Glencore International A.G. and C.I. Prodeco S.A. v. Republic of Colombia (I)
ICSID · Investment (ICSID and treaty) · Colombia · 27 Aug 2019
Why it matters
This award is significant for its detailed analysis of the fair and equitable treatment standard in the context of fiscal liability proceedings by state audit bodies. It clarifies that state entities, including comptrollers, must act reasonably and proportionately, and that their decisions can breach investment treaty protections if they are arbitrary or based on flawed methodologies. The case also addresses the umbrella clause and fork-in-the-road provisions, providing guidance on their interpretation.
Summary
Glencore International A.G. and C.I. Prodeco S.A., Swiss and Colombian companies respectively, invested in a coal mining project in Colombia through a mining contract with the state. In 2010, they negotiated an eighth amendment to the contract, which was later challenged by Colombia's Comptroller General (Contraloría) in a fiscal liability proceeding. The Contraloría found that the amendment caused financial harm to the state and ordered Prodeco to pay COP 60 billion (about USD 25 million). Prodeco paid the amount under protest and initiated ICSID arbitration under the Switzerland-Colombia Bilateral Investment Treaty (BIT). The Tribunal had to decide several jurisdictional objections, including allegations of corruption and bad faith, a fork-in-the-road clause, and an umbrella clause. It dismissed most objections but upheld the umbrella clause objection, limiting its jurisdiction to claims under the BIT's substantive protections. On the merits, the Tribunal found that the Contraloría's calculation of damages was arbitrary and unreasonable, violating the fair and equitable treatment standard and the prohibition on unreasonable measures. The Tribunal ordered Colombia to restitute the amount paid plus interest, and to indemnify Prodeco for any Colombian taxes on the award. The decision underscores that state audit bodies must adhere to principles of reasonableness and due process, and that their actions can give rise to international responsibility.
The detail
Parties: Glencore International A.G. and C.I. Prodeco S.A. v. Republic of Colombia (I)
Case number: ICSID Case No. ARB/16/6
Outcome: The Tribunal found Colombia breached the fair and equitable treatment standard and the prohibition on unreasonable measures under the Switzerland-Colombia BIT, and ordered Colombia to restitute COP 60 billion (approx. USD 19.1 million) plus interest to Prodeco.
Quantum: USD 19,100,000
Applicable law: Switzerland-Colombia BIT (2006); ICSID Convention; International law
Issues in play: The case involved a conflict between Colombia's sovereign right to conduct fiscal audits and its treaty obligations to provide fair and equitable treatment and protect investments. The Tribunal had to determine whether the Contraloría's calculation of damages in a fiscal liability proceeding was arbitrary and unreasonable.
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