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06 May 2021
France's top court has reinstated a $1.58 billion arbitration award rendered in investment treaty proceedings between Canadian gold miner Rusoro and Venezuela.
In its 31 March 2021 decision,(1) the Court of Cassation accepted Rusoro's argument that the limitation period for bringing a claim under the Canada-Venezuela Bilateral Investment Treaty (the Canada-Venezuela BIT) was a question of admissibility and not of the tribunal's jurisdiction to hear the dispute. Accordingly, the Court of Cassation quashed the Paris Court of Appeal's previous ruling that had reached the opposite conclusion.
The Court of Cassation's decision guides the future review of arbitral awards by the French courts and adds to the longstanding discussion in investment treaty arbitration about the distinction between the admissibility of a claim and the jurisdiction of an arbitral tribunal. By deciding that the issue of whether the claims were time barred was a question of admissibility (a non-reviewable issue), the court set a clear limitation under French law in this regard.
Rusoro acquired mining concessions and contracts for gold in Venezuela through a series of complex transactions between 2006 and 2008. Gold prices then rose considerably, as did the valuation of gold-producing companies such as Rusoro. In 2008 and 2009 the Chavez government enacted a series of measures that dismantled the legal regime for marketing gold in Venezuela. In 2011, when gold prices and the value of gold-producing companies had peaked, the government formally nationalised Rusoro's investments in Venezuela without compensation.
In July 2012 Rusoro brought a claim against Venezuela under the Canada-Venezuela BIT. Rusoro alleged that the Venezuelan government had expropriated its gold mines in the country. As the case was administered under the International Centre for Settlement of Investment Disputes (ICSID) Additional Facility Rules with Paris as the chosen seat of arbitration, any attempt to set aside an award in the case needed to be pursued in the French courts rather than through the ICSID annulment process.
In a lengthy award, the tribunal concluded that Venezuela had expropriated Rusoro's gold mining assets. Given that the Canada-Venezuela BIT contained a three-year statute of limitations on bringing claims, and that Rusoro had initiated arbitral proceedings in July 2012, the tribunal held that it did not have jurisdiction over the measures that Venezuela had taken in 2008 and 2009. The tribunal's finding of a treaty breach was based solely on the 2011 nationalisation.
The tribunal spent a significant portion of its award quantifying Rusoro's damages; of the six different valuation methods that the parties' experts had proposed, the tribunal found three inapposite to the circumstances of the case. It then used a weighted average of the three remaining approaches to mitigate the shortcomings of each. The methods combined in this manner were:
Based on this weighted approach, the tribunal awarded Rusoro approximately $966 million in compensation for the unlawful expropriation.
Venezuela applied before the Paris Court of Appeal to set aside the award under Article 1520(1) of the Code of Civil Procedure (CCP) on the basis that the tribunal had exceeded its jurisdiction.(2) Venezuela argued, among other things, that while the tribunal had recognised that it lacked jurisdiction to review government measures adopted outside the limitation period, it nonetheless included in its award compensation for such conduct by referring to pre-2009 benchmarks. Rusoro responded that the tribunal had done nothing of the kind. It also argued that the three-year limitation period related to admissibility and not to the tribunal's jurisdiction and was therefore outside the court's scope of review.(3)
The court sided with Venezuela and held that the tribunal's jurisdiction was conditional on claims falling within the time limit set by the Canada-Venezuela BIT. According to the court, its conclusion derived from the "clear terms" of the limitation period provision and was confirmed by the tribunal's own finding in its award, which characterised the issue as jurisdictional.
In reviewing the tribunal's quantum analysis, the Paris Court of Appeal affirmed that the maximum market valuation method and the adjusted investment valuation method incorporated compensation for the events of 2008 and 2009, as they assessed Rusoro's value using data from as early as 2006. Therefore, the court ruled that these valuation methods used by the tribunal in its weighted average included losses outside the tribunal's temporal jurisdiction. For this reason, the court set aside most of the damages portion of the award.
Rusoro appealed the decision to the Court of Cassation and reiterated that the limitation period in the Canada-Venezuela BIT related to admissibility and not jurisdiction. Rusoro also recalled the position adopted in French jurisprudence that the court reviewing an arbitral award should come to its own conclusion about the tribunal's jurisdiction, without regard to the qualifications used by the tribunal.(4)
The Court of Cassation opined that the "review [of a tribunal's jurisdiction] is exclusive of any substantive review of the award". In its characteristically concise style, the court ruled that:
whereas the limitation period in… the Treaty does not constitute an objection to jurisdiction, but a question relating to the admissibility of claims, which does not fall under Article 1520, 1° of the CPP, the Court of Appeal violated the aforementioned text.
On this basis, the Court of Cassation quashed the Paris Court of Appeal decision. Therefore, the award has now been fully reinstated and is subject to enforcement. While Venezuela can bring the case back before a different bench of the Paris Court of Appeal, it would have to do so on different grounds. Venezuela has not yet declared whether it will pursue a new appeal.
Whether a preliminary objection relates to jurisdiction or admissibility is a contested question under public international law, including in investment arbitration proceedings. 'Jurisdiction' is defined as a court's ability to adjudicate a claim, whereas 'admissibility' presumes jurisdiction and speaks to whether there are reasons that the claim should nevertheless not be heard.(5) At times, similar objections have been qualified as jurisdictional in nature, while at other times they have been qualified as pertaining to the admissibility of claims.(6)
While the distinction may have little practical impact in ICSID Convention arbitrations,(7) it is highly relevant for arbitration proceedings seated in France. Under Article 1520 of the CCP, applications to set aside an arbitral award can be brought only on five limited grounds. These include that the arbitral tribunal has adopted an incorrect decision on jurisdiction. Admissibility issues are not on the list.
While admissibility is not subject to review, the French courts control tribunals' jurisdiction(8) and can consider all relevant factual and legal elements. Given the potential invasiveness of a review,(9) only objections that are clearly jurisdictional should fall within the scope of Article 1520 of the CCP for the purposes of a set-aside challenge on jurisdictional grounds.
However, this has not always been the approach of the Paris Court of Appeal, which has at times adopted a more expansive view on jurisdiction.(10) For instance, in Komstroy v Moldova, the court held that the requirement that an asset must contribute to the economy of the host state to qualify as an investment under the Energy Charter Treaty was jurisdictional, although the requirement was not found in the treaty's jurisdictional provisions. The Court of Cassation later reversed this decision (for further details please see "Paris Court of Appeal may revisit definition of 'investment' under Energy Charter Treaty").
In Rusoro, the Court of Cassation has sent a signal to the lower courts that a narrow view of jurisdiction should be adopted when reviewing investment arbitration awards. In this regard, the Court of Cassation's decision appears consistent with the recognition and enforcement objectives in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which are also entrenched in French jurisprudence.(11)
For further information on this topic please contact Jonathan Brosseau or Luiza Saldanha at Freshfields Bruckhaus Deringer by telephone (+33 1 44 56 44 56) or email (email@example.com or firstname.lastname@example.org). The Freshfields Bruckhaus Deringer LLP website can be accessed at www.freshfields.com.
Olivia Kimbrough, trainee, assisted in the preparation of this article.
(1) The decision is available here (in French).
(2) On the challenge of awards in France, see M Rivoire and C Seraglini, "Challenging and Enforcing Arbitration Awards: France", Global Arbitration Review, 31 January 2020 (available here).
(3) Under French law an award can be set aside only on the grounds listed in Article 1520 of the CCP, which do not include the inadmissibility of claims. Admissibility relates to the merits of a dispute, which is non-reviewable by the courts. C Seraglini and J Ortscheidt, Droit de l'arbitrage interne et international (2nd edition, 2019), Page 978, Paragraph 989.
analyse the decision rendered by the arbitral tribunal in order to restore to it, if necessary, its exact qualification, without stopping at the denominations retained by the arbitrators or proposed by the parties.
(5) See Hochtief v Argentina (ICSID Case ARB/07/31) decision on jurisdiction, 24 October 2011, Paragraph 90, "[j]urisdiction is an attribute of a tribunal and not of a claim, whereas admissibility is an attribute of a claim but not of a tribunal". See also Micula v Romania (I) (ICSID Case ARB/05/20) decision on jurisdiction and admissibility, 24 September 2008, Paragraph 63:
The Tribunal concurs with Respondent that an objection to jurisdiction goes to the ability of a tribunal to hear a case while an objection to admissibility aims at the claim itself and presupposes that the tribunal has jurisdiction.
The Argentine Republic submits that the Tribunal must establish whether, as a matter separate from jurisdiction, the claim is admissible in the instant case. The distinction between admissibility and jurisdiction does not appear to be necessary in the context of the ICSID Convention, which deals only with jurisdiction and competence.
The arguments that the parties have put forth involve a number of questions of admissibility and jurisdiction. The distinction between admissibility and jurisdiction does not appear quite appropriate in the context of ICSID as the Convention deals only with jurisdiction and competence.
(10) Since 2016 the Paris Court of Appeal has set aside awards in six investment treaty cases (involving Moldova, Venezuela, Russia, Libya, Kyrgyzstan and Madagascar). In at least two of these cases, the Court of Cassation reinstated the awards.
(11) For examples, see Court of Cassation, First Civil Chamber, 8 July 2015, 13-25.846, Ryanair Ltd v Syndicat Mixte des Aéroports de Charente; Court of Cassation, First Civil Chamber, 23 March 1994, 92-15.137, Hilmarton v OTV and Court of Cassation, First Civil Chamber, 29 June 2007, 06-13.293, Putrabali.
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