ICSID and SADC - PowerPoint Presentation

Slide1

ICSID and SADC

Investor-State Dispute SettlementSlide2

Investor-State Dispute Settlement

(ISDS)

ISDS mechanisms grant foreign investors the right to initiate dispute settlement proceedings directly against a foreign government (the "Host State") rather than suing the Host State in that State’s courts“Arbitration without privity”ISDS rights arise from provisions of certain bilateral investment treaties “BITs”), international trade treaties, such as NAFTA’s Chapter 11, and international investment agreements, such as the Energy Charter TreatyISDS takes place under the auspices of international arbitral tribunals such as the LCIA, the ICC, the Stockholm C of C, or UNCITRAL Arbitration Rules, but it most often is associated with arbitration under the rules of the International Centre for Settlement of Investment Disputes, commonly referred to as the ICSIDSlide3

Investor-State Dispute Settlement

(ISDS)

The U.S. enabling legislation for the ICSID Convention, 22 U.S.C. §1650a A benefit of the Washington Convention is that it is even more favorable to recognition and enforcement of awards than the New York Convention as there are no grounds under the Washington Convention for national courts to refuse recognition and enforcement of ICSID tribunal awardsSlide4

The Convention on the Settlement of Investment Disputes between States and Nationals of Other States

African MembersAlgeria Benin Botswana Brunei Darussalam Burkina Faso Burundi Cabo Verde Cameroon Central African Republic Chad Comoros Congo, Democratic Rep. of Congo, Rep. of Côte d’Ivoire Egypt, Arab Rep. of Ethiopia Gabon Gambia, The Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Malawi Mali Mauritania Mauritius MoroccoMozambique Namibia

Niger

Nigeria

Rwanda Sao

Tome and Principe

Senegal

Seychelles Sierra Leone Somalia South Sudan Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe Slide5

ICSID Procedures for the

Settlement

of Disputes Between an Investor and Host StateNotice

Cooling-off periods, 3 to 6 months (Parties often take this time to negotiate the dispute)File arbitrationJurisdictional stageSlide6

ICSID Procedures

Request

For Arbitration

First Session of the TribunalGoverning substantive law and procedural rulesLocation of proceedings – (counsel, parties, witnesses, arbitrators)Language of written and oral proceedingsDeadlines for the written procedure - Memorial, Counter-Memorial, Reply, RejoinderWitness Statements and Expert Reports and DiscoveryBifurcation of Proceedings: Jurisdiction and MeritsWritten Pleadings: Post-hearing briefsPre-Hearing ConferenceOrder and presentation of proof; examination of witnessesAllocations of time for presentationsSubmission

of rebuttal

evidence

Post-hearing

briefing (including fee

petitions)

Oral HearingSlide7

ICSID

- Statistics

As of March 28, 2012:233 cases concluded142 cases pendingArbitrators:70% of the arbitrators from Western Europe and North America2% from Sub-Saharan AfricaHost State Defendants:1% of cases involved Western European states>20% of all cases African State RespondentsSlide8

ICSID

- Statistics

Based on UN review of nearly 200 concluded investment treaty arbitrations:Award decided in favor of State – approximately 40%Award decided in favor of Investor – approximately 30%Settlement rate – approximately 30%Slide9

ICSID

– More Data

ICSID Proceedings Among ICSID SignatoriesEgypt - 16The Democratic Republic of Congo - 9Congo Republic, Gabon, Guinea and Tanzania - 4Algeria, Cameroon, Central African Republic, Liberia, Morocco, and Zimbabwe - 3Burundi, Gambia, Ghana, Ivory Coast, Madagascar, Niger, Nigeria, Senegal, Togo, and Tunisia - 2Burkina Faso, Kenya, Mali, Rwanda, and The Seychelles - 1 Proceedings against Non-Contracting States under the ICSID Additional Facility Rules Among Non-ICSID SignatoriesSouth Africa - 1 arbitration Equatorial Guinea – 1 arbitration and 1 conciliationSlide10

A Few

Arbitral

Results Involving African

State RespondentsSlide11

Benvenuti

&

Bonfant v. People's Republic of the CongoICSID Case No. ARB/77/2 (Aug

. 8, 1980) Tribunal de grande instance, Paris, Decision of Dec. 23, 1980, 1982 Rev. Arb. 205 Tribunal de grande instance, Paris, Decision of Jan. 13, 1981, 1982 Rev. Arb. 206 Cour d'appel, Paris, Decision of June 26, 1981, 1982 Rev. Arb. 207 and English translation in 20 I.L.M. 878 (1981)In is dispute, the Congolese authorities nationalized a joint venture bottling facility by militarily occupying the facility and imprisoning the venture’s employeesThis case was only the second ICSID award to be reviewed in a national courtThe saga in the French courts ultimately confirmed the benefits that the Convention offers investors as it obliges each contracting state to recognize an ICSID awardSlide12

Am. Mfg. & Trading Inc.

v

. Zaire ICSID Case No. ARB/93/1 (Feb. 10, 1997)

In this dispute, AMT claimed that Zaire violated its obligations under the U.S.-Zaire BIT by failing to protect and maintain the security of its investment and by failing to make restitution or pay compensation when Zairean soldiers broke into its industrial complex and damaged and stole goods owned by its 94% owned entity The Tribunal rejected Zaire’s argument that the ICSID did not have jurisdiction because the dispute was between a local Zairean company and Zaire, concluding that AMT had a right to compel arbitration on its own behalf because it owned 94% of the local company and that, because the local entity was majority-owned by U.S. citizens, it had standing to utilize the ICSIDIt awarded US$9 million in compensation plus interest and costsThis was the first award ever given under a bilateral investment treaty to which the United States was a contracting partySlide13

M

.

Meerapfel Söhne AG v. Central African RepublicICSID Case No.

ARB/07/10 (May 12, 2011)The Tribunal was comprised of arbitrators from Morocco, Gabon, and Belgium, and the Moroccan national was President of the Tribunal - Azzedine Kettani (Chair), François T’Kint, Judge, Marie-Madeleine MborantsuoSwiss Claimant company was the majority shareholder in a joint venture tobacco-farming business in the Central African Republic, with CAR minority shareholders When the venture suffered various problems, it filed a local lawsuit, but later entered into a Protocol of Agreement with the CAR which contained an ICSID arbitration clauseThe assets of the venture were later requisitioned to recover tax debts, and the CAR repudiated the Protocol of Agreement In the ICSID arbitration, the Claimant alleged that the CAR had expropriated its investment without compensation in violation of the Protocol of AgreementThe Tribunal concluded that the CAR had indirectly expropriated Claimant’s investment and awarded damages in the value of the tobacco harvest actually lost to the CAR’s

expropriation

by determining the average price of tobacco on the date of

expropriation but declined

to award the Claimants lost profits and other expenses or moral damages Slide14

Antoine

Goetz

& Consorts et S.A. Affinage des Metaux v. Republique du Burundi, ICSID Case

No. ARB/95/3 (Feb. 10, 1999); 6 ICSID Rep. 5 (2004); ICSID Case No. ARB/01/2 (June 21, 2012)Goetz v. Burundi involved a claim filed in 1995 that the revocation of a free zone concession, which granted certain incentives and exceptions to a mineral mining enterprise constituted an indirect expropriation under the Belgium and Luxemburg Union-Burundi BITThe Tribunal ruled against Burundi, concluding that “the revocation of their FTZ license forced [the complainants] to stop all activity . . . thereby making their investment completely useless and depriving them of the benefits they could expect therefrom”Tribunal allowed Burundi’s counterclaim and offered non-pecuniary remedy, i.e., reinstatement of the free zone regimeSlide15

Biwater

Gauff (Tanz.) Ltd. v. United Republic of TanzaniaICSID Case No. ARB/05/22 (Jul. 24,

2008)An Anglo-German consortium filed a claim against the Republic of Tanzania under the UK-Tanzania BIT concerning a concession to operate the water and sewerage services of Tanzania's capital, Dar es SalaamThe Tribunal's majority ruled that, while Tanzania's actions may have constituted prima facie violations of certain BIT provisions, they did not cause injury to the claimant's venture, and, accordingly, the claimant was not entitled to compensationHowever, the finding of non-compensable fault on the part of Tanzania allowed the Tribunal to allocate the costs of the proceeding equallyThe Award has been described as a “model of reasoning and exhaustive analysis,” and it provides a flexible definition of "investment" under the ICSID ConventionIt also offers clarity on a number of legal standards such as fair and equitable treatmentThe Tribunal also served to legitimize amicus submissionsSlide16

Bernardus

Henricus Funnekotter and Others v. Republic of Zimbabwe, ICSID Case No. ARB/05/6 (April 22, 2009)

This ICSID claim was brought in 2005 by a group of 13 Dutch farmers who alleged that Zimbabwe had breached various provisions of the Netherlands-Zimbabwe BIT by expropriating their agricultural landholdings and other property as part of Mugabe’s land-reform programIn its defense, Zimbabwe noted that its actions were justified in the public interest to address entrenched historical inequalities in land-ownership in ZimbabweZimbabwe also argued that large-scale nationalizations called for a discounted rate of compensation, although this was dismissed by the Tribunal, which determined that the value of an investment should be considered independently “of the number and aim of the expropriations” In April 2009, the Tribunal ordered Zimbabwe to pay the claimants approximately 8.2 million Euros in damages and US $225,000 in arbitral costsSlide17

Southern

African Development Community (SADC)

SADC’s primary objective is “to promote sustainable and equitable economic growth and socio-economic development through efficient productive systems, deeper co-operation and integration, good governance, and durable peace and security, so that the region emerges as a competitive and effective player in international relations and the world economy”15 Member States: Angola, Botswana, Democratic Republic of the Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, ZimbabweSlide18

Southern African

Development Community (SADC)

The SADC Protocol on Finance and Investment (the "Protocol"), which entered into force on April 16, 2010, contains international protections for foreign investors in the SADC, including the ability to initiate binding international arbitration proceedings directly against Member StatesWhile Article 28(2) sets forth three options for investor state-arbitration - the SADC Tribunal, the ICSID or the ICSID Additional Facility, or the UNCITRAL Rules – the SADC Tribunal’s jurisdiction has been restricted to disputes between Member States, so the choices now are limited to the ICSID options and UNCITRAL Further, Article 28 allows parties that resist arbitration to effectively limit a party’s choice of forum to arbitration under the UNCITRAL RulesSlide19

Southern

Africa Development

Community (SADC) SADC Model BIT Exceptions for measures relating to public morals and safety, the protection of human, animal or plant life or health, the conservation of natural resources, environmental protection, prudential and taxation measures, as well as for existing non-conforming measures and ‘excluded sectors’, and omitting MFNRecommendations for various investor obligations, an article confirming a host state’s right to regulate in the public interest, and a provision on ‘fair administrative treatment’ rather than the ‘fair and equitable treatment’ provisionRecommendation for ‘fair and adequate’ compensation in cases of legitimate expropriation, rather than ‘prompt, adequate and effective’Recommendation that foreign investors be denied recourse to international investor-state dispute settlement procedures, or, if such recourse is included, qualifying it by requiring that investors first exhaust local remediesSlide20

System Under Scrutiny

The legitimacy of investment agreement arbitration has increasingly

come under scrutinyBolivia, Ecuador, and Venezuela have publicly denounced the ICSID Convention, a formal legal withdrawal pursuant to its Article 71A frequent unsuccessful respondent in ICSID proceedings, Argentina also has indicated that it may withdraw from the ConventionAustralia recently decided to exclude provisions on international arbitration in its future investment agreementsIndia’s Department for Industrial Policy and Promotion has called for a review of all of the BITs that India has signedIndonesia too has indicated that it may let its ISDS legal obligations lapse Slide21

A System Under Scrutiny

South Africa, although not an signatory of the Washington Convention, launched a review

of its BITs following a claim against it under the ICSID Additional Facility Rules in Piero Foresti v. Republic of South AfricaInvestors from Luxembourg and Italy argued that South Africa's Mining and Petroleum Resources Development Act violated the fair and equitable treatment and the national treatment provisions of South Africa’s BIT with Belgium and Luxembourg and expropriated their mineral rights by treating foreign investors and investments less favorably than investments with Historically Disadvantaged South AfricansThe claim was settled in 2010, but South Africa immediately began its BIT reviewDraft Promotion and Protection of Investment Bill and Model BITSlide22

Websites

https://icsid.worldbank.org/ICSID/Index.jsp

http://www.sadc.int/http

://unctad.org/SearchCenter/Pages/Results.aspx?k=isds