Occidental Exploration & Production Company v The Republic of Ecuador
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mance |
| Judgment Date | 09 September 2005 |
| Neutral Citation | [2005] EWCA Civ 1116 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2005/1121 |
| Date | 09 September 2005 |
[2005] EWCA Civ 1116
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr Justice Aikens
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Phillips of Worth Matravers, Mr
Lord Justice Clarke and
Lord Justice Mance
Case No: A3/2005/1121
Mr Christopher Greenwood QC and Mr Toby Landau (instructed by Messrs Debevoise & Plimption Llp) for the Appellant
Mr David Lloyd Jones QC and Mr Simon Birt (instructed by Messrs Weil Gotshal & Manges Llp) for the Respondent
Outline
This is the judgment of the Court. The appeal, from a judgment and order of Aikens J dated 29th April 2005, concerns the extent to which the English Courts may under s.67 of the Arbitration Act 1996 consider a challenge to the jurisdiction of an award made by arbitrators appointed under provisions to be found in a Bilateral Investment Treaty. The Treaty was signed on 27th August 1993 between the United States of America ("USA") and the Republic of Ecuador ("Ecuador"). It contained provisions "concerning the encouragement and reciprocal protection of investment" in each country by the nationals and companies of the other. These included a provision (Article VI) whereby, in the event of an "investment dispute", such nationals and companies could enjoy direct dispute resolution rights against the other country. One of the options provided was arbitration subject to the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL"), as here occurred. The arbitration was between Occidental Exploration and Production Company ("Occidental"), a Californian corporation, and Ecuador. There was a distinguished panel of arbitrators consisting of the Honourable Charles N. Brower, Dr Patrick Barrera Sweeney and, as chairman, Professor Francisco Orrego Vicuña. Their final award was dated 1 st July 2004.
Regarding the place of any arbitration, the Treaty says only that it "shall be held in a state that is a party to the New York Convention". There are over 130 such states. But Article 16(1) of UNCITRAL, to which the Treaty refers, provides that
"Unless the parties have agreed upon the place where the arbitration is to be held, such place shall be determined by the arbitral tribunal, having regard to the circumstances of the arbitration".
Occidental and Ecuador were unable to agree upon a place, and the arbitrators by decision dated 1 August 2003 determined that it should be London. The factor "tipping the balance" in favour of London (over Washington D.C.) was its "perception …. as being neutral". Hearings were actually held in Washington, but the award dated 1 st July 2004 records the place of arbitration as London.
By their award the arbitrators determined the dispute in favour of Occidental, save on one point relating to whether there had been expropriation, which was not in the event relevant to the result. Ecuador by claim form dated 11 August 2004 seeks to have the award set aside under both ss.67 and 68 of the 1996 Act. Also on 11 August 2004, Occidental issued a claim form seeking, in the event of a challenge to the award by Ecuador and if necessary, to re-visit the point on expropriation. But by application notice dated 24 November 2004 Occidental raised a prior objection, that Ecuador's challenge requires the English court to interpret provisions of the Bilateral Investment Treaty between the USA and Ecuador, in contravention of a rule of English law making such an issue "non-justiciable". Colman J directed the trial of a preliminary issue relating to that objection. Before Aikens J the objection was abandoned as regards the points raised under s.68. By his judgment and order under appeal, Aikens J also decided it against Occidental as regards the points raised under s.67. Aikens J was not, and we are not, concerned with the merits of Ecuador's challenge under either of ss.67 and 68.
Occidental's investment
The investment to which Occidental's claim related arose under a contract dated 21 April 1999 with Petroecuador (a state-owned corporation of Ecuador). Occidental thereby obtained the exclusive right to carry out hydrocarbon exploration and exploitation in Block 15 of the Ecuadorian Amazon basin region. Occidental assumed virtually all the costs, and received in return a percentage of the oil produced and the right to export it. The percentage was determined under an elaborate formula in clause 8.1 of the contract known as "Factor X".
The costs incurred by Occidental involved it in paying VAT. As an exporter, it sought reimbursement of this VAT from the Ecuadorian tax authority, the Servicio de Rentas Internas ("SRI"). At first, in respect of periods from July 1999 to September 2000, this was afforded by SRI, but thereafter and in respect of subsequent periods it was refused. SRI initially justified its refusal on the ground that Factor X had been calculated on a basis covering Occidental's potential VAT liabilities. Latterly (although Ecuador suggests that the arbitrators failed to appreciate this) the justification advanced by SRI and Ecuador changed and was and is that VAT refunds are only available to exporters of "manufactured" products, within which description it is contended that the crude oil exported did not fall.
The Bilateral Investment Treaty
The judge summarised the scheme of the Treaty:
"14. ….. (1) The Preamble sets out the aim of the Treaty, which is to promote greater economic cooperation and investment between the Parties, but on a defined and agreed basis.
(2) Article I sets out various definitions. "Investment" is defined broadly.
(3) Article II sets out the basis on which each Party will permit and treat investment ….. It also provides that the Parties will ensure that investment will have fair and equitable treatment according to international law standards.
(4) Article III deals with expropriation or nationalisation of investments.
(5) Article IV deals with transfers, particularly of funds.
(6) By Article V the Parties agree to consult promptly to resolve any disputes in connection with the Treaty.
(7) Article VI deals with the resolution of "investment disputes" between a State Party and a national or company of the other State Party. Its terms are central to this application ……
(8) Article VII concerns the resolution of disputes between the two Parties to the treaty, ie. USA and Ecuador. If necessary, disputes are to be submitted to an arbitral tribunal, for binding decision "in accordance with the applicable rules of international law". "
(9) Article X deals with the tax policies of each Party and provides that each Party should strive to accord fairness and equity in the treatment of investments of nationals and companies of the other Party. It states that the provisions of the Treaty, in particular Articles VI and VII will nevertheless apply to matters of taxation only to a certain extent, as set out in the Article. This Article gave rise to argument about its scope in the arbitration between Occidental and Ecuador."
More specifically, Articles II, V, VI, VII and X of the Treaty provide:
"II.3(a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.
(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investments. For purposes of dispute resolution under Articles VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.
…..
V. The Parties agree to consult promptly, on the request of either, to resolve any disputes in connection with the Treaty or to discuss any matter relating to the interpretation or application of the Treaty.
VI.1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party's foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.
2. In the event of an investment dispute, the parties to the dispute should initially seek a resolution through consultation and negotiation. If the dispute cannot be settled amicably, the national or company concerned may choose to submit the dispute, under one of the following alternatives, for resolution:
(a) to the courts or administrative tribunals of the Party that is party to the dispute; or
(b) in accordance with any applicable, previously agreed dispute-settlement procedures; or
(c) in accordance with the terms of paragraph 3.
3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:
(i) to the International Centre for the Settlement of Investment Disputes ("Centre") established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington March 18, 1965 ("ICSID Convention"), provided that the Party...
To continue reading
Request your trial
-
R (on the application of Bancoult) v Secretary of State for Foreign and Commonwealth Affairs
...does Republic of Ecuador v. Occidental Exploration and Production CompanyUNK[2005] EWHC 774 (Comm) (affirmed by the Court of Appeal in [2005] EWCA Civ 1116, [2006] QB 432), by reference to which Mr Pleming sought to counter the CND case. 154. We do not consider it necessary to engage in ful......
-
ETI Euro Telecom International NV v Republic of Bolivia and Another
...for Settlement of Investment Disputes” (Article 9(6)). 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 i......
-
R (Miller and Another) v Secretary of State for Exiting the European Union; Re McCord's application
...Board [1972] AC 342; [1972] 2 WLR 71; [1972] 1 All ER 105, HL(E)Ecuador (Republic of) v Occidental Exploration and Production Co [2005] EWCA Civ 1116; [2006] QB 432; [2006] 2 WLR 70; [2006] 2 All ER 225, CAFeirste v Department of Education Northern Ireland [2011] NIQB 98Fitzgerald v Muldoon......
-
The High Commissioner for Pakistan in the United Kingdom v Prince Mukarram Jah, His Exalted Highness the 8th Nizam of Hyderabad
...from an arbitration agreement contained in an unincorporated treaty: Republic of Ecuador v. Occidental Exploration and Production Co, [2005] EWCA Civ 1116 at [47]; and the force of this is greater in the present context, where the relevant relationship has been structured according to the ......
-
Reconceptualising ‘Justiciability’: Crafting a Coherent Framework for Australia’s Unique Constitutional Context
...1) 272 (Kitto J) and Thomas (n 2) 418–19 [321]–[322](Kirby J) and 474–8 [501]–[512] Hayne J.215. Buttes Gas (n 24) 931.216. Ibid.217. [2005] EWCA Civ 1116, [37]–[47].218. T R S Allan, ‘Human Rights and Judicial Review: A Critique of “Due Deference”’ (2006) 65(3) Cambridge LawJournal 671, 67......
-
Reconceptualising ‘Justiciability’: Crafting a Coherent Framework for Australia’s Unique Constitutional Context
...1) 272 (Kitto J) and Thomas (n 2) 418–19 [321]–[322](Kirby J) and 474–8 [501]–[512] Hayne J.215. Buttes Gas (n 24) 931.216. Ibid.217. [2005] EWCA Civ 1116, [37]–[47].218. T R S Allan, ‘Human Rights and Judicial Review: A Critique of “Due Deference”’ (2006) 65(3) Cambridge LawJournal 671, 67......
-
Foreign states in Australian courts.
...Abbasi [2002] EWCA Civ 1598 (Unreported, Lord Phillips MR, Waller and Carnwath LJJ, 6 November 2002) [53] (Lord Phillips MR). (136) [2005] EWCA Civ 1116 (Unreported, Lord Phillips MR, Clarke and Mance LJJ, 9 September (137) Ibid [31] (Mance LJ). (138) Ibid [32]. (139) Ibid. (140) Ibid [42].......
-
Weighing Global Regulatory Rules and Decisions in National Courts
...followed practice accompanied byopinion juris as standard accounts of customary international law require.39Occidental v Ecuador [2005] EWCA Civ 1116.The substantive case concerned Ecuador ’sdenial of a value added tax exemption for oil exported by Occidental.40The Corfu Channel Case (Unite......