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Queen Mary University of London, School of Law

Legal Studies Research Paper No. 129/2013

Award as an Investment
The Value of an Arbitral Award or The
Cost of Non-Enforcement

Loukas A Mistelis

Electronic copy available at: http://ssrn.com/abstract=2195016

AwardasanInvestment
TheValueofanArbitralAwardorTheCostofNonEnforcement

LoukasA.Mistelis*

I.Introduction........................................................................................................................ 1
II.WhatisanArbitralAward? ............................................................................................ 4
A.DefinitionandLegalNatureofArbitralAwards .................................................................. 4
B.ValueofArbitralAwardsandtheConsequencesofEnforcementandNon
EnforcementofArbitralAwards ................................................................................................. 9

III.AwardasanInvestment ............................................................................................. 12
A.SaipemvBangladesh .............................................................................................................12
B.ATAvJordan ............................................................................................................................15
C.GEAGroupAktiengesellschaftvUkraine ............................................................................18
D.WhiteIndustriesvIndia ........................................................................................................21
IV.ConcludingRemarks .................................................................................................... 24

I.Introduction

International commercial arbitration is now well established in most parts of the


world and with a substantial increase in the number of cases in various emerging
markets and developing countries 1 as the preferred method of resolution of
international commercial disputes.2Perhaps, the prime features of arbitration are
thechoices3thatareavailabletothearbitratingparties:theymaychooseaneutral
venuetohavetheirdisputeresolved,avoidsubmittingtotheotherpartysnational
courts and can select (often specialist) experienced arbitrators with whom the
partiesfeelcomfortablethatthedisputewillbefairlyheardanddecided.However,

CliveMSchmitthoffProfessorofTransnationalCommercialLawandDirector,SchoolofInternational
Arbitration,CentreforCommercialLawStudies,QueenMaryUniversityofLondon.Email:
L.Mistelis@qmul.ac.uk.Iwishtoacknowledgewiththethankstheresearchassistanceprovidedby
JohnRibeiro.Anyerrorsoftasteorjudgmentareentirelymine.
1
Indeedthereisasignificantincreaseincasesincountriessuchas,orinvolvingpartiesfromBrazil,
China,IndiaandRussia.Forexample,itisoftenpointedoutthatRussianpartiesuseLCIAarbitration
servicesmorethananyothernationalityandBrazilianpartiesfeatureveryhighlyinICCstatistics.
Indiaisalsooneofthefastestgrowingarbitrationjurisdictions.
2
Varioussurveysconductedbyacademicinstitutions,arbitrationinstitutions,industryorganizations
andlawfirmsconfirmthepopularityofarbitrationasadisputesettlementmechanism.See,e.g.,
LoukasMistelis,InternationalArbitration:CorporateAttitudesandPractices,15AmericanRev.of
IntlArb.525593(2004),publishedinJune2006;andLoukasMistelis,ArbitralSeatsChoicesand
Competition,inS.Krll,L.A.Mistelis,P.PeralesViscasillas&V.Rogers(eds.),LiberAmicorumEric
Bergsten.InternationalArbitrationandInternationalCommercialLaw:Synergy,Convergenceand
Evolution,363380,Kluwer2011andLoukasMistelisandCrinaBaltag,TrendsandChallengesin
InternationalArbitration:TwoSurveysofInhouseCounselofMajorCorporations,5(2)WAMR
WorldArbitrationandMediationReview83110(2008).
3
Seehttp://www.arbitrationonline.org/docs/2010_InternationalArbitrationSurveyReport.pdfand/or
http://choices.whitecase.comwithvariousdatarelatingtochoicescorporatepartiesmakeinthe
contextofarbitrationandtheprioritiespartiesset.

1
Electronic copy available at: http://ssrn.com/abstract=2195016

themainadvantageofarbitrationformanyusersofthisprocessistheenforceability
ofawards.Indeedformorethanhalfacentury,sinceitssignatureinJune1958,the
NewYorkConventionontheRecognitionofForeignArbitralAwards4,createsato
alargeextentuniformlegalregimefortheenforcementofforeignarbitralawards5
and de facto and de jure a system for the free movement of awards. The mobility
andenforceabilityofarbitralawardsisunprecedentedandunparalleled:recognition
andenforcementofforeignjudgments,absentatreatyfacilitatingandharmonizing,
istypicallymoreonerousandsubjecttovariouscontrolsattheincomingcourtlevel.

TheNewYorkConventionisrecognizedasafoundationofinternationalcommercial
arbitration and imposing on courts of contracting States a public international law
obligation to recognize and enforce awards made in other States, subject to
specificlimitedexceptionsandcreatesauniformlegalregimeonthegroundson
whichenforcementofanawardmayberesisted.6

Itiscurrentlyinforcein146countriesmakingitoneofthemostsuccessfulinternationaltreaties.
Seealsohttp://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.htmland
http://www.newyorkconvention1958.organdhttp://www.newyorkconvention.orgforfurther
information,fulltextsofthetreatyanddataonitsapplicationandcurrentpractice.
5
SeeontheNewYorkConvention:MarcBlessing(ed),TheNewYorkConventionof1958:acollection
ofreportsandmaterialsdeliveredattheASAConferenceheldinZurichon2February1996,ASA
1996;DomenicoDiPietro&MartinPlatte,EnforcementofInternationalArbitrationAwardsThe
NewYorkConventionof1958,CameronMay2001;EmmanuelGaillardandDomenicoDiPietro(eds),
EnforcementofArbitrationAgreementsandInternationalArbitralAwards.TheNewYorkConvention
inPractice,CameronMay2008;GiorgioGaja(ed.),NewYorkConvention,Oceana19781996;ICCA's
GuidetotheInterpretationofthe1958NewYorkConvention:AHandbookforJudges,(2011);
HerbertKronke,PatriciaNacimiento,DirkOttoandNicolaChristinePort,Recognitionand
EnforcementofForeignArbitralAwards:AGlobalCommentaryontheNewYorkConvention(Kluwer
LawInternational,2010);LoukasMistelisandStavrosBrekoulakis(eds),ArbitrabilityInternational
andComparativePerspectives,Kluwer2009;LoukasMistelisandDomenicoDiPietro,1958NewYork
ConventionontheRecognitionandEnforcementofForeignArbitralAwards,inMistelis(ed),Concise
Arbitration,Kluwer2010,pp.132;UnitedNations(eds),EnforcingArbitralAwardsundertheNew
YorkConventionExperienceandProspects,1999;AlbertJanvandenBerg,TheNewYorkArbitration
Conventionof1958TowardsaUniformJudicialInterpretation,Kluwer1981;AlbertJanvanden
Berg,ConsolidatedCommentaryonNewYorkConvention,partofICCAYearbookbutalsoavailableon
www.kluwerarbitration.com,since1976.MarcBlessing(ed),TheNewYorkConventionof1958:a
collectionofreportsandmaterialsdeliveredattheASAConferenceheldinZurichon2February1996,
ASA1996;DomenicoDiPietro&MartinPlatte,EnforcementofInternationalArbitrationAwardsThe
NewYorkConventionof1958,CameronMay2001;EmmanuelGaillardandDomenicoDiPietro(eds),
EnforcementofArbitrationAgreementsandInternationalArbitralAwards.TheNewYorkConvention
inPractice,CameronMay2008;GiorgioGaja(ed.),NewYorkConvention,Oceana19781996;ICCA's
GuidetotheInterpretationofthe1958NewYorkConvention:AHandbookforJudges,(2011);
HerbertKronke,PatriciaNacimiento,DirkOttoandNicolaChristinePort,Recognitionand
EnforcementofForeignArbitralAwards:AGlobalCommentaryontheNewYorkConvention(Kluwer
LawInternational,2010);LoukasMistelisandStavrosBrekoulakis(eds),ArbitrabilityInternational
andComparativePerspectives,Kluwer2009;LoukasMistelisandDomenicoDiPietro,1958NewYork
ConventionontheRecognitionandEnforcementofForeignArbitralAwards,inMistelis(ed),Concise
Arbitration,Kluwer2010,pp.132;UnitedNations(eds),EnforcingArbitralAwardsundertheNew
YorkConventionExperienceandProspects,1999;AlbertJanvandenBerg,TheNewYorkArbitration
Conventionof1958TowardsaUniformJudicialInterpretation,Kluwer1981;AlbertJanvanden
Berg,ConsolidatedCommentaryonNewYorkConvention,partofICCAYearbookbutalsoavailableon
www.kluwerarbitration.com,since1976
6
MistelisandDiPietro,inConciseArbitration,supranote5,atp.1.

2
Electronic copy available at: http://ssrn.com/abstract=2195016

Itisimportantthatthearbitralawardisacknowledgedasaninstrumentcapableof
recognitionandenforcement.Forthearbitratingpartiesandthearbitraltribunalthe
awardisnothingbutaninstrumentrecordingthetribunalsdecisionprovisionallyor
finally determining claims of the parties. 7 It may deal with legal or factual
differences between the parties, may involve interpretation of contract terms or
determiningtherespectiverightsandobligationsofthepartiesunderthecontract.8
Ultimatelyitistheenforceabilityandindeedtheenforcementofthearbitralaward
thatgivescredencetotheentirearbitrationprocessandjustifiesthecostandtime
thatthepartiestoadisputehaveinvestedintheresolutionprocess.

Itisagainstthisbackgroundthatinrecentyearstherehasbeenanumberofcases
whichconsideredthenonenforcementofawardsoractionsandinactionsaimingat
technicallymakingsuchenforcementobsoletethatconsideredsuchstateconductas
abreachofbilateralinvestmenttreaties(BITs).Thepurposeofthispaperistobriefly
discussandexplorethelegalnatureofarbitralawards(infra,II)andthenlookatthe
specificinvestmentarbitrationcases9thatdealtwiththeBITconsequencesofnon
enforcementofanarbitralaward(infra,III)beforeofferingsomeconcludingremarks
(infra, IV). The paper will not deal with enforcement of investment arbitration10
awardsortheconsequencesofnonenforcementofinvestmentarbitrationawards:
this is a substantial topic which requires separate attention and for which some
literature11alreadyexists.

JulianDMLew,LoukasMistelisandStefanKrll,ComparativeInternationalCommercialArbitration,
KluwerLawInternational2003,para241.
8
Ibid,atpara241.
9
See,e.g.,SaipemS.p.A.vThePeoplesRepublicofBangladesh,ICSIDCaseNoARB/05/07,Awardof
30June2009(ArbitralTribunal:ProfGabrielleKaufmannKohler,Chair,ProfChristophSchreuerand
SirPhilipOtton)availableonlineat:http://italaw.com/sites/default/files/case
documents/ita0734.pdf;notentirelyinthesamethematicbecauseoftheprevalenceofaforkinthe
roadissue:PantechnikiS.A.ContractorsandEngineers(Greece)vtheRepublicofAlbania,ICSIDCase
NoARB/07/21,Awardof30July2009(SoleArbitrator:JanPaulsson),availableonlineat:
http://italaw.com/sites/default/files/casedocuments/ita0618.pdf;ATAConstruction,Industrialand
TradingCompanyvTheHashemiteKingdomofJordan,ICSIDCaseNoARB/08/2,Awardof28March
2010(ArbitralTribunal:YvesFortier,Chair,ProfDrAhmedSadekElKosheriandProfMichael
Reisman),availableonlineat:http://italaw.com/sites/default/files/casedocuments/ita0043.pdf;GEA
GroupAktiengesellschaftvUkraine,ICSIDCaseNoARB/08/16,Awardof31March2011(Arbitral
Tribunal:ProfAlbertJanvandenBerg,Chair,TobyLandauQCandProfBrigitteStern),availableonline
at:http://italaw.com/sites/default/files/casedocuments/ita0356.pdf;andWhiteIndustriesAustralia
LimitedvRepublicofIndia,arbitrationcaseunderUNCITRALRules,awardof30November2011
(ArbitralTribunal:TheHonCharlesBrower,ChristopherLau,SC,WilliamRowley,QC),availableonline
at:http://italaw.com/sites/default/files/casedocuments/ita0906.pdf.
10
ForthedistinctionbetweeninvestmentandcommercialarbitrationseeNigelBlackaby,Investment
ArbitrationandCommercialArbitration(ortheTaleoftheDolphinandtheShark),inLoukasMistelis
andJulianLew(eds),PervasiveProblemsinInternationalArbitration,Kluwer2006,217233.
11
See,e.g.,AlanAlexandroffandIanLairdComplianceandEnforcement,inPeterMuchlinski,
FedericoOrtinoandChristophSchreuer(eds),OxfordHandbookofInternationalInvestmentLaw,
Oxford2008,11701187;CrinaBaltag,EnforcementofArbitralAwardsagainstStates,19(34)
AmericanReviewofInternationalArbitration391414(2008);RDoakBishop(ed),Enforcementof
ArbitralAwardsagainstSovereigns,Juris2009withcontributionsfromBishop(312),Reedand
Martinez(1334),andotherpapersinthesamecollection;AnooshaBoralessa,Enforcementinthe
UnitedStatesandUnitedKingdomofAwardsagainsttheRepublicofArgentina,N.Y.IntlLRev53et
seq(2004);AugustReinisch,EnforcementofInvestmentAwards,inKatiaYannacaSmall(ed),

II.WhatisanArbitralAward?
Thereareveryfewdefinitionsofferedasfarasarbitralawardsareconcerned.Itis
worth pointing out that there is no distinction to be made between commercial
awards and investment awards for definition purposes: both instruments have the
same function as they bring an end to a dispute with a decision rendered by an
independentandimpartialtribunalandarecapableofbeingenforced.However,itis
essentialtoascertaintheessentialcharacteristicsandlegalnatureofarbitralawards
inordertoappreciatetheirlegaloreconomicvalueandconsidertheconsequences
of their enforcement. Accordingly, in this part we explore definitions and the legal
natureofawards(infra,A)beforelookingattheissueofthevalueofawards(infra,
B)andtheconsequencesofenforcementandnonenforcement(infra,C).

A.DefinitionandLegalNatureofArbitralAwards
It is briefly argued in this part that a meaningful definition and delimitation of the
legalnatureofarbitralawardsmaywellbealignedtodiscussionsaboutthejuridical
natureandphilosophicalfoundationsofarbitration.

AUSLegalDictionarydefinesanarbitral(orarbitration)awardas:

adecisionmadebyanarbitrationtribunalinanarbitrationproceeding.An
arbitralawardisanalogoustoajudgmentinacourtoflaw.Anarbitralaward
canbeofanonmonetarynaturewheretheentireclaimant'sclaimsfailand
nomoneyneedstobepaidbyeitherparty.
An arbitration award can be made for payment of a sum of money,
declarationuponanymattertobedeterminedinthearbitrationproceedings,
injunctive relief, specific performance of a contract and for rectification,
settingasideorcancellationofadeedorotherdocument.12

What is pertinent in this definition is that an award is considered analogous to a


courtjudgmentandhenceitisvestedwiththesamefunctionalityandpowers.This
definitionaimsatestablishingthatarbitrationhasapowerfuloutcomeandisnota
poor relation to court litigation. This is undisputedly a true statement as we have
alreadyseen,courtesyoftheNewYorkConvention.Craigmakesthepointthatthe

ArbitrationUnderInternationalInvestmentAgreements:AGuidetotheKeyIssues,Oxford2010,671
697;ChristophSchreuerwithLorettaMalintoppi,AugustReinischandAnthonySinclair,TheICSID
nd
Convention:aCommentary,2 edition,Cambridge2009,articles4855,8051185(orjustArticle48,
805839);ChristopherDugan,DonWallace,Jr.,NoahRubins,andBorzuSabahi,InvestorState
Arbitration,Oxford2008,675700;R.DoakBishop,JamesCrawford,WilliamMichaelReisman,
ForeignInvestmentDisputes:Cases,Materials,andCommentary,KluwerLawInternational2005,515
etseq.;M.Sornarajah,TheSettlementofForeignInvestmentDisputes,KluwerLawInternational2000,
279etseq.
12
http://definitions.uslegal.com/a/arbitralaward/.

Convention was designed to give international currency to arbitral awards.13He


also expresses the concern that since the mechanics for enforcement are left to
domestic court and national court procedures the New York Convention has its
weaknesses.14Efficiency of the enforcement mechanism is often intertwined with
judicialefficiencyaswellasjudicialattitudestowardsthearbitralprocess.15

Arbitrationconventions,lawsandrulesdonotofferconcretedefinitionsofarbitral
awards16somanyauthorsattempttocapturethemainfeaturesofanawardinlieu
ofafulllegaldefinition.Forexample, LewMistelisandKrllfocusontheessential
characteristicsoftheaward.Theystressthat:

anaward:
concludesthedisputeastothespecificissuedeterminedintheaward
so that it has res judicata effect between the parties; if it is a final
award,itterminatesthetribunalsjurisdiction;
disposesofpartiesrespectiveclaims;
maybeconfirmedbyrecognitionandenforcement;
maybechallengedinthecourtsoftheplaceofarbitration17

Thesefourmainfunctions(conclusionofdispute,determinationofpartiesrightsand
obligationsanddispositionofclaims,recognitionandenforceabilityandpotentialfor
revieworchallenge)provideforcontextandappreciationoftheaward.

Thefactthattheawardcanbechallengedorcanberesisteditsenforcementaddsa
dimensionorapointofconsideration:Whatisthelegalnatureofanaward?Craig
asks:

Shouldanydocumenthavingtheformofanawardbeaseasilyrecognized
andenforcedasapromisetopay,intheformofabillofexchangeorother
negotiable instrument? Or should the recognition and enforcement court

13

SeeWLaurenceCraig,SomeTrendsandDevelopmentsintheLawsandPracticeofInternational
CommercialArbitration,30TexasIntlLJ1,at11(1995).
14
Ibid.;seealsomorerecentlyasimilarcriticalandconstructiveperspectivebyStavrosBrekoulakis,
EnforcementofForeignArbitralAwards:ObservationsontheEfficiencyoftheCurrentSystemand
theGradualDevelopmentofAlternativeMeansofEnforcement,19AmericanRevofIntlArbitration
415446(2008).
15
SeetheempiricaldataandanalysisinLoukasMistelisandCrinaBaltag,Recognitionand
EnforcementofArbitralAwardsandSettlementinInternationalArbitrationinPractice:Corporate
AttitudesandPractices,19AmericanRevofIntlArbitration319375(2008).
16
SeeDomenicoDiPietro,ArbitralAwardsUndertheNewYorkConvention:WhatAreandWhatMay
Be,(lastvisited18August2012),http://blogs.law.nyu.edu/transnational/2011/11/arbitralawards
underthenewyorkconventionwhatareandwhatmaybe/,14November2011;DomenicoDi
Pietro,WhatConstitutesanArbitralAwardUndertheNewYorkConvention?,inEmmanuelGaillard
andDomenicoDiPietro(eds),EnforcementofArbitrationAgreementsandInternationalArbitral
AwardsTheNewYorkConventioninPractice,CameronMay2008,139160.SeealsoGerold
Herrmann,DoestheWorldNeedAdditionalUniformLegislationonArbitration?15(3)Arbitration
International211236(1999),alsoatJulianLewandLoukasMistelis(eds),ArbitrationInsights,Kluwer
2007,223255,at249250.
17
LewMistelisandKrll,para2413.

view the award as if it were a judgment of an inferior, albeit exceptional,


tribunal, and satisfy itself at least as to the procedures followed by the
tribunalinreachingtheaward?18

Inansweringthesequestions,andlegallyqualifyinganarbitrationaward,oneshould
firstlookatthevarioustheoriesrelatingtothenatureofarbitration.Arguablythisis
the missing piece in order to provide a comprehensive allround legal definition of
arbitralawards.Thediscussionofthelegalnatureofarbitralawardsisconnectedto
thedebateaboutthelegalorjuridicalnatureofarbitration:althoughatfirstglanceit
appearstobeatheoreticaldebate,itdoeshavepracticeconsequences.

Inbrief,thereisconsensusastothefourmaintheoriesaboutthejuridicalnatureof
arbitrationwithassociatedconclusionsastothelegalnatureofarbitralawards:19

(i)
The contractual theory focuses on the origin of arbitration in the
agreement of the parties to refer their dispute to arbitration and the
consensual nature of arbitration. Since the arbitration agreement is
enforceabletheoutcomeofthearbitration,theaward,willalsohaveto
beenforceable.Thearbitralawardistheconsequenceandderivativeor
outcomeoftheagreementtoarbitrate.Formanywritersthisistheresult
ofagenttheory,theawardisacontractmadebythearbitratorsactingas
agentoftheparties.
(ii)
The jurisdictional theory focuses on the endorsement of arbitration by
nationallegalsystemsandthestatusofthearbitratorwhichisequatedto
thejudicialfunctionofthejudge.Thecaveat,ofcourse,existsthatjudges
and arbitrators are in the same business, the judge on the public side
whilethearbitratorontheprivateside.20Itisthepremiseofthistheory
that arbitration and the national courts and national law interact21and
thatthelawoftheseatofarbitrationiscriticalindeterminingthelevelof
interaction. The arbitrators perform a judicial function and the result of
its work, the arbitral award, is treated like and is given the effect of a
judgmentofanationalcourt.22
(iii)
Thehybrid(orrathereclecticorsuigeneris)theory23attemptstostrikea
balance between the contractual and the jurisdictional theory by
accepting that arbitration has evolved to encompass characteristics of

18

Craig,supranote13,atpage9.
Foranearlydiscussiononthefourmaintheories,seeJulianDMLew,ApplicableLawin
InternationalCommercialArbitration,Oceana1978,5166.Seealso,Lew,MistelisandKrll,paras
5.025.33;AdamSamuel,JurisdictionalProblemsinInternationalCommercialArbitration:AStudyof
Belgian,Dutch,English,French,Swedish,Swiss,USandWestGermanLaw,Schulthess1989;Ashjan
FaisalShukriDaoud,TheLegalNatureofArbitrationAward,ItsEffectsandAppealMechanismsA
ComparativeStudy,2008,publishedathttp://scholar.najah.edu/print/5638.Foranupdateand
furtherreferencesseeHongLinYu,ATheoreticalOverviewoftheFoundationsofInternational
CommercialArbitration,3(2)Contemp.AsiaArb.J255286(2008).
20
Donaldson,JinBremerSchiffbauvSouthIndiaShippingCorpLtd[1981]AC909at921
21
FrancisAMann,LexFacitArbitrum,2(3)ArbIntl245(1983).SeealsoHongLinYu,supranote19,
at258etseq.
22
SeeforahistoricalperspectiveonthatHongLinYu,supranote19,at2623.
23
DevelopedbyProfessorSauserHall,seeLew,supranote19,at57withfurtherreferences.
19

(iv)

both contractual and jurisdictional nature. As such the hybrid theory is


consideredtobemorecomprehensiveorcomplete.24Theoriginandbasis
of arbitration is a contract but the outcome, the award, is akin to a
judgmentofanationalcourt.
The autonomous theory 25 sees arbitration as a selfluminous system
founded on party autonomy, at least tolerated or endorsed by national
laws. In the pure form of this theory the award is not a judgment and
thearbitralagreementisnotacontractlikeanyother,26itissomething
different supported by a global arbitration institution. The autonomy of
arbitrationisindeedanideal,possiblyunattainablebutpossiblyfeasible
via the increasing harmonisation of arbitration law and practice.27In a
moderate sense the New York Convention provides the backbone for
an international (if not global) system for the enforcement of awards,
whichmaycontributetothisend.

Emmanuel Gaillard provides an alternative and appealing classification.28There are


three different representations of international arbitration to consider which do
not,however,offeraconclusiononthelegalnatureofawards,unliketheclassical
discussionimmediatelyabove:

The first is the monolocal account which assimilates the arbitrator to a


national judge exercising his or her function within a single national legal
order.29Each arbitration is anchored to a single legal order; namely, the
legalorderoftheseat.
The second is the Westphalian or multilocal account which focuses on the
placeofenforcementoftheaward.Underthisrepresentationthearbitration
isnotanchoredtoanyonelegalorder,butrathertoalllegalorders(including
theseat)thatarewillingtorecognizetheeffectivenessoftheaward.30
The third is the transnational or autonomous account which looks to the
arbitral legal order itself rather than one of any particular sovereign,
whether it be the seat or the place(s) where enforcement is sought. This
representation is based off the selfperception of international arbitrators
thattheyadministerjusticeonbehalfoftheinternationalcommunityrather
thananygivenstate.31

24

PieterSanders,TrendsintheFieldofInternationalCommercialArbitration,145(2)RecueildesCours
205,at233234(1975).
25
SeeLew,supranote19,at5961;Samuel,supranote19,at67.Thefounderofthistheoryis
RubellinDevichi.
26
SeeLew,supranote19,at17quotingandtranslatingRubellinDevichiandSamuel,ibid,at68.
27
JulianDMLew,AchievingtheDream:AutonomousArbitration,22(2)ArbitrationInternational,
179203(2006).
28
SeeEmmanuelGaillard,LegalTheoryofInternationalArbitration,MartinusNijhoff/Brill2010;and
EmmanuelGaillard,RepresentationsofInternationalArbitration,1(2)JIntlDispSettlement271
281(2010).
29
Gaillard,LegalTheory(2010),15.
30
Ibid.,24.
31
Ibid.,35.

Indeedthesetheoriesfocusmoreonthejustificationandlegitimacyofarbitrationas
adisputesettlementsystemandalsoassessthesameonthebasisofenforceability
of awards in a single place, multiple places or the community of nations operating
underthesameprinciples.32

However, they also have a major impact on how we can legally delimit and define
arbitralawards.Ifanawardwouldbetheoutcomeofapurelycontractualapproach
then its enforcement would be entirely in the hands of the parties; however, we
knowthatcourtscanenforceawards.Ifanawardwouldbesolelytheoutcomeofa
jurisdictional theory, then they would be fully controlled by the courts in whose
territorytheawardwasmade;however,wedoknowthatawardsmaybeenforced
evenifithasbeensetasideatthecourtsoftheplacewhereitwasmade.Indeed,
whenanawardisannulledorvacated,isnotenforceableinthecountryinwhichit
was made. It will usually be unenforceable in other countries although it may on
occasions be enforceablein somecountries.33FamouslytheFrench SupremeCourt
(CourdeCassation)inthemuchdiscussedPutrabalicasestated:

an international award, which is not connected to any legal system, is an


internationaljudicialdecision,whoselegalityisexaminedwithregardstothe
applicable laws in the country where its recognition and enforcement are
sought.34

Italsofollowsthattheawardisnotalwayscontrolledbythelawsoftheplacewhere
itwasmade.Lawsoftheplaceofarbitrationmaywellhaveabearingonthelegality,
validityandeffectivenessoftheawardbuttheinternationalandtransnationallaw,
as the 1958 New York Convention, will also have a say, often a say not consistent
withthelawoftheplaceofarbitration.Ithasatransnationaldynamicandeffectand
may not be controlled by a single legal system which could occasionally rely on
idiosyncraticgroundstohaveanawardsetasidelocally.

In conclusion what we should be adding to the definitions of the arbitral awards


suggested above is that an award is de facto and de jure a judgment with

32

Gaillard,Representations,ibid.,at276278.
See,e.g., USA, ChromalloyGasTurbineCorpvArabRepublicofEgypt,939FSupp907(DDC1996);
USCourtofAppealsfortheDistrictofColumbia,TermoRioS.A.E.S.Pv.ElectrantaS.P.,25May2007,
Year Book Commercial Arbitration (2008); France, Cour de cassation, 10 June 1997, Omnium de
TraitementetdeValorisationvHilmarton,XXIIYBCA696(1997);France,Courdecassation,23March
1994, Omnium de Traitement et de Valorisation v Hilmarton, XX YBCA 663 (1995); France, Cour de
cassation, 9 October 1984, Pabalk Ticaret Ltd Sirketi (Turkey) v Norsolor SA (France), XI YBCA 484
(1986); Direction Gnrale de lAviation Civile de lEmirat de Duba v. Internationale Bechtel, Paris
CourtofAppeals,29September2005;Austria,ObersterGerichtshof,20October1993/23February
1998, KajoErzeugnisse Essenzen GmbH v DO Zdravilisce Radenska, 105 sterreichische Juristen
Zeitung513,XXIVaYBCA919(1999),RevArb419(1998),XXYBCA1051(1995);Netherlands,Supreme
Court,YukosCapitalv.Rosneft,25June2010(LJN:BM1679);SeealsoJanPaulsson,EnforcingArbitral
AwardsNotwithstandingaLocalStandardAnnulment(LSA),9(1)ICCInternationalCourtofArbitration
Bulletin(1998).
34
France,CourdeCassation,SocitPTPutrabaliAdyamuliav,StRenaHolding,29June2007.For
moreinformation,seee.g.BernardAudit,FrenchCourtDecisionsonArbitration20072008,19(2)ICC
InternationalCourtofArbitrationBulletin.para31(2008).
33

transnational effect. This is also supported by the New York Convention35and the
1965 ICSID Convention36which clearly impose a public international obligation on
their respective contracting states to recognise and treat an award as if it was a
decisionofalocalcourt.Irrespectiveofwhereonestandsontheacademicdebate
regarding the legal nature of the arbitration as a system it is undisputed that the
functionality of an award is that of a court judgment; further it is a judgment of
arbitraljusticewhichhasawiderenforceabilitythanajudgmentofstatejustice.

B. Value of Arbitral Awards and the Consequences of Enforcement and


NonEnforcementofArbitralAwards
Having ascertained the legal quality of arbitral awards it is now essential to assess
theirvalue,eitherintheeconomicsenseorintermsofenforcementaswellasthe
consequences of nonenforcement. In other words, what is the true currency of
arbitralawards?

In2008,inanempiricalsurveyconductedbytheSchoolofInternationalArbitration37
the results about compliance and enforcement of arbitral awards are compelling;
awards are typically voluntarily complied with and only in a very small number of
cases,enforcementproceedingswillbeinstigatedtoensureenforcement:

84% of respondents indicated that the opposing party had honoured the
awardinfullinmorethan76%ofthecases.Only3%reportedthatanaward
debtorhadfailedtocomplywiththeaward.Duringtheinterviews,corporate
counsel often mentioned that more than 90%, typically 99% of the awards
hadbeenhonouredbythenonprevailingparty.38

Accordingtothesamesurvey,inonly11%ofcasesdidparticipantsneedtoproceed
to courts or other enforcement agencies to enforce an award. Even in such cases,
the majority of the corporations reported that they had not encountered major
difficultiesindoingso.Thesefindingsrefutethe,predominately,anecdotalevidence
that corporations encounter major difficulties when resorting to recognition and
enforcement of arbitral awards: only a very small proportion of the corporations
facedproblemswhentryingtorecognizeandenforceforeignarbitralawards.Outof
the11%,only19%ofthecorporationshadencountereddifficultieswhenseekingto
recognize and enforce foreign arbitral awards.39This number appears to be, and
actually is, quite small and encouraging as far as enforcement of awards is
concerned.

35

Inparticular,Articles36.
1965ConventionoftheSettlementofInvestmentDisputesbetweenStatesandNationalofOther
ContractingStateshttp://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp,inparticular,Articles5355.
37
Seehttp://www.arbitrationonline.org/research/Corpattitempirical/2008.html.
38
MistelisandBaltag,RecognitionandEnforcementofArbitralAwardsandSettlementin
InternationalArbitration:CorporateAttitudesandPractices,19(34)AmericanReviewofIntl
Arbitration319375(2008),at343.
39
Ibid.,at345.
36

As part of the same survey inhouse lawyers reported that the difficulties in
enforcing an award often arose because of the circumstances of the awarddebtor
ratherthandeficienciesinthearbitralorcourtproceedings.40Thesurveyindicates
that70%oftheproblemsrelatedtothelackofassetsortheinabilitytoidentifythe
debtors assets. Against this background it is not surprising that assettracking or
assettracing has become a profession nowadays. However, it is very encouraging
that

only6%oftherespondentsencountereddifficultiesbecausethecountryof
enforcement was not a signatory to the New York Convention. The small
percentage in this last case is translated in the large number of countries
parties to the New York Convention 1958. 17% of the corporate counsel
indicated the hostility of the place of enforcement, which is understood as
comprising, among others, an unstable and bureaucratic political and legal
systemwithallconsequencesderivingfromthis,intimidationandthreatsor
corruption.41

Thereare,however,alsoconcernsabouttheeffectivenessandefficiencyoftheNew
YorkConvention42anditisoftenpointedoutthatsettlementmaypresentabetter
optionthananattempttoenforcethroughnationalcourts.Inthe2008surveythe
empiricalevidenceisthat56%ofcorporationswhichhadexperienceddifficultiesat
the place of enforcement, identified as a major issue the local enforcement or the
execution proceedings. Similarly, the majority of counsel linked the enforcement
problemswiththeattitudeoflocalbureaucratsandcourtswhile10%ofrespondents
citeddifficultiesarisingfromcorruptionatlocalcourts.43

Accordingtoourempiricalsurvey,44%oftheparticipatingcorporationsresponded
that they usually recovered 100% of the arbitral award when using recognition,
enforcement and execution proceedings, while 40% recovered over 76% of the
amountawarded.Inotherwords,atleast84%oftheparticipantsreportedthatthey
have recovered 76 to 100% of the award sum. Corporate counsel also indicated in
theinterviewsthatthelackofassetsofthenonprevailingpartyisthemainreason
for the failure to recover the full amount of an award. 44 The fact that parties
prevailinginarbitrationarepreparedtosettleandsatisfytheirclaimforasumless
thanthat100%awardedbythearbitraltribunalshouldnotbereadasadefectofthe
arbitrationsystemoranindicationofadiminishedvalueoftheaward.Quitetothe
contrary, one should not overlook the fact that most awards are complied with or
areprovidingthebasisforenforcementforaverysubstantialpercentage.Itiswell
possible that lawyers or damages experts may inflate claims in the request for
arbitrationwhileinstructingpartiesarehappywithasummuchlowerthanoriginally
claimed for. Similarly in claims which include damages for lost profit, oftentimes

40

Ibid.,at346.
Ibid.,at346.
42
See,forexample,Brekoulakis,supranote14.
43
Supranote38,at348349wheretherearealsoindicationsofcountrieswhichareperceivedas
hostileintermsofenforcementofforeignarbitralawards.
44
Ibid,at351352.
41

10

sumsagainmaybeoverstated.Butthisisofcourseatopictobeexploredinanother
paper!

It is also worth mentioning that the award debt was typically collected in a rather
shortperiodoftime(i.e.oftenlessthansixmonthsormorecommonlylessthanone
year),butwithsomecases(about5%)goingformorethantwoyears.45

Asalternativetovoluntarycomplianceorenforcementviathenationalcourts,other
options have been developed such as postaward settlement; such alternatives to
traditional enforcement seem to be gathering pace. 46 Similarly, it has been
reported47that one award (CMS v Argentina)48was assigned to a fund, Blue Ridge,
which exercised significant diplomatic pressure in order to ensure enforcement. It
was anecdotally reported that CMS received from Blue Ridge a sum they felt fully
compensatedthembutlowerthanthesumawardedastheresultofthearbitration
proceedings.Similarly,inarecentdecisionoftheThaiSupremeCourt,judgmentno
9691/2554,itwasconfirmedthatawardsaretransferableandmaybeenforcedfor
thebenefitofthetransfereeandultimaterecipientofthetransferredaward.49

It is a reasonable conclusion to draw that the value of an arbitral award lies not
only on the fact that the legal framework for the recognition and enforcement of
(foreign) arbitral awards is supportive of enforcement internationally (courtesy of
the New York Convention), giving teeth and true economic currency to the
outcome of arbitrations but also on the fact that the awards maintain economic
valueirrespectiveofwhethertheawardisenforcedornot.Awardsmaybeusedasa
basis for renegotiation of contracts or for the exercise of pressure to achieve
legitimatecommercialobjectives.Forexample,pressreleasesmaybeissuedand/or
published on the financial or daily political press, awards may be assigned to
collecting agencies, funds or banks, or an award may be used after it has been
rendered to safeguard future business relationships. This may appear too rosy a
picturebutthefactremainsthatawards,whetherenforcedornot,doembodyreal
economicand/orcommercialvalue.

45

Ibid.,at351.
See,e.g.,LoukasMistelis,TheSettlementEnforcementDynamicinInternationalArbitration,19(3
4)AmericanReviewofInternationalArbitration377389(2008),at379etseq.andmostpertinentlyat
383387.
47
Viuales,J.E.andD.Bentolila,Theuseofalternative(nonjudicial)meanstoenforceinvestment
awards,in:BoissondeChazournes,L.,M.KohenandJ.E.Viuales(eds.),DiplomaticandJudicial
MeansofDisputeSettlement:AssessingtheirInteractions(TheHague:Brill,forthcomingin2012),also
inSSRN:SSRNid2125051,atp13.
48
CMSGasTransmissionvRepublicofArgentina,ICSIDCaseNoARB/01/8.
49
InformationprovidedbyProfessorThawatchaiSuvanpanich.Thecaseallegedlyrelatedtoan
enforcementofanLCIAawardinThailandwheretheenforcementproceedingswereinitiatedbythe
transfereeandbeneficiaryoftheoriginalawardclaim.Theawardcreditorappearstohavebeena
BritishVirginIslandscompanywhichtransferredtheawardtoaThaicompany.
46

11

III.AwardasanInvestment
In this section we look at the various cases where investment arbitration tribunals
have examined whether the nonenforcement of arbitral awards and/or the active
state interference with the enforcement (proceedings) of awards may (under
circumstances) amount to breach of bilateral investment treaties. In some cases
judicialinterferencemaybeseenasexpropriationormayotherwisetriggeralevelof
stateresponsibility:itmaybeseenasabuseofrightsbyastateorasanexpression
ofdenialofjusticeandhenceasunfairandinequitabletreatment. Inotherwords,
thepertinentquestioniswhetheranarbitrationagreementoranarbitralawardis
an investment and therefore enjoys protection 50 under the relevant BIT and
possibly also the ICSID Convention. If the answer to the first question is negative,
then the likelihood is that an investment treaty tribunal will decline jurisdiction to
hear this matter. In most cases it will be important to examine both the BIT and
Article25oftheICSIDConvention.

Itseemsthatthejurisprudencesofarisinconsistent51andhenceworthyoffurther
discussion. In particular we discuss below Saipem v Bangladesh (infra, A) ATA v
Jordan(infra,B),GEAvUkraine(infra,C)andWhiteIndustries(infra,D)withsome
referencealsotoothercases.

A.SaipemvBangladesh
The first known investment arbitration decision that considered the issue of state
responsibility for the nonenforcement of an arbitral award is the Decision on
Jurisdiction in Saipem S.p.A v The Peoples Republic of Bangladesh.52In this case
Saipem,theClaimant,issuedICSIDarbitrationproceedingsagainsttheGovernment
ofBangladeshonthebasisofanallegedbreachoftheexpropriationclause(Article
5)53oftheItalyBangladeshBIT.54

50

CharlesClaypoole,RecentDevelopmentsintheJurisprudenceofInvestmentArbitration
Tribunals,EuropeanandMiddleEasternArbitrationReview2012.
51
Ibid.
52
SaipemS.p.A.vPeople'sRepublicofBangladesh(ICSIDCaseNo.ARB/05/7),DecisiononJurisdiction
andRecommendationonProvisionalMeasures,21March2007,RenderedbyProf.Gabrielle
KaufmannKohler(President),Prof.ChristophSchreuerandSirPhilipOtton.Seealsodiscussionsin
AndrewNewcombe,WhenisCourtInterferenceinArbitrationProceedingsExpropriatory,Kluwer
ArbitrationBlog7July2009;AdamKayandLukeEricPerterson,BangladeshCourtsOverstepping
SupervisoryRoleinICCArbitrationAmountstoUnlawfulExporporiationatICSID,12September2009,
www.iareporter.com/articles/20090912_2/print;andRuthTeitelbaum,CaseReportonSaipemv.
Bangladesh,26(2)ArbIntl313321(2010);PromodNair,StateResponsibilityfornonenforcement
ofarbitralawards:revisitingSaipemtwoyearson,25July2011,KluwerArbitrationBlog.
53
Article5(NationalizationorExpropriation):
(1)TheinvestmentstowhichthisAgreementrelatesshallnotbesubjecttoanymeasure
whichmightlimitpermanentlyortemporarilytheirjoinedrightsofownership,possession,
controlorenjoyment,savewherespecificallyprovidedbylawandbyjudgmentsororders
issuedbyCourtsorTribunalshavingjurisdiction.
(2)InvestmentsofinvestorsofoneoftheContractingPartiesshallnotbedirectlyor
indirectlynationalized,expropriated,requisitionedorsubjectedtoanymeasureshaving
similareffectsintheterritoryoftheotherContractingParty,exceptforpublicpurposes,or
nationalinterest,againstimmediatefullandeffectivecompensation,andonconditionthat

12


The underlying dispute arose out of a gas pipeline construction contract between
Saipem, an Italian company, and Petrobangla (Bangladesh Oil Gas and Mineral
Corporation),aBangladeshiStateentity,whichprovidedforICCarbitrationwithseat
in Dhaka. After the project was completed, a dispute arose over payment and
Saipemfiledarequestforarbitration.DuringtheICCproceedings,Petrobanglafiled
an action with the local courts seeking revocation of the tribunals authority. It
alleged that the tribunal had breached the parties procedural rights by rejecting
several of Petrobanglas procedural requests. The local courts found in favour of
Petrobanglasinterests;however,thisdidnotdetertheICCtribunalwhoeventually
renderedanawardinfavourofSaipem.Petrobanglathenfiledanapplicationbefore
the High Court Division of the Supreme Court of Bangladesh to set aside the ICC
Award.Althoughdenyingtheapplication,theHighCourtDivisionultimatelyfoundin
favour of Petrobangla by refusing to even acknowledge the existence of the ICC
Awardintheeyeofthelaw.Itheldthatanonexistentawardcanneitherbeset
asidenorcanitbeenforced.

SaipemissuedtheICSIDproceedingsagainsttheGovernmentofBangladeshalleging
thatthe

local courts colluded with the State entity to sabotage the ICC Arbitration
and deny the foreign investors right to arbitrate under the [construction]
contractandobtainsatisfactionofitsclaims.55

Inessence,SaipemarguedthattheactionsofBangladesh(throughPetrobanglaand
thelocalcourts)deprivedSaipemofsumsawardedtoitbytheICCAwardandthus
amounted to an expropriation in breach of Article 5 of the BIT. Petrobangla
contestedjurisdictionunderArticle25oftheICSIDConventionand,iffound,under
theBIT.InbothcasestheICSIDtribunalconsideredtheexistenceofaninvestment.

Applying the Salini56test, the tribunal found that Saipem had made an investment
withinthemeaningofArticle25.Indoingso,thetribunalemphasizedthatitwould
considertheentireoperationwhendeterminingtheexistenceofaninvestment
andinthiscasethatincludedtheinitialconstructioncontract,theconstructionitself,
warranties,retentionmoneyandtherelatedICCArbitration.57Thetribunalfurther
elaboratedthepointwhenconsideringwhetherthedisputearosedirectlyoutofan
investment (Article 25(1)). It noted that the ICC Award could not be viewed in
isolationforthispurpose.Rather,itheldthattherightsarisingoutoftheICCAward
arise only indirectly from the investment. It suggested that a finding otherwise

thesemeasuresaretakenonanondiscriminatorybasisandinconformitywithalllegal
provisionsandprocedures.
54
AgreementbetweentheGovernmentoftheRepublicofItalyandtheGovernmentofthePeoples
RepublicofBangladeshonthePromotionandProtectionofInvestments,20March1990(entered
intoforceon20September1994).
55
SaipemS.p.A.vPeople'sRepublicofBangladesh(ICSIDCaseNo.ARB/05/7),para.61
56
SaliniCostrutorriS.p.AandItalstradeS.p.Av.KingdomofMorocco(DecisiononJurisdiction),Case
No.ARB/00/4(July23,2001),availableathttp://italaw.com/documents/SaliniEnglish.pdf.
57
Supranote55,para.110.

13

would mean that the Award itself constituted an investment under Article 25(1).58
This, in the words of the tribunal, was a finding it was not prepared to accept.59
When considered with the other elements (the construction contract, the
constructionitself,etc.),however,thedisputecouldbefoundtoarisedirectlyoutof
theoverallinvestment.Inotherwords,theawardwasjustonepieceofthepuzzle.

ThetribunalalsofoundjurisdictionundertheBIT.Inparticular,itacceptedSaipems
argument that the construction contract is an investment under Article 1(1) of the
BIT60andthattherightsaccruingfromtheICCAwardfallsquarelywithinthenotion
of credit for sums of money [] connected with investments set out in Article
1(1)(c).61Takingtheirordinarymeaning,thetribunalheldthatthewordscreditfor
sums of money also include rights under an award ordering a party to pay an
amount of money. 62 However, unwilling to consider whether the Award itself
constitutedaninvestment,thetribunaladdedthefollowingcaveat:
Thissaid,therightsembodiedintheICCAwardwerenotcreatedbytheAward,
butariseoutoftheContract.TheICCAwardcrystallizedthepartiesrightsand
obligations under the original contract. It can thus be left open whether the
Award itself qualifies as an investment, since the contract rights which are
crystallizedbytheAwardconstituteaninvestmentwithinArticle1(1)(c)ofthe
BIT.63
Insomanyrespectsthisisaseminalcase:whilethedecisionofthetribunaldoes
not state that (a) the award may constitute an investment and/or (b) its non
enforcementortheinterferencewithitsenforcementmaybeseenasanunlawful
interferencewithaninvestment,itdoesfunctionallyapplyinvestmentlaw(both
ICSID and the relevant BIT) to assess state liability in the given fact pattern and
assumesjurisdiction.Thisfunctionalequivalenceismorethansufficienttotrigger
bothstateliabilityandinvestmentprotectionandifthefactualcircumstancesare

58

Ibid.,para.113.
Ibid.
60
Article1(1):
Theterminvestmentshallbeconstruedtomeananykindofpropertyinvestedbeforeor
aftertheentryintoforceofthisAgreementbyanaturalorlegalpersonbeinganationalof
oneContractingPartyintheterritoryoftheotherinconformitywiththelawsand
regulationsofthelatter.
Withoutlimitingthegeneralityoftheforegoing,theterm"investment"comprises:
a)movableandimmovableproperty,andanyotherrightsinremincluding,insofarasthey
maybeusedforinvestmentpurposes,realguaranteesonotherproperty;
b)shares,debentures,equityholdingsandanyothernegotiableinstrumentordocumentof
credit,aswellasGovernmentandpublicsecuritiesingeneral;
c)creditforsumsofmoneyoranyrightforpledgesorserviceshavinganeconomicvalue
connectedwithinvestments,aswellasreinvestedincomeasdefinedinparagraph5
hereafter;[]
e)anyrightofafinancialnatureaccruingbylaworbycontractandanylicence,concession
orfranchiseissuedinaccordancewithcurrentprovisionsgoverningtheexerciseofbusiness
activities,includingprospectingfor,cultivating,extractingandexploitingnaturalresources.
61
SaipemS.p.A.vPeople'sRepublicofBangladesh(ICSIDCaseNo.ARB/05/7),para.125.
62
Ibid.,para.126.
63
Ibid.,para.127.
59

14

appropriate provide a significant additional support for arbitral awards. It would


have been, of course, more instructive to have an indication of what specific
breachoftheinvestmentprotectiontreatydidtheconductofcourtsamountto.

B.ATAvJordan
ATA v Jordan64concerned whether the Jordanian courts annulment of an arbitral
awardrenderedinfavouroftheClaimant,aTurkishconstructioncompany,andthe
extinguishmentofthearbitrationagreementtheawardwasbasedonamountedtoa
breachoftheJordanTurkeyBIT.65

The underlying dispute involved the collapse of a dike at a site on the Dead Sea
constructed by the Claimant for the Arab Potash Company (APC) pursuant to a
FIDICformcontractenteredintoon2May1998.Whenthedikecollapsed,APCan
entity based in Jordan and at the time controlled by the government of Jordan
commencedFIDICarbitrationproceedingsagainstATA,whobroughtacounterclaim
inrespectofsumsowedunderthecontract.Thiswason6September2000.Three
years later (30 September 2003), the FIDIC tribunal found in favour of ATA,
exoneratingitofanyliabilityforthecollapseandawardingcompensationinrelation
tothecounterclaim.

Shortlythereafter,on29October2003,APCappliedtotheAmmanCourtofAppeal
to have the FIDIC award annulled pursuant to the Jordanian Arbitration law. The
CourtofAppealissueditsjudgmenton24January2006(incidentally1dayafterthe
JordanTurkeyBITcameintoforce),annullingtheFIDICawardonthebasisthatthe
tribunalmadeanerrorinitsapplicationofJordanianlaw.TheCourtofAppealalso
referred to Article 51 of the Jordanian Arbitration Law 2001 and extinguished the
arbitrationagreementbetweenATAandAPC.66TheClaimantlaterappealedtothe
Jordanian Court of Cassation, which, on 16 January 2007, upheld the Court of
Appeals judgment. Following this decision, APC commenced proceedings against
ATA before the Jordanian Court of First Instance in relation to its original claims
regardingthecollapseofthedike.

Againstthisbackground,ATAinitiatedICSIDproceedingsagainstJordanforalleged
violations of the JordanTurkey BIT. In particular, ATA argued that Jordan had

64

ATAConstruction,IndustrialandTradingCompanyvTheHashemiteKingdomofJordan(ICSIDCase
No.ARB/08/2),Award,18May2010,RenderedbyMrL.YvesFortier,CC,QC(President),ProfessorDr
AhmedSadekElKosheri,ProfessorW.MichaelReisman.
65
AgreementbetweentheHashemiteKingdomofJordanandtheRepublicofTurkeyconcerningthe
ReciprocalPromotionandProtectionofInvestments,2August1993(enteredintoforceon23January
2006).
66
JordanianArbitrationLaw2001Article51:
Ifthecompetentcourtapprovesthearbitralaward,itmustdecideitsexecutionandsuch
decisionisfinal.If,otherwise,thecourtdecidesthenullityoftheaward,itsdecisionis
subjecttochallengebeforetheCourtofCassationwithinthirtydaysfollowingthedateof
notifyingthatdecision.Thefinaldecisionnullifyingtheawardresultsinextinguishingthe
arbitrationagreement.

15

unlawfully expropriated its claims to money and rights to legitimate performance


undertheconstructioncontractandFIDICawardandthatithadfailedtoaccordfair
andequitabletreatmenttoATAsinvestmentbywayofseriousandrepeateddenials
ofjusticebytheJordaniancourts.Jordan,theRespondent,contestedjurisdictionon
thegroundsthattheBITdoesnotapplyasthedisputepredatesitsentryintoforce
andthat,inanyevent,therewasnoinvestmentexistingatthetimeoftheBITs
entryintoforceormadeoracquiredthereafter.

The ICSID tribunal considered its jurisdiction in relation to two of the Court of
Cassationsfindings:
(i)
theannulmentoftheFIDICawardand
(ii)
the extinguishing of the arbitration agreement in the contract between
ATAandAPC.

Withrespecttotheformer,theICSIDtribunalfoundthatthedisputethatgaverise
to ATAs claims which crystallized when the Court of Cassation confirmed the
annulment of the award (16 January 2007), was legally equivalent to and really
indistinguishable from the original dispute which was initiated when the FIDIC
arbitrationproceedingscommenced(6September2000).67Sincetheoriginaldispute
arose prior to the entry into force of the JordanTurkey BIT (23 January 2006), the
tribunal found that all claims in connection with the annulment of the award
(including claims of denial of justice) per se are inadmissible because of a lack of
jurisdictionrationetemporis.68

In relation to the annulment decision, the tribunal also considered, albeit obiter
dicta,whetheraninternationalcommercialarbitralawardconstituteaninvestment
that could be, as it were, expropriated by an otherwise lawful annulment by a
nationalcourt.69NotingthatArticle25(1)oftheICSIDConventionleavestheterm
investment open to the parties to define, the tribunal looked to Article I(2)(a) of
the JordanTurkey BIT which provides that a claim to money is a discrete
investment, separate from the investment which gave rise to it. 70 The question
remained asto whetheranarbitralawardin itselfqualifiesas aclaimtomoney.
LikeSaipemvBangladesh,thetribunalrefrainedfromdecidingthisquestiondirectly
andinsteadnotedthatiftherationetemporiscouldbedefeatedtheFIDICaward
would be part of an entire operation that qualifies as an investment.71In this
respect the ATA v Jordan ICISD tribunal aligns itself with the Saipem v Bangladesh
ICSIDtribunal.

Next, the tribunal considered the Respondents jurisdictional objections in relation


totheextinguishmentofthearbitrationagreement.Namely,thetribunalconsidered
whether there was an investment and whether it was barred ratione temporis. In

67

ATAConstruction,IndustrialandTradingCompanyvTheHashemiteKingdomofJordan(ICSIDCase
No.ARB/08/2),paras95and103.
68
Ibid.
69
Ibid.,para.110.
70
Ibid.,para.111.
71
Ibid.,paras113etseq.

16

regards to the first question, the tribunal observed that the extinguishment of the
arbitration agreement amounted to the extinguishment of the right to arbitrate.
This was because, after the annulment of the FIDIC award, ATA would have been
entitled to initiate another arbitration both under the New York Convention (to
whichbothJordanandTurkeywereparty)andundertheoldJordanianLaw,which
was in force when the original contract was concluded in 1998. 72 The tribunal
determined that the right to arbitrate is a distinct investment pursuant to the
BITasitfellclearlywithintheArticleI(2)(a)(ii)definition:i.e.claimstomoneyorany
other rights to legitimate performance having financial value related to an
investment.73

Inregardstothesecondquestion,thetribunalnotedthattherighttoarbitratewas
extinguishedbytheCourtofCassation(16January2007)andnottheenactmentof
the2001JordanianArbitrationLaw.74Here,thetribunalfocusedonthediscretionof
theJordaniancourts.Inparticular,itheldthat
[t]heCourtofCassationcouldhaveexemptedtheClaimantfromtheoperation
ofthisnewlaw.Asaresult,thispartofthedecisionoftheCourtofCassation,
occurring,asitdoes,aftertheentryintoforceoftheBITanddistinctfromthe
underlying investment, is not barred ratione temporis and falls within the
Tribunals jurisdiction because the right to arbitrate was never in contention
until the annulment whereupon the Court of Cassation extinguished that
right.75
Havingsoestablisheditsjurisdictioninsofarastheextinguishmentofarbitralclause
claims,thetribunalmovedontothemerits.Itfoundthattheretroactiveapplication
of the 2001 Jordanian Arbitration Law to extinguish a valid right deprived an
investor such as the Claimant of a valuable asset in violation of the Treatys
investment protections. 76 More specifically, the tribunal had problem with the
JordaniancourtsretroactivityandfoundthatitcontravenedJordansBITobligation
toaccordATAsinvestmentfairandequitabletreatment.77

Havingfoundtheextinguishmenttobeunlawful,thetribunalturnedtothequestion
of reparation. It found that the single remedy which would offer adequate and
effective relief was to restore ATAs right to arbitrate. 78 It thus ordered the
immediateandunconditionalterminationoftheproceedingsatJordanianCourtof

72

Ibid.,para.116.
Ibid.,para.117.
74
Ibid.
75
Ibid.,para.118.
76
Ibid.,para.126.
77
ThisobligationwasderivedfromthePreambleoftheBITwhichprovidedthatfairandequitable
treatmentofinvestmentisdesirableinordertomaintainastableframeworkforinvestmentand
maximumeffectiveutilizationofeconomicresources.Thetribunalalsonotedthatbyvirtueof
ArticleII(2)oftheTreaty(theMFNclause),theRespondenthasassumedtheobligationtoaccordto
theClaimantsinvestmentfairandequitabletreatment(seetheUKJordanBIT)andtreatmentnoless
favourablethanthatrequiredbyinternationallaw(seetheSpainJordanBIT).
78
Ibid.,paras129131.
73

17

First Instance and the restoration of the Claimants right to arbitrate under the
original1998agreement.79

The ATA v Jordan decision reinforces the decision of the Saipem tribunal as to the
liability of states which interfere with arbitral rights and lawfully obtained arbitral
awardssuchliabilitywouldnormallyentitleanawardcreditortoinitiateICSID(or
otherinvestmenttreaty)arbitration.ItisalsoworthnotingthatboththeSaipemand
the ATA tribunals consider an award as an aspect of the entire operation for
purposesofdecidingwhethertherehadbeenaninvestmentforthepurposesof80
the relevant treaty. The ATA tribunal in addition makes plain that the right to
arbitrate(i.e.thenonstatutoryextinctionoftherighttoarbitrationwasadistinct
investment,inthatithadfinancialvaluerelatedtoaninvestment.81

C.GEAGroupAktiengesellschaftvUkraine
GEAGroupvUkraine82tookaslightlydifferentapproachwhenconsideringwhether
acommercialarbitrationawardqualifiesasaninvestmentinthesenseofinvestment
arbitration(andtreaties).

The dispute in this case stems from a settlement agreement and repayment
agreement whereby Oriana, a Ukrainian kombinat, a stateowned oil refinery,
agreed to compensate KCH, a German chemical company, for its nonperformance
under a fuel conversion contract.83The 1995 contract provided for the supply of
naphthafueltoOrianaforprocessingwithOrianareceivingatollingfee,whilethe
supplyaswellaslogisticswereorganizedbytheGermanparty,KCH.Itwasalleged,
afteranincidentin1998(whenaGermaninspectorwasshotinthekneecap)thata
substantial amount of naphtha (in the region of 125,000 tons) was missing. The
parties following such events negotiated a Settlement Agreement followed by a
RepaymentAgreement,accordingtowhichOrianaagreedtoprovidejustoverUS$
27 million in compensation. Both agreements contained an ICC arbitration clause,
withtheseatofthearbitrationinVienna.

79

Ibid.,para.132.
Claypoole,supranote50.
81
ATAvJordan,supranote67,para.117.
82
GEAGroupAktiengesellschaftvUkraine(ICSIDCaseNo.ARB/08/16),Award,31March2011,
RenderedbyProfessorAlbertJanvandenBerg(President),MrTobyLandauQC,ProfessorBrigitte
Stern.SeealsocommentsandstorycoveragebyLukeEricPeterson,GermanFirmSuesUkraine
underBIT:ClaimantComplainsorFailuretoEnforceICCArbitralAwardandOtherBreaches,
www.iareporter.com/articles/20090929_33/print;LukeEricPeterson,Analysis:TribunalRulingin
GEAvUkraineOffersContrasttoEarlierICSIDArbitrationWhereNonEnforcementofArbitralAward
WasatIssue,www.iareporter.com/articles/20110414_1/print;Claypole,supranote49.Seealso
LeonilaGuglya,InternationalReviewofDecisionsConcerningRecognitionandEnforcementofForeign
ArbitralAward:AThreattotheSovereigntyoftheStatesoranOverestimatedHazard(sofar)?(With
EmphasisontheDevelopmentswithintheInternationalInvestmentArbitrationSetting)(April1,
2011),2CzechYearbookofIntlL93121(2011).Availableathttp://ssrn.com/abstract=1795607.
83
Thetribunaldescribedthiscomplexcontractualrelationshipasentailingacontributioninkind,
intheformofoveronemillionmetrictonsofdieselandnaphtha,catalystsandothermaterials,
deliveredtoUkraineaspartofabroadeconomicoperation,aswellasthecontributionofthe
Claimantsknowhowonlogistics,marketing,andthemobilisationofrepairsandotherservices.
80

18


The claimants predecessor, Solvadis, obtained an ICC award in 2002. The ICC
tribunalfoundinfavourofSolvadis(formerlyKCH)andawardedoverUSD30million
in primary compensation. On 11 March 2003 Solvadis sought recognition and
enforcementoftheICCawardintheAppellateCourtoftheIvanoFrankivskRegion
(Ukraine), but found its application rejected as the court found the repayment
agreement had been concluded by unauthorized persons and was thus invalid.
SolvadisthenfiledacassationcomplaintwiththeSupremeCourtofUkraine,butto
noavail.Alongsidetheenforcementproceedings,Solvadisalsoattemptedtoclaim
under the ICC award in bankruptcy proceedings brought by a third party against
Oriana.Heretoo,afteranumberofappeals,Solvadiswasunsuccessful.ThisledGEA
Group,theultimatebeneficiaryoftheICCAward,84toissueICSIDproceedingsunder
theGermanUkraineBIT85forallegedbreachesofexpropriation,fullprotectionand
security, fair and equitable treatment, arbitrary and discriminatory measures,
nationaltreatmentandmostfavourednationtreatmentobligations.

AfterrulingonGEAsstanding,86theICSIDtribunalconsideredwhetherGEAmadean
investment in Ukraine within the meaning and scope of the BIT and the ICSID
Convention. The tribunal considered this question in relation to the (i) conversion
contract, together with the property rights and products delivered under that
contract; (ii) the settlement agreement, together with the repayment agreement;
and (iii) the ICC award, on its own. 87 It found that neither (ii) the settlement
agreement nor (iii) the ICC award could in and of themselves constitute
investments.88

WithrespecttotheICCaward,thetribunalfailedtofindpersuasionwiththefindings
oftheSaipemtribunalnotingthattheTribunalmadestatementsthataredifficult
toreconcile.89ItheldthattheICCawardisnothingmorethanalegalinstrument,
which provides for the disposition of rights and obligations arising out of the
Settlement Agreement and Repayment Agreement (neither of which was itself an
investment).90It further maintained that even if the settlement and repayment
agreements could be characterized as investments or the award itself could be
characterized as directly arising out of the conversion contract or the products

84

On28June2004(afterSolvadisscassationcomplaintwasrejectedintheenforcement
proceedings,butbeforeitsfinalappealwasrejectedinthebankruptcyproceedings),Solvadis
assignedallofitsrightsderivingfromthebusinesswithOrianatoGEA(thenknowasMG
TechnologiesAG).
85
AgreementbetweentheFederalRepublicofGermanyandUkraineonthePromotionandMutual
ProtectionofInvestments,15February1993.
86
GEAGroupAktiengesellschaftvUkraine(ICSIDCaseNo.ARB/08/16),paras94125.
87
Ibid.,para.145.Thetribunalnotedthatthesethreecategoriesofinvestmentcouldbeidentified
fromtheClaimantsdescriptionofitsinvestment,i.e.thecontractualandpropertyrightsunderthe
ConversionContract,formalisedinthesettlementagreementandtherepaymentagreementwith
respecttotheamountsthatareatdispute,andultimately[]crystallisedintheICCaward.(para.
144)
88
Ibid.,paras157and161.
89
Ibid.,para.163.
90
Ibid.,para.161.

19

(which the tribunal did consider an investment within the meaning of the BIT),91
GEAsclaimswithregardstotheawardareboundtofail.Itobservedthat
the fact that the Award rules upon rights and obligations arising out of an
investment does not equate the Award with the investment itself. In the
Tribunals view, the two remain analytically distinct, and the Award itself
involvesnocontributionto,orrelevanteconomicactivitywithin,Ukrainesuch
astofallitselfwithinthescopeofArticle1(1)oftheBITor(ifneeded)Article
25oftheICSIDConvention.92
As mentioned above, the tribunal acknowledged that the Claimant made at least
some investment in Ukraine (i.e. the conversion contract, together with the
propertyrightsandproductsdeliveredunderthatcontract)andthusconsideredthe
merits of GEAs claims. Although in the end, the tribunal was unable to find any
liability on the part of the Respondent, for the sake of completeness, it did offer
someanalysisinrelationtoGEAsclaimsrelatingtotheICCAward.93

InrelationtotheClaimantsassertionthattheUkrainiancourtsrefusaltorecognize
theICCAwardistantamounttoanexpropriation,thetribunalfoundthattheclaim
mustfail.Thetribunalnotedthatwhileitmayhavebeenabletoproveexpropriation
in Saipem, a similar finding was not appropriate in this case.94In particular, the
tribunalfoundthat
[e]ven assuming (contrary to its earlier finding) that the ICC Award could
somehow qualify as an investment, the Claimant has provided the Tribunal
with no reason to believe that the courts of Ukraine were applying a
discriminatory law, only that the Ukrainian courts came to a conclusion
different to that which GEA had hoped. Moreover, contrary to Saipem, the
Tribunal has been presented with no evidence that the actions taken by the
Ukrainiancourtswereegregiousinanyway;thattheyamountedtoanything
other than the application of Ukrainian law; or that they were somehow
deliberatelytakentothwartGEAsabilitytorecoverontheICCAward.95
Similarly,thetribunalwasunabletofindsympathywithGEAsdenialofjusticeclaim
that the Ukrainian courts refused enforcement of the award without taking the
Claimantsargumentsintoaccount.ItheldthatGEAwasunabletoproducesufficient
evidencetothiseffectandthatitinsteadappearsfromtherecordthatthecourts
tooktheClaimantsargumentsintoaccountandsimplyrejectedthem.96Referring
to the Mondev test, 97 the tribunal concluded that having regard to generally

91

Ibid.,paras146153.
Ibid.,para.162.
93
Ibid.,para.206.
94
Ibid.,para.234.
95
Ibid.,para.236.
96
Ibid.,para.318.
97
MondevInternationalLtdvUnitedStatesofAmerica,CasenoARB(AF)/99/2,atparas.126127et
seq.,availableathttp://www.naftalaw.org/disputes_us_mondev.htm.TheMondevtribunal
presentedanextendeddiscussionondenialofjusticeasrelatingtodomesticjudicialattitudesand
presentsadenialofjusticetestinparas.126etseq.
92

20

accepted standards of the administration of justice it did not have any justified
concernsastothejudicialproprietyoftheoutcomewithrespecttotheUkrainian
courtsdecisionsandastherewasnothingclearlyimproperanddiscreditablewith
thesedecisions,itrejectedtheGEAsclaims.98

WithGEAvUkrainewerecordadifferentsideoftheargument,aslightlynarrower
definition of investment (in that the economic development element of the
definition is deemed an essential element) and a refusal to allow investment
arbitration proceedings for failure to enforce and possibly local law and courts
interference with enforcement proceedings. The approach of the tribunal was
labeledasabeltsandsuspendersoneinthatthetribunalanalyzedcertainmerits
claims despite finding it lacked jurisdiction over them. 99 The award is a useful
counterbalancetotheSaipemandATAones.

D.WhiteIndustriesvIndia
Ourfinalcasedealingwithinvestmenttreatyimplicationsofthenonenforcementof
anarbitralawardisWhiteIndustriesvRepublicofIndia.100

Here, the Claimant, an Australian mining company, issued UNCITRAL arbitration


proceedingsundertheAustraliaIndiaBIT101inrelationtodelaysbytheIndiancourts
intheenforcementofanICCarbitrationaward.TheoriginalICCawardaroseouta
contract entered into by White with Coal India, an Indian stateowned and
controlledcompany,forthesupplyofequipmenttoanddevelopmentofacoalmine
in Piparwar, India. The commercial relationship broke down and White filed a
request for arbitration in 1999. In May 2002, the ICC tribunal seated in Paris
renderedanawardinfavourofWhite.InSeptemberthatyearCoalIndiaappliedto
theCalcuttaHighCourttohavetheawardsetasideandWhiteappliedtotheDelhi
HighCourtforenforcement.Afterreceivingnoticeofthesettingasideproceedings,
WhitepetitionedtotheSupremeCourtofIndiatotransferCoalIndiasapplicationto
theDelhiHighCourt.ProceedingsinCalcuttawerestayedandthetransferpetition
was heard in January 2003. The transfer petition was eventually withdrawn and
proceedingscontinuedinthelowercourts.InDelhi,afterwhatcanbedescribedasa

98

GEAvUkraine,supranote86,para.319.
Petersen,supranote82.
100
WhiteIndustriesAustraliaLimitedvRepublicofIndia(UNCITRAL),FinalAward,30November2011,
RenderedbyJ.WilliamRowleyQC(Chair),TheHonCharlesN.Brower,andChristopherLauSC.See
alsoRishabGuptaandLukeEricPeterson,IndiaSuedbyForeignInvestorforInvestmentTreaty
Breach;ComplaintStemsfromWillingnessofIndianCourtstoConsiderSetAsideofanEarlier
CommercialArbitrationRuling,www.iareporter.com/articles/20110707_2/print;JasmineJosephand
BadrinathSrinivasan,CommentsontheAwardinWhiteIndustriesInvestmentArbitrationAgainst
India,http://practicalacademic.blogspot.co.uk/2012/02/commentsonawardinwhite
industries.html;JoanneGreenaway,DoesInvestmentArbitrationProvideforaSecondBitatthe
Cherry?,28March2012,KluwerArbitrationBlog,atwww.kluwerarbitrationblog.com;Prabhash
Ranjan,TheWhiteIndustriesArbitration:ImplicationsforIndiasInvestmentTreatyProgram,13
April2012,www.iisd.org/itn/2012/04/13/thewhiteindustriesarbitrationimplicationsforindias
investmenttreatyprogram/.
101
AgreementbetweentheGovernmentofAustraliaandtheGovernmentoftheRepublicofIndiaon
thePromotionandProtectionofInvestments,26February1999(enteredintoforceon4May2000).
99

21

lessthanidealproceduralhistory,102CoalIndiasuccessfullypetitionedforastayof
the enforcement proceedings pending disposal of the setting aside proceedings in
Calcutta. This was in March 2003. In Calcutta, White sought to have Coal Indias
setting aside application struck out on the basis that the Indian courts lacked the
jurisdiction to take on such applications in respect of foreign awards. Whites
applicationwasrejectedbytheCalcuttaHighCourt,whichwassubsequentlyupheld
bytheAppellateDivisioninMay2004.WhitethenappealedtotheSupremeCourt.

By2010,neithertheappealnortheenforcementproceedingshadbeenheardwhich
promptedWhitetoinitiateUNCITRALproceedingsagainstIndia.Inparticular,White
contestedthatIndiahadeffectivelyexpropriateditsinvestment(Article7oftheBIT),
failedtoaffordfairandequitabletreatmenttoitsinvestment(Article3(2)),failedto
encourage and promote favourable conditions for investors from Australia (Article
3(1)) and failed to provide effective means of asserting claims and enforcing rights
withrespecttoitsinvestment.

The UNCITRAL tribunal began by considering whether White had an investment


pursuant to Article 1 of the BIT. It acknowledged that a doublecheck (i.e.
establishmentofaninvestmentunderboththeICSIDConventionandtheBIT)was
notnecessaryinthiscase,butfoundthattheSalinitest(usedforICSIDcases)103was
satisfied in any event. After finding that the definition of investment in the BIT
wouldclearlyincludeWhitesrightsundertheContract,104thetribunalconsidered
WhitesrightsundertheICCaward.AgreeingwiththeSaipemtribunal,thetribunal
intheinstantcaseconcludedthat
rights under the Award constitute part of Whites original investment (i.e.,
beingacrystallisationofitsrightsundertheContract)and,assuch,aresubject
tosuchprotectionasisaffordedtoinvestmentsbytheBIT.105
Indoingso,thetribunalconsideredtherecentdecisionintheGEAGroupvUkraine
citedbyIndiainsupportofitsargumentthatrightspursuanttotheAwardarenota
coveredinvestmentforthepurposesoftheBIT.Itfoundthat
the conclusion expressed by the GEA Tribunal represents an incorrect
departure from the developing jurisprudence on the treatment of arbitral
awards to the effect that awards made by tribunals arising out of disputes
concerning investments made by investors under BITs represent a
continuationortransformationoftheoriginalinvestment.106
It noted that such a finding was also in line with the reasoning employed by the
tribunalsinothercases,suchasMondev,Chevron,andFrontierPetroleumServices107

102

WhiteIndustriesAustraliaLimitedvRepublicofIndia(UNCITRAL),FinalAward,30November2011,
para.7.4.1
103
Seesupranote56,atpara52.
104
WhiteIndustriesAustraliaLimitedvRepublicofIndia(UNCITRAL),FinalAward,30November2011,
paras7.4.1etseq.
105
Ibid.,para.7.6.10.
106
Ibid.,para.7.6.8.
107
FrontierPetroleumServicesvCzechRepublic,UNCITRALPCACase,Award12November2010.In

22

who characterized arbitral awards as providing protection to the subsisting


intereststhat[theinvestor]continuedtoholdintheoriginalinvestmentratherthan
aninvestmentinitself.108

With respect to the substantive claims, the tribunal only found force in one of
Whitesarguments;namelythatIndiafailedtoprovideeffectivemeansofasserting
claims. Although the AustraliaIndia BIT lacked an effective means provision, the
tribunalfoundthattheobligation(whichdidexistunderaKuwaitIndiaBIT)109could,
nevertheless,beincorporatedintotheBITthroughamostfavourednationclause.
Applyingtheeffectivemeansstandard,thetribunalfirstconsideredtheenforcement
proceedings in the Delhi High Court. Here it was held that although Whites
applicationforenforcementremainedunresolvedformorethannineyears,itcould
not be demonstrated that White had taken all available measures to prevent the
delay.Inparticular,thetribunalwasunsatisfiedwithWhitesdecisionnottoappeal
theDelhiHighCourtsstayorder.Thetribunalwas,however,moresympatheticto
Whitesjurisdictionalclaimsinthesettingasideproceedings.Thetribunalconcluded
that
even though we have decided that the nine years of proceedings in the set
aside application do not amount to a denial of justice, the Tribunal has no
difficultyinconcludingtheIndianjudicialsystemsinabilitytodealwithWhites
jurisdictionalclaiminovernineyears,andtheSupremeCourtsinabilitytodeal
with Whites jurisdictional appeal for over five years amounts to undue delay

thislessknowncasetheclaimant(Frontier),aCanadiancompany,hadobtainedinterimandfinal
awardsinSwedisharbitrationproceedingsagainstaCzechcompany(MA).Beforetheawardswere
made,MAhadbeendeclaredbankrupt.FrontiersoughttoenforcetheawardsintheCzechRepublic.
However,theCzechcourtsrefusedtorecogniseorenforcetheawards,relyingonthepublicpolicy
exceptioninArt.V(2)(b)oftheNewYorkConvention.FrontierclaimedthattheCzechcourts'failure
torecogniseandenforcetheawardsmeantthattheCzechRepublicwasinbreachofitsobligations
undertheBITtoprovidefairandequitabletreatmentandfullprotectionandsecuritytoFrontier's
investment.ItcommencedarbitrationundertheUNCITRALRules1976.Thetribunaldismissed
Frontier'sclaims.ItfoundthattheallegedinactionoftheCzechcourtsinrelationtotheinterim
awarddidnotconstituteafailuretoproperlygiveeffecttothataward.Inrelationtothefinalaward,
thetribunal'srolewastodeterminewhethertheCzechcourts'refusaltorecogniseandenforcethe
finalawardinfullviolatedtheBIT.Specifically,wastheCzechcourts'refusalmadeinanarbitraryor
discriminatorymannerordiditotherwiseamounttoabreachofthefairandequitabletreatment
principles?Thetribunalfoundthatequalityofcreditorsinbankruptcyproceedingsandequitable
distributionofassetswerewellestablishedpublicpolicyprinciplessufficienttorefuseenforcementof
awardsundertheNewYorkConvention.Further,therewasnoevidencethattheCzechcourtshad
actedarbitrarily,discriminatorilyorinbadfaith.Itwouldbeagainstpublicpolicytoaffordspecial
statusandpreferentiallysatisfytheFrontiersclaimtothedetrimentofothercreditors.
108
WhiteIndustries,supranote102,atpara.7.6.8,footnote41withreferencetoChevron
CorporationandTexacoPetroleumCompanyvRepublicofEcuador,UNCITRALPCACaseno34877,
InterimAward,1December2008,at185,MondevInternationalLtdvUnitedStatesofAmerica,ICSID
CaseNoARB(AF)/99/2,Award,11October2002,at81.
109
AgreementbetweentheStateofKuwaitandtheRepublicofIndiafortheEncouragementand
ReciprocalProtectionofInvestments,27November2001.Inparticular,Article4(5)provides:
EachContractingStateshallmaintainafavourableenvironmentforinvestmentsinits
territorybyinvestorsoftheotherContractingState.EachContractingStateshallin
accordancewithitsapplicablelawsandregulationsprovideeffectivemeansofasserting
claimsandenforcingrightswithrespecttoinvestments(Emphasisadded)

23

andconstitutesabreachofIndiasvoluntarilyassumedobligationofproviding
Whitewitheffectivemeansofassertingclaimsandenforcingrights.
Onthatbasis,thetribunalconsideredwhethertheICCawardwasenforceableunder
the laws of India, and after it did find this to be the case, awarded White full
compensationforthelossitsufferedasaconsequenceofIndiasbreachoftheBIT.
This included not only the amount payable under the ICC award ($4,085,180) but
alsointerestatarateof8%perannumfrom24March1998,asumthatexceedsthe
amountoftheawarditself.

WhiteIndustriesisthemostrecentcaseinwhatappearstobeanemergingtrendof
foreigninvestorsusingremediesunderBITstorecoversumsowedtothemonthe
basis of international arbitral awards. The process is not a quick or an inexpensive
one but in this case the claimant was motivated by the fact that nine years have
lapsedtryingtoenforcetheICCawardsothatadenialofjusticeinbreachofthefair
and equitable treatment principle was quite convincing. This was compounded by
whattheUNCITRALtribunalsawasafailuretocomplywiththeinternationallegal
obligationtoenforceanarbitralawardstemmingfromtheNewYorkConvention.

ItisaptlycommentedthattheWhiteIndustriesdecisionis

somethingofadoubleedgedsword.Ontheonehanditprovidesaremedy
oflastresorttoinvestorsincountrieswherejudicialinterferenceinthe
enforcementofarbitralawardsiscommonplace.Itbuildsonthedecisions
in the cases of Saipem and more recently Chevron Corporation (USA)
andTexacoPetroleumCompany(USA)vRepublicofEcuadorHowever,itis
unlikelytoopenfloodgatesforclaimsrelatingtodelaysinenforcement.110

IV.ConcludingRemarks
Thecontinuingimportanceandresonanceofarbitrationrelies,ifnotexclusively,at
leastheavilyontheenforceabilityofarbitralawards.Avictoryinarbitrationwillbe
pyrrhicifitsoutcomecannotbeenforcedorvoluntarilycompliedwith.Aswehave
seen,indeedinthevastmajorityofcases,typicallyintheregionofninetypercent,
awardsarevoluntarilycompliedwith.Thistoalargeextentjustifiesarbitrationasa
selfstandingjurisdiction,orevenanalternativejuridicalsystem.

Inthoseinstanceswhereawardsarenotvoluntarilycompliedwith,then,moreoften
thannot,theassistanceofnationalcourtswillbesoughtandjudicialenforcementis
asecondbestalternative.Judicialassistanceforenforcementpurposesisgenerallya
wellestablished and mostly wellfunctioning system thanks to the New York
Convention. But on occasions the system may by tedious, long and subject to
national/locallawandcourtpeculiarities,leavingafrustratingaftertaste.TheNew
York Convention is not harmonizing national court procedures and hence its

110

Greenaway,supranote100.

24

applicationmayoccasionallybeaffectedorevenbecomehostagetodomesticcourt
practicesandrelevanceoflocalprocedurallaws.

Wheninternationalarbitrationinteractswithnationalcourtsthereispotentiallyan
increased(andsadlyinsomerareinstancesimmeasurable)legalriskthatthingsmay
notexactlydevelopthewayinwhichtheprevailingpartyinarbitration(andaward
creditor) had expected. Consequently, certain alternatives have been developed,
suchasapostarbitrationsettlement,transfer(orassignment)ofthearbitralaward
of even sale of the award. Arbitral awards offer tangible economic (even if not
monetary) value, as they can embody real value and function as an asset in the
contextofbusinessnegotiationsandbetweenthepartiesorpartiesandfunders.

Anemerging,andlegallypotentalternativetotheenforcementvianationalcourts
(or alternatives to judicial enforcement), especially when national courts are not
particularlyarbitrationfriendly,orsupportiveofactionsbroughtbyforeignparties,
isthesubstantiationofaclaimonthebasisofICSIDorBilateralInvestmentTreaties.
Insuchcasesaserious(oratleastreasonable)attemptmustfirstbemadetohave
the,typicallycommercialarbitration,awardenforcedviathenationalcourts.What
remains then (as guidance question) is to appreciate when the nonenforcement
maybeseenastriggeringinvestmentprotectioninthesenseofinvestmenttreaties.

Inordertoresorttoinvestmentprotectionitisessentialtoestablish(a)whetheran
arbitralaward(whichfunctionallyisequatedtoalocalcourtjudgment,irrespective
of where it was made) is an investment, and if the answer to the first question is
negativetoexplorewhether(b)theundueandpossiblyunlawfuljudicialinactionor
interferencemayqualifyasexpropriationordenialofjusticeconsistentwiththefair
and equitable standard entrenched in most bilateral investment treaties and in
customaryinternationallawwhererelevant.Inthisregardthereisapeculiarand
possibly unintended interaction of commercial arbitration and investment treaty
arbitration.

The case law stemming from investment treaty tribunals is reviewed above and
shows that the practice is inconsistent but with a trend creeping, if not emerging.
Fourcases,SaipemvBangladesh,ATAvJordan,WhiteIndustriesvIndiaandChevron
andTexacovEcuador111goinonedirection,whiletwocases,GEAvUkraineandtoa
large extent Frontier Petroleum Services v Czech Republic 112 go in a different
direction. It is of course also important to point out that specifics of fact patterns
and relevant treaties as well as state practices are always relevant so details and
nuancesarecritical.However,certainprinciplescanbeestablishedbylookingatthe
cases.

Thekeyquestioniswhetheranarbitrationagreementand/oranarbitralawardcan
bedeemedaninvestment,capableofprotectioninaccordancewithBITs.States,in

111

This,alreadyalmosticoniccases,deservesanalysisinaseparatearticleasithasseveralfacetsand
manyinstancesinarbitrationandvariousnationalcourts.Seehttp://italaw.com/cases/257formany
butnotallinstances.
112
Supranote107.

25

theirdefencetoinvestmenttreatyclaims,arguethatanawardcannotbeseenasan
investment in the context of Art.25ofthe ICSIDConvention (andarguably most
BITs).ItisstillthedominantviewthatinvestmentmustmeettheSalinitest.113

TheSaipemtribunalemphasizedthatinordertoestablishwhetheraninvestment
existspursuanttheSalinitestonehastotakeintoaccountthewholeoperationof
the foreign company rather than the award or the arbitration agreement. It also
foundthattheentireoperationalsomettherequirementsofthebroaddefinitionof
therelevantBIT.InrelationtotheBITdefinitionthetribunalconfirmedthatanykind
or property can qualify as investment and the award functions or may function as
property,asanasset.TheATAtribunaltookasimilarapproach,lookingattheaward
asapartandparceloftheentireoperationinthehoststateandconfirmedthatit
canbeconsideredinordertoestablishjurisdictionundertherelevantBITandICSID
Convention.

TheGEAvUkrainetribunaltookadifferentapproach:althoughitdidacceptthatthe
conversion contract couldqualify asaninvestment,thesettlementandrepayment
agreementsdidnotconstituteinvestmentsundertherelevantBITorICSID.Itfurther
found that the ICC award could not itself qualify as investment: it is a legal
instrument which provides for the disposition of rights and obligations.114It also
added that the award could not be an investment because it is the outcome (or
offspring) of the settlement and repayment agreements which it found are not
investments. It went further to point out that it cannot reconcile the approach
adoptedbytheSaipemandATAtribunals.

TheFrontierPetroleumServicestribunaladoptedamixed(ornuanced)approach.As
itwasanUNCITRALtribunal,itdidnothavetoexaminejurisdictionunderArt.25of
theICSIDConvention:itonlyconsideredtherelevantBIT.Itfoundthattheawarddid
constitute an investment for purposes of the BIT pointing out that the original

113

AccordingtotheSalinitribunalforaninvestmenttoqualifyunderArt.25oftheICSIDConvention,
theinvestmentmust(i)beasubstantialcommitment,(ii)associatedwithrisk,(iii)havecertain
(longer)duration,(iv)bringwithitaregularityofprofitandreturnand(v)contributetotheeconomic
developmentofthehostState.Seesubstantialwritingsonthetopic,including,forexampleCrinaM.
Baltag,PrecedentonNotionofInvestment:ICSIDAwardinMHSv.Malaysia,4(5)TDM(2007),at2
3;WalidBenHamida,TwoNebulousICSIDFeatures:TheNotionofInvestmentandtheScopeof
AnnulmentControl,24J.IntlArb.287(2007),at289;ChristoperF.Dugan,DonWallaceJr.,Noah
Rubins,andBorzuSabahi,InvestorStateArbitration(OxfordUniversityPress,2008),at257etseq.;
RudolfDolzerandChristophSchreuer,PrinciplesofInternationalInvestmentLaw(OxfordUniversity
Press,2008),at69;MartinEndicott,TheDefinitionofInvestmentinICSIDArbitration:Development
LessonsfortheWTO?,inMarkusGehring,MarieClaireSegger(eds),SustainableDevelopmentin
WorldTradeLaw379(KluwerLawInternational,2005);EmmanuelGaillard,IdentifyorDefine?
ReflectionsontheEvolutionoftheConceptofInvestmentinICSIDPractice,inBinder,Kriebuam,
ReinischandWittich(eds.),InternationalInvestmentLawforthe21stCentury:EssaysinHonourof
ChristophSchreuer403(OxfordUniversityPress,2009);DevashishKrishan,ANotionofICSID
Investment,inToddWeiler(ed),InvestmentTreatyArbitrationandInternationalLaw61(JurisNet,
2008);SbastienManciaux,TheNotionofInvestment:NewControversies,9(6)J.WorldInvestment
&Trade1(2008).
114
GEAvUkraine,supranote82,atpara.161.

26

investment was transformed into an entitlement to a first secured charge in the


FinalAward.115

Allthesecases,aswellasWhiteIndustries,alsoclearlyindicatethatwrongfuljudicial
inactionorapotentiallyunlawfuljudicialinterferencewiththearbitralprocessmay
triggerinvestmentprotectionunderBITsandtheICSIDConvention.Itseemsthatthe
mosttypicalcasewillbedenialofjusticeconsistentwithfairandequitablestandard.
Ofcourse,expropriationmayalsobearguedbutitwillnotalwaysbeeasytoprove.
Inmostcases,however,anonenforcementofanawardbasedongroundsprovided
forintheNewYorkConventionwhereanadditionaldenialofjusticeclaimcannotbe
substantiated will not be sufficient to trigger investment treaty protection. As an
exception,theFrontierPetroleumServicestribunaldidlookattheissueoftheNew
York Convention and instead of denial of justice, fair and equitable treatment and
expropriationexaminedthequestionoffullprotectionandsecurity.Thetribunalsin
examiningalltheseissuestheyalsoassessedthelawfulnessorunlawfulnessofthe
actionsandconductofthestate.

Ameredissatisfactionofthepartyseekingprotectionwiththedecisionofnational
courtswillnotsufficeforinvestmenttreatyarbitration.Ifthedecisionofthenational
court is tenable (or simply arguable) and there is no evidence of discriminatory
treatment, arbitrariness, abuse of rights or bad faith then there is no scope for
introductionofinvestmenttreatyprotection.Insomecasestheconductofthestate
willamounttoabuseofrights.Theseassessmentsastoabuseofrightsordenialof
justicewillbedoneonthebasisofinternationallaw.

Despite the inconsistencies116of the awards discussed above there seems to be a


cleartrendsupportingthepropositionthatinvestmenttreatyarbitrationprovidesan
additionalforumoranultimumrefugiumremedytoinvestorswheretherehasbeen
judicialinterferencewiththearbitralprocessand/orthearbitralaward.

Itappearsthatinvariablyfiveconditionswillneedtobefulfilled:
(a) The jurisdiction of investment arbitration tribunals will have to be
basedonrelevantBITsand/ortheICSIDConventionwhichinthecase
of the BITs will have to include sufficiently broad language to
accommodatesuchclaims;
(b) The investment arbitration tribunal will have to establish that the
state interference with the award will be subsumed to the relevant
definitionofinvestmentintheBIT;
(c) Judicial interference may include unlawful, systemic judicial inaction
whichmayviolatelegitimateexpectationofawardcreditors;
(d) In all cases the judicial attitude should not be tenable, even if
arguableandshouldtypicallybeabusiveordiscriminatoryorarbitrary
orinbadfaith;

115

FrontierPetroleumServicesvCzechRepublic,supranote107,atpara.231.
SeealsothediscussioninClaypoole,supranote49,passim.

116

27

(e) The assessment of state conduct, be it expropriation or denial of


justiceorfullprotectionandsecuritywillhavetosatisfythestandards
prevalentintherelevanttreatyand/orcustomaryinternationallaw.

Itisworthnotingthatallthesecaseshavebeenconsideredinthelastfewyearswith
a slight increasing trend. Linking the destiny of commercial arbitration outcomes
with foreign investment protection and investment treaty arbitration is indeed an
intriguing proposition with consequences which are not yet easy to ascertain fully.
Sofar,investmentarbitrationtribunalshaveshownreasonandrestraintandtreaded
verycarefully.

Whatitisclearsofar(andanundisputedconclusiontodraw)isthatthemerenon
enforcement of commercial arbitration awards would not automatically pull the
triggerofinvestmentprotection;forinvestmenttreatyprotectiontobeactivatedit
isimportantthatclaimantslinkthenonenforcementwithunlawfulconductofthe
state (judicial or other authorities) and are able to prove that such conduct would
amount either to denial of justice (and treatment which is unfair and inequitable)
and in some cases indicative of absence of full protection and security or even
expropriation.Investmenttreatyarbitrationtribunalswillexaminetheirjurisdictions
in the usual way and in the case of ICSID arbitration they will also have to satisfy
themselves that the conditions of Art. 25 ICSID Convention are also met. In other
words, investment treaty arbitration will not normally provide for an additional
instanceintheenforcementprocessofcommercialawardsbutmaywellbethere
to provide a remedy in case a state judicial authority either refuses to enforces or
otherwisefailstotakeanyactiontoenforceanarbitralawardsinafashionwhichis
arbitrary,discriminatory,inbadfaithandpossiblyamountingtoanabuseofrights.It
isahighthresholdwhichisnecessaryinordertoenhanceprotectionunderBITsand
theICSIDConvention.

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