Prominent Issues in Latin American Arbitration:
Annulment, Multi-party Arbitrations, Corruption and Fraud
Carolyn B. Lamm
White & Case LLP
April 12, 2012
Prominent Issues
 ANNULMENT
 MULTI-PARTY ARBITRATIONS
 FRAUD & CORRUPTION
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Finality is a hallmark of an ICSID Award
Finality is central to the ICSID system
 Article 53(1): “The award shall be binding on the parties and shall not be subject to
any appeal or any other remedy except those provided for in this Convention.”
 Article 54(1): “Each Contracting State shall recognize an award … and enforce the
pecuniary obligation imposed by that award … as if it were a final judgment of a court
in that State.”
Annulment grounds are limited
 Article 52 (1): “Either party may request annulment of the award by an application in
writing addressed to the Secretary-General on one or more of the following grounds:
(a)
that the Tribunal was not properly constituted;
(b)
that the Tribunal has manifestly exceeded its powers;
(c)
that there was corruption on the part of a member of the Tribunal;
(d)
that there has been a serious departure from a fundamental rule of procedure; or
(e)
that the award has failed to state the reasons on which it is based.”
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Annulments in Latin America
 ICSID annulment from Latin America: 40% of total (58% of pending)
Applying Party
Applications
Annulled
Not Annulled
Pending
10
3*
4
3
Chile
2
0
1
1
Ecuador
2
0
1
1
Honduras
1
0
1
0
Peru
1
0
1
0
Claimants
7
2*
3
2
Argentina
*Vivendi v. Argentina and CMS Gas Transmission v. Argentina: “Partial” Annulment
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Awards Annulled in 2010/2011
GLOBALLY: 4 of 11 | LATIN AMERICA: 2 OF 6
March 25, 2010:
Rumeli Telekom v. Kazakhstan
Not annulled
May 11:
Transgabonais v. Gabon
Not annulled
June 14:
Helnan v. Egypt
Partially annulled
June 29:
Sempra v. Argentina
Annulled
July 30:
Enron v. Argentina
Annulled
Aug. 10:
Vivendi v. Argentina II
Not annulled
Dec. 10:
Vieira v. Chile
Not annulled
Dec. 23:
Fraport v. Philippines
Annulled
March 1, 2011:
Duke v. Peru
Not annulled
Sept. 6:
Togo Electricité v. Togo
Not annulled
Sept. 16:
Continental Casualty v. Argentina
Not annulled
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Examples of Appellate-like Decisions in Latin American
 Sempra v. Argentina
 Annulled the Award on the ground of manifest excess of powers for resorting to customary
international law to interpret the BIT
 Essentially acted as an appellate body reviewing the merits of the Award
 Enron v. Argentina
 Annulled the Award on the ground of manifest excess of powers for failure to apply customary
international law on necessity
 Yet found that the Parties had not argued the legal elements before the Tribunal, and the Tribunal
thus was not required expressly to address them
 The ad hoc Committee essentially reviewed the merits of the Award
 Vivendi v. Argentina II
 No annulment, but replete with gratuitous criticism of Award
 Criticized the arbitrator severely, citing “most serious shortcomings”
 Criticized the arbitrator’s judgment in other cases
 Additional Opinion of Professor Dalhuisen criticized the ICSID Secretariat generally as seeking
too active a role
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Other Challenges to Finality in Latin America
 Argentina’s Non-Payment of Awards
 In last decade, Argentina has not paid awards resulting from investor-state
arbitrations
 Backlash:
 On March 26, President Obama suspended Argentina from the U.S. Generalized
System of Preferences program for failure to pay awards in CMS Gas (2005) and
Azurix (2006).
 Reported U.S. opposition to World Bank and IMF loans for Argentina
 Denunciation of the ICSID Convention
 Bolivia (2007)
 Ecuador (2010)
 Venezuela (2012)
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Prominent Issues
 ANNULMENT
 MULTI-PARTY ARBITRATIONS
 FRAUD & CORRUPTION
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Use of Multi-Party Arbitration
 ICSID has registered joint requests for arbitration for 40 years
 45+ ICSID arbitrations from Latin America have involved more than one
claimant:
 Argentina: 18 arbitrations
 Venezuela: 10 arbitrations
 Ecuador: 7 arbitrations
 Peru: 4 arbitrations
 Chile: 1 arbitration
 El Salvador: 1 arbitration
 Honduras: 1 arbitration
 Nicaragua: 1 arbitration
 Panama: 1 arbitration
 Uruguay: 1 arbitration
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Argentina Water Concession Cases
 4 disputes against Argentina relating to effect of emergency measures
on water services concessions in different provinces:
 Suez, Sociedad General de Aguas de Barcelona, S.A. and InterAguas Servicios
Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17
 Aguas Cordobesas S.A., Suez, and Sociedad General de Aguas de Barcelona S.A.
v. Argentine Republic ICSID Case No. ARB/03/18
 Suez, Sociedad General de Aguas de Barcelona S.A. and Vivendi Universal S.A. v.
Argentine Republic, ICSID Case No. ARB/03/19
 AWG Group Ltd. v. Argentine Republic (UNCITRAL)
 Each ICSID case involved multiple claimants and multiple BITs
 All 4 cases had same Tribunal and similar jurisdictional considerations
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Abaclat and others v. Argentina
 Disputes relating to Argentine default on sovereign bonds
 60,000 claimants are Italian bondholders
 Decision on Jurisdiction (4 Augist 2011): Majority found that it had
jurisdiction over “mass claims”
 The "mass aspect of Claimants' claims" present no barrier to the arbitration and the
"claims are admissible."
 “This appears to be the first case in ICSID’s history [in which] mass claims are
brought before it”
 “Undeniable the large number of Claimants raises a series of questions and
challenges”
 Important to begin the analysis with a review of the terms of the relevant
BIT. Here the Argentina-Italy BIT provides that bonds or “debt
instruments” and securities are an investment; uses plural language for
multiple claimants
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Abaclat and others v. Argentina (cont.)
 The Argentine-Italy BIT is replete with references to plural “nationals”
and “investors”
 Preamble: “between States and Nationals”
 Art. 2(1): “investors of the Contracting Party”
 Art. 2(2): ”Investments of investors”
 Art. 3(1): “investments made by the investors”
 Art. 4: “Investors of one Contracting Party”
 Art. 5(1)(a):“investors of the other Contracting Party”
 Art. 5(1)(b): “investors of one of the Contracting Parties”
 Art. 6(1) and (4): “guarantee to investors”
 Art. 8(3): “investors still continues to exist”
 Art. 8(5)(a): “investments by investors”
 Art. 10 (1): “Contracting Parties and their investors”
 Art. 10 (2): “more favorable for the investors”
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Compare: Unconsolidated Related Cases
RELATED CASES  Camuzzi v. Argentina
 Sempra v. Argentina
 Electricidad Argentina v.
SIMILARITIES




 Same Claimant (EDF)
 Same Tribunal
 Similar disputed issues
DIFFERENCES
 Separate jurisdictional
 Electricidad Argentina:
rulings
 Sempra: Award in
2007; Anulled in 2010
 Camuzzi: suspended in
2010
Suspended in 2006
 EDF International:
Proceeding closed March
13, 2012. Decision pending
Same Tribunal
Similar proceedings
Similar rules
Similar disputed issues
Argentina
 EDF International v.
Argentina
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Prominent Issues
 ANNULMENT
 MULTI-PARTY ARBITRATIONS
 FRAUD & CORRUPTION
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Fraud/Corruption Allegations as Both Sword and Shield
 Allegations of fraud/corruption by state may be part of claims for breach
of BITs
 See EDF v. Romania (recognizing that requiring bribes would constitute, if proven, “a
violation of the fair and equitable treatment owed to the Claimant pursuant to the BIT”
and a “fundamental breach of transparency and legitimate expectations”)
 Allegations of fraud/corruption by investor may be bar against bringing
claims
 See Plama v. Bulgaria (finding that material misrepresentations by investor in the
course of his investment resulted in the investment being deemed to be unprotected
by the Energy Charter Treaty (“ECT”), even though the ECT did not have
requirement that investment be “in accordance with law”.
 See World Duty Free v. Kenya (holding that Claimant’s bribes violated international
public policy and, as a result, that “Claimant is not legally entitled to maintain any of
its pleaded claims”).
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Significant Latin American Case: Inceysa v. El Salvador
 El Salvador objected to jurisdiction based on Claimant having obtained
concession contract by fraud.
 Tribunal found numerous misrepresentations by Inceysa during bidding
process:
 Submitting false financial information
 Failure to tell the truth regarding identity of strategic partner
 Misrepresentation of corporate history and experience
 Submitting false information concerning experience of sole administrator
 Concealing affiliation with runner-up in bid
 Tribunal found that even though BIT did not us “in accordance with law”
language to define investment, “disputes that arise from an investment
made illegaly are outside of the consent granted by parties and,
consequently, are not subject to the jurisdiction of [ICSID], and that this
Tribunal is not competent to resolve them…”.
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Other Latin American Cases
 Fraud/Corruption allegations have been less salient in other Latin
American arbitrations.
 Luchetti v. Peru
 Tribunal didn’t reach Peru’s objection that Claimants’ investment was not in
accordance with Peruvian laws and regulations.
 Aguas del Tunari v. Bolivia
 Tribunal rejected Bolivia’s jurisdictional challenge that Claimant’s corporate structure
breached concession contract and was misrepresented.
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