My welcome as a member of the Tribunal freshly reconstituted on August 10, 2015 was marked by the filing, the very same day, of Respondent’s Application for Reconsideration of the Tribunal’s Decision on Respondent’s [first] Request for Reconsideration of March 10, 2014 (the "Majority Reconsideration Decision"). This Second Application caused Claimants to respond in their letter of August 12, 2015, followed by comments contained in Respondent’s letter of the same day, which was addressed in turn by Claimants’ response by letter of August 13, 2015, again answered by Respondent through its email of August 14, 2015. It is common knowledge that Respondent’s initial and renewed requests relate to the Tribunal’s Decision on Jurisdiction and the Merits dated September 3, 2013 (the "Majority Merits Decision"). My learned Colleagues on the Tribunal’s bench have decided to maintain their initial position taken in the "Majority Reconsideration Decision", well aware (in light of my notes submitted on August 18 and September 9, 2015) that it will again remain a majority ruling, associated to a new dissent as stated below, which adds support to Professor Abi-Saab’s Dissenting Opinion of March 10, 2014. The refined thoughts contained in a recent article1, on which the Parties have filed comments on January 22, 2016, did not have the effect of changing my Colleagues’ categorical position, resulting in the Majority’s Decision on Respondent’s Request for Reconsideration of the Tribunal’s Decision of 10 March 2014, dated February 9, 2016 (the "Second Majority Reconsideration Decision", or the "Renewed Version").
Charles N. Brower/Paula F. Henin, Res judicata, ConocoPhillips v. Venezuela, ICSID Case No. ARB/07/30, in Building International Investment Law, The First 50 Years of ICSID, ed. by Meg Kinnear et al,, Alphen aan den Rijn 2016, p. 55-69.
It is worth recalling the precise terms of the dispositif of the Tribunal’s Decision on Jurisdiction and the Merits:
"404. For the foregoing reasons, the Tribunal decides as follows:
a. It does not have jurisdiction under Article 22 of the Investment Law and accordingly the claims by ConocoPhillips Company are dismissed; and
b. It has jurisdiction under Article 9 of the Bilateral Investment Treaty over:
i. the claims brought by ConocoPhillips Petrozuata BV, ConocoPhilips Hamaca BV and ConocoPhillips Gulf of Paria BV in respect of (1) the increase in the income tax rate which came into effect on 1 January 2007 and (2) the expropriation or migration; and
ii. the claims brought by ConocoPhillips Petrozuata BV and ConocoPhillips Gulf of Paria BV in respect of the increase in the extraction tax in effect from 24 May 2006.
c. All claims based on a breach of Article 3 of the BIT are rejected.
d. The Respondent breached its obligation to negotiate in good faith for compensation for its taking of the ConocoPhillips assets in the three projects on the basis of market value as required by Article 6(c) of the BIT.
e. The date of valuation of the ConocoPhillips assets is the date of the Award.
f. All other claims based on a breach of Article 6(c) of the BIT are rejected.
g. All other questions, including those concerning the costs and expenses of the Tribunal and the costs of the parties’ determination are reserved for future determination."
"(a) DECLARE that Venezuela has breached:
(i) Article 11 of the Foreign Investment Law and Article 6 of the Treaty by unlawfully expropriating and/or taking measures equivalent to expropriation with respect to ConocoPhillips’ investments in Venezuela;
(b) ORDER Venezuela to pay damages to ConocoPhillips for its breaches of the Foreign Investment Law and the Treaty in an amount to be determined at a later stage in these proceedings, including by payment of compound interest at such a rate and for such period as the Tribunal considers just and appropriate;
(c) AWARD such other relief as the Tribunal considers appropriate;
"In its September 2013 Decision, the Tribunal’s ultimate and unassailable conclusion was that Venezuela acted unlawfully in expropriating the three Projects. That breach of international law requires Venezuela to make full reparation to the Claimants for the investment taken, which is the matter now before the Tribunal."3
When the view is, as it should be, that the assessment of damages must be connected to the breach as it was identified in the dispositif of the Decision on Jurisdiction and the Merits (letter d), these both positions are not correct. On the other hand, however, they are perfectly correct when the liability to be considered is based on Article 6 of the BIT as this had been claimed by Claimants.5 However, this is precisely the breach of the BIT that is not affirmed in the dispositif of the Decision.6 The Majority of the Tribunal decided to proceed (exclusively) with the examination of damages without ruling about the underlying liability.7
Claimants also submit that international law requires the Respondent to restore the Claimants "to the position they would have enjoyed but for the confiscation": Claimants’ Reply on Quantum of 13 October 2014, Title II/A before para. 16. The situation in which Claimants should be restored is that just before the taking and not that when the breach of the obligation to negotiate in good faith occurred.
This has been stated already by Professor Abi-Saab in his Dissenting Opinion on Jurisdiction and the Merits of February 19, 2015, paras. 264-267. "We thus have a Decision the main finding of which - that of the illegality of the expropriation - cannot be found anywhere in its text." (para. 264)
In its Note attached to the Renewed Version, the Majority provides an unsollicitated interpretation of letter d of para. 404 of the dispositif of the Tribunal’s Decision on Jurisdiction and the Merits, concluding that this provision was "precisely" stating that "Venezuela has breached Article 6 of the Treaty by unlawfully expropriating" Claimants’ investments in Venezuela. However, letter d of the dispositif addresses exclusively Respondent’s breach of its obligation to negotiate in good faith for compensation, which the Decision identified as being « commonly accepted », omitting to refer to any grounding in Article 6 of the BIT (para. 362, quoted in the Note). This obligation was not - and could not be - based on Article 6(c). This provision was referred to merely as providing the standard on which good faith negotiations had to be based (see paras. 334(4), 404(d)). In Claimants’ briefs on the Merits, the assertions on the unlawfulness of the expropriation have been heavily supplied by the absence of any reasonable compensation on Respondent’s part, however without relying on a violation of an obligation to negotiate in good faith (cf. Claimants’ Memorial on the Merits of September 15, 2008, paras. 297-320; Claimants’ Reply on the Merits of November 2, 2009, paras. 375-391, 415-427, 432-437). Therefore, Claimants’ claim for a declaration that Venezuela had breached Article 6 has not been based on such violation.
Given that the Tribunal has not decided upon the alleged breach of Article 6, the presentation of submissions of the Parties as to the factual allegations to be made in that respect remains open. This is all the more so as the Tribunal has not declared the proceeding closed according to Arbitration Rule 38(1). This further means that the factual assessment underlying the ruling on the matter of good faith negotiation, while decisive in this latter respect, is not precluding Respondent from arguing and submitting evidence as a defence to presently outstanding claims on liability and damages, if any. Even when considering such ruling as binding in any way, such effect does not extend to the underlying reasons, which are subject to reexamination in respect of any other issue on the merits, for which such reasons or facts may be relevant.9 Claimants seem to share this view when stating that the Tribunal "may therefore wish to address this matter as part of its quantum determination".10 In light of such an assessment, it would appear to me that consideration of Respondent’s Application for Reconsideration could be deferred at a later stage when the issue of an alleged breach of the BIT is dealt with in terms encompassing all of the elements pertinent under Article 6 of the BIT.11 In this respect, I am respectfully dissenting from my Colleagues’ majority position that the matter shall now be decided.
Another illustration may be given in respect of para. 402 of the Majority Merits Decision where it is emphasized that the Tribunal "does not at this stage make a finding in respect of the relevance, if any, of the compensation formulas included in the Petrozuata and Hamaca Association Agreements to the determination of the quantum compensation payable in this case", while it had decided that there was not "any evidence that in this period [April-June 2007], the Venezuelan representatives brought the compensation formulas in the Petrozuata and Hamaca Association Agreements into the negotiation" (para. 400).
Claimants’ letter of January 22, 2016.
In the same vein, consideration may be given to the "several issues" the Tribunal referred to but did not propose to decide (para. 334), nor identify in its Decision on Jurisdiction and the Merits and which are part of the "all other questions" reserved for further examination under letter g) of the dispositif and not related to quantum or costs.
The place of such statement in the part on procedural history is the most unsuitable solution. Indeed, the statement has for its purpose to introduce the Tribunal’s Decision on Jurisdiction as a ratio decidendi for its Award that closes the proceeding. Its purpose is precisely not to merely recall a piece of historical importance, but to state a decision in the Award itself.
See also Brower/Henin, op.cit., p. 67, noting that "Professor Abi-Saab’s Dissenting Opinion rightly points out that the majority’s Decision on Reconsideration underplays the specific characteristics of the ICSID system and its lex specialis.".
Claimants’ First Submission on Respondent’s Application for Reconsideration of October 28, 2013, No. 23.
It seems premature for me to draw today a negative interference from the Tribunal’s sentence in its Decision on Jurisdiction and the Merits that it "does not have before it any evidence at all of the proposals made by Venezuela in this final period" (para. 400), statement which is then explained in further detail.
Claimants’ First Submission on Respondent’s Application for Reconsideration of October 28, 2013, No. 21-25; Claimants’ Second Submission on Respondent’s Application for Reconsideration of November 25, 2013, No. 26-31; Claimants’ letter of January 22, 2016.
Majority Reconsideration Decision, para. 21.
Majority Reconsideration Decision, para. 21; Renewed Version, para. 31.
Cf. Andrew McDougal/Samy Markbaoui, ConocoPhillips Petrozuata, ConcocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B. V. v. Bolivarian Republic of Venezuela, Journal of World Investment and Trade 15 (2014) p. 1062-1069(1068).
The Majority Reconsideration Decision (para. 21) and the Renewed Version (para. 31) both rely on the Electrabel Decision in support of the principle of res judicata, omitting to note that this term does not appear in the Decision.
Professors Gabrielle Kaufmann-Kohler and Brigitte Stern.
Quiborax S.A. and Non Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID/ARB/06/2, Award of September 16, 2015, para. 130. The Majority is therefore wrong in stating in its Renewed Version that the Quiborax Tribunal did not question the binding character of the earlier ruling or its "res judicata effect" (para. 33). The Quiborax Tribunal accepted to examine the objection and rejected it. In the instant case, Respondent requests nothing more than that its Application may be heard and examined.
Cf. Award, para. 541. Similarly, the Tribunal in CMS Gas Transmission Company v. Republic of Argentina ICSID/ARB/01/8, Award of May 12, 2005, stated simply that certain issues dealt with at the jurisdictional stage raised by Respondent in relation to the merits "were decided upon at that stage and will not be reopened in this Award" (para. 126). The principle of res judicata has not been mentioned.
Abaclat et al. c. Argentine Republic, ICSID Case No ARB/07/5, Decision on Jurisdiction and Admissibility, August 4, 2011, paras. 515-521, concluding that the "ICSID Framework" does not contain a "qualified silence" excluding the adoption of appropriate procedural rules to deal with "mass claims".
The primary addressee of this provision is clearly the Tribunal. In its Renewed Version, the Majority disposes from considering Rule 19 because Respondent did not seek therein support for its power of reconsideration (para. 36, in fine). Iura novit curia does not exist. Respondent was not most explicit, indeed. A reference to Rule 19 can be found in a quote in footnote 125 of Respondent’s Second Brief pursuant to the Tribunal’s Request of October 1, 2013, dated November 25, 2013.
Claimants’ First Submission on Respondent’s Application for Reconsideration of October 28, 2013, No. 15, in fine, omits observing this point when arguing that the stage to which Rule 38(2) refers has passed. In fact, it has never been reached.
Even if Rule 38(2) would be pertinent, allowing reopening of the proceeding in light of new evidence, the effects on the substance of the clarification requested from the Tribunal are crystal clear and cannot be reduced to an "essentially procedural character" as the Majority affirms in its Renewed Version (para. 36).
"... there appears to be nothing to stop a tribunal from supplementing, rectifying, interpreting or revising a preliminary decision on jurisdiction informally while the case is still pending before it." Christoph Schreuer, The ICSID Convention: A Commentary, 2nd ed., Cambridge 2009, Art. 41 No. 24. The Renewed Version comports the extraordinary omission of this statement, while Schreuer’s Commentary is invoked for the proposition that Article 44 deals only with the power to rule on matters of procedural character, not including the power invoked by Respondent (para. 23).
Tokios Tokeles v. Ukraine, ICSID/ARB/02/18, Award of July 26, 2007, para. 98: "The Tribunal notes that it could have dealt with the contention simply recording that by virtue of the treatment of the same point in the Decision on Jurisdiction the principles of res judicata and issue estoppel excluded any right to raise it again, but in the circumstances it has been thought right to reconsider the question, with the same result as before."
"It is by no means clear that the basic trend in international law is to accept reasoning, preliminary or incidental determination as part of what constitutes res judicata. " AMCO v. Republic of Indonesia, ICSID/ARB/81/1, Decision on Jurisdiction of May 10, 1988, para. 32.
The Tribunal relies on quotes from Claimants’ Second Submission that are taken in most part from their statement and not from the travaux préparatoires. Claimants merely mentioned the Convention’s drafters stressing the "binding character of any decision by [an arbitral tribunal] on preliminary questions or merits" (referring to History of the ICSID Convention, Volume II-1 (1968), page 408, CL-269). Claimants’ quote is misleading. It does not originate from the "drafters of the Convention", but from the Chairman of a meeting of legal experts. And it refers to a comment having the purpose to "emphasize the distinction between the ruling of a tribunal and a recommendation by the conciliation commission concerning competence" (ib). In any event, any statement that would have been made at the time of the Convention’s drafting is of little relevance since the Centre has taken the position that an affirmative Decision on Jurisdiction cannot have the quality of an award.
Majority Reconsideration Decision, para. 22 ; Renewed Version, para. 27, in fine.
Decision, para. 42.
Decision, paras. 43-48. The quote is repeated in the Majority’s Renewed Version (para. 31), without further elaboration, except the mention of two other ICSID cases "to the same or similar effect", as "cited by the Perenco Ecuador tribunal", although they do not support the argument.
The Perenco Tribunal notes (para. 45) that the Tribunal seized with the Waste Management II case affirmed that a decision on a particular point on jurisdiction or the merits constitutes res judicata; Waste Management Inc. v. United Mexican States (Waste Management II), ICSID/ARB(AF)/00/3, Decision on Mexico’s Preliminary Objection concerning the Previous Proceeding, para. 45. This presentation is not correct and no support can be driven for a situation as existing in the Perenco matter and in the instant case. As the Waste Management II Award of April 30, 2004 explains, the decision on jurisdiction that was addressed by Mexico’s objection was rendered in a prior and different proceeding, when jurisdiction was denied because of Claimant’s failure to commit with the requirement to pursue domestic remedies before resorting to international arbitration (para. 4). The Waste Management II Tribunal concluded that this negative decision did not prevent Claimant from bringing its claim again before an arbitral tribunal (para. 11).
Decision, para. 48.
Decision, paras. 86-88.
Decision, para. 86
This is a manifest mistake that must be highlighted. It can be explained by the fact that the absence of a declaration for closure of the proceedings is not mentioned in the Majority Decision on Reconsideration. It can be identified when reading the Decision on Jurisdiction and the Merits.
Interestingly, the Perenco Tribunal recognizes that the Abaclat Tribunal was "seeking to design a procedure that would govern the special needs and demands of the case before it" (para. 79). The Tribunal understands that this seems admissible as "an example of a tribunal in the early stage of a case" (ib.). However, it does not identify why such filling of a gap was authorized by Article 44 "in the early stage of a case" and not at a later stage, at least as long as the proceeding had not been declared closed.
Tanzania Electric Supply Company Limited v. Independent Power Tanzania Limited, ICSID/ARB/98/8, Final Award of July 12, 2001, para. 32.
Another way to address the issue is to refer to well-recognized exceptions to the recognition and enforcement of a decision’s effect of res judicata, including a situation where evidence has been submitted "that the previous decision is vitiated by a fundamental flaw, such as being tainted by corruption or fraud, resulting from a procedure inconsistent with fundamental due process principles, or having been rendered by a tribunal lacking jurisdiction": Brower/Henin, op.cit., p. 69.
See also Brower/Henin, op.cit,, concluding that "it might not be right to suggest, as the majority in ConcocoPhillips v. Venezuela did, that the question of a tribunal’s power to revisit its own findings can be considered in isolation from the context of the very request" (p. 68/69).
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