Orazul International España Holdings S.L. v Argentine Republic - ICSID Case No. ARB/19/25 - Decision on the Respondent's Request for Bifurcation - English - 7 January 2021
Reproduced from www.worldbank.org/icsid with permission of ICSID.
Table of Contents
- A. PROCEDURAL BACKGROUND
- B. THE RESPONDENT'S POSITION ON BIFURCATION
- C. THE CLAIMANT'S POSITION ON BIFURCATION
- D. THE TRIBUNAL'S DECISION ON BIFURCATION
- I. The Applicable Legal Framework
- II. The Tribunal's Analysis
- 1. The Respondent's claim that the Claimant's claim is belated and contrary to general principles of law
- 2. The Respondent's claim that the Claimant failed to first comply with Article 10 of the BIT
- 3. The Respondent's claim that the Tribunal lacks jurisdiction and the Claimant has engaged in an abuse of process
- 4. The Respondent's claim that the Claimant consented to the measures and has waived its right to bring its claims
- III. Conclusion
- E. THE TRIBUNAL'S ORDERS
II. The Tribunal's Analysis
32. After carefully analysing the Parties' respective submissions of 30 November 2020 and 14 December 2020, in the interests of procedural economy and efficiency, the Tribunal decides not to bifurcate the hearing of the Respondent's four Preliminary Objections from the merits for the reasons outlined below.
1. The Respondent's claim that the Claimant's claim is belated and contrary to general principles of law
33. Bearing in mind its intention not to conflate the "merits of the objection" with the prior question of the merits of a bifurcation, the Tribunal does not accept that the Respondent's objection based on the Claimant's allegedly unreasonable delay in commencing these proceedings is frivolous or vexatious. The dispute underlying these proceedings has continued for nearly two decades. While, as the Claimant identifies, the BIT contains no express limitation period, in a case that has persisted as long as this, the Tribunal is not convinced that the Respondent's objection regarding the commencement of these proceedings is entirely unreasonable. To this end, the Respondent has pointed the Tribunal to, in the Tribunal's preliminary view, defensible legal doctrine supporting its position.37
34. At the same time, however, the Tribunal is not convinced that bifurcation based on the Respondent's timeliness argument would necessarily facilitate the efficient conduct of these proceedings. To this end, the Tribunal considers that any decision on the Respondent's objection would likely entail the Tribunal prematurely delving into the substance of the merits of the Claimant's claims and having to decide on issues encompassed therein. This includes, in particular, the likelihood that the Tribunal would have to consider the timing of the challenged measures and whether they amounted to a continuous breach of the BIT. It will also likely entail the Tribunal's consideration of the Respondent's alleged promises to the Claimant over the years that the measures would only be "temporary" in nature (including, in particular, the Respondent's commitments allegedly made in relation to the FONINVEMEM programs). As the Claimant argues, such comprise representations it relied on in deciding not to commence proceedings earlier. However, in the Tribunal's view, such also go to the heart of the Claimant's claims in these proceedings for violations by the Respondent of the BIT. To this end, the Tribunal refers to the evidence of the Claimant's witness Mr. McGee, who explains that:38
the Government continued adopting harmful measures affecting Cerros Colorados, while constantly "moving the goal post" to achieve the promised normalization of the market and reinstate the rules in force prior to the 2003 measures.
35. The Tribunal is thus not convinced that significant issues relevant to both the Respondent's objection and the merits do not overlap, nor that meaningful efficiency savings would result from bifurcation in the event the Tribunal ultimately does not uphold the Respondent's objection.
2. The Respondent's claim that the Claimant failed to first comply with Article 10 of the BIT
36. With respect to the Respondent's objection regarding the Claimant's failure to first adhere to the 18-month national courts condition in Article 10 of the BIT, the Tribunal also finds that, on balance, it is not in the interest of efficiency to bifurcate the proceedings.
37. The Tribunal considers that the Respondent's objection is not vexatious or without any merit. While the Parties do not dispute that the Claimant did not comply with Article 10 of the BIT before commencing these arbitration proceedings, they disagree on the mandatory nature of such provisions and whether the Claimant may invoke the MFN Clause to effectively remove and replace the obligation in substance. To this end, the Tribunal is cognisant that whether particular aspects of a BIT may be transposed to another treaty through application of a most favoured nation clause remains controversial. It thus considers that the issue warrants further elaboration by the Parties in these proceedings.
38. Notwithstanding this, while the question of whether the Claimant was obligated to comply with Article 10 remains largely a legal one, the Tribunal considers that it will still likely entail a review of matters inextricably intertwined with the merits. In view of the Parties' submissions to date, the Tribunal in particular foresees having to evaluate whether, in light of the surrounding circumstances, the Claimant's compliance with Article 10 would have engendered a reasonable prospect of resolving the Parties' dispute before Argentine national courts within the applicable timeframes. In the Tribunal's view, such will necessarily involve a consideration of matters relevant to the Claimant's substantive claims.
3. The Respondent's claim that the Tribunal lacks jurisdiction and the Claimant has engaged in an abuse of process
39. In its third preliminary objection, the Respondent raises challenges against the Claimant's status as a protected investor under the BIT, and regarding whether its participations constitute protected investments under the same.
40. The Respondent's objections in this regard are representative of the typical issues that arise in investor-state disputes. Outside of the validity of the Respondent's challenges, in the Tribunal's view, the objections the State raises are of a sort that are generally intertwined with the merits of a case, insofar as they render bifurcation an inefficient procedural mechanism. In this case, and similar to the Respondent's objection on timeliness, the Tribunal considers that the perceived complexity and evolving nature of the ownership and corporate structure of the Claimant, its related entities and their participations in Argentina over the past two decades will in all likelihood warrant a detailed analysis by the Tribunal of facts and evidence relating thereto. Should the Respondent's objection fail, the same issues are then likely to arise again at a merits stage of the proceeding, especially those concerning the ownership of relevant participations over the duration of the Parties' relations and the impact, if any, of the Respondent's alleged conduct on their value. Accordingly, in the Tribunal's view, the Respondent's objection does not warrant bifurcation.
4. The Respondent's claim that the Claimant consented to the measures and has waived its right to bring its claims
41. The Parties are in dispute over the application and effect of the successive agreements and governmental regulations issued by the Respondent over the course of the Parties' dealings. These include, inter alia, the agreements concerning the contested FONINVEMEM programs and Resolution No. 95/2013.
42. The Parties in particular disagree on whether the Claimant itself was party to the agreements or subject to the regulations, whether such amounted to waivers over the Claimant's claims in these proceedings (or adequate compensation in lieu), and whether the Respondent might have breached its commitments under the agreements and lost its right to rely on the waivers. In the Tribunal's view, these questions are complex and, in view of the Parties' submissions to date, deserve further elaboration and substantiation in the course of these proceedings.
43. At the same time, the Tribunal considers that evaluating the above questions without prematurely delving into the substance of the Claimant's claims and the evidence in support thereof is unrealistic. In particular, the Tribunal expects that resolving the Respondent's waiver objection will entail deciding on questions such as whether the Respondent forced the Claimant or Cerros Colorados to enter into the above agreements, their scope and content, and whether the Respondent breached its commitments thereunder, including as regards the FONINVEMEM programs. In the Tribunal's understanding, these are issues that remain central to the Claimant's claims that the Respondent violated the BIT and will require an evaluation of evidence to that end.
44. Should the Respondent fail on its objection, it is likely that the Tribunal would need to consider the same evidence again, resulting in a probable duplication thereof. To this end, the Tribunal points to the evidence of the Respondent's witness, Mr. Cameron, filed with its Memorial on Preliminary Objections, in which he already now discusses matters that appear relevant to the Claimant's claims on the merits, including, in particular, the contested circumstances around the entry by power generators into the FONINVEMEM program and its various agreements.39 As the Claimant's witness Mr. McGee also explains:40
While the Government made it look as if participation in FONINVEMEM was optional, in reality doing so was a condition for Cerros Colorados to secure collection of the unpaid receivables from CAMMESA originated between 2004 and 2006 that were not "invested" in FONINVEMEM.
45. Thus, in the Tribunal's view again, considerations of efficiency do not advocate for bifurcating the proceedings in light of the Respondent's waiver obligation.
46. In view of the above, the Tribunal is not convinced that bifurcation would assist to facilitate the efficient conduct of this arbitration. Rather, given the likelihood that the Tribunal would need to consider many of the same issues and supporting evidence necessary to establish the merits of the Claimant's claims, the Tribunal considers that one collective procedure and final hearing is appropriate in this case. The Tribunal nevertheless recalls that the present decision by no means prejudges its final decision on the preliminary objections raised by the Respondent and, should it ultimately uphold the Respondent's Preliminary Objections, it retains authority and discretion to compensate it by way of orders as to costs.
47. In coming to its decision, the Tribunal is mindful that the Respondent, being the party bringing this request to bifurcate the proceedings, has itself not sought to elaborate further on how bifurcation might materially reduce or render entirely unnecessary the remaining stages of the arbitration, were the Tribunal to uphold its objections.41 As to the third factor tribunals consider when deciding such requests, the Tribunal has in this regard not been convinced that, on balance, bifurcation would in fact reduce time and costs in these proceedings.
48. In view of its decision, and as described above in Part A, the arbitration will henceforth adhere to the jointly established procedure identified as Scenario 2.2 of the Procedural Timetable. The Tribunal will therefore address the Respondent's Preliminary Objections together with the merits.
E. The Tribunal's Orders
49. In view of the foregoing, the Tribunal:
a. dismisses the Respondent's request to bifurcate the proceedings;
b. directs the Parties to follow the procedural calendar set out in Scenario 2.2 of the Procedural Timetable annexed to the PO1.
50. The Tribunal reserves its decision on costs.
For and on behalf of the Tribunal,
Dr. Inka Hanefeld, LL.M. (NYU)
President of the Tribunal
Date: 7 January 2021
Footnotes omitted from this introduction.