On 27 October 1997, the International Centre for the Settlement of Investment Disputes (icsid or the Centre) received from Mr Eudoro Armando Olguin, a national of the Republic of Peru (Peru), a Request for Arbitration against the Republic of Paraguay (Paraguay). The Request related to a dispute which arose from treatment which Mr Olguin allegedly received from the Paraguayan authorities, relating to his investment in a company for the manufacture and distribution of food products in Paraguay. In his Request, the Claimant invoked the provisions of the Convention between the Republic of Peru and the Republic of Paraguay on the Reciprocal Promotion and Protection of Investments ("the Convention" or "the CPI").
On receiving the Request for Arbitration, the Centre, in accordance with Rules 5(1)(a) and 5(1)(b) of the icsid Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (Institution Rules), acknowledged receipt of the Request and informed the applicant that it would not be possible to take any other action with respect to this until it had received payment of the lodging fee prescribed by Regulation 16 of the icsid Administrative and Financial Regulations. In addition, the Centre requested Mr Olguin to provide: (i) complementary information relating to the parties to the dispute; (ii) more detailed information on the consent of Paraguay to submit the dispute that was the subject of his Request to arbitration in accordance with the rules of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (icsid Convention), including information on the date of his Request for the settlement of his dispute with Paraguay; and (iii) specific information on the questions which constituted the subject-matter of the dispute. The Claimant replied to these questions by means of a letter dated 15 December 1997.
In a letter dated 21 May 1998, the Republic of Paraguay informed the Centre that it contested the Request for Arbitration presented by Mr Olguin, on the following grounds: (i) it denied that the operations conducted by the Claimant were investments; (ii) it denied knowledge of the existence of obligations of guarantee attributed by the Claimant to Paraguay; (iii) it affirmed the existence of a payment made by the Central Bank of Paraguay to Mr Olguin after the facts in dispute; (iv) the written waiver by the Claimant to his right to institute any further action against the Paraguayan authorities based on these facts; (v) the inapplicability of the dispute settlement mechanisms contemplated by the CPI, given that Mr Olguin had chosen the jurisdictional route, thereby waiving international arbitration; (vi) the non-existence of a dispute between Paraguay and Mr Olguin; (vii) the previous lack of consent of the parties to submit the dispute to arbitration before ICSID. The Claimant responded in detail to that letter by a communication dated 17 June 1998.
On 29 October 1998, after more than 60 days had elapsed from the date of registration of the Request, the Claimant informed the Secretary-General of the Centre that it had opted for the formula envisaged in Article 37(2)(b) of the ICSID Convention for the constitution of the Tribunal. Consequently, the Tribunal was established with three arbitrators, one appointed by Mr Olguin, another by the Republic of Paraguay and a third, who would preside over the Tribunal, would be appointed by common agreement of the parties. In the same communication, the Claimant appointed as arbitrator for the present case, Professor Dale Beck Furnish, a national of the United States of America.
On 2 August 1999 the Republic of Paraguay formally submitted its objection to the jurisdiction of icsid, expounded the arguments on which such objection was based and attached documents in support of these arguments. The following is a summary of those arguments:
(a) To be subject to the jurisdiction of icsid, a State must expressly accept this jurisdiction since "... no contracting State shall by the mere fact of its ratification, acceptance or approval of this Convention and without its consent be deemed to be under any obligation to submit any particular dispute to conciliation or arbitration". (Preamble to the icsid Convention).
(b) The fact that the Republic of Paraguay concluded with the Republic of Peru, on 31 January 1994, the "Convention on the Reciprocal Promotion and Protection of Investments" does not signify that Paraguay has given its consent to submit to the jurisdiction of icsid, because:
(a) Speculative financial investments are not protected by the CPI; and
(b) To be protected by the CPI, the investments made must have been accepted in advance by the State in which they are made, which was not the case for those of Mr Olguin [; and]
(c) Mr Olguin made a judicial claim before the courts of the Republic of Paraguay "with a view to recovering his financial speculation", which, pursuant to Article 8(3) of the CPI, prevents him from requesting arbitration before icsid for the same purpose; and
(d) In conformity with the domestic legislation of Paraguay, even if the Republic of Paraguay were liable to fulfil the obligations as sought by Mr Olguin, that liability would not be direct but only subsidiary, obliging the Claimant first to claim the fulfilment of these alleged obligations from the agents of the State involved in the actions which gave rise to this dispute, and only subsidiarily from the Republic of Paraguay.
On 31 August 1999, the Claimant referred in writing to the objections to the Centre’s jurisdiction raised by the Republic of Paraguay, expounded the reasons why he thought that those objections should be dismissed, and submitted documents in support of his position. In essence, Mr Olguin’s case was the following:
(a) The Republic of Paraguay, by concluding the Convention with the Republic of Peru, impliedly submitted to the jurisdiction of icsid;
(b) The operations conducted by the Claimant constitute an investment under the icsid Convention and the CPI; and
(c) Mr Olguin never submitted any judicial claim in Paraguay the fulfilment of the obligations to which the arbitration referred.
In resolving the question raised, the Arbitral Tribunal will not elaborate on the facts which have been accepted by the Parties, namely:
a) This Tribunal has the powers to resolve the question of its own competency and consequently, in this case, to rule on the objection raised as to icsid’s jurisdiction;
b) The Republic of Paraguay is a Contracting State to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and Mr Olguin is a national of another Contracting State (the Republic of Peru);
c) The Republics of Paraguay and Peru concluded the "Convention on the Reciprocal Promotion and Protection of Investments" (the "CPI") on 31 January 1994.
Citing the Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, icsid Doc. 2, of 18 March 1965, paragraphs 23 and 24:
23. The consent of the parties is the cornerstone of the Centre’s jurisdiction. Consent to jurisdiction must be given in writing and once given cannot be unilaterally revoked (Article 25(1)).
24. The consent of the parties must exist when the request is made to the Centre (Articles 28(3) and 36(3)), but the Convention does not specify in any form the time at which the consent must be given. Consent may be given, for example, in the clauses of a contract of investment, which provides for the submission to the Centre of future disagreements which may arise from the contract, or in a settlement between the parties relating to a dispute which has already arisen. Nor does the Convention require the consent of both parties to be recorded in the same document. Thus, a receiving State could propose in its legislation on the promotion of investments that disputes on certain classes of investments be submitted to the jurisdiction of the Centre, and the investor can give his consent by written acceptance of the offer. (Emphasis not in the original).
Asian Agricultural Products Limited v. Democratic Socialist Republic of Sri Lanka, 27 June 1990, icsid Case No. ARB/87/3, Award of 27 June 1990, ICSID Reports, Vol. 4, p. 246.
Tradex Hellas SA v. Republic of Albania, icsid Case No. ARB/94/2, Decision on jurisdiction of 24 December 1996, ICSID Review—Foreign Investment Law Journal, Vol. 14, 1999, p. 161 [5 ICSID Reports 43].
American Manufacturing & Trading, Inc. v. Republic of Zaire, icsid Case No. ARB/93/1, Award of 21 February 1997, International Legal Materials, Vol. 36, 1997, p. 1534 [5 ICSID Reports 11]
Ceskoslovenska Obchodni Banka, AS v. Slovak Republic, icsid Case No. ARB/97/4, Decision on jurisdiction of 24 May 1999, ICSID Review—Foreign Investment Law Journal, Vol. 14, 1999, p. 250 [5 ICSID Reports 330],
This Tribunal has no doubt that the investments made by Mr Olguin in the Republic of Paraguay are included in those enumerated in Article 1 of the CPI. Moreover, there exists no rule in the CPI which requires investments made by a national of another Contracting State to be accepted or recognized by the State in which they are made. With regard to the possible flaws in Mr Olguin’s investments, this is clearly a subject relating to the merits, which cannot be resolved at this stage of the proceedings.