By Notice of Arbitration dated 26 September 2019 (the "Notice of Arbitration"), the Claimant commenced arbitration proceedings against the Respondent pursuant to Article 26(4)(b) of the Energy Charter Treaty (the "ECT").
The Respondent argues that, having elected to pursue the dispute before other fora, the Claimant is precluded from now pursuing the present arbitration.7 In the Respondent's view, Article 26(3)(b)(i) of the ECT constitutes a fork-in-the-road clause, as it withholds consent to arbitration "where the Investor has previously submitted the dispute under subparagraph 2(a) [to the courts or administrative tribunals of the disputing Contracting Party] or (b) [any other dispute settlement]".8
The Respondent contends that the ordinary meaning of Article 26(3)(b)(i) of the ECT, in its context and in the light of its object and purpose, calls for the application of the so-called "fundamental basis test".9 The Respondent notes that "dispute" is a broad, non-technical term that is neither defined nor qualified in the ECT, and is ordinarily understood as referring to "a disagreement or argument".10 The context of Article 26(3)(b) of the ECT also reinforces this broad reading according to the Respondent.11 The Respondent points out that neither the title of Annex I.D, nor Article 26(1) or Part III of the ECT, requires an identity of causes of action, parties, or object in order to determine what constitutes the "same dispute".12
As regards the object and purpose of Article 26(3)(b)(i) of the ECT, the Respondent argues that a fork-in-the-road clause is designed to avoid multiple proceedings arising out of the same facts, with the resulting multiplication of cost, risk of contradictory outcomes, and unfairness to the respondent State.13 For this reason, the Respondent submits that the interpretation and application of the provision should not be too formalistic, but should focus instead on whether the overlapping disputes "share the fundamental cause of the claim and seek for the same effects".14 The Respondent cites various decisions adopting this fundamental basis test,15 and takes issue with those employing the "triple identity test" to fork-in-the-road clauses.16 For the Respondent, the triple identity test is more relevant to the lis pendens doctrine, and fork-in-the-road clauses requires a more nuanced and distinct approach.17
Memorial on Jurisdiction ¶¶ 32-33; Hearing Transcript, 8 December 2020, 14:25-15:17, 16:4-14, 64:25-65:6; Supervision y Control S.A. v. Republic of Costa Rica, ICSID Case No. ARB/12/4, Award, 18 January 2017, ¶ 310, RLA-11.
Memorial on Jurisdiction ¶¶ 34-44, citing Pantechniki S.A. Contractors & Engineers (Greece) v. The Republic of Albania, ICSID Case No. ARB/07/21, Award, 28 July 2009, ¶¶ 61-62, 64, 67, RLA-10; H&H Enters. Invs., Inc. v. Arab Republic of Egypt, ICSID Case No. ARB/09/15, Award, 6 May 2014, ¶ 367, RLA-9; Supervision y Control S.A. v. Republic of Costa Rica, ICSID Case No. ARB/12/4, Award, 18 January 2017, ¶¶ 310, 330, RLA-11.
The Claimant contends that the fork-in-the-road clause is triggered only when the dispute submitted under Article 26(2)(a) or (2)(b) is one "which concern[s] an alleged breach of an obligation of [the EU] under Part III".29 In this regard, the Claimant denies submitting the present dispute to another forum such as to vitiate the Respondent's consent to international arbitration under Article 26(3) of the ECT.30
Response to Preliminary Phase Request ¶ 30; Hearing Transcript, 8 December 2020, 36:14-37:18, 51:17-23, 60:16-62:4; The Energy Charter Treaty, 1994, Articles 26(1) and 26(3)(b)(i), CLA-1/CL-1; E. Gaillard & M. McNeill, "Chapter 2 - The Energy Charter Treaty", in K. Yannaca-Small (ed.), Arbitration Under International Investment Agreements: A Guide To The Key Issues, 2nd ed. (Oxford: OUP), 2018, p. 52, CLA-22.
Response to Preliminary Phase Request ¶ 29; Hearing Transcript, 8 December 2020, 36:9-13, 37:20-38:8, 51:24-52:5, 58:6-22, 59:14-60:13.
Memorial on Jurisdiction ¶ 219; Hearing Transcript, 8 December 2020, 9:11-18; Philip Morris Asia Ltd. (Hong Kong) v. The Commonwealth of Australia, PCA Case No. 2012-12, Procedural Order No. 8, 14 April 2014, ¶ 109, RLA-66.
Response to Preliminary Phase Request ¶ 14; Hearing Transcript, 8 December 2020, 30:13-14; Gavrilović and Gavrilović d.o.o. v. Republic of Croatia, ICSID Case No. ARB/12/39, Decision on Bifurcation, 21 January 2015, ¶¶ 64-66, CLA-163.
Even assuming that the Glamis Gold criteria apply, the Claimant submits that they do not support bifurcation in the circumstances of this case.111 First, having refuted the Respondent's jurisdictional arguments, the Claimant maintains that neither of the Respondent's objections is substantial.112 Second, bifurcation is impractical, considering that the jurisdictional objections are intertwined with the merits of the dispute.113 Third, bifurcation of the Respondent's jurisdictional arguments may not lead to the disposal of the case and may even preclude the Claimant from bringing claims for denial of justice under Article 10(1) of the ECT or breach of Article 10(12) of the ECT in this arbitration.114
Response to Preliminary Phase Request ¶ 17; Hearing Transcript, 8 December 2020, 30:17-19.
Response to Preliminary Phase Request ¶¶ 8(i)(c), 19, 21(ii), 29-43, 45, 52-59; Hearing Transcript, 8 December 2020, 26:18-20, 31:4-9, 69:14-19.
Response to Preliminary Phase Request ¶¶ 7-8, 18, 23-28, 45, 47; Hearing Transcript, 8 December 2020, 26:10-17, 30:20-31:1.
Response to Preliminary Phase Request ¶¶ 8(v), 70-72.
The Respondent contends that, under Article 26(3)(b)(i) of the ECT, it has reserved its consent "to submit disputes to international arbitration under ECT only to those disputes that have not been submitted to the courts of the European Union",116 and that this case is "before no less than three adjudication bodies."117 In its submissions, the Respondent rejects the "triple identity" test and instead supports a "fundamental basis" test which goes to whether the disputes share a "fundamental cause" and seek the same outcomes.
Under the fork-in-the-road clause in Article 26 of the ECT, the Tribunal is required to analyse whether the "dispute" subject to this arbitration has been already submitted to the European courts. The Tribunal is not convinced that the analysis required to rule on the Respondent's fork-in-the-road objection will be as straightforward as the Respondent argues. Irrespective of the proper test to be applied, the Tribunal does not believe that it could decide the issue at hand by merely comparing the pleas in the proceedings before the General Court and the CJEU with the claims made in this arbitration, without further analysis. Absent such analysis, the Tribunal apprehends the danger that it might apply the fork-in-the road clause in a manner too superficial to give proper effect to the clause. The analysis may also – to a certain extent at least – become intertwined with aspects of the merits. Moreover, the Tribunal's ruling may have significant implications as to the jurisdiction of arbitral tribunals in future investor-State disputes involving the EU. Consequently, the Tribunal favours a cautious approach in which it can take account of the complete picture of the claims being advanced in this case alongside the arguments brought and remedies sought before the EU courts. The Tribunal would not otherwise be confident that it could decide the objection and realize any efficiency through bifurcation.
The Claimant's legal situation has been left unmodified by the Amending Directive, which has no "direct effect" regarding the Claimant. Consequently, the Amending Directive cannot, as such, breach the ECT. Rather, the alleged breaches of the ECT could only result from the measures which the Member States may or may not take in order to transpose and implement the Gas Directive, as modified by the Amending Directive. As explained below, however, the Member States have a broad margin of discretion when transposing and implementing the relevant provisions of the challenged EU directives. This excludes the international responsibility of the European Union for any alleged breaches of the ECT that result from measures of the Member States within that broad margin of discretion.120
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