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FRAPORT

The Annulment Committee of the International Centre for the Settlement of


Investment Disputes (ICSID) confirmed in the arbitral hearing of Fraport AG
Frankfurt Airport Services Worldwide v The Philippines [ICSID Case No.
ARB/03/25] 23 December 2010) that the right to be heard is a fundamental
rule of procedure in international arbitration. Failing to grant such an
opportunity will render any arbitral award or decision being susceptible to
annulment.
In 1997, Fraport, a German company, commenced an investment
programme in an international terminal at Manila airport. The Philippine
government later cancelled the contract and so Fraport commenced
arbitration at ICSID under the Germany-Philippines bilateral investment
treaty. After proceedings were closed, but before the award was given, the
ICSID accepted further evidence on aspects of Philippine law that
purportedly rendered Fraport's involvement illegal (due to restrictions on
the control of public utilities by foreign companies). The ICSID upheld the
cancellation of the contract without allowing Fraport the opportunity to
make its own submissions on that new evidence.
The Annulment Committee stated that the right to be heard was recognised
in international arbitration, public international law and also recognised in
human rights instruments as the right to a fair trial. Failure to allow Fraport
to make representations (in particular, about the role of private shareholder
agreements that would have clarified Fraport's control) amounted to a
serious departure from a fundamental role of procedure and so the decision
was annulled.
On 23 March, Fraport announced that it will re-open proceedings against
The Philippines, with the damages sought now totalling $800 million.