On 11 January 2017, the arbitral tribunal in the investor-state arbitration between a French-Mauritian businessman (the “Claimant”) and the Republic of Mauritius (“Mauritius”)  issued a decision (i) on Claimant’s application to order Mauritius to pay the full advance on costs and (ii) on Mauritius application to order Claimant to pay security for costs. Both requests were denied.
The PCA administered arbitration was initiated by Claimant in November 2015 because Mauritius allegedly violated the France-Mauritius BIT by freezing and misappropriating his assets. The arbitration is governed by the UNCITRAL Rules of 1976.
The arbitration is still in the initial phase. Shortly after the constitution of the tribunal, the parties applied for the following interim measures.
Claimant’s request to order Mauritius to pay the full advance on costs
Pursuant to Article 41.1 UNCITRAL Rules, both parties must deposit an equal amount as an advance on costs. Claimant had paid the advance on costs for the initial phase of the arbitration but failed to pay the advance on the costs for the rest of the proceedings. Claimant argued that he was in no position to pay the advance on costs because Mauritius wrongfully froze his personal and professional assets. Claimant alleged that he had already borrowed money from friends in order to pay the initial phase of the arbitration, but that he was not able to raise more money. If the tribunal were to insist that Claimant pay his share of the advance on costs before resuming with the arbitration, the tribunal would deprive him of his access to justice rights under the applicable BIT. For these reasons, Claimant argued that Mauritius should be ordered by way of interim measure to pay the full advance on costs. Alternatively, Mauritius should facilitate the Claimant’s payment of the advance “by unfreezing certain bank accounts and/or real properties”. Claimant committed to use the unfrozen funds only for the arbitration proceedings.
Mauritius argued that Claimant’s failure to pay the advance on costs was a breach of the alleged consent to arbitrate under the France-Mauritius BIT. Moreover, Mauritius noted that an order vis-à-vis the Respondent to finance the arbitration would be unprecedented. It would “in effect relieve claimants from any litigation risk, provided they could submit prima facie evidence of their impecuniosity”. Mauritius, furthermore, stated that a decision in Claimant’s favour would prejudge the merits of the case at a very early stage of the proceedings because Claimant’s application was inseparable from Claimant’s case on the merits – Mauritius’ alleged misappropriation of and interference with his assets.
The tribunal declined Claimant’s request to order Mauritius to pay the entire advance on costs.
Firstly, the tribunal noted that it was not aware of any decision ordering the respondent state to pay the entire advance on costs – while there are decisions ordering the claimant to pay the state’s share.
Secondly, while the tribunal left the question unanswered whether the respondent state could be ordered to pay the full advance on costs by way of interim measure, the tribunal held that the requirements for an interim measure were not fulfilled. Claimant failed to show the requirement of urgency and irreparable harm to his rights. The tribunal held that Claimant has not sufficiently demonstrated that he has exhausted his possibilities to finance the proceedings – especially considering that Claimant managed to pay the advance on costs for the initial phase of the proceedings (€ 50,000). Further, the tribunal argued that Claimant’s situation – namely to be impecunious because of an alleged investor state’s misappropriation – “is the situation faced by any investor claimant in a similar situation. If Mauritius were required to fund the proceedings, it would protect Claimant from all litigation risk, at the expense of the Mauritian tax payers.”
The tribunal also declined Claimant’s request to order Mauritius to unfreeze the assets for financing the proceedings: “In any event, to order such an interim measure would risk crossing the border into the merits of the case, as unfreezing the relevant assets would in effect provide to Claimant the first instalment of the relief he seeks on the merits.”
However, the tribunal admitted the Claimant the right to resubmit his request regarding the advance on costs in case Claimant cannot pay the advance within 60 days and is able to prove that he does not have any other means to finance the proceedings.
Mauritius’s requests for security for costs
In view of Claimant’s impecuniosity, Mauritius asked the tribunal to order security for costs in an amount of EUR 3 million.
Mauritius argued that Claimant acknowledged that he would not be able to satisfy any adverse costs award. Mauritius argued that this circumstance sufficed for the test for an order for security for costs because “there is every possibility that Mauritius will suffer the irreparable harm of never being able to recover the costs expended to defend itself”.
While Claimant did not dispute that he was impecunious, Claimant argued that “mere financial difficulties of a party do not constitute the necessarily exceptional circumstances that would justify an order of security for costs against him”. Moreover, Claimant argued that Mauritius had already seized and froze his personal and professional assets and thereby created security for costs.
The tribunal denied the request for security for costs. The tribunal considered the decision in RSM v. Saint Lucia (cf. GAN: Is a Recent ICSID Decision Giving Real Teeth to Security for Costs or Merely Kicking the Can Down the Road) but held that in the case at hand there were no exceptional circumstances that would warrant an order for security for costs. The tribunal held that the “mere” impecuniosity was not sufficient to justify an order for security for costs.