7 march 2014 international arbitration, paris 20 years of the energy charter treaty jurisdiction and...
TRANSCRIPT
7 March 2014
International Arbitration, Paris
20 Years of the Energy Charter Treaty Jurisdiction and Admissibility under the Energy Charter Treaty
Laurent Gouiffès / Thomas Kendra
www.hoganlovells.com
Contents
1. The blurred boundaries of the distinction between jurisdiction and admissibility
2. The relevance of the distinction between jurisdiction and admissibility2.1 Distinguishing the concepts
2.2 Practical implications of the distinction
3. The recognition of the distinction under the ECT3.1 Shareholder claims
3.2 Failure to comply with a waiting period
3.3 Denial of benefits
4. Conclusion
2
www.hoganlovells.com 3
1. The blurred boundaries of the distinction between jurisdiction and admissibility
• Distinction expressly recognised in international law by Article 79 ICJ Rules of Court.
• Absence of distinction in the ICSID Convention, the ICSID Arbitration Rules, the UNCITRAL Rules and investment treaties – including the ECT.
• Divergent analyses by tribunals and practitioners.– Rejection of the distinction.
• Enron v. Argentina (2004).• Methanex v. USA (2002).
– Recent BIT cases recognise the distinction, but discrepancies seem to remain.• Abaclat v. Argentina (2011).• Hochtief AG v. Argentina (2011).• Daimler Financial Services AG v. Argentina (2012).
www.hoganlovells.com 4
2. The relevance of the distinction between jurisdiction and admissibility
• Power of the tribunal v. appropriateness of a specific claim.– "Jurisdiction is the power of the arbitral tribunal to hear the case,
admissibility is whether the case itself is defective — whether it is appropriate for the arbitral tribunal to hear it" (Waste Management, Inc. v. United Mexican States, Keith Highet (2000)).
• Jurisdiction: objections aimed at the tribunal.– Depends on the existence of the tribunal's adjudicative power.– Depends on the scope of the tribunal's adjudicative power.
• Admissibility: objections aimed at the claim.– Depends on the appropriateness for the tribunal to hear a
specific claim on the merits.
2.1 Distinguishing the concepts
www.hoganlovells.com 5
2.2 Practical implications of the distinction
• Impact on the review of awards.– Decisions on jurisdiction can be challenged, whereas findings
as to admissibility cannot be reviewed.
• Impact on the parties' ability to resubmit the claim.– Refusal to hear a claim based on a lack of jurisdiction will
prevent a party from re-submitting the same claim; refusal based on admissibility will not, provided the previous flaw has been cured (Abaclat v. Argentina (2011)).
• Impact on the tribunal's ability to act on its own motion.– If the disputing parties do not raise admissibility objections, that
acquiescence will cure the breach (Hochtief v. Argentina (2011)).
www.hoganlovells.com 6
• Definition of Investment – ratione materiae– Article 1(6) ECT: Definitions
• "“Investment” means every kind of asset, owned or controlled directly or indirectly by an Investor and includes […] (b) a company or business enterprise, or shares, stock, or other forms of equity participation in a company or business enterprise, and bonds and other debt of a company or business enterprise".
• Definition of Investor – ratione personae– Article 1(7) ECT: Definitions
• "“Investor” means: (a) with respect to a Contracting Party: (i) a natural person having the citizenship or nationality of or who is permanently residing in that Contracting Party in accordance with its applicable law; (ii) a company or other organization organized in accordance with the law applicable in that Contracting Party; (b) with respect to a “third state”, a natural person, company or other organization which fulfils, mutatis mutandis, the conditions specified in subparagraph (a) for a Contracting Party".
3. The recognition of the distinction under the ECT
3.1 Shareholder claims
www.hoganlovells.com 7
• An objection to jurisdiction or to admissibility?– Tribunals focus on the jurisdiction ratione personae and
ratione materiae of shareholders' claims, treating it as a jurisdictional issue.• Yukos Universal Ltd. v. Russia (2009).
– The Tribunal found that the legal ownership of the shares did qualify as an investment, and hence that the Claimant fulfilled the jurisdictional condition ratione materiae.
• Nykomb Synergetics Technology Holding v. Latvia (2003).– The Tribunal found that the indirect shareholding
constituted an investment within the meaning of the Treaty.
3.1 Shareholder claims
www.hoganlovells.com 8
3.1 Shareholder claims
• The issue is incorrectly characterised as only a problem of jurisdiction (Douglas, The International Law of Investment Claims (2009)).– Admissibility also needs to be considered: whether the Claimant has
a founded legal interest in the claim (personal loss).
• Consequences in the assessment of damages.– "the assertion of jurisdiction over an inadmissible claim by a
shareholder leads to consequential errors in the assessment of damages" (Douglas).
– No clear link between the loss suffered by the company, and that suffered by the shareholders.
www.hoganlovells.com 9
• Article 26(2) ECT: Settlement of Disputes between an Investor and a Contracting Party– "If such disputes can not be settled […] within a period of three months
from the date on which either party to the dispute requested amicable settlement, the Investor party to the dispute may choose to submit it for resolution:
(a) to the courts or administrative tribunals of the Contracting Party party to the dispute;
(b) in accordance with any applicable, previously agreed dispute settlement procedure; or
(c) in accordance with the following paragraphs of this Article".
3.2 Failure to comply with a waiting period
www.hoganlovells.com 10
3.2 Failure to comply with a waiting period
• An objection to jurisdiction or to admissibility?– A vivid debate in BIT cases:
• Hochtief AG v. Argentina (2011).• Impregilo S.p.A. v. Argentina (2011).• Daimler Financial Services AG v. Argentina (2012).
– 2 main lines of reasoning:• Objection to admissibility:
– Observance of the waiting period as the condition for the enforcement to an already existing consent to arbitrate.
– Objection to the claim, that cannot (yet) be formed.• Objection to jurisdiction:
– Observance of the waiting period as the condition for the very existence of the consent to arbitrate.
– Objection to the Tribunal, which has no jurisdiction over the claim.
www.hoganlovells.com 11
3.2 Failure to comply with a waiting period
• A distinction not found relevant in awards ruling on Article 26(2) ECT.– Mohammad Ammar Al Balhoul v. Tajikistan (2010).
• The Tribunal observed that "there have been conflicting views among tribunals as to whether [it] constitutes a mere procedural requirement […] or a jurisdictional requirement".
– Amto v. Ukraine (2008).• The Tribunal did not refer to the debate between jurisdiction and admissibility, but
observed that several ICSID awards concluded that non-observance did not bar jurisdiction.
– Petrobart Ltd. v. Kyrgyzstan (2005).• The Tribunal concludes that the Claimant "complied with the procedural
requirement" of proposing amicable settlement.
– AES Summit Generation v. Hungary (2010).• Refers to Article 26(2) as a "procedural requirement" and observes that it has
been fulfilled.
• Prevelance of a "fact-driven" approach.
www.hoganlovells.com 12
3.3 Denial of benefits
• Article 17(1) ECT: Non-application of Part III (Investment Promotion and Protection) in certain circumstances– "Each Contracting Party reserves the right to deny the advantages of this
Part to:(1) a legal entity if citizens or nationals of a third state own or control such entity and if that entity has no substantial business activities in the Area of the Contracting Party in which it is organized".
www.hoganlovells.com 13
3.3 Denial of benefits
• An objection to jurisdiction or to admissibility?– The benefits in Part III which can be denied do not refer to jurisdictional
conditions for arbitration, such as consent.
• No clear-cut approach from tribunals.– Some treat it as an admissibility issue and examine the conditions.
• Plama Consortium Ltd. v. Bulgaria (2008).• Yukos Universal Ltd. v. Russia (2009).
– Some treat it as a jurisdictional issue and examine the conditions.• Amto v. Ukraine (2008).• Libananco Holdings Co. Limited v. Turkey (2011).
– Some do not mention whether it is examined as admissibility or jurisdiction.• Petrobart Ltd. v. Kyrgyzstan (2005).
– Some blur the distinction, or consider it irrelevant.• Liman Caspian Oil B.V. v. Kazakhstan (2010).
www.hoganlovells.com 14
4. Conclusion
• BIT tribunals increasingly refer to the distinction between jurisdiction and admissibility.
• Yet the distinction is not always used or remains unclear under the ECT.
• A coherent and consistent approach is desirable, given the practical consequences.
www.hoganlovells.com
Hogan Lovells has offices in:
AlicanteAmsterdamBaltimoreBeijingBrusselsBudapest*CaracasColorado SpringsDenver
DubaiDusseldorfFrankfurtHamburgHanoiHo Chi Minh CityHong KongHoustonJakarta*
Jeddah*JohannesburgLondonLos AngelesLuxembourgMadridMiamiMilanMoscow
Munich New YorkNorthern VirginiaParisPhiladelphiaPragueRio de JaneiroRiyadh*Rome
San FranciscoShanghai Silicon ValleySingaporeTokyoUlaanbaatarWarsawWashington DCZagreb*
"Hogan Lovells" or the "firm" is an international legal practice that includes Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses. The word "partner" is used to describe a partner or member of Hogan Lovells International LLP, Hogan Lovells US LLP or any of their affiliated entities or any employee or consultant with equivalent standing. Certain individuals, who are designated as partners, but who are not members of Hogan Lovells International LLP, do not hold qualifications equivalent to members.
For more information about Hogan Lovells, the partners and their qualifications, see www.hoganlovells.com.
Where case studies are included, results achieved do not guarantee similar outcomes for other clients. Attorney Advertising.
© Hogan Lovells 2014. All rights reserved.
*Associated offices