Pac Rim V El Salvador

Dispute Resolution: Submission of the us in Pac Rim v el Salvador in 2011

United States views on international law (based on the document “Digest of U.S. Practice in International Law”): On May 20, 2011, in an arbitration brought under CAFTA-DR information on Privileges and Immunities in this legal Encyclopedia, the United States made a submission pursuant to Article 10.20.2 on a question of interpretation of CAFTA-DR in Pac Rim Cayman LLC v. El Salvador (ICSID Case No. ARB/09/12). Claimant Pac Rim Cayman LLC is a gold mining company that incorporated in the Cayman Islands. It became a Nevada company in a December 2007 corporate restructuring. In the Notice of Arbitration, filed on April 30, 2009, Claimant alleged that El Salvador violated obligations under CAFTA-DR Articles 10.3 (national treatment), 10.4 (most-favored-nation treatment), 10.5 (minimum standard of treatment) and 10.7 (expropriation). Claimant sought damages in excess of $77 million in connection with measures, including environmental permits and exploitation concessions, allegedly adversely affecting Claimant's exploitation of gold resources in El Salvador. The U.S. submission on interpretation of the CAFTA-DR is excerpted below (with most footnotes omitted) and available in full at (internet link) state.gov/documents/organization/164308.pdf.

Developments

4. The United States hereby addresses two issues of treaty interpretation related to CAFTA-DR Article 10.12.2: first, whether a CAFTA-DR Party is required to invoke the denial of benefits provision under Article 10.12.2 before arbitration commences; and second, whether the notice provision under CAFTA-DR Article 18.3, which is referenced in Article 10.12.2, requires the Party to give notice to the claimant as well as to the Party under the law of which the claimant is constituted or organized.

A CAFTA-DR Party Is Not Required To Invoke The Denial Of Benefits Provision Under Article 10.12.2 Before Arbitration Commences 5. Article 10.12.2 imposes two substantive requirements that must be met before the provision can be invoked by a CAFTA-DR Party; specifically, an enterprise must (1) have no substantial business activities in the territory of any Party other than the denying Party, and (2) be owned or controlled by persons of a non-Party or of the denying Party. Article 10.12.2 does not impose any requirement, however, with respect to when a respondent may invoke the denial of benefits provision. Neither this Article nor any other provision of CAFTA-DR precludes a Party from invoking the denial of benefits provision at an appropriate time, including as part of a jurisdictional defense after a claim has been submitted to arbitration, to deny a claimant enterprise benefits under the Agreement.8 6. Requiring the respondent to invoke the denial of benefits provision before a claim is filed would place an untenable burden on that Party. It would require the respondent, in effect, to monitor the ever-changing business activities of all enterprises in the territories of each of the other six CAFTA-DR Parties that attempt to make, are making, or have made investments in the territory of the respondent. This would include conducting, on a continuing basis, factual research, for all such enterprises, on their respective corporate structures and the extent of their business activities in those countries. To be effective, such monitoring would in many cases require foreign investors to provide business confidential and other types of non-public information for review. Requiring CAFTA-DR Parties to conduct this kind of continuous oversight in order to be able to invoke the denial of benefits provision under Article 10.12.2 before a claim is submitted to arbitration would undermine the purpose of the provision. There is no basis to read into the plain language of Article 10.12.2 a requirement that a Party assert its right to deny benefits before the commencement of arbitration.

Details

7. Similarly, there is no basis in the plain language of CAFTA-DR to suggest that a respondent is required to invoke Article 10.12.2 between the submission of a claimant's notice of intent and notice of arbitration. Article 10.16.2, for example, requires that a notice of intent include a claimant's “name and address,” but Article 10.16.2 does not require a claimant to disclose the extent of the claimant's business activities in the territory of any CAFTA-DR Party or the names of any persons or entities that own or control the claimant enterprise.

8. For the above reasons, there is no reasonable basis under any applicable rule of treaty construction to read into the text of Article 10.12.2 a requirement to invoke the denial of benefits provision before arbitration commences.

Neither Article 10.12.2 nor Article 18.3 Requires Notice To Claimants 9. Under Article 10.12.2, a CAFTA-DR Party's denial of benefits is “subject to” Article 18.3, the provision that delineates notification requirements for CAFTA-DR Parties. Paragraph 1 of Article 18.3 provides:

To the maximum extent possible, each Party shall notify any other Party with an interest in the matter of any proposed or actual measure that the Party considers might materially affect the operation of this Agreement or otherwise substantially affect that other Party's interests under this Agreement.

10. On its face, Article 18.3 requires a CAFTA-DR Party, to the maximum extent possible, to provide notice to one or more other CAFTA-DR Parties of certain “proposed or actual” measures as described in the provision. There is no mention of notice to claimants in Article 18.3, and none is required.

Dispute Resolution: Submission of the U.S. in Pac Rim v. el Salvador

In relation to the international law practice and Dispute Resolution: Submission of the U.S. in Pac Rim v. el Salvador in this world legal Encyclopedia, please see the following section:

Trade, Commercial Relations, Investment, Transportation

About this subject:

Other Trade Agreements and Trade-related Issues

Under this topic, in the Encyclopedia, find out information on Dominican Republic-Central America-United States Free Trade Agreement (“CAFTA-DR”). Note: there is detailed information and resources, in relation with these topics during the year 2011, covered by the entry, in this law Encyclopedia, about Dispute Resolution: Submission of the U.S. in Pac Rim v. El Salvador

Resources

See Also

• Trade
• Commercial Relations
• Investment
• Transportation
• Trade Agreements
• Trade-Related Issues
• Dominican Republic
• Central America
• United States
• Free Trade Agreements

Resources

Notes and References

1. 8 See CAFTA-DR, art. 10.12.2. Under Article 10.12.2, “a Party may deny the benefits of this Chapter.”

   As such, a CAFTA-DR Party may invoke Article 10.12.2 to deny the benefits of both the substantive provisions and the dispute settlement provisions of Chapter Ten.