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Mauritius v. UK: Chagos Marine Protected Area Unlawful

Published on April 17, 2015        Author: 

On 1 April 2010, the UK declared the world’s largest Marine Protected Area (MPA) around the Chagos Archipelago. The Archipelago is one of 14 remaining British overseas territories, administered by the UK as the British Indian Ocean Territory (BIOT). In contrast to other British overseas territories such as the Falklands/Malvinas and Gibraltar, BIOT is not on the UN list of non-self-governing territories. There is currently no permanent local population because the UK cleared the archipelago of the Chagossians between 1968 and 1973.

Mauritius and the UK both claim sovereignty over the Chagos Archipelago. The largest island of the Chagos Archipelago – Diego Garcia – has since the late 1960s housed the most important US military base in the Indian Ocean. The UK leased the island for defense purposes to the US in 1966, prior to Mauritian independence in 1968. The 50-year lease of Diego Garcia is due to be renewed in 2016.

In the Matter of the Chagos Marine Protected Area Arbitration (Mauritius v. UK), a tribunal constituted under Annex VII of the UN Convention on the Law of the Sea (UNCLOS) issued its award on 18 March 2015. The tribunal found that the UK’s declaration of the MPA disregarded Mauritius’ rights, rendering the MPA unlawful. The award raises the prospect that the renewal of the lease in 2016 will require the UK to meaningfully consult Mauritius.

Mauritius made four submissions to the tribunal:

First: The UK was not entitled to declare a MPA because it was not a coastal state under UNCLOS (the ‘sovereignty claim’, according to the UK)

Second: The UK was prevented from unilaterally declaring the MPA due to Mauritius’ rights as a coastal state under UNCLOS

Third: The UK may not take any steps to prevent the Commission on the Limits of the Continental Shelf from making recommendations to Mauritius in respect of any full submission to the Commission that Mauritius may make

Fourth: The UK’s declaration of the MPA was incompatible with substantive and procedural obligations under UNCLOS

The jurisdictional part of the award is centered on whether the four submissions concern the ‘interpretation or application of UNCLOS’ under Article 288 UNCLOS. This blog entry concentrates on the merits as regards the Fourth Submission. Read the rest of this entry…

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ICSID Arbitrators: The Ultimate Social Network?

Published on September 25, 2014        Author: 

waibelMichael Waibel is a University Lecturer at the University of Cambridge.

Sergio Puig’s article offers a refreshingly new, thought-provoking analysis of the links between investment arbitrators. Who the parties appoint as arbitrators matters for how the investment treaty regime operates. Criticism of the appointment process in investment arbitration is widespread, yet rigorous empirical work on this important aspect of the investment treaty regime remains rare. Relying on the theoretical frame of social network analysis, Sergio sheds light on the interactions among ICSID arbitrators. His analysis suggests that a core group of 25 arbitrators enjoys disproportionate influence on the development of the investment treaty regime. To understand what animates the regime, it may suffice to analyse the preferences and political philosophy of these 25 ‘power-brokers’.

The Core-Periphery Divide and Underrepresentation

The core of the arbitration network is composed of 25 arbitrators. Members of this elite group are on average connected to 11.75 other arbitrators. The core’s cultural and legal homogeneity is striking: 14 Europeans, 4 Latin Americans, 3 Canadians, 1 New Zealander and only 1 US arbitrator. Similarly, among the top ten countries of origin of ICSID arbitrators overall, five are Euro-Atlantic states (US, France, UK, Canada and Switzerland) and five Latin American. By contrast, African and Asian arbitrators have rarely been appointed to ICSID tribunals, despite significant inward- and outward flows of foreign investment to and from Asia in particular. In such data-intensive work, minor errors are bound to creep in. For instance, in Figure 4, Vaughan Lowe appears as a US, rather than a UK national, and the 26th arbitrator in the core between Jonny Veeder and Jan Paulsson remains nameless.

The formal bond of nationality may be only a crude measure of arbitrator behaviour. As Sergio rightly highlights (p. 405), many arbitrators with nationalities of developing countries have received at least part of their legal education in developed countries (chiefly the UK, the US and France). Indeed, if one focuses on arbitrators who have spent most or all of their adult lives in a developing country and have not worked or received part of their educated in developed countries, the voice of developing countries in even less represented among ICSID arbitrators than the formal link of nationality would suggest.

Other demographics are also underrepresented among ICSID arbitrators, most notably women. 93 percent of all ICSID appointments were male arbitrators (p. 404). Given that Brigitte Stern has accumulated the highest number of appointments of any ICSID arbitrator, the share of female arbitrators is even lower at 5 percent (p. 405). Two female super arbitrators apart, women are at the periphery of the arbitration network. This gender imbalance mirrors the general characteristics of the entire arbitration network (p. 411).

Yanhui Wu and I have recently assembled data on a control group composed of more than 700 potential ICSID arbitrators, i.e. individuals with similar characteristics and qualifications to those who have already been appointed to at least one ICSID tribunal. Our control group includes current and former ICJ and WTO Appellate Body (AB) Members who, unlike some of their judicial colleagues, have yet to be appointed to an ICSID tribunal, and partners at leading arbitration practices in the same position. Ten former AB members and 18 current and former ICJ judges since 1990 have never been appointed. The following table compares some characteristics of the treatment and control groups. Read the rest of this entry…


Boyle and Crawford on Scottish Independence

Published on February 12, 2013        Author: 

Last month, Joseph Weiler’s post on Catalonian independence and the European Union triggered a lively discussion here on EJIL!Talk (including Nico Krisch’s reply). Yesterday’s publication by the British government of a legal opinion by Alan Boyle of the University of Edinburgh and James Crawford of the University of Cambridge, entitled ‘Referendum on the Independence of Scotland: International Law Aspects’ has already received extensive news coverage (eg BBC, New York Times, Guardian, FT) and was labelled as ‘incredibly arrogant’ by the Scottish deputy first minister.  In a riposte, the Scottish government accelerated publication of a report on the macroeconomic framework in case of Scotland’s independence. A committee composed of economists, including Nobel prize winners Joseph Stiglitz of Columbia University and Sir James Mirrlees of the University of Cambridge, suggested that if the Scottish people voted for independence in 2014, a formal currency union between UK and Scotland, with a 10 percent Scottish stake in the Bank of England, would be the most likely outcome.  The currency that Scotland would use in the event of independence and Scottish membership in international organisations, most importantly the European Union, have been focal points of the discussion in the lead-up to the referendum.

Read the rest of this entry…


Iceland not responsible for the liabilities of its deposit insurance scheme

Published on January 28, 2013        Author: 

In a landmark decision, the EFTA Court on 28 January 2013 dismissed all claims brought by the EFTA Surveillance Authority against Iceland in the Icesave case. The Authority had alleged that Iceland had breached its obligations under Directive 94/14/EC on deposit guarantee by failing to compensate Icesave depositors and had violated the prohibition on non-discrimination in the Directive and Article 4 of the EEA Agreement by prioritising payments to domestic savers. The court, referring to the collapse of the Icelandic banking system as an “enormous event” (para. 161), found that Iceland was not responsible for the liabilities of the Icelandic deposit insurance scheme that was overwhelmed with claims following the collapse of Iceland’s three major banks.

Icesave refers to two branches of the Icelandic bank Landsbanki that accepted deposits offering comparatively high interest rates in the UK and the Netherlands. Deposits in these branches were primarily the responsibility of the Icelandic Depositors’ and Investors’ Guarantee Fund (TIF). Following the wholesale collapse of Iceland’s banking system in October 2008, savers in the UK and the Netherlands lost access to their deposits on 6 October 2008. The Icelandic Parliament adopted emergency legislation on the same day to split Landsbanki into a good and a bad bank. By virtue of the same legislation, it gave priority to depositors as compared to other creditors (for further background on the Icesave dispute, including the unsuccessful negotiations between Iceland and the UK/Netherlands, see my ASIL Insight Iceland’s Financial Crisis – Quo Vadis International Law).

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ITLOS order Ghana to release Argentine navy ship

Published on December 17, 2012        Author: 

On 15 December, the International Tribunal for the Law of the Sea (ITLOS) ordered Ghana to release the Argentine military training vessel ARA Fragata Libertad (see oral proceedings). NML Capital, an investment company focused on distressed debt based in the Cayman Islands and owned by Elliot Associates, a US hedge fund, had earlier obtained an order from the Ghana Superior Court of Judicature (Commercial Division) to attach the Libertad moored in the port of Trema to satisfy a judgment by a US District Court for payment on defaulted Argentine bonds. The Libertad was on an official goodwill mission in Ghana’s internal waters at the time of the attachment. Read the rest of this entry…


Karlsruhe gives green light for German ESM ratification

Published on September 12, 2012        Author: 

On September 12, 2012, the German Constitutional Court dismissed several constitutional complaints that sought an injunction to prevent German ratification of the European Stability Mechanism (ESM) – a central pillar of the Eurozone’s crisis response – and the Fiscal Treaty in the preliminary phase of the proceedings (extracts in English). A full ruling is expected in a few months. German ratification is required for the ESM treaty to enter into force, and critical in financial terms for the ESM’s credibility. The Court’s preliminary ruling means that the last hurdle for the ESM to enter into force has now been cleared. German ratification should follow in the next few weeks.

The court conditioned German ratification on two reservations to the ESM treaty: first, the German capital subscription needs to be limited to 190 billion Euros, as provided by the ESM Treaty (though the ESM’s capital may be increased beyond this ceiling pursuant to the procedure forseen in Article 10 of the ESM Treaty); and second, notwithstanding the confidentiality of the ESM’s deliberations, the German Parliament needs to be fully informed about operations of the ESM.  The Bundesverfassungsgericht seized its one chance to foreclose two possible, but unlikely interpretations of the ESM Treaty that would conflict with the German Constitution before interpretative authority passes to the Court of Justice under the ESM Treaty.

The Court’s insistence on two reservations is only a small  “but”. The Court took issue with two aspects that are marginal to the firepower and effectiveness of the ESM. The decision has virtually no effect on how the ESM will operate, and in particular on the capital that the ESM will have its disposal. It could lengthen the German ratification process by a few weeks, but the Court’s decision has removed substantial  unertainty about the Eurozone crisis response. Most other Eurozone member countries, including France and Spain, have already ratified the treaty. According to Article 48 of the ESM Treaty, the Treaty enters into force once countries representing 90 percent of capital subscriptions have ratified. The German share in of the total capital subscriptions of 700 billion Euros is just over 27 percent.

Read the rest of this entry…


Oil exploration around the Falklands (Malvinas)

Published on August 13, 2012        Author: 

In June, I looked at the longstanding sovereignty dispute over the Falklands Islands (Malvinas) on the occasion of the 30-year anniversary of the 1982 war. I revisit this topic today to examine the question of investor protection in areas where sovereignty is disputed, taking the Falklands (Malvinas) as an example. The promise of an oil boom in the South Atlantic has prompted several companies listed in London, including Falkland Oil and GasBorders and Southern PetroleumRockhopper, Desire Petroleum and Argos Resources, to survey the area. They obtained exploration licenses from the Falklands administration in 2011, which drew strong criticism from Argentina. Shareholders in these inherently risky ventures may wonder whether they have any legal protections should the sovereignty dispute intensify.

The sovereignty dispute adds an additional layer of uncertainty for the companies engaged in exploratory drilling and their shareholders, aside from the uncertainty on how much oil, if any, will ultimately be discovered. The listing prospectuses of the companies concerned all mention the pending sovereignty dispute as a risk factor, but likely underplayed its importance. For example, the Falkland Oil and Gas Prospectus contains the following disclaimer:

There may be other unforeseen matters such as disputes over borders. Investors will be  aware that the Falkland Islands were, in 1982, the subject of hostilities between the  United Kingdom and Argentina.

The Argentine Government has not relinquished all its claims in relation to the Falkland Islands. However, the position of the UK and Falkland Islands Governments is that the   United Kingdom has no doubt about its sovereignty over the Falkland Islands, South   Georgia and the South Sandwich Islands and the surrounding maritime areas. Her Majesty’s Government  remains fully committed to the offshore prospecting policy pursued by the Falkland Islands Government, as laid out in the Offshore Petroleum (Licensing) Regulations 2000. This policy is entirely consistent with Her Majesty’s sovereign rights over the Falkland Islands.

Do investments in the territorial sea of the Falklands (Malvinas) fall under the territorial scope of application of the UK’s BIT (or, for that matter, under the scope of Argentina’s BITs)? Read the rest of this entry…


Dublin, Karlsruhe and Luxembourg in dialogue

Published on August 6, 2012        Author: 

While financial markets have focused on Karlsruhe where the second challenge to the Eurozone rescue efforts in a year is currently pending, the Irish Supreme Court held on July 31 that Irish ratification of the Treaty establishing the European Stability Mechanism and the Fiscal Treaty was compatible with the Irish constitution.  The court referred two questions to the Court of Justice under the latter’s accelerated preliminary reference procedure due to the exceptional urgency of the case. Notwithstanding, the Supreme Court declined to enjoin the Irish ratification process while the case is pending before the Court of Justice. The Irish government ratified both treaties on August 1.

In contrast, the German Bundesverfassungsgericht bidded its time on a similar challenge to German ESM ratification. Ireland is on the frontline of the Eurozone crisis. The Economist, in departure from the deference it typically pays to court proceedings, called the German Constitutional Court ‘ scandalously slow’ . Ireland is one of three Eurozone countries with an EU-IMF financing package in place. Most of the support is provided by the European Financial Stability Facility that the ESM is designed to replace once it starts operating. The need to decide this significant case as a matter of urgency was evident to the Irish Supreme Court. It put seven judges on the appeal, super-fast-tracked the hearing, and reserved four days for the hearing.

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ECHR leaves Northern Rock shareholders out in the cold

Published on August 3, 2012        Author: 

On August 1, the European Court of Human Rights (ECtHR) dashed hopes of Northern Rock shareholders to obtain compensation from the UK for the collapse and nationalization of British bank Northern Rock. The Fourth Section of the ECtHR unanimously dismissed the case Dennis Grainger and others v. UK (Application No. 34940/10) as manifestly ill-founded and inadmissible. The decision has broader ramifications. It suggests that member countries of the European Convention of Human Rights (ECHR) have a wide margin of appreciation in setting macro-economic policy in general and in the resolution of banking and financial crises in particular. The ECtHR decision suggests that creditors and other interested parties will face an uphill struggle in challenging measures taken in the context of financial crisis resolution before the ECtHR and in obtaining compensation. It is an important decision at the intersection of international finance and human rights. Investors holding the debt of Eurozone governments will take note.

The court fully endorsed the holding and approach of the English courts. Like the English domestic courts, it found that the assumptions that  the valuer of Northern Rock shares was required to make pursuant to the Banking (Special Provisions) Act 2008 s.5 (4) did not violate the rights of shareholders under Article 1 of the First Additional Protocol.

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Falklands (Malvinas) Redux

Published on June 17, 2012        Author: 

June 14 2012 marked the 30th anniversary of the end of the 1982 Falklands (Malvinas) War. After a decade of relative calm and increased technical cooperation on the Falklands (Malvinas), diplomatic tensions between Argentina and the UK have flared up in the lead-up to this anniversary. A concerted diplomatic push by Argentina has returned the sovereignty dispute over the Falklands (Malvinas) to the top of the foreign policy agenda. On June 14, Argentine President Kirchner made an emotional appeal to the UN Special Committee on Decolonisation for bilateral negotiations on sovereignty between Argentina and the UK. She was the first head of state to speak to the Committee. A recent conference at the University of Cambridge explored why the Islands remain so deeply rooted in the Argentine psyche.

The dispute over the Falklands (Malvinas) has returned centre stage just as the prospects of substantial hydrocarbon reserves in the seas surrounding the Islands greatly increased the economic stakes of the sovereignty dispute. The promise of an oil boom in the South Atlantic has prompted several companies listed in London, including Falkland Oil and Gas, Borders and Southern Petroleum, Rockhopper, Desire Petroleum and Argos Resources, to survey the area. They obtained exploration licenses from the Falklands administration in 2011, which drew strong criticism from Argentina. Earlier, both Argentina and the UK had anticipated that cooperation in matters of natural resources was desirable, given the uncertainty generated by their sovereignty dispute.   Read the rest of this entry…