Arbitration Aftermath – September 21st, 2023

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.

Discover more digests

JGC v. Spain

Japanese investor files for enforcement of ICSID award against Spain in the US, while ICSID annulment proceeding is pending

ICSID Case No. ARB/15/27
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Hi-Taek Shin (President), August Reinisch (Appointed by the claimant), and Mónica Pinto (Appointed by the State)
Ad hoc Committee (Annulment proceeding): Dyalá Jiménez Figueres (President), Ucheora Onwuamaegbu (Member), and Tina M. Cicchetti (Member)

On the 15^th of September, JGC Holdings Corporation (“JGC”), one of Japan’s biggest construction companies, filed a petition to enforce a EUR 23.5 million ICSID award in the US District Court for the District of Columbia.

In 2010, JGC invested in two Spanish companies that own and operate concentrated solar power plants in Andalusia, relying on the financial incentives offered by Spanish legislative measures aimed at encouraging investment in renewable energies. Spain subsequently started withdrawing the incentives in 2012, prompting JGC to file for arbitration under the Energy Charter Treaty (“ECT”) in 2015.

The tribunal found Spain’s actions in breach of the ECT’s fair and equitable treatment, but only awarded the investor EUR 23.5 million out of the EUR 161 million claimed. Spain then filed for annulment in 2022. These proceedings are currently pending.

JGC is now one of the many creditors trying to enforce ECT awards against Spain in the District of Columbia. Many of these cases are stayed pending a decision of the Court of Appeals for the District of Columbia Circuit on Spain’s intra-EU defense (see Antin v. Spain below). JGC, however, being a Japanese company, will not have to deal with overcoming the intra-EU defense.

Related Documents:

A.D. Trade v. Guinea (I) and A.D. Trade v. Guinea (II)

Creditor of ICC awards obtains authorization for attachment of Guinea’s shares in Compagnie des Bauxites de Guinée

ICC Case No. 21390/MCP/DDA
Institution: ICC (International Chamber of Commerce)
Tribunal: Christopher P. Koch (President), Martial Akakpo (Appointed by the institution), and Nathalie Meyer-Fabre (Appointed by the institution)
Seat of arbitration: Paris, France

ICC Case No. 22374/DDA
Institution: ICC (International Chamber of Commerce)
Tribunal: Charles H. Poncet (President), Jean‑Yves Garaud (Appointed by the claimant), and Maria Vicien Milburn (Appointed by the State)
Seat of arbitration: Paris, France

The US District Court for the District of Delaware has granted A.D. Trade’s motion for an order authorizing attachment fieri facias of Guinea’s shares in Compagnie des Bauxites de Guinée (“CBG”) on the 15^th of September.

Background: Arbitration Proceedings and Columbia Enforcement Action

Belgian A.D Trade was successful in a pair of ICC arbitrations against Guinea, where it was awarded EUR 31 million in damages plus interests and costs in November 2017 (ICC Case No. 21390) and USD 5 million in damages in February 2020 (ICC Case No. 22374). The first arbitration pertained to an agreement to create a new intelligence unit for Guinea’s president, while the second concerned an agreement to acquire a transport aircraft and related services.

A.D. Trade first filed for enforcement in the US District Court for the District of Columbia in January 2022. The Court entered default judgment in March 2023 and enforced the awards in April, granting A.D. Trade USD 59.7 million, the value of the awards plus interest and costs.

Delaware Proceedings

The creditor then registered the Columbia enforcement judgment in the District of Delaware under 28 U.S.C. § 1963 and filed for attachment, directed at Delaware registered CBG.

A.D. Trade explained that Guinea owns 49% of the shares in CBG and that attachment of assets held by third parties is permitted under Delaware law. It further argued that the shares are not immune from execution under the Foreign Sovereign Immunities Act (“FSIA”), as the assets are being used for commercial activity in the US, the creditor gave notice of judgment to Guinea and a reasonable period of times has elapsed following the entry of judgment and the giving of notice.

The Delaware Court granted A.D. Trade’s motion with a concise one-page order, thereby affirming that the attachment complied with Delaware law and the FSIA’s requirements.

Another arbitral creditor of Guinea, Compagnie Sahélienne d’Entreprise (“CSE”), had also filed for attachment fieri facias of Guinea’s shares in CBG last year in Delaware. The motion was granted, and A.D. Trade filed for intervention in these proceedings, but CSE and Guinea later reached confidential settlement.

French Proceedings

A.D. Trade also pursued enforcement in France, having obtained exequatur of the 2017 award in Paris in December 2017. It obtained authorization for execution on a parcel of a property located in Paris, which was later auctioned and sold for EUR 2.8 million in April 2023.

ESPF and others v. Italy

**ICSID Ad hoc Committee rejects Italy’s request to annul ECT award**

Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Henri C. Álvarez (President), Michael C. Pryles (Appointed by the claimant), and Laurence Boisson de Chazournes (Appointed by the State)
Ad hoc Committee: Jacomijn J. van Haersolte-van Hof (President), D. Brian King (Member), and Ucheora Onwuamaegbu (Member)

In a recently published decision, an ICSID Ad hoc Committee rejected Italy’s request to annul an ECT award that granted the investor EUR 16 million in damages on the 31^st of July, 2023.

Background

The dispute relates to the claimants’ – German and Austrian investment funds – investment in photovoltaic technology projects in Italy, after the State adopted incentives in 2005 to encourage investments in the solar energy industry. Starting in 2009, the claimants invested in more than 350 photovoltaic plants in Italy.

Italy reduced the incentive tariffs in 2014, prompting the claimants to file for arbitration under the ECT in 2016. In a September 2020 award, the tribunal found Italy in breach of the ECT’s obligation to provide fair and equitable treatment, as well as in breach of the ECT’s impairment and umbrella clauses.

The tribunal awarded the investors EUR 16 million in damages, plus interest, legal fees, and arbitration costs.

Annulment Proceeding

Italy argued that the tribunal manifestly exceeded its powers by upholding jurisdiction over an intra-EU claim, based on the non-applicability of article 26 of the ECT to intra-EU investment disputes.

The Ad hoc Committee noted that Italy was focusing on considerations “many of which are based on EU law and presented through the prism of EU court decisions” while the investors presented “a more rigidly structured argumentation by reference to international law, consistent with its emphasis on the plain text of the ECT.” The Committee found that Italy had not met the threshold of showing any excess of power by the tribunal.

In rejecting Italy’s contestation of prior decisions that have rejected the intra-EU objection, the Committee found that “while recognizing that there is no strict rule of precedent in international (investment) arbitration, a consistent line of cases addressing an issue in a consistent way is typically decisive in undermining a claim of an alleged manifest excess of powers.”

Italy alleged that the tribunal’s failure to properly take into account the Belenergia and SunReserve awards constitutes a failure to state reasons. However, the tribunal agreed with the investors that no standard of “reinforced duty of reasoning” necessarily exists when prior decisions rule on the same standards or conduct. The Committee found that the tribunal thoroughly explained its reasoning for the relevant issues, and as such there was no departure from a fundamental rule of procedure.

Dangelas and others v. Vietnam

Paris Court of Appeal dismisses request to set-aside UNCITRAL award that upheld jurisdiction over dual national’s claim

PCA Case No. 2020-05
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Laurence Shore (President), Vaughan Lowe (Co-Arbitrator), and Stavros L. Brekoulakis (Co-Arbitrator)
Seat of arbitration: Paris, France

On the 12^th of September, the Paris Court of Appeal rejected Vietnam’s request to set-aside an award that upheld jurisdiction over Maya Dangelas’ claim, a US-Vietnam dual national, ruling that the US-Vietnam Trade Relations Agreement does not exclude dual national from the scope of application of the treaty.

Background

The dispute relates to the investment of Ms. Dangelas, along with U.S. Global Institute and Angels, which she founded in the US, in the Kien Luong thermal power station project in Vietnam.

Vietnam cancelled the project and removed it from the master plan for electricity development in March 2016. Alleging that they own Tan Tao Energy Corporation (which was carrying out the Kien Luong project) and that the cancellation constitutes expropriation of their investment under the US-Vietnam Agreement, the investors filed for UNCITRAL arbitration in September 2019.

The tribunal issued its decision on jurisdiction in December 2021. A decision on the merits has still not been rendered.

Vietnam’s Set-Aside Application

The State requested set-aside of the jurisdictional award, maintaining that the tribunal should have applied a “dominant and effective” nationality test, and that Ms. Dangelas was presenting herself as a Vietnamese national and not as a foreign investor in Vietnam until 2014.

Vietnam also contended that the claimants did not prove the necessary ownership to ensure the legal control of Tan Tao Energy and that the documents used to substantiate the right of ownership were tainted with fraud.

Vietnam finally argued that the annulment of the award on the grounds of violation of international public policy is justified under procedural fraud since the tribunal based its decision on falsified documents.

Court of Appeal’s Decision

Regarding Vietnam’s ratione personae arguments, the Court found that article 1(9) of the treaty only required that the physical person be “a national of a Party under its applicable law”. The Court explained that the US’s position on the question of dual nationals under other treaties was unrelated in this respect, and that a diplomatic note issued by the US embassy in Hanoï was irrelevant since it is not a competent authority to issue a note on the treaty’s interpretation (Chapter VII of the US-Vietnam Agreement).

Relying on the Vienna Convention on the Law of Treaties, the Court ruled that the ordinary meaning of the terms of the treaty (article 31 of the Vienna Convention) cannot lead to the exclusion of dual nationals from the application of the treaty.

The Court confirmed that the tribunal was thus not required to apply a “dominant and effective” nationality test.

The Court also found Vietnam’s allegation that Ms. Dangelas structured her investment while dissimulating her American nationality and evading the legal regime for foreign investment in Vietnam to be without effect on the tribunal’s jurisdiction and as a matter to be determined on the merits.

On the State’s ratione materiae arguments, the Court found that the treaty’s definition of investment was “very broad” and that the investors’ demonstrated indirect ownership of Tan Tao Energy was sufficient to be qualified as a protected investment.

The Court finally rejected the State’s request to set-aside the award on the ground of violation of international public policy. The Court explained that an award could only be set aside because of procedural fraud if this had a “decisive” effect on the decision of the arbitral tribunal. This was not the case since the tribunal was aware of such allegations and the documents’ authenticity was debated during the arbitration.

Prior Enforcement of The Tribunal’s Separate Award on Costs

The tribunal decided on the costs of the jurisdictional phase of the arbitration in a separate decision in March 2022. The investors were awarded more than USD 2 million in costs. The award was granted exequatur by the Paris Court of Justice in April 2022.

Second Arbitration Launched by Ms. Dangelas

In July 2022, Ms. Dangelas, along with Tan Tao Investment & Industry Corporation (ITACO), launched a second arbitration against Vietnam under the US-Vietnam Trade Relations Agreement, over the allegation that the State sought to force ITACO into liquidation.

The arbitration is being conducted under the UNCITRAL Rules and is being heard by a tribunal composed of David Unterhalter (President), Stanimir A. Alexandrov (Appointed by the claimant), and Raúl E. Vinuesa (Appointed by the State).

Infrastructure Services Luxembourg (Antin) v. Spain

US District Court for the District of Columbia stays enforcement action against Spain pending decision of Court of Appeals on intra-EU defense

Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Eduardo Zuleta Jaramillo (President), Francisco Orrego Vicuña (Appointed by the claimant), and J. Christopher Thomas (Appointed by the State)
Ad hoc committee (Annulment proceeding): Cavinder Bull (President), José Antonio Moreno Rodríguez (Member), and Nayla Comair-Obeid (Member)

In a September 13^th Minute Order, the US District Court for the District of Columbia stayed the proceedings in Antin v. Spain pending a decision of the US Court of Appeals for the District of Columbia, finding that “judicial economy strongly favors granting a stay”.

Parties’ Submissions

Spain filed a motion to stay the proceedings in April 2023, arguing that the other cases pending in the Court of Appeals involve the same issues on the Court’s subject matter jurisdiction under the Foreign Sovereign Immunities Act. Spain contended that a stay “would avoid fractured and disorderly litigation” and maintained that “judicial economy and consistency in judicial decision-making” weigh in favor of a stay.

The investor argued in return that Spain’s strategy to stay the case “is seeking to head off a potentially unfavorable ruling here while trying to score favorable rulings in other cases in advance of the D.C. Circuit’s consideration of these issues”. Recalling that the enforcement action has been pending for 5 years, already being stayed for 2 and a half years, the investor contended that they would be “adversely affected” by a stay.

The investor then urged the court not to stay the case, in view of the threat posed by the current proceeding pending in Luxembourg in which Spain is seeking to require the investor to suspend enforcement in the US.

Decision of the District Court

In granting the stay of proceedings, the court first ruled that the Luxembourg decision didn’t seem to be “imminent”, thus not posing a direct threat to the investor. The Court also ruled that a stay would not prevent the investor from being among the first creditors to enforce its award against Spain in case of a favorable ruling from the Court of Appeals.

The Court, citing the Baywa, InfraRed and Watkins enforcement proceedings that are currently stayed in the District Court of Columbia, found that in balancing “considerations of efficiency and judicial economy against the potential hardship to the parties”, no hardship outweighs the benefits of a stay and granted Spain’s motion.