Workshop I: Consent to ICSID Arbitration
Under Investment Laws and Treaties
Arbitration Academy
July 10, 2012
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1
Conditions for ICSID Jurisdiction
Article 25(1) of the ICSID Convention
•
•
•
•
•
Legal Dispute
Arising Directly out of an Investment
Between Contracting State
And National of another Contracting State
Consent in Writing
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2
What is a “Legal Dispute”?
• Existence or scope of a legal right or
obligation
• Cannot be a mere conflict of interest
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3
What is An “Investment”?
Significant undertaking
Duration
Risk
Regularity of profits
Contribution to the host
State’s Economy
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I will apply the
parties’
definition
4
A Contracting State
• Must have ratified the ICSID Convention
• A subdivision or agency of a Contracting State
may be a party if:
1. It has been designated to ICSID (Article 25(1))
2. The State has approved its consent to arbitration
(Article 25(3))
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5
A National of Another Contracting State
• An individual may not have host State
nationality (Article 25(2)(a))
• A company may only have host State
nationality if it is under foreign control and
the parties have agreed to treat
it as a foreign national (Article 25(2)(b))
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6
Consent is the Cornerstone of Jurisdiction
ICSID Convention Preamble:
“[N]o Contracting State shall by the mere fact of its
ratification, acceptance or approval of this
Convention and without its consent be deemed to be
under any obligation to submit any particular dispute
to conciliation or arbitration.”
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Requirements for Consent
• Must be in Writing
• Must be Clear and Explicit
• Must Exist at the time the Request for Arbitration is
submitted to ICSID
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8
Sources of Consent
• Contracts
• Investment Laws
• Bilateral Investment Treaties
• Multilateral Agreements
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Basis of Consent Invoked to Establish Jurisdiction (end of 2011)
Agreement between the United
States of America and the
Sultanate of Oman on the
Establishment of a Free Trade
Area
(Oman-U.S. FTA)
1%
Energy Charter Treaty (ECT)
4%
Treaty of Amity and Cooperation
in Southeast Asia (ASEAN)
1%
North American Free Trade
Agreement (NAFTA)
4%
Investment Law of the Host-State
6%
Investment Contract between
the Investor and the Host-State
20%
Dominican Republic-United
States-Central America Free
Trade Agreement (DR-CAFTA)
1%
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Bilateral Investment Treaty (BIT)
63%
Example of ICSID Jurisdiction
Tokios Tokelės v. Ukraine (ICSID Case No. ARB/02/18)
Legal Dispute
The dispute concerned an alleged political repression campaign by
Ukrainian authorities claimed to have breached the investment
protection provisions of the BIT
Investment
The investment was the Claimant’s subsidiary in Ukraine, a
publishing enterprise
Contracting
States
The Respondent was Ukraine
Nationality
Claimant was a Lithuanian publishing company
Consent
Consent to ICSID arbitration was contained in the Lithuania/Ukraine
BIT
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How Does an ICSID Clause in a Treaty
Become “Consent in Writing” to ICSID
Arbitration?
• State gives consent by concluding the Treaty
• The ICSID clause is seen as an “offer”
• The covered investor may “accept” the offer, often
by submitting the dispute to ICSID
• The consent in writing is perfected by the covered
investor’s acceptance
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12
Example of Consent to ICSID Arbitration –
AAPL v. Sri Lanka (First ICSID BIT Case)
Article 8 of the Sri Lanka-United Kingdom BIT
(1) Each Contracting Party hereby consents to submit to the
International Centre for the Settlement of Investment
Disputes… for settlement by conciliation or arbitration under
the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States opened for
signature at Washington on 18 March 1965 any legal disputes
arising between that Contracting Party and a national or
company of the other Contracting Party concerning an
investment of the latter in the territory of the former.
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13
Consent Through Host State Legislation
• State makes unilateral declaration by adopting national
law, e.g. Investment Law
• The ICSID clause in law is seen as an “offer”
• The covered investor may “accept” the offer, often by
submitting the dispute to ICSID
• The consent in writing is perfected by the covered
investor’s acceptance
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Example of Consent to ICSID Arbitration Investment Law of El Salvador
“In the case of disputes arising among foreign investors and the
State, regarding their investments in El Salvador, the investors
may submit the controversy to:
a) The International Centre for Settlement of Investment Disputes
(ICSID), in order to settle the dispute by conciliation and
arbitration, in accordance with the Convention on Settlement of
Investment Disputes Between States and Investors of Other
States”
(Legislative Decree No. 732, October 14, 1999, Art. 15 (Unofficial Translation))
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Not All References to ICSID Arbitration in
BITs and Investment Laws
Amount to Consent –
Each Clause Must Be Studied Individually
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Was there a Manifestation of Consent
by the State in the BIT/Investment Law?
“Nowadays, arbitration is the generally accepted
avenue for resolving disputes between investors
and states. Yet, that phenomenon does not take
away the basic prerequisite for arbitration: an
agreement of the parties to arbitrate. It is a wellestablished principle, both in domestic and
international law, that such an agreement should
be clear and unambigous.”
Plama v. Bulgaria, Decision on Jurisdiction of February 8, 2005
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17
Scope of Consent
Parties may limit the scope of consent by e.g.:
• Requirement to exhaust local remedies
• Type of disputes covered
• Investors covered
But Parties cannot expand the scope of consent
beyond the ICSID Convention requirements
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Time of Consent
Institution Rule 2(3):
“‘Date of consent’ means the date on which
the parties to the dispute consented in writing
to submit it to the Centre; if both parties did
not act on the same day, it means the date on
which the second party acted.”
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19
Consequences of Consent
• No unilateral withdrawal of consent by either
party
• No diplomatic protection
• No other remedy available – ICSID Convention
Arbitration is Exclusive
20
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Screening of the Request for Arbitration by the
Secretary-General
Was there Manifestly No Consent?
Article 36(3) of the ICSID Convention
“The Secretary-General shall register the request unless he
finds, on the basis of the information contained in the
request, that the dispute is manifestly outside the
jurisdiction of the Centre.”
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PART II: Consent to ICSID Jurisdiction:
National Investment Laws
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22
Case Study 1: Egypt Investment Law
Article 8 of Law No. 43 Concerning the Investment of Arab
and Foreign Funds and the Free Zones (1974)
Investment disputes in respect of the implementation of the
provisions of this Law shall be settled in a manner to be
agreed upon with the investor, or within the framework of the
agreements in force between the Arab Republic of Egypt and
the investor’s home country, or within the framework of the
Convention for the Settlement of Investment Disputes
between the State and nationals of other countries to which
Egypt has adhered by virtue of Law No. 90 of 1971, where it
(i.e., the Convention) applies.
23
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Case Study 1: Egypt Investment Law
Article 8 [continued]
• Disputes may be settled through arbitration. An Arbitration Board shall
be constituted, comprising a member on behalf of each disputing party
and a third member acting as chairman to be jointly named by the two
said members. Failing agreement on the nomination of the third member
within thirty days of the appointment of the second member, the
chairman shall be chosen, at the request of either party, by the Supreme
Council of Judicial Bodies from among counsellors of the judiciary in the
Arab Republic of Egypt.
• The Arbitration Board shall lay down its rules of procedure unrestricted by
the rules contained in the Civil and Commercial Code of Procedures, save
the rules which relate to the basic guarantees and principles of litigation.
The Board shall see to it that the dispute is expeditiously resolved. Awards
shall be rendered by majority vote and shall be final and binding on both
parties and enforceable as any other final judgment
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Case Study 1: Egypt Investment Law
Southern Pacific Properties (Middle East)
v.
Arab Republic of Egypt (ARB/84/3)
Decision on Jurisdiction of April 14, 1988
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25
Case Study 1: Egypt Investment Law
SPP v. Egypt
Was the provision referring to ICSID in the Investment Law
capable of constituting consent to jurisdiction?
• SPP: Article 8 “establishes a mandatory, hierarchic sequence of dispute
resolution procedures” and “if there is no applicable bilateral treaty in
force between Egypt and the investor’s State… legal disputes arising
directly out of investments must be settled by procedures specified in the
Washington Convention if the investor’s State is a party to the
Convention”
• Egypt: “Article 8 contains no language expressly consenting to the
jurisdiction of the Centre and… is nothing more than a nonlimitative list of
possible methods of dispute settlement which may be negotiated by the
investor and the Egyptian Government on a case-by-case basis”
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Case Study 1: Egypt Investment Law
SPP v. Egypt
Standard of Interpretation Applied by Tribunal
• “…the Tribunal will apply general principles of statutory
interpretation taking into consideration, where appropriate,
relevant rules of treaty interpretation and principles of
international law applicable to unilateral declarations”
• “… jurisdictional instruments are to be interpreted neither
restrictively nor expansively, but rather objectively and in
good faith, and jurisdiction will be found to exist if – but only
if – the force of the arguments militating in favor of it are
preponderant”
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Case Study 1: Egypt Investment Law
SPP v. Egypt
Interpretation of Article 8
• Ordinary grammatical meaning of the words “shall be settled” was
mandatory on its face, and it was undisputed that Arabic word from which
it was translated meant “shall be/will be”
• Intent of Law was to give advance consent to ICSID arbitration, among
other dispute settlement means, which were in an established hierarchy
of available methods from most to least specific
• No separate agreement to establish consent needed because it would
destroy the internal logic of Article 8 and “render much of that provision
superfluous”
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Case Study 1: Egypt Investment Law
SPP v. Egypt
Tribunal’s Conclusion
•
“…the Tribunal finds that Article 8 of Law No. 43 establishes a mandatory
and hierarchic sequence of dispute settlement procedures, and
constitutes an express ‘consent in writing’ to the Centre’s jurisdiction
within the meaning of Article 25(1) of the Washington Convention in
those cases where there is no other agreed-upon method of dispute
settlement and no applicable bilateral treaty.” … “[T]he Tribunal finds
that Article 8 of Law No. 43 operates to confer jurisdiction upon the
Centre with respect to the Parties’ dispute.”
•
Advance consent under Article 8 also reported to have been confirmed in
decision on jurisdiction in unpublished case Manufacturers Hanover Trust
Company v. Egypt, ICSID Case No. ARB/98/1
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29
Case Study 1: Egypt Investment Law
Article 7 of New Investment Guarantees and
Incentives Law (1997)
“The investment disputes regarding the implementation of the provisions
of this law may be settled in the manner agreed upon with the investor.
The parties concerned may also agree to settle such disputes within the
framework of the agreements in force between the Arab Republic of Egypt
and the country of the investor, or within the framework of the
Convention for the Settlement of Disputes arising from investments
between States and nationals of other countries, which the Arab Republic
of Egypt has adhered to by Law No. 90 of 1971, and pursuant to the
conditions, terms and cases where such agreements do apply, or
according to the provisions of Law No. 27 of 1994 concerning Arbitration
of Civil and Commercial Issues. It may also be agreed to settle said
disputes through arbitration before the Cairo Regional Center for
International Commercial Arbitration”
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30
Case Study 2: Venezuela Investment Law
Article 22 of Investment Promotion and
Protection Law (1999)
“Disputes arising between an international investor whose country of
origin has in effect with Venezuela a treaty or agreement on the
promotion and protection of investments, or disputes to which the
provisions of the Convention Establishing the Multilateral Investment
Guarantee Agency (OMGI-MIGA) or the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States (ICSID)
are applicable, shall be submitted to international arbitration according to
the terms of the respective treaty or agreement, if it so provides, without
prejudice to the possibility of making use, when appropriate, of the
dispute resolution means provided for under the Venezuelan legislation in
effect.”
[English translation]31
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Case Study 2: Venezuela Investment Law
Article 22 Interpreted in 3 ICSID Cases
• Mobil Corporation and others v. Bolivarian Republic of Venezuela, ICSID
Case No. ARB/07/27, Decision on Jurisdiction of June 10, 2010
• Cemex Caracas Investments B.V. and Cemex Caracas II Investments B.V. v.
Bolivarian Republic of Venezuela, ICSID Case No. ARB/08/15, Decision on
Jurisdiction of December 30, 2010
• Brandes Investment Partners, LP v. Bolivarian Republic of Venezuela, ICSID
Case No. ARB/08/3, Award of August 2, 2011
Issue: Does “if it so provides” language in Article 22 constitute consent to
ICSID jurisdiction?
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Case Study 2: Venezuela Investment Law
Mobil v. Venezuela
Decision on Jurisdiction of June 10, 2010
-andCemex v. Venezuela
Decision on Jurisdiction of December 30, 2010
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Case Study 2: Venezuela Investment Law
Mobil v. Venezuela, Cemex v. Venezuela
Determining Standard of Interpretation
“Legislation and more generally unilateral acts by
which a State consents to ICSID jurisdiction must be
considered as standing offers to foreign investors
under the ICSID Convention. Those unilateral acts
must accordingly be interpreted according to the
ICSID Convention itself and the rules of international
law governing unilateral declarations of States”
(Mobil para 85; Cemex para 79)
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Case Study 2: Venezuela Investment Law
Mobil v. Venezuela, Cemex v. Venezuela
Determining Standard of Interpretation
• Article 22 is an act formulated in the framework and on the basis of the
ICSID Convention, and not in a State’s exercise of its freedom to act on the
international plane.
• Therefore, the Tribunal must interpret “the relevant words of a declaration
including a reservation contained therein in a natural and reasonable way,
having due regard to the intention of the State concerned. That intention
can be deduced from the text, but also from the context, the
circumstances of its preparation and the purposes intended to be served”
(Mobil para 90, 94-95; Cemex para 87)
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Case Study 2: Venezuela Investment Law
Mobil v. Venezuela, Cemex v. Venezuela
Interpretation of Article 22
– “ambiguous and obscure text.” Tribunal had to “look further” to
context
– Could not draw from rest of Investment Law, or from Venezuela’s
attitude toward arbitration, that Article 22 consented to jurisdiction
– No legislative history because it was a decree law, not discussed in
Parliament
– Publications by drafter, and contemporaneous statements made after
proceedings begun
– Venezuela’s BITs had clear consent to arbitration, meaning that the
State could have expressed the intent clearly in Article 22 if it had
wished
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Case Study 2: Venezuela Investment Law
Mobil v. Venezuela, Cemex v. Venezuela
Tribunals’ Conclusions
“The Tribunal thus arrives to the conclusion that such
intention is not established. As a consequence, it cannot
conclude from the obscure and ambiguous text of Article 22
that Venezuela, in adopting the 1999 Investment Law,
consented in advance to ICSID arbitration for all disputes
covered by the ICSID Convention. That article does not
provide a basis for jurisdiction of the Tribunal in the present
case” (Cemex para 138; Mobil para 140)
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37
Case Study 2: Venezuela Investment Law
Brandes v. Venezuela
Award of August 2, 2011
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Case Study 2: Venezuela Investment Law
Brandes v. Venezuela, Award
Standard of Interpretation
• Initial process of interpretation must be conducted
within the parameters set by the Republic’s legal
system, based on its Political Constitution
• Also considered international law to reach a
definitive conclusion
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Case Study 2: Venezuela Investment Law
Brandes v. Venezuela, Award
Interpretation of Article 22
– Text was “confusing and imprecise”
– No other provisions of investment law could be read that Article 22
provided consent
– Compared to Venezuelan BITs and found they had “clear and precise”
consent to ICSID arbitration, unlike Article 22
– Decisions of Venezuelan Supreme Tribunal of Justice and authorities not
binding on Tribunal
– Additional documentary evidence contained nothing “that may lead it to
depart from the conclusions arrived at by those tribunals with respect to the
specific matter at issue here”
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PART III: Consent to ICSID Jurisdiction:
Bilateral Investment Treaties
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41
Case Study 1: Rumeli v. Kazakhstan
Decision on Jurisdiction of July 29, 2008 [in English]
Article VII of the Turkey – Kazakhstan BIT :
“[…]the investor and the concerned Party shall endeavor to settle these
disputes by consultations and negotiations in good faith.
If these disputes cannot be settled in this way within six months following the
date of the written notification mentioned in paragraph I, the dispute can be
submitted, as the investor may choose, to:
(a) (ICSID)
(b) an ad hoc court of arbitration under the UNCITRAL Rules
(c) the ICC, provided that, if the investor concerned has brought the dispute
before the courts of justice of the Party that is a party to the dispute and final
award has not been rendered within one year.
[…]”
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[Emphasis Added, English Version]
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Case Study 1: Rumeli v. Kazakhstan
Decision on Jurisdiction of July 29, 2008
Tribunal’s Conclusion
“By contrast with the Turkish version, the English and
Russian versions of the Treaty do not require a prior
submission of the dispute to local courts before
initiation of arbitration proceedings before ICSID. The
Arbitral Tribunal considers therefore that no such
requirement had to be fulfilled by Claimants before
starting this arbitration.”
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43
Case Study 2: Kilic v. Turkmenistan
Decision on Jurisdiction of May 7,2012
Issues identified by the Tribunal:
• Need to establish the number of authentic
versions of the BIT
• Need to establish the correct translation of
the Russian version
• Does the Vienna Convention on the Laws of
Treaties apply and, if so, what provisions?
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Case Study 2: Kilic v. Turkmenistan
Decision on Jurisdiction of May 7,2012
Vienna Convention Article 33:
“When a treaty has been authenticated in two
or more languages, the text is equally
authoritative in each language, unless the
treaty provides or the parties agree that, in
case of a divergence, a particular text shall
prevail.”
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Case Study 2: Kilic v. Turkmenistan
Decision on Jurisdiction of May 7,2012
Article VII.2 of the Turkey-Turkmenistan BIT provides that an investor may
have recourse to international arbitration:
“provided that, if the investor concerned has brought the dispute before the courts of
justice of the Party that is a party to the dispute and a final award has not been
rendered within one year…”.
[English version]
“on the condition that, if the concerned investor submitted the conflict to the court of
the Party, that is a Party to the conflict, and a final arbitral award on compensation of
damages has not been rendered within one year.”
[First English translation of the Russian version]
“on the condition that the concerned investor submitted the conflict to the court of the
Party, that is a Party to the conflict, and a final arbitral award on compensation of
damages has not been rendered within one year.”
[Second English translation of the Russian version]
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Case Study 2: Kilic v. Turkmenistan
Decision on Jurisdiction of May 7, 2012
Tribunal’s Conclusion on the Russian
“Accurate” Translation
“The ordinary meaning of these words in their
context and in the light of the object and purpose of
the treaty requires the submission of the dispute to
local courts prior to the initiation of arbitration
proceedings, whether before ICSID, “ad hoc” (in
accordance with the UNCITRAL Rules), or before the
ICC Court of Arbitration in Paris.
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Case Study 2: Kilic v. Turkmenistan
Decision on Jurisdiction of May 7, 2012
Vienna Convention Article 32:
“Recourse may be had to supplementary means of
interpretation, including preparatory works of the treaty and
the circumstances of its conclusion, in order to confirm the
meaning resulting from the application of article 31, or to
determine the meaning when the interpretation according to
article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable.”
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Case Study 2: Kilic v. Turkmenistan
Decision on Jurisdiction of May 7, 2012
Tribunal’s Conclusion on the English Version
“These circumstances surrounding the conclusion of the BIT
lead the Tribunal to conclude that the better view is that the
English language version of Article VII.2 is properly to be
interpreted as requiring mandatory recourse to the local
courts.
The Tribunal considered Rumeli v. Kazakhstan but concluded
that it was “unpersuasive” because it provided no analysis or
reasoning in support of the conclusion.
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Case Study 3: Millicom v. Senegal
Decision on Jurisdiction of July 16, 2010 [in French and English]
Article 10 of the Netherlands – Senegal BIT:
“The Contracting Party in the territory of which a national of the
other Contracting Party makes or intends to make an investment
shall assent to any request on the part of such national to submit,
for arbitration or conciliation, any dispute that may arise in
connection with that investment, to the Centre established by
the Washington Convention of 18 march 1965 on the settlement
of investment disputes between States and nationals of other
States.”
[English Translation]
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Case Study 3: Millicom v. Senegal
Decision on Jurisdiction of July 16, 2010
French original text of Article 10:
« La Partie Contractante sur le territoire de laquelle un ressortissant
de l'autre Partie Contractante effectue ou envisage d'effectuer un
investissement, devra consentir à toute demande de la part de ce
ressortissant en vue de soumettre, pour arbitrage ou conciliation,
tout différend pouvant surgir au sujet de cet investissement au
Centre institué en vertu de la Convention de Washington du 18
mars 1965 pour le règlement des différends relatifs aux
investissements entre Etats et ressortissants d'autres Etats. »
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Case Study 3: Millicom v. Senegal
Decision on Jurisdiction of July 16, 2010
• Principles of interpretation applied: Vienna Convention
Article 31
• Tribunal’s Conclusion: Wording does not give the State
discretion to consent
“It is prescribed that the State not only “pourra” (“may”)
but “devra” (“shall”) give its consent.”
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ICSID
1818 H Street, N.W.
Washington, D.C. 20433
USA
Tel: (202) 458-1534
Fax:(202) 522-2615 or 522-2027
Website: www.worldbank.org/icsid
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