{"id":3796,"date":"2016-08-10T09:37:57","date_gmt":"2016-08-10T14:37:57","guid":{"rendered":"http:\/\/itn.mattrock.ca\/?p=3796"},"modified":"2024-08-09T18:27:08","modified_gmt":"2024-08-09T16:27:08","slug":"transglobal-green-energy-llc-and-transglobal-green-panama-s-a-v-republic-of-panama-icsid-case-no-arb-13-28","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2016\/08\/10\/transglobal-green-energy-llc-and-transglobal-green-panama-s-a-v-republic-of-panama-icsid-case-no-arb-13-28\/","title":{"rendered":"ICSID tribunal upholds Panama\u2019s abuse of process objection; Transglobal to pay arbitration costs and most of Panama\u2019s legal expenses"},"content":{"rendered":"

Transglobal Green Energy, LLC and Transglobal Green Panama, S.A. v. Republic of Panama (ICSID<\/span> Case No. ARB\/13\/28)<\/em><\/h3>\n

In the proceeding brought by Transglobal Green Energy, LLC (a U.S.-based company) and Transglobal Green Panama S.A. (a Panama-based company) against Panama under the United States\u2013Panama bilateral investment treaty (BIT<\/span>), an ICSID tribunal accepted Panama\u2019s abuse of process objection. Pointing out that Transglobal abused the international investment treaty system to bring its claims, the tribunal declined jurisdiction and condemned Transglobal to pay all arbitration costs, as well as most of Panama\u2019s legal fees and expenses.<\/p>\n

As the tribunal accepted Panama\u2019s request to bifurcate proceedings, the award deals solely with jurisdiction and arbitration costs. In fact, as the tribunal decided on the abuse of process objection, it deemed unnecessary to deliberate on Panama\u2019s remaining objections, which were related to absence of investment, waiver of the right to bring a dispute, most-favoured-nation (MFN<\/span>) clause and domestic control of the investment.<\/p>\n

Relevant Facts I: Bajo de Mina concession and Supreme Court decision<\/em><\/h2>\n

Transglobal\u2019s claims arose out of events that date back to 2005. In May that year, La Mina Hydro-Power Corp. (La Mina), a Panamanian company, entered into a Concession Contract with Panama\u2019s agency for regulation of public utilities (in Spanish,\u00a0Autoridad Nacional de los Servicios Publicos<\/em>\u00a0[ASEP]) to design, build and operate a hydroelectric power plant at Bajo de Mina.<\/p>\n

La Mina failed to commence the construction of the power plant within the agreed-upon deadline, so ASEP issued a resolution terminating the Concession Contract. In response, La Mina requested the Supreme Court of Panama to grant injunctive relief against the termination and to review the administrative decision. The Supreme Court denied the request for injunctive relief.<\/p>\n

Pending the Supreme Court\u2019s decision on the review of the termination decision, ASEP entered into a concession contract for the same project with another company, Ideal Panama S.A., which proceeded with the construction of the power plant. Later, in November 2010, the Supreme Court decided that La Mina\u2019s contract with ASEP remained in force and ordered the restitution of the concession to La Mina, which was not immediately executed.<\/p>\n

Relevant Facts II: Transglobal Green Energy enters the scene<\/em><\/h2>\n

Just over a month after the Supreme Court\u2019s ruling, which remained unimplemented, Mr. Julio Lisac, the owner of La Mina, signed a Memorandum of Understanding (MOU) with Transglobal Green Energy (TGGE). In September 2011, both entered into a Partnership and Transfer Agreement (PTA), which provided for the creation of Transglobal Green Energy Panama (TGGE Panama), a special-purpose company to undertake the hydropower project at Bajo de Mina. Importantly, the PTA had the stated purpose of \u201cindividually or jointly look[ing] for and obtaining mechanisms to enable the execution of the November 11, 2011 [sic] Judgment, and enable[ing] the partnership to acquire the concession rights\u201d (para. 85). Shortly thereafter, TGGE Panama was incorporated, with Mr. Lisac and TGGE as sole shareholders. Although TGGE held 70 per cent of shares, the tribunal later found that the voting arrangements and the principle of exclusive execution by Mr. Lisac revealed \u201cMr. Lisac\u2019s intent to remain in\u00a0de facto<\/em>\u00a0control of TGGE Panama (para. 111).<\/p>\n

Mr. Lisac requested the transfer of the Bajo de Mina concession rights to TGGE Panama. Then, on January 2012, before ASEP had decided on the transfer request, the Cabinet Council, a deliberative organ of high-ranking state officials, authorized the administrative rescue (rescate administrativo)<\/em>\u00a0of the concession \u201con grounds of urgent social interest\u201d (para. 69).<\/p>\n

ASEP implemented the administrative rescue of the Concession Contract. Since then, Mr. Lisac has initiated several judicial proceedings to recover the concession rights. On September 19, 2013, the Request for Arbitration was filed with ICSID.<\/p>\n

Transglobal\u2019s abuse of process<\/em><\/h2>\n

The tribunal begun its analysis of jurisdiction by considering the objection based on abuse of process \u201cbecause the existence of abuse of process is a threshold issue that would bar the exercise of the Tribunal\u2019s jurisdiction even if jurisdiction existed\u201d (para. 100).<\/p>\n

Panama asserted that Transglobal \u201cattempted to create artificial international jurisdiction over a domestic dispute [\u2026] by inserting a foreign investor into the ownership of a domestic project, at a time when the project was already embroiled in a domestic dispute\u201d (para. 85). To prove that Mr. Lisac\u2019s dispute with Panama arose before Transglobal\u2019s investment, it listed a number of events, such as ASEP\u2019s 2006 resolution terminating the Concession Contract and the Supreme Court\u2019s 2010 decision. Transglobal did not offer counterarguments to the objection\u2014in fact, it did not submit a counter-memorial on jurisdiction.<\/p>\n

Citing\u00a0Phoenix v. Czech Republic<\/em>, the tribunal stated that \u201cthere is a line of consistent decisions of arbitral tribunals on objections to jurisdiction based on abuse of the investment treaty system\u201d (para. 102). According to this line of cases, transferring a national investment to a foreign company in an attempt to obtain BIT protection to a pre-existing dispute configures abuse of rights and precludes the exercise of jurisdiction.<\/p>\n

In determining whether Mr. Lisac had tried to internationalize his domestic dispute with Panama to bring it under BIT protection, the tribunal noted that the enforcement of the 2010 Supreme Court\u2019s ruling took a prominent place in the PTA signed between Mr. Lisac and TGGE. Indeed, the tribunal indicated that assisting in the enforcement of that judgment was the first obligation undertaken by TGGE under the PTA. Additionally, in the tribunal\u2019s view, the voting arrangement under the PTA revealed \u201cMr. Lisac\u2019s intent to remain in\u00a0de facto<\/em>\u00a0control of TGGE Panama irrespective of the percentage of shares held and at the same time to benefit from the foreign nationality of TGGE for the purpose of pursuing this arbitration\u201d (para. 111).<\/p>\n

In its final remarks about the objection, the tribunal observed that procedural developments exposed an \u201cintimate relationship of the ongoing court proceedings in Panama and this proceeding\u201d (para. 113). Transglobal twice requested the suspension of the arbitration based on developments of the ongoing court proceedings in Panama. According to the tribunal, these suspension requests, made while Transglobal awaited the implementation of the 2010 decision, revealed that it was seeking international remedies for a pre-existing domestic dispute.<\/p>\n

Arbitration costs and legal expenses<\/em><\/h2>\n

In its reasoning on costs, the tribunal acknowledged that, in cases involving abuse of process, \u201ctribunals have tended to decide that claimants should bear the costs of the proceeding, [but] as regards the attorney\u2019s fees and expenses, the record is mixed\u201d (para. 125). To illustrate this divide, it again quoted\u00a0Phoenix<\/em>, in which the claimant was ordered to pay the respondent\u2019s legal fees and expenses, and\u00a0Ren\u00e9e Rose Levy v. Peru<\/em>, in which the claimant was ordered to pay a reasonable\u2014in the tribunal\u2019s assessment\u2014contribution to the respondent\u2019s fees and expenses.<\/p>\n

The tribunal then sided with\u00a0Ren\u00e9e Rose Levy<\/em>, holding that the claimant should bear the costs of proceedings, as well as attorney\u2019s fees and expenses, \u201cprovided that the latter are reasonable\u201d (para. 126).<\/p>\n

Panama had argued that Transglobal\u2019s conduct throughout the arbitration\u2014failing to provide translations of important documents, submitting discrepant documentary evidence and requesting suspensions while aware that Panama would oppose to them\u2014had unnecessarily complicated Panama\u2019s defense. The tribunal considered that Transglobal had a \u201ccavalier attitude\u201d (para. 126) and, taking into account the overall course of proceedings, concluded that Transglobal should bear Panama\u2019s attorneys\u2019 fees and expenses, exception made to some early requests for shifting the costs and provisional measures relating to security for costs that were rejected.<\/p>\n

Panama had also requested that the tribunal, based on its general authority under Article 61(2) of the ICSID Convention<\/span>, ordered that all remaining funds in the administrative account were given to Panama. The tribunal denied this latter request because it understood \u201cit had no authority to issue such an order\u201d (para. 129).<\/p>\n

Notes:\u00a0<\/em>The arbitral tribunal was composed of Andr\u00e9s Rigo Sureda (President appointed by the co-arbitrators, Spanish national), Christoph H. Schreuer (Claimant\u2019s appointee, Austrian national), and Jan Paulsson (Respondent\u2019s appointee, Bahraini, French and Swedish national). The award of June 2, 2016 is available at\u00a0http:\/\/www.italaw.com\/sites\/default\/files\/case-documents\/italaw7336.pdf<\/a>.<\/p>\n

Ina\u00ea Siqueira de Oliveira<\/strong>\u00a0is a Law student at the Federal University of Rio Grande do Sul, Brazil.<\/p>\n

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