Interconexión Eléctrica S.A. E.S.P. v. Republic of Chile
ICSID · Investment (ICSID and treaty) · Chile · 13 Dec 2024
Why it matters
This award is significant for its detailed analysis of the fair and equitable treatment standard under the Chile-Colombia FTA, confirming that the standard requires a high threshold of egregious conduct. It also addresses the concept of composite acts and the application of prescription periods in investment treaty claims. The dissenting opinion highlights disagreements on the standard of review and the characterization of state conduct as arbitrary.
Summary
The dispute arose from a public tender for the construction of a high-voltage transmission line (Cardones-Polpaico) in Chile. The claimant, Interconexión Eléctrica S.A. E.S.P. (ISA), won the tender and undertook the project through its subsidiaries. The project faced significant delays due to environmental permitting, social opposition, and difficulties obtaining easements. ISA sought extensions of the deadline for commercial operation, which were partially granted by the Chilean authorities. However, the Ministry of Energy rejected ISA's request to excuse delays caused by third-party vandalism and social unrest, applying Chilean civil code provisions on force majeure and debtor default. ISA initiated ICSID arbitration under the Chile-Colombia FTA, alleging that Chile violated the fair and equitable treatment standard through a series of arbitrary and unreasonable decisions. The Tribunal, by majority, dismissed all claims, finding that the state's actions did not meet the high threshold of manifest arbitrariness required under customary international law. The Tribunal also held that many claims were time-barred under the treaty's three-year prescription period. The dissenting arbitrator argued that the Ministry's reasoning was arbitrary and that the majority applied an overly stringent standard.
The detail
Parties: Interconexión Eléctrica S.A. E.S.P. v. Republic of Chile
Case number: ICSID Case No. ARB/21/27
Outcome: The Tribunal dismissed all claims. No damages awarded.
Applicable law: Chile-Colombia Free Trade Agreement (FTA), specifically Article 9.4 (Fair and Equitable Treatment), and customary international law.
Issues in play: The case involved the standard of fair and equitable treatment under customary international law versus the investor's expectations of stability and predictability. The Tribunal applied a high threshold requiring manifest arbitrariness or gross unfairness, rejecting the investor's claim that a series of administrative decisions amounted to a breach.
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