Vercara, LLC (formerly Security Services, LLC d/b/a Neustar Security Services (formerly Neustar, Inc.) v. Republic of Colombia
ICSID · Investment (ICSID and treaty) · Colombia · 20 Sep 2024
Why it matters
This award is significant for its detailed analysis of the scope of MFN clauses in investment treaties, particularly when used to import substantive protections from other treaties. The Tribunal emphasized that the intention of the contracting states, as expressed in the treaty's clear wording, governs the interpretation of MFN clauses. It also addressed jurisdictional issues including forum selection, waiver, abuse of process, and the standing of assignees of investment claims, providing guidance on these procedural hurdles.
Summary
The dispute arose from Colombia's decision not to extend a 2009 concession agreement for the administration of the .co domain name, which was held by .Co Internet S.A.S., a company owned and controlled by Neustar, Inc. (a US company). Instead, Colombia launched a public tender in 2020, which Neustar won but on less favorable terms. Neustar initiated ICSID arbitration under the US-Colombia Trade Promotion Agreement (TPA), alleging violations of fair and equitable treatment (FET), national treatment, most-favored-nation (MFN) treatment, and unreasonable measures (the latter imported from the Swiss-Colombia BIT via the MFN clause). Colombia raised seven jurisdictional objections, including that Neustar had made a definitive forum selection by bringing proceedings before Colombia's Council of State, that it failed to comply with pre-arbitration requirements, that it breached its waiver obligation, that it lacked standing, that it committed abuse of process, that the claims were contractual rather than treaty-based, and that Vercara (the successor entity) could not bring claims after a transfer of the investment. The Tribunal rejected six of these objections, finding it had jurisdiction over Neustar but not over Vercara because the transfer agreement did not assign the ICSID claim. On the merits, the Tribunal rejected all claims. It held that the FET standard under the TPA is limited to customary international law and does not include a prohibition on unreasonable measures. The Tribunal also rejected the attempt to import a broader standard via the MFN clause, finding that the contracting states intended the FET provision to be the exclusive standard. It further found that Colombia's decision to tender the concession was not arbitrary or unreasonable, as it had a contractual right not to renew and the commercial environment had changed. The Tribunal ordered each party to bear its own costs and share the arbitration costs equally.
The detail
Parties: Vercara, LLC (formerly Security Services, LLC d/b/a Neustar Security Services (formerly Neustar, Inc.) v. Republic of Colombia
Case number: ICSID Case No. ARB/20/7
Outcome: Tribunal found it had jurisdiction over Neustar but not over Vercara; rejected all claims on the merits; each party to bear its own costs and share arbitration costs equally.
Applicable law: Free Trade Agreement between Colombia and the United States (TPA), ICSID Convention, Swiss-Colombia BIT (for MFN claim)
Issues in play: The case involved the interplay between the fair and equitable treatment (FET) standard under the TPA (limited to customary international law) and the broader 'unreasonable measures' standard under the Swiss-Colombia BIT, which Claimant sought to import via the MFN clause. The Tribunal held that the MFN clause could not be used to bypass the more restrictive FET provision agreed by the TPA parties.
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