1. ICSID and the Investor-State Dispute Settlement System (ISDS) to be or not to be for African states ? 2015 Annual Conference of the Chartered Institute of Arbitrators, Nigeria Branch, Abuja 3 rd -4 th November 2015 Rose Rameau, MCIArb, Esq., Fulbright Scholar, University Of Ghana School of Law 1

2. State consent in investment arbitration Agenda I. Consent in investment arbitration II. How does the notion of competence –competence affect the consent Of sovereign states? III. B.G Group plc v. Argentina a. Factual background and procedural history b. Consent in B.G Group plc v. Argentina. IV. What does BG mean to African States? 2

3. Consent generally I.CONSENT GENERLLY A. Where does consent come from? An agreement to arbitrate is the "foundation stone" of international arbitration In order for an arbitral tribunal to have jurisdiction in an arbitration proceeding; the parties must have had a contractual obligation in which they consent to submit themselves to the jurisdiction of the tribunal. -Clause Compromissoire (Compromissory clause) -Submission agreement or Compromise 3

4. Continued Introduction B. Competence-Competence or Kompetenz-Kompetenz Article 41of the ICSID Convention states: (1) The Tribunal shall be the judge of its own competence. (2) Any objection by a party to the dispute that the dispute is not within the jurisdiction of the Centre, or for other reasons is not within the competence of the Tribunal, shall be considered by the Tribunal which shall determine whether to deal with it as a preliminary question or to join it to the merits of the dispute C.Results Arbitration agreement is the nucleus of the arbitration process. 1.It grants the power to the arbitrators to resolve the dispute 2.It burdens the parties to respect the agreement by not seeking other means of dispute resolution that is not provided in the agreement 3.Thus, consent to arbitrate derives from the arbitration agreement. 4

5. Continued consent… D.True 1)Domestic arbitration 2)Commercial arbitration ? Investment arbitration. *** Investment arbitration presents some particularities in this respect Investment treaty arbitration – the double-key test Investment treaty arbitration – the double-key test – the host State's offer to arbitrate disputes with a defined class – the investor's acceptance of that offer 5

6. II. Consent in investment arbitration A. A.Where investment arbitration is concerned, there is usually 1. No traditional arbitration agreement 2. Consent is not easily established - It is based on investment treaties between two sovereign states for the future consent of potential claimants or investors 3.This is similar to a third-party beneficiary contract contracting states make promises to each other for the benefit of their respective citizens. 4. In international commercial arbitration, the agreement that the parties sign usually grants power to the arbitrators to resolve the difference. 5.In contrast, in international investment arbitration, the mere signature to the international agreement, such as a BIT, does not in itself grant the tribunal jurisdiction over a sovereign state 6

7. II. Consent in investment arbitration Continued B. B. What happens when there is an objection to state consent? 1.Objection to consent triggers the jurisdiction of the tribunal. 2.Tribunal should not proceed if there is no consent to arbitrate. 3.The same tribunal that decides whether a state consents to the proceeding is the same tribunal that will decide whether it has has competence to hear the matter. (art 41 ICSID) 4.Competence-Competence theory conflicts with the principle of state’s sovereignty. 7

8. To what extent DOES the notion of competence-competence minimise the power of state consent in investment aRbitration? 1. 1.A state should be allowed to consent to arbitration by articulating in its domestic laws and other instruments how and when arbitration would proceed. 2. 2.Mere signature of BIT does not mean that the state has consented. 3. 3.Signature to BIT is an offer to consent in the future. States that have included local litigation and or negotiation prior to arbitration intend to have have those provisions as a condition precedent. - - B.G Group plc. v. Argentina exposes discussions on the battle of consent and the competence-competence theory. 8

9. IV. B.G Group plc v. Argentina A.Brief fact: - UK-Argentina BIT which requires that investors submit disputes to the host state court for 18 months before filing for arbitration. - BG argued that the local litigation requirement should be interpreted as a non-mandatory step. - The tribunal agreed and awarded 185 million in BG’s favor. - The award was confirmed by a district court in Washington then on appeal it was set aside on the basis that the tribunal exceeded its mandate by waiving the local litigation requirement. 9

10. IV. B.G Group plc v. Argentina Issues before the US supreme Court: 1. Whether the tribunal has exceeded its powers in its interpretation of Article 8 of the BIT? Federal Arbitration Act: “A Court may annul an award if it finds the tribunal exceeded the power mandated” 2. Should deference be given to the tribunal’s decision, or should there be a de novo review of the tribunal’s factual and legal analysis? In order words, who should interpret the local litigation requirement? 10

11. IV. B.G Group plc v. Argentina AT & T Technologies: Issues regarding validity of the agreement should be determined by the court… de novo review. First Options: Jurisdiction v. admissibility. Admissibility would mean a mere procedure and the tribunal would decide. Jurisdiction is substantive means the court would decide. Here, the Court held this was just procedure. Howsam: Procedural issues such as time bar similar to local litigation requirement so the Sup. Court should give deference to the tribunal’s decision 11

12. IV. B.G Group plc v. Argentina B. Consent in BG Majority Decision - Contractual analysis in relation to local litigation requirement. - This was a procedural issue centered on admissibility and not jurisdiction. - BIT was viewed as a contract in which the parties’ intention were to be assessed in the same way as for private agreement. Consent was not specifically expressed as a condition on the fulfillment of the local litigation requirement. So non-compliance should not invalidate the arbitration proceeding. - - Georgia v. Russian Federation, Case concerning Application of the International Convention on the Elimination of All Forms of Racial Discrimination (ICJ, Decision on Preliminary Objections, 1 April 2011, Paras 133-135), and highlighted that the trend in public international law has clearly favoured the strict application of procedural prerequisites (para 250). 12

13. IV. What does BG mean to African States? 1.STOP SIGNING BIT. 2.FDI WILL CONTINUE TO INCREASE IN AFRICA. 3.REVIEW STATE INVESTMENT LAWS AND PLACE INVESTORS ON NOTICE. 4.RENEGOTIATE BIT’S AND REDRAFT CLAUSES TO REFLECT BETTER BALANCE 13

14. IV. What does BG mean to African States? 1.STOP SIGNING BIT. THE GHANA EXAMPLE Signed 26 BITs; only 8 in forceSigned 26 BITs; only 8 in force China, Denmark, Germany, Malaysia, Netherlands, Serbia, Switzerland, UKChina, Denmark, Germany, Malaysia, Netherlands, Serbia, Switzerland, UK No BITs with African nations are in forceNo BITs with African nations are in force All include:All include: Fair & Equitable TreatmentFair & Equitable Treatment Most Favoured NationMost Favoured Nation ExpropriationExpropriation All include arbitration:All include arbitration: ICSID or UNCITRALICSID or UNCITRAL Ghana-China: ad hoc arbitration for quantum onlyGhana-China: ad hoc arbitration for quantum only 14

15. IV. What does BG mean to African States? 2.FDI WILL CONTINUE TO INCREASE IN AFRICA. Ghana has fewer BITs in force than: in force than: Senegal (12) Senegal (12) Nigeria (13) Nigeria (13) Cameroon (9) Cameroon (9) South Africa (17 ) South Africa (17 ) 15

16. IV. What does BG mean to African States? 3.REVIEW STATE INVESTMENT LAWS AND PLACE INVESTORS ON NOTICE.  A “right to deny benefits” to “mailbox” or “brass name plate” companies and introduce the possibility of lifting the corporate veil  Energy Charter Treaty 16

17. IV. What does BG mean to African States? 4.RENEGOTIATE BIT’S AND REDRAFT CLAUSES TO REFLECT BETTER BALANCE All BITs include:All BITs include: Fair & Equitable TreatmentFair & Equitable Treatment Most Favoured NationMost Favoured Nation ExpropriationExpropriation All include arbitration:All include arbitration: ICSID or UNCITRALICSID or UNCITRAL -------------------------------------------------------------------------------------------------------------------------------------------------- Observance of obligations ("umbrella clauses”Observance of obligations ("umbrella clauses” Full protection and securityFull protection and security 17

18. Full protection and security clause Physical security – obligation to protect investments from harm – due diligence standard – relevance of both acts and omissions of the State – can be breached by failure to prevent conduct of third parties – compensation for damage Asian Agricultural Products Ltd v. Sri Lanka – compensation for requisitioned property American Manufacturing and Trading, Inc. v. Zaire 18

19. Questions? Rose Rameau, MCIArb, Esq., Fulbright Scholar, Thank you! These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. 19 University Of Ghana School of Law