Russia chose not to participate in the first public hearing held on March 7, 2022, raising jurisdictional objections. In its submission preceding the hearing, Russia changed its justification of the use of force in Ukraine by removing the reference to genocide. Instead, it claimed that it has been acting in self-defense, in accordance with Article 51 of the UN Charter, and that the issue of concern is one of state recognition and use of force in international law, which “fall beyond the scope of the Convention and thus the jurisdiction of the Court.”
Although Ukraine’s argumentation to obtain the Court’s prima facie jurisdiction for the purposes of the provisional measures has been described as a creative approach, the Court found it plausible. Conversely, the Court rejected Russia’s jurisdictional argument and made it clear that Russia’s claim on the use of force in self-defense does not invalidate its prima facie finding on the existence of a dispute between the parties within the meaning of the Genocide Convention.
On March 16, 2022, the ICJ granted Ukraine’s request for provisional measures while reserving final judgment on jurisdiction and the merits. By thirteen votes to two, the Court ordered that Russia must immediately suspend its military operations and ensure that any military or irregular armed units under its control cease actions to further the military operations. Additionally, the Court unanimously ordered that both states “refrain from any action which might aggravate or extend the dispute.” Judges who opposed the first two measures directed at Russia were Judge Gevorgian from Russia and Judge Xue from China.
Apart from causing some reputational harm to Russia, the effect of the decision remained largely symbolic. Russia did not take the ruling into account and refused to halt its military actions in Ukraine. Although the decision is binding on Russia, the Court lacks the mechanisms to enforce it. Even if the case is taken to the UN Security Council, it would be impossible to overcome Russia’s veto power.
Nonetheless, the decision marks an important step towards proving the illegality of the invasion under international law. In this first “false genocide claim” case in its history, the Court exposes the perils of the abusive interpretation of the duty to prevent and punish genocide under Article I of the Genocide Convention.
Noteworthy are the Court’s arguments that: (1) it is not in possession of evidence substantiating the genocide allegations by Russia; (2) in fulfilling its duty to prevent genocide, every State may only act within the limits permitted by international law; (3) it is doubtful that the Convention automatically authorizes a State’s unilateral use of force in the territory of another State for the purpose of preventing or punishing an alleged genocide; and (4) Ukraine has a plausible right not to be subject to military operations for the purpose of preventing and punishing an alleged genocide on its territory.
The legal issues arising out of this dispute received wide international resonance. As many as twenty-four States, including the United States, have filed interventions under Article 63 of the ICJ Statute denying Russia’s claims of genocide as a pretext for the unilateral use of force. Many other States signaled their intention to intervene in the proceedings in the future. Such united support for an ICJ disputing party is rare and remarkable, given that the Court’s final judgment interpreting the Convention will be legally binding on all intervening countries.
In October 2022, Russia filed preliminary objections to the Court’s jurisdiction, which have not been made public. The Court issued an order directing Ukraine to respond to those objections by February 3, 2023.
This is the second case filed with the Court against Russia arising out of its military actions in Ukraine. In 2017, Ukraine filed an application related to Russia’s annexation of Crimea, whereby the Court found that it has jurisdiction, and the merits stage is ongoing.
C. International Criminal Court (ICC)
Russia’s full-scale invasion of Ukraine on February 24, 2022, has elevated the ongoing fighting in Donbas to the level of a territory-wide international armed conflict. Therefore, on February 28, 2022, the ICC Prosecutor announced his decision to “proceed with opening an investigation into the Situation in Ukraine.” He indicated that there is a “reasonable basis to believe that both alleged war crimes and crimes against humanity have been committed” since the onset of the conflict in 2014. Hence, “given the expansion of the conflict . . . [the] investigation will also encompass any new alleged crimes . . . committed by any party to the conflict on any part of the territory of Ukraine” on an ongoing basis.
Although Ukraine is not a State Party to the Rome Statute establishing the ICC, it accepted the ICC’s jurisdiction by filing an Article 12(3) declaration, which was later extended for an indefinite term. An unprecedented joint referral of the situation to the ICC by forty-three State Parties to the Rome Statute allowed Ukraine to expedite the matter, overcoming jurisdictional hurdles. Thus, by March 2, 2022, the ICC Prosecutor launched an investigation into the situation based on the referrals received.
In April 2022, the ICC became part of a joint investigation team, which was earlier established by Ukraine and other States under the auspices of Eurojust. This marked a new chapter in the Court’s history when it started to engage more transparently with investigations on the ground alongside other actors. In May 2022, the ICC Prosecutor deployed the largest-ever team of forty-two investigators, including seconded national experts, to collect evidence in Ukraine. In September 2022, the ICC, together with Eurojust, published practical guidelines for civil society organizations on documenting core international crimes.
Various credible sources indicate the widespread commission of alleged war crimes and crimes against humanity on the territory of Ukraine by Russian forces that potentially fall within the Court’s jurisdiction. Reported incidents include attacks against civilians and civilian infrastructure, as well as the use of prohibited weapons such as cluster munitions and phosphorous bombs. The ICC Prosecutor is mandated to investigate crimes committed by all parties to the conflict, but the alleged crimes appear to have been predominantly committed by Russian forces and pro-Russian separatist groups, with some isolated instances of Ukrainian combatants mistreating Russian prisoners of war.
Although the ICC has been collecting evidence of potential crimes in Ukraine, it has not formally announced charges or issued arrest warrants related to the invasion. This is because the ICC’s jurisdiction is “complimentary” to domestic criminal jurisdiction and is designed to intervene only in cases that Ukraine is not equipped to prosecute. So far, Ukraine has documented nearly 40,000 cases of war crimes and conducted invasion-related prosecutions in its domestic courts under domestic law. But given serious concerns about the capacity of Ukraine’s judicial system to address the large scale of atrocities committed on its territory, the ICC may potentially have a bigger role to play.
The reach of the ICC remains limited to war crimes, crimes against humanity, and genocide committed by individuals. Its jurisdiction does not extend to the crime of aggression, which is a particularly grave violation of the prohibition on the use of force between states. According to the ICC Statute, the crime of aggression is “the planning, preparation, initiation or execution, by a person in a position effectively to exercise control over or to direct the political or military action of a State, of an act of aggression which, by its character, gravity and scale, constitutes a manifest violation of the Charter of the United Nations.” The UN General Assembly, in its resolution of March 2, 2022, took the position that the Russian invasion of Ukraine constitutes an act of aggression. To ensure accountability for this crime, Ukraine has called for the creation of an ad hoc international tribunal that would focus on the crime of aggression committed by Russian leaders and military commanders and supplement the efforts of the ICC and Ukraine’s domestic courts.
D. European Court of Human Rights (ECHR)
The ECHR, on March 1, 2022, was the first judicial institution to order “interim measures” in response to “massive human rights violations being committed by the Russian troops in the course of the military aggression against the sovereign territory of Ukraine.” Interim measures are legally binding “urgent measures which . . . apply only where there is an imminent risk of irreparable harm.”
At the request of Ukraine, the Court called on the Russian government to “refrain from military attacks against civilians and civilian objects” and to “ensure immediately the safety of the medical establishments, personnel and emergency vehicles.” The Court indicated that Russia’s actions present “a real and continuing risk of serious violations of the Convention rights of the civilian population, in particular . . . right to life . . . prohibition of torture and inhuman or degrading treatment or punishment . . . and . . . right to respect for private and family life.”
Unsurprisingly, Russia did not comply with the interim measures. Furthermore, on March 15, 2022, Russia communicated its intent to denounce the European Convention on Human Rights. Its withdrawal from the Convention became effective on September 16, 2022. Nonetheless, the Court may still consider cases filed against Russia involving the alleged human rights violations that occurred before the withdrawal took effect.
Currently, there are five inter-state claims lodged against Russia by Ukraine, including the one filed on June 23, 2022, which concerns allegations of mass and gross human rights violations committed by Russia in Ukraine since February 24, 2022. There are also more than 8,500 individual claims filed before the ECHR against Russia.
II. Developments in International Investment Arbitration
A. Introduction
The field of international investment law has experienced significant developments in 2022. From surprising case outcomes to changes in institutional rules, this area of law, not long ago regarded as nascent and obscure, continues to evolve into more well-defined contours. Below, we report on a few noteworthy developments in International Investment Arbitration.
B. A New Set of Amendments: The 2022 International Centre for Settlement of Investment Disputes (ICSID) Rules and Regulations
After a five-year-long rule amendment process, ICSID, an international arbitration institution that operates under the auspices of the World Bank, released a new version of its rules for resolving disputes between foreign investors and their host States. The new amendments are the first since 2006 and represent the most extensive modernization of ICSID procedures, which are the most widely used set of arbitration rules in the field of International Investment Arbitration. The 2022 Rules came into effect on July 1, 2022, and aim to improve access, speed, transparency, and overall cost efficiency in investor-state dispute settlements. Most notably, the amendments include new rules establishing a new expedited arbitration procedure; a revised rule on the procedure available to dispose of meritless claims; rules that enhance the transparency of ICSID orders, decisions, and awards; rules creating and tightening deadlines at various stages of arbitration; rules requiring disclosure of third-party funding; and rules concerning cost allocation and provision of security for costs, among others. Additionally, the amendments provided a brand new set of mediation and fact-finding rules that offer procedures to resolve disputes through negotiation and to conduct targeted and impartial factfinding. The changes to the ICSID rules are a comprehensive effort to make investor-state cases less delayed, opaque, and financially burdensome and to, thereby, make foreign investment a more attractive option for investors and host States alike.
C. Access to Discovery Assistance Under 28 U.S.C. § 1782 Narrowed
In June 2022, a unanimous U.S. Supreme Court significantly narrowed access to U.S. discovery procedures in the context of international arbitration. Previously, under 28 U.S.C. § 1782(a), the U.S. Congress permitted federal district courts to order testimony or the production of documents “for use in a proceeding in a foreign or international tribunal.” But there had long been a circuit split over whether 28 U.S.C. § 1782 applied to private international commercial arbitrations. In order to settle the split, the U.S. Supreme Court granted certiorari to and consolidated a case concerning a private commercial arbitral panel and a case concerning an ad hoc investor-state panel, ZF Automotive US, Inc. v. Luxshare, Ltd. and AlixPartners, LLP v. Fund for Protection of Investors’ Rights in Foreign States, respectively. In the Court’s view, the modern version of § 1782 arose out of Congress’s express interest in improving assistance to a broader scope of foreign judicial and quasi-judicial bodies for the “animating purpose” of international comity. The Court, thus, concluded that, in order to benefit from the purposes of the statute, an arbitral panel must be imbued with governmental authority. The Court held that neither the private commercial arbitral panel at issue in ZF Automotive nor the ad hoc investor-state tribunal in AlixPartners fit the definition of a governmental adjudicative body. The decision summarily excluded private arbitral panels in international commercial arbitrations from the scope of § 1782(a), but it left open the possibility that investor-state disputes resolved through courts of arbitration with governmental authority, rather than ad hoc private rules, could still benefit from discovery assistance through § 1782(a).
In September 2022, the question of what type of investor-state proceedings would continue to have access to § 1782 found one answer in the case of P&ID v. Nigeria. The case concerns Nigeria’s efforts to set aside a $10 billion award rendered in 2017 in an arbitration over a gas production contract between Process and Industrial Developments Ltd. (P&ID) and Nigeria. After the award was rendered, Nigeria contended the award arose out of a contract that was fraudulently procured and commenced a proceeding in England to set aside the arbitral award based on new evidence establishing that the contract was procured by bribes. For use in the English proceedings, Nigeria requested permission to conduct discovery under § 1782 in the U.S. District Court for the Southern District of New York and sought leave to serve subpoenas on the ultimate owners of P&ID. The court granted Nigeria’s application, finding that Nigeria had satisfied all the statutory requirements under § 1782: the respondents were not party to the English proceedings; the application was not an attempt to circumvent foreign proof-gathering restrictions and policies; the discovery request was not unduly burdensome; and the English set aside proceeding qualified as a proceeding under a “foreign or international tribunal,” particularly a tribunal that would be receptive to § 1782 assistance. This decision on Nigeria’s § 1782 request provides a helpful rearticulation of the factors U.S. courts consider in determining whether proceedings related to investment arbitration can benefit from U.S. discovery assistance.
Contrastingly, in October 2022, a federal magistrate judge in the Eastern District of New York ruled that an arbitration panel constituted under ICSID in the case of Alpene Ltd v. Republic of Malta did not qualify as a “foreign tribunal” for the purposes of using § 1782 for discovery assistance. The judge did not find sufficient evidence to support that Malta and China, the Claimant’s country of origin, had “inten[ded] to imbue the body in question [here, the ICSID arbitration panel] with governmental authority.” The judge explained that, because ICSID tribunals cannot reciprocate discovery assistance, they cannot further the statute’s aim of promoting cooperation between the United States and other countries. This ruling has further greatly narrowed the types of international arbitral proceedings that can look to U.S. district courts for discovery assistance.
D. Green Power v. Spain: The First Intra-European Union (EU) Objection to the Energy Charter Treaty (ECT) Ever Upheld
The ECT is an international agreement that provides a multilateral framework for cross-border energy sector cooperation. Though it has been in force for around thirty years, a growing number of European countries have contested the framework and announced plans to withdraw from it because the treaty has become an obstacle to certain efforts related to renewable energy. One particular area of consternation for ECT signatories is the scope of jurisdiction in the dispute resolution mechanism found in Article 26, which many European host States have argued does not extend to intra-EU claims.
The dispute in Green Power v. Spain arose out of changes Spain made to its regulatory framework that negatively impacted the investments of two Danish companies in Spain’s solar sector. The investors brought claims under the ECT, and Spain objected to the jurisdiction of the tribunal on the basis that Article 26 did not contain a valid offer to arbitrate intra-EU disputes. In three prior landmark cases, Slovakia v. Achmea (2018), Moldova v. Komstroy (2021), and Poland v. PL Holding (2021), the Court of Justice of the European Union (CJEU) found that Article 26 of the ECT was inoperative between EU investors and EU Member States. But, as ECT tribunals are not bound to follow EU law, ECT investor-state tribunals had, prior to the Green Power v. Spain decision, consistently dismissed EU Member States’ objections to their jurisdiction to arbitrate disputes between EU investors and EU Member States. But, in Green Power v. Spain, given that the seat of arbitration was Stockholm and that there was no prior agreement on the applicable law between the parties, the tribunal looked to the Swedish Arbitration Act to determine the applicable law in the case. The Swedish Arbitration Act demanded the application of the law of the seat, in this case Swedish law, and, in turn, EU law, which is incorporated into Swedish law. Upon review of the ordinary meaning, context, text, related instruments, and practice under the ECT, the tribunal found that EU law was relevant to issues concerning its jurisdiction. Thus, the tribunal applied the CJEU’s reasoning in the Achmea line of cases and concluded in a June 2022 ruling that it was precluded from exerting jurisdiction.
While groundbreaking, the Green Power v. Spain decision has limited application, given that ECT arbitrations seated outside of the EU or brought under ICSID, rather than domestic EU laws, would continue to evade intra-EU jurisdictional objections. On the heels of this decision, however, European states have concluded a five-year negotiation process and reached an agreement to revise the ECT to explicitly preclude Article 26 from applying intra-EU. In the meantime, intra-EU ECT arbitration remains contentious. The future of the ECT altogether remains uncertain in the face of continued country withdrawals.
E. Yukos Capital v. Russia: Five-Billion-Dollar Award Against Russia Upheld
In August 2022, a Swiss Federal Tribunal upheld the findings of a Permanent Court of Arbitration tribunal, which held Russia liable for expropriating the investments of the Luxembourg finance company, Yukos Capital Ltd, under the ECT. The dispute arose out of loans Yukos Capital made to its Russian parent company, Yukos Oil, a company that was forced into bankruptcy and liquidated by Russia without any payment being made to Yukos Capital Ltd. Russia had sought to set aside the award on the basis of several jurisdictional objections, including that the loans were not qualifying protected investments within the meaning of the ECT, that the proceedings were an abuse of rights, that the investments were illegal tax-evasive transactions, and that the award violated public policy against unjust enrichment. The Swiss Federal Tribunal dismissed all of Russia’s jurisdictional objections and rejected Russia’s application to set aside the award. This $5 billion award is one of several arbitral awards that have arisen out of Russia’s dismantling of Yukos Oil, including three awards (Hulley Enterprises v. Russia, Yukos Universal v. Russia, and Veteran Petroleum v. Russia) won by Yukos Oil shareholders against Russia, totaling over $50 billion. Russia continues to defend enforcement of these awards.
F. RWE v. Netherlands: A Provisional Measures Balancing Act
In August 2022, the tribunal in RWE v. Netherlands re-affirmed the four-pronged test for recommending provisional measures pursuant to Article 47 of the ICSID Convention. The tribunal said that it must consider (1) whether it had prima facie jurisdiction; (2) whether the claimant had established a prima facie case on the merits; (3) the urgency and necessity of the measures requested; and (4) the proportionality of those measures. While it was readily satisfied that the first two criteria had been met, the tribunal focused on the urgency and necessity and proportionality prongs of RWE’s request that it direct the Netherlands to withdraw or suspend proceedings against one of the Claimants, RWE AG, before the Higher Regional Court of Cologne. In May 2021, pursuant to the German Code of Civil Procedure, the Netherlands had requested that the Cologne court find the RWE v. Netherlands arbitration inadmissible as a matter of EU and German law, relying on the CJEU’s 2018 Achmea ruling.
At the time of the tribunal’s decision-making, the case before the Cologne court was still pending, which most likely played a key role in the tribunal’s finding that—even if RWE could make a case for proportionality—the measures requested were neither urgent nor necessary. While noting “some hesitation” in not granting the request, the tribunal left its door widely open to RWE. In case the German court found the ICSID arbitration inadmissible, the tribunal committed to entertain “on an expedited basis” a potential renewed request for provisional measures. At the same time, while acknowledging the Netherlands’ stated intentions not do so, the tribunal recommended that the Netherlands not restrain RWE from participating fully in the arbitration without first providing sufficient notice to RWE of its intentions to allow the Claimants to apply for provisional measures again.
In the analysis preceding its decision, the tribunal recognized the conundrum. On the one hand, it sympathized with RWE that the German case was part of “a strategy to end th[e] arbitration” and more than a theoretical danger, as it could lead to an anti-arbitration injunction forcing RWE AG to withdraw from the arbitration and/or to blocking enforcement. Even if the decision on inadmissibility was merely declaratory, it would pose some level of threat to the tribunal’s kompetenz-kompetenz, RWE’s right of access to ICSID, and the integrity of ICSID proceedings. On the other hand, the tribunal recognized the position of the Netherlands that EU law mandated this course of action and that it was seeking nothing more than a declaratory decision. The tribunal also acknowledged the representations of the Netherlands that it would continue to comply with all of its international law obligations and continue to participate in the arbitration, regardless of the outcome of the German case, and especially its stated view that the RWE v. Netherlands tribunal is the only competent body to determine its own jurisdiction.
Just two weeks later, on September 1, 2022, the Higher Regional Court of Cologne declared the RWE v. Netherlands arbitration inadmissible. The decision is yet to become final as a matter of German law. No further applications for provisional measures were made, and the arbitration proceeding is suspended as of October 18, 2022, pursuant to the parties’ agreement.
G. Kruck v. Spain: Contrasting Approaches to the Legitimate Expectations Standard
Kruck v. Spain concerns a dispute submitted to ICSID under the ECT by a group of over seventy German entities and individuals against Spain. The claims arise out of a series of renewable energy reforms enacted by Spain that adversely affected Claimants’ investments in photovoltaic (PV) power plant facilities. In the Claimants’ view, Spain had induced foreign investment through an attractive renewable energy incentives regime that then fundamentally altered after their investments were made. The primary legal claim in the case concerned the content of the Fair and Equitable Treatment (FET) standard and whether the doctrine of legitimate expectations under the standard had been breached. Spain maintained that interpretation of the legitimate expectations doctrine must factor in Spain’s right to regulate in the public interest and disputed that it had made “specific commitments” giving rise to legitimate expectations that would prevent it from altering its own laws.
In its September 2022 decision, the tribunal majority, Vaughan Lowe and Michael C. Pryles, concluded that “in circumstances where the explicitly declared purpose of legislation is to invite investors to commit capital to projects in reliance upon guarantees of stability in a regulatory regime, specific commitments can be made by provisions in general legislation.” It found that Spanish Royal Decree 661/2007 (RD 661) had promised attractive and stable regulated tariffs and premiums to qualifying registered PV facilities for a fixed period and, thus, gave rise to legitimate expectations upon which potential investors could rely. Spain subsequently breached those legitimate expectations when it adopted a new regulatory regime.
In a dissenting opinion, Zachary Douglas disagreed with the majority’s formulation of the test for legitimate expectations, arguing that the majority had used a flawed approach inspired by contract law that attributed liability based on a notion of strict liability—an approach that rendered the State’s public policy reasons for breaching its regulatory “promise” irrelevant. Douglas argued that under Article 10 of the ECT and international investment law broadly, a State can only be found liable for a breach of legitimate expectations on the basis of fault. Where there is a change in regulation at issue, a determination of fault should weigh the proportionality of the burden on the investor against the public interest pursued. Douglas broadly criticized tribunals that have essentially created a no-fault compensation scheme for disgruntled foreign investors at the expense of State Parties.
