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Glamis Gold v. USA

Type of decisionAward
Date of decision8 June 2009
Tribunal
Michael K. Young (President)
David D. Caron
Kenneth D. Hubbard (dissenting)
Legal instrumentNorth American Free Trade Agreement
Further informationFull text of the decision

Statements from this decision

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International Minimum Standard / The Law of Aliens
The inclusion of the term “expropriation” in Article 1110 incorporates by reference the customary international law regarding that subject
Under customary international law, a state must provide compensation for an expropriation that unreasonably interferes with, or unduly delays, effective enjoyment of the property; it is not responsible, however, for loss of property or for other economic disadvantage resulting from bona fide regulation if it is not discriminatory
The fair and equitable treatment standard of Article 1105(1) NAFTA is to be understood as the minimum standard of treatment of aliens established by customary international law
Due to the fact that what the international community views as “outrageous” may change over time, one may find in modern situations shocking and egregious events not considered to reach this level in the past
The customary international law minimum standard of treatment is meant to serve as absolute bottom, below which conduct is not accepted by the international community; although the circumstances of the case are of course relevant, the standard is not meant to vary from state to state or investor to investor
A procedural error, which is corrected quickly and effectively through domestic channels does not constitute “a complete lack of due process” and therefore is not in breach of the customary international law minimum standard of treatment
International Investment Treaties (IITs)
International Law Rules Applicable to IITs
Relationship of IITs to Other Sources of International Law
System of Precedents
A case-specific mandate is not a license to ignore systemic implications; each tribunal should render its case-specific decision with sensitivity to the position of future tribunals
As the IIT parties choose not to establish a standing adjudicative body, tribunals should have a case-specific focus as they address a dispute
While recognizing that there is no precedential effect given to previous decisions, a tribunal should nevertheless communicate its reasons for departing from major trends present in previous decisions
In the light of their case-specific mandate and the respect demanded for future tribunals, arbitrators should confine their decision to the issues presented and refrain from making statements not required by the case before them
Relationship of an IIT to Customary International Law
The inclusion of the term “expropriation” in Article 1110 incorporates by reference the customary international law regarding that subject
In the context of establishing a rule of customary international law the evidence of “concordant practice” may inter alia be shown by treaty practice (e.g., Model BITs)
General remarks regarding the creation of customary international law
The fair and equitable treatment standard of Article 1105(1) NAFTA is to be understood as the minimum standard of treatment of aliens established by customary international law
Arbitral awards do not constitute state practice and thus cannot create or prove customary international law; they can, however, serve as illustrations of customary international law if they involve an examination of customary international law, as opposed to a treaty-based or autonomous interpretation
Depending on the underlying IIT, two ways of examining a fair and equitable treatment standard exist: defining customary international law or interpreting the autonomous language and nuances of the underlying treaty language
Arbitral decisions concerning an autonomous FET standard provide no guidance for FET standards referring to customary international law
The customary international law minimum standard of treatment is meant to serve as absolute bottom, below which conduct is not accepted by the international community; although the circumstances of the case are of course relevant, the standard is not meant to vary from state to state or investor to investor
Relationship of IITs to Domestic Law
Supremacy of Public International Law
The legality of an act under domestic law does not presuppose its legality under international law and vice versa
Protection of Investors under IITs
Expropriation and Standards of Protection
Expropriation
Scope of Protection
A claim of expropriation is a claim for the fair market value of an investment taken; the value of the claim therefore corresponds to the value of the investment as if the measures had not occurred
General Requirements of an Expropriatory Act
Degree of Interference
Claims only arise under Article 1110 NAFTA when the governmental act affects an investor to the extent that it leads to actual present harm.; threats of expropriation or nationalization are not sufficient
In order to constitute a taking at all the economic impact of the measure must have radically deprived the investor of the economical use and enjoyment of its investments, as if the rights related thereto had ceased to exist
Duration of Interference
Difficulties of short duration the Investor is facing do not constitute an expropriation
Direct Expropriation
A direct expropriation is an open, deliberate and acknowledged taking of property, such as outright seizure or formal or obligatory transfer of title in favour of the host state
Indirect Expropriation / Regulations
Right to Regulate
Under customary international law, a state must provide compensation for an expropriation that unreasonably interferes with, or unduly delays, effective enjoyment of the property; it is not responsible, however, for loss of property or for other economic disadvantage resulting from bona fide regulation if it is not discriminatory
Determining Whether a Regulation Constitutes an Indirect Expropriation
To demonstrate that an expropriation has not occurred, a tribunal may use the valuation method most favourable to the investor for determining whether the measures challenged had a significant economic impact on the investment
In the context of an indirect expropriation some entitlements inherent in the property right are taken by the government so as to render almost without value the rights remaining with the investor
“Tantamount” means equivalent and thus the concept should not encompass more than direct expropriation; it merely differs from direct expropriation and results in a physical taking of property despite the absence of an actual transfer of ownership rights
In the case of an indirect taking or an act tantamount to expropriation a tribunal must consider the severity of the economic impact and the duration of that impact in order to assess the degree of interference with the property right
Measures Tantamount to Expropriation
“Tantamount” means equivalent and thus the concept should not encompass more than direct expropriation; it merely differs from direct expropriation and results in a physical taking of property despite the absence of an actual transfer of ownership rights
In the case of an indirect taking or an act tantamount to expropriation a tribunal must consider the severity of the economic impact and the duration of that impact in order to assess the degree of interference with the property right
Fair and Equitable Treatment
Relationship to Public International Law
Depending on the underlying IIT, two ways of examining a fair and equitable treatment standard exist: defining customary international law or interpreting the autonomous language and nuances of the underlying treaty language
Due to the fact that what the international community views as “outrageous” may change over time, one may find in modern situations shocking and egregious events not considered to reach this level in the past
Character and Scope
Arbitral decisions concerning an autonomous FET standard provide no guidance for FET standards referring to customary international law
Discretion of the State
A standard of deference is already present in Article 1105(1) NAFTA, rather than being additive to that standard; the idea of deference is found in the modifiers “manifest” and “gross”
Case Groups
Legitimate Expectations
Article 1105(1) NAFTA protects the investor's legitimate expectations
In absence of a quasi-contractual relationship an investor cannot have a legitimate expectation according to which the host country will not pass legislation that might affect him
A violation of Article 1105 NAFTA based on the unsettling of reasonable, investment-backed expectation requires, as a threshold circumstance, at least a quasi-contractual relationship between the state and the investor, whereby the state has purposely and specifically induced the investment
While an investor cannot have a legitimate expectation that the host country will not pass legislation affecting the investment, interim or emergency legislation may violate international law even when the subsequent final legislation would not
Further Cases
Article 1105 NAFTA requires a state to not treat investors of another state in a manifestly arbitrary manner
Arbitrary and Discriminatory Measures
Article 1105 NAFTA requires a state to not treat investors of another state in a manifestly arbitrary manner
Contract and Treaty Claims
Impact of Contract Claims on IIT Claims
Mere contract breaches without something further such as denial of justice or discrimination will normally not suffice to establish a breach of Article 1105 NAFTA
Investment Treaty Arbitration
General Remarks
As the IIT parties choose not to establish a standing adjudicative body, tribunals should have a case-specific focus as they address a dispute
Chapter 11 of the NAFTA contains a significant public system of private investment protection
Jurisdiction
The Tribunal's Rights and Duties
Due to the respect owed to private and public authorities alike all NAFTA tribunals are to provide particularly detailed reasons their awards
While recognizing that there is no precedential effect given to previous decisions, a tribunal should nevertheless communicate its reasons for departing from major trends present in previous decisions
Costs
General Remarks
According to Article 40(1) UNCITRAL Rules the unsuccessful party should bear arbitration-related costs, but a tribunal has nevertheless the discretion to apportion the costs otherwise in the light of the circumstances of the case
According to Article 40(2) UNCITRAL Rules complete discretion is provided to the Tribunal to apportion the costs of legal representation
Damages and Interest
Basis for Calculating Damages
A claim of expropriation is a claim for the fair market value of an investment taken; the value of the claim therefore corresponds to the value of the investment as if the measures had not occurred
North American Free Trade Agreement
Preamble
Chapter 11 of the NAFTA contains a significant public system of private investment protection
Chapter Eleven – Section A – Investment
Article 1102 – National Treatment
General Remarks
The treatment of investors under Article 1102 is compared to the treatment a state's own investors receive and thus can vary greatly depending on each state and its practices; the fair and equitable treatment promised by Article 1105 is not dynamic
Article 1105 – Minimum Standard of Treatment
The Relationship of the Standard to Public International Law
Depending on the underlying IIT, two ways of examining a fair and equitable treatment standard exist: defining customary international law or interpreting the autonomous language and nuances of the underlying treaty language
Arbitral decisions concerning an autonomous FET standard provide no guidance for FET standards referring to customary international law
Due to the fact that what the international community views as “outrageous” may change over time, one may find in modern situations shocking and egregious events not considered to reach this level in the past
Character and Scope of the Standard
The fair and equitable treatment standard of Article 1105(1) NAFTA is to be understood as the minimum standard of treatment of aliens established by customary international law
The customary international law minimum standard of treatment is meant to serve as absolute bottom, below which conduct is not accepted by the international community; although the circumstances of the case are of course relevant, the standard is not meant to vary from state to state or investor to investor
The treatment of investors under Article 1102 is compared to the treatment a state's own investors receive and thus can vary greatly depending on each state and its practices; the fair and equitable treatment promised by Article 1105 is not dynamic
Bad faith is not required to find a violation of the fair and equitable treatment standard, but its presence is conclusive evidence of such
Mere contract breaches without something further such as denial of justice or discrimination will normally not suffice to establish a breach of Article 1105 NAFTA
A violation of Article 1105 NAFTA based on the unsettling of reasonable, investment-backed expectation requires, as a threshold circumstance, at least a quasi-contractual relationship between the state and the investor, whereby the state has purposely and specifically induced the investment
Discretion of the State
A standard of deference is already present in Article 1105(1) NAFTA, rather than being additive to that standard; the idea of deference is found in the modifiers “manifest” and “gross”
Case Groups
An act must be sufficiently egregious and shocking in order to fall below accepted international standards and constitute a breach of Article 1105(1) NAFTA; such a breach could lay in gross denial of justice, manifest arbitrariness, blatant unfairness, a complete lack of due process, evident discrimination or a manifest lack of reasons
Article 1105(1) NAFTA protects the investor's legitimate expectations
Article 1110 – Expropriation and Compensation
General Remarks
The inclusion of the term “expropriation” in Article 1110 incorporates by reference the customary international law regarding that subject
General Requirements of an Expropriatory Act
Degree of Interference
Claims only arise under Article 1110 NAFTA when the governmental act affects an investor to the extent that it leads to actual present harm.; threats of expropriation or nationalization are not sufficient
In order to constitute a taking at all the economic impact of the measure must have radically deprived the investor of the economical use and enjoyment of its investments, as if the rights related thereto had ceased to exist
Duration of Interference
Difficulties of short duration the Investor is facing do not constitute an expropriation
Indirect Expropriation / Regulations
Determining Whether a Regulation Constitutes an Indirect Expropriation
In the context of an indirect expropriation some entitlements inherent in the property right are taken by the government so as to render almost without value the rights remaining with the investor
In the case of an indirect taking or an act tantamount to expropriation a tribunal must consider the severity of the economic impact and the duration of that impact in order to assess the degree of interference with the property right
Measures Tantamount to Expropriation
“Tantamount” means equivalent and thus the concept should not encompass more than direct expropriation; it merely differs from direct expropriation and results in a physical taking of property despite the absence of an actual transfer of ownership rights
In the case of an indirect taking or an act tantamount to expropriation a tribunal must consider the severity of the economic impact and the duration of that impact in order to assess the degree of interference with the property right
Chapter Eleven – Section B – Settlement of Disputes between a Party and an Investor of Another Party
Article 1117 – Claim by an Investor of a Party on Behalf of an Enterprise
According to Article 1117(1) NAFTA a claimant needs to have incurred loss or damage in order to bring a claim for compensation under Article 1120
Article 1117(2) does not provide for a simple, fixed three-year period before the date the claim is brought, but rather refers to three years “from the date on which the enterprise first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the enterprise has incurred loss or damage”
A claim brought on the basis of an event properly within the time limit of Article 1117(2) may cite to earlier events as “background facts” or “factual predicates.”; it is necessary that any action be preceded by other steps, but such factual predicates are not per se the legal basis for the claim
Article 1120 – Submission of a Claim to Arbitration
According to Article 1117(1) NAFTA a claimant needs to have incurred loss or damage in order to bring a claim for compensation under Article 1120
UNCITRAL Arbitration Rules 1976
Article 40
According to Article 40(1) UNCITRAL Rules the unsuccessful party should bear arbitration-related costs, but a tribunal has nevertheless the discretion to apportion the costs otherwise in the light of the circumstances of the case
According to Article 40(2) UNCITRAL Rules complete discretion is provided to the Tribunal to apportion the costs of legal representation

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