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international litigation blog

EU Commission Presents Proposals for Investment Court System in CETA and Announces Plurilateral Treaty to Terminate Intra-EU BITs

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A couple of days before Working Group III of the United Nations Commission on International Trade Law (UNCITRAL) held its 38th session on the reform of investment arbitration, the European Commission (the Commission) presented four proposals (the Proposal(s)) to the Council of the European Union (the EU) for specific rules to put into place the Investment Court System (the ICS) provisions in the EU-Canada Comprehensive Economic and Trade Agreement (the Agreement or CETA).

The ICS included in CETA represents a new approach by the EU in relation to investment-related disputes and is the same approach taken in the agreements the EU has negotiated with Singapore, Viet Nam and Mexico, while also being on the table in all on-going investment negotiations.

The foundation of the ICS is already established in CETA (as discussed here, here and here), however it remains to be applied pending ratification of the Agreement by all of the EU Member States. The Joint Interpretative Instrument on CETA agreed by the EU and Canada in October 2016 includes a commitment to make the system operational as soon as the Agreement enters into force. The Proposals are thus necessary to deliver on this commitment and these rules complete the putting together of the reformed approach to investment dispute settlement under CETA.READ MORE

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ISDS Reform: Working Group III Gets Down to Brass Tacks

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Last week, multilateral efforts to reform investor-state dispute resolution (ISDS) entered a new phase, with substantive discussions of reform options beginning in earnest. As readers of this blog are aware, delegations from around a hundred States have been working multilaterally toward reforming ISDS in the United Nations Commission on International Trade Law (UNCITRAL), Working Group III (WGIII) over the last two years.

This work began in earnest in WGIII’s 34th Session in Vienna (2017) and has continued through biannual Sessions in Vienna and New York. From 2017–2018, Delegations registered substantial concerns with ISDS, relating to fragmented arbitral outcomes; the arbitrators charged with adjudicating disputes; matters of duration and cost; the lack of a framework to address multiple proceedings; and third-party funding (Phase 1). In Vienna last year, WGIII decided to work multilaterally to reform such concerns within UNCITRAL (Phase 2) – discussed further here. Last week proved to be a key hinge in the process. WGIII has now moved firmly into working on concrete reform options (Phase 3).

WGIII’s 37th Session in New York this past Spring 2019 appeared as something of a lull in the process, but it culminated in a key compromise on working methods that preserved consensus for the time being. WGIII spent much of that week debating working procedures, ultimately adopting a compromise plan to divide working time between developing “structural reforms” (i.e., large scale institutional reform options like a standing investment court or a standalone appellate body), and “functional reforms” (i.e., specific targeted reforms on problematic aspects of ISDS, like the lack of code of conduct, the lack of a mechanism to address multiple claims and shareholder claims more generally, third party funding, and security for costs). But it deferred actually developing a concrete project schedule until the fall.

WGIII’s 38th Session in Vienna last week marked the fruition of that compromise, and a transition into detailed discussions on reform options.READ MORE

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U.S. Circuit Court Finds Section 1782 Allows for Obtention of Evidence Located Outside the U.S. Detained by Companies not Incorporated in the U.S.

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On 7 October 2019, the United States Court of Appeals for the Second Circuit (the Second Circuit) rendered a decision in the case of Re: Application of Antonio del Valle Ruiz in which it ruled on whether 28 U.S.C. Section 1782 (Section 1782) allows for the obtention of evidence located outside the United States.

As we discussed before, Section 1782 is a U.S. Federal Statute that allows a litigant before a “foreign or international tribunal” outside the United States to apply to the U.S. district courts to obtain discovery against a person or entity residing or found in the district where the application is sought. As many jurisdictions, in particular civil law jurisdictions, have more limited procedures for the disclosure of evidence between parties, the possibility of using Section 1782 to obtain evidence is thus potentially very useful.

The case related to a dispute over the 2017 take-over, by the Spanish bank Santander, of Banco Popular Espanol, another Spanish bank. A group of Mexican and American investors contested the take-over and brought a case against Santander in the United States. During the dispute, the investors sought to obtain documents held by Santander. However, since Santander itself was not incorporated in the United States (and thus was not “residing or found” in the relevant district), the investors sought to obtain discovery, through a Section 1782 order issued against Santander‘s New York affiliate: Santander Investment Securities Inc.READ MORE

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Nord Stream 2 Investor Initiates ECT Arbitration Proceedings Against European Union

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On 26 September 2019, the Russian energy giant Gazprom issued, through its Switzerland-based subsidiary Nord Stream 2 AG, a notice for arbitration against the European Union alleging that recent amendments brought to Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (the Gas Directive) damaged its investments in the Nord Stream 2 pipeline and thus violated the Energy Charter Treaty 1994 (the ECT).

The issuing of this notice for arbitration appears to mark the first time that investment arbitration proceedings under the ECT are to take place against the European Union itself and serves as the latest saga in the area of inter-mixity of investment dispute settlement and EU law.READ MORE

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EFTA Surveillance Authority Gives Green Light to Arbitration-Set Energy Price

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On 10 September 2019, the EFTA Surveillance Authority (the ESA)* handed down a decision where it ruled that energy prices, set in an arbitral award, which a private company had to pay to the Icelandic State-owned energy producer did not amount to State aid.

In the case at hand, a dispute had arisen between Elkem Iceland (Elkem), a ferrosilicon producer, and Landsvirkjun (Landsvirkjun), the Icelandic state-owned energy producer, concerning the price to be paid by Elkem to Landsvirkjun for energy supply.

Pursuant to the contract between Elkem and Landsvirkjun, the dispute was referred to arbitration.

In May 2019, the arbitral tribunal handed down its award in which the tribunal set the energy price to be paid by Elkem to Landsvirkjun.

However, concerned that such an arbitration-set energy price could amount to State aid, Iceland notified the arbitral award to the ESA for an assessment with State aid rules.READ MORE

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CJEU Rules on Jurisdiction in Private Damages Actions for Infringement of Competition Law in Absence of Contractual Link between Plaintiff and Participant to Cartel

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On 29 July 2019, the Court of Justice of the European Union (the CJEU) handed down a judgment in which it held that a domestic court in an EU Member State has jurisdiction to rule on a follow-on competition damages claim even when no direct contractual link exists between the participant to a cartel and the victim.

The case concerned a civil action for damages initiated by Tibor-Trans Fuvarosó és Kereskedelmi Kft (Tibor-Trans), a freight transport company based in Hungary, against DAF Trucks NV (DAF), a trucks manufacturer headquartered in the Netherlands. The case was initiated before Hungarian courts by Tibor-Trans following the 2016 decision of the European Commission which found that, between 1997 and 2011, the international truck manufacturers, including DAF, had colluded on pricing and on the timing and the passing on of costs for the introduction of emission technologies (Case AT.39824 – Trucks).

Tibor-Trans brought its follow-on action for damages against DAF alleging that it had suffered financial harm as a result of the collusive arrangements between truck companies. Tibor-Trans said it had heavily invested in the purchase of new trucks between 2000 and 2008. In order to purchase those trucks, Tibor-Trans had secured financing from leasing companies which retained ownership of the vehicles until the expiry of the leasing agreements. The right of ownership only passed on to Tibor-Trans after performance of its obligations under the leasing agreements. Thus, although Tibor-Trans never purchased any DAF trucks, it claimed to be a direct victim of the anti-competitive infringement, considering that (i) the leasing companies only provided financing and completely passed on the overcharge to Tibor-Trans; and (ii) in Hungary, customers were only able to purchase trucks from independent dealers, and not directly from the original equipment manufacturers.

Tibor-Trans argued that Hungarian courts had jurisdiction to rule in that case. Tibor-Trans relied more particularly on Article 7(2) of Regulation 1215/2012 of the European Parliament and of the Council of 12 December 2012 on the jurisdiction and enforcement of judgments in civil and commercial matters (the Brussels Ibis Regulation) which provides that “[a] person domiciled in a Member State may be sued in another Member State: […] in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur“.READ MORE

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EU Commission Appeals EU General Court’s Judgment in Micula

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On 27 August 2019, the European Commission filed an appeal before the Court of Justice of the European Union against the judgment of the EU General Court handed down on 18 June 2019 in the Micula case.

As we discussed previously, in its judgment of 18 June 2019, the EU General Court annulled the 2015 European Commission’s decision which found that an ICSID arbitral award handed down against Romania in favour of Swedish investors (the Miculas) amounted to State Aid.

The case is filed under the number C-638/19P (Commission v. European Food and Others). A summary of the main grounds of appeal should be published in the coming weeks in the EU’s Official Journal.

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