Almås v. The Republic of Poland

Professor Mads Andenæs,

University of Oslo and Institute of Advanced

Legal Studies, University of London. Nordic Investment Law Seminar, Oslo 2017

Subject of an informal seminar: Investment protection for Norwegian companies, 31 August 2016, Pluricourts and the Financial Markets Project, Institute of private law: “Norway is a capital exporter and investments claims brought by Norwegian companies are on the rise. The Norwegian state has a mixed experience in investment disputes brought against it. The seminar will provide an opportunity to take stock and learn the lesson of the experiences so far from the perspective of the Norwegian investor.”

ALMÅS V. THE REPUBLIC OF POLAND 27 JUNE 2016 NORWEGIAN CLAIMANTS AND COUNSEL: GREAT

INTEREST TO US

BITs and investment treaty arbitration

Direct protection of investors rights, private law, public law, international law

International law protecting private law against public law intervention

GP of PIL: pacta sunt servanda

Private law, public law, international law

Ten years ago: system under threat.

Abi-Saab’s dissent in Abaclat and Others v. Argentina (2011).

Gillaume and Crawford: series of awards, taking down legitimate expectations. Using PIL devices to limit state responsibility (NAFTA model).

“SAVING INVESTMENT TREATY ARBITRATION”

BLUESUN V. ITALY

New balance: states have a richer arsenal of PIL devices Bluesun v. Italy • Energy Charter Treaty/ICSID • Crawford (P), Dupuy • Developing sun cells with state aid

Cautionary tale: Almaas v Poland

• How could the claimants possibly lose?

• What went wrong?

• What can we learn from this proceeding?

Claimants, BIT and arbitration

• Norwegian investors in Poland

• Poland–Norway BIT 1990, 13 articles. Article VI: Expropriation

• 1976 UNCITRAL Rules

• Panel of three arbitrators:

• Professor Mestad, Professor Reinisch, Judge Crawford (President)

• Norwegian law firm (Wiersholm); Polish Office of General Prosecutor and Polish law firm

Almaas

• Invested thorugh Polfarm

• Poland’s Agricultural Property Agency

• 30 year lease on 4000+ hectare farm in mid 1990s

• Crop failures and falling diary prices

Almaas

• Agricultural Property Agency terminates lease in 2009: change of agreed use, …

• Polfarm bankrupt

Issues

• Was conduct “attributable” to Polish state?

• Attribution is a legal operation by which the conduct of a range of domestic law entities is treated as conduct of an international law entity—the state

• Could MFN clause be relied on such that an umbrella clause in a different BIT benefitted the claimants?

• Expropriation?

• Fair and equitable treatment?

• Unreasonable and discriminatory measures?

Award: company law I

• —Almås brothers’ rights to shares or contractual rights of Polfarm

• Compare ICJ in Barcelona Traction and Diallo

• Clear under investment law that shareholders are protected

Award: attribution

• —were the acts done as a matter of international law attributable to Poland?

• Not state organ, company law II, Article 4 ILC 2001 Draft articles on Responsibility of States for Internationally Wrongful Acts

• Governmental authority or contractual right? Article 5 ILC 2001 Draft articles on Responsibility of States for Internationally Wrongful Acts

• “Not performed at instruction of Polish authorities”

• Similar to Italy v Cuba, where attribution became central question (see Attila Tanzi’s dissent). How convincing is the Tribunal’s argument?

Award: attribution

• Views and roles of the arbitrators

• Crawford and the ILC 2001 Draft articles on Responsibility of States for Internationally Wrongful Acts

Award: contract

• Not necessary but still ruled on contractual issue. Even if attributable to Polish state:

• Claims would also have failed on merits: changes in use etc material breach of contract

• Role of domestic courts

• Crystallex v Venezuela

Background but not in award I

• Polish government attracting foreign investment in 1990s

• Recent nationalist turn:

• «Polish land»

• Beyond: banking, «Cosmopolitan capitalists»

• Classic need for investment protection

Background but not in award II

• Commission procedures against Poland

• Other investment arbitrations against Poland

Too far?

• From too far, to too far the other way?

Three further topics:

• Treaty and contract—what is the relationship between the two in terms of international investment law?

• Puissance public? Almaas para 273–284

• Public and private law concepts: proportionality and legitimate expectations.

Treaty and contract

• Opposition to idea that international law had direct role to play in settlement of investment disputes

• Prosper Weil: ‘ingrained … reluctance [of some] to introduce international law in investment relations’. Strong reluctance towards ‘the internationalization of legal investment relations’

• Weil, ‘The State, the Foreign Investor, and International Law’ (2000) 15 ICSID Review 401

• ‘Any contract which is not a contract between States in their capacity as subjects of international law is based on the municipal law of some country. ’

• Permanent Court of Int. Justice, Serbian Loans 1929 PCIJ Ser. No 20/21 p 41.

• Then international law would burst in.

• Investment contracts were brought under international law.

• 1965 ICSID Convention, Art 42(1):

• ‘The Tribunal shall decide a dispute in accordance with such rules … as may be agreed by the parties,’

• 42(1) cont’d:

• ‘In the absence of such agreement, the Tribunal shall apply the law of the Contracting State Party to the dispute … and such rules of international law as may be applicable’.

• In other words, international law has at least some role to play, even on minimalist reading.

• Indeed, Report of the World Bank Executive Directors on the ICSID Convention:

• ‘The term “international law” as used in this context should be understood in the sense given to it by Article 38(1) of the Statute if the ICJ, allowance being made for the fact that Article 38 was designed to apply to inter-State disputes.’

• Sir Eli Lauterpacht (1968):

• ‘the assumption which appears to underlie the wording employed (in Article 42) is that, as a matter of established doctrine, international law is already effective to govern directly the relationship between States and foreign investors’.

• Amco v Indonesia (1990):

• ‘international law is fully applicable and to classify its role as “only” “supplemental and corrective” seems a distinction without a difference’.

• What does this ‘internationalization of legal investment relations’ (Weil) mean?

• State contracts; concession contracts are all governed by international law principle of pacta sunt servanda.

• principle of pacta sunt servanda applies to the legal relationship between the State and a private investor: ‘contractual undertakings must be respected’.

• Texaco (1978) 17 ILM 1, 19

• Almas v Poland para 273–284: puissance publique—what is the meaning of this doctrine?

• Can the sovereign state do things with impunity just because it is sovereign?

Public and private law concepts: proportionality and legitimate expectations