African countries, like most developing countries, have always considered FDI to be an important part of their development strategy, and international investment agreements, mostly bilateral investment treaties (BITs) with a developed country have been seen as an important means for African countries to signal their economic stability in order to attract foreign investors. However, African countries have needed to appreciate the consequences of concluding a BIT beyond the realisation of an economic objective, by prioritising capacity building and legal expertise in investment treaty law and arbitration.

There are currently over 2500 BITs worldwide, making it the most popular form of international agreement for attracting and protecting FDI. Approximately 400 of these are concluded between an African country and a developed country. With the increase in FDI, the number of BITs concluded by African countries will continue to rise.

Regrettably, a common feature of the earlier BIT model was the extremely broad and imprecise provisions, which resulted in conflicting interpretations. Over time, states have been renegotiating and entering into a newer BIT model in which we see the use of clearer language and more precise terms in provisions.

However, most countries that are parties to the newer BIT model are also still parties to a number of the older model, thereby increasing the risk of conflicting interpretations. Arbitral tribunals (mostly from developed countries) continue to interpret and apply the disputed provisions. In doing this, they are contributing to the development of investment treaty law.

Investment treaty law is a complex area with multiple sources and is in a constant state of evolution. Due to its specialised nature, expertise in this field has generally been limited to a small group of lawyers and arbitrators, based mainly in Europe and the United State. African states have usually relied on foreign lawyers to mount an effective defence to investment treaty claims.

The lack of expertise in this area is due to the fact that local law firms in Africa do not have access to sources of legal authority or the breadth of exposure to investment treaty arbitration cases and professional contacts that their western counterparts have. Apart from the occasional training seminars organised for developing countries by organisations such as UNCTAD, training in this area barely exists in Africa, and resources to invest in extensive training abroad remain scarce.

While the adoption of modern arbitration legislation based on the UNCITRAL Model Law across Africa has increased over the years, only six African states in Sub-Saharan Africa have adopted laws based on the UNCITRAL Model Law. The majority of African states have signed and ratified both the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention).

In November 2008, Mauritius passed a new International Arbitration Act based on the UNCITRAL Model Law, and has a specific focus on investment arbitration. Similarly, in 2010 Nigeria reviewed its Arbitration and Conciliation Act of 2004 (ACA) in a move to become a more arbitration friendly venue. Although the ACA is not based on the UNCITRAL Model Law, the arbitration rules attached to it are. Under its National Investment Promotion Act, any foreign investor who registers under the ACA is automatically entitled to bring treaty arbitration under the ICSID.

Whereas South Africa is the richest state in Sub-Saharan Africa, it is not considered to be arbitration-friendly. It is yet to implement recommendations made in 1998 by the South African Law Commission for the application of the UNICITRAL Model Law. South Africa is also not a party to the ICSID Convention, although it has ratified the New York Convention.

As far as arbitration-friendly courts are concerned, Nigerian courts have made an increasing contribution to the development of arbitration in the region. Cases such as the M.V. Lupex v. N.O.C. (2003) 15 NWLR (Part 844) 469 in which the Supreme Court held that it was an abuse of court process for the respondent to institute fresh proceedings in Nigeria while arbitration proceedings where pending in London, demonstrate support for arbitration by the Nigerian courts.

Equally, the adoption of the Mauritius International Arbitration Act is designed to ensure that local courts are supportive of arbitration, as the Act includes specific provisions for the robust and swift determination of interlocutory issues. The Act also has provisions that support the doctrine of competence-competence in order to avoid the need for local courts to decide jurisdictional issues. Further, the Act makes provision for all appointments and a number of administrative functions to be carried out by the Permanent Court of Arbitration (PCA), thereby separating the arbitral process from the local courts.

Finally, as far as arbitral institutions are concerned, African states have been content to use the internationally renowned arbitral institutions of the ICSID, PCA, International Chamber of Commerce (ICC) and London Court of International Arbitration (LCIA) (hereinafter the “Big Four”), although the ICC and the LCIA are rarely used for the resolution of investment disputes. Despite the fact that the Big Four may have African nationals on their panels, arbitral appointments are usually limited to a close-knit group of people.

Arbitral institutions such as the Cairo Regional Centre for International Commercial Arbitration (CRCICA) and the Lagos Regional Centre for International Commercial Arbitration (LRCICA) are well-recognised within their region but there are currently no arbitral institutions in Africa that are prominent enough to compete with the Big Four.

There have undoubtedly been a few attempts by African states to establish regional arbitral institutions for determining cross-border disputes within the Sub-Saharan region. Indeed, new institutions are being launched across Sub-Saharan Africa with more frequency, with the most recent being the Kigali International Arbitration Centre (KIAC) which is expected to become operational in early 2012, if not sooner.

Amongst other things, the KIAC aims to offer dispute resolution services in a range of fields including investment and trade. The KIAC also intends to provide training to lawyers and other specialists to build local capacity. Rwanda’s Minister of Justice and Attorney-General, Tharcisse Karugarama, hopes that the KIAC will be an international centre for other countries in Africa and beyond to seek arbitration.

Additionally, as we have seen above, Mauritius has taken bold steps to establish itself as a regional centre for resolving international disputes including commercial and investment disputes in Africa. In December 2010 it hosted a major conference on arbitration along with the Big Four and two other arbitral bodies, ICCA and UNCITRAL. When the Mauritius government introduced its new arbitration legislation in 2008, it also signed a host country agreement with the PCA. The PCA has since set up a regional branch in Mauritius.

In July 2011, the Mauritian government and the LCIA launched LCIA-MIAC, a new centre to administer international arbitrations relating to Africa and beyond.

The setting up of regional branches in Mauritius both by the PCA and the LCIA signifies the importance placed on the steps taken by Mauritius to establish itself as the regional centre for the resolution of international arbitration disputes. This bodes well for Mauritius, as the combined expertise of the PCA and the LCIA professionals will, within time, be imparted to local lawyers.

In light of the above, it appears that Africa has taken some major steps to promote arbitration within the region. However, it still has a long way to go in combating the lack of expertise, as the absence of local training and scarce resources to invest in extensive training abroad remains an impediment to Africa’s ability to address effectively the challenge of developing expertise and building capacity in investment treaty law and arbitration.

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

The first of these disputes was mounted at ICSID in 2005 by a group of 13 Dutch farmers who alleged that Zimbabwe, by depriving them of their agricultural landholdings and other property, had breached various provisions of the Netherlands-Zimbabwe bilateral investment treaty (BIT). In April 2009 an ICSID tribunal issued an award in Funnekotter et al. v Zimbabwe, finding that Zimbabwe had breached its obligations under Article 6 of the Netherlands-Zimbabwe BIT (which sets out the conditions for a lawful expropriation), and ordered Zimbabwe to pay the Claimants €8,220,000 plus interest as compensation for the lands expropriated by the Zimbabwean Government. (*)

A second dispute was brought before the Southern African Development Community (SADC) Tribunal in October 2007 by Mike Campbell and 77 other farmers who had received compulsory acquisition notices from the Zimbabwean Government. The farmers had initially applied to the Supreme Court of Zimbabwe for a protection order to prevent any forced eviction, but this was denied, with the Supreme Court finding that (i) despite the farmers’ submission that they were targeted exclusively because of their race, race was not an issue given that the relevant provisions of the Constitution did not make any reference to race; (ii) the Government had an inherent right to compulsorily acquire property; and (iii) the legislature had full power to change the Constitution to allow agricultural land to be confiscated without compensation ‘for resettlement and other purposes’.

However, the Campbell claim before the SADC Tribunal was more successful. In November 2008 the Tribunal held that (i) the Tribunal had jurisdiction to hear the case because the amendments that had been made to the Zimbabwean Constitution had eliminated the farmers’ access to the domestic courts; (ii) the farmers had been deprived of their right to a fair hearing before being deprived of their rights to their land; (iii) the actions of the Zimbabwean Government constituted indirect discrimination because it affected white farmers only; and (iv) the farmers were entitled to compensation for the expropriation of their lands.

Most recently, a Swiss-German family has brought a claim before ICSID, seeking damages for the expropriation of three large estates, including forestry and agricultural businesses. In a claim registered at ICSID on 8 July 2010, the von Pezold family alleges that Zimbabwe has breached its treaty obligations with Switzerland and Germany by failing to provide fair and equitable treatment and full protection and security.

While it is evident that there is some groundswell of resistance to Zimbabwe’s land reform programme, what will be telling is whether any awards rendered are actually enforced against the State. In Funnekotter, Zimbabwe was ordered to pay the ordered compensation to the farmers within three months. This did not occur, so in January 2010 the Southern District Court of New York, which had jurisdiction under Section 1650a of the United States Code to enforce an ICSID award, confirmed the award for the full amount of US$25 million. Likewise, the Campbell award was confirmed in the South African High Court in February 2010, and in March 2010 the title deeds to four Cape Town houses belonging to the Zimbabwean Government were handed over to the farmers. Although the houses were due to be auctioned at the end of July 2010, this was postponed following the Zimbabwean Government’s challenge to the legality of the sale. Sources close to the case have explained that the Zimbabwean Government is arguing that the properties are protected by diplomatic immunity. Zimbabwe’s application will be heard in September 2010.

Perhaps as a result of this resistance, in August 2009, Zimbabwe formally withdrew its SADC membership, stating that it would not be bound by any of the Tribunal’s past or future orders. Neither the SADC Treaty nor the Protocol on the Tribunal contain a safeguard mechanism. In a further development, the South African Justice Minister has recently requested a legal opinion on the scope of the SADC Treaty and the enforceability of the SADC Tribunal’s rulings in both Zimbabwe and South Africa. As the South African courts are the only courts to have enforced a SADC ruling, South Africa’s compliance with SADC is vital to ensuring the enforceability, and thereby legitimacy, of the SADC Tribunal.

(*) The SADC is an economic community in Southern Africa with fifteen member states (Angola, Botswana, DRC, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, Zimbabwe). Originally founded in 1980, it gained full legal status with the signing of the SADC Treaty in 1992. It aims to promote economic cooperation and free trade between the member states.

I don’t do a lot of field trips, and my wife harboured some suspicion that this “research venture” was merely a tidy excuse to trade the New York winter for the Southern African summer.

These suspicions only grew when pictures surfaced of me on a four-wheeled all terrain vehicle in the Namibian desert – with nary a laptop or notebook in sight.

So, it’s with considerable relief that I see that my short paper (written with the South African lawyer Ross Garland) was published this week.

The paper is hardly the first word on the topic. Nor, I expect, will it be the last.

While conflicts over land are hardly exclusive to sub-Saharan Africa, the international law dimension of land politics is coming to a head in this region though. (Indeed, I blogged about this topic a year ago).

Readers of my Investment Arbitration Reporter news service will be aware of the international arbitration claim mounted by a bloc of Dutch passport-holders following the violent expropriation of their farms in Zimbabwe. The claimants prevailed in their arbitration at the International Centre for Settlement of Investment Disputes (ICSID) – making out a breach of the Netherlands-Zimbabwe bilateral investment treaty – but they are struggling to collect on the 2009 arbitral award. Don’t be surprised if other claims against Zimbabwe should emerge in the months or years to come.

Elsewhere in the region, relations between land-owners and governments have been less fraught, but there are unavoidable political pressures for more ambitious forms of land reform.

Proposed land reform measures tend to be viewed through the prism of domestic constitutions and their property rights guarantees. However, matters don’t end there. Foreign owners – as well as locals who dress up in foreign garb via creative ownership structures – may also rely on bilateral investment treaties for a further layer of legal protection.

To date, there have not been large-scale expropriations in Namibia or South Africa. However, if governments move beyond the willing-buyer/willing-seller approach to land reform then we could see more legal disputes arise.

Already, in the case of Namibia, a handful of German property-owners who were among the first to be targeted for compulsory expropriation turned to the Namibian Constitution and the Germany-Namibia BIT when their lands were targeted for expropriation in recent years.

Likewise, in South Africa, an anonymous Swiss investor complained that the mere prospect of future expropriation had devalued his land to such an extent that it breached the Swiss-SA BIT.

An arbitral panel rejected that claim – in a still unpublished UNCITRAL arbitral award – but don’t be surprised if we see the politically-contentious question of land reform taken up by future arbitral tribunals.

In the mean time, let me leave you with a few shots of the Namibian desert: an expanse of beautiful, but arid land that is unlikely to give rise to any investor-state arbitration claims.

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

Three years later, as I make another visit to the region, the long-promised deal has just been sewn up.

But, despite much clamouring for a protective pact – particularly from South Africans with property in Zimbabwe – the recent signing of an SA-Zimbabwe BIT has left many stakeholders unhappy.

Elements of South African business boycotted the official signing ceremony, complaining that the deal ignores the plight of those South Africans who have (already) suffered expropriation in Zimbabwe.

Indeed, a conservative farming organization went so far as to petition a South Africa court in an effort to interdict the South African government from proceeding with the BIT. The applicants argued that the failure of the pact to apply retroactively – so as to provide some remedy for South Africans who have been expropriated in Zimbabwe – may have breached the South African Government’s legal obligations to stick up for the interests of its citizens abroad.

I’m skeptical of such legal arguments – whether framed as a breach of the regional SADC treaty or of the international law of diplomatic protection – but I guess we’ll never know what the South African courts would have made of them. Rather, the applicants promptly settled their case, with the South African government promising that the new Zim-SA treaty “does not affect existing rights or remedies in terms of other sources of international law, in particular those in terms of the Treaty of the Southern African Development Community (SADC).”

Such assurances must be rather cold comfort for South Africans who have suffered abuses at the hands of the Zimbabwean regime. Some South Africans were part of a claim brought before the regional SADC tribunal, alleging expropriation and human rights abuses. Although the tribunal found Zimbabwe in breach of its SADC obligations, the claimants have struggled to enforce the tribunal’s ruling – or to get regional governments to crack down on Zimbabwe for flouting the tribunal’s authority.

So, there’s not much in the new Zim-SA BIT – or the bland reassurances of the SA Government about the need to respect SADC legal obligations – to give much hope to those who have already lost their shirts in Zimbabwe. Article 11 of the BIT is pretty clear in precluding claims arising out of any property right or interest compulsorily acquired by either party in its own territory before the entry into force of this agreement.” (An interesting question, however, is whether this unusual clause would preclude claims that did not pertain to compulsory acquisitions (for e.g. fair and equitable treatment)

At the same time as property-holders have been annoyed by the terms of the new BIT, I’ll wager that the agreement will also disappoint civil society groups whose hopes were raised by a scathing draft report issued by South Africa’s Department of Trade and Industry (DTI). In the report, which I’ve profiled at more length in my newsletter, the DTI argued for a wholesale rethink of bilateral investment treaties so as to ensure that they protect foreign investment while not jeopardizing other important public policy interests.

Indeed, the report in question contemplated all manner of changes, including the greater use of exceptions clauses, and more circumscribed investor protection clauses. In procedural terms, it was noted that the investor-state arbitration process should be more transparent, subject to a possible appellate review system, and – most striking – take a back seat to domestic remedies wherever possible.

Yet, remarkably, the latest BIT to be signed by the DTI bears the imprint of none of this radical thinking.

Apart from a (limited) exception for black economic empowerment (affirmative action) programs, the treaty is a very archetypal investment treaty with broad “fair and equitable treatment” protections, and the standard “prompt, adequate and effective” compensation in cases of expropriation.

Whatever one’s views on the merits of such unreconstructed agreements, it seems clear that the new SA-Zim BIT gives no signs of having been negotiated by the authors of the recent DTI report.

Likewise, on procedural matters, the new SA-Zim BIT provides for international investor-state arbitration after a 6 month cooling off period. Far from mandating any recourse to domestic remedies, the pact contains a fork-in-the-road clause which might preclude international arbitration for claimants who first try their luck in the domestic courts.

Similarly, the treaty addresses none of the other concerns – such as a lack of transparency or predictability of dispute settlement – voiced in the DTI draft report.

It’s possible that the stiff political pressure for South Africa to conclude a protective pact with Zimbabwe has meant that the DTI’s Platonic Ideals had to be set to one side. (It should be stressed, moreover, that the DTI Report was a draft publication, so it should not be taken as established government policy). However, given the remarkable gulf between the DTI’s avowed negotiating philosophy and the latest treaty practice, one wonders how seriously to take South Africa’s ongoing investment treaty review process.

It may be full of sound and fury, but not signifying a whole heck of a lot.

Luke Eric Peterson

http://www.investmentarbitrationreporter.com

Many believe that we are seeing a new “Scramble for Africa”, as food-scarce countries and private investors alike jostle to lease or purchase vast swathes of agricultural land abroad.

There are multiple drivers for such deals: including the perennial hope that land values will rise over time, as well as the inability of some Asian and Middle Eastern countries to grow enough food to feed their burgeoning populations.

Lately, the size and number of these land-deals are attracting concern in some quarters.

Earlier this month, I participated in a symposium on land investments at the Graduate Institute for International Studies in Geneva.

Among the speakers were the authors of a new report of the Food & Agriculture Organization (FAO) and the UK-based International Institute for Environment & Development (IIED).

To their credit, the authors did not limit themselves to hand-wringing over the wisdom and equity of large-scale land deals. Rather, they expended considerable energy in looking into the specific terms of deals entered into by a cross-section of African countries.

While they laid their hands on a handful of contracts governing these deals, many more are cloaked in confidentiality. Indeed, the lack of transparency around many of these arrangements could sow the seeds of their failure.

Already, we’ve seen governments toppled because of public alarm over un-transparent and lop-sided land concessions granted by the (now former) President of Madagascar to the Korean company Daewoo.

A recent feature in The Economist magazine bluntly warns that too many deals are “shrouded in secrecy”.

This lack of transparency often means that such deals have thin political support within the host countries.

In their new report, the FAO and the IIED, along with the International Fund for Agricultural Development (IFAD), warn that ostensibly long-term deals could have short lives, unless there is some level of “local satisfaction” with such arrangements.

The authors call for deals which consult and compensate affected communities, including the current users of lands which are earmarked for offer to foreign bidders. The report’s authors also commend business models which employ and engage locals, rather than erecting walled-off gardens within communities.

(In reading such adjurations, one is reminded of the fated-to-fail water privatization scheme in Cochabamba, Bolivia, where a foreign investor was handed not only a local water concession, but also the rights to various other water sources that had long been used by members of the local community. As many will recall, the scheme failed spectacularly – with locals taking to the streets and sending company executives packing – and after several years of arbitration, all sides seemed to come away as losers).

It’s hard to find fault with those who seek to make large-scale land deals more palatable and sustainable over the long time-spans envisioned by the architects of such transactions.

Nevertheless, even where the best efforts are made, one can anticipate that investor-state arbitration will loom large over some of these cross-border deals in the years to come.

In many cases, bilateral investment treaties will provide a default dispute settlement mechanism for such land investments (apart from whatever remedies may be provided in the underlying contracts).

At the Geneva symposium, a representative of the IISD, (not to be confused with the aforementioned IIED) highlighted several potential investment treaty implications, including the fact that host-country export controls on food products in times of food scarcity could clash with investment treaty protections owed to export-oriented foreign investors.

Indeed, one key driver of these land-deals is a desire on the part of foreign investors to be more than passive purchasers of commodities on world markets. Investors hope to own or control agricultural production in other locales so that they can ensure food security at home.

When food producing countries slap export controls on food exports in future, it may fall to arbitrators to determine whether such measures can be squared with BIT obligations owed to foreign investors in the local agricultural sector.

Another way in which investor-state arbitration may impact upon such deals is the potential for governments to change their minds about certain sales or leasing agreements at some later date – and move to cancel, or re-write, these deals.

Any number of considerations could lead to states to reconsider these arrangements: unhappiness with the equity of these deals; poor performance of investors; negative environmental consequences; or simply local demands for land reform.

We’ve already seen several BIT arbitrations arise out of disputes over the nationalization of foreign-owned land tracts, particularly in parts of South America and Africa.

When some of today’s large-scale land deals end up in arbitration, arbitrators will doubtless be asked to consider the legitimate expectations of investors. Interesting questions will arise as to what expectations can be deemed legitimate if certain land deals that run for 50 or a 100 years were struck without adequate consultation or transparency at the outset. Questions of corruption, which have also dogged certain of these deals, might also arise if, and when, disputes materialize.

Given the haste and lack of forethought going into some of these deals, it seems all too likely that they will give rise to a great deal of arbitration in the years or even decades to come.

Luke Eric Peterson
InvestmentArbitrationReporter.com

There can be no doubt that the principal objection to arbitration rests, not upon the unwillingness of nations to submit their controversies to impartial arbitration, but upon an apprehension that the arbitrations to which they submit may not be impartial. It has been a very general practice for arbitrators to act, not as judges deciding questions of fact and law upon the record before them under a sense of judicial responsibility, but as negotiators effecting settlements of the questions brought before them in accordance with the traditions … of diplomatic agents. The two methods are radically different, proceed upon different standards of honorable obligation, and frequently lead to widely differing results.

The arbitrator as diplomat. What an interesting concept, and one that appears utterly lost in history. One of the best examples of the “arbitrator as diplomat” is in the so-called Casablanca Case. In 1908, the PCA was presented with a claim by Germany that French soldiers had used excessive force against German nationals who deserted the French Foreign Legion in Morocco. The German Dr. M. Kriege and the Frenchman Louis Renault, both prominent international lawyers in their day, drafted the terms of arbitration on behalf of their respective governments. They then promptly turned around and became members of the tribunal. Five days after the hearing, the five-member panel of arbitrators decided the case by rendering a most perfunctory opinion that was palatable to both France and Germany but devoid of legal reasoning. The arbitrators ruled that “the circumstances did not warrant, on the part of the French soldiers, either the threat made with a revolver or the prolongation of the shots fired at the Moroccan soldiers of the consulate.”

An editorial published in the American Journal of International Law remarked that the decision was inoffensive, obscure, inadequate and artificial. “We should not close our eyes to the fact that … the decision is a compromise, a triumph of diplomacy transferred from the foreign office to the permanent court of arbitration at The Hague. It is not a judgment such as one would expect from a court of justice.”

The use of arbitration to resolve matters applying the traditions of diplomacy is in complete and utter disuse. But one wonders whether certain disputes that are so politically sensitive might profit from recourse to diplomatic arbitration. Using today’s standards, almost certainly it would require the parties to request an unreasoned award using principles of ex aequo et bono. Presumably it also would be useful only in those circumstances when the parties needed political cover by transferring the dispute to third party decisionmakers. I have difficulty imagining a scenario where this would be appropriate. But I am sure there are instances when we could profit from its use.

Roger Alford

By any measure, the arbitration is a watershed in that it represents one of the most transparent examples of international arbitration in history. All of the pleadings, the entire transcript, and the complete oral hearings are all available on the PCA website. And of course the final award likewise will be published.

The key language authorizing such transparency is found in Article 8.6 of the Arbitration Agreement:

“The oral pleading(s) of the Tribunal shall be open to the media. A portion of a hearing may only be closed at the discretion of the Tribunal for security reasons. The Parties authorize the PCA to issue periodic press releases regarding the progress of the arbitration proceedings and to make publicly available on its website the final award, as well as Party submissions.”

Having watched a fair bit of the oral hearing, I think there is little doubt that international arbitrations involving matters of public interest benefit greatly from this approach. The veil of secrecy is removed and the world is invited to observe and even marvel at the peaceful settlement of disputes in action. The reputation and credibility of international arbitration (and individual arbitrators and counsel) is greatly enhanced by such transparency. Even Sudan, a country of profound disrepute, benefits from this sort of exposure.

This approach of remarkable transparency is, of course, in sharp contrast to other types of international adjudication, most notably the WTO, which excels in its irrational limitations on the public’s access to information. Unlike the Abyei Arbitration, virtually nothing is available to the general public under the WTO regime. Neither the pleadings, nor the supporting documents, nor the written transcript of the oral hearings are made available by the WTO. Even the scheduled date of an oral hearing is considered confidential. Only the interminable final reports are public, and they are so tedious that their import is often lost.

Of course, this is not to suggest that transparency is desirable in every instance, particularly in the context of private commercial arbitration. A recent story in the Economist summarized the matter nicely: “Commercial law operates in a climate of secrecy, especially when two or more private bodies are involved. International law (on human rights, say, or border disputes) tends to work more openly. So what happens when the two worlds meet? In practice privacy generally prevails.”

It shouldn’t. The presumption should be exactly the opposite. At a minimum the following presumption should prevail: if the arbitration involves a state party, then the proceedings should be open to the public. As is common with public records, there should be exceptions to this general rule. The FOIA exemptions in the United States include, among other things, some useful limitations on public disclosure: (1) classified national security information; (2) trade secrets and other confidential business information; (3) privileged government documents; and (4) information involving matters affecting personal privacy. In most cases such concerns can be addressed by submitting every brief in two versions: a private version and a public redacted version. That is the common practice in domestic international trade litigation. And of course public oral hearings can be regulated with specific portions of the hearing closed to the public to protect such interests.

The proliferation of investment arbitration and public international arbitration will continue to put severe pressure on the parties and arbitrators to promote transparency. Kudos to those involved in the Abyei Arbitration for setting the standard.

Roger Alford