International Court of Justice allows Iran claim to proceed to the merits phase but upholds jurisdictional objection on sovereign immunity

On 13 February 2019, the International Court of Justice dismissed one of the United States’ jurisdictional objections to a claim by Iran, upheld another and deferred a final jurisdictional objection to the merits phase in the case concerning Certain Iranian Assets (Iran v United States). The substantive claim, brought by Iran against the United States, relates to legislative and executive acts by the latter permitting enforcement against Iranian assets.

Iran filed its application instituting proceedings on 14 June 2016 under the 1955 Treaty of Amity, Economic Relations, and Consular Rights between the United States of America and Iran (a “Party” or the “Parties“) (the “Treaty“), from which the United States has since indicated it will withdraw. This is one of two cases currently pending before the Court between Iran and the United States.

The Judgment on Preliminary Objections (the “Judgment“) is available on the Court’s website, and can be accessed here. Our previous post concerning Iran’s application instituting proceedings in the same case is available here.

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NAFTA tribunal considers issues of res judicata and the customary international law minimum standard of treatment

In Apotex Holdings Inc. and Apotex Inc. v United States of America, (ICSID Case No. ARB(AF)/12/1), a NAFTA chapter eleven tribunal considered issues of res judicata and the customary international law minimum standard of treatment.

In a case notable for its discussion of res judicata and the customary international law minimum standard of treatment, a NAFTA Chapter Eleven tribunal has allowed jurisdictional objections over a significant part of the alleged claims. With respect to the claimants’ remaining claims, the tribunal concluded, on the merits, that the US had not breached any of its commitments under international law.

The tribunal analysed international jurisprudence on res judicata in detail, applying a flexible approach to the question of when claims will be precluded by a prior decision. Following previous NAFTA awards, the award explored the complex relationship between the customary international law minimum standard and the guarantee of fair and equitable treatment and full protection and security contained in NAFTA Article 1105(1).

It did so in the context of the claimants’ novel claims about the status of due process among the protections required by the customary international law minimum standard of treatment. However, the tribunal left for a future tribunal to decide whether NAFTA’s guarantee of most-favoured-nation (MFN) treatment can be used to expand the substantive protections under Article 1105 – a critical topic, in the light of all NAFTA states’ unanimous opposition to that interpretation. (Apotex Holdings Inc. and Apotex Inc. v United States of America, (ICSID Case No. ARB(AF)/12/1).)

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Recent developments in US legislation on modern slavery

The recent introduction of the Federal Business Supply Chain Transparency on Trafficking and Slavery Bill (H.R. 4842) on 11 June 2014 (the “Bill”) is the U.S. government’s latest initiative in developing its approach towards human rights protections in business. The Bill builds on the California Business Supply Chain Transparency on Trafficking and Slavery Act, which came into force in January 2012 and only applies to retailers and manufacturers doing business in California. Under the Bill, all companies with worldwide annual gross receipts exceeding $100 million, and which are currently required to file annual reports with the Securities and Exchange Commission, are to disclose what measures, if any, they have taken to identify and address conditions of forced labour, slavery, human trafficking and the worst forms of child labour[1] within their supply chains,[2] whether within the US or abroad. These reporting obligations are designed to encourage the adoption of internal policies and processes by exposing businesses to scrutiny. They also incentivise businesses by empowering consumer groups with greater information on companies’ human rights behaviour. In addition to complementing existing US legislation prohibiting human trafficking and forced labour in relation to federal procurement contracts, the Bill is consistent with other initiatives around the world to curb forced labour.

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US issues new Ukraine-related sanctions and additional guidance

Herbert Smith Freehills has published the latest issue of its Corporate Crime e-bulletin. This edition covers the new sanctions designations issued by the US Office of Foreign Assets Control (OFAC) in response to the situation in Ukraine, as well as OFAC’s additional guidance regarding the scope of US Ukraine related sanctions.

For further information, please contact Scott Balber, Partner, Susannah Cogman, Partner, Jonathan Cross, Counsel, or your usual Herbert Smith Freehills contact.

Scott Balber
Scott Balber
Partner, US head of investigations and financial services litigation
+1 917 542 7810
Susannah Cogman
Susannah Cogman
Partner
+44 20 7466 2580
Jonathan Cross
Jonathan Cross
Counsel
+1 917 542 7824

Europe consults on investment protection and ISDS in the TTIP

The European Commission has launched a public consultation on its proposed approach to investment protection and investor-state dispute settlement (ISDS) provisions in the Transatlantic Trade and Investment Partnership (the TTIP).  The TTIP is a free trade agreement currently in negotiation between the United States and the European Union. Negotiations for the TTIP began in July 2013.

The Commission has described its approach as containing “a series of innovative elements that the EU proposes using as the basis for the TTIP negotiations” and stated that the key issue on which it is consulting is “whether the EU’s proposed approach for TTIP achieves the right balance between protecting investors and safeguarding the EU’s right and ability to regulate in the public interest”.

Whilst the EU is not consulting on a draft text of the TTIP, it has included as a reference text the investment protection and ISDS provisions in the Comprehensive Economic and Trade Agreement (the CETA), between the EU and Canada.

Whilst we are currently a long way from a signed agreement including investment protection and ISDS provisions, stakeholders may nonetheless want to take this opportunity to consider the ways in which the EU’s approach and the negotiations could impact upon them.  The European Commission’s Consultation can be found here and closes on 6 July 2014.

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Ecuadorian Bill for the Enforcement of Awards and Judgments: will recent developments give the bill further impetus?

The Bill for the Enforcement of Awards and Judgments was introduced into the National Assembly of Ecuador in December 2013, against the backdrop of the ongoing dispute between Chevron and Ecuador which is playing out in a number of fora. Recent developments in this matter, as well as the US Supreme Court’s decision in the case of BG v Argentina, in which Ecuador had submitted an amicus curiae brief in support of Argentina, may give Ecuador further will to bring the Bill into law.

The Bill seeks to amend various pieces of legislation, including Ecuador’s Arbitration Law (the “Ley de Arbitraje y Mediación”), with the objective of strengthening the mechanisms of protection of public resources and services. The Bill attempts to achieve its purpose by two broad means, firstly, by amending provisions relating to the enforcement of foreign awards and other measures issued by arbitral tribunals and secondly, by amending laws to bolster the protection given to State assets and resources.

According to the Explanatory Memorandum of the Bill, existing mechanisms have proven insufficient to preserve the integrity of public resources from “illegitimate” enforcements, attachments and other measures taken against State property in the satisfaction of judgments and arbitral awards against the State, an experience expressly stated as one similarly shared by Ecuador’s sister republics, and specifically, the Republic of Argentina. The Explanatory Memorandum also highlights the need for the creation of rules to regulate the performance and compliance of the Ecuadorian State with rulings adverse to its interests.

Whilst Ecuador has signed the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, if passed into law, the Bill will have the effect of making enforcement of foreign awards more onerous and enforcement against state assets more difficult.

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Ukraine – EU imposes asset freeze and travel ban on 21 Russian individuals; US introduces additional Executive Order and imposes asset freeze and visa ban on 11 Ukrainian and Russian individuals

Herbert Smith Freehills has published its latest Sanctions Update e-bulletin, on the imposition targeted sanctions by the EU and US in response to the recent Crimea referendum.

On 17 March 2014, the EU introduced an asset freeze and travel ban applying to 21 Russian individuals. On the same day, the US introduced a second Executive Order, allowing it to sanction Russian individuals and released a list of 11 Russian and Ukrainian individuals subject to an asset freeze and visa ban under its Executive Orders.

For further information, please contact Rod Fletcher, Partner, Susannah Cogman, Partner, Daniel Hudson, Partner, or your usual Herbert Smith Freehills contact.

Rod Fletcher
Rod Fletcher
Partner
+44 20 7466 2411
Susannah Cogman
Susannah Cogman
Partner
+44 20 7466 2580
Daniel Hudson
Daniel Hudson
Partner
+44 20 7466 2470

Ukraine – EU imposes asset freeze on members of former government and issues a statement in relation to Russia; US introduces Executive Order permitting the blocking of assets

Herbert Smith Freehills has issued its latest Sanctions Update e-bulletin, concerning the EU and US response to recent events in Ukraine.

On 5 March 2014, the EU introduced an asset freeze applying to former President Yanukovych and other former government officials and persons associated with the former government. The UK has introduced domestic legislation criminalising breaches of this asset freeze. The EU also held an emergency Heads of State meeting on 6 March. The conclusions from that meeting indicate that there is a possibility of EU sanctions being imposed on Russia in the absence of negotiations between Russia and Ukraine which produce results within a limited timeframe. Also on 6 March the US introduced an Executive Order which would permit the imposition of an asset freeze and visa bans although no companies or individuals have yet been designated.

For further information, please contact Rod Fletcher, Partner, Susannah Cogman, Partner, Daniel Hudson, Partner, or your usual Herbert Smith Freehills contact.

Rod Fletcher
Rod Fletcher
Partner
+44 20 7466 2411
Susannah Cogman
Susannah Cogman
Partner
+44 20 7466 2580
Daniel Hudson
Daniel Hudson
Partner
+44 20 7466 2470

The US Supreme Court decides BG v Argentina – right place, wrong road?

In a 7-2 majority decision on 5 March 2014, the United States Supreme Court has reinstated BG Group (BG)’s US$185 million arbitral award against Argentina.[1] The Supreme Court sought to clarify the delineation between “procedural” and “substantive” arbitrability issues in relation to pre-conditions to arbitrate. The Supreme Court found that a litigation pre-condition to arbitrate was procedural in nature, and that issues of arbitrability arising out of such a pre-condition were, therefore, for the arbitrators, not the courts, to decide. Although Article 8 of the Argentina-UK bilateral investment treaty (BIT) was a dispute resolution provision in a treaty between two sovereign nations, both the majority and the dissenters on the Supreme Court limited their analyses to principles of US commercial contracts law. All justices appeared to have found a common ground in their deliberate disregard of the rules of treaty interpretation under international law. In this respect, the decision of the District Court of Columbia that originally confirmed the award remains the only instance in the BG v Argentina US court saga that recognised the relevance of international law, and of its rules of interpretation under the Vienna Convention, in the context of treaty arbitration.

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Cert petition in the BG v Argentina case: No support from the US Solicitor General

In the latest development in Argentina’s challenge of the BG Group v Argentina arbitral award, the United States Solicitor General (“SG“) has argued that the United States Supreme Court should deny BG Group’s petition for a writ of certiorari (the application to the US Supreme Court for an appeal of the US District Court’s decision) (the “Petition“).

In the SG’s opinion, (1) the decision of the US Court of Appeals for the District of Columbia Circuit, reported at 665 F.3d 1363, had had been correct in ascertaining that it rather than the arbitral tribunal had jurisdiction to determine the gateway issue with regard to the 18 month litigation precondition in the UK-Argentina BIT; (2) the D.C. Circuit applied settled principles in determining a question of arbitrability by reference to the intent of the parties; (3) the decision did not conflict with decisions of other United States courts of appeals because all prior decisions were fact-specific; (4) the vacatur of the BG Group award was unlikely to have implications beyond the unusual circumstances of this case; and (5) because no modern treaty to which the United States is a party includes litigation as a precondition to arbitration, the D.C. Circuit decision did not implicate the interests of the United States. As a result, the SG considers that no further review by the US Supreme Court was warranted in this case.

In urging the Supreme Court to deny the Petition, the SG disregards the long-established distinction between “admissibility” and “jurisdiction” in international law, the long-established distinction between procedural and substantive admissibility in U.S. jurisprudence, and the threat that the D.C. Circuit decision poses both to treaty and commercial arbitration in the United States. The SG’s brief is truly a disappointment to arbitration practitioners, perhaps even more disappointing than the D.C. Circuit’s decision.

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