ETI Euro Telecom International NV v Republic of Bolivia and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lawrence Collins,Lord Justice Stanley Burnton,Lord Justice Tuckey |
| Judgment Date | 28 July 2008 |
| Neutral Citation | [2008] EWCA Civ 880 |
| Docket Number | Case No:A3/2008/1628 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 July 2008 |
Lord Justice Tuckey
Lord Justice Lawrence Collins and
Lord Justice Stanley Burnton
Case No:A3/2008/1628
Nos 468 of 2008 and 469 of 2008
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
MR JUSTICE ANDREW SMITH
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Gabriel Moss QC and Mr Marcus Haywood (instructed by Orrick, Herrington & Sutcliffe) for the Appellant/Claimant
Mr Joe Smouha QC and Mr Paul McGrath (instructed by Stephenson Harwood) for the First Respondent /First Defendant
Mr Jeffrey Gruder QC (instructed by Reed Smith) for the Second Respondent/Second Defendant
Hearing date : July 22, 2008
I Introduction
This is an urgent appeal brought by permission of this court from a decision of Andrew Smith J given on July 11, 2008, in which he set aside freezing orders granted in favour of ETI Euro Telecom International NV (“ETI”), the appellant, against the epublic of Bolivia (“Bolivia”) and Empresa Nacional de Telecomunicaciones Entel SA (“Entel”), the respondents. It concerns an attempt by ETI to use national courts to secure its position in an international arbitration arising out of the nationalisation of its interests in Bolivia.
The World Bank Convention and the Bilateral Investment Treaty
The Convention on the Settlement of Investment Disputes of 18 March 1965 was concluded under the auspices of the World Bank, and entered into force in 1966. It created the International Center for Settlement of Investment Disputes (“ICSID”). ICSID is based in Washington DC, but arbitrations conducted under its auspices are not subject to any national law. The number of ICSID arbitrations has greatly expanded in recent years as a result of the widespread use of bilateral investment treaties (“BITs”) under which Contracting States agree in advance that their nationals will have a right of recourse to ICSID.
One such agreement, the Agreement on Encouragement and Reciprocal Protection of Investments between Netherlands and Bolivia, was signed on 10 March 1992 and entered into force on 1 November 1994.
The Netherlands-Bolivia BIT provides: (1) each country shall “ensure fair and equitable treatment to the investments of nationals of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment or disposal thereof by those nationals” (Article 3(1)); (2) each country shall “accord to such investments full security and protection which in any case shall not be less than that accorded either to investments of its own nationals or to investments of nationals of any third State, whichever is more favorable to the investor.” (Article 3(2)); and (3) neither country “shall take any measures depriving, directly or indirectly, nationals of the other Contracting Party of their investments unless … the measures are accompanied by provision for the payment of just compensation.” (Article 6).
The BIT also includes a dispute resolution mechanism which provides for arbitration to resolve any disputes which may arise from investments between either Bolivia or the Netherlands, on the one hand, and an investor from the other state. The BIT provides that if both Contracting Parties have acceded to the ICSID Convention “any disputes that may arise from investment between one of the Contracting Parties and a national of the other Contracting Party shall, in accordance with the provisions of that Convention, be submitted for conciliation or arbitration to the International Center for Settlement of Investment Disputes” (Article 9(6)).
In Republic of Ecuador v Occidental Exploration and Production Company [2005] EWCA Civ 1116, [2006] QB 432 at [32], this court said of a different BIT: “…The Treaty involves, on any view, a deliberate attempt to ensure for private investors the benefits and protection of consensual arbitration; and this is an aim to which national courts should, in an internationalist spirit and because it has been agreed between States at an international level, aspire to give effect …”
ICSID Convention and Arbitration Rules
Because of their significance in these proceedings I set out here, without any elaboration, those provisions of the ICSID Convention and the ICSID Arbitration Rules, which are relevant on this appeal.
By Article 26 of the Convention:
“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.”
Article 47 deals with the power of an ICSID arbitral tribunal to recommend provisional measures:
“Except as the parties otherwise agree, the tribunal may, if it considers the circumstances so require, recommend any provisional measures which should be taken to preserve the respective rights of either party.”
Rule 39 of the ICSID Arbitration Rules (of which what is now Article 39(6) is the most significant on this appeal) provides:
“(1) At any time after the institution of the proceeding, a party may request that provisional measures for the preservation of its rights be recommended by the Tribunal. The request shall specify the rights to be preserved, the measures the recommendation of which is requested, and the circumstances that require such measures.
(2) The Tribunal shall give priority to the consideration of a request made pursuant to paragraph (1).
(3) The Tribunal may also recommend provisional measures on its own initiative or recommend measures other than those specified in a request. It may at any time modify or revoke its recommendations.
…
(5) If a party makes a request pursuant to paragraph (1) before the constitution of the Tribunal, the Secretary-General shall, on the application of either party, fix time limits for the parties to present observations on the request, so that the request and observations may be considered by the Tribunal promptly upon its constitution.
(6) Nothing in this Rule shall prevent the parties, provided that they have so stipulated in the agreement recording their consent, from requesting any judicial or other authority to order provisional measures, prior to or after the institution of the proceeding, for the preservation of their respective rights and interests.”
The ICSID Convention and United Kingdom law
The Arbitration (International Investment Disputes) Act 1966 was designed to implement the ICSID Convention. The ICSID Convention was scheduled to the 1966 Act (section 1(1)), but was not made part of United Kingdom law.
The 1966 Act is mainly concerned with enforcement of ICSID awards (sections 1 and 2), but also provides in section 3(1) in its original form that any of the provisions contained in section 12 of the Arbitration Act 1950 (attendance of witnesses, production of documents, etc.) and the Foreign Tribunals Evidence Act 1856 (which relates to the taking of evidence in the United Kingdom for the purposes of proceedings before a foreign tribunal) may be applied by statutory instrument to ICSID arbitration. Subject to that, it was provided in section 3(2) that the Arbitration Act 1950 would not apply to ICSID arbitration, except that section 4(1) of the Arbitration Act 1950 (stay of court proceedings where there was submission to arbitration) would apply.
The Arbitration Act 1996, section 107(1) and schedule 3, replaced section 3 of the 1966 Act with the following:
“3(1) The Lord Chancellor may by order direct that any of the provisions contained in sections 36 and 38 to 44 of the Arbitration Act 1966 (provisions concerning the conduct of arbitral proceedings, & c.) shall apply to such proceedings pursuant to the Convention as are specified in the order with or without any modifications or exceptions specified in the order.
(2) Subject to subsection (1), the Arbitration Act 1996 shall not apply to proceedings pursuant to the Convention, but this subsection shall not be taken as affecting section 9 of that Act (stay of legal proceedings in respect of matter subject to arbitration).
(3) An order made under this section –
(a) may be varied or revoked by a subsequent order so made, and
(b) shall be contained in a statutory instrument.”
No order was made under the 1966 Act, section 3(1), prior to its amendment and no order has been made under section 3(1) of the 1966 Act as amended. Consequently the only provisions of the Arbitration Act 1996 which apply are (as with the Arbitration Act 1950) those relating to stays of English proceedings brought in breach of an agreement to submit to ICSID arbitration.
II ETI's 1995 investment in Entel, and Bolivian 2007 decrees
In 1995, ETI, a Netherlands company, entered into a series of agreements with the Bolivian Government and Entel, a Bolivian telecommunications company, pursuant to which Entel was privatised. ETI obtained ownership of 50% of Entel's shares, and also was granted management control of Entel.
The privatisation of Entel was structured by the Bolivian Government as a payment by ETI to Entel of US$610 million to subscribe for 50% of Entel's shares and management control. The remaining shares were held by two Bolivian pension funds (about 47.5% of the share...
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