Case summaries – Respondent Issue 1 I. Pantechniki vs.

Albania (2009)

1. A contractor‟s road work site in Albania was overrun and ransacked by looters during severe civil disturbances in March 1997. It is estimated that two-thirds of the country‟s adult population had lost much of their savings to Ponzi schemes in which government officials were said to be complicit. Waves of rioting battered the country. Hundreds of people were killed. The government fell. Disorder was everywhere – particularly in the southern region where the work site was located. Neither public nor private security forces could withstand the onslaught of looting. The contractor‟s site at Bushtriza was in a remote location. The nearest police station was distant. The contractor‟s on-site private security personnel were overwhelmed. What equipment could not be stolen was destroyed. 2. The contractor is the Claimant here. Each of its two contracts contained a provision to the effect that the Albanian Government‟s General Road Directorate accepted the risk of losses due to civil disturbance. The Claimant sought recoupment of losses in excess of US$4.8 million. (Losses valued in Albanian Lek are disregarded for the sake of simplicity.) The Resident Engineer made a lower evaluation of some US$3.1 million. A special commission was then created by the General Road Directorate. This commission valued the Claimant‟s loss at US$1,821,796. The Claimant says it accepted this amount in the interest of good relations. The Minister of Public Works (who supervises the General Road Directorate) wrote to the Minister of Finance requesting payment of the amount established by the commission. The Minister of Finance refused. He explained that his Ministry ―cannot carry out the obligations of Ministries or other Institutions as a result of their contractual relations‖ unless funds are approved for that purpose by the

Council of Ministers. More than ten years later no payment has been made. 3. The Claimant brought a case against the Ministry of Public Works in an Albanian court in May 2001. It states that it did so in the expectation – raised by comments of the Minister of Finance – that this would be a mere formality to facilitate the approval of payment. But the Albanian courts have not given the claim a cordial reception. The Court of Appeal of Tirana ruled that the contractual provision referred to above was a nullity under Albanian law because it purported to create liability without fault. The Claimant filed an appeal to the Supreme Court but subsequently abandoned that avenue because of its professed belief that it cannot get a fair disposition of its claim there. 4. Instead the Claimant today invokes the protection of the 1 Albania- Greece bilateral investment treaty of 1991 (the Treaty).
Despite taking a minimalist approach to defining an objective core meaning of investment for the purposes of Art. 25, the approach inFakes diverges from what the 30 July 2009 Award in Pantechniki S.A. Contractors & Engineers v. Albania, referred to as an “emerging synthesis”, citing Zachary Douglas’ formulation in The International Law of Investment Claims that: “The economic materialisation of an investment requires the commitment of resources to the economy of the host state by the claimant entailing the assumption of risk in expectation of a commercial return.” (Rule 23) In Fakes, “a certain duration” is identified as a necessary criterion, while the formulation in Douglas’ Rule 23 includes expectation of commercial return but not duration. It is unfortunate that the Tribunal in Fakes, in its attempt to set out a definitive test, did not explain in more detail why “a certain duration” is a necessary criterion mandated by the ICSID Convention. Why should an investment that has been in a host State for a hour not obtain treaty protection? This would seen to create a perverse incentive for states to expropriate as soon as possible.


Fakes vs. Turkey (2010)

The Fakes Tribunal takes the minimalist middle road in this debate. It affirms that there is an objective definition of investment in the ICSID Convention that cannot be defined simply through the parties’ consent (para. 108). Second, it finds that the criteria of (i) contribution, (ii) a certain duration, and (iii) an element of risk, are both necessary and sufficient to define an investment within the framework of the ICSID Convention (para. 110).

Second. since certain terms of Article 25 would otherwise be devoid of any meaning. . in resorting to the concept of investment in connection with jurisdiction. a prominent family in Turkey who controlled a vast group of companies in a variety of business sectors including banking. Telsim appeared to be unaware of the share transfer. there was no investment 107. something which does not satisfy the objective requirements of Article 25 of the Convention. The Tribunal found that the purpose of the arrangement was to use the name of Mr Fakes as “bait” to attract potential purchasers who might be hesitant to deal with the Uzans. The Tribunal believes that an objective definition of the notion of investment was contemplated within the framework of the ICSID Convention. for the purposes of ICSID jurisdiction. Third. The parties to the dispute cannot by contract or treaty define as investment.S. which emphasized that the “Convention itself. Egypt case. establishes a framework to this effect: jurisdiction cannot be based on something different or entirely unrelated. the Tribunal considers that the notion of investment. The Claimant submitted that. 28) Turkish authorities ultimately froze and sold various assets held directly or indirectly by the Uzans. a leading Turkish telecommunications company. as a result of series of share sale agreements. The Tribunal concluded that. He claimed an astronomical US$ 19 billion in damages. (Telsim).”72 Second. The Tribunal ultimately disposed of the claim on the basis that although there were formal share sale agreements for the Telsim shares. In coming to this conclusion. the Tribunal agrees with the Tribunal in the Joy Mining v. which is one of the conditions to be satisfied for the Centre to have jurisdiction. television and telecommunication. including Telsim Mobil Telekomunikayson Hizmetleri A. which is a distinct condition for the Centre‟s jurisdiction. cannot be defined simply through a reference to the parties‟ consent. . 108. the present Tribunal considers that the criteria of (i) a .800) could not be reconciled with the acquisition of legal rights to the majority of shares in a major telecommunications company. the low purchase price (US$ 3. Mr Fakes did not hold legal title over the Telsim share certificates because the parties never had any intention to transfer any rights to Mr Fakes nor did they actually transfer any rights. as the parties did not intend to give effect to the alleged share transfer.The dispute in Fakes arose out of “various investigations and lawsuits brought against the Uzans. even assuming the amount was paid. First. Fourth.96% of the shares in Telsim shortly before the Turkish conduct at issue. the Tribunal highlighted four points. Mr Fakes never obtained possession of the share certificates and was not in a position to obtain possession. electricity.” (para. In this respect. on 3 July 2003 he became the legal owner of 66. .

however. In the Tribunal’s view. the tribunal laid emphasis on the foreseeability of the dispute. after the first in a series of facts giving rise to a dispute has taken place). This analysis . and (iii) an element of risk.99. as a project might never be completed or a child might not be up to his parents‟ hopes or expectations. This implies that should subsequent tribunals adopt a first-fact approach (i. the decision in Pac Rim Cayman LLC v. are both necessary and sufficient to define an investment within the framework of the ICSID Convention. On the other hand and as far as continuing wrongful acts are concerned. the tribunal in Pac Rim Cayman LLC v. there ordinarily will be.contribution. In the Tribunal‟s opinion. as in this case. Pac Rim Cayman vs.‟ be it in the context of a complex international transaction or that of the education of one‟s child: in both instances. 2. but after that dividing-line is passed. one cannot harvest the benefits of such contribution instantaneously. there will be ordinarily no abuse of process.) Irrespective of how ambiguous this dividing line is. before that dividing-line is reached. an after-the-fact restructuring will amount to an abuse of rights and such an investment will not be covered by the consent of the host State. this means that the practice started before the Claimant’s change of nationality and continued after such change. this approach reflects an objective definition of „investment‟ that embodies specific criteria corresponding to the ordinary meaning of the term „investment‟. and one runs the risk that no benefits would be reaped at all. The Republic of El Salvador held that: “[T]he dividing-line occurs when the relevant party can see an actual dispute or can foresee a specific future dispute as a very high probability and not merely as a possible controversy. (ii) a certain duration.e. depend upon its particular facts and circumstances. The Republic of El Salvador contains an important finding: “Where the alleged practice is a continuous act ….” (para. one is required to contribute a certain amount of funds or know-how. The answer in each case will. without doing violence either to the text or the object and purpose of the ICSID Convention. III. El Salvador (2005) Most recently. These three criteria derive from the ordinary meaning of the word „investment. 109.

According to the Claimant.16.mental permit and a mining exploitation concession in El Salvador through one of its subsidiaries in 2004.21.” (para. changed the nationality of another subsidiary. the Respondent‟s presentation of its jurisdictional objection based on Abuse of Process begins with a statement of facts.107. from the Cayman 8 Islands to the United States. In summary. Three years later. changes are alleged to have been envisioned. the Claimant has “abused the provisions of CAFTA and the interna. in December of 2007.tional arbitration process by changing Pac Rim Cayman's nationality to a CAFTA Party to bring a preexisting dispute before this Tribunal under CAFTA. thus manipulating the process under CAFTA and the ICSID Convention in bad faith to gain unwarranted access to international arbitration.17. The environmental permit and the concession were not granted. 2. The Respondent then makes its legal analysis on these facts. Pac Rim Cayman. the 11 Companies were looking for ways to save money. which (as will be seen later in this Decision) is strongly contested by the Claimant. . which are not contested by the Claimant: 
 ―Pacific Rim Mining Corp. In the Respondent‟s submission. as follows: “This led to an examination of the overall corporate structure of the Companies... “(i)n 2007.” 2. There were administrative costs 111. 113. 112. Pacific Rim Mining Corp.” and as a result.‖ 2. is a Canadian company that applied for an environ. In summary.) 110. but it would preclude the exercise of such jurisdiction on the basis of abuse of process if the Claimant had changed its nationality during that continuous practice knowing of an actual or specific future dispute. the Claimant submits that its change of nationality was not an abuse of process because it was part of an overall plan to restructure the Pac Rim group of companies. 2.would found the basis of the Tribunal’s jurisdiction ratione temporis under CAFTA.

they could eliminate the costs of maintaining Pac Rim Cayman in the Cayman Islands. such application should be treated as having been effectively terminated under the laws of the Respondent by January 2007 60 (i. measures and other essential facts giving rise to the Parties‟ dispute all took place before 13 De. that application was effectively terminated. The Claimant’s Submission: In summary.e.” -President Saca’s speech – March 2008 114. 2. nothing more could have been done by the Claimant after the expiration of the 30-day extension to revive it.involved in maintaining Pac Rim Cayman as a Cayman Islands entity. 2.cember 2007. therefore. At the same time. Shrake since 1997. In other words. one year before the Claimant‟s change of nationality).ploitation concession filed with the Bureau of to Nevada. Accordingly. the Companies were advised that there would be no adverse tax consequences to domesticating Pac Rim Cayman to Nevada – the jurisdiction from which it had been effectively managed by Mr.e. the Respondent contends that the relevant acts.77. and (ii) with regard to the ex. once the Bureau of Mines sent the two warning letters to the Claimant in October and December 2006 triggering the provisions of Article 38 of the Mining Law. the Companies believed that by domesticating Pac Rim Cay. the Claimant . three 59 years before the Claimant‟s change of nationality). MARN did not meet the time limit established under Salvadoran law to either issue or deny the environmental permit by December 2004 (i.ronmental permit. if that company could be domesticated to Nevada with cost 12 savings and no adverse tax consequences. It made no sense to manage a Cayman Islands company from Nevada. without losing any tax benefits. . measure.78. The Respondent specifically alleges that: (i) with regard to the envi. and.

and pursuant to Article 1101(1)@) only measures relating to investments that are within the scope of Chapter Eleven should be covered. The . II. and which then wiped out the value of its mining investments and nullified its legitimate expectations and other protections under CAFTA. this would exclude investments of ADM and TLIA located outside of Mexico. Egypt (2004) 5. Mexico (2007) Chapter Eleven of the NAFTA applies to measures adopted or maintained by a Party relating to. I. Following various disagreements between the parties. This means that the protection applies only to measures relating to investments of investors of one Party that are in the territory of the party that has adopted or maintained such measures. The dispute in this case arises out of a ―Contract for the Provision of Longwall Mining Systems and Supporting Equipment for the Abu Tartur Phosphate Mining Project‖ (the ―Contract‖).alleges that the relevant measure was the de facto mining ban 61 consisting of a practice of withholding min. In a case such as the one at bar. 16. 1998 between Joy Mining Machinery Limited and the General Organization for Industrial and Mining Projects of the Arab Republic of Egypt (―IMC‖).ing-related permits and concessions which only became public and known to the Claimant in March 2008 (with President Saca‟s speech). the Contract was amended by an agreement of November 8. thereby giving rise to its present dispute with the Res. Archer Daniels Midland vs. The phosphate extracted is used for the production of fertilizers. The Abu Tartur Phosphate Mining Project (the ―Project‖) is located in Egypt’s Western Desert and is managed by IMC. even if such investments are destined to promote fructose sales in Mexico. executed on April 26. inter alia "investments of investors of another Party in the territory of the Party".pondent. 2000 (―Amendment Agreement‖). Joy Mining vs.

while the second stage comprised a new Longwall System (―First New Longwall‖). 17.antee for Contract Performance. 18.228.950. The Amendment Agreement resulted from these discussions and some timetables. Installation of the equipment on site began in February 1999 and since the outset each party has claimed that performance problems which surfaced are to be blamed on the other.Longwall Mining System consists of equipment allowing for the use of a specialized technique for this kind of min. 19. This amount was later reduced by the Amendment Agreement to UK£9. Joy Mining asserts that there were geological 492 ICSID REVIEW—FOREIGN INVESTMENT LAW JOURNAL problems in the mine site as well as poor management of the Project by IMC.737. conditions and guarantees were adjusted accordingly.293. Advance Payment and Remaining Payment or Balance were supplied by the Company for each of the Contract’s stages. Disagreement persisted between the parties as to technical . while the latter asserts that the problems arose from the malfunctioning of the equipment.duction. Letters of guar. These guarantees have been renewed at various points in time and are currently in place at the Bank of Alexandria. As disagreements activity. The Contract and later the Amendment Agreement provided for a timetable and conditions for the release of these guarantees connected to the performance of the equipment and to the achievement of certain levels of pro. The Contract envisaged two stages.325. The first concerned the partial replacement of equipment already existing at the Project site supplied by other companies (―Replacement Longwall‖). The total Contract price amounted to UK£13. independent experts were appointed and discussions held later with a committee appointed by the Minister for Industry and Technology.605. amounting to a total of UK£12.

aspects relat. 1976. Joy Mining submitted the dispute to ICSID arbitration under the United Kingdom-Arab Republic of Egypt Agreement for the Promotion and Protection of Investments.ed to the commissioning and performance tests of the equipment. Thereafter. have been renewed by the Company several times in order to pre. the guarantees would have been released at different dates in accordance with their schedule. 20. In particular. that the free transfer of funds has been prevented. However. 22. The guarantees have not been released by IMC and. as mentioned. Joy Mining asserts that it is entitled to the release of the guarantees. IMC contends that the guarantees should remain in place until the com. the Company was paid the full purchase price of the equipment in accordance with the Contract. 2003.vent their drawdown. The Company claims that the Contract is an investment under this Treaty and that the deci. that discrimina- . but ending at the latest on July 31. in force as from February 24. which will be discussed further below in con.ried out in accordance with the Contract and the Amendment Agreement. explaining that if commissioning and testing of the equipment had been car.sions by IMC and Egypt not to release these guarantees are in violation of the Treaty. it is claimed that nationalization or measures having an effect equivalent to expropriation have been undertaken in respect of the bank guarantees.missioning and testing of the equipment is satisfactorily carried out and that in any event the question of performance under the Contract and connected guarantees has to be settled through a separate dispute settlement mechanism agreed to under the Contract. Further negotiations to resolve the differences between the parties have been unsuccessful. 21.nection with the objections to jurisdiction. both Provisional and Final Acceptance Certificates would have been issued at the latest in April and July 2003.

which were rather typical trans-boundary CIF sales. generally.48 36. The tribunal. among them the United Nations Convention on Contracts for the International Sale of Goods. concluded that pure commercial transactions. before the goods are cleared for import into the recipient territory. can by any reasonable process of interpretation be construed to be ‘investments’ for the purposes of the ICSID Convention. at such bodies as the International Chamber of Commerce and the London Court of International Arbitration?2 III. and final payment. those contracts are not investment contracts. cannot be considered as investments for the purpose of Article 25. of limited duration. Ukraine (2010) An excellent illustration of the general trend of exclusion of sales contracts is provided by the Global Trading and Globex v.47 As for the transactions in question in that particular case. after resorting to previous ICSID decisions.21 and significant conceptual contributions. the tribunal stated: … these are each individual contracts. Ukraine case.CASES 493 tion has taken place and that. International contracts are today a central feature of international trade and have stimulated far reaching developments in the governing law. The Claimants‟ case is based upon the following key alleged . for the purchase and sale of goods. except in exceptional circumstances. such as simple purchase and sale contracts. and that neither contracts of that kind. fair and equitable treatment and full protection and security have not been accorded. and are to be kept separate and distinct for the sake of a stable legal order. nor the moneys expended by the supplier in financing its part in their performance. even if complex. The Tribunal is also mindful that if a distinction is not drawn between ordinary sales contracts. and which provide for delivery. 58. the result would be that any sales or procurement contract involving a State agency would qualify as an investment. on a commercial basis and under normal CIF trading terms. what difference would there be with the many State contracts that are submitted every day to international arbitration in connection with contractual performance. and an investment.22 Yet. Globex vs. Otherwise. the transfer of title.

39. The Claimants emphasise both the economic development purposes of the Prime Minister's solicitation of the sales and purchase contracts and her assurances 11 of payment by Ukraine. it is contended. imports had been severely limited with the result that domestic prices soared to the benefit of domestic poultry producers and to the detriment of the Ukrainian consumer. The Claimants allege further that officials of the State Reserve also attended the meeting. according to the Claimants. Ukraine's failure to pay for and take delivery of most of . On 1 June 2008 the Prime Minister requested the United States Embassy in Kyiv to identify US poultry exporters willing to consider exporting to Ukraine and approximately 6 weeks later. Yulia V. the Claimants plead. led directly to the poultry sales and purchase contracts negotiated by the Claimants with senior Ukrainian officials. At this meeting. a meeting hosted by the Prime Minister was held between US exporters.” This. After her election in December 2007. 37. The Claimants allege that due to the structure of the Ukrainian poultry market. 38. “Prime Minister Tymoshenko proposed a poultry „purchase-and-import program‟ as a special government initiative for the express purpose of correcting what she perceived to be anti-competitive and 9 inflationary conditions in the Ukrainian poultry industry. a US Embassy official. The State Reserve subsequently designated Alan Trade as counterparty to the poultry sales and 10 purchase contracts with the Claimants. and Ukrainian officials in Kyiv.facts (which for the purposes of this application were not disputed by the Respondent and are taken as true by the Tribunal). Tymoshenko became Prime Minister of Ukraine and. The Request for Arbitration sets out in detail the steps taken by both Claimants to perform their respective purchase and sale contracts. resolved to deal with the poultry supply issue in order to reduce prices to consumers.

incurred by the Claimants before they finally 12 disposed of the goods. including demurrage charges.g.the poultry shipped to the designated port. e. Article 11 falls considerably short of saying what the Claimant asserts it means. Pakistan initiated an arbitration in Pakistan on the basis of the arbitration clause inserted in the PSI Agreement (the “PSI Agreement arbitration”). SGS vs. The ―commitments‖ the observance of which a Contracting Party is to ―constantly guarantee‖ are not limited to contractual commitments. Pakistan emerged from the PSI entered into between the Swiss company SGS and the Republic of Pakistan whereby SGS was to provide PSI services with respect to goods exported from certain countries to Pakistan. textually. I. the efforts of the United States Embassy to convince Ukraine to fulfil its contractual obligations to the two exporters. The phrase ―constantly [to] guarantee the observance‖ of some statutory. necessarily signal the creation and acceptance of a new internation. SGS filed preliminary objections to the jurisdiction of the arbitrator along with a counter-claim for alleged breaches of the PSI Agreement. Firstly. Pakistan (2003) The dispute in SGS v. although the parties disputed the adequacy of each other’s performance. The PSI Agreement was mutually performed. The resulting dispute between the parties as regards the validity and consequences of the termination gave rise to different proceedings. SGS sought the resolution of its disputes with Pakistan under the BIT between the Swiss Confederation and the Islamic Republic of Pakistan and. In September 2000. before Pakistan terminated the Agreement. where clearly there was none . administrative or contractual commitment simply does not to our mind. In parallel. the municipal legislative or administrative or other unilateral measures of a Contracting Party.175 The commitments referred to may be embedded law obligation on the part of the Contracting Party.. on October 66. and the resulting losses.

namely. is not. the ―commitments‖ subject matter of Article 11 may. and so automatic and unqualified and sweeping in their operation. it appears to us that while the Claimant has sought to spell out the conse. by itself. the scope of Article 11 of the BIT. We have not been point. without imposing excessive violence on the text itself. Thus.matically ―elevated‖ to the level of breaches of international treaty law. As a matter of textuality therefore. 167. Considering the widely accepted principle with which we started. we believe that clear and convincing evidence must be adduced by the Claimant. be commitments of the State itself as a legal person. a violation of a contract entered into by a State with an investor of another State. Clear and convincing evidence of what? Clear and convincing evidence that such was indeed the shared intent of the Contracting Parties to the Swiss-Pakistan Investment Protection Treaty in incorporating Article 11 in the BIT. appears susceptible of almost indefinite expansion. attributable to the State itself. under the law on state responsibility. The text itself of Article 11 does not purport to state that breaches of contract alleged by an investor in relation to a contract it has concluded with a State (widely considered to be a matter of municipal rather than international law) are auto. a violation of international law.before. We do not find such evidence in the text itself of Article 11. that under general international law.quences or inferences it would draw from Article 11. or of any office. entity or subdivision (local gov. the Article itself does not set forth those consequences. and considering further that the legal consequences that the Claimant would have us attribute to Article 11 of the BIT are so far-reaching in scope.ernment units) or legal representative thereof whose acts are. so burdensome in their potential impact upon a Contracting Party. while consisting in its entirety of only one sentence.ed to any other evidence of the putative common intent of the Contracting Parties by the Claimant. . Further.

A third consequence would be that an investor may. Any alleged violation of those contracts and other instruments would be treated as a breach of the BIT. or of municipal statute or regulation. the benefits of the dispute settlement provisions of a contract with a State also a party to a BIT. at will. Decision of the Tribunal on Objections to Jurisdiction. and render any mutually agreed procedure of dispute settlement. ARB/01/13. . as well as other municipal law instruments setting out State commitments including unilateral commitments to an investor of the other Contracting Party. 6. The Tribunal considers that Article 11 of the BIT should be read in such a way as to enhance mutuality and balance of ben. Article 11 would amount to incorporating by reference an unlimited number of State contracts. On the reading of Article 11 urged by the Claimant.A. a dead-letter.ple breach of contract. would flow only to the investor. Firstly. nullify any freely negotiated dispute set. at the investor’s choice. v. For that investor could always defeat the State’s invocation of the contractually specified forum. Société Générale de Surveillance S. other than BIT-specified ICSID arbitration. by itself. the Claimant’s view of Article 11 tends to make Articles 3 to 7 of the BIT substantially superfluous.cluded from proceeding to the arbitral forum specified in the contract unless the investor was minded to agree. paragraphs 166-67 (Aug. There would be no real need to demonstrate a violation of those substantive treaty standards if a sim. 2003).168.tlement clause in a State contract.efits in the inter-relation of different agreements located in differing legal orders. But the State party to the contract would be effectively pre. The consequences of accepting the Claimant’s reading of Article 11 of the BIT should be spelled out in some detail. Secondly. Islamic Republic of Pakistan. ICSID Case No. would suffice to constitute a treaty violation on the part of a Contracting Party and engage the international responsibility of the Party. The investor would remain free to go to arbitration either under the contract or under the BIT.

all being incorporated under the laws of Argentina.(April 27. 12. Exhibit 1).. 2006). ARB/03/15. 1 . Argentine Republic. (2006) 1. see Request for Arbitration. in the generation of power. Exhibit 8). CAPSA is mainly in the business of generating electrical power and. accessorily. Argentina1. According to the Claimant.92% indirect controlling shareholding in Servicios El Paso SRL ("Servicios") and indirect noncontrolling shareholdings in Companias Asociadas Petroleras SA ("CAPSA"). according to the Claimant. CAPEX could no longer function independently. CAPSA. Costanera and Pacifico. EI Paso is a company incorporated under the laws of the State of Delaware (United States). CAPEX. Costanera and Pacifico will hereafter be collectively referred to as the "Argentine Companies". butane and gasoline. a series of measures taken by the Government since December 2001 were in breach of fundamental undertakings by which it had induced EI Paso and other foreign investors to invest in Argentina. Central Costanera SA and Gasoducto del Pacifico SA ("Pacifico"). in the exploration. El Paso's investment in the latter and in CAPSA was rendered essentially worthless. EI Paso owns a 45% interest in CAPSA. El Paso vs. CAPSA is engaged in the exploration. CAPEX SA ("CAPEX"). replacing these undertakings by conditions which have proved devastating to the Claimant and have amounted to an expropriation of the Claimant's investment. development and production of crude oil and gas as well as in the marketing of propane. It owns a 99. amount to expropriation El Paso Energy International Company v. the latter having a 60% interest in CAPEX (for a graphic representation of the structure of the EI Paso group. and the new conditions have also adversely affected Servicios. development and production of oil and. the Government's actions. through CAPEX.II. Decision on Jurisdiction. Under the new scheme. ICSID Case No. Under the Argentina-US Treaty Concerning the Reciprocal Encouragement and Protection of Investment concluded on 14 November 1991 and entered into force on 20 October 1994 (ibid.

It would be strange indeed if the acceptance of a BIT entailed an international liability of the State going far beyond the obligation to respect the standards of protection of foreign investments embodied in the Treaty and rendered it liable for any violation of any commitment in national or international law "with regard to investments".(April 27. ICSID Case No. ICSID Case No. Kingdom of Spain. Judge Guillaume and Professor Orrego Vicuna. have been well understood and clearly explained by the first Tribunal which dealt with the issue of the so-called "umbrella clause" in the SGS v. ICSID Case No. Argentine Republic. 2006). Argentina2. has strikingly described what some of the practical consequences ofa broad interpretation ofthe umbrella clauses could be: El Paso Energy International Company v. 2000). III. These far-reaching consequences of a broad interpretation of the so-called umbrella clauses. the Tribunal analyzed the issue from a different point of view. 2006). ARB/03/13 (July 27. 2 . Argentine Republic. as this would necessarily imply that any commitments of the State in respect to investments. A wellknown specialist of ICSID. No. an umbrella clause cannot transform any contract claim into a treaty claim. Spain (2000) In the Maffezini case (Emilio Agustín Maffezini v. Pakistan case and which insisted on the theoretical problems faced. even the most minor ones. ARB/03/15. In this case Spain alleged that ICSID lacked Pan American Energy LLC and BP Argentina Exploration Company v. 2006). Christoph Schreuer. Argentine Republic. in this Tribunal's view. Mafezzini vs. Pan American vs. Decision on Jurisdiction.82. following the important precedents set by Tribunals presided over by Judge Feliciano. quite destructive of the distinction between national legal orders and the international legal order. ARB/97/7. In conclusion. award of January 25. ARB/03/13 (July 27. Pan American Energy LLC and BP Argentina Exploration Company v. IV. would be transformed into treaty claims.

If on analyzing the structure of an entity it seems that it is not a State’s organ because the State has used a corporate veil. 65. Reports 1986.tions or under its ―effective control‖. p.eral in a relationship of ―complete dependence‖ on the respondent State.C. Military Operations vs. If the entity is in charge of State’s functions. as noted above. In that Judgment the Court. after having rejected the argument that the contras were to be equated with organs of the United States because they were ―completely dependent‖ on it. or that the State’s instructions were given. The Tribunal stated that to determine if an entity was a State’s organ and its doings attributable to the latter two tests were required: structural and functional. 64.‖ (Ibid.J. this led to the following significant conclusion: ―For this conduct to give rise to legal responsibility of the United States. in this context it is not necessary to show that the persons who performed the acts alleged to have violated international law were in gen. it has to be proved that they acted in accordance with that State’s instruc.. I. The test thus formulated differs in two respects from the test — described above — to determine whether a person or entity may be equated with a State organ even if not having that status under internal law. This provision must be understood in the light of the Court’s jurisprudence on the subject. particularly that of the 1986 Judgment in the case concerning Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. It must however be shown that this ―effective control‖ was exercised. it would in principle have to be proved that that State had effective control of the military or paramilitary operations in the course of which the alleged violations were committed. Nicaragua and Bosnia genocide case – standard of effective control – acting under specific instructions BOSNIA GENOCIDE: 399.jurisdiction because the dispute was not between an individual (Maffezini) and a State (Spain) but between an individual and a Corporation (SODIGA). para.) 400. First. then the entity will be considered an organ of the State. in respect of each operation in which the alleged . 115). p. United States of America) referred to above (paragraph 391). the analysis needs to be turned to the function of the entity. added that the responsibility of the Respondent could still arise if it were proved that it had itself ―directed or enforced the perpetration of the acts contrary to human rights and humanitarian law alleged by the applicant State‖ (I.

SGS vs. at which point SGS’s services under the CISS Agreement were discontinued.violations occurred. Subsequently. This further extension lasted from 31 December 1999 to 31 March 2000. In the 1980s. In addition SGS provides assistance in the modernization of customs and tax infrastructures in the country of import. In the . not generally in respect of the overall actions taken by the persons or groups of persons having committed the violations. II.shipment inspections carried out on behalf of the governmental authorities of the importing country in the country of export. but also seeks to verify compliance with import regulations. they agreed to introduce further amendments and to extend the duration of the CISS Agreement from 15 March 1998 to 31 December 1999 (the Second Addendum). the Philippines asked SGS and the latter agreed to extend the provision of services under the CISS Agreement as amended. 14. the Philippines decided to appoint an inspector in its countries of supply to provide a comprehensive import supervision service (CISS). which led to a new agreement entered into with SGS on 23 August 1991 (the CISS Agreement) for an initial period of three years. inter alia. the declared value of goods and their classification for customs purposes. Conclusion of the CISS Agreement was approved by the President of the Philippines. Pre-shipment inspection not only covers quality. 13. the parties agreed on the extension of the CISS Agreement. A number of companies were short-listed in a bidding process conducted on 6 November 1990. with certain modifications. Before the end of the three year period. By a document dated 22 December 1999. The Philippines entered into two successive CISS contracts with SGS in 1986 before putting the subsequent contract out to tender. certification services based on pre. quantity and price of imported goods prior to shipment to the Philippines. quantity and export market price. Philippines (2004) SGS is part of a large group providing. including verification of the quality. for a further three year term (the First Addendum).

It seems that it was primarily motivated by changes to customs arrangements associated with the implementation of the GATT-WTO Valuation System. SGS bases its Request for Arbitration on Article 25(1) of the ICSID Convention.early years there was some opposition to the CISS system. but this seems to have dissipated by the time of the First and Second Addendums. VI(1) and X(2) of the BIT. In any event the Tribunal has no evidence that the discontinuance in 2000 was due to any overall dissatisfaction on the part of the Philippines Bureau of Customs (BOC) with the service provided by SGS. (c) between a contracting State and a National of another Contracting State. In substance its claim was for monies unpaid under the amended CISS Agreement. But it is one thing for a defined class of existing claims to be referred to an international tribunal ―without exception‖. Doctrine: 153. amounting to CHF202. reducing the need for physical inspection of imports. considering that (a) there is a dispute of legal nature. (b) arising directly out of an Investment. in refusing to pay the amount claimed (most of which was conceded by the BOC to be payable). in accordance with which customs duty would be chargeable on transaction values rather than assessed values. In commencing the present proceedings SGS alleged that. in addition to which SGS sought interest on the amount unpaid. and (d) the parties have consented in writing to ICSID Arbitration. 16.36 (approximately US$140m).413.047. the Philippines is in breach of Articles IV(1). As the ad hoc Committee said in the Vivendi case: . IV(2). and another for a government to agree to the adjudication for the future of an indefinite range of cases in a number of different forums with different rules. The Tribunal cannot accept that standard BIT jurisdiction clauses automatically override the binding selection of a forum by the parties to determine their contractual claims.3 15. SGS submitted to the Philippines certain monetary claims which were subject to various attempts for amicable settlement.

this principle is one concerning the admissibility of the claim. substantive and procedural. and have done so exclusively. This impediment. In the Tribunal’s view. Until the question of the scope or extent of the . In the Tribunal’s view the answer is that it should not be allowed to do so. to say the least. To summarise. Although under modern international law.84 ) Conclusion on Article 12 of the CISS Agreement 155. It is. The jurisdiction of the Tribunal is determined by the combination of the BIT and the ICSID Convention.‖82 (iii) Distinction between jurisdiction and admissibility 154. not jurisdiction in the strict sense. Thus the question is not whether the Tribunal has jurisdiction: unless otherwise expressly provided. it should comply with the contract in respect of the very matter which is the foundation of its claim. doubtful that a private party can by contract waive rights or dispense with the performance of obligations imposed on the States parties to those treaties under international law. treaty jurisdiction is not abrogated by contract. in the Tribunal’s view its jurisdiction is defined by reference to the BIT and the ICSID Convention. based as it is on the principle that a party to a contract cannot claim on that contract without itself complying with it. unless there are good reasons. preventing the claimant from complying with its contract.83 they will normally do so in order to achieve some public interest. The Philippine courts are available to hear SGS’s contract claim. But the Tribunal should not exercise its jurisdiction over a contractual claim when the parties have already agreed on how such a claim is to be resolved. the tribunal will give effect to any valid choice of forum clause in the contract. such as force majeure. treaties may confer rights. on individuals. SGS should not be able to approbate and reprobate in respect of the same contract: if it claims under the contract. is more naturally considered as a matter of admissibility than jurisdiction. The question is whether a party should be allowed to rely on a contract as the basis of its claim when the contract itself refers that claim exclusively to another forum.―where the essential basis of a claim brought before an international tribunal is a breach of contract.

Philippines (2004) .” SGS v. Philippines tribunal provided for its determination that the exclusive forum selection clause rendered the treaty claim inadmissible was “the principle that a party to a contract cannot claim on that contract without itself complying with it.Respondent’s obligation to pay is clarified—whether by agreement between the parties or by proceedings in the Philippine courts as provided for in Article 12 of the CISS Agreement—a decision by this Tribunal on SGS’s claim to payment would be premature. Among the reasons that the SGS v.

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