreign investments, save where such expropriation is effected for a public purpose, in a non-discriminatory manner, and, crucially, is accompanied by the payment of prompt, adequate and effective compensation.

In 2008, the former shareholders of Yukos, (GML Limited – the Gibraltar-registered vehicle formerly known as Menatep, Hulley Enterprises Limited, Yukos Universal Limited and Veteran Petroleum Limited, the Yukos pension fund), brought their expropriation claims against Russia under the ECT. These claims were later linked as one arbitration.

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