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Salini, Et Al. v. Morocco

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SALINI COSTRUTORRI S.P.A. AND ITALSTRADE S.P.A. v. KINGDOM OF MOROCCO CASE NO. ARB/00/4, 23 July 2001, 42 ILM 609 PERTINENT FACTS: With regard to the Bilateral Treaty of the Parties, the Petitioner Italian companies consider that the contract at issue is an investment within the meaning of Articles 1(c) and (e) in the said document. The dispute arose out of the non-performance of the said contract by the Respondent Kingdom of Morocco. The contract, therefore, gives the Italian companies a right
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  SALINI COSTRUTORRI S.P.A. AND ITALSTRADE S.P.A. v  . KINGDOM OF MOROCCO CASE NO. ARB/00/4, 23 July 2001, 42 ILM 609 PERTINENT FACTS:  With regard to the Bilateral Treaty of the Parties, the Petitioner Italian companies consider that the contract at issue is an investment within the meaning of Articles 1(c) and (e) in the said document. The dispute arose out of the non-performance of the said contract by the Respondent Kingdom of Morocco. The contract, therefore, gives the Italian companies a right of an economic nature and the right to damages. The Kingdom of Morocco, in defense, alleges that, considered in isolation, these provisions dilute the notion of investment into a broader notion of economic rights. Articles 1(c) and (e) should, therefore, be read in conjunction with paragraph 1 of Article 1, which refers to the laws and regulations of the host State of the investment. Therefore, it is Moroccan law that should define the notion of investment. According to them, the transaction in question should be characterized as a contract for services. ISSUE: Do the Italian companies satisfy the elements of investment within the meaning of the Bilateral  Treaty and the Washington Convention? RULING:  YES.  The contract concluded between ADM and the Italian companies is an investment within the meaning of the Bilateral Treaty. The option of choosing the forum contained in Article 8.2 could be exercised in favor of arbitral proceedings under the auspices of ICSID.  The protection of investments is the basis for the option of choosing the forum stipulated in Article 8.2 of the Bilateral Treaty. This article, therefore, seeks to define the investments that come under the protection of the Bilateral Treaty, to wit:  Article 1 of the Bilateral Treaty provides that: “Pursuant to the present Agreement, 1.   The term “investment” designates all categories of assets invested, after the coming into force of the  present agreement, by a natural or legal person, including the Government of a Contracting Party on the territory of the other Contracting Party, in accordance with the laws and regulations of the aforementioned party. In particular, but in no way exclusively, the term “investment” includes:    …   c.) capitalized debts, including reinvested income, as well as rights to any contractual benefit having an economic value; d.) copyright, trademark, patents, technical methods and other intellectual and industrial property rights, know-how, commercial secrets, commercial brands and  goodwill; e.) any right of an economic nature conferred by law or by contract, and any license or concession granted in compliance with the laws and regulations in force, including the right of prospecting, extraction and exploitation of natural resources.    …    g.) the elements mentioned in (c), (d) and (e) above must be the object of contracts approved by the competent authority. ”     The parties, therefore, agreed upon a number of non-exhaustive hypotheses that they consider to be investments.  The construction contract creates a right to a “contractual benefit    having an economic value”   for the Contractor, mentioned in Article 1(c). The Contractor also benefits from a “right of an economic nature conferred … […]…by contract”   dealt with by Article 1(e). Moreover, the Respondent does not deny that the rights of the Italian companies are of the same nature as those referred to in (c) and (e) of Article 1.  The tribunal cannot follow the Kingdom of Morocco in its view that paragraph 1 of Article 1 refers to the law of the host State for the definition of “investment”. In focusing on “the categories of invested ass  ets (…) in accordance with the laws and regulations of the aforementioned party,”   this provision refers to the validity of the investment and not to its definition. More specifically, it seeks to prevent the Bilateral Treaty from protecting investments that should not be protected, particularly because they would be illegal. Yet, in the present case, the Claimants took part in the tender process in conformity with the legal rules applicable to invitations to tender. At the end of this procedure, they also won the bid and concluded the corresponding contract for services in conformity with the laws in force at that time. Thus, whether one looks to the pre-contractual stage or that corresponding to the performance of the contract for services, it has never been shown that the Italian companies infringed the laws and regulations of the Kingdom of Morocco.  To be considered as investments, the rights enumerated under letters (c) and (e) “must be the object of contracts approved by the competent authority” under the terms of Article 1(g). The Bilateral Treaty does not indicate who the competent authority is, this being likely to vary according to the contract in question. The competent authority is determined according to the laws and regulations of the State on the territory of which the investments are made (  cf.  Article 1, paragraph 1). The Tribunal considers that the contract in question was indeed the object of an authorization from the competent authority because: (1) the allocation of the contract to the Italian companies occurred in accordance with the rules and procedure fixed by the President of ADM, acting in virtue of the powers conferred on him by the Board of Directors of this company, and (2) the different stages leading to the signature of the construction contract involved various interventions by the authorities concerned.  As a result, the Tribunal considers the condition of Article 1 (g) is satisfied. Insofar as the option of jurisdiction has been exercised in favor of ICSID, the rights in dispute must also constitute an investment pursuant to Article 25 of the Washington Convention.  The Arbitral Tribunal, therefore, is of the opinion that its jurisdiction depends upon the existence of an investment within the meaning of the Bilateral Treaty as well as that of the Convention, in accordance with the case law, to wit: “The jurisdiction of the Centre shall extend to any legal dispute arising directly out of relation to an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to that Centre by that State) and a national charter of another Contracting State, which the Parties to the dispute consent in writing to submit to the Centre.”     There is no definition given by the Convention. The two Parties recalled that such a definition had seemed unnecessary to the representatives of the States that negotiated it. Indeed, as indicated in the Report of the Executive Directors on the Convention:  “No attempt was made to define the term “investment” given the essential requirement of consent by the parties, and the mechanism through which the Contracting States can make known in advance , if they so desire, the classes of disputes which they would or would not consider submitting to the Centre (article 25(4)) .”     The tribunal notes that there have been almost no cases where the notion of investment within the meaning of Article 25 of the Convention was raised. However, it would be inaccurate to consider that the requirement that a dispute be “in direct relation to an investment”   is diluted by the consent of the Contracting Parties. To the contrary, ICSID case law and legal authors agree that the investment requirement must be respected as an objective condition of the jurisdiction of the Centre (  cf.  in particular, the commentary by  E. Gaillard, in JDI 1991, p. 278 et seq.,  who cites the award rendered in 1975 in the  Alcoa Minerals vs. Jamaica   case as well as several other authors). The criteria for characterization are derived from cases in which the transaction giving rise to the dispute was considered to be an investment without there ever being a real discussion of the issue in almost all cases.  The doctrine generally considers that the investment infers: contributions, certain duration of performance of the contract and a participation in the risks of the transaction. In reading the Convention’s preamble, one may add the contribution to the economic development of the host State of the investment as an additional condition. In reality, these various elements may be interdependent. Thus, the risks of the transaction may depend on the contributions and the duration of performance of the contract. As a result, these various criteria should be assessed globally even if, for the sake of reasoning, the Tribunal considers them individually here.  The Italian companies have satisfied the said elements since: (1) they made contributions in money, in kind, and in industry, as set out and assessed in their written submissions, and (2) The transaction complies with the minimal length of time upheld by the doctrine, which is from 2 to 5 years, when it extended its duration of work from 32 months to 36 months.   Consequently, the Tribunal considers that the contract concluded between ADM and the Italian companies constitutes an investment pursuant to Articles 1 and 8 of the Bilateral Treaty concluded between the Kingdom of Morocco and Italy, as well as Article 25 of the Washington Convention. IMPREGILO S.p.A. v ISLAMIC REPUBLIC OF PAKISTAN On 19 December 1995, two Contracts (the “Contracts”) were concluded between Impregilo (acting on behalf of GBC) and the Pakistan Water and Pow  er Development Authority (“WAPDA” or the “Employer”). Construction began in early 1996 but completion was delayed due to obstacles created by the Respondent and to unforeseen conditions discovered over the course of the work. The Engineer rejected most of GBC’s claims for extensions of time, as well as its claims for payment of additional costs. As a result, WAPDA refused to compensate GBC for most of those costs.  According to Impregilo’s Request, jurisdiction over this dispute is established by Article 25 (1) of the ICSID Convention and by Article 9 of the BIT between Italy and Pakistan signed on 19 July 1997, which entered into force on 22 June 2001.  With respect to jurisdiction ratione personae, it is an investor of Italy for the purposes of the BIT. It is also “a national of another Contracting State” for the purposes of the ICSID Convention. As Leader of the Joint  Venture, Impregilo is entitled to represent GBC in all matters relating to the Contracts.  WAPDA is an instrumentality of the Government of Pakistan and exercises governmental authority. It is therefore part of the Government of Pakistan. The Islamic Republic of Pakistan is both a Contracting Party  to the BIT and a Contracting State under Article 25 (1) of the ICSID Convention. It is thus a proper Respondent in this case. On the merits, Impregilo claims that Pakistan has violated Article 2(2) of the BIT. Impregilo also claims that Pakistan has violated Article 5(1) of the BIT  Aside from alleged breaches of the Treaty, Impregilo also complains of breaches of the Contracts. It submits that the Tribunal has jurisdiction to consider such claims under Article 9 of the BIT which covers “any disputes” without exception, between the Parties  Relief sought: As a result of these alleged breaches of the BIT and the Contracts, the Respondent has caused damages of approximately US$ 450 million. Impregilo seeks compensation for the entirety of the damages, including interest. Held:  Tribunal unanimously decides:  That it has no jurisdiction ratione materiae over Impregilo’s claims based on the alleged breaches of the Contracts.  That with respect to the other Treaty Claims, including the Treaty Claims relating to the frustration of the dispute resolution mechanism, the Tribunal will determine its jurisdiction when considering the merits.  That the provisions of the BIT do not bind Pakistan in relation to any act that took place, or any situation that ceased to exist, before 22 June 2001 and the jurisdiction of the Tribunal ratione temporis is limited accordingly. Methanex vs US Facts: Methanex sued the United States government because of the law in California that bans methanol as one of the components of gas. Methanex is one of the largest supplier of methanol thus the said law was inflicting damage on the future profits of Methanex. California banned the said substance because it merges easily in  water, moves rapidly upon it and cannot be removed easily. Methanex argued that California had these problems even before, the complainant further stated that the government is doing a restrictive measure rather than having alternate solutions for its problems. One of the issues that was put forward in this case was that NAFTA’s Chapter 11 secretive arbitral proceedings. Wherein some of its clauses are subjected to several different interpretations thus not making the intention of the United States as a party in the NAFTA known or clear. The articles in question 1101, 1102, 1105 and 2101 of the NAFTA all pertain to the jurisdiction of US to the materials used by foreign corporations that have branches within the United States territory. Ruling on the said issue:
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