{"id":2116,"date":"2012-10-30T04:10:11","date_gmt":"2012-10-30T09:10:11","guid":{"rendered":"http:\/\/itn.mattrock.ca\/?p=2116"},"modified":"2012-12-10T07:43:53","modified_gmt":"2012-12-10T13:43:53","slug":"news-in-brief-9","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2012\/10\/30\/news-in-brief-9\/","title":{"rendered":"News in Brief"},"content":{"rendered":"

South Africa begins withdrawing from EU<\/span>-member BITs<\/strong><\/p>\n

South Africa has terminated its bilateral investment treaty with Belgium and Luxembourg, and intends to phase out other treaties with European countries.<\/p>\n

In a September 7th letter to Belgium’s Ambassador in Pretoria, South Africa’s Minister of International Relations denunciated the treaty, in accordance with the treaty\u2019s termination clauses (most termination clauses in BITs allow either contracting party to give a written notice of termination after a specific number of years).<\/p>\n

The treaty\u2019s sunset clause guarantees that existing investments will continue to be covered by the treaty for another ten years.<\/p>\n

ITN<\/span> understands that \u00a0at least six more letters will be sent to European countries. In total, South Africa has 13 treaties with EU member states.<\/p>\n

South Africa\u2019s weighs risks and benefits of BITs<\/em><\/p>\n

In recent years South Africa has critically reviewed its investment treaty practices. That scrutiny came in the wake of a 2007 claim by several Italian citizens and a Luxembourg corporation filed a claim under the Belgium-Luxembourg BIT<\/span>. The claimants charged that the 2004 Mineral and Petroleum Resources Development Act (MPRDA)\u2014part of South Africa\u2019s efforts to increase participation by historically disadvantaged South Africans in the mining industry\u2014amounted to the expropriation their mineral rights.<\/p>\n

While the case was settled in 2010, it stirred the South African government to reconsider its investment treaty policies. A report issued by the Department of Trade and Industry (DTI) was particularly critical of South Africa\u2019s investment treaties.<\/p>\n

\u201cExisting international investment agreements are based on a 50-year-old model that remains focused on the interests of investors from developed countries. Major issues of concern for developing countries are not being addressed in the BIT negotiating processes,\u201d wrote the DTI.[1]<\/a><\/p>\n

More recently, South African Trade Minister Rob Davies has said that the South African Cabinet was largely supportive of the DTI\u2019s conclusions.<\/p>\n

“Cabinet understood that the relationship between BITs and FDI<\/span> was ambiguous at best, and that BITs pose risks and limitations on the ability of the government to pursue its Constitution-based transformation agenda,\u201d said Davies at an UNCTAD<\/span><\/span> event in Geneva on 24 September 2012.<\/p>\n

Davies has stated that the Cabinet ordered that South Africa\u2019s first-generation treaties\u2014agreed to shortly after the 1994 transition to democracy\u2014should be \u201creviewed with a view to termination.\u201d<\/p>\n

China and Canada conclude BIT negotiations<\/strong><\/p>\n

China and Canada have concluded negotiations over a bilateral investment treaty (termed a foreign investment promotion and protection agreement in Canada) after 18 years and 22 rounds of formal negotiations.<\/p>\n

The treaty, published in late September, must still be ratified by both parties. It is China\u2019s most comprehensive investment treaty to date, but also features notable deviations from Canada normal practice in recent years.<\/p>\n

Canada\u2019s relatively robust transparency provisions for dispute settlement have been watered down. While Canada\u2019s recent investment treaties require the publication of a range written materials related to arbitration proceedings \u2014 with legitimately confidential text redacted \u2014 the Canada-China agreement only demands the publication of final awards. Other documents \u2014 such as notices of dispute and pleadings \u2014 will be made public at the discretion of the disputing state. The disputing host state would also have to approve public hearings.<\/p>\n

A non-disputing party (amicus curiae) may be allowed to submit written submissions at the tribunal\u2019s discretion if it \u201chas a significant interest in the arbitration.\u201d<\/p>\n

Canada\u2019s recent treaties have also provided national treatment for the establishment of investment \u2014i.e., allowing the foreign investor the same rights to set up an investment as domestic investors. The treaty with China, however, only provides Most-Favoured Nation treatment with respect to establishment.<\/p>\n

Notably, the treaty does not place further restrictions on performance requirements, as has been the case in previous agreements with Canada. The treaty only reaffirms the state parties\u2019 obligations under the WTO<\/span> Agreement on Trade-Related Investment Measures<\/em>.<\/p>\n

The provisions on capital flows allow the state parties to restrict transfers in circumstances of serious balance of payment difficulties, so long as a number of conditions are met. These include that they are of limited duration, and applied equitably without discrimination.<\/p>\n

Foreign direct investment between the China and Canada are modest, but have climbed steadily over in recent years. The stock of Canadian Direct Investment in China was valued at nearly C$4.5 billion at the end of 2011. The stock of FDI into Canada from China was C$10.9 billion at the end of 2011.<\/p>\n

The treaty is available here: http:\/\/www.international.gc.ca\/trade-agreements-accords-commerciaux\/agr-acc\/fipa-apie\/china-text-chine.aspx?lang=en&view=d<\/a><\/p>\n

ICSID<\/span> secretariat publishes background paper on annulment<\/strong><\/p>\n

The ICSID secretariat has published a background paper on annulment procedures in response to a letter from the Philippine Office of the Solicitor General. The letter expressed concern over an ICSID ad hoc<\/em> committee\u2019s decision to annul a 2007 award that favoured the Philippines (Fraport AG v. the Philippines).<\/p>\n

Characterizing the annulment decision as \u201cseriously flawed\u201d and taken in excess of the ad hoc<\/em> Committee\u2019s authority under the ICSID Convention<\/span>, the Solicitor General urged the ICSID Administrative Council to issue guidelines on annulment for use by ad hoc<\/em> Committees in order to ensure fair and effective annulment proceedings.<\/p>\n

The ICSID paper is intended to assist State-parties to the ICSID Convention in deciding whether to look into the matter raised by the Philippines.<\/p>\n

The Solicitor General cites statistics claiming that 11 out of 41 annulment applications have resulted in annulment and that eight out of the 11 annulments were rendered in the past 10 years.<\/p>\n

The background paper, in addition to providing a substantial review of the annulment mechanism and past annulment decisions, emphasized the necessity of placing the numbers into proper perspective. The paper explains that throughout its 47-year history, ICSID has:<\/p>\n[r]egistered 344 cases and issued 150 awards. Of these, 6 awards have been annulled in full and another 6 awards have been partially annulled. In other words, only 4 percent of all ICSID awards have led to full annulment and 4 percent have led to partial annulment.<\/p>\n

The 2007 award dismissed Fraport\u2019s claims in connection with its investment in the Ninoy Aquino International Airport Terminal 3 Project after the tribunal concluded that Fraport had made its investments illegally, and thus was not entitled to protection under the Germany\u2013Philippines BIT.<\/p>\n

The award was subsequently annulled by an ad hoc<\/em> Committee on the ground that there had been a serious departure from a fundamental rule of procedure.<\/p>\n

Experts file amicus briefs in support of BP Group PLC<\/strong><\/p>\n

Arbitration experts from the United States have filed amicus briefs in support of a petition for review filed by BG Group PLC (BG) with the US Supreme Court.<\/p>\n

The arbitrators critique a January 2012 decision by a US Court of Appeals for the DC Circuit. That decision set aside an UNCITRAL<\/span> award following the court\u2019s determination that BG had failed to seek relief in the local Argentinean courts as a precondition to international arbitration under the Argentina-UK BIT.<\/p>\n

The amicus fear that the appellate court\u2019s decision would adversely impact on the attractiveness of the United States as a seat of international arbitration.\u00a0 One brief authored by the American Arbitration Association characterizes the decision as \u201ca dramatic and unprecedented instance of \u2026 judicial intrusion.\u201d<\/p>\n

Another brief prepared by George Bermann and a team from law firm Hughes Hubbard & Reed finds fault with what the appellate court called a \u201ctemporal limitation\u201d (i.e., by requiring that an investor initially seek recourse, for eighteen months, in domestic court as a pre-condition to arbitration) before the UNCITRAL rules are \u201ctriggered.\u201d The UNCITRAL rules allow arbitrators the authority to rule on objections to their own jurisdiction, counter the amicus.<\/p>\n

The Bergmann-Hughes Hubbard brief says the appellate court decision \u201cshows why threshold and merits questions alike are better dealt with by arbitrators,\u201d and urges the Supreme Court to seize the opportunity \u201cto clarify the confused state of United States law\u201d concerning the difference between substantive and procedural arbitrability.<\/p>\n

The vacated UNCITRAL award obligated Argentina to pay BG more than US$185 Million in damages after the tribunal had found that Argentina had breached the fair and equitable treatment standard. More information on the appellate court\u2019s decision can be found here https:\/\/www.IISD<\/span><\/span><\/span>.org\/itn\/2012\/04\/13\/awards-and-decisions-7\/<\/a><\/p>\n

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[1]<\/a> \u201cSouth African trade department critical of approach taken to BIT-making\u201d, Damon Vis-Dunbar, Investment Treaty News, 15 July 2009, https:\/\/www.iisd.org\/itn\/2009\/07\/15\/south-african-trade-department-critical-of-approach-taken-to-bit-making\/<\/p>\n<\/div>\n<\/div>\n