On October 18, 2018, an ad hoc Committee (“Committee”) of the International Center for the Settlement of Investment Disputes (“Center” or “ICSID”) allowed an application by the Republic of Gambia (“The Gambia”) requesting the continued stay of the enforcement of a nearly $23 million arbitral award granted in the case of Carnegie Minerals (Gambia) Limited v. Republic of The Gambia: Decision on the Gambia’s Request for a Continued Stay of Enforcement of the Award (ICSID Case No. ARB/09/19). Unless modified or terminated, the decision will remain in place until the Committee rules on The Gambia’s application for the annulment of the Award. Despite The Gambia’s apparent victory, celebrations are not exactly in order for at least two reasons. First, a stay of enforcement of an ICSID arbitral award can be modified or terminated at the request of either party to a dispute; a common reason for modifying or terminating an award is if an award debtor fails to fulfill a condition (e.g. the provision of adequate financial security) for the stay. Second, as the Tanzania Electricity Supply Company (“TANESCO”) discovered recently in the case of Standard Chartered Bank (Hong Kong) Limited v. Tanzania Electric Supply Company Limited (“SCB HK v. TANESCO”), a stay of enforcement of an arbitral award does not necessarily mean that the underlying application for annulment will be ultimately successful. On April 17, 2017, a Committee granted TANESCO’s request for a stay of a $148.4 million award in favor of Standard Chartered Bank Hong Kong (“SCB HK”). However, on August 2, 2018, the same Committee upheld the initial award and rejected TANESCO’s annulment application in its entirety.
Stay of Award: What is It? What is the Legal Basis? What is the appropriate Legal Standard?
Article 52(5) of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the “ICSID Convention”) and Rule 54(1) of the ICSID Rules of Arbitration Proceedings (the “Arbitration Rules”), provide the legal basis for a stay of enforcement of arbitral awards. A request for a stay of enforcement of an award can be included in the initial application for annulment of an award or can be made subsequently. Article 52(5) of the ICSID Convention, first sentence, provides that a Committee constituted to hear a party’s application for annulment “may, if it considers that the circumstances so require, stay enforcement of the award pending its decision.” Article 52(5) of the ICSID Convention, second sentence, provides: “If the applicant requests a stay of enforcement of the award in his application, enforcement shall be stayed provisionally until the Committee rules on such request.”
A stay of an award is an exceptional recourse mechanism designed to safeguard against the violation of fundamental legal principles relating to the arbitral process. Ordinarily, ICSID awards are final and binding. Article 53(a) of the ICSID Convention clearly states: “The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.”
Who has Standing to Request a Stay of Enforcement of an Arbitral Award?
Only a party to a dispute before the ICSID can apply for a stay of enforcement of an award rendered in connection to that dispute. Essentially, under the ICSID Convention, the right to request a stay of enforcement is triggered by an application for the annulment of an award. As previously noted, an application for a stay may be made as part of the initial application for annulment or at any time during an annulment proceeding. Rule 54(5) of the Arbitral Rules specifically mandates the Secretary-General of the ICSID to promptly notify both parties of the stay of enforcement of any award and of the modification or termination of such a stay. A stay of enforcement becomes effective on the date on which the Secretary General dispatches such notification.
A Stay of an Award: How Often Are Requests Made? What is the Record of African States?
According to the ICSID, as of April 15, 2016, a total of 43 requests for the stay of enforcement had been made in connection with some 90 registered annulments. African countries have been involved in at least 10 requests for a stay of enforcement of an award. African States that have in the past requested a stay of enforcement of an arbitral award include:
· The Republic of Guinea: MINE v. Guinea ARB/84/4;
· The Arab Republic of Egypt: SPP v. Egypt ARB/84/3;
· Wena Hotels v. Egypt ARB/98/4;
· The Republic of Seychelles: CDC Group plc v. Seychelles ARB/02/14;
· The United Republic of Tanzania: Standard Chartered Bank (Hong Kong) Limited v. Tanzania Electric Supply Company Limited ARB/10/20; and
· The Democratic Republic of Congo – Mitchell v. DRC ARB/99/7;
Is there a Presumption in Favor of a Stay of Enforcement?
The legal texts provide no basis for a presumption in favor of granting a stay or continuing a provisional stay of enforcement. On the contrary, the language of Article 53 of the ICISD Convention and Rule 54(2) of the Arbitral Rules suggest that the decision whether or not to grant a stay is at the discretion of the ad hoc committees. A sizeable group of committees have confirmed that that there is no presumption in favor of a stay of enforcement. In Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador: Decision on the Stay of Enforcement of the Award, 30 September 2013 (ICSID Case No. ARB/06/11) the Committee stated that “an award debtor is not entitled to a continued stay of enforcement,” and that “there is no basis for a presumption in favor of continuation of the stay.” Although there is no presumption in favor of a stay of execution, more often than not requests for stays are granted.
What Factors Support a Stay of Execution of an Award?
The ICSID Convention does not offer any guidance as to the factors that an ad hoc committee must take into account when considering whether or not to grant a stay. Article 52(5) of the ICSID Convention simply states that “the Committee may, if it considers that the circumstances so require, stay enforcement of the Award pending its decision.” Although a discretionary decision, annulment committees take into account a variety of factors in considering whether to grant a stay on enforcement. In SCB HK v. TANESCO, the Committee reiterated the non-exhaustive list of all the circumstances that may be a committee may deem relevant in determining how to rule upon a request for a stay on enforcement. These include:
· prospects for compliance with the award if the award is not annulled
· absence of dilatory tactics;
· the risk of non-recovery of sums due under the award if the award is annulled;
· absence or minimal prejudice to the opposing party by delaying the payment adverse economic consequences on either party; and
· a balance of both parties’ interest.
The stay of enforcement of an ICSID award is an important, extraordinary and temporary remedy. A review of prior cases indicates that African countries are not strangers to applications for stay of enforcement of arbitral awards. A prospective applicant for a stay should bear several things in mind. First, although a stay of enforcement has been granted in many cases, there is no presumption in favor of granting a stay of execution. Second, as a sizeable group of committees have concluded, the prima facie grounds for annulment are not relevant to the determination of whether an applicant on annulment is entitled to a stay. Third, while a stay can come as a welcomed relief for an applicant, it can come with stiff conditions attached and always has financial implications for the applicant in the form of significant legal fees and costs. Finally, a grant of a stay of enforcement of an award does not affect an underlying application for annulment one way or another and does not mean that the award debtor will ultimately prevail in the effort to get an award annulled. Bolivia should know. Bolivia granted mining concessions to a Chilean company Quiborax SA and its Bolivian investment entity, Non Metallic Minerals SA. When Bolivia revoked the mining concessions, Quiborax SA initiated a claim with the ICSID. In 2015, in the case of Quiborax SA and Non Metallic Minerals SA v. Plurinational State of Bolivia, a Tribunal determined that Bolivia had violated the rights of the Claimants and awarded the latter nearly $50 million in compensation. In December 2015, Bolivia applied to have the arbitral award annulled and successfully moved to stay the enforcement of the award. In February 2017, an ad hoc Committee denied the Claimant’s request to lift the stay on the award. However, in May 2018, the Committee ultimately rejected Bolivia's application for annulment.
*E.J. Ball Professor of Law, University of Arkansas School of Law; Arkansas Bar Foundation Professor (2014 – 2016).