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Annulment committee not limited to the text of the award
Practical Law UK Legal Update Case Report 2-501-8881 (Approx. 4 pages)
Annulment committee not limited to the text of the award
by PLC Arbitration
| Published on 30 Mar 2010 • International, USA (National/Federal) |
An update on Republic of Kazakhstan v Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS (ICSID Case No ARB/05/16), decision of the ad hoc committee of 25 March 2010, which concerned annulment of an ICSID award.
Speedread
In Republic of Kazakhstan v Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS (ICSID Case No ARB/05/16), Kazakhstan sought annulment of an ICSID award in which it was found in breach of the bilateral investment treaty between Kazakhstan and Turkey and ordered to pay damages.
The application failed because the applicant had failed to establish any grounds for annulment under Article 52(1)(b),(d) or (e) of the ICSID Convention. The decision contains a useful summary of the applicable principles, and also clarifies that, if no reasons are given in the award as to the calculations undertaken by the tribunal in quantification of damages, Article 52(1)(e) of the ICSID Convention does not limit the committee's consideration to the text of the award. The tribunal may interpret the award in the light of the evidence and submissions before the tribunal.
Background
Article 52(1)(b), (d) and (e) of the ICSID Convention provide:
"(1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds:...
(b) that the Tribunal has manifestly exceeded its powers;...
(d) that there has been a serious departure from a fundamental rule of procedure; or
(e) that the award has failed to state the reasons on which it is based."
For further discussion of annulment, see Practice note, Procedure in ICSID arbitration.
Rule 34(1) of the ICSID Arbitration Rules provides:
"The Tribunal shall be the judge of the admissibility of any evidence adduced and of its probative value."
Facts
The award did not specify the basis on which the quantum of damages had been calculated.
In the annulment proceeding, the applicant claimed violation of Articles 52(1)(b), (d) and (e) of the ICSID Convention in relation to:
- The tribunal's finding that it had jurisdiction when the investment was a fraud.
- The tribunal's finding of collusion despite a lack of evidence on this issue.
- The tribunal's failure to make a finding as to causation.
- The tribunal's failure to give reasons in relation to the amount of damages awarded.
Decision
The annulment committee found that none of the grounds for annulment invoked by Kazakhstan had been established, and dismissed the application in its entirety.
The committee summarised the applicable principles as follows:
- Annulment under Article 52(1) of the ICSID Convention does not depend on any alleged error or breach being non-trivial or determinative of the claim. Such requirements cannot be read into Article 52. If an Article 52 ground is established, the committee has a discretion to intervene.
- Manifest excess of powers, under Article 52(1)(b) of the ICSID Convention, occurs when the tribunal fails to apply any law or applies the wrong law, and the violation is evident and capable of discernment with little effort and without deeper analysis. Misapplication of the law does not constitute manifest excess of powers.
- A failure to state reasons, under Article 52(1)(e) of the ICSID Convention, occurs when there is total absence of reasons, or when the tribunal's failure to address a question alters an important finding of the tribunal or makes the award unintelligible. Reasons must be coherent and permit the tribunal's reasoning, on fact and on law, to be followed. It is not clear whether contradictory reasons constitutes failure to state reasons, unless, perhaps, they completely cancel each other out.
- It is important for the tribunal to accurately and comprehensively summarise the positions of the parties in the award, but it does not have to explicitly address each and every argument of the parties. Similarly, the tribunal is not obliged to explain its treatment of each and every piece of evidence adduced by the parties but, rather, to show the reasons on which the award is based.
- In accordance with Rule 34(1) of the ICSID Arbitration Rules, the tribunal is the judge of the admissibility and probative value of evidence. The annulment committee is not a court of appeal and cannot analyse the probative value of evidence.
- The requirement that the excess of powers be "manifest" means that the alleged lack of jurisdiction must be evident on the face of the award and does not depend on reconsideration of evidence.
- An application for annulment under Article 52(1)(e) of the ICSID Convention requires special consideration in the context of quantification of damages. The fact of damage must be proven by the claimant but the amount of loss is determined by the tribunal. Tribunals enjoy a considerable measure of discretion in determining issues of quantum. The precise amount of damages is established on the basis of the tribunal's informed estimation in the light of all available evidence. For this purpose, the tribunal may use different valuation methodologies, and these may be complementary and not mutually exclusive.
Applying these principles, in relation to the allegations of fraud and collusion the committee was not in a position to substitute its own views of the evidence for those of the tribunal. On a fair reading of the award, furthermore, the tribunal had adequately considered causation. Kazakhstan did have stronger grounds to object with regard to the tribunal's treatment of quantum, as the tribunal had merely stated the amount of damages in the award, without explaining the calculations which underlay that amount. However, the committee held that under Article 52(1)(e) of the ICSID Convention, the annulment committee is not limited to the text of the award, but can interpret the award in the light of the evidence and submissions before the tribunal. To this end, the annulment committee requested the parties to provide it with a complete record of all evidence before the tribunal relating to the quantum. After analysing the award in the light of this evidence, the committee rejected the application to annul.
Comment
The decision is a good illustration of the fact that annulment committee is not a court of appeal and grounds for annulment are very limited.
The annulment committee clarified that, if no reasons are given in the award as to the calculations undertaken by the tribunal in quantification of damages, Article 52(1)(e) of the ICSID Convention does not limit the committee to the text of the award, but allows the award to be interpreted in the light of the evidence and submissions before the tribunal.