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Measures "on the margins" of judicial proceedings breached FET (ICSID)
Practical Law UK Legal Update 9-520-9778 (Approx. 3 pages)
Measures "on the margins" of judicial proceedings breached FET (ICSID)
by PLC Arbitration
| Published on 21 Aug 2012 • International, USA (National/Federal) |
In Swisslion DOO Skopje v Former Yugoslav Republic of Macedonia (ICSID Case No ARB/09/16), the tribunal considered whether court proceedings relating to a shareholder dispute amounted to a breach of the Macedonian/Swiss BIT.
An ICSID tribunal has rejected claims that Macedonian court proceedings amounted to a breach of the fair and equitable treatment (FET) standard under the Macedonian/Swiss bilateral investment treaty (BIT). However, it went on to hold that measures "taken or not taken prior to and on the margins of the judicial proceedings" breached the FET requirement.
The claimant, a Swiss investor in a struggling Macedonian social enterprise company (A), alleged that, once it had returned A to profitability, the Macedonian government had acted to take back its stake in A. The acts complained of included court proceedings in which the government sought, pursuant to the relevant share sale agreement, to block the claimant's control of shares. The tribunal held that the proceedings themselves did not breach the BIT - there was no evidence of serious procedural unfairness, or a lack of judicial independence or misconduct. However, measures "on the margins" of the court proceedings did, collectively, amount to a breach. These included:
- Unfairly failing to respond to the claimant's communications or to engage with it on a timely basis.
- Making applications to the Securities and Exchange Commission (SEC) that were motivated by a wish to place an administrative burden on the claimant.
- Publicising a criminal investigation into the claimant's staff, but then failing to publicise the fact that the investigation had been dropped.
This collective breach of the FET standard was "relatively minor" and the tribunal found that damages should be assessed by reference to the costs incurred in connection with the SEC and criminal investigations. The respondent was also ordered to pay part of the claimant's costs. The award is a good illustration that conduct around or relating to judicial proceedings may amount to a breach of treaty, even where the proceedings themselves are unobjectionable.