Presented By: Partner. Legal Practitioners & Arbitrators

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Arnold Clarke
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1 CURRENT TRENDS IN INVESTOR-STATE STATE ARBITRATION Presented By: Mrs. Funke Adekoya, SAN FCIArb Chartered Arbitrator Partner Legal Practitioners & Arbitrators

2 CURRENT 2013/2014 ICSID CASELOAD STATISTICS 40 new cases were accepted by ICSID in % of ICSID cases are based on bilateral investment treaties for jurisdiction 26% of cases are in the oil, gas and mining sector, with 13% and 10% in the electrical power & energy and transportation sectors respectively Statistics taken from The ICSID Caseload Statistics (Issue ) available at

3 CURRENT TREND 1 COUNTRIES EXITING FROM THE ICSID CONVENTION. ANY EFFECT? Bolivia, Ecuador and Venezuela have withdrawn from the International Centre for the Settlement of Investment Disputes (ICSID) regime. Australian government has announced that it would no longer include investor-state dispute resolution provisions in its bilateral and regional investment agreements. South Africa has decided to phase out a number of bilateral investment treaties (BITs) with various European states. Nigeria is considering the introduction of preliminary mediation of disputes in the new model BITs. In spite of all these ICSID will remain relevant for many years to come

4 CURRENT TREND 2 INCREASE IN INVESTOR CLAIMS? The number of arbitrations brought by investors against states continues to increase. Typically, the investor s claims are brought under bilateral investment treaties (BITs) entered into between states that provide for the international arbitration of disputes regarding the investor s investment in the host state

5 MORE NIGERIAN INVESTOR-STATE STATE ARBITRATION? With more FDI into the energy, electricity, mining and infrastructure structures, there is a likelihood for more disputes in this arena. By virtue of 26 of the Nigerian Investment Promotion Act which states that (1) (2)Any dispute between an investor and any Government of the Federation in respect of an enterprise to which this Act applies which is not amicably settled through mutual discussions, may be submitted at the option of the aggrieved party to arbitration as follows (a) or (b) in the case of a foreign investor, within the framework of any bilateral or multilateral agreement on investment protection to which the Federal Government and the country of which the investor is a national are parties; or (c)in accordance with any other national or international machinery for the settlement of investment disputes agreed on by the parties. A foreign investor may be able to access ICSID arbitration against a State government in the absence of a BIT between host and investor country.

6 NIGERIA AND ICSID Currently Nigeria has only one case filed with ICSID However there are many ongoing arbitrations that may result in ICSID claims. The Petroleum Industry Bill when passed and the impact of privatisation share purchase agreements may also result in more ICSID claims in the near future.

7 INTEROCEAN OIL DEVELOPMENT COMPANY AND INTEROCEAN OIL EXPLORATION COMPANY V. FEDERAL REPUBLIC OF NIGERIA (ICSID CASE NO. ARB/13/20) Subject Matter Oil exploration and production joint venture Date Registered September 09, 2013 Date of Constitution of Tribunal Constituted:December 11, 2013 Composition of Tribunal President:William W. PARK (U.S./Swiss) Arbitrators:Julian D.M. LEW (British) Edward TORGBOR (British/Ghanaian) Party Representatives Claimant(s) Respondent(s) Bello Salihu, Lagos, Nigeria Aare Afe Babalola, Lagos, Nigeria Oba Nsugbe, London, U.K. Addie & Co, London, U.K. Ajumogobia & Okeke, Lagos, Nigeria Status of Proceeding Pending (the Tribunal held a hearing on preliminary objections in London on June 26, 2014)

8 CURRENT TREND 3 MORE CLAIMS BASED ON CHANGES TO GOVERNMENT REGULATIONS More claims are based on perceived wrongful government action than previously. In 2013, the same changes in energy regulations in the Czech Republic resulted in seven separate claims against it while Spain faced six separate cases in which investors challenged the same government regulations that adversely affected solar energy producers. iaepcb2014d3_en.pdf Likely to happen in Nigeria based to changes to government regulations and policy.

9 CURRENT TREND 4 USE OF CORRUPTION BY INVESTOR AS A STATE DEFENCE World Duty Free Co. Ltd. v. Republic of Kenya 2006 ICSID Case No. ARB/00/7, Award (Oct. 4, 2006), available at WDFv.KenyaAward.pdf.] Kenya was alleged to have unlawfully expropriated the claimant s investment. There was no relevant BIT, and the investment contract selected Kenyan and English law. In the course of proceedings, the investor described in detail how he had obtained the contract by bribing Kenya s then-president. Kenya seized upon the admission to argue that the case should be dismissed. The arbitral tribunal declined jurisdiction

10 CORRUPTION BY INVESTOR AS A DEFENCE Siemens A.G. v. Argentine Republic [ICSID Case No. ARB/02/08, Award (Feb. 6, 2007)] The Claimant won a US$200 million ICSID award against Argentina for the country s unlawful expropriation of a Siemens contract with the state, in violation of the Argentina-Germany BIT. Argentina initiated an annulment petition. While the petition was pending, the Siemens scandal broke : Siemens executives had systematically been bribing public officials on a massive scale worldwide, including in Argentina. Siemens eventually admitted its guilt in settlement agreements with U.S. and German anti-corruption authorities.

11 CORRUPTION BY INVESTOR AS A DEFENCE In response to these revelations, Argentina asked ICSID to revise the award. The request to open revision proceedings encouraged Siemens to settle. The agreed settlement required it to abandon its award in exchange for Argentina s consent to discontinue the annulment and revision proceedings. The relevance (or irrelevance) of Siemens corruption was never authoritatively settled. Culled from

12 CURRENT TREND 5 EXTENDING STATE DEFENCE TO ALL FORMS OF INVESTOR WRONGDOING There is a trend to Imputing into BITs an obligation for the investor to act in good faith toward the host state, so that wrongdoing by the investor will impact either jurisdiction of the arbitral tribunal or the extent of damages awarded Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26 investment obtained by fraud Plama Consortium Ltd. v. Republic of Bulgaria, ICSID Case No. ARB/03/24 investment based on material misrepresentation An investor s wrongdoing related to its investment is likely to be of increasingly legal relevance to the investor s ability to fully access BIT protections.

13 CAVEAT Although this presentation has referred to various source materials, all current trends identified are solely based on the views and analysis of the presenter.

14 LEGAL PRACTITIONERS & ARBITRATORS www.aelex.

Marble House 1 Kingsway Road Ikoyi, Lagos

7406533 F: (+234-1) 4617092 lagos@aelex.

Shehu Shagari Way Abuja, FCT, Nigeria T:

Harcourt Rivers State, Nigeria T: (+234-84)

portharcourt@aelex.com Vanguard House No.

14 14 LEGAL PRACTITIONERS & ARBITRATORS LAGOS ABUJA PORT HARCOURT ACCRA 7 th Floor Marble House 1 Kingsway Road Ikoyi, Lagos Nigeria T: (+234-1) , , F: (+234-1) lagos@aelex.com 4 th Floor AdamawaPlaza 1 st Avenue, Off Shehu Shagari Way Abuja, FCT, Nigeria T: (+234-9) ; (0) F: (+234-9) abuja@aelex.com 2 nd Floor UPDC Building 26 Aba Road Port Harcourt Rivers State, Nigeria T: ( ) , F: ( ) portharcourt@aelex.com Vanguard House No. 21 Independence Avenue Ridge-Accra PMB CT 72 Accra, Ghana T: ( ) F: ( ) accra@aelex.com

15 THANK YOU 15

ILLEGALITY IN INVESTMENT ARBITRATION. Sylvia T. Tonova

ILLEGALITY IN INVESTMENT ARBITRATION Sylvia T. Tonova Warsaw, Poland 7 June 2013 Investor-State Arbitration System Instruments: Bilateral Investment Treaties (BITs) Multilateral treaties (e.g. Energy Charter