{"id":352,"date":"2008-10-28T05:30:00","date_gmt":"2008-10-28T10:30:00","guid":{"rendered":"http:\/\/itn.mattrock.ca\/2008\/10\/28\/socit-gnrale-passes-jurisdictional-hurdle-in-dispute-with-dominican-republic-controversy-erupts-over-press-release\/"},"modified":"2013-02-08T05:28:26","modified_gmt":"2013-02-08T11:28:26","slug":"soci-233-t-233-g-233-n-233-rale-passes-jurisdictional-hurdle-in-dispute-with-dominican-republic-controversy-erupts-over-press-release","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2008\/10\/28\/soci-233-t-233-g-233-n-233-rale-passes-jurisdictional-hurdle-in-dispute-with-dominican-republic-controversy-erupts-over-press-release\/","title":{"rendered":"Soci\u00e9t\u00e9 G\u00e9n\u00e9rale passes jurisdictional hurdle in dispute with Dominican Republic; controversy erupts over press release"},"content":{"rendered":"

By Fernando Diaz Cabrera
\n28 October 2008<\/strong><\/p>\n

Lawyers for the Dominican Republic have accused a subsidiary of the French financial services company Soci\u00e9t\u00e9 G\u00e9n\u00e9rale of breaking confidentiality rules in an ad-hoc<\/em> arbitration when it issued a press release announcing that the tribunal had ruled in its favour by rejecting the Dominican Republic\u2019s objections to jurisdiction.<\/p>\n

A 3 October 2008 press release by TCW Group, a subsidiary of Soci\u00e9t\u00e9 G\u00e9n\u00e9rale,\u00a0states that the Tribunal had \u201crejected the objections raised by the Dominican Government and allowed US$ 680 million in claims against the Republic to proceed to a final hearing and an award on the merits of the dispute.\u201d<\/p>\n

Counsel for the Dominican Republic, Peter Thomas, partner at Simpson Thacher & Bartlett LLP, says the press release, at a minimum,\u00a0violated the spirit of Article 32(5) of UNCITRAL<\/span> Rules by providing details of the confidential award.<\/p>\n

Article 32(5) states that an \u201caward may be made public only with the consent of both parties.\u201d<\/p>\n

Mr. Thomas told ITN<\/span> that the press release was an incomplete and misleading summary of the award, given that the company failed to mention two important objections by the Dominican Republic that were upheld by the tribunal. As a result, the Dominican Republic\u00a0wanted to\u00a0publish the award in order to make the full facts known. Lawyers for the Dominican Republic have voiced their displeasure to the tribunal.<\/p>\n

For their part, counsel for Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, Christopher Dugan and Joseph Profaizer of Paul, Hastings, Janofsky & Walker LLP, said that Article 32(5) prohibits only the publication of the award itself, rather than references of the sort provided in the press release.<\/p>\n

Moreover, Mr. Dugan argues that even if the Dominican Republic’s interpretation of Article 32(5) is valid, it was in fact the Dominican Republic that first went public with details of the award. He alleges that government officials told people outside of government that they had won the decision, and that it was in response to this that TCW issued its press release.<\/p>\n

In an interview with ITN, David Caron, co-author of \u201cthe UNCITRAL Arbitration Rules, A Commentary\u201d and C. William Maxeiner, Distinguished Professor of Law at Berkeley, said they do not view Article 32(5) by itself as prohibiting a press release reporting the basic decision of a tribunal. However, if an UNCITRAL tribunal did find a violation of the rule, it could order the offending party to refrain from repeating their actions, explained Mr. Caron.<\/p>\n

Soci\u00e9t\u00e9 G\u00e9n\u00e9rale v. Dominican Republic arbitration proceeds to merits stage following decision on jurisdiction<\/em><\/p>\n

As reported previously in ITN*, TCW and its affiliates launched two arbitration claims against the Dominican Republic in 2007, seeking US$ 680 million as compensation in each case.<\/p>\n

One claim was brought under the 2003 Dominican Republic-France bilateral investment treaty by TCW\u2019s parent company, Soci\u00e9t\u00e9 G\u00e9n\u00e9rale. The other claim was launched by TCW and one of its subsidiaries under the Central America-Dominican Republic-United States\u00a0Free Trade Agreement (CAFTA-DR).<\/p>\n

Among TCW\u2019s claims were that the Dominican Republic had expropriated its investments in the electricity distributer EDE Este, as a result of the country\u2019s alleged failure to allow for electricity rate increases and to control rampant electricity theft.
\nIn November of 2007 the Dominican Republic objected to the tribunal\u2019s jurisdiction in respect of the BIT<\/span> claim, which is governed by the UNCITRAL rules of arbitration.<\/p>\n

The Dominican Republic raised four objections:\u00a0(i) that Soci\u00e9t\u00e9 G\u00e9n\u00e9rale had not made an investment that could be protected by the BIT because there was no contribution to the Republic’s development as the preamble to the BIT envisages; (ii) that the facts alleged by the claimant, even if true, did not amount to an\u00a0expropriation; (iii) that the events that gave rise to the claim occurred before the BIT came into effect in January of 2003; (iv) and that the dispute occurred before the French company Soci\u00e9t\u00e9 G\u00e9n\u00e9rale\u00a0acquired the investment\u00a0November of 2004, and therefore the claims are not protected by the Dominican Republic-France BIT.<\/p>\n

In a decision on jurisdiction handed down in late September,\u00a0 the tribunal rejected the first objection and held that despite the indirect and complicated structure of Soci\u00e9t\u00e9 G\u00e9n\u00e9rale\u2019s investment, which involves several subsidiaries and joint ventures, and which was acquired for a nominal fee of $2 dollars, it did fall under the BIT\u2019s broad definition of investment.<\/p>\n

In rejecting the second objection, the tribunal held that if proven at the merits phase, the facts alleged by Soci\u00e9t\u00e9 G\u00e9n\u00e9rale were capable of resulting in a breach of the BIT, and should therefore be adjudicated at that phase.<\/p>\n

The tribunal\u2019s decision on the third objection was mixed. It accepted the Dominican Republic\u2019s view that events occurring before the BIT\u2019s entry into force could not be considered as violations due to the principle of non-retroactivity. But the tribunal held that these events could be considered as\u00a0continuous acts that may have resulted\u00a0in violations after the BIT’s entry into force.<\/p>\n

Finally, the tribunal again accepted the Dominican Republic\u2019s argument that Soci\u00e9t\u00e9 G\u00e9n\u00e9rale could not make claims for acts and events occurring before it became involved in the investment in November of 2004.\u00a0It also limited the claim to the portion of the investment that belonged to Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, thereby excluding from its jurisdiction over 50% of\u00a0the investment which it determined was owned by American investors.<\/p>\n

The case will now move on to the merits phase with the temporal and nationality limitations imposed by the tribunal.<\/p>\n

The TCW press release is available from Market Watch at: http:\/\/www.marketwatch.com\/news\/story\/international-tribunal-allows-us680-million\/story.aspx?guid={93B0BED5-E791-4A9C-8788-D0587DF3551E}&dist=hppr<\/a><\/p>\n

The decision on jurisdiction in Soci\u00e9t\u00e9 G\u00e9n\u00e9rale v. Dominican Republic<\/em> is available on the Investment Treaty Arbitration website at: http:\/\/ita.law.uvic.ca\/documents\/SGJurisdiction.pdf<\/a><\/p>\n