US$50 billion awards against Russia in Yukos cases are set aside by Dutch court
In a judgment dated April 20, 2016, the District Court of The Hague, in the Netherlands, set aside awards that had ordered Russia to pay US$50 billion to the shareholders of Yukos, a bankrupt oil company. An English translation of the judgment is available online, and a summary of the awards, issued in July 2014 by a tribunal at the Permanent Court of Arbitration (PCA), is available at the ITN website.
The Dutch court found that the PCA tribunal lacked jurisdiction under the Energy Charter Treaty (ECT) to arbitrate the cases against Russia. In particular, it noted that Russia had signed but never ratified the ECT, and that the Russian parliament had rejected its ratification. According to the court, “based only on the signature of the ECT, the Russian Federation was not bound by the provisional application of the arbitration regulations of Article 26 ECT.”
The court also found that Russian law prohibits bringing disputes of a public law nature to international arbitration without legislative approval. As the court understood that the Yukos case centred on a challenge to tax measures imposed by Russia, and as the ECT was not ratified, the court concluded that the dispute could not have been brought to arbitration.
The decision could make it more difficult to enforce the awards in many countries. However, counsel for the Yukos shareholders, Yas Banifatemi of Shearman & Sterling, stressed that “enforcement courts will be at liberty to assess the award for themselves, irrespective of what the Dutch courts have to say on the matter.” There are pending enforcement proceedings in Belgium, France, Germany, the United Kingdom, and the United States.
TTIP draft to be prepared by July; ISDS being built based on both EU and U.S. proposals
Officials from the European Union and the United States gathered in Brussels for the 12th round of negotiations over the Transatlantic Trade and Investment Partnership (TTIP) from February 22 to 26.
At the end of the meeting, chief EU negotiator Ignacio Bercero and chief U.S. negotiator Dan Mullaney announced that a consolidated draft would be prepared by July 2016, with brackets only for the “most sensitive issues.” According to Mullaney, finalizing TTIP in 2016 would allow the partners to be “the standard setters rather than the standard takers” in international trade. Two other negotiating rounds are planned before the summer break. The 13th round took place in New York, from April 25 to 29.
Among the topics discussed in February was the investor–state dispute settlement (ISDS) mechanism. Bercero highlighted that the EU is proposing an Investment Court System (ICS) composed by a standing tribunal and an appeals mechanism. But the United States is not ready to abandon its long-standing ISDS model recently reproduced in the TPP. Bercero said the partners are “working on the basis of textual proposals from both sides” and trying to find convergence.
TTIP faces wide opposition, particularly in Europe. Over 100,000 Dutch citizens have signed a petition demanding a referendum on the agreement. The German Advisory Council on the Environment (SRU), which advises the federal government, indicated that the agreement could endanger the environment and democracy. In Spain, the deputy president of the General Council of Attorneys, Oriol Rusca, declared that TTIP is a threat to all citizens.
China–United States BIT: ISDS to be included; ongoing negotiations on negative lists1
Since 2008, China and the United States have undergone 24 negotiation rounds for a bilateral investment treaty (BIT). On March 3, 2016, U.S. Trade Representative Michael Froman noted that the “high standard” BIT being negotiated is “in many respects similar to the investment chapter of TPP.”
Echoing Froman’s statement, on March 23, Chen Deming—China’s former Minister of Commerce—announced that the two countries have resolved some key roadblocks in the negotiations and agreed to rely on international arbitration to resolve investor–state disputes. However, Chen also acknowledged that some major conflicts remain, mainly over the negative list on market access.
Both parties hope to conclude negotiations before the end of President Obama’s term, and preferably in August or September, before the U.S. presidential election enters into a critical stage.
Three mining disputes: the first investment disputes against Colombia come to light2
On February 19, 2016, Cosigo Resources (Canada) and Tobie Mining and Energy (United States) submitted an arbitration request against Colombia under the Free Trade Agreements (FTAs) concluded by Colombia with the United States and Canada. The claimants argue that their investment in the mining concession of Taraira South was expropriated fraudulently and without compensation. The concession is located in the Amazon region, within the Yaigojé Apaporis Natural Park, created by the Colombian government by means of a resolution. The claimant seeks US$16.5 billion for expropriation and US$11 million for the costs incurred to acquire the concession.
The Canadian company Eco Oro Minerals also announced a dispute with Colombia on its web page in March, alleging a delay in the delimitation of the Páramo de Santurbán environmental protected area, where mining activities had been prohibited, and claiming that its investments suffered from adverse effects as a result. The company warned that, if no agreement were reached during the next six months, it would submit the dispute to international arbitration under the Colombia–Canada FTAs.
Finally, on March 16, the Swiss giant Glencore submitted a third claim against Colombia at the International Center for Settlement of Investment Disputes (ICSID), under the 2006 Colombia–Switzerland bilateral investment treaty. The mining company claims that the Colombian government has cancelled its concession agreement that enabled the expansion of activities in the Calenturitas and La Jagua mines.
Canada–European Union CETA re-concluded in February to incorporate EU ICS proposal
Responding to EU requests, Canadian and EU officials reopened negotiations of the Comprehensive Economic and Trade Agreement (CETA) concluded in 2014 to reformulate the agreement’s investor–state dispute settlement (ISDS) clause. Re-concluded on February 29, the CETA now includes a standing tribunal and an appeals mechanism, in line with the EU ICS proposal, also included in the recent EU–Vietnam free trade agreement (FTA). The CETA parties also state the shared objective of establishing a permanent multilateral investment court.
Second ICSID claim filed against Uruguay; Philip Morris decision still pending
On March 24, the International Centre for Settlement of Investment Disputes (ICSID) registered (Case No. ARB/16/9) a request for arbitration filed by U.S. telecom company Italba against Uruguay. The company alleges that Uruguay terminated a wireless spectrum licence in violation of the fair and equitable treatment standard under the Uruguay–United States bilateral investment treaty (BIT). This is the second ICSID case against Uruguay. The first was initiated by Philip Morris in 2010 (Case No. ARB/10/7); a hearing on the merits was held in late October 2015.
Singapore International Arbitration Centre releases investment arbitration rules3
On February 1, 2016, the Singapore International Arbitration Centre (SIAC) released draft rules tailored to investment arbitration (Draft SIAC Rules), to be finalized in May following public consultation.
Similarly to the Rules on Transparency in Treaty-based Investor–State Arbitration adopted by the United Nations Commission on International Trade Law in 2013 (UNCITRAL Transparency Rules), Rule 28 of the Draft SIAC Rules contains specific provisions on the participation of non-disputing parties. A non-disputing party that is a party to the contract or treaty has a prima facie right to make certain written submissions. However, submissions by a non-disputing party that is not a party to the contract or treaty are subject to the tribunal’s approval, depending on the confidentiality of proceedings, the extent that such submissions will bring a different perspective to relevant legal or factual matters, and whether the non-disputing party has a “sufficient interest” in the proceedings.
The Draft IA Rules do not directly address the issue of transparency, however. Unlike the UNCITRAL Transparency Rules, the Draft IA Rules do not contemplate either publication of information upon commencement of arbitral proceedings or publication of arbitration-related documents. They also do not provide that arbitration proceedings be made public.
The Draft SIAC Rules mirror SIAC’s commercial arbitration procedure in certain respects, for instance: upon receipt of a notice of arbitration, the SIAC’s Court of Arbitration must appoint an arbitrator within 28 days (Rules 6 and 7); and, there are strict timelines for arbitral challenges to be made and ruled on (Rule 12). Also, upon express agreement of the parties, the Draft SIAC Rules provide for SIAC to appoint an “emergency arbitrator” to determine interim relief prior to the constitution of the main tribunal.
Finally, the Draft SIAC Rules address third-party funding: a tribunal may order disclosure of a third-party funding arrangement (Rule 23), and may consider any such arrangements in apportioning arbitration costs (Rule 32).
The Draft SIAC Rules are available at http://www.siac.org.sg/images/stories/articles/rules/IA Rules (rev 20160115).pdf.
Notes: The editorial team acknowledges, with many thanks, the contributions by Joe Zhang (1), Carolina Muñoz Bernal (2), and Matthew Levine (3).