Author: Olivia Lu*
| Jurisdictions: International |
Topics: ICSID Expropriation Minimum Standard of Treatment Damages in Arbitration |
On September 9, 2021, an ICSID tribunal released its ruling in the arbitration proceeding between Eco Oro Minerals Corp. (Eco Oro) and the Republic of Colombia (Colombia). The tribunal held that Colombia’s prohibition of mining in the Santurbán Páramo did not constitute an unlawful expropriation but did violate the minimum standard of treatment (MST), thus entitling Eco Oro Minerals Corp. to damages.
I. Background
On Feburary 8, 2007, Eco Oro, a Canadian mining company, entered into a concession mining contract with the Colombian Institute of Geology and Mining in an area overlapping with the Santurbán Páramo, an environmentally vulnerable wetland with a major influence on natural water distribution throughout the country. In 2010, Colombia passed Law 1382 amending the 2001 Mining Code to expressly include páramo ecosystems as one of the areas where mining is banned. Although the Colombia Constitutional Court declared Law 1382 unconstitutional, in 2011, Law 1450 reenacted Law 1382’s mining ban. In 2015, Colombia passed Law 1753 to establish exceptions to the mining ban in the páramo, but the Colombian Constitutional Court later struck down the exception-granting provisions.[1]
In 2016, Eco Oro requested arbitration under the Canada-Colombia Free Trade Agreement (FTA).[2] Horacio A. Grigera Naon served as claimant’s appointed arbitrator. Philippe Sands served as respondent’s appointed arbitrator. Juliet Blanch chaired the tribunal.[3]
II. Expropriation
Blanch and Sands comprised a tribunal majority[4] holding that Eco Oro suffered a complete deprivation of the right to exploit as to amount to an indirect expropriation. However, the tribunal considered that Colombia’s mining ban in the páramo was a legitimate, good-faith, and non-discriminatory exercise of police powers under Annex 811(2) of the FTA.[5]
In his dissent, Naon argued that interpreting Annex 811(2) of the FTA requires a weighing and balancing exercise to determine the proportionality and reasonableness of the disputed host state measures. Because Colombia was unable to provide Eco Oro confirmation on the exact delimitations of the Santurbán Páramo’s borders, Naon deemed the mining ban disproportionate and incompatible with good faith. Additionally, Naon stated that the deprivation of Eco Oro’s mining rights was so severe as to constitute a rare circumstance which warrants compensation for expropriation.[6]
III. Minimum Standard of Treatment
Blanch and Naon comprised a tribunal majority holding that Colombia breached the MST.[7] The tribunal held that the FTA entitled Eco Oro to legitimate expectations that Colombia would ensure a predictable business environment, which were violated in the confusing regulatory environment arising from the Colombian Constitutional Court’s ruling on Law 1753 conflict with then-President Juan Manuel Santos’ support for Eco Oro’s mining project, as well as Colombia’s failure to provide a final delimitation of the Santurbán Páramo’s borders. The tribunal ruled that Colombia’s inability to coherently manage competing interests in protecting the páramo and obtaining mining royalties arbitrarily violated the minimum standard of treatment, as well as the obligation to provide fair and equitable treatment (FET).[8]
In his dissent, Sands argued that the tribunal conflated MST with FET in its analysis of Eco Oro’s legitimate expectations, as violations of legitimate expectations under MST standards require quasi-contractual obligations that are not present in this case. Furthermore, Sands argued that legal and regulatory stability has never been treated as part of MST. Because different arms of the same government can express conflicting priorities, Sands argued that mere inconsistency does not amount to a finding of arbitrariness.[9]
IV. Damages
Canada provided a non-disputing party submission explaining that if a host state measure qualifies as a legitimate policy objective under Article 2201(3) of the FTA, then the host state is not liable for violating the FTA and providing compensation. However, the tribunal held that if the contracting parties intended to eliminate compensatory liability, then they would have drafted the Article 2201(3) more similarly to Annex 811(2)(b) to explicitly stipulate that an environmental protection measure would not entitle a claimant to compensation.[10]
The tribunal noted that it did not have sufficient information to determine the amount of damages owed by Colombia to Eco Oro and required additional party submissions.[11] Eco Oro claimed damages of over $700 million.[12]
V. Conclusion
The tribunal’s rejection of Canada’s interpretation of its own FTA demonstrates that states desiring to carve out liability for public policy exceptions must be careful in using consistent and express language in treaty drafting to adequately communicate their intentions to tribunals in future disputes. Currently, there are two other arbitrations arising from Colombia’s mining ban in the Santurbán Páramo: Galway Gold v. Colombia[13] and Red Eagle v. Colombia[14]. While Eco Oro v. Colombia is not binding on other tribunals, the tribunal’s analysis may have implications for how other tribunals will interpret Colombia’s páramo mining ban.
* Olivia Lu is a Student Editor at ARIA and a 2L at Columbia Law School. She is also the J.D. President of the Columbia International Arbitration Association.
[1] Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/02/6, Decision on Jurisdiction, Liability, and Directions on Quantum (Sep. 9, 2021).
[2] Id.
[3] Lisa Bohmer, Analysis: Arbitrators in Eco Oro v. Colombia Environmental Mining Ban Dispute Disagree on Police Powers and Scope of Minimum Standard of Treatment in Canada-Colombia FTA; Majority Finds MST Breach, and Decides That General Exceptions Do Not Relieve Colombia From Its Duty to Pay Compensation, Inv. Arb. Rep. (Sep. 16, 2021), https://www-iareporter-com.prx.law.columbia.edu/articles/analysis-arbitrators-in-eco-oro-v-colombia-environmental-mining-ban-dispute-disagree-on-police-powers-and-scope-of-minimum-standard-of-treatment-in-canada-colombia-fta-majority-finds-mst-breach-an/.
[4] Id.
[5] Eco Oro, Decision on Jurisdiction, Liability, and Directions on Quantum, ¶ 642.
[6] Eco Oro, Partial Dissenting Opinion of Horacio A. Grigera Naon (Sep. 9, 2021), ¶ 27.
[7] Lisa Bohmer, Analysis: Arbitrators in Eco Oro v. Colombia Environmental Mining Ban Dispute Disagree on Police Powers and Scope of Minimum Standard of Treatment in Canada-Colombia FTA; Majority Finds MST Breach, and Decides That General Exceptions Do Not Relieve Colombia From Its Duty to Pay Compensation, Inv. Arb. Rep. (Sep. 16, 2021), https://www-iareporter-com.prx.law.columbia.edu/articles/analysis-arbitrators-in-eco-oro-v-colombia-environmental-mining-ban-dispute-disagree-on-police-powers-and-scope-of-minimum-standard-of-treatment-in-canada-colombia-fta-majority-finds-mst-breach-an/.
[8] Eco Oro, Decision on Jurisdiction, Liability, and Directions on Quantum, ¶ 821.
[9] Eco Oro, Partial Dissenting Opinion of Professor Philippe Sands QC (Sep. 9, 2021), ¶ 27.
[10] Eco Oro, Decision on Jurisdiction, Liability, and Directions on Quantum, ¶ 831, 836.
[11] Id.
[12] Caroline Simson, Colombia on the Hook in Eco Oro’s $700M Mining Claim, Law360 (Sep. 10, 2021, 7:56PM), https://www.law360.com/articles/1420632/colombia-on-the-hook-in-eco-oro-s-700m-mining-claim.
[13] Galway Gold’s Vetas License Unaffected by the Santurban Paramo, Yahoo (Dec. 24, 2014), https://www.yahoo.com/entertainment/galway-golds-vetas-license-unaffected-151900729.html.
[14] Caroline Simson, Mining Co. Looks to Arbitrate $31M Colombia Gold Row, Law360 (Mar. 28, 2018, 6:26PM), https://www.law360.com/articles/1027192/mining-co-looks-to-arbitrate-31m-colombian-gold-row.