ICSID Tribunal sides with Chile, rejects claimant’s partial revision request in long running dispute over El Clarin newspaper

By Fernando Cabrera Diaz

January 13, 2010

An ICSID tribunal has rejected a partial revision request by Pey Casado and the Presidente Allende Foundation of an award rendered in their long-running dispute with Chile over the takeover and closure of the El Clarin newspaper during the early days of the Pinochet regime. This is the first time that an ICSID tribunal has issued a decision relating to a revision request.

As reported previously by Investment Treaty News, the dispute traces its roots to the 1973 coup which overthrew the socialist Chilean President Salvador Allende. Mr. Pey Casado claims he is the rightful owner of El Clarin which was taken over by the dictatorship of General Augusto Pinochet and expropriated by decrees issued under Law No. 77 of 1973, allegedly due to the paper’s sympathies to the Allende Government.

Mr. Pey Casado fled Chile in 1973 to return to his birthplace of Spain. He has assigned 90% of his claim against Chile to the Salvador Allende Foundation, a non-profit group established in 1990 to promote freedom of the press and democratic values in Spanish speaking nations.

The tribunal’s May 8, 2008 decision on the merits awarded the claimants just over US$ 10 million plus interest, a fraction of the US$ 400 million in damages they originally sought.  The claim was fundamentally based on the alleged expropriation of El Clarin in 1973.  However, the tribunal rejected the expropriation claim and instead found a violation of the fair and equitable treatment provisions of the 1994 Chile-Spain BIT.  Specifically, the tribunal found that Chile breached its obligations under the BIT when in April of 2000 it compensated third parties US$ 10 million for the expropriation of the newspaper, instead of the claimants.

Subsequently, the claimants requested revision of the tribunal’s award under ICSID Convention Article 51.  In particular, the claimants argued that they had become aware of new information for the tribunal’s consideration with respect to its expropriation claim.  The tribunal, however, ultimately disagreed, holding that the claimants could not meet the burden of proof in establishing that the information would have changed the outcome of the award.

At issue was a press release issued by Chile’s Consejo de Defensa del Estado (CDE) on February 22, 2008 referring to a Chilean Supreme Court decision awarding damages in the expropriation of a different newspaper, Horizonte Presse.  The claimants allege that they only became aware of CDE’s press release on May 18, 2008, ten days after the tribunal’s decision on the merits was handed down.

The claimants argued that CDE’s press release acknowledged that there was consistent Chilean Supreme Court jurisprudence that the confiscation decrees issued under Decree Law No. 77 of 1973 were null and void ab initio.* Based on that acknowledgement, the claimants reasserted that the government’s expropriation of El Clarin was a continuing illegal act under Chilean law that began in 1973 and continued until well after the Chile-Spain BIT came into force.  Accordingly, the claimants argued that they were entitled to significantly more than a $10 million damage award.

In analysing the revision request, the tribunal noted that under Article 51(1) the claimants were required to prove three things: (1) the discovery of a new fact; (2) that neither the claimants nor the tribunal knew of the fact at the time the award was rendered and that such lack of knowledge was not due to the claimants’ negligence; and (3) that the fact would have changed the outcome of the award.

On the first requirement, the tribunal was satisfied that the contents of the CDE’s press release, however characterized, constituted a fact.  As to whether it was a new fact, the tribunal expressed doubts that the claimant, Mr. Pey Casado, and/or his lawyers were not aware of the agreement between Horizonte Presse and the CDE because the settlement in that case was widely reported, and in particular was reported in the El Mercurio newspaper to which Mr. Pey Casado was a subscriber.

The tribunal, however, ultimately based its decision on a finding that the claimants did not meet the third requirement that the ‘new’ fact would have a decisive effect on the underlying award, because it agreed with Chile that CDE’s press release applied only to the Horizonte Presse case. Furthermore, given that legal precedent in and of itself is not binding under Chilean law in subsequent cases, even if the CDE’s press release referred to jurisprudence beyond the Horizonte Presse case, such jurisprudence would not be binding on other cases such as Mr. Pey Casado’s case.  Based on these findings the tribunal rejected the claimants’ request for partial revision.

The three-member tribunal was composed of Pierre Lalive of Switzerland (President), Mohammed Chemloul of Algeria and Emmanuel Gaillard of France. The long-running dispute was first registered in 1998 and has seen three arbitrators resign, and both sides complain of the “glacial pace” of the proceedings.

On July 6, 2009 ICSID registered an application by Chile for the institution of annulment proceedings relating to the tribunal’s May 8, 2008 award on the merits.

* ITN spoke to Mara Senn, one of the lawyers representing Chile at Arnold & Porter LLP, who said that the CDE was merely defending Chile’s settlement in the Horizonte Presse case and that the language cited by claimants did not refer to the jurisprudence of nullity but rather to the Supreme Court’s consistent position on the issue of damages.

Sources:

ITN Reporting

Revision Request, June 2, 2008, available at Investment Treaty Arbitration at: http://ita.law.uvic.ca/documents/PeyRevisionSPA.pdf

Revision Decision, November 18, 2009 available at investmnetclaims.com

Award on the Merits, May 8, 2008 available at investmentclaims.com

Previous ITN Reporting:

“World Bank President will rule on Chile’s effort to disqualify tribunal in ICSID case,” By Luke Eric Peterson and Damon Vis-Dunbar, Investment Treaty News, 14 December 2005, available at: http://www.IISD.org/pdf/2005/itn_dec14_2005.pdf