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Published online by Cambridge University Press: 18 May 2017
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page 1324 note 1 Decision, at para. 15 (citing Article 11 of the PSI Agreement).
page 1324 note 2 See Lanco International Inc. v. Argentine Republic (ICSID Case No. ARB/97/6), Preliminary Decision: Jurisdiction of the Arbitral Tribunal, 40 ILM 457 (2001).
page 1324 note 3 See Compañí'a de Aguas del Aconquija S.A.&Vivendi Universal v. Argentine Republic (ICSID Case No. ARB/97/3). Award, 40 ILM 426 (2001), Decision on Annulment, 41 ILM 1135 (2002).
page 1324 note 4 Decision, at para. 155.
page 1324 note 5 Id. at para. 189.
page 1324 note 6 Id. at para. 181.
page 1324 note 7 Id. at para. 166.
page 1324 note 8 Id. at para. 166, n. 135.
page 1324 note 9 Id. at para. 167.
page 1324 note 10 Id. at para. 171.
page 1324 note 11 OECD Draft Convention on the Protection of Foreign Property, 1962 Draft, 2 ILM 241 (1963), 1967 Draft, 7 ILM 118 (1968).
page 1324 note 12 OECD Draft, 2 ILM 241, 247 (1963) and 7 ILM 118, 123 (1968).
page 1324 note 13 Id. at 247, note 1, and at 123, note l(b) (emphasis in the original).
page 1324 note 14 See id.
page 1324 note 15 Prosper Weil, Problèmes Relatifs aux Contrats Passés entre un Etat et un Particulier, 128 Recueil des Cours 95, 130 (1961).
page 1324 note 16 Id. at 132.
page 1325 note 17 See Decision, at paras. 135-36.
page 1324 note 18 Id. at para. 161.
page 1324 note 19 Id. (emphasis in the original).
page 1324 note 20 Id.
page 1324 note 1 Respondent's Memorial on Objections to Jurisdiction (“Objections“) at paragraph 151.
page 1324 note 2 SGS's Reply at paragraph 228.
page 1324 note 3 SGS's Request for Arbitration (the “Request“), dated 12 October 2001, at paragraphs 5-10.
page 1324 note 4 Id. at paragraph 11.
page 1324 note 5 Id.
page 1324 note 6 Id.
page 1324 note 7 PSI Agreement, Article 4. Exhibit S3 to the Request for Arbitration.
page 1324 note 8 Id., Article 5.7.
page 1324 note 9 Letter from Pakistan's Investment Promotion Board to SGS, dated 22 December, 1994, at paragraph i. Exhibit S4 to the Request for Arbitration.
page 1324 note 10 SGS's Request at paragraph 13.
page 1324 note 11 PSI Agreement, Article 10.6.
page 1324 note 12 Id., Article 11.
page 1324 note 13 Petition filed by SGS with the Court of First Instance of Geneva, at page 12. Exhibit 3 to the Respondent's Objections to the Claimant's Request for Urgent Provisional Measures.
page 1324 note 14 Paragraph C.5 of SGS's “Reply on Behalf of the Respondent” in the matter of Islamic Republic of Pakistan v. Société Générate de Surveillance S.A., Application under Section 20 of the Arbitration Act 1940, dated 7 April 2001. Exhibit S26 to Claimant's Reply to the Respondent's Objections to Jurisdiction.
page 1324 note 15 SGS's Request at paragraph 16.
page 1324 note 16 Id., at paragraph 36.
page 1325 note 17 Pakistan has annexed its Statement of Claim dated 18 October 2002 and filed with the PSI Agreement arbitrator shortly before that arbitration was stayed pending resolution of the present Objections. Exhibit P15 to the Respondent's Objections to Jurisdiction.
page 1325 note 18 English translation of the Petition to the Court of First Instance, dated 12 January 1998. Exhibit 3 to Respondent's Objections to the Claimant's Request for Urgent Provisional Measures.
page 1325 note 19 Id.
page 1325 note 20 Judgment on Exception of the Court of First Instance. Exhibit 4 to the Respondent's Objections to the Claimant's Request for Urgent Provisional Measures.
page 1325 note 21 Court of Appeal of Geneva's decision in the Civil Case, June 23, 2000. Exhibit 2C to the Respondent's Index of Swiss Court Proceedings.
page 1325 note 22 Exhibit S25 to the Claimant's Reply to the Respondent's Objections to Jurisdiction.
page 1325 note 23 Id.
page 1325 note 24 Reply on behalf of the Respondent in the matter of Islamic Republic of Pakistan v. Société Générale de Surveillance S.A., at counter claim, paragraph 2.Exhibit 6 to the Respondent's Objections to the Claimant's Request for Urgent Provisional Measures.
page 1325 note 25 Id.
page 1325 note 26 Letter from SGS to Pakistan dated 10 October 2001. Exhibit S 18 to the Request for Arbitration.
page 1325 note 27 Id.
page 1325 note 28 Id.
page 1325 note 29 Request for Arbitration, dated 12 October 2001.
page 1325 note 30 Id.
page 1325 note 31 Exhibit PI to Respondent's Objections to the Claimant's Request for Urgent Provisional Measures.
page 1325 note 32 Id.
page 1325 note 33 Id.
page 1325 note 34 Id.
page 1325 note 35 Judgment of the Supreme Court of Pakistan (Appellate Jurisdiction) on Civil Appeal Nos. 459 (SociétéGénérale de Surveillance S.A. v. Pakistan, through Secretary Ministry of Finance, Revenue Division, Islamabad)& 460 (Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad v. SociétéGénérale de Surveillance S.A.), June 2002, at paragraph 78. Exhibit P21 to Respondent's Objections to Jurisdiction.
page 1325 note 36 Letter from counsel for Pakistan to the Tribunal dated 22 November, 2002, attaching the Stay Order issued by the sole Arbitrator, Justice Nasir Aslam Zahid, on 12 November 2002.
page 1325 note 37 Statement of Claim, Exhibit P17 to the Respondent's Objections to Jurisdiction.
page 1325 note 38 Id., at paragraph 63.
page 1325 note 39 Objections, at paragraph 60, quoting the Claimant's Request for Arbitration at paragraph 61.
page 1325 note 40 Id.
page 1325 note 41 Compaña de Aquas del Aconquija, S.A. and Compagnie Générale des Eaux v. Argentine Republic, (“Vivendi” or “Vivendi Annulment“) Case No. ARB/97/3, Decision on Annulment of 3 July 2002.
page 1325 note 42 Id., at paragraph 98.
page 1325 note 43 Objections at paragraph 61.
page 1325 note 44 Id., at paragraphs 97-100, and 129-33.
page 1325 note 45 Id., at paragraph 62.
page 1325 note 46 Transcript of the Hearing (“Transcript“), Volume 1, p. 7, lines 15-23.
page 1326 note 47 Objections at paragraphs 63-64. Pakistan refers in this regard to Article 25(1) of the ICSID Convention which states that the Centre's jurisdiction shall only extend to legal disputes “which the parties to the dispute consent in writing to submit to the Centre.“
page 1326 note 48 Article 26 states: “Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this convention.” Pakistan refers in this respect to works such as Professor Christoph Schreuer's The ICSID Convention: A Commentary, awards of other ICSID tribunals, and decisions of national courts.Objections, at paragraphs 65-69.
page 1326 note 49 Objections, at paragraph 70.
page 1326 note 50 Klöckner Industrie-Anlagen GmbH, et al. v. United Republic of Cameroon (“Klöckner“), Case No. ARB/81/2, Decision on Annulment, 3 May 1985, Tradex Hellas S.A. v. Republic of Albania (“Tradex Hellas“), Case No. ARB3/94/2, Decision on Jurisdiction, 24 December 1996, 14 ICSID Review — F.I.L.J. 161 (1999), Salini Costrutorri SpA and Italstrade SpA v. Kingdom of Morocco (“Salini“). Case No. ARB/00/4, Decision on Jurisdiction, 23 July 2001, 1 J.D.I. 196 (2002), Lanco International Inc. v. Argentine Republic (“Lanco“), Case No. ARB/97/6, Preliminary Decision on Jurisdiction, 8 December 1998, 40 ILM 457 (2001), Compañia de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic (” Vivendi“) Case No. ARB/97/3, Decision on Annulment of 3 July 2002, 41 ILM 1135 (2002).
page 1326 note 51 Objections at paragraphs 78-80. The passage from Vivendi Annulment is cited at paragraph 80 of the Memorial.
page 1326 note 52 Id., at paragraph 97.
page 1326 note 53 Id., at paragraph 84.
page 1326 note 54 Transcript, Volume 1, at pp. 15-16, p. 112, lines 2-7.
page 1326 note 55 Objections at paragraphs 87.
page 1326 note 56 Id., at paragraph 88. Holiday Inns S .A . and others v. Morocco (“Holiday Inns“), Case No. ARB/72/1 (an unpublished ICSID award discussed in Pierre Lalive, “The First ‘World Bank’ Arbitration (Holiday Inns v. Morocco)Some Legal Problems”, 1 ICSID Reports 645) also affirmed the principle of ut res magis valeat quam pereat.
page 1326 note 57 Id., at paragraph 89.
page 1326 note 58 Id., at paragraph 91.
page 1326 note 59 Id., at paragraphs 92 and 93.
page 1326 note 60 Id., at paragraph 94.
page 1326 note 61 Id., atparagraph 96.
page 1326 note 62 Id., at paragraph 97.
page 1326 note 63 Id., at paragraph 100.
page 1326 note 64 Transcript, Volume 1, pp. 95-96.
page 1326 note 65 Id., Volume 1, p. 104, lines 7-8.
page 1326 note 66 Objections at paragraph 102. During the hearing, counsel for Pakistan reviewed the Request for Arbitration and asserted that it “does not allege facts which if proven would rise to a level of a breach of the BIT; accordingly, they fall to be determined by the PSI Agreement to arbitration as contract claims where they currently stand, and not before this Tribunal.” Transcript, Volume I, p. 84, lines 10-14 et seq.
page 1326 note 67 Vivendi Annulment, pp. 38-39, at paragraphs 98-101.
page 1326 note 68 Objections, at paragraph 104.
page 1326 note 69 The BIT claims are: failure to promote SGS's investment, failure to protect its investment, failure to provide fail and equitable treatment, expropriation, and failure constantly to guarantee the observance of Pakistan's commitments to SGS.
page 1326 note 70 Objections at paragraph 105.
page 1326 note 71 Request, at paragraph 61.
page 1327 note 72 Id., at paragraph 36.
page 1327 note 73 Objections, at paragraphs 105-109. At the hearing, counsel for the Respondent stated: ”…what the Tribunal has to look at is the claim as stated by the Claimant, and to ask itself the question, the facts as alleged, which we say are purely contractual breaches, it's all they have alleged, is that sufficient if they prove everything that they claim they wish to prove, is that sufficient to bring them into … the breach of the BIT?” Transcript, Volume 1, p. 106, lines 11-17.
page 1327 note 74 Objections at paragraph 112. The Respondent cites the Holiday Inns, Amco Asia, Lanco, and Salini cases in support of this proposition to determine whether a claim is subject to a particular dispute resolution clause. At the hearing, extensive argument was devoted to the point that the PSI Agreement arbitrator could consider claims that Pakistan breached the Treaty. Transcript, Volume 1, pp. 23-27.
page 1327 note 75 Pakistan refers to various texts and to such cases as Pennzoil Exploration and Production Co. v. Ramco Energy Ltd., Partial Award in ICC Case No. 7319 of 1992, and Judgment No. 8375 of 16 November 1987 in this regard. It also cites JJ. Ryan&Son Inc. v. Rhone Poulenc Textile, S.A for the proposition that an arbitral clause that is worded “all disputes arising in connection with the present contract” must be construed to encompass a broad scope of arbitral issues and every dispute between the parties that has a significant relationship to the contract regardless of the label attached to the dispute. Id., at paragraph 113, citing J.J. Ryan&Son Inc. v. Rhone Poulenc Textile S.A. 863 F.2d 315, 321 (4th Cir.1988). [Pakistan's emphasis.] Pakistan also cites both Redfern and Hunter and Fouchard Gaillard Goldman who, it says, agree that the phrase “arising out of” will embrace all disputes capable of being submitted to arbitration and arbitrators have jurisdiction as long as the terms of arbitration are wide enough to demonstrate the parties intended it to be so.
page 1327 note 76 Objections at paragraphs 120-128. Pakistan cites Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt (“SPP“), Case No. ARB/84/3, for the proposition that “a specific agreement between the parties to a dispute would naturally take precedence with respect to a bilateral treaty between the investor's State and [a particular sovereign]…[This hierarchy] reflects the maxim generalia specialibus non derogant.” It also cites Professor Schreuer's Commentary which states that a document with a dispute settlement clause which is more specific in relation to the parties and to the dispute should be given precedence over a document of more general application such as the BIT. Pakistan asserts that, contrary to SGS's assertion that the specific agreement of the parties should be rendered valueless, the PSI Agreement is a specific agreement regarding dispute resolution and should be given precedence over the more general provisions of the BIT. Pakistan also distinguishes the Vivendi Annulment decision from the present case by noting that although both cases present superficially similar facts, in that the Vivendi Annulment Committee held that a contractual choice of forum clause did not supersede the parties’ choice of ICSID to resolve the BIT claims, that case differs from the present one in that the clause in the operative contract provided only that “for purposes of interpretation and application of this Contract the parties submit themselves to the [local courts].” This was a narrow clause clearly limited to contract claims and not to BIT claims, whereas the clause in the PSI Agreement is a broad form of arbitration clause. Similarly, in Lanco and Salini, Pakistan says that those cases turned either on a more narrowly drafted clause or on one that was not a true choice of forum clause since it vested jurisdiction over disputes in local courts who, as a matter of law, already had compulsory jurisdiction over the disputes. These are in contrast with the broad clause in question because it is not limited to “interpretation and application” of the contract but extends to any and all claims “arising out of or relating” thereto.
page 1327 note 77 Objections at paragraph 128.
page 1327 note 78 Id.
page 1327 note 79 At the hearing, counsel for Pakistan directed the Tribunal to the negotiating history of what became Article 26 of the Convention. The Tribunal was given excerpts from the ICSID's History of the ICSID Convention, a two volume work that reproduces the travaux préparatoires of the Convention. Counsel observed that the records show that the delegates to the negotiations were assured that the proposed convention would not operate so as to disrupt settled expectations or pre-existing arrangements. Transcript, Volume 1, pp. 38-47, p. 69, lines 13-16.
page 1327 note 80 Objections at paragraphs 130-131.
page 1327 note 81 Id., at paragraph 132.
page 1327 note 82 Judgment of the Supreme Court of Pakistan, in Société Générate de Surveillance S.A. v. Islamic Republic of Pakistan, Exhibit P21 to Respondent's Objections to Jurisdiction, at p. 33, paragraph 54.
page 1327 note 83 Objections at paragraph 133.
page 1328 note 84 Id., at paragraph 136.
page 1328 note 85 Id., at paragraph 139.
page 1328 note 86 Id., at paragraph 140.
page 1328 note 87 Id., at paragraph 143.
page 1328 note 88 Id., at paragraph 144-145.
page 1328 note 89 Id., at paragraph 151.
page 1328 note 90 Reply at paragraphs 116-120. Transcript, Volume 1, pp. 115-124.
page 1328 note 91 Claimant's Reply to the Respondent's Objections to Jurisdiction (“Reply“) at paragraphs 31-35. SGS also filed an expert report and a supplementary report by Professor Christoph Schreuer.
page 1328 note 92 Reply at paragraph 34.
page 1328 note 93 Id.
page 1328 note 94 Article 25 states: The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that 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.
page 1328 note 95 Reply, at paragraph 37.
page 1328 note 96 Id., at paragraph 39.
page 1328 note 97 Id., at paragraphs 39-40.
page 1328 note 98 Id., at paragraph 41.
page 1328 note 99 Id., at paragraph 44. Transcript, Volume 1, pp. 135-139.
page 1328 note 100 Id., at paragraph 48.
page 1328 note 101 Id., at paragraph 49.
page 1328 note 102 Id., at paragraph 50.
page 1328 note 103 Vivendi Annulment, at paragraphs 95-96, quoted in the Reply at paragraph 53.
page 1328 note 104 Reply, at paragraph 55.
page 1328 note 105 Id., at paragraph 58. SGS cites Salini and Vivendi for the “uncontroversial principle” that a tribunal constituted under a BIT has jurisdiction over claims alleging violations of that BIT. Vivendi adds that even if the contract in question refers contractual disputes to the courts of a domestic jurisdiction, it does not affect the jurisdiction of the Tribunal to consider a claim based on the provisions of a BIT.
page 1328 note 106 Id., at paragraphs 61 and 62.
page 1328 note 107 Id., at paragraph 63.
page 1328 note 108 Id., at paragraph 64 and Transcript, Volume 1 at pp. 140-183 and Volume 2 at pp. 74-106. SGS refers to, among others, R. Dolzer and M. Stevens, who commented in their book, Bilateral Investment Treaties, on the importance of umbrella clauses in protecting the investor's contractual rights against any interference which might be caused by either a simple breach of contract or by administrative or legislative acts. Umbrella clauses are included because it “is not entirely clear under general international law whether such measures constitute breaches of international obligations.” (Dolzer and Stevens at p. 82.) SGS also refers in this regard to a comment of the late Ibrahim Shihata (former Secretary-General of ICSID) and to Professor Schreuer's opinion.
page 1328 note 109 Reply, at paragraph 68.
page 1328 note 110 Id., at paragraph 72.
page 1329 note 111 Transcript, Volume 1, p. 130, lines 23-25, p. 131, lines 1-3, pp. 140-168.
page 1329 note 112 Id, Volume 1 at p. 141, lines 15-23.
page 1329 note 113 Id, Volume 1 at p. 146, lines 16-21.
page 1329 note 114 Transcript, Volume 1, p. 130, lines 12-16.
page 1329 note 115 Reply at paragraphs 74-79.
page 1329 note 116 Id., at paragraph 81.
page 1329 note 117 Id., at paragraph 93.
page 1329 note 118 Id., at paragraph 97.
page 1329 note 119 Id., at paragraph 113.
page 1329 note 120 Id., at paragraph 115.
page 1329 note 121 Id., at paragraphs 117-118.
page 1329 note 122 Id., at paragraphs 131-135.
page 1329 note 123 Article 46 of the ICSID Convention states that:Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counter-claims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.
page 1329 note 124 Reply, at paragraph 138.
page 1329 note 125 Id., at paragraphs 139-141. SGS observes that in at least one ICSID case, Alex Genin Eastern Credit Limited, Inc. andA.S. Baltoil v. The Republic of Estonia, Case No. ARB/99/2. the State bought a counter-claim alleging violations of Estonian banking law and the tribunal's jurisdiction over the counter-claim was never questioned. SGS has also expressly confirmed its agreement to the submission of Pakistan's eventual counter-claims to the jurisdiction of this Tribunal.
page 1329 note 126 In SPP, the tribunal interpreted Egyptian investment legislation which gave an investor three options for resolving disputes: any method agreed between the parties, resolution under a bilateral investment treaty or resolution under the ICSID Convention. The tribunal found that the intention of the legislature was to give precedence to a specific agreement of the parties. But as there was no such agreement between the parties, the tribunal concluded they had given their consent to ICSID arbitration as one of the options provided for by the legislation. However, in the present case, there is no domestic legislation providing for a hierarchical order of alternatives for dispute resolution. “The Switzerland-Pakistan BIT is the only relevant ‘investment law’ at issue in this case and it provides exclusively for ICSID arbitration.” Even if SPP did purport to establish a general principle that a contractual forum selection clause should have precedence over a dispute resolution clause in a BIT, it has not been followed by any other ICSID tribunal facing this question. The maxim generalia specialibus non derogant has no application here because the two dispute settlement clauses at issue in this case relate to different standards of protection. The BITs Article 9 provides the investor with an essential procedural guarantee that cannot be ousted by the forum selection clause in the PSI Agreement. (Reply, at paragraphs 142-148.)
page 1329 note 127 Id., at paragraph 149.
page 1329 note 128 Id., at paragraph 150.
page 1329 note 129 Id., at paragraph 151.
page 1329 note 130 Id., at 154.
page 1329 note 131 Id., at paragraph 157. For example, in the Selwyn Case, the British-Venezuelan Mixed Claims Commission noted that “international arbitration is not affected jurisdictionally by the fact that the same question is in the courts of one of the nations,” SGS also cites Socaciu v. Romania, where the Romanian-Austrian Mixed Arbitral Tribunal held that once international proceedings have begun, proceedings before the domestic courts had no object. In the Jean-Baptiste Caire Case, the French-Mexican Mixed Claims Commission refused to impose supplementary admissibility requirements (not provided for in the governing Convention) on the claimants merely because parallel proceedings were pending in a domestic forum. The commission viewed the domestic proceedings as irrelevant to the question of its jurisdiction and the admissibility of the claims presented to it. SGS cites a more recent authority where the Iran-U.S. Claims Tribunal held in E-System v. Iran&Bank Melli that the Government of Iran should request that Iranian court proceedings be stayed until proceedings in the international tribunal were completed. Similar language was used in the second Holiday Inns jurisdiction decision which also stated that international tribunals have a superior status in comparison to domestic proceedings.
page 1330 note 132 Reply at paragraph 164.
page 1330 note 133 Id., at paragraph 166.
page 1330 note 134 Id., at paragraphs 167. In the Ronald S. Lauder v. Czech Republic case and the CME Czech Republic B. V. v. Czech Republic case, the respondent's Us pendens arguments were rejected by both tribunals because they involved different parties and different causes of action (under different BITs). SGS also questions Pakistan's use of S.A.R.L Benvenuti&Bonfant v. People's Republic of the Congo (“Benvenuti&Bonfant“), ICSID Case No. ARB/77/2, and Amco Asia Corporation v. Republic of Indonesia CAmco Asia“), ICSID Case No. ARB/81/1, as cases in support of its argument of Us pendens. In both cases, the tribunal rejected the principle's application. SGS asserts, moreover, that these cases were dismissed not merely because the parties in the pending actions were not the same, but also because there was also a lack of identity in the causes of action. In Benvenuti&Bonfant the tribunal found the principle not to be applicable where there was no identity of the parties and no identity of “object and cause of action in the proceeding pending before both tribunals.” Likewise, in Amco Asia the tribunal held that neither the parties involved nor the claims raised were identical.
page 1330 note 135 Id., at paragraph 174.
page 1330 note 136 Id., at paragraph 176.
page 1330 note 137 Id., at paragraphs 177-178. SGS also denies Pakistan's assertion that SGS has waived its right to pursue its claims before an ICSID tribunal when it commenced the Swiss legal proceedings or when it tiled its counter-claims in the PSI Agreement arbitration. SGS argues that this right arose only when SGS accepted Pakistan's offer to arbitrate its disputes with SGS in ICSID arbitration. It was only from the date of that agreement (10 October 2001) that Article 26 of the ICSID Convention and the exclusivity rule therein applied to prevent SGS from seeking relief in other fora. Pakistan cannot argue that SGS should have given its consent to ICSID arbitration before 10 October 2001, and that by not doing so, it waived its right to consent to the jurisdiction of ICSID by proceeding in the Swiss courts and PSI Agreement arbitration. Reply, at paragraphs 181-182.
page 1330 note 138 Reply, at paragraph 135.
page 1330 note 139 Id., at paragraph 181.
page 1330 note 140 Id., at paragraph 189. Also, SGS's participation was without prejudice to its legal rights under international law. The Swiss proceedings were dismissed without findings on the merits of the dispute and therefore did not resolve its claim.
page 1330 note 141 Id., at paragraphs 192-194.
page 1330 note 142 Id., at paragraph 189.
page 1330 note 143 Id., at paragraph 197.
page 1330 note 144 Id.,
page 1330 note 145 Id., at paragraphs 200-204.
page 1330 note 146 Id., at paragraphs 205-206.
page 1330 note 147 Id., at paragraph 207. Fedax N.V. (Netherlands Antilles) v. Republic of Venezuela, (“Fedax“) ICSID Case No. ARB/96/3 and Ceskoslovenska Obchodni Banka, S.A. v. The Slovak Republic (“CSOB“), ICSID Case No. ARB/97/4.
page 1330 note 148 Id., at paragraph 212.
page 1330 note 149 Id., at paragraph 215.
page 1330 note 150 Id., at paragraph 217.
page 1330 note 151 Id., at paragraph 223. SGS also refers in this regard to Wena Hotels Ltd. v. Arab Republic of Egypt. ICSID Case No. ARB/98/4.
page 1330 note 152 Id., at paragraph 224. In this regard, SGS cites Ethyl Corp. v. Canada and Ronald S. Lauder v. The Czech Republic.
page 1331 note 153 That freedom does not, however, appear to be unlimited, considering that “investment” may well be regarded as embodying certain core meaning which distinguishes it from “an ordinary commercial transaction” such as a simple, stand alone, sale of goods or services. Thus, in Fedax, the Tribunal, in finding that six promissory notes issued by the Government of Venezuela constituted an investment, observed that “under both ICSID and the Additional Facility Rules the investment in question, even if indirect, should be distinguishable from an ordinary commercial transaction.” (At paragraph 14 of the Decision on Objections to Jurisdiction.) The tribunal held that promissory notes did constitute an investment within the meaning of the BIT, noting that the central characteristics of an investment involve a “certain duration, a certain regularity of profit and return, assumption of risk, a substantial commitment and a significance for the host State's development.” Fedax also observed that only exceptionally has a treaty excluded claims to money that arise solely from commercial contracts for the sale of goods or services from the definition of investment, citing Article 1139 of the NAFTA and the comments of Mr. Antonio Parra. ICSID's Deputy Secretary-General, that “[a] broad definition of investment such as that included in the Agreement is not at all an exceptional situation. On the contrary, most contemporary bilateral treaties of this kind refer to ‘every kind of asset’ or to ‘all assets', including the listing of examples that can qualify for coverage; claims to money and to any performance having a financial value are prominent features of such listing.” (At paragraph 20 of Fedax, citing Antonio Parra, “The Scope of New Investment Laws and International Instruments” in Robert Prichard (ed.) Economic Development. Foreign investment and the Law (1996) pp. 27-44 at pp. 35-36 ‘ICSID and Bilateral Investment Treaties', News from ICSID, Vol 2, No. 1 (1985) pp 12-20 at pp. 19-20.)
page 1331 note 154 Pakistan's Reply at paragraph 109 and SGS's Reply at paragraph 19(vi) and Exhibits S21 and S22.
page 1331 note 155 Id., at S69 to 71. These documents are said to evidence expenditures made in 1992-1993 related to the liaison offices in Pakistan.
page 1331 note 156 Mihaly International Corporation v. Democratic Socialist Republic of Sri Lanka (“Mihaly“), ICSID Case No. ARB/00/2, Award of 7 March 2002, ICSID Review - FILJ p. 142 (2002).
page 1331 note 157 The Mihaly tribunal pointed out that under the parties’ Letters of Intent, of Agreement and of Extension, the Respondent had made it clear that until and unless a contract was actually signed by the parties, no expenses incurred by the Claimant could be regarded as investment. (At paragraphs 59-60.)
page 1331 note 158 Brief on Objections to Jurisdiction filed with the Court of First Instance. Exhibit S58 to Claimant's Reply to the Respondent's Objections to Jurisdiction.
page 1331 note 159 Id.
page 1331 note 160 Respondent's Memorial on Objections to Jurisdiction.
page 1331 note 161 Pakistan's Reply at paragraph 111.
page 1331 note 162 Rejoinder at paragraph 159.
page 1331 note 163 By a letter dated 7 May 2003, the Respondent furnished the Tribunal, through its Secretary, as well as the Claimant and its counsel, a copy of a decision of the Swiss Supreme Court dated 4 April 2003, affirming a decision of the Chambre d'accusation du Canton de Genève of 15 January 2003, which admitted the Government of Pakistan as a civil party to the criminal proceedings in Switzerland against Ms. Benazir Bhutto, Mr. Arif Ali Zardari (her husband) and Mr. Jens Schlegelmilch (her advisor), in respect of Mr. Schlegelmilch. Ms. Bhutto and Mr. Zardari did not appeal the decision of the Chambre d'accusation.
page 1331 note 164 E.g., Amco Asia at paragraph 38.
page 1331 note 165 At the hearing, the Claimant contended that the fact that the Request for Arbitration was registered by the ICSID Secretariat showed that the dispute was not manifestly outside the jurisdiction of the Centre and that took care of the prima facie test because that test was applied by the Secretariat itself. Transcript, Volume 1, pp. 131-132. The Tribunal does not consider this persuasive. The Secretariat's screening exercise is minimal and cannot be equated to a subsequent tribunal's evaluation of its jurisdiction to hear the case. For its part, the Respondent contended in response that the Tribunal should use the analysis employed by the Klöckner ad hoc Annulment Committee and subject the claims to careful scrutiny to ensure that they fall within its mandate. Transcript, Volume 2, pp. 41-52. While the Tribunal agrees with Respondent's point that careful professionalism is warranted in establishing jurisdiction to pronounce on a State's obligations vis-a-vis an investor, the Tribunal finds the approach posited by the Respondent as too exacting at the present stage. The role of an ad hoc Annulment Committee is to review a tribunal decision to ensure that it meets the requirements of the ICSID Convention and does not offend any of the grounds set out in its Article 52. This ‘after the fact’ role is necessarily different from the role of a tribunal at the outset of the case. If the facts as pleaded are plainly incapable of supporting a finding of breach of the Treaty, part or all of the claim might be struck (see United Parcel Service of America, Inc. v. Government of Canada, Award on Jurisdiction, at paragraphs 33-37, available at <www.dfait-maeci.gc.ca/tna-nac/document/jurisdiction%2OAward.22NovO2.pdf>). However, the Tribunal cannot subject the Request for Arbitration to too rigorous a standard of review at this stage as the Claimant is not obliged to set out extensive allegations of fact and arguments as to how the acts complained of might give rise to a breach of the Treaty.
page 1332 note 166 Transcript of Oral Hearing on Objections to Jurisdiction, Volume 1, at p. 21, lines 7-17 (by the Respondent) and at p. 187, lines 6-9 (by the Claimant).
page 1332 note 167 pdf Vivendi Annulment, supra, at paragraphs 95 and 97.
page 1332 note 168 The Committee went on to observe in a footnote and subsequent paragraph: That is, unless the treaty in question otherwise provides. See e.g., Article 11(1) of the Claims Settlement Declaration of 19 January 198 1,1 Iran-U.S. Claims Tribunal Reports p. 9, which overrode exclusive jurisdiction clauses concerning United States courts but not Iranian courts: see the cases cited by C.N. Brower&J.D. Brueschks, The Iran-United States Claims Tribunal (The Hague, Martinus Nijhoff, 1998) pp. 60-72. The Committee does not need to consider whether the effect of Article 8 of the BIT is to override exclusive jurisdiction clauses in contracts underlying investments to which the BIT applies.
page 1332 note 169 pdf See the Tribunal's Procedural Order No. 2, dated 16 October 2002, on the Claimant's Request for Provisional Measures.
page 1332 note 170 Transcript of hearing on the Claimant's Application for Provisional Measures held at The Hague on 23 September 2002 at p. 48, lines 27-28.
page 1332 note 171 Pre-Shipment Inspection Agreement, Article 11.1.
page 1332 note 172 Transcript, Volume 1, pp. 140-187
page 1332 note 173 Id., at p. 149. lines 5-6.
page 1332 note 174 ADF Group Inc. v. United States of America. (“ADF“) ICSID Case No. ARB(AF)/00/1, Final Award, available at <www.state.gov/ documents/organization/16586.pdf>.
page 1332 note 175 The Claimant has, for instance, not tried to distinguish between (a) a contract between a Contracting Party and an investor of the other Contracting Party, the applicable law of which is the national law of the Contracting Party and (b) a State contract with a private investor the applicable law of which is specified as “international law” or “general principles of law.” The seminal lectures of Prosper Weil, Problèmes Relatifs am Contruts Passés Entre un État el un Particulier, Hague Recueil des Cours (Vol. Ill, 1969), Tome 128, pp. 157-188, explored the theoretical consequences of “internationalization” of contracts the lex contractus of which is determined to be international law or general principles of law, such as the natural resources concessions granted, in an earlier day, by e.g., Iran, Abu Dhabi and Qatar. The Claimant's reading of Article 11 of the BIT apparently extends to every contract, or other commitment, that a Contracting Party has entered into or assumed, or may in the future enter into or undertake with respect to an investor of the other Contracting Party.
page 1332 note 176 We do not, of course, here suggest that the particular location by itself of a provision within the Treaty affords anything like conclusive indication of the specific intent of the Contracting Parties. We are saying that the interpretation urged by the Claimant raises questions as to the coherence of the structuring of the BIT.
page 1332 note 177 The Claimant also invites our attention to Article II (2) of the UK-Pakistan BIT and contends that on the basis of the most-favored- investor clause in Article 7 of the Swiss-Pakistan BIT and Maffezini v. Kingdom of Spain, (“Maffezini“) ICSID Case No. ARB/97/7, Decision on Jurisdiction, 25 January 2000, paragraphs 38-64, the Claimant is entitled to the benefit of the UK-Pakistan BIT. Without passing upon the applicability of Article 7 of the Swiss-Pakistan BIT to the specific issue we are addressing, we consider that Article 11(2) of the UK-Pakistan BIT does not exhibit the kind of clarity and specificity that is appropriately demanded in this respect by a treaty interpreter. We do not see a significant difference between Article 11 of the Swiss-Pakistan BIT and Article 11(2) of the UK-Pakistan BIT.
page 1332 note 178 See in this connection, e.g., Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R; WT/DS48/AB/R, adopted 16 January 1998, paragraphs 163-165. Footnote 154 in this Appellate Body Report sets out a representative collection of the pertinent literature on this interpretative principle. In the very recent decision in The Loewen Group, Inc. and Raymond L. Loewen v. United States of America, (“Loewen“) ICSID Case No. ARB(AF)/98/3, 26 June 2003, available at www.state.gov/documents/organization/22094.pdf, the claimants contended that NAFTA Article 1121, which requires an investor to waive its right to initiate or continue before any administrative tribunal or court under the law of any Party to NAFTA any proceedings with respect to the measure of a Party, if the investor wishes to proceed under Chapter Eleven of the NAFTA, in effect dispenses with the requirement that a decision of a lower court be challenged through the judicial process before a Party can be held responsible for a breach of international law constituted by a judicial decision. The Loewen Tribunal rejected this contention and refused to read NAFTA Article 1121 as the claimants urged. The Loewen Tribunal said: An important principle of international law should not be held to have been tacitly dispensed with by international agreement, in the absence of words making clear an intention to do so (Elettronica Sicula SpA (ELSI) United States v. Italy (1989) ICJ 15 at 42). Such an intention may be exhibited by express provisions which are at variance with the continued operation of the relevant principle of international law. Although the precise purpose of NAFTA Article 1121 is not altogether clear, it requires a waiver of domestic proceedings as a condition of making a claim to a NAFTA tribunal. Professor Greenwood and Sir Robert Jennings agree that Article 1121 “is not about the local remedies rule.” One thing is, however, reasonably clear about Article 1121 and that is that it says nothing expressly about the requirement that, in the context of a judicial violation of international law, the judicial process be continued to the highest level. Nor is there any basis for implying any dispensation of that requirement. It would be strange indeed if sub silentio the international rule were to be swept away. And it would be very strange if a State were to be confronted with liability for a breach of international law committed by its magistrate or low-ranking judicial officer when domestic avenues of appeal are not pursued, let alone exhausted. If Article 1121 were to have that effect, it would encourage resort to NAFTA tribunals rather than resort to the appellate courts and review processes of the host State, an outcome which would seem surprising, having regard to the sophisticated legal systems of the NAFTA Parties. Such an outcome would have the effect of making a State potentially liable for NAFTA violations when domestic appeal or review, if pursued, might have avoided any liability on the part of the State. Further, it is unlikely that the Parties to NAFTA would have wished to encourage recourse to NAFTA arbitration at the expense of domestic appeal or review when, in the general run of cases, domestic appeal or review would offer more wide-ranging review as they are not confined to breaches of international law. 164. For the reasons given, Article 1121 involves no waiver of the duty to pursue local remedies in its application to a breach of international law constituted by a judicial act. (Emphases added) We agree with the interpretative approach of the Loewen Tribunal.
page 1333 note 179 United Nations Treaty Series, vol. 1819, p. 456.
page 1333 note 180 NAFTA, Article 1121.
page 1333 note 181 Transcript, Volume 1, pp. 60-65.
page 1333 note 182 Transcript, Volume 1, p. 73, lines 17-23.
page 1333 note 183 Respondent's Reply. Exhibit S26.
page 1333 note 184 Transcript, Volume 1, pp. 73-83.
page 1333 note 185 Transcript, Volume 1, pp. 129-130.
page 1333 note 186 6 E.g., Ethyl Corporation v. The Government of Canada, Award on Jurisdiction, 24 June 1998, 38 I.L.M. 708,724.
page 1333 note 187 Transcript, Volume 1, at pp. 115-124.
page 1333 note 188 Reply at paragraphs 113-114. Transcript, Volume 2, pp. 1126-128.
page 1333 note 189 While SGS contended that the Tribunal was the judge of the contract breaches in light of Articles 9 and 11, it went on to say that “in any event if you were not, you don't need to be the judge of the contract in order to be the judge of the violation of the treaty, be it the classic violations or be it the violations because of the observance of commitments provision.” Transcript, Volume 2, p. 114, lines 3-7.
page 1333 note 190 Vivendi Annulment, supra, at paragraph 105.
page 1333 note 191 Id., at paragraph 113.
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