ICSID tribunal rejects denial of justice claim against the Republic of Panama
Bridgestone Licensing Services, Inc. and Bridgestone Americas, Inc. v. Republic of Panama, ICSID Case No. ARB/16/34
On August 14, 2020, an ICSID Tribunal examined the merits of the case of an alleged violation of the FET clause contained in Article 10.5.1 of the US–Panama Trade Promotion Agreement (TPA). The tribunal affirmed that both claimants had locus standi to pursue a denial of justice claim, as a component of the FET standard, despite the fact that Bridgestone Americas Inc. (BSAM) was not a party to the original judicial proceedings where the denial of justice allegedly took place. Eventually, however, the tribunal dismissed the claim as per its merit.
Background and claims
The claimants, Bridgestone Licensing Services, Inc (BSLS) and Bridgestone Americas (BSAM), are United States subsidiaries of the Japanese company Bridgestone Japan (BSJ). As such, the Bridgestone Group of Companies is conducting business in the manufacture and sale of tires under the trademarks FIRESTONE and BRIDGESTONE. These trademarks are both registered in Panama. BSLS is the owner of these trademarks and has granted BSAM a licence to use them in Panama. (paras 118-122)
In 2002, Muresa Intertrade S.A. (Muresa) applied to register the RIVERSTONE trademark for tires in Panama. BSJ and BSLS issued proceedings opposing the registration of the RIVERSTONE mark due to the confusion risk arising from its use. This proceeding proved unsuccessful. BSJ and BSLS filed an appeal that was subsequently withdrawn in September 2006.
In September 2007, a distributor of RIVERSTONE tires filed a civil tort claim in Panama against BSJ and BSLS for losses allegedly suffered as a consequence of the Trademark Opposition Proceeding. The claim was dismissed at first instance and on appeal. The decision was then reversed by the Supreme Court, which awarded USD 5 million in damages against BSJ and BSLS (para. 128). The Supreme Court found BSJ and BSLS liable for reckless and bad faith conduct of legal proceedings, which constitutes a civil tort under Article 217 Judicial Code of the Republic of Panama.
The Supreme Court attached great significance to a letter sent from the legal representatives of Bridgestone to Muresa (the Foley Letter) in the finding of liability (para. 411). In the letter, the legal representatives of Bridgestone stated that opposition proceedings were going to be filed in various countries against the registration of the RIVERSTONE brand if Muresa would not abstain from selling the product. The admission and appraisal of this letter as evidence by the Panamanian Supreme Court constituted a main point in the claimants’ argumentation. (paras 474-475)
Tribunal rejects respondent’s objection that claimant had no locus standi to bring a claim of denial of justice
The respondent argued that BSAM lacked locus standi in advancing a claim of denial of justice, given that it was not itself a party to the proceedings in which the denial of justice occurred. The respondent based its submission on, among others, two basic points. First, that the exhaustion of local remedies is a prerequisite for a denial of justice claim and that to exhaust a particular remedy, one necessarily must first pursue it. Second, that if a party declines to pursue a remedy or argument, it could not properly argue a claim of denial of justice (paras 144–148).
The tribunal confirmed that this position of the respondent reflected international law. However, the tribunal clarified that this position could not automatically be applied to a complaint under the applicable investment treaty, which expressly protects “covered investments” and not “investors.” The tribunal pointed at Article 10.5.1 of the TPA, the legal basis of the claimants’ claim, and emphasized that it was dealing with the treatment that should be accorded to the covered “investment” and not to the “investor.” It thus concluded that the relevant issue was not whether BSAM had suffered a denial of justice, but rather whether the investment had been denied fair and equitable treatment (paras 165-169).
Tribunal rejected the claim of denial of justice advanced by the claimants
In assessing the arguments, the tribunal first clarified that it did not purport to exercise an appellate function (para. 410). Thereby, possible deficiencies of application of Panamanian procedural rules did not give rise to a denial of justice claim. The tribunal emphasized only an egregious error of law would amount to, or even contribute to, a denial of justice claim (para. 474).
The claimants’ argument for denial of justice mainly involved (i) the alleged wrongful admission and error of appraisal of the Foley Letter as evidence and (ii) the alleged disregard of res judicata.
With regard to the alleged wrongful admission of evidence, the tribunal made no definitive finding as to whether the Supreme Court was correct, while failing to find evidence of denial of justice; although the tribunal considered that the Supreme Court gave unjustified weight to the Foley letter, it did not in itself constitute a reason for denial of justice (para. 474).
The tribunal also entertained the claimants’ argument that the Supreme Court disregarded res judicata in concluding a bad faith initiation of legal proceedings. The claimants argued that in the Trademark Opposition Proceedings it was already established that the opposition was filed in good faith, which constituted a prerequisite for its admissibility. After examining the Panamanian rule of res judicata, the tribunal concluded that the principle did not apply. It commented, though, that “one might have expected the Supreme Court to remark upon the fact” (para. 483).
The tribunal eventually recognized that a judgment holding BSJ and BSLS liable simply for exercising their procedural right to file an objection to a trademark application would have been startling indeed. Still, the reasoning of the Supreme Court was understandable, despite its possible defects. The tribunal hence dismissed the claims (para. 547).
Notes: The tribunal was comprised of Lord Nicholas Phillips Baron of Worth Matravers (President, UK national), Horacio A. Grigera Naón (appointed by the claimants; Argentine national) and J. Christopher Thomas (appointed by the respondent; Canadian national). The award, dated August 14, 2020, can be found here: https://www.italaw.com/sites/default/files/case-documents/italaw11771.pdf
Marios Tokas is an international lawyer based in Geneva. He is pursuing his Master’s in international law at the Graduate Institute of International and Development Studies. He is an associate research fellow for the Centre for International Sustainable Development Law.