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As new case lands at ICSID, and several more loom, Bolivia turns up the heat on arbitral system
publication date: Apr 22, 2010
By Luke Eric Peterson
On the heels of a politically-embarrassing provisional measures decision* issued by an arbitral tribunal at the International Centre for Settlement of Investment Disputes (ICSID), the Republic of Bolivia has reacted by demanding the disqualification of all 3 tribunal members. According to a source familiar with the request, Bolivia contends that the arbitrators are prejudiced against the government, and fail to meet the “impartiality” criterion imposed by the ICSID system. Under the ICSID rules, a challenge to an entire tribunal would be adjudicated by the Chairman of ICSID Administrative Council (i.e. the World Bank President). However, in view of Bolivia’s record of antipathy towards ICSID (see below), it remains to be seen whether the Centre would hand the challenge off to some outside body. On occasion, the Centre has done this where challenges have been made to arbitrators with prior ties to the World Bank (for e.g. Andres Rigo Sureda, a former senior World Bank lawyer). Relations with ICSID go from bad to worse The latest move by Bolivia marks a dramatic escalation of hostilities between the country and an arbitral institution from which the government has sought to distance itself in recent years. In 2007, Bolivia withdrew from ICSID, complaining that the Centre was biased towards foreign investors. However, Bolivia’s withdrawal did not sever all ties with the Washington-based Centre. One pre-existing arbitration, the Quiborax claim, continued to be arbitrated at the Centre, while another lodged by a Telecom Italia subsidiary in 2007 was pursued for nearly two years before an agreement was struck to move the dispute to ad-hoc arbitration.** More recently, a US energy company has sought ICSID arbitration in relation to the nationalization of its stake in a Bolivian energy company. PanAmerican contends that the move by Bolivia to nationalize its 51% shareholding in the Chaco energy company breached protections contained in the US-Bolivia bilateral investment treaty by failing to provide full compensation. In an S.E.C. filing, BP plc, a part-owner of PanAmerican, has said that Bolivia offered inadequate compensation for the nationalized shares, and that the company would pursue claims for full compensation. Although Bolivia has objected vociferously to new claims being brought to the ICSID following the 2007 announcement of the country’s withdrawal from ICSID, PanAmerican is expected to argue that it was one of several multinational energy firms to put Bolivia on notice in 2005 of potential arbitration of claims arising out of the country’s nationalization plans for the energy sector. As such, this consent or acceptance of Bolivia’s offer to arbitrate at the ICSID would have been in place long before the country gave notice in May of 2007 to withdraw from the ICSID. The government has yet to make known its response to PanAmerican’s claim. However, in recent months, Bolivia’s posture towards international arbitration has hardened. Apart from the recent challenge to the tribunal in the Quiborax arbitration, the government has also undertaken a purging of the government department charged with defending the Bolivian state in arbitration matters, and there has been a parting of ways between the Republic and its former outside legal advisors. Although the government has retained new outside counsel, the law firm Dechert, it remains to be seen whether the government will cooperate with ongoing arbitrations, and any new claims that are coming online. In addition to the PanAmerican claim at ICSID, a German firm OilTanking GmbH is in the early stages of pursuing an ad-hoc arbitration claim for the nationalization of its stake in the energy pipeline firm Compañía Logística de Hidrocarburos Boliviana (CLHB) Meanwhile, IAReporter can reveal that at least two other investors, the Spanish airport operator Albertis and an air transport arm of BP plc have put Bolivia on notice of potential investment treaty claims. Bolivia’s state ministry in charge of representing the state in arbitration did not respond to a request for comment from IAReporter. PanAmerican is represented by the law firm Freshfields.
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