INTERNATIONAL ARBITRATION NEWSLETTER
The ABCs of Arbitrating Outside of the New York Convention
Non-Convention states such as Iraq and Taiwan can pose complex questions of reciprocity and enforceability for
international investors and businesses.
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NEWS IN BRIEF
Arbitrator Disqualified by Co-Arbitrators for the
Appearance of a Lack of Impartiality, an ICSID First
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Japan: Major Overhaul of JCAA Rules
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New Rules on Transparency and Party
Representation — When Do They Apply?
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EU and Myanmar to Negotiate a Bilateral
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ICSID Awards May Have Significant Consequences
for Future Claims Against Indonesia
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ICJ Grants Timor-Leste’s Request for Provisional
Measures Against Australia
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New York Convention Extended to the British Virgin
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Update on ICSID’s Caseload
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Munich I District Court Held Standard Athlete’s
Arbitration Clause Invalid
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ICSID Tribunal Provides Declaratory Relief but Not
Monetary Damages to Assignee
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US Supreme Court Revives International Arbitration
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Ukraine Crisis: US and EU Sanctions
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Leading International Arbitration Partner Joins Latham & Watkins in Paris
Fernando Mantilla-Serrano, a renowned international arbitration practitioner, will serve as global Co-chair of Latham’s
International Arbitration Practice and will co-lead the growing team.
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The ABCs of Arbitrating Outside of the New York Convention
Non-Convention states such as Iraq and Taiwan can pose complex questions of reciprocity and
enforceability for international investors and businesses.
By Joanna Rosen and Yi-Chin Ho
The United Kingdom has recently extended application of the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention) to the British Virgin Islands, bringing the total
number of countries and territories which are party to the New York Convention to more than 150. However, 47 countries are
still not party to the New York Convention (Non-Convention States), including several with sizable and growing economies.1
International investors and businesses should consider carefully the intersecting, and often ambiguous, web of international
instruments, domestic laws and policies governing the enforcement of arbitral awards when doing business in or with
companies from these 47 countries.
In this article, we identify the sources of law relevant to the enforceability in the US of arbitration awards rendered in Non-
Convention States. The take away lesson: all companies should pay close attention to international instruments, as well as
domestic laws, governing the enforceability of arbitral awards. These will be relevant not only in the territory of the seat of
the arbitration, but also in the state in which a business or trading partner may have assets and in which enforcement may
Under the New York Convention, arbitral awards are enforceable in a large number of jurisdictions around the world, with
limited grounds to refuse enforcement. Outside the European Union, no wide ranging treaty provides for the enforcement
of court judgments. The ability to enforce arbitral awards, as compared to court judgments, is often a decisive factor for
companies when selecting international arbitration over litigation as their preferred dispute resolution mechanism.
Some Non-Convention States — such as Iraq, Libya, Taiwan and Yemen — are economies with the potential to attract
significant foreign investment and international trade. However, their Non-Convention status could significantly impact
how business is conducted. International companies investing or doing business in these States should be aware of the
difficulties posed with enforcing arbitral awards in those States and structure the deal and contract documents accordingly.
Should things go wrong, difficulties may arise if an arbitration is seated in one of these Non-Convention States and a party
subsequently seeks enforcement in the US, although there are other instruments and laws to which that party can turn in the
The New York Convention generally requires Convention States to enforce arbitral awards rendered in other Convention
States. However, many Convention States have adopted the “reciprocity reservation,” which, broadly speaking, limits their
obligations to recognize and enforce only those awards rendered in another Convention State. More than 75 countries,
including the US, China, India, Japan, Korea, and the UK have entered this reservation. Thus, the place where the award is
legally deemed to have been rendered (the “seat”) can have significant consequences in the enforcement analysis.
The Convention Calculus
Companies wanting to ensure maximum flexibility in the enforcement of their award in Convention States should draft the
dispute resolution clause to provide that the seat is in a Convention State. However, this may not always be possible. For
example, a party from a Non-Convention State may insist upon having the seat of arbitration in its home State. This means
that at the drafting stage, companies must consider not just what is most comfortable and cost-effective in the short term, but
their long-term goals regarding enforcement. Similarly, companies should conduct diligence at the outset to find out where
their business partners have assets. For example, although a Yemenite company may prefer to arbitrate in its own backyard,
doing so may not be practical in the long run if arbitration in Yemen would impede enforcement elsewhere where its assets
The New York Convention is Not The Only Treaty in Town
Arbitration awards rendered in States that are not parties to the New York Convention are not per se unenforceable in the
US. However, where the New York Convention does not apply, a party wanting to analyze the potential for enforcement of a
foreign arbitral award in the US needs to consider other international treaties that may permit recognition and enforcement of
First, some Non-Convention States belong to regional organizations or have ratified treaties requiring that the State parties
enforce arbitral awards from other jurisdictions. For example, although Grenada, Guyana, St. Kitts and Nevis and St. Lucia
are not parties to the New York Convention, they, like the US, are members of the Organization of American States (OAS).
All OAS States are bound by the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and
Arbitral Awards which “ensur[es] extraterritorial validity of judgments and arbitral awards rendered in [the OAS’s] respective
territorial jurisdictions.” Companies doing business within OAS States, including the US and/or the five Non-Convention
States in the OAS, should be aware of this treaty and its potential assistance in enforcing an award.
Second, States may also have bilateral agreements that apply to arbitrations and/or arbitral awards. When seeking
to enforce or resist enforcement of an award in the US or with one of its trading partners, parties should consult the
enforcement and reciprocity requirements and provisions of the US bilateral treaties. These could include, for example,
treaties of amity and/or friendship, commerce and navigation (FCN). Most FCNs contain language relating to and governing
the enforceability of arbitrations between parties of the two contracting countries. The US currently has more than three
dozen such bilateral treaties, including with the Non-Convention States of Ethiopia, Suriname, Taiwan and Togo.2 Although
many of these FCNs expressly state that the parties shall not decline to enforce an arbitral award rendered in the other
treaty partner country, others do not expressly require reciprocity. In such circumstances, enforcement may be subject to
At least one case suggests there is an arguable basis to rely on an FCN to enforce a foreign arbitral award in the US. In
Landegger v. Bayerische Hypotheken und Wechsel Bank, a federal district court in New York opined that it would be contrary
to the spirit and policy of the FCN in question not to recognize and enforce an arbitral agreement rendered in the treaty
partner’s territory. The current draft of Restatement (Third) of the U.S. Law of International Commercial Arbitration similarly
indicates that an FCN could be used to enforce a foreign arbitral award if all of the following conditions apply:
(1) The party seeking enforcement is a citizen of the other State Party to the FCN.
(2) The award is final and enforceable according to the laws of the country in which it was made.
(3) An enforcement action is brought before the proper court.
(4) The arbitral award must not contravene the public policy of the forum state.3
Notwithstanding these apparently clear statements, the issue of the enforcement of arbitral awards pursuant to an FCN
has received relatively little judicial attention. Therefore, debate remains as to extent to which FCNs can be used to enforce
arbitral awards in the US.
Remember National Laws
National laws may provide additional grounds for enforcing or resisting enforcement of an arbitral award, separate and aside
from the New York Convention and other treaty law.
In the US, no law specifically addresses the enforcement of foreign arbitral awards rendered in Non-Convention States.4
While federal and state statute and judicial principles of comity and reciprocity, as detailed below, clearly favor recognizing
foreign court judgments and arbitral awards from Convention States, whether and how these laws and principles apply to
foreign arbitral awards rendered in Non-Convention States remains unclear. Thus, those arbitrating or possibly arbitrating in
a Non-Convention State who have reason to believe that they face enforcement proceedings in the US should consult with
counsel as to whether the US courts would, despite its reciprocity reservation, enforce a Non-Convention award.
FAA – The Federal Arbitration Act (FAA) is the federal statute that, amongst other things, authorizes courts to recognize and
enforce arbitral awards. While the FAA “manifests a ‘liberal federal policy favoring arbitration agreements,’”5 the only foreign
awards to which the FAA expressly applies are those rendered in Convention States or under the Inter-American Convention
on International Commercial Arbitration, which mirrors the language of the New York Convention.6 While nothing specifically
precludes enforcement of other awards, nothing affirmatively permits enforcement either. However, some courts and
commentators have concluded that the FAA is broad enough to reach all foreign arbitral awards, and that the FAA’s express
reach to Convention State awards should not preclude or preempt recognition of awards rendered in Non-Convention
State Statutes – Most states in the US have general arbitration laws and/or laws specifically relating to international arbitral
awards. The international arbitration laws of Connecticut, Florida, Georgia and Oregon expressly authorize enforcement of
Non-Convention State awards.8 On the other hand, the international arbitration statutes of California, Hawaii, Illinois, Ohio
and Texas expressly prohibit enforcement of Non-Convention awards.9 In the middle lie the international arbitration statutes
of Colorado, North Carolina and Maryland, which are silent with respect to their application to Non-Convention State awards.
Thus, whether those states would enforce Non-Convention awards would be a matter of judicial interpretation.Page 4
In addition to international arbitration statutes, most states also have a general arbitration statute. The general arbitration
statute of New York, a hub for international arbitration, has been used to enforce foreign awards rendered in Non-Convention
States.10 Because most states modelled their general arbitration statutes on the Uniform Arbitration Act and/or the Revised
Uniform Arbitration Act, the enforcement of Non-Convention awards analysis should mirror the analysis under Chapter 1 of
the FAA, as neither the Uniform Arbitration Act nor the Revised Uniform Arbitration Act, like Chapter 1, expressly permits
enforcement of judgments rendered abroad.11
Common Law Principles – In the US, common law principles of comity and equity may require courts to recognize foreign
arbitral awards, regardless of where the arbitration was seated.12 Often, however, the US courts will only enforce a foreign
judgment or award if the nation in which the award was rendered would, in turn, enforce US judgments/awards, thus creating
a game of “chicken or the egg.” For this reason, those seeking to enforce an arbitral award should bear in mind the approach
the courts in the territory of the seat of the arbitration have adopted.
Parties can and should take appropriate steps at the contract drafting stage to mitigate the risks that any eventual arbitral
award may not be enforceable in the US. The most straightforward way is to ensure any potential arbitration is seated in
a New York Convention State. If this is not possible, the contracting parties should consider whether other international
instruments, federal or state law, or common law principles may provide adequate means of enforcing their arbitral awards in
Leading International Arbitration Partner Joins
Latham & Watkins in Paris
Fernando Mantilla-Serrano, a renowned international arbitration practitioner, will serve as global
Co-chair of Latham’s International Arbitration Practice and will co-lead the growing team.
Fernando Mantilla-Serrano has joined Latham & Watkins LLP as a partner and Global Co-Chair of the International
Arbitration Practice. He is widely recognized as one of the leading international arbitration lawyers globally.
Mantilla-Serrano is acclaimed for the depth of his knowledge and experience in international arbitration representing
companies, States, and State-owned entities in highly complex commercial and investor-state disputes with an emphasis on
matters involving energy, banking, joint ventures and Latin America. His practice covers numerous sectors, with particular
focus on the oil & gas, power, natural resources, construction, manufacturing and automotive industries. Mantilla-Serrano
regularly serves as tribunal chairman, sole arbitrator and party-appointed arbitrator, and has also served as an expert before
arbitral tribunals and State courts.
Mantilla-Serrano will be based in Paris, from where he will work closely with other arbitration partners in New York, San
Francisco, London, Germany, Spain, Hong Kong, Singapore and Tokyo.
Mantilla-Serrano joins Latham from Shearman & Sterling. He was previously head of the International Arbitration Practice at
Garrigues in Spain and Counsel at the Secretariat of the ICC International Court of Arbitration, where he remains a member
of the Court.Page 5
NEWS IN BRIEF
US Supreme Court Revives International Arbitration Decision
The Court’s first-ever case involving an investment treaty upheld a US$185 million award in favor of
a British company.
By Anne Löhner
On 5 March 2014, the US Supreme Court issued an unprecedented decision in a case involving a bilateral investment
treaty — reviving a US$185 million arbitral award in favor of British energy company BG Group PLC against Argentina.1 In a
7-2 majority opinion authored by Justice Breyer, the Supreme Court held that, when reviewing arbitral awards made under
an investment treaty, US courts should interpret and apply threshold provisions concerning arbitration consistent with their
interpretations of similar provisions in ordinary contracts. Accordingly, courts should review arbitrators’ interpretations of such
thresholds with deference.
The underlying dispute arose amidst Argentina’s 2001/2002 financial crisis, when the Argentine government passed
measures to control inflation and stabilize commodity prices. According to BG, these measures essentially expropriated its
investment in an Argentine gas distributor, prompting BG to initiate arbitration under the UK-Argentina bilateral investment
treaty. In 2006, an arbitral tribunal acting under the 1976 UNCITRAL Arbitration Rules and seated in Washington, D.C.
issued the award in BG’s favor. The three arbitrators decided to exercise jurisdiction despite BG’s failure to comply with the
treaty’s 18-month “local litigation requirement” prior to commencing arbitration, finding that such compliance would have
been futile in light of Argentina’s attempts to restrict investors’ access to its local courts. In 2012, the US Court of Appeals
for the District of Columbia Circuit vacated the award, holding that the arbitrators had exceeded their jurisdiction by ignoring
the local litigation requirement. According to the Court of Appeals, the issue of whether the parties met the pre-condition
to arbitrate was an independent question of law to be decided by the courts. In reversing the Court of Appeals’ decision,
the Supreme Court followed international precedent by leaving the arbitrators to determine whether a case should proceed
to arbitration. Justice Breyer noted that the treaty’s local litigation requirement was procedural and not a condition to
Argentina’s consent to arbitrate, likening the requirement to a mere “claims-processing rule.”
Some observers questioned whether the Supreme Court’s decision in BG Group v. Argentina would be widely applied in the
future, arguing that the opinion appeared to narrowly address the specific pre-condition to arbitrate contained in the UKArgentina
bilateral investment treaty. However, commentators generally welcomed the decision’s impact as bolstering the
perception of the US as an arbitration-friendly jurisdiction.
Ukraine Crisis: US and EU Sanctions
In response to the political crisis in Ukraine, the United States and European Union have initiated a
series of targeted sanctions. While the first and second rounds of US sanctions targeted government
and military figures, the latest measures also designate private individuals with extensive business
interests and close ties to the Russian political leadership.
By Charles Claypoole, William M. McGlone and Les Carnegie
The US sanctions accompany similar measures that have been imposed by the European Union, the Government of
Canada and other governments. These other sanctions, along with countermeasures implemented by the Government of
Russia, continue to evolve and expand, principally through additional designations of targeted persons.
New US Designations
On 28 April 2014, the US imposed, under the authority of Executive Order 13661, asset freezes on an additional seven
Russian officials and froze the assets of 17 companies connected with these officials (bringing the total of designated
individuals up to 45, and of designated entities up to 19). The current designations include Russian banks. The designated
individuals include Russian government officials and Russian businesspersons, including, according to the White House,
“members of PrePage 6
New US Executive Order
On 20 March 2014, US President Barack Obama issued Executive Order 13662 (EO) establishing an extremely broad
framework for possible future sanctions on important sectors of the Russian economy, and expanding upon the authority
granted by Executive Order 13660 of 6 March and Executive Order 13661 of 16 March 2014. The EO authorizes the
Treasury, in consultation with the US Department of State, to designate persons operating in sectors of the Russian
economy, as well as persons materially assisting, or that are owned or controlled by or acting on behalf of, designated
While no parties have yet been designated under the EO, it confers broad authority on the Treasury to designate virtually
any person that operates in any sector of the Russian economy that the Treasury decides to target. The EO provides a nonexhaustive
list of economic sectors that the Treasury could target, including “financial services, energy, metals and mining,
engineering, and defense and related materiel.” Unless and until persons are actually designated under the EO, however,
it does not restrict dealings with persons operating in any Russian economic sector. President Obama warned, however,
that the US was keeping such measures “in reserve” and would impose such sanctions pursuant to the EO if the situation in
New EU Sanctions
In the latest Council Implementing Regulation 477/2014 on 12 May 2014, the list of people subject to an EU asset freeze
has been extended by a further 13 individuals and two entities. This brings the total of individuals sanctioned in relation to
the events in Ukraine and pursuant to EU Regulation 208/2014 (5 March 2014) and EU Regulation No 269/2014 (17 March
2014, as amended by EU Regulation 476/2014) to 83 people and two entities. It is worth noting that EU foreign ministers
have decided in EU Regulation 476/2014 to widen the criteria according to which persons or entities can be designated.
Henceforth the list includes (i) “natural persons responsible for, actively supporting or implementing, actions or policies
which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine…, or which obstruct the work
of international organisations in Ukraine”, as well as their associates, and (ii) “legal persons, entities or bodies in Crimea or
Sevastopol whose ownership has been transferred contrary to Ukrainian law”, or those who benefit from such transfer.
The individuals are mostly current and former Ukrainian and Russian politicians or military commanders, whereas the
entities are two enterprises that have been confiscated by Crimean authorities. The asset freeze applies to all funds
and economic resources (which are broadly defined) belonging to, owned, held or controlled by the 83 individuals and
two entities. Consistent with standard EU asset freeze wording, the regulations also provides that no funds or economic
resources shall be made available, directly or indirectly, to or for the benefit of these individuals or entities.
UK Export Licensing Suspension and New US Export Control Constraints
Beyond the EU and US sanctions described above, the Government of the United Kingdom announced on 18 March 2014
that it has suspended all existing licenses and license applications for exports of military and dual-use items to the Russian
military “which could be or are being deployed against Ukraine.” This action illustrates the potential for individual EU Member
States to impose additional measures, and the UK government’s announcement encourages “other European nations to
take similar action.”
On 28 April 2014, the US Departments of State and Commerce announced new restrictions on exports and reexports to
Russia and Crimea under the International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR).
These steps follow the Commerce Department’s Bureau of Industry and Security (BIS) 1 March 2014 hold on issuing new
licenses for exports and reexports to Russia of items subject to the EAR and the State Department’s Directorate of Defense
Trade Controls (DDTC) 27 March 2014 hold on issuing new licenses for the export or reexport of defense items to Russia.
The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued Advisories on 25 February 2014
and 6 March 2014 referencing individuals subject to the first EU asset freeze and reminding “financial institutions of their
responsibility to take reasonable, risk-based steps regarding the potential suspicious movement of assets related to Viktor
Yanukovych departing Kyiv and abdicating his responsibilities and other senior officials resigning from their positions or
departing Kyiv.” Financial institutions should consider these reminders in light of the ongoing situation in Ukraine and the
expanding US and EU sanctions.
Legal and Business Considerations
As the list of sanctioned parties grows to encompass entities with business interests in Russia and beyond, US and EU
persons and firms should carefully scrutinize all operations and business relationships that could involve designatedsident Putin’s inner circle.”
persons. Firms that deal with entities operating in the Russian economy or that are closely aligned with Russian economic
interests should closely monitor future designations and consider contingency plans in the event business partners are
blocked by the US or EU sanctions regimes.
In particular, businesses with ongoing contractual relationships with Russian persons or entities should consider carefully
not only whether they are compliant with applicable US and EU sanctions, but also whether the designation of their business
partners under applicable sanctions could constitute a force majeure event or frustration of extant contracts. For instance,
recent English case law has highlighted the need for companies facing this situation to exercise caution, and consider
potential risks of litigation or arbitration before terminating contracts in light of sanctions risks.
New York Convention Extended to the British Virgin Islands
Recent arbitration act reforms and recognition of the New York Convention improve the climate for
By Catriona E. Paterson
On 24 February 2014, the UK agreed to extend application of the New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (the New York Convention) to the British Virgin Islands (BVI). The treaty will enter into force for the
territory on 25 May 2014.
The New York Convention is a multilateral treaty that attempts to ensure that foreign arbitral awards are recognized and
generally capable of enforcement in the jurisdictions of the State Parties to the treaty in the same way as domestic awards.
The courts of the State Parties must also give full effect to arbitration agreements by denying jurisdiction to hear cases if the
parties to the dispute are bound under contract to refer the matter to an arbitral tribunal. The New York Convention is widely
seen as a seminal instrument in the enforcement of foreign arbitral awards.
The UK, which maintains responsibility for the foreign relations of the BVI, agreed to extend application of the New York
Convention following a request from the Government of the BVI.
The extension of the New York Convention to the BVI parallels reforms to the territory’s arbitration act, which were passed in
December 2013 and which are expected to come into force later this year. These changes are intended to remedy perceived
weaknesses in the BVI’s previous (outdated) arbitration act and in the territory’s legal framework for arbitration.
Update on ICSID’s Caseload
While the volume of cases has dropped from an all-time high, Europe and Central Asian cases
represent an increasing share of the caseload.
By Jan Erik Spangenberg
The International Centre for Settlement of Investment Disputes (ICSID) recently published its latest bi-annual caseload
statistics covering the period up until 31 December 2013.2 The statistics show that a drop in newly registered cases
witnessed in the first half of 2013 has continued during the second half of the year. In all, 40 cases were registered in 2013.
This marks a 20 percent drop in comparison to 2012, which saw 50 cases registered — ICSID’s all-time high. Of the 40
newly registered cases, only two were registered under the Additional Facility Rules.
Wins and losses at ICSID remain balanced between investors and States. Of all cases registered by ICSID since 1972
that have been finally resolved by way of arbitration, 46 percent resulted in awards upholding claims, in part or in full, in
favor of the investor. Of the remaining 54 percent of disputes that went in favor of the State, the arbitral tribunals declined
jurisdiction (25 percent), dismissed all claims (28 percent) or held in an early stage of the proceedings that the claims were
manifestly without merit (one percent). Looking at only those cases decided in 2013, the statistics were even less favorable
for investors, with only 30 percent of awards upholding claims and 70 percent of all decided cases dismissed for lack of
jurisdiction or as unfounded.
In 2013, the majority (66 percent) of newly registered cases involved State parties from Europe & Central Asia (33 percent),
Western Europe (13 percent) and the Middle East & North Africa (20 percent).3 Historically, on the basis of all cases
registered to date, these regions only accounted for 37 percent of all cases. On the other hand, cases involving South
American State parties have dropped from an overall 27 percent to only 5 percent in 2013. The energy sector remained the
largest source of ICSID disputes in 2013, with 27 percent of all newly registered cases stemming from the oil, gas & mining
industry and 20 percent from electric power and other energy businesses.4
On a final note, in 2013 French arbitrators again scored more arbitrator appointments (27), than the US (12 appointments)
and the UK (10 appointments) together, thereby reaching 155 appointments overall and very close to surpassing the number
of US arbitrators (163 appointments to date).
A closer look at the ICSID statistics for 2013 therefore shows that — contrary to some recent public criticism of investment
treaty arbitration — the success rate has tipped in favor of States and the majority of respondent states are European
countries, a shift away from developing countries.
Whether these trends will continue or remain particularities of the year 2013 remains to be seen.
New Rules on Transparency and Party Representation –
When Do They Apply?
Potentially far-reaching new guidelines intended to provide a uniform benchmark for the conduct of
By Jan Erik Spangenberg
At the end of 2013, the United Nations General Assembly adopted the UNCITRAL Rules on Transparency in Treaty-based
Investor-State Arbitration (the Rules on Transparency).5 As previously reported in this Newsletter, these rules had been
developed by the United Nations Commission on International Trade Law (UNCITRAL) Working Group on Arbitration and
Conciliation, which had been charged with the task of preparing a legal standard on this topic in 2008.6
Pursuant to their Article 1, the Rules on Transparency will apply to all investor-State arbitrations initiated under the
UNCITRAL Arbitration Rules arising out of an investment protection treaty concluded after 1 April 2014, unless otherwise
agreed by the parties to the treaty. The rules apply to arbitrations pursuant to older treaties only if the parties to the
arbitration or the State parties to the treaty have so agreed. The rules are also incorporated by means of the UNCITRAL
Arbitration Rules, as revised in 2013, which include a new article 1(4) stating that for investor-State arbitration initiated
pursuant to an investment treaty, the Arbitration Rules include the Rules on Transparency.
Parties initiating investor-State arbitrations under the UNCITRAL Arbitration Rules and investment treaties concluded after 1
April 2014 need to be aware of the possible application of the Rules on Transparency and their implication. Parties currently
conducting arbitrations under the UNCITRAL Arbitration Rules also need to be aware of the respondent State’s ability to
agree on the application of the rules to the ongoing arbitration by agreement with the claimant’s State. Article 1(2)(b) of the
Rules on Transparency does not explicitly require the claimant itself to also agree to the rules.
The application of the Rules on Transparency may have far-reaching implications. The rules require, inter alia, that the
parties, through the General Secretary of the United Nations or another repository named by UNCITRAL:
• Make public basic information regarding the dispute, including the name of the parties and the treaty under which the
claim is made
• Publish their written submissions as well as transcripts of hearings and orders, decisions and awards of the arbitral
• Upon request by any person, make available any additional documents, including expert reports and witness statements
The rules also require that substantive hearings are held in public. All transparency obligations are, however, subject to an
exception for the protection of confidential or otherwise protected information and the integrity of the arbitral process.
A “Transparency Registry”, set up by UNCITRAL following the entry into force of the Rules on Transparency can be found at:
The International Bar Association (the IBA) Guidelines on Party Representation in International Arbitration (the Guidelines)
present another set of guidelines which parties to any international arbitration may also need to consider applying. The
Guidelines on Party Representation only apply, however, where and to the extent that the Parties have so agreed or the
Arbitral Tribunal, after consultation with the Parties, wishes to rely upon them after having determined that the Arbitral
Tribunal has the authority to rule on matters of Party representation to ensure the integrity and fairness of the arbitral
proceedings (Guideline 1).
The Guidelines, on which we have previously reported,7 are intended to provide a benchmark for the conduct of counsel
in international arbitration. They attempt to mitigate the fact that counsel can be, and often are, subject to differing norms
and practices, including those of the arbitral seat or the professional conduct rules of counsel’s home jurisdiction(s). The
Guidelines’ key provisions include:
• A prohibition on ex parte communications with an arbitrator (Guidelines 7-8)
• Guidance on the extent to which counsel may assist with the preparation of witness or expert testimony
• Guidance on counsel’s obligations with respect to document production (Guidelines 12-17)
• Remedies for counsel misconduct, which could include, inter alia, the imposition of an adverse costs order and/or the
drawing of “appropriate inferences” in the tribunal’s assessment of evidence or legal arguments (Guidelines 26-27)
While the Guidelines had already been adopted by the IBA Council on 25 May 2013, the discussion on the need for such
rules and whether they constitute a right step or a step too far continues. To illustrate this point, at the latest IBA Arbitration
Committee’s February 2014 Arbitration Day in Paris, during a debate of the Guidelines both Toby Landau QC and Michael
Schneider (Lalive) opposed the rules as unnecessary and excessive regulation.
Meanwhile, the London Court of International Arbitration (LCIA) published a draft of its new Arbitration Rules, which include
an annex with its own general guidelines on party representation, albeit much less specific than the IBA Guidelines.8
For the time being, if and how this development for codification of party representation rules continues and if and to what
extent these rules are actually applied in arbitrations from now on remains to be seen. Parties are advised to watch out for
agreements on the application of these rules in future specific procedural rules or procedural orders. For the avoidance of
doubt, parties may also want to consider expressly stipulating their non-application.
EU and Myanmar to Negotiate a Bilateral Investment Treaty
Without any previous European BITs, a potential EU-Myanmar BIT could open the pathway for more
foreign investment into Myanmar.
By Catriona E. Paterson
The move to negotiate a BIT with Myanmar is part of a broader initiative to open Myanmar to trade and investment with the
EU. Myanmar currently has no BIT in place with any Member State of the EU, making this treaty of potential significance to
any foreign investor seeking to take advantage of Myanmar’s re-entry into the global economy. Proponents hope the BIT will
bring greater legal certainty and stability by providing key protections for foreign investors and their investments. The BIT
(1) Ensure the free transfer of capital into and out of the territories of the State Parties
(2) Ensure the fair and equitable treatment of investments and/or investors
(3) Prohibit the expropriation of property, except as against the payment of compensation
(4) Protect against discriminatory treatment of investments and/or investors
EU sanctions that had previously restricted economic relations with Myanmar were suspended in April 2012, and ultimately
lifted in April 2013. In June 2013, Myanmar was also readmitted to EU’s “Generalised System of Preferences” tariff
preferences, paving the way for increased trade. According to the EU, in 2013, bilateral trade in goods with Myanmar
amounted to €569 million, with EU exports to the country increasing by 45 percent to €346 million.
Myanmar has recently taken other steps with a view to enhancing the legal environment for foreign trade and investment.
The State enacted a new Foreign Investment Law in 2012 and acceded to the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards in 2013 (see our previous report on the subject “New Accessions to the New York
Convention and ICSID Convention”). In May 2013, Myanmar also signed a Trade and Investment Framework Agreement
with the US, which establishes a framework for future cooperation on trade and investment issues.
For a discussion on the EU’s competencies to conclude extra-European bilateral investment treaties, please see our
previous article “New European Regulation Clarifies the Status of Extra-European Bilateral Investment Treaties”.
Munich I District Court Held Standard Athlete’s Arbitration
A German court has determined that structural imbalances between individual athletes and sports
federations invalidated a standard arbitration clause.
By Jan Erik Spangenberg
On 28 February 2014, the Munich I District Court held that an arbitration clause in an athlete’s agreement with a sport
federation may be invalid due to a structural imbalance between the parties and a lack of choice on the part of the athlete.
The case concerns disciplinary actions taken by the International Skating Union (ISU) and the German Skating Union
(DESG) against a German ice skating star. The athlete was suspended by the ISU from 2009 to 2011 after increased levels
of certain regulated substances were allegedly found in a blood sample. The ice skater challenged the suspension and an
arbitral tribunal constituted under the rules of the Court of Arbitration for Sport (CAS) heard the dispute. The CAS tribunal
upheld the doping suspension. The ice skater’s subsequent application to set aside the arbitral award was rejected by the
Swiss Federal Tribunal in a decision on 10 February 2010.
The Munich I District Court rendered a new judgment related to a new claim for the athlete brought against ISU and DESG
for damages allegedly incurred due to the suspension. The Munich court held that that the arbitration clause in the athlete’s
agreements with ISU and DESG was invalid. The underlying rationale for the decision was the “structural imbalance”
between the parties at the time of the contract formation. The standard athlete’s agreements, which included the arbitration
clauses, had to be signed in order for the athlete to participate in professional sports competitions. The dominant position
of national and international sports federations meant the athletes were forced to accept the terms in question. The Munich
court held that the arbitration agreements were, in the circumstances, entered into involuntarily and were accordingly invalid
under both Swiss and German law.
Notwithstanding the invalidity of the arbitration clause, the Munich court found that the CAS award and the Swiss Federal
Tribunal’s decisions were binding and that res judicata prevented it from refusing the enforceability of the award. The
judgment is not yet binding and may be appealed to the Munich Court of Appeals. Should the judgment stand, it may have
far-reaching implications for sports arbitration and the underlying standard athlete’s agreements with professional sports
ICSID Tribunal Provides Declaratory Relief but Not
Monetary Damages to Assignee
Assuming jurisdiction, an ICSID tribunal has heard claims brought by an assignee under a project
By Catriona E. Paterson
In an award rendered on 12 February 2014, a tribunal established under the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States (the ICSID Convention)9 upheld the claims of an assignee under
project finance arrangements. However, the tribunal declined to award monetary damages, concluding that it could only
grant declaratory relief in the circumstances of the case.
Independent Power Tanzania Limited (IPTL) and Tanzania Electric Supply Company Limited (TANESCO), a company wholly
owned by the United Republic of Tanzania, had entered into a Power Purchasing Agreement (PPA) in 1995. Under this
agreement, IPTL agreed to build and maintain an electricity generating facility in Tanzania. The method and manner in which
TANESCO’s payment obligations under the PPA would be calculated were, however, contentious from the outset.
In 2005, Standard Chartered Bank (Hong Kong) (the Claimant) acquired IPTL’s project-related debt, which included security
granted by way of an assignment of IPTL’s rights under the PPA. These rights vested in the claimant when IPTL defaulted on
its debts in 2006. The claimant therefore brought the ICSID arbitration as assignee of IPTL’s right to arbitrate under the PPA.
As to jurisdiction, the primary issue before the Tribunal was whether the assignment of IPTL’s rights to the Claimant was
valid, despite the fact that the assignment had not been registered, as required by Tanzanian law. The Tribunal considered
that the assignment of the right to receive payments from TANESCO should properly be regarded under Tanzanian law as
a registerable charge over book debts. Therefore, the assignment specifically in respect of the book debts would be void
against a liquidator or administrator as a result of the non-registration. Conversely, the assignment of the right to ICSID
arbitration (contained in the PPA) was not something of which a third party would need notice, and therefore registration
of the assignment of this right was not required. The Tribunal accordingly concluded that the Claimant, as assignee, was
entitled to bring the arbitration and that the Tribunal had jurisdiction to hear the dispute.
However, the Tribunal concluded that it could only grant relief in relation to rights arising under the PPA, and not those
arising under associated financing arrangements. The Tribunal was therefore limited to making a declaratory order as to
amounts TANESCO owed to IPTL, but could not “make an order requiring TANESCO to pay any such amounts to [the
Claimant] independently of IPTL.” The Tribunal was also influenced by concerns that an order for payment of the debt could
interfere with the order of priority of creditors under the local law, should ITPL face liquidation or administration. In these
circumstances, the Tribunal determined declaratory relief would be a more appropriate remedy.
Because the amounts TANESCO owed to IPTL were insufficiently particularized during the course of the proceedings,
the Tribunal was constrained to ordering the parties to agree to the amounts the Respondent owed to ITPL. The ICSID
proceedings were part of a larger — and more complex — dispute which is rumbling on in other fora, including before the
ICSID Awards May Have Significant Consequences for
Future Claims Against Indonesia
Awards may invite further claims against Indonesia.
By Jan Erik Spangenberg
On 24 February 2014, arbitral tribunals established under the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States (the ICSID Convention) upheld jurisdiction to hear disputes in two parallel arbitrations
brought by Churchill Mining Plc and its Australian subsidiary, Planet Mining Pty Ltd, pursuant to the UK-Indonesia and
Australia-Indonesia bilateral investment treaties (the BITs) respectively.10
The awards are noteworthy for their interpretation of the BITs’ dispute resolution clauses, which Indonesia had maintained
did not allow for investors to initiate arbitration proceedings against the State without the State’s separate consent. Article
7(1) of the UK-Indonesia BIT states that “the Contracting Party in the territory of which a national or company of the other
Contracting Party makes or intends to make an investment shall assent […] for conciliation or arbitration, to the Centre
established by the Convention on the Settlement of Investment Disputes […].” Article 11(4) of the Australia-Indonesia BIT
contains a clause which states that where a dispute is referred to ICSID arbitration by an investor of one party, “the other
Party shall consent in writing to the submission of the dispute to the Centre within forty-five days of receiving such a request
from the investor.” Indonesia argued that the phrase “shall assent” in the BIT with the UK implied that a further act of consent
was required and no binding consent to arbitration had yet been given. According to Indonesia, this two-step process was
also stipulated in the BIT with Australia.
The ICSID tribunal jointly appointed in both cases and composed of Gabrielle Kaufmann-Kohler, Albert Jan van den Berg
and Michael Hwang SC rejected Indonesia’s interpretation, taking into consideration the context surrounding the words “shall
assent” and the preparatory materials of the BIT.
The Tribunal also rejected Indonesia’s argument that the Claimants’ investment fell outside the scope of the BIT. Indonesia
argued that under the 1967 Foreign Investment Law, foreign investors can only engage in mining on the basis of direct
cooperation with the government and that the Claimants circumvented the law by securing beneficial ownership in the
mining licenses of certain local companies. The tribunal held that the admission requirement for foreign investments set forth
in Article 2(1) of the BIT constituted a one-time occurrence, i.e. a gateway through which all British investors must pass only
once. Since the Claimants’ shareholding in the local mining companies had been approved in 2006, the tribunal concluded
that the Claimants had obtained the necessary approvals already when making their investments at that time.
The decisions may have significant consequences for future claims against Indonesia under both BITs. Indonesia has
already announced that it intends to terminate all of its 67 BITs currently in place. Investors with potential claims will
therefore need to monitor this development and make sure that their investments remain protected.
ICJ Grants Timor-Leste’s Request for Provisional Measures
Documents seized by Australian intelligence agents to remain sealed during arbitration.
By Catriona E. Paterson
On 3 March 2014, the International Court of Justice (ICJ) handed down its decision on Timor-Leste’s application for
provisional measures against Australia.
The underlying dispute, which has been referred to arbitration, relates to a claim by Timor-Leste that the 2006 Treaty on
Certain Maritime Arrangements in the Timor Sea (CMATS) between the two states is “invalid” because of alleged espionage
by Australian intelligence agents during its negotiation. The CMATS governs how the two states exploit off-shore oil and gas
reserves in the Greater Sunrise field in the Timor Sea, worth an estimated US$40 billion.
Timor-Leste applied to the ICJ for provisional measures in support of the arbitral proceedings, after Australian intelligence
agents seized documents from the Australian premises of a legal representative to Timor-Leste, allegedly on national
security grounds. The documents seized included those relating to the pending arbitration and confidential correspondence
between Timor-Leste and its legal advisers.
In the ICJ proceedings, Timor-Leste requested the return of the seized material, a formal apology from Australia and an
assurance that there would be no further interception of its communications with its legal advisers. Timor-Leste argued that
it had a right under international law to confidential communication with its lawyers and counsel in relation to the arbitral
proceedings and possible future negotiations with Australia. Australia countered that there was no principle of immunity of
state papers and that confidentiality of state communications did not apply insofar as they concerned criminal conduct or a
threat to national security.
In its decision, the ICJ noted that provisional measures are intended to preserve the rights claimed by the parties pending
a decision on the merits of the claim. As such, Timor-Leste did not need to prove that the rights asserted existed in
international law, but only that they were “at least plausible” and linked to the provisional measures sought. The ICJ
concluded that the State’s asserted right to conduct the arbitration and negotiations without interference derived from,
or were concomitant with, the principle of sovereign equality of states and the need to maintain equality when states are
peacefully settling an international dispute.
The ICJ also considered that there was a “real and imminent risk” that Timor-Leste could suffer irreparable prejudice if the
material was divulged to those involved in the arbitration or negotiations with Timor-Leste.
Although the ICJ did not order the return of the seized material, it did instruct Australia not to disclose the material to the
disadvantage of Timor-Leste until the conclusion of the pending case, to keep the material under seal and not to intercept
communications between Timor-Leste and its legal advisers in relation to the arbitration.
Arbitrator Disqualified by Co-Arbitrators for the Appearance
of a Lack of Impartiality, an ICSID First
Appointment on a similar arbitration in the past was sufficient to disqualify arbitrator.
By Rebekah Soule
On 20 March 2014, two arbitrators disqualified a co-arbitrator for having an appearance of partiality arising from a past
appointment by the respondent on a similar arbitration with significant overlaps in the facts and law at issue.11 This is the first
time under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID
Convention) that an arbitrator has been disqualified by his or her colleagues.
The claimants, Caratube International Oil Company LLP and Mr. Devincii Salah Hourani, had moved to disqualify the
respondent-appointed arbitrator. The claimants asserted that he could not be independent or impartial because he had
served as an arbitrator on behalf of the respondent in Ruby Roz Agricol v. The Republic of Kazakhstan, a case with
significant overlap in the law and the facts with the case at bar. The claimants also submitted that the arbitrator could not
exercise independent and impartial judgment as he had been appointed to serve as arbitrator numerous times by counsel for
the respondent State — Kazakhstan — which he had allegedly not fully disclosed.
In his response to the challenge, the arbitrator provided assurances of his independence and impartiality and emphasized
that he continued to consider his disclosures regarding past appointments sufficient and in accordance with the relevant
rules and good practice, including Rule 6 of the ICSID Arbitration Rules and Section 3.3.7 of the International Bar
Association Guidelines on Conflicts of Interest.
In reaching their decision to disqualify the arbitrator appointed by the respondent, the co-arbitrators held that proof of
actual dependence or bias was not necessary; rather, it was sufficient to establish the appearance of dependence or bias.
In their view, the similarities between the two cases warranted the disqualification. The co-arbitrators emphasized that the
similarities between cases were important considerations in assessing impartiality, as an arbitrator cannot be expected to
maintain a ‘Chinese wall’ in his own mind separating knowledge of documents or information gained in one arbitration that
may be relevant to another. Given the similarities between the two cases, the co-arbitrators concluded that the claimants had
sufficiently established the existence of the appearance of a lack of impartiality or independence, thus disqualification was
The co-arbitrators went on to determine that the mere fact that the challenged arbitrator had been appointed by counsel for
the respondent before did not indicate a lack of independence or impartiality on its own. However, they declined to offer any
further views on the question of repeat appointments, an issue that has proved to be controversial. The co-arbitrators also
left open whether the challenged arbitrator’s disclosures were sufficient.
This decision serves as a timely reminder to disputing parties to consider carefully their arbitral appointments, or those of
their opponents, in particular where two or more disputes may arise out of similar fact patterns.
Japan: Major Overhaul of JCAA Rules
JCAA stays abreast of international arbitration norms with the first major changes in a decade.
By Daiske Yoshida
The Japan Commercial Arbitration Association (JCAA) has significantly changed its Commercial Arbitration Rules, effective
1 February 2014. These changes represent the first major overhaul of the Rules since 2004. Amongst the most notable
changes are the following:
• Emergency Arbitrator: The JCAA has instituted a procedure for appointing an emergency arbitrator. The JCAA will
appoint an emergency arbitrator within two days of an application, who generally decides on emergency measures
within two weeks of the appointment. The request for arbitration may be submitted within 10 days after the application
for an emergency arbitrator. However, Japan’s Arbitration Act has not yet been updated to recognize the enforceability of
emergency measures. Thus, although Japanese courts currently may enforce interim measures, such as preserving the
status quo, the courts lack a mechanism to enforce emergency measures.
• Interim Measures and Expedited Procedures: In accordance with the 2006 Model Law of the United Nations
Commission on International Trade Law, the Rules now specify the types of interim measures an arbitral tribunal may
order, such as preserving the status quo and protecting assets and evidence, as well as the conditions for granting such
measures. The rules no longer limit expedited procedures to cases where the amount in controversy is JPY20 million
(approximately US$200,000) or less.
• Mediation: The old rules did not refer to mediation, but the Rules now provide that the parties may agree at any time
during the arbitration to refer the matter to mediation under JCAA’s commercial mediation rules. The arbitrator may not
act as the mediator unless all of the parties agree. An arbitrator who also acts as the mediator may not have ex parte
communications with the parties, unless agreed otherwise. Admissions and other statements made during the mediation
are not admissible as evidence in the arbitration.
• Multiple Claims and Multiple Parties: The Rules now provide for greater flexibility in multi-claim and multi-party
arbitrations. A claimant may make multiple claims in a single arbitration, provided that (1) all parties agree, (2) all claims
arise under the same arbitration agreement, and (3) all claims arise between the same parties. The third requirement
includes three conditions: (a) the same or similar questions of fact or law arise from the claims, (b) the arbitration
agreement calls for a JCAA arbitration, and (c) the arbitral proceeding can be conducted in a single proceeding with
regard to such issues as hearing location, the number of arbitrators, and language of the proceeding. Separate
proceedings may be consolidatePage 14
Also, the Rules now provide for joinder of a third party if (1) all of the parties and the third party agree in writing, or (2) all
of the claims are made under the same arbitration agreement, provided that the third party consents in writing if, after the
tribunal has been constituted, a party applies to join the third party.
Under the old rules, in multi-party arbitrations, each respondent had the right to request a separate arbitral proceeding
under a different tribunal – which was intended to guarantee each respondent’s right to appoint an arbitrator. This right has
been repealed. Instead, in three-arbitrator tribunals in multi-party arbitrations, if the two party appointed arbitrators cannot
agree on the third arbitrator, the JCAA will make the appointment; and if one of the parties fails to appoint a party arbitrator,
the JCAA will appoint all three arbitrators. The JCAA may appoint the arbitrator already appointed by the claimant(s) or
respondent(s) as one of the three arbitrators, if no party raises an objection.
Whether these amendments will have an effect on the relatively low number of JCAA-administered arbitrations remains
to be seen. Nevertheless the changes demonstrate that the JCAA is keeping abreast of worldwide trends in international
arbitration rules and practice.
1 The States that are not party to the New York Convention are: Andorra, Angola, Bhutan, Burundi, Cape Verde, Chad,
Comoros, Republic of Congo, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Grenada, Guinea-Bissau, Guyana, Iraq,
Kiribati, North Korea, Libya, Malawi, Maldives, Federated States of Micronesia, Namibia, Nauru, Niue, Palau, Papua New
Guinea, Saint Kitts & Nevis, Saint Lucia, Samoa, Seychelles, Sierra Leone, Solomon Islands, Somalia, South Sudan,
Sudan, Suriname, Swaziland, Taiwan, Timor-Leste, Togo, Tonga, Turkmenistan, Tuvalu, Vanuatu, and Yemen.
2 See United States Department of States, Treaties in Force, A List of Treaties and Other International Agreements of
the United States in Force on January 1, 2011, available at http://www.state.gov/documents/organization/169274.
3 See Restatement (Third) of the U.S. Law of International Commercial Arbitration – Tentative Draft No. 2 (April 16, 2012),
Chapter 4, Topic 1 (citations omitted); see also Landegger, 357 F. Supp. at 692-94.
4 While arbitral award made in nations that have ratified or acceded to the Inter-American Convention on International
Arbitration (“Inter-American Convention”) are enforceable in the United States, see 9 U.S.C. Sections 301, 304, all of the
parties to the Inter-American Convention are also members of the New York Convention.
5 9 U.S.C. Section 208; Gilmer v. Interstate/Johnson Lee Corp., 500 U.S. 20, 25 (1991); Mitsubishi Motors Corp., 473 U.S.
at 631; Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983).
6 See FAA, Chapters 2 and 3.
7 See Restatement (Third) of the U.S. Law of International Commercial Arbitration – Tentative Draft No. 2 (April 16, 2012),
Chapter 4, Topic 1. See also e.g. Lindo v. NCL (Bahamas) Ltd., 652 F.3d 1257, 1292 (11th Cir. 2011); Bautista v. Star
Cruises, 396 F.3d 1289 (11th Cir. 2005); Weizmann Institute of Science v. Neschis, 421 F. Supp. 2d 654, 674 (S.D.N.Y.
2005); DaPuzzo v. Globalvest Management, Co., 263 F. Supp. 2d 714, 727 (S.D.N.Y. 2003).
8 Conn. Gen. Stat. Sections 50a-101(2), 50a-135(1); Fla. Stat. Section 684.25; Ga. Code Section 9-9-42; Or. Rev. State
9 Cal. Code. Civ. P. Section 1297.12; Hawaii Rev. Stat. Section 658D-4(d); Section 710 Ill. Comp. Stat 30/1-5(b); Ohio Rev.
Code Ann. Section 2712.02(B); Tex. Civ. Prac. & Rem. Code Ann Section 172.001(b).
10 See Landegger v. Bayerische Hypotheken und Wechsel Bank, 357 F. Supp. 692, 694 (S.D.N.Y. 1972).
11 Restatement (Third) of the U.S. Law of International Commercial Arbitration – Tentative Draft No. 2 (April 16, 2012),
Chapter 4, Topic 1.
12 See Hilton v. Guyot, 159 U.S. 113, 163 (1895) and Weizmann Institute of Science v. Neschis, 421 F. Supp. 2d 654, 674
13 BG Group PLC v. Argentina, No. 12-138 (U.S. Sup. 2014).
14 The ICSID Caseload – Statistics are available for download at: https://icsid.worldbank.org/ICSID/FrontServlet?requestTyp
e=ICSIDDocRH&actionVal=CaseLoadStatistics (last accessed on 9 April 2014).
15 The classification of the geographic regions used by ICSID in its statistical reporting is based on the World Bank’s
regional system, available at: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/0,,pagePK:180619~theSite
Backd before the tribunals are constituted, based on similar criteria.