Cervin Investissements S.A. and Rhone Investissements S.A. v. Republic of Costa Rica
ICSID · Investment (ICSID and treaty) · Costa Rica · 7 Mar 2017
Why it matters
This case is significant for its detailed analysis of the fair and equitable treatment standard in the context of tariff regulation by a state utility regulator. The Tribunal clarified that while regulatory changes may breach FET if they are arbitrary or destroy legitimate expectations, a single procedural delay (here, in resolving an administrative appeal) can constitute a violation even if no damages result. The decision underscores that not every regulatory misstep amounts to a compensable breach, and that claimants bear a heavy burden to prove causation of damages.
Summary
The dispute arose from tariff-setting decisions by Costa Rica's public services regulator (ARESEP) for liquefied petroleum gas (LPG) distribution. The claimants, Swiss companies that owned Costa Rican LPG distributors Tropigás and GNZ, alleged that ARESEP's tariff resolutions from 2010 to 2014 violated the fair and equitable treatment (FET) standard under the Switzerland-Costa Rica BIT. They claimed that ARESEP arbitrarily reduced their allowed returns, changed the regulatory methodology without notice, and delayed administrative appeals. The Tribunal first upheld jurisdiction over most claims but declined jurisdiction over the 2014 tariff resolution as it was not ripe. On the merits, the Tribunal applied the FET standard as interpreted in previous ICSID cases, requiring stability, transparency, and protection of legitimate expectations. It found that Costa Rica did not repudiate the regulatory framework, nor act arbitrarily or in bad faith, except for one specific instance: the excessive delay (over 14 months) in resolving GNZ's administrative appeal against the first 2011 tariff resolution. This delay violated FET. However, the claimants failed to prove that this delay caused any financial loss, so no damages were awarded. All other claims were dismissed. The Tribunal ordered the claimants to pay 50% of Costa Rica's arbitration costs and legal fees, totaling US$ 1,045,487.24, plus interest. The award is notable for its thorough examination of regulatory conduct and the high threshold for establishing FET violations in tariff-setting contexts.
The detail
Parties: Cervin Investissements S.A. and Rhone Investissements S.A. v. Republic of Costa Rica
Case number: ICSID Case No. ARB/13/2
Outcome: The Tribunal found that Costa Rica violated the fair and equitable treatment standard under the Switzerland-Costa Rica BIT by excessively delaying the resolution of an administrative appeal, but awarded no damages because the claimants failed to prove causation. All other claims were dismissed. The claimants were ordered to pay US$ 1,045,487.24 in costs.
Applicable law: Switzerland-Costa Rica Bilateral Investment Treaty (BIT) of 2000; ICSID Convention; Costa Rican law (ARESEP regulations)
Issues in play: The case involved the fair and equitable treatment (FET) standard under the BIT versus Costa Rica's regulatory autonomy in setting liquefied petroleum gas (LPG) tariffs. The claimants argued that the regulator's tariff decisions were arbitrary and violated their legitimate expectations, while Costa Rica defended its regulatory discretion.
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