BIT: Agreement between the Republic of Paraguay and the Swiss Confederation on the Promotion and Reciprocal Protection of Investments, entered into on January 31, 1992 and in force and effect since September 28, 1992.
ICSID Arbitration Rules: Rules of Procedure for Arbitration Proceedings.
ICSID or Centre: International Centre for Settlement of Investment Disputes.
ICSID Convention: Convention on the Settlement of Investment Disputes between States and Nationals of Other States.
ICSID Financial Regulations: ICSID Administrative and Financial Regulations.
SGS: SGS Société Générale de Surveillance S.A.
(a) Its application for annulment of the award is substantial.
(b) It is not a dilatory tactic.
(c) The continued stay of enforcement of the award does not prejudice SGS.
(d) No bond or guarantee is necessary as mounting interest on the award and Paraguay’s obligations under the ICSID Convention suffice to protect SGS’s right to payment if the annulment were denied.2
(a) SGS will be sufficiently compensated for any delay in the enforcement of the Award by the continued accrual of interest. In Paraguay's opinion, even if it were not to prevail, SGS would be in the same economic position as it is in now.
(b) Paraguay has no history of non-compliance with international awards and has paid the amount determined by the Tribunal in the only award issued against it.
(c) No exceptional circumstances exist that would require Paraguay to provide security in order to continue the stay of enforcement of the award.
(d) Paraguay’s application for annulment is not dilatory.10
"[t]here is no indication, past or present, that Paraguay will not enforce the Award should its annulment request fail.
Paraguay is in full compliance with Article 69 of the ICSID Convention. It has passed Law No. 944/1982, which incorporated the ICSID Convention into Paraguayan law.
Moreover, Article 536 of the Paraguayan Code of Civil Procedure establishes that international arbitral awards shall have full force and effect in accordance with the terms of the treaties under which they are rendered".13
"As the ad hoc committee in Mitchell v. Congo explained, ‘in a different field but with the same ‘raison d’être’, stay of enforcement pending an appeal from a judicial decision is, according to several national laws, almost automatic’".15
"[s]imple interest at LIBOR + 1% (as was awarded by the Tribunal) does not constitute adequate compensation for the time value of money. The unchallenged evidence, at the hearing below, by SGS’s Vice President, Finance and Administration (Governments and Institutions Services Division), Michael Lironi, was that interest even at LIBOR + 2% was below SGS’s ‘actual cost of borrowing’. SGS would suffer a further prejudice if Paraguay - as it has done with respect to the 2005 judgment of the Swiss Federal Tribunal -were to reorganize or conceal its foreign assets so as to make itself judgment proof’.18
(a) Posting a bond would not prejudice Paraguay. In such regard, it asserted that "Paraguay does not and cannot say that it would suffer economic hardship if required to post a bond. Nor would Paraguay suffer any harm if the Award were annulled. In such circumstance, the bond would simply be rescinded, thereby fully addressing Paraguay’s stated concern about efficiency"41
(b) The Committee would safeguard the integrity of the ICSID system and ensure that Paraguay honor its obligations under the ICSID Convention. In connection therewith, SGS stated that "[t]he Committee will have noted that Paraguay nowhere undertakes to comply with the Award should the Committee reject its application for annulment. (In any event, assurances would have little value given the history of broken promises by Paraguay to pay SGS.) Paraguay’s failure even to undertake to comply with the Award comes on top of a record of defiance by Paraguay of its ICSID obligations - Paraguay paid its share of the arbitration costs below only after it decided to commence these annulment proceedings - and evidence of attempts by Paraguay to make itself judgment-proof and frustrate enforcement of a Swiss court judgment rendered in favor of European banks. By ordering a bond, this Committee would prevent this case from becoming another black mark for the ICSID system of a dishonored award"42
(c) The nature of the application for annulment submitted by Paraguay warrants a bond or other security. SGS asserts that the Committee should determine whether or not the application for annulment is dilatory. In the words of SGS, "...Paraguay’s application is a disagreement about treaty interpretation. Paraguay does not allege procedural vice, due process violation or unfairness. The core issue raised by Paraguay is a disagreement with the Tribunal about the proper interpretation of the dispute resolution clause of the BIT in light of the forum selection clause in the underlying contract"43
Creditor Approx. Amount Arbitral Tribunal or Court
Nine Banks US$85,000,000 plus interest Swiss Federal Tribunal
SGS US$39,000,000 plus interest ICSID Arbitral Tribunal
BIVAC US$36,000,000 ICSID Arbitral Tribunal and Paraguayan Courts.
Part of the offering proceeds could be attached by creditors to satisfy outstanding and pending judgments and awards against Paraguay.
Creditors holding outstanding court judgments or arbitral awards present a risk of disruption to the offering. The risk with respect to the offering is that the initial purchasers in the offering could be said to have an obligation to pay money to Paraguay and Paraguay’s judgment creditors may attempt to restrain Paraguay’s interest in any such obligation. Further, Paraguay’s creditors could attempt to attach the proceeds of the offering".49
"... as a matter of urgency and in accordance with its powers under Article 39(1) of the Rules, the Committee order that Paraguay direct its agents - including Citigroup and its affiliates (as Global Coordinator, Joint Book-Runner, Trustee, Principal Paying Agent, Transfer Agent and Registrar of the Offering), Bank of America Merrill Lynch (as Joint Book-Runner of the Offering) and any other financial institutions involved in the Offering - to place the proceeds of the Offering (up to the amount of the ICSID Award plus interest) in an interest-bearing trust account with Citigroup in New York pending the Committee’s decision on the Parties’ respective requests regarding the stay of enforcement".51
(a) Stated that, "... although it is true that Paraguay is raising funds on the international debt markets... this fact does nothing to change the debate over continuation of the stay of enforcement of the Award..,".52
(b) Stated once again that since no ad hoc committee has declined to continue the stay enforcement of an award, such stay should be continued pending the Committee’s final decision in the context of this annulment proceeding.53
(c) Submitted a copy of the special power granted by the President of the Republic of Paraguay to the Attorney General "... to provide a sworn commitment before the International Centre for Settlement of Investment Disputes (ICSID), in the name and in representation of the Paraguayan State, [in] the litigation Societe Generale de Surveillance S.A. (S.G.S.) against the Republic of Paraguay, No. ARB/07/29...".54
(a) "For the avoidance of doubt, such withdrawal does not entail acceptance by SGS of the arguments raised in Paraguay’s letter of 24 January 2013...".55
(b) "... Paraguay had hitherto offered no assurances that it intended to comply with the Award should this Committee reject its annulment application".56
(c) "The decree that authorizes Paraguay to offer assurances was issued on 24 October 2012..." but Paraguay preferred to keep it in reserve and it was not until it "... was faced with the prospect of seeing the proceeds of its first sovereign bond offering seized that Paraguay undertook to represent to this Committee that it intended to comply with the Award".57
(d) "... Paraguay anticipated future enforcement actions and specified that "any action taken to enforce... the SGS Award" would not be regarded as an event of default under the bonds".58
(e) "SGS maintains its request that the Committee not extend the provisional stay of enforcement or, alternatively, order Paraguay to provide financial security for the full amount of the Award with interest".59
"SGS’s unfounded speculation about the timing of the letter cannot detract from the fact that Paraguay has conveyed its assurances that it will pay the Award if it is not annulled. As Paraguay has already pointed out, annulment committees routinely accept such assurances to support extending provisional stays".60
"The Committee may, if it considers that the circumstances so require, stay enforcement of the award pending its decision. If the applicant requests a stay of enforcement of the award in his application, enforcement shall be stayed provisionally until the Committee rules on such request".
"Stay of Enforcement of the Award
(1) The party applying for the interpretation, revision or annulment of an award may in its application, and either party may at any time before the final disposition of the application, request a stay in the enforcement of part or all of the award to which the application relates. The Tribunal or Committee shall give priority to the consideration of such a request.
(2) If an application for the revision or annulment of an award contains a request for a stay of its enforcement, the Secretary-General shall, together with the notice of registration, inform both parties of the provisional stay of the award. As soon as the Tribunal or Committee is constituted it shall, if either party requests, rule within 30 days on whether such stay should be continued; unless it decides to continue the stay, it shall automatically be terminated.
(3) If a stay of enforcement has been granted pursuant to paragraph (1) or continued pursuant to paragraph (2), the Tribunal or Committee may at any time modify or terminate the stay at the request of either party. All stays shall automatically terminate on the date on which a final decision is rendered on the application, except that a Committee granting the partial annulment of an award may order the temporary stay of enforcement of the unannulled portion in order to give either party an opportunity to request any new Tribunal constituted pursuant to Article 52(6) of the Convention to grant a stay pursuant to Rule 55(3).
(4) A request pursuant to paragraph (1), (2) (second sentence) or (3) shall specify the circumstances that require the stay or its modification or termination. A request shall only be granted after the Tribunal or Committee has given each party an opportunity of presenting its observations.
(5) The Secretary-General shall promptly notify both parties of the stay of enforcement of any award and of the modification or termination of such a stay, which shall become effective on the date on which he dispatches such notification".
(a) Upon registration of an application for the annulment of an award, ICSID authorities appoint an ad hoc Committee to decide on such application.
(b) If the application for annulment contains a request for stay of enforcement of the award, the Secretary-General of ICSID shall order the provisional stay thereof.
(c) In the event that the Committee considers "that the circumstances so require", it may order that the stay be continued pending its decision on the application for annulment.
(d) Unless the Committee decides to continue the stay, it shall automatically be terminated.
(e) If the Committee grants a stay of enforcement, it may at any time modify or terminate the stay at the request of either party.
"The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention".
(a) Rejects Paraguay’s request for the continued stay of the enforcement of the Award rendered on February 10, 2012 whose annulment was requested by Paraguay;
(b) Declares that the provisional stay granted by the Secretary-General is terminated as of the date hereof;
(c) Decides that it will rule on the allocation of costs and expenses in its decision on the annulment of the Award.
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