Glencore International A.G., C. I. Prodeco S.A., and Sociedad Portuaria Puerto Nuevo S.A. v. Republic of Colombia (II)
ICSID · Investment (ICSID and treaty) · Colombia · 19 Apr 2024
Why it matters
This award is significant for its application of the FET standard to a state's failure to regulate, finding that Colombia's inaction in resolving a tariff dispute for a public access channel was arbitrary and discriminatory. It clarifies that a state's omission can breach investment treaty protections, and it addresses the calculation of damages where the claimant's own conduct and speculative assumptions reduce the award. The decision also discusses the prohibition of compound interest under Colombian law and the net-of-taxes principle.
Summary
Glencore International A.G., a Swiss company, and its Colombian subsidiaries C.I. Prodeco S.A. and Sociedad Portuaria Puerto Nuevo S.A. (PNSA) brought an ICSID arbitration against Colombia under the Switzerland-Colombia BIT. The dispute arose from PNSA's operation of a port terminal that required use of a public access channel (the 'Access Channel') for coal exports. PNSA had built and maintained the channel under a concession agreement, but another foreign-owned company (Cerrejón) used the same channel free of charge. Claimants argued that Colombia's failure to impose a tariff on Cerrejón or otherwise compensate PNSA violated the BIT's fair and equitable treatment (FET), most-favored-nation (MFN), and unreasonable/discriminatory measures provisions. The tribunal upheld jurisdiction, rejecting Colombia's objections that the claims were time-barred and manifestly without merit. On the merits, the tribunal found that Colombia's inaction was arbitrary and discriminatory, breaching the FET standard under Article 4(2). However, it dismissed the MFN and unreasonable/discriminatory measures claims. For damages, the tribunal awarded US$9.4 million, significantly less than the US$40.3 million claimed, due to speculative assumptions in Claimants' calculations and their own risk assumption. The tribunal ordered simple interest at 5.6% from the award date, citing Colombian law's prohibition on compound interest, and required the award to be net of Colombian taxes. Each party bore its own costs, and arbitration costs were split equally.
The detail
Parties: Glencore International A.G., C. I. Prodeco S.A., and Sociedad Portuaria Puerto Nuevo S.A. v. Republic of Colombia (II)
Case number: ICSID Case No. ARB/19/22
Outcome: Tribunal found Colombia breached fair and equitable treatment under Article 4(2) of the Switzerland-Colombia BIT by arbitrarily and discriminatorily failing to resolve the Access Channel tariff issue. Colombia ordered to pay US$9.4 million plus simple interest at 5.6% from award date, net of Colombian taxes.
Quantum: US$9.4 million
Applicable law: Agreement between the Republic of Colombia and the Swiss Confederation on the Promotion and Reciprocal Protection of Investments (2006); ICSID Convention; ICSID Arbitration Rules (2006); Colombian law.
Issues in play: The case involved the fair and equitable treatment (FET) standard under Article 4(2) of the Switzerland-Colombia BIT, specifically whether Colombia's failure to regulate tariffs for the use of a public access channel was arbitrary and discriminatory. The tribunal also considered most-favored-nation treatment and impairment by unreasonable/discriminatory measures.
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