issue #22, week 44. 02 November 2007
Prepared by TDM and Aloysius Gng (CEPMLP/Dundee)

TDM News Digest

provides a condensed overview of recent events of interest to the international arbitration community.

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Recent issues:

NEWS

Russia: Dutch court voids YUKOS bankruptcy in Netherlands

October 31, http://uk.reuters.com/article/oilRpt/idUKL3131955920071031

A Dutch court nullified on Wednesday all decisions taken by the Russian receiver of bankrupt oil firm YUKOS related to the company's Dutch assets. The court said receiver Eduard Rebgun, who had replaced the management of Dutch-based YUKOS Finance BV and put all assets, worth about $2 billion, up for sale, had no right to do so and all his actions should be reversed.

"Russian bankruptcy of YUKOS was not in line with Dutch principles of law," the court said in its ruling, adding it could not recognise the bankruptcy or Rebgun's rights as a caretaker.

…

See also (in Dutch)

http://www.rechtspraak.nl/Actualiteiten/Belangrijke+uitspraak+inzake+Yukos.htm

http://zoeken.rechtspraak.nl/resultpage.aspx?snelzoeken=true&searchtype=ljn&ljn=BB6782&u_ljn=BB6782

Scottish & Newcastle placed more pressure on Carlsberg and Heineken to raise a proposed 720p a share takeover offer for the brewer or walk away by asking a Swedish arbitration panel to confirm that Carlsberg had breached a legal agreement in their Russian joint venture.

November 1, http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=FT&Date=20071101&ID=7738898

The move comes after S&N rejected a conditional offer from Carlsberg and Heineken last week, deriding it as an attempt to buy S&N "on the cheap". S&N has not met Carlsberg and Heineken to discuss the offer, but on Wednesday stressed that the arbitration action did not stop the two brewers from making another offer. "The ball is in their court," S&N said.

…

See also "Carlsberg fury as S&N seeks to derail bid with arbitration move" http://business.scotsman.com/agriculture.cfm?id=1739082007

ICSID: CMS Gas Transmission Company v. Argentine Republic (Annulment Proceeding) (September, 2007)

http://www.asil.org/ilib/2007/10/ilib071031.htm#j1

http://www.worldbank.org/icsid/cases/pdf/arb0108_Annulment_Decision.pdf

Members of the ad hoc Committee: Judge Gilbert Guillame, President, Judge Nabil Elaraby, Professor James R. Crawford. Secretary of the ad hoc Committee: Mr. Gonzalo Flores

An ad hoc committee (Committee) of the International Centre for the Settlement of Investment Disputes (ICSID) upheld Argentina's application for an annulment of a Tribunal Award with respect to an "umbrella clause" in the bilateral investment treaty (BIT) between the US and Argentina. The Committee dismissed Argentina's other claims for annulment.

The case arose out of Argentina's economic crises. As part of its economic recovery effort, Argentina privatized a number of government owned industries including the gas industry and created Transportadora de Gas del Norte (TGN) to which it granted a license to distribute gas. Argentina eventually sold 70% of TGN to a group of investors. It also tied the Argentine peso to the US dollar. CMS Gas Argentina bought a total of 29.42% of the shares of TGN. It was CMS' understanding that tariffs were to be calculated in dollars and then converted to pesos at time of billing and adjusted every six months in accordance with the US Producer Price Index (US-PPI). In 2001 Argentina's economic situation worsened. It passed Law No. 25.561 which declared a state of emergency and ended the adjustment of tariffs in accord with the US-PPI and set the tariff calculation at one peso to one dollar.

CMS applied for arbitration against Argentina. In its May 2005 Award the Tribunal held that there had been no expropriation or discriminatory/arbitrary treatment of CMS under the BIT. It held that Argentina had breached the duty to provide CMS with fair and equitable treatment as required under Article II(2)(a) of the BIT, and failed to follow the obligations pursuant to which the investment was made under Article II(2)(c) of the BIT. It rejected Argentina's defenses that it had acted out of necessity and Article XI of the BIT and awarded CMS US $133.2 million. Argentina applied to ICSID for an annulment of the May 12, 2005 award asserting pursuant to Article 52(1) of the Convention that the Arbitral Tribunal had manifestly exceeded its powers and failed to state the reasons for which the award was made in violation of Article 52(e) of the ICSID Convention.

In a number of places in its decision the Committee notes that its jurisdiction is a limited one under Article 52 of the ICSID Convention and that it is not an appellate body. The Committee rejected Argentina's argument that it manifestly exceeded its powers when it permitted CMS to bring suit regarding its lost incomes because it deemed CMS to be an investor under the BIT that had made a capital investment covered by the BIT, and its claims for violation thus fall within the jurisdiction of the Tribunal. The Committee likewise disposed of Argentina's claim that it transformed the fair and equitable and umbrella clauses of the BIT into strict liability provisions because the Tribunal's finding that the Argentine emergency law transformed the business environment upon which the investment was based was founded upon applicable law and relevant facts.

…

USA: Income Trust Fall-Out: American Couple the First to Launch Nafta Challenge Against Government of Canada for Eliminating Income Trusts; Inviting Others to Join

U.S. Investors In Canadian Energy Trusts NAFTA Claim
NAFTA Trust Claims, http://www.naftatrustclaims.com/

OTTAWA - OCTOBER 30, 2007 - Marvin and Elaine Gottlieb are taking on Prime Minister Stephen Harper, Finance Minister Jim Flaherty and the Canadian government for the Halloween 2006 broken promise on the elimination of income trusts. The Chicago couple are the first Americans to file a Notice of Intent to Submit a Claim to Arbitration under the North American Free Trade Agreement (NAFTA). The couple are among the thousands of US investors who lost a total of $5 billion dollars in the fall-out from the Conservative Government's decision last year to effectively tax income trusts in the energy sector out of existence.

"The Halloween 2006 income trust decision by the Government of Canada has had a massive financial impact on thousands of investors in Canada and the U.S. and we believe that it breached Canada's NAFTA obligations", said Marvin Gottlieb. "Because of this decision, more than $30 billion has been lost by individual investors in Canada and more than $5 billion has been lost by energy trust investors, including Elaine and me, in the United States.

"Based on Stephen Harper's very public promise, thousands of individuals and grandparents like us invested our hard earned money in income trusts and energy trusts. This is not just a nightmare on Bay Street. It's a nightmare on Wall Street. But worse, it's been a nightmare on Main Street".

Under the NAFTA, Canada is not allowed to target other NAFTA citizens when they impose new measures. Mr. Flaherty is on record that energy trusts were included because of their high U.S. ownership, while Real Estate Investment Trusts, owned mostly by Canadians, were excluded. The NAFTA also stipulates that Canada must pay compensation for destroying investment by U.S. investors. The Government of Canada's 2006 Halloween tax changes for income trusts were designed to eliminate the income trust model for investment by U.S. citizens. The NAFTA says that U.S. investors are entitled to rely upon Canadian government promises. Mr. Harper repeatedly made a public promise that his Government would not tax trusts, as had the previous Liberal Government. Canada's tax treaty with the United States also says that trust income will not be taxed at more than 15%.

…

Notice of Intent To File NAFTA Arbitration

http://www.naftatrustclaims.com/sitebuildercontent/sitebuilderfiles/noifunal.pdf

Bolivia Asks ICSID to Reject Telecom Italia Plea for Arbitration

http://www.cellular-news.com/story/27057.php

Bolivia's government has asked the World Bank's International Center for Settlement of Investment Disputes (ICSID) to reject a plea for arbitration filed by Telecom Italia subsidiary Euro Telecom International, regional news portal Terra reported.

In May 2007 Bolivia declared that it did not recognize ICSID as a valid organization and in a mission to New York last week Bolivia's government coordination vice minister Héctor Arce argued that Bolivia can no longer be included in the ICSID system, which disqualifies the agency as a competent body for taking this case.

…

Poland Backs Out of Privatisation

October 27, http://www.ft.com/cms/s/0/c0baea5a-8428-11dc-a0a6-0000779fd2ac.html

Poland's treasury has officially backed out of a 1999 agreement to privatise PZU, the state-owned insurance company, days before a new government takes power. Poland has been in a long-running dispute with Eureko, the Dutch insurance consortium, over Warsaw's failure to follow an agreement and sell it PZU. Eureko has taken Poland to arbitration and could claim more than €2bn ($2.9bn, £1.4bn) in damages. Eureko said yesterday the ministry's decision was meaningless. Civic Platform, which takes power after November 5, called the dispute a "serious danger".

…

Ecuador's New Oil Contracts to Exclude International Dispute Arbiter

October 26, http://news.morningstar.com/news/ViewNews.asp?article=/DJ/200710261332DOWJONESDJONLINE000802_univ.xml&Cat=IndSect

New contracts signed between foreign oil companies and Ecuador will exclude the World Bank's International Center for Settlement of Investment Disputes (ICSID) as a forum for any disagreements, its energy minister told Dow Jones Newswires on Friday. Energy Minister Galo Chiriboga said oil companies will have local avenues to resolve any disputes, such as the arbitrage center at Quito's Chamber of Commerce and the local court overseeing business disagreements.

A clause determining the ICSID as arbiter is already out of the new contracts Ecuador plans to sign for marginal, or less prolific, oil fields before the end of the year. Companies bidding for the marginal fields would have to invest about $180 million. Ecuador would get 85 barrels for each 100 barrels from the fields.

Additionally, if Ecuador succeeds in reaching an agreement with the five foreign oil companies operating in the country, it could exclude the ICSID in the renegotiated contracts as well, said Jaime Pinos, the Energy Ministry's legal counselor.

....

See also

http://www.elcomercio.com/noticiaEC.asp?id_noticia=146095&id_seccion=6

http://www.elcomercio.com/noticiaEC.asp?id_noticia=143287&id_seccion=6

Indonesia's Pertamina fined for perjury in Karaha case

October 27, http://uk.reuters.com/article/oilRpt/idUKJAK33168620071027

JAKARTA, Oct 27 (Reuters) - Indonesia's state oil and gas firm Pertamina has paid $500,000 to Karaha Bodas of the United States because a former Pertamina official committed perjury in a court case, a lawyer for the Indonesian firm said on Saturday.

…

Venezuela eyes Conoco arbitration

October 26, http://www.abcmoney.co.uk/news/262007153244.htm

CARACAS, Venezuela (AP) - Venezuela said Friday it is ready for international arbitration if it fails to reach an agreement with ConocoPhillips on compensation for the company's multibillion-dollar investment in the South American country. 'We have always been ready for arbitration,' Oil Minister Rafael Ramirez said in a statement. 'We are ready and we hope to resolve this situation in the short term.'

Houston-based ConocoPhillips, along with Exxon Mobil Corp., refused to sign deals in May with Venezuela to keep pumping oil in the petroleum-rich Orinoco Basin under tougher terms imposed by President Hugo Chavez's government.

…

India: Remarks by Secretary Henry M. Paulson, Jr. on the United States as a Partner in India's Continued Growth at the US-India Forum

http://www.treas.gov/press/releases/hp648.htm

…

Investors also want to know that contracts can be legally enforced, and that they have recourse to a fair and timely arbitration or judicial process when needed. In order to meet infrastructure investment needs, real efforts must be made to address this area.

…

Article: Transnational Tribunals and the Transmission of Norms

by Chris Borgen, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=793485

... a substantially revised version of my forthcoming article Transnational Tribunals and the Transmission of Norms: The Hegemony of Process. Transnational tribunals, which I define as dispute resolution mechanisms that allow nonstate actors such as individuals and companies to sue states for alleged infringements of their rights, include regimes as disparate as ICSID arbitrations and the European Court of Human Rights. My article assesses whether and how such tribunals cause normative change in the domestic legal and political systems of member states…. via Opinio Juris, http://www.opiniojuris.org/posts/1193679850.shtml

You can download the paper at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=793485

EVENTS

Frankfurt Investment Arbitration Moot Court
The Frankfurt Investment Arbitration Moot Court is the first international student competition focussing on investment protection. The students will present their arguments orally on 15 February 2008 before tribunals of arbitration and investment treaty specialists.
February 15 – 16 2008. Frankfurt am Main Chamber of Commerce and Industry, Germany
More information is available at www.investmentarbitrationmoot.com

Short overview of upcoming events

The above information is reproduced from the International Arbitration Planner by kind permission of Lovells (www.lovells.com and www.lovells.com/arbitration). More details on these and many other events can be found at www.arbitrationevents.com

MOVES / JOBS

Frederick Fucci Joins Arnold & Porter in New York

http://www.aporter.com/press_releases.cfm?u=TransactionalLawyerJoinsArnoldPorterInNewYork&action=view&id=176

Arnold & Porter LLP announced that corporate transactional lawyer Frederick Fucci has joined the firm as a partner in New York. Mr. Fucci has significant transactional experience in the energy sector and other industries. He has represented both domestic and foreign clients in mergers and acquisitions, joint ventures, project finance transactions, restructurings, and commercial contract matters. In addition, Mr. Fucci has handled a number of international arbitrations including in commercial disputes before the International Chamber of Commerce (ICC) and as an arbitrator on panels appointed under ICC rules.

"We welcome Fred's broad transactional practice, which expands our New York and firmwide corporate platform and dovetails nicely with Arnold & Porter's public policy, government contracts, environmental, litigation, and international tax practices," said Michael Gerrard, head of the New York office. "His commercial arbitration experience also complements Arnold & Porter's extensive international arbitration experience."