RSM Production Corporation v Grenada - ICSID Case No ARB/04/14 - Annulment Proceeding - Order of the Committee Discontinuing the Proceeding and Decision on Costs - 28 April 2011
Country
Year
2011
Summary
A. Introduction and Procedural History
1. On 26 June 2009, RSM Production Corporation ('the Applicant'), submitted a Request for Annulment to the ICSID Secretariat ('ICSID') pursuant to Article 52(1) of the ICSID Convention and Rule 50(1)(iii) of the ICSID Arbitration Rules, requesting the annulment of the Award of 13 March 2009 rendered by the Tribunal in the arbitration proceeding between the Applicant and Grenada ('the Respondent'). The Request for Annulment was registered by the ICSID Secretariat on 10 July 2009, and the ad hoc Annulment Committee ('the Committee') was constituted on 17 August 2009.
2. In its Request for Annulment, the Applicant submitted that in rendering the Award, the Tribunal 'manifestly exceeded its powers' (contrary to Article 52(1)(b) of the ICSID Convention); that there was a 'serious departure from a fundamental rule of procedure' (contrary to Article 52(1)(d)); and that the Award 'failed to state the reasons on which it is based' (contrary to Article 52(1)(e)).
3. On 17 September 2009, pursuant to Regulation 14(3)(d) and (e) of the ICSID Administrative and Financial Regulations, ICSID invited the Applicant to make an advance payment of USD 150,000 to enable it to meet the direct costs of the proceeding in the next three to six months. The Applicant made an initial payment of USD 118,105 and subsequently paid the difference to the requested USD 150,000.
4. The Committee convened a procedural hearing in London on 16 October 2009 ('the First Session'). At the First Session, the parties agreed that the annulment proceeding would consist of two phases, written and oral. The dates 15 - 17 February 2010 were set aside for the oral hearing.
5. At the First Session, the Applicant made an application in which it requested the Committee to investigate suspicions of corruption in the contract underlying the present dispute. The Committee invited the Applicant to put its application in writing. The Applicant duly submitted its application by letter dated 29 October 2009, to which it attached various exhibits. The Respondent submitted its observations on the Applicant's application, together with various exhibits, by letter dated 16 November 2009.
6. On 16 November 2009, the Applicant submitted its Memorial in Support of its Request for Annulment.
7. On 7 December 2009, the Ad Hoc Committee issued a Decision on RSM Production Corporation's Application for a Preliminary Ruling of 29 October 2009, in which it rejected the Applicant's application.
8. Under cover of an email dated 31 December 2009, the Respondent submitted its Counter-Memorial to the Request for Annulment.
9. By letter dated 13 January 2010, ICSID requested a second advance payment in the amount of USD 300,000. The amount was an estimate of the further costs incurred and to be incurred in relation to the annulment proceeding to finality, including the hearing in Washington, D.C., and was arrived at in consultation with the President of the Committee pursuant to Regulation 14(3)(a)(ii) of the ICSID Administrative and Financial Regulations.
10. Under cover of a letter dated 15 January 2010, the Applicant submitted its Reply to Grenada's Counter-Memorial to the Request for Annulment.
11. On 19 January 2010, the Applicant requested that the hearing be reduced to one day and be held by a video conference. On 20 January 2010, ICSID informed the parties that the Committee did not accede to the Applicant's request given the parties' earlier consent for an in-person hearing. By letter dated 20 January 2010, the Applicant objected to the request for a second advance payment of USD 300,000 as 'unreasonable', and indicated that it was prepared to pay USD 100,000.
12. By letter dated 22 January 2010, ICSID confirmed on behalf of the Committee that the advance payment of USD 300,000 was intended to meet the further expenses in the proceedings, and that the call for USD 300,000 was a reasonable pre-estimate in light of the expedited time schedule agreed at the First Session of the Committee. In addition to providing a breakdown of the estimates, in that letter ICSID informed the parties that if the funds were not received by the beginning of the following week, it would have to 'recommend a postponement of the hearing on Annulment' if it was not clear that ICSID would be able to pay 'all of the resulting bills associated with the continuation of the proceeding.'
13. By letter dated 25 January 2010, Mr Jack Grynberg, the President and Chief Executive Officer of the Applicant, informed the Secretary-General of ICSID, Ms Meg Kinnear, that he considered the requested advance payments of USD 300,000 to be 'unreasonable and excessive', and requested that she intervene to persuade the Committee to accept a less expensive procedure for the hearing.
By letter dated 26 January 2010, the Secretary-General replied to Mr Grynberg, noting that the parties had, at the First Session, agreed to an oral hearing, and that the specified estimate remained payable. She also requested Mr Grynberg to address future correspondence through the Secretary to the Committee.
14. By letter dated 28 January 2010, Dewey & LeBoeuf informed ICSID and the Committee of its withdrawal as counsel for the Applicant.
15. By letter dated 28 January 2010, ICSID observed that the advance of USD 300,000, as requested in the letter dated 13 January 2010, remained outstanding, including the amount of USD 31,895 which was due after the first call of funds, but which had not been received. The Committee noted that if any part of the amount remained outstanding by 12 February 2010, the proceeding would be suspended. The Applicant was invited to confirm by 3 February 2010 whether the requested deposits would be paid and the hearing confirmed.
16. By letter dated 29 January 2010, Mr Jack Grynberg, the President and Chief Executive Officer of the Applicant, informed ICSID that the outstanding amount of USD 31,895 had been wired to ICSID, and requested that the hearing be postponed for a reasonable period in order for the Applicant to retain and instruct new counsel.
17. By letter dated 2 February 2010, the Respondent submitted that the Applicant 'should not be able to preserve the pendency of this proceeding, without making the payments that it undertook, as applicant, to pay pursuant to the Administrative and Financial Regulations.' The Respondent observed that '[i]t would be scandalous if this case were allowed to languish for many months, only to be ultimately dismissed for RSM's failure to go through with what it started - without any compensation for Grenada's wasted costs' (Respondent's letter dated 2 February 2010).
18. Under cover of an email dated 3 February 2010, the Respondent submitted its Rejoinder to the Request for Annulment.
19. Since no payment was received from the Applicant, the Committee vacated the hearing dates by letter dated 4 February 2010. In that letter, the Committee also informed the parties that, in the event of non-payment by the Applicant of the request for advance payment of costs by 12 February 2010, the proceeding would be subject to the procedure in Regulation 14(3)(d) of the ICSID Administrative and Financial Regulations, and that, in such case, the advance payment would have to be made by one party or the other, if the Respondent were to request the Committee to proceed further under default or other provisions of the ICSID Convention or ICSID Arbitration Rules.
20. On 17 February 2010, ICSID notified the parties that the advance on costs had not been paid by 12 February 2010. In accordance with Regulation 14(3)(d) and (e) of the ICSID Administrative and Financial Regulations, the parties were given the opportunity to make the outstanding payment within 15 days (i.e., by 5 March 2010), and were informed that the Secretary-General may move that the Committee stay the proceedings if part of the required advance payment was still outstanding after that date.
21. By letter dated 4 March 2010, the Respondent requested that the Committee continue the proceeding and, acting on the basis of Article 45(2) of the ICSID Convention, Rule 42 of the ICSID Arbitration Rules, and its inherent powers, issue a decision dismissing the Applicant's annulment application for want of prosecution and abuse of process and award costs. Alternatively, the Respondent requested that the Committee proceed to rule on the merits of the annulment application and on the issue of costs.
22. By letter dated 4 March 2010, Mr Grynberg objected to the Respondent's request, which it described as 'wholly improper'.
23. By letter dated 11 March 2010, ICSID informed the parties of the proposal of the Committee to convene for a one-day procedural hearing in Washington D.C. to consider the applications and submissions of either party as to the course of the proceeding. The parties were also advised that the procedural hearing would take place subject to the payment by 24 March 2010, by either party, of an advance of USD 150,000 to finance that hearing.
24. Not having received any payment, by letter dated 26 March 2010, the Secretary to the Committee, on behalf of the Secretary-General and in accordance with Regulation 14(3)(d) of the ICSID Administrative and Financial Regulations, moved that the Committee stay the proceeding for lack of payment. By letter dated 29 March 2010, the Committee decided to stay the proceeding, effective 29 March 2010.
25. By letter dated 9 April 2010, Mr Grynberg, the President and Chief Executive Officer of the Applicant, brought to the Committee's attention certain allegations of criminal behaviour being carried out against the Minister of Finance, Planning, Economic Development, Energy and Foreign Trade of Grenada, and requested that the Committee 'immediately make a decision, without any meetings, based on the comprehensive briefing by both sides'.
26. By letter dated 30 September 2010, the Respondent observed that the proceeding had been suspended for six months, and noted that the Secretary-General may move the Committee to discontinue the proceeding in accordance with Regulation 14(3)(d) of the ICSID Administrative and Financial Regulations. In the event that the Committee discontinued the proceeding, the Respondent renewed its request that the Committee award full costs to Grenada. The Respondent also drew the attention of the Committee to two recent decisions, namely Foresti v Republic of South Africa (ICSID Case No ARB(AF)/07/1, Award of 4 August 2010), and Howard v Government of Canada (Order for the Termination of the Proceedings and Award on Costs of 2 August 2010), which, the Respondent claimed, supported its position.
27. By letter dated 14 October 2010, the Applicant stated that it 'does not contest that the Tribunal has the discretionary authority to order payments of fees of one party from another.' But it opposed the Respondent's request that the Committee award full costs (which, the Applicant noted, consisted of the Respondent's legal fees), asserting that its annulment application was 'far from frivolous', and alleged that, in any event, the Respondent 'did not pay its own attorney fees for this proceeding'. The Applicant submitted that the Committee could only entertain the Respondent's request after investigating whether the Respondent had actually incurred any costs, and whether the fees requested were reasonable, as to which an opportunity for discovery and argument ought to be granted.
28. On 27 October 2010, ICSID notified the parties that the Secretary-General may move that the Committee discontinue the proceedings and requested each party's view in this regard. By letter dated 3 November 2010, the Respondent requested that the Secretary-General move the Committee to discontinue the proceeding, and it repeated its request that the Committee award the Respondent its full costs in doing so. By letter dated 4 November 2010, the Applicant confirmed that it had no objections to the discontinuance, and restated its objection to the Respondent's claim for its legal fees.
29. By letter dated 5 November 2010, the Respondent brought to the Committee's attention the case Quadrant Pacific Growth Fund LP and Canasco Holdings Inc, v Republic of Costa Rica (ICSID Case No ARB(AF)/08/1, Order of the Tribunal Taking Note of the Discontinuance of the Proceeding and Allocation of Costs of 27 October 2010).
30. After more than six months had elapsed since the stay of the proceeding, by letter dated 8 November 2010, the Secretary to the Committee moved, in accordance with Regulation 14(3)(d) of the ICSID Administrative and Financial Regulations, and on behalf of the Secretary-General, that the Committee discontinue the annulment proceeding in this case for non-payment of advances for the direct expenses of the proceeding.
31. By letter dated 7 December 2010, ICSID informed the parties that part of the actual costs incurred in the proceeding remained outstanding and could not be covered since the balance of the case was negative. It requested the Applicant to pay USD 35,000 by 7 January 2011 to allow ICSID to cover costs already incurred before the discontinuance.
32. By letter dated 14 January 2011, ICSID observed that the Applicant had failed to pay the USD 35,000 as requested. ICSID invited either party to advance the relevant amount within 15 days, i.e., by 31 January 2011.
33. On 23 March 2011, the Respondent transferred to ICSID USD 31,424.74 to cover outstanding fees and expenses relating to the conclusion of this proceeding. By letter dated 8 April 2011, ICSID acknowledged receipt of this amount.
34. By letter dated 11 April 2011, the Respondent amended its claim for costs to include this additional sum, with the result that the Respondent's claim for costs amounts to USD 186,072.81.
...C. Dispositive Part
70. For the reasons set forth above, the Committee:
(a) Orders that these proceedings are hereby discontinued; and,
(b) Decides that the Applicant shall pay the sum of USD 186,072.81 to the Respondent in respect of expenses incurred in connection with this annulment proceeding.
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