Optima Ventures LLC and Optima 7171 LLC v United States - ICSID Case No. ARB/21/11 - Decision on the Respondent's Preliminary Objections under Arbitration Rule 41-5 - 19 January 2024
Country
Year
2024
Summary
Source: icsid.worldbank.org
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I. INTRODUCTION
1. This case concerns a dispute submitted to the International Centre for the Settlement of Investment Disputes ("ICSID" or "Centre") on the basis of the United States-Ukraine Bilateral Investment Treaty ("BIT") (signed on March 4, 1994, entered into force on November 16, 1996) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force October 14, 1966 ("ICSID Convention" or "Convention").
2. The Claimants are Optima Ventures LLC, Optima 7171 LLC, and Optima 55 Public Square LLC ("Optima" or "Claimants"). The Respondent is the United States of America ("United States," "US" or "Respondent."). The Claimants and the Respondent are collectively referred to herein as the "Parties." The Parties' respective representatives and their addresses are listed above.
3. The dispute arises out of a series of measures taken by the Respondent with respect to two real estate properties in the United States, which allegedly affected the Claimants' US businesses and resulted in a loss to their investments. The first of these two properties is located at 7505 and 7171 Forest Lane, Dallas, Texas and is referred to herein as the "CompuCom Campus" or the "Texas Property." The second is located at 55 Public Square, Cleveland, Ohio, and is referred to herein as "55 Public Square" or the "Ohio Property."
4. This Decision concerns the Respondent's preliminary objections ("Preliminary Objections") to the Claimants' claims, filed pursuant to Rule 41(5) of the ICSID Rules of Procedure for Arbitration Proceedings ("Arbitration Rules").
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VIII. THE TRIBUNAL'S ANALYSIS
98. The Respondent filed its Preliminary Objection on February 14, 2023. As indicated above,92 that filing took place within 30 days from the re-constitution of the Tribunal. Thus, the Preliminary Objections have been timely filed, and it is undisputed that the Parties have not agreed to another expedited procedure for making preliminary objections. Therefore, these requirements of Rule 41(5) have been met.
99. After careful analysis and deliberation, although the Respondent has presented several significant issues which the Claimants will have to address in due course, the Tribunal finds that the Preliminary Objections do not meet the required threshold for summary dismissal pursuant to Rule 41(5). In rendering this Decision, the Tribunal shares the view of the Trans- Global tribunal that, to avoid any possible misconception that it has prejudged the merits of the claims (which is not the case), the less it says here, the better.93
100. As indicated in the text of Rule 41(5), this Decision is without prejudice to any positions or arguments of the Parties that may be pursued outside of the Rule 41(5) procedure.94
VIII.1 First Objection
101. As explained above in Section VI.1, the First Objection points to the waiting period provided for in the BIT, which, in the Respondent's contention, was not honored by the Claimants with the result that this Tribunal is deprived of jurisdiction in this case.
102. In the view of the Tribunal, the Respondent's objection may not be upheld under Rule 41(5).
Questions concerning the issue of precisely when a BIT "dispute" arose in connection with the Texas and Ohio Cases involve the weighing of factual allegations and a legal interpretation of BIT provisions and other sources invoked by the Parties. Such issues are not suitable for resolution pursuant to Arbitration Rule 41(5), which is meant only for the application of "genuinely indisputable rules of law to uncontested facts."95
103. Further, the determination of nature of the waiting period set forth in Article VI of the BIT as mandatory and jurisdictional (or not), and whether it may be bypassed by virtue of the application of the BIT's MFN provision, requires a review of extensive Party arguments and sources on those subjects, and the resolution of unsettled or debatable issues of law, which in the circumstances of this case the US has not established would be appropriate in the context of a proceeding under Arbitration Rule 41(5).96
104. Therefore, the Tribunal finds that the First Objection should be dismissed.
VIII.2 Second Objection
105. As explained above in Section VI.2, the Second Objection raises a series of contested issues regarding the substantive elements of claims arising under Articles II and III of the BIT. Whereas the US argues that the claims are "inchoate" and therefore not actionable under the BIT, the Claimants maintain that their BIT claims are ripe for resolution.
106. These arguments include issues concerning the extent to which finality or exhaustion of remedies is required to establish claims of breach with respect to conduct involving judicial measures, what remedies are available to a claimant in a forfeiture proceeding under US law, and the magnitude and duration of loss that is required to establish an expropriation.
107. The Tribunal's resolution of such issues, in turn, requires the complex interpretation and application of disputed treaty provisions,97 including a legal determination of what conduct constitutes arbitrary treatment under Article II(3)(b) and the denial of effective means of redress under Article II(7) in light of the statutory framework concerning US forfeiture proceedings, and the content of the FET standard under Article II(3)(a).
108. The claims also implicate a determination of contested facts,98 such as the extent of the factual predicate for the forfeiture proceedings, the extent to which Claimants did, or were entitled to, seek redress under applicable United States law, and the cause and extent of the Claimants' loss, if any, with respect to the Texas and Ohio Properties.
109. The resolution of such issues is not obvious, or self-evident from the existing Arbitration record, but rather requires further submissions, argument, and analysis of unsettled or debatable, and complex, matters of law and contested facts.99 Indeed, the Parties' positions reveal that these issues are reasonably susceptible to argument, thus disqualifying Claimants' claims arising under Articles II and III of the BIT from being dismissed under Rule 41(5).100
110. Therefore, the Tribunal finds that the Second Objection should be dismissed.
VIII.3 Third Objection
99. As described above in Section VI.3 (and paragraphs 61-63), the Third Objection concerns the principles of prescriptive jurisdiction and adjudicatory comity as matters of domestic and international law, calling for an interpretation of a variety of sources of law, as well as a review of the factual basis for the US forfeiture proceedings and related measures, and, potentially, legislative and judicial measures and associated facts in Ukraine.
100. These questions cannot be dispatched easily as required by the criteria under Rule 41(5).101 Rather, in the words of the PNG tribunal, they involve, "novel, difficult [and] disputed legal issues,"102 as well as contested facts. Indeed, the issues raised do not appear to have been addressed previously by an ICSID tribunal and may require the resolution of complex matters of first impression, which cannot properly be resolved in a Rule 41(5) procedure.103
101. Accordingly, the Tribunal finds that the Third Objection should be dismissed.
IX. COSTS
111. Pursuant to Article 62(1) of the ICSID Convention and Rule 47 of the Arbitration Rules, the Tribunal has discretionary power in its award to decide the amount and allocation of legal and arbitration costs recoverable by one party against the other party.
112. At this stage, the Tribunal takes note of the Parties' positions and requests with respect to costs and reserves its assessment as to costs for a later phase of the Arbitration.
X. OPERATIVE PART
113. In light of the above considerations and for the reasons set forth above, the Tribunal decides:
(1) The Respondent's Preliminary Objections under Rule 41(5) are hereby dismissed.
(2) The issue of costs is reserved for a later stage of the proceeding.
On behalf of the Tribunal
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Footnotes omitted