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2019 | OriginalPaper | Buchkapitel

Procedural Aspects of the Obligation of Non-Recognition Before International Investment Tribunals

verfasst von : Sebastian Wuschka

Erschienen in: International Investment Law and the Law of Armed Conflict

Verlag: Springer International Publishing

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Abstract

In the case of the investment claims filed against Russia with regard to its illegal annexation of Crimea in 2014, the international law principle of non-recognition of illegal acquisition of territory could serve as a jurisdictional defence. Due to the illegality of the territorial acquisition, Russia could try to argue, its investment treaties would not apply ratione loci to Crimea. It is, however, highly unlikely that a State would invoke its own illegal actions as a defence in international arbitrations. This contribution therefore analyses—on an abstract level—how ICSID and non-ICSID investment tribunals should approach such a situation. It shows that the obligation of non-recognition needs to be taken into account by arbitral tribunals in both frameworks. As long as both parties participate in the proceedings, the tribunal may interpret any lack of jurisdictional objections as a basis for a forum prorogatum. It would not need to make any (ancillary) determination with regard to the case’s underlying territorial dispute to hear the case on the merits that could potentially contravene the obligation of non-recognition. In default proceedings, to the contrary, the tribunal cannot rely on the concept of forum prorogatum. It is under a duty to review its jurisdiction ex officio in both the ICSID and the non-ICSID investment arbitration framework. This does not mean, however, that its interpretation of the treaty’s territorial nexus, assuming it accepts jurisdiction, will always contravene the obligation of non-recognition.

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Vorheriges Kapitel Kosovo and Foreign Investment Protection

Nächstes Kapitel Exploring the Links Between Nationality Changes and Investment Claims Arising Out of Armed Conflicts: The Case of Russian Passportization in Crimea

Aeroport Belbek and Igor Valerievich Kolomoisky v Russia, PCA Case No. 2015-07; PrivatBank and Finilon v Russia, PCA Case No. 2015-21; Luzgor et al. v Russia, PCA Case No. 2015-29; PJSC Ukrnafta v Russia, PCA Case No. 2015-34; Stabil et al. v Russia, PCA Case No. 2015-35; Everest Estate et al. v Russia, PCA Case No. 2015-36; Naftogaz v Russia, PCA Case No. 2017–16; Oschadbank v Russia (case details not public).

See already Costelloe (2016), Happ and Wuschka (2016) and Repousis (2016). For the argument that the law of occupation would also allow aggrieved foreign investors on the annexed territory to rely on the de jure sovereign’s investment treaties, see Mayorga (2016).

Kalderimis et al. (2015), p. 322.

Metal-Tech v Uzbekistan, ICSID Case No. ARB/10/3, Award (4 October 2013), para. 123.

Micula et al. v Romania, ICSID Case No. ARB/05/20, Decision on Jurisdiction and Admissibility (24 September 2008) para. 65.

See ICSID Arbitration Rule 41(2) and 42(4).

Dawidowicz (2010), p. 683 et seq.; for reflections of this understanding see, e.g., UN General Assembly, UN Doc. Res 2734 (XXV), 16 December 1970 and UN General Assembly, Res. 3314 (XXIX), 14 December 1974. See further on this Happ and Wuschka (2016), p. 254.

Report of the ILC, 53rd Session, GAOR, 56th Session, Suppl. No. 10 (A/56/10), 2001, 287, para. 5.

Happ and Wuschka (2016), p. 254.

ILC Yearbook 2011, vol. II(2), pp. 31–143.

Article 53 VCLT.

Milano (2006), p. 184.

Legal Consequences for States of the Continued Presence of South Africa in Namibia, Advisory Opinion, ICJ Reports 16 (1971), p. 56; see on this also Milano (2006), p. 184.

Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, ICJ Reports 136 (2004), para. 159.

Talmon (2006), pp. 262 et seq.; Happ and Wuschka (2016), p. 263.

Happ and Wuschka (2016), p. 263.

For a chronology of the events, see The Telegraph Online, Ukraine crisis: timeline of major events, http://www.telegraph.co.uk/news/worldnews/europe/ukraine/11449122/Ukraine-crisis-timeline-of-major-events.html; see also Marxsen (2014), pp. 367–370.

UN General Assembly, Territorial Integrity of Ukraine, UN Doc. A/RES/68/262, 27 March 2014, para. 6.

See also Happ and Wuschka (2016), p. 254; Talmon (2006), p. 467.

Article 4 of the ILC’s Articles on State Responsibility; Happ and Wuschka (2016), p. 255.

Cf. Talmon (2006), p. 467.

Happ and Wuschka (2016), p. 255.

On this “most remarkable feature of the ICSID system”, see Bishop and Marchili (2012), para. 2.28 (with further references).

See, e.g., Article 41(1) of the ICSID Convention; Article 23(1) of the UNCITRAL Arbitration Rules.

Emphasis added.

Schreuer et al. (2009), Article 41, para. 52, p. 530.

Alcoa Minerals v Jamaica, ICSID Case No. ARB/74/2, Decision on Jurisdiction and Competence (6 July 1975) (not publicly available).

Kaiser Bauxite v Jamaica, ICSID Case No. ARB/74/3, Decision on Jurisdiction and Competence, (6 July 1975), reprinted in 1 ICSID Reports 296 (1993).

Reynolds v Jamaica, ICSID Case No. ARB/74/4, Decision on Jurisdiction and Competence (6 July 1975) (not publicly available).

Delaume (1986), p. 224.

Kaiser Bauxite v Jamaica, ICSID Case No. ARB/74/3, Decision on Jurisdiction and Competence (6 July 1975), para. 10.

Kaiser Bauxite v Jamaica, ICSID Case No. ARB/74/3, Decision on Jurisdiction and Competence (6 July 1975), para. 10 (emphasis in the original).

Delaume (1986), p. 224 (emphasis in the original).

See also Judge Kreća’s discussion in the Legality of Use of Force case: “The expression “proprio motu” implies the discretionary authority of the Court to take action on its own initiative. The action taken by the Court “ex officio” is an expression of the duty of the Court by virtue of its judicial function.”; Legality of Use of Force (Serbia and Montenegro v Belgium), Preliminary Objections, Judgment, I.C.J. Reports 371 (2004), Separate Opinion of Judge Kreća, 401 (emphasis in the original). See further for the first tribunal that seems to have diligently followed the accurate approach LETCO v Liberia, ICSID Case No. ARB/83/2, Award (31 March 1986), as reprinted in 2 ICSID Reports 343 (1994), 356–357.

Metal-Tech v Uzbekistan, ICSID Case No. ARB/10/3, Award (4 October 2013), para. 123 (emphasis added).

Micula et al.v Romania, ICSID Case No. ARB/05/20, Decision on Jurisdiction and Admissibility (24 September 2008), para. 65.

Duke Energy v Ecuador, ICSID Case No. ARB/04/19 (18 August 2008), para. 163.

Mihaly v Sri Lanka, ICSID Case No. ARB/00/2, Award (15 March 2002), para. 57 (emphasis in the original).

It must be noted, however, that some tribunals have simply reaffirmed what the literal language of Rule 41(2) requires them to do. Cf. Kardassopoulos v Georgia, ICSID Case No. ARB/05/18, Decision on Jurisdiction (6 July 2007) para. 108, where the tribunal found it was “well established, the Tribunal may […] examine its competence in a particular dispute, ratione personae or on another basis, on its own initiative (proprio motu)”.

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award (8 December 2008), para. 65 et seq.

Mavrommatis Palestine Concessions (Greece v Great Britain), PCIJ, Ser. A No. 3, 1924, p. 10.

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award (8 December 2008), para. 68 (emphasis in the original, footnotes omitted).

United States Diplomatic and Consular Staff in Tehran (USA v Iran), Judgment of 24 May 1980, ICJ Reports 3 (1980).

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award, 8 December 2008, para. 68 (emphasis in the original, footnotes omitted).

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award (8 December 2008), para. 69.

Mihaly v Sri Lanka, ICSID Case No. ARB/00/2, Award (15 March 2002), para. 57 (emphasis in the original).

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award (8 December 2008), para. 65.

Duke Energy v Republic of Ecuador, ICSID Case No. ARB/04/19, Award, (18 August 2008), para. 163 (emphasis in the original).

Aegean Sea Continental Shelf (Greece v Turkey), Decision of 19 December 1978, ICJ Reports 3 (1978), para. 15; United States Diplomatic and Consular Staff in Tehran (USA v Iran), Judgment of 24 May 1980, ICJ Reports 3 (1980), para. 4.

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award (8 December 2008), para. 68.

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award (8 December 2008), para. 68 (emphasis in the original).

Wintershall v Argentina, ICSID Case No. ARB/04/14, Award (8 December 2008), para. 68 (emphasis added).

Cf. Aegean Sea Continental Shelf (Greece v Turkey), Decision of 19 December 1978, ICJ Reports 3 (1978), para. 15.

Cf. Schreuer et al. (2009), Article 41, para. 45.

Cf. Schreuer et al. (2009), Article 41, para. 49.

Schreuer et al. (2009), Article 41, para. 49.

Similarly Steingruber (2014), p. 687.

There have been exceptional cases in which tribunals have still accepted jurisdictional objections at later stage. In these cases, however, the possibility to raise the relevant objection had not been apparent for the respondent; cf. Daimler v Argentina, ICSID Case No. ARB/05/1, Award, 22 August 2012, para. 109.

Schreuer (2013), para. 40.

See also Schreuer et al. (2009), Article 41, para. 50.

McLachlan et al. (2017), para. 3.72; Schreuer et al. (2009), Article 41, para. 50.

Happ and Wuschka (2016), p. 266; see also Schreuer et al. (2009), Article 25, para. 188.

Schreuer et al. (2009), Article 54, para. 85 (see also Article 42, para. 48).

Schreuer et al. (2009), Article 54, para. 85.

Schreuer et al. (2009), Article 42, para. 49.

Delaume (1988), p. 90.

Schreuer et al. (2009), Article 42, para. 49.

According to the ICSID Caseload Statistics 2017-2, ICSID had registered 619 cases under the ICSID Convention and the ICSID Additional Facility Rules by the end of June 2017, whereas the UNTCTAD Investment Policy Hub has so far registered 817 publicly known cases, see http://investmentpolicyhub.unctad.org/ISDS.

It should be noted here that the arbitration rules applicable in the Crimea cases are the earlier 1976 edition of the UNICTRAL Rules.

Tribunals are well advised to follow this approach also if not mandated by the respective rules. Otherwise, their actions might run counter to, inter alia, the parties’ right to be heard; cf. Kühn (2015), pp. 404 et seq.

Article 30 UNCITRAL Rules; Article 6(8) and 26(2) ICC Rules; Articles 9(3) and 35 SCC Rules.

Cf. Article 45(1) ICSID Convention and ICSID Arbitration Rule 42(3).

Born (2009), pp. 1867–1868; Greenberg et al. (2011), p. 208, para. 5.25; see also Kühn (2015), p. 403.

Born (2009), p. 1867.

Butchers and Kimbrough (2006), p. 241.

Mihaly v Sri Lanka, ICSID Case No. ARB/00/2, Award (15 March 2002), para. 57 (emphasis in the original).

At the time of the finalisation of this contribution, legislation based on the Model Law had been adopted by 80 States in a total of 111 jurisdictions; cf. UNCITRAL, Status of the UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006, http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html.

For a detailed explanation of the relatively minor modifications in the formulation of Article 34 of the UNCITRAL Model Law compared to Article V of the New York Convention, see Holtzmann and Neuhaus (1989), pp. 911 et seq.

Cf. Blackaby et al. (2015), paras 10.30–10.33.

Most recently Swiss Federal Tribunal, 10 December 2015, 4A_392/2015. See for earlier decisions only Swiss Federal Tribunal, 14 November 1991, BGE 116 (1990) II, 634–639.

Sec. 1027, 1040 (2) German Code of Civil Procedure; Most recently on this issue also in the context of recognition of foreign arbitral awards Regional Court Munich I, Pechstein v German & International Skating Union, 26 February 2014, 37 O 28331/12, para. A. IV. 2) b) aa).

Sec. 73 (1) UK Arbitration Act 1996.

As the example of the “Crimea claims” shows, that State is still likely to challenge the award. Russia, for instance, has so far tried to challenge at least the interim awards that upheld jurisdiction in PJSC Ukrnafta v Russia, PCA Case No. 2015-34, and Stabil et al. v Russia, PCA Case No. 2015-35, in Switzerland, the arbitral seat; cf. Swiss Federal Tribunal, Judgment of 16 October 2018, 4A_396/2017 & Judgment of 16 October 2018, 4A_398/2017.

Tribunal de Première Instance de Bruxelles, SNF SAS v Cytec Industries, 8 March 2007 (2007) Revue de l’Arbitrage 303; Gerechtshof’s-Gravenhage, Marketing Displays International v VR Van Raalte Reclame, 27 May 2004, KG/RK 2002-979 and 2002-1617 (2006) Stockholm International Arbitration Review 8(2):201.

ECJ, Eco Swiss v Benetton, Case C-126/97, Judgment of 1 June 1999 (Full Court), para. 39.

ICC Award No. 1110 of 1963 (1994) Arbitration International 10(3):282, p. 294.

ICC Award No. 1110 of 1963 (1994) Arbitration International 10(3):282, p. 291.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, pp. 279–311.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, p. 280, para. 7.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, p. 284, para. 18.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, p. 284, para. 19.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, p. 284, para. 20.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, p. 284, para. 21.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, p. 284, para. 22.

See also Happ and Wuschka (2016), pp. 262 et seq.

A different issue would be the tribunal’s jurisdiction over potential counter-claims. It may well be that granting the de facto sovereign the right to raise those would imply a form of recognition of the illegal situation. Over such counter-claims, the tribunal could not accept jurisdiction.

ICC case No. 6474 of 1992 (2000) Yearbook Commercial Arbitration XXV, p. 284, para. 22.

100

Of course, this contribution could only address the UNCITRAL, ICC and SCC Rules and much will depend on the particular procedural framework. That being sad, the conclusions reached should be equally relevant for other rules under which investment arbitrations are conducted.

101

See further on this, e.g., Happ and Wuschka (2016), pp. 255 et seq.

102

Investment Arbitration Reporter, Full jurisdictional reasoning comes to light in Crimea-related BIT arbitration vRussia, Investment Arbitration Reporter, 9 November 2017, https://www.iareporter.com/articles/full-jurisdictional-reasoning-comes-to-light-in-crimea-related-arbitration-everest-estate-v-russia/.

103

Investment Arbitration Reporter, Further Russia investment treaty decisions uncovered, offering broader window into arbitrators’ approaches to Crimea controversy, 17 November 2017, https://www.iareporter.com/articles/investigation-further-russia-investment-treaty-decisions-uncovered-offering-broader-window-into-arbitrators-approaches-to-crimea-controversy/.

104

Swiss Federal Tribunal, Judgment of 16 October 2018, 4A_396/2017 & Judgment of 16 October 2018, 4A_398/2017. Since these two judgment were published only during the final stages of the publication process for this volume, they—unfortunately—could not be discussed in greater detail here.

105

See para. 3.2. in both judgments.

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Titel: Procedural Aspects of the Obligation of Non-Recognition Before International Investment Tribunals
verfasst von: Sebastian Wuschka
Verlag: Springer International Publishing
Buch: International Investment Law and the Law of Armed Conflict
Print ISBN: 978-3-030-10745-1

Electronic ISBN: 978-3-030-10746-8

Copyright-Jahr: 2019
DOI: https://doi.org/10.1007/978-3-030-10746-8_7

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