CYIL vol. 10 (2019)

CYIL 10 ȍ2019Ȏ IN SEARCH OF THE PERFECT DENIAL OF BENEFITS CLAUSE Another approach was employed by the Pac Rim tribunal considering the Central America Free Trade Agreement (“CAFTA”) provision, concluding that since no express time limit is stated in the treaty, the denial may be exercised at any time before the time limit to present jurisdictional objections elapses. 23 Such interpretation is more reasonable especially since the ownership structure is quickly variable and any prior notifications and denials do not offer much effect as the owner of the investment may change the very next day. It is more logical to observe the ownership structure once the arbitration is commenced and ask whether the control criterions are fulfilled at that moment. Some of the treaties also specifically set additional guidance as to the application, especially the need of previous notifications and consultations. 24 Those two obligations are aimed at different addressees. The notification is made towards the investor while consultations should take place between the concerned parties to the treaty, i.e. states. In the Pac Rim proceedings, the claimant raised the issue of necessary notification, or more precisely, of its timing. It claimed that the respondent deliberately prolonged its notification to the US (as the other concerned contracting state) and thus exercised its right too late. To be exact, the notification was made on 1 March 2010, the clause was exercised towards the claimant on 3 August 2010, but the notice of intent to arbitrate dated back to 9 December 2008. 25 The tribunal dismissed those objections on the grounds that: (i) given that this was the first denial of benefits exercised by any CAFTA member, it required particular attention, careful consideration and, inevitably, also time on the side of the respondent, 26 and (ii) according to the ISCID rules under which the arbitration was held, any jurisdictional objection should have been made at the time limit fixed for the filing of the counter-memorial at the latest, which was complied with. 27 Some of the other treaties contain further guidance on the process of invocation in order to prevent ambiguity. For example, the 2015 India Model BIT, specifically states that “ [a] Party may at any time, including after the institution of arbitration proceedings […] deny the benefits of this Treaty […] ” 28 Such an approach is advisable as the tribunal is then not forced to second-guess what effects the parties intended to give to the clause. After the denial is invoked, it is necessary to ask what effects it brings, whether only prospective or retrospective. The conclusions on the prospective effect of the denial by some tribunals were based mainly upon the “object and purpose” interpretation of the treaty, arguing that since the aim of the treaty is the “long term cooperation”, retrospective denial would operate in contradiction to the principle and would deprive the investor of its legitimate expectations, as was held again in the Plama decision. 29 While examining the Plama decision, aforementioned requirements is not static and can change from one day to the next, which means that it is only when a dispute arises that the respondent State will be able to assess whether such requirements are met and decide whether it will deny the benefits of the treaty in respect of that particular dispute . ” see Rurelec v. Bolivia , Award para. 379. 23 Pac Rim v. El Salvador , Decision on the Respondent’s Jurisdictional Objections para. 4.83. 24 CAFTA 10:12 sec. 2. 27 Pac Rim v. El Salvador , Decision on the Respondent’s Jurisdictional Objections, para. 4.85, similar conclusion was reached by the Ullysseas tribunal which operated under the UNCITRAL rules, see Ullyseas v. Ecuador , Interim Award, para. 172. 28 India Model BIT, Article 35. 29 e.g. Plama v. Bulgaria , Decision on Jurisdiction paras. 161 and 162. 25 Ibid, para. 4.38. 26 Ibid, para. 4.84.

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