RSM: The Claimant and Respondent to Counterclaim is RSM Production Corporation, a company organised and existing under the laws of Texas, United States of America, with its principal place of business located at 5299 Prentice Blvd, Suite 500, Greenwood Village, Colorado 80111, USA. Its president and chief executive officer is Mr Jack J. Grynberg, who is also a director of the company. Mr Grynberg has worked as a petroleum engineer for more than thirty years. The company is owned by members of Mr Grynberg's family. (For ease of reference, the Claimant is here referred to as "the Claimant" or "RSM.")
"26.1 Any dispute or difference arising between the parties relating to the construction, meaning or effect of this Agreement or the rights or liabilities of the parties hereunder, or any matter arising out of the same or connected therewith shall be resolved amicably by negotiations.
26.2 Subject to Clause 26.1 and 26.5 all disputes, differences or questions between the parties to this Agreement with respect to any matter arising out of or relating to this Agreement shall be referred to arbitration pursuant to Clause 26.3.
26.3 (a) Any unresolved dispute or difference aforesaid shall be submitted for settlement by arbitration to the International Centre for the Settlement of Investment Disputes (ICSID) established by the Convention for the Settlement of Investment Disputes between States and Nationals of other States of 16 March 1965 and for this purpose it is agreed that although the Company (as an investor) is a company registered as a foreign company in Grenada, it is controlled by nationals of the United States and shall be treated as a national of that State for the purpose of the Convention.
(b) Each dispute submitted by a party to arbitration shall be heard by an Arbitration Board, composed of three arbitrators. Each party shall appoint one arbitrator, and these two shall designate a third arbitrator, who shall chair the Arbitration Board. If the arbitrators named by the parties fail to agree upon a third arbitrator within thirty (30) days after the latter of the two arbitrators has been appointed, or if any party does not appoint an arbitrator within thirty (30) days following appointment of an arbitrator by the other party, such arbitrator shall, at the request of either party, be designated by the Chairman of the Administrative Council of ISCID [sic].
(c) If for any reason an arbitrator is unable to perform his functions, a substitute shall be chosen in the same manner as the original arbitrator.
(d) Unless otherwise agreed in writing by the parties, the third arbitrator appointed pursuant to paragraph (a) shall not be a national of Grenada or of the country where the parent company of the Company is incorporated.
26.4 (a) The said arbitration shall, unless otherwise agreed by the parties, be held in London, England.
(b) The award resulting from arbitration shall be final and binding on the parties.
26.5 Any matter in dispute between the parties under Clause 8.7, 13.5 and 13.7 shall be referred for determination by a sole expert to be appointed by agreement between the parties hereto and failing such agreement by the Chairman of the Administrative Council of ICSID."
The word "investor" is not here expressly defined. For ease of reference below, Article 26 of the Agreement is described as the "Arbitration Agreement."
"The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting 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."
The term "investment" is not here expressly defined.
"This Agreement shall be governed by, interpreted and construed in accordance with the Laws of Grenada."
As regards the "Laws of Grenada," it was common ground between the Parties that recourse could be made to English common law; and both Parties did so extensively in these proceedings [D5,205].
(1) Professor Bernard Audit, as Co-Arbitrator, appointed by RSM by letter dated 20 September 2005, of Université de Paris II (Panthéon-Assas), 12 place du Panthéon, 75005 Paris, France;
(2) Dr David S. Berry, as Co-Arbitrator, appointed by Grenada by letter dated 31 October 2005, of the University of the West Indies, Cave Hill Campus, P.O. Box 64, Bridgetown, Barbados; and
(3) V.V. Veeder Esq, as President, appointed by the two co-arbitrators on 1 December 2005, of Essex Court Chambers, 24 Lincoln's Inn Fields, London WC2E 3EG, United Kingdom.
Ms Milanka Kostadinova, Senior Counsel, ICSID, was appointed Secretary to the Tribunal.
"98.1. The Agreement remains in full force and effect;
98.2. The Government must under the Agreement ensure that RSM is granted an Exploration License;
98.3. In the alternative, the Government must pay damages to RSM for the loss it has suffered, such damages to be determined following an inquiry as to damages;
98.4. The Government must not proceed with discussions with third parties concerning the grant of oil and gas exploration rights within the area subject to the Agreement and may not award, promise or issue any exploratory or development rights to any third party which would affect RSM's rights or obligations under the Agreement before the Tribunal has issued its award;
98.5. The Government must pay in full the fees and expenses of the Arbitrators, the ICSID administrative expenses and all costs incurred in connection with this arbitration by RSM (including without limitation the fees and expenses of all experts and all legal fees and expenses); and
98.6. RSM is entitled to such further relief as is just and equitable in all the circumstances of this case."
As regards the prayer for relief in paragraph 98.4 above, Counsel for RSM acknowledged at the conclusion of the Main Hearing that it might unnecessarily duplicate the prayer for relief in paragraph 98.1 [D5,204]. As regards the prayer for relief in paragraph 98.3, at RSM's request, the Tribunal indicated at the conclusion of the Main Hearing that, if this relief were granted, the Tribunal would be minded to hold a further hearing to conduct the requested "inquiry as to damages" [D5,216].
"7.1 For the foregoing reasons, Grenada respectfully requests the Arbitral Tribunal to render an Award:
(1) Declaring that RSM's claims are not within the jurisdiction of the Arbitral Tribunal;
(2) Declaring, alternatively, that Grenada has not breached any of its obligations under the Agreement;
(3) Dismissing all of RSM's claims;
(4) Declaring that RSM fraudulently induced the Government to enter into the Agreement, and/or that RSM breached the Agreement;
(5) Declaring, on the basis of the finding described in (4) above, that the Agreement is rescinded, or alternatively terminated, or lapsed, such that the Government has no further contractual obligations to RSM;
(6) Ordering RSM on the basis of the finding in (4) above to refrain from: (a) interfering in any way in Grenada's foreign policy and relations with other States; (b) representing to any person or entity that it has authority to act as an agent or representative of the Government of Grenada; and (c) asserting to any person or entity that it has any kind of license or other rights in respect of Grenada's offshore territory or EEZ;
(7) Awarding to the Government, on the basis of the finding described in (4) above, the sums of EC$ 391,860.00 and US$1,000.00;
(8) Ordering RSM to pay all costs of this proceeding, including the Government's legal and expert fees and expenses, the fees and expenses of the Arbitral Tribunal and of any experts appointed by the Arbitral Tribunal, as well as the costs charged by ICSID; and
(9) Awarding the Government such other and further relief as the Arbitral Tribunal may consider appropriate."
"The Tribunal is aware of many ICSID and other arbitral decisions noted above and the fact that they have progressively given a broader meaning to the concept of investment. But in all those cases there was a specific connection to ICSID, either because the activity in question was beyond doubt an investment or because there was an arbitration clause involved. The same holds true of concession contracts in which the investor is called on to perform a public service on behalf of the State."
(The Claimant also cited, principally, the decisions in Joy Mining v Egypt, CSOB v The Slovak Republic (at paragraphs 63-64, citing the Report of the Executive Directors of the World Bank on the ICSID Convention), and the ad hoc Committee decision in Mitchell v DRC (at paragraph 30)).2
"[W]here in any proceedings against the Crown any such relief is sought as might in proceedings between subjects be granted by way of injunction or specific performance, the court shall not grant any injunction or make an order for specific performance, but may in lieu thereof make an order declaratory of the rights of the parties;..."
Accordingly, being thus deprived of the natural remedy of specific performance in this case, RSM claims a declaratory order in lieu of specific performance under the 1959 Act. Grenada's attempt to resist a declaratory order in lieu of specific performance under Section 17(1)(a) of the 1959 Act by reliance on principles of public international law is misconceived, given the Agreement's applicable law. It would mean that RSM's remedies in these ICSID proceedings would be more limited than if RSM were pursuing its claim before a Grenadian state court.
"Whereas the Company intends to apply for a Development Licence over the area described in Annex A and shown on the map in Annex B hereof and the Government intends to grant the said licence, and
Whereas the Company intends in the event of a commercial discovery to apply for a Development Licence or licences and to develop, produce, process, transport, sell, export or otherwise dispose of the said Petroleum, and
Whereas Section 6 of the  Act authorises the Minister to enter into an agreement with any person in respect of the grant of a licence, the condition to be included in a Licence or any matter incidental to or connected with the grant of a Licence under the Act, and
Whereas the Company has for the purposes aforesaid the necessary financial capability, technical competence and professional skill."
(a) An 'Affiliate' or 'Affiliated Company', in relation to any person constituting the Company, means any Company holding directly or indirectly a majority of shares in such person or any Company which is controlled directly or indirectly by any such aforesaid company...
(i) The 'Company' means RSM Production Corporation and includes any other person to whom the Company has assigned its participating interest or any part thereof in the Exploration Licence referred to in Article 3 or in any Development Licence granted under Article 8.
"3.1 As soon as possible but in no event later than ninety (90) days after the Effective Date, the Company shall apply for, and the Minister, under and in accordance with the Act, will grant to the Company an Exploration Licence over the area described in Annex A and shown on the map in Annex B. This Licence shall be substantially in the form of the draft licence set forth in Annex C."
"3.2 The Exploration Licence granted pursuant to Article 3 hereof shall be for an initial period of four years commencing from the date of the grant of the License and shall, subject to the Act, on application duly made by the Company, be renewed for two further periods of two years each in accordance with the Act."
As earlier noted, the "Effective Date" is defined as 4 July 1996. The form of the Draft Exploration Licence to be granted by the Minister was indeed set out in Annex C, a single page with only two dates to be completed together with the signature of the Minister.
"Within thirty (30) days after the Effective Date or such further period as may be allowed by the Minister, the Company shall prepare and submit to the Minister a detailed work programme and Budget setting forth the Exploration operations which the Company proposes to carry out in the Calendar year in which the Exploration Licence is granted to the Company under Article 3 and the estimated cost thereof."
"24.1 [A] Failure on the part of the Company to fulfil any of the terms and conditions of this Agreement shall not be treated as breach of this Agreement in so far as the failure arises from force majeure and [B] if, as a result of force majeure, the fulfilment by the Company of any of the terms or conditions of this Agreement is delayed beyond the period fixed or allowed for its fulfilment, the period of the delay shall be added to the duration of this Agreement and to the period so fixed or allowed."
"24.2 [A] Where the Company seeks to invoke Clause 24.1 it shall promptly notify the Government in writing of the occurrence of conditions of force majeure and shall take all reasonable steps to remove the cause thereof. [B] The Company shall promptly notify the Government as soon as conditions of force majeure no longer prevent the Company from carrying out its obligations and following such notice shall resume Petroleum Operations as soon as reasonably practicable."
"24.3 Where a force majeure situation continues for more than thirty (30) consecutive days, the parties shall meet forthwith in order to review the situation and to agree on the measures to be taken for the removal of the cause of force majeure and for the resumption, in accordance with the provisions of this Agreement, of the performance of the obligations hereunder."
"24.4 [A] In this Article the expression "force majeure" means any event beyond the reasonable control of the party claiming to be affected by such event which has not been brought about at its instance and which has caused such non-performance or delay in performance, including, without limitation, market prices for Petroleum or the anticipated products of Petroleum which, after taking into account estimated Royalties, corporate profits tax payments, and production, processing, transportation and all other costs of every type and all other costs of every type and nature, would not afford a reasonable profit to the Company; natural phenomena or calamities; epidemics; fires; wars; invasions; blockades; riots; strikes; insurrections; labour disturbances; acts of God; inevitable accidents; and any adverse claim or dispute as to the Government's ownership of, or control over, the petroleum in any portion of the Agreement Area. [B] For the avoidance of doubt, an adverse claim or dispute relating to the Government's ownership of or control over the petroleum in any portion of the Agreement Area shall be deemed a force majeure situation as to the entire Agreement Area, thereby excusing performance of all of the Company's obligation under this Agreement and extending the duration of this Agreement and the period allowed for the performance or fulfilment of all such obligations by the period required to establish beyond doubt the Government's ownership of, and control over, all petroleum in the entire area described in Appendix A and shown on the Map in Appendix B."
The Tribunal notes, particularly, the wording in Article 24.4 [B]: this is a clear albeit unstated reference to Grenada's boundary difficulties with Venezuela and Trinidad & Tobago; and, as here expressed, an adverse claim or dispute as to any portion of the area was to qualify as a force majeure event as to the entire area under the Agreement.
"[A] The Company may not assign to any person, firm, company or corporation not a party hereto, in whole or in part, any of its rights, privileges, duties or obligations under this Agreement without the prior written consent of the Government, which consent shall not be unreasonably withheld. [B] However, the Company shall be free to assign, by instrument in writing, its rights, privileges, duties, or obligations under this Agreement to an Affiliate provided that no such assignment shall in any way relieve the assignor of any of its obligations hereunder."
The Tribunal notes that Article 25[A] was no absolute bar to RSM's assignment: such assignment was permitted subject to Grenada's prior consent which was not to be unreasonably withheld.
"If by reasons of expiration, surrender or cancellation the Company no longer holds any Exploration Licence granted pursuant to Article 3 or any Development Licence granted pursuant to Article 8, this Agreement shall be deemed to have been terminated, but save as aforesaid, shall continue in full force and effect so long as the Company continues to hold any of the said Licenses.
"All notices and other communications to be given under this Agreement shall be given in writing and:
(a) Where the notice is to be given to the Minister or the Government [sic: it] may be delivered or sent by registered post to:
Permanent Secretary Ministry of Finance Lagoon Road St George's Grenada
"4(1) Subject to the provisions of this Act, no person shall carry out operations relating to petroleum exploration or production except under and in accordance with a license granted under this Act. (2) A person who contravenes subjection (1) shall be guilty of an offence and liable, on summary conviction, to a fine of $50,000 and to imprisonment for two years..."
"5(1) A license may be granted - (a) in the case of an exploration licence, to a company whether incorporated in or outside Grenada; but in the case of a company incorporated outside Grenada, it shall have an established place of business in Grenada and be registered as a foreign company in accordance with the provisions of the Companies Act; (b) in the case of a development licence, to a body corporate which is a company or a corporation incorporated and registered in Grenada."
"The Minister may enter into an agreement (not inconsistent with this Act) with any person with respect to all or any of the following matters, namely - (a) the grant of a licence to that person or to any other person identified in the agreement, including a body corporate yet to be formed; (b) the conditions to be included in a licence granted or renewed; (c) the procedure to be followed by the Minister while exercising any discretion conferred upon him by or under this Act and the manner in which the discretion shall be exercised; (d) any matter incidental to or connected with the foregoing."
"9(1) Unless the licence otherwise provides, an assignment or transfer to another person of the rights acquired or the obligations undertaken thereunder shall be null and void unless previous consent in writing of the Minister has been obtained. (2) An application by the holder of a licence for consent to the assignment or transfer of the licence or any rights or obligations thereunder shall be made to the Minister in the described form."
"29(1) The Minister may make regulations prescribing matters required or permitted to be prescribed by this Act or necessary or convenient to be prescribed for carrying out or giving effect to this Act."
There were no such regulations, but there were in existence draft regulations.
"FF. With reference to the contract area, be advised that the southern portion of the contract area should not include any area under maritime boundaries delimitation negotiations."
This was an implicit reference to boundary negotiations between Grenada and Venezuela and Trinidad & Tobago.
"ff) Based on my meeting with Prime Minister Keith Mitchell, Mr Mitchell was anxious to include the areas to median point between Venezuela and Grenada and between Trinidad and Grenada, which would strengthen Grenada's hand in negotiations. The median point is based on the 1954 Geneva Convention [sic: 1958 Geneva Convention] and, in fact, there is a precedence [sic: precedent] in 1985 where the median point between Malta, which as you know is an island, and Libya which is on the African continent, has been reached and agreed upon.... I would like you to know that I have agreed with the Prime Minister that Grynberg Petroleum will, in fact, pay all the legal costs if it is necessary to argue Grenada's ownership in the International Court of Justice in The Hague, Netherlands."
Apart from this offer of financial assistance, it is not clear from the evidence adduced in these proceedings what positive contribution for Grenada's benefit RSM and Mr Grynberg could have brought to these maritime boundary negotiations, which had begun before this offer of assistance.
"Mr Speaker, talks are now being held with several interested groups to deal with oil exploration issues. Less than two weeks ago a delegation of oil exploration experts and financiers from North America met with top Government officials, including myself, and expressed great interest in oil exploration in Grenada. Mr Speaker, please rest assured that our dealings would be clearly transparent, and that environmental implications will be given the fullest consideration" [CB1,302].
This was a reference to RSM.
"B.B With reference to the establishment of a limit for the existing force majeure event, be advised that I am in agreement with Mr Flaxman's suggestion that this matter be held in abeyance for the time being. The three-year limit negates the nature/characteristics and complexities inherent to Maritime Boundaries Delimitation Negotiations.
Your attention is hereby drawn to Articles #24.1 and #24.3. I am of the opinion that the afore-mentioned articles take care of the concerns of both parties (RSM and Government of Grenada)."
"DD. Grateful if consideration would be given to an extension of the time period for the issuance of the exploration license from seven (7) days to ninety (90) days. This would allow ample time for the finalisation and promulgation of the Petroleum and Regulations Act, and other institutional arrangements."
Articles 24.1 and 24.2 of the Agreement, as eventually executed by the Parties [CB01,350], contain no time-limit on the duration of the force majeure period. It is to be noted, however, that RSM agreed, as requested by Grenada, to extend the time-limit from seven to ninety days. It follows that the bulk of this time-period was intended by the Parties to be required for Grenada's Government and Civil Service in discharging Grenada's obligation to issue the Exploration Licence, rather than RSM's discharge of its obligation to apply for the Licence to Grenada, in comparison a much simpler task.
"In accordance with Article 24 of the Agreement between us dated July 4, 1996, RSM Production Corporation hereby notifies the Government of Grenada of the occurrence of a force majeure event, 'dispute as to the Government [of Grenada]'s ownership of or control over the petroleum in any portion of the Agreement area.'
Under Article 24.4, this dispute is deemed 'a force majeure event as to the entire Agreement Area, thereby excusing performance of all the Company's [RSM Production Corporation] obligations under this Agreement and extends the duration of the Agreement and the time allowed for performance or fulfilment of all of such obligations by the period required to establish beyond doubt the Government's ownership of, and control over, all petroleum in this entire area.'
In negotiations RSM has agreed to reimburse to this Government such direct costs and expenses, not exceeding US$400,000, as may be incurred by the Government for third party services in establishing its ownership and control of the petroleum in the entire Agreement Area, although RSM has reserved the right to terminate, in its sole discretion, such reimbursements at any time. For its part, the Government of Grenada has agreed vigorously to pursue all appropriate means for establishing its ownership and control of such petroleum, and has further agreed that any reimbursement amounts paid to it by RSM in connection with third party service shall conclusively be deemed proper expenditures in connection with the Initial Exploration Period which shall directly reduce the minimum expenditure required under Article 4.1(a) during the Initial Exploration Period."
The letter was counter-signed by Senator Bubb for Grenada under the heading "Accepted and Agreed: Government of Grenada," undated.
"... no later than May 10, 2004 which reflects our computation of the original 90-day application period, as enlarged by the occurrence of the force majeure event beginning on July 18, 1996. In part, this reflects RSM's determination that its letter to the Prime Minister [i.e. Mr Grynberg's letter dated 12 January 2004] was wholly ineffective as having been sent to the wrong office, and that the force majeure condition is only now lifted by the delivery of this letter. If the Government of Grenada disagrees with our computation, we would very much appreciate your advice, although RSM certainly does not intend to wait until the end of this period. Instead, RSM will apply as soon as reasonably practicable...."
RSM included with this letter a cashier's check dated 26 February 2004 in the amount of US $19,200.00. (It is not apparent from the evidence what happened with such a cheque, if it was received by Grenada).
"16. RSM delivered its application for an oil and natural gas exploration licence to the Permanent Secretary of the Ministry of Finance on April 14, 2004, after a four (4) day holiday."
This delivery date of 14 April 2004 accords with the date set out in RSM's letter dated 4 May 2004 (see below); and it was the date first pleaded by RSM in its Request for Arbitration of 31 August 2004 addressed to ICSID: "18. RSM delivered its application for an oil and gas exploration licence a copy of which is attached as Exhibit I, to the Permanent Secretary of the Ministry of Finance on April 14, 2004" [WS1.4].
"... Legal Position
The legal position can be shortly stated as follows. Under clause 3.1, the 90 day period for applying for an exploration licence expired on 2 October 1996. No application was made by RSM by that date. Even if (which is not accepted) RSM's letter of 18 July 1996 concerning force majeure had the effect of suspending the time within which RSM had to apply for an exploration licence, the 90 day period had resumed at the latest from 12 January 2004 when you wrote to the Prime Minister that "(B)ecause we are now confident that we can proceed with our licence offshore Grenada we are revoking the force majeure..." Allowing for the 14 days prior to the letter of 18 July 1996, the remaining period of 76 days would have expired on 28 March 2004. RSM did not apply for an exploration licence until 14 April 2004. It therefore failed to comply with the strict time limit imposed by clause 3.1.
To suggest as you have in correspondence (notably in your letter to us of 4 May 2004) that the notice contained in your letter to the Prime minister dated 12 January 2004 "could only be effective if directed to the Permanent Secretary of the Ministry of Finance" is legally untenable, as is the contention elsewhere in the letter that "(I)f, however, the January 12 letter were viewed as an effective notice, then such notice must, in accordance with Article 19.1 of the Petroleum Agreement be "delivered or sent by registered post". Clause 29 is simply a notice clause which provides that notices or communications "may" (not "must") be given to the Permanent Secretary of the Ministry of Finance. This means that the Permanent Secretary is authorized to receive the notice. It does not mean that no-one else is. Clause 29 is facultative. The procedure provided for it is not the only contractually effective method of communicating with the Government.
Even if (which is not accepted) your letter of 12 January 2004 was not legally effective notice under the Agreement, it is powerful evidence that by that date RSM was in fact no longer prevented from performing its obligations. That in itself is enough to bring an end to the period of suspension. It is also enough to require RSM to give notice under clause 24 of the Agreement. Assuming in your favour that only notice to the Permanent Secretary of the Ministry of Finance would suffice, RSM was in Breach [sic] of its obligation under clause 24.2 to give that notice "promptly" by waiting until 27 February 2004 to do so. As a matter of Grenadian law, RSM cannot rely on its own breach of clause 24 as extending the period for which, as RSM contends, it was relived (sic: relieved) of its contractual obligations.
Termination of the Agreement
By failing to apply for an exploration licence within the 90 day period stipulated under clause 3.1, RSM is in clear breach of the Agreement. It follows, as Leading English Counsel has confirmed, that the Government is entitled to terminate the Agreement. Please treat this letter as notification to RSM of that termination.
As you know, Clause 26(1) of the Agreement provides that disputes or differences between the parties should, if possible, be "resolved amicably by negotiations". The Government's position as conveyed in this letter will not be unfamiliar to you. We have previously communicated it to you, notably in our letter of 27 April 2004. Your reaction to that letter, and the adversarial steps taken by you subsequently, suggest that there is no realistic prospect of an amicable resolution. We nevertheless invite you to review the stance that you have taken to date, and to accept that the Government is entitled to terminate the Agreement for the reasons given.
Should you decline to do so, the Government would wish the dispute to be resolved by ICSID arbitration as expeditiously as possible. If the arbitrations' award [sic] shows that we are wrong, we will of course abide by the result.
We would appreciate a prompt response to this letter."
"An investment is frequently a rather complex operation, composed of various interrelated transactions, each element of which, standing alone, might not in all cases qualify as an investment. Hence, a dispute that is brought before the Centre must be deemed to arise directly out of an investment even when it is based on a transaction which, standing alone, would not qualify as an investment under the Convention, provided that the particular transaction forms an integral part of an overall operation that qualifies as an investment."29
The Tribunal agrees with this juridical approach.
"... Finally, it is highly unusual that a company is allowed - much less obliged - 'to take all reasonable steps to remove the cause of the force majeure', when the force majeure is a human-controlled factor such as international boundary delimitation. This can only lead to a conflict of interest, because the operator's commercial interests will almost inevitably differ from the host government's political and diplomatic interests. In any case, where boundary delimitation is concerned, the involvement of a foreign company will almost surely - as it apparently proved in this case - be unacceptable to the other parties to the boundary delimitation process.
I have been involved in offshore exploration and development throughout the world, and it is not uncommon to find that maritime boundaries have not been established between two states. I have never seen a situation in which a representative of a private oil company, particularly one from a third country with a commercial interest in the disputed zone, has been directly involved in the bilateral negotiations on boundary delimitation. I understand that the Government has taken the position in this case that RSM advised the Government that RSM, or Mr Grynberg personally, could be of significant assistance in establishing international boundaries between Grenada and both Venezuela and Trinidad & Tobago. If that position is correct, I would regard such advice as having been unreasonable and, to the extent relied upon by the Government, misleading and counterproductive. Certainly, if what RSM had in mind when it allegedly so advised the Government was legal proceedings of the kind RSM eventually undertook (purportedly on the Government's behalf) against PDVSA, Petrotrin and Trinidad & Tobago, RSM should have known that this was an unprecedented approach without any significant likelihood of contributing to a quicker resolution of the boundaries."
The Tribunal accepts this expert evidence.
"43. In my experience, there is a certain protocol that governs boundary negotiations. They start with political agreement between the heads of state on the commencement of negotiations, followed by an exchange of diplomatic notes expressing interest and setting up a time for the negotiations to begin. This will then lead to negotiating teams being set up and a first session being held.
44. There is little point in getting into the technical details, such as engaging hydrographers to try to establish a defensible boundary, before there is broad agreement on the method of delimitation. For example, Venezuela is holding out on the ratification of the United Nations Convention on the Law of the Sea (UNCLOS), because it wants to use the continental shelf theory to delimit its maritime boundary with Grenada, whereas UNCLOS, which Grenada has ratified and is therefore bound by, specifies the median line as the basic point of departure for maritime boundary delimitation negotiations."
The Tribunal accepts this evidence.
"We have suggested that up to $400,000 of the initial exploration commitment may be used to reimburse the Government and our expenditures in the border delineation process, subject to the terms and conditions set forth in our written offer to the Government dated December 29, 1995, a copy of which is attached hereto. In addition, we verbally agreed that we would supply personnel, legal team and contacts to obtain the best benefits for Grenada either through negotiation or the International Court of Justice. We can add this paragraph to the attached side letter dated December 29, 1995. We know, however, from the experience of other countries, and from your own experience with Trinidad and Tobago, that border delineation is a very lengthy process. We also know that Grenada and the other concerned States have complete control over both the timing and cost of securing a final border agreement, which would make any third party agreement to fund all costs to completion extremely unwise."
"In negotiations RSM has agreed to reimburse to the Government such direct costs and expenses, not exceeding US $400,000, as may be incurred by the Government for third party services in establishing its ownership and control of the petroleum in the entire Agreement Area, although RSM has reserved the right to terminate, in its sole discretion, such reimbursements at any time. For its part, the Government of Grenada has agreed vigorously to pursue all appropriate means for establishing its ownership and control of such petroleum, and has further agreed that any reimbursement amounts paid to it by RSM in connection with third party services shall conclusively be deemed proper expenditures in connection with the Initial Exploration Period which shall directly reduce the minimum expenditure required under Article 4.1(a) during the Initial Exploration period."
It will be recalled that this letter was accepted, agreed and signed by Senator Bubb for Grenada.
"29. It was always agreed that I would assist Grenada in resolving the disputes with Trinidad & Tobago and Venezuela. I have a great deal of experience in resolving such disputes in the past, and am still actively involved in boundary resolutions around the world. The Government agreed to appoint me as its Special Envoy for negotiations with Venezuela. However, when Mr Bowen became involved he withdrew this status and refused to allow me to play any part in the negotiations with Venezuela. Prime Minister Mitchell verbally agreed that RSM should fund the costs of negotiations and litigation in resolving the boundary disputes. This agreement was confirmed in writing. I had agreed with Senator Bubb that if necessary RSM would fund and manage international litigation before the International Court of Justice or the International Tribunal for the Law of the Sea, in order to help resolve the boundary disputes. Senator Bubb agreed with this suggestion and was happy for us to do this as it was clearly in Grenada's best interests - especially as we had agreed to fund the litigation. Yet, when we commenced such proceedings against Trinidad & Tobago before ITLOS, Mr Bowen refused to give the Government's consent, once again frustrating our efforts to get the disputes resolved."
"20. At the time he began his involvement with Grenada and its boundary delimitation exercise, Mr Grynberg was unaware of the technical issues involved, or how the whole process was institutionalised and formalised. Although he had experience and knowhow in geology, and was given "special envoy" status "for the purpose of discussing issues related to petroleum resources" on this basis, at the time he appeared to be entirely unfamiliar with the basic concepts involved in boundary delimitation, such as what the median line or the continental shelf theory as a starting point meant, the history and substance of Venezuela's approach on these issues, and that Venezuela had not ratified the UNCLOS."
"30.... Trinidad & Tobago later backed down from its earlier stance by stating that it has no interest or rights in Block 21, and this was due to my efforts and at my full expense. It is ridiculous for the Government to draw a distinction between Petrotrin and the Government of Trinidad & Tobago. Petrotrin is wholly owned by the Government. It is effectively just a branch of the Government and it acts in issuing oil and natural gas concessions.
31. PDVSA, the Venezuelan state-owned oil company, also later backed down from its previous claims to parts of Grenada's territory. Before I decided to halt the litigation in the US District Court against PDVSA, they informed my legal counsel that although Venezuela could not publicly back down from the boundary dispute, it would not object to RSM's oil exploration and development operations in the Agreement Area closest to Venezuela. I have never said that this resulted in a formal agreement on delimitation of the boundary. But that is irrelevant. What I did was to resolve the dispute to the extent that RSM can now go forwards with its exploration and production activities. Again, PDVSA is wholly owned by the Venezuelan Government. Grenada's claim that it is somehow independent and that its statements for practical purposes are not those of the Government of Venezuela is nonsense [Citing: Exhibit C-16, Letter from Petrotrin, Petroleum Company of Trinidad and Tobago to Mr Graven, Counsel of RSM of 5 November 2002]."
"20. More generally, I believe that for several reasons it would have been unwise for Grenada to have participated even in a properly-formulated application for arbitration (which the application filed by RSM was not) against Trinidad and Tobago in 2002. First, Trinidad is an important trading partner for Grenada, with trade (especially agricultural) between our countries being significant for the livelihood of a substantial number of Grenada's people. In order not to risk unnecessarily this important economic benefit, any dispute resolution mechanism we might pursue with Trinidad should be consensually agreed and as non-adversarial as possible. Given Mr Grynberg's method of operation - which was becoming increasingly apparent to us by 2002 - having him in charge of the proceeding plainly would have been an unacceptable risk. Furthermore, RSM never undertook definitively to pay the full costs of the proposed ITLOS proceeding. Had we endorsed the ITLOS case, there would have been a substantial risk that at some point we would be left holding the bag, saddled with a proceeding we could not afford to pursue and with great economic damage having been done to us through the souring of our trading relationship with Trinidad and Tobago."77
"31....As might be expected, the classification of contractual terms is a question of the interpretation of the contract itself and English law does not lay down prescriptive or systematic rules in this regard save in particular contexts [Fn 13: A notable example being the Sale of Goods Act 1979]. Nonetheless a particular approach has been adopted in relation to contractual time stipulations which present their own special features. This approach is very much evident from the leading case on the classification of such stipulation, Bunge Corporation v Tradax Export SA [Fn 14  1 WLR 711]. In this case, the party in breach of a time stipulation, the purchaser under an fob contract sought to establish that a provision requiring notice to be given within a specified time of the probable readiness of the carrying vessel was an intermediate obligation; with the consequence (so it was maintained) that although the notice was given five days out of time the seller was not entitled to terminate as it could not show that the breach had deprived it of substantially the whole benefit for which it had contracted. The House of Lords disagreed: the time stipulation... was properly to be regarded as a condition of the contract, so that the magnitude and effect of the breach were irrelevant. There are several strands to the reasoning in the judgments but the most important is that the question of classification is one of the proper interpretation of the contract, a principle best expressed by an oft-cited passage in the judgement of Bowen LJ in Bensten [sic: Bentsen] v. Taylor [Fn 15:  2 QB 274]:"There is no way of deciding that question except by looking at the contract in the light of the surrounding circumstances, and then making up one's mind whether the intention of the parties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty sounding only in damages or as condition precedent by the failure to perform which the other party is relieved of liability."
32. I would summarise the relevant principles of English law as follows:-
(1) The question as to whether a time stipulation is properly to be regarded as a condition of the contract is one of the interpretation of the provision in question in the context of the contract as a whole and the relevant surrounding circumstances. In suitable cases the courts should not be reluctant to hold that a particular provision as to time is a condition, indeed "they should usually do so in the case of time clauses in mercantile contracts". [Fn 16: Bunge Corporation (supra) per Lord Wilberforce at page 716].
(2) A particular clause is generally to be construed as a condition of the contract where compliance with it was a precondition of performance of the contract by the other party. Thus in Bunge itself, Lord Roskill regarded it as "the most important single factor" in favor [sic] of the sellers' argument that they could not nominate the loading port until they had received from the buyers the notice of the probable readiness of the vessel [Fn 17: Page 729F-H]. As Lord Roskill put it: "I agree with Mr Staughton [Leading Counsel for the sellers] that in a mercantile contract when a term has to be performed by one party as a condition precedent to the ability of the other party to perform another term, especially an essential term such as the nomination of a single loading port, the term as to the time for the performance for the former obligation will in general fall to be treated as a condition."
(3) As Lord Wilberforce explained in Bunge Corporation, the danger in applying an approach based on "gravity of the breach" reasoning is that it tends to detract from certainty "the most indispensable quality of mercantile contracts". In relation to a time stipulation there was only one kind of breach possible, to be late, and the questions which had to be asked were (i) what importance have the parties expressly ascribed to this consequence and (ii) in the absence of an expressed agreement, what consequences ought to be attached to it having regard to the contract as a whole [Fn 18: Page 715 and see also Lord Roskill at page 725]. As Lord Roskill observed, there are many reported cases where the innocent party was entitled to terminate the contract for breach of condition even though he had not been deprived of substantially the whole benefit of the contracted performance [Fn 19: Pages 724G-725D]. Inquiring as to the "gravity of breach" only became relevant when it had been concluded that the particular term in question was not, on the proper construction of the contract, a condition at all. [Fn 20: Page 726B-D].
(4) A stipulation which relates to the grant, renewal or termination of a proprietary interest is likely to be regarded as a condition. [Fn 21: see United Scientific Holdings Ltd v Burnley Borough Council  AC 904 per Lord Diplock at pages 928G-929G].
(5) A conceptually different approach, which the tribunal may decide is relevant to Article 3 of the Agreement, involves asking whether the stipulation constitutes a unilateral offer the acceptance of which will bring into existence a new legal relationship between the parties. A unilateral offer of this kind is only capable of acceptance strictly in accordance with its terms and a non-conforming purported acceptance is at best a counteroffer which the grantor of the option is under no obligation to accept. [Fn 22: A possibility canvassed in United Scientific Holdings (supra)].
33. Returning to the present dispute, whilst many modern forms of clause solve the problem at the outset by expressly stipulating that for the performance of a particular stipulation time will be of the essence, no such stipulation is present here but when considering whether time was impliedly made of the essence and as part of this adjudication weighing the importance attached to timeliness, the Tribunal will I believe wish to take into account the words "in no event later than" in Article 3.1."