Victor Pey Casado and President Allende Foundation v. Republic of Chile (I)
ICSID · Investment (ICSID and treaty) · Chile · 8 May 2008
Why it matters
This case is a landmark ICSID decision on the temporal scope of BITs, establishing that a treaty's substantive protections do not apply retroactively to expropriation completed before its entry into force, but may apply to continuing violations such as denial of justice. It also addressed the fork-in-the-road clause, holding that a claim for denial of justice is not barred by prior local proceedings on different issues. The award clarified the definition of investment under the ICSID Convention, including indirect ownership through local companies.
Summary
Victor Pey Casado, a Spanish national, and the President Allende Foundation (Spain) brought an ICSID claim against Chile under the Spain-Chile BIT. The dispute arose from the confiscation of shares in two Chilean publishing companies (CPP S.A. and EPC Ltda) by the Chilean government after the 1973 coup. The expropriation was formalized by Decree No. 165 in 1975. In 1995, the claimants initiated local proceedings in Chile, which resulted in a 2000 decision (Decision No. 43) that awarded compensation to non-owners, effectively denying the claimants' property rights. The claimants then pursued ICSID arbitration in 1997. Chile raised multiple jurisdictional objections, including that Pey Casado was a Chilean national, that the investment was not protected under the BIT, and that the dispute was time-barred. The Tribunal upheld jurisdiction, finding that Pey Casado had Spanish nationality (having renounced Chilean nationality) and that the acquisition of shares constituted an investment. On the merits, the Tribunal held that the 1975 expropriation predated the BIT and could not be challenged under it. However, the 2000 Decision No. 43 and the subsequent denial of justice (failure to provide effective remedy) violated the BIT's fair and equitable treatment standard. The Tribunal awarded USD 10,132,690.18 in damages (based on the value of the companies at the time of the denial of justice) plus interest, and ordered Chile to pay USD 2,000,000 towards the claimants' legal costs and 3/4 of the arbitration costs. The award was later subject to annulment proceedings, but the annulment committee partially annulled the award on the issue of costs, reducing the contribution to USD 1,000,000.
The detail
Parties: Victor Pey Casado and President Allende Foundation v. Republic of Chile (I)
Case number: ICSID Case No. ARB/98/2
Outcome: The Tribunal found that Chile violated the fair and equitable treatment obligation and ordered Chile to pay USD 10,132,690.18 plus interest, and USD 2,000,000 in costs, with 3/4 of procedural costs borne by Chile.
Quantum: USD 10,132,690.18
Applicable law: ICSID Convention; Spain-Chile Bilateral Investment Treaty (BIT) signed 2 Oct 1991, entered into force 29 Mar 1994; international law
Issues in play: The case involved the temporal application of the BIT to expropriation occurring before its entry into force, and the definition of investment under the ICSID Convention and the BIT. The Tribunal distinguished between the expropriation (1975) and subsequent denial of justice (2000), applying the BIT only to the latter.
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