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.
Micula v. Romania (I)
Romania Fails in Bid to Overturn Enforcement of the Micula Award in the US
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 14 May, the US Court of Appeals for the District of Columbia Circuit rejected Romania’s request for relief from three judgments that enforced the Micula award in the US.
Background
In December 2013, an ICSID tribunal found that Romania had violated the Romania-Sweden BIT by withdrawing the tax incentives that had been granted to Swedish investors Viorel and Ioan Micula and their companies (“the investors”). The tribunal ordered Romania to pay the investors more than RON 376 million plus interest. An ad hoc committee of ICSID rejected Romania’s application for annulment in 2016.
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 of the EU annulled the EC’s decision. The EC then appealed to the CJEU, which in January 2022 set aside the judgment annulling the EC’s 2015 decision. In September 2022, the CJUE ruled (upon a request from the Brussels Court of Appeal) that the award is incompatible with EU law and that it cannot be enforced in the EU.
In the US, the District Court of Columbia (“DC Court”) confirmed the award in September 2019 (“2019 judgment”). The DC Court rejected Romania’s EU law objection to the subject matter jurisdiction of the court. It found that EU law is inapplicable because the dispute predates Romania’s accession to the EU and that the award did not “relate to the interpretation or application of EU law.” The US Court of Appeals for the District of Columbia Circuit (“DC Appeals Court”) affirmed the DC Court’s confirmation of the award in 2020.
These proceedings also led to judgments for discovery sanctions and accrued sanctions against Romania, which were upheld by the DC Appeals Court in June 2022.
Subsequently, Romania sought relief from the 2019 judgment and ensuing sanctions in March 2022. It relied on the two 2022 decisions of the CJUE. The DC Court rejected Romania’s request in December 2022. The state appealed.
DC Appeals Court Rejects Romania’s Request for Relief
The DC Appeals Court first noted that Romania does not distinguish between the three DC Court judgments and reasons that if the 2019 judgment is set aside, the sanction should also be set aside. Thus, the court only addressed whether the DC Court erred in denying relief from the 2019 judgment.
First, the court rejected Romania’s argument that the DC Court’s jurisdictional analysis was premised on an erroneous interpretation and application of EU law.
The court was unconvinced that the 2022 CJEU decisions support the interpretation that the state’s accession to the EU retroactively renders the BIT “void ab initio”. It explained that the January 2022 decision “does not implicitly, much less ‘indisputably” rule on the retroactive validity of an agreement to arbitrate pre-dating Romania’s accession” and that the September 2022 decision “similarly states that Romania’s consent to arbitrate became void ‘from Romania’s accession to the European Union’”.
The court highlighted that under the FSIA exception, “the relevant jurisdictional question is the existence of a valid agreement to arbitrate”.
Second, the court rejected Romania’s contention that the DC Court’s subject matter jurisdiction depended on the 2019 judgment of the General Court of the EU. It explained that the DC Court based its conclusion on a “close inspection” of the award and the BIT.
Romania contended, for the first time on appeal, that the 2022 CJEU decision invalidated the award itself. The court was unconvinced, noting that under the ICSID Convention, the only possibility to set aside an ICSID award is through ICSID annulment proceedings.
Finally, Romania repeated its arguments that the 2022 CJEU decisions established that there has never been a valid agreement to arbitrate and invoked the principle of international comity.
The court assessed whether the asserted comity concerns “rise to the level of an extraordinary circumstance”. It found that the DC Court “carefully examined” the CJEU decisions before concluding that they did not affect jurisdiction under the FSIA. It highlighted the United States’ treaty obligations under the ICSID Convention, requiring US courts to give “full faith and credit” to ICSID awards.
The investors are also pursuing enforcement of the award in other jurisdictions. In March 2024, the CJEU ruled that the UK Supreme Court infringed EU law by enforcing the award.
GPGC v. Ghana
Ghana Declared in Default in US Enforcement Proceedings of USD 134 Million Award
PCA Case No. 2019-05
Institution: PCA (Permanent Court of Arbitration)
Tribunal: John Beechey (President), J. William F. Rowley (Appointed by the claimant), Albert K. Fiadjoe (Appointed by the respondent)
Seat of Arbitration: London, United Kingdom
On 24 April, the United States Bankruptcy Courts for the District of Columbia declared Ghana in default in the context of enforcement proceedings of a contractual PCA award.
The dispute arose from Ghana’s termination of an agreement entered with GPGC, a Ghanaian majority-owned subsidiary of Singaporean Trafigura Group for the installation and operation of two gas turbine power plants. In January 2021, the arbitral tribunal declared Ghana’s termination of the contract unlawful and awarded GPGC USD 134 million in damages plus interest, along with legal and arbitration costs.
In its petition to enforce the award, GPGC said that Ghana has already made partial payments but that the remaining amount due with interest is USD 134 million (as of January 19, 2024).
GPGC is also seeking enforcement of the award in the UK. In October 2023, the High Court of Justice of England and Wales rejected Ghana’s attempt to set aside an order allowing alternative service of interim charging orders against five London properties where the state held either freehold or leasehold interests (see our prior digest here).
Lao Holdings v. Laos (I)
Laos Successful in Obtaining Enforcement of ICSID Costs Awards in Singapore
ICSID Case No. ARB(AF)/12/6
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: William Ian Corneil Binnie (President), Bernard R. Hanotiau (Appointed by the claimant), Brigitte Stern (Appointed by the State)
Seat of Arbitration: Singapore, Singapore
On 18 April, the Singapore International Commercial Court (SICC) refused to set aside an order that permitted Laos to enforce a USD 2 million ICSID costs award.
Background
The dispute arose out of Lao Holdings’ (“LH”) investment to develop a casino in Laos and involved numerous arbitrations between LH and its affiliates against Laos.
In the ICSID Additional Facility arbitration initiated by LH against Laos under the Laos—Netherlands BIT, the tribunal denied LH the benefit of treaty protection after finding bad faith in the initiation of some investments and bad faith in the performance of other investment agreements. The tribunal ordered the investor to pay Laos USD 481,622 in arbitration costs and USD 1.4 million for the state’s legal costs.
LH sought to set aside the award at the seat in Singapore. The SICC dismissed LH’s set aside request in 2021. The judgment was later upheld by the Singapore Court of Appeal in 2022.
In May 2023, Laos obtained enforcement of the award in Singapore. LH applied to set aside the enforcement order.
SICC Upholds Enforcement Order
LH contended that the enforcement order should be set aside, and enforcement refused, since
(i) the award is contrary to public policy,
(ii) the costs order was a decision on a matter beyond the scope of the submission to arbitration,
(iii) the costs order was not in accordance with the agreed arbitral procedure.
LH said that around March 2020, it learned about a fee cap agreement between Laos and its legal counsel. LH contended that it sought to recover additional expenses above that fee cap. The investor argued that the ICSID tribunal was misled into granting an excessive costs order due to Laos’ intentional non-disclosure of the agreement.
Laos argued that LH was precluded from bringing its application because it was aware of these facts during its set-aside bid and should have raised the grounds of challenge at that time.
Abuse of Process
LH contended that it could not have raised these issues in the set aside proceeding as it was time-barred and precluded from introducing those grounds since the fee cap arrangement came to light after the expiry of the three-month limit set by Article 34(3) of the UNCITRAL Model Law.
In reply, Laos argued that the three-month limit only applies to the filing of the originating summons and not the affidavit in support.
The SICC agreed with Laos. It found that LH “could and should have” brought the grounds relating to the fee agreement in the context of the set aside proceeding and that “to raise them now would be to misuse or abuse the process of the court”.
Merits of the Claim
In any event, the SICC ruled that LH’s grounds against enforcement have no merit.
The court found that the agreement had a fee cap “but also a conditional element for GOL to pay its counsel any amount above the US$1.5 million fee cap which was awarded as costs and expenses by the BIT I Tribunals and recovered.”
Further, the court ruled that Laos was not under an obligation to disclose the agreement to the ICSID tribunal “as it could not have been material to the award of costs”. The court agreed with the state that “a party does not have to disclose the fee agreement with its lawyers if it is claiming an amount that is equal to or lower than the amount payable by the client”, which it found to be the case.
The Court was not persuaded by LH’s arguments that disclosure of a similar fee agreement in a parallel SIAC arbitration had impacted the tribunal’s costs order (Laos v. Lao Holdings and Sanum, SIAC Case No. ARB 143/14/MV).
The court highlighted that even if it had concluded that the fee agreement should have been disclosed, “the non-disclosure could not possibly have reached the high threshold required for a finding that enforcement of the ICSID Award would be contrary to public policy in Singapore.”
Accordingly, the SICC dismissed LH’s application and allowed Laos to enforce the award.
Laos Granted Alternative Means of Service in Enforcement Proceedings in the US
On 24 April, the United States District Court for the Northern Mariana Islands granted Laos’ motion for alternative means of service.
The US proceedings concern enforcement of the award rendered in the ICSID AF proceeding with LH and the award rendered in the parallel BIT proceeding between LH’s affiliate Sanum Investments and Laos (PCA Case No. 2013-13), which concluded with a USD 1.7 million costs award in favour of the state.
The US court granted Laos’ motion to serve Shawn A. Scott and Sanum Investments Ltd. by alternative means pursuant to Fed. R. Civ. P. 4(f)(3).
The US proceeding has been launched against John K. Baldwin, Shawn A. Scott and Bridge Capital, LLC, the alleged alter egos of LH and Sanum.
EDF v. Spain
Swiss Federal Tribunal Upholds Intra-EU ECT Award, Dismissing Spain’s EU Law Arguments
PCA Case No. AA613
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Alejandro A. Escobar (President), Stanimir A. Alexandrov (Appointed by the claimant), Raúl E. Vinuesa (Appointed by the State)
Seat of arbitration: Geneva, Switzerland
On 3 April, in a landmark ruling, the Swiss Federal Tribunal dismissed Spain’s bid to set aside an intra-EU Energy Charter Treaty (ECT) award that had ordered it to pay French EDF Energies Nouvelles EUR 29.6 million in damages. The judgment was published earlier this month.
Background
This arbitration is one of many that arose from Spain’s reforms of incentives offered to investors in the renewable energy sector.
EDF initiated the arbitration in 2016 on the basis of the ECT. In 2023, the tribunal majority dismissed Spain’s EU law objections to jurisdiction and found that Spain breached Article 10(1) of the ECT. The tribunal ordered Spain to pay EUR 29.6 million in damages. Raul E. Vinuesa, the state’s appointee, dissented.
Spain sought to set aside the award at the seat in Geneva.
Swiss Federal Tribunal Rejects CJEU’s Interpretation in Komstroy, Upholds intra-EU ECT award
First, Spain contended that the tribunal had failed to properly discuss during its deliberation the effect of the award in Green Power v. Spain, which is the first known award to accept the intra-EU objection to jurisdiction. The state also relied on the dissenting opinion of Raul E. Vinuesa, which raised this point.
In this regard, Spain argued that, according to article 190 of the Federal Act on Private International Law (PILA), the arbitral tribunal had been improperly constituted, its right to be heard had been violated, and procedural public policy had been infringed.
The Swiss Federal Tribunal was unconvinced. The court explained that a reading of the award clearly shows that the tribunal had indeed taken into consideration the Green Power award in its deliberation and decision. The court reasoned that the dissenting opinion is without effect as “a dissenting opinion remains an independent opinion, unrelated to the award, which does not affect either the reasons or the operative part of the award.”
Second, Spain then challenged the impartiality of the tribunal’s president, Alejandro A. Escobar. It said the reasoning behind the award is highly similar to that in Triodos v. Spain, whose tribunal was also presided over by Escobar.
The Swiss court was also unconvinced by this argument. The court found Spain’s challenge belated as it never raised this during the arbitration. It highlighted that it is “hardly surprising that the answer to an identical problem should be the same in two awards handed down six months apart by arbitral tribunals presided over by the same person.”
Third, Spain advanced that the tribunal erred in upholding jurisdiction over the dispute. The state argued that Article 26 of the ECT is incompatible with EU law. It said that in the event of such a conflict of norms, EU law should take precedence over the ECT.
The court clarified that it freely examines the jurisdiction of the arbitral tribunal. It explained that this may entail assessing questions of foreign law. In doing so, the court has full discretion, but in principle accepts the majority opinion, or in the event of disagreement between doctrine and case law, the opinion of the Supreme Court of that state.
In the context of international investment treaties, the court specified that it would itself determine the meaning to be given to certain terms, taking into account, where appropriate, the doctrine and drawing inspiration, if necessary, from the solutions reached by arbitral tribunals in the matter. The court emphasised however, that awards are not binding on other arbitral tribunals or the court, and that “arbitral jurisprudence cannot be considered a source of arbitration law as such”.
The court explained that it would interpret the ECT in light of the Vienna Convention on the Law of Treaties.
The court highlighted that “the present dispute is part of a wider issue concerning the legitimacy of recourse to investment arbitration within the EU to settle disputes of an intra-European nature” and that “for several years now, EU bodies have been waging a crusade” against intra-EU investment arbitration disputes.
The court emphasised that decisions by the CJEU, particularly in the Komstroy case, do not bind the court called upon to rule on an appeal against an award rendered by an arbitral tribunal seated outside of the EU, in this case in Switzerland. It explained that it “will not attach any particular value to the judgment of the CJEU in Komstroy but will, on the contrary, endeavour itself to ascertain the meaning and scope of Article 26 ECT.”
In analysing the ECT, the court considered that Article 26(3)(a) ECT, interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose, precludes the finding that the unconditional consent given by the state does not cover disputes of an intra-European nature.
The court did not agree with the reasoning adopted by the CJEU in Komstroy, since “it is based essentially, if not exclusively, on the requirement to preserve the autonomy and specific character of EU law, without taking any account of international law or the rules of interpretation of the treaties.”
The court found that the existence of a conflict between Art. 26 ECT and the EU Treaties has not been established. In any event, even if Art. 26 is incompatible with EU law, the court emphasised that there is nothing to suggest, under public international law, that the EU rules should take precedence over those of the ECT. It explained that the rules of conflict between international treaties enshrined in Art. 30 of the VCLT do not lead to the primacy of EU law over the ECT.
In conclusion, the Swiss Federal Tribunal found no reason to set aside the award and dismissed Spain’s request.
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.
