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

Decision on Jurisdiction and Competence

I

1

By letter of 17 June 1974, Kaiser Bauxite Company (hereafter called "Kaiser") addressed a request for arbitration against the Government of Jamaica to the Secretary-General of the International Centre for Settlement of Investment Disputes (hereafter called "Centre") pursuant to Article 36(1) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (hereafter called "Convention") and Rule 1 of the Centre’s Institution Rules. In order to found the jurisdiction of the Centre the request relied on provisions expressing the consent of the parties to arbitration proceedings pursuant to the Convention contained in agreements dated December 30, 1969 and February 24, 1972, respectively, between the Government of Jamaica, and Kaiser Aluminum and Chemical Corporation, of which certified copies had been duly deposited with the Centre.

2
The Secretary-General registered the request on June 21, 1974 and promptly notified the parties thereof, pursuant to Article 36(3) of the Convention and Institution Rule 6(1).
3
The records of the Centre show the following relevant facts with respect to the constitution of the Tribunal. On June 27, 1974 Kaiser made proposals to the Government of Jamaica with respect to the constitution of an Arbitral Tribunal. On September 19, 1974 Kaiser, not having received a reply to its proposals, chose that the Tribunal be constituted in accordance with Article 37(2)(b) of the Convention, that is to say, that the Tribunal was to consist of three arbitrators, one arbitrator to be appointed by each party and the third, to be the President of the Tribunal, to be appointed by agreement of the parties. Kaiser appointed Elihu Lauterpacht (British) to be an arbitrator. The Government of Jamaica did not appoint an arbitrator. The Tribunal not having been constituted within 90 days after notice of registration by the Secretary-General of the request for arbitration, Kaiser on November 8, 1974 requested the Chairman of the Administrative Council, pursuant to Article 38 of the Convention and Arbitration Rule 4, to appoint two arbitrators and to designate one of them as the President of the Tribunal. The Chairman, after consultations in accordance with Arbitration Rule 2, on December 9,1974 appointed Mr Jorgen Trolle (Danish) and Mr Fuad Rouhani (Iranian) as arbitrators and designated Mr Trolle as the President of the Tribunal. As required by Article 40(1) of the Convention, both Mr Trolle and Mr Rouhani were appointed from the Panel of Arbitration, Mr Trolle having been designated to the Panel by the Kingdom of Denmark pursuant to Article 13(1) of the Convention on August 20,1973 and Mr Rouhani having been designated by the Chairman pursuant to Article 13(2) of the Convention on November 19,1974. All three arbitrators having accepted their appointment, the Tribunal was constituted on December 16, 1974. Prior to the first session of the Tribunal, Mr Lauterpacht on January 20, 1975 submitted his resignation upon assuming his duties as Legal Adviser of the Department of Foreign Affairs of the Government of Australia. On February 3, 1975 the remaining members of the Tribunal consented to Mr Lauterpacht’s resignation as required by Arbitration Rule 8. Kaiser thereupon duly appointed Sir Michael Kerr (British) as arbitrator and upon the latter’s acceptance of his appointment the Tribunal in its present composition was reconstituted on March 10,1975.
4
On the same day the parties were convened for a first meeting with the Tribunal to be held at the seat of the Centre at Washington, DC on April 2, 1975, i.e. within the time limit fixed by Arbitration Rule 13.
5
At this session Kaiser appeared while the Government of Jamaica did not appear and was not represented. The President announced that the Tribunal had determined that it was properly constituted under the Convention and the Arbitration Rules.

II

6
Although no formal objection to the jurisdiction of the Centre and the competence of the Tribunal had been received from either side in this case, in view of the failure of the Government of Jamaica to appear and the notice, dated May 8,1974, referring to Article 25 of the Convention, filed by it with the Centre, the Tribunal decided that it was appropriate that the question of the jurisdiction of the Centre and the competence of the Tribunal should be dealt with as a preliminary issue. Furthermore, there was at this stage nothing before the Tribunal except a request for registration of these proceedings filed by the claimant, but it was pointed out by the Tribunal that it was necessary to consider the question of jurisdiction and competence on the basis of the nature of the claimant’s claim and the relief sought by it in these proceedings.
7

Having regard to this the Tribunal made the following order:

I. Kaiser to file with the Centre by May 4,1975, a Memorial dealing with the following:

(i) a full statement of the nature of Kaiser’s claim and the relief sought in these proceedings (but without at this stage adducing evidence or argument in support); and

(ii) full argument on any issue as to the jurisdiction of the Centre and the competence of the Tribunal having regard to the notice, dated May 8, 1974, referring to Article 25 of the Convention for the Settlement of Investment Disputes between States and Nationals of Other States, filed by the Government of Jamaica with the Centre, and on any issue that might arise from the wording of the arbitration clause on which Kaiser founds jurisdiction and competence or in any other connection.

II. The Government of Jamaica to file a Counter-Memorial by June 11, 1975, in reply to the aforesaid Memorial.

III. All further matters in the proceedings to be stood over for the time being.

8
Kaiser filed a Memorial within the fixed time limit.
9
No Counter-Memorial has been filed by Jamaica.

III

10
The Tribunal regrets that Jamaica has failed to appear and to bring forward any objections to the jurisdiction of the Centre and the competence of the Tribunal which it might entertain. The Tribunal nevertheless, decided to examine its own jurisdiction proprio motu and in doing so to consider any objections which might be raised against its jurisdiction.
11
At the present stage and by virtue of Article 41 of the Convention and Arbitration Rules the Tribunal is concerned to pronounce upon this issue. The issue being thus limited, the Tribunal will avoid not only all expressions of opinion on matters of substance, but also any pronouncement which might prejudge or appear to prejudge any eventual decision on the merits.
12

The facts relevant to the question of competence and jurisdiction are, as alleged by Kaiser:

(a) Kaiser owns and operates bauxite mining facilities on the north coast of Jamaica, and has invested over $63 million in its Jamaican facilities. It has been conducting operations in Jamaica since 1952, and in 1973 it was the largest single taxpayer in the country, having paid $9,869,471 in royalties and income taxes to the Government of Jamaica (the 'Government’). Kaiser decided to invest its capital and to conduct operations in Jamaica in reliance upon particular contractual arrangements with the Government. These investment agreements with the Government are set forth in three documents. They are:

(1) the Principal Agreement, executed on March 15, 1957 (‘Principal Agreement’);

(2) an amendment to the Principal Agreement, executed on December 30, 1969 (T969 Agreement’); and

(3) a further amendment to the Principal Agreement, executed on February 24, 1972 (T972 Agreement’).

These agreements specifically define Kaiser’s obligations to the Government concerning taxes and royalties. The particular contractual provisions are complex, and are set out at paragraphs 2-5 and 7-9 of the Principal Agreement; paragraphs 1-5 of the 1969 Agreement; and paragraphs 1-6 of the 1972 Agreement.

Paragraph 5 of the Principal Agreement was drafted to prevent the imposition of additional royalties and taxes that were not specifically provided for and referred to in the Agreement. This provision states:

5. FURTHER TAXES: No further taxes will be imposed on bauxite, bauxite reserves or bauxite operations or any assets used in bauxite operations or dividends on bauxite operations.

Further Taxes shall include all taxes, burdens, levies, excises and imposts on bauxite operations and all assets used in connection therewith in Jamaica or its territorial waters (including but not limited to any additional royalty under the Mining Law and any other royalty, and any tax, burden or impost on severance, transportation, storage, handling, exportation, employment, sales, shipping, capital and reserves).

It is understood that taxes dealt with elsewhere in this agreement and normal license duties of general application, such as licenses on motor vehicles and harbour and light dues of general application and flat local service rates on land and import duties of general application (but not any duty which would be a tax, burden or impost of the nature of any of those enumerated in the above definition of ‘further taxes’) are excluded from this clause.

Kaiser’s claim is that this provision has been contravened by the Government’s enactment of legislation which does impose such a ‘further tax’ on bauxite mined by Kaiser in Jamaica. This legislation, called the Bauxite (Production Levy) Act, 1974 (the ‘Act’) provides in relevant part that:

‘notwithstanding anything in any law, enactment or agreement, a tax to be known as a Production Levy shall be paid on all bauxite... extracted... in Jamaica on or after the 1st January, 1974...’ Act, Paragraph 3(1).

(Memorial, pp. 1-3)

(b) Para. 6 of the 1969 Agreement referred to above provides as follows:

6. (1) Each of the parties hereto hereby Agrees and Consents to any legal dispute arising under the Principal Agreement or this Agreement being submitted to the International Centre for Settlement of Investment Disputes established by the Convention set out in the Schedule to the Investment Disputes Awards (Enforcement) Act, 1966 of Jamaica.

(2) The foregoing constitutes a consent both to conciliation proceedings and to arbitration proceedings under the said Convention but the consent to arbitration proceedings shall not be to the exclusion of any other remedy which may be open to either party.

(3) In determining any dispute submitted to arbitration as aforesaid, the Arbitration Tribunal shall apply the law of Jamaica and such rules of international law as may be applicable excluding however any enactments passed or brought into force in Jamaica subsequent to the date of this agreement which may modify or affect the rights of the parties under the Principal Agreement or this Agreement and excluding also any law or rule which could throw doubt upon the authority or ability of the Government to enter into the Principal Agreement and this Agreement.

(c) Para. 7 of the 1972 Agreement referred to above provides as follows:

7. (1) Each of the Parties hereto hereby Agrees and Consents to any legal dispute arising under the Principal Agreement, the 1969 Agreement or this Agreement being submitted to the International Centre for Settlement of Investment Disputes established by the Convention set out in the Schedule to the Investment Disputes Awards (Enforcement) Act, 1966 of Jamaica. 6/

6/ Subparagraphs 7(2) and 7(3) of the 1972 Agreement are identical to subparagraphs 6(2) and 6(3) of the 1969 Agreement.

(Memorial, p. 8)

(d) The relief sought by Kaiser in this arbitration is that the Tribunal:

A. State that the Government is legally bound to respect its undertaking, as set forth in Paragraph 5 of the Principal Agreement, not to impose ‘further taxes’ on Kaiser, including imposition of the Bauxite (Production Levy) Act.

B. Declare that Kaiser is not legally obliged to pay any further monies to the Government pursuant to the requirements of the Bauxite (Production Levy) Act, and

C. Award Kaiser an amount equal to all monies paid by Kaiser pursuant to the Bauxite (Production Levy) Act up to and including the date of the Tribunal’s award, together with interest thereon computed at the rate of six per cent per annum.

(Memorial, p. 5)

V

13

The jurisdiction of the Centre is established under the Convention in accordance with Article 25 which in its material parts provides as follows:

(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.

(2) ‘National of another Contracting State’ means:

(a)....

(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.

(3).....

(4) Any Contracting State may, at the time of ratification, acceptance or approval of this Convention or at any time thereafter, notify the Centre of the class or classes of disputes which it would or would not consider submitting to the jurisdiction of the Centre. The Secretary-General shall forthwith transmit such notification to all Contracting States. Such notification shall not constitute the consent required by paragraph (1).

14
On May 8, 1974 the Government of Jamaica sent the following notification to the Centre:

In accordance with Article 25 of the Convention establishing the International Centre for the Settlement of Investment Disputes, the Government of Jamaica hereby notifies the Centre that the following class of dispute at any time arising shall not be subject to the jurisdiction of the Centre.

Class of Dispute

Legal Dispute arising directly out of an investment relating to minerals or other natural resources.

VI

15

The Tribunal therefore has to consider:

— whether there is a legal dispute between the parties;

— whether such dispute arises directly out of an investment,

— whether Jamaica is a Contracting State under the Convention;

— whether Kaiser is a national of another Contracting State;

— whether Kaiser and Jamaica each consented in writing to submit the dispute to the Centre; and

— whether Jamaica’s notification, dated May 8, 1974, submitted under Article 25 to the effect that disputes regarding minerals or other natural resources shall not be subject to the jurisdiction of the Centre, operates to deprive the Centre of jurisdiction.

16
The Tribunal finds that the dispute concerning the alleged legal rights and obligations stemming from particular provisions in Kaiser’s agreements with the Government is a legal dispute.
17
The Tribunal finds that the dispute arises directly out of an investment. It is said in the Report of the Executive Directors of the International Bank for Reconstruction and Development accompanying the Convention when submitted to Governments (hereafter called ED Report), para. 27, that no attempt was made to define the term "investment" given the essential requirement of consent by the parties. It follows that the intention of the Convention was that the consent of the parties should be entitled to great weight in any determination of the Centre’s jurisdiction. Moreover, it seems clear to the Tribunal that a case like the present, in which a mining company has invested substantial amounts in a foreign State in reliance upon an agreement with that State, is among those contemplated by the Convention.
18
Jamaica signed the Convention on June 21, 1965, and deposited its Instrument of Ratification on September 9, 1966. Pursuant to Article 68(2) of the Convention, it entered into force with respect to Jamaica on October 14, 1966.
19
Kaiser is a private corporation organized under the laws of the State of Nevada in the United States of America. The United States signed the Convention on August 27,1965, and deposited its Instrument of Ratification on June 10,1966. Pursuant to Article 68(2) of the Convention it entered into force with respect to the United States on October 14, 1966.
20
Accordingly, at the time of the 1969 and 1972 Agreements, Jamaica was a Contracting State and Kaiser was a national of another Contracting State.
21

The Tribunal considers that paras 6 and 7, respectively, of the 1969 and 1972 Agreements constitute written consent by the parties as required by Article 25(1) of the Convention to submit to the Centre disputes such as the present dispute. In this connection the Tribunal agrees with the view expressed in para. 24 of the ED Report that consent may be given in a clause included in an investment agreement providing for the submission to the Centre of future disputes arising out of that agreement. It follows from the foregoing and from Article 25(1) of the Convention that, written consent to the jurisdiction of the Centre having been given in this case by both parties, neither party could unilaterally withdraw such consent and deprive the Centre or the Tribunal of jurisdiction.

22
The Government of Jamaica appears to contend that its notification to the Centre on May 8, 1974 deprives the Centre and consequently the Tribunal of jurisdiction. The Tribunal cannot accept this view.
23

In the present case the written consent was contained in the arbitration clauses between the Government and Kaiser which have already been quoted. This consent having been given could not be withdrawn. The notification under Article 25 only operates for the future by way of information to the Centre and potential future investors in undertakings concerning minerals and other natural resources of Jamaica. This view of Article 25 is shared by the ED Report which states the following:

31. While no conciliation or arbitration proceedings could be brought against a Contracting State without its consent and while no Contracting State is under any obligation to give its consent to such proceedings, it was nevertheless felt that adherence to the Convention might be interpreted as holding out an expectation that Contracting States would give favorable consideration to requests by investors for the submission of a dispute to the Centre. It was pointed out in that connection that there might be classes of investment disputes which governments would consider unsuitable for submission to the Centre or which, under their own law, they were not permitted to submit to the Centre. In order to avoid any risk of misunderstanding on this score, Article 25(4) expressly permits Contracting States to make known to the Centre in advance, if they so desire, the classes of disputes which they would or would not consider submitting to the Centre. The provision makes clear that a statement by a Contracting State that it would consider submitting a certain class of dispute to the Centre would serve for purposes of information only and would not constitute the consent required to give the Centre jurisdiction. Of course, a statement excluding certain classes of disputes from consideration would not constitute a reservation to the Convention.

24
The Tribunal accordingly finds that the Government could not withdraw, and did not by its notification of May 8, 1974 validly withdraw its consent to arbitration given in the 1969 and 1972 Agreements. In addition to the reasons already given, the Tribunal considers that any other interpretation would very largely, if not wholly, deprive the Convention of any practical value for Contracting States and investors and this cannot have been intended.

VII

25
For the foregoing reasons the Tribunal concludes 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).
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