ICSID Tribunal Rules on ECT Jurisdiction

Dispute Resolution Journal, Aug-Oct 2005

INVESTOR-STATE ARBITRATION

In Plama Consortium Ltd. v. Republic of Bulgaria (ICSID No. ARB/03/24), an ICSID tribunal ruled on Feb. 8, 2005, that it had jurisdiction to hear the dispute under Article 26 of the Energy Charter Treaty. The tribunal agreed with Plama that Article 26 contains a standing, open written offer to investors by Contracting States to institute ICSID arbitration and that, as an investor, Plama accepted the offer by filing a request for arbitration. Plama argued that Bulgaria consented to ICSID arbitration by ratifying the ECT. It also argued that Bulgaria consented to arbitration through the "MFN" (most-favored-nation) clause in the Bulgaria-Cyprus Bilateral Investment Treaty, but the tribunal did not agree.

Bulgaria argued that since it had denied treaty benefits to Plama under Article 17(1) ECT, arbitration was not available. Plama countered that this was not a jurisdictional defense, but a defense on the merits. Since both parties asked the tribunal to decide whether Article 17(1) applied, the tribunal addressed that issue. It held that a denial of treaty benefits must be expressed and thereafter applies only prospecrively. Bulgaria did not express its denial of benefits until after Plama sought arbitration. To allow retroactive application would deprive investors of certainty as to their rights, the tribunal said.

Carl F. Salans (president), Albert Jan van den Berg and V.V. Veeder served on the tribunal.