News: Tribunal'S Decision In Anticipated Yukos Case Released To Public

February 2010CONSORTIUM BUILDING NEW QUITO AIRPORT.The City of Quito accepted theproposal and signed the concessionand construction contracts with CCCin 2002 for the design, financing,construction, and operation of thenew Quito International Airport,as well as the administration andoperation of the current MariscalSucre International Airport.Since then, according to publicreports, the company claims it hasinvested US 74 million of its equityinvestment as well as US 376 millionin international financing for theUS 650 million project.Sources:“La renegociación cumple 5 meses,”December 19, 2010 (El Comercio)“Canadian Commercial Corporationvisits the new Quito InternationalAirport (NQIA) site,” CCC PressRelease, December 9, 2009,available from the CCC website at:http://www.ccc.ca/eng/id QuitolatestNews.cfmQuiport website: http://www.quiport.com/www/frontEnd/main.phpThe Ecuador-United States BilateralInvestment Treaty available fromthe United Nations Conference onTrade and Development (UNCTAD)website here: us ecuador.pdfThe Canada-Ecuador BilateralInvestment Treaty available fromthe United Nations Conference onTrade and Development (UNCTAD)website here: Continued from page 3canada ecuador.pdfRelated ITN Reporting:“ALBA moves forward with plan tocreate regional investment arbitrationalternative to ICSID at 7th Summit,”By Fernando Cabrera Diaz, InvestmentTreaty News, 3 November 2009, isavailable to-icsid-at-7thsummit.aspx“Ecuador continues exit from ICSID,”By Fernando Cabrera-Diaz, InvestmentTreaty News, 8 June 2009, is availablehere:CLAIMANT SEEKS ENFORCEMENT OF ENVIRONMENTALLAWS IN NOTICE OF DISPUTE ALLEGING EXPROPRIATION OFBARBADIAN NATURE SANCTUARYNEWS:By Elizabeth WhitsittA notice of dispute forwarded toBarbados some five months ago byMr. Peter Allard, Canadian owner ofthe Graeme Hall Nature Sanctuary,contends that the Governmentof Barbados has violated itsinternational obligations by refusingto enforce its environmental laws.Located on the south coast ofBarbados, Graeme Hall Sanctuaryconsists of 34.25 acres of naturalwetlands and is situated within a240 acre green space that is thelast significant mangrove forestand migratory bird habitat in theCaribbean state.Mr. Allard acquired the land for theSanctuary in the mid-1990s andsubsequently developed it into an“In an interview with ITNMr. Allard’s lawyer, Mr.Robert Wisner of McMillanLLP, indicated that whileBarbados has yet to respondto his client’s notice ofdispute, he is hopeful thatan amicable settlementbetween the parties can bereached.”eco-tourism facility. In the noticeof dispute, Mr. Allard claims to havetaken numerous steps to contributeto the sustainability of the Sanctuary4only to have such efforts thwarted bythe acts and omissions of Barbados.Mr. Allard asserts that Barbados’ actsand omissions have severely damagedthat natural ecosystem relied uponto attract tourists to the Sanctuary.Consequently, Mr. Allard contendsthat Barbados failed to provide hisinvestment full protection and securityand fair and equitable treatment inaccordance with the Canada-BarbadosBIT.With respect to Barbados’ omissionsto protect the Sanctuary, Mr. Allardargues that Barbados has, amongother things, failed to: (i) prevent therepeated discharge of raw sewage intothe Sanctuary wetlands, (ii) investigateor prosecute sources of runoff ofContinued on page 9

February 2010PERENCO-NOMINATED ARBITRATOR DISQUALIFIED FORINTERVIEW COMMENTS IN ICSID DISPUTE WITH ECUADORNEWS:By Fernando Cabrera DiazPermanent Court of Arbitration (PCA)Secretary-General Cristiaan M.J. Kronerhas accepted the challenge by Ecuadorto remove the Honourable Charles N.Brower as arbitrator in its dispute withoil company Perenco Ecuador Limited. Inhis December 9, 2009 ruling Mr. Kronerconcludes that “comments made by JudgeBrower in an August 2009 interview gaverise to reasonable doubts as to JudgeBrower’s impartiality or independence inthe dispute.”The challenge to Judge Brower aroseout of comments he made in a publishedarticle entitled “A World-Class ArbitratorSpeaks!” in the August 2009 issue of TheMetropolitan Corporate Counsel. JudgeBrower was interviewed about a wide rangeof topic for the article, but the controversialcomments came when he was asked whathe thought were the most pressing issues ininternational arbitration.The Judge responded by saying: “There isan issue of acceptance and the willingnessto continue participating in it, asexemplified by what Bolivia has done andwhat Ecuador is doing. Ecuador currentlyis expressly declining to comply with theorders of two ICSID tribunals with very stiffinterim provisional measures, but they justsay they have to enforce their national lawand the orders don’t make any difference.But when recalcitrant host countries findout that claimants are going to act likethose who were expropriated in Libya,start bringing hot oil litigation and chasingcargos, doing detective work looking forpeople who will invoke cross-default clausesin loan agreements, etc., the politics maychange. After a certain point, no one willinvest without having something to rely on.”Judge Brower was referring in part toEcuador’s refusal to abide by a temporaryrestraint order and subsequent provisionalmeasures issued by the tribunal in thePerenco case, which recommended thatEcuador refrain from trying to collectalleged debts from the company whilethe debts were being disputed in thearbitration.Ecuador seized Perenco’s oil assets onMarch 3, 2009 in an attempt to forciblycollect debts the company had allegedlyaccumulated from its refusal to pay taxesunder a windfall tax law (Law 42) enactedamid rising oil prices in 2006. Thecountry has maintained that the tribunal’sprovisional measures are not binding as amatter of international law.In refusing to pay the Law 42 tax, Perencohas argued that Law 42 is in violation ofits contract with Ecuador and the FranceEcuador bilateral investment treaty.After becoming aware of Judge Brower’scomments in August of 2009 Ecuadorfiled for the judge’s disqualification onSeptember 19, 2009.By previous agreement of the parties,arbitrator challenges in the dispute areresolved by the Secretary-General ofthe PCA, applying the International BarAssociation Guidelines on Conflicts ofInterest in International Arbitration (IBAGuidelines).Under the IBA Guidelines the relevantquestion in resolving the challenge toJudge Brower is whether the interviewcomments constitute circumstancesthat, “from a reasonable third person’spoint of view having knowledge of therelevant facts, give rise to justifiabledoubts as to the arbitrator’s impartialityor independence,” said Secretary-GeneralKroner in his decision.According to Mr. Kroner, Judge Brower’sremarks could lead an informed thirdperson to reasonably infer that JudgeBrower was drawing an analogy betweenEcuador and Libya in the famousnationalizations of oil companies in the1970s. As a result, Mr. Kroner went onto conclude that although Judge Browermay not have actually prejudged the issueof expropriation, from a reasonable thirdperson’s point of view his commentscould give rise to an appearance that hehad prejudged the issue.5Based on these reasons, SecretaryGeneral Kroner sustained Ecuador’schallenge and disqualified Judge Browerfrom the arbitration.ITN spoke top Perenco spokespersonRodrigo Marquez, who said that thecompany had no comment on thedisqualification of Judge Brower. Mr.Marquez did confirm that Judge Browerhad been replaced by a new Perenconominated arbitrator Neil Kaplan.ITN also contacted a senior official of theEcuadorian government who called theagreement between the parties to use thePCA and in particular the IBA Guidelinesto resolve issues regarding impartiality ofarbitrators an important development inthe field.“This precedent is fundamental to thesystem of settlement of investmentdisputes. The fact that the parties, ontheir own initiative, established higherstandards of excellence and fairness forthe arbitrators than those standardsestablished under the ICSID Conventionsends a good message to the arbitratorswho have the sensitive and delicate taskof judging sovereign states.,”added Mr.Galindo.The arbitration is now set continueat ICSID with a full panel, added Mr.Marquez.Sources: PCA Decision on Ecuador’sRequest to Disqualify Judge Broweravailable at Investment treaty covEcuador-Challenge.pdfPrevious ITN Reporting: “Ecuador defiesprovisional measures in dispute withFrench oil company,” By Damon VisDunbar, Investment Treaty News, 8 June2009, is available ures-indispute-with-french-oil-company.aspx

February 2010ICSID TRIBUNAL AFFIRMS POWER TO EXCLUDECOUNSEL, BUT DECLINES TO DO SONEWS:By Elizabeth WhitsittAn ICSID tribunal, composed SirFranklin Berman, Mr. DonaldDonovan and Mr. Marc Lalonde,has determined that Mr. BartonLegum, a partner with Salans& Associés, can continue torepresent Dutch firm RompetrolN.V. in its arbitration againstRomania. Mr. Legum formally tookover as counsel for Rompetrolin the summer of 2009 after hiscolleague, Ms. François-Poncet,announced her departure fromprivate practice.In August 2009, Romania sought“to remove Mr. Legum from thecase and to forbid him fromparticipating in it in any way” afterlearning that Mr. Legum would betaking over legal representationof Rompetrol’s case. Of concernto Romania was the fact that Mr.Legum and Mr. Donald Donovan, amember of the tribunal, had bothworked at Debevoise and PlimptonLLP from 2004-2008.In a rare maneuver, Romaniaelected to challenge Mr. Legum’sposition, rather than to challengethe tribunal itself or any of itsmembers. Neither the ICSIDConvention nor the ICSIDArbitration Rules explicitly providefor challenges to the appointmentof counsel in arbitral proceedings.As a result, Romania groundedits challenge on the inherentgeneral powers of ICSID tribunalsto “police the integrity of [their]proceedings.”As support for its position,Romania relied upon the 2008decision of an ICSID tribunal inHrvatska Elekropriveda d.d. v.Republic of Slovenia. In its rulingthe Hrvatska tribunal excludedthe participation of counsel inarbitral proceedings after theRepublic of Slovenia announced itsappointment of Mr. David MildonQC as co-counsel shortly beforehearings in the arbitration wereto begin. In that case, concernsabout the existence of a conflict ofinterest were raised when Hrvatska“the Rompetrol tribunalconsidered that ‘ theHrvatska [d]ecision mightbetter be seen as anad hoc sanction for thefailure to make properdisclosure in good timethan as a holding of moregeneral scope.’”learned that Mr. Mildon QC and amember of the tribunal, Mr. DavidWilliams QC, were members of theEssex Court Chambers in London.In its decision of January 14, 2009,the Rompetrol tribunal ultimatelyrejected Romania’s position. In sodoing, the tribunal observed that“[a] power on the part of a judicialtribunal of any kind to exercise acontrol over the representationof the parties in proceedingsbefore it is by definition a weightyinstrument ” Moreover, thetribunal concluded that the powerto exclude counsel should only beused when there is an “overridingand undeniable need to safeguardthe essential integrity of the entirearbitral process.”Considering the facts of the case(i.e. that the association betweenMr. Legum and Mr. Donovan hadceased), the tribunal determinedthat it should not interfere withRompetrol’s choice of legal counsel6because the integrity of the arbitralprocess was not an issue.Apparently concerned aboutreconciling its decision with theHrvatska ruling, the Rompetroltribunal was careful to point out thatits analysis should not be seen assecond-guessing the assessment ofthe Hrvatska tribunal. Rather, theRompetrol tribunal suggested thatthe Hrvatska tribunal’s decision wasmaterially influenced by Slovenia’slate announcement regarding theappointment of a new lawyer inthe arbitration. As a result, theRompetrol tribunal considered that“ the Hrvatska [d]ecision mightbetter be seen as an ad hoc sanctionfor the failure to make properdisclosure in good time than as aholding of more general scope.”Undoubtedly, the Rompetroltribunal’s re-casting of the Hrvatskadecision may well provokefurther comment about the powerto exclude counsel in arbitralproceedings.Sources:Decision of the Tribunal onthe Participation of a Counselin Rompetrol Group N.V. v.Romania is available here: ation.pdfRelated ITN Reporting:“Arbitrators clash on questionof interpretation in HrvatskaElectroprivreda d.d. v. The Republicof Slovenia,” By Elizabeth Whitsitt,Investment Treaty News, 15 July2009, available archive/2009/07/14/arbitrators-

February 2010NEWS:TWC GROUP SETTLES WITH THE DOMINICAN REPUBLICBy Elizabeth WhitsittTWC Group, Inc. and its affiliateDominican Energy Holdings L.Phave reached a settlement withthe Dominican Republic, ending adispute that began in 2007.TWC had been seeking some US 680 million for alleged violationsof the Central America-DominicanRepublic-United States Free TradeAgreement (CAFTA-DR).In a joint letter issued on 30 June2009 to a tribunal constitutedunder the UNCITRAL ArbitrationRules, the parties announced thatthey had reached an agreement,and requested discontinuance ofthe arbitration proceedings. In itsconsent award made available tothe public only recently, the tribunalaccepted the parties’ request fordiscontinuance. Additionally thetribunal ordered that costs of thearbitration – which have been fixedat some EUR 212 thousand – be bornequally between the parties.The TWC Group did not respond torequests made by ITN for furtherinformation about the settlement.As previously reported by ITN, in2007 TCW’s French parent company,Société Générale, launched parallelarbitral proceedings against theCaribbean nation under a differenttreaty, the 2003 Dominican RepublicFrance bilateral investment treaty(DR-France BIT). In October 2008, anarbitral tribunal issued a decision onjurisdiction in which it allowed thearbitration to proceed to the meritsphase of the dispute.Sources:Consent Award in TWC Group, Inc.v. Dominican Energy Holdings L.P. isavailable here: http://ita.law.uvic.ca/TRIBUNAL’S DECISION IN ANTICIPATED YUKOS CASE.In its decision, the results of whichhave been widely publicized, thetribunal ultimately sided with theclaimants. But it was not a completevictory for the shareholders of whatwas once considered Russia’s largestoil company.Focusing on the plain and ordinarymeaning of ECT Article 45, thetribunal rejected the claimants’ firstargument that would have madea state’s limitation of the ECT’sprovisional application dependenton a formal opt-out declaration.Specifically, the tribunal held that“[n]othing in the language of Article45 suggests that the limitation clausein Article 45(1) is dependent on themandatory making of a declarationunder Article 45(2).” Similarly, thetribunal observed that Article 45(1)did not expressly require any formof opt-out declaration or notificationin order for a signatory party to limitthe ECT’s provisional application.Subsequently, the tribunal focusedits analysis on whether thedispute settlement provisions ofthe ECT were inconsistent withRussia’s Constitution or laws. Asa preliminary matter, the tribunalclarified when a signatory state couldopt-out of the ECT’s provisionalapplication under Article 45(1). Onthis point, the parties’ positionsdiffered dramatically.According to Russia, it couldbe provisionally bound by eachprovision of the ECT, but only to theextent performance of the obligationcreated by that provision was notinconsistent with its Constitution,laws or regulations. Based on7documents/TD-DRConsentAward 002.PDFProcedural Order No. 4 in TWC Group,Inc. v. Dominican Energy Holdings L.P.is available here: http://ita.law.uvic.ca/documents/TD-DRPO4 002.pdfRelated ITN Reporting:“Société Générale passes jurisdictionalhurdle in dispute with DominicanRepublic; controversy erupts overpress release,” By Fernando CabreraDiaz, Investment Treaty News (28October 2008), available aspxContinued from page 1this “piecemeal” approach, Russiacontended that it was not bound bydispute settlement provisions in theECT.The claimants, on the other hand,asserted that Article 45(1) operateson an “all-or-nothing basis.” Inparticular, the claimants arguedthat each signatory agrees to bebound by the ECT if the principle ofprovisional application is consistentwith its domestic law. If, on the otherhand, a signatory’s domestic lawdoes not allow it to be bound by wayof provisional application, it maydecline to assume any internationalobligations under the ECT. CitingRussia’s long-standing practice ofprovisionally applying internationaltreaties, the claimants challengedRussia’s contention that the disputesettlement provisions of the ECT wereContinued on page 8

February 2010TRIBUNAL’S DECISION IN ANTICIPATED YUKOS CASE.inconsistent with its Constitution orlaws.For its part, the tribunal eventuallysided with the claimants. Specifically,the tribunal found that “ by signingthe ECT, the Russian Federation [had]agreed that the treaty as a wholewould be applied provisionally unless the principle of provisionalapplication itself was inconsistent‘with [Russ

NEWS: ICSID tribunal affirms power to exclude counsel, but declines to do so PAGE 7 NEWS: TWC Group settles with the Dominican Republic PAGE 9 . "ICSID tribunal dismisses RSM Production Corporation's claim against Grenada," By Damon Vis-Dunbar, Investment Treaty News, 26