Gabriel Resources v Romania (ICSID Case No ARB/15/31)

Introduction

On March 8, 2024, the panel rendered its award in Gabriel Resources v Romania. The case concerned a mining dispute between a Jersey company, Gabriel (Jersey) Ltd (Gabriel Jersey), its Canadian parent company Gabriel Resources Ltd (Gabriel Canada) (together Gabriel), and Romania. Gabriel Jersey established the joint venture SC Roşia Montană Gold Corporation SA (RMGC) with Romania, which was intended to open and exploit a gold mine in Roşia Montană.

The claimants alleged that Romania had violated the FET, full protection and security (FPS), unreasonable or discriminatory measure, expropriation, and umbrella clauses of the UK–Romania and Canada–Romania BITs. On jurisdiction, the tribunal ruled that the Achmea judgment and subsequent EU member state declarations banning intra-EU ISDS do not affect ISDS tribunals’ jurisdiction over investors from Jersey. It accepted the existence of composite acts in the case at hand, preventing the claims from being time-barred. However, it did not find that Romania breached the BITs’ standards of treatment.

ECJ Achmea and the Bailiwick of Jersey

Romania stated that Gabriel Jersey should not be able to resort to the UK–Romania BIT’s arbitration clause since it is incompatible with the Achmea judgment. The state argued that Jersey courts’ previous referrals to the CJEU, Article 355(5)(c) of the TFEU, and Protocol No. 3 of the UK 1972 Accession Treaty show that the Bailiwick of Jersey can be equated to an EU member state for the purposes of the application and interpretation of EU law. This argument hinges on the fact that only member state courts may refer matters to the CJEU under Article 267 of the TFEU and that this referral power is central to the decision rendered in Achmea.

Additionally, it argued that the TFEU, to which Romania became a party in 2007, is a subsequent treaty in the sense of Article 30 (3) of the VCLT and that the interpretation of the UK–Romania BIT was agreed upon by the treaty parties by way of their declarations of January 15 and 16, 2019, which are interpretation agreements in the sense of Article 31(3)(a) of the VCLT.

The European Commission, intervening with an amicus brief, supported Romania’s arguments and opined that the UK–Romania BIT was terminated on January 1, 2007, and that this termination also deprived the tribunal of jurisdiction. With reference to Article 59 of the VCLT, it stated that the BIT was wholly or partially terminated by conclusion of and incompatibility with a later treaty—namely the TFEU as explained by a 2018 EU memorandum. Lastly, it posited that EU law should prevail over Article 7 of the BIT under conflict of laws rules.

Considering that Article 1(d)(i) of the UK–Romania BIT defines companies as “corporations, firms and associations incorporated or constituted under the law in force in any part of the United Kingdom or in any territory to which this Agreement is extended in accordance with the provisions of this Article,” it held that Gabriel Jersey is not a British company, but rather one from a territory to which the BIT has been extended. The extension occurred by means of an exchange of notes, in which parties agreed to extend the BIT’s applicability to Man, Guernsey, and Jersey. The tribunal then found that Jersey’s limited relationship with the EU, set out in Article 355(5)(c) of the TFEU and Protocol No 3 of the UK 1972 Accession Treaty, means that Jersey was never a part of the European Union.

The tribunal agreed with the claimant in finding that while Jersey courts had in the past referred matters to the CJEU, establishing the applicability of the Achmea decision would be speculative and that “[t]he extension of the CJEU’s ruling to a situation where the investor is from a non-Member State that applies EU law in a limited manner would require a separate and independent justification. It certainly does not follow logically from the CJEU’s reasoning in Achmea” (para. 632). It thus rejected Romania’s Achmea-based jurisdiction objection.

Issue and claims

The FET, FPS, unreasonable or discriminatory measures, and umbrella clause claims are all founded on the same alleged misconduct. Gabriel holds that Romania’s conduct toward RMGC forms a composite act that breaches BIT obligations. It submits that the government politicized the permitting process by, inter alia, delaying it by refusing to rectify errors and to confirm the endorsement of an environmental permit and by unnecessarily letting parliament decide on whether the project should continue by means of proposing an ad hoc law (the Special Law) which led to protests. The claimant concludes that while there was no single formal decision to treat the investment unlawfully, Romania’s conduct as a whole resulted in a repudiation of Gabriel’s rights.

Gabriel’s primary claim was that the government’s 2013 rejection of the project and termination of the RGMC joint venture was the culmination of a composite act that breached the aforementioned BIT standards of treatment on September 9, 2013. This composite act begins in 2011, when Romania started conditioning project decision making on political approval.

In its first alternative claim, Gabriel posited that if the composite act of the first claim is not accepted, the project’s political repudiation on September 9, 2013, should be seen as a stand-alone repudiation of the investor’s rights, equally breaching the aforementioned standards.

In the second alternative claim, Gabriel argued that the aforementioned standards have been breached by Romania’s conduct after the September 9, 2013, government announcement, by way of, most notably, the mining site’s inscription on the UNESCO World Heritage List, its designation as a national historical site, and the rejection of the Special Law.

Interpretation of the applicable standards

FET

Gabriel argued that Romania, through the aforementioned composite act, failed to accord it FET. It stated that the alleged coercive negotiations, maladministration, due process violations, and arbitrary legal framework modifications are FET breaches and that the customary minimum standard of treatment of aliens (MST) provision of the Canada–Romania BIT should be equated to the FET clause of the UK–Romania BIT. Otherwise, it states, the MFN clause of the first BIT should be used to import the latter’s FET clause.

The respondent holds that the MST clause should be interpreted according to the Neer standard, meaning that only egregious conduct constitutes a breach and that the MFN clause cannot be used to import the UK–Romania BIT’s FET clause.

Referencing Waste Management and Mondev International, the tribunal ruled that the two BITs’ FET standards are identical. The test is

whether Romania has acted in an arbitrary, discriminatory or inconsistent manner with respect to Claimants’ investments; whether it has denied due process to Claimants; whether it has acted inconsistently with specific representations made to Claimants; and finally whether it or its officials have abused their power in doing so. (para. 858)

FPS

Gabriel held that the BITs’ FPS standard is one of due diligence. Romania disagreed, claiming that the standard is one of protection and security from harm caused by third parties.

The tribunal agreed with Romania and found that the test for both BITs is “whether Respondent failed to provide physical protection and security to Claimants and/or their investments in respect of the acts of third parties” (para. 875).

Unreasonable or discriminatory measures

Gabriel argued that Romania’s unreasonable or discriminatory measures constituted a breach of the UK–Romania BIT’s non-impairment standard and of the Canada–Romania BIT’s national treatment standard. It held that the two standards are equivalent in their prohibition of discriminatory treatment but nevertheless chose to import the non-impairment standard through the Canada–Romania BIT’s MFN clause.

In particular, the claimant argued that the stark contrast between the hundreds of exploration permits and the permissive attitude toward the Certej project and the Roşia Poieni mine on the one hand and the politicized negative treatment of RMGC’s project on the other demonstrates that the standard has been breached.

Romania stated that Gabriel had not identified the measure that allegedly breaches the national treatment or non-impairment standard, that the alleged breach of the standard with regard to the Bucium perimeter exploitation (the details of which are largely redacted in the published award) had ended in is time-barred, and otherwise referred to its arguments against the establishment of an FET breach.

The tribunal ruled that both BITs’ provisions prohibit unreasonable or discriminatory measures and that the test is equivalent to that for FET, with the addition of the question of whether the claimant was treated differently from other investors in similar circumstances.

Umbrella clause

The claimant argued that Romania did not observe the obligations it entered into with regard to the joint ventures, leading to a breach of the umbrella clause of the UK–Romania BIT. Additionally, it imports the clause into the Canada–Romania BIT using the MFN clause. The respondent submits that there was no investment contract subject to the umbrella clause between Romania and Gabriel.

The tribunal found that the umbrella clause applies to the investment agreement between Gabriel Jersey and Romania. It found it unnecessary to decide on whether the clause could be imported using MFN treatment.

Application to the facts

On the primary claim, the tribunal found that there was no improper linking of the permitting process with the renegotiation of the economics of the project, that Romania’s treatment of the permitting process was not wrongful, that there is no evidence of Romania’s abuse of process with regard to the permitting process, the mining project or the Special Law, and that Romania did not mishandle the Bucium exploration licence applications.

On the first alternative claim, the tribunal found that Romania did not abuse its powers or conspire to undermine Gabriel’s investments in the process that culminated in the rejection of the Special Law. It found that politicians may speak freely with the media and that “what is more important is how the State in its various manifestations actually treated the Project.” Thus, it denied the claim.

On the second alternative claim, the tribunal found that the state’s conduct after the Special Law’s rejection in parliament, namely declaring Roşia Montană to be a historical monument where mining is prohibited, registering it as a UNESCO World Heritage Site, and the state’s conduct relating to the Bucium exploration licence applications and historical site designation meetings in 2014–2015, was not wrongful. It found the presentation of the claim to be brief, if not incomplete, and that the claimants did not show how the events were a result of the Special Law’s rejection or how the events actually violated treaty provisions. Nevertheless, the tribunal analyzed the matter and found that the respondent did not act in bad faith after the Special Law’s rejection, that there was no wrongdoing in the designation of Roşia Montană as a historical monument, and that the UNESCO listing cannot be seen as a political act aimed at the project’s derailment. It thus denied the claim.

Conclusion

While the tribunal came to a majority decision finding that Romania had not infringed upon any BIT treatment standards, Professor Grigera Naón dissented and stated that the rejection of the Special Law and Romania’s continuing conduct culminating in the denial of the environmental permit breached both treaties’ FET standard.

The tribunal’s majority has shown a willingness to grant leeway regarding the political complexities of decision making in joint venture investments. While the tribunal emphasized that it accepts the existence of composite acts, it nevertheless embarked on an analysis of the minutiae that rendered the components of the composite act legal. In the author’s view, this makes the embrace of composite acts futile on the whole and artificial when it is applied to questions of ratione temporis jurisdiction only. Had the tribunal opted to analyze the composite act as a whole on the facts, the case may have followed a path closer to the familiar police powers doctrine. The tribunal’s decision to refuse the application of the Achmea decision to Channel Islands matters will also doubtlessly be the object of future discussion.

Lastly, it should be noted that this saga has not yet ended; Gabriel Resources has initiated action for annulment, for which an ICSID ad hoc committee was constituted on October 8, 2024,^[1] and, on August 5, 2024, it announced that it had served a new notice of dispute concerning Romania’s refusal to renew the mining company’s operating licence.^[2]

Note

The tribunal was composed of Horacio A. Grigera Naón (dissenting, Argentine national, appointed by claimant), Zachery Douglas KC (Australian and Swiss national, appointed by respondent), and Pierre Tercier (Swiss national, president).

Author

Domenico Ricciuto, LLM is an associate with the arbitration practice of De Brauw Blackstone Westbroek in Amsterdam, the Netherlands.

^[1] Gabriel Resources Ltd. (2024, July 8). Corporate update (Press release). Accesswire. https://www.accesswire.com/886063/gabriel-resources-ltd-corporate-update

^[2] Brouwer, E. (2024, August 6). Gabriel Resources submits new notice of dispute to Romania over state’s refusal to extend mining license at heart of previous arbitration between the parties. IAReporter. https://www.iareporter.com/articles/gabriel-resources-submits-new-notice-of-dispute-to-romania-over-states-refusal-to-extend-mining-license-at-heart-of-previous-arbitration-between-the-parties/