PCA Tribunal refuses to yield jurisdiction over Indian construction firm’s treaty claims against Mozambique – despite ICC Tribunal’s injunction

By Dean Ehrlich, 17 January 2023

In early December last year, the Permanent Court of Arbitration Tribunal seized with Patel Engineering Limited’s claim that the Republic of Mozambique violated its obligations under the India-Mozambique BIT reasserted its right to define its own jurisdiction over the matter.

This despite an ICC Tribunal majority (in a parallel proceeding) attempting to restrain Patel Engineering from “pursuing the determination of any matters in dispute between the Parties arising out of [their contract] in any other forum, even if only accessorily for the purpose of the adjudication of Treaty Claims, until this Arbitral Tribunal has taken its decision on those matters.”

In doing so, the PCA Tribunal held that, despite some overlap in the dispute “which the Parties must manage,” the proceedings before ICC Tribunal and the PCA Tribunal “remain separate from each other” and “neither Tribunal can interfere with the other’s mandate.”

“This is a basic principle of international arbitration,” the PCA Tribunal explained. “There is a basic distinction in the type of disputes which can be resolved by arbitration. There can be international law disputes which derive from a treaty breach and there can be contractual disputes which derive from breaches of contract, and as you know, and as we have said in our previous decisions, this is an international law tribunal constituted under the BIT between India and Mozambique. We are an international law tribunal, and the scope of our jurisdiction is restricted to international law disputes which imply a breach of the obligations assumed by the Republic of Mozambique under its BIT.”

The ICC Tribunal’s injunction against India headquartered Patel Engineering was not without controversy. The injunction was accompanied by a dissenting opinion by Co-Arbitrator Mr. Stephen Anway, who wrote separately “to make clear [his] view that it should not be presumed that this Tribunal has the power to police a party’s conduct in a different arbitration before a different tribunal or that, if such a power were available to us, it would be appropriate to exercise in this case.”

According to Anway, an attempt to silence “a party – particularly in a proceeding over which the tribunal issuing the order has no jurisdiction – should concern not only every stakeholder in the ISDS system, but every party concerned with the rule of law. One tribunal’s attempt to silence a party before another tribunal, when the claims are brought under different legal instruments, inexorably leads to due process concerns.”

However, in its Decision on Mozambique’s Request for Suspension, the PCA Tribunal held firm to its conviction that the proceedings before ICC Tribunal and the PCA Tribunal are based on different agreements and concern different causes of action. With reference to the duties of mutual respect and comity existing between tribunals, the PCA Tribunal rejected Mozambique’s suggestion that the ICC Tribunal’s injunction against Patel Engineering even applied to the proceedings before it.

In that regard, Mozambique had tried to argue that the ICC Tribunal’s injunction bound not only Patel Engineering but also the Tribunal, citing both the binding nature of the ICC Tribunal’s decisions on the parties and the res judicata effect of the ICC’s decisions in the international sphere. According to Mozambique, the continuation of proceedings before the PCA Tribunal:

  • would put Mozambique “in an untenable position” and “injure” its rights to have the underlying contractual disputes decided before the ICC Tribunal;
  • would violate Patel Engineering’s obligations under the arbitration agreement in the parties’ contract;
  • would result in the PCA Tribunal deciding “numerous contractual matters in assessing the BIT claims” and leave the ICC Tribunal with “nothing”; and
  • would disrespect the ICC Tribunal’s exclusive jurisdiction over the contractual claims.

However, the PCA Tribunal was not persuaded. “Conferring the ICC Injunction any other interpretation, including one which would have the effect of challenging the Tribunal’s kompetenz-kompetenz, would run contrary to the ICC Tribunal’s ratio and to reason.”

The Tribunal therefore rejected Mozambique’s Request for Suspension and ordered that the arbitration proceed as scheduled.

According to the PCA Tribunal’s most recent procedural order, the evidentiary hearings indeed proceed as scheduled in Oporto, Portugal and lead to the evidentiary part of the proceedings coming to a close. The parties now require the PCA Tribunal’s leave to file new substantive submissions or marshal new evidence.

The PCA Tribunal is composed of Juan Fernández-Armesto (Presiding Arbitrator), Guido Santiago Tawil (Arbitrator) and Hugo Perezcano Díaz (Arbitrator), while the ICC Tribunal is composed of Jan Kleinheisterkamp (President), Eduardo Silva Romero (Co-Arbitrator) and Stephen P. Anway (Co-Arbitrator).

The arbitration proceedings between Patel Engineering and Mozambique before the PCA Tribunal began in March 2020 based on allegations that Mozambique had failed to fulfil certain “fundamental legal obligations and assurances” under the India-Mozambique BIT and customary international law – upon which Patel Engineering based its decision to invest in a USD 3.115 billion project to the develop and operate a 500 km rail corridor terminating at a new port it would construct along the Zambezia coast.

Mozambique, on the other hand, alleges that Patel Engineering fraudulently concealed the Government of India’s decision to blacklist Patel Engineering in connection with a significant government infrastructure project – a fact that Mozambique claims would have brought “any and all” dealings between it and Patel Engineering to a swift end.

Mozambique also alleges that the “Memorandum of Interest” concluded between the parties contains an ICC arbitration clause “broad enough to encompass treaty claims” and that therefore the PCA Tribunal lacks jurisdiction over Patel Engineering’s claims.

Claimant is represented by CMS Cameron McKenna Nabarro Olswang LLP, Brick Court Chambers and Miranda & Asociados, whilst Respondent is represented by Dorsey & Whitney LLP.

 

 

 

 

URL: https://taobserver.com/news/324/pca-tribunal-refuses-to-yield-jurisdiction-over-indian-construction-firms-treaty-claims-against-mozambique--despite-icc-tribunals-injunction