Victor Pey Casado and Foundation Presidente Allende v. The Republic of Chile, ICSID Case No. ARB/98/2
On September 13, 2016 a tribunal issued a final award in the case filed by Victor Pey Casado and the Foundation Presidente Allende against Chile under the Chile–Spain bilateral investment treaty (BIT). It found that the claimants’ allegations were unsubstantiated or beyond the scope of the resubmission tribunal pursuant to the arbitration rules of the International Centre for Settlement of Investment Disputes (ICSID). Determining that the arbitration costs were to be shared in the proportion of three-quarters by the claimants and one-quarter by Chile, the tribunal ordered the claimants to reimburse USD159,509.43 to Chile.
Pey Casado, a naturalized Chilean who was born in Spain, purchased a stake in the left-leaning Chilean newspaper El Clarín in 1972. The newspaper was occupied during the 1973 coup d’état against President Salvador Allende. El Clarín was formally nationalized two years later by dictator Augusto Pinochet. Pey Casado donated 90 per cent of his stock in the entity owning El Clarín to the other claimant, Spain-based Foundation Presidente Allende in January 1990, shortly after democratic rule returned to Chile.
Pey Casado filed a civil case with Chilean courts in October 1995 seeking restitution for the confiscation of a Goss printing press that had been in the premises of El Clarín when the seizure of the property took place. Chile initiated a reparation program in July 1998 to compensate victims of property confiscation during the dictatorship, but the claimants waived the right to seek compensation under this program in June 1999. National Assets Ministry Decision 43 of April 2000 authorized compensation to four individuals for the expropriation of El Clarín, but the list of beneficiaries did not include the claimants.
The claimants initiated ICSID arbitration in November 1997. The tribunal issued its award on May 8, 2009 on the merits of the dispute. It dismissed the expropriation claims but granted the claimants over USD10 million in damages for breach of fair and equitable treatment (FET), having found that the seven-year delay of the Chilean courts to issue a decision on the merits in the Goss press case amounted to a denial of justice and that exclusion of Pey Casado and Foundation President Allende from compensation authorized under Decision 43 constituted discrimination. Revision and annulment proceedings ensued. The ad hoc committee decided to partially annul the first award as regards the method of calculation of the damages on December 18, 2012.
The claimants resubmitted the dispute to ICSID pursuant to Article 52(6) of the ICSID Convention on June 18, 2013.
Expropriation claim inadmissible as it falls outside tribunal’s ratione temporis jurisdiction
The claimants sought to broadly interpret FET in order to get compensated for their expropriation claim, which was previously dismissed on rationae temporis objection by the first tribunal. The first tribunal had previously decided that the substantive protections of the 1991 BIT did not extend retroactively to cover the expropriation of claimants’ assets by Chile between 1973 and 1975. Considering the res judicata effect of these findings and siding with Chile, the resubmission tribunal found that it lacked the authority to re-examine afresh the allegations of expropriation.
As claimants failed to prove injury, tribunal refuses to grant compensation
In the resubmission tribunal’s reading, “all of the failings identified by the First Tribunal, including the denial of justice, amount[ed] together, globally, to a failure to accord fair and equitable treatment, and thus constitute[ed] a breach of the BIT,” giving the claimants a right to “compensation” (para. 209). However, it noted that the first tribunal failed to identify the nature and extent of the injury caused by the breach. It also recalled that the first award was annulled due to the methodology for estimating such compensation.
The tribunal disagreed with the claimants that “compensation” in the first tribunal’s award referred necessarily to monetary compensation. Rather, it read that award “as stating the entitlement to reparation that necessarily follows from the determination of the breach of an international obligation, but without predetermining what form or nature that reparation must take” (para. 201). Accordingly, the tribunal found that its jurisdiction was limited to determining the form of reparation and, should it find that monetary compensation was appropriate, the amount of damages.
The analysis of the tribunal was guided by Article 31 of the 2001 Articles on Responsibility of States for Internationally Wrongful Acts of the International Law Commission (ILC), which sets out the obligation of the responsible state “to make full reparation for the injury caused by the internationally wrongful act.” The tribunal indicated “that the operation of the primary rule enunciated by the ILC depends upon injury, and that injury in turn depends on causation” (para. 204).
As the claimants had focused on the quantification of the damage, “without undertaking the prior step of showing the precise nature of the injury, causation and damage itself” (para. 232), the tribunal held that they failed to meet their burden of proving any injury resulting from treaty breaches established in the first award.
The tribunal then gave “anxious consideration” to the options before it (para. 244). It reasoned that it could not grant compensation for expropriation, given that the claim had been excluded by the first tribunal and the annulment committee. Neither could it devise a theory of damages independently from the parties’ submissions (which was what the first tribunal had done and was later overruled by the annulment committee), or award moral damages “as a form of consolation,” or decide ex aequo et bono.
Accordingly, the tribunal dismissed all monetary claims, holding that “its formal recognition of the Claimants’ rights and its finding that they were the victims of a denial of justice constitutes in itself a form of satisfaction under international law for the Respondent’s breach of Article 4 of the BIT” (para. 256.2).
Resubmission tribunal dismisses new claim regarding unjust enrichment
The claimants alleged that by possessing and using the confiscated assets Chile was unjustly enriched under Chilean and international law, to the detriment of the claimants. In turn, Chile contended that this stand-alone claim of unjust enrichment was not linked to the BIT and would result in awarding compensation without prior determination of a treaty breach.
The tribunal stated that the finding of liability was fixed in the first award and in the decision on annulment. As the claimants did not raise the unjust enrichment claim before the first tribunal, the resubmission tribunal found that the claim was beyond its jurisdiction.
Tribunal dismisses unsubstantiated claim for moral damages
The claimants argued that Pey Casado’s inclusion on a list of wanted persons following the ousting was a threat to his personal safety. They also alleged that the refusal to provide reparation for the confiscation of his assets and Chile’s conduct in the original arbitration and afterwards compounded their inner suffering. The tribunal dismissed these claims noting that the claimants failed to meet their burden of proving that they suffered any damages of a moral character.
Notes: The ICSID resubmission tribunal was composed of Frank Berman (President appointed by the Chairman of the ICSID Administrative Council, British national), Philippe Sands (claimant’s appointee, British national) and Alexis Mourre (respondent’s appointee, French national). The September 13, 2016 award is available in English at http://www.italaw.com/sites/default/files/case-documents/italaw7630.pdf, in French at http://www.italaw.com/sites/default/files/case-documents/italaw7605.pdf and in Spanish at http://www.italaw.com/sites/default/files/case-documents/italaw7607.pdf. The award of the first tribunal, the decision on annulment and other relevant documents in the case are available at http://www.italaw.com/cases/829.
Amr Arafa Hasaan is an Alumnus of the Graduate Institute of Geneva and the University of Geneva, and Counsellor at the Egyptian State Lawsuits Authority.