Transglobal Green Energy, LLC and Transglobal Green Energy de Panama, S.A. v. The Republic of Panama
ICSID · Investment (ICSID and treaty) · Panama · 2 Jun 2016
Why it matters
This case is a landmark application of the abuse of process doctrine in investment arbitration. The Tribunal dismissed the claims because the U.S. investor acquired a Panamanian subsidiary after the dispute had already crystallized, solely to gain ICSID jurisdiction. The decision reinforces that tribunals will scrutinize corporate restructurings undertaken to access treaty protections, and it clarifies the timing of when a dispute arises for jurisdictional purposes. It also addresses cost-shifting and security for costs in abuse cases.
Summary
Transglobal Green Energy, LLC (TGGE), a U.S. company, and its Panamanian subsidiary, Transglobal Green Panama, S.A. (TGGE Panama), brought an ICSID claim against Panama under the U.S.-Panama BIT. The dispute arose from a hydro-electric concession called 'Bajo de Mina.' Panama objected to jurisdiction on several grounds, including that TGGE Panama was a domestic company and that the claim was an abuse of process because TGGE had acquired TGGE Panama after the dispute had already arisen, solely to gain access to ICSID arbitration. The Tribunal agreed with Panama's abuse of process objection. It found that the dispute had crystallized before TGGE acquired TGGE Panama in September 2011, as the parties were already in conflict over the concession. The Tribunal applied the test from Phoenix Action v. Czech Republic, which requires that a restructuring must not be undertaken to gain treaty protection after a dispute has arisen. Since TGGE's sole purpose in acquiring TGGE Panama was to bring an ICSID claim, the Tribunal dismissed the claims without needing to consider other objections. The Tribunal also ordered Claimants to pay all arbitration costs and Panama's legal fees of over US$2.2 million, finding that Claimants' conduct, including repeated suspension requests and failure to pay advances, warranted a full cost award. The decision underscores that tribunals will police abusive treaty shopping and that costs can be used to deter such behavior.
The detail
Parties: Transglobal Green Energy, LLC and Transglobal Green Energy de Panama, S.A. v. The Republic of Panama
Case number: ICSID Case No. ARB/13/28
Outcome: The Tribunal upheld Panama's objection of abuse of process, dismissing all claims. Claimants were ordered to pay the costs of the arbitration and Panama's legal fees and expenses of US$2,209,532.70, plus interest.
Quantum: US$2,209,532.70
Applicable law: Treaty between the United States of America and the Republic of Panama Concerning the Treatment and Protection of Investments (1982, amended 2000); ICSID Convention; ICSID Arbitration Rules
Issues in play: The central issue was whether Claimants' restructuring to gain ICSID jurisdiction constituted an abuse of process under international investment law, specifically the principle that treaty protection should not be acquired through manipulative corporate restructuring after a dispute has arisen.
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