And it’s been about 8 months since public hearings wrapped up in another ICSID arbitration between Pacific Rim and the Republic of El Salvador.

Both proceedings were webcast online, and perhaps you tuned into one or both proceedings at some point during the hearings?

Or, more likely, you didn’t.

But, either way, you’ll enjoy the luxury of going back and watching an archived video of these proceedings on the ICSID website at some later date.

I think that’s worth reflecting upon.

Some of the first “public” hearings in ICSID arbitration required that curious parties show up at the Centre and watch the proceedings unfold in real-time.

When the parties to the Southern Blue Fin Tuna arbitration agreed to open the doors, only to have nobody show up, some skeptics muttered that the whole experiment showed that the need for transparency was overblown.

A few years later, the Methanex v. United States arbitration was opened to the public via a live-video feed that you had to watch in a special viewing room at the ICSID. I attended parts of these hearings, and while there were students, academics and practitioners in the audience, I’d also be the first to concede that elbow-room was never at a premium.

Prof. William W. Park, in a recent academic article, reminds us that when investor-state arbitration proceedings have been opened to the public, they “usually prove so utterly boring that the audience dwindles quickly.” Hence, he wonders if concerns about the conflict between public and private interests are “more theoretical, than real.”

I don’t think so.

Given the great inconvenience of having to travel to Washington, D.C. and devote one or more workweeks to a viewing experience, it’s remarkable that anyone showed up at the Methanex hearings in 2004. Even courthouse journalists, who get paid to cover legal proceedings, rarely have 8 hours a day to devote to the art of spectating. The same goes for academics, practitioners, and just about anyone else with a day job.

But, thanks to advances in internet technology – which allow for the webcasting of hearings and for them to be archived online in perpetuity – the true audience for a public hearing is now a much more elastic concept. As with a television program, the real audience consists not merely of those who troubled themselves to watch it in real-time, but also those who may watch it online – days, weeks, or even years later.

Let’s be clear: I believe that the case for transparency in investor-state arbitration ought to be rooted in concepts of good governance, economic efficiency and human rights law – not in any sort of crude head-count. (For a thoughtful exposition of the rationale for openness in investor-state arbitration, take a look at Marcos Orellana’s article in the Autumn 2011 ICSID Review.)

But, if we insist upon counting heads, let’s agree that the definition of the audience has changed dramatically over the last decade. Thanks to these dramatic technological changes, the opening-night box office numbers are not the only ones that matter.

For this expanded audience, one of transparency’s greatest gifts may be that it is spawning a growing online archive of arbitration proceedings that can be utilized by generations of future scholars, practitioners, and even critics of the present system.

Luke Eric Peterson
InvestmentArbitrationReporter.com

The event was subject to the Chatham House rules, so my notes below should not be attributed to any particular panelist or audience members. However, in the case of moderator Michael Goldhaber, his views have been publicized in his magazine columns, one of which is referenced below. (Roger intends to blog about his own talk, so I’ll leave him to weigh in further in this space).

In no particular order, here a couple things that caught my ear at the NYU event:

• Until recently, arbitrators had been able to ride in the slipstream of the U.S. Courts, to borrow Michael Goldhaber’s expression. For instance, mere days after a U.S. Judge issued a preliminary injunction against enforcement of an 18 Billion (U.S.) Ecuadorian court judgment, an arbitral tribunal sitting in the Chevron v. Ecuador BIT arbitration issued its own interim measures. However, the U.S. injunction was overturned in September by a U.S. Appeals Court. That means, according to Goldhaber, that the BIT arbitration may have become Chevron’s “first or only line of defense”.

• And, as you may have heard, Chevron’s BIT claims may test the boundaries of available relief in such arbitrations. Based on the evidence of last week’s NYU event, there is a full spectrum of opinion as to the propriety of investment arbitration tribunals ordering states to do (or refrain from doing) certain things. Some advocates and arbitrators are keen to see such tribunals award non-pecuniary forms of relief. Others warn that they threaten to undermine the support of certain states for investment treaty arbitration. While a forthcoming decision on jurisdiction could touch on the available forms of relief, another possible flash-point could arise if Chevron were to ask for more clarity as to the types of actions required of Ecuador pursuant to an earlier (but notably terse) interim measures order.

• Many of the juiciest revelations and allegations in the Chevron-Ecuador saga have stemmed from the use of a U.S. statute (28 U.S.C. § 1782) that permits judicial discovery in the aid of foreign proceedings. Views differ as to whether such court-aided discovery complicates and lengthens arbitral proceedings. However, there was some suggestion last Monday night that the use of that statute will continue to grow – unless the U.S. Supreme Court curtails its availability – and that lawyers might risk a “malpractice” suit if they don’t brief their clients about the statute.

• Apparently, some corporate clients are so keen to avoid any use of U.S. judicial discovery that these companies are negotiating contracts whose arbitration provisions exclude such an option. One wonders if governments will begin to negotiate investment treaties that prohibit (or condone) such a discovery tool.

• Mind you, if a party does plan to use the 1782 statute – and their contract or treaty does not exclude such a possibility – they might want to tell their arbitral tribunal at the earliest possible juncture. Not only will this help to determine whether such evidence is likely to be admitted in the arbitration, it might also help to persuade a Federal Court Judge that the discovery request is not a vain exercise.

• Perhaps most intriguing is the potential for non-parties to an arbitration to use the U.S. statute to procure evidence that might be relevant to a given arbitration. The statute is worded so as to permit “interested persons” to petition a U.S. Federal Court for discovery. To date, a would-be amicus curiae in an international arbitration has not attempted to use this tool to gather evidence. But, watch this space.

Luke Eric Peterson
InvestmentArbitrationReporter.com

At the time of this writing, a freezing request by German businessman Franz Sedelmayer remained under active review at a Swedish government debt enforcement agency.

Mr. Sedelmayer, you may recall, is the bearer of a real collector’s item: a vintage 1998 arbitral award in which the Russian Federation was ordered to pay some $2.35 Million (US) for helping itself to the German businessman’s St. Petersburg-based private security company.

Since 1998, Mr. Sedelmayer has made a second career out of enforcing that arbitral award. By his estimate, he has been involved in more than 70 litigations around the world, trying to identify and seize Russian assets, while defending against various legal actions brought by the Russian authorities against him.

More than one bailiff in Western Europe has broken into a cold sweat when tasked by Mr. Sedelmayer with slapping the handcuffs on Russian government assets. For a long time, the indefatigable German businessman accumulated plenty of anecdotes – including a quixotic bid to seize Russian cosmonaut gear at an international air show – but few liquid assets.

Recently, his luck has started to change, as he has begun to lay hands on certain buildings and real estate in Western Europe.

However, Mr. Sedelmayer’s latest enforcement tactic – seizing Russian funds deposited at arbitration centres and law firms – should occasion some soul-searching amongst proponents of foreign investment protection standards.

If the successful claimant in an investment treaty arbitration is reduced to targeting deposits ponied up in other more recently initiated arbitrations, the entire enterprise takes on the contours of a classic pyramid scheme: with the contributions of later entrants used to pay off earlier participants.

Not only does this enforcement model appear deeply embarrassing for devotees of investment arbitration, its limits are also plainly apparent. Even if a bailiff agrees to seize arbitration deposits, and such a seizure is not quashed by the courts on sovereign immunity grounds, it can only offer succor to those with debts small enough to be satisfied by the deposits used to finance other arbitral proceedings.

If a tiny award against a highly-globalized G8 economy can remain unpaid for more than a decade, what of those seeking larger sums from regimes that tend to stuff their cash into the sofa cushions, rather than scattering it beyond their borders?

One answer that has been bandied about in the Argentine context is for home governments – or all governments with an interest in binding dispute settlement – to bring diplomatic pressure to bear against dilatory debtors. However, this “re-politicization” of the dispute settlement process comes with all of the usual baggage. States expend precious diplomatic capital when they go to battle for investors-creditors on the foreign relations playing field. Sometimes that capital is worth spending. At other times it is not.

Another solution is to expect claimants to bear the cost of enforcement – either by carrying insurance which covers the risk of award-default, or by selling their awards at a discount to vulture funds or organizations specializing in debt-collection. This pathway may be attractive for some, but for bearers of modest awards it may be neither viable nor equitable. (Try explaining to the owner of an expropriated family business, that they should take a haircut after gambling everything and “winning” in arbitration.)

There may be no silver bullets when it comes to dealing with recalcitrant debtor states.

However, the fact that an arbitral award-creditor has been reduced to targeting deposits laid down in other arbitral proceedings strikes me as something of a watershed.

Mr. Sedelmayer’s long struggle – and his increasingly audacious tactics – remind us that it is one thing to erect a system of 3,000+ international investment treaties, but quite another thing to make it work.

As the 15th anniversary of his arbitration victory looms, it is time to take some of the energy devoted to investment treaty rule-making and to re-focus it on the vexing question of enforcement.

Luke Eric Peterson
InvestmentArbitrationReporter.com

The claim alleges that Guatemala is failing to enforce its own labour laws, thus falling afoul of international legal obligations written into the U.S. Free Trade Agreement with Central America and the Dominican Republic (CAFTA-DR).

While there have been a handful of arbitration claims brought under the CAFTA-DR’s investor-state dispute process, the U.S.-Guatemala proceeding is apparently the first state-to-state claim to be brought pursuant to Chapter 20 of the same agreement.

Those familiar with the rather leisurely investor-state arbitration process might be surprised to discover that the CAFTA’s state-to-state process provides for a fast-track form of dispute resolution.

Indeed, from the moment that a state-to-state claim is launched, parties have 15 days to select a chair for the three-member arbitration panel. And, once the chair is selected, the parties have a further 15 days to pick their respective arbitrators.

Failure to select a wing-arbitrator within that 15 day period, means that the choice will be made by lot – within a matter of 3 days – from a roster of approved Chapter 20 panelists.

(By contrast to this hasty process of arbitrator selection, parties in investor-state proceedings under the CAFTA-DR have 75 days in which to set up an arbitral panel, after which further time can elapse if an appointing authority needs to nominate the remaining panelists.)

All going according to plan, an arbitral panel in the U.S.-Guatemala case could be in place inside of a month. And, not only are arbitrators empaneled very swiftly under the state-to-state dispute resolution process, they are also expected to resolve cases in months, rather than years.

Within 120 days, and definitely no later than 180 days, arbitrators should have prepared an initial report setting forth findings of facts, and a preliminary determination as to whether the respondent state has breached its CAFTA obligations.

The parties then have two weeks to comment on the initial report, and the arbitrators must issue their final report a mere 30 days after the release of their initial report. While there is a bit of discretion for extending certain deadlines set out in Chapter 20 of the CAFTA, the default timetable for state-to-state arbitrations clearly envisions a very swift form of justice.

By my back-of-the-envelope math, an arbitral claim could be resolved in about 8 months.

By contrast, it took nearly 8 months to put together an arbitral tribunal to hear the first claim under CAFTA’s investor-state chapter. That unrelated case, which also involves Guatemala, will celebrate its 4th anniversary later this month and oral hearings are still some distance off.

So, in principle, the newly-minted claim against Guatemala under Chapter 20 could be fully arbitrated before the longer-running investor-state proceeding sees a final award.

By Luke Eric Peterson
InvestmentArbitrationReporter.com

And I also refrain from counseling others as to whom they should nominate to arbitral tribunals.

But, today I’d like to make an exception.

Recently, Zimbabwean President Robert Mugabe engineered the effective demise of the regional tribunal of the Southern African Development Community (SADC). These depressing developments have been chronicled in my Investment Arbitration Reporter newsletter, and you can find more background here.

While members of the international arbitration community should be decrying this move to kick the legs out from under an international tribunal, they might also reflect that a small group of independent-minded jurists now find themselves with some free time on their hands.

Members of the SADC Tribunal generally hail from the ranks of the senior judiciary of their respective countries, and have had the further experience of interpreting and applying the SADC Treaty, an international law instrument.

Arbitration practitioners will know that there is perpetual discussion about the need to expand the pool of international arbitrators, and to draw from the ranks of developing country jurists.

While I can’t vouch personally for any of the former members of the SADC Tribunal, some of them are prominent figures, including the former Chief Justice, A.G. Pillay, a retired Mauritian Judge who also serves as Chair of the U.N. Committee on Economic, Social and Cultural Rights.

Certainly, the entire Tribunal made a rather strong first impression on me by virtue of their judgment in the Campbell case.

The Tribunal surprised many observers when it ruled in 2008 that Zimbabwe was liable for multiple breaches of the SADC treaty in relation to that country’s abominable treatment of nationals and foreigners alike. In subsequent years, the Tribunal rebuked Zimbabwe on several occasions for flouting the Tribunal’s judgment, refusing to compensate those who had lost their homes and livelihoods, and continuing to turn a blind eye to brutal beatings and political thuggery.

If you’ve seen the excellent documentary about the Campbell case, you may recall that Zimbabwe sought repeatedly to delay the SADC Tribunal’s hearing of that case. Finally, the patience of the Judges wore thin, and one Tribunal member was seen to chastise the Zimbabwean defence counsel thusly:

“We are building a house of justice in the region, and the court finds no reason to postpone this case.”

Unfortunately, the political decision taken last month in Namibia by the SADC Heads of State has meant that this regional “house of justice” is only the latest structure to be razed to the ground by the Mugabe government.

Nevertheless, it may lie within the power of some readers of this blog to ensure that the former caretakers of that house – the Judges of the now hobbled Tribunal – are recognized for their integrity in the service of the rule of law. Considering them for appointment to future international panels strikes me as the least that the international arbitration community might do under the circumstances.

(Luke Eric Peterson, http://www.InvestmentArbitrationReporter.com)

Such sums may be “small change” compared to the more conventional forms of economic compensation claimed for treaty breaches. Still, it’s become de rigeur for claimants – and even some states – to tack on claims for a few million Dollars in moral damages.

Arbitrators have been slower to award moral damages. However, in a recently-concluded ICSID arbitration proceeding, a tribunal grappled at considerable length with the claimant’s $3Million (US) moral damages request.

You can find a fuller accounting of the Joseph Charles Lemire v. Ukraine case here, so I won’t rehearse all of its facts. It suffices to mention that Mr. Lemire is a U.S. investor in Ukraine’s radio broadcasting industry, and that he accused Ukrainian broadcasting authorities of unfairly rejecting a long string of applications for new radio frequencies that would have permitted him to expand his radio business.

Arbitrators ultimately held that Ukraine’s treatment of Mr. Lemire did not meet the standards of fairness set out in the U.S.-Ukraine bilateral investment treaty, and awarded him $8.7 Million (US) for his financial losses.

Mr. Lemire made a further request for moral damages, complaining that he had suffered indignity, stress, humiliation and other forms of moral harm as a result of the state’s serial (and legally unfair) rejection of radio licensing applications. He also cited the stress and anxiety occasioned by state-harassment, including a series of (allegedly irregular) inspections, and license renewal delays.

What “exceptional circumstances” would justify moral damages?

In its March 28, 2011 Award, the tribunal debated whether Mr. Lemire’s treatment constituted the type of “exceptional circumstances” that warrant an award of moral damages.

To elucidate the meaning of “exceptional circumstances” the arbitrators looked to certain arbitral awards plead by the parties. They identified three criteria:

• the State’s actions imply physical threat, illegal detention, or other analogous situations in which the ill-treatment contravenes the norms according to which civilized nations are expected to act;
• the State’s actions cause a deterioration of health, stress, anxiety, other mental suffering such as humiliation, shame and degradation, or loss of reputation, credit and social position; and
• both cause and effect are grave or substantial

Mr. Lemire’s injuries don’t meet the test

The tribunal acknowledged that Ukraine’s repeated and unfair rejection of Mr. Lemire’s licensing applications had led to some “negative impact” to his reputation and entrepreneurial image. However, the gravity of this harm could not be likened to the hurt caused from armed threats, or by witnessing the deaths of others, or the other types of suffering endured by claimants in earlier cases where moral damages were warranted.

The tribunal also found that the allegedly harassing inspections carried out on Mr. Lemire’s company were not undertaken in order to “intimidate” the foreign investor.

Thus, while the tribunal expressed sympathy for Mr. Lemire’s stress and anxiety, it held that the economic compensation awarded was sufficient to compensate for the moral aspects of his injuries.

Ukraine urged that any moral damages be calculated in line with human rights law

Because Mr. Lemire’s suffering did not rise to the level where moral damages were warranted, arbitrators did not need to address an argument by Ukraine that such damages should be quantified in line with the practice under international human rights law.

Ukraine pointedly noted that Mr. Lemire had offered no explanation for his decision to claim $3 Million (US). Moreover, the government observed that awards of moral damages before international human rights courts and tribunals “are much lower than that requested by Claimant.”

I’ve made a similar argument in a 2009 article, in my Investment Arbitration Reporter newsletter. Frankly, it’s unheard of for human rights tribunals to award 1 Million (US), much less 3 Million (US), even in cases of the gravest indignities such as torture or extra-judicial killing.

I happen to favour the award of moral damages in certain investment treaty cases. Such a remedy can be a crucial one where claimants have suffered grave indignities, particularly when calculable business losses may be minimal. However, I can’t see a principled reason why the same manner of indignities visited upon claimants – be they in human rights or investment law contexts – should result in the award of wildly divergent sums by international tribunals

If arbitrators were to engage in a comparative analysis of the quantification of moral damages it might help, in its own small way, to alleviate the perception that investment treaty arbitration is a system of “concierge-level” international justice that puts aliens (or at least foreign investors) on a privileged plane above all other claimants in international dispute resolution.

If time permits, I may do another list for 2011. But, first I thought I’d take a look back at last year’s list and offer a brief update on those cases. Rather, than do all of the heavy-lifting here, I’ll direct readers of this blog to relevant reporting in my Investment Arbitration Reporter newsletter (not to be confused with Kluwer’s ITA newsletter) where appropriate. (You won’t need a subscription to view the articles that are referenced below, as we’ll make them publicly available.)

Without further ado, here’s a run-down of the ten cases from last year.

Suez, Vivendi, Anglian Water, et al. v. Argentina

In August, decisions on liability were finally rendered, holding Argentina liable for breaching investment protections owed to a Who’s Who of foreign investors in that country’s water and sewage sector. However, for those interested in the running debate about the coherence or fragmentation of public international law, the decisions may be something of a disappointment. While the arbitrators found breaches of Argentina’s bilateral investment treaty obligations, they gave short shrift to Argentina’s invocation of international human rights law obligations in its defence of these claims. Check out our reporting for a fuller run-down of what happened.

Fraport v. Philippines

Next on last year’s list was Fraport’s bid to annul an ICSID jurisdictional decision which had grounded the company’s bid for compensation over an expropriated airport terminal. In 2007, a divided tribunal ruled that the company’s claim should fail due to the fact that the claimant had quietly circumvented local laws designed to limit foreign control of the terminal project.

Well, tell your friends that you read it on the internet: Fraport got an early Christmas present on December 23rd when an ICSID annulment committee annulled the 2007 ruling. The annulment paves the way for a new arbitration, and one imagines that this will land on ICSID’s doorstep early in the new year. Keep an eye on the IAReporter newsletter for the fuller story on this one.

Brandes Investment Partners v. Venezuela

Last year, we noted that a decision should be forthcoming by a panel of arbitrators in a telecoms nationalization claim whose viability hinges on the ambiguous-looking arbitration clause in a domestic investment protection statute. Yeah, that’s a mouthful. But you’ve got time to digest it because, as of this writing, a decision in the Brandes case is still awaited.

Mind you, a different ICSID panel weighed in earlier this year with a notably restrictive interpretation of the same statute at issue in the Brandes case. Our report on that dimension of the Mobil v. Venezuela case is here. Now it remains to be seen what the Brandes tribunal makes of the ruling in the Mobil case.

El Paso v. Argentina

Nothing new to report here. El Paso turned to arbitration against Argentina back in 2003, alleging that the country’s handling of an earlier financial crisis triggered breaches of protections owed to El Paso. Arbitrators are still dotting their ‘I’’s and crossing their ‘t’’s on this long-anticipated decision. El Paso must be thoroughly demoralized given that the most likely outcomes are A) a dismissal of its case or B) a “victory” followed by a protracted annulment process.

AES v. Hungary

There is rather more to report in relation to another claim highlighted in last year’s list. AES was one of three foreign power producers to sue Hungary for allegedly failing to respect the terms of long-term power purchase agreements. However, in September, arbitrators handed down a verdict in favour of Hungary, finding no breaches of the country’s obligations under the Energy Charter Treaty. A fuller accounting of the case can be read here.

Foresti and others v. South Africa

A group of foreign miners drew international headlines when they alleged that South Africa’s Black Economic Empowerment program – and the country’s new BEE-inspired mining regime – had breached protections owed under South Africa’s bilateral investment treaties.

As was noted last December, the politically contentious dispute seemed to be fizzling out after the claimants signaled that they were prepared to lay down their arms. However, the claimants and South Africa could not agree on the peace terms, so it fell to arbitrators to hold a hearing and issue an award which drew a line under the case. Read all about it here.

RosInvestCo v. Russian Federation

On December 19, 2010, we reported that an arbitral award in one of three pending Yukos-related arbitrations against Russia had been quietly rendered back in September. The ruling had remained under lock and key until the Russian Federation moved earlier this month to set aside the award. Here’s our quick run-down of what happened, but keep an eye on our newsletter for a full accounting of the award’s holdings.

Chemtura v. Canada

Canada walked away victorious after arbitrators ruled in August of 2010 that a U.S. chemical company had failed to make out any of its claims under the North American Free Trade Agreement (NAFTA). The case had been watched nervously by public health advocates as Chemtura was attempting to second-guess Canada’s phase-out of the controversial agro-chemical, lindane. But, in the end, Canadians were left only with a hefty legal bill – not an arbitral edict requiring them to put a teapoon of lindane on their morning oatmeal. See this report for the crux of the tribunal’s ruling.

Chevron v. Ecuador (Round One)

While a bruising multi-front legal fight over liability for Amazonian oil pollution gathered pace last year, arbitrators also weighed in with a ruling on a less-publicized under-card battle between the two combatants: Chevron corporation and the Republic of Ecuador.

In what could be a hefty victory for Chevron, arbitrators ruled that Ecuador was liable for delaying the judicial resolution of a series of contract disputes. As we made clear in an analysis of the arbitral ruling, the tribunal appeared to break new ground in ruling that an international tribunal can step into the shoes of domestic courts that are failing to deliver justice in a timely fashion.

Libananco v. Turkey


Various claimants came out of the woodwork to sue Turkey following that country’s winding up of the Uzan family business empire. Libananco, a Cyprus-based entity, has long maintained that it has the most credible claims. The off-shore company insists that it held stakes in two valuable electricity concessions prior to their being taken over by the government. With all of the other known arbitration claims brought by shell-companies now having been dispatched on jurisdictional grounds, a ruling in the Libananco case is the only thing left to be written.

However, if Libananco should prevail, it will have to contend with a recent ruling by a New York judge that any ICSID arbitration winnings must accrue to the benefit of those who suffered a Billion Dollar fraud at the hands of the Uzans. See our story here.

Luke Eric Peterson
Editor
http://www.InvestmentArbitrationReporter.com

A central issue in the case was whether the Government of Pakistan – which was not itself a signatory to a 1996 contract between Dallah and a Pakistani government-created Trust – could be bound by an arbitration clause providing for ICC arbitration.

While Dallah persuaded a panel of arbitrators that Pakistan was a “true party” to the contract, the Saudi company has been unsuccessful in enforcing the tribunal’s $20,588,040 Million (US) award in the UK courts. Indeed, today’s UK Supreme Court decision is the third to deny enforcement of the ICC award.

I won’t rehearse all of the background here, as you can find numerous accounts of the case, including Gary Born’s comprehensive analysis of an earlier (2009) Appeals Court ruling. No doubt, plenty of commentators will weigh in, in the days to come, with their views on today’s judgment. In the mean time, you can find a copy of the ruling here.

Following the flurry of Uruguayan press coverage, I spent a bit of time digging into the case. While it was clear that the government had not made up its mind, I was assured that the government had been advised, by what I would describe as “serious actors”, that it had a strong case.

After more than six months of weighing its options, it now emerges that Uruguay has hired outside legal counsel. And in a press release that landed in my inbox this morning, the law firm Foley Hoag appears ready to take the offensive:

“Our view is that Philip Morris is hoping to use this case to deter not only Uruguay but other signatories to the WHO’s Framework Convention from taking effective measures to safeguard the public health against the known hazards of tobacco consumption”

“Sovereign states are normally given wide discretion in enacting legislation or promulgating regulations to protect and promote public health. Indeed, that is one of the fundamental aspects of sovereignty. This is not a case of economic regulation, but of government action strictly in the name of public health.”

It now remains to be seen whether Phillip Morris plans to press forward with its case.

Some of the most notorious of investment arbitrations have a way of fizzling out before arbitrators have to weigh in on the merits – think of claims arising out of Black Economic Empowerment in South Africa or a particularly infamous water privatization in Bolivia.

But, at least for now, the Phillip Morris v. Uruguay case is sure to get a renewed spurt of attention.

There is no doubt that not-for-profit organizations face a barrage of abuse and mistreatment at the hands of host countries, and that the existing international framework of human rights law and charity law is rather anemic in the face of such abuses.

In past research papers, myself and a colleague have mused about the jurisdictional and substantive issues which might arise when not-for-profits seek the protections of international investment treaties.

However, Lisa is right to ask, at the end of her recent post, whether many organizations would truly pursue this path?

To be sure, there are some obvious limiting factors, including the typical desire of not-for-profit organizations to remain in the host country so as to continue carrying out their charitable activities. Many such organizations are not as fickle as for-profit foreign investors who will choose to pull up stakes when economic conditions in a given host territory begin to sour. Indeed, for an NGO to exit a host country and engage in an international arbitration would be viewed by many charitable actors as a “loss” even before arbitrators were to weigh in on the merits of a claim.

There is also the question of damages. Assuming that some claimants were to pursue investment treaty claims, would there be any meaningful financial losses at the end of the road?

It should be recalled that not-for-profit activity is big business. In some of the more benighted countries, where for-profit investors are thin on the ground, not-for-profit activity can be responsible for a significant share of GDP.

If a host state seizes or destroys a network of hospitals, entrepreneur skills-training centres, or non-profit manufacturing operations, an expropriation claim could be for a sizable amount.

But, even in cases where financial losses do not run into the tens of Millions of Dollars, there may be other remedies which would be attractive to not-for-profit organizations. These include moral damages, interim measures, and also orders of specific performance.

I have some qualms about how these different types of relief are used in recent investment arbitrations. As yet, we have seen no convincing formula for calculating moral damages (or even an attempt to look at how such damages are calculated in other areas of international law). Similarly, if investment treaty tribunals plan to move from awarding financial compensation to ordering sovereign governments to suspend regulations or to enact certain measures, don’t be surprised to see a deeper political backlash (including more searching questions about the composition and interests of such tribunals).

But, still, there is no question that a would-be claimant in 2010 can make a stab at moral damages, interim measures or some forms of specific performance.

I doubt that we will ever see a day where dozens of arbitrations between not-for-profit organizations and states are afoot under the rubric of investment treaties. However, that is not to say that not-for-profit organizations cannot use the threat of arbitration, and the binding legal commitments found in international investment treaties, as a useful weapon when they are confronted with abusive treatment in a host country.

Luke Eric Peterson
http://www.iareporter.com