International investment arbitration – also known as investment treaty arbitration or investorState arbitration – is a procedure whereby foreign investors may seek a binding adjudication of claims against host States that have either violated investment protection treaty obligations or, in some circumstances, breached their contractual commitments or their national foreign investment law. The countries of Asia are party to numerous bilateral and multilateral investment treaties which are intended to promote investment by ensuring fair treatment of foreign investors and which permit arbitration of investor claims before the International Centre for Settlement of Investment Disputes (ICSID) or similar fora. Economic activity in Asia cooled in early 2014 and failed to deliver an expected rebound in the second half of the year. Growth in China and India started off strong at 7.5 percent and 5.4 percent respectively. While India continued to grow, China’s growth declined in the third quarter of 2014 and beyond. Japan’s economy contracted in the second quarter and failed to make a predicted rebound, falling into a recession. With the exception of Thailand, which faced economic repercussions of political tension and regime change, the member countries of the Association of Southeast Asian Nations (ASEAN) experienced steady growth in the first half of 2014. China’s slowdown exerted downward pressure on emerging Asian economies as the year progressed. The number of new investment arbitrations in Asia in 2014 returned to the level of previous years in which 3-5 new cases have been initiated annually, after a dip in 2013 (in which only one new case was initiated). Disputes have arisen most frequently in the oil, gas and mining, electric power and other energy industries, although the construction and finance industries also see multiple pending disputes. Indeed, two construction arbitrations were initiated in 2014 as compared with oil, gas and mining’s one. Countries in the region have concluded at least 1,273 investment treaties (including bilateral investment treaties, free trade agreements and other treaties containing investment-related provisions). Almost 14 percent of the region’s investment treaties are intraregional (i.e., concluded between only Asian countries), as are almost 14 percent of the region’s investment disputes. For purposes of this review, continental Asia includes those countries grouped as Eastern Asia, Southern Asia, and South-Eastern Asia by the United Nations Conference on Trade and Development (UNCTAD). It does not include Central or Western Asian countries, some of which are represented in our review of investment arbitration in Russia and the Commonwealth of Independent States. Elevator Speeches International Investment Arbitration in Asia: Year in Review 2014 INTERNATIONAL ARBITRATION TEAM For questions about international investment arbitration, please contact a member of our International Arbitration Team, or the authors of this review: Authors: Emma Lindsay Counsel, New York +1 212 541 2121 firstname.lastname@example.org Bieta Andemariam Intern,* New York +1 212 541 4630 email@example.com *not admitted in New York PAGE 2 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Investment Arbitration in the Region1 A total of 42 ICSID cases have involved Asian parties as either claimant investors, respondent States or both, with the first arbitration brought against an Asian country – by U.S., British and Indonesian investors against Indonesia – filed in 1981, and the first exclusively intraregional arbitration – brought by a Singaporean investor against Indonesia – filed in 2004. Of those 42 cases, 15 cases were pending in 2014. Claims against Asian countries have been made most frequently by investors from Britain with Belgium, China and Italy tying for second place. All of the cases brought by Chinese investors were pending in 2014, one of which is the first brought by an Asian investor against a Western country (Belgium). Top Nationalities of Investors with ICSID Arbitrations in Asia 1 This review considers only investment arbitrations brought under the auspices of ICSID, which constitute the majority of investment arbitrations in Asia. Based on our review of public sources, we are aware of 26 other investment claims relating to the region, most of which were brought pursuant to the UNCITRAL Arbitration Rules. As most investment treaties allow for fully confidential arbitration, the actual number of non-ICSID cases could be higher. The countries in the region that have faced the most investment claims are Indonesia, Pakistan and Bangladesh. Asian Countries Facing Investment Claims PAGE 3 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM The number of investment arbitrations initiated in 2014 increased over the five-year low in 2013, but was not as high as in previous years. The basis for arbitral jurisdiction in most cases has been an investment treaty (typically a bilateral investment treaty), although claims also have been made pursuant to contracts and, on one occasion, a national investment law. Of the 27 concluded arbitrations, seven cases (26 percent) have involved further proceedings seeking to annul the arbitral award. Applications for annulment were successful in one case and rejected in two cases, with applications in two cases pending in 2014. One case was settled, and one case was discontinued for lack of payment. The vast majority of investment arbitrations against Asian countries have been brought by investors from other regions. However, almost 17 percent of investment arbitrations in the region have involved only Asian parties. Three purely intraregional cases have been brought within the last five years, with Cambodia facing a claim brought by a Cambodian investor and China facing claims from Korean and Malaysian investors. Investment disputes in the region have arisen most frequently in the oil, gas and mining, electric power and other energy industries, followed by the construction and finance industries. Of the disputes pending in 2014, approximately 73 percent involved one of these industries. 6 5 4 3 2 1 2010 2011 2012 2013 2014 Investment Cases by Industry Total Cases Initiated Per Year Cases Initiated Per Year Instrument Invoked to Establish ICSID Jurisdiction Inner Circle = Pending Cases Outer Circle = Total Cases Inner Circle = Pending Cases Outer Circle = Total Cases 43 12 16 7 8 PAGE 4 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Investment Treaties Involving Asian Countries More than a third (38.5 percent) of the nearly 3,300 investment treaties currently in existence involve Asian signatories. China has concluded the most investment treaties, followed by South Korea and India. Of the 1,273 investment treaties signed by Asian countries, 173 are treaties signed between or among only Asian states. The United States has signed 19 investment treaties with Asian countries, six of which permit investor-State arbitration (the treaties between the United States and Bangladesh, Korea, Mongolia, Singapore, Sri Lanka and Vietnam). Ten investment treaties were signed by Asian countries in 2014. Japan led the field, concluding one bilateral investment treaty (with Kazakhstan) and two economic partnership agreements (with Australia and Mongolia). Korea and Singapore followed with two treaties apiece (with Australia and Canada and with Burkina Faso and Côte d’Ivoire respectively). PAGE 5 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM u India continued its work on a new model bilateral investment treaty. It is expected that the United States may be the first country with which India will negotiate a bilateral investment treaty once the new model is finalized. u Several long-awaited investment treaties entered into force, including the trilateral investment agreement among China, Japan and Korea (on May 17, 2014) and the bilateral investment treaty between China and Canada (on October 1, 2014). Both treaties permit investor-State arbitration. u Indonesia gave notice of the termination of its bilateral investment treaty with the Netherlands in March 2014. The termination will come into effect Other Developments in 2014 on July 1, 2015. The treaty will remain in force for a period of 15 years with respect to investments made prior to the date of termination. u Negotiations for several significant new investment treaties involving countries in the region continued through 2014 and beyond. These include the negotiations for the Trans-Pacific Partnership (involving Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam), the Regional Comprehensive Economic Partnership (involving the ASEAN countries, Australia, China, Japan, Korea, India and New Zealand) and the bilateral investment treaties between China and the European Union and between China and the United States. Critical Times to Consult Counsel INVESTORS: u At the outset – when structuring an investment and negotiating project contracts u As soon as difficulties arise – when facing operational, regulatory or other issues in the host country u In discussions with the host country – when trying to resolve difficulties amicably u Before commencing a claim – when deciding whether and how to make a claim against the host country u In post-award proceedings – when seeking to collect on an award or reach a settlement with the host country u In getting the business relationship back on track – when moving forward in the wake of a dispute STATES: u At the outset – when negotiating and drafting investment treaties and national investment laws u In the pre-investment process – when inviting and accepting foreign investment u In the investment phase – when negotiating project contracts u As soon as notice of a dispute is given – when consulting with an investor about a potential investment arbitration claim u Upon receipt of a claim – when formulating an arbitral strategy in the initial stages of a dispute u In implementing or challenging an award – when considering next steps after the arbitration concludes PAGE 6 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Authors Emma Lindsay Counsel, New York +1 212 541 2121 firstname.lastname@example.org Bieta Andemariam Intern,* New York +1 212 541 4630 email@example.com *not admitted in New York Additional Contacts Pedro Martinez-Fraga Partner, Miami +1 786 322 7373 firstname.lastname@example.org Co-Leader of the International Arbitration Team Rodney Page Partner, Washington, D.C. +1 202 508 6002 email@example.com Co-Leader of the International Arbitration Team Constantin Achillas Partner, Paris +33 1 44 17 77 34 firstname.lastname@example.org Nigel Binnersley Partner, Hong Kong +852 3588 9110 email@example.com Mathew Rea Partner, London +44 (0)20 3207 1203 firstname.lastname@example.org About Our Team Bryan Cave’s International Arbitration Team provides a comprehensive service to clients around the world embracing all aspects of international dispute resolution. We handle a broad range of matters, including international commercial and investment arbitration, public international law and complex commercial litigation, for a wide variety of business, financial, institutional and individual clients, including publicly-held multinational corporations, large and mid-sized privately-held companies, partnerships and emerging enterprises. We also advise sovereign clients with regard to their particular complex legal, regulatory and commercial challenges. Our team features many practitioners who serve as both counsel and arbitrator and draws on the full range of subject-matter and industry experience across the firm, including in construction, energy, finance, manufacturing, mining and natural resources, pharmaceuticals, technology, telecommunications, tourism, transportation and many other sectors. Combining the common law and civil law traditions, members of our team are admitted to practice in many jurisdictions across the globe and speak a variety of languages. In addition, we work with an established network of law firm “friends” and colleagues in places where we do not have a direct presence, ensuring our strong market knowledge and quality of service on matters worldwide.