c. ononaiwu - icsid cases involving caricom states (oas-crnm-caricom workshop - june 2008)

ICSID CASES ICSID CASES INVOLVING INVOLVING

CARICOM STATESCARICOM STATES

O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :“ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :“ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :“ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :“ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :“ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :“ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :“ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S :

S T A T E O F P L A Y A N D W A Y F O R W A R D ”S T A T E O F P L A Y A N D W A Y F O R W A R D ”S T A T E O F P L A Y A N D W A Y F O R W A R D ”S T A T E O F P L A Y A N D W A Y F O R W A R D ”S T A T E O F P L A Y A N D W A Y F O R W A R D ”S T A T E O F P L A Y A N D W A Y F O R W A R D ”S T A T E O F P L A Y A N D W A Y F O R W A R D ”S T A T E O F P L A Y A N D W A Y F O R W A R D ”G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2 -------- 2 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 9

CARICOM STATESCARICOM STATESDr Chantal OnonaiwuTrade Policy & Legal Specialist

Caribbean Regional Negotiating Machinery

IntroductionIntroduction

� Five CARICOM Member States have been involved in disputes brought to ICSID:

� Grenada (2)

� Guyana (1)

� Jamaica (3)

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� Jamaica (3)

� St Kitts & Nevis (1)

� Trinidad & Tobago (2)

� Most of these cases were brought pursuant to ISDS clauses in contracts.

� Only two were initiated under ISDS provisions in BITs.

ContractContract--based Casesbased Cases

Grenada Grenada

• WRB Enterprises & Grenada Private Power Ltd v Grenada

• RSM Production Corporation v Grenada

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Jamaica Jamaica

• Alcoa Minerals of Jamaica Inc v Jamaica

• Kaiser Bauxite Co v Jamaica

• Reynolds Jamaica Mines Ltd & Reynolds Metals Co vJamaica

ContractContract--based Casesbased Cases

St Kitts & Nevis St Kitts & Nevis

• Cable Television of Nevis & Cable Television of Nevis Holdings v Federation of St Kitts & Nevis

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Trinidad & Tobago Trinidad & Tobago

• Tesoro Petroleum Corporation v Trinidad & Tobago

TreatyTreaty--based Cases based Cases

Guyana Guyana

• Booker plc v Guyana

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Trinidad & Tobago Trinidad & Tobago

• FW Oil Interests v Trinidad & Tobago

Subject Matter of DisputesSubject Matter of Disputes

Oil and gas exploration and exploitation

Bauxite mining

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Privatization of electricity enterprise

Cable TV charges

Debt arising from nationalisation

GRENADA’S DISPUTES GRENADA’S DISPUTES 7

WRB Enterprises & Grenada Private Power Ltd WRB Enterprises & Grenada Private Power Ltd v Grenada v Grenada

• In 1994, the government agreed to sell to WRB Enterprises (a US company) a 50% stake in the island’s electricity company, GRENLEC.

• The successor government refused to approve the privatization,claiming the deal was unfair.

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claiming the deal was unfair.

• In 1997, the government threatened to re-nationalize thecompany by buying out WRB. However, WRB was unwilling torenegotiate.

• WRB brought the dispute for arbitration before ICSID in 1997.

• The government later accepted the privatization and the partiesagreed to a settlement.

RSM Corporation v Grenada RSM Corporation v Grenada

• In 1996, RSM (a US company) and Grenada entered into an agreement for the exploration, and potential extraction, of oil and gas deposits in a designated area off Grenada, Petite Martinique and Carriacou.

• RSM contracted to apply, within 90 days of signature of the agreement, for an exploration license, which Grenada had to award.

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award.

• Under the contract, RSM could invoke force majeure to excuse performance of the agreement and delay the 90-day period for applying for the license. There was no time limit to the period of force majeure.

• Force majeure covered Grenada’s maritime boundary dispute with Venezuela and Trinidad & Tobago.

• RSM was required to take ‘all reasonable steps’ to remove the cause of the force majeure.


• Fourteen days after the agreement was signed, RSM invoked the force majeure clause, which allowed it to suspend the 90-day period for the next 8 years.

• During this 8-year period, RSM’s CEO participated in Grenada’s maritime boundary negotiations with

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Grenada’s maritime boundary negotiations with Venezuela and Trinidad & Tobago.

• Unilaterally, he attempted to negotiate with Venezuela and commenced a lawsuit against Venezuela’s state oil company.

• He authorized false maps that favoured T&T, pursued unilateral proceedings against T&T before ICSID and ITLOS and wrote a threatening letter to the Prime Minister of T&T.


• In January 2004, RSM notified its revocation of force majeure and applied for a licence in April 2004.

• Grenada refused to grant the licence and terminated the agreement in July 2005.

•

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• In 2005, RSM initiated ICSID arbitration proceedings pursuant to the arbitration clause in the agreement.

• RSM sought a declaration that the 1996 agreement was still in force and Grenada must grant it a licence. In the alternative, it sought damages.


• Grenada alleged breach of contract and counterclaimed for illegal misrepresentation under Grenadian law, entitling termination of the agreement and damages.

• It claimed that RSM’s actions in relation to T&T and Venezuela amounted to a breach of its obligation regarding removal of force majeure.

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regarding removal of force majeure.

• Grenada also claimed that it was misled to believe that RSM was able to carry out exploration and development, as well as the expertise to assist with maritime boundary delimitations.


• In 2006, while the ICSID arbitration proceedings were pending, RSM filed a complaint in a New York court against a Grenadian Senator and three other persons, raising issues of corruption against them and claiming over US$500 million in damages.

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• The arbitration tribunal made several procedural orders in relation to the New York legal proceedings. Ultimately, the tribunal was satisfied that the Senator’s testimony before it was not adversely affected by those proceedings.


• The arbitration rendered its award in 2009, dismissing RSM’s substantive claims.

• The 1996 agreement had either lapsed in March 2004 when the 90-day period expired, or was lawfully terminated by Grenada in 2005.

• Grenada’s counterclaim was also rejected.

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• Grenada’s counterclaim was also rejected.

• RSM’s breach of its obligation regarding removal of forcemajeure did not entitle termination of the agreement andGrenada did not prove loss entitling damages.

• Some of the alleged misrepresentations were not made and,where the CEO had made misrepresentations, they were notfraudulent.

• The parties were ordered to bear their own legal costs and split the costs of arbitration.

GUYANA’S DISPUTE15

Booker plc v GuyanaBooker plc v Guyana

• In 1976, Guyana nationalized a UK company’sinvestments in the Guyanese sugar industry.

• A long-term compensation plan was agreed.

• Payment installments were interrupted in the 1980swhile the government considered re-privatization of the

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while the government considered re-privatization of thesugar industry.

• When the government decided against this, negotiationsover payment of the remaining debt resumed.

• After unsuccessful negotiations, Booker plc invoked theUK-Guyana BIT to launch arbitration with ICSID.

Booker plc v GuyanaBooker plc v Guyana

• An arbitration ruling requiring Guyana to pay Booker plc could have jeopardized the country’s efforts to qualify for the IMF’s Highly Indebted Poor Countries programme.

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• Following negative press coverage and demonstrations in the UK, Booker plc’s parent firm abandoned the claim and the proceedings were discontinued.

JAMAICA’S DISPUTESJAMAICA’S DISPUTES18

Alcoa Minerals, Kaiser Bauxite, Reynolds Jamaica Mines v Jamaica

� The Government of Jamaica entered into agreements with several US bauxite companies to construct an alumina refining plant in return for a 25-year bauxite mining concession.

The agreements contained a “no further tax” clause,

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� The agreements contained a “no further tax” clause, under which Jamaica undertook to impose only those taxes and royalties specified in the agreement.

� The agreements also provided for the submission of disputes arising under them to ICSID.


� In 1974, the Government decided to renegotiate aspects of the agreements in order to secure greater national control over bauxite reserves and to derive a higher level of revenues from the sector.

� In May 1974, Jamaica introduced the Bauxite (Production

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� In May 1974, Jamaica introduced the Bauxite (Production Levy) Act, which imposed a new tax on bauxite mining.

� Shortly before enacting the statute, Jamaica filed a notification with ICSID, pursuant to Article 25(4) of the Convention, to exclude disputes arising out of an

investment relating to minerals or other natural resources.


� Three of the bauxite companies initiated separate arbitration proceedings before ICSID, seeking the return of the monies paid pursuant to the Act.

� Jamaica refused to appoint an arbitrator and failed to appear at the first meeting of the arbitration tribunal.

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appear at the first meeting of the arbitration tribunal.

� The tribunal decided to deal with its jurisdiction as a preliminary point in order to determine whether:

� the disputes fell within the subject-matter jurisdiction of ICSID; and

� Jamaica’s notification of withdrawal affected the prior consent to arbitration.


� The tribunal held that the disputes were within the jurisdiction of ICSID.

� The case concerned a legal dispute arising directly out of an investment

� Jamaica is a Contracting State under the Convention and

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� Jamaica is a Contracting State under the Convention and the companies were nationals of the US, another Contracting State

� The companies and Jamaica consented in writing to submit the dispute to ICSID.


� It found also that Jamaica could not withdraw its consent to the arbitration given in the agreements.

� Its notification to ICSID could only operate in respect of potential future investors.

� “[A]ny other interpretation would...deprive the Convention of

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� “[A]ny other interpretation would...deprive the Convention of any practical value for Contracting States and investors”

� The parties eventually reached a settlement and the proceedings were discontinued in 1977.


� Further challenges to the bauxite levy were made in other fora.

� In 1976, Revere Jamaica Ltd initiated a constitutional challenge to the Bauxite (Production Levy) Act before the Supreme Court of Jamaica.

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the Supreme Court of Jamaica.

� The Supreme Court found that an undertaking to bind the Government as to future taxation was invalid and created no valid contractual right in favour of Revere.


� In 1976, Revere Copper & Brass instituted a claim under the expropriation provision of a guaranty contract with the Overseas Private Investment Corporation (OPIC), before the American Arbitration Association.

The arbitration tribunal found an expropriation under the

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� The arbitration tribunal found an expropriation under the terms of the contract. The Government’s introduction of the levy directly prevented Revere from exercising effective control over the use or disposition of its property.

� Revere was awarded approximately US$1.1 million plus interest of 6% p.a.

ST KITTS & NEVIS’ DISPUTEST KITTS & NEVIS’ DISPUTE26

Cable TV Nevis & Cable TV Nevis Holdings v St Cable TV Nevis & Cable TV Nevis Holdings v St Kitts & NevisKitts & Nevis

• In 1986, two US-owned companies entered into anagreement with the Nevis Island Administration (NIA)granting them a cable TV franchise.

• The agreement contained an ICSID arbitration clause.

• The companies instituted arbitration proceedings

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• The companies instituted arbitration proceedingsagainst the Federation of St Kitts & Nevis in respect ofa dispute related to charges for cable TV services inNevis.

• The Federation objected to ICSID’s jurisdiction in thematter.


Article 25, ICSID Convention:

(1) The jurisdiction of the Centre shall extend to any legaldispute arising directly out of an investment, between aContracting State (or any constituent subdivision oragency of a Contracting State designated to the

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agency of a Contracting State designated to theCentre by that State) and a national of anotherContracting State, which the parties to the disputeconsent in writing to submit to the Centre…

(3) Consent by a constituent subdivision or agency of aContracting State shall require the approval of that Stateunless that State notifies the Centre that no such approval isrequired.


• The Tribunal declined jurisdiction over the dispute.

• NIA, and not the Federation, was the party to theagreement containing consent to ICSID jurisdiction.

• The Constitution of St Kitts & Nevis established Nevis asa constituent subdivision of the Federation.

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a constituent subdivision of the Federation.

• The NIA had not been designated to ICSID as aconstituent subdivision under Article 25(1) of the ICSIDConvention.

• The Federation had not notified ICSID, pursuant toArticle 25(3), that its approval of NIA’s consent to ICSIDjurisdiction was not required.

TRINIDAD & TOBAGO’S DISPUTESTRINIDAD & TOBAGO’S DISPUTES30

Tesoro Petroleum Corporation v Tesoro Petroleum Corporation v Trinidad & TobagoTrinidad & Tobago

• In 1968, Tesoro and the Government of Trinidad and Tobago entered into a joint venture to purchase and develop oil fields.

• After the first 5 years of operation of the joint company,dividends could be declared.

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dividends could be declared.

• From 1981, relations between the Government and Tesorobecame strained.

• The Government refused to approve the declaration ofdividends for 1981 and 1982.

• In 1982, Tesoro decided to sell its shares in the joint ventureand the parties entered into negotiations over theGovernment’s possible purchase of the shares.

Tesoro Petroleum Corporation v Tesoro Petroleum Corporation v Trinidad & TobagoTrinidad & Tobago

• In 1983, Tesoro initiated conciliation proceedings before ICSID, seeking damages for the Government’s alleged breach of its obligation to support the payment of dividends for the two years.

• In light of the Conciliator’s recommendations, the parties

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• In light of the Conciliator’s recommendations, the parties agreed in 1985 to settle the matter through payment of dividends to the shareholders for the period 1981-1985.

• The case has been cited as a good example of how conciliation proceedings may help the parties settle their differences at relatively small cost of time and money.

FW Oil Interests v Trinidad & TobagoFW Oil Interests v Trinidad & Tobago

� FW Oil (a US firm) claimed that, in 2000, it wasawarded a contract to develop oil and gas fieldslocated off Trinidad’s south-west coast, but thecontract was revoked several months later.

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� In 2001, FW Oil instituted ICSID arbitrationproceedings under the US-Trinidad & Tobago BIT.

� It alleged that Trinidad & Tobago had breached thecontract, the laws of Trinidad & Tobago and the BIT,and claimed compensation for its lost profits andwasted costs.

FW Oil Interests v Trinidad & TobagoFW Oil Interests v Trinidad & Tobago

� The Trinidad & Tobago press reported that FW Oilhad alleged that it was the victim of corruption byofficials by state enterprises and a formerGovernment Minister.

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� The arbitration tribunal rendered its award in 2006,finding that FW Oil had not established that it hadan “investment” as defined under the terms of theBIT.

THANK YOUTHANK [email protected]@[email protected]@crnm.org

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c. ononaiwu - icsid cases involving caricom states (oas-crnm-caricom workshop - june 2008)

Economy & Finance