[ssf] [Fwd: [GATScrit] MFN Shopping in BITs]

[Chris Malins]

This is an interesting ruling to those (like me) who believe that the 
subtleties of trade law are where its at. The principle at stake is that 
should a country have two different trade treaties with

The macroscopic interpretation of this is that if, say, a country were 
to take the step of guaranteeing local input in trade related decisions, 
or additional environmental scrutiny, but had not made these strictures 
in some previous treaty, then a company could challenge the process and 
demand a more trade friendly dispute settlement structure.

Chris
-------- Original Message --------
Subject: [GATScrit] MFN Shopping in BITs
Date: Thu, 21 Jul 2005 18:23:31 +0200
From: Riaz Tayob <riazt at IAFRICA.COM>
To: GroupSEATINI <seatini at yahoogroups.com>,  GATSCrit List 
<GATSCrit at yahoogroups.com>

4. Tribunal OKs treaty-shopping for better arbitration options in Gas 
Natural case,
By Luke Eric Peterson

Another international arbitral tribunal has weighed in on the question 
as to whether “Most-Favored Nation” treatment offers foreign investors 
access to more favorable dispute resolution options found in other 
treaties.


In a jurisdictional decision rendered on June 17, 2005, a tribunal 
presiding over a claim by Spanish company Gas Natural SDG S.A. against 
Argentina ruled that the most-favored nation clause of the 
Spain-Argentina bilateral investment treaty entitled the investor to 
invoke more favorable dispute resolution provisions found in another 
investment treaty signed by Argentina with the United States. (Gas 
Natural is seeking compensation for losses to its shareholding in 
Argentine gas firm Buenos Aires Norte (BAN) following measures taken by 
Argentina during its financial crisis.)

The immediate upshot of the ICSID decision is to permit Gas Natural to 
ignore a requirement in the Spain-Argentina BIT for investors to have 
recourse to local courts for a period of 18 months, prior to turning to 
international arbitration of disputes under the treaty.

The tribunal, consisting of Mr. Henri C. Alvarez, a Canadian lawyer, Dr. 
Pedro Nikken, a former Judge of the Inter-American Court of Human 
Rights, and Andreas Lowenfeld, a Professor at New York University, 
rejected Argentina’s contention that the MFN clause extended to 
substantive investment protections, but not to procedural matters.

Lluis Paradell, of the law firm Freshfields Bruckhaus Deringer, 
represented Gas Natural in the arbitration. He says that the decision is 
notable because it reaffirms a decision in an earlier ICSID case 
Maffezini v. Spain. Paradell also notes that the tribunal seems to have 
gone further in deeming access to arbitration to be an integral part of 
the bundle of “substantive” rights offered in an investment treaty. In 
its reasoning, the tribunal ruled that access to “independent 
international arbitration is an important - perhaps the most important – 
element in investor protection.”

The tribunal did take note of another arbitral decision, Salini v. 
Jordan, which touched upon the perennially thorny MFN issue - and which 
reined in the use of the MFN clause in another context. Perhaps more 
notable, however, was the failure of the Gas Natural tribunal to discuss 
a second recent arbitral decision rendered at ICSID in the case of Plama 
Consortium Limited v. Republic of Bulgaria. The Plama case was decided 
some time after arguments had been made in the Gas Natural case; however 
it was published several months before the Gas Natural tribunal issued 
its decision in June of this year. In the Plama case, an ICSID tribunal 
rejected an effort by the foreign investor to use an MFN clause to lay 
claim to better arbitration provisions found in another investment 
treaty signed by Bulgaria. Indeed, the tribunal ruled that the MFN 
clause did not apply to procedural matters because there was no express 
indication of such scope in the relevant treaty.

By contrast, the Gas Natural tribunal reached what Lluis Paradell 
characterizes as an opposite reading, when it gave the benefit of the 
doubt to investors in ruling that “Unless it appears clearly that the 
state parties to a BIT or the parties to a particular investment 
agreement settled on a different method for dispute resolution of 
disputes that may arise, most-favored-nation provisions in BITs should 
be understood to be applicable to dispute settlement.”

Apart from the MFN question, the tribunal in the Gas Natural claim also 
rejected arguments by Argentina which would have denied jurisdiction to 
hear the case on the grounds that it dealt with non-arbitrable “measures 
of general economic policy” and that, as an indirect shareholder in an 
Argentine gas firm, Gas Natural could not bring claims under the 
Spain-Argentina BIT.

After rejecting both of these jurisdictional objections, the tribunal 
paved the way for the claim to be heard on the merits. Whether or not 
the case will proceed, remains unclear. As was reported in this News 
Bulletin in March, Gas Natural has agreed to withdraw its claim at 
ICSID, and is pursuing a negotiated settlement with Argentine 
authorities, including renegotiation of its contracts. For the moment, 
however, the ICSID arbitration remains open.

Sources:

Gas Natural SDG S.A. v. Argentine Republic, Decision of the Tribunal on 
Preliminary Questions of Jurisdiction, ICSID Case No. ARB/03/10, June 
17, 2005

Available on-line at: http://ita.law.uvic.ca/alphabetical_list.htm#gi or
INVEST-SD: Investment Law and Policy News Bulletin, July 13, 2005

Published by the International Institute for Sustainable Development
(http://www.iisd.org/investment/invest-sd/)

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