Posts Tagged Sovereignty
Popplewell J held in  EWHC 822 (Comm) Reliance v India in April. This post therefore is not a claim to speedy reporting (Allen & Overy have excellent review here). Rather, a quick note on the various implications of the holding in wider context.
The Act of State doctrine (in its narrow sense) essentially holds that courts should not question the validity of acts taken by a foreign government within that government’s territory.
Claimant (at 110) ‘submitted that even if non-justiciable in an English court, (one of the relevant claims, GAVC)…is arbitrable; the basis for the doctrine of foreign act of state, to the extent that it applies, is that one sovereign state should not sit in judgment on the acts of another; unlike a court, an arbitral tribunal is not an organ of a sovereign state; therefore its determination of the validity of the conduct of a sovereign party would not entail one sovereign calling into question the conduct of another; because the rationale for the foreign act of state doctrine does not apply to arbitration, what would in court be a non-justiciable issue can nevertheless be adjudicated upon by arbitrators.’
Popplewell J disagreed in what I understand to be a first formal finding on the subject: at 111 and in discussing relevant authority:
‘whilst some aspects of the foreign act of state doctrine have as their basis the exercise of “judicial self-restraint” (leading to some suggesting it is an expression of comity, GAVC), those are not the aspects of the doctrine which are relevant to the current issue… the principle that the validity and effectiveness of legislative and executive acts of a sovereign state in relation to property within its jurisdiction is not justiciable..is a hard-edged principle of English private international law, and (the majority of authority suggests, GAVC) that its rationale derives from the very concept of sovereignty which recognises the power and right of a state to determine the property rights of those whose property is situate within its territory.’
At 113: ‘there is no good reason why the principle should be any less applicable in arbitration than in litigation before an English court. It does not depend upon the tribunal itself being an organ of a sovereign state or exercising sovereign functions: it depends upon a general principle of English private international law which recognises the sovereignty of nations within recognised spheres, a principle to which arbitration tribunals, no less than courts, are required to give effect when applying English private international law principles.’
The case is an excellent illustration of the now very diverse and not always integrated international dispute resolution landscape. A case like Reliance could have conceivably ended up in BIT arbitration – which as readers will know has its own extensive challenges with domestic regulatory autonomy and the space for investment tribunals to challenge the legality and at the least the proportionate impact of States exercising sovereign regulatory functions.
This leaves two further dispute settlement channels: the use of the courts in ordinary and the use of ‘standard’ commercial arbitration (outside the BIT context), which is what was employed here. As the judgment shows, the former (courts in ordinary) have kept some control over the latter.
Lucia Raimanova and Matej Kosalko signal that classic choice of law rules combined with contractual party autonomy empowers parties to steer the litigation away from issues that a party might wish to avoid: particularly, by opting for the most interesting lex contractus (and, I would add, potentially varying same en parcours de route, to respond to changes in case-law or statutory law), and by having the State concerned sign away its right to invoke the Act of State doctrine (much like the similar contractual surrender of sovereign immunity).
International litigation is seldom confined to singular lines of analysis.
Update 29 September 2016. The award was made public on 28 September 2016. It sides with Barbados. Look for my analysis in a separate blog piece.
Thank you for the team at Dechert to remind us of the potential that BITs may be used to pursue proactive, rather than just reactive environmental litigation. A word of explanation: Bilateral Investment Treaties, in particular their investor-state dispute settlement mechanisms, are currently under a lot of pressure following the public outcry over the TTIP negotiations. Allowing private investors to sue countries that roll out regulation, using vague principles of protection of property, is seen by many as a form of corporate bullying.
Dechert’s briefing however reminds us firstly, specifically vis-a-vis stubborn air pollution in the Indonesia area, that States may carry responsibility in line with Trail Smelter’s nec utere tuo principle. The possibility for individuals (as opposed to neighbouring States) suing on that basis, is of course complicated by the mechanism of (absence of) direct effect of huge chunks of international environmental law. That is where investor-state can come in handily. Such as in Allard v Barbados at the Permanent Court of Arbitration. Dechert’s summary of that case reads ‘the Canadian owner of an eco-tourist facility in Barbados is currently suing the Government of Barbados for an alleged breach of the full protection and security provision (among other provisions) in the Canada- Barbados bilateral investment treaty. Peter Allard argues in his claim that Barbados breached its treaty obligations by failing to enforce its domestic environmental laws, which he alleges led to the environment being spoilt and a loss of tourist revenues at his eco-resort’.
A timely reminder of the good BITs can do, just before I am to speak (again) tomorrow on TTIP and why EU citisens are so suspicious of it.