AN ABCD of Post-Award Remedies Investment Treaty Forum, 9 May 2008 Matthew Weiniger, Head of Public International Law, Herbert Smith LLPmatthew.weiniger@herbertsmith.com

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• A is for Annulment

• B is for Bolivia

• C is for Constitutional prohibition

• D is for De facto refusal to enforce

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AWARDS AND ANNULMENT

0

2

4

6

8

10

12

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

Number of ICSID awards

Number of applications forannulment

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ANNULMENT – WHO SEEKS IT?

Annulment Applications

Investor Applicant

State Applicant Total

Decided 6 9 15

Pending 4 6 10

Settlement/Discounted

2 1 3

Total 12 16 28

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ANNULMENT

• Inconsistent? And compared to what?

• Swembalt v Latvia: Denmark/Sweden

• Stay jurisprudence: CMS and Azurix

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BOLIVIA’S WITHDRAWAL FROM ICSID

• Written Notice of Denunciation notified 2 May 2007, took effect 3 November 2007

• What is its effect?

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DENUNCIATION AND THE ICSID CONVENTION

Article 71

Any Contracting State may denounce this Convention by written notice to the depository of this Convention. The denunciation shall take effect six months after receipt of such notice.

Article 72

Notice by a Contracting State pursuant to Articles 70 or 71 shall not affect the rights or obligations under this Convention of that State or of any of its constituent subdivisions or agencies or of any national of that State arising out of consent to the jurisdiction of the Centre given by one of them before such notice was received by the depositary.

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EFFECT OF DENUNCIATION

Three possible answers:

• Investor must perfect consent before notice sent

• Investor must perfect consent before notice takes effect

• Investor can continue to rely upon consent in BITs

• ETI Eurotelecom v Bolivia (Arb 07/28)

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ECUADOR

23 November 2007:

Withdraws consent for disputes arising out of exploitation of natural resources such as petroleum, gas, minerals and others.

• Murphy Exploration v Ecuador (Arb/08/04)

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CONSTITUTIONAL PROHIBITION

Vienna Convention on the Law of Treaties

Article 27

Internal law of States, rules of international organisations and observance of treaties

1. A State party to a treaty may not invoke the provisions of its internal law as justification for its failure to perform the treaty.

2. An international organization party to a treaty may not invoke the rules of the organization as justification for its failure to perform the treaty.

3. The rules contained in the preceding paragraphs are without prejudice to article 46.

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DE FACTO REFUSAL TO ENFORCE

Argentina:

• The Republic of Argentina hereby provides “an undertaking to CMS Gas Transmission Company that, in accordance with its obligations under the ICSID Convention, it will recognize the award rendered by the Arbitral Tribunal in this proceeding as binding and will enforce the pecuniary obligations imposed by that award within its territories, in the event that annulment is not granted”.

• Where is the catch?

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DE FACTO REFUSAL TO ENFORCE

• Annulment Stay Decision, para 50, understands this as:

“This letter irrevocably comments Argentina to enforce the pecuniary obligations imposed upon it by the Award in the event that annulment is not granted. In the Committee’s view, the letter of Dr. Guglielmino dated 12 June 2006 should dispel the doubts that CMS may legitimately have had in the past.”

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WORLD BANK OPERATIONAL MANUAL BANK PROCEDURES

BP 7.40, January 1996:

1. When a dispute over default, expropriation, or governmental breach of contract comes to the attention of a Bank staff member, the staff member informs the country department (CD) director and the Legal Department (LEG). In consultation with LEG, the CD director recommends a Bank position to the Regional vice president (RVP). If, on this basis, the RVP decides not to make any new loans to the country, the RVP informs the relevant managing director and the Senior Vice President and General Counsel.

2. If, at the time a loan is presented to the executive directors for approval, there are any substantial amounts in dispute between the borrowing country and suppliers or lenders to, or investors in, that country, the matter is mentioned in the Memorandum and Recommendation of the President/President’s Report.

3. If the Bank decides to lend while a dispute over default or expropriation is pending, staff monitor the situation during project implementation to assess progress toward a settlement or decision.