On behalf of Guatemala
Sra. Noiana Marigo, Freshfields Bruckhaus Deringer
Sr. Lluis Paradell, Freshfields Bruckhaus Deringer
Sra. Olga Puigdemont Sola, Freshfields Bruckhaus Deringer
Sr. Alejandro Arenales, Arenales & Skinner-Klée Sr. Alfredo Skinner-Klée, Arenales & Skinner-Klée Sr. Rodolfo Salazar, Arenales & Skinner-Klée
Sr. Saúl Oliva, Procuraduría General de la Nación
On behalf of TECO
Ms. Andrea J. Menaker, White & Case LLP Mr. Petr Polásek, White & Case LLP Ms. Kristen M. Young, White & Case LLP
Mr. Charles A. Attal, III, TECO Energy, Inc., Senior Vice President-General Counsel, Chief Legal Officer and Chief Ethics and Compliance Officer Mr. Javier Cuebas, TECO Energy, Inc., Corporate Counsel
On behalf of TECO
Ms. Andrea J. Menaker, White & Case LLP
Mr. Petr Polásek, White & Case LLP
Ms. Kristen M. Young, White & Case LLP
Ms. Samanta Fernandez-Micone, White & Case LLP
Ms. Erin Vaccaro, White & Case LLP
Mr. Charles A. Attal, III, Senior Vice President-General Counsel, Chief Legal Officer and Chief Ethics and Compliance Officer TECO Guatemala Holdings, LLC
Mr. Javier Cuebas, Senior Corporate Counsel, TECO Guatemala Holdings, LLC
On behalf of Guatemala
Mr. Nigel Blackaby, Freshfields Bruckhaus Deringer US LLP Ms. Noiana Marigo, Freshfields Bruckhaus Deringer US LLP Mr. Lluis Paradell, Freshfields Bruckhaus Deringer US LLP Ms. Lauren Friedman, Freshfields Bruckhaus Deringer US LLP Ms. Olga Sola,Freshfields Bruckhaus Deringer US LLP Ms. Eva Treves, Freshfields Bruckhaus Deringer US LLP Ms. Harriet Aitken Drury, Freshfields Bruckhaus Deringer US LLP Ms. Angelica Rodriguez, Freshfields Bruckhaus Deringer US LLP Mr. Stephen Maurer, Freshfields Bruckhaus Deringer US LLP Ms. Deborah Blake, Freshfields Bruckhaus Deringer US LLP Ms. Kimberly Larkin, Freshfields Bruckhaus Deringer US LLP
Licda. Maria Eugenia Villagrán, Procuradora General de la Nación, República de Guatemala Mr. Edgar Manuel Villanueva Sosa, Embassy of Guatemala, Washington, D.C.
Ms. Viviana Raquel Arenas Aguilar, Consultant, Embassy of Guatemala, Washington, D.C.
"[...] TECO respectfully requests that the Committee issue a Decision:
1. Partially annulling the damages section of the Award insofar as it does not award TECO any compensation for losses arising from the sale of EEGSA on 21 October 2010;
2. Partially annulling the damages section of the Award insofar as it does not award TECO any interest accruing in the period from 1 August 2009 until 21 October 2010;
3. Partially annulling the damages section of the Award with respect to the interest rate applicable to pre-award interest at the U.S. Prime rate plus two percent; and
4. Ordering Guatemala to pay TECO'S legal fees and costs incurred in these proceedings."2
"(a) Reject TGH's annulment application in full;
(b) Order TGH to pay Guatemala's legal fees and costs, and all the fees and costs of the ad hoc Committee and ICSID in these proceedings, including all costs relating to the phase of these proceedings related to the stay of enforcement of the Award".3
"664. [...] In the Arbitral Tribunal's view, in adopting Resolution No. 144-2008, in disregarding without providing reasons the Expert Commission's report, and in unilaterally imposing a tariff based on its own consultant's VAD calculation, the CNEE acted arbitrarily and in violation of fundamental principles of due process in regulatory matters.
665. In so doing, the CNEE in fact repudiated two fundamental principles upon which the tariff review process regulatory framework is premised: the principle that, save in the limited exceptions provided by the LGE and the RLGE, the tariff would be based on a VAD calculation made by a prequalified consultant appointed by the distributor; and the principle that, in case of a disagreement between the regulator and the distributor, such disagreement would be resolved having regard to the conclusions of a neutral Expert Commission".9
"687. In the Arbitral Tribunal's view, in accepting that the Expert Commission would deliver its report the week of July 24, 2008 (or even by mid June 2008), the CNEE also had to accept that it would not be able to seriously consider the experts' conclusions, correct the Bates White VAD study accordingly, and publish the tariff by August 1, 2008.
688. By accepting to receive the Expert Commission's report in the week of July 24, 2008, to then disregard it along with the Bates White study on the basis that such date did not leave enough time to publish the tariff by August 1, 2008, the CNEE acted in breach of the fundamental principles of due process as well as in a contradictory and aberrant manner.
689. Respondent acknowledges that it only conducted a ‘preliminary review' of the revised July 28 Bates White's study and concluded that, because the models were not linked and did not allow ‘quick verifications of the sources of efficient prices', it could not be amended ‘within the two remaining days'.
690. In the Arbitral Tribunal's view, both under the regulatory framework and under the minimum standard of treatment, the CNEE could and should have taken the time, after careful review of the Expert Commission's report, to implement its conclusions in the Bates White Study. The ‘preliminary review' that the CNEE performed in less than one day was clearly insufficient to discharge that obligation. The Arbitral Tribunal can find no justification, other than its desire to reject the Bates White study in favor of the more favorable Sigla's study, for such a behavior."10
(i) Manifest excess of powers (Article 52(1)(b));
(ii) A serious departure from a fundamental rule of procedure (Article 52(1)(d)); and
(iii) Failure to state reasons (Article 52(1)(e)).
"Regardless of our opinion of the correctness of the Tribunal's legal analysis, however, our inquiry is limited to a determination of whether or not the Tribunal endeavored to apply English law."18
"Neither Article 48(3) nor Article 52(1)(e) specify the manner in which the Tribunal's reasons are to be stated. The object of both provisions is to ensure that the Parties will be able to understand the Tribunal's reasoning. This goal does not require that each reason be stated expressly. The tribunal's reasons may be implicit in the considerations and conclusions contained in the award, provided they can be reasonably inferred from the terms used in the decision."25 [emphasis added]
"Article 52(1)(e) concerns a failure to state any reasons with respect to all or part of an award, not the failure to state correct or convincing reasons. It bears reiterating that an ad hoc committee is not a court of appeal. Provided that the reasons given by a tribunal can be followed and relate to the issues that were before the tribunal, their correctness is beside the point in terms of Article 52(1)(e). Moreover, reasons may be stated succinctly or at length, and different legal traditions differ in their modes of expressing reasons. Tribunals must be allowed a degree of discretion as to the way in which they express their reasoning."26
"[E]xisting tariffs were considered as a relevant factor in determining the price of the transaction. There is however no sufficient evidence that, had the 2008-2013 tariffs been higher, the transaction price would have reflected the higher revenues of the company until 2013. The interview of Mr. Restrepo only mentions as a ‘possibility' that with a higher VAD for the rest of the tariff period, the transaction price would have been higher. And there [sic] no evidence in the record of how the transaction price has been determined. The Arbitral Tribunal therefore ignores what other factors might have come into play and cannot conclude with sufficient certainty that an increase in revenues until 2013 would have been reflected in the purchase price and to what extent."41 [emphasis added]
(i) EPM’s non-binding offer letter to Iberdrola, which explained the methodologies used by EPM and its advisor to calculate EPM’s proposed transaction price;
(ii) the 14 October 2010 Citibank Fairness Opinion, where Citibank analyzed the fairness to TECO of EPM’s price offer of USD 605 million, the price at which the shares in DECA II were ultimately sold to EPM; and
(iii) the expert reports of the Parties’ experts, Mr. Kaczmarek and Dr. Abdala.46
Guatemala considers that there is no fundamental rule of procedure which addresses the treatment of evidence or the standard of proof. Numerous arbitral awards have found that the rules of evidence are not strict or technical, and that a tribunal should have a large measure of discretion when it comes to standard of proof. In Guatemala’s view, TECO cannot point to a single annulment decision to the contrary.78
"the Tribunal manifestly exceeded its powers by overstepping the scope of the parties' dispute, given that the parties had agreed upon the 1 August 2009 start date for accrual of interest and the 8.8 percent pre-award interest rate; seriously departed from a fundamental rule of procedure by denying TECO its right to be heard, given that the Tribunal's ‘unjust enrichment' theory was not argued by either party and the Tribunal did not give the parties an opportunity to comment on its ‘unjust enrichment' theory".
"[...] Claimant respectfully requests that the Tribunal issue an Award:
4. Ordering Respondent to pay interest on the above amount at 8.8 percent, compounded from 1 August 2008 until full payment has been made."105 [emphasis added]
"The Arbitral Tribunal considers that interest should only accrue from the date of the sale of EEGSA to EPM in October 2010. As a matter of fact, because the US$21,100,552 historical losses damages correspond to revenues that would have progressively flowed into EEGSA from August 2008 until October 2010, and because such amount has not been discounted to August 2008, calculating interest on the entire amount of the historical damages as from the first day of the tariff period would result in an unjust enrichment of the Claimant. As a consequence, interest shall only accrue from October 21, 2010."109 [emphasis added]
Guatemala argues that, when an arbitral tribunal exceeds the limits of the jurisdiction it has been granted, or when it fails to apply the law applicable to the dispute, it commits a manifest excess of powers. Guatemala adds that, in case of allegations of excess of powers with respect to jurisdiction, an annulment committee is bound to conduct a thorough review of jurisdictional issues. Referring to doctrinal commentary,114 Guatemala contends that any exercise of jurisdictional power without proper jurisdiction is a manifest excess of powers. In addition, the failure by a tribunal to apply the proper law exists in instances in which a tribunal fails to apply international law, if it is part of the applicable law.115
According to Guatemala, an arbitral tribunal is not an administrative review body meant to ensure compliance with each and every rule or regulation set down by domestic law. Mere domestic regulatory disputes fall under the jurisdiction of domestic courts, and an investment treaty claim involves something more than a domestic law disagreement. In addition, if the dispute brought before an investment tribunal concerns a disagreement between an investor with the actions of an administrative body that has already been the subject of a final decision by the local judicial authorities, the only available claim that may be brought to the international tribunal is a claim for denial of justice. Guatemala argues that its position is supported by the awards rendered in ADF v. United States,125 S.D. Myers v. Canada,126 Generation Ukraine v. Ukraine,127 Saluka v. Czech Republic128 and Azinian v. Mexico129 Considering that no claim for denial of justice had been brought by TECO, Guatemala argues that the Tribunal should have found that it lacked jurisdiction.130
On a preliminary note, TECO takes issue with Guatemala’s suggestion that an ad hoc committee is required to scrutinize a tribunal’s decision on jurisdiction more closely than a tribunal’s other decisions. TECO argues that the language of Article 52(1)(b) of the ICSID Convention does not provide for a heightened level of scrutiny or for a wider latitude to annul awards in respect of matters of jurisdiction, and does not dispense with the requirement that an excess of powers must be manifest in order to warrant annulment. TECO argues that the decisions rendered in Azurix v. Argentina,131 SGS v. Paraguay,132 Lucchetti v. Peru, MCI v. Ecuador, Soufraki v. U.A.E. and Alapli v. Turkey, as well as ICSID’s Background Paper on Annulment133 confirm that decisions on jurisdiction do not call for greater scrutiny than other decisions and do not dispense with the requirement that the excess of powers be manifest. TECO adds that the decisions cited by Guatemala in support of its position do not in fact support its arguments. With respect to the secondary sources referred to by Guatemala, TECO submits that they are contradicted by numerous annulment decisions which found otherwise.134
"The present Committee concurs that there is no basis in the Convention for the distinction propounded by Applicant and that, therefore, the same threshold applies to matters of jurisdiction and the merits in order for the Committee to find that an excess of powers is manifest."149
"[T]he wording of Article 52(1)(b) is general and makes no exception for issues of jurisdiction. Moreover, a request for annulment is not an appeal, which means that there should not be a full review of the tribunal's award. [...] [T]he Committee considers that the word ‘manifest' should be given considerable weight also when matters of jurisdiction are concerned."150
"The ad hoc Committee sees no reason why the rule that an excess of power must be manifest in order to be annullable should be disregarded when the question under discussion is a jurisdictional one. Article 52(1)(b) of the Convention does not distinguish between findings on jurisdiction and findings on the merits. [... ] It follows that the requirement that an excess of powers must be ‘manifest' applies equally if the question is one of jurisdiction. A jurisdictional error is not a separate category of excess of powers. Only if an ICSID tribunal commits a manifest excess of power, whether on a matter related to jurisdiction or to the merits, is there a basis for annulment."151
"It makes no difference that the issue in this case is about the Tribunal's jurisdiction, since jurisdiction does not give the ad hoc Committee a wider competence to assess the validity of the award under Article 52 but must be dealt with as any other issue. The standards for reviewing the Tribunal's decision about competence are therefore the same as those which ad hoc committees should apply when they review any other matters."152
In Tza Yap Shum v. Peru, the annulment committee similarly stated:
"The Committee notes that the text of Article 52(1)(b) of the ICSID Convention makes no distinction between decisions of the arbitral tribunal on competence or substance. [...] Deference to the legal and factual findings of an arbitral tribunal is the same for any decision. It follows that the standards of the review are the same for competence as those which ad hoc committees apply when they review any other matters decided by an arbitral tribunal."153
"[T]he requirement of a ‘manifest excess of power' goes to the nature of the review exercise. In cases where the jurisdiction of the Tribunal is reasonably open to more than one interpretation, the ad hoc Committee will give special weight to the Arbitral Tribunal's interpretation of the jurisdictional instrument. [...] The Committee is convinced that the jurisprudence of ICSID ad hoc Committees on the ‘tenable' standard for review on issues of jurisdiction is to be interpreted to like effect. The Committee considers that the excess of jurisdiction should be demonstrable and substantial and not doubtful."154 [internal citations omitted]
The Committee cannot find anything manifestly unreasonable or untenable in the Tribunal’s analysis. Moreover, as TECO has rightly pointed out and as the Iberdrola annulment committee recently confirmed174, there is no inherent incompatibility between a regulatory dispute having arisen at the domestic law level and an arbitral tribunal being subsequently called to assess the conduct of the State under international law. The fact that Guatemala does not accept the Tribunal’s finding that a lack of a denial of justice claim did not preclude its jurisdiction over the dispute does not change this conclusion. It is evident to both Parties and to the Committee that, while the opinion shared by Guatemala exists, it is not unanimously accepted, and there have been numerous arbitral tribunals that have found otherwise.175 What this shows is that the Tribunal’s interpretation of the applicable law, while not unanimously accepted, is nonetheless at least tenable. This is sufficient to conclude that annulment on this ground is not warranted.
"In the Committee's view, annulment under Article 52(1)(e) should only occur in a clear case. This entails two conditions: first, the failure to state reasons must leave the decision on a particular point essentially lacking in any expressed rationale; and second, that point must itself be necessary to the tribunal's decision."186
"[T]he Constitutional Court noted in its decision of November 18, 2009 that it had not been called to assess the ‘rationality!' of the adopted tariff. Such term can be understood both with respect to the content of the tariff and with the process leading to its establishment."225 [emphasis added]
"559. As a threshold matter, the Arbitral Tribunal notes that the Constitutional Court made it very clear, in its decisions of November 18, 2009 and February 24, 2010, that the report of the Expert Commission would only have an ‘illustrative or informative ' value, and that the Commission had no power to determine in a binding manner a dispute between the CNEE and EEGSA.
560. The Arbitral Tribunal considers that this is a point of interpretation of Article 75 of the LGE that is submitted to Guatemalan law, and in respect of which it is proper to defer to the decision made by the Constitutional Court."234 [emphasis added] [internal citations omitted]
"It is estimated that tariffs fixed, when the report by the Experts' Commission has not been accepted as valid to guide this policy, cannot be, within its discretion, harmful or unreasonably arbitrary, in view of the indicators of efficient operators as a reference [...]. However, the rationality of the tariff schemes approved was not reported as damage or as evidence in this amparo action, and the only damage reported focused on the concept of legal due process, which was already analyzed (paragraph a) of section VI of the conclusions."237 [emphasis added]