ANALYSIS: Why it’s important to read between the lines of UNCTAD’s annual review of investor-State dispute settlement cases
The UN Conference on Trade and Development (UNCTAD)* has recently published its annual snapshot of known arbitration claims under international investment treaties.
Drawing upon published reports of claims filed last year, the UNCTAD has tallied a total of 57 claims. (One of these cases later emerged to have been filed in 2012, thus reducing the number of documented claims to 56.**)
The largest proportion of “known” cases launched in 2013 – 31 of 56 – were initiated at the International Centre for Settlement of Investment Disputes (ICSID).
As a resource for readers, we’ve listed all 56 cases here, as well as links to where you can learn more about each claim. While the list is extremely useful as a snapshot of our current knowledge of new claims, several cautions are discussed below.
ICSID cases will be over-represented, for the time being
I’ve assisted UNCTAD on some of their earliest efforts to tally investment treaty claims, and I always look forward to their annual updates. However, it’s important for casual readers to recognize that an annual accounting of the previous year’s “known” claims will always be highly distorted in favor of one particular arbitral forum: the International Centre for Settlement of Investment Disputes (ICSID).
Although investment treaties frequently offer more than one forum for resolving disputes – including ICSID, UNCITRAL and (less often) commercial arbitration rules like those of the Stockholm or International Chambers of Commerce – only claims filed under the ICSID rules come to immediate public attention. (The ICSID’s own regulations mandate that all claims registered there will be disclosed to the public.)
By comparison’s sake, claims initiated under the UNCITRAL, ICC, Stockholm or some other rules can be initiated without similar publicity, and may not become “known” to the public for months, years or perhaps ever.
Thus, while UNCTAD’s latest review found only 26** claims cropping up outside of ICSID last year, experience teaches us that many more will emerge in the fullness of time.
By way of example, when UNCTAD tallies were made for previous years, some of the most notable cases launched in the relevant year were not yet a matter of public record and, as such, were not reflected in the UNCTAD survey for that year.
For instance, a claim by the Al Kharafi construction company against Libya was launched in 2011, but came to public notice only in 2013 when one of the largest investment awards in history was rendered in favour of the claimant. However, the initial secrecy surrounding the claim meant that it was not counted as part of UNCTAD’s tally of 2011 claims.
Similarly, another high-profile claim, the White Industries v. India case – was launched in 2010 without any publicity or fanfare, thus ensuring that when UNCTAD issued a tally of 2010 claims in March of 2011, the case went undocumented. The arbitration came to light only in July of 2011 when IAReporter reported upon its existence.
With time, a very different picture will emerge as to where claims are filed, and how many there are
Only after the passage of several years can we begin to glimpse the degree of distortion that may lurk in initial end-of-year attempts to document the cases filed in the preceding 12 months.
A case-study of the year 2010 is useful in this regard.
In March of 2011 UNCTAD published a tally of known claims filed in 2010, documenting a total of 25 known cases. Of these, the large majority (18) were filed at ICSID.
However, since March 2011, at least 8 more claims that were launched outside of ICSID in 2010 have come to our attention.
These cases are:
• White Industries v. India,
• ST AD v. Bulgaria,
• Michael L. McKenzie v. Vietnam,
• JSC BTA Bank v. Kyrgyzstan,
• Farouk Bozbey v. Turkmenistan,
• RSM v. Ecuador,
• two claims that the Stockholm Chamber of Commerce registered in 2010, but whose identities remain confidential.***
Thus, when measured with the benefit of more hindsight, the number of claims filed in 2010 outside of ICSID is actually more than double what we thought. Far from a marginal 7 cases, it now emerges that at least 15 cases were filed that year under UNCITRAL or other non-ICSID auspices.
Indeed, there may be others that are already on the public record, but which elude my memory at time of this writing. If I were obliged to wager, I’d bet that by the time we reach the 5 year anniversary of UNCTAD’s report on 2010 claims, the number of cases revealed to have been filed outside of ICSID, will eclipse the number (18) brought to ICSID in that year.
In other words, we will have gone from a preliminary snapshot that suggested ICSID was the center of the IIA disputes universe that year – handling nearly 4 of every 5 known claims – to a picture that shows that ICSID handled only about 1 in 2 known claims that year.
Precisely because so many non-ICSID claims begin their lives burrowed deep underground, UNCTAD rightly caveats each year’s annual report on IIA claims by noting that they are tallying up only the “known” claims at the time of writing.
However, unless readers continue to keep score in the months and years after the publication of those annual reports, they may be left with the impression that ICSID “dominated” a given year – when, in the fullness of time, the picture is very different.
Countries may sit at the top of the list of most-sued states due to their own openness to transparency – or their posture towards consolidation of claims
For the same reasons that we should bear in mind how many non-ICSID claims may be lurking uncounted, we should also look with a skeptical eye at the list of countries that feature as the most frequently-sued respondents in UNCTAD’s annual reports.
According to UNCTAD’s snapshot of 2013, the respondents sued most frequently were:
• The Czech Republic (7),
• Egypt (6),
• Spain (6),
• Uzbekistan (4),
• Canada (3).
However, only in the fullness of time will we come to learn whether other countries warranted a spot on this Top 5 list due to their having been sued frequently in 2013, but with some of those claims remaining confidential initially.
Indeed, countries can secure themselves an initial spot on the list of repeat-offenders due to their own policies of transparency.
Canada, for instance, has a policy of disclosing all treaty-based claims against it, be they ICSID or UNCITRAL claims. For all we know, Angola, China, Russia, or any number of other less-transparent nations could have as many (or more) claims filed against them in a given year. However, if such claims were lodged outside of ICSID, then they might go undocumented when preliminary tallies are made of a given year’s known cases.
In a related vein, strategic decisions taken in defence of arbitral claims can also catapult a country onto the “most-sued” list. The Czech Republic sits atop UNCTAD’s latest rankings as the country known to have been sued most often in 2013. But, as we revealed in January of this year, the Czech Republic merits that ranking as a result of its own choice to block a group of investors from bringing claims in a single consolidated proceeding, and insisting instead that six parallel claims be arbitrated.
(Indeed, another country, Turkmenistan, that did not merit a place on UNCTAD’s top-5 list could yet emerge to be the country with the single-most claims filed against it in 2013, depending upon the outcome of an ongoing process to deconsolidate a multi-party claim filed against that nation.)
While UNCTAD’s annual tally of known claims filed in the previous year offers a helpful run-down of new claims, it can only offer a snapshot of what is in front of the camera at the time that the photo is taken.
Over time, our first impressions as to which institutions or rules were most utilized, as well as which countries were sued most frequently, may shift significantly.
In the mean time, UNCTAD’s preliminary snapshot remains useful, and as a service for readers we’ve listed the 56 known cases here (along with links to where you can learn more about each case.)
|* The UNCTAD is a specialized UN agency focusing on trade and development issues, it is not to be confused with the UNCITRAL, the UN agency that has developed a set of arbitral rules that are widely used in international arbitration.** The Charanne and Construction v. Spain case is listed in UNCTAD’s tally for 2013, however the case was launched in 2012 at the Stockholm Chamber of Commerce, under the case number 062/2012. (UPDATE, March 13, 2014: Thus, strictly speaking, the actual number of known non-ICSID cases should be 25, not 26.)
*** The SCC, in a communication with IAReporter, indicated that it registered two BIT cases that year: one involving a Luxembourg-based investor vs. an EU state and another by Russian investors vs. a CIS state. (These cases are in addition to one other treaty-based claims filed that year, Ascom and Stati v. Kazakhstan, and which has long been publicly known.)