Summary

Source: icsid.worldbank.org

CONTENTS

I. INTRODUCTION
II. EXECUTIVE SUMMARY
III. BACKGROUND
III.A. The Facts Underlying The Arbitration
III.A.1. Eco Oro Invests In Colombia
III.A.2. Colombia Takes Measures That Interfere With Eco Oro's Investment
III.A.3. Eco Oro Initiates Arbitration
III.A.4. Colombia Takes Further Measures That Deprive Eco Oro's Investment Of All Value
III.B. The Arbitration Award
III.B.1. The 2021 Decision on Jurisdiction, Liability, and Directions on Quantum
III.B.2. Arbitrator Sands Dissents From The Liability Decision
III.B.3. Proceedings On Quantum
III.B.4. The 2024 Damages Award
III.B.5. The Sands Concurrence
IV. LEGAL STANDARDS APPLICABLE TO ANNULMENT
IV.A. Failure To State The Reasons On Which The Award Is Based Under Article 52(1)(E)
IV.A.1. Lack Of Reasoning
IV.A.2. Contradictory Reasoning
IV.A.3. Failure To Address Arguments Or Evidence
IV.B. Serious Departure From A Fundamental Rule Of Procedure Under Article 52(1)(d)
IV.C. Manifest Excess of Powers Under Article 52(1)(b)
V. GROUNDS FOR ANNULMENT OF THE AWARD
V.A. The Damages Award Is Contradictory, Warranting Annulment
V.A.1. Failure To State Reasons
V.A.2. Serious Departure From A Fundamental Rule Of Procedure
V.A.3. Manifest Excess of Powers
V.B. The Damages Majority Assigned To Eco Oro An Impossible Standard Of Proof In Assessing Its Loss Of Opportunity
V.B.1. Failure to State Reasons
V.B.2. Serious Departure from Fundamental Rules of Procedure
V.C. The Damages Majority Failed To Consider Eco Oro's Evidence Regarding Lost Opportunity
V.C.1. Failure to State Reasons
VI. REQUEST FOR RELIEF

I. INTRODUCTION

1. Pursuant to Article 52 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID Convention") and Rule 50 of the Rules Of Procedure For Arbitration Proceedings ("ICSID Arbitration Rules"), Eco Oro Minerals Corp. (the "Applicant" or "Eco Oro") respectfully submits this Application for Annulment ("Application"). This Application is filed within 120 days of the date of the rendering of the decision on rectification to which it relates, and is accompanied by the requisite lodging fee and Power of Attorney.

2. This Application is submitted together with Exhibits A-001 to A-010 and Legal Authorities AL-001 to AL-031.

3. By this Application, Eco Oro requests the annulment of the award on damages dated 15 July 2024 (the "Damages Award") in Eco Oro Minerals Corp. v. Republic of Colombia (ICSID Case No. ARB/16/41) (the "Arbitration") on three grounds:

a. the majority of the Eco Oro tribunal ("Tribunal") that rendered the Damages Award manifestly exceeded its powers (ICSID Convention, Article 52(1)(b));

b. the Damages Award failed to state the reasons on which it is based (ICSID Convention, Article 52(1)(e)); and

c. the majority of the Tribunal that rendered the Damages Award seriously departed from a fundamental rule of procedure (ICSID Convention, Article 52(1)(d)).

4. This Application proceeds in five additional parts: Part II summarizes the Application; Part III provides an overview of the Arbitration and the Tribunal's decisions; Part IV summarizes the relevant legal standards applicable to annulment; Part V describes the grounds on which the Damages Award should be annulled; and Part VI states Eco Oro's Request for Relief.

5. Eco Oro reserves its right to supplement, amend, and develop the grounds set forth in this Application in its submissions to be filed following the constitution of the ad hoc Committee.

II. EXECUTIVE SUMMARY

6. A majority of the Tribunal found Colombia in breach of its obligations to Eco Oro. The Tribunal proceeded to a damages phase to assess the amount of compensation owed to Eco Oro as a result of Colombia's breach. Instead of awarding Eco Oro compensation for the harm that it previously found Colombia caused, a new majority of the Tribunal (the "Damages Majority") decided that Colombia owed nothing, not because it had not caused Eco Oro damage, but for reasons that contradicted the Tribunal's prior findings. The Damages Majority found that Eco Oro had not established the amount owed to it due to Colombia's failure to delimit the páramo (an area where mining was not to be permitted)--the same failure that the Tribunal found was in violation of the Treaty in the liability phase. This inconsistency makes the Damages Award impossible to understand. The Damages Majority also ignored evidence that showed precisely what the Tribunal was apparently looking for: a valuation of a loss of opportunity. And it suddenly applied a police powers exception to expropriations to its finding of breach of the FET provision. All of these failures, and more, require that the Damages Award be annulled.

7. Annulment committees play a vital role in safeguarding the integrity, fairness, and coherence of ICSID arbitration. By assessing whether an award exhibits the defects that Article 52 of the ICSID Convention enumerates, ad hoc committees ensure that the arbitral process is both credible and equitable. States and investors alike rely on the annulment process to ensure the integrity of the international investment law system.

8. The Damages Award and the process by which it was rendered suffers from multiple serious and independent defects that require annulment. In particular, the Damages Award warrants annulment because the Damages Majority:

(i) made manifestly contradictory findings in the Damages Award on key issues;

(ii) held Eco Oro to a novel standard of proof that, as the Damages Majority itself admitted, was impossible to meet; and

(iii) failed to consider evidence Eco Oro repeatedly submitted and then made a finding that Eco Oro had not submitted the pertinent evidence at all.

9. Any one of these flaws should result in the annulment of the Damages Award, but taken together they demonstrate failures and contradictions that strain any reasonable reading and a result at odds with the ICSID Convention.

10. A more detailed background follows, but in brief, this case arises from Eco Oro's long- standing and recognized investments of over $250 million in Colombia's mining sector.

In 1994, Eco Oro acquired Permit 3452, granting it the right to explore and exploit precious metals within a 250-hectare area about 400 kilometers north of Bogotá. In the ensuing decade, Eco Oro obtained additional licenses in the area and submitted environmental management plans that regional government agencies approved. As the concession's exploration phase progressed, Eco Oro submitted environmental studies needed to construct a mine.

11. In 2010, Colombia limited mining in certain high-altitude ecosystems known as the páramo. A rough map by a non-profit corporation indicated an overlap between one such páramo and part of Eco Oro's concession. From this point on, in the Tribunal's words, Eco Oro rode a "regulatory roller-coaster" during which Colombia took inconsistent positions on whether and where Eco Oro would be able to conduct its mining operations, and thus deprived Eco Oro of a stable regulatory framework.

12. In 2011, Colombia's Constitutional Court struck down the law that outlawed mining in páramo ecosystems for lack of prior consultation. Colombia then issued an official delimitation ("Resolution 2090") based on the rough map the non-profit corporation had created. Although half of Eco Oro's concession overlapped with the páramo according to the delimitation, Colombia enacted exceptions to the ban that applied to Eco Oro's concession. Colombian authorities repeatedly assured Eco Oro that its mining project would be able to proceed on this basis.

13. In 2016, the Colombian Constitutional Court struck down those exceptions. In the aftermath, multiple Colombian agencies admitted that Eco Oro's status was unclear under Colombia's regulatory framework. One agency issued a resolution that approved an extension of Eco Oro's exploratory phase, but only for those areas that did not overlap with the páramo according to the official delimitation ("VSC 829").

14. This led Eco Oro to initiate arbitration in December 2016 pursuant to the Free Trade Agreement between Canada and the Republic of Colombia, signed on 21 November 2008, and which entered into force on 15 August 2011 (the "FTA"). Among other things, Eco Oro claimed that Colombia's actions breached the expropriation and fair and equitable treatment ("FET") provisions of the FTA.

15. In 2017, the Colombian Constitutional Court struck down the official delimitation and ordered that the government complete a new delimitation. The deadline to do so was 15 July 2019. Eco Oro was forced to renounce its concession to mitigate its losses after Colombia demanded that it submit construction plans before Colombia itself released the new delimitation and thus before Colombia itself determined where mining was allowed. To Eco Oro's knowledge, after nearly eight years, Colombia has yet to release a new delimitation.

16. Following the Parties' submissions in the Arbitration and a four-day hearing on jurisdiction, merits and quantum, on 9 September 2021, the Tribunal issued a Decision on Jurisdiction, Liability and Directions on Quantum (the "Liability Decision").

17. The Tribunal unanimously found jurisdiction over Eco Oro's claims.

18. A majority of the Tribunal found that Colombia did not breach the expropriation provisions of the FTA, as its measures were taken in the exercise of its police powers, which the FTA specifically exempts from its expropriation provisions.

19. However, a separate majority of the Tribunal (the "Liability Majority") found that Colombia's conduct breached its FET obligations under the FTA.

20. The Liability Decision found Colombia's actions in failing to delimit the páramo had rendered Eco Oro's concession "valueless," but reserved its final decision on damages until it could assess the Parties' further submissions on the appropriate quantum of damages. The Tribunal posed a series of questions ranging from the proper methodology to be employed to calculate damages to the applicable interest rate. Over the next year, the Parties answered these questions at length and with considerable expense. Among other things, Eco Oro explained that the most appropriate way to value its loss was through a set of transactions involving nearby concessions (the "Comparable Transactions") because those transactions reflected comparable risks and values, including the risks associated with environmental permitting. The Tribunal accepted in its Liability Decision that the Comparable Transactions methodology appeared to be the most effective way to measure Eco Oro's damages.

21. Following the Parties' submissions, the Tribunal raised no further questions, asked for no further submissions and did not hold a damages hearing.

22. Nearly three years after the Liability Decision, a different majority of the Tribunal completely reversed course. On 15 July 2024, the Tribunal issued the Damages Award where the new Damages Majority decided it would "award no damages from Colombia's breach." Contrary to its Liability Decision, in reliance on which the Parties had made submissions on quantum, the Damages Majority rendered an internally inconsistent decision and now found that it could not "accept that Colombia's" FET breach "caused the total loss in value of" Eco Oro's concession.

The Damages Majority had now decided, for the first time in the Arbitration, that Colombia could only be held liable for measures that breached the FTA's FET provision but not for any measures that were excused by the FTA's police powers exception, even though that exception expressly applies only to the FTA's expropriation provision and could have been raised and argued in the liability phase.

On this basis, the new Damages Majority proceeded under a new theory of liability, namely, that Eco Oro could only recover for the losses associated with its inability to apply for an environmental license.

23. The Damages Majority then found that the appropriate way of valuing Eco Oro's loss was to determine the "value of this lost opportunity."14 The Damages Majority found that Eco Oro had failed to provide "any evidence" on how to value the lost opportunity, and so it would award no damages.15 In doing so, the Damages Majority failed to address, and indeed completely ignored, the fact that the Comparable Transactions methodology, and Eco Oro's multiple submissions and supporting evidence, did expressly measure the value of the lost opportunity to apply for an environmental license. Instead, the Damages Majority decided to award no compensation for the breach the Tribunal found years before, where it expressly recognized that Eco Oro had incurred losses as a result of those breaches. Missing, according to the Damages Majority, was Colombia's final delimitation of the páramo--a delimitation in Colombia's power to provide and the failure of which formed part of the underlying breach found by the Tribunal in the first instance.

24. Remarkably, the Damages Majority acknowledged that "Colombia may be benefitting from its failure to issue a final delimitation of the Santurbán Páramo given it is the absence of the final delimitation that prevents the Tribunal from assessing the percentage likelihood that economic exploitation could have been possible."16 In other words, the Damages Majority (and the accompanying dissent) baldly recognized that the Damages Award rewards Colombia for its breach of the FTA. The Damages Majority refused to compensate Eco Oro on the theory that any evidence, which it nonetheless ignored, could not assess the proper quantum because Colombia had yet to delimitate the páramo.

25. Colombia breached the FTA, in part, because it failed to delimit the páramo. Yet Colombia owes no compensation for this breach because it failed to delimit the páramo.

The inconsistency, the circularity, the confusion, goes unaddressed by the Damages Majority.

26. Professor Sands, who had dissented from the Liability Decision, now penned a concurrence to the Damages Award (the "Sands Concurrence"). The Sands Concurrence did not take issue with the Damages Award. Instead, Professor Sands used the opportunity to ventilate his personal views on the propriety of third-party funding in international arbitration. He robustly criticized Eco Oro for the amount it spent pursuing its rights in this Arbitration and, specifically, for borrowing funds from a third party to do so. This ignored the fact that a significant portion of Eco Oro's funding came from retail and institutional investors who had spent hundreds of millions of dollars of capital over two decades in attempting to develop a mine, all of which they lost as a result of Colombia's conduct that the Tribunal acknowledged was unlawful.

27. As set forth below, Eco Oro seeks annulment of the Damages Award on at least three independent grounds recognized under the ICSID Convention: (i) the Tribunal manifestly exceeded its powers (ICSID Convention, Article 52(1)(b)); (ii) the Damages Award failed to state the reasons on which it is based (ICSID Convention, Article 52(1)(e)); and (iii) the Tribunal seriously departed from a fundamental rule of procedure (ICSID Convention, Article 52(1)(d)). In particular:

a. The Damages Award contains irreconcilable contradictions in the Tribunal's reasoning, warranting annulment for failure to state reasons (Section V.A.1), for a serious departure from a fundamental rule of procedure (Section V.A.2), and for manifestly exceeding its power (Section V.A.3);

b. The Tribunal assigned an impossible standard of proof to Eco Oro, warranting annulment for failure to state reasons (Section V.B.1) and for a serious departure from a fundamental rule of procedure (Section V.B.2); and

c. The Tribunal disregarded the evidence Eco Oro submitted regarding the valuation of lost opportunity, warranting annulment for failure to state reasons (Section V.C.1).

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VI. REQUEST FOR RELIEF

172. On the basis of the foregoing, without limitation and reserving Eco Oro's right to supplement these requests for relief, Eco Oro respectfully requests that the Committee:

a. ANNUL the Damages Award in full;

b. ORDER Colombia to pay all of the costs and expenses associated with the annulment proceedings, including Eco Oro's legal fees, the fees and expenses of the Committee, and ICSID's other costs; and

c. AWARD such other relief as the Committee considers appropriate.

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Footnotes omitted