Dawood Rawat v. The Republic of Mauritius, PCA Case 2016-20
In the proceeding initiated by Mr. Dawood Rawat against Mauritius, a tribunal constituted under the 1976 Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) ruled that it lacked jurisdiction to decide on the investor’s claims under the 1973 France–Mauritius bilateral investment treaty (BIT). The arbitration was administered by the Permanent Court of Arbitration, and the award was rendered on April 6, 2018.
Background and claims
Mr. Rawat claimed that he controlled “one of the most innovative and dynamic conglomerates in Mauritius” (Statement of Claim, para. 29) operating in the banking sector. He argued that, soon after the 2014 general elections in Mauritius, he started to face a series of illegal actions by the government, including the revocation of his banking license (later transferred to a state-owned company) and the arrest of some of his relatives. Claiming that Mauritius had breached BIT Articles 2 and 3 (expropriation and fair and equitable treatment clauses), Mr. Rawat requested the restitution of his assets and the payment of compensation.
Mauritius did not dispute that certain of the actions alleged by Mr. Rawat had occurred, but sustained they were justified by a legal investigation of a money laundering scheme coordinated by Mr. Rawat and his family members. Before getting into the merits of its arguments, Mauritius raised preliminary objections to the tribunal’s jurisdiction, requesting that it dismiss Mr. Rawat’s claims.
Although Mr. Rawat was born in Mauritius and had Mauritian nationality, the tribunal found that there was substantial evidence that he became a French national after marrying a French woman. However, the parties contended as to whether Mr. Rawat thus qualified as a French investor entitled to initiate arbitration against Mauritius under the BIT. Therefore, the key issue to be decided by the tribunal was whether the France–Mauritius BIT applied to the case in view of the claimant’s dual French–Mauritian citizenship.
No express exclusion of dual nationals from BIT coverage
The arbitrators reasoned that they could not “add conditions to the BIT, as drafted and ratified by France and Mauritius” (para. 170). They noted that there was no express exclusion of dual nationals from the protections under the BIT, unlike other treaties signed by the same states, such as the 1984 France–China BIT and the 2014 Mauritius–Egypt BIT, and considered that this would lead to considering Mr. Rawat as protected under the France–Mauritius BIT.
Interpreting the BIT according to the Vienna Convention of the Law of Treaties
The tribunal then turned to the interpretation of the BIT according to the Vienna Convention of the Law of Treaties (VLCT). It considered that “the object and purpose of the France–Mauritius BIT would also point to the outcome of including, rather than excluding, dual nationals” (para. 172), since the preamble of the BIT highlighted that the goal of the treaty is to “protect and stimulate investment” without distinguishing the possible sources of investment.
Regarding the interpretation in accordance with the context (VCLT Art. 31(2)), the tribunal deemed it necessary to examine the relevant provisions of the BIT. It read BIT Article 9 as requiring that agreements relating to investments made in the territory of the contracting states must include an International Centre for Settlement of Investment Disputes (ICSID) arbitration clause. Article 25(2) of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention), in turn, expressly excludes dual nationals from the concept of “ressortissant” in the official French version.
The tribunal found that BIT Article 9 “makes an obligation, as opposed to an option, for Contracting States to include an ICSID arbitration clause in investment contracts” (para. 178). Therefore, there was a strict alignment between the concept of “ressortissant” under the BIT and the ICSID Convention.
In conclusion, the tribunal considered that France and Mauritius, by referring to the ICSID Convention, implicitly excluded dual nationals from the scope of the BIT. Consequently, it held that it had no jurisdiction over the dispute.
Interpreting the BIT according to the effet utile principle
According to the tribunal, the effet utile principle would reinforce that conclusion. The arbitrators referred to Cemex v. Venezuela and sustained that the useful effect, although not expressly set out in the VCLT, “is generally accepted to flow from the principle of interpretation of treaties in good faith as envisioned in VCLT Article 31(1)” (para. 182).
As the BIT referred to the ICSID Convention, according to which there is no room for arbitration involving dual national investors (Art. 25(2)), the arbitration clauses would be inoperable. Hence, the application of the effet utile principle would lead to the same conclusion: it would be meaningless to interpret the BIT as providing for arbitration with French–Mauritian dual nationals.
Establishing jurisdiction through the most-favoured-nation clause
It was undisputed that there was no investor–state arbitration clause in the France–Mauritius BIT. However, Mr. Rawat argued that Mauritius consented to arbitrate with French investors in two steps. First, it consented to the most-favoured-nation (MFN) clause of the France–Mauritius BIT, which allowed an investor to “benefit from all the provisions more favorable than those of [the BIT] which could result from international commitments already made or that would be made in the future” (BIT Art. 8). Second, Mauritius entered into an investment treaty with Finland providing for direct arbitration. Therefore, the claimant invoked the MFN clause in the France-Mauritius BIT to establish the tribunal’s jurisdiction.
Mauritius contended there was no consent to arbitrate, arguing that one can only rely on the MFN clause after establishing the tribunal’s jurisdiction under the treaty. As the BIT was silent on investor–state arbitration, it could not be considered a “matter” governed by the treaty.
The tribunal considered that Mr. Rawat was not covered by the France–Mauritius BIT, holding that the claimant could not benefit from substantive protections provided by the BIT. Notwithstanding, the tribunal proposed criteria for deciding if jurisdiction could be established via the MFN clause.
The “heart of the ejusdem generis test” (para. 187), according to the arbitrators, would be to define the scope of the expression “the matters covered by this agreement” (BIT Article 8) and whether the matters covered by the France–Mauritius BIT and by the Finland–Mauritius BIT were of the same kind. This would involve distinguishing matters and treatments by assessing the “level of granularity” at which matters should be considered. Such difference would be relevant as “matters cannot be ‘bettered’ by virtue of MFN clauses; ‘treatment’ of matters may” (para. 187).
Decision and costs
The tribunal concluded it lacked jurisdiction over the dispute, ordering Mr. Rawat to pay one third of Mauritius’ total fees and expenses for the jurisdictional objection phase. No further reimbursement was determined regarding the arbitration costs, as neither party had prevailed on its prior requests for interim measures.
Notes: The arbitral tribunal was composed of Lucy Reed (Presiding arbitrator appointed by the Parties, U.S. national), Jean-Christophe Honlet (Claimant’s appointee, French national) and Vaughan Lowe (Respondent’s appointee, British national). The award on jurisdiction of April 6, 2018 is available at https://www.italaw.com/sites/default/files/case-documents/italaw9618.pdf
Pietro Benedetti Teixeira Webber is a final year law student at the Federal University of Rio Grande do Sul, Brazil.