Investment Treaty Arbitration: Zimbabwe

Austria (not in force)¹

Belgium-Luxembourg (not in force)²

Botswana (2012)³

China (1 March 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Expropriation only

Croatia (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Czech Republic (not in force)

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Denmark (2 February 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Egypt (not in force)⁴

France (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Germany (14 April 2000)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Ghana (not in force)⁵

India (not in force)⁶

Indonesia (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Islamic Republic of Iran (not in force)⁷

Italy (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Jamaica (not in force)⁸

Kuwait (not in force)⁹

Malawi (not in force)¹⁰

Malaysia (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Mauritius (not in force)

Yes

Yes

No

Yes

Yes

6 months

Yes

Expropriation only

Mozambique (not in force)¹¹

Netherlands (1 May 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Portugal (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Russian Federation (not in force)¹²

Serbia (22 July 1997) 13

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Singapore (not in force)¹⁴

South Africa (11 May 2010)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Sweden (not in force)

Yes

Yes

No

Yes

Yes

6 months

No

Yes

Switzerland (9 February 2001)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Tanzania (not in force)¹⁵

Thailand (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Uganda (not in force)¹⁶

United Kingdom (not in force)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes

Investment Agreement for the COMESA^{17 Common Investment Area (not in force)}

Yes

Yes

No

Yes

No

6 months

Yes

Yes

SADC^{18 Protocol on Finance and Investment, Annex 1 (16 April 201019 )}

Yes

Yes

No

Yes

No

6 months

No

Yes

N/A

Natural persons

In respect of natural persons, Zimbabwe’s BITs normally define ‘investor’ to include citizens or nationals of a Contracting Party.

Permanent residents

In the Denmark and Malaysia BITs, the definition of ‘investor’ includes any natural person who permanently resides in a Contracting Party.

Legal persons

Zimbabwe’s BITs include differing definitions for investors that are legal persons:

Eight BITs only require incorporation in a Contracting Party (the Denmark, Indonesia, Malaysia, Mauritius, Netherlands, South Africa, Thailand and United Kingdom BITs).

Six BITs provide that legal persons must be incorporated and either have their ‘seat’ (Czech Republic and Switzerland BITs), ‘head office’ (France and Italy BITs), ‘headquarters’ (Serbia BIT) or ‘principal office’ (Portugal BIT) in the territory of a Contracting Party.

The China BIT requires that a Chinese legal person must be established and domiciled in Chinese territory. It also requires that a Zimbabwean legal person must be incorporated and have their principal place of business in Zimbabwe.

The Croatia BIT requires that the legal person must be incorporated, have its seat and perform real business activity in the same Contracting Party that is purportedly its home state.

The Germany BIT requires that a German legal person must be a juridical person, company or association with its seat in German territory. It also requires that a Zimbabwean legal person must be incorporated and have their principal place of business in Zimbabwe.

The Sweden BIT requires that the legal person’s ‘seat’ must be in a Contracting Party.

Legal persons under direct or indirect control of investors of the contracting party

Several of Zimbabwe’s BITs apply to legal persons controlled by investors of one of the Contracting Parties, irrespective of where that entity may be. For example:

The France and Netherlands BITs provide that an ‘investor’ may be a legal person controlled, ‘directly or indirectly’, by nationals of the Contracting Party.

The Italy BIT extends to all ‘foreign subsidiaries and affiliates and branches, controlled in anyway’ by natural and legal persons.

The Sweden BIT covers legal persons in a third state so long as a natural or legal person in either Contracting Party has a ‘predominate interest’ in them.

The Switzerland BIT refers to ‘effective control’.

However, none of Zimbabwe’s BITs define ‘control’.

Eligible assets

All of Zimbabwe’s publicly available BITs provide that an ‘investment’ can take the form of any kind of asset, and all provide a non-exhaustive list of assets that would be covered. The definition of ‘investment’ used in nine of Zimbabwe’s BITs also requires that the asset was ‘invested’ (the China, Czech Republic, Indonesia, Italy, Serbia, Sweden and Thailand BITs), ‘established or acquired’ (Croatia BIT), or ‘made’ (Portugal BIT) in the host state by the foreign investor.

Indirect controls of assets

The Sweden BIT expressly includes in the definition of ‘investment’ assets owned or controlled indirectly by a protected investor.

Commencement of coverage

The majority of Zimbabwe’s BITs stipulate that they protect investments made before the agreement entered into force. There are five exceptions:

The Croatia BIT only applies (expressly) to investments made before its entry into force, and explicitly excludes its application to ‘disputes that may have arisen or any claim, which was settled before its entry into force’.

Although the Czech Republic BIT applies to investments made before or after its entry into force, it explicitly does not apply to ‘claims arising out of events which occurred, or to claims which had been settled, prior to its entry into force’.

The Portugal and Thailand BITs only apply to investments made after their entry into force.

Although the South Africa BIT applies to investments made before or after its entry into force, it explicitly does not apply to ‘any property right or interest compulsorily acquired by either Party in its own territory before the entry into force of this Agreement’.

Accordance with local laws

The majority of Zimbabwe’s BITs explicitly require investments to have been made in accordance with the other Contracting Party’s applicable laws.

Admission / approval of an investment

Four of Zimbabwe’s BITs stipulate that investments must be ‘specifically approved’ by the ‘competent authorities’ of the host state (the Germany, Mauritius, Portugal and Thailand BITs), but in some instances, this requirement is removed by a protocol annexed to the treaty. Moreover, the Mauritius BIT specifies that the specific approval must be in writing and expressly indicates that the host state must have designated which authorities are competent; and the Portugal BIT expressly provides that such approval is only necessary where it is required under the host state’s laws.

Illustration of the FET standard

The majority of Zimbabwe’s BITs provide that each Contracting Party shall accord fair and equitable treatment to investments. Most simply mandate that ‘[e]ach Contracting Party shall ensure fair and equitable treatment of the investments of nationals of the other Contracting Party’ (see e.g. the Netherlands BIT) and typically link this requirement to the full protection and security standard. More exceptionally: (i) in the Czech Republic, Denmark and Malaysia BITs, the standard is also included within the MFN provision; and (ii) the France BIT expressly lists several examples of ‘de jure and de facto impediments to fair and equitable treatment’.

Link with customary international law

Zimbabwe’s BITs generally do not link the FET standard with customary international law.

There are exceptions: the Croatia BIT refers to ‘fair and equitable treatment in accordance with international law’; and the France BIT refers to ‘fair and equitable treatment in accordance with the principles of International Law’.

Right to regulate for a public purpose

One of the conditions permitting expropriation included in Zimbabwe’s BITs is the requirement that the expropriation be for a ‘public purpose’ or in the ‘public interest’. Exceptionally, the Switzerland and United Kingdom BITs explicitly condition this as requiring the public purpose to be ‘related to the internal needs of [the expropriating Party]’. Further, some of Zimbabwe’s BITs appear to provide alternatives to the public purpose requirement: for example, the Indonesia and Malaysia BITs provide that the expropriation can be for ‘a lawful purpose or public purpose’ and the Italy BIT provides that the expropriation can be for ‘public purposes or national interest’.

Expropriation in accordance with the ‘due process of law’

Most of Zimbabwe’s BITs require that any expropriation must take place in accordance with ‘due process of law’. However, by way of exception:

The France BIT simply requires that expropriation be in the public interest, ‘not discriminatory or contrary to a particular obligation’, and is taken against compensation.

The Italy BIT’s due process requirement is framed to require that any expropriation be ‘in conformity with all legal provisions and procedures’, and the Portugal BIT requires that the expropriation be ‘by virtue of law’.

The German, Switzerland, Thailand and United Kingdom BITs do not expressly require that the expropriatory act itself is taken in accordance with due process of law (however, due process must be followed in any event because it is a minimum requirement of customary international law and of the fair and equitable treatment standard). These four treaties do, however, require that such acts and the amount of compensation be subject to review by due process of law.

Indirect expropriation

Five of Zimbabwe’s BITs expressly protect against ‘indirect’ expropriation (the Croatia, France, Italy, Netherlands, and Sweden BITs). All of the other publicly available BITs protect against ‘measures having effect equivalent to nationalisation or expropriation’.

Compensation

Zimbabwe’s BITs require compensation for an expropriated investment. Different formulations for this requirement are used. The majority require ‘prompt, adequate and effective’ compensation, but some are drafted to require ‘prompt and adequate’ (France BIT), ‘immediate, full and effective’ (Italy BIT), ‘just’ (Netherlands BIT) or ‘adequate’ (Serbia BIT) compensation.

Most of Zimbabwe’s BITs indicate the compensation standard to be used for valuing the investment: these formulations include, the ‘fair market value’ (Croatia, Denmark, Indonesia and Sweden BITs), ‘genuine value’ (China, Netherlands and United Kingdom BITs), ‘market value’ (Malaysia, Serbia, South Africa and Thailand BITs), ‘real value’ (France and Switzerland BITs), and ‘real market value’ (Italy BIT) standards. Exceptionally, the Indonesia BIT requires that where fair market value cannot be determined in accordance with internationally recognised methods, the amount of compensation payable shall be ‘such reasonable amount as may be mutually agreed between the Contracting Parties’. The Malaysia BIT contains a similar provision whereby the amount of compensation can be set at ‘such reasonable amount as may be mutually agreed between the Contracting Parties and the investors of the other Contracting Party’. Further, the Italy BIT contains specific methods for assessing compensation.

Most of Zimbabwe’s BITs expressly include interest in the compensation to be paid.

Most of Zimbabwe’s BITs expressly require that the compensation shall be freely transferable.

Domestic review procedures

Most of Zimbabwe’s BITs require that investors have a right to challenge the legality of an expropriation and the amount of compensation by a procedure in accordance with due process of law.

Limited right to arbitration

Two of Zimbabwe’s BITs limit the right to commence arbitration to disputes relating to the amount of compensation due following an expropriation (the China and Mauritius BITs). Such provisions are the subject of debate as to whether arbitration is limited to quantification of the value of the expropriated property or can also cover the question of whether or not there has been an expropriation.

Scope of MFN treatment

All of Zimbabwe’s publicly available BITs include MFN protection. Some only extend such protection to ‘investments’. However, the majority of Zimbabwe’s BITs also extend MFN protection to treatment relating to investors. Most qualify this extension to cover the ‘management, maintenance, enjoyment, use or disposal of their investment’ (the Croatia, Czech Republic, Denmark, Germany, Serbia, Thailand and United Kingdom BITs). The Malaysia BIT includes this qualification, but also extends MFN protection to ‘any activity’ connected to an investment. Others BITs qualify the investor’s right to MFN protection as only extending to treatment with respect to the investor’s ‘activities’ related to their investments (the China, France and Portugal BITs). By contrast, the South Africa and Switzerland BITs do not expressly qualify the investor’s right to MFN protection.

Moreover, MFN protection is extended to ‘returns on investments’ (or equivalent language) in the Croatia, Czech Republic, Germany, Italy, South Africa, Switzerland and United Kingdom BITs.

Exceptions to MFN treatment

All of Zimbabwe’s publicly available BITs provide that the MFN protection does not extend to preferential treatment accorded by the other Contracting Party to investments of investors of any other state based on (i) a customs union, free trade zone, or economic union or (ii) an agreement relating to the avoidance of double taxation or other tax matters. The precise formulations vary between BITs.

In addition to the aforementioned exclusions:

Two BITs also exclude from the application of their MFN clauses preferential treatment pursuant to agreements for the facilitation of ‘frontier trade’ (China BIT) or ‘cross border trade’ (Italy BIT).

The Mauritius and South Africa BITs also exclude from the application of their MFN clauses any special advantages accorded to foreign development finance institutions operating in the territory of either Contracting Party for the exclusive purpose of development assistance through mainly non-profit activities.

The South Africa BIT also excludes from the application of its MFN clause ‘any domestic law or other measure the purpose of which is to promote the achievement of equality in its territory, or designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination in its territory’.

The Netherlands BIT specifically states that the following shall not be deemed to breach the MFN clause: ‘limitations regarding the acquisition of land or other immovable property, save for land and immovable property which is directly connected with an investment’.

Absence of the national treatment standard

The China, Indonesia, Malaysia and Portugal BITs do not include a standalone national treatment clause.

Scope

The obligation on the host state to accord full protection and security is included in the majority of Zimbabwe’s BITs. The formulation of the standard varies. The majority of Zimbabwe’s BITs provide for ‘full protection and security’. Other formulations include: ‘protection’ (China BIT), ‘full and complete protection and safety’ (France BIT), ‘adequate protection and security’ (Indonesia BIT), ‘full and adequate protection and security’ (Malaysia BIT), ‘full physical security and protection’ (Netherlands BIT), ‘full protection’ (South Africa BIT) and ‘full legal protection and security’ (Serbia BIT). The extent to which these formulations provide different levels of protection is open to debate.

Link with customary international law

The obligation to provide full protection and security is not generally linked with customary international law in Zimbabwe’s BITs.

Scope

The vast majority of Zimbabwe’s BITs contain a standard umbrella clause that requires the host state to ‘observe’ or ‘honour’ any obligations they may have entered into with regard to protected investments (the Croatia, Denmark, Germany, Italy, Mauritius, Netherlands, Portugal, South Africa, Sweden, Switzerland, Thailand and United Kingdom BITs).

While the Malaysia BIT does not include an umbrella clause per se, the dispute resolution provision applies not only to breaches of the rights granted by the BIT but also to disputes concerning ‘an obligation entered into by [the host state] with the investor of the other Contracting Party regarding an investment by such investor’. This provision provides consent to arbitration but does not elevate the obligation to an international level.

Qualification of the obligation

The umbrella clauses in Zimbabwe’s BITs are generally unqualified.

Free transfer of payments

All of Zimbabwe’s publicly available BITs include provisions requiring the Contracting Parties to permit investors to transfer investments and investment returns freely. Several of these treaties subject the right to free transfer of payments to the laws of the host state (for example, the China, Indonesia, Italy, Malaysia, Mauritius, Portugal and Serbia BITs). With the Malaysia BIT, the right is also subject to the ‘national policies’ of the host state. More exceptionally, the Serbia BIT also conditions the right to free transfer of payments as one that arises after the investor has paid off ‘all fiscal and other financial obligations’. Further, the South Africa BIT includes exceptions to the free transfer provisions in circumstances where the investor is a natural person who has permanent residency status in the host state.

Non-impairment

Most of Zimbabwe’s BITs contain the non-impairment standard. The formulation is generally consistent throughout and prohibits impairment by unreasonable or discriminatory measures of the management, maintenance, use, enjoyment or disposal of investments. Variations include the following:

The non-impairment standard in the Indonesia and Netherlands BITs also expressly covers the ‘operation’ of investments; the Sweden BIT also expressly covers the investment’s ‘acquisition of goods and services and the sale of their production’; and the Switzerland BIT also expressly covers ‘extension’ of investments.

The Croatia BIT provides that ‘[n]either Contracting Party shall hamper, by arbitrary, unreasonably (sic) or discriminatory measures, the development, management, maintenance, use, enjoyment, expansion, sale and if it is the case, the liquidation of such investments’.

Armed conflict/civil unrest

All of Zimbabwe’s publicly available BITs guarantee investors of Contracting Parties most favoured nation treatment in regards to the compensation, restitution, indemnification or other settlement in respect of loss or damage suffered owing to armed conflict or civil unrest. In addition, the majority of its BITs require national treatment in such circumstances (the notable exceptions are the China and Malaysia BITs). The formulation of exactly what state of emergency is required to trigger these requirements varies from treaty to treaty.

Several of Zimbabwe’s BITs also provide a free-standing right to restitution or compensation in such circumstances, if the loss or damage suffered was caused by the requisition or destruction (outside of combat and not required by necessity) of the investor’s property by the host state’s forces or authorities.

Fork-in-the-road

Several of Zimbabwe’s BITs include fork-in-the-road provisions (the China, Croatia, Czech Republic, Indonesia, Mauritius, South Africa and Thailand BITs). Such provisions require that investors elect whether to pursue their claim through the local courts of the host state or through international arbitration; they cannot do both.

Exhaustion of local remedies

Zimbabwe’s BITs do not generally make an investor’s right to commence arbitration contingent on the exhaustion of local remedies. Exceptionally, the Serbia BIT requires that disputes must first be submitted ‘to a competent court of the Contracting Party which is a party to the dispute’; the right to commence arbitration only arises if either party is not satisfied with the decision of that court. In addition, the Malaysia BIT prohibits the commencement of arbitration if the dispute is ‘currently pending’ before the local courts, administrative tribunals or agencies of the host state.

ICSID or ad-hoc arbitration

Most of Zimbabwe’s BITs provide a right of recourse to ICSID. Several also include ad hoc arbitration under the UNCITRAL rules as an alternative to arbitration at ICSID (the Croatia, Czech Republic, Denmark, Italy, Serbia, South Africa, Sweden and Thailand BITs). More exceptionally:

In addition to ICSID and UNCITRAL arbitration, the South African BIT also expressly permits ad hoc arbitration under any other rules that the disputing parties agree on.

The consent to arbitration in the Germany and Portugal BITs is to ICSID arbitration. However, both BITs expressly allow the disputing parties to agree on a different forum.

The China and Mauritius BITs only permit recourse to ad hoc arbitration. Both BITs include mechanisms for the appointment of the tribunal. Further, both BITs provide that the tribunal is to determine its own procedure (aside from a few mandatory rules included in the BITs). However, the China BIT provides that ‘the tribunal may, in the course of determination of procedure, take as guidance the Arbitration Rules of the [ICSID]’; and the Mauritius BIT provides that the tribunal’s determination of its own procedure is to be ‘with reference to’ the ICSID Convention.

Applicable law

Several of Zimbabwe’s BITs have provisions that address what law or laws govern the parties’ dispute. The majority of those BITs provide that the following laws apply:

The terms of the BIT.

The domestic law of the host state. As regards the host state’s rules on conflict of laws, the China, Netherlands, South Africa and Switzerland BITs expressly indicate that they are to be applied when relevant.

General international law. The most common formulation to effect this in Zimbabwe’s BITs is: ‘such rules of general international law as may be applicable’ (see e.g. the United Kingdom BIT). More exceptionally, the China BIT provides that the ‘generally recognized principles of international law accepted by both Contracting Parties’ apply and the Italy BIT provides that the ‘principles of international law recognised by the two Contracting Parties’ apply. In addition, some of Zimbabwe’s BITs provide that any other treaties in force between the Contracting Parties are applicable.

Further points of exception can be found in the Denmark and Italy BITs. Although both BITs permit recourse to ICSID or UNCITRAL arbitration, the Denmark BIT’s provision on applicable law only applies in ICSID arbitrations and the Italy BIT’s provision on it only applies in UNCITRAL arbitrations.

With those treaties that do not contain an applicable law provision, any default position under the applicable arbitration rules will apply. For example, see: Article 42 of the ICSID Convention and Article 35 of the 2010 UNCITRAL Arbitration Rules.

Use of MFN to expand procedural rights

MFN provisions in Zimbabwe’s BITs do not explicitly exclude procedural rights from the scope of its application. Exceptionally, the United Kingdom BIT expressly includes the investor-state dispute settlement provision in the list of articles to which the MFN standard applies.

Government entity to which claim notices are sent

The treaties do not stipulate upon whom a dispute notice is to be served. Therefore, the notice should be addressed to the Attorney General. Service upon the Attorney General can be effected by sending the notice to the Attorney General’s Office in Harare.

Government department which manages investment treaty arbitrations

The Civil Division of the Attorney General’s Office, in conjunction with the Ministry of Lands, has managed the three treaty claims thus far brought against Zimbabwe.

Internal/external counsel

Based on experience and practice, the Attorney General’s Office is authorised to represent the Zimbabwean Government in international arbitration. Zimbabwe has also retained external counsel in the three treaty claims thus far brought against it. There does not appear to be a formal public procurement process when hiring external counsel.

Washington Convention implementing legislation

Zimbabwe signed the Washington Convention on 25 March 1991 and ratified it on 20 May 1994. The Washington Convention entered into force for Zimbabwe on 19 June 1994.

The Washington Convention was implemented through the 1995 Arbitration (International Investment Disputes) Act, Chapter 7:03, which provides for the registration of an investment treaty award through the High Court. The effect of the registration is that the award has the same status and effect as a final judgment of the High Court.

New York Convention implementing legislation

Zimbabwe acceded to the New York Convention on 29 September 1994 and it entered into force for Zimbabwe on 28 December 1994.

The New York Convention was implemented through the 1996 Arbitration Act, Chapter 7:15.

Legislation governing non-ICSID arbitrations

The 1996 Arbitration Act, Chapter 7:15 gives the UNCITRAL Model Law the force of law in Zimbabwe.

Compliance with adverse awards

To date, Zimbabwe has failed to honour the award issued against it in ICSID Case No. ARB/05/6. The awards in ICSID Case Nos. ARB/10/15 and ARB/10/25 are currently subject to annulment proceedings.

Attitude of government towards investment treaty arbitration

The Zimbabwean Government continues to negotiate and sign bilateral investment treaties. As far as the authors are aware, there have been no press releases indicating that the Government wishes to withdraw from ICSID or revoke any of its currently in force bilateral investment treaties. Moreover, in October 2013, the Government designated eight individuals to ICSID’s panel of arbitrators and conciliators for Zimbabwe.

Attitude of local courts towards investment treaty arbitration

Zimbabwe’s courts have demonstrated an unwillingness to follow Article 26 of the ICSID Convention, in that some local courts have determined issues that are the subject of parallel ICSID proceedings.

Local courts

Arbitration

Constitution of Zimbabwe, 2013

Partially²⁰

Yes

No

Yes

No

Multilateral Investment Guarantee Agency

Zimbabwe became a member of the Multilateral Investment Guarantee Agency (‘MIGA’) in 1992. Under the Convention establishing the MIGA, Zimbabwean nationals and corporate entities are eligible to acquire, for the payment of a premium, political risk insurance from MIGA in respect of certain developing states, provided that certain conditions are met. To be eligible for assistance, the investment must be medium to long term in nature, support the host country’s development goals, comply with MIGA’s policy on Social and Environmental Sustainability and anti-corruption and fraud standards, and also be financially viable.

Bernardus Henricus Funnekotter and others v. Republic of Zimbabwe , ICSID Case No. ARB/05/6, Award, 22 April 2009, Netherlands-Zimbabwe BIT

Bernhard von Pezold and others v. Republic of Zimbabwe , ICSID Case No. ARB/10/15, Award, 28 July 2015, Germany-Zimbabwe and Switzerland-Zimbabwe BITs

Border Timbers Limited, Timber Products International (Private) Limited, and Hangani Development Co. (Private) Limited v. Republic of Zimbabwe , ICSID Case No. ARB/10/25, Award, 28 July 2015, Switzerland-Zimbabwe BIT