Author: James Carstensen
Arbitration experts predict a wave of investor-state arbitration disputes could be coming in response to the strict lockdown measures taken by most countries, and urge pre-emptive engagement by arbitration experts to build a common approach toward mediating disputes.
At the fifth annual Paris Arbitration Week conference last week, Ziad Obeid, managing partner of Beirut-based international law firm, and Zeina Obeid, a litigation and arbitration partner at the firm, said that COVID-19 restrictions could lead to a slew of new ISDS disputes.
“I would not be surprised to see this, we are already starting to get requests for advice on certain measures,” Ziad Obeid said during the conference, which has fast become one of the world’s major venues for international arbitration and was held physically and broadcast online this year. “Investors are already starting to think about this for the future but also to see how mediation could be good means of achieving a positive result in lieu of ‘going all the way.’”
While states would be likely to raise a necessity defense, he said that if the measures they have taken last for a longer period or are broader in scope than necessary, there could be an argument for breach of fair and equitable treatment standards.
“It’s going to be a questioning of determining if there is breach of treaty standard. From a state perspective, they will inevitably raise a defense such as the defense of necessity,” he said. “It will be interesting to see how that defense will be considered by tribunals.”
Obeid noted that in the past, similar government responses to emergencies had resulted in waves of investor-state disputes.
One example is in Egypt, where the government, facing a lack of gas supplies following the Arab Spring, terminated its gas agreement with a group of U.S.-incorporated companies. That resulted in a finding of unlawful expropriation 00000000.by the International Centre for Settlement of Investment Disputes.
According to an analysis by Global Arbitration Review, the Egyptian government faced 37 arbitration cases worth US$ 14.3 billion in the three years following the 2011 uprising, compared to just two per year prior.
Obeid also referred to Argentina, which he said faced more than fifty investor-state arbitration disputes in response to government emergency measures amid the 2001 economic crisis that included the nationalizing of assets. According to the International Institute for Sustainable Development, the move resulted in awards against Argentina amounting to over US$2 billion.
In light of the potential fallout, the partners suggested arbitrators and lawyers act early and take a proactive approach by holding early engagement between experts to forge a common approach.
