{"id":3415,"date":"2015-08-04T16:55:40","date_gmt":"2015-08-04T21:55:40","guid":{"rendered":"http:\/\/itn.mattrock.ca\/?p=3415"},"modified":"2024-08-09T18:26:19","modified_gmt":"2024-08-09T16:26:19","slug":"png-sustainable-development-program-ltd-v-independent-state-of-papua-new-guinea-icsid-case-no-arb-13-33","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2015\/08\/04\/png-sustainable-development-program-ltd-v-independent-state-of-papua-new-guinea-icsid-case-no-arb-13-33\/","title":{"rendered":"Unanimous ICSID tribunal dismisses expropriation claim due to Papua New Guinea\u2019s lack of written consent to arbitrate"},"content":{"rendered":"

PNG Sustainable Development Program Ltd. v. Independent State of Papua New Guinea, ICSID<\/span> Case No. ARB\/13\/33<\/em><\/h2>\n

In an award dated May 5, 2015, a tribunal at the International Centre for Settlement of Investment Disputes (ICSID) dismissed PNG Sustainable Development Program Ltd.\u2019s (PNGSDP) claim against Papua New Guinea for an alleged unlawful expropriation. It found that Papua New Guinea had not given \u201cconsent in writing\u201d to arbitrate claims under the ICSID Convention<\/span>.<\/p>\n

Background and claims<\/h3>\n

The dispute centered on PNGSDP\u2019s alleged investment in Ok Tedi, an open-pit copper and gold mine located in Papua New Guinea. PNGSDP owned a majority shareholding in the Papua New Guinean company that had a mining lease for the Ok Tedi mine.<\/p>\n

In September 2013, Papua New Guinea adopted the Ok Tedi Tenth Supplemental Mining Agreement, which purported to cancel all shares in the Ok Tedi mine owned by PNGSDP and create new shares to be issued to the State. PNGSDP claimed the enactment of the act amounted to an unlawful expropriation without compensation, and initiated arbitration in December 2013, based on two domestic laws of Papua New Guinea: the 1992 Investment Promotion Act (IPA) and the 1992 Investment Disputes Convention Act (IDCA). It also claimed violations of the fair and equitable treatment standard, the guarantee of free transfers, the full protection and security standard, the national treatment standard, among other breaches of the two statutes.<\/p>\n

Jurisdiction: did Papua New Guinea \u201cconsent in writing\u201d to ICSID arbitration?<\/h3>\n

The threshold issue of PNGSDP\u2019s claim was whether Papua New Guinea had given \u201cconsent in writing\u201d to arbitration, a jurisdictional requirement under Article 25 of the ICSID Convention (para. 44). PNGSDP argued that the requirement was satisfied because IPA Article 39, either on its own or in conjunction with IDCA Article 2, constituted a standing offer by Papua New Guinea to arbitrate investment disputes under ICSID.<\/p>\n

The relevant language of IPA Article 39 states: \u201cThe Investment Disputes Convention Act 1978, implementing the [ICSID Convention], applies, according to its terms, to disputes arising out of foreign investment\u201d (para. 46). IDCA Article 2 states: \u201cA dispute shall not be referred to the Centre [the International Centre for Settlement of Investment Disputes (ICSID)] unless the dispute is fundamental to the investment itself\u201d (para. 47).<\/p>\n

Papua New Guinea argued that neither provision constituted \u201cconsent in writing\u201d under national or international law standards: IPA Article 39 merely stated that the IDCA \u201capplied, according to its terms.\u201d<\/p>\n

The parties disagreed over what interpretive standard the tribunal should use to examine the disputed provisions.<\/p>\n

Papua New Guinea asserted that a literal interpretation of the IPA and IDCA was appropriate under both national and international law and that it required the tribunal to examine the \u201cgrammatical and ordinary meaning of the words\u201d (para. 52). Furthermore, it indicated that the tribunal should adopt a restrictive approach, arguing that a state\u2019s written consent to arbitrate must be \u201cclear and unambiguous\u201d (para. 56).<\/p>\n

PNGSDP countered that the correct interpretative approach of IPA Article 39 was the one outlined in\u00a0SPP v. Egypt<\/em>, which held that jurisdictional instruments should be interpreted \u201cneither restrictively nor expansively, but rather objectively and in good faith\u201d (para. 108). It invoked the\u00a0effet utile\u00a0<\/em>principle of treaty interpretation, which asserts that a text should be read in such a manner that a reason and meaning can be attributed to every word in the text (para. 252). PNGSDP also offered up a \u201cquasi-Vienna\u201d approach, which would allow the tribunal to bring in additional interpretive factors, such as good faith, the object and purpose of Papua New Guinea\u2019s alleged unilateral declaration in its national investment legislation, the circumstances surrounding the declaration, and subsequent state conduct that might indicate its meaning. Again invoking\u00a0SPP<\/em>, PNGSDP also asserted that official investment promotion literature, most notably, the statements found on the websites of Papua New Guinea\u2019s Investment Promotion Authority and its Embassy to the United States, should be used to help interpret national investment legislation.<\/p>\n

The tribunal sided with PNGSDP and agreed with the\u00a0SPP<\/em>\u00a0decision that jurisdictional instruments should be interpreted objectively and neutrally, rather than expansively or restrictively. It determined that it was well settled that there is no presumption against a finding of jurisdiction under the ICSID Convention, and no greater requirement of proof of an agreement to arbitrate. It concluded that the standard of proof is in most cases \u201cthe preponderance of the evidence or a balance of probabilities\u201d (para. 255). The tribunal also \u201cconsidered the legislative history of th[e] provisions and the investment promotion materials as part of the relevant context in which the legislation was adopted and understood\u201d (para. 274).<\/p>\n

According to the tribunal, where domestic legislation has both national and international effects, the legislative provisions are of a \u201chybrid\u201d nature and, therefore, must be interpreted from a hybrid perspective, taking into account both domestic and international law. Where the two methods conflict, the international law principles will generally prevail, though it is a case-specific determination. The tribunal also agreed with PNGSDP that the\u00a0effet utile\u00a0<\/em>principle of statutory construction was applicable when interpreting \u201chybrid\u201d provisions. It concluded that, although a state\u2019s interpretation of its own legislation \u201cis unquestionably entitled to considerable weight, it cannot control the Tribunal\u2019s decision as to its own competence\u201d (para. 273).<\/p>\n

After examining IDA Article 39, the tribunal concluded that the provision\u2019s \u201cnatural and ordinary meaning is a declaration that the terms\u2014all of the terms\u2014of the IDCA apply to foreign investments\u201d (para. 286). As such, Article 39 could not be credibly read to satisfy the specific requirement for written consent to ICSID jurisdiction under Article 25 of the ICSID Convention.<\/p>\n

Turning to IDCA Article 2, the tribunal determined that the provision clearly contemplated that future consent was required for submission of claims to ICSID. It then held that there was no other provision in the IDCA that would constitute written consent to ICSID jurisdiction.<\/p>\n

To interpret the provisions, the tribunal declined to use the cases provided by the parties, namely\u00a0Brandes Investment Partners v. Venezuela<\/em>,\u00a0CEMEX v. Venezuela<\/em>,\u00a0ConocoPhillips v. Venezuela<\/em>\u00a0and\u00a0SPP v. Egypt<\/em>, because they dealt with different language in dissimilar legislative provisions, and therefore provided no material benefit to interpreting what constituted consent in writing in this case.<\/p>\n

Although the tribunal determined that the\u00a0effet utile<\/em>\u00a0principle was applicable to interpreting the provisions, it did not accept PNGSDP\u2019s argument that IDA Article 39 should be interpreted to \u201ctrigge[r] the actual application of the ICSID Convention to this dispute\u201d (para. 306). Though the tribunal agreed that meaning should be given to the words of states, and interpretations of treaties that would render particular meanings or provisions redundant or meaningless should be disfavored, it agreed with Papua New Guinea that\u00a0effet utile<\/em>\u00a0did not authorize it to re-write legislative provisions. The party\u2019s intent and good faith are primary, while\u00a0effet utile<\/em>\u00a0\u201cplays a subsidiary role in determining intent\u201d (para. 307). The tribunal distinguished states\u2019 unilateral declarations from cases involving negotiated, bilateral treaties, stating that in some cases a state\u2019s legislation may be \u201cmerely confirmatory\u201d (para. 309). Here, the tribunal reasoned that the objective of the IPA was to detail the state\u2019s comprehensive legislative regime addressing foreign investments. For that reason, \u201crecording the continued force and effect of a prior legislative enactment, for the benefit of readers (including investors and courts), serves a useful purpose\u201d (para. 312).<\/p>\n

As a result, the tribunal determined that the language of IPA Article 39 even when read together with IDCA Article 2 was insufficient to establish \u201cconsent in writing\u201d on behalf of Papua New Guinea to arbitrate claims under ICSID. The tribunal dismissed the case for lack of jurisdiction and further declined to consider other jurisdictional objections. Each party was ordered to bear its own litigation costs and split the costs of arbitration.<\/p>\n

\n

Notes<\/h3>\n

The tribunal was composed of Gary Born (President appointed by the Chairman of the Administrative Council, U.S. national); Michael Pryles (claimant\u2019s appointee, Australian national) and Duncan Kerr (respondent\u2019s appointee, Australian national). The award is available at\u00a0http:\/\/www.italaw.com\/sites\/default\/files\/case-documents\/italaw4257.pdf<\/a>.<\/p>\n

\n

Author<\/h3>\n

Marquita Davis<\/strong> is a Geneva International Fellow from University of Michigan Law and an extern with IISD<\/span>\u2019s Investment for Sustainable Development Program.<\/p>\n