Omega Engineering LLC and Oscar Rivera v Panama ICSID Case No. ARB/16/42 - TPA - Award of the Tribunal - 14 October 2022
Country
Year
2022
Summary
Source: icsid.worldbank.org
AWARD
Members of the Tribunal
Mr. Laurence Shore, President
Dr. Horacio A. Grigera Naón, Co-Arbitrator
Professor Zachary Douglas KC, Co-Arbitrator
Date of dispatch to the Parties: October 14, 2022
TABLE OF CONTENTS
The Relevant Treaty Provisions
The BIT's Provisions
The TPA Provisions
The Parties' Respective Cases
Summary of the Claimants' Claims
i. The Claimants' Claims
ii. Damages
Panama's Jurisdictional Objections
i. Corruption precludes treaty relief
ii. The Claimants have advanced commercial claims and have not demonstrated that Panama acted in a sovereign capacity; commercial claims
are not protected under the Treaties
iii. The BIT claims must be resolved under the project contracts' dispute resolution provisions
iv. There is no jurisdiction over claims relating to Panama's criminal investigation of Mr. Rivera
Panama's Defenses to the Claimants' Four Heads of Claims
i. Indirect Expropriation
ii. Fair and Equitable Treatment
iii. Full Protection and Security
iv. Umbrella Clause
Panama's Response to Claimants' Damages Requests
i. Response to Head 1 - Losses on Existing Contracts
ii. Response to Head 2 - Fair Market Value of Future Contracts
iii. Response to Head 3 - Moral Damages
The Claimants' Responses to Panama's Four Jurisdictional Objections
i. Response to "Corruption precludes treaty relief"
ii. Response to "Claimants have advanced commercial claims; they have not proved sovereign intent"
iii. Response to "the BIT claims must be resolved under the project contracts' dispute resolution provisions"
iv. Response to "there is no jurisdiction over claims relating to the criminal investigation of Mr. Rivera"
The Six Consortium Projects and the Corruption Investigation
The Six Projects
i. The CDLA Project
ii. The MINSA CAPSI Project
iii. The La Chorrera Project
iv. The Municipality of Colón Project (or The Municipal Palace Project)
v. The Mercado Público de Colón Project ("Cold Chain Market" Project)
112
vi. The Markets Project
The Tribunal's Conclusion: The Cause of the Consortium's Failed Project Contracts
Introduction - The Relevant Issue in This Arbitration
The Background to Examining the "Tonosí Land Deal"
The Tribunal's Analysis of the "Tonosí Land Deal" Hearing Testimony
The Parties' Written Submissions on the Tonosí Land Deal
The Tribunal's Decision: The Tonosí Land Deal and the Corruption
Investigation
Panama's Jurisdictional Objections
Corruption precludes treaty relief
The Claimants Have Asserted Commercial Claims That Are Not Protected by
the Two Treaties
The BIT Claims Must Be Resolved Under the Project Contracts' Dispute
Resolution Provisions
There Is No Jurisdiction Over Claims Relating to Panama's Criminal
Investigation of Mr. Rivera
The Claimants' Four Heads of Claims
Unlawful (Indirect) Creeping Expropriation
Denial of Fair and Equitable Treatment
Denial of Full Protection and Security
Umbrella Clause
No Recovery of Economic or Moral Damages
The Applicable Rules
The Parties' Positions in Their Respective Costs Submissions
The Tribunal's Analysis and Decision on Costs
...
I. INTRODUCTION AND PARTIES
1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") on the basis of three treaties: (i) the Treaty between the United States of America and the Republic of Panama Concerning the Treatment and Protection of Investment signed on October 27, 1982, which entered into force on May 30, 1991 (the "BIT"),1 (ii) the United States - Panama Trade Promotion Agreement signed on June 28, 2007, which entered into force on October 31, 2012 ("TPA" and together with the BIT, the "Treaties"), and (iii) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on October 14, 1966 (the "ICSID Convention").
...
III. OUTLINE OF THE DISPUTE
A. THE RELEVANT TREATY PROVISIONS
102. As indicated in the "Introduction and Parties" section, above (paragraphs 7-9), the Claimants have brought claims under the BIT and the TPA based on their alleged investment in eight public works contracts and Panama's alleged violation of its treaty obligations regarding these contracts. The Claimants' claims also include Panama's pursuit of criminal charges against Mr. Rivera personally, arising from the Claimants' successful bid for one of these contracts (the La Chorrera Project contract). Five of the contracts are said, by the Claimants, to be covered by the provisions of the BIT, while three were entered into after the TPA entered into force and come under the TPA's provisions.3 According to the Claimants, the relevant substantive protections provided by the two Treaties are effectively the same (see, e.g., Cl. Reply, pages 205- 255).4
103. The Tribunal discusses in detail, in a separate section below ("The Corruption Investigation," Section IV), the Parties' differing factual accounts of how each of the eight contracts (one project comprised three contracts) came to an end, and whether the circumstances surrounding the termination of the projects constitute violations of the BIT and the TPA. The Parties have devoted the bulk of their memorials and hearing time to explaining the causes of the six project failures, as well as examining the bases for Panama's investigation into the Claimants' successful bid on the La Chorrera Project. Resolving those issues leads to the resolution of the claims that the Claimants have brought in this arbitration.
104. While Panama has raised a series of jurisdictional objections, outlined below, Panama did not seek bifurcation of the proceedings for its objections to be considered as preliminary issues. Bifurcation, in any event, would have been unhelpful, since facts and legal issues relevant to the most significant jurisdictional objections merge with Panama's merits defenses. Panama also recognizes this by, for example, relying on ICSID jurisdictional decisions that, it says, are "equally valid" in the "context of a merits assessment."5 Moreover, under the terms of the BIT and the TPA (and the ICSID Convention), as a matter of jurisdiction ratione personae, ratione materiae,6 ratione temporis, and ratione voluntatis, it is apparent that the Claimants are prima facie entitled to bring their claims and have them assessed by this Tribunal.7 Panama's jurisdictional objections are not principally directed to those four factors. Whether the claims qualify for the protections provided by the BIT and the TPA turns on the correct characterization, upon an assessment of the evidence, of Panama's conduct. That is, in relation to the Project contracts, should Panama's conduct be characterized as "commercial" or "sovereign."
105. As for Panama's criminal investigation of the Claimants, the question for the Tribunal is whether there was a reasonable, factual basis for Panama's conduct, which was clearly undertaken as part of its police powers (i.e., Panama was acting in a sovereign capacity). Pursuant to the provisions of the BIT (Article II(2)) and the TPA (Articles 10.5, 10.7, 22(1), and Annexes 10-A and 10-B), the Tribunal's mandate is to apply international law; the Tribunal has no authority to make determinations pursuant to domestic criminal law standards for conviction of alleged offenses - which, in any event, neither side presented to the Tribunal.
...
VII. AWARD
426. For the reasons set forth above, the Tribunal decides as follows:
- The Tribunal has jurisdiction (a) over the Parties in this case, and (b) to judge the Claimants' claims.
- The Tribunal rejects the Claimants' claims.
- The Claimants shall bear their own costs.
- The Claimants shall pay to the Respondent a portion of the Respondent's costs, in the amount of US $4,840,086.78.