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IIA Issues Note No. 1/2013: Recent Developments in Investor-state Dispute Settlement

Note by UNCTAD, 2013

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This issue note analyses the recent developments in investor state dispute settlement (ISDS). As the public discourse about the usefulness and legitimacy of the ISDS mechanism is gaining momentum, reform options with respect to their feasibility, expected effectiveness and implementation methods remains wanting. The note advocates a multilateral policy dialogue to help to develop a consensus about the preferred course for reform and ways to put it into action.

Highlights
• In2012,58newcaseswereinitiated,whichconstitutesthehighestnumberofknown


treaty-baseddisputeseverfiledinoneyearandconfirmsthatforeigninvestorsare
increasinglyresortingtoinvestor-Statearbitration.


• In 66% of the new cases, respondents are developing or transition economies.
Whilethenumberofcasesinitiatedbydevelopingcountryinvestorshasincreased,
themajorityofnewcases(64%)stilloriginatefromdevelopedcountries.


• Claimantshavechallengedabroadrangeofgovernmentmeasures,includingthose
relatedtorevocationsoflicences,breachesofinvestmentcontracts,irregularities
in public tenders, changes to domestic regulatory frameworks, withdrawal of
previouslygrantedsubsidies,directexpropriationsof investments, taxmeasures
andothers.


• Atleast42arbitraldecisionswereissuedin2012,includingdecisionsonobjections
totribunal’sjurisdiction,meritsofthedispute,compensationandapplicationsfor
annulmentofanarbitralaward.31ofthesedecisionsareinthepublicdomain.


• In70%ofthepublicdecisionsaddressingthemeritsofthedispute,investors’claims
wereaccepted,at least inpart.Ninepublicdecisionsrendered in2012awarded
damagestotheclaimant,includingthehighestawardinthehistoryofISDS(US$
1.77billion)inOccidental v. Ecuador,acasearisingoutofaunilateraltermination
bytheStateofanoilcontract.


• Forthefirsttimeintreaty-basedISDSproceedings,anarbitraltribunalaffirmedits
jurisdictionoveracounterclaimlodgedbyarespondentStateagainsttheinvestor.


• Thetotalnumberofknowntreaty-basedcasesreached514in2012,andthetotal
numberofcountriesthathaverespondedtooneormoresuchcaseincreasedto95.


• Theoverallnumberofconcludedcasesreached244.Ofthese,approximately42%
weredecidedinfavouroftheStateandapproximately31%infavouroftheinvestor.
Approximately27%ofthecasesweresettled.


• ThepublicdiscourseabouttheusefulnessandlegitimacyoftheISDSmechanism
isgainingmomentum,especiallygiventhattheISDSmechanismisontheagenda
in numerous bilateral and regional international investment agreements (IIA)
negotiations.


• While ISDS reform options abound, their systematic assessment including with
respect to their feasibility, expected effectiveness and implementation methods
remainswanting.Amultilateralpolicydialoguecouldhelptodevelopaconsensus
aboutthepreferredcourseforreformandwaystoputitintoaction.


Recent Developments in investoR-
state Dispute settlement (isDs)


updated for the multilateral Dialogue on investment, 28-29 may 2013


no. 1
May 2013


IIA
ISSUES NOTE


U n i t e d n at i o n s C o n f e r e n C e o n t r a d e a n d d e v e l o p m e n t


Note: This report may be freely cited provided appropriate acknowledgement is
given to UNCTAD and UNCTAD’s website is mentioned (www.unctad.org/diae).


This publication has not been formally edited.




2


I. Statistical Update: 2012


A. New claims


In 2012, the number of known treaty-based investor-State dispute settlement
(ISDS)casesfiledunderinternationalinvestmentagreements(IIAs)grewbyatleast
58.1Thisconstitutesthehighestnumberofknowntreaty-baseddisputeseverfiled
inoneyear.


Figure 1. Known ISDS cases


Source: UNCTAD


Ofthe58newdisputes(seeannex1),39werefiledwiththeInternationalCentre
for Settlement of InvestmentDisputes (ICSID) (ofwhich seven cases are under
theICSIDAdditionalFacilityrules),sevenunderthearbitrationrulesoftheUnited
Nations Commission on International Trade Law (UNCITRAL) and another five
under theStockholmChamberofCommerce (SCC).The InternationalChamber
ofCommerce (ICC)and theCairoRegionalCentre for InternationalCommercial
Arbitration (CRCICA) received one new case each. One case was an ad hoc
arbitration.Forfivecases,theapplicablearbitrationrules/venuesareunknown.2


In38ofthe58newcases,respondentsaredevelopingortransitioneconomiesand
in15casestheyaredevelopedcountries.Forfivecasestherespondentcountryis
unknown.In2012,Venezuela,forthesecondconsecutiveyear,respondedtothe
largestnumberofcases(9);followedbyPakistan(4);Algeria,EgyptandHungary
(3each).In2012,Belgium,EquatorialGuinea,RepublicofKoreaandLaosfaced
theirfirstISDSclaims.


1 This Note does not cover cases that are exclusively based on investment contracts (State contracts) or national investment
laws and cases where a party has so far only signalled its intention to submit a claim to ISDS, but has not yet commenced the
arbitration.


2 Information about 2012 claims has been compiled on the basis of public sources. We are grateful for additional information
received from the ICSID Secretariat, the Permanent Court of Arbitration, the Arbitration Institute of the Stockholm Chamber of
Commerce, the Cairo Regional Centre for International Commercial Arbitration and the London Court of International Arbitration.




3


Of the58newcases,37werefiledby investors fromdevelopedcountries.Out
of these 37 cases, 27were filed against developing countries or economies in
transition;theremainingtencaseswerefiledbyinvestorsfromdevelopedcountries
againsthostdevelopedcountries.2012witnessedan increase in thenumberof
casesfiledbyinvestorsfromdevelopingcountries(15,comparedtoninein2011).
Forsixcasestheinvestor’shomecountryremainsunknown.


2012 saw at least eight new intra-EU investment disputes, i.e. claims by EU
investorsagainstEUMemberStates,whichbrought theoverallnumberofsuch
claimsto59.Oftheeightnewclaims,twowerebroughtpursuanttotheEnergy
CharterTreaty(towhichallMemberStatesareparty)andtheothersixpursuantto
provisionsofintra-EUbilateralinvestmenttreaties(BITs).3Hungarywasthemost
popularrespondent,havingtocopewiththreenewintra-EUclaims.


Investors have challenged a broad range of government measures, including
those related to revocations of licences (e.g., in mining, telecommunications,
tourism),allegedbreachesofinvestmentcontracts,allegedirregularitiesinpublic
tenders,changestodomesticregulatoryframeworks(gas,nuclearenergy,marketing
of gold, currency regulations),withdrawal of previously granted subsidies (solar
energy),directexpropriationsof investments,taxmeasuresandothers (seealso
SectionIIIbelow).


B. Total claims by end 2012


The totalnumberofknown treaty-basedcases rose to514by theendof2012
(figure2).4Sincemostarbitrationforumsdonotmaintainapublicregistryofclaims,
thetotalnumberofcasesislikelytobehigher.


Figure 2. Known ISDS cases (cumulative, as of end 2012)


Source: UNCTAD


Themajority of cases have been brought under the ICSIDConvention and the
ICSIDAdditionalFacilityRules(314cases)andtheUNCITRALRules(131).5Other


3 These are BITs between Hungary and the Netherlands, Hungary and the UK, Hungary and Portugal, Bulgaria and the Netherlands,
Italy and Romania, Latvia and Lithuania.


4 Due to new information becoming available for 2011 and earlier years, the number of total known IIA-based ISDS cases at end
2011 was revised upwards to 456 from 450, as reported in UNCTAD’s 2012 IIA Issue Note No. 1, available at http://unctad.org/
en/PublicationsLibrary/webdiaeia2012d10_en.pdf.


5 A number of cases under the UNCITRAL rules are administered by the Permanent Court of Arbitration (PCA). By the end of 2012,
the total number of PCA-administered ISDS cases amounted to 85, of which 47 were pending. Only 18 of all PCA-administered
ISDS cases are public. Source: the Permanent Court of Arbitration International Bureau.




4


venueshavebeenusedonlyrarely,with27casesattheStockholmChamberof
CommerceandeightwiththeInternationalChamberofCommerce(seefigure3).


Figure 3. Distribution of known cases among
arbitral institutions/rules


(total as of end 2012)


Intotal,overthepastyearsat least95 governmentshaverespondedtooneor
moreinvestmenttreatyarbitration:61developingcountries,18developedcountries
and16countrieswitheconomiesintransition(seeannex2).Argentinacontinuesto
bethemostfrequentrespondent(52cases)followedbyVenezuela(34),Ecuador
(23)andMexico(21).


Figure 4. Most frequent respondents in ISDS cases
(total as of end 2012)


Investor-Statearbitrationshavebeeninitiatedmostfrequentlybyclaimants from
theUnitedStates(123cases,or24%orallknowndisputes),theNetherlands(50
cases),theUnitedKingdom(30)andGermany(27).


The three investment instruments most frequently used as a basis for ISDS
claims have been NAFTA (49 cases), the Energy Charter Treaty (29) and the
Argentina-UnitedStatesBIT(17).




5


C. Outcomes


In2012,ISDStribunalsrenderedatleast 42 decisions in investor-State disputes
(seeannex3),31ofwhichareinthepublicdomain(atthetimeofwriting).6Ofthe
31publicdecisions,twelveaddressedjurisdictional issues,withsevendecisions
upholding the tribunal’s jurisdiction (at least inpart) andfivedecisions rejecting
jurisdiction.17decisionsonthemeritswererenderedin2012,withtwelveaccepting
–atleastinpart–theclaimsoftheinvestors,andfivedismissingalloftheclaims.
Comparedtopreviousyears,thisrepresentsahigherpercentageofrulingsagainst
theState.


Ofthetwelve decisions finding State’s liability,sixfoundaviolationoftheFET
provision,fiveoftheexpropriationprovision,twooftheumbrellaclauseandone
of the prohibition of certain performance requirements. At least nine decisions
renderedin2012awardedcompensationtotheinvestor,amongthemthehighest
award in the history of ISDS7 (some decisions on liability have postponed the
questionofdamagestothenextphaseofthearbitration).


Twodecisions on the application forannulment were issued in 2012by ICSID
adhoccommittees,withonepartiallyannulling thearbitralawardandtheother
dismissingallclaimsforannulment.


In2012, individualarbitrators issuedseven dissenting opinions,up fromsix in
2011andthreein2010.The2012dissentingopinionstouchuponabroadnumber
of issues, including themost favorednation (MFN) clause, theumbrella clause,
the definition of investment, expropriation, fair and equitable treatment, non-
conformingmeasuresandtheassessmentofdamages.


Inadditionto investor-Statecases,onearbitralawardwas issuedinState-State
proceedingsbetweenEcuadorandtheUnitedStatesbroughtundertheEcuador-
UnitedStatesBIT.8Thisawardisnotpublic.


2012arbitraldevelopmentsbroughttheoverall number of concluded casesto
244.9Outof these,approximately42%weredecided in favourof theStateand
approximately31%infavouroftheinvestor.Approximately27%ofthecaseswere
settled.Insettledcases,specifictermsofsettlementtypicallyremainconfidential.10


Figure 5. Results of concluded cases
(total as of end 2012)


6 There may have been other decisions issued in 2012 whose existence is not known due to the confidentiality of the dispute
concerned.


7 See section III.C “Compensation” below.
8 Republic of Ecuador v. United States of America, PCA Case No. 2012-5, Award, 29 September 2012.
9 A number of arbitral proceedings have been discontinued for reasons other than settlement (e.g., due to the failure to pay the


required cost advances to the relevant arbitral institution). Status of some other proceedings is unknown. Such cases have not
been counted as “concluded”.


10 Some settlements have been made public, which allowed for their discussion and analysis (for example, Vattenfall AB, Vattenfall
Europe AG, Vattenfall Europe Generation AG v. Federal Republic of Germany (ICSID Case No. ARB/09/6).


In favour of State
42%


In favour of investor
31%


Settled
27%




6


II. 2012 Decisions – An Overview11


A. Jurisdictional and admissibility issues


On the scope of the ISDS clause,thetribunalinIberdrola v. Guatemalainterpreted
thereferenceintheGuatemala-SpainBITtodisputes“concerning matters governed
by this Agreement”. The tribunal found that the treaty does not give “general
consent to submit any kind of dispute or difference related to investments […], but
only those related to violations of substantive provisions of the treaty itself.”12


On the jurisdictional threshold of a prima facie case,thetribunalinIberdrola v.
Guatemalanotedthataninternationaltribunalhasjurisdictiononlyiftheclaimant
establishes“that the facts it alleged, if proven, could constitute a violation of the
Treaty.” The tribunal accepted the respondent’s objection to jurisdiction with
respecttotheallegedbreachesoftheprovisionsonexpropriation,fairandequitable
treatmentand fullprotectionandsecurity since theclaimanthadnotpresented
“clear and concrete reasoning”onwhatwere,initsopinion,theactsofauthorityof
Guatemalathat,ininternationallaw,couldconstituteviolationsoftheGuatemala-
SpainBIT.13


Similarly, the tribunal inChevron v. Ecuador II noted that, for purposes of the
respondent’sjurisdictionalobjections,ithadtodecidewhetherornot,ifthefacts
allegedbytheclaimantsareassumedtobetrue,thechallengedconductwouldbe
capableofconstitutingbreachesoftheBIT.Thetribunalnotedthattheassumption
of truth could be reversed if such factual pleadings were “incredible, frivolous,
vexatious or otherwise advanced by the Claimant in bad faith.”14Furthermore,the
tribunaldecidedthatrequiringtheclaimanttoestablishitscasewitha51%chance
ofsuccess (i.e.,onabalanceofprobabilities)wouldconstitutetoohighaprima
facie standardandthattheclaimant’scaseshouldbe“decently arguable”orhave
“a reasonable possibility as pleaded”.15


On denial of benefits,thetribunalinPac Rim Cayman v. El Salvador determined
thatthetime-limitbywhichtherespondentshoulddecidetodenybenefitsunder
CAFTA Article 10.12.2 is set by ICSID Arbitration Rule 41. Rule 41 addresses
objectionsthatthedisputeisnotwithinthejurisdictionoftheCentreornotwithin
thecompetenceofthetribunal.Itestablishesthatthoseobjections“shall be made
as early as possible”and“no later than the expiration of the time limit fixed for the
filing of the counter-memorial”.16Thisrepresentsadeparturefromearlierdecisions,
whichheldthataStatemaynotdenybenefitsofthetreatytotheinvestorafterthe
claimwasbrought.17


The tribunal in Pac Rim Cayman v. El Salvador also held, with respect to the
requirementofsubstantialbusinessactivitiesinthedenial-of-benefitsclause,that
thisrequirement“relates not to the collective activities of a group of companies,
but to activities attributable to the ‘enterprise’ itself”.18Althoughitconsideredthata


11 While the monitor aims to highlight key findings stemming from the decisions investment treaty tribunals rendered in 2012, it is
not a comprehensive review. Texts of the relevant arbitral awards can be found at www.italaw.com.


12 Iberdrola Energía S.A. v. Republic of Guatemala (ICSID Case No. ARB/09/5), Award, 17 August 2012, para. 306.
13 Ibid.paras. 323-373.
14 Chevron Corporation and Texaco Petroleum Corporation v. The Republic of Ecuador (UNCITRAL, PCA Case No. 2009-23), Third


Interim Award on Jurisdiction and Admissibility, 27 February 2012 (Chevron v. Ecuador II), para. 4.6.
15 Ibid., para. 4.8.
16 Pac Rim Cayman LLC v. Republic of El Salvador (ICSID Case No. ARB/09/12), Decision on the Respondent’s Jurisdictional


Objections, 1 June 2012, para. 4.85.
17 Plama Consortium Limited v. Bulgaria (ICSID Case No. Arb/03/24), Decision on Jurisdiction, 8 February 2005, paras. 161-162;


Veteran Petroleum Limited (Cyprus) v. The Russian Federation (UNCITRAL, PCA Case No. AA 228), Interim Award on Jurisdiction
and Admissibility, 30 November 2009, paras. 514-515.


18 Pac Rim Cayman LLC v. Republic of El Salvador (ICSID Case No. ARB/09/12), Decision on the Respondent’s Jurisdictional
Objections, 1 June 2012, para. 4.66.




7


traditionalholdingcompanymaycarrysubstantialbusinessactivitiesunderCAFTA
Article10.12.2,19afterfindingthattheclaimant’sactivitiesasaholdingcompany
wereprincipallytoholdassets,namelythesharesofitssubsidiariesinElSalvador,
andnoactivitiesweredirectedatitssubsidiaries’businessactivitiesintheUnited
States,thetribunalconcludedthattheclaimantdidnothavesubstantialactivities.20


On the definition of “investment” for purposes of establishing the scope of
application of (as well as the jurisdiction under) an investment treaty, the
tribunalinCaratube International Oil Company (CIOC) v. Kazakhstanacceptedthe
respondent’sobjectionstojurisdictionhavingestablishedthattheUSnationalin
questiondidnotcontroltheclaimantcompany.The“investment”wasunderstood
by the tribunal as “an economic arrangement requiring a contribution to make
profit, and thus involving some degree of risk”.The tribunal found“no plausible
economic motive”toexplaintheUSnational’sinvestmentinCIOC,noevidenceof
acontributionofanykind(theUSnational’spersonalguaranteesforaloanreceived
by the company from a Lebanese bank were not considered as constituting a
sufficientcontributioninthiscase)oranyriskundertakenbytheUSnational,and
nocapitalflowbetweentheUSnationalandCIOC.21


On the requirement that the dispute concerns “an investment of a national
or company of the other contracting party” for purposes of establishing the
tribunal’s jurisdiction under an investment treaty, the tribunal inStandard v.
Tanzania found that an indirect chain of ownership linking the British claimant
to debt by a Tanzanianborrower did not satisfy the requirement in the Treaty’s
arbitrationprovision.Thetribunalreasonedthat,despitethefactthattheclaimant
ownedasubstantialequityinterestinaHongKongcompany,whichinturnheld
TanzaniandebtacquiredfromMalaysianfinancialinstitutions,itcouldnotbesaid
thatthoseloansweretheclaimant’sinvestments.22Thetribunalnotedthatinorder
to “benefit from Article 8(1)’s arbitration provision, a claimant must demonstrate
that the investment was made at the claimant’s direction, that the claimant funded
the investment or that the claimant controlled the investment in an active and direct
manner.”23


On the definition of “investment” for purposes of establishing jurisdiction
under Article 25 of the ICSID Convention,decisionsrenderedin2012seemto
focustheirattentionprincipallyonthreefactors:contribution,riskandduration.For
example,thetribunalin Electrabel v. Hungarynotedthat“[w]hile there is incomplete
unanimity between tribunals regarding the elements of an investment, there is a
general consensus that the three objective criteria of (i) a contribution, (ii) a certain
duration, and (iii) an element of risk are necessary elements of an investment.”The
tribunalalsonotedthat,while theeconomicdevelopmentof thehostStatewas
oneoftheobjectivesoftheICSIDConvention(andadesirableconsequenceofthe
investment),24itwas“not necessarily an element of an investment.”25


19 Ibid.,para. 4.72.
20 Ibid.,paras. 4.74, 4.78.
21 Caratube International Oil Company LLP v. The Republic of Kazakhstan (ICSID Case No. ARB/08/12), Award, 5 June 2012,


para. 455.
22 Standard Chartered Bank v. The United Republic of Tanzania (ICSID Case No. ARB/10/12), Award, 2 November 2012,


paras. 196-197.
23 Ibid., para. 230.
24 The investment’s contribution to the economic development of the host State is one of the elements of the jurisdictional test


established in Salini v. Morocco (ICSID Case No ARB/00/04), Decision on Jurisdiction, 23 July 2001.
25 Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Decision on Jurisdiction, Applicable Law and Liability, 30


November 2012, para. 5.43.




8


Similarly, in the assessment of the tribunal inDeutsche Bank v. Sri Lanka, the
development of ICSID arbitral practice suggested that only three criteria were
relevantforthepurposeofdefininganinvestment,namelycontribution,riskand
duration. On the contrary, a contribution to the economic development of the
hostStateandaregularityofprofitandreturnshouldnotbeusedasadditional
benchmarks.Thetribunalalsonotedthat“the existence of an investment must be
assessed at its inception and not with hindsight.”26


Applyingthesethreecriteriatothehedgingagreementatissue,27thetribunalfound
that all of themwere fulfilled. Inparticular, it found that thehedgingagreement
involvedacontributiontoSriLanka(notingthatacontributioncantakeanyform
and it is not limited to financial terms but also includes know-how, equipment,
personnel and services).28 The tribunal also found that the investmentwasof a
certain duration, even if the commitment was originally for twelvemonths and
despite the fact that it was terminated after 125 days (noting that short-term
projects are notdeprivedof “investment” status solelyby virtueof their limited
durationandthatdurationistobeanalysedinlightofallthecircumstancesandof
theinvestor’soverallcommitment).29


AsimilarapproachwasalsofollowedbythetribunalinQuiborax v. Bolivia,according
towhichthecommitmentofresources,riskanddurationareallpartoftheordinary
definitionofan investment,whileacontribution to thedevelopmentof thehost
State, conformitywith the lawsof thehostState and respect of good faith are
not.30Inapplyingtheelementofcontributionorcommitmentofresourcestoone
oftheChileanshareholdersofthelocalcorporationholdingminingconcessionsin
Bolivia,thetribunalagreedwiththedistinctionmadebytherespondent“between
the objects of an investment, ‘such as shares or concessions [...] and the action
of investing’”.31 Inparticular, thetribunalconsideredthat“[w]hile shares or other
securities or title may be the legal materialization of an investment, mere ownership
of a share is, in and of itself, insufficient to prove a contribution of money or assets”.32
In that case, therewas no evidence of an original contribution (i.e., an original
paymentfortheshare)norofasubsequentcontributionofthatshareholdertothe
exploitationoftheminingconcessions.


On the definition of “investor” for purposes of establishing the jurisdiction
under an investment treaty, the tribunal in Pac Rim Cayman v. El Salvador
had to consider if the claimant had abused the provisions of CAFTA and the
internationalarbitrationprocessbychangingPacRimCayman’snationalityfrom
theCaymanIslandstoaCAFTAParty(USA)inordertobringapre-existingdispute
toarbitration.33Thetribunalopinedthatthedividinglineindeterminingwhethera
changeofnationalitycanbecomeanabuseofprocessoccurs“when the relevant
party can see an actual dispute or can foresee a specific future dispute as a very
high probability and not merely as a possible controversy [...]. The answer in each
case will, however, depend upon its particular facts and circumstances...”34Inthe
presentcasethetribunalfoundthatsincethebasisoftheclaim(ElSalvador’sde


26 Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka (ICSID Case No. ARB/09/2), Award, 31 October 2012, para.
295.


27 The hedging agreement at issue was concluded to protect Sri Lanka against the impact of rising oil prices.
28 Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka (ICSID Case No. ARB/09/2), Award, 31 October 2012, para.


297.
29 Ibid., paras. 303-304.
30 Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia (ICSID Case No. ARB/06/2),


Decision on Jurisdiction, 27 September 2012, para. 219.
31 Ibid., para. 233.
32 Ibid.
33 Pac Rim Cayman LLC v. The Republic of El Salvador (ICSID Case No. ARB/09/12), Decision on the Respondent’s


Jurisdictional Objections, 1 June 2012, paras. 2.16-17.
34 Ibid., para. 2.99.




9


factobanonminingin2008)occurredafter PacRimCayman’schangeofnationality
in2007,thedisputecouldnothavebeenforeseenbytheclaimant.35Therefore,it
rejectedrespondent’sobjectiontojurisdiction.


On the (6 month) amicable settlement requirement, the tribunal inTeinver v.
Argentina found that Article X(1) of the Argentina-Spain BIT did not impose a
requirementontheclaimanttogiveformalnoticetotherespondentStateofthe
existenceofadisputeinordertocommencesettlementnegotiations.36


On the treaty requirement that litigation before domestic courts be pursued
for at least 18 months as a precondition for international arbitration, the
tribunal inTeinver v. Argentina foundthatas longasthe localproceedingsdealt
withthesamesubject-matterastheonebroughtto internationalarbitration, the
treatyrequirementismet.Equally,thetribunalnotedthattheunderlyingBITpermits
eitherparty(includingtherespondentState)toinitiatethedomesticlitigationforthe
recourse-to-local-courtsrequirementtobefulfilled.37


ThetribunalinICS Inspection v. Argentinafoundthatitlackedjurisdictiondueto
theclaimant’s failuretocomplywiththemandatory18-monthrecourse-to-local-
courtsrequirementsetforthinArticle8oftheArgentina-UKBIT.Initsreasoning,
the tribunal noted that the trend in public international law (as evidenced for
exampleintherecentdecisionoftheICJinthe Georgia v. Russiacase38)hasclearly
favouredthestrictapplicationofproceduralprerequisites.39Thetribunalalsoheld
thatthe18-monthrecourse-to-local-courtsrequirementconstitutesaconditionto
therespondentState’sconsenttoarbitration.40Moreover,thetribunaldecidedthat
itcouldnotignorethe18-monthrecourse-to-local-courtsrequirementonthebasis
that the litigationwouldbe futileor inefficient.While the tribunal found that the
futilityhadnotbeendemonstrated,thetribunalstressedthatitcouldnot“create
exceptions to treaty rules where these are merely based upon an assessment of the
wisdom of the policy in question, having no basis in either the treaty text or in any
supplementary interpretive source, however desirable such policy considerations
might be seen to be in the abstract.”41


ThetribunalinDaimler v. Argentina tookasimilarviewofthe18-monthrecourse-
to-local-courts requirement set forth in Article 10 of the Argentina-Germany
BIT. According to the tribunal, “since the 18-month domestic courts provision
constitutes a treaty-based pre-condition to the Host State’s consent to arbitrate, it
cannot be bypassed or otherwise waived by the Tribunal as a mere ‘procedural’ or
‘admissibility-related’ matter”.42


On the legality of claimant’s investment, the tribunal in Teinver v. Argentina
rejectedtherespondentState’sobjectiontojurisdictionbasedonthedefinitionof
investmentinArticle I(2)oftheArgentina-SpainBIT,whichrequiresinvestmenttobe
“acquired or effected in accordance with the legislation of the country receiving the
investment”.Accordingtothetribunal,theTreatymadeclearthatthecriticaltime
periodfordetermininganinvestment’slegalityisthetimewhentheinvestmentwas
made,andtherelevantlawforpurposesofdeterminingwhethertheinvestmentwas


35 Ibid.,para. 2.109.
36 Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic  (ICSID Case


No. ARB/09/1), Decision on Jurisdiction, 21 December 2012, para. 112.
37 Ibid., paras. 130-136.
38 Case concerning Application of the International Convention on the Elimination of All Forms of Racial Discrimination


(Georgia v. Russian Federation) (International Court of Justice), Decision on Preliminary Objections, 1 April 2011,
paras. 133-135.


39 ICS Inspection and Control Services Limited (United Kingdom) v. The Republic of Argentina (UNCITRAL, PCA Case No. 2010-9),
Award on Jurisdiction, 10 February 2012, para. 250


40 Ibid., paras. 258-262.
41 Ibid., paras. 267-269.
42 Daimler Financial Services AG v. Argentine Republic (ICSID Case No. ARB/05/1), Award, 22 August 2012, para 194.


Both the ICS Inspection and the Daimler tribunals were chaired by Professor Pierre Marie Dupuy.




10


legallymadeisthelawofthehostState.43Thetribunalrejectedtherespondent’s
objectionasitfailed“to demonstrate that claimants, as a factual matter, committed
illegalities in the process of acquiring their investment in the Argentine Airlines.”44


TheSAUR v. Argentinacaseaddressedadifferentfacetoftheissueof“illegality”.
TheapplicableArgentina-FranceBITdidnotcontainanexplicitrequirementthat
investments bemade in accordancewith the legislation of the host State. The
tribunalheld,however,thattheprincipleoflegalityandgoodfaithexistsregardless
of whether the treaty expresses it in explicit terms. In the tribunal’s view, this
principlewouldpreclude investorswhoengage in “serious violation of the legal
order”ofthehostStatefrombenefittingfromtreatyprotection.45Onthefactsofthe
case,however,thetribunaldidnotfindsuchviolationsonthepartoftheclaimant.


On the question of whether the claimant’s sale of the investment affects
jurisdiction, in Daimler Financial Services  AG  v. Argentine Republic, Argentina
contestedthetribunal’sjurisdictiononthegroundthattheclaimant,DaimlerFinancial
Services,hadsolditssharesintheharmedsubsidiary,DaimlerChryslerServices
Argentina,totheclaimant’sparentcompany,DaimlerChryslerAGStuttgart,before
thefilingofthearbitration.46Thetribunaldidnotacceptthisargumentholdingthat
ICSIDclaimswere“at least in principle separable from their underlying investments”
and thus the claimant’s ICSID claims “were [not] necessarily and automatically
transferred along with the shares by operation of law.”Instead,thetribunalstated
thatanyqualifyinginvestorwhosuffereddamagesasaresultofthegovernmental
measure,atthetimethosemeasuresweretaken,shouldretainstandingtobring
aclaim,providedtheydidnototherwiserelinquishtheirrighttothatclaim.47The
tribunal noted further that thequestionof the ultimatebeneficiary of the award
wasnotrelevanttothejurisdictionofthetribunal,butshouldbeaddressedatthe
damagesphase.48


On the claimant’s transfer of rights to a third-party funder,thetribunalinTeinver
v. Argentina noted that “international case law has consistently determined that
jurisdiction is generally to be assessed as of the date the case is filed”.49Accordingly,
since theclaimants transferred their rightsor interests in this case to the third-
party funderafter initiating thearbitration, the tribunal rejected the respondent’s
objectiontojurisdiction.50


On the relevance of European Union (EU) law for purposes of establishing the
jurisdiction under the Energy Charter Treaty (ECT),thetribunalinElectrabel v.
HungaryrejectedthesubmissionsputforwardbytheEuropeanCommissionasa
non-disputingparty.Thelattercontendedthatthecasewas“an intra-EU dispute”
betweenaBelgianinvestorandanEUMemberState,governedbyEUlaw,which
shouldbedecidedbyCommunitycourtsandnotbyan international tribunal. In
dismissingthesearguments,thetribunalrecognizedthespecialstatusofEUlaw
operatingasabodyofsupranationallawwithintheEUandtheroleoftheCourtof
JusticeoftheEUasthearbiterandgate-keeperofEUlaw.However,thetribunal
statedthat,whileitwasrequiredtointerpret(andapply)EUlawtothedisputeat


43 Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic  (ICSID Case
No. ARB/09/1), Decision on Jurisdiction, 21 December 2012, paras. 318-323.


44 Ibid., para. 324.
45 SAUR International SA v. Republic of Argentina (ICSID Case No. ARB/04/4), Decision on Jurisdiction and Liability, para. 308.
46 Daimler Financial Services AG v. Argentine Republic (ICSID Case No. ARB/05/1), Award, 22 August 2012, para. 105.
47 Ibid., para. 145.
48 Ibid, paras. 147-156. The Tribunal noted that “in the event that some future tribunal should find itself faced with a parallel claim


by [DaimlerChrysler AG Stuttgart], that tribunal would have ample legal tools at its disposal to prevent any double recovery
against the Respondent arising out of the same set of facts and circumstances as the present claim.” Ibid.


49 Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic  (ICSID Case
No. ARB/09/1), Decision on Jurisdiction, 21 December 2012, para. 255.


50 Ibid, para. 259. See Renta 4 v. Russia for the implication of a third-party funding arrangement to the question of the award of
legal costs (below).




11


hand,itwasnotrequiredtoadjudicateuponthevalidityofEUlaw.51Thetribunal
explainedfurtherthattheclaimantwasnotbringingacaseagainsttheCommunity
andwasnotchallengingaCommunitymeasureand that theRespondentState
consentedintheECTtoarbitrationundertheICSIDConvention.52


B. Substantive issues


On the most-favoured-nation (MFN) clause as it applies to jurisdictional
matters, several decisions rendered in 2012 continue to show a significant
divergencebetweendifferenttribunalsandamongarbitratorssittingonthesame
tribunal.Forexample,themajorityofthetribunalinTeinver v. Argentinaconcluded
thattheclaimantcouldrelyontheMFNclausefoundintheArgentina-SpainBITto
makeuseofthe(morefavourable)disputeresolutionprovisionscontainedinArticle
13oftheArgentina-AustraliaBIT.53Thetribunalnotedthatthebroad“all matters”
languageoftheMFNclausewasunambiguouslyinclusive.54


Ontheotherhand,thetribunalinICS Inspection v. ArgentinafoundthattheMFN
clauseinArticle3oftheArgentina-UKBITdidnotapplyinsuchawayastopermit
the claimant to avail itself of thedispute resolutionprovisionsof theArgentina-
LithuaniaBIT.The tribunalfirstofallnoted that “a State’s consent to arbitration
shall not be presumed in the face of ambiguity [and] where a claimant fails to
prove consent with sufficient certainty, jurisdiction will be declined.”55 Secondly,
according to the tribunal, the term “treatment”, in the absence of any contrary
stipulationinthetreatyitself,wasmostlikelymeantbythetwoContractingParties
toreferonlytothe legal regimetoberespectedbythehostState inconformity
withitsinternationalobligations,conventionalorcustomary,whilethesettlement
ofdisputesremainedanentirelydistinctissue,coveredbyaseparateandspecific
treatyprovision.56Thirdly, the reference to “treatment in its territory” in theMFN
clause clearly imposed a territorial limitation, which consequently excluded
internationalarbitrationproceedingsfromthescopeoftheMFNclause.57Finally,on
thebasisoftheaggregatecomparisonoftheentiredisputesettlementmechanism
inthetwotreatiesatissue(Argentina-UKandArgentina-LithuaniaBITs),thetribunal
concludedthatLithuanianinvestorswerenotnecessarilyaccordedmorefavourable
treatmentbyArgentinaascomparedtotheUKinvestor.58


Similarly,themajorityofthetribunalinDaimler v. Argentinadeniedtheuseofthe
MFNclausetocircumventthelocallitigationrequirementintheArgentina-Germany
BIT. Themajority determined that the languageof theArgentina-GermanyBIT’s
MFNclausewasterritoriallylimited,that“treatment”wasintendedbytheparties
toreferonlytotreatmentoftheinvestment,andthattheBITdidnotextendMFN
treatmentto“all matters”subjecttotheBIT.59Thisdecisionisnoteworthy,notonly


51 Ibid, paras. 4.197-4.198.
52 Ibid, paras. 5.33-5.37.
53 In contrast to Article X of the Argentina-Spain BIT, Article 13 of the Argentina-Australia BIT provides neither the 6-month waiting


period requirement nor the 18-month recourse-to-local-courts requirement.
54 Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic  (ICSID Case


No. ARB/09/1), Decision on Jurisdiction, 21 December 2012, para. 186.
55 ICS Inspection and Control Services Limited (United Kingdom) v. The Republic of Argentina (UNCITRAL, PCA Case No. 2010-9),


Award on Jurisdiction, 10 February 2012, para. 280.
56 Ibid, para. 296.
57 Ibid, at para. 296.
58 Ibid, paras. 319-323. Unlike the Argentina-UK BIT, the Argentina-Lithuania BIT did not contain the 18-month recourse-to-local-


courts requirement. However, it included a 6-month waiting period requirement. The tribunal reasoned that: “Although there are
costs and delay involved in litigating before the Argentine courts if this fails to achieve a resolution, in many circumstances, this
may be more favourable than direct access to international arbitration after only six months of amicable negotiations.” (Ibid., para.
323.)


59 Daimler Financial Services AG v. Argentine Republic (ICSID Case No. ARB/05/1), Award, 22 August 2012, paras. 224,
230-231, 236.




12


becauseofthestrongdissentbyoneofthearbitrators,60butparticularlybecause
oneofthetwoarbitratorsinthemajorityofthetribunalwroteaconcurringstatement
withregardtotheMFNissue.Inhisstatement,thearbitratorexplainedhisreasons
for subscribing to the award inDaimler, the result ofwhich differs from that of
theearlier Siemens case(basedonthesameapplicableBIT), inwhichthesame
arbitratorhadparticipated.61


On the application of MFN to substantive treaty obligations,thetribunalinEDF
v. ArgentinaconcludedthattheMFNclauseintheapplicableArgentina-FranceBIT
permittedrecoursetothe“umbrella”clausefound inArgentina’sBITswithother
countries.Inthetribunal’sview,toignoretheMFNclauseinthiscasewouldpermit
morefavourabletreatmentofinvestorsprotectedunderArgentina’sBITswiththird
countries,whichisexactlytheresultthattheMFNclauseisintendedtoprevent.62


On the fair and equitable treatment (FET) clause,decisions rendered in2012
confirmthevarietyofapproachesthat investmenttribunalstake inapplyingone
ofthemostimportantprovisionsinIIAs.WhilethetribunalinDeutsche Bank v. Sri
LankanotedthattheFETclauseintheGermany-SriLankaBITwasintendedasan
autonomousstandard,thetribunalrecognizedthat“the actual content of the Treaty
standard of fair and equitable treatment is not materially different from the content
of the minimum standard of treatment in customary international law, as recognised
by numerous arbitral tribunals and commentators.”63


Borrowing from the decision inWaste Management II, the tribunal distilled the
standardtoinclude:(i)protectionoflegitimateandreasonableexpectationswhich
have been relied upon by the investor to make the investment; (ii) good faith
conduct,althoughbadfaithonthepartoftheStateisnotrequiredforitsviolation;
(iii)conductthatistransparent,consistentandnotdiscriminatory,thatis,notbased
onunjustifiabledistinctionsorarbitrary;(iv)conductthatdoesnotoffendjudicial
propriety,thatcomplieswithdueprocessandtherighttobeheard.64Havingfound
impropermotives, bad faith, lack of transparency, due process, and excess of
powers,thetribunalconcludedthatSriLankahadbreachedtheFETstandard.65


InthecontextofdeterminingthecontentoftheFETstandard,thetribunalinBosh
International v. Ukraine agreedwiththeviewofthetribunalinBayindir v. Pakistan,
whichstated thatunless therearecompelling reasons to thecontrary, tribunals
oughttofollowsolutionsestablishedinaseriesofconsistentcases,comparableto
thecaseathand.66TheBosh InternationaltribunaladoptedthereadingoftheFET
standardfromtheLemire v. Ukrainedecision.67Accordingly, inordertoestablish
abreachoftheFETstandard,theactionoromissionbytheStateneedstoviolate


“a certain threshold of propriety”andamongtherelevantfactorstobeconsidered
thetribunalreferredtothehostState’sspecificrepresentationstotheinvestor,lack


60 Ibid, Dissenting Opinion of Judge Charles N. Brower, 15 August 2012.
61 Ibid, Opinion of Professor Domingo Bello Janeiro, 16 August 2012.
62 EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic (ICSID Case


No. ARB/03/23), Award, 11 June 2012, para. 932.
63 Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka (ICSID Case No. ARB/09/2), Award, 31 October 2012, paras.


418-419. Also in SAUR v. Argentina, the tribunal the discussion about whether the autonomous FET standard
was different from the minimum standard of treatment of aliens under customary international law “dogmatic and
conceptualist”. For the tribunal, the treatment required by both standards was the same. See SAUR International SA v.
Republic of Argentina (ICSID Case No. ARB/04/4), Decision on Jurisdiction and Liability, paras. 491-494.


64 Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka(ICSID Case No. ARB/09/2), Award, 31 October 2012, para.
420.


65 Ibid, para. 491.
66 Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine (ICSID Case No. ARB/08/11), Award, 25 October


2012, para. 211.
67 Joseph Charles Lemire v. Ukraine (ICSID Case No ARB/06/18), Decision on Jurisdiction and Liability, 14 January 2010, para.


284.




13


ofdueprocessortransparency,harassment,coercion,abuseofpower,badfaith,
arbitrariness,discriminationorinconsistency.68


ThetribunalinOccidental v. Ecuadornotedthat“the obligation for fair and equitable
treatment has on several occasions been interpreted to import an obligation of
proportionality.”69 The tribunal there was called upon to determine whether the
Government’sterminationoftheinvestor’sconcession(duetotheinvestor’sfailure
tonotifythegovernmentofapartialtransferofitsrights,whichwasinbreachof
theconcessionagreement)representedabreachoftheFETclause.Followinga
detailedexaminationofthecircumstancesofthecase,thetribunalconcludedthat
EcuadorhadbreachedtheFETclauseasthepricepaidbytheclaimants–total
loss of an investmentworthmany hundreds ofmillions of dollars –was out of
proportion to thewrongdoing,andsimilarlyoutofproportion to the importance
andeffectivenessofthe“deterrence message”,whichtheRespondentmighthave
wishedtosendtothewideroilandgascommunity.70


The tribunal inSwisslion v. Macedonia deemed it unnecessary to engage in an
extensivediscussionoftheFETstandardandlimiteditselftosubscribe“to the view
expressed by certain tribunals that the standard basically ensures that the foreign
investor is not unjustly treated, with due regard to all surrounding circumstances,
and that it is a means to guarantee justice to foreign investors.”71 The tribunal
foundabreachoftheFETstandardasitdeterminedthatthehostStatefailed“to
engage with the investor on a timely basis and deal forthrightly with it”72andwas
“motivated to subject Swisslion to additional administrative proceedings outside of
the contractual litigation”.73Whilethetribunalnotedthatitsfindingswere“a close
call”,italsoconcludedthatthebreachwasnot“de minimis”(i.e.,notinsignificant).74


CitingtherecentdecisioninImpregilo v. Pakistan,75thetribunalinBureau Veritas &
BIVAC v. Paraguay determinedthatinordertosucceedinaclaimallegingviolation
oftheFETclause,theclaimantmustshowthat“the conduct of Paraguay reflects
an act of ‘puissance publique’, that is to say ‘activity beyond that of an ordinary
contracting party’.”76Thetribunal inBureau Veritas foundthatParaguayhadnot
availeditselfofthekindsofpowersthatarenormallyavailabletoasovereignand
not available to the ordinary contracting party. It noted that “[n]o legislation or
regulatory acts have been adopted, no police powers used, no judgment of any
court has been ignored.”77


Recent decisions also appear to attribute different relevance to the investor’s
legitimate expectations. The tribunal in Electrabel v. Hungary noted what it
considered awidely accepted view, namely, that the “most important function”
of theFETstandard istheprotectionofthe investor’sreasonableand legitimate


68 Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine (ICSID Case No. ARB/08/11), Award, 25 October
2012, paras. 212-217. The tribunal eventually rejected the claimant’s FET claims.


69 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador (ICSID Case
No. ARB/06/11), Award, 5 October 2012, para. 404.


70 Ibid, para. 450.
71 Swisslion DOO Skopje v. The Former Yugoslav Republic of Macedonia (ICSID Case No.  ARB/09/16), Award, 6 July 2012,


para. 273.
72 Ibid, para. 289.
73 Ibid, para. 296.
74 Ibid, para. 300.
75 Impregilo S.p.A. v. Islamic Republic of Pakistan(ICSID Case No. ARB/03/3), Decision on Jurisdiction, 22 April 2005.
76 Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. The Republic of Paraguay (ICSID Case No.


ARB/07/9), Further Decision on Objections to Jurisdiction, 9 October 2012, para. 211.
77 Ibid, para. 241. However, while it concluded that, at this point in time, Paraguay has not, by its failure to make payment on


the outstanding debt under the contract, violated the FET clause of the Netherlands-Paraguay BIT, the Bureau Veritas tribunal
stayed the proceedings (for three months) to allow the claimant to exercise its right to have recourse to the contractual forum
(the Asunción tribunals). Ibid., para. 284.




14


expectations78 and that while “specific assurances may reinforce investor’s
expectations, such assurance is not always indispensable”.79Thetribunalalsonoted
thatitwas“well-established that the host State is entitled to maintain a reasonable
degree of regulatory flexibility to respond to changing circumstances in the public
interest”andthat,therefore,“the requirement of fairness must not be understood
as the immutability of the legal framework, but as implying that subsequent changes
should be made fairly, consistently and predictably”.80 The tribunal went on to
findthat ithadnotbeenreasonableor legitimatefortheclaimanttoexpectthat
pricingunderlong-termpowerpurchaseagreementswouldbefixedinaccordance
with factors established at the time of privatization or that the so called yearly
commercialagreement(YCA)for2006wouldbethesameasforearlierperiodsthat
precededmarketliberalisationandeconomicchangesconsequentuponHungary’s
accessiontotheEuropeanUnion.81


Ontheotherhand,thetribunalinUlysseas v. Ecuadoradheredtothe“much narrower
conceptions of the fair and equitable standard in the context of the recognition
that one of the major components of this standard is the parties’ legitimate and
reasonable expectations.” In particular, the tribunal quoted with approval the
holdingof thetribunal inEDF v. Romaniaaccordingtowhich, in theabsenceof
specificpromisesorrepresentationsmadebytheStatetotheinvestor,thelatter
cannot have a legitimate expectation that therewill be no changes in the host
State’slegalandeconomicframework.82


Similarly,thetribunalin Toto v. Lebanonnotedthat,intheabsenceofastabilisation
clause or similar commitment, changes in the regulatory framework would be
considered as breaches of the duty to grant FET “only in case of a drastic or
discriminatory change in the essential features of the transaction.” The tribunal
rejected the claims as the claimant failed to establish that the respondent, in
changingtaxesandcustomsduties,broughtaboutsuchadrasticordiscriminatory
consequence. In the tribunal’sview, theadditionalcost resulting from increased
taxesandcustomdutieswassmallcomparedtotheoverallamountoftheproject.83


On the customary minimum standard of treatment of aliens as reflected in
NAFTA and CAFTA,thetribunalinMobil & Murphy v. Canadanotedinparticular
thatindeterminingwhetherthatstandardhasbeenviolated“it will be a relevant
factor if the treatment is made against the background of (i) clear and explicit
representations made by or attributable to the NAFTA host State in order to induce
the investment, and (ii) were, by reference to an objective standard, reasonably
relied on by the investor, and (iii) were subsequently repudiated by the NAFTA
host State.”84Italsonotedthattheminimumstandard“does not require a State to
maintain a stable legal and business environment for investments, if this is intended
to suggest that the rules governing an investment are not permitted to change,
whether to a significant or modest extent”andthatNAFTAArticle1105protects
onlyagainst“egregious behaviour”.85


ThetribunalinRDC v. GuatemalaagreedwithpreviousNAFTAdecisionsconcluding
thattheminimumstandardoftreatmentisconstantlyinaprocessofdevelopment,


78 Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Decision on Jurisdiction, Applicable Law and Liability,
30 November 2012, para. 7.75.


79 Ibid,para. 7.78.
80 Ibid, para. 7.77.
81 Ibid., para. 7.140.
82 Ulysseas, Inc. v. The Republic of Ecuador (UNCITRAL), Final Award, 12 June 2012, paras. 248-249 quoting EDF International


S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic (ICSID Case No. ARB/03/23),
Award, 11 June 2012, para 217.


83 Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon (ICSID Case No. ARB/07/12), Award, 7 June 2012, para. 244.
84 Mobil Investments Canada Inc. and Murphy Oil Corporation v. Canada (ICSID Case No. ARB(AF)/07/4), Decision on Liability and


Principles of Quantum, 22 May 2012, para. 152.
85 Ibid,para. 153.




15


includingsinceNeer’sformulation,86andadoptedthe“balanced description”ofthe
minimumstandardoftreatmentadoptedbythetribunalinWaste Management II.87
Itconcludedthattherespondenthadbreachedtheminimumstandardoftreatment
inCAFTAArticle10.5asitsconductwasarbitrary,grosslyunfairandunjustaswell
asinbreachofrepresentationsmadebytherespondentuponwhichtheclaimant
reasonablyrelied.88


On denial of justice (within FET), the tribunal in Iberdrola v. Guatemala noted
thattheclaimanthadfailedtosubstantiateitsclaimthatthestandardofdenialof
justiceincludedintheFETclauseisbroaderthanthatrecognizedundercustomary
internationallaw.89Accordingly,thetribunalreviewedtheconductofthehostState
onthebasisoftheconceptofdenialofjusticeinthecurrentstateofcustomary
internationallaw.90


On the relationship between the FET clause and the prohibition of unreasonable
measures,thetribunalinSwisslion v. Macedonianotedthatmostofthemeasures
complainedofunderArticle4(1)oftheMacedonia-SwitzerlandBIT(prohibitionto
impairinvestmentsbyunreasonablemeasures)wereduplicativeofthemeasures
that had already been examined within the context of the breach of the FET
standardinArticle4(2).Intheviewofthetribunal,theArticle4(1)claimwasbetter
addressedunderArticle4(2)andaccordinglytheArticle4(1)claimwasdismissed.91
Thetribunalfurthernotedthat“the claimed breach of Article 4(1) adds little to the
Claimant’s case, and would not in any event increase the measure of damages.”92


On the prohibition of discriminatory and arbitrary measures, the tribunal in
Ulysseas v. Ecuadornotedthatforameasuretobediscriminatoryitwassufficient
that,objectively, twosimilarsituationswere treateddifferentlyandtherewasno
needtoestablishthatthediscriminationwassomehowrelatedtothenationality
oftheinvestor(s)concerned.93Onthequestionofarbitrariness,citingthedecision
inEnron v. Argentina,the Ulysseastribunalstatedthat,foraviolationtobefound,
someimportantmeasureofimproprietymustbemanifest.94Thetribunaldismissed
theclaimsofdiscriminationandarbitrariness.


On the definition of indirect expropriation, decisions rendered in 2012 have
continuedtopointouttherelevanceofvariouselements,withaprimaryemphasis
on thehostStatemeasure’s adverse effect on the investor. Themajority of the
tribunalinBurlington v. Ecuador,forexample,agreedwithpastdecisionsfocusing
on whether the measure has resulted in substantial deprivation.95 The majority
explained that a lossofmanagement or control over the investmentwasnot a
necessary element of substantial deprivation: “what appears to be decisive, in
assessing whether there is a substantial deprivation, is the loss of the economic value
or economic viability of the investment. The loss of viability does not necessarily


86 Railroad Development Corporation v. Republic of Guatemala (ICSID Case No. ARB/07/23), Award, 29 June 2012, para. 218.
87 Ibid, para. 219.
88 Ibid, para. 235.
89 Iberdrola Energía S.A. v. Republic of Guatemala (ICSID Case No. ARB/09/5), Award, 17 August 2012, para. 427.
90 Ibid. The tribunal reached this conclusion in light of the language of the FET provision of the Guatemala-Spain BIT,


which provides for no “less favourable treatment than that required by International Law.” See also Jan Oostergetel v. Slovakia
(UNCITRAL), Final Award, 23 April 2012, paras. 276-299 (distinguishing between procedural and substantive denial of justice).


91 Swisslion DOO Skopje v. The Former Yugoslav Republic of Macedonia (ICSID Case No.  ARB/09/16), Award, 6 July 2012,
para. 328.


92 Ibid.
93 Ulysseas, Inc. v. The Republic of Ecuador (UNCITRAL), Final Award, 12 June 2012, para. 293. See also Marion Unglaube and


Reinhard Unglaube v. Republic of Costa Rica (ICSID Case No. ARB/08/1 and ICSID Case No. ARB/09/20), Award, 16 May 2012,
para. 262 (“In order to prevail regarding an allegation of discriminatory treatment, a Claimant must demonstrate that it has been
subjected to unequal treatment in circumstances where there appears to be no reasonable basis for such differentiation.”)


94 Ulysseas, Inc. v. The Republic of Ecuador (UNCITRAL), Final Award, 12 June 2012, para. 319.
95 Burlington Resources Inc. v. Republic of Ecuador (ICSID Case No. ARB/08/5), Decision on Liability, 14 December 2012,


para. 396.




16


imply a loss of management or control. What matters is the capacity to earn a
commercial return.”96


TheBurlingtonmajorityfurthernotedthatthecriterionoflossoftheeconomicuse
orviabilityoftheinvestmentappliedto“the investment as a whole”.Consequently,
awindfallprofit taxcouldnotbe tantamount toexpropriation.According to the
majorityof the tribunal, “[b]y definition, such a tax would appear not to have an
impact upon the investment as a whole, but only on a portion of the profits. On the
assumption that its effects are in line with its name, a windfall profits tax is unlikely
to result in the expropriation of an investment”.97Themajorityofthetribunalthus
foundthatneitherofthetwochangesinthefiscalregime(windfalltaxat50%and
99%)hadtheeffectofrenderingtheinvestment“worthless and unviable”,andthus
werenottantamounttoexpropriation.98


The tribunal inElectrabel v. Hungary emphasized that inorder toprove indirect
expropriation, the claimant must prove that its investment lost all significant
economicvaluefollowingtheearlyterminationofthepowerpurchaseagreement
(PPA).99Furthermore,thetribunalnotedthat“both in applying the wording of Article
13(1) ECT and under international law, the test for expropriation is applied to the
relevant investment as a whole, even if different parts may separately qualify as
investments for jurisdictional purposes.”100Havingdetermined that thePPAwas
onlypartoftheclaimant’soverallinvestmentinDunamenti,thetribunalfoundthat
theclaimanthadfailedtomeetthetestforindirectexpropriation.101


Thetribunal inRenta 4 v. Russiaemphasizedthat indirectexpropriationmustbe
deduced from a pattern of conduct, observing its conception, implementation,
andeffects,eveniftheintentiontoexpropriateisdisavowedateverystep.Noting
thepossibilityofoverlapbetweentheelementsof indirectexpropriationandthe
conditions for a lawful expropriation, the tribunal determined that the “fact that
individual measures appear not to be well founded in law, or to be discriminatory, or
otherwise to lack bona fides, may be important elements of a finding that there has
been the equivalent of an indirect expropriation”,independentlyofthequestionof
lawfulnessoftheexpropriationundertheIIA.102


On the test for direct expropriation,thetribunalinBurlington v. Ecuadorstated
that a governmentalmeasure constituted (direct) expropriation under the treaty
if (i) themeasuredeprivedtheinvestorofhis investment; (ii) thedeprivationwas
permanent;and(iii)thedeprivationfoundnojustificationunderthepolicepowers
doctrine.103 Having determined in particular that there was no justification for
the dispossession of the claimant’s oil fields, the tribunal concluded that such
dispossessionconstitutedexpropriation.104


On the scope and meaning of umbrella clauses,recentdecisionsconfirmthe
lackofconsensusinthisarea.ThetribunalinSGS v. Paraguaynotedthattherewas
nothinginArticle11oftheParaguay-SwitzerlandBITthatstatedorimpliedthata
governmentwouldonlyfailtoobserveitscommitmentsifitabusesitssovereign
authority.105Accordingly,iftherespondentfailedtoobserveanyofitscontractual


96 Ibid., para. 397.
97 Ibid., para. 404.
98 Ibid., paras. 430 and 456.
99 Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Decision on Jurisdiction, Applicable Law and


Liability, 30 November 2012, para. 6.53.
100 Ibid., para. 6.58.
101 Ibid., paras. 6.58-6.64.
102 Renta 4 S.V.S.A., et al v. The Russian Federation (SCC No. 24/2007), Award, 20 July 2012, para. 45.
103 Burlington Resources Inc. v. Republic of Ecuador (ICSID Case No. ARB/08/5), Decision on Liability, 14 December 2012,


para. 506.
104 Ibid., para. 529.
105 SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay (ICSID Case No. ARB/07/29), Award, 10 February 2012,


para. 91.




17


commitments, it breached Article 11 and no further examination of whether
respondent’s actionsareproperly characterizedas “sovereign”or “commercial”
innaturewasnecessary.106Furthermore,thetribunalinSGS v. Paraguayrejected
therespondent’sargumentthattheinvestor’sclaimsundertheumbrellaclausebe
resolvedbythecontractuallydesignatedforum(i.e.,thelocalcourts).107


On the other hand, the tribunal inBosh International v. Ukraine concluded that
theterm“Party”inArticleII(3)(c)oftheUkraine-USBIT108referredtoanysituation
wherethePartywasacting quaState,meaningthatwheretheconductofentities
couldbeattributedtothehostState,suchentitiesshouldbeconsideredtobe“the
Party”forthepurposesofArticleII(3)(c).109Thetribunalalsoconcludedthat“where
a contractual claim is asserted under an umbrella clause, the claimant in question
must comply with any dispute settlement provision included in that contract.”110


Similarly,notingtheambiguityintheparties’contractualrelationship,thetribunal
inSwisslion v. Macedonia rejected the claim that the respondent had failed to
“constantly guarantee” the observance of its commitments. The tribunal noted:
“At the end of the day, there were issues pertaining to the investor’s compliance
with the contract on which reasonable persons could disagree. The Ministry did not
unilaterally terminate the contract, but rather put the issue before the courts. The
Tribunal is therefore unable to find that in resolving to seek the termination of the
contract and in submitting the matter to the jurisdiction of the courts, as provided
for in the contract, the Ministry breached any obligation to constantly guarantee the
observance of its commitments.”111


The tribunal in Burlington v. Ecuador analysed whether the umbrella clause
protectionappliedtoobligationsenteredintonotbetweentherespondentandthe
claimant,butbetweentherespondentandtheclaimant’slocalsubsidiary.Noting
supportbypreviousICSIDdecisions,themajorityof thetribunalconcludedthat
theumbrellaclauseimpliesthattheclaimantandtherespondentthemselvesare
partiestothecontactconcerned.112Themajority’sconclusionwasbasedonthe
analysis of the ordinarymeaning of the word “obligation”. Since the treaty did
notdefinethisterm,thetribunallookedtonationallawandconcludedthatunder
Ecuadorianlawthenon-signatoryparentofapartytoacontractmaynotdirectly
enforceitssubsidiary’srightsunderthecontract.113


On the prohibition of performance requirements,thetribunalin Mobil & Murphy
v. Canada determined that,whileArticle 1106NAFTAdid not expressly refer to
researchanddevelopment (R&D) andeducationand training (E&T) in the list of
prohibitedrequirements,114theordinarymeaningoftheterm“services”wasbroad
enoughtoencompassR&DandE&T.115


On the state of necessity under customary law,thetribunalinEDF v. Argentina
found that the respondent had failed to meet its burden to demonstrate three


106 Ibid., para. 95.
107 Ibid., paras. 105-109.
108 Article II(3)(c) provides as follows: “Each Party shall observe any obligation it may have entered into with regard to investments”.
109 Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine (ICSID Case No. ARB/08/11), Award, 25 October


2012, paras. 243 and 246.
110 Ibid., paras. 251-252.
111 Swisslion DOO Skopje v. The Former Yugoslav Republic of Macedonia (ICSID Case No.  ARB/09/16), Award, 6 July 2012,


para. 324.
112 Burlington Resources Inc. v. Republic of Ecuador (ICSID Case No. ARB/08/5), Decision on Liability, 14 December 2012,


para. 220.
113 Ibid., paras. 214-215.
114 Article 1106(1)(c) NAFTA prohibits requirements “to purchase, use or accord a preference to goods produced or services


provided in its territory, or to purchase goods or services from persons in its territory”.
115 Mobil Investments Canada Inc. and Murphy Oil Corporation v. Canada(ICSID Case No. ARB(AF)/07/4), Decision on Liability and


Principles of Quantum, 22 May 2012, paras. 215-216.




18


keyelements: (i) that theemergency legislationwas theonlyway tosafeguard
Argentina’sessentialinterests,(ii)thatArgentinahadnotcontributedtothesituation
ofnecessity;and(iii)thatArgentinahadnotreturnedtothepre-necessitystatusquo
whenthatbecamepossible.116Thetribunalalsonotedthatinlightofthelanguage
ofArticle27oftheILCArticlesonStateResponsibility,“the successful invocation
of the necessity defense [under customary law] does not per se preclude payment
of compensation to the injured investor for any damage suffered as a result of the
necessity measures enacted by the State.”117


On the relevance of human rights, the tribunal inEDF v. Argentinanoted that
thetribunalshouldbesensitivetointernationaljus cogens norms,includingbasic
principlesofhumanrights.118Withoutcallingintoquestionthepotentialsignificance
orrelevanceofhumanrightsinconnectionwithinternationalinvestmentlaw,the
tribunalwasnotpersuadedthatthe“Respondent’s failure to re-negotiate tariffs in
a timely fashion, so as to re-establish the economic equilibrium to which Claimants
were entitled under the Concession Agreement‘s Currency Clause, was necessary
to guarantee human rights.”119


InSAUR v. Argentina,thetribunalacknowledgedthatthelawofhumanrightsin
general,andtherighttowaterinparticular,constitutesoneofthesourcesoflaw
applicabletotheresolutionofthedispute.120Thetribunalnotedfurtherthatthese
rightsmust be “counterbalanced”with the rights of the investor under theBIT,
meaning that the sovereignpowers relating topeople’s right towatermust not
beexercisedbyapublicauthorityinan“absolute”mannerthatwoulddefeatthe
investor’sBITrights.121


On the relevance of the doctrine of the margin of appreciation (withrespect
to the assessment of the allegedly expropriatoryState conduct), the tribunal in
Renta 4 v. Russiaresistedapplyingthesaiddoctrinetoinvestmenttreatiesinlight
of the difference between IIAs and human rights conventions. In the tribunal’s
view,whilehuman rightsconventionsestablishminimumstandards towhichall
individualsareentitled,irrespectiveofanyactofvolitionontheirpart,“investment-
protection treaties contain undertakings which are explicitly designed to induce
foreigners to make investments in reliance upon them.”122Inlightofthisdifference,
thetribunalsuggestedthatIIAs“should not be diluted”bythenotionsof“margins
of appreciation”,whicharerelevantfor(andjustifiedinthecontextof)humanrights
instruments.123


C. Compensation


On damages,atleastninedecisionsrenderedin2012awardedthemtotheinvestor.


116 EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic (ICSID Case
No. ARB/03/23), Award, 11 June 2012, para 1171.


117 Ibid., para.1177.
118 EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic (ICSID Case


No. ARB/03/23), Award, 11 June 2012, para. 909.
119 Ibid., para. 914. A similar approach was adopted by the tribunal in SAURInternational SA v. Republic of Argentina (ICSID


Case No. ARB/04/4), Decision on Jurisdiction and Liability, 6 June 2012, paras. 328-332.
120 By contrast, the tribunal in Von Pezold v. Zimbabwe and Border Timbers v. Zimbabwe stated that“the reference [in the BITs’


applicable-law provision] to ‘such rules of general international law as may be applicable’ […] does not incorporate the universe
of international law into the BITs or into disputes arising under the BITs.”The tribunal made this statement when considering
whether the amicus curiae submission, which made references to the international human rights law on indigenous peoples,
would assist the tribunal in the determination of a factual or legal issue related to the proceeding. See Bernhard Von Pezold
and others v. Zimbabwe (ICSID Case No. ARB/10/15), and Border Timbers Limited and others v. Zimbabwe (ICSID Case No.
ARB/10/25), Procedural Order No. 2, 26 June 2012, para. 57.


121 SAUR International SA v. Republic of Argentina (ICSID Case No. ARB/04/4), Decision on Jurisdiction and Liability, paras. 330-
332.


122 Renta 4 S.V.S.A., et al v. The Russian Federation (SCC No. 24/2007), Award, 20 July 2012, para. 22. The tribunal suggested
that foreigners “may invoke a higher standard of protection than nationals”. Ibid., para. 21.


123 Ibid., para. 22.




19


Thehighestamount–whichalsorepresentsthehighestknownawardofdamages
inthehistoryof investmenttreatyarbitration–featuredinOccidental v. Ecuador
II where the investor was awarded US$ 1.77 billion plus pre- and post-award
compoundinterestbythemajorityofthetribunal.InEDF v. Argentinatheclaimant
wasawardedUS$136.13millionpluscompoundinterest,whileinDeutsche Bank
v. Sri Lanka,theclaimantwasawardedUS$60.36millionplusinterest.InSGS v.
Paraguay,theclaimantwasawardedUS$39.02millionplusinterestandinRDC v.
Guatemala,theclaimantwasawardedUS$11.2millionpluscompoundinterest.
SmallerawardsweregrantedinMarion and Reinhard Unglaube v. Costa Rica(US$
3.1millionplusinterest),Renta 4 v. Russia(US$2millionpluscompoundinterest),
Antoine Goetz v. Burundi(US$2millionplusinterest),andSwisslion v. Macedonia
(€350,000pluscompoundinterest).


On the condition for the award of damages,thetribunalinRDC v. Guatelmala
determinedthat,whilereparationwasduetotheclaimanttocompensateitfullyfor
theinjurysuffered,thepaymentoftheamountawardedshouldbesubjecttothe
claimant’srelinquishingitsrightsunderallthecontracts.Sincetheclaimant’slocal
subsidiary,FVG,wasthepartytotheusufructcontracts,thetribunalconditioned
payment of the awardupon the transfer of the claimant’s shares in FVG to the
respondent.124


On valuation methods, the tribunal in Occidental v. Ecuador found that “the
discounted cash flow method is the most widely used and generally accepted
method in the oil and gas industry for valuing sales or acquisitions”125 and that
“it can derive no assistance from an analysis of the seven transactions which the
respondent has submitted as comparable sales [since each oil and gas property
presents a unique set of value parameters].”126


On the award of future lost profits,inMobil and Murphy v. Canada,thetribunal
–havingfoundthatCanadaadmittedacontinuingbreachofNAFTAArticle1106
inflictingtheongoingdamagetotheclaimants’interestsintheinvestment–held
that it would award compensation for past damage (including past lost profits)
but rejectedtheclaimfor future lostprofits (projectedbytheclaimantupto the
year2036)becauseitsaiditwouldnotbeabletoestimatethosedamageswith
“reasonable certainty”.Thetribunalsuggested,instead,thattheclaimantsshould
bringnewarbitralproceedingsinthefuturetocollectdamages“for losses which
[will] have accrued”bytherelevantpointintimeasbythattimethedamageswill
become“fully ascertainable”and“actual”.127


With regard to additional circumstances relevant for quantifying the losses,
threefindingsbythemajorityofthetribunalinOccidental v. Ecuador128areworth
emphasizing(inparticularasoneofthearbitratorswasin“complete disagreement”129
withthefindingsof themajority).First, themajoritydecidedtodisregardcertain
“value-depressing measures”takenbytherespondent(beforethemeasureunder
reviewwasadopted)becausethosemeasures(forexample,Law42providingfor
awindfallprofittaxof99%)weretakeninbreachoftheapplicableBIT.130Second,
the tribunal concluded that the respondentmust compensate the claimants for


124 Railroad Development Corporation v. Republic of Guatemala (ICSID Case No. ARB/07/23), Award, 29 June 2012, para. 267.
125 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador (ICSID Case


No. ARB/06/11), Award, 5 October 2012, para. 779.
126 Ibid., para. 787.
127 Mobil Investments Canada Inc. and Murphy Oil Corporation v. Canada (ICSID Case No. ARB(AF)/07/4), Decision on Liability and


on Principles of Quantum, 22 May 2012, paras. 473-478.
128 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador (ICSID Case


No. ARB/06/11), Award, 5 October 2012.
129 Ibid., Professor Brigitte Stern’s Dissenting Opinion, 20 September 2012, para. 1.
130 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador (ICSID Case


No. ARB/06/11), Award, 5 October 2012, para. 527.




20


100%of their interest in the investment despite the fact that the claimantmay
be liablevis-à-vis third-parties.131Third, thetribunaldiscounted25%of thetotal
loss suffered by the investor because of the investor’s “material and significant
wrongful act” (linked to the investor’s failure to fully disclose the nature of the
assignmentagreementwithathirdparty).Citingthelegalprinciplesofcontributory
negligence,thetribunalfoundthattheclaimantshadcontributedtotheextentof
25%totheprejudicewhichtheysufferedfollowingthehostState’sterminationof
theconcessionagreementandthat“the resulting apportionment of responsibility
as between the claimants and the respondent, to wit 25% and 75%, is fair and
reasonable in the circumstances of the present case.”132


On the investor’s duty to mitigate damages,thetribunalinEDF v. Argentinastated
thatitwouldbepatentlyunfairtoallowtheclaimantstorecoverdamagesforloss
thatcouldhavebeenavoidedbytakingreasonablestepsasthedutytomitigate
damagesisawell-establishedprincipleininvestmentarbitration.133Itfurtheradded
thatwhethertheaggrievedpartyhadtakenreasonablestepstoreducethe loss
wasaquestionoffact,notlawandwhatwasreasonabledependedlargelyupon
thefactsoftheindividualcase.134


On the calculation of interest, the tribunal inOccidental v. Ecuadornoted that
whilethetraditionalnormwastoawardsimpleinterest,thispracticehaschanged
andthemajorityofrecentawardsprovidedforcompoundinterest.135


The tribunal in SGS v. Paraguay noted that the virtually universal principle of
international law and international arbitration practice in the case of a delayed
paymentofmonetaryobligationsdueistoapplyinterestasofthedatepayment
became due. The tribunal noted that the claimant adopted the conservative
approachofrequestinginterestonlyasfromthedateofcontracttermination,rather
thanfromthedatewheneachinvoicebecamedue.136


D. Other issues: counterclaims, provisional measures, due process,
previous decisions, amicus curiae briefs and legal fees


On counterclaims by a respondent State,theGoetz v. Burundi decisionbecame
the first one in IIA arbitration where the tribunal affirmed its jurisdiction over a
respondentState’scounterclaim.Specifically,BurundisoughtUS$1 millionfrom
the claimants for their bank’s failure to honour the terms of a local operating
certificate. The tribunal found that despite the applicable BIT’s silence on the
matter, itwascompetent toconsider thecounterclaimpursuant toArticle46of
theICSIDConventionasthecounterclaimfellwithinthejurisdictionofICSID(i.e.,
relatedtotheinvestment),wascoveredbytheconsentofthepartiesanddirectly
relatedtotheobjectofthedispute.Havingadmittedthecounterclaim,thetribunal
wentontodismissitonthemerits.137


On provisional measures,thetribunalinTethyan v. Pakistanstated–inlinewith
pastpractice–thatprovisionalmeasuresmaybeorderedwherethesituation is
urgentandtherequestedmeasuresarenecessarytopreservetheassertedright


131 Ibid., para. 656.
132 Ibid., para. 687.
133 EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic (ICSID Case


No. ARB/03/23), Award, 11 June 2012, paras. 1301-1302.
134 Ibid., para. 1306.
135 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador (ICSID Case


No. ARB/06/11), Award, 5 October 2012, para. 834.
136 SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay (ICSID Case No. ARB/07/29), Award, 10 February 2012,


para. 184. The tribunal believed appropriate to apply in that specific case, the LIBOR rate plus one percentage point. (Ibid., para. 188.)
137 Antoine Goetz & Others and S.A. Affinage des Metaux v. Republic of Burundi (ICSID Case No. ARB/01/2), Award, 21 June 2012,


paras. 267-287.




21


fromirreparableharm.138


ThetribunalinBurlington v. Ecuadorrejectedtheclaimant’sargumentthatthenon-
compliancewithanorderforprovisionalremediesconstitutedexpropriationofthe
claimant’srighttopursueICSIDarbitration.Whilethetribunaldidnotexcusethe
respondent’s failuretoabidebytheprovisionalmeasures, itnotedthatanorder
forprovisionalremediesonlycreatedproceduralrightsduringthearbitrationand


couldnotbeassimilatedtoacourt’sdecisiontoannulafinalaward(suchasitwas
inthecaseofSaipem v. Bangladesh).139


On due process in the arbitration proceedings, the tribunal in Iberdrola v.
Guatemala notedthatpost-hearingbriefswerememorialsofconclusionsandthey
didnotprovideanewopportunityforthepartiestoreformulatetheirapplications
orarguments.Inthetribunal’sview,toallowpartiestointroducechangestothe
petitumortothestructureoftheclaimsinthepost-hearingbriefs“would constitute
a clear violation of right of reply and introduce chaos into the process.”140


On the role of previous decisions, thetribunal inRenta 4 v. Russiaheldthat it
wasnotboundbyeitherRosInvest v. Russia(treatyarbitration)orYukos v. Russia
(ECHRcase),whichrelatedtothesamefactsbutwerebroughtunderdifferentlegal
instruments.Atthesametime,itnotedthat“the lengthy texts of those decisions go
over much of the same ground that has been covered in this case, and it is natural
to examine them in the light of many of the arguments made here as well.”141


InBosh International v. Ukraine, thetribunalstatedthatwhile itdidnotconsider
itselfboundbypastdecisionsofotherarbitraltribunals,itrecognisedthatitshould
paydueregardtotheirconclusions.Italsoreiteratedtheviewthatintheabsenceof
compellingreasonstothecontrary,tribunalsoughttofollowsolutionsestablished
inaseriesofconsistentcases,comparabletothecaseathand.142


On amicus curiae briefs, the tribunal inVon Pezold v. Zimbabwe andBorder
Timbers v. Zimbabwe rejected thepetition for leave to submit anamicus curiae
(friend of the court) brief by the EuropeanCenter ofConstitutional andHuman
Rights (ECCHR) and four indigenous communities of Zimbabwe because they
did not satisfy any of the criteria underRule 37(2) ICSIDArbitrationRules. The
tribunalnoted inter alia that (i) thecircumstancesoftheamici’sapplicationgave
risetolegitimatedoubtsastotheirindependenceorneutrality;143(ii)consideration
ofrightsofindigenouspeoplesunderinternationallaw,towhichtheamicusbrief
referred,wasnotpartofthetribunal’smandateundereithertheICSIDConvention
ortheapplicableBITs;144(iii)inlightofitsmissionandexpertise,theECCHRdidnot
havea“significant interest in the proceeding”.145


On legal fees,thetribunalinDeutsche Bank v. Sri Lankadecidedtogranttothe
claimantafullrecoveryofitscosts,legalfeesandexpensesemphasizingthat(i)


138 Tethyan Copper Company v. Pakistan (ICSID Case No. ARB/12/1), Decision on Provisional Measures, 13 December 2012, para. 118.
139 Burlington Resources Inc. v. Republic of Ecuador (ICSID Case No. ARB/08/5), Decision on Liability, 14 December 2012, para. 481.
140 Iberdrola Energía S.A. v. Republic of Guatemala (ICSID Case No. ARB/09/5), Award, 17 August 2012, para. 347.
141 Renta 4 S.V.S.A., et al v. The Russian Federation (SCC No. 24/2007), Award, 20 July 2012, para. 24. The tribunal noted further: “The


arbitrators understand that the same arguments may be affected not only by differences in the norms articulated in the relevant
legal texts, but also by the pleadings and evidence put forward in support of those arguments. Bearing in mind all of these
qualifications, the present Tribunal will nevertheless pay respectful heed to the analysis and conclusions of the distinguished
arbitrators and judges in these two cases. Indeed they must do so, as both sides in this case have made submissions as to their
implications and relative persuasiveness.” Ibid., para. 25.


142 Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine (ICSID Case No. ARB/08/11), Award, 25 October
2012, para. 211, referring to Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Pakistan(ICSID Case No ARB/03/19), Award, 27
August 2009, para. 145.


143 Bernhard Von Pezold and others v. Zimbabwe (ICSID Case No. ARB/10/15) and Border Timbers Limited et al v. Zimbabwe (ICSID
CASE No. ARB/10/25), Procedural Order No. 2, 26 June 2012, para. 56.


144 Ibid., para. 59.
145 Ibid., para. 61.




22


theclaimantwasthesuccessfulparty;(ii)therespondent’sjurisdictionalchallenges
failedaswellasitsattemptstoresistfindingsagainstit;and(iii)breachesbythe
respondentwereegregiousandtherespondentactedinbadfaith.146


The tribunal in Bosh International v. Ukraine found that while in some cases,
wheretheunsuccessfulclaimanthasengagedinsomeformofabusiveconduct,
arbitraltribunalshaveorderedthattheclaimantpayallorasignificantpartofthe
respondent’scosts,thepresentcasedidnotfallintothiscategory.However,the
tribunalconsidereditappropriatetoordertheclaimanttomakeacontributionto
thecosts incurredbytherespondent linkedtothehearingsbeingdelayedtwice
followingrequestsbytheclaimants.Thetribunalorderedtheclaimantstopayone-
sixthoftherespondent’scosts.147


The tribunal in ICS Inspection v. Argentina noted that the traditional position in
investment treaty arbitration, in contrast to commercial arbitration, hadbeen to
followthenormalpracticeunderpublicinternationallawthatthepartiesbeartheir
owncostsoflegalrepresentationandassistance.Whileitacceptedthatanumber
of investment tribunals have opted instead to apply the principle of awarding
legalcosts,andthatthispracticemaybeappropriateinsomecases,thetribunal
preferredtofollowthepublicinternationallawpracticeunlessthecircumstances
ofthecasejustifiedadeparturefromthatpractice.148Despiteitsfindingagainstthe
claimant,thetribunaldecidedthatthepartiesshouldbeartheirownlegalcosts.149


InRenta 4 v. Russia, theclaimants,whohadbroadlyprevailedinthearbitration,
requestedthatthetribunalawardthemcostsintheoverallamountofUS$14.57
million.Thetribunalpointedoutthatthisparticulardisputewasunusualasitwas
entirely financed by a third party,Menatep, and the claimant did not bear any
enforceablelegaldutytocompensatethatthirdparty.Thus,thetribunalrejected
therequestforcostsonthegroundsthattheclaimantshadnotactuallyincurred
anycosts.150


E. Annulment and judicial review


Thead hoccommitteeinAES v. Hungaryrecognizedthattheapplicationforthe
annulmentofanawardbasedonthefailureofanarbitraltribunaltostatereasons
for its decision did not allow entering “into an assessment of the merits of the
dispute, either directly or indirectly.”151However,inthecommittee’sview,annulment
maybepossibleintheexceptionalcircumstancewhereatribunal’sreasonsare“so
contradictory”or“frivolous or absurd in nature”thattheyeffectively“amount to no
reasons at all”.152


Thead hoccommittee inVictor Pey Casado v. Chileannulledpartof theaward
inter aliaonthegroundthattherehadbeen“a serious departure from fundamental
rules of procedure”inthemeaningofArticle52(1)(d)oftheICSIDConvention(the
disputingpartieshadnotbeengivenanopportunitytomakeargumentsregarding
damagesforabreachoftheFETstandard).Inreachingitsdecision,thecommittee


146 Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka (ICSID Case No.  ARB/09/2), Award, 31 October 2012,
paras. 588-590.


147 Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine (ICSID Case No. ARB/08/11), Award, 25 October
2012, paras. 291-292.


148 ICS Inspection and Control Services Limited (United Kingdom) v. The Republic of Argentina (UNCITRAL, PCA Case No. 2010-9),
Award on Jurisdiction, 10 February 2012, para. 340.


149 Ibid., para. 343.
150 Renta 4 S.V.S.A., et al v. The Russian Federation (SCC No. 24/2007), Award, 20 July 2012, paras. 221-223.
151 AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary (ICSID Case No. ARB/07/22), Decision


on Annulment, 29 June 2012, para. 52.
152 Ibid., paras. 53-54.




23


notedthatanapplicantwasnotrequiredtoshowthatitwouldhavewonthecase,
iftherulehadbeenrespected.153Furthermore,notingthecontraryviewexpressed
in many recent decisions of other ad hoc committees, the Victor Pey Casado
committeeconcludedthatithad“no discretion not to annul an award if a serious
departure from a fundamental rule is established.”154


On decisions of domestic courts reviewing arbitral awards,theUnitedStates
CourtofAppeals for theD.C.Circuit reversed thedecisionof theDistrictCourt
andvacatedthefinalawardinBG v. Argentina.155TheCourtofAppealstatedthat
thearbitraltribunalrendereditsdecisionwithoutregardtothecontractingparties’
agreementestablishingapreconditiontoarbitration(intheformofthe18-month
recourse-to-local-courtsrequirement).TheCourtofAppealsnotedfirstthat,unless
specified in theapplicable treaty,“the question of arbitrability is an independent
question of law for the court to decide.”156TheCourtofAppealsthenstatedthat
therecouldbe“only one possible outcome on the arbitrability question before it,
namely, that the foreign investor was required to commence a lawsuit in Argentina’s
courts and wait 18 months before filing for arbitration pursuant to the UK-Argentina
BIT.”157


III. Some systemic challenges


2012developmentsinISDSbroughttolightanumberofcross-cuttingissuesand
concerns.


Divergent findings.DifferentinterpretationsofthesameorsimilarIIAprovisions
persist.Avividexamplefor2012isthe“umbrella”clause–aclausewhichobliges
thecontractingStates tohonourcommitmentsextended to individual investors,
(e.g.bymeansofinvestmentcontracts).Tribunalsadoptedcontradictorydecisions
onthreekeyissues:(i)whetheranIIAclaimundertheumbrellaclausecanproceedif
theunderlyinginvestmentcontractsetsoutitsowndisputeresolutionmechanism,
(ii)whethertherelevantStateconductmustbeanexerciseofsovereignpowers(ius
imperii),and(iii)whetherthepartiesinIIAarbitrationneedtobethepartiestothe
investmentcontractconcerned(i.e.forexamplewhetheritisenoughfortheclaimant
intheIIAarbitrationtobeamajorityshareholderinthecompanythatconcludedan
investmentcontractwiththeState).158Sometimes,divergentoutcomescanbe–at
leastpartially–explainedbythedifferencesinwordingofaspecificIIAapplicable
inaparticularcase;however,forthemostparttheyrepresentthedifferencesinthe
viewsofindividualarbitrators.Intheabsenceofamechanismthatwouldensure
uniformityofIIAinterpretation,divergentfindingscanbeexpectedtopersist.


Claims arising out of crisis-related and financial austerity measures.In2012,
anumberofcasesemergedthathavetheiroriginintherecentfinancialcrisisand
theongoingeconomicrecession.Forexample,apairofChineseinvestorsbrought
anISDSclaimagainstBelgiumrelatingtothatGovernment’streatmentofFortis,
a Belgian-Dutch financial institution, in the midst of the financial crisis.159 The
claimantsreportedlyallegedamagesofUS$2.3billion.ACypriotbanknotifiedits


153 Victor Pey Casado and President Allende Foundation v. Republic of Chile (ICSID Case No. ARB/98/2), Decision on
Annulment, 18 December 2012, para. 78.


154 Ibid., para. 80. In the committee’s view, the only available discretion concerned the point of determining whether the departure
from a rule of procedure was “serious” for purposes of Article 52 of the ICSID Convention.


155 BG Group Plc. v. The Republic of Argentina (UNCITRAL), Final Award, 24 December 2007.
156 Argentina v. BG Group PLC (United States Court of Appeals for the District of Columbia Circuit), No. 11-7021, 17 January 2012,


p. 13.
157 Ibid., p. 17.
158 See the paragraphs “On the scope and meaning of umbrella clauses” in Part I.B above.
159 Ping An Life Insurance Company of China, Limited and Ping An Insurance (Group) Company of China, Limited v. Kingdom of


Belgium (ICSID Case No. ARB/12/29).




24


intentionto initiatearbitrationproceedingsagainstGreecearguingthatthelatter
haddiscriminatedagainsttheclaimant’sGreeksubsidiarywhenimplementingits
bankbail-outprogramme.160Similarly,anumberofclaimshavebeenbrought,or
threatened,againstgovernmentswhohaveintroducedausteritymeasuresaffecting
renewableenergyproducers.Reportedly,Italy,theCzechRepublicandSpainhave
beenputonnoticewithrespecttopossiblearbitrationsregardingthosecountries’
withdrawalofsubsidiesforsolarenergy,introducedatatimeofamorefavourable
economicclimate.161


Challenges to environmental measures. In 2012, States have continued to
face investor claims concerningmeasures of general application introduced on
environmental grounds. Thus, Canada was put on notice with respect to two
potential NAFTA claims – one arising out of the moratorium on offshore wind
farms introduced by the Government of Ontario (pending further research into
such farms’ environmental and health effects), which allegedly destroyed the
claimant’scontractual rights;162 theother regardingabanby theGovernmentof
Quebeconoilandgasactivitiesincertainareas.163ASwedishinvestorfiledacase
againstGermanyunder theEnergyCharterTreatydemandingcompensation for
thedamageallegedlyincurredduetotheGovernment’sannouncedphase-outof
nuclearpowerplants.164


Enforcement of arbitral awards. Enforcing awards against sovereign States
remainsadifficultissueassomegovernmentscontinuenotpayingearlierarbitral
awardsrenderedagainstthem.Someinvestorsprefertosettlewiththerespondent
State,165 often for an amount lower than that awarded but with a guarantee of
promptpayment,orwiththemonetaryawardbeingfullyorpartiallyreplacedby
otherbenefits.Otherclaimantsseekto locaterespondentState’sassetsabroad
and start enforcement procedures in the relevant third countries.166 Still others
bringthenon-paymentofawardstotheattentionoftheirhomegovernments,with
aviewtoreceivingtheirsupport.Onesuchexamplefrom2012istheUnitedStates
excludingArgentinafromthe listofcountriesbenefittingfromtradepreferences,
untilArgentinapaysonICSIDawardsinfavourofUSinvestors.167


Transparency of ISDS.AnotabledevelopmenthasbeentheUNCITRALWorking
Group’scompletionofalegalstandardontransparencyinIIAarbitrations.Untilnow,
ISDSproceedingsundertheUNCITRALArbitrationRuleshavebeencharacterized
byahighlevelofconfidentialityand,frequently,theveryexistenceofadisputehas
beenunknown.168InJanuary2013,theUNCITRALWorkingGroupIIagreedona


160 “Investment Treaty Arbitration against Greece Looms after Foreign Bank Gives Notice of Dispute Due to ‘Discriminatory’ Bail-
out”, IA Reporter, 27 March 2013, http://www.iareporter.com/articles/20130327.


161 See V. Jha, “Trends in Investor Claims Over Feed-in Tariffs for Renewable Energy”, Investment Treaty News, 19 July 2012.
162 Windstream Energy LLC v. Government of Canada, Notice of Intent to Submit a Claim to Arbitration, 17 October 2012, available


at http://italaw.com/cases/1585.
163 Lone Pine Resources  Inc.  v. Government of Canada, Notice of Intent to Submit a Claim to Arbitration, 8 November 2012,


available at http://italaw.com/cases/1606.
164 Vattenfall AB and others v. Federal Republic of Germany,  ICSID Case No. ARB/12/12. See “Germany is Sued at ICSID by


Swedish Energy Company in Bid for Compensation for Losses Arising out of Nuclear Phase-out”, IA Reporter, 1 June 2012,
http://www.iareporter.com/articles/20120601_1.


165 As, for example, in the Cargill v. Mexico case, see IA Reporter, 22 February 2013, http://www.iareporter.com/
articles/20130222. See also “Republic of Georgia agrees to pay 1/3rd of ICSID award”, IA Reporter, 31 December 2011,
http://www.iareporter.com/articles/20111231_6.  


166 See, e.g., “UK Court orders Republic of Laos to post $70 million while legal fight continues over unpaid arbitral award”, IA
Reporter, 22 November 2012, http://www.iareporter.com/articles/20121122_4.


167 United States, Presidential Proclamation “To Modify Duty-free Treatment Under the Generalized System of Preferences and for
Other Purposes”, Federal Register, 26 March 2012.


168 The following fact is telling: at the end of 2012 the Permanent Court of Arbitration reported to have administered 85 ISDS cases
under UNCITRAL Rules, only 18 of these disputes were publicly known. Source: the Permanent Court of Arbitration International
Bureau.




25


setofrules(stilltobeformallyadoptedbytheUNCITRALitself)thatprovidefora
significantlyincreasedleveloftransparency,includingapublicregistryofdisputes,
openoralhearingsaswellaspublicationofkeydocuments(noticesofarbitration,
pleadings,transcripts,andalldecisionsandawardsissuedbythetribunal).These
rules will apply to arbitrations under future IIAs that refer to UNCITRAL rules
(unlessthepartiestothesefuturetreatiesexpresslyoptout),andthusexcludethe
multitudeofexistingIIAsfromtheircoverage.Statepartiestotheexistingtreaties
mayseparatelyagreetoapplythenewUNCITRALtransparencyrulestodisputes
underexistingtreaties,iftheysowish.169


Also noteworthy is the decision of the Warsaw District Administrative Court
of 13December 2012.Reportedly, the court held that arbitral awards rendered
underinvestmenttreatiesconstitutepublic informationeligibleforreleasebythe
Polish government. Although under appeal, the decisionmay eventually oblige
the Government to release the unpublished award. At a broader level, there is
thepossibility that freedom-of-information laws– in thosecountrieswhere they
exist–canhelpbringtolightdisputesandarbitralawardsthathavethusfarbeen
unknown.170


Third party funding (TPF) of claims.Thepracticeofinvolvingspecializedfirmsto
financeIIAclaimsagainstStatesinexchangeforashareinapossiblefutureaward
orsettlement in favourof theclaimanthasbeengainingprominence inthepast
yearandattractedtheattentionofcommentatorsandscholars.171Thepracticeof
litigationfinanceexistsinafewcountries(Australia,theUnitedStates,theUnited
Kingdomandsomeothers)and,insomecircumstances,canbeviewedasgiving
accesstojusticetothoseclaimantswhodonothavethemeanstopayheftylegal
feesandotherlitigationcosts.Ontheotherhand,thereareseriouspolicyreasons
againstTPFofIIAclaims–forexample,itmayincreasethefilingofquestionable
claims.172 From a respondent State’s perspective, such frivolous claims, even
ifmost of them fail, can take significant resources andmay cause reputational
damage. There areother concernswhichput thepracticeof TPF intodirect or
indirectconflictwithprofessionalethicalrulesinsomecountries.173Whilethereis
nointernationalregulationofTPFandpublicknowledgeaboutfinancingofclaims
islimited,IIA-relatedTPFdevelopmentsneedtobemonitoredcloselywithaview
bettertounderstandtrendsandtheirpolicyimplications.


* * *


The2012peakinthenumberofnewcasesconfirmsthatforeigninvestorscontinue
relyingonIIA-basedISDS.Theincreasingnumberofvictoriesforclaimants(70%
in2012)and,onsomeoccasions,highamountsofdamagesawarded(e.g.US$


169 See Report of Working Group II (Arbitration and Conciliation) on the work of its fifty-eighth session (New York, 4-8 February
2013), available at http://www.uncitral.org/pdf/english/workinggroups/wg_arb/765-e-draft-as-submitted-website.
pdf. The agreement reached is yet to be formally adopted by the Commission.


170 “Polish court rules on release of investment arbitration awards under Freedom of Information law”, IA Reporter, 2 January 2013,
http://www.iareporter.com/articles/20130102_3.


171 L. Bench Nieuwveld and V. Shannon (eds.), Third-Party Funding in International Arbitration (Wolters Kluwer, 2012); E. De
Brabandere and J. Lepeltak, “Third Party Funding In International Investment Arbitration”, Grotius Centre Working Paper
No.  2012/1, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2078358; P.  Eberhardt and C. Olivet,
“Profiting from Injustice: How Law Firms, Arbitrators and Financiers are Fuelling an Investment Arbitration Boom” (Corporate
Europe Observatory and Transnational Institute, 2012), available at http://corporateeurope.org/sites/default/files/publications/
profiting-from-injustice.pdf; W.H. Van Boom, “Third-Party Financing in International Investment Arbitration”, March 2012,
available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2027114;.


172 TPF companies, who build a “portfolio” of claims, have an economic incentive to put money even into weak cases that have at
least some chance of a high monetary award.


173 See, e.g., L. Bench Nieuwveld; «Third Party Funding: Why the Fuss? The Insurance Industry Holds the Answer» TDM 7 (2012),
www.transnational-dispute-management.com.




26


1.77 billion in the case of Occidental v. Ecuador) demonstrate the protective
potential of the IIA/ISDS regime. The continuing trend of investors challenging
generally applicablepublicpolicies, contradictorydecisions issuedby tribunals,
anincreasingnumberofdissentingopinions,concernsaboutarbitrators’potential
conflictsofinterestallillustratetheproblemsinherentinthesystem.


Accordingly,thepublicdiscourseabouttheusefulness,legitimacyanddeficiencies
of the ISDS mechanism is gaining momentum, especially given that the ISDS
mechanismisontheagendainnumerousbilateralandregionalIIAnegotiations.
Whilereformoptionsabound,theirsystematicassessmentincludingwithrespect
to their feasibility, expected effectiveness and implementation method (e.g. at
the levelof IIAs,arbitral rules, institutions) remainswanting.Amultilateralpolicy
dialogueonISDScouldhelptodevelopaconsensusaboutthepreferredcourse
forreformandwaystoputitintoaction.


ThisIssuesNotewaspreparedbyUNCTAD’sIIASection,includingHamed
El-Kady,SergeyRipinsky andElisabeth Tuerk. VentzislavKotetzov and
ThomasTurnerprovidedhelpfulassistance.


SectionIIon“2012Decisions–AnOverview”isbasedonadraftprepared
byFedericoOrtino,King’sCollegeLondon,benefittingfromcommentsby
TomerBroude,TonyCole,RudolfDolzer,MichaelEwing-Chow,Junianto
James Losari, Ariel Meyerstein, Facundo Perez Aznar, Stephan Schill,
ChristophSchreuer,EduardoSilvaRomero,IgnacioTorterola,ToddTucker
andToddWeiler.


TheIIAprogrammeissupervisedbyJoergWeber,
undertheoverallguidanceofJamesZhan.


Contact:iia@unctad.org




27


Annexes174


174 Every effort was made to ensure the accuracy and completeness of the information. Comments, corrections and additions can
be sent to iia@unctad.org.


Annex 1. Known treaty-based cases initiated in 2012


Case Title Home Country
1 Accession Mezzanine Capital L.P. and Danubius Kereskedöház


Vagyonkezelö Zrt. v. Hungary (ICSID Case No. ARB/12/3)
United Kingdom


2 Ampal-American Israel Coproation and Others v. Arab Republic of Egypt
(ICSID Case No. ARB/12/11)


United States,
Germany


3 Apotex Holdings Inc. and Apotex Inc. v. United States of America (ICSID
Case No. ARB(AF)/12/1)


Canada


4 Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of
Venezuela (ICSID Case No. ARB 12/20)


Barbados


5 Bycell v. India Russian Federation
6 CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited


and Telecom Devas Mauritius Limited v. India
Mauritius


7 Churchill Mining PLC v. Republic of Indonesia (ICSID Case
No. ARB/12/14)


United Kingdom


8 Dan Cake (Portugal) S.A. v. Hungary (ICSID Case No. ARB/12/9) Portugal
9 Elecnor S.A. and Isolux Corsán Concesiones S.A. v. Republic of Peru


(ICSID Case No. ARB/12/5)
Spain


10 Emmis International Holding B.V., Emmis Radio Operating B.V., MEM
Magyar Electronic Media Kereskedelmi Szolgáltató Kft. v. Hungary (ICSID
Case No. ARB/12/2)


Netherlands,
Switzerland


11 Fábrica de Vidrios Los Andes, C.A. and Owens-Illinois de Venezuela, C.A.
v. Bolivarian Republic of Venezuela (ICSID Case No. ARB/12/21)


Netherlands


12 Gazprom v. The Republic of Lithuania (ICC) Russian Federation
13 Gazprom v. Lithuania II (UNCITRAL) Russian Federation
14 Gelsenwasser AG v. People’s Democratic Republic of Algeria (ICSID Case


No. ARB/12/32)
Germany


15 Georg Gavrilovic and Gavrilovic d.o.o. v. Republic of Croatia (ICSID Case
No. ARB/12/39)


Austria


16 Grupo Francisco Hernando Contreras v. Republic of Equatorial Guinea
(ICSID Case No. ARB(AF)/12/2)


Spain


17 Guardian Fiduciary Trust, Ltd, f/k/a Capital Conservator Savings &
Loan, Ltd v. Macedonia, former Yugoslav Republic of (ICSID Case No.
ARB/12/31)


Netherlands


18 Inversión y Gestión de Bienes, IGB, S.L. and IGB18 Las Rozas, S.L. v.
Kingdom of Spain (ICSID Case No. ARB/12/17)


Venezuela


19 Karkey Karadeniz Elektrik Uretim A.S. (Turkey) v. Islamic Republic of
Pakistan (ICSID Case No. ARB/13/1)


Turkey


20 Lao Holdings N.V. v. Lao People’s Democratic Republic (ICSID Case No.
ARB(AF)/12/6)


Netherlands


21 LSF-KEB Holdings SCA and others v. Republic of Korea (ICSID Case No.
ARB/12/37)


Luxembourg


22 Marco Gavazzi and Stefano Gavazzi v. Romania (ICSID Case No.
ARB/12/25)


Italy


23 Mercer International, Inc. v. Canada (ICSID Case No. ARB(AF)/12/3) United States
24 MNSS B.V. and Recupero Credito Acciaio N.V v. Montenegro (ICSID


Case No. ARB(AF)/12/8)
Netherlands


25 Mr. Ali Allawi v. Pakistan (UNCITRAL) United Kingdom
26 Mr. Levitis v. Kyrgyzstan (UNICITRAL) United States
27 Mr. Yosef Maiman and Others v. Egypt (UNCITRAL) Poland




28


28 Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v.
Turkmenistan (ICSID Case No. ARB/12/6)


Turkey


29 Nadel and Ithaca Holdings Inc. v. Kyrgyzstan (UNCITRAL) United States
30 Novera AD, Novera Properties B.V. and Novera Properties N.V. v.


Republic of Bulgaria (ICSID Case No. ARB/12/16)
Netherlands


31 Orascom Telelcom Holding v. Algeria (UNCITRAL) Egypt
32 Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of


Algeria (ICSID Case No. ARB/12/35)
Luxembourg


33 Ping An Life Insurance Company of China, Limited and Ping An Insurance
(Group) Company of China, Limited v. Kingdom of Belgium (ICSID Case
No. ARB/12/29)


China


34 Planet Mining Pty Ltd v. Republic of Indonesia (ICSID Case
No. ARB/12/40)


Australia


35 Progas Energy Ltd. v. Pakistan Mauritius
36 Repsol, S.A. and Repsol Butano, S.A. v. Argentine Republic (ICSID Case


No. ARB/12/38)
Spain


37 Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela (ICSID Case No.
ARB(AF)/12/5)


Canada


38 Saint-Gobain Performance Plastics Europe v. Bolivarian Republic of
Venezuela (ICSID Case No. ARB/12/13)


France


39 Sanum Investments Ltd. v. Laos (ad hoc) China
40 Slovak Gas Holding BV, GDF International SAS and E.ON Ruhrgas


International GmbH v. Slovak Republic (ICSID Case No. ARB/12/7)
France, Germany,
Netherlands


41 Supervision y Control S.A. v. Republic of Costa Rica (ICSID Case No.
ARB/12/4)


Spain


42 Telefónica S.A. v. United Mexican States (ICSID Case No. ARB(AF)/12/4) Spain
43 Tenaris S.A. and Talta - Trading e Marketing Sociedade Unipessoal Lda.


v. Bolivarian Republic of Venezuela (ICSID Case No. ARB/12/23)
Luxembourg,
Portugal


44 Ternium S.A. and Consorcio Siderurgia Amazonia S.L. v. Bolivarian
Republic of Venezuela (ICSID Case No. ARB/12/19)


Spain


45 Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan
(ICSID Case No. ARB/12/1)


Australia


46 Transban Investments Corp. v. Bolivarian Republic of Venezuela (ICSID
Case No. ARB/12/24)


Barbados


47 Tullow Uganda Operations PTY LTD v. Republic of Uganda (ICSID Case
No. ARB/12/34)


United Kingdom


48 UAB Energija (Lithuania) v. Republic of Latvia (ICSID Case No.
ARB/12/33)


Lithuania


49 Valle Verde Sociedad Financiera S.L. v. Bolivarian Republic of Venezuela
(ICSID Case No. ARB/12/18)


Spain


50 Vattenfall AB and others v. Federal Republic of Germany (ICSID Case
No. ARB/12/12)


Sweden


51 Venoklim Holding B.V. v. Bolivarian Republic of Venezuela (ICSID Case
No. ARB/12/22)


Netherlands


52 Veolia Propreté v. Arab Republic of Egypt (ICSID Case No. ARB/12/15) France


Source: UNCTAD.


In addition, in at least six arbitrations initiated in 2012, the claimant and the respondent have not been
disclosed(fiveattheStockholmChamberofCommerceandoneatCairoRegionalCentreforInternational
CommercialArbitration).




29


Country Cases
Argentina 52
Venezuela, Bolivarian Republic of 34
Ecuador 23
Mexico 21
Czech Republic 20
Canada 19
Egypt 17
United States 15
Poland 14
Ukraine 14
India 12
Kazakhstan 11
Slovak Republic 11
Hungary 10
Bolivia, Plurinational State of 9
Romania 9
Russian Federation 9
Turkey 9
Pakistan 8
Peru 8
Georgia 7
Moldova, Republic of 7
Algeria 6
Turkmenistan 6
Costa Rica 5
Indonesia 5
Jordan 5
Kyrgyzstan 5
Lithuania 5
Albania 4
Congo, Democratic Republic of 4
Mongolia 4
Philippines 4
Belize 3
Bulgaria 3
Chile 3
Croatia 3
El Salvador 3
Estonia 3
Germany 3
Guatemala 3
Latvia 3
Lebanon 3
Macedonia, TFYR 3
Paraguay 3
Sri Lanka 3
Uzbekistan 3
Vietnam 3


Annex 2. Known investment treaty claims, by respondents




30


Zimbabwe 3
Armenia 2
Azerbaijan 2
Bangladesh 2
Burundi 2
Dominican Republic 2
Ghana 2
Lao People’s Democratic Republic 2
Malaysia 2
Morocco 2
Serbia 2
Slovenia 2
Spain 2
Tanzania, United Republic of 2
United Arab Emirates 2
United Kingdom 2
Yemen 2
Australia 1
Belgium 1
Bosnia and Herzegovina 1
Cambodia 1
China 1
Ethiopia 1
France 1
Gabon 1
Grenada 1
Guyana 1
Iran, Islamic Republic of 1
Italy 1
Montenegro 1
Myanmar 1
Nicaragua 1
Nigeria 1
Oman 1
Panama 1
Portugal 1
Republic of Equatorial Guinea 1
Republic of Korea 1
Saudi Arabia 1
Senegal 1
South Africa 1
Tajikistan 1
Thailand 1
Trinidad and Tobago 1
Tunisia 1
Uruguay 1
Unknown 13




31


Annex 3. Decisions rendered in 2012


A. Decisions upholding jurisdiction (at least in part)


Case Title
Legal


Instrument
Investor’s


home country


Year
case was
initiated


1 Chevron Corporation and Texaco Petroleum
Corporation v. The Republic of Ecuador
(UNCITRAL, PCA Case No. 2009-23), Third
Interim Award on Jurisdiction and Admissibility,
27 February 2012


Ecuador-United
States BIT


United States 2006


2 H&H Enterprises Investments, Inc. v. Arab
Republic of Egypt (ICSID Case No. ARB 09/1),
Decision on Jurisdiction, 5 June 2012


Egypt-United
States BIT


United States 2009


3 Quiborax S.A., Non Metallic Minerals S.A.
and Allan Fosk Kaplún v. Plurinational State of
Bolivia (ICSID Case No. ARB/06/2), Decision on
Jurisdiction, 27 September 2012


Bolivia-Chile BIT Chile 2006


4 Bureau Veritas, Inspection, Valuation,
Assessment and Control, BIVAC B.V. v.
The Republic of Paraguay (ICSID Case No.
ARB/07/9), Further Decision on Jurisdiction, 9
October 2012


Netherlands-
Paraguay BIT


Netherlands 2007


5 Teinver S.A., Transportes de Cercanías S.A.
and Autobuses Urbanos del Sur S.A. v. The
Argentine Republic (ICSID Case No. ARB/09/1),
Decision on Jurisdiction, 21 December 2012
and Separate Opinion


Argentina-Spain
BIT


Spain 2009


6 Electrabel S.A. v. Republic of Hungary (ICSID
Case No. ARB/07/19), Decision on Jurisdiction,
Applicable Law and Liability, 30 November 2012


Energy Charter
Treaty


Belgium 2007


7 Urbaser S.A. and Consorcio de Aguas
Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa
v. The Argentine Republic (ICSID Case
No. ARB/07/26), Decision on Jurisdcition, 19
December 2012


Argentina-Spain
BIT


Spain 2007




32


B. Decisions rejecting jurisdiction


Case Title
Legal
Instrument


Investor’s
home country


Year
case was
initiated


1 ICS Inspection and Control Services
Limited (United Kingdom) v. The Republic of
Argentina (UNCITRAL, PCA Case No. 2010-
9), Award on Jurisdiction, 10 February 2012


Argentina-United
Kingdom BIT


United Kingdom 2009


2 Pac Rim Cayman LLC v. Republic of El
Salvador (ICSID Case No. ARB/09/12),
Decision on Jurisdiction, 1 June 2012


CAFTA-DR United States 2009


3 Caratube International Oil Company LLP v.
The Republic of Kazakhstan (ICSID Case No.
ARB/08/12), Award, 5 June 2012


Kazakhstan-
United States BIT


United States 2008


4 Standard Chartered Bank v. The United
Republic of Tanzania (ICSIDCase
No. ARB/10/12), Award, 2 November 2012


Tanzania- UK BIT United Kingdom 2010


5 Daimler Financial Services AG v. Argentine
Republic (ICSID Case No. ARB/05/1),
Award, 22 August 2012


Argentina-
Germany BIT


Germany 2005


C. Decisions finding State’s liability for IIA breaches (at least in part)1


Case Title
Legal
Instrument


Investor’s
home country


Year
case was
initiated


1 SGS Société Générale de Surveillance S.A.
v. The Republic of Paraguay (ICSID Case
No. ARB/07/29), Award, 10 February 2012


Paraguay-
Switzerland BIT


Switzerland 2007


2 Marion Unglaube and Reinhard Unglaube
v. Republic of Costa Rica (ICSID
Case No. ARB/08/1 and ICSID Case
No. ARB/09/20), Award, 16 May 2012


Costa Rica-
Germany BIT


Germany 2008


2009


3 Mobil Investments Canada Inc. and Murphy
Oil Corporation v. Canada (ICSID Case
No. ARB(AF)/07/4), Decision on Liability and
Principles of Quantum, 22 May 2012 and
Partial Dissenting Opinion, 17 May 2012


NAFTA United States 2007


4 SAUR International SA v. Republic of
Argentina (ICSID Case No. ARB/04/4),
Decision on Jurisdiction and Liability, 6 June
2012


Argentina-
France BIT


France 2004


5 EDF International S.A., SAUR International
S.A. and León Participaciones Argentinas
S.A. v. Argentine Republic (ICSID Case
No. ARB/03/23), Award, 11 June 2012


Argentina-
France BIT;
Argentina-
Belgium/
Luxembourg BIT


France 2003


1 These decisions may also include findings on jurisdiction and on compensation.




33


6 Antoine Goetz and Others and S.A. Affinage
des Metaux v. Republic of Burundi (ICSID
Case No. ARB/01/2), Award, 21 June 2012


Belgium/
Luxembourg-
Burundi BIT


Belgium 2001


7 Railroad Development Corporation v.
Republic of Guatemala (ICSID Case
No. ARB/07/23), Award, 29 June 2012


CAFTA-DR United States 2007


8 Swisslion DOO Skopje v. The Former
Yugoslav Republic of Macedonia (ICSID
Case No. ARB/09/16), Award, 6 July 2012


Macedonia-
Switzerland BIT


Switzerland 2009


9 Renta 4 S.V.S.A., et al v. The Russian
Federation (SCC No. 24/2007), Award, 20
July 2012


Spain-U.S.S.R
BIT


Spain 2006


10 Occidental Petroleum Corporation and
Occidental Exploration and Production
Company v. The Republic of Ecuador (ICSID
Case No. ARB/06/11), Award, 5 October
2012 and Dissenting Opinion


Ecuador-United
States BIT


United States 2006


11 Deutsche Bank AG v. Democratic Socialist
Republic of Sri Lanka (ICSID Case
No. ARB/09/2), Award, 31 October 2012
and Dissenting Opinion


Germany-Sri
Lanka BIT


Germany 2009


12 Burlington Resources Inc. v. Republic of
Ecuador (formerly Burlington Resources
Inc. and others v. Republic of Ecuador
and Empresa Estatal Petróleos del Ecuador
(PetroEcuador)) (ICSID Case No. ARB/08/5),
Decision on Liability, 14 December 2012 and
Dissenting Opinion


Ecuador-United
States BIT


United States 2008


D. Decisions dismissing all of the investors’ claims


Case Title
Legal


Instrument
Investor’s


home country


Year
case was
initiated


1 Jan Oostergetel and Theodora Laurentius
v. The Slovak Republic (UNCITRAL), Final
Award (Redacted), 23 April 2012


Netherlands-
Slovak Republic
BIT


Netherlands 2006


2 Toto Costruzioni Generali S.p.A. v.
The Republic of Lebanon (ICSID Case
No. ARB/07/12), Award, 7 June 2012 and
Concurring Opinion


Italy-Lebanon
BIT


Italy 2007


3 Ulysseas, Inc. v. The Republic of
Ecuador (UNCITRAL), Final Award, 12 June
2012


Ecuador-United
States BIT


United States 2009


4 Iberdrola Energía S.A. v. Republic of
Guatemala (ICSID Case No. ARB/09/5),
Award, 17 August 2012


Guatemala-
Spain BIT


Spain 2009


5 Bosh International, Inc and B&P Ltd Foreign
Investments Enterprise v. Ukraine (ICSID
Case No. ARB/08/11), Award, 25 October
2012


Ukraine-United
States BIT


United States 2008




34


E. Decisions on the application for annulment


Case Title Legal Instrument
Investor’s


home country


Year
case was
initiated


1 AES Summit Generation Limited and AES-
Tisza Erömü Kft v. The Republic of Hungary
(ICSID Case No. ARB/07/22), Decision on
Annulment, 29 June 2012


Hungary-
United Kingdom
BIT


United Kingdom 2001


2 Victor Pey Casado and President Allende
Foundation v. Republic of Chile (ICSID
Case No. ARB/98/2), Decision on
Annulment, 18 December 2012


Chile-Spain BIT Spain 1998


F. Decisions awarding compensation


Case Title
Legal


Instrument
Investor’s


home country


Year
case was
initiated


1 SGS Société Générale de Surveillance S.A.
v. The Republic of Paraguay (ICSID Case
No. ARB/07/29), Award, 10 February 2012


Paraguay-
Switzerland BIT


Switzerland 2007


2 Marion Unglaube and Reinhard Unglaube
v. Republic of Costa Rica (ICSID
Case No. ARB/08/1 and ICSID Case
No. ARB/09/20), Award, 16 May 2012


Costa Rica-
Germany BIT


Germany 2008


2009


3 Antoine Goetz and Others and S.A. Affinage
des Metaux v. Republic of Burundi (ICSID
Case No. ARB/01/2), Award, 21 June 2012


Belgium/
Luxembourg-
Burundi BIT


Belgium 2001


4 Railroad Development Corporation v.
Republic of Guatemala (ICSID Case
No. ARB/07/23), Award, 29 June 2012


CAFTA-DR United States 2007


5 EDF International S.A., SAUR International
S.A. and León Participaciones Argentinas
S.A. v. Argentine Republic (ICSID Case
No. ARB/03/23), Award, 11 June 2012


Argentina-France
BIT; Argentina-
Belgium/
Luxembourg BIT


France 2003


6 Swisslion DOO Skopje v. The Former
Yugoslav Republic of Macedonia (ICSID
Case No. ARB/09/16), Award, 6 July 2012


Macedonia-
Switzerland BIT


Switzerland 2009


7 Renta 4 S.V.S.A., et al v. The Russian
Federation (SCC No. 24/2007), Award, 20
July 2012


Spain-U.S.S.R
BIT


Spain 2006


8 Occidental Petroleum Corporation and
Occidental Exploration and Production
Company v. The Republic of Ecuador (ICSID
Case No. ARB/06/11), Award, 5 October
2012 and Dissenting Opinion


Ecuador-United
States BIT


United States 2006


9 Deutsche Bank AG v. Democratic Socialist
Republic of Sri Lanka (ICSID Case
No. ARB/09/2), Award, 31 October 2012
and Dissenting Opinion


Germany-Sri
Lanka BIT


Germany 2009




35


G. Decisions not publicly available


Case Title Legal Instrument
Investor’s


home country


Year
case was
initiated


1 Konsortium Oeconomismus v.
Czech Republic, Award, 1 February 2012


Czech Republic-
Switzerland BIT


Switzerland 2009


2 Adem Dogan v. Turkmenistan (ICSID Case
No. ARB/09/9), Decision on Jurisdiction,
29 February 2012


Germany-
Turkmenistan BIT


Germany 2009


3 Inmaris Perestroika Sailing Maritime
Services GmbH and Others v. Ukraine
(ICSID Case No. ARB/08/8), Award, 1
March 2012


Germany-Ukraine
BIT


Germany 2008


4 Intertrade Holding GmbH v.
Czech Republic, Award, 7 June 2012


Czech Republic-
Germany BIT


Germany 2008


5 Hesham T. M. Al Warraq v. Republic
of Indonesia, Decision on Jurisdiction, 21
June 2012


OIC Investment
Agreement


Saudi Arabia 2011


6 Alapli Elektrik B.V. v. Republic of Turkey
(ICSID Case No. ARB/08/13), Award, 16
July 2012 and Dissenting Opinion


Netherlands-
Turkey BIT


Netherlands 2008


7 Karmer Marble Tourism Construction
Industry and Commerce Limited Liability
Company v. Georgia (ICSID Case
No. ARB/08/19), Award, 9 August 2012


Georgia-Turkey
BIT


Turkey 2008


8 European American Investment Bank AG
(EURAM) v. Slovak Republic (UNCITRAL),
Award on Jurisdiction, 22 October 2012


Austria-Slovak
Republic BIT


Austria 2010


9 Achmea B.V. v. The Slovak
Republic(formerly Eureko B.V. v. The Slovak
Republic) (UNCITRAL, PCA Case No.
2008-13), Award, 7 December 2012


Netherlands-
Slovak Republic
BIT


Netherlands 2009


10 Millicom International Operations B.V. and
Sentel GSM S.A. v. Republic of Senegal
(ICSID Case No. ARB/08/20), Award, 27
November 2012


Netherlands-
Senegal BIT


Netherlands 2008


11 TRACO Deutsche Travertin Werke GmbH v.
Poland


Germany-Poland
BIT


Germany Unknown


H. State-State Arbitration


Case Title
Legal


Instrument
Investor’s


home country


Year
case was
initiated


1 Republic of Ecuador v. United States
of America (PCA Case No. 2012-5), 29
September 2012 (not public)


Ecuador-United
States BIT


N.A. 2011


Source: UNCTAD.




36


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International Investment Agreements (IIAs),
please visit the website of the UNCTAD


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www.unctad.org/diae
www.unctad.org/iia


For further information,
please contact


Mr. James X. Zhan
Director


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UNCTAD


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