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What We Learn from the Suez/Vivendi v. Argentina Non-Annulment (2) — Greener Grass in More-Favored Nations

You are not finished learning from the ICSID annulment committee’s non-annulment of the Suez/Vivendi v. Argentina award, at least not if you actually read these posts (a covert activity that leaves cookies, and suggests you probably did not heavily annotate the latest issue of the ICSID Review). Some number of you will remember that Argentina turned up at the US Supreme Court a few years back, trying to sell the idea that the Supremes should tell British investors they had to spend 18 months cooling off in the Argentine courts day-by-day (with an allowance for Tango and Malbec at night) if they wanted to eventually pursue international arbitration at the World Bank to show that Argentine fiscal policies had sunk the profitability of their investments against settled expectations. The Court did not buy the argument that 18 months in the Cooler was a condition of Argentina’s consent to ICSID arbitration, because the UK-Argentine investment treaty couldn’t fairly be read to say that (not even after a half bottle of REALLY GOOD Malbec). [BG Group PLC v. Republic of Argentina, 134 S. Ct. 1198 (2014)]

So it will not surprise you to know that in the Suez/Vivendi case [Suez & Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Annulment, May 5, 2017], Argentina also tried and failed to convince the arbitrators that the investors should be shut down because they refused to comply with the 18 months in the Cooler clause – this one in the Spain-Argentina investment treaty. What sunk Argentina in this case was that the France-Argentina investment treaty had no such clause, and the Spain-Argentina treaty had a “most favored nation” (MFN, hereinafter Grass-is-Greener) clause. Said the Spanish investor to the ICSID Tribunal: “The Grass-is-Greener in France, so we play by French rules.” Game, set, and match to the Spanish investor. (R. Nadal, citing this precedent, won his round of 64 match at Roland-Garros yesterday, 6-2, 6-4, 6-1. On clay not grass).

So Argentina told the annulment committee that the Grass-is-Greener argument has a long history of not working for investors in regard to dispute resolution provisions in treaties, i.e. that many investment tribunals have rejected similar arguments by investors that MFN clauses gave them an escape from procedural preconditions to investment arbitration that were present in the treaty they invoked to launch arbitration, but not in another treaty between the Host State and another State. Argentina apparently was quite right about this, except for a small problem: that MFN clauses get interpreted one-by-one on their own terms, treaty by treaty, so what’s Green Grass for one may be weeds for another. The problem that sunk Argentina in the Suez/Vivendi case is that the MFN clause in its investment treaty with Spain had been construed as being applicable to dispute settlement procedures – and thus to give Spanish investors the benefit of less-encumbered passage to arbitration found in other States’ investment treaties with Argentina — on approximately four other occasions by four other Tribunals.

The ICSID annulment committee, after duly reminding its readers that its mandate is limited to ensuring that arbitrators act like a Tribunal and not like a lynch mob, found no basis to dislodge the Tribunal’s thoroughly-explicated and case-law-supported position (you get in trouble if you say “precedent”) that the Spanish investor was entitled to the benefit of the France-Argentina treaty rule of No Time in the Cooler Before Arbitration.

So today’s lesson, readers: get out there in cyberspace and read the bilateral investment treaties of some likely arbitration-target States. The Grass-is-Greener question is a hot topic – not only for dispute resolution, but for substantive protections like “fair and equitable treatment” which might mean one thing between Spain and Ukraine, and something else between the US and Ukraine, and who knows what between the EU and Ukraine, who sort of finalized a new treaty courtesy of a Dutch ratification vote as reported in yesterday’s New York Times.

 

 

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