RSM Production Corporation v. Grenada
ICSID · Investment (ICSID and treaty) · Grenada · 13 Mar 2009
Why it matters
This case is notable for its detailed analysis of the definition of 'investment' under the ICSID Convention, particularly in the context of a contractual dispute rather than a treaty-based investment claim. The tribunal upheld jurisdiction based on the parties' arbitration agreement, rejecting Grenada's challenge. It also clarified the application of force majeure and contractual termination principles in the oil and gas exploration context. The case demonstrates ICSID's willingness to hear contractual disputes where the parties have consented, even absent a bilateral investment treaty.
Summary
RSM Production Corporation, a US company, entered into an agreement with Grenada in 1996 to explore for oil and gas offshore. RSM was to apply for an exploration licence, but Grenada refused to grant it in 2004 and terminated the agreement in 2005. RSM initiated ICSID arbitration under the agreement's arbitration clause, claiming damages. Grenada challenged jurisdiction, arguing that the dispute did not arise out of an 'investment' under the ICSID Convention. The tribunal rejected the challenge, finding that the agreement constituted an investment because it involved a long-term commitment, substantial expenditure, and contribution to Grenada's economic development. On the merits, the tribunal held that Grenada's obligation to grant a licence had lapsed because RSM failed to submit a detailed work plan and pay fees within the required time. The force majeure clause did not excuse RSM's delays because RSM's efforts to assist Grenada in resolving a maritime boundary dispute with Venezuela and Trinidad & Tobago did not prevent it from performing its obligations. The tribunal also dismissed Grenada's counterclaims for misrepresentation and breach of contract. Each party bore its own costs and shared ICSID costs equally.
The detail
Parties: RSM Production Corporation v. Grenada
Case number: ICSID Case No. ARB/05/14
Outcome: The Tribunal dismissed all of RSM's substantive claims and most of Grenada's counterclaims, declared that Grenada did not breach the agreement, and ordered each party to bear its own costs and share ICSID costs equally.
Applicable law: Agreement of 4 July 1996; Petroleum and Natural Gas Deposits Act 1989 of Grenada; Laws of Grenada (including English common law); ICSID Convention; ICSID Arbitration Rules
Issues in play: The case involved the interpretation of contractual obligations under Grenadian law, particularly the force majeure clause and the expiry/termination of the agreement. The tribunal also addressed the definition of 'investment' under the ICSID Convention.
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