• Copy the reference
  • Tutorial video

Lawyers, other representatives, expert(s), tribunal’s secretary

Decision of the Tribunal on Objections to Jurisdiction

A. Procedure

1.
On July 18, 1997, the International Centre for Settlement of Investment Disputes (ICSID or the Centre) received from Mr. Emilio Agustín Maffezini, a national of the Argentine Republic (Argentina), a Request for Arbitration against the Kingdom of Spain (Spain). The request concerns a dispute arising from treatment allegedly received by Mr. Maffezini from Spanish entities, in connection with his investment in an enterprise for the production and distribution of chemical products in the Spanish region of Galicia. In his request the Claimant invokes the provisions of the 1991 "Agreement for the Reciprocal Promotion and Protection of Investments between the Kingdom of Spain and the Argentine Republic" (the Argentine-Spain Bilateral Investment Treaty or BIT).1 The request also invokes, by way of a most-favored-nation (MFN) clause in the Argentine-Spain BIT, the provisions of a 1991 bilateral investment treaty between the Republic of Chile (Chile) and Spain.2
2.
On August 8, 1997, the Centre, in accordance with Rule 5 of the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (Institution Rules), acknowledged receipt of the request and on the same day transmitted a copy to the Kingdom of Spain and to the Spanish Embassy in Washington, D.C. At the same time, the Centre asked Mr. Maffezini to provide (i) specific information concerning the issues in dispute and the character of the underlying investment; (ii) information as to the complete terms of Spain's consent to submit the dispute to arbitration under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention); (iii) information as to the basis of his claim that the MFN clause in the Argentine-Spain BIT would allow him to invoke Spain's consent contained in the Chile-Spain BIT; and (iv) documentation concerning the entry into force of the bilateral investment treaties invoked in the request. Mr. Maffezini provided this information in two letters of September 10 and September 29, 1997.
3.
On October 30, 1997, the Secretary-General of the Centre registered the request, pursuant to Article 36(3) of the ICSID Convention. On this same date, the Secretary-General, in accordance with Institution Rule 7, notified the parties of the registration of the request and invited them to proceed to constitute an Arbitral Tribunal as soon as possible.
4.
On December 22, 1997, the Claimant proposed to the Respondent that the Arbitral Tribunal consist of a sole arbitrator, to be appointed by agreement of the parties. The Claimant further proposed that, if the parties fail to agree in the name of the sole arbitrator by January 31, 1998, the sole arbitrator shall be appointed by ICSID's Secretary-General.
5.
On March 5, 1998, Spain having failed to respond to the Claimant's proposal and more that 60 days having elapsed since the registration of the request, the Claimant informed the Secretary-General that he was choosing the formula set forth in Article 37(2)(b) of the ICSID Convention. The Tribunal, therefore, would consist of three arbitrators, one appointed by Mr. Maffezini, one appointed by Spain, and the third, presiding arbitrator, appointed by agreement of the parties.
6.
On March 18, 1998, the Centre received a communication from the Spanish Ministry of Economy and Finance, whereby Spain anticipated having objections to the jurisdiction of the Centre and to the competence of the Tribunal, providing the Centre with a summary of the grounds on which such objections were based. The Centre promptly informed the Respondent that a copy of this communication, as well as copies of the request for arbitration and its accompanying documentation, of the notice of registration and of the correspondence exchanged between the parties and the Centre would be transmitted, in due course, to each of the Members of the Tribunal, noting that the question of jurisdiction was one for the Tribunal to decide.
7.
On April 24, 1998, Mr. Maffezini appointed Professor Thomas Buergenthal, a national of the United States of America, as an arbitrator. On May 4, 1998, Spain appointed Mr. Maurice Wolf, also a national of the United States of America, as an arbitrator. The parties, however, failed to agree on the appointment of the third, presiding, arbitrator. In these circumstances, by means of a further communication of May 14, 1998, the Claimant requested that the third, presiding, arbitrator in the proceeding be appointed by the Chairman of ICSID's Administrative Council in accordance with Article 38 of the ICSID Convention.3
8.
Having consulted with the parties, the Chairman of ICSID's Administrative Council appointed Professor Francisco Orrego Vicuña, a Chilean national, as the President of the Arbitral Tribunal. On June 24, 1998, ICSID's Legal Adviser, on behalf of the Centre's Secretary-General, and in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (Arbitration Rules), notified the parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date. On the same date, pursuant to ICSID Administrative and Financial Regulation 25, the parties were informed that Mr. Gonzalo Flores, Counsel, ICSID, would serve as Secretary of the Arbitral Tribunal.
9.
On July 3, 1998, the Respondent filed an application for provisional measures, requiring the Claimant to post a guaranty in the amount of the costs expected to be incurred by Spain in defending against this action. By further filing of August 7, 1998, the Claimant requested the Tribunal to dismiss such application.
10.
After consulting with the parties, the Tribunal scheduled a first session for August 21, 1998. On August 20, 1998, counsel for the Respondent hand-delivered a document containing Spain's objections to the jurisdiction of the Centre. A copy of Spain's filing was distributed by the Centre to the Members of the Tribunal on that same date. A copy of Spain's filing was later handed by the Secretary of the Tribunal to the Claimant's representative in the course of the Tribunal's first session with the parties.
11.
The first session of the Tribunal with the parties was held, as scheduled, on August 21, 1998, at the seat of ICSID in Washington, D.C. At the session the parties expressed their agreement that the Tribunal had been properly constituted in accordance with the relevant provisions of the ICSID Convention and the Arbitration Rules and that they did not have any objections in this respect.
12.
During the course of the first session the parties agreed on a number of procedural matters reflected in written minutes signed by the President and the Secretary of the Tribunal. The Respondent, represented at the session by Mr. Rafael Andrés León Cavero, drew the Tribunal's attention to its objections to the jurisdiction of the Centre. The Tribunal, after briefly ascertaining the views of the parties on this matter, fixed the following time limits for the written phase of the proceedings: the Claimant would file a memorial, with all of his arguments on the question of jurisdiction and on the merits within 90 days from the date of the first session; the Respondent would then file a counter-memorial, with all of its arguments on the question of jurisdiction and on the merits within 90 days from its reception of the Claimant's memorial. The Tribunal left open the possibility of requiring the submission of a reply and a rejoinder to the parties. The Tribunal also left open the possibility of holding a hearing on the issue of jurisdiction.
13.
In accordance with the above-described schedule, the Claimant submitted to the Centre his memorial on the merits and on the question of jurisdiction on November 19, 1998. On April 9, 1999, after a request for an extension of the time limit for the filing of its counter-memorial was granted by the Tribunal, the Respondent submitted its written pleadings on the merits and on the question of jurisdiction.
14.
On May 14, 1999, the Tribunal invited the parties to submit any further observations they may had on the question of jurisdiction, calling for a hearing on jurisdiction to be held on July 7, 1999, at the seat of the Centre in Washington, D.C. The parties filed their final observations on the question of jurisdiction on June 3, 1999 (the Claimant) and June 18, 1999 (the Respondent). Due to consecutive requests filed first by counsel for the Respondent, and later by counsel for the Claimant, the hearing on jurisdiction was postponed until August 9, 1999.
15.
At the August 9, 1999 hearing, Dr. Raúl Emilio Vinuesa addressed the Tribunal on behalf of the Claimant, referring to the arguments put forward in his written pleadings. Mr. Rafael Andrés León Cavero addressed the Tribunal on behalf of the Kingdom of Spain. The Tribunal then posed questions to the representatives of the parties, as provided in Rule 32(3) of the Arbitration Rules.
16.
Having heard the views of the parties, the Tribunal rendered, on August 26, 1999, Procedural Order No 1, deciding that, in accordance with Article 41(2) of the ICSID Convention and Rule 41(3) of the Arbitration Rules, it would deal with the question of jurisdiction as a preliminary matter, therefore suspending the proceedings on the merits.
17.
On October 28, 1999, the Tribunal issued Procedural Order No. 2, addressing Spain's request for provisional measures. The Tribunal, pointing out that the recommendation of provisional measures seeking to protect mere expectations of success on the side of the Respondent would amount to a pre-judgement of the Claimant's case, unanimously dismissed Spain's request.
18.
The Tribunal has considered thoroughly the parties' written submissions on the question of jurisdiction and the oral arguments delivered in the course of the August 9, 1999 hearing on jurisdiction. As mentioned above, the consideration of the merits has been postponed until the issue of the Centre's jurisdiction and Tribunal's competence is decided by the Tribunal. Having considered the basic facts of the dispute, the ICSID Convention and the 1991 Argentine-Spain BIT, as well as the written and oral arguments of the parties' representatives, the Tribunal has reached the following decision on the question of jurisdiction.

B. Considerations

Exhaustion of Domestic Remedies

19.
The Kingdom of Spain first challenges the jurisdiction of the Centre and the competence of the Tribunal on the ground that the Claimant failed to comply with the requirements of Article X of the Bilateral Investment Treaty between Argentina and Spain. Article X of this Treaty reads as follows:

"Article X

Settlement of Disputes Between a Contracting Party and an Investor of the other Contracting Party

1. Disputes which arise within the terms of this Agreement concerning an investment between an investor of one Contracting Party and the other Contracting Party shall, if possible, be settled amicably by the parties to the dispute.

2. If the dispute cannot thus be settled within six months following the date on which the dispute has been raised by either party, it shall be submitted to the competent tribunal of the Contracting Party in whose territory the investment was made.

3. The dispute may be submitted to international arbitration in any of the following circumstances:

a) at the request of one of the parties to the dispute, if no decision has been rendered on the merits of the claim after the expiration of a period of eighteen months from the date on which the proceedings referred to in paragraph 2 of this Article have been initiated, or if such decision has been rendered, but the dispute between the parties continues;

b) if both parties to the dispute agree thereto.

4. In the cases foreseen in paragraph 3, the disputes between the parties shall be submitted, unless the parties otherwise agree, either to international arbitration under the 18 March 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States or to an ad hoc arbitral tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

If after a period of three months following the submission of the dispute to arbitration by either party, there is no agreement to one of the above alternative procedures, the dispute shall be submitted to arbitration under the March 18, 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, provided that both Contracting Parties have become parties to the said Convention. Otherwise, the dispute shall be submitted to the above mentioned ad hoc tribunal.

5. The Arbitral Tribunal shall decide the dispute in accordance with the provisions of this Agreement, the terms of other Agreements concluded between the parties, the law of the Contracting Party in whose territory the investment was made, including its rules on conflict of laws, and general principles of international law.

6. The Arbitral Award shall be binding on both parties to the dispute and each Contracting Party shall execute them in accordance with its laws."

20.
Respondent makes two interrelated arguments based on Article X. The first is that Article X(3)(a) requires the exhaustion of certain domestic remedies in Spain and that Claimant failed to comply with this requirement. The second contention is that Claimant did not submit the case to Spanish courts before referring it to international arbitration as required by Article X(2) of the BIT.
21.
The Tribunal will first address the contention that Article X(3)(a) requires the exhaustion of domestic remedies. The starting point for its analysis of Respondent's submission is Article 26 of the ICSID Convention. It permits the Contracting States to condition their consent to ICSID arbitration on the prior exhaustion of domestic remedies. Article 26 reads as follows:

"Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention."

22.
The language of Article 26 makes clear that unless a Contracting State has conditioned its consent to ICSID arbitration on the prior exhaustion of domestic remedies, no such requirement will be applicable. Article 26 thus reverses the traditional international law rule, which implies the exhaustion requirement unless it is expressly or implicitly waived.
23.
In determining whether Spain conditioned its acceptance of the Centre's jurisdiction and the Tribunal's competence on the prior exhaustion of domestic remedies, the Tribunal notes that in ratifying the ICSID Convention, Spain did not attach any such condition to its acceptance of Article 26. But since Spain was free to do so in the BIT, the Tribunal must now examine whether Article X of that treaty requires the prior exhaustion of domestic remedies. Although Article X does not condition the reference to ICSID arbitration expressis verbis on the prior exhaustion of domestic remedies, it does speak of proceedings in domestic courts. It must be determined, therefore, whether that language can be interpreted to require the exhaustion of domestic remedies and, if so, what the scope of that requirement is.
24.
Paragraph 2 of Article X provides that, if a dispute arises between an investor and one of the Contracting Parties to the BIT, and if that dispute cannot be resolved amicably within a period of six months, it shall be submitted to the competent tribunals of the Contracting Party in whose territory the investment was made. Paragraph 3 of Article X then stipulates that the dispute may be submitted to an international arbitral tribunal in any of the following circumstances:

a) at the request of one of the parties to the dispute, if no decision has been rendered on the merits of the claim after the expiration of a period of eighteen months from the date on which the proceedings referred to in paragraph 2 of this Article have been initiated, or, if such decision has been rendered, but the dispute between the parties continues;

b) if both parties to the dispute agree thereto.

25.
The Respondent reads Article X(3)(a) to mean that, if a domestic court has rendered a decision on the merits on the issues in dispute within the prescribed period of eighteen months, the case can no longer be referred to international arbitration, irrespective of the holding of the court. This conclusion follows, in Respondent's view, because once the decision has been rendered, the dispute cannot be said to continue. Hence, if Claimant had referred the case to the Spanish courts and if those courts had passed on the merits of the case within the eighteen-month period, the dispute could no longer be submitted to the Centre under Article X. It follows, in Respondent's view, that Claimant's failure to give Spanish courts the opportunity to resolve the issues in dispute requires the Tribunal to rule that it is not competent to hear the instant case.
26.
Claimant admits that the dispute was not referred to a Spanish court prior to its submission to the Centre. He contends, however, that an analysis of the here relevant provisions of Article X indicates that a dispute does not have to be referred to a domestic court before it is submitted to international arbitration as long as the dispute continues and the eighteen-month period has expired. In Claimant's view this conclusion follows from the fact that Article X(3)(a) permits the reference of a case to international arbitration whether or not a domestic court decision has been rendered and regardless of its outcome.
30.
Here it is to be noted that the requirements of the exhaustion of domestic remedies differs depending on whether the appeal to an international tribunal contends that the domestic tribunal was guilty of a denial of justice, or whether the claim seeks the vindication of rights guaranteed in a treaty, for example, which empowers the tribunal to interpret and apply the treaty. In the former case, the right to appeal to an international tribunal, if it exists at all, can only be based on a denial of justice by the domestic courts. In such a case, if there was no denial of justice, the case will have to be rejected, whether or not the domestic court committed errors of law or fact in rendering its judgement. This is not true in a case where, as here, the parties have a treaty right to obtain a final determination from the international tribunal on the scope of their rights under the treaty, provided they have first exhausted all available domestic remedies.
31.
The foregoing analysis is relevant in determining the soundness of Respondent's interpretation of Article X(3)(a) and its contention that pursuant to this provision a dispute cannot be deemed to continue if the domestic court has rendered a decision on the merits which addressed all issues raised by the parties. Leaving aside for a moment the wording of paragraph 3(a), Respondent's argument is based on the assumption that a case may be referred to international arbitration under the BIT only if there was a denial of justice by the domestic court. This proposition, if accepted, would have the effect of denying the party to a dispute the right to challenge the domestic court's interpretation of the BIT. Respondent's interpretation can be reconciled neither with the language nor object and purpose of the dispute resolution provisions of BITs in general and the instant BIT in particular. This is so because these clauses are designed to give foreign investors the right to have their disputes under a BIT decided either exclusively or ultimately by international arbitration.6
32.
Moreover, the wording of paragraph 3(a) does not support Respondent's submission on this subject. It contains no guidelines for deciding whether or under what circumstances a dispute may be deemed to continue. In the Tribunal's view, the absence of such objective criteria leaves each party free to decide for itself whether the dispute continues, that is, whether its claim has been vindicated by the domestic court, and to refer the case to international arbitration if it is not satisfied with the domestic court judgment. Had the Contracting Parties to the BIT wished to establish a different procedure, they would have done so.

Most Favored Nation Clause

The Claimant's Standing

SODIGA's Status in the Kingdom of Spain

Time of the Dispute

C. Decision

99.
For the foregoing reasons, the Tribunal unanimously decides that the present dispute is within the jurisdiction of the Centre and the competence of the Tribunal. The Tribunal has, accordingly, made the necessary Order for the continuation of the procedure pursuant to Arbitration Rule 41(4).
Subsequent citations of this document as a whole:
Subsequent citations of this excerpt:
Click on the text to select an element Click elsewhere to unselect an element
Select a key word :
1 /

Instantly access the most relevant case law, treaties and doctrine.

Start your Free Trial

Already registered ?