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.
Mason Capital v. South Korea
South Korea Faces Enforcement of USD 32 Million Award in the US
PCA Case No. 2018-55
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Klaus M. Sachs (President), Elizabeth Gloster (Appointed by the claimants), Pierre Mayer (Appointed by the State)
Seat of arbitration: Singapore
On 24 May, US hedge fund Mason Capital filed for enforcement of a USD 32 million treaty award against South Korea in the US District Court for the District of Columbia.
The dispute arose out of government intervention in the merger between Samsung C&T (“SC&T”) and Cheil Industries. Mason Capital, a shareholder in SC&T, alleged that Korea had manipulated the shareholder vote and damaged its investment. It filed for arbitration in 2018 under the Korea-USA FTA.
In 2020, the tribunal issued a decision rejecting the state’s preliminary objections to jurisdiction.
In April 2024, the tribunal issued its final award, ordering Korea to pay Mason USD 32 million in damages, EUR 630,000 in arbitration costs as well as USD 10 million in legal fees.
Another US hedge fund and shareholder in SC&T, Elliott Associates, also filed for arbitration under the Korea-USA FTA concerning the same merger. The USD 48 million award is currently being challenged by Korea in the UK (see our previous digest here).
The Lopez-Goyne Family Trust v. Nicaragua
Nicaragua Seeks to Enforce ICSID Costs Award in the US
ICSID Case No. ARB/17/44
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Luca G. Radicati di Brozolo (President), José A. Martínez de Hoz, Jr. (Appointed by the claimants), Brigitte Stern (Appointed by the State)
On 22 May, Nicaragua filed a petition in the US District Court for the Northern District of California to enforce a USD 1.5 million costs award against a group of US investors.
The dispute arose out of Nicaragua’s termination of a concession contract with Industria Oklahoma Nicaragua (ION) for oil exploration and exploitation in Nicaragua’s onshore Pacific region. The group of investors, which is comprised of 24 individuals, corporations and trusts, held shares in ION. They filed for arbitration in 2017 under the CAFTA-DR-USA.
The investors alleged that Nicaragua’s termination of the concession constitutes an unlawful expropriation and a breach of the treaty’s fair and equitable treatment standard. They sought compensation of a minimum of USD 35 million and a maximum of USD 198 million.
Nicaragua submitted a counterclaim alleging breaches of environmental obligations.
In March 2023, the arbitral tribunal upheld jurisdiction over the dispute but found that Nicaragua did not breach the treaty. It ordered the investors to pay the state USD 1.5 million in costs and expenses. The tribunal also ruled that it lacked jurisdiction over the counterclaim.
The investors sought to annul the award, but the proceeding was discontinued at their request in September 2023.
Clorox v. Venezuela
Venezuela Fails to Set Aside USD 104 Million Award in Switzerland
PCA Case No. 2015-30
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Yves Derains (President), Bernard R. Hanotiau (Appointed by the claimant), Raúl E. Vinuesa (Appointed by the State)
Seat of arbitration: Geneva, Switzerland
On 26 April, the Swiss Federal Tribunal upheld a BIT award that ordered Venezuela to pay USD 104 million to Clorox S.L., a Spanish subsidiary of US multinational Clorox.
Background
The dispute arose out of price control measures enacted by Venezuela in 2011. Clorox claimed that the measures heavily affected the profit margin of its subsidiary Clorox Venezuela – the shares of which were transferred to Clorox Spain.
In 2015, Clorox Spain filed for arbitration under the Spain – Venezuela BIT. In 2019, the tribunal declined jurisdiction, finding that Clorox Spain had not actively invested in Venezuela to be protected under the BIT. The award was set aside by the Swiss Federal Tribunal in 2020, which considered that the tribunal had added supplementary jurisdictional conditions to the BIT.
In a second award in 2021, a majority of the tribunal upheld jurisdiction and dismissed Venezuela’s abuse of process objection. The Swiss Federal Tribunal rejected Venezuela’s set aside bid and upheld the award in 2022.
In a previously undisclosed August 2023 final award, the arbitral tribunal found that Venezuela indirectly expropriated the investor and ordered the state to pay USD 104 million in damages plus interest.
Dismissal of Venezuela’s Request to Set Aside the Final Award
The Swiss Federal Tribunal (“Court”) first emphasised that under the Swiss Federal Act on Private International Law, it may not review factual findings of the arbitral tribunal in the context of set aside proceedings and stressed that it does not act as an appellate court.
The Court noted that Venezuela presented its own version of the facts without formally raising a challenge against the reasoning of the award. As such, the Court said it would not take into account the version of the facts presented by Venezuela.
Venezuela’s only ground was that the award violated public policy. The Court dismissed the state’s claim that the tribunal’s decision is unfounded, arbitrary, and contradicts the facts. The Court reiterated that it is not an appeal jurisdiction and that Venezuela did not establish how the award is contrary to material public policy.
In conclusion, the Court rejected Venezuela’s attempt to set aside the award.
Marseille-Kliniken v. Equatorial Guinea (II)
Swiss Company Enforces EUR 7.3 Million Award Against Equatorial Guinea in the Cayman Islands
SCAI Case No. 600413-2015
Institution: SAC (Swiss Arbitration Centre formerly SCAI)
Tribunal: Andrea Meier (President), Felix Fischer (Appointed by the claimant), Melissa Magliana (Appointed by the institution)
Seat of arbitration: Zurich, Switzerland
On 8 March, the Grand Court of the Cayman Islands granted Marseille-Kliniken leave to enforce a EUR 7.3 million SCAI award against Equatorial Guinea in ex parte proceedings. The judgment was only recently published.
Background
The dispute arose out of a 2009 management contract between Swiss-based Marseille-Kliniken (“MK”) and Equatorial Guinea for the operation of a medical centre, staff training, and the development of hospital administration software. The dispute gave rise to a first arbitration that was settled after a EUR 14 million award in favour of MK.
In the second arbitration, MK was awarded EUR 7.3 million in damages plus interests and costs in December 2017. In November 2023, MK obtained confirmation of the award in the US (see our previous digest here). Guinea appealed in December 2023.
MK later launched enforcement proceedings in the Cayman Islands in December 2023. It sought an ex parte order for leave to enforce the 2017 award.
Ex Parte Enforcement of the Award in the Cayman Islands
In the Judgment, Justice Kawaley found that MK’s application fulfilled all the statutory requirements for ex parte enforcement. He explained that the “application was almost a text book case for granting leave to enforce at the ex parte stage” and saw no reason to refuse enforcement of the award.
Justice Kawaley discussed the time limit for challenging the ex parte order. He noted it was clear from the US enforcement proceedings that the state has “no apparent difficulty in instructing counsel”. He explained that a period of 21 days is justified over the standard period of 14 days since “serving or giving notice to a party overseas will justify an extension to the standard response time applicable to parties within the jurisdiction.”
Justice Kawaley concluded that “the fact that one attempt to resist enforcement had already been rejected by another court made it seem implausible that any seriously arguable grounds for setting aside the Ex Parte Order I had decided to grant would be advanced to this Court.”
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.
