ICSID Provisional Measures to Enjoin Parallel Domestic Litigation (R.gil)

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ICSID PROVISIONAL MEASURES TO ENJOIN PARALLEL DOMESTIC LITIGATION Rodrigo Gil I. INTRODUCTION International Centre for Settlement of Investment Disputes (“ICSID”) cases where provisional measures are requested to enjoin parallel domestic litigation differ substantially from other ICSID provisional measures cases. In order to account for these differences, the traditional three-prong test of urgency, necessity and irreparable harm must be redefined. There are two main features in provisional measures cases involving parallel domestic proceedings that distinguish them from other provisional measures requests. First, in cases involving parallel domestic litigation, there is a struggle between the supremacy of international tribunals and the autonomy of domestic courts. Provisional measures to enjoin domestic litigation challenge states’ sovereignty to exercise their powers to conduct national proceedings within their own territory. This overlap between international and national jurisdiction has forced ICSID tribunals to consider additional circumstances, beyond the natural scope of provisional relief, when they review an interim measures request. ICSID tribunals have acknowledged their duty to balance the rights of foreign investors to submit disputes before ICSID with the power of sovereign states to exercise their own domestic jurisdiction. Provisional measures provide a procedural tool to set boundaries between the jurisdictions of ICSID tribunals and domestic courts. Second, a review of the ICSID cases involving parallel domestic litigation shows that the main rights invoked in support of the provisional measures requested are not Claimants’ rights in dispute, they are instead: the right to exclusivity of ICSID proceedings and the right to non-aggravation of the ICSID dispute, both self-standing procedural rights. The first is expressly set forth in Article 26 of the Washington Convention (also known as

&536 WORLD ARBITRATION & MEDIATION REVIEW [VOL. 3:4-5

the ICSID Convention).1 The second was first established by the Permanent Court of International Justice (PCIJ) in Electricity Company of Sofia v. Bulgaria, which held that “the parties to a case must abstain from any measure capable of exercising a prejudicial effect in regard to the execution of the decision to be given and, in general, not allow any step of any kind to be taken which might aggravate or extend the dispute”.2 The rights to the exclusivity of ICSID jurisdiction and the non-aggravation of the dispute are separate procedural rights that are not part of the underlying controversy. This is a fundamental difference from the typical provisional measure case in international commercial arbitration in which provisional measures are aimed at safeguarding Claimants’ rights in dispute. This difference in the nature of the rights invoked – those at issue in the litigation as opposed to separate procedural rights – has not yet been clearly delineated by ICSID tribunals. In fact, in a typical provisional measures case, the pre-conditions to the grant of provisional relief are derived from the fact that the very existence of the rights protected by provisional relief depends on the final outcome of the arbitration. Because the actual existence of the disputed right is uncertain, the moving 1 Article 26 of the Washington Convention provides: 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. Avaialable at http://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/partA-chap02.htm. Article 38(1) of the Statute of the International Court of Justice provides: The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply: … c. the general principles of law recognized by civilized nations. Available at http://www.icj-cij.org/documents/index.php?p1=4&p2=2&p3= 0#CHAPTER_II. 2 Electricity Company of Sofia and Bulgaria (Belg. v. Bulg.), PCIJ series A/B No. 79, Judgment at 199 (Dec. 5, 1939).

2009] ICSID PROVISIONAL MEASURES 537 party must show a strong case on the merits in order to get provisional relief. Accordingly, the traditional requirements of urgency, necessity and irreparable harm constitute a strict test intended to reduce the risk of causing unfair damage to the non-moving party if the claim is later dismissed. Notwithstanding, the rights protected by provisional measures in cases of parallel domestic litigation are procedural, not substantive. The rights to the exclusivity of ICSID jurisdiction and the non-aggravation of the dispute are not at issue in the investment dispute. They are self-standing rights that came attached to the ICSID proceeding and therefore the traditional three-prong test of urgency, necessity and irreparable harm must be tailored to effectively safeguard such kinds of rights. The understanding of (a) the struggle between ICSID and domestic jurisdiction and (b) the self-standing nature of the rights to which relief is sought in cases of parallel domestic litigation is crucial to model an appropriate test to address these kinds of cases. Section II of this article contains a brief explanation of the importance of provisional measures dealing with parallel domestic litigation in the context of ICSID case law. Section III includes a thorough review of ICSID arbitration cases where parties have submitted requests for provisional measures relating to parallel domestic litigation. The cases analyzed in this section are divided into two groups. The first group of cases interprets ICSID case law evolution as an attempt to reach a balance in the conflict between ICSID and domestic tribunals over jurisdictional powers. The second group of cases concerns ICSID tribunals’ application of the traditional urgency, necessity and irreparable harm test in cases of parallel domestic litigation. Section IV describes the conclusions derived from the review of ICSID case law. The traditional three-prong test of urgency, necessity and irreparable harm is refined in order to take into consideration the struggle between the supremacy of international tribunals and the autonomy of domestic courts and to account for the special self-standing nature of the rights involved in cases of parallel domestic litigation


II. PARALLEL DOMESTIC LITIGATION IN THE CONTEXT OF ICSID PROVISIONAL MEASURES3 The regulation of provisional measures in ICSID arbitration is found in Article 47 of the Washington Convention, which provides: 3 A general review of the regulation and case law on provisional measures requested in ICSID arbitration can be found in Aurélia Antonietti, ICSID and Provisional Measures: An Overview, 21 NEWS FROM ICSID, N.º2, 10 (2004); DOAK BISHOP, JAMES CRAWFORD and MICHAEL W.REISMAN, FOREIGN INVESTMENT DISPUTES: CASES, MATERIALS AND COMMENTARY (2005); Charles N. Brower & Ronald E.M. Goodman, Provisional Measures and the Protection of ICSID Jurisdictional Exclusivity against Municipal Proceeding, 6 ICSID REVIEW-FILJ 441 (1991); David D. Caron, Interim Measures of Protection: Theory and Practice in Light of the Iran-United States Claims Tribunal, 46 ZEITSCHRIFT FÜR AUSLÄNDISCHES ÖFFENLICHES RECHT UND VÖLKERRECHT 465-518 (1986); Lawrence Collins, Provisional and Protective Measures in International Litigation, 234 RECUEIL DES COURS 98, 98 (1992–III); LAWRENCE COLLINS, ESSAYS IN INTERNATIONAL LITIGATION AND THE CONFLICTS OF LAW (1994); Georges R .Delaume, ICSID Arbitration and the Courts, 77 AJIL 785 (1983); Georges R. Delaume, ICSID Arbitration Proceedings: Practical Aspects, 5 PACE L. REV. 563 (1985); Georges R. Delaume, ICSID Tribunals and Provisional Measures—A Review of the Cases, 1 ICSID REVIEW-FILJ 392 (1986); Georges R. Delaume, Judicial Decisions Related to Sovereign Immunity and Transnational Arbitration, 2 ICSID REVIEW-FILJ 403 (1987); MASIÁ E. FERNÁNDEZ., ARBITRAJE EN INVERSIONES EXTRANJERAS: EL PROCEDIMIENTO ARBITRAL EN EL CIADI 226-229 (2004); Steven P. Finizio Ethan G. Shenkman and Julian Davis Mortenson, Recent Developments in Investor-State Arbitration: Effective Use of Provisional Measures, in GLOBAL ARBITRATION REVIEW SPECIAL REPORT - EUROPEAN ARBITRATION REVIEW 2007 at 15.; Yves Fortier, Interim Measures: An Arbitrator’s Provisional View (lecture delivered at the Fordham Law School Conference on International Arbitration and Mediation, New York (6 June 2008)); Paul D. Friedland, Provisional Measures in ICSID Arbitration, 2 ARB. INT’L 335 (1986) (hereinafter “Frieldland, Provisional Measures in ICSID Arbitration”); Paul D. Friedland, ICSID and Court-Ordered Provisional Measures: An Update, 4 ARB. INT’L 161 (1988) (hereinafter, “Friedland, An Update”); Rodrigo Gil, Medidas Provisionales en Arbitrajes CIADI, De CSOB a Occidental Petroleum, in ESTUDIOS SOBRE GARANTIAS REALES Y PERSONALES 905-947, (Editorial Juridica de Chile, Santiago (2009); Pierre Lalive, The First World Bank Arbitration (Holiday Inns v. Morocco)—Some Legal Problems, 1 ICSID REPORTS 645; JULIAN D.M. LEW, CONTEMPORARY PROBLEMS IN INTERNATIONAL ARBITRATION, (Centre for Commercial Law Studies, Queen Mary College University of London (1987)); LORETTA MALINTOPPI, PROVISIONAL MEASURES IN RECENT PROCEEDINGS: WHAT PARTIES REQUEST AND WHAT TRIBUNALS ORDER IN INTERNATIONAL INVESTMENT LAW FOR THE 21ST CENTURY: ESSAYS IN HONOUR OF CHRISTOPH SCHREUER (2009); Bertrand P. Marchais, ICSID Tribunals and Provisional Measures: Introductory Note to Decisions of the Tribunals of Antwerp and Geneva in MINE v. Guinea, 1 REV.-FILJ 372 (1986); A. Masood, Provisional Measures of protection in Arbitration under the World Bank Convention, 1 DELHI L. REV. 138 (1972);

2009] ICSID PROVISIONAL MEASURES 539 Except as the parties otherwise agree, the Tribunal may, if it considers that the circumstances so require, recommend any provisional measures which should be taken to preserve the respective rights of either•party.4 Francisco Orrego Vicuna, The Binding Nature of Procedural Orders in International Arbitration; 10 ICC INT´L CT. ARB. Bull. (Spring 1999); R. Antonio Parra, The Powers of the Arbitrator and the Experience of the Arbitral Institutions: The Practices and Experience of ICSID, in CONSERVATORY AND PROVISIONAL MEASURES IN INTERNATIONAL ARBITRATION, ICC Publication n.º 519 at 37 (1993); R. Antonio Parra, The Practices and Experiences of ICSID in Conservatory and Provisional Measures in International Arbitration, 37 ICC No. 519 (1993); REDFERN & HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION (4th ed., 2004); LUCY REED, JAN PAULSSON & NIGEL BLACKABY, GUIDE TO ICSID ARBITRATION (2004); SONIA RODRÍGUEZ JIMÉNEZ, EL SISTEMA ARBITRAL CIADI 163, 163. (2006); Christoph H. Schreuer, Commentary on the ICSID Convention: Articles 45, 46, 47, 48 and 49, 13 ICSID REV.-FILJ 150 (1998) (hereinafter “Schreuer, Commentary on the ICSID Convention”); CHRISTOPH H. SCHREUER, THE ICSID CONVENTION: A COMMENTARY, Cambridge (2009) (hereinafter “SCHREUER, THE ICSID CONVENTION”); CHILLIDA VIVES, EL CENTRO INTERNACIONAL DE ARREGLO DE DIFERENCIAS RELATIVAS A INVERSIONES (CIADI) 144 (1998); ROBERT VOLTERRA, PROVISIONAL MEASURES (INTERIM MEASURES) AND INVESTMENT TREATY ARBITRATION UNDER ICSID AND UNCITRAL: DEVELOPMENTS AND TRENDS IN INVESTMENT TREATY LAW, Current Issues III (Andrea K. Bjorklund, et al., ed. 2009). 4 Article 47 is further complemented by Rule 39 of the ICSID Arbitration Rules, which 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. (4) The Tribunal shall only recommend provisional measures, or modify or revoke its recommendations, after giving each party an opportunity of presenting its observations. (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


These measures have been requested in a variety of situations, from the usual cases of evidence preservation and addressing parallel domestic proceedings to a case involving efforts to stop adverse propaganda against a foreign investor and another regarding removal of vegetation. ICSID has issued 37 decisions on provisional measures in 30 different cases, dating from 1972 to February 2009. Of these, 19 decisions were issued to decide a request to enjoin a parallel domestic proceeding. The following chart lists these ICSID cases where provisional measure decisions were rendered, by date, outcome and the main issue involved. Those cases involving parallel domestic litigation are presented in bold type and most of them will be addressed in detail in the next section.

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. Available at http://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/partF-chap05.htm.

2009] ICSID PROVISIONAL MEASURES 541

ICSID Provisional Measures Decisions

All Cases are available at

http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=ShowHome&pageName=Cases_Home Provision Measures Case description Decision date Ruling Issues 1. AGIP S.p.A. v. People's Republic of the Unreported Granted Preservation of Evidence Congo, ICSID Case No. ARB/77/1 (Nov. 30, 1979). 2. Amco Asia Corporation and others v. December 9, 1983 Dismissed Confidentiality Republic of Indonesia, ICSID Case No. ARB/81/1 (Nov. 20, 1984). 3. Atlantic Triton Company Limited v. a) December 18, 1984 Dismissed Enforcement of the award People’s Revolutionary Republic of Guinea, b) December 18, 1984 Dismissed Costs ICSID Case No. ARB/84/1 (Apr. 21, 1986). c) December 18, 1984 Dismissed Domestic Proceedings 4. Azurix Corp. v. Argentine Republic, ICSID August 6, 2006 Dismissed Domestic Proceedings Case. No. ARB/01/12 (July 14, 2006). 5. Bayindir Insaat Turizm Ticaret Ve Sanayi a) November 29, 2004 Granted Domestic Proceedings A.S. v. Islamic Republic of Pakistan, ICSID b) November 29, 2004 Dismissed Costs Case No. ARB/03/29 (Aug. 27, 2009). 6. Biwater Gauff (Tanzania) Limited v. United a) March 31, 2006 Granted Preservation of Evidence Republic of Tanzania, ICSID Case No. b) September 29, 2006 Dismissed Confidentiality ARB/05/22 (July 24, 2008). 7. Burlington Resources, Inc. and others v. June 29, 2009 Granted Domestic Proceedings Republic of Ecuador, ICSID Case No. ARB/08/5 (Decision on Jurisdiction June 2, 2010). 8. City Oriente Limited v. Republic of Ecuador November 19, 2007 Granted Domestic Proceedings and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/06/21 (discontinued following settlement Sept. 12, 2008). 9. Compañia del Desarrollo de Santa Elena May 10, 1999 Dismissed Not remove vegetation S.A. v. Republic of Costa Rica, ICSID Case No. ARB/96/1 (Feb. 17, 2000). 10. Československa Obchodní Banka, a.s. March 1, 2000 Granted Domestic Proceedings (CSOB) v. Slovak Republic, ICSID Case No. ARB/97/4 (Dec. 29, 2004). 11. Helnan International Hotels A/S v. Arab May 17, 2006 Dismissed Domestic Proceedings Republic of Egypt, ICSID Case No. ARB/05/19 (July 3, 2008). 12. Holiday Inns S.A. and others v. Morocco, July 2, 1972 Dismissed Domestic Proceedings ICSID Case No. ARB/72/1 (discontinued following settlement Oct. 17, 1978). 13. Inceysa Vallisoletana S.L. v. Republic of July 25, 2005 Dismissed Costs El Salvador, ICSID Case No. ARB/03/26 (Aug. 2, 2006). 14. Libananco Holdings Co. Limited v. Republic June 23, 2008 Dismissed Costs of Turkey, ICSID Case No. ARB/06/8 (parties post-hearing briefs and statements of costs July 1, 2010). 15. Emilio Agustín Maffezini c. Reino de España, October 28, 1999 Dismissed Costs ICSID Case No. ARB/97/7 (Nov. 13, 2000).


16. Maritime International Nominees December 4, 1985 Granted Domestic Proceedings Establishment (MINE) v. Republic of Guinea, ICSID Case No. ARB/84/4 (Jan. 6, 1988). 17. Occidental Petroleum Corporation and August 17, 2007 Dismissed Contract Performance Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/06/11 (hearing on quantum Feb. 4, 2010). 18. Perenco Ecuador Limited v. Republic of May 8, 2009 Granted Domestic Proceedings Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/6 (tribunal reconstituted May 6, 2010). 19. Víctor Pey Casado and President Allende a) September 25, 2001 Dismissed Costs Foundation v. Republic of Chile, ICSID b) September 25, 2001 Dismissed Domestic Proceedings Case No. ARB/98/2 (May 8, 2008). 20. Phoenix Action, Ltd. v. Czech Republic, April 6, 2007 Dismissed Domestic Proceedings ICSID Case No. ARB/06/5 (April 15, 2009). 21. Plama Consortium Limited v. Republic September 6, 2005 Dismissed Domestic Proceedings of Bulgaria, ICSID Case No. ARB/03/24 (Aug. 27, 2008). 22. Quiborax S.A., Non-Metallic Minerals S.A. & February 26, 2010 Granted Domestic Proceedings Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2 (respondent files objections to jurisdiction July 30, 2010). 23. Railroad Development Corporation v. October 15, 2008 Dismissed Preservation of Evidence Republic of Guatemala, ICSID Case No. ARB/07/23 (procedural order June 7, 2010). 24. Repsol YPF Ecuador, S.A. and others v. June 17, 2009 Granted Domestic Proceedings Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No. ARB/08/10 (claimants’ memorial on the merits filed Dec. 17, 2009). 25. Saipem S.p.A. v. People's Republic of March 21, 2007 Granted Warranty Bond Bangladesh, ICSID Case No. ARB/05/7 (June 20, 2009). 26. SGS Société Générale de Surveillance October 16, 2002 Granted Domestic Proceedings S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13 (discontinued following settlement May 23, 2004). 27. Tanzania Electric Supply Company December 20, 1999 Dismissed Contract Performance Limited v. Independent Power Tanzania Limited, ICSID Case No. ARB/98/8 (July 12, 2001). 28. Tokios Tokelés v. Ukraine, ICSID July 1, 2003 Granted Domestic Proceedings Case No. ARB/02/18 (July 26, 2007). 29. Vacuum Salt Products Ltd. v. Republic a) December 3, 1992 Dismissed Preservation of Evidence of Ghana, ICSID Case No. ARB/92/21 b) June 14, 1993 Dismissed Domestic Proceedings (Feb. 16, 1994). 30. World Duty Free Company Limited April 25, 2001 Dismissed Confidentiality v. Republic of Kenya, ICSID Case No. ARB/00/7 (Oct. 4, 2006). 31. Zhinvali Development Ltd. v. Republic January 24, 2002 Granted Domestic Proceedings of Georgia, ICSID Case No. ARB/00/1 (Jan. 24, 2003).

2009] ICSID PROVISIONAL MEASURES 543 In the majority of cases, domestic proceedings are a legitimate exercise of a sovereign’s power to decide a domestic dispute. Parallel domestic litigation is usually initiated for reasonable and legitimate reasons. However, host sovereigns and foreign investors sometimes resort to domestic courts to improve their relative positions in a case pending before ICSID. Parties initiate these proceedings with various goals in mind: to force a negotiation, to obtain additional evidence or to prevent eventual enforcement of a prejudicial award. For instance, in an ICSID arbitration involving a contract dispute, a host sovereign could seek a domestic court ruling that a contract is null and void. A foreign investor could resort to local courts to obtain an attachment in his favor. In a dispute involving direct expropriation, a sovereign may try to obtain a domestic decision declaring that the foreign investment is illegal. A sovereign may also start criminal proceedings against the management or counsel of a foreign company in an attempt to persuade them not to pursue arbitral proceedings against the state. As shown in the following graph, more than 50% of the provisional measures have been requested to enjoin parallel domestic litigation (19 out of 37 provisional measure requests). Graph 1 More than 50% of the Provisional Measures have been requested to stop parallel domestic litigation The largest group of cases involving provisional measures concern parallel proceedings before domestic courts.


In the majority of the ICSID cases involving parallel domestic proceedings, tribunals granted the requested provisional measures: Graph 2 Chances to get provisional relief in cases of parallel domestic litigation

Dismissed 1. Atlantic Triton 2. Azurix 3. Helnan 4. Holiday 5. Pey Casado 6. Phoenix 7. Plama

Granted 1. Bayindir 2. Burlington 3. City Oriente 4. CSOB 5. MINE 6. Perenco 7. Quiborax 8. Repsol 9. SGS 10. Tokios Tokelés 11. Vacuum 12. Zhinvali The available data indicates that not only claimants seek provisional relief; sovereigns have also requested that ICSID tribunals enjoin domestic proceedings filed by foreign investors, though far less frequently. Graph 3 Which party usually requests interim relief?

Sovereigns have requested provisional relief to stop parallel domestic litigation in 2 cases: Atlantic Triton and MINE; both relate to attachments by domestic courts

2009] ICSID PROVISIONAL MEASURES 545 III. EVOLUTION OF THE ICSID TRIBUNAL’S POWERS TO ENJOIN PARALLEL DOMESTIC LITIGATION THROUGH THE USE OF PROVISIONAL MEASURES

Since the inception of the ICSID in 1966, and the grant of authority to ICSID to impose provisional measures to enjoin parallel domestic litigation, ICSID case law on provisional measures has developed in two main areas. First is the interpretation of Article 26 of the Washington Convention in balancing the power of ICSID tribunals to grant provisional relief against the power of domestic courts to decide local disputes. Second is the evolution of the traditional three-prong test of urgency, necessity and irreparable harm, which is typically required for an ICSID tribunal to grant or deny provisional relief in cases of parallel domestic litigation. Accordingly, the two main rights protected by provisional measures in cases of parallel domestic litigation are the right to the exclusivity of ICSID jurisdiction and the right not to aggravate the ICSID dispute. The first right – that of the exclusivity of ICSID tribunals – is set forth in Article 26 of the Washington 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 ….” According to this right, “domestic courts should abstain from any action that might interfere with the conduct of ICSID proceedings. If a claim before such a court calls for adjudication under ICSID, the court before which the claim is brought ought not to entertain it and should refer the parties to ICSID. This rule can be referred to as the rule of ‘judicial abstention.’”5 The second right – that of non-aggravation of the dispute submitted to an international tribunal – has its legal basis in Article 38(1)(c) of the Statute of the International Court of Justice. Article 38(1) provides: “The Court, whose function is to decide in accordance with international law such disputes as are submitted 5 Marchais, supra note 3, at 372. In the same sense, Schreuer indicates that “the exclusive nature of ICSID proceedings is secured by art. 26 of the Washington Convention.” Schreuer, Commentary on the ICSID Convention, supra note 3, at 784.


to it, shall apply: . . . the general principles of law recognized by civilized nations.”6 Applying this principle to relevant ICSID arbitrations, domestic litigation interfering with ICSID proceedings could increase damages or aggravate the dispute in other ways. In the words of Friedland: Article 38(1) of the Statute of the International Court of Justice lists the well-known sources of international law, among which are ‘the general principles of law common to civilized nations.’ One general principle that has been received into international law, and applied by the International Court of Justice, is that conduct by one party tending to aggravate the dispute submitted to the court for resolution may justify provisional measures.7 In cases of parallel domestic litigation, the right to the exclusivity of ICSID proceedings and non-aggravation of the dispute may overlap, but each has its own scope. Generally, if the right invoked in support of the requested provisional measure is the exclusivity of the ICSID jurisdiction, the domestic proceeding should be at a jurisdictional level in order to interfere with the ICSID proceeding. By contrast, if the right invoked is the non-aggravation of the ICSID dispute, the scope of domestic proceeding covered by the provisional relief is bigger including also domestic administrative proceeding capable to aggravate the dispute. In this section, the key cases involving provisional measures to enjoin domestic litigation are explained with their surrounding context and highlighting the distinctions among them. The factual background, the analysis of the parties’ rights and the ICSID tribunals’ reasoning are limited due to the dearth of available public information. The fact description is particularly important to understanding the subjective reasons that may have influenced ICSID tribunals to grant or dismiss the provisional measures requested. 6 See note 1. 7 Frieldland, Provisional Measures in ICSID Arbitration, supra note 3, at 336.

2009] ICSID PROVISIONAL MEASURES 547 The cases are divided into two sub-sections. The first includes the most important cases as ICSID attempted to balance the tension between ICSID and domestic jurisdictional powers. In chronological order, these cases are: Holiday Inns, Atlantic Triton, MINE, Vacuum, CSOB, Pey Casado, Bayindir, Phoenix, SGS, the closely-related Ecuadorian cases of City Oriente, Burlington, Perenco and Repsol, and finally Quiborax. The second group of cases includes the most relevant ICSID decisions dealing with the urgency, necessity and irreparable harm test: Tokios Tokelés, Plama, Azurix, and also the Ecuadorian cases of City Oriente, Burlington, Perenco and Repsol. A. The Struggle between ICSID and Domestic Jurisdictions Provisional measures are at the core of the tension between ICSID authority and a sovereign’s autonomy. Although ICSID’s jurisdictional power is limited to investment disputes, sovereigns do not want ICSID tribunals with broad powers interfering with their domestic policies or courts. While there has been a tendency to limit the scope of provisional relief so as not to interfere with local jurisdictions, there has also been an inclination to consider provisional measures as enforceable orders. The evolution of ICSID case law demonstrates this tension between ICSID and domestic jurisdictions. The issue of provisional measures to enjoin parallel domestic litigation arose in the first arbitration proceeding before an ICSID tribunal, Holiday Inns. In this and the next case, Atlantic Triton, ICSID tribunals lacked the confidence to grant provisional measures. Such relief was not granted until MINE when the protected right was the exclusivity of ICSID jurisdiction. After MINE, ICSID cases have drawn boundaries on the extent of provisional relief’s scope in cases of parallel domestic litigation, granting provisional measures only in exceptional cases where there is a clear violation of Article 26 of the Washington Convention.

Vaccum set forth that a prima facie case of ICSID jurisdiction is required before provisional relief will be granted. Since Vaccum, most ICSID tribunals perform a preliminary review of jurisdiction before granting provisional measures in cases involving parallel domestic litigation. The jurisdictional test to grant interim relief


in these cases is stricter than the test required to register a case under Article 28(3) of the Washington Convention, but less rigorous than needed for a decision on jurisdiction or on the merits.8 The jurisdictional test in cases of parallel domestic litigation is also stricter than other cases of provisional measures where the tension between ICSID and domestic courts is absent. The requirement of a prima facie case of ICSID jurisdiction is a means of balancing the tension between ICSID and domestic tribunals and avoiding the damage which would result from enjoining parallel litigation in a case that is ultimately dismissed for lack of ICSID jurisdiction. Later, in CSOB, the ICSID Tribunal restricted the scope of provisional measures to stop domestic litigation, showing some deference to domestic tribunals. This Tribunal established, in effect, an ex parte duty to inform the domestic court of the existence of an ICSID proceeding before requesting provisional relief. In Pey Casado, the ICSID tribunal considered the fact that an administrative proceeding does not affect the exclusivity of ICSID jurisdiction because there is no jurisdictional conflict between ICSID and a domestic tribunal. Therefore, Article 26 of the Washington Convention does not apply. Under Article 26, provisional measures can be used only to enjoin parallel domestic judicial proceedings. Another restriction was added in Phoenix. Here, the Tribunal mainly refused to grant provisional relief because, essentially, the parallel domestic litigation started before the investment was made. Therefore, there was not a clear purpose to interfere with ICSID Jurisdiction by initiating such proceedings. Shortly after Phoenix, in SGS, the provisional measures request was mainly denied for being too broad. The SGS Tribunal recognized the tension between domestic and international jurisdictions, and established that the provisional relief granted 8 Article 28 (3) provides: “The Secretary-General shall register the request unless he finds, on the basis of the information contained in the request that the dispute is manifestly outside the jurisdiction of the Centre. He shall forthwith notify the parties of registration or refusal to register.” Available at http://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/partA-chap03.htm.

2009] ICSID PROVISIONAL MEASURES 549 should be as limited as possible so as to not interfere with the domestic courts’ legitimate powers to decide local disputes within their own jurisdictions. Notwithstanding this tendency to reduce the scope of provisional measures to enjoin parallel litigation, ICSID case law has also evolved to strengthen the enforceability of provisional measures once granted. Thus, even though ICSID tribunals are expressly empowered to recommend the adoption of provisional measures under Article 47 of the Washington Convention, today there is agreement that provisional measures are enforceable orders. The first ICSID Tribunal to rule that – in general – provisional measures are actual orders and not merely recommendations, was Maffezini,9 which held that “the word recommend has an equivalent meaning to the word dictate,” and that such orders are “no less binding than that [of] a final award.”10 This holding was followed by Pey Casado and Tokios Tokelés, both parallel domestic litigation cases. Tokios Tokelés was particularly significant where the Tribunal ruled that “[i]t is to be recalled that, according to a well-established principle laid down by the jurisprudence of the ICSID tribunals, provisional measures ‘recommended’ by an ICSID tribunal are legally compulsory; they are in effect ‘ordered’ by the tribunal, and the parties are under a legal obligation to comply with them.”11 9 Maffezini, ICSID Case No. ARB/97/7, Decision on Provisional Measures (Oct. 28, 1999). 10 Id. ¶ 9. 11 Tokios Tokelės, ICSID Case No. ARB/02/18, Decision on Provisional Measures (Procedural Order 1), ¶ 4 (July 1, 2003). ICSID provisional measures are also considered orders out of the scope of a parallel domestic litigation scenario. The Tribunal that consolidated this view was Occidental Petroleum, which held that “[t]he Tribunal wishes to make clear for the avoidance of doubt that, although Article 47 of the Washington Convention uses the word ‘recommend’, the Tribunal is, in fact, empowered to order provisional measures.” Occidental Petroleum, ICSID Case No. ARB/06/11, Decision on Provisional Measures, ¶ 58 (Aug. 17 2007).


This issue is particularly relevant in cases of provisional measures used to stop domestic litigation, affecting the sovereign’s power to carry out a legitimate proceeding in their territory. In Vacuum, CSOB, Tokios Tokelés, Bayindir and City Oriente, ICSID tribunals considered situations of non-compliance with the provisional relief granted. Initially, ICSID tribunals merely reiterated the provisional relief already granted. Subsequent tribunals made it clear, however, that recommendations for provisional measures are orders, which must be obeyed by domestic courts. The next part of this section describes the key cases dealing with the struggle between ICISID and domestic jurisdiction. Each case begins with a summary of the holding, followed by a brief factual background to assist in understanding the rationale underlying the tribunal’s decision. 1. Holiday Inns12 – Parallel domestic litigation started with the first ICSID case The Government of Morocco (“Morocco”) entered into a Joint Venture Agreement (“JVA”) with the Swiss corporation, Holiday Inns, for the construction and operation of four hotels in Morocco. The JVA also involved Occidental Petroleum, an American company, which was engaged to construct gas stations next to the hotels. After a change of government, Morocco stopped paying foreign investors for the costs incurred during the construction of the hotels. In 1972, Holiday Inns and Occidental Petroleum filed a Request for Arbitration with ICSID. Shortly after the ICSID arbitration was registered, Morocco obtained an order from a local court instructing Holiday Inns to resume construction. The court also appointed a judicial administrator to take over the management of the existing hotels. The claimants argued before the ICSID Tribunal that Morocco had breached the terms of the JVA and had infringed the exclusive ICSID jurisdiction by bringing coercive proceedings before local 12 Holiday Inns, ICSID Case No. ARB/72/1, Decision on Jurisdiction (May 12, 1974) (Unreported). A detailed review of this case is provided by P. Lalive, The First ‘World Bank’ Arbitration (Holiday Inns v. Morocco) – Some Legal Problems, 51 BRIT. Y.B. OF INT’L L. 123, 142-43 (1980).

2009] ICSID PROVISIONAL MEASURES 551 courts. During the first session of the Tribunal, Holiday Inns made an oral request for provisional measures, asking the Tribunal to order Morocco to enjoin the domestic proceedings. Holiday Inns invoked the right of the exclusivity of ICSID proceedings as set forth in Article 26 of the Washington Convention. While declining to grant the provisional measures, the Tribunal held that it had jurisdiction to recommend provisional measures pursuant to Article 47 of the Washington Convention. Although the Tribunal did not expressly order Morocco to withdraw the proceedings initiated before local courts, it requested that the parties cooperate and refrain from any measures incompatible with the fulfillment of the JVA. Thus, while the first tribunal in ICSID history did not demonstrate confidence in granting provisional measures, by making it clear that ICSID tribunals have the authority to grant provisional relief in order to enjoin parallel domestic litigation it took an important step toward developing the scope of provisional measures available in ICSID proceedings. 2. Atlantic Triton13 – A prima facie case of ICSID jurisdiction is required In August 1981, the Republic of Guinea (“Guinea”) entered into a management agreement (“MA”) with a Norwegian company, Atlantic Triton, for the conversion, equipping, and operation of three fishing vessels. The purpose of the MA was to develop the national fishing industry and thereby improve the nutrition of Guinea’s urban population. Pursuant to the MA, Atlantic Triton repaired and converted the ships in Norway and began operation of the fishing vessels. Due to the poor performance of the national fishing company, Guinea requested technical assistance from the Food and Agriculture Organization (“FAO”) in September 1982. The FAO found that the vessels converted by Atlantic Triton unsuitable for 13 Atlantic Triton Company Limited v. People’s Revolutionary Republic of Guinea, ICSID Case No. ARB/84/1, Award (Apr. 21, 1986)., 115 JOURNAL DU DROIT INTERNATIONAL 181 (1988) (excerpts); English translation of French original in 3 ICSID Rep. 13 (1995). See also LAWRENCE COLLINS, ESSAYS IN INTERNATIONAL LITIGATION AND THE CONFLICT OF LAWS 77 (Oxford University Press 1994).


fishing in Guinean waters, the ships urgently required maintenance and repair, and new fishing vessels would be necessary to satisfy the above-mentioned needs of the urban population. Atlantic Triton acknowledged the unsatisfactory performance, but claimed financial hardship due to the non-payment of the management fees Guinea owed under the MA. Based on Guinea’s refusal to comply with its financial obligations, Atlantic Triton canceled the MA in April 1983. In October, Atlantic Triton requested an order from a French commercial court to attach the three Guinean vessels, which were being repaired in a French port. The French court granted the attachment. The Government of Guinea moved to vacate the order and requested compensation for abuse of process. Several months later, Atlantic Triton filed a Request for ICSID Arbitration pursuant to the MA, requesting compensation for cost overruns, unpaid management fees and damages suffered in connection with the conversion and operation of the vessels. On April 6, 1984, the French Commercial Court confirmed the attachment order. In August, the Guinea responded with a Request for Provisional Measures, asking the ICSID Tribunal to order the immediate suspension of the attachments authorized by the French Commercial Court. On October 26, 1984, the Rennes Court of Appeals vacated the attachment of the Guinean vessels, holding that the French courts lacked jurisdiction to grant Atlantic Triton’s request. The court ruled that the ICSID Tribunal had general and exclusive jurisdiction to decide the dispute, both on the merits and as to any provisional measures requested. The French court strictly applied Article 26 of the Washington Convention, which provides that domestic courts in signatory countries shall abstain from any action that can interfere with the conduct of an ICSID arbitral proceeding. This is the same right – non-interference with the conduct of an ICSID arbitration – that Holiday Inns invoked to support its provisional measures request. In Atlantic Triton, the French court helped to establish the symbiotic relationship between Articles 26 and 47 of the Washington Convention, finding that the purpose of Article 26 is to protect ICSID jurisdiction. As a result, before a court will grant provisional measures to enjoin a parallel domestic proceeding, ICSID jurisdiction should be clearly established.

2009] ICSID PROVISIONAL MEASURES 553 In its April 1986 award, the ICSID Tribunal rejected Atlantic Triton’s claim and dismissed Guinea’s Request for Provisional Measures as moot, since local courts had already vacated the attachments and the ships sailed from France. Subsequently, the French Cour de Cassation reversed the decision of the Rennes Court of Appeals, concluding that Article 26 of the Washington Convention “was not intended to prohibit applications to the courts for protective measures aimed at ensuring the enforcement of the forthcoming award.”14 3. MINE15 – The first case to grant provisional measures to enjoin parallel domestic litigation In August 1971, Maritime International Nominees Establishment (MINE), a Liechtenstein company owned by a Swiss national, entered into a Joint Venture and Transportation Agreement with the Republic of Guinea (“JVA”). The purpose of this JVA was to create a mixed-economy company, called La Société Guinéenne de Transports Maritimes, to transport bauxite mined in Guinea to several foreign markets. A dispute arose between the parties when Guinea entered into a similar transportation agreement with another carrier. Guinea argued that MINE had defaulted under the JVA and that an arrangement with third parties was necessary in order to export bauxite extracted from Guinean mines. In 1978, MINE submitted the dispute to the American Arbitration Association (AAA), arguing that Guinea refused to cooperate with the actions necessary to submit the dispute to ICSID arbitration. In 1980, the AAA rendered an award in MINE’s favor. Later, MINE initiated attachment proceedings in Europe to enforce the AAA award. Because the AAA decision was later set aside, in May 1984, MINE initiated an ICSID arbitration. A year later, Guinea 14 Cour de cassation [Cass.] [Supreme Court], Paris, Nov. 18, 1986, 2 ICSID REV.-FILJ 182 (1987) (Fr.). 15 Maritime International Nominees Establishment (MINE) v. Republic of Guinea, ICSID Case No. ARB/84/4, Award (Jan. 6, 1988). For a comprehensive factual background of this case see JAMES C. BAKER, FOREIGN DIRECT INVESTMENT IN LESS DEVELOPED COUNTRIES: THE ROLE OF ICSID AND MIGA 80-82 (1999).


submitted a Request for Provisional Measures to vacate all pending attachments over its assets and bank accounts, which MINE had requested in several European jurisdictions. On December 4, 1985, the ICSID Tribunal issued its Decision on Provisional Measures, holding that MINE’s European attachment actions breached the exclusive ICSID jurisdiction. Once again, Article 26 of the Washington Convention was the legal framework invoked to protect the exclusivity of ICSID arbitration. Pursuant to Article 47, the Tribunal recommended that MINE “dissolve every existing provisional measure obtained in litigation in national courts (including attachment, garnishment, sequestration, or seizure of the property of Guinea, by whatever term it is designated and by whatever means obtained).”16 Confirming ICSID arbitration as the exclusive remedy, the Tribunal also recommended that MINE refrain from seeking any additional remedy in national courts. On January 6, 1988, the Tribunal rendered its final award, ruling that Guinea breached the JVA and was, therefore, responsible for damages. Guinea initiated an annulment proceeding, but the award was only partially annulled in 1990. A few months later, Guinea and MINE settled the dispute. The MINE Tribunal was the first in ICSID history to grant provisional measures to enjoin parallel domestic proceedings. The right invoked in support of the request for provisional measures was, again, the exclusivity of ICSID proceedings set forth in Article 26. 4. Vacuum 17 – A minimum jurisdictional standard should be met to grant provisional relief The frequent failure of sovereign states to obey a decision on provisional measures, especially temporary restraining orders, is a critical problem. It affects the jurisdiction, powers, and 16 MINE, ICSID Case No. ARB/84/4, Award, at 69. 17 Vacuum Salt Products Ltd. v. Republic of Ghana, ICSID Case No. ARB/92/21, Decision on Provisional Measures (June 14, 1993), Award (Feb. 16, 1994). A detailed review of the facts of this case also in AMAZU ASOUZU, INTERNATIONAL COMMERCIAL ARBITRATION AND AFRICAN STATES 293 (2001) (part of the Cambridge Studies in International and Comparative Law).

2009] ICSID PROVISIONAL MEASURES 555 effectiveness of ICSID tribunals. Vacuum represents an important development in expanding the scope and authority of ICSID tribunals to address this problem. In Vacuum, the Tribunal discussed for the first time the issue of a state party’s failure to comply with a procedural order on provisional measures. Mr. Panagiotopulos, a Greek national resident in Ghana, had incorporated Vacuum Salt Products Limited (“Vacuum”) in Ghana. On January 22, 1988, the Government of Ghana (“Ghana”) and Vacuum entered into a 30-year agreement to develop a mining and salt production facility located in the Songhor Lagoon (“Mining Agreement”). The Mining Agreement included an ICSID arbitration clause. On April 24, 1992, Ghana notified Vacuum that it intended to revoke and cancel the Mining Agreement. Pursuant to the Ghanaian State Lands Act of 1962, Ghana claimed that the government was entitled to reacquire title over the Songhor Lagoon, subject to compensation to be arranged directly by the Land Valuation Board. In response, on May 28, 1992, Vacuum initiated an ICSID arbitration against Ghana. Soon after, in August of the same year, Ghana passed Law 287, which provided the legal basis for the official cancellation of the Mining Agreement. The new regulation incorporated a special administrative procedure to permit review of any compensation claims derived from the application of Law 287. Vacuum submitted a Request for Provisional Measures to the Tribunal on October 22, 1992, claiming that Law 287 violated ICSID’s exclusive jurisdiction over disputes under the Mining Agreement. The next day, Vacuum filed a claim before Ghanaian local authorities for compensation under Law 287. On December 3, 1992, the ICSID Tribunal issued its Decision on Provisional Measures, recognizing a prior voluntary undertaking by Ghana to postpone the Law 287 administrative proceedings pending completion of the ICSID arbitration. In March 1993, Vacuum filed a second request for the provisional measures it had previously requested, asserting that Ghana had failed to comply with the procedural order. Vacuum claimed that Ghana had not obeyed the ICSID Tribunal recommendations in relation to Law 287.


In June 1993, the Tribunal dismissed Vacuum’s second Request for Provisional Measures, finding that Ghana had not breached the Tribunal’s award of provisional measures.18 It is possible that the Tribunal dismissed the second petition for the provisional measures because it may not have believed there was a clear prima facie case of jurisdiction. Therefore, the Tribunal did not need to reach the issue of the consequences of non-compliance with a provisional measures order.19 On February 16, 1994, the Tribunal rendered its final award, holding that it did not have jurisdiction over the dispute because the involvement of the Greek national, Mr. Panagiotopulos, was insufficient to show foreign control of the company. This is a good example of the close relationship between Article 26 of the Washington Convention and the jurisdictional ICSID requirements. Since provisional measures under Article 26 are intended to protect ICSID jurisdiction, ICSID tribunals need to be confident that a minimum jurisdictional standard is met before granting provisional relief. 5. CSOB20 – Rule of deference to domestic courts

CSOB arose in the early 1990’s, during the breakup of the former Czechoslovakia into the Czech and the Slovak Republics, and the related privatization of the State Bank Ceskoslovakia Obchodni Banka A.S. (“CSOB”). On December 19, 1993, the Ministries of Finance of both new republics, together with CSOB, entered into an agreement to establish the basic principles of the financial consolidation of CSOB (“Consolidation Agreement”). 18 Vacuum, ICSID Case No. ARB/92/21, Decision on Provisional Measures, at 323. 19 A later Tribunal, City Oriente, pointed out that “a failure to comply with orders given to Respondents by the Tribunal in accordance with Article 47 of the Convention will entail a violation of Article 26 thereof, and engage Respondents’ liability.” See City Oriente Limited v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/06/21, Decision on Provisional Measures, ¶53 (Nov. 19, 2007). 20 Československa Obchodní Banka, a.s. (CSOB) v. Slovak Republic, ICSID Case No. ARB/97/4, Award (Dec. 29, 2004). The antecedents of this case can be found in the Decision on Jurisdiction (May 24, 1999), Procedural Order 2 (Sept. 9, 1998), Procedural Order 3 (Nov. 5, 1998), Procedural Order 4 (Jan. 11, 1999), and Procedural Order 5 (Mar. 1, 2000).

2009] ICSID PROVISIONAL MEASURES 557 In order to facilitate CSOB’s operation in both republics, it was agreed that the bank would assign its loan portfolio receivables to two so-called “collection companies” – one to be established by the Czech Republic and the other by the Slovak Republic. The companies would finance the assignment price through a loan granted by CSOB. At the same time, the Czech and the Slovak Republics guaranteed payment of the obligations arising from the transaction. Shortly after the operation was initiated, the Slovakian collection company, Slovenska Inkasni, incurred losses and defaulted on its obligations to CSOB under the referred loan agreement. In turn, the Slovak Republic refused to cover those losses in favor of CSOB, as the Consolidation Agreement allegedly provided. CSOB submitted a Request for Arbitration to ICSID on April 18, 1997. As the Slovakian collection company’s financial situation deteriorated, the Bratislava Regional Court began bankruptcy procedures against Slovenska Inkasni. CSOB was the only creditor. The bankruptcy procedure was closely linked to the heart of the dispute submitted to ICSID. The local bankruptcy court would analyze the validity and amount of CSOB’s credits against the Slovakian collection company and would decide if the company had the right to receive funds from the Slovak Republic to cover its losses in accordance with the Consolidation Agreement. Because of the inter-relationship between the bankruptcy and the issues before the ICSID Tribunal, on September 4, 1998, CSOB requested the Tribunal to grant a provisional measure to suspend the bankruptcy procedure against Slovenska Inkasni. In accordance with Article 26 of the Washington Convention, CSOB invoked the principle of ICSID exclusivity. Because there was no evidence that the parties reported the existence of the ICSID arbitration to the Bratislava court, the ICSID Tribunal concluded that there was reason to assume that the court would not recognize the ICSID exclusivity and would only suspend the bankruptcy procedure once it was duly informed of the existence of the international arbitration.21 21 CSOB, ICSID Case No. ARB/97/4, Decision on Jurisdiction, at 2.


Following this reasoning, CSOB informed the Bratislava court of the ICSID proceedings and of the pending request for provisional measures. The Bratislava court agreed to defer the scheduled hearing until the end of the year and to postpone its decision on the request to suspend the bankruptcy procedure. While the request for suspension of the bankruptcy procedure was pending, CSOB pressed its request for provisional measures before the ICSID Tribunal. On November 5, 1998, the Tribunal delayed rendering a decision on the provisional measure pending further analysis. In this second award, the Tribunal once again relied on its confidence that the Bratislava court would suspend the bankruptcy procedure in favor of the ICSID Arbitration. The Tribunal emphatically stated that it could not foresee “any reason to assume that, if the Bratislava court had been duly informed, it would not suspend the bankruptcy procedure.”22 The Tribunal twice rejected CSOB’s request, relying on the good judgment of the Bratislava court. However, that confidence was misplaced. On November 5, 1998, the same day that the Tribunal dismissed the provisional measures request, the Bratislava court dismissed CSOB’s request to suspend the bankruptcy procedure. CSOB appealed to the Supreme Court of Slovakia and, on January 7, 1999, requested for the third time that the ICSID Tribunal issue the provisional measure. On January 11, 1999, given the changed circumstances in the domestic courts, the Tribunal finally recommended the suspension of the bankruptcy procedure.23 Notwithstanding this recommendation, on September 23, 1999, the Supreme Court of Slovakia upheld the decision of the Bratislava court. The Slovak Republic simply did not obey the ICSID Tribunal’s provisional measure recommendation. The Tribunal’s only reaction to this violation was to reiterate its previous order. Thus, on March 1, 2000, the ICSID Tribunal, in its fourth decision on the matter, again recommended the suspension of the bankruptcy procedure and reaffirmed its previous recommendation.24 The Tribunal thus reached the same 22 Id. at 3. 23 Id. at 2. 24 Id. at 3.

2009] ICSID PROVISIONAL MEASURES 559 conclusion as the Vacuum Tribunal, where Ghana disregarded the Tribunal’s recommendation. The CSOB Tribunal implicitly assumed the existence of an ex parte duty to inform the domestic court of the ICSID arbitration proceeding. This rule of deference is intended to give domestic courts the first chance to enjoin parallel litigation. According to this rule of deference to local authorities, only after the domestic court formally refuses to stay the parallel proceedings can an ICSID tribunal recommend suspension of domestic procedures as a provisional measure. As the results in CSOB demonstrate, however, an ICSID tribunal should consider the degree of urgency and necessity of the measures requested in deciding whether to defer to local authorities. 6. Pey Casado25 – Administrative domestic proceedings do not violate Article 26 of the Washington Convention – A violation of Article 26 requires that the “same dispute” be settled by a domestic court – A tangential effect on the claimant’s ICSID interests is insufficient to stop a parallel domestic litigation Supremacy of ICSID proceedings over domestic courts

El Clarín was a popular, left wing newspaper that operated in Chile until 1973. When Pinochet’s dictatorship began, the state closed down the newspaper and confiscated its assets. Almost twenty-five years later, in 1997, Victor Pey Casado (“Pey”) – who asserted that he was one of the newspaper’s shareholders – filed a request for arbitration before ICSID, claiming compensation for damages suffered as a consequence of the expropriation.26 25 Víctor Pey Casado and President Allende Foundation v. Republic of Chile, ICSID Case No. ARB/98/2, Decision on Provisional Measures (Sept. 25, 2001). The author Rodrigo Gil worked as a counsel of the Republic of Chile during the revision proceeding phase of this case as a member of Arnold & Porter LLP, Washington DC. The information provided herein is publically available and not derived from any personal knowledge of the author. 26 Víctor Pey sued the Republic of Chile jointly with the Salvador Allende Foundation, after assigning part of his rights under this litigation to that institution.


After democracy returned to Chile, the National Congress passed a law to compensate victims whose property was expropriated by the military government. In applying this law, through Decree 43 of April 28, 2000 (“Decree 43”), damages were awarded to a number of parties registered as holders of rights to El Clarín at the time of the expropriation. Because Pey had no legal rights over El Clarín, according to applicable Chilean law, he received no compensation.27 In April 2001, Pey requested that the ICSID Tribunal recommend suspension of Decree 43 enforcement. Pey contended that application of that Decree would result in a denial of his rights, violate the exclusivity of ICSID jurisdiction and aggravate the dispute. Following the line of reasoning in Holiday Inns, Atlantic Triton, MINE, Vacuum and CSOB, Pey relied upon Article 26 of the Washington Convention as the legal framework for the provisional measure requested. The Tribunal dismissed the provisional measures requested by Pey on three grounds. First, the Tribunal pointed out that the domestic procedure under Decree 43 was an administrative proceeding, not judicial. This is an important contribution to the development of Article 26 boundaries by making it clear that administrative proceedings cannot violate Article 26 of the Washington Convention. Second, the ICSID Tribunal found that Decree 43 “did not settle the same dispute that the plaintiff submitted to the jurisdiction of [the] ICSID arbitral tribunal, although some of its motives [were] likely to affect, at least indirectly, the interests 27 Law No. 19.568 published in the Official Gazette of the Republic of Chile on June 23, 1998. Under this law, any person or entity – including political parties – whose property rights were affected by the application of Law Decree Nos. 12, 77 and 133 of 1973, 1.697 of 1977, and 2.346 of 1978, had the right to request that the Government of Chile restore the property, or provide adequate compensation. The law also established that the legal successor of such people, and of those who had been deprived of their property by an official act executed after September 11, 1973, would also be entitled to the referred right of restitution or compensation. The people who were compensated under Chilean Law were Jorge Venegas Venegas and the legal successors of Darío Saint Marie, Ramón Carrasco Peña and Emilio González González, all of them owners of El Clarín under Chilean Law.

2009] ICSID PROVISIONAL MEASURES 561 invoked by the plaintiff.”28 By this reasoning, the Tribunal required a high degree of connection between the ICSID dispute and the domestic proceeding. A mere tangential effect on an ICSID interest is insufficient grounds for the international tribunal to enjoin a parallel domestic litigation. Third, the Tribunal highlighted the supremacy of international proceedings over proceedings before domestic courts. Asserting this principle, the Tribunal stated that Decree 43 “could neither bind the ICSID Tribunal, nor prevail over the decision that could be issued by [this] kind of arbitral tribunal.”29 Thus, the Tribunal held that the supremacy principle by itself would be “more than enough to make unnecessary and inadequate the recommendation of the provisional measure requested.”30 The application of this principle of supremacy of international procedures in cases of parallel domestic litigation is not without criticism. First, it is indifferent to the impact it might have on the parties’ rights in parallel domestic litigation. Second, it does not consider the unique facts of individual cases. Finally, although the Tribunal dismissed the provisional measures request, it invited both parties to: strictly respect the general principle of law according to which each party involved in a legal process has the obligation to avoid any act that could affect the rights of the other party upon the enforcement of the final award on merits, and also avoid any act that could aggravate or extend the dispute submitted to the Arbitral Tribunal.31 7. Bayindir32 – Reiteration of the provisional relief in cases of non-compliance In July 1997, Bayindir Insaat Turizm Ticaret Ve Sanayi (“Bayindir”), a company incorporated in the Republic of Turkey, 28 Pey Casado, Provisional Measures, ¶ 59. 29 Id. ¶ 60. 30 Id. ¶ 61. 31 Id., Dispositive, item 4. Free translation from the Spanish original. 32 Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award (Aug. 27, 2009).


and the National Highway Authority of Pakistan (“NHA”), a public company responsible for developing and maintaining Pakistan’s national highway, entered into an agreement for the construction of a six-lane motorway connecting Islamabad and Peshawar (“Motorway Contract”). The Motorway Contract provided that NHA would pay Bayindir 30% of the contract price as an advance payment and that Bayindir would provide a bank guarantee equivalent to that advance (“Mobilization Advance Guarantee”). The highway was originally scheduled for completion on July 31, 2000, but the project experienced repeated delays. In September 1999, Bayindir submitted claims against Pakistan for non-payment of construction costs and fees, along with a request for an extension of time to complete the construction. Subsequently, the parties agreed to modify the construction deadlines to allow Bayindir to finish two priority sections of the highways by March 2001, with the remaining work to be completed by December 2002. On April 20, 2001, however, Bayindir notified NHA that it was unable to complete the priority sections of the highway as scheduled “due to reasons beyond [its] control.”33 Shortly thereafter, NHA served Bayindir a notice of termination of the Motorway Contract, and the Pakistani Army took control of the construction site, forcing all Bayindir personnel to leave the facilities.34 Bayindir promptly challenged the notice of termination before the Constitutional High Court of Lahore, but the court dismissed the case a few days later on the grounds that the Motorway Contract contained a binding domestic arbitration clause.35 The following year, Bayindir filed a Request for Arbitration before ICSID. Pakistan objected to ICSID jurisdiction, arguing that Bayindir’s claims were really contractual disputes that should be resolved in a domestic arbitration. In early 2003, NHA served Bayindir with a notice of arbitration in Pakistan under the 33 Id. ¶ 37. 34 That same month, NHA called in the Mobilization Advance Guarantees that Bayindir had posted at the beginning of the Motorway Contract. Although Bayindir obtained an order from the Turkish local courts enjoining the banks from paying the guarantees, the orders were later vacated. 35 Bayindir, ICSID Case No. ARB/03/29, Decision on Jurisdiction, ¶ 41 (Nov. 14, 2005).

2009] ICSID PROVISIONAL MEASURES 563 Arbitration Act of 1940. In response, Bayindir asserted that the dispute had already been submitted to ICSID. In July 2004, Bayindir filed a Request for Provisional Measures, asking the ICSID Tribunal to order Pakistan to stay the domestic arbitration, as well as other proceedings which NHA had initiated in Pakistani and Turkish courts aimed at collecting the Mobilization Advance Guarantee. The parties agreed to modify the calendar in the domestic arbitration proceeding to allow the ICSID Tribunal to issue its Decision on Jurisdiction before the Pakistani Arbitral Tribunal could issue its decision. In November 2004, the ICSID Tribunal recommended that Pakistan take “whatever steps may be necessary to ensure that NHA does not enforce any final judgment it may obtain from the Turkish courts with regard to the Mobilisation Advance Guarantees.”36 Notwithstanding this recommendation, NHA failed to comply with the provisional measures recommendation and later obtained a favorable award from the Turkish court in connection with the collection of the Mobilization Advance Guarantees. In April 2006, NHA filed an additional claim against Is Bank – a Pakistani bank – to collect interest accrued by the Guarantee. In response, Is Bank sought a declaration from a domestic court stating that no default interest should be deemed accrued. In another example of a provisional measure filed by a sovereign state to stop parallel domestic litigation, Pakistan requested from the ICSID Tribunal that Bayindir take all necessary steps to ensure that Is Bank withdrew its action before the domestic court. On April 14, 2008, the Tribunal granted Pakistan’s requested provisional measure, ruling: “Bayindir shall take whatever steps may be necessary and use its best efforts to procure the withdrawal by Is Bank of its application dated 14 March 2007.”37 In the same order, since Pakistan had not complied with the provisional measure already ordered, the ICSID Tribunal held that “Pakistan shall take whatever steps may be necessary to ensure that NHA does not enforce any final judgment it may obtain from 36 Id. ¶ 55. 37 Id. ¶ 59.


the Turkish courts with regard to the encashment of interest on the Mobilization Advance Guarantees.”38 As in Vacuum, CSOB and Tokios Tokelés, the Bayindir Tribunal’s response to the violation was merely to reiterate the provisional measure that it had previously recommended. Ten days later, Bayindir informed the ICSID Tribunal that Is Bank was prepared to agree with NHA to suspend the proceedings before the Turkish Court over its claim for interest on the Mobilization Advance Guarantee until the ICSID Tribunal rendered its award on the merits. On August 27, 2009, the Bayindir Tribunal rendered its final award, rejecting Bayindir’s claim on the grounds that Pakistan was legally entitled to terminate the Motorway Contract based on Bayindir’s defective performance of the Contract. 8. Phoenix39 – ICSID jurisdiction is not affected by domestic proceedings arising before the investment dispute In this complex case involving several national and international issues and parties, the Czech Republic initiated a criminal investigation against Mr. Vladimir Beňo. At the time, Beňo was the Executive Officer of Benet Praha and Benet Group – both Czech companies involved in the purchase and sale of ferroalloys. The criminal investigation targeted a series of tax and custom duty evasions. It also focused on income tax fraud allegedly committed by Mr. Beňo, Benet Praha and Benet Group. After obtaining an arrest order, the Czech police took Mr. Beňo into custody, but he escaped and fled to Israel. While the criminal proceedings were pending, the Czech Republic froze all of Benet Praha’s bank accounts and other financial assets. In addition to the criminal investigation and customs proceedings against Beňo, private parties initiated civil proceedings against Benet Group before Czech courts. At issue were the ownership of certain companies, buildings and plots of land that were in the possession of third parties. 38 Id. 39 Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Decision on Provisional Measures (April 6, 2007), Award (April 15, 2009).

2009] ICSID PROVISIONAL MEASURES 565 Meanwhile, in Israel, Mr. Beňo registered a new company under the name of Phoenix Action Ltd (“Phoenix”). On December 26, 2002, Phoenix acquired both Czech companies and became the sole owner and shareholder of Benet Praha and Benet Group. On March 2, 2003, only two months after Phoenix’s purchase of Benet Praha and Benet Group, Phoenix informed the Czech Republic of an investment dispute between them. Nearly two years later, in February 2004, Phoenix filed its Request for Arbitration before ICSID, seeking damages. Phoenix alleged that the seizure of Benet Praha’s financial assets – and the delay in the civil proceedings against Benet Group – constituted unfair and inequitable treatment. In January 2007, Phoenix filed a request for provisional measures, requesting that the Tribunal: (a) recommend that the Czech Cadastral Office block further transfers of the disputed land plots, and (b) issue a recommendation to lift the freeze on Benet Praha’s bank accounts. With this request, Phoenix changed the nature of the remedy requested before the Tribunal, arguing that the Claimant’s preferred remedy was the recovery of land and funds, rather than damages.40 Regarding the provisional measures requested to block the transfer of plots of land, the ICSID Tribunal held that: provisional measures are indeed not deemed to give to the party requesting them more rights than it ever possessed and has title to claim. In other words, provisional measures are deemed to maintain the status

quo, not to improve the situation of the Claimant before the rendering of the Tribunal’s award. The Tribunal considers that, far from seeking to maintain the status quo, the recommendations sought by the Claimant are plainly directed to affect a fundamental change to it by improving the Claimant's situation.41 The ICSID Tribunal refused to grant the request for a measure seeking the release of Benet Praha’s frozen funds because “it [was] identical to the final relief sought and [was] not necessary and urgent in order to protect rights that could be irremediably

40 Phoenix, ICSID Case No. ARB/06/5, Decision on Provisional Measures, ¶ 38. 41 Id. ¶ 37.


forfeited.”42 Arguably, the critical fact to this Tribunal was that Benet Praha’s bank accounts had already been frozen for more than six months at the time Phoenix acquired the company, and the company was already involved in extended litigation over ownership of certain other companies and related lands. 9. SGS43 – Request for provisional measures request must not be too broad; – Ordinary exercise of domestic proceedings cannot be restrained In September 1994, the Islamic Republic of Pakistan (“Pakistan”) and the Swiss company, Société Générale de Surveillance S.A. (“SGS”), entered into a contract for the inspection of goods imported into Pakistan from several foreign countries (“Inspection Contract”). In December 1996, Pakistan notified SGS that the Inspection Contract was terminated. SGS considered this termination to be a unilateral repudiation of the Inspection Contract and also a violation of the bilateral investment treaty (“BIT”) between Switzerland and Pakistan. The arbitration clause in the Inspection Contract provided that all differences should be settled in Islamabad under the Arbitration Act of Pakistan. Nevertheless, SGS sued Pakistan in Swiss courts for damages arising from the unlawful termination of the Inspection Contract. The Swiss court dismissed the action based on Pakistan’s sovereign immunity. In response, SGS filed a request for arbitration before ICSID, and Pakistan initiated a domestic arbitration through a Pakistani domestic court in Islamabad. In the Pakistani court proceeding, SGS contended that the dispute should be settled by ICSID and requested suspension of the court proceeding until the ICSID Tribunal resolved jurisdictional objections. Pakistan, in turn, filed a motion to stay the ICSID arbitration. The case went to the Supreme Court of 42 Id. ¶ 41. 43 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13 Decision on Jurisdiction (Aug. 6, 2003); Decision on Provisional Measures (Procedural Order 2) (Oct. 16, 2002) (discontinued following settlement May 23, 2004).

2009] ICSID PROVISIONAL MEASURES 567 Pakistan to determine whether to stay the domestic arbitration or order a stay of the ICSID proceedings. Simultaneously, in May 2002, SGS requested that the ICSID Tribunal adopt four provisional measures: (a) put an end to all proceedings that were pending in Pakistani courts, especially Pakistan’s petition to stop the ICSID arbitration; (b) suspend the domestic arbitration procedure in Islamabad until the ICSID Tribunal resolved objections to its jurisdiction; (c) direct Pakistan to abstain from initiating or participating in any other arbitration-related proceedings before Pakistani courts; and (d) instruct Pakistan not to engage in any other act that might aggravate or extend the ICSID dispute between the parties. Two months after the SGS Request for Provisional Measures before ICSID, the Supreme Court of Pakistan ordered SGS to abstain from pursuing ICSID arbitration proceedings. The ICSID Tribunal held that it could not order the Supreme Court of Pakistan to reverse its decision under Pakistani domestic law. Thus, the ICSID Tribunal “accept[ed] that this proceeding in the Supreme Court of Pakistan is one which Pakistan cannot withdraw or discontinue. Nor can Pakistan ‘remove’ [it] or set it aside. It is a final and completed judgment of that Court.” 44 Nevertheless, the ICSID Tribunal indicated that this type of domestic decision would be unenforceable against an international tribunal like ICSID. The Tribunal stated that, “although the Supreme Court Judgment of July 3, 2002 is final as a matter of the law of Pakistan, as a matter of international law, it does not in any way bind this Tribunal.”45 The Tribunal emphasized that domestic decisions cannot be used to frustrate the jurisdiction of an international court. Moreover, the Tribunal pointed out “[n]or can a State plead its internal law in defense of an act that is inconsistent with its international obligations. Otherwise, a Contracting State could impede access to ICSID arbitration by operation of its own law.”46 44 SGS, ICSID Case No. ARB/01/13, Decision on Provisional Measures, at 293. 45 Id. at 299. 46 Id. at 300.


The right SGS invoked to sustain the provisional measure was the right of access to an ICSID forum. The prima facie existence of that right can be supported by the BIT between Switzerland and Pakistan. The ICSID Tribunal held that Article 47 of the Washington Convention protects this right, and it cannot be restricted by an order issued by a domestic court. As to the request to stay the domestic arbitration in Islamabad, SGS invoked the right of exclusivity of the ICSID Arbitration under Article 26 of the Washington Convention. The ICSID Tribunal observed that, since it was SGS that initially sued in Pakistani courts, the tribunal was not inclined to grant the measure. However, based on efficiency grounds, the Tribunal recommended that the arbitration in Islamabad be stayed until the ICSID Tribunal issued its decision on jurisdiction. The Tribunal dismissed as too broad the provisional measure request that Pakistan not initiate or participate in future proceedings against SGS, finding that “[w]e cannot enjoin a State from conducting the normal processes of criminal, administrative and civil justice within its own territory. We cannot, therefore, purport to restrain the ordinary exercise of these processes.”47 The Tribunal also rejected the generic petition to recommend that the State of Pakistan refrain from aggravating or extending the dispute. 10. The Ecuadorian cases.48 – ICSID Tribunals have the power to stop criminal domestic proceedings

47 Id. at 301. 48 City Oriente Limited v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/06/21, Decision on Provisional Measures (Nov. 19, 2007) (discontinued following settlement on Sept. 12, 2008); Burlington Resources, Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/5, Decision on Provisional Measures (Procedural Order 1) (June 29, 2009) (Decision on Jurisdiction pending); Perenco Ecuador Limited v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/6, Decision on Provisional Measures (May 8, 2009) (tribunal reconstituted May 6, 2010); Repsol YPF Ecuador, S.A. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No. ARB/08/10, Decision on Provisional Measures (June 17, 2009) (claimants’ memorial on the merits filed Dec. 17, 2009).


City Oriente – Temporary restraining orders can be

Burlington used to stay parallel domestic litigation

Perenco – Provisional measures are proper

Repsol “orders”

Various claimants requested provisional measures in four ICSID cases against the Republic of Ecuador. The disputes related to several production-sharing contracts for the exploration and exploitation of oil fields in the Amazon Region. The foreign investors, City Oriente Limited (“City Oriente”), Perenco Ecuador Limited (“Perenco”), Repsol YPF Ecuador S.A. (“Repsol”), and Burlington Resources Oriente Limited (“Burlington”) made substantial investments in different blocks of the Amazon fields. While those production-sharing contracts were in effect, oil prices suddenly rose and the incomes of the hydrocarbon companies skyrocketed. In reaction to these income spikes, the President of Ecuador initiated a legal reform to amend the Hydrocarbon Law so as to enable the Government to seize the extraordinary revenues those companies were obtaining. On April 19, 2006, Law 42 was passed, providing that all hydrocarbon companies would grant Ecuador no less than a 50% share of the extraordinary revenues derived from the higher prices of oil. More than a year later, in October 2007, while the oil prices continued to increase, Ecuador passed Decree 662, which increased the minimum State participation share from 50% to 99% of the “windfall” profits. City Oriente immediately reacted to the application of Law 42 by filing a request for arbitration with ICSID. Perenco, Burlington and Repsol filed their requests for arbitration with ICSID only after Ecuador issued Decree 662. Ecuador initiated a number of domestic proceedings against these and other foreign investors in an effort to collect unpaid amounts owed under Ecuador’s new Hydrocarbon Law. Ecuadorian officials also sought to terminate production-sharing contracts, citing non-payments to the State. These domestic proceedings directly targeted claimants closely linked to the ICSID arbitrations. All claimants requested provisional measures, asking the ICSID Tribunals to recommend that Ecuador refrain from: (a) instituting or prosecuting any proceedings or actions demanding payments due under


provisions of the country’s Hydrocarbon Law; (b) engaging in any conduct intended to terminate production-sharing contracts; and (c) aggravating the dispute or altering the status quo. Just as City Oriente was the first to register its case with ICSID, it was also the first to be sued by Ecuador in parallel domestic proceedings. The parallel litigation was moving forward when, in October 2007, City Oriente filed its Request for Provisional Measures to enjoin all domestic litigation. Two days later, the State Attorney General and the Ecuadorian Prosecutor’s Office filed a criminal complaint against City Oriente’s representatives and managers. In response, City Oriente reappeared before the ICSID Tribunal to request an order to “immediately” execute the provisional measures already requested. City Oriente believed that waiting to get on the calendar for a hearing risked the imprisonment of the company’s staff and would render moot the requested provisional measures. Five days later, on October 16, 2007, the Tribunal granted provisional relief with a temporary restraining order. Although the criminal proceeding was the main thrust of this order, the ICSID Tribunal’s recommendation covered the entire scope of the provisional measures requested. Despite this restraining order, the very next day an Ecuadorian citizen named Mr. Góngora, together with the Ecuadorian Prosecutor, filed a criminal complaint of embezzlement against three executives of City Oriente and Ecuador’s former Minister of Energy and Mines. The charge was City Oriente’s failure to fulfill Law 42 payments. The following day, the State Attorney General and the Ecuadorian Prosecutor filed a second criminal complaint - in a different district - against City Oriente’s executives for refusal to make the payments provided for in Law 42. City Oriente immediately reported to the Tribunal this failure to comply with the Tribunal’s recommendation. On October 24, 2007, the Tribunal reiterated the basis for its restraining order, stating that “[i]t is the Tribunal’s view that said actions may undermine the effectiveness of the provisional relief requested by Claimant, thereby depriving Claimant of its lawful

2009] ICSID PROVISIONAL MEASURES 571 right to have its interests effectively protected.”49 The Tribunal was clear in stating that a failure to comply with its orders in accordance with Article 47 of the Washington Convention violated Article 26. By stating that non-compliance would result in liability, the City Oriente Tribunal’s action sent an important signal regarding the power of the Tribunal. No longer, as in previous cases, would ICSID tribunals merely reiterate the provisional measures ordered without referring to potential liability for failure to comply. Subsequently, the City Oriente Tribunal granted the provisional measures requested, holding that the “Republic of Ecuador is responsible to stay any proceedings and actions stemming from the criminal investigation underway that may affect Claimant or Claimant’s officers or employees, or may require them to make an appearance.”50 Ecuador had raised two main arguments against the provisional measures: (a) Ecuador has a sovereign right to prosecute and punish all crimes perpetrated in its territory, and (b) the criminal complaint filed by Mr. Góngora should not be viewed as an act of the State. The Tribunal responded to the first argument by stating that the undisputed right of Ecuador to prosecute and punish such crimes “should not be used as a means to coactively secure payment of the amounts allegedly owed by City Oriente pursuant to Law No. 2006-42, since this would entail a violation of the principle that neither party may aggravate or extend the dispute or take justice into [its] own hands.”51 The Tribunal agreed with Ecuador’s second argument to the extent that a complaint filed by a citizen should not be viewed as a State act. Nevertheless, the Tribunal rejected Ecuador’s contention because “what should actually be viewed as an act of the State, for which Ecuador is accountable, is the institution of a 49 City Oriente, ICSID Case No. ARB/06/21, Decision on Provisional Measures, ¶ 15. 50 Id. ¶ 65. 51 Id. ¶ 62.


criminal proceeding by the Prosecutor’s Office based on such complaint.”52 The City Oriente Tribunal seemed to regard the common facts in the criminal domestic proceedings and the ICSID Arbitration as material and decisive in reaching its decision. The criminal proceedings were intrinsically linked to the ICSID arbitration. Moreover, in one of the criminal complaints against City Oriente’s executives, the Prosecutor’s Office included an express reference to certain statements City Oriente had made in the ICSID proceedings. Although the cases brought by Perenco and Burlington involved no criminal complaints, those claimants also asked the ICSID tribunals to issue temporary restraining orders prohibiting Ecuador from undertaking any measures against them, pending a decision on their requests for provisional relief. Although each of the respondents contended that Ecuador had not formally started any contract termination proceedings, the two ICSID tribunals responded differently. The Perenco Tribunal held that, regardless of Ecuador’s statements, it was necessary “to request the parties to refrain from initiating or continuing any action or adopting any measure which may, directly or indirectly, modify the status quo between the parties vis-à-vis the participation contracts, including any attempt to seize any asset of [Perenco], until it has had an opportunity to further hear from the parties on the question of provisional measures.”53 In contrast, the Burlington Tribunal declared that there was no need to rule on Burlington’s request in view of Ecuador’s repeated assurances to terminate the underlying contract. A few days later, on March 3, 2009, in violation of the Perenco Tribunal’s order and in defiance of the Burlington Tribunal’s reliance on Ecuador’s assurances, a domestic administrative tribunal ordered the immediate seizure of all of the Perenco-Burlington consortium’s crude production. Both ICSID tribunals reacted immediately. 52 Id. ¶ 64. 53 Perenco, ICSID Case No. ARB/08/6, Decision on Provisional Measures, ¶ 28.

2009] ICSID PROVISIONAL MEASURES 573 On March 5, the Perenco Tribunal sent an e-mail to the parties, making it clear that its February 24, 2009 request “had and continues to have the same authority as a recommendation, as envisaged in Article 47 of the [Washington] Convention and Arbitration Rule 39”.54 On March 6, the Burlington Tribunal recommended “that the Respondents refrain from engaging in any conduct that aggravates the dispute between the Parties and/or alters the status quo until it decides on the Claimants’ Request for Provisional Measures or until it reconsiders the present recommendation, whichever is first.”55 Both actions came in the form of temporary restraining orders, issued under Article 47 of the Washington Convention. 11. Quiborax56 – Failure to obey provisional measures – ICSID Tribunals have the power to enjoin criminal domestic proceedings, but not necessarily the tools to enforce this power This dispute originated from the confiscation of eleven mining concessions by the Plurinational State of Bolivia (“Bolivia”) through Presidential Decreto Supremo 27.589 on June 24, 2004. (“D.S. 27.589”). Such concessions were held by Non Metallic Minerals (“NMM”), a Bolivian company in which Chilean co-Claimants Quiborax and Allan Fosk claimed to have a 51% majority interest.57 54 Id. ¶ 35. 55 Burlington, ICSID Case No. ARB/08/5, Decision on Provisional Measures, ¶ 24. 56 Quiborax S.A., Non-Metallic Minerals S.A. & Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Provisional Measures (Feb. 26, 2010) (respondent files objections to jurisdiction July 30, 2010). The author Rodrigo Gil is counsel to the Claimants in this proceeding as an attorney with Bofill Mir & Alvarez Jana, Santiago, Chile. As this is an ongoing case and the parallel proceeding dispute is continuing at the time of this publication, the author will avoid any particular comment on this decision. In addition, for these same reasons, the case facts described in this section are mainly a literal transcription of the relevant sections of the Decision on Provisional Measures. The information provided herein is publically available and not derived from any personal knowledge of the author. 57 Quiborax, ICSID Case No. ARB/06/2, Provisional Measures Decision, ¶ 4


Immediately following Claimants’ request for friendly consultations under the Chilean – Bolivian Bilateral Investment Treaty (“BIT”), Bolivia initiated a series of administrative proceedings against the subsidiary NMM. In an escalating series of events, Bolivia submitted NMM to multiple investigations and on October 28, 2004, the Bolivian Mining Superintendency annulled the already revoked concessions.58 By November 2007, NMM had been ordered to pay approximately US$1,200,000 in alleged taxes and fines.59 Simultaneously, Bolivia set up an inter-ministerial task force to evaluate the merits of Claimants’ claim.60 On December 8, 2004, in an internal memorandum by Bolivian Authorities – that was later made public – (the “2004 Memo”), the task force concluded that D.S. 27.589 suffered serious legal defects and that the case was about to become an international predicament for Bolivia.61 The task force outlined different scenarios to aid Bolivia’s defense strategy, recommending as the “best alternative” to try to demonstrate the existence of flaws in the processing of the mining concessions.62 On January 18, 2005, six months after Claimants’ request for friendly consultations and one month following the issuance of the 2004 Memo, the Superintendencia de Empresas ordered a corporate audit of NMM.63 The audit was carried out by employees of the Superintendencia.64 According to the testimony of one of them, this audit was directed to establish whether NMM’s shareholders were Chilean nationals.65 The audit appeared to have been ordered at the request of the Ministry of 58 Id. ¶ 9. 59 Id. 60 Id. ¶ 8. 61 Id. 62 Id. 63 Id. ¶ 23. 64 Id. 65 Id.

2009] ICSID PROVISIONAL MEASURES 575 Foreign Affairs.66 The corporate audit finished with the issuance of Report 001/2005 where the Superintendencia employees concluded that NMM’s shareholders were Quiborax, David Moscoso and Allan Fosk and thus the investment by Chilean nationals was protected by the BIT.67 On October 10, 2008, the Bolivian Minister of the State’s Legal Defense, requested the head of Superintendencia to once again review the file on NMM and certify if there were any irregularities that could give rise to the annulment of NMM’s corporate acts or the annulment of the company’s incorporation.68 A week later, on 17 October 2008, the Superintendente de Empresas confirmed the findings of Informe 001/2005 and denied the existence of any irregularities that could give rise to the annulment of the company’s acts, certifying, among other things, the shareholder composition of NMM.69 The escalated series of events did not stop, however. Despite the certification issued by the Superintendencia de Empresas on October 17, 2008, Bolivian authorities continued to review Claimants’ corporate documentation.70 Bolivia discovered that an NMM shareholders' meeting on September 11, 2001, contained a different list of shareholders from that included in the minutes of a meeting allegedly held 2 days later, on September 13, 2001.71 Both minutes had almost identical content, but while the minutes of September 11, 2001 stated that the shareholders of NMM were the attorneys and employees of the local law firm who participated in the incorporation of NMM, the minutes of September 13, 2001 stated that the shareholders of NMM were Allan Fosk, Quiborax and David Moscoso.72 66 Id. 67 Id. ¶ 24. 68 Id. ¶ 25. 69 Id. ¶ 26. 70 Id. ¶ 27. 71 Id. ¶ 28. 72 Id. ¶ 28.


According to Bolivia, the existence of these two contradictory documents, seen jointly with other corporate documents of NMM, suggested that the minutes of September 13, 2001 may have been forged.73 According to Claimants’ position the explanation of the inconsistency was merely the result of a clerical error.74 Based on this inconsistency, Bolivia prepared and initiated criminal actions against several persons related directly or indirectly to NMM including co-Claimant Allan Fosk, Claimants’ Bolivian business partner David Moscoso, the former legal local counsel and his employees who participated in the NMM incorporation, the former employees of the Superintendencia de Empresas who authored a report confirming the condition of Quiborax and Allan Fosk as shareholders of NMM, and two Notaries Public whose services NMM has used in the past.75 The proceedings regarding David Moscoso – Claimants’ Bolivian business partner – moved swiftly. Thus, on March 16, 2009, Bolivia presented formal charges against Claimants’ Bolivian business partner David Moscoso and requested his preventive detention.76 The Judge, Ms. Margot Pérez, refused to grant Bolivia’s initial request.77 In reaction, the Minister of the State’s Legal Defense and the Minister of Institutional Transparency and Defense against Corruption presented criminal charges of prevaricato (malfeasance in office) against Judge Pérez for failing in her functions.78 Both Ministers accused Judge Pérez of not “taking into consideration the importance of this case that concerns the protection of the goods and interests of the State that are subject of an international arbitration”; failing to value “the procedural risks that continue to exist, and that affect the arbitration that the State of Bolivia confronts before an 73 Id. 74 Id. ¶ 33. 75 Id. ¶ 30. 76 Id. ¶ 38. 77 Id. ¶ 43. 78 Id. The Minister of the State’s Legal Defense justified his standing to file this criminal complaint on the basis of his legal responsibilities to “promote, defend and protect the interests of the plurinational state in jurisdictional proceedings and arbitrations in investment disputes.”

2009] ICSID PROVISIONAL MEASURES 577 international tribunal” and by delaying the proceedings “which negatively affects the interests of the Bolivian state, since this causes harm and delay in the international arbitration.”79 A new Judge was appointed in charge of the criminal proceeding. Shortly after this replacement, Claimants’ Bolivian business partner David Moscoso was subject to a bail of US$300,000 on his personal liberty, to be deposited within seventy-two hours.80 Mr. Moscoso did not pay. The hearing on David Moscos’s summary proceeding took place on August 14, 2009.81 The resulting decision indicated that Mr. Moscoso had confessed his participation in the forgery of the minutes NMM’s shareholders' meeting of September 13, 2001,82 though this confession contradicts Mr. Moscoso´s previous declaration before the criminal courts, rendered on January 30, 2009.83 On September 14, 2009, Claimants submitted a Request for Provisional Measures.84 Claimants contended that “[t]he criminal proceedings were merely instrumental to Bolivia’s goals in the arbitration, which were to (i) deny the condition of Claimants as foreign investors under the BIT; (ii) obtain, manipulate and fabricate evidence that supports Bolivia’s defense strategy, and (iii) ultimately, force Claimants to give up their claims in the arbitration.85 Claimants alleged that the criminal proceedings impaired the rights to preservation of the status quo and non-aggravation of the dispute; the right to the procedural integrity of the arbitration proceedings; and the right to exclusivity of the ICSID proceedings in accordance with Article 26 of the ICSID Convention.86 79 Id. 80 Id. ¶¶ 38-39. 81 Id. ¶ 41. 82 Id. 83 Id. ¶ 42. 84 Id. ¶ 13. 85 Id. ¶ 46. 86 Id. ¶ 49.


Respondent noted at the outset that provisional measures are exceptional in nature and should not be granted lightly.87 Respondent also contended that provisional measures may not be granted in this case because the criminal proceedings do not affect any of Claimants’ rights in the dispute;88 there was no self-standing right to the preservation of the status quo or the non-aggravation of the dispute;89 and that the criminal proceeding was not dealing with the same ICSID matter.90 On February 26, 2010, the Tribunal issued its decision granting Claimants request ordering that Respondent take all appropriate measures to suspend the criminal proceedings identified as Case Nº 9394/08, and that Respondent also refrain from initiating any other criminal proceedings directly related to the present arbitration, or engaging in any other course of action which may jeopardize the procedural integrity of this arbitration.91 According to press declarations made by the Bolivian Minister of the State’s Legal Defense, Bolivia has formally contended that it will not comply with such decision since in their opinion it violate Bolivia’s sovereign. At the closing of this article, criminal proceedings were ongoing. B. Standards for evaluating requests for provisional measures The traditional purpose of provisional measures is to preserve claimants’ rights during judicial or arbitral proceedings. Generally, provisional measures are requested to protect rights that underlie the claims at issue in the proceeding. A typical provisional measure in a commercial arbitration case involves a creditor seeking to secure payment of the credit on which his claim is based. Because the claim could subsequently be dismissed for lack of legal standing to sue or for other reasons, tribunals must balance a petitioner’s right to temporary relief 87 Id. ¶ 73. 88 Id. ¶ 75. 89 Id. ¶ 81. 90 Id. ¶ 92. 91 Id. at p. 46.


during the proceeding with the need to preserve the non-moving party’s position if the petioner should ultimately not prevail. In this context, the traditional way to balance both claimants’ and defendants’ competitive positions in international arbitration is the requirement of satisfying the urgency, necessity, and irreparable harm test. Under this test, provisional measures must be urgent and necessary to prevent irreparable harm to the rights for which protection is sought. Tribunals will usually grant provisional measures only if they determine that there is a high probability that the alleged right will be recognized in the arbitral award. ICSID arbitration differs from commercial arbitration, however. ICSID tribunals evaluate the sovereign behavior of states, not just the actions of the parties to commercial contracts. In their decision-making process, ICSID tribunals thus must consider the host sovereign’s powers to define its own policies and to carry out its own domestic proceedings. To accommodate this difference from the consideration of the “usual” corporate behavior, the traditional three-prong test should take into consideration that provisional measures must not place an excessive burden on a sovereign.92 This duty to avoid an extreme burden on the host state is particularly important in cases of provisional measures to enjoin parallel domestic litigation where, as explained in the previous section, there is a tension between ICSID and domestic tribunals in the exercise of their respective jurisdictional powers. In addition, in cases of provisional measures to enjoin parallel domestic litigation, the nature of the rights for which protection is sought is related to the duty of abstention, which is aimed at: (1) 92 This is a principle that could be derived from Article 35 of The International Law Commission’s Articles on State Responsibility, which provides: A State responsible for an internationally wrongful act is under an obligation to make restitution, that is, to re-establish the situation which existed before the wrongful act was committed, provided and to the extent that restitution … (b) Does not involve a burden out of all proportion to the benefit deriving from restitution instead of compensation. Available at http://www.ilsa.org/jessup/jessup06/basicmats2/DASR.pdf.


maintaining the status quo in effect when the investment dispute arose, and (2) protecting the ICSID proceedings as the exclusive forum to decide an investment dispute. Thus, the right to non-aggravation of the ICSID dispute and the right to the exclusivity of ICSID jurisdiction are aimed at safeguarding the procedural fairness of ICSID proceedings. These rights are functionally linked to the ICSID arbitration itself rather than to the parties’ legal positions. The non-aggravation of the ICSID dispute and the right to the exclusivity of ICSID jurisdiction are self-standing post-investment dispute rights. In the context of parallel litigation, the right to non-aggravation of the ICSID dispute and the right to the exclusivity of ICSID jurisdiction thus do not form part of the subject matter of the ICSID dispute. Their existence is separate and not disputed. As a technical matter, in cases of parallel domestic litigation, interim measures do not provide provisional relief; instead they provide permanent relief, protecting the rights of non-aggravation of the ICSID dispute and the ICSID exclusivity itself during the entire life of such rights. These rights arise when the investment dispute is crystallized, but, significantly, they terminate when the ICSID award is rendered. From the moment the investment dispute crystallizes, both parties are indisputably entitled to both rights. For that reason both parties – not just claimants – are entitled to ask for provisional relief to enjoin parallel domestic proceedings. These special features of the rights protected by provisional measures in cases of parallel domestic litigation must be considered in the test that ICSID tribunals use to decide whether to grant provisional measures. This section addresses ICSID cases applying the traditional urgency, necessity, and irreparable harm test.93 ICSID case law of course is still evolving and, although ICSID tribunals have usually applied the same three-prong test whether parallel domestic proceedings are involved or for other reasons, there is an emerging 93 In this sense, professor Schreuer also considered that “ICSID arbitration practice shows that tribunals will only grant provisional measures if they are found to be necessary, urgent and are required in order to avoid an irreparable harm. Schreuer, Commentary on the ICSID Convention, supra note 3, at 776.

2009] ICSID PROVISIONAL MEASURES 581 tendency for ICSID tribunals to redefine the test to address the unique circumstances raised by parallel domestic litigation. As to the urgency element, as will be explored below, ICSID tribunals have taken varying approaches to a party’s delay in asking for provisional relief. In Tokios Tokelés, the Tribunal concluded that the measure requested was not urgent due to the delay in requesting relief: The requesting party had the opportunity to file interim measure with its previous papers. In contrast, the Azurix Tribunal found that, although the party’s delay reduced the sense of urgency, a delay does not necessarily affect the urgent nature of the measure. This dichotomy between a subjective and objective approach to the urgency of the measure requested is usually present in cases of parallel domestic litigation. ICSID Tribunals’ approach to the necessity prong in cases of parallel domestic litigation focuses upon the relationship between the respective scopes of the ICSID and domestic proceedings. In terms of evaluating necessity, Tokios Tokelés was the central case to address this issue. It held that it is sufficient to show a minimal link between the domestic proceedings and the investor or his investment and, further, these domestic proceedings have the capacity to affect the rights invoked by the parties in the ICSID case. In applying the irreparable harm prong, ICSID tribunals in general have tried to reach a balance between two opposing approaches, where the harm caused by a parallel litigation can be fully compensated in the damages award. At one extreme is Plama, where the Tribunal held that harm is not irreparable if it can be compensated for by damages. At the other extreme is Azurix, where the Tribunal took an opposite view. Moreover, in trying to reach a balance, the Burlington Tribunal ruled that a provisional measure based on irreparable harm should not be granted when more damages come from the mere passage of time, as opposed to specific actions initiated by a sovereign state.

Burlington represents the first step in recognizing the special nature of the rights involved in cases of parallel domestic litigation. The Tribunal held: the rights to be preserved by provisional measures are not limited to those which form the subject matter of the dispute, or substantive rights as referred to by the


Respondents; [and further, those rights] may extend to procedural rights, including the general right to the status quo and to the non-aggravation of the dispute. These latter rights are thus self-standing rights.94 The key distinction in cases involving parallel domestic litigation is that provisional measures preserve independent procedural rights, not the substantive rights involved in the ICSID controversy. Therefore, the classic prerequisites of urgency, necessity and irreparable harm should be redefined with an eye toward optimizing the protection of ICSID rights: exclusivity of ICSID proceedings and the non-aggravation of ICSID disputes. The remainder of this section describes the key provisional measure cases addressing the three-prong test of urgency, necessity and irreparable harm in a parallel domestic litigation scenario. Each case begins again with a summary of the holding, followed by a brief factual background. 1. Tokios Tokelés95 – The urgency standard is subjective – The necessity test requires only a minimal link between the domestic proceeding and the investor or his investment In 1994, Tokios Tokelés, an editing and publishing company incorporated in Lithuania, opened a subsidiary called Taki spravy in the Ukraine. In January 2002, Taki spravy published a book that allegedly contained a favorable description of Yulia Tymoshenko, the leader of the political opposition.96 In February 2002, the Ukraine initiated a series of proceedings and audits against Taki spravy. It carried out numerous, invasive tax investigations, filed a series of actions against Taki spravy in Ukrainian courts and ordered that all company assets be placed under administrative custody. 94 Burlington, ICSID Case No. ARB/08/5, Decision on Provisional Measures, ¶ 55. 95 Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction (Apr. 29, 2004), Procedural Order 1 (July 1, 2003), Procedural Order 3 (Jan. 18, 2005), Award (July 26, 2007). 96 Leader of the political party Всеукраїнське об'єднання "Батьківщина" (All Ukrainians United for the Nation).

2009] ICSID PROVISIONAL MEASURES 583 Tokios Tokelés believed that the investigations were a direct consequence of their published comments about the opposition leader, and in response to these events, Tokios Tokelés initiated ICSID arbitration proceedings against the Ukraine. Tokelés subsequently requested provisional measures to enjoin the Ukraine’s domestic proceedings against Taki spravy. In July 2003, the ICSID Tribunal granted the requested provisional measures based on: (a) the right to the exclusivity of ICSID proceedings as established in Article 26 of the Washington Convention, and (b) the obligation of non-aggravation of the dispute by either party involved. The Tribunal held that the Ukrainian authorities must suspend or discontinue any judicial or other proceedings before domestic authorities that might in any way jeopardize the principle of exclusivity of ICSID proceedings or aggravate the dispute submitted to ICSID. The Tribunal concluded that: In becoming a party to the Convention, Ukraine has committed itself to the principal of exclusivity of ICSID proceedings, and, hence, to the exclusion of domestic judicial or administrative remedies. Pursuant to this principle, which lies at the very heart of the ICSID institution and mechanism, once the parties have consented to ICSID arbitration, they must refrain from initiating or pursuing proceedings in any other forum in respect of the subject matter of the dispute before ICSID.97 The Tribunal’s recommendation, however, made reference only to proceedings that could pose a threat to the exclusivity of ICSID or could aggravate the dispute, holding: (a) that the parties to a dispute over which ICSID has jurisdiction must refrain from any measure capable of having a prejudicial effect on the rendering or implementation of an eventual ICSID award or decision, and, in general, refrain from action of any kind which may aggravate or extend the dispute, or render its resolution more difficult; and (b) that the parties must withdraw or stay any and all judicial proceedings 97 Tokios Tokelės, Procedural Order 1, ¶ 3.


commenced before national jurisdictions, and refrain from commencing any further such proceedings in connection with the dispute before the ICSID tribunal.98 The Tokelés decision was an important application of the principle of non-aggravation of the ICSID dispute in parallel domestic litigation. Moreover, the Tribunal recommended the suspension of any proceedings “related to Tokios Tokelés and its investments in Ukraine through Taki spravy.”99 Thus, in order to obtain the suspension of proceedings before domestic courts, it is sufficient to show that there is a minimal link between the domestic proceedings and the investor or his investment, and that these proceedings have the capacity to affect the rights invoked by the parties. The procedural history of this case does not end here, however. In September 2004, Tokios Tokelés requested that the ICSID Tribunal reaffirm its decision to grant provisional measures and issue the following new instructions: (a) cease criminal proceeding against O.V. Danylov, General Director of the subsidiaries of Tokios Tokelés in Ukraine; (b) cease confiscation of assets from another subsidiary (Taki II); and (c) cease tax investigations of this subsidiary. Tokios Tokelés contended that the criminal proceeding against Danylov would violate its right to the exclusivity of ICSID proceedings to settle investment disputes. In support of their contention, Tokelés argued that the criminal proceedings had forced Danylov to leave the Ukraine, which, in turn, caused a loss of profits for the subsidiary, Taki II. The loss of profits in turn affected the financing of the ICSID proceedings and put at risk the issuance of the final award by the ICSID Tribunal. The Tribunal denied the request for provisional measures to cease the criminal proceedings. First, the Tribunal found no necessity because there was no evidence of causation. Second, based upon Tokios Tokelés’ delay in requesting provisional measures, the Tribunal concluded that the measure requested was not in fact urgent. In so finding, the Tribunal used a 98 Id. ¶ 2. 99 Id. ¶ 7.

2009] ICSID PROVISIONAL MEASURES 585 subjective standard to measure the urgency of the provisional measure request, holding: Moreover, the circumstances underlying the provisional measure requested do not appear urgent. Although the criminal proceedings against O.V. Danylov were initiated in March 2002 – nine months before ICSID registered Claimant’s Request for Arbitration – Claimant did not include these proceedings in its first Request for Provisional Measures dated June 3, 2003, or its letter of June 24, 2003, to which Order No. 1 refers. Claimant cannot credibly claim that circumstances it did not consider urgent 18 months ago are urgent now.100 The ICSID Tribunal also rejected the other two requested provisional measures. It first held that it was not necessary to grant the request to cease confiscation of assets because the encumbrance had been removed in May 2004. Likewise, the Tribunal rejected the measure intended to stop the tax investigations, as those audits had already concluded, and Tokios Tokelés had not provided sufficient evidence that the investigations had caused irreparable harm to the right invoked. The Tokios Tokelés Tribunal clarified the scope of the elements of necessity and urgency: A measure is necessary when one party’s actions cause or threaten to cause irreparable harm to the rights invoked by the other party; a measure is urgent when the harmful impact on the rights of one party is likely to occur before the final award. 2. Plama101 – The harm is not irreparable if it can be compensated for by damages. The “only-more damages” argument is a valid basis to dismiss a request for provisional relief In the late 1990’s, the Government of Bulgaria (“Bulgaria”) carried out the privatization of a state oil refinery and a Cypriot company, Plama Consortium Limited (“Plama”), by acquiring 100 Tokios Tokelės, ICSID Case No. ARB/02/18, Procedural Order 3, ¶ 13. I. 101 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction (Feb. 8, 2005), Decision on Provisional Measures (Sept. 6, 2005), Award (Aug. 27, 2008).


49.9% of the shares of the company operating the refinery, Nova Plama AD (“Nova Plama”). Shortly thereafter, differences arose between Plama and Bulgaria related to pre-existing debts incurred when the refinery was under State administration. Additionally, the parties had a dispute over the enactment of a new Environmental Protection Act in July 2002, which released Bulgaria from any historic liability concerning environmental contamination caused by State companies that had been subsequently privatized. According to Plama, this caused a negative impact on the refinery’s operations, as well as on Plama’s reputation and commercial market value. On December 24, 2002, under the Energy Charter Treaty and the Cyprus-Bulgaria BIT, Plama filed a Request for Arbitration before ICSID. Subsequently, a number of proceedings were initiated against Plama in Bulgarian courts. Among these was a bankruptcy process against Nova Plama, initiated by two private creditors: Yorset Holdings and DZI Bank. These creditors pursued the collection of the same debts that were subject to dispute in the ICSID arbitration. On July 19, 2005, the Court of the District of Pleven declared the bankruptcy of Nova Plama, ordering the company to cease its commercial activities and to sell its assets and distribute the proceeds among its creditors. Appealing this decision did not suspend its immediate execution. Moreover, in February 2005, the Antitrust Commission of Bulgaria instructed Nova Plama to reimburse Bulgaria for certain subsidies that the company had received in violation of antitrust laws. That decision was also immediately enforceable. At the same time, Bulgaria’s Credits Collecting Agency instituted a proceeding against Nova Plama to collect certain taxes and other public debts. In July 2005, Plama requested the ICSID Tribunal to issue provisional measures to enjoin the proceedings before Bulgarian courts and to prevent Bulgaria from carrying out any act that could aggravate the dispute.102 In support of its request, Plama invoked the exclusivity of the ICSID arbitration and the right to 102 Plama additionally requested that the Respondent abstain from adopting any action that could aggravate or extend the disputes submitted to the ICSID tribunal, and also to secure the payment of trial costs associated with the provisional measures requested.

2009] ICSID PROVISIONAL MEASURES 587 non-aggravation of the dispute. Moreover, Plama argued that the domestic proceedings would affect its right to continue operating its refinery. On September 6, 2005, the ICSID Tribunal dismissed Plama’s requests for the following reasons. First, none of the domestic proceedings violated ICSID’s exclusive jurisdiction. The Tribunal distinguished this case from CSOB, where a provisional measure to stay bankruptcy proceedings was granted. The material distinguishing fact in Plama was that creditors who were not parties to the ICSID arbitration had initiated the bankruptcy proceeding. On the issue of the antitrust and tax collection proceedings, the Tribunal found that those proceedings were at an administrative level only; the fact that those proceedings had not yet reached a judicial level was therefore material in this case. In addition, the Tribunal found that the antitrust claim and tax collection proceedings were not ICSID claims and, therefore, would not affect Plama’s claim. This reasoning relates to the necessity of any provisional measure, requiring a close connection between the domestic litigation and the ICSID proceedings. Second, there was no violation of the non-aggravation duty, which the Tribunal defined as “refer[ing] to actions which would make resolution of the dispute by the Tribunal more difficult.”103 In the Tribunal’s opinion, “it is a right to maintenance of the status quo, when a change of circumstances threatens the ability of the Arbitral Tribunal to grant the relief which a party seeks and the capability of giving effect to the relief.”104 Third, regarding the right to continue operating the refinery, the ICSID Tribunal noted that the “Claimant has not sought restitution or any other relief from this Tribunal which would permit it to continue to operate the Nova Plama refinery.”105 In the Tribunal’s view, “[b]ecause the claims and relief which the Claimant seeks are limited to damages, the scope of the ‘rights relating to this dispute,’ which deserve protection by provisional 103 Plama, ICSID Case No. ARB/03/24, Decision on Provisional Measures ¶ 45. 104 Id. 105 Id. ¶ 47.


measures, is necessarily limited to the damage claims.”106 Given that Plama had only claimed damages as a remedy, the Tribunal decided that the outcome of the local proceedings would not affect the Tribunal’s ability to render its final award.107 The logical extension of this argument is that the irreparable harm requirement would not be met either. In the words of the Tribunal: Whatever the outcome of the bankruptcy proceedings or the [antitrust] or [tax collecting] proceedings in Bulgaria is, Claimant’s right to pursue its claims for damages in this arbitration and the Arbitral Tribunal’s ability to decide these claims will not be affected. The Tribunal accepts Respondent’s argument that harm is not irreparable if it can be compensated for by damages, which is the case in the present arbitration and which, moreover, is the only remedy Claimant seeks.108 According to this reasoning, there is no violation of the non-aggravation duty if the harm caused by domestic litigation can be compensated by a damages award. A mere increase in damages would not constitute an aggravation of the dispute. The significance of this holding cannot be minimized. Had this only-more-damages argument been raised in earlier cases, it could 106 Id. ¶ 41. 107 The Tribunal held that the rights to be invoked by the parties should refer to the “rights in dispute” or, at least, to the “rights relating to the dispute” and that, consequently, they must be related to the arbitration. The rights to be preserved must relate to the requesting party’s ability to have its claims and requests for relief in the arbitration fairly considered and decided by the arbitral tribunal and for any arbitral decision which grants to the Claimant the relief it seeks to be effective and able to be carried out. Thus the rights to be preserved by provisional measures are circumscribed by the requesting party's claims and requests for relief. They may be general rights, such as the rights to due process or the right not to have the dispute aggravated, but those general rights must be related to the specific disputes in arbitration, which, in turn, are defined by the Claimant’s claims and requests for relief to date. Id. ¶ 40. 108 Id. ¶46.

2009] ICSID PROVISIONAL MEASURES 589 have been applied to dismiss the vast majority of the provisional measures requested, beginning with the first request made in Holiday Inns as, in nearly every case, damages were the only remedy being sought. Applying this principle, irreparable harm could therefore never be shown when the only remedy sought is damages. The “only-more-damages” argument thus carries the risk of being dispositive, regardless of the nature and characteristics of the investment disputes submitted to the ICSID, or of the facts in each case. Significantly, it could eliminate the chances of provisional measures awards in an ICSID arbitration, as the authority of ICSID tribunals to grant remedies other than damages can also be challenged. 3. Azurix109 – The urgency standard is objective – The only-more damages argument is not a valid basis to dismiss a provisional measure request On June 30, 1999, the Province of Buenos Aires entered into a 30-year concession agreement (“Concession Agreement”) with Azurix Buenos Aires S.A. (“ABA”), an Argentinean subsidiary of the U.S. company, Azurix Corp. The purpose of the Concession Agreement was to distribute potable water and to treat and dispose of sewage in Buenos Aires According to Azurix, Buenos Aires would breach the Concession agreement if it: (a) repudiated the contractual right to calculate tariffs in U.S. dollars; (b) failed to provide certain infrastructure contemplated in the Concession Agreement; or (c) failed to resolve historical problems that arose during the public administration of the company. Following an alleged breach of one or more of these provisions, in September 2001, Azurix initiated arbitration proceedings against Argentina before ICSID. During the course of the ICSID proceedings in 2002, Buenos Aires terminated the Concession Agreement on the grounds that ABA had not complied with the minimum investment requirements and that the quality of services provided did not meet standards provided for in the Concession Agreement. 109 Azurix Corp. v. Argentine Republic, ICSID Case. No. ARB/01/12, Decision on Provisional Measures (Aug. 6, 2003), Decision on Jurisdiction (Dec. 8, 2003), Award (July 14, 2006).


In February 2002, ABA filed for reorganization proceedings to avoid bankruptcy. The purpose of reorganization proceedings under Argentina’s Bankruptcy Law – like those provided in most national bankruptcy codes – is to allow the restructuring of a company’s liabilities and debts and to provide for payment terms that will allow the company to avoid bankruptcy. To accomplish that, the Bankruptcy Law requires that preventive agreements between the company and its creditors must be approved by 50% of the non-secured creditors, representing two-thirds of the creditors declared admissible by the bankruptcy judge. If majority approval is not obtained, any creditor may trigger the liquidation of the company.110 By resolution No. 46/02, dated May 27, 2002, the regulatory authority Organismo Regulador de Aguas Bonaerenses (“Authority”) declared that the termination of the Concession Agreement, due to ABA’s default, caused damage to Buenos Aires in the amount of A$173 million. Immediately following the Authority’s action, credit was verified before the bankruptcy judge, but it was limited to A$20 million. As a result, Buenos Aires became the key creditor in ABA’s bankruptcy proceedings. Azurix countered that the liquidation of ABA would automatically deprive ABA of its investment in Argentina and, therefore, it would not be allowed to appear in local administrative or court proceedings to defend its rights. To avoid that scenario, on July 15, 2003, Azurix filed a Request for Provisional Measures, asking the ICSID Tribunal to recommend that Argentina refrain from any action or omission capable of aggravating or extending the dispute, in particular with respect to the reorganization of ABA. According to Azurix, the provisional measures requested would preserve ABA’s right to continue or initiate administrative or judicial proceedings to defend its rights. The Tribunal determined that it was not in a position to recommend the provisional measures requested. The Tribunal reasoned that granting the request “would inevitably lead the Tribunal to prejudice the merits of the case before the Tribunal [would be] in a position [to consider the merits].”111 The Tribunal 110 Azurix, ICSID Case. No. ARB/01/12, Decision on Provisional Measures ¶¶ 4-6. 111 Id. ¶45.

2009] ICSID PROVISIONAL MEASURES 591 determined that the right invoked by Azurix was not protected by the provisional measures requested, because “the rights that the Tribunal may preserve with a recommendation of provisional measures are limited to those that the treaty accords to the investors of the nationality of the state parties.”112 Nevertheless, the Tribunal did ask the parties to “abstain from adopting measures of any character which could aggravate or extend the controversy submitted to arbitration.”113 This Tribunal viewed the urgency question somewhat differently than previous tribunals. Azurix became aware of the risk of bankruptcy liquidation triggered by Buenos Aires on October 10, 2002, when the bankruptcy judge accepted the credit verified by Buenos Aires in the reorganization proceeding. Azurix, however, waited more than nine months to ask the ICSID Tribunal to adopt a provisional measure to stop the proceedings. Unlike in Tokios Tokelés, where the Tribunal found that the party’s delay reduced the sense of urgency of their position, the Azurix Tribunal concluded that “the lack of explanation for this delay does not affect the urgent nature of the measure now requested. In fact, objectively, the delay has increased its urgency.”114 Regarding the irreparable harm requirement, one of Argentina’s arguments in opposition to the request was the “only-more-damages” argument raised in Plama. According to Argentina, “the new losses suffered by Azurix as a result of ABA’s liquidation could be compensated in the arbitration award.”115 In contrast to the Plama Tribunal’s holding , the Azurix Tribunal rejected the “only-more-damages” argument on the principle that “once a dispute is submitted to arbitration, the parties shall not take steps that may aggravate or extend their disputes or prejudice the execution of the award.”116 This represents an important shift from Plama, where the Tribunal held that the 112 Id. ¶43. 113 Azurix, ICSID Case. No. ARB/01/12, Award ¶¶ 11-13. 114 Id. ¶34. 115 Id. ¶21. 116 Id. ¶ 46.


obligation not to aggravate the dispute was unaffected by a mere incremental increase in damages even where damages were the sole remedy requested. 4. The Ecuadorian cases117 – The only-more damages argument is City Oriente a valid basis to dismiss a provisional Burlington measure request only if such Perenco damages resulted from the mere Repsol passage of time After the issuance of temporary restraining orders in each of these cases, the claimants raised the issue of provisional measures to stop parallel domestic litigation in Ecuador. Claimants asked for the protection of three rights in support of their respective requests for provisional measures: (a) the right to specific performance of the production-sharing contracts; (b) the right to non-aggravation of the dispute; and (c) the right to exclusivity of ICSID proceedings under Article 26 of the Washington Convention.118 The primary argument in support of the right to specific performance of the production-sharing contracts was that Law 42 117 Burlington Resources, Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/5 (Decision on Jurisdiction pending); City Oriente Limited v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/06/21 (discontinued following settlement on Sept. 12, 2008); Perenco Ecuador Limited v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/6 (tribunal reconstituted May 6, 2010); Repsol YPF Ecuador, S.A. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No. ARB/08/10 (claimants’ memorial on the merits filed Dec. 17, 2009). The facts of these cases were explained in detail in the previous section. 118 The legal discussion in Repsol was slightly different than in the other cases. After submitting the Request for ICSID Arbitration, Repsol and Petroecuador agreed to modify the underlying production sharing contract. Therefore, the focus of the discusion triggered by the provisional measure requested in this case was to determine if Ecuador was obliged to stay the collection proceedings under the amended agreement. For this reason, the Repsol Tribunal did not undertake a thorough analysis of the traditional requirements to grant provisional measures, i.e. urgency, necessity and irreparable harm, as well as the rights to be protected by provisional relief. Repsol, ICSID Case No. ARB/08/10, Provisional Measure Decision (June 17, 2009).

2009] ICSID PROVISIONAL MEASURES 593 and Decree 662 implied a breach of the production-sharing contracts by Ecuador and, therefore, the claimants were entitled to sue for contract performance. Section 1505 of the Ecuadorian Civil Code provides that the party in bonis may choose between contract performance and contract termination, with a claim for damages in either case; the Claimants chose to demand contract performance. Thus, the provisional measures that Claimants requested were designed to preserve the effectiveness of an expected award that would grant the remedy of contract performance. In order to recommend the provisional measures claimants requested, the Tribunals had to find that contract performance was a feasible and lawful remedy in an ICSID arbitration. That was not easy to conclude in light of the Occidental Tribunal’s dismissal of provisional relief on the grounds that specific performance was not an available remedy.119 To reach this seemingly opposite conclusion, the City Oriente, Perenco and Burlington Tribunals distinguished the underlying facts of their respective cases from the Occidental case. The first factual distinction was that Ecuador had already terminated the production-sharing contract in Occidental when the claimants filed their request for arbitration. This meant that Occidental was claiming the restitution of a concession Ecuador had already taken over. By contrast in these new cases, the claimants requested that the Tribunal order Ecuador to comply with contractual commitments undertaken in the production-sharing contracts. 119 Occidental Petroleum, ICSID Case No. ARB/06/11, Decision on Provisional Measures ¶¶ 66, 75, 79, 82, and 93 (Aug. 17, 2007). The Occidental Petroleum Tribunal analyzed the theoretical existence of the right to restitution of Occidental’s contractual rights to carry out the exploration and exploitation of the concession. The ICSID Tribunal held that this right would be conditioned on the possibility or impossibility to reinitiate the operations of the concessions. In the view of the Occidental Petroleum Tribunal, to carry out this right would be “legally impossible” given that the contracts had been cancelled in the exercise of a State’s sovereignty. Forcing Ecuador to reverse these actions and reinstate the rights of the investor to resume the operations in concession would impose an excessive burden on the State – conduct forbidden by Article 35 of the ILC Articles on State Responsibility. The Occidental Petroleum Tribunal thus determined that forcing a sovereign State to restore a concession after nationalization or termination would constitute a disproportionate reparation that would interfere with the sovereignty of such State.


The second factual distinction was that Occidental concerned purely an investment treaty claim. In City Oriente, Perenco, Repsol and Burlington, however, the Tribunals had to examine the provisional measures requested in the context of a contractual case subject to Ecuadorian law. This difference was material. The Occidental Tribunal concluded that “in arbitration proceedings subject to international law, a claimant cannot demand performance of a contract previously terminated by the State by virtue of its sovereign powers.”120 The Tribunals in these new cases found that an ICSID dispute based on a contract violation subject to domestic law was outside the scope of Occidental. Thus, the Tribunals gave leave to the Claimants to request contract performance as a remedy before ICSID, therefore permitting provisional measures to be used to protect the effectiveness of an award.121 Since the right invoked in support of the provisional measure request was the same as the right that was part of the ICSID dispute and not a self-standing right, the discussion focused on the plausibility of Claimants’ right. Ecuador argued that City Oriente mistakenly referenced Section 1505 of the Civil Code, a section that allegedly did not apply because the production-sharing contract was an administrative contract. In the view of the City Oriente Tribunal, “the party requesting the measure need only prove that its claim has the appearance of good right, fumus boni iuris, or, in other words, the petitioner must prove that the rights invoked are plausible.” Following this line of reasoning, the Tribunal found that this requirement was met because an Ecuadorian High Court issued at least one decision “where Section 1505 of the Civil Code was applied to a contract entered into by and between a private person and a public body, where the Court admitted Plaintiff's claim and ordered the public entity to perform its contractual duties.”122 120 City Oriente, ICSID Case No. ARB/06/21, Decision on Revocation of Provisional Measures ¶ 43. 121 Id.; Perenco, ICSID Case No. ARB/08/6, Provisional Measures Decision ¶ 48; Burlington, ICSID Case No. ARB/08/5, Provisional Measures Decision ¶¶ 70-71. 122 City Oriente, ICSID Case No. ARB/06/21, Decision on Revocation of Provisional Measures ¶¶ 20, 21 and 38.

2009] ICSID PROVISIONAL MEASURES 595 Ecuador raised another related argument: that Law 42 should be qualified as a new legal obligation, rather than as a contract modification. The City Oriente Tribunal also rejected this contention because “City Oriente has a right to have the status quo ante maintained for as long as these arbitration proceedings are pending, and that the Contract continues to be regularly performed as agreed to by the parties … and it also has a right to request that Petroecuador and Ecuador refrain from adopting any unilateral compulsory or coercive measure impairing contractual balance.”123 Second, as to the right to the non-aggravation of the dispute, one of Ecuador’s contentions was that “there is no general, autonomous and abstract principle to prevent the aggravation of the dispute that would automatically justify the passing of provisional measures,”124 and that the preservation of the status quo and the non-aggravation of the dispute were not “free standing rights in international law, independent from contractual or treaty rights.”125 The Tribunals rejected this argument. In particular, the Burlington Tribunal held that: the rights to be preserved by provisional measures are not limited to those which form the subject matter of the dispute, or substantive rights as referred to by the Respondents; [and further, those rights] may extend to procedural rights, including the general right to the

status quo and to the non-aggravation of the dispute. These latter rights are thus self-standing rights.126 123 Id. ¶33. 124 Id. ¶24. 125 Burlington, ICSID Case No. ARB/08/5, Decision on Provisional Measures ¶ 39. 126 Id. ¶ 60. The right to the preservation of the status quo was also discussed in these cases. Although closely linked to the right to the non-aggravation of the dispute, it has its own analysis in City Oriente. In this case, the Tribunal set forth that “The sole purpose of the Provisional Measures is to maintain the status quo ante while a decision is pending on this proceeding and while the Tribunal determines who is right under Ecuadorian Law, chosen by mutual agreement of the parties as applicable laws.” City Oriente, ICSID Case No. ARB/06/21, Decision on Revocation of Provisional Measures ¶ 92.


Ecuador raised a second defense to the irreparable harm requirement; that is, that an increase in damages could never constitute sufficient grounds for the recommendation of provisional measures – such damages could be compensated in the final award. This was the same only-more-damages argument that was accepted in Plama, rejected in Azurix, and later revived and followed in Occidental. Because Occidental was a closely-related case, most of the ICSID Tribunals in the related cases were obliged to deal with this issue again. The Occidental Tribunal held that the mere incremental increase in eventual damages suffered by the claimant does not justify provisional measures, making a clear statement that “provisional measures are not designed to merely mitigate the final amount of damages.”127 The Occidental Tribunal stated: [It] is not directed at the non aggravation of the dispute, but merely at the non increase of alleged damages; it is not a provisional measure that the Tribunal can order … the harm in this case is only “more damages”, and this is harm of a type which can be compensated by monetary compensation, so there is neither necessity nor urgency to grant a provisional measure to prevent such harm.128 Once again, these Tribunals did not follow the Occidental approach of only-more-damages. The Burlington Tribunal was particularly clear, holding that “[u]nlike Occidental, this case is not one of only ‘more damages’ caused by the passage of time. It is a case of avoidance of a different damage. The risk here is the destruction of an ongoing investment and of its revenue-producing potential which benefits both the investor and the State.” 129 In essence, the Burlington Tribunal adopted the only-more-damages argument used in Occidental, but it reduced its scope to cases where “more damages” resulted from the “mere passage of time.” Thus, it can be argued that more damages caused 127 Occidental Petroleum, ICSID Case No. ARB/06/11, Decision on Provisional Measures ¶¶ 96, 97. 128 Id. ¶¶ 98, 99. 129 Burlington, ICSID Case No. ARB/08/5, Decision on Provisional Measures ¶ 83- 84.

2009] ICSID PROVISIONAL MEASURES 597 by specific actions that are initiated by sovereign states are outside the scope of Occidental. In Occidental, the “more damages” were being caused by the ship-or-pay related contracts. Consequently, the “more damages” resulted from keeping the status quo and, as such, were caused by the “mere passage of time.” However, that was not what happened in Plama, where “more damages” resulted from the ongoing bankruptcy, antitrust and tax collection domestic proceedings. After dismissing each of the arguments raised by Ecuador, on November 19, 2007, the City Oriente Tribunal granted the provisional measure requested and confirmed its decision on May 13, 2008, by dismissing a request for revocation of the provisional measures. Later, in May 2009, the Perenco Tribunal also granted the provisional measure; the Repsol and Burlington Tribunals made their favorable recommendations in June 2009. In City Oriente, Perenco and Burlington, as a counterbalance to their recommendations of provisional measures, the ICSID tribunals also ordered that the claimants deposit in an escrow account all payments allegedly due under Law 42 and that those funds shall only be released in accordance with a final award. In the next and final section, a new test is suggested from the ICSID case law. This test is designed to be sensitive to the tension between ICSID and domestic jurisdictions and to take into consideration the self-standing and procedural nature of the rights usually invoked in support of provisional relief in cases of parallel domestic litigation. IV. CONCLUSION: REDEFINING THE TEST FOR GRANTING PROVISIONAL RELIEF IN CASES OF PARALLEL DOMESTIC LITIGATION

Provisional measures are set forth in Article 47 of the Washington Convention and in Rule 39 of the ICSID Arbitration Rules. Although these regulations establish that ICSID tribunals can only recommend the adoption of provisional measures, today there is agreement that ICSID tribunals are actually empowered to order these measures. This empowerment is particularly important in cases of parallel domestic litigation as Sovereigns are sometimes tempted to initiate domestic proceedings against foreign investors as a counter-reaction to filing an ICSID claim against them. This situation is especially critical since parallel


domestic litigation has been involved in more than 50% of all provisional measures cases in ICSID history. A detailed review of these cases reveals two main features with respect to parallel proceedings. First, in cases of parallel domestic litigation, a jurisdictional tension is present between the ICSID authority to rule on the investment dispute and the national courts to decide the underlying domestic controversy. Second, the rights invoked in support of the request to enjoin domestic proceeding are self-standing rights that are not at issue in the investment dispute. As to the jurisdictional struggle between ICSID and domestic courts, ICSID tribunals have tried to reach a balance between their authority to decide the investment dispute and the powers of sovereigns to carry out their own domestic proceedings. Thus, ICSID tribunals, on one hand, have tended to limit the scope of Article 26 of the Washington Convention to cases where the exclusivity of ICSID jurisdiction is clearly in peril so as to not affect the ordinary power of domestic courts and, on the other hand, have strengthened the enforceability of provisional measures once granted, considering them as proper orders. In this sense, ICSID Tribunals have considered that, as a general rule, (a) only judicial proceeding – and not administrative proceedings – are capable of interfering with ICSID jurisdiction; (b) judicial proceeding should have been initiated after the ICSID controversy was crystallized; (c) provisional measures should not be too broad; and, finally (d) there has to be a close relationship between the investment dispute and the domestic controversy. As to the rights invoked to enjoin parallel domestic proceedings, they consist mostly of the exclusivity of ICSID jurisdiction set forth in Article 26 of the Washington Convention and the non-aggravation of ICSID disputes derived from Article 38(1) of the Statute of the International Court of Justice. Such rights are self-standing rights that are not part of the underlying investment controversy. They are also post-investment dispute rights that came attached to the ICSID proceedings. This is a critical feature compared to the vast majority of provisional measure cases in international arbitration where the rights to be protected and the rights underlying the arbitration claims are the same. ICSID tribunals have not yet adequately addressed this distinction.

2009] ICSID PROVISIONAL MEASURES 599 The exceptional features of the provisional measures cases involving parallel domestic litigation require a rethinking of the traditional three-prong test of urgency, necessity and irreparable harm usually required to grant provisional relief. The analysis that ICSID tribunals undertake for deciding whether to order to enjoin a domestic proceeding (a) has to be sensible to the jurisdictional tension that is present between ICSID and domestic courts, and also (b) has to properly take in consideration the self-standing rights to which both parties are entitled: the right not to aggravate the ICSID controversy and the right to the ICSID exclusive forum to decide the investment dispute. Accordingly, some distinction needs to be made depending upon the nature of the parallel domestic proceedings:

First, if the domestic litigation is an administrative proceeding, the right invoked in support of the provisional measure requested should not be the exclusivity of ICSID jurisdiction because there is no jurisdictional conflict unless such administrative proceeding could render the ICSID jurisdiction ineffective. As a general rule, to enjoin administrative proceedings, the more appropriate right to invoke is the non-aggravation of the ICSID dispute. ICSID tribunals are more free to order the suspension of administrative proceedings to the extent that those proceedings may aggravate the dispute. Second, if the domestic litigation is a judicial proceeding, a special test must be applied in order to strike a balance between the autonomy of domestic courts and the supremacy of international tribunals, while also optimizing and protecting the rights involved in these cases. With these factors in mind, and in light of the evolution of ICSID case law on this matter, a tailored test to apply in cases involving provisional measures to enjoin judicial parallel domestic proceedings should take in consideration the following four steps: Step 1: Strong case for ICSID jurisdiction Given the struggle between ICSID arbitral proceedings and domestic courts, the existence of a prima facie case of ICSID jurisdiction to grant provisional relief in cases of parallel domestic


litigation should be more rigorous than in other cases of provisional measures where this conflict is absent. In addition, before deciding on enjoining a domestic judicial proceeding, the ICSID tribunal should briefly verify whether the jurisdictional requirement are prima face met in a more accurate way than required to merely register the ICSID case under Article 28(3) of the Washington Convention, but less rigorous than considered necessary for a decision on jurisdiction. This provides a means to balance the tension between ICSID and domestic tribunals, and thus avoid the risk of ICSID enjoining parallel proceedings only to later dismiss the claims for lack of their own jurisdiction. In other words, in cases of parallel domestic litigation, a strong case on ICSID jurisdiction is required rather than a strong case on the merits. Step 2: Close proximity between the domestic proceeding and the ICSID arbitration The main purpose behind provisional measures to enjoin domestic litigation under Article 26 of the Washington Convention is to protect ICSID’s exclusive jurisdiction. Therefore, one of the primary factors to be considered in determining whether to grant a provisional measures request is the extent to which the domestic proceedings are closely linked to the ICSID arbitration. Only parallel jurisdictional domestic litigation is within the scope of Article 26 of the Washington Convention. There should be a close relationship between the domestic proceedings and the ICSID arbitration. In this sense, among the factors to be considered by the ICSID tribunal in establishing the close proximity between the two proceedings are: (a) whether the identity of the parties involved in such proceedings are the same; (b) whether the domestic claim was motivated by the ICSID claim; (c) whether the outcome of the domestic proceeding would affect the effectiveness or enforceability of the ICSID award; (d) whether the domestic proceeding is being used to obtain unfair evidence to be used in the ICSID arbitration; and (e) whether the outcome of such domestic proceeding would affect the understanding of any of the legal issues involved in the ICSID arbitration. Step 3: Deference to domestic courts Even in cases where the ICSID arbitration and the domestic proceedings are closely linked and where there is a strong case for jurisdiction, the ICSID tribunal may still decline to grant a

2009] ICSID PROVISIONAL MEASURES 601 provisional measure request to stop a domestic proceeding on policy grounds. Denials for policy reasons might occur when the ICSID tribunal considers that: (a) the domestic court has not been fully informed about the existence of an ICSID arbitration; (b) rights of innocent third parties might be affected; (c) the measure requested is too broad; or (d) provisional measures will interfere with a sovereign’s policies that go beyond private interests of foreign investors. Step 4: Urgency ICSID tribunals have taken two different approaches in applying the urgency prong of the existing test: one is objective, the other subjective. Ultimately, this discussion relates to the effects of the petitioner’s delay in asking for provisional relief. Although the implications of delay should be analyzed on a case-by-case basis, it seems reasonable that, in cases involving the right to exclusivity of ICSID jurisdiction, an objective test for urgency should be used. Urgency is the only element of the classic three-prong test of urgency, necessity and irreparable harm that applies in parallel domestic litigation scenarios, but it is redefined as an urgency to avoid a harm to the right to exclusivity of ICSID jurisdiction. It is not necessary that the harm be irreparable as the rights protected by provisional measures in a parallel domestic litigation scenario are independent self-standing procedural rights, unrelated to the substance of the dispute. The requirement to show irreparable harm as a condition to grant provisional relief in cases of parallel domestic litigation would cause unfair and excessive interference with those rights. The traditional element of necessity and the redefined harm requirement are conceptually included in the close proximity step of this test. In sum, the evolution of ICSID case law regarding provisional measures shows that the traditional urgency, necessity and irreparable harm test needs to be redefined in cases of provisional measures to enjoin parallel domestic litigation. These cases have a unique status due to the tension between the supremacy of international tribunals and the autonomy of domestic courts, and also because they are aimed at protecting procedural rights that are not disputed in the ICSID arbitration. For these reasons, a more tailored test of when such relief should be granted must be used.


RODRIGO GIL Rodrigo Gil is a law professor at the University of Chile School of Law and senior associate in the international arbitration group of Bofill Mir & Alvarez Hinzpeter Jana, Santiago, Chile. He has experience in investment arbitration, representing both foreign investors and sovereigns, as well as in commercial arbitration. Mr. Gil obtained his Law degree from Universidad de Chile (1999) and his LL.M. at Berkeley Law School, California in 2008 (Fulbright Scholar). He worked in the international arbitration team of Arnold & Porter LLP in Washington D.C. and London in 2008 and 2009. Mr. Gil can be reached at [email protected].

ICSID Provisional Measures to Enjoin Parallel Domestic Litigation (R.gil)

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