THE AUTHOR:
Zeyad Abouellail, Legal Content Officer at Jus Mundi
Introducing “Arbitration Aftermath” by Zeyad Abouellail: Your guide to the latest post-award developments in the evolving landscape of investor-State and commercial arbitration. Each week, Zeyad explores a range of post-award news involving sovereign States with a global perspective –– from post-award settlements, compliance with awards, to recognition and enforcement procedures, annulment, and more.
CC/Devas v. India (I)
India appeals Australian judgment that dismissed jurisdictional immunity defence in enforcement proceedings of BIT award
PCA Case No. 2013-09
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Marc Lalonde (President), David R. Haigh (Appointed by the claimants), Anil Dev Singh (Appointed by the State, replaced Francisco Orrego Vicuña)
Seat of Arbitration: The Hague, Netherlands
On November 10th, the Federal Court of Australia granted India leave to appeal a judgment that upheld jurisdiction over the State and dismissed its sovereign immunity arguments under the New York Convention and the 1985 Foreign States Immunities Act (“FSIA”).
Last month, the Federal Court ruled that India isn’t immune from jurisdiction, finding a clear and unmistakable submission by agreement within the meaning of section 10(2) of the FSIA. It also found that the investors fulfilled the requirements of Articles III and IV of the New York Convention. At this stage, they only needed to provide the arbitration agreement and an authenticated copy of the award (see to our previous digest here).
In the November 10th judgment, Justice Jackman highlighted an anticipation of India’s opposition to enforcement in the final hearing, relying on article V of the New York Convention (adopted in the 1974 International Arbitration Act). Such opposition inherently involves a submission to the court’s jurisdiction and a waiver of sovereign immunity.
He concluded that India’s appeal on sovereign immunity should precede that instance; otherwise, “any right of appeal on that matter would be rendered nugatory.”
The investors are concurrently pursuing enforcement in the US and Canada. In February 2022, they initiated a second treaty arbitration concerning India’s strategy to evade payment of the USD 562 million ICC award rendered in Devas v. Antrix (see our previous digest here).
Last month, the Hague District Court upheld the quantum award and dismissed India’s fraud allegations (see our previous digest here).
Micula v. Romania (I)
CJUE Advocate General asserts UK Supreme Court breached EU law by enforcing ICSID award
ICSID Case No. ARB/05/20
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Laurent Lévy (President), Stanimir A. Alexandrov (Appointed by the claimants), Georges Abi-Saab (Appointed by the State)
Ad hoc committee: Claus von Wobeser (President), Bernardo M. Cremades Sanz-Pastor, Abdulqawi Ahmed Yusuf
On November 9th, Advocate General Emiliou (“AG Emiliou”) delivered an Opinion recommending that the Court of Justice of the European Union (“CJEU”) declare that the UK Supreme Court infringed EU law by enforcing the Micula v. Romania (I) award and refusing to stay the proceedings pending related actions before EU courts.
Background
In December 2013, an ICSID tribunal found that Romania violated the Romania – Sweden BIT by revoking tax incentives granted to Swedish investors Viorel and Ioan Micula and their companies (“the investors”). The tribunal ordered Romania to pay more than RON 376 million plus interest, now valued at over EUR 250 million.
While Romania partially complied, the European Commission (“EC”) directed the State to halt the award’s implementation, deeming it unlawful State aid. In 2015, the EC adopted its decision, which provided that such payment constitutes State aid within the meaning of Article 107(1) of the TFEU.
The investors appealed and, in June 2019, the General Court annulled the EC’s decision. The EC then appealed to the CJEU, which in January 2022 set aside the judgment, remanding the case to the General Court (the proceedings are pending).
In the UK, the award was recognized successfully in 2014. Romania appealed, and while the High Court of England and Wales dismissed the appeal, it ordered a stay in enforcement pending EU court proceedings. The Court of Appeals upheld the stay in July 2018, citing the principle of sincere cooperation (Article 4(3) TFEU).
However, in February 2020, the UK Supreme Court overturned previous rulings and enforced the award. Relying on Article 351(1) TFEU’s subordination clause, the Supreme Court argued the UK was obligated under the ICSID Convention, a multilateral treaty, to enforce the award.
In July 2022, the EC initiated infringement proceedings after formally notifying the UK about the alleged breach of EU law resulting from the UK Supreme Court’s decision. Despite contestations, the UK did not participate in the infringement proceedings.
Findings of AG Emiliou
Preliminarily, AG Emiliou noted that the CJUE has jurisdiction since the UK was still bound by EU provisions at the time of the Supreme Court judgment and that the latter was delivered during the transition period.
The EC alleged four distinct breaches of EU law.
1. Duty of sincere cooperation (Article 4(3) TFEU)
The EC alleged that the UK breached the principle of sincere cooperation by not staying proceedings related to an issue requiring EU law interpretation, pending an appeal before the CJUE.
AG Emiliou was unconvinced by the Supreme Court’s arguments against staying the proceedings and found that the EC’s first ground is well founded.
He emphasized the Supreme Court’s acknowledgement in its judgment of potentially conflicting decisions involving the same parties and subject matter. He stressed that a pending appeal before the CJUE was, in principle, “sufficient to trigger the duty of cooperation”.
He clarified that both EU and UK proceedings “broadly” addressed the enforceability of the award in the EU, requiring interpretation of the same provisions and general principles of EU law. He argued that the UK proceedings significantly impacted the effectiveness of EC’s State aid decisions, posing a risk of conflicting judgments.
He also argued that it was “abundantly clear” to the Supreme Court that if the investors’ were allowed to enforce the award in the UK, the EU proceeding would have “have largely lost their purpose”.
Moreover, he pointed out the Supreme Court’s failure to correctly interpret Article 351(1) TFEU. AG Emiliou stressed that determining the scope of application of Article 351(1) inherently involved the interpretation of EU law.
The key issue was whether the provision would be applicable when the prior agreement is a multilateral agreement and when the dispute “is purely internal” to the EU. He stated that the provisions of the ICSID Convention and EU law are “inextricably linked”, but that does not affect the CJUE competence to address EU-related aspects. Moreover, the provisions of the ICSID Convention can have a “direct impact” on the effectiveness of the EC’s decision on State aid.
Disagreeing with the Supreme Court, AG Emiliou highlighted that the issues raised by the investors under Article 351 TFEU were not separate from those in EU Courts. He said that “the risk of creating a ‘substantial impediment to the operation of EU law’ existed regardless of the specific legal basis relied on by the investors in the different proceedings”.
2. Infringement of Article 351(1) TFEU
The EC alleged that the Supreme Court violated Article 351(1) TFEU by asserting that EU law doesn’t apply to the enforcement of the award due to the UK’s ICSID Convention obligations to non-EU States.
AG Emiliou recommended rejecting this ground.
He explained that Article 351(1) doesn’t contain any obligations towards States and “there could be no self-standing breach of the first paragraph of Article 351 TFEU”.
However, he critiqued the Supreme Court’s application of Article 351(1), highlighting its focus solely on obligations under Article 54 of the ICSID Convention without acknowledging any corresponding rights. He argued that the Court should have considered the BIT and its associated obligations, emphasizing that by excluding the BIT, “the Supreme Court lost sight of the basic legal relationship which gave rise to the dispute: that between Romania on the one side, and Sweden and its nationals on the other”.
3. Infringement of Article 267 TFEU
The EC contended that by failing to refer the question to CJUE for a preliminary ruling, the Supreme Court breached Article 267 TFUE.
AG Emiliou agreed with the EC.
He noted pending enforcement proceedings in EU courts and other EU member states (France, Belgium, Luxembourg, and Sweden) involving different EU rules and principles, emphasizing the tangible risk of conflicting judicial decisions being “both real and present“.
4. Infringement of Article 108(3) TFEU
The EC argued that the UK courts’ enforcement of the award directly contradicted the standstill obligation of Article 108(3) TFEU.
AG Emiliou found that this ground should be rejected by the CJUE.
He said that the EC failed to present evidence detailing “how and when the enforcement of the award in the United Kingdom, made possible by the contested judgment, led to an actual payment of the sums set out therein”.
DTEK v. Russia
Russia faces enforcement of USD 207 million Crimea award in the US
PCA Case No. 2018-41
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Juan Fernández-Armesto (President, replaced Stanimir A. Alexandrov), J. William F. Rowley (Appointed by the claimant), Vladimir Pavic (Appointed by the State)
Seat of Arbitration: The Hague, Netherlands
On November 7th, Ukrainian electricity company DTEK Krymenergo lodged a petition in the US District of Columbia to enforce a PCA award holding Russia liable for USD 207.8 million in damages, just a week after the award’s issuance.
The Award and J. William F. Rowley’s Separate Opinion on Quantum are now publicly available and can be accessed here.
On November 1st, the arbitral tribunal rendered its Award, finding that Russia breached the Russia – Ukraine BIT. It granted the investors USD 207.8 million in damages, along with interests and costs.
The dispute stems from Russia’s annexation of Crimea in 2014. DTEK launched the arbitration in 2017, alleging expropriation of its assets. DTEK owned an electricity network in Crimea.
On jurisdiction, the tribunal found that the BIT remains in full force and effect, notwithstanding the armed conflict in Crimea. The tribunal (by majority) agreed with the investors that the case does not involve a decision regarding the sovereignty of Crimea. The majority found that, at the relevant date, Crimea was a territory under the control of Russia for the purposes of the BIT.
The tribunal unanimously held that Russia is estopped from arguing that Crimea does not fall under the definition of “territory” under the BIT as it has not acted in good faith. It noted that Russia has “publicly and repeatedly declared that its firmly held position is that Crimea forms part of its sovereign territory”.
On merits, the tribunal emphasized that there is “no disagreement between both Parties that direct expropriation has indeed taken place”. It found that Russia breached Article 5 of the BIT by expropriating DTEK’s investment.
On damages, the tribunal dismissed DTEK’s USD 421.2 million claim (following the DRC methodology) and opted for a “reasonable weighting” for each alternative. It evaluated various methods like Book value, Adjusted auction price, Listed share price, and DCF valuation. Ultimately, a weighted average of these methods led to the USD 207.8 million figure.
In a press release, DTEK said that the award is worth USD 267 million and that it will pursue enforcement in countries where Russian assets are located “without delay”.
Tidewater v. Venezuela
Valores Mundiales v. Venezuela
Saint-Gobain v. Venezuela
Tenaris and Talta v. Venezuela (II)
Creditors of Venezuela attach PDVSA’s assets in the US
Tidewater v. Venezuela, ICSID Case No. ARB/10/5
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Alan Campbell McLachlan (President), Andrés Rigo Sureda (Appointed by the claimant), Brigitte Stern (Appointed by the State)
Ad hoc committee: Abdulqawi Ahmed Yusuf (President), Rolf Knieper, Cecil W.M. Abraham
Valores Mundiales v. Venezuela, ICSID Case No. ARB/13/11
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Eduardo Zuleta Jaramillo (President), Horacio A. Grigera Naón (Appointed by the claimants), Yves Derains (Appointed by the State)
Ad hoc committee: Luca G. Radicati di Brozolo (President), José Antonio Moreno Rodríguez, Fausto De Quadros
Saint-Gobain v. Venezuela, ICSID Case No. ARB/12/13
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Klaus M. Sachs (President), Charles N. Brower (Appointed by the claimant), Gabriel Bottini (Appointed by the State)
Ad hoc committee: Ricardo Ramírez-Hernández (President), Lawrence Boo Geok Seng, Olufunke Adekoya
Tenaris and Talta v. Venezuela (II), ICSID Case No. ARB/12/23
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Juan Fernández-Armesto (President), Enrique Gómez-Pinzón (Appointed by the claimants), Brigitte Stern (Appointed by the State)
Ad hoc committee: Rolf Knieper (President), José Antonio Moreno Rodríguez, N. Fernando Piérola Castro (appointed following resignation of Dyalá Jiménez Figueres)
On November 1st, the US District Court for the District of Delaware allowed multiple creditors of Venezuela, including four creditors of ISDS awards, to attach assets of PDVSA. The arbitral creditors previously won ICSID awards worth more than USD 600 million combined (not taking into account accrued interest).
Background
In 2018, Crystallex successfully attached PDVSA’s assets in Delaware, establishing PDVSA as Venezuela’s alter ego. The Court of Appeal for the Third Circuit upheld this attachment in 2019. Subsequently, other arbitral creditors such as OIEG mirrored this action, also attaching PDVSA’s assets (see March 2023 Opinion & Order and Court of Appeals for the Third Circuit decisions).
These successful attachments prompted several other judgment creditors to seek attachments of PDVSA’s assets in Delaware.
US District Court grants motion of attachment fieri facias against the shares of PDVSA in PDV Holding
The creditors argued that PDVSA remains Venezuela’s alter ego and is not immune under the Foreign Sovereign Immunities Act (“FSIA”). Venezuela and PDVSA countered that Federal law requires the application of Delaware law, which would preclude attachment.
In its Memorandum Opinion, the Court established that Venezuela and PDVSA are collaterally estopped from arguing that the application of Delaware alter ego principles would preclude attachment. The issue of whether federal or Delaware law should apply to the alter ego analysis was already litigated in both the Crystallex and OIEG actions.
In Crystallex, the District Court ruled that “it is federal law, not state law, that applies” to “address the circumstances under which an agency or instrumentality of a foreign state may be treated as the sovereign state itself for purposes of either jurisdiction or attachment and execution”. This decision was later upheld by the Third Circuit.
Venezuela and PDVSA contended that applying collateral estoppel would result in “inequitable administration of the laws”. The Court dismissed this argument, concurring with the creditors that re-litigating the issue “would create further delays and waste judicial resources but might also subject the Seven Creditors to a different legal standard than the Court applied in the Crystallex and OIEG Actions, potentially leading to inconsistent decisions”.
Furthermore, the Court asserted that even if collateral estoppel didn’t apply, federal common law – not Delaware law – governs whether PDVSA is Venezuela’s alter ego for the purpose of attachment of property.
An Order was issued the same day conditionally granting the writ of attachment fieri facias, pending the judgment creditors being named as Additional Judgment Creditors in the Sale Procedure and the license issued by OFAC.
ABOUT THE AUTHOR
Zeyad Abouellail is a Legal Content Officer at Jus Mundi and a PhD candidate & teaching assistant at Paris-Saclay University. His research focuses on the post-award phase in investment arbitration, and he also lectures on civil and contract law. He holds two Master’s Degrees in International Business Law from Paris-Saclay University and Paris 1 Panthéon-Sorbonne University. Prior to joining Jus Mundi, Zeyad interned at several law firms in international arbitration and corporate law in Cairo, Egypt.
