South American Silver Limited v. Bolivia
PCA · Investment (ICSID and treaty) · Bolivia · 22 Nov 2018
Why it matters
This award is significant for its application of the clean hands doctrine in investment arbitration, which the tribunal rejected as a general principle of international law. It also clarified the standard for expropriation compensation, awarding only sunk costs rather than lost profits, and addressed the interaction between indigenous rights and investment protections.
Summary
South American Silver Limited (SAS), a Bermudian company, invested in a mining project in Bolivia through its local subsidiary CMMK, holding ten mining concessions. In 2012, following social conflicts with indigenous communities, Bolivia issued Supreme Decree No. 1308 reversing the concessions, citing public interest and the need to protect indigenous rights. SAS initiated arbitration under the UK-Bolivia BIT, claiming expropriation, unfair treatment, and discrimination. Bolivia objected to jurisdiction, arguing SAS was not the true owner of the concessions and that the investment was illegal due to lack of clean hands. The tribunal rejected these objections, finding SAS had a protected investment. On the merits, the tribunal held that the reversal was a direct expropriation but not for a public purpose? Actually, the tribunal found it was for a public purpose but without compensation, breaching Article 5. It dismissed other claims, including FET and full protection and security. For damages, the tribunal rejected SAS's claim for lost profits (over US$300 million) and instead awarded US$18.7 million, representing the actual investment costs, plus compound interest. The tribunal also apportioned costs, ordering SAS to bear 65% of arbitration costs and each party to bear its own legal costs. The award was issued by a majority; one arbitrator dissented on certain points.
The detail
Parties: South American Silver Limited v. Bolivia
Case number: PCA Case No. 2013-15
Outcome: The Tribunal found Bolivia breached Article 5 of the UK-Bolivia BIT by expropriating without compensation, and ordered Bolivia to pay US$18.7 million plus compound interest. All other claims and objections were dismissed.
Quantum: US$18.7 million
Applicable law: UK-Bolivia BIT (1988), UNCITRAL Rules (2010), international law
Issues in play: The case involved the collision between Bolivia's sovereign right to expropriate for public purpose and the investor's right to compensation under the BIT. The clean hands doctrine was also invoked by Bolivia but rejected.
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