'Award' in 2015 FDI Moot Case

Vasiuki LLC v. Republic of Barancasia, LCIA Arbitration No 00/2014

As an experiment in "democratic adjudication" we invited the arbitrators of the 2015 Foreign Direct Investment International Arbitration Moot to decide the 2015 Case issues via an anonymous online survey. While this method clearly fails to accommodate reasoning and persuasion, its relative lack of individual accountablility probably encouraged participation! To the extent this 'decision' intrigues you, the results are below.

A committee led by Inga Martinkute drafted the 2015 Case. Broadly speaking the case resembles a number of cases that have emerged in the EU recently regarding guaranteed feed-in tariffs for solar power producers.

A threshold issue for the tribunal was whether the intra-EU BIT on which the claims were based remained in force or had been terminated by the host State's and home-State's accession to the EU and ratification of the Lisbon Treaty, and/or modified by (ambiguous) communications between those States, or unilaterally terminated by the host State according to the terms of the BIT.

The substantive issues revolved around an amendment to the law on feed-in tariffs with (arguably) at least some retro-active effects and an allegedly arbitrary denial of license. Respondent raised an affirmative defence of necessity on the basis of some civil unrest and the financial burden of the FIT.

Departing from our usual practice, the 2015 FDI Moot case included issues on the proper basis for compensation in the event of liability. Global Financial Analytics supported this not only with their expertise in drafting this part of the case and assembling the underlying data sets, but also by offering a generous prize for the best arguments on the compensation issues.

Finally, the tribunals also had to consider the claimant's plea for restitution/specific performance, i.e. re-instatement of the original FIT legislation or payment of the original tariff with respect to the issued licenses. While tribunals may well hesitate to order a sovereign to make restitution/specifically perform, in this case these remedies in practice amounted to the payment of compensation but without the uncertainty of the competing bases for damages put forward by the claimant and respondent, respectively.

The survey was not scientific; for example, it did not impose a decision tree on the survey respondents; they could simply indicate which (if any) views they agreed with in each group. Almost 60% seemed to believe that the BIT remained in force; about 75% saw a violation of a substantive obligation under the BIT, and only about 21% saw this as excused by necessity. Significant numbers had serious doubts about one or more aspects of the claimant's position on quantum. More than one third were comfortable ordering the Respondent State to continue paying the original tariff on the issued licenses, and about one fifth thought this would be the most appropriate remedy.

1 Has the C-B BIT been effectively terminated?

Yes, by virtue of Article 59 VCLT and both C and B's accession to the EU/TFEU 

5

9.09%  


Yes, by virtue of Article 54 VCLT and the communications between C and B 

12

21.82%  


Yes, by virtue of Article 13 BIT and B's notification 

4

7.27%  


 

2 Has B violated the FET protections of the BIT?

Yes, B has violated the Claimant's legitimate expectations with respect to the law or the licenses

24

43.64%  


Yes, B has not observed requisite fairness and due process or proportionality in its legislative processes. 

13

23.64%  


Yes, B has behaved in an arbitrary manner toward the claimant. 

4

7.27%  


 

3 Were B's actions excused on the grounds of necessity (assuming B has violated its FET obligation to Claimant)?  

Yes, B's conduct should be excused on the basis of necessity 

12

21.82%  


 

4 Claimant's request for restitution/specific performance (assuming B's violation of the BIT cannot be excused) is

within the tribunal's power with respect to re-instating original LRE, Art 4 

4

7.27%  


within the tribunal's power with respect to ordering payment under the issued licenses of the original EUR 0.44. 

20

36.36%  


the most appropriate remedy with respect to re-reinstating original LRE, Art 4 

1

1.82%  


the most appropriate remedy with respect to ordering payment under the issued licenses of the original EUR 0.44 

12

21.82%  


 

5 Claimant's basis for claiming and quantifying compensation is (assuming there has been no expropriation or necessity entailing application of BIT Art 4 or Art 5 respectively)

not appropriate as it is speculative with respect the future profitability of the investments. 

21

38.18%  


not appropriate as its land and equipment costs are not lost value. 

20

36.36%  


not appropriate as Claimant's expert failed to discount cash flows to debt. 

13

23.64%  


not appropriate as Claimant's assumption of no delays or problems is not supported by its operational history. 

10

18.18%  


not appropriate as it seeks compensation for investments that have not yet been made. 

13

23.64%