Investment Treaty Arbitration: East Timor

BIT Contracting Party or MIT

Substantive protections

Procedural rights

Germany (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Portugal (7 April 2004 )

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Kuwait (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Seat of the juridical person

The Portugal BIT provides that juridical persons with seat in, and incorporated according to, the laws of a Contracting Party are investors^{1 .}

The Germany BIT allows for entities without legal personality to be considered German investors^{2 .}

The Kuwait BIT provides for the Governments of the contracting States to be considered as investors 3 .

Permanent residence/nationality

All three BITs provide that individuals who have the nationality of a Contracting Party according to the laws of that Contracting Party are investors^{4 .}

The Germany BIT also states that individuals who have a passport issued by the competent authorities of a Contracting Party are nationals of that country, without prejudice to other mechanisms to establish nationality 5 .

Eligible assets

All BITs define ‘investment’ to include every kind of asset invested in a territory of a Contracting Party by a national of the other Contracting Party^{6 .}

Compliance with national law

The Portugal BIT includes compliance with the laws of the host party in the definition of ‘investment’^{7 .}

Illustrations of FET standard

All BITs simply provide that each Contracting Party shall ensure fair and equitable treatment to investments^{8 .}

Right to regulate for a public purpose

All BITs provide protection against expropriation and state that expropriation can only occur in accordance with the law, in the public interest and with swift compensation^{9 .}

The Portugal and Kuwait BITs also state that such measures can only occur on a non-discriminatory basis 10 .

The Kuwait BIT adds that those measures have to be taken in accordance with due process of law of general application 11 .

Indirect expropriation

Both BITs refer to measures tantamount to expropriation^{12 .}

Judicial or other review

The Portugal and Germany BITs recognise a right to investors to a judicial or other review of the expropriation^{13 .}

Compensation

All BITs require that the investor be provided with compensation equivalent to the market value of the expropriated asset before the date of expropriation or the time in which it was publicly known^{14 .}

The Kuwait BIT provides that the compensation shall be calculated in a freely convertible currency be chosen by the investor, on the basis of the prevailing market rate of exchange for that currency on the valuation date 15 .

Common exceptions to MFN treatment

All BITs expressly provide that the provision of ‘most favoured nation’ and/or ‘national’ treatment to an investment does not extend to the benefits of membership of a customs union, monetary union or free trade area, nor to taxation agreements and/or taxation legislation^{16 .}

Limitations

The protocol of the German BIT provides that a treatment given to an investor is not considered to be ‘less favourable’ if it is taken on the basis of public safety, public order, public health reasons, or public moral^{17 .}

Umbrella clause 19

The umbrella clause included in the Portugal BIT provides the following:

1. If in addition to this Agreement, the provisions of the domestic law of a Party or obligations under international law in force or hereafter between the two parties establish a system, general or special, conferring investments made by investors of the other Party a more favorable treatment than that provided for in this Agreement, the more favorable treatment will prevail.

2. Both parties shall comply with any obligations, not included in this Agreement , made in relation to investments made by investors of the other Party in its territory. ²⁰

Umbrella clause 19

The umbrella clause included in the Portugal BIT provides the following:

1. If in addition to this Agreement, the provisions of the domestic law of a Party or obligations under international law in force or hereafter between the two parties establish a system, general or special, conferring investments made by investors of the other Party a more favorable treatment than that provided for in this Agreement, the more favorable treatment will prevail.

2. Both parties shall comply with any obligations, not included in this Agreement , made in relation to investments made by investors of the other Party in its territory. ²⁰

Non-impairment

All BITs order that the contracting parties may not impair by unjustified, arbitrary or discriminatory measures the management, maintenance, use, fruition or sale of an investment 21 .

Compensation for damages arising from war or civil strife

All BITs provide that if an investment suffers damages arising from war, revolution or other form of civil strife, the investor deserves treatment that is not less favourable than that granted to investors from the contracting party or from any other third country 22 .

The Kuwait BIT adds that, without prejudice to the above paragraph, an investor of one Contracting State who, in any of the above-mentioned events, suffers a loss in the territory of the other Contracting State resulting from: (i) requisitioning of its investments or part thereof by its forces or authorities, or (ii) destruction of its investments or part thereof by its forces or authorities, which was not caused by combat action or was not required by necessity of the situation, shall be accorded restitution or compensation, which in either case shall be prompt, adequate and effective 23 .

Transfer rights

All BITs recognise the investor’s right to transfer any profits, compensation etc, arising from his investment outside of the host country in a freely convertible currency 24 .

Fork in the road

The Portugal BIT has a fork-in-the-road provision^{25 .}

ICSID arbitration

The option of ICSID Arbitration is provided for in the Portugal and Kuwait BITs and is the only available option in the Germany BIT^{26 .}

UNICTRAL arbitration

The option of UNCITRAL Arbitration is provided for in the Portugal and Kuwait BITs^{27 .}

Other dispute settlement procedures

The Kuwait BIT provides for the possibility of resolution in accordance with any applicable, agreed dispute-settlement procedures 28 .

The Kuwait BIT provides for the option of an arbitral tribunal constituted pursuant to the arbitration rules of any arbitral institution mutually agreed upon between the parties of the dispute 29 .

Internal remedies

The option of local courts is provided for in the Portugal BIT^{30 .}

The Kuwait BIT provides for the option of, prior to the institution of the arbitral proceeding or during the proceeding, seeking before the judicial or administrative tribunals of the Contracting State that is a party to the dispute interim injunctive relief for the preservation of its rights and interests, provided it does not include request for payment of any damages 31 .

Procedural rules

The BITs simply refer to the relevant arbitration rules (UNCITRAL, ICSID)^{32 .}

Applicable law

No express rule is provided for.

Government entity to which claim notices are sent

In the absence of an explicit provision in that regard, notice of disputes should be addressed to the President and the Prime-Minister.

Government department which manages investment treaty arbitrations

To be decided on a case by case basis.

Internal/external counsel

External counsel would probably be used with or without a formal public procurement process.

Washington Convention implementing legislation

Timor signed the convention on 23 July 2002 and it has been in force since 22 August 2002.

New York Convention implementing legislation

No.

Legislation governing non-ICSID arbitrations

No.

Compliance with adverse awards

There is no track record in this regard.

Attitude of government towards investment treaty arbitration

Neutral.

Attitude of local courts towards investment treaty arbitration

There is no track record in this regard.

Lei do Investimento Privado nº 14/2011, of 28 September 2011

No

Yes

National treatment; transfer rights

Yes

Yes (ICSID)

N/A.

Lighthouse Corporation Pty Ltd and Lighthouse Corporation Ltd, IBC v. Democratic Republic of Timor-Leste (ICSID Case No. ARB/15/2), proceedings regarding a fuel supply agreement. According to the information that is publicly available, the arbitration is based on the respective contract and Law 5/2005, of 7 July 2005 (Investment Law).³³