Towards a Practical Framework for Mass Claims in Investment Treaty Arbitration | Vinson & Elkins LLP

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These national measures can harm foreign investors. International investment law can provide protection against these risks, both in the form of legal guarantees to banking and financial investors over their investments and remedies against governments through international treaty arbitration. investment. While arbitral institutions have so far refused to establish an institutional framework to deal with mass claims in arbitration, the ruling on jurisdiction Adamakopoulos v. Cyprus, February 7, 2020,1 reviews past arbitration awards and provides clarification on these types of cases.

The methods and procedures for dealing with mass claims under public international law, where each claim is dealt with separately, would not be practical for investment arbitration. Mass claims proceedings in investment treaty arbitration often involve a large number of claimants seeking a quick decision. Over the past decade, investment treaty tribunals have generally recognized jurisdiction over the claims of several unaffiliated parties.2 A recent case highlights elements of a potential framework for dealing with these types of cases, which includes early identification of the applicant pool, bifurcation, and practical documentation considerations.

Adamakopoulos vs. Cyprus

In 2012-2013, two Cypriot banks, Laiki Bank and Bank of Cyprus, suffered losses due to their exposure to the Greek economic crisis. As an emergency measure, in March 2013, Cyprus reached an agreement with the European Central Bank (“ECB”), the International Monetary Fund (“IMF”) and the European Commission to adopt an adjustment plan. The plan resulted in the merger of the two banks into the new Bank of Cyprus and the bail-in of the deposit holders, shareholders and bondholders of the Bank of Cyprus. The Claimants – 951 Greek nationals, six Greek companies and one Luxembourg company – have filed claims against Cyprus before the International Center for Settlement of Investment Disputes (“ICSID”) under the Greece-Cyprus Bilateral Investment Treaty ( “TBI”) and Luxembourg-Cyprus BIT. They alleged that the adjustment plan violated Cyprus’s obligations to them as investors under these BITs. The deposit holders alleged that they received a “haircut” reducing each applicant’s deposits to $ 100,000. The bondholders alleged that their bonds had become worthless, either because they had been converted into shares of the Bank of Cyprus, or in the case of Laiki Bank, through the resolution measures for that bank.

Cyprus opposed the multi-party claims on several grounds, presented as jurisdictional arguments. The main jurisdictional objections of Cyprus were that (i) the multi-party claims were outside the jurisdiction of the Tribunal and inadmissible without the consent of the Respondent State and (ii) the bundling of claims was not admissible. For a court to have jurisdiction over an investment request, it must have the power to make a decision affecting the merits of the case. The concept of admissibility refers to the power of the court to decide a case at a given time, taking into account a possible temporary or permanent defect in the request.

Jurisdiction

The Tribunal found that it had jurisdiction over both the individual claims and the collective claim. Relying on the brief on the merits presented by the Claimants,3 the Tribunal found that there was “substantial unity” in the claims made and that the Respondent’s alleged liability was similar under both BITs.4 The Tribunal’s only concern with its jurisdiction was the ability to characterize the mass claim by 956 claimants as a single dispute, when the real and practical problem facing the Tribunal was the manageability of a mass claim with such a large number of applicants under ICSID. .5

The Tribunal distinguished previous ICSID decisions in Allemani and Atmosphere (90 and 74 applicants, respectively),6 as the number of applicants in the Adamakopoulos cases were well above the number of claimants in these cases and none of them were resolved. Nevertheless, the Tribunal followed the Tribunal’s approach in Allemani,7 asserting that there was no consequence in using the terminology “mass claims”. The majority characterized the case as a “mass claim” on the grounds that it was brought by a large number of claimants in a single case, but Allemani was not a class action, nor a representative claim or grouping of claims. The Tribunal disagreed with Cyprus’s position that BITs do not allow mass claims because they use the singular instead of the plural to describe an “investor”.8 In addition, the Tribunal concluded that no separate consent was required for mass claims under BITs and that such a requirement could not be implied.9

Eligibility

Cyprus’s concerns regarding the admissibility of the mass claims related to two specific issues: (1) the conduct of the proceedings and (2) the post-sentence phase. The Tribunal considered several factors in assessing management issues in the conduct of the proceedings: balancing the rights of claimants to have their claims heard, the ability of the ICSID cadre to manage the claim process, and the safeguarding of claims. due process rights of the defendant. .ten

The Respondent raised concerns about the post-award phase, such as how cancellation procedures might work for such a large number of claimants and how to assess cost recovery claims. The Tribunal found that these questions did not relate to admissibility and therefore did not affect the jurisdiction of the Tribunal. Rather, the Tribunal considered these issues as raising the issue of whether the Respondent was entitled to security for costs in these circumstances.11 The Tribunal ordered the Respondent to file an application for security for costs within 30 days of its decision on jurisdiction.12

With respect to the respondent’s case management concerns, the majority disagreed with the court in Abaclat,13 who had decided that there was a mandate for the tribunal under the ICSID system to create a new procedural framework, outside the ICSID framework, to deal with the case. The Tribunal concluded that the case should and could be handled within the framework of ICSID. The majority did not consider that the likelihood that the proceedings would last for many years should automatically constitute a ground for declaring the application inadmissible.14

In order to pursue the case, the Tribunal concluded that certain conditions had to be met. First, the pool of claimants should be fixed as it would be unreasonable for the respondent and create general uncertainty for all parties involved if individual claimants were allowed to opt out of the bulk claim at will.15 Second, the Tribunal found that there was a good argument for separating the liability and damages phases and therefore invited the parties to comment on the separation within 30 days of its decision on jurisdiction. .16

Procedural challenges for lawyers and claimants to consider when considering mass claims

Some procedural lessons can be learned from Adamokopoulos and other cases to be implemented in future mass claims brought under investment treaties. Cases such as Abaclat, Atmosphere and Adamakopoulos show that a general arbitration structure appears in mass complaints procedures, despite the courts’ refusal to recognize a specific institutional framework for mass complaints. In the initial phase, there are general jurisdictional questions common to all applicants. The respondent will raise objections as to the number of applicants. A court order may be required, setting the number of claimants and setting out the procedure for any bifurcated proceedings. In the second phase, there will be general liability and damages issues common to all claimants. The lawyer should also consider a third phase, to consider individual questions of jurisdiction, liability and damages. This phase may need to be carried out in conjunction with the second phase and may involve independent verification of the applicant’s data and documentation.

Mass claims will also bring unique practical considerations. The volume of documents and information that will need to be collected from each claimant will require careful planning and may involve liaising with a local lawyer, depending on where all claimants are located. For each applicant, the council will have to collect, among others, originally signed consent, power of attorney, signed delegation of power to an agent to coordinate with applicants and counsel, proof of ownership of the investment, proof of nationality at relevant times, attestation originally signed that the applicant is not having dual nationality of the receiving State and the originally signed questionnaire covering all other relevant information.

The judicial decision in Adamakopoulos may encourage other investors to consider investment treaty arbitration as a means of appealing against economic decisions of sovereign governments. The ruling provides some clarity on the practical obstacles faced by claimants in mass claims arbitrations, but a final decision on a mass claims framework in investment treaty arbitration is still missing.

1 Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB / 15/49, Decision on Jurisdiction (February 7, 2020).

2 See Antoine Goetz and others v. Republic of Burundi (ICSID case n ° ARB / 95/3); Suez, et al. v. The Argentine Republic (ICSID case n ° ARB / 03/17), or Urbaser SA, et al. v, The Argentine Republic (ICSID case n ° ARB / 07/26).

3 Supra note 1 at para. 206.

4 Identifier. in par. 210.

5 Identifier. in par. 214.

6 Giovanni Alemanni and others v. The Argentine Republic (ICSID case n ° ARB / 07/8); Ambiente Ufficio SpA and others v. Argentine Republic (ICSID case n ° ARB / 08/9).

7 Giovanni Alemanni and others v. The Argentine Republic, ICSID Case No. ARB / 07/8, Decision on Jurisdiction and Admissibility, para. 267 (November 17, 2014).

8 Supra note 1 at para. 197.

9 Identifier. in par. 201.

ten Identifier. in par. 224. Identifier. in par. 235.

12 Identifier. in par. 264.

13 See Abaclat and others v. The Argentine Republic, ICSID Case No. ARB / 07/5 (formerly known as Giovanna Beccara and others against the Argentine Republic).

14 Supra note 1 at para. 233.

15 Identifier. in par. 260.

16 Identifier. in par. 262.

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