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Foreign Direct Investment International Arbitration Moot and Ideological Dominance

From 4 to 6 November 2011, King’s College London hosts International Moot on Foreign Direct Investment where I as a Visiting Researcher with my remedies topic can participate. The Moot consists of symposium in defining investments and investors in investor State arbitration (Prof. Guido Carducci) and the relevance of customary international law in investor State arbitration (Dr. Todd Weiler,  Dr. Markus Burgstaller) followed by preliminary (during the first 2 days) and final (during the last day) oral hearings.

Such moots constitute excellent opportunities for getting to know and comparing the level of legal education and the quality of arguments made by representatives of other universities, perhaps also to control and shape (for better mutual understanding but also for dominance?) the use of sources and arguments in dispute resolution. For how can I understand what the other party means under “fork-in-the-road” clause if I do not derive from similar with other participants sources. But that way, at the same time, the sources used determine interpretation and application of laws, meaning that what justice is is determined by the authors of the used by the practitioners sources. Here one tool enabling control is plurality of sources of the same school (so that one endlessly has to read and accommodate to certain thoughts /ideologies and does not have time for reading thoughts expressed by representatives of other thinkers in other sources). Therefore it was important for me to look at the sources used by the participants in this Moot, and I must confess that I was really amazed by the choice and use of sources – especially the wide use of theoretical scientific monographs and articles: documents used at the deliberations in the UN; authors such as Roberto Ago, Lance Bartholomeusz, Ian Brownlie, Rosalyn Higgins; and the Publishers – Oxford University Press, Cambridge University Press, Kluwer, Brill, Yearbook of the International Law Commission, American Review of International Arbitration, Académie de Droit International, to name some.  

Specifically for the high number of the used sources it is very difficult for arguments to compete here, i.e. bring in new arguments. But this is how it has always worked – you must know the “Enemy” in order to compete it. Specifically international disputes involve different traditions, consequently it was a relief to find also such books as: Enzo Cannizzaro, “The Law of Treaties Beyond the Vienna Convention” (OUP 2011); William J. Davey, John Jackson (ed.), “The Future of International Economoc Law” (OUP 2008) besides the authoritative: Olivier Corten and Pierre Klein (eds.), “The Vienna Conventions on the Law of Treaties. A Commentary” (OUP 2011); Richard Gardiner, “Treaty Interpretation” (OUP 2010); James Crawford, Alain Pellet, Simon Olleson (eds.), Kate Parlett (co-ed.), “The Law of International Responsibility” (OUP 2010), etc., and besides even more authoritative books/articles on specific application of norms.

The teams of this Moot come from: Ankara Bar Association-Ankara University, Belarusian State University, Boston University, School of Law, Charles University, Faculty of Law, City University of Hong Kong, School of Law, Federal University of Minas Gerais, Georgetown University Law Center, Gujarat National Law University, Kaplan Law School, King’s College London, Kyiv National Taras Shevchenko University, Lagos State University, Faculty of Law, Masaryk University, Faculty of Law, MGIMO University, Mykolas Romeris University, National University of Juridical Sciences, New York University School of Law, Novosibirsk State University, Paris Dauphine University, Pepperdine University School of Law. I just hope that participation of these teams does not constitute the probably worst reflection of Wittgenstenian vision of people sitting around the table and doing sth. non-understandable for by-standers being actually imprisoned by the ideologies imposed on them that they are unable to change or modify becuse of their physical (and extended by humans technical) and intellectual constraints mostly.

The underlying instruments of this Moot are: the 1985 UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law) and its implementation acts, the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID or Washington Convention), other relevant arbitration rules (as ICSID, UNCITRAL, the ICC, the LCIA).

THE FACTS: The claimant, Freedonia Petroleum LLC, an international energy company, is active in different world regions in the exploration and production of crude oil, 60% of whiches interest belongs to the Freedonia governmen, and 40% to consortium of privately-held and publicly-traded Freedonian enterprises. Based on authorization, on 31 January 2007, the Republic of Sylvania issued an international tender for deep sea exploration blocks in the Medanos field in the Libertad Gulf situated in the territorial waters of the Republic of Sylvania. To participate in the bidding process, foreign investors were required to incorporate a wholly-owned subsidiary in Sylvania. On 1 February 2007, Freedonia Petroleum incorporated Freedonia Petroleum S.A. (“FPS), a wholly-owned subsidiary in Sylvania, to participate in the bidding process, FPS was the sole bidder in the tender process. On 26 May 2007, the Sylvanian Government and FPS entered into the Medanos License Agreement. Inter alia, FPS undertook to pay a 12% royalty and to observe certain safety obligations which included a requirement to take all appropriate measures to prevent discharges of oil on navigable water; and, in the event of a discharge, to ensure an immediate and effective removal of oil on navigable waters, and also included Clause 18: “The Republic of Sylvania undertakes to take all the necessary measures to ensure that FPS enjoys all the rights conferred upon it by this Agreement. Any modifications of the terms and conditions of this Agreement may only be made by mutual written consent of the parties” and Clause 22: “This Agreement shall have the force of law.”

On 9 June 2009, a large explosion occurred in the Medanos Field causing several oil explorations wells operated by FPS to leak. The origin of the explosion was unknown. The damaged wells released 35,000 – 60,000 gallons of oil a day into the Gulf of Libertad Sylvania. On 26 February 2010, the Sylvanian Government ordered FPS to pay SD 150,000,000 liquidated damages for the breach of its obligations under the Agreement and the OPA,  a s   a m e n d e d. FPS commenced administrative proceedings before the Sylvanian Ministry of Energy to resist the request for payment, alleging that it had complied with all applicable safety obligations. On 10 June 2010, the Ministry of Energy rejected FPS’s administrative claim and requested that it pay a fine for breach of its safety obligation in the amount of SD 150,000,000 within 15 days. On 23 March 2011, Freedonia Petroleum filed a request for arbitration before the International Chamber of Commerce (“ICC”) against the Republic of Sylvania invoking the dispute resolution clause contained in the Freedonia-Sylvania BIT and claiming compensation for breach of the BIT, including unfair and inequitable treatment, violation of legitimate expectations, and expropriation.

Issues in Dispute under arbitration: (A) Whether the Tribunal has jurisdiction in respect of the claims and counterclaims submitted by the Claimant and Respondent, respectively, and/or whether the said claims and counterclaims are admissible, having regard to: (i) The Freedonian government’s majority ownership of the Claimant, Freedonia Petroleum; (ii) The recourse by the Claimant’s wholly-owned subsidiary FPS to the Sylvanian Ministry of Energy prior to requesting ICC arbitration; (B) Whether NPCS’ actions are attributable to the Respondent; (C) Whether the Respondent materially breached its confidentiality obligations, inter alia, by allegedly leaking a confidential report to La Reforma; (D) Whether the Respondent’s actions or omissions amount to expropriation, a violation of fair and equitable treatment, a breach of Claimant’s legitimate expectations, or otherwise violate general international law and applicable treaties; and (E) Whether the Respondent is entitled to rely on its domestic law and international legal notions of national security and public interest as defences; (F) The Respondent’s counterclaim for declaratory relief. Should the Tribunal confirm its jurisdiction and find the Claimant and/or Respondent to be liable, separate proceedings will follow to determine remedies and damages, if any.

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