ANSUNG HOUSING CO., LTD. V. PEOPLE’S REPUBLIC OF CHINA,CASE NO. ARB/14/25
In an award dated March 9, 2017, a tribunal at the International Centre for Settlement of Investment Disputes (ICSID) dismissed a case against China for lack of temporal jurisdiction. It ordered the Korean claimant to reimburse China for the costs of the proceeding plus 75 per cent of China’s legal fees and expenses.
This was the second known ICSID case brought against China. In 2011 a Malaysian investment initiated an ICSID proceeding against China, but the claim was settled before a tribunal was selected. For details of the first case, see https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB/11/15.
The dispute arose out of a Korean developer’s golf course project in China. Immediately after the constitution of the arbitral tribunal, China filed an objection based on Rule 41(5) of the ICSID Arbitration Rules, which allows the tribunal to dismiss a claim that is manifestly without legal merit. Given the summary nature of the proceeding, the tribunal “assume[d] the truth of the facts alleged by Claimant” (para. 32).
In late 2006, the Korean-incorporated claimant, Ansung Housing Co. Ltd. (Ansung), entered into an investment agreement with a local government in the Chinese province of Jiangsu to develop a 27-hole golf course. The agreement approved the development of the first phase of the project (18 holes) and reserved additional land for the second phase (9 holes). Ansung also received land use rights over roughly 80 per cent of the land needed to complete the first phase.
The construction began in March 2007, but between June 2007 and November 2010 Ansung faced several government-caused difficulties that left the project in limbo. The local government imposed additional requirements for the land use rights due to a change in the law, requested a higher price than originally agreed, granted rights that only covered one-third of the land requested, and failed to grant the additional land reserved in the 2006 agreement.
After failing to meet the loan repayment obligations regarding the half-completed project, Ansung sold the golf business in transactions carried out in November and December 2011. On October 7, 2014 it filed a request for ICSID arbitration under the 2007 China–Korea bilateral investment treaty (). The award does not mention the specific claims.
Three-year limitation period: When does it start? When does it end?
One of the key provisions debated by the parties was Article 9(7) of the China–Korea BIT, which provides: “[A]n investor may not make a claim pursuant to paragraph 3 of this Article if more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge that the investor had incurred loss or damage.”
China challenged that the arbitration was instituted more than three years after Ansung first acquired knowledge that it had incurred loss or damage, therefore rendering the claim time-barred under Article 9(7). Ansung, on the other hand, asserted that the claim was made well within the three-year limitation period.
In terms of the starting date of the temporal limitation period, the tribunal sided with China, which relied on various decisions rendered by tribunals under the North American Free Trade Agreement () when interpreting similar language in NAFTA. The tribunal held that given the plain meaning of the words used in Article 9(7), “[t]he limitation period begins with an investor’s first knowledge of the fact that it has incurred loss or damage, not with the date on which it gains knowledge of the quantum of that loss or damage” (para. 110). Applying the standard to the case and based on the facts as pleaded by Ansung, the tribunal concluded that Ansung had first acquired or should have first acquired the knowledge—thereby starting the clock for the three-year limitation period—before October 2011.
Turning to the ending date, Ansung argued that it should be the date when it submitted the written notice of arbitration to the respondent (May 19, 2014). China, on the other hand, argued that it should be the date when the case was registered with ICSID (November 4, 2014). Not persuaded by either argument, the tribunal found it “not difficult” to conclude that the language of the BIT was referring to “the date on which an investor deposits its request for arbitration with ICSID” (para. 115)—October 7, 2014 in this case. In reaching this conclusion, the tribunal quoted the Decision on Jurisdiction in Vannessa Ventures v. Venezuela which held that “relevant document regarding the interruption of the statute of limitation is therefore the Request for Arbitration” (para. 116).
After identifying the starting and ending date, the tribunal concluded that the claim was indeed brought after the expiration of the limitation period and was thus “time-barred and, as such, [was] manifestly without legal merit” (para. 122).
Ansung fails in attempt to rely onto bring in less strict temporal limitations
Ansung tried to bypass the temporal limitation by invoking the most-favoured-nation (MFN) clause of the BIT. It contended that the prescription period was among the substantive rights covered by MFN, and claimed protection of other Chinese treaties with no such prescription periods. Alternatively, Ansung argued that MFN treatment should also be interpreted to cover procedural rights including access to investor–state arbitration. The tribunal did not agree, and deemed the limitation period in question as a condition to China’s consent to arbitrate, which was not covered by a “plain reading” of the MFN clause (para. 138).
Further, the tribunal noted that paragraph 5 of the MFN clause provides: “Treatment accorded to investors of one Contracting Party within the territory of the other Contracting Party with respect to access to the courts of justice and administrative tribunals and authorities both in pursuit and in defence of their rights shall not be less favourable than that accorded to investors of the latter Contracting Party or to investors of any third State.”
In contrast to the express reference to domestic avenues, the tribunal noted the conspicuous absence of any mention to international dispute resolution in the MFN article. It therefore concluded that the state parties clearly did not intend to extend MFN treatment to the situation at hand, and thus swiftly decided to dismiss the claim, as requested by China.
Notes: The tribunal was composed of Lucy Reed (President appointed by the Chairman of the ICSID Administrative Council, U.S. national), Michael Pryles (claimant’s appointee, Australian national) and Albert Jan van den Berg (respondent’s appointee, Dutch national). The award is available in English at http://www.italaw.com/sites/default/files/case-documents/italaw8538.pdf.
Joe Zhang is a Law Advisor to’s Investment for Sustainable Development Program.