INVESTMENT ARBITRATION, QUO VADIS? REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD Fifth International Conference for a Euro-Mediterranean Community of International Arbitration Noradèle RADJAI Madrid, 20 November 2018
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD FET breach alleged in most cases decided in 2017/2018 77% 43 out of 56 cases alleged a breach of FET 2
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD FET breach admitted for over half of the cases 13 cases 18 cases 42% 42% 58% 58% Breach of FET admitted Breach of FET rejected 3
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD JKX OIL v. UKRAINE UAB v. LATVIA IA SCC (February 2017) ICSID Case No. ARB/12/33 (22 December 2017) KONTINE NENTAL AL v. GABONESE REPU PUBLIC IC NOVENERGIA v. SPAIN PCA (early 2017) SCC Case 2015/063 (15 February 2018) CERV RVIN v. COS OSTA RICA MASDAR v. SPAIN ICSID Case No. ARB/13/2 (7 March 2017) ICSID Case No. ARB/14/1 (17 May 2018) EISER v. SPAIN OLIN v. LIBYA ICSID Case No. ARB/13/36 (4 May 2017) ICC Case No. 20355/MCP (25 May 2018) TEINVER v. ARGE GENTINA ANTIN v. SPAIN ICSID Case No. ARB/09/1 (21 July 2017) ICSID Case No. ARB/13/31 (15 June 2018) VALOR ORES S MUNDIALES S v. VENEZU ZUELA CITY-STATE TE v. UKRAINE ICSID Case No. ARB/13/11 (25 July 2017) ICSID Case No. ARB/14/9 (26 July 2018) MYTIL ILIN INEOS OS v. SERBIA (II) CHEVRON v. ECUADOR R (II) PCA Case No. 2014-30 (August 2017) PCA Case No. 2009-23 (30 August 2018) LONGREEF F v. VENEZU ZUELA LA UNIÓN FENOSA OSA v. EGYPT ICSID Case No. ARB/11/5 (6 November 2017) ICSID Case No. ARB/14/4 (31 August 2018) NATLAN AND D v. CZE ZECH REPUB PUBLIC IC FORESIG IGHT T AND OTHERS v. SPAIN PCA Case No. 2013-35 (20 December 2017) SCC Case No. 2015/150 (14 November 2018)
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD ISOLUX X v. SPAIN EVROBALT T AND KOMPOZIT ZIT v. MOLDOVA SCC case no. V2013/153 (17 July 2016, publicly available July SCC (17 December 2017) 2017) ANTARIS IS v. C CZE ZECH H REPUB PUBLI LIC BLUSUN v. ITALY PCA Case No. 2014-01 (2 May 2018) ICSID Case No. ARB/14/3 (27 December 2016, publicly available in June 2017) GAVRILOVIĆ v. CROATIA ICSID Case No. ARB/12/39 (26 July 2018) ELI LILLY Y v. CANADA GROT v. MOLDOVA ICSID Case No. UNCT/14/2 (16 March 2017) ICSID Case No. ARB/16/8 (28 June 2018) JSW SOLAR AR v. CZE ZECH REPUB PUBLIC IC KREDERI v. UKRAINE PCA Case No. 2014-03 (11 October 2017) ICSID Case No. ARB/14/17 (2 July 2018) KOCH v. VENEZU ZUELA ICSID Case No. ARB/11/19 (30 October 2017) MARFIN IN v. CYPR PRUS ICSID Case No. ARB/13/27 (26 July 2018) FOUAD ALGHANIM M v. JORDAN DAVID AVEN v. COS OSTA RICA ICSID Case No. ARB/13/38 (14 December 2017) ICSID Case No. UNCT/15/3 (18 September 2018) 5
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD Typical elements of the FET standard 1. Transparency and stability, including by reference to the investors’ legitima timate expect ctations ations 2. Proportionality and balance of interests, taking into account the State’s regulatory ory inte terests ests 3. Due process, including denial of justice 4. Arbitrary, discriminatory, non-transparent or unreasonable conduct 6
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD Leg egitima itimate e ex expecta ectation tions 7
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD Legitimate expectations: recurring elements Timing of the expectations ▪ Assurances/representations by the State: What State ▪ conduct can give rise to such expectations? Investor due diligence: What constitutes sufficient due ▪ diligence ? 8
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD Timin ming g of of th the ex e expec ecta tations tions 9
Timing of expectations: The Principles “reasonableness of an asserted expectation is to be determined objectively • at at the time the investm tment ent is is made ” ( Gavrilović v. Croatia ) legitimacy of expectation must be assessed “at the the time time of of the the in investm stmen ent, • considering the information the investor had (or should have had) if he had acted with the requisite due diligence” ( Antin v. Spain ) assessment of expectations at at the the ti time me of of mak making ng the the in investmen stment ( Teinver v. • Argentina) it is only the investor’s expectations at at the the ti time me of of the the inv investmen stment that are • relevant (Cervin v. Costa Rica) FET application will depend on the expectations that were cultivated and • fostered by local laws and regulations as they were, specifically at at the the ti time me of of the investmen stment ( Novenergia v. Spain) 10
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD Timing of expectations: The Practice ✓ Nov Noven ener ergia v. Sp Spain ain: most of the «warning signs» cited by Spain as casting doubt on the durability of the special regime pos post-dated the the Claimant’s in investment estment and were thus not relevant × Iso solux ux v. Sp Spain ain: investment was only made in 2012, when it would have been much clearer to any investor that the special regime was not sustainable × Ce Cervin vin v. Costa Costa Ri Rica ca: investor could not rely on sta stateme ements nts by by the State made de af after the inves estm tments ents 11
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD What type e of State te cond nduct uct can n give e rise se to to legitima itimate e expect pectations tions by the invest estor? or? 12
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD The Principles: State assurances/representations must be specific (?) “legitimate expectations founded on specif ecific ic assura ssuranc nces es or or rep epres esentat entatio ions ns ma made • by by the State ate to the investor are protected” ( Gavrilović v. Croatia) legitimate expectations “depend on speci specific ic und under ertak takings ings and and rep epres esenta entati tions ons • made by ma by the the host host Stat State to to ind induce uce inv nves estors ors to make an investment” ( Union Fenosa v. Egypt ) affirmative action by the State, either in the form of speci ecific ic comm commit itme ments nts or or • ate ( Antin v. Spain ) repres esent entatio ions ns made by by the host st State un under ertak takings ings and and ass ssuranc urances es need need not not be be speci specific ic and can be justified by state conduct and statements that objectively create expectations, regardless of the intent of the state to create them or not ( Novenergia v. Spain) 13
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD The Principles: State assurances/representations may be inferred from legislation/regulation (?) “ pr promi omise ses or or rep eprese senta ntati tion ons to to in invest stors ors ma may be be inf infer erred fr from om dome domestic stic • le legisla slati tion on in the context of its background, including official statements (without) legal force” ( Antaris v. Czech Republic ) repr prese senta ntati tion ons can an be be der derived ed fr from om a reg egula ulati tion on aimed at encouraging • investments in a specific sector ( Antin v. Spain ) • laws do not amount to promises that could engender expectations in investors; laws ar are gen ener eral al, whil hile pr promi omise ses and and contract contractua ual commit commitmen ments ar are specif spe cific ic, and only the latter create legitimate expectations ( Blusun v. Italy ) • pr provision sions of of gen eneral eral le legi gisla slati tion or or sta state pol polic icies ies ap applic plicable able to a plurality of persons do do no not su suff ffice ice generally to establish legitimate expectations required under an FET autonomous standard (Koch v. Venezuela) 14
REVIEW OF LANDMARK CASES IN 2017-2018: THE FET STANDARD The Practice: State assurances/representations that can give rise to expectations Union Feno Unio enosa v. Egyp ypt: letter from relevant ministry sent as “official ✓ endorsement” of the investment Masda Masdar v. Spain ain: letters from the relevant Ministry regarding compensation ✓ conditions for the facility were deemed to constitute specific commitments Olin v. Li Olin Libya ya: changes in legal framework to incentivize investment, as well as ✓ public assurances and issuances of investment licences Nov Novene nergia ia v. Spai Spain: special regulatory framework designed to incentivize ✓ investments in Spanish renewable energy sector, combined with promotional material Antin Antin v. Sp Spain ain: Spain’s promotion of the stability of its incentive regime for ✓ renewable energy projects; though reports, press releases, preamble of royal decrees, government plans and advertising material 15
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