Beijing Shougang and others v. Mongolia
PCA · Investment (ICSID and treaty) · Mongolia · 30 Jun 2017
Why it matters
This case is a landmark interpretation of a narrowly drafted BIT arbitration clause. The Tribunal held that where the treaty only grants jurisdiction over the amount of compensation for expropriation, it cannot decide on the existence or legality of the expropriation. This decision clarifies the limits of investor-state arbitration under older Chinese BITs and emphasizes the importance of the treaty text.
Summary
Three Chinese state-owned enterprises (the Claimants) invested in a Mongolian mining company, Tumurtei Khuder LLC, which held a mining license (939A License) over the Tumurtei iron ore deposit. The Claimants alleged that Mongolia unlawfully revoked the license and took other measures that amounted to expropriation without compensation, violating the 1991 China-Mongolia BIT. Mongolia objected to jurisdiction, arguing that Article 8(3) of the BIT only allowed arbitration over the amount of compensation for expropriation, not the expropriation itself. The Tribunal, after a detailed analysis of the treaty text, context, and negotiating history, agreed with Mongolia. It found that the BIT's arbitration clause was an exception to the primary dispute resolution methods (negotiation and local courts) and must be interpreted narrowly. The Tribunal upheld jurisdiction over the parties (ratione personae) but declined jurisdiction over the subject matter (ratione materiae) because the dispute concerned the legality of the expropriation, not just the amount of compensation. Consequently, the Tribunal dismissed all claims and counterclaims. The case is significant for its strict interpretation of BIT arbitration clauses and its impact on investor-state disputes under similar treaties.
The detail
Parties: Beijing Shougang and others v. Mongolia
Case number: PCA Case No. 2010-20
Outcome: The Tribunal upheld its jurisdiction ratione personae but declined jurisdiction ratione materiae, finding that the dispute over expropriation (except the amount of compensation) was not within the scope of the arbitration clause. The Tribunal dismissed all claims and counterclaims.
Applicable law: Agreement between the Government of the People's Republic of China and the Government of Mongolia Concerning the Encouragement and Reciprocal Protection of Investments (1991), Mongolian law (including Minerals Laws), and international law.
Issues in play: The key issue was the interpretation of Article 8(3) of the China-Mongolia BIT, which limited arbitration to disputes involving the amount of compensation for expropriation. The Tribunal had to decide whether it had jurisdiction over the legality of the expropriation itself or only the quantum.
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