How Perplexed is Determining Quantum? – Cambridge International Law Journal

The Resolution on Jurisdiction, Legal responsibility and Instructions on Quantum in Eco Oro v Colombia (Legal responsibility Resolution) was rendered by an ICSID tribunal on 09 September 2021, wherein Colombia was discovered to have breached the Minimal Commonplace of Remedy (MST) and the Truthful and Equitable Remedy (FET) below Article 805 of the Canada-Colombia Free Commerce Settlement (FTA) 2008 (FTA), whereas not committing expropriation following Article 811. Eco Oro’s declare was primarily based on its mining rights within the Angostura undertaking, an space that coincided with the Santurbán páramo, an ecosystem essential for preserving biodiversity due to its potential to soak up and regulate water. The Legal responsibility Resolution attracted in depth criticism for almost all discovering of the MST/FET breach, contemplating that the tribunal was deciphering a more recent technology funding treaty with categorical provisions offering safety for the atmosphere. It was recommended that the pursuits of the fossil gas business prevailed over the preservation of the susceptible ecosystem of the Páramos.

The a lot awaited Award on Damages (Quantum Resolution) has lately been rendered on 15 July 2024, granting no damages in favour of the investor. Eco Oro severely criticised the Quantum Resolution as ‘deeply flawed‘. In its opinion, the tribunal’s majority choice to not award any compensation straight contradicted its earlier remark as to Colombia’s MST/FET breach, albeit by a unique majority. Furthermore, it asserted that the tribunal did not objectively assess the proof produced by the Claimant.     

Aligning the Quantum Resolution with the discovering of MST/FET violation initially appears to be a frightening activity. This publish argues {that a} meticulous examination of the Quantum Resolution reveals sound reasoning primarily based on which no injury was awarded. The Claimant didn’t adduce proof to show its loss flowing from Colombia’s treaty breach. The State’s legit train of regulatory energy to protect its atmosphere was thought-about by the tribunal whereas evaluating the breach of the MST/FET provision. This publish will firstly talk about the affect of environmental concerns in funding arbitration, earlier than analysing the strategy adopted by the Eco Oro tribunal to evaluate the declare for damages. Then, the style of tribunal’s scrutiny into Eco Oro’s misplaced industrial alternative will probably be analysed to validate the arguments made on this publish.

Environmental Implications

Not one of the main features of Eco Oro v Colombia was determined unanimously, both within the legal responsibility or through the quantum section, manifesting the exceptionally contentious nature of the asymmetrical relationship between the investor’s authorized protections and the environmental safety. Whereas the bulk consisting of Juliet Blanch and Philippe Sands discovered no expropriation below Article 811 resulting from Colombia’s lawful train of police powers to protect its atmosphere (adopted by a Partial Dissent from Horacio Grigera Naón), one other majority composed of Blanch and Naón held that Colombia’s inconsistent and arbitrary conduct in delimiting the Páramo zone violated FTA’s MST/FET provision (accompanied by Sands’ Partial Dissent). Within the quantum stage, Blanch and Sands fashioned the bulk in deciding to not compensate the investor regardless of Colombia’s breach, whereas Naón rendered his dissent, illustrating the inherent complexity pertaining to environmental concerns in funding claims.

The conclusion as to the MST/FET breach by the tribunal within the Legal responsibility Resolution is controversial, as one other majority upheld Colombia’s regulatory energy to have been lawfully utilized bona fide and with out discrimination to protect its susceptible ecosystem. Colombia was discovered to have legitimately imposed absolutely the ban on the mining actions within the Páramos, pursuant to the police energy doctrine. Scholarships expressed the view that the Eco Oro tribunal dedicated error within the Legal responsibility Resolution by contemplating different grounds of legal responsibility, even after discovering the State measures to be regulatory. Sands was additionally deeply involved with this incongruity (Partial Dissent, para 16). This subject was satisfactorily addressed by the bulk in Pink Eagle v Colombia involving related impugned measures proscribing mining within the Páramos (this time Sands forming the bulk with Andrés Rigo Sureda).

The Pink Eagle tribunal dismissed the investor’s MST/FET declare because it was happy that Colombia acted for the legit function of defending atmosphere. In figuring out the MST/FET breach, the adjudicators discovered it pointless to query how the State selected to stability the competing pursuits, being the State’s proper to manage, on the one hand, and the investor’s rights below the funding treaty, on the opposite (para 308). This demonstrates the Pink Eagle tribunal’s willingness to grant in depth discretion to the host State respecting regulatory affairs engaged with environmental points.   

Figuring out Compensation

The FTA doesn’t present the standards for quantifying damages for the MST/FET breach. In funding arbitration, the rule emerged as a substantive precept requiring compensation to be paid for the MST/FET violation on the similar normal as in circumstances of expropriation (Sempra v Argentina, para 403). The Quantum Resolution doesn’t differentiate between computation of damages for the MST/FET breach and the State’s expropriatory conduct. Within the absence of any treaty steerage, the tribunal took recourse to the extremely influential secondary guidelines of the ILC Articles on State Duty (ILC Articles) which incorporates lack of income throughout the purview of compensation (Article 36(2)). When calculating damages, the tribunal famous that worth of the complete undertaking was obliterated by the implementation of lawful measures of Colombia, requiring it to particularly assess the actual loss brought on by the breach of Article 805 (paras 299, 316). Thus, evaluation of compensation below Article 805 was depending on the bulk findings as to Article 811 within the Legal responsibility Resolution (Quantum Resolution, para 316).

The tribunal noticed that breach of Article 805 was attributable to the totality of Colombia’s actions perpetuated by a sequence of measures, reasonably than any single act (paras 295, 301). It additional identified that the challenged measures had been adopted based on the precept of police energy making the Respondent State’s actions authorized, although Eco Oro may solely recuperate compensation brought on by internationally wrongful act. Damages arising out of lawful conduct usually are not recoverable (paras 299, 300-302). For these causes, the ensuing loss being the concession contract was not recoverable within the method as Eco Oro pleaded, regardless of its entitlement to damages (paras 298, 302). Though not expressly acknowledged, this line of reasoning resonates completely with Articles 2 and 15 of the ILC Articles.

Lack of Alternative

After rejecting the investor’s declare for damages to the complete undertaking, the tribunal recognized misplaced alternative with regard to Eco Oro’s chance of acquiring environmental licence as the one recoverable compensation (para 303). When the arbitrators really feel unable to have interaction within the exact calculation of misplaced income, it might select to award damages for lack of industrial alternative, being a sub-head of misplaced income. Nonetheless, the Eco Oro tribunal in the end declined to award damages for lack of alternative to the investor resulting from quite a lot of causes.

Firstly, the investor adduced skilled proof assessing the market valuation of the concession contract incorporating the Angostura Deposit in Colombia’s jap area, as an alternative of offering any proof to help the tribunal in figuring out the worth of the misplaced enterprise likelihood. Thus, Eco Oro ignored the tribunal’s request contained within the Legal responsibility Resolution (Quantum Resolution, paras 303, 316). Secondly, the Claimant produced no proof suggesting that the involved Angostura Deposit would fall outdoors the Páramo demarcation entitling it to an environmental licence (para 308). Lastly, the tribunal was unable to find out the worth for misplaced alternative as a result of Colombia may lawfully refuse to grant the environmental licence (para 305). Eco Oro was not awarded damages as a result of it couldn’t show that it could have secured an environmental license if Colombia had not violated the FTA.

The final reasoning coheres with Clayton and Bilcon v Canada the place the investor was awarded damages for lack of alternative relating to acquisition of regulatory approval, within the presence of internationally wrongful act by the Respondent State (para 396; additionally Concurring Opinion of Professor Bryan Schwartz, paras 9-13). Lack of alternative can solely be compensated when it’s calculable, which Eco Oro miserably did not show (Quantum Resolution, para 315). Assessing misplaced alternative is an especially tough activity (Gemplus v Mexico, para 13-99), as proof of misplaced likelihood requires a lot larger threshold. The difficult nature of computing misplaced alternative is sufficiently addressed within the funding jurisprudence (S.D. Myers v Canada, Second Partial Award, para 161), which pattern has been constantly adopted in Eco Oro v Colombia. Additional, the tribunal was unable to find out the loss because of the unavailability of the ultimate delineation of the Páramo, although Colombia’s accountability in failing to determine this zone can’t be disregarded (para 317).

Conclusion

Eco Oro v Colombia epitomises an distinctive occasion the place Colombia could also be ‘benefitting’, regardless of its personal treaty breach (para 317). Although Colombia violated the FTA’s MST/FET clause, the legitimate train of regulatory measures laid down the inspiration for efficiently defending Eco Oro’s funding declare for damages. The tribunal evaluated the implication of the breach below Article 805 within the mild of its evaluation of Article 811, illustrating the complicated interaction between completely different substantive obligations below the funding treaties. In line with the tribunal’s evaluation, solely lack of alternative was recoverable which couldn’t be decided because of the Claimant’s failure to show the quantum by adducing proof, even when particularly requested to take action. Finally, the Claimant couldn’t set up what quantifiable loss was brought on by Colombia’s breach.

Khan Khalid Adnan has lately accomplished his LLM in Litigation and Dispute Decision from UCL with distinction. He’s a Fellow of the Chartered Institute of Arbitrators (FCIArb), a Barrister in England and Wales, and an Advocate of the Supreme Courtroom of Bangladesh. At the moment, he serves because the Head of the Chamber at Khan Saifur Rahman & Associates, Dhaka, Bangladesh.